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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 33-47040

CINEMARK USA, INC.

(Exact name of registrant as specified in its charter)


Texas		75-2206284
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3900 Dallas Parkway
Plano, Texas		75093
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (972) 665-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

As of May 6, 2022, 1,500 shares of Class A common stock and 182,648 shares of Class B common stock were outstanding.

CINEMARK USA, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements	4

		Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (unaudited)	4

		Condensed Consolidated Statements of Loss for the three months ended March 31, 2022 and 2021 (unaudited)	5

		Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2022 and 2021 (unaudited)	6

		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)	7

		Notes to Condensed Consolidated Financial Statements (unaudited)	8

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

	Item 4.	Controls and Procedures	34

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	35

	Item 1A.	Risk Factors	35

	Item 5	Other Information	35

	Item 6.	Exhibits	40

SIGNATURES			41

Cautionary Statement Regarding Forward-Looking Statements

Certain matters within this Quarterly Report on Form 10Q include “forward–looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The “forward-looking statements” may include our current expectations, assumptions, estimates and projections about our business and our industry. They may include statements relating to:

•

future revenues, expenses and profitability;

•

currency exchange rate and inflationary impacts;

•

the future development and expected growth of our business;

•

projected capital expenditures;

•

access to capital resources;

•

attendance at movies generally or in any of the markets in which we operate;

•

the number or diversity of popular movies releases, the length of exclusive theatrical release windows and our ability to successfully license and exhibit popular films;

•

national and international growth in our industry;

•

competition from other exhibitors, alternative forms of entertainment and content delivery via streaming and other formats;

•

determinations in lawsuits in which we are a party; and

•

the impact of the COVID-19 pandemic on us and the motion picture exhibition industry.

Forward-looking statements can be identified by the use of words such as “may,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions. These statements are neither historical facts nor guarantees of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions and are, therefore, subject to risks, inherent uncertainties and other factors, some of which are beyond our control and difficult to predict, including, among others, the impacts of the COVID-19 pandemic. Such risks and uncertainties could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. For a description of the risk factors, please review the “Risk Factors” section or other sections of, or incorporated by reference to, Cinemark USA, Inc.'s Annual Report on Form 10-K filed March 9, 2022. All forward-looking statements are expressly qualified in their entirety by such risk factors. We undertake no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Unless the context otherwise requires, all references to “we,” “our,” “us,” “the issuer”, “the Company” or “Cinemark” relate to Cinemark USA, Inc. and its consolidated subsidiaries. All references to Latin America are to Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data, unaudited)


	March 31,			December 31,
	2022			2021
Assets
Current assets
Cash and cash equivalents	$	314.3		$	442.7
Inventories		16.8			15.5
Accounts receivable		52.9			68.8
Current income tax receivable		46.5			46.6
Prepaid expenses and other		35.0			36.2
Accounts receivable from parent		49.2			46.7
Total current assets		514.7			656.5
Theatre properties and equipment		3,415.8			3,368.8
Less: accumulated depreciation and amortization		2,066.8			1,985.9
Theatre properties and equipment, net		1,349.0			1,382.9
Operating lease right-of-use assets, net		1,201.6			1,230.8
Other assets
Goodwill		1,256.9			1,248.8
Intangible assets, net		310.8			310.8
Investment in NCM		131.9			135.4
Investments in affiliates		25.8			25.2
Deferred charges and other assets, net		28.5			22.3
Total other assets		1,753.9			1,742.5
Total assets	$	4,819.2		$	5,012.7
Liabilities and equity
Current liabilities
Current portion of long-term debt	$	27.2		$	24.3
Current portion of operating lease obligations		219.4			217.1
Current portion of finance lease obligations		14.7			14.6
Accounts payable and accrued expenses		381.2			504.6
Total current liabilities		642.5			760.6
Long-term liabilities
Long-term debt, less current portion		2,028.2			2,028.7
Operating lease obligations, less current portion		1,044.1			1,078.3
Finance lease obligations, less current portion		98.8			102.6
Long-term deferred tax liability		56.0			57.8
Long-term liability for uncertain tax positions		46.4			45.9
NCM screen advertising advances		343.8			346.0
Other long-term liabilities		30.5			37.9
Total long-term liabilities		3,647.8			3,697.2
Equity
Cinemark USA, Inc.'s stockholder's equity:
Class A common stock, $0.01 par value: 10,000,000 shares authorized, 1,500 shares issued and outstanding		—			—
Class B common stock, no par value: 1,000,000 shares authorized, 239,893 shares issued and 182,648 shares outstanding		49.5			49.5
Treasury stock, 57,245 Class B shares at cost		(24.2	)		(24.2	)
Additional paid-in-capital		1,463.9			1,459.0
Retained earnings (deficit)		(606.5	)		(544.0	)
Accumulated other comprehensive loss		(366.9	)		(397.0	)
Total Cinemark USA, Inc.'s stockholder's equity		515.8			543.3
Noncontrolling interests		13.1			11.6
Total equity		528.9			554.9
Total liabilities and equity	$	4,819.2		$	5,012.7

The accompanying notes are an integral part of the condensed consolidated financial statements.

