Cinemark has taken a series of measures to preserve its financial position amid the COVID-19 pandemic, including slashing pay, laying off hourly employees, furloughing employees and reducing spending, a filing shows.
The Plano movie chain has made the decision to lay off more than 17,500 of its hourly theater employees in the United States and furlough 50 percent of its corporate employees at 20 percent of salary with full benefits. The company has reduced salaries of its remaining employees by 50 percent, while also pursuing similar actions in its international markets to the extent permitted by local laws.
The company has temporarily closed all of its theaters in the U.S. and Latin America, effective March 18. Cinemark Holdings Inc. (NYSE: CNK), composed of brands that include Century, Tinseltown and Rave, operates 554 theaters.
The company’s directors, as well as CEO Mark Zoradi, have elected to take no salary. Numerous executives have voluntarily reduced their salaries by 80 percent for as long as its theaters remain closed.
"We believe the senior secured notes, along with our current cash balance and other cost reduction measures, will provide us sufficient liquidity to endure the COVID-19 crisis, even if prolonged," Zoradi said in a statement.
Cinemark has also halted all of its non-essential operating and capital expenditures such as marketing promotions and initiatives, travel and entertainment, system enhancements and other theater enhancements. The move is expected to significantly reduce its utilities, general and administrative expenses and capital expenditures on a temporary basis.
Cinemark is also working with its landlords and major suppliers to modify the timing of certain contractual payments. The company has also suspended its quarterly dividend, which is expected to preserve about $42 million each quarter.
As of March 31, Cinemark USA had a cash balance of $479.4 million, which reflects the company borrowing $98.8 million as part of a $100 million revolving credit line. Even if the company’s theaters stayed closed for the rest of the year, Cinemark USA indicates it has sufficient cash to sustain its operations for the rest of the year, the company said in the filing. The company’s liquidity position is preliminary information, unaudited and subject to completion of its financial closing procedures, and shouldn’t be viewed as a substitute for the full quarterly financial statement prepared in accordance with GAAP.
The movie theater chain is expecting to receive an approximate $20 million tax refund in 2020, related to improvement property expenditures from 2018 and 2019. The company will benefit from its ability to defer social security payroll tax matches that would otherwise be required in 2020, and receive a payroll tax credit in 2020 for expenses related to paying wages and health benefits to employees not working as a result of closures.
Cinemark USA plans to start a private offering of $250 million aggregate principal amount of senior secured notes due 2025 and the company plans to use the net proceeds of the offering for general corporate purposes, including increasing its liquidity, according to a separate news release.
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