Cinemark, the nation’s third-largest exhibition chain, specified in a recent 8-K filing that its layoffs in the wake of closing theaters March 18 due to the COVID-19 pandemic count 17,500 domestic hourly theater employees. In addition, 50% of their Plano, TX headquarter employees were furloughed at 20% of their salary (with full benefits), with the reduction of remaining employees’ salaries at 50%.
All of this is part of the circuit’s cash-saving initiative to remain solvent. In addition to yesterday’s announcement that Cinemark is selling $250M in debt securities, the chain also announced that they are suspending a quarterly dividend which will save them another $42M quarterly. The latest 8-K also mentioned that Cinemark is working with landlords and major suppliers “to modify the timing of certain contractual payments.”
In addition, thanks to the recent passing of the CARES Act, Cinemark said that they expect to receive an estimated $20M cash tax refund in 2020 “related to qualified improvement property expenditures from 2018 and 2019, benefit from the ability to defer social security payroll tax matches that would otherwise be required in 2020; receive a payroll tax credit in 2020 for expenses related to paying wages and health benefits to employees who are not working as a result of closures and reduced receipts associated with COVID-19; and apply any tax loss incurred in 2020 to prior year income for a refund when our 2020 tax return is filed.”
“Although we are reviewing, and intend to seek, any available potential benefits under the CARES Act, including those described above, we cannot predict the manner in which such benefits will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all,” read the 8-K.
Last Friday in an annual proxy statement, it was reported that Cinemark CEO Mark Zoradi, earned $6.3 million in total compensation for 2019, up from $5.2 million the year before. Chairman Lee Roy Mitchell earned $2.4 million last year, up from $2 million in 2018. Zoradi and the company’s board of directors earlier said they’re forgoing their salaries during the COVID-19 crisis with other executives taking 80% pay cuts during the circuit’s closure.
Cinemark specified their financial position as “strong” before COVID-19 hit with $479.4M in cash as of March 31 and that’s because they “maintained a healthy balance sheet with low leverage.”
“Even if our theatres remained closed for the remainder of the year, Cinemark USA believes that it has sufficient cash to sustain its operations for the remainder of the year, even before giving effect to this offering,” read the 8-K.
Zoradi further commented, “While Cinemark was well-positioned with approximately $0.5B in cash and 2x net leverage heading into this global pandemic, we are taking prudent steps to further safeguard our liquidity position during this unprecedented time. 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, and once again open our theatres and welcome moviegoers to experience the magic of cinematic storytelling on our big screens.”
Cinemark has 345 theaters nationwide and operates 554 theaters with 6,132 screens in 42 states domestically and 15 countries throughout South and Central America.
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