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF LOSS

(in millions, unaudited)


	Three Months Ended March 31,
	2022			2021
Revenues
Admissions	$	235.8		$	56.1
Concession		173.0			39.5
Other		51.7			18.8
Total revenues		460.5			114.4
Cost of operations
Film rentals and advertising		127.6			23.2
Concession supplies		30.0			7.2
Salaries and wages		79.8			31.2
Facility lease expense		73.7			64.8
Utilities and other		86.9			49.1
General and administrative expenses		39.9			35.1
Depreciation and amortization		61.7			68.2
Restructuring costs		—			(0.2	)
(Gain) loss on disposal of assets and other		(6.9	)		4.5
Total cost of operations		492.7			283.1
Operating loss		(32.2	)		(168.7	)
Other income (expense)
Interest expense		(32.1	)		(30.5	)
Interest income		1.6			0.6
Loss on extinguishment of debt		—			(2.6	)
Foreign currency exchange gain (loss)		3.2			(3.0	)
Distributions from NCM		—			0.1
Interest expense - NCM		(5.8	)		(5.8	)
Equity in loss of affiliates		(2.2	)		(6.8	)
Total other expense		(35.3	)		(48.0	)
Loss before income taxes		(67.5	)		(216.7	)
Income tax benefit		(6.5	)		(13.2	)
Net loss	$	(61.0	)	$	(203.5	)
Less: Net income (loss) attributable to noncontrolling interests		1.5			(0.6	)
Net loss attributable to Cinemark USA, Inc.	$	(62.5	)	$	(202.9	)

The accompanying notes are an integral part of the condensed consolidated financial statements.

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions, unaudited)


	Three Months Ended March 31,
	2022			2021
Net loss	$	(61.0	)	$	(203.5	)
Other comprehensive income (loss), net of tax
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes and settlements		14.6			5.7
Foreign currency translation adjustments		14.4			(9.5	)
Total other comprehensive income (loss), net of tax		29.0			(3.8	)
Total comprehensive loss, net of tax		(32.0	)		(207.3	)
Comprehensive (income) loss attributable to noncontrolling interests		(1.5	)		0.6
Comprehensive loss attributable to Cinemark USA, Inc.	$	(33.5	)	$	(206.7	)

The accompanying notes are an integral part of the condensed consolidated financial statements.

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions, unaudited)


	Three Months Ended March 31,
	2022			2021
Operating activities
Net loss	$	(61.0	)	$	(203.5	)
Adjustments to reconcile net loss to cash used for operating activities:
Depreciation		61.1			67.5
Amortization of intangible and other assets		0.6			0.7
Amortization of debt issue costs		1.9			1.7
Interest accrued on NCM screen advertising advances		5.8			5.8
Amortization of NCM screen advertising advances and other deferred revenues		(8.2	)		(7.9	)
Amortization of accumulated losses for amended swap agreements		1.1			1.1
Share based awards compensation expense		4.9			4.4
(Gain) loss on disposal of assets and other		(6.9	)		4.5
Loss on extinguishment of debt		—			2.6
Non-cash rent expense		(2.3	)		0.1
Equity in loss of affiliates		2.2			6.8
Deferred income tax expense (benefit)		(7.9	)		(17.9	)
Distributions from equity investees		0.6			0.2
Changes in assets and liabilities and other		(100.4	)		9.9
Net cash used for operating activities		(108.5	)		(124.0	)

Investing activities
Additions to theatre properties and equipment		(18.7	)		(17.7	)
Proceeds from sale of theatre properties and equipment and other		10.6			—
Net cash used for investing activities		(8.1	)		(17.7	)

Financing activities
Restricted stock withholdings for payroll taxes		(1.6	)		—
Contributions received from parent		—			120.0
Proceeds from issuance of senior notes		—			405.0
Proceeds from other borrowings		—			9.0
Redemption of senior notes		—			(400.0	)
Repayments of long-term debt		(3.4	)		(2.0	)
Payment of debt issue costs		—			(6.0	)
Fees paid related to debt refinancing		—			(1.5	)
Payments on finance leases		(3.6	)		(3.7	)
Net cash provided by (used for) financing activities		(8.6	)		120.8

Effect of exchange rate changes on cash and cash equivalents		(3.2	)		(1.6	)

Decrease in cash and cash equivalents		(128.4	)		(22.5	)

Cash and cash equivalents:
Beginning of period		442.7			260.6
End of period	$	314.3		$	238.1

The accompanying notes are an integral part of the condensed consolidated financial statements.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

1. The Company and Basis of Presentation

Cinemark USA, Inc., a wholly-owned subsidiary of Cinemark Holdings, Inc., and its subsidiaries operate in the motion picture exhibition industry, with theatres in the United States (“U.S.”), Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay.

