CINEMARK USA INC /TX - FORM 10-Q

CINEMARK USA INC /TX - FORM 10-Q - August 7, 2015

Attached files

Attached files

CINEMARK USA INC /TX Reports

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EX-31.1 - EX-31.1 - CINEMARK USA INC /TX	d941945dex311.htm
EX-32.2 - EX-32.2 - CINEMARK USA INC /TX	d941945dex322.htm
EX-31.2 - EX-31.2 - CINEMARK USA INC /TX	d941945dex312.htm
EX-32.1 - EX-32.1 - CINEMARK USA INC /TX	d941945dex321.htm

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 June 30, 2015

Commission File Number: 033-47040

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 Suite 500 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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

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

As of July 31, 2015, 1,500 shares of Class A and 182,648 shares of Class B common stock were issued and outstanding.

CINEMARK USA, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014 (unaudited)		4

		Condensed Consolidated Statements of Income for the three and six months ended June 30, 2015 and 2014 (unaudited)		5

		Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 and 2014 (unaudited)		6

		Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014 (unaudited)		7

		Notes to Condensed Consolidated Financial Statements (unaudited)		8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		36

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		45

	Item 4.	Controls and Procedures		46

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings		47

	Item 1A.	Risk Factors		47

	Item 5.	Other Information		47

	Item 6.	Exhibits		52

SIGNATURES				53

Cautionary Statement Regarding Forward-Looking Statements

Certain matters within this Quarterly Report on Form 10Q include “forward–looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, the future development and expected growth of our business, projected capital expenditures, attendance at movies generally or in any of the markets in which we operate, the number or diversity of popular movies released and our ability to successfully license and exhibit popular films, national