The accompanying condensed consolidated balance sheet as of December 31, 2021, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from these estimates. Majority-owned subsidiaries of which the Company has control are consolidated while those affiliates of which the Company owns between 20% and 50% and does not control are accounted for under the equity method. Those affiliates of which the Company owns less than 20% are generally accounted for under the cost method, unless the Company is deemed to have the ability to exercise significant influence over the affiliate, in which case the Company would account for its investment under the equity method. The results of these subsidiaries and affiliates are included in the condensed consolidated financial statements effective with their formation or from their dates of acquisition. Intercompany balances and transactions are eliminated in consolidation.

These condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and the notes thereto for the year ended December 31, 2021, included in the Annual Report on Form 10-K filed March 9, 2022 by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results to be achieved for the full year.

Amounts included in the condensed consolidated financial statements of this Quarterly Report on Form 10-Q are rounded in millions. The amounts reported in the consolidated financial statements, and the notes thereto, of the Annual Report on Form 10-K for the year ended December 31, 2021 filed March 9, 2022 are rounded in thousands.

2. Impact of the COVID-19 Pandemic

The COVID-19 pandemic has had an unprecedented impact on the world and the movie exhibition industry with widespread social and economic effects. The Company temporarily closed its theatres in the U.S. and Latin America during March of 2020 at the onset of the COVID-19 outbreak. During that time, the Company implemented various cash preservation strategies, including, but not limited to, temporary personnel and salary reductions, halting non-essential operating and capital expenditures, negotiating modified timing and/or abatement of contractual payments with landlords and other major suppliers and the suspension of dividends to Cinemark Holdings, Inc.

Throughout 2020 and 2021 the Company reopened theatres as local restrictions and the status of the COVID-19 pandemic would allow. All of the Company's domestic and international theatres were reopened by the end of the fourth quarter of 2021. The industry’s recovery from the COVID-19 pandemic is still underway and is contingent upon the volume of new film content available, as well as the box office performance of new film content released, consumer sentiment in returning to move theaters and government restrictions. The industry is also adjusting to the evolution of the exclusive theatrical window, competition from streaming platforms, supply chain constraints, inflationary impacts and other economic factors.

Restructuring Charges

During June 2020, Company management approved and announced a restructuring plan to realign its operations to create a more efficient cost structure (referred to herein as the “Restructuring Plan”) in response to the COVID-19 pandemic. The Restructuring Plan primarily included a headcount reduction at its domestic corporate office and the permanent closure of certain domestic and international theatres. The Company paid approximately $0.5 related to previously accrued restructuring costs during the three months ended March

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

31, 2022. The remaining accrued restructuring costs of $1.0, which are primarily related to facility closure costs, are reflected in accounts payable and accrued expenses on the condensed consolidated balance sheet as of March 31, 2022.

3. New Accounting Pronouncements

Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”) and ASU 2021-01, Reference Rate Reform (Topic 848): Scope, (“ASU 2021-01”). The purpose of ASU 2020-04 is to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. More specifically, the amendments in ASU 2020-04 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The amendments in ASU 2020-04 and ASU 2021-01 are effective as of March 12, 2020 through December 31, 2022. The Company does not expect ASU 2020-04 and ASU 2021-01 to have a material impact on its condensed consolidated financial statements.

ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, (“ASU 2021-10”). The purpose of ASU 2021-10 is to provide annual disclosure guidance about transactions with a government for which the entity is applying a grant or contribution accounting model by analogy. More specifically, the amendments in ASU 2021-10 require disclosure of a) the nature of the transactions and the related accounting policy used to account for the transactions, b) the line items on the balance sheet and income statement, including the amounts applicable to each line item, that are affected by the transactions and c) significant terms and conditions of the transactions, including commitments and contingencies. The amendments in ASU 2021-10 are effective for annual periods beginning after December 15, 2021. The amendments in ASU 2021-10 should be applied either a) prospectively to all transactions at the date of initial application and new transactions that are entered into after the date of initial application or b) retrospectively to those transactions. The Company will provide the disclosures required by ASU 2021-10 in its Form 10-K for the year ended December 31, 2022.

4. Lease Accounting

Lease Deferrals and Abatements

Upon the temporary closure of theatres in March 2020, the Company began negotiating the deferral of rent and other lease-related payments with its landlords while theatres remained closed. These discussions and negotiations have remained ongoing as the Company continues to be impacted by the COVID-19 pandemic. These negotiations resulted in amendments to the leases that involve varying concessions, including the abatement of rent payments during closure, deferral of all or a portion of rent payments to later periods and deferrals of rent payments combined with an early exercise of an existing renewal option or extension of the lease term. Total remaining deferred payments as of March 31, 2022 and December 31, 2021 were $22.1 and $31.9, respectively, and are included in accounts payable and accrued expenses in the condensed consolidated balance sheets.

The following table represents the Company’s aggregate lease costs, by lease classification, for the periods presented.


		Three Months Ended
		March 31,
Lease Cost	Classification	2022		2021
Operating lease costs
Equipment (1)	Utilities and other	$	0.6	$	0.4
Real Estate (2)(3)	Facility lease expense		75.0		63.8
Total operating lease costs		$	75.6	$	64.2

Finance lease costs
Amortization of leased assets	Depreciation and amortization	$	3.1	$	3.2
Interest on lease liabilities	Interest expense		1.4		1.6
Total finance lease costs		$	4.5	$	4.8

(1)

Includes approximately $0.5 and $0.3 of short-term lease payments for the three months ended March 31, 2022 and 2021, respectively.

(2)

Includes approximately $5.9 and $(2.3) of variable lease payments based on a change in index, such as CPI or inflation, variable payments based on revenues or attendance and variable common area maintenance costs for the three months ended March 31, 2022 and 2021, respectively. The credit amount for the three months ended March 31, 2022 is due to the abatement of certain lease payments as discussed at Lease Deferrals and Abatements above.

(3)

Approximately $0.3 and $0.4 of lease payments are included in general and administrative expenses primarily related to office leases for the three months ended March 31, 2022 and 2021, respectively.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

The following table represents the minimum cash lease payments included in the measurement of lease liabilities and the non-cash addition of lease right-of-use assets for the periods presented.


	Three Months Ended
	March 31,
Other Information	2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Cash outflows for operating leases	$	69.3	$	66.2
Cash outflows for finance leases - operating activities	$	1.4	$	1.6
Cash outflows for finance leases - financing activities	$	3.6	$	3.7
Non-cash amount of right-of-use assets obtained in exchange for:
Operating lease liability additions, net of write-offs	$	11.8	$	24.9

As of March 31, 2022, the Company had signed lease agreements with total noncancelable lease payments of approximately $90.8 related to theatre leases that had not yet commenced. The timing of lease commencement is dependent on the completion of construction of the related theatre facility. Additionally, these amounts are based on estimated square footage and costs to construct each facility and may be subject to adjustment upon final completion of each construction project. In accordance with ASC Topic 842, fixed minimum lease payments related to these theatres are not included in the right-of-use assets and lease liabilities as of March 31, 2022.

5. Revenue Recognition

The Company’s patrons have the option to purchase movie tickets well in advance of a movie showtime or right before the movie showtime, or at any point in between those two timeframes depending on seat availability. The Company recognizes such admissions revenue when the showtime for a purchased movie ticket has passed. Concession revenue is recognized when products are sold to the consumer. Other revenues primarily consist of screen advertising and screen rental revenues, promotional income, studio trailer placements and transactional fees. Except for National CineMedia, LLC. ("NCM") screen advertising advances discussed below in Note 8, these revenues are generally recognized when the Company has performed the related services. The Company sells gift cards and discount ticket vouchers, the proceeds from which are recorded as deferred revenue. Deferred revenue for gift cards and discount ticket vouchers is recognized when they are redeemed for concession items or, if redeemed for movie tickets, when the showtime has passed. The Company generally records breakage revenue on gift cards and discount ticket vouchers based on redemption activity and historical experience with unused balances. The Company offers a subscription program in the U.S. whereby patrons can pay a monthly or annual fee to receive a monthly credit for use towards a future movie ticket purchase. The Company records the subscription program fees as deferred revenue and records admissions revenue when the showtime for a movie ticket purchased with a credit has passed. The Company has loyalty programs in the U.S. and many of its international locations that either have a prepaid annual fee or award points to customers as purchases are made. For those loyalty programs that have a prepaid annual fee, the Company recognizes the fee collected as other revenue on a straight-line basis. For those loyalty programs that award points to customers based on their purchases, the Company records a portion of the original transaction proceeds as deferred revenue based on the number of reward points issued to customers and recognizes the deferred revenue when the customer redeems such points. The value of loyalty points issued is based on the estimated fair value of the rewards offered. The Company records breakage revenue on its loyalty and subscription programs generally upon the expiration of loyalty points or subscription credits. Advances collected on other contracts are deferred and recognized during the period in which the Company satisfies the related performance obligations, which may differ from the period in which the advances are collected.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Accounts receivable as of March 31, 2022 and December 31, 2021 included approximately $22.6 and $23.5 respectively, of receivables related to contracts with customers. The Company did not record any assets related to the costs to obtain or fulfill a contract with customers during the three months ended March 31, 2022.

Disaggregation of Revenue

The following tables represent revenues, disaggregated based on major type of good or service and by reportable operating segment, for the periods presented.


	Three Months Ended
	March 31, 2022
	U.S.		International
	Operating		Operating
	Segment (1)		Segment		Consolidated
Admissions revenues	$	191.8	$	44.0	$	235.8
Concession revenues		141.1		31.9		173.0
Screen advertising, screen rental and promotional revenues (2)		18.7		8.1		26.8
Other revenues		20.4		4.5		24.9
Total revenues	$	372.0	$	88.5	$	460.5


	Three Months Ended
	March 31, 2021
	U.S.		International
	Operating		Operating
	Segment (1)		Segment		Consolidated
Admissions revenues	$	48.5	$	7.6	$	56.1
Concession revenues		33.0		6.5		39.5
Screen advertising, screen rental and promotional revenues (2)		11.2		2.2		13.4
Other revenues		4.4		1.0		5.4
Total revenues	$	97.1	$	17.3	$	114.4

(1)

U.S. segment revenues exclude intercompany transactions with the international operating segment. See Note 16 for additional information on intercompany eliminations.

(2)

Amount includes amortization of NCM screen advertising advances. See Screen Advertising Advances and Deferred Revenues below.

The following tables represent revenues, disaggregated based on timing of recognition and by reportable operating segment, for the periods presented.


	Three Months Ended
	March 31, 2022
	U.S.		International
	Operating		Operating
	Segment (1)		Segment		Consolidated
Goods and services transferred at a point in time	$	348.3	$	78.6	$	426.9
Goods and services transferred over time (2)		23.7		9.9		33.6
Total	$	372.0	$	88.5	$	460.5


	Three Months Ended
	March 31, 2021
	U.S.		International
	Operating		Operating
	Segment (1)		Segment		Consolidated
Goods and services transferred at a point in time	$	80.5	$	14.3	$	94.8
Goods and services transferred over time (2)		16.6		3.0		19.6
Total	$	97.1	$	17.3	$	114.4

(1)

U.S. segment revenues exclude intercompany transactions with the international operating segment. See Note 16 for additional information on intercompany eliminations.

(2)

Amount includes amortization of NCM screen advertising advances. See Screen Advertising Advances and Deferred Revenues below.

Screen Advertising Advances and Other Deferred Revenues

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

The following table presents changes in the Company’s NCM screen advertising advances and other deferred revenues for the three months ended March 31, 2022.


	NCM screen advertising advances (1)			Other Deferred Revenues (2)
Balance at January 1, 2022	$	346.0		$	160.3
Amounts recognized as accounts receivable		—			0.5
Cash received from customers in advance		—			49.6
Interest accrued related to significant financing component		5.8			—
Revenue recognized during period		(8.0	)		(40.2	)
Foreign currency translation adjustments		—			1.5
Balance at March 31, 2022	$	343.8		$	171.7

(1)

See Note 8 for the maturity of NCM screen advertising advances as of March 31, 2022.

(2)

Includes liabilities associated with outstanding gift cards and discount ticket vouchers, points or rebates outstanding under the Company’s loyalty and membership programs and revenues collected but not yet earned for screen advertising, screen rental and other promotional activities. Amounts are classified as accounts payable and accrued expenses or other long-term liabilities on the condensed consolidated balance sheet.

The table below summarizes the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of March 31, 2022 and when the Company expects to recognize this revenue.


	Twelve Months Ended March 31,
Remaining Performance Obligations	2023		2024		Thereafter		Total
Other deferred revenues	$	152.1	$	19.6	$	—	$	171.7

6. Long Term Debt

Long-term debt consisted of the following for the periods presented:


	March 31,		December 31,
	2022		2021
Cinemark USA, Inc. term loan due 2025	$	631.5	$	633.1
Cinemark USA, Inc. 8.750% senior secured notes due 2025		250.0		250.0
Cinemark USA, Inc. 5.875% senior notes due 2026		405.0		405.0
Cinemark USA, Inc. 5.250% senior notes due 2028		765.0		765.0
Other		32.4		30.2
Total carrying value of long-term debt	$	2,083.9	$	2,083.3
Less: Current portion		27.2		24.3
Less: Debt issuance costs, net of accumulated amortization		28.5		30.3
Long-term debt, less current portion, net of unamortized debt issuance costs	$	2,028.2	$	2,028.7

Senior Secured Credit Facility

Cinemark USA, Inc. has a senior secured credit facility that includes a $700.0, term loan and a $100.0 revolving credit line (the “Credit Agreement”). As of March 31, 2022, there was $631.5 outstanding under the term loan and no borrowings were outstanding under the revolving credit line. As of March 31, 2022, $100.0 was available for borrowing under the revolving credit line. Quarterly principal payments of $1.6 are due on the term loan through December 31, 2024, with a final principal payment of $613.4 due on March 29, 2025. The revolving credit line matures on November 28, 2024. The average interest rate applicable to outstanding term loan borrowings under the Credit Agreement as of March 31, 2022 was approximately 3.4% per annum, after giving effect to the interest rate swap agreements discussed below.

Interest Rate Swap Agreements

Below is a summary of the Company’s interest rate swap agreements, which are designated as cash flow hedges, as of March 31, 2022:

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)


						Estimated
						Fair Value at
Notional						March 31,
Amount		Effective Date	Pay Rate	Receive Rate	Expiration Date	2022 (1)
$	137.5	December 31, 2018	2.12%	1-Month LIBOR	December 31, 2024	$	1.3
$	175.0	December 31, 2018	2.12%	1-Month LIBOR	December 31, 2024		1.6
$	137.5	December 31, 2018	2.19%	1-Month LIBOR	December 31, 2024		1.0
					Total	$	3.9

(1)

Approximately $(1.7) of the total is included in accounts payable and accrued expenses and $5.6 is included in deferred charges and other assets, net on the condensed consolidated balance sheet as of March 31, 2022.

Effective March 31, 2020, the Company amended and extended its three then existing interest rate swap agreements and entered into a fourth interest rate swap agreement, all of which are used to hedge a portion of the interest rate risk associated with the variable interest rates on the Company’s term loan debt and qualify for cash flow hedge accounting. Upon amending the interest rate swap agreements effective March 31, 2020, the Company determined that the interest payments hedged with the agreements are still probable to occur, therefore the loss that accumulated on the swaps prior to the amendments of $29.4 is being amortized to interest expense through December 31, 2022, the original maturity dates of the swaps. Approximately $1.1 was recorded in interest expense in the condensed consolidated income statement for the three months ended March 31, 2022 and the three months ended March 31, 2021.

The fair values of the interest rate swaps are recorded on the Company’s condensed consolidated balance sheets as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive loss. The changes in fair value are reclassified from accumulated other comprehensive loss into earnings in the same period that the hedged items affect earnings. The valuation technique used to determine fair value is the income approach and, under this approach, the Company uses projected future interest rates as provided by counterparties to the interest rate swap agreements and the fixed rates that the Company is obligated to pay under the agreement. Therefore, the Company’s measurements use significant unobservable inputs, which fall in Level 2 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35. The Company is assessing the impact of reference rate reform, as well as the impact of ASU 2020-04 and ASU 2021-01, on the Company's interest rate swaps. See further discussion at Note 3.

Fair Value of Long-Term Debt

The Company estimates the fair value of its long-term debt primarily using quoted market prices, which fall under Level 2 of the U.S. GAAP fair value hierarchy as defined by ASC 820, Fair Value Measurement (“ASC Topic 820”). The table below presents the carrying value and fair value of the Company's long-term debt as of the periods presented:


	As of
	March 31, 2022		December 31, 2021
Carrying value (1)	$	2,083.9	$	2,083.3
Fair value	$	1,993.8	$	2,058.0

(1)

The carrying value excludes unamortized debt issuance costs.

7. Equity

Below is a summary of changes in stockholders’ equity attributable to Cinemark USA, Inc., noncontrolling interests and total equity for the three months ended March 31, 2022 and 2021:


	Common Stock		Treasury Stock			Additional Paid-In-Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			Total Cinemark USA, Inc. Stockholder's Equity			Noncontrolling Interests		Total Equity
Balance at January 1, 2022	$	49.5	$	(24.2	)	$	1,459.0	$	(544.0	)	$	(397.0	)	$	543.3		$	11.6	$	554.9
Share based awards compensation expense		—		—			4.9		—			—			4.9			—		4.9
Net loss		—		—			—		(62.5	)		—			(62.5	)		1.5		(61.0	)
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes and settlements		—		—			—		—			14.6			14.6			—		14.6
Amortization of accumulated losses for amended swap agreements		—		—			—		—			1.1			1.1			—		1.1
Foreign currency translation adjustments		—		—			—		—			14.4			14.4			—		14.4
Balance at March 31, 2022	$	49.5	$	(24.2	)	$	1,463.9	$	(606.5	)	$	(366.9	)	$	515.8		$	13.1	$	528.9

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)


	Common Stock		Treasury Stock			Additional Paid-In-Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			Total Cinemark USA, Inc. Stockholder's Equity			Noncontrolling Interests			Total Equity
Balance at January 1, 2021	$	49.5	$	(24.2	)	$	1,310.6	$	(163.3	)	$	(398.6	)	$	774.0		$	11.0		$	785.0
Share based awards compensation expense	—		—				4.4	—			—				4.4			—			4.4
Contributions from parent		—		—			120.0		—			—			120.0			—			120.0
Net loss	—		—			—			(202.9	)		—			(202.9	)		(0.6	)		(203.5	)
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of taxes and settlements	—		—			—		—				5.7			5.7			—			5.7
Amortization of accumulated losses for amended swap agreements	—		—			—		—				1.1			1.1			—			1.1
Foreign currency translation adjustments	—		—			—		—				(9.5	)		(9.5	)		—			(9.5	)
Balance at March 31, 2021	$	49.5	$	(24.2	)	$	1,435.0	$	(366.2	)	$	(401.3	)	$	692.8		$	10.4		$	703.2

8. Investment in National CineMedia LLC

Below is a summary of activity with NCM included in the Company’s condensed consolidated financial statements:


	Investment in NCM			NCM Screen Advertising Advances			Equity in Loss		Other Revenue			Interest Expense - NCM		Cash Received (2)
Balance as of January 1, 2022	$	135.4		$	(346.0	)
Screen rental revenues earned under ESA (1)		—			—		$	—	$	(4.2	)	$	—	$	4.2
Interest accrued related to significant financing component		—			(5.8	)		—		—			5.8		—
Equity in loss		(3.5	)		—			3.5		—			—		—
Amortization of screen advertising advances		—			8.0			—		(8.0	)		—		—
Balance as of and for the three months ended March 31, 2022	$	131.9		$	(343.8	)	$	3.5	$	(12.2	)	$	5.8	$	4.2

(1)

Amounts include the per patron and per digital screen theatre access fees due to the Company, net of amounts due to NCM for on-screen advertising time provided to the Company’s beverage concessionaire of approximately $1.5.

(2)

The Company had a receivable from NCM of $6.2 as of March 31, 2022.

Investment in National CineMedia

NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. The Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM primarily provides advertising to our theatres. See Note 6 to the Company's Annual Report on Form 10-K filed March 9, 2022 for additional discussion of the Company's investment in NCM as well as the accounting for its original NCM membership units and subsequent common unit adjustments.

Common Unit Adjustments

The Company also periodically receives consideration in the form of common units from NCM. Annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens operated and theatre attendance generated. The common units received are recorded at estimated fair value as an increase in the Company’s investment in NCM with an offset to NCM screen advertising advances.

As of March 31, 2022, the Company owned a total of 43.2 common units of NCM representing an ownership interest of approximately 26%. Each of the Company’s common units in NCM is convertible into one share of National Cinemedia, Inc. ("NCM, Inc.") common stock. As of March 31, 2022, the estimated fair value of the Company’s investment in NCM was approximately $109.6 based on NCM, Inc.’s stock price as of March 31, 2022 of $2.54 per share (Level 1 input as defined in FASB ASC Topic 820). The estimated fair value was below the Company’s carrying value of $131.9. The Company believes the recent decline in NCMI’s stock price is a result of the continued impacts of the COVID-19 pandemic along with the market’s reaction to inflation and interest rate developments as well as global events. The Company continues to recover from the impacts of the COVID-19 pandemic, and the Company believes NCM will continue to recover as well, as new film content continues to be released on a consistent basis.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Additionally, NCM, Inc.’s stock price was only below the Company's carrying value of NCM for less than two consecutive months as of March 31, 2022.

During March 2022, NCM performed its annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, the Company will receive an additional 0.5 common units of NCM during the second quarter of 2022. The Company will record the additional common units received in April 2022 at their estimated fair value with a corresponding adjustment to NCM screen advertising advances.

Exhibitor Services Agreement

As discussed above, the Company’s domestic theatres are part of the in-theatre digital network operated by NCM, the terms of which are defined in the ESA. NCM provides advertising to its theatres through its branded “Noovie” pre-show entertainment program and also handles lobby promotions and displays for our theatres. The Company receives a monthly theatre access fee for participation in the NCM network and also earns screen advertising or screen rental revenue on a per patron basis. See Note 6 to the Company's Annual Report on Form 10-K filed March 9, 2022 for further discussion of the accounting for revenues earned under the ESA as well as the accounting related to NCM screen advertising advances.

The deferred NCM screen advertising advances are recorded on a straight-line basis over the term of the amended ESA through February 2041. The table below summarizes when the Company expects to recognize these revenues:


	Twelve Months Ended March 31,
Remaining Maturity	2023		2024		2025		2026		2027		Thereafter		Total
NCM screen advertising advances (1)	$	9.3	$	9.9	$	10.6	$	11.3	$	12.1	$	290.6	$	343.8

(1)

Amounts are net of the estimated interest to be accrued for the periods presented. See discussion of significant financing component below.

Significant Financing Component

As discussed in Note 6 to the Company's Annual Report on Form 10-K filed March 9, 2022, the Company's ESA with NCM includes an implied significant financing component, as per the guidance in ASC Topic 606. As a result of the significant financing component, the Company recognized incremental screen rental revenue and interest expense of $8.0 and $5.8, respectively, during the three months ended March 31, 2022 and incremental screen rental revenue and interest expense of $7.9 and $5.8, respectively, during the three months ended March 31, 2021. The interest expense was calculated using the Company’s incremental borrowing rates at the time when the cash was received from the NCM, Inc. IPO and each tranche of common units was received from NCM, which ranged from 4.4% to 8.3%.

NCM Financial Information

Below is summary financial information for NCM for the periods indicated:


	Three Months Ended			Three Months ended
	March 31, 2022			April 1, 2021
Gross revenues	$	35.9		$	5.4
Operating loss	$	(22.5	)	$	(28.3	)
Net loss	$	(39.5	)	$	(43.5	)


	As of			As of
	March 31, 2022			December 30, 2021
Current assets	$	125.9		$	115.4
Noncurrent assets	$	656.8		$	658.0
Current liabilities	$	56.7		$	67.2
Noncurrent liabilities	$	1,163.1		$	1,114.7
Members equity	$	(437.1	)	$	(408.5	)

9. Other Investments

Digital Cinema Implementation Partners LLC (“DCIP”)

On February 12, 2007, the Company, AMC and Regal (the “Exhibitors”) entered into a joint venture known as DCIP to facilitate the implementation of digital cinema in the Company’s theatres and to establish agreements with major motion picture studios for the financing of digital cinema. As of March 31, 2022, the Company had a 33% voting interest in DCIP and a 24.3% economic interest in DCIP. DCIP also entered into long-term Digital Cinema Deployment Agreements (“DCDAs”) with six major motion picture studios pursuant to which Kasima LLC, one of DCIP’s subsidiaries, received a virtual print fee ("VPF") each time the studio booked a film or

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

certain other content on the leased digital projection systems. Other content distributors entered into similar DCDAs that provided for the payment of VPFs for bookings of the distributor's content on a leased digital projection system. The DCDAs expired in October 2021. Pursuant to the operating agreement between the Exhibitors and DCIP, DCIP began to distribute excess cash generated from their operations to the Exhibitors during 2019. As the DCDAs have expired and the MELA between the Company and Kasima has been terminated, as discussed below, DCIP and its subsidiaries no longer have regular operations, and final distributions are expected to be made to the Company during 2022.

Effective November 1, 2020, the Company amended the master equipment lease agreement (“MELA”) with Kasima LLC, which is an indirect subsidiary of DCIP, resulting in the termination of the MELA. Upon termination of the MELA, the Company received a distribution of the digital projection equipment that it previously leased. As the fair value of the distributed projectors was greater than the Company’s investment in DCIP at the time of the distribution, the investment in DCIP was reduced to zero at the time of the distribution. The Company does not recognize undistributed equity in the earnings or loss of its investment in DCIP until such time that future net earnings, less distributions received, surpass the amount of the excess distribution. The investment in DCIP on the condensed consolidated balance sheets as of December 31, 2021 and March 31, 2022 was $0.

Below is summary financial information for DCIP for the periods indicated:


	Three Months Ended
	March 31, 2022			March 31, 2021
Gross revenues	$	0.5		$	5.6
Operating income (loss)	$	(0.5	)	$	4.0
Net income (loss)	$

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

CINEMARK USA INC /TX 10-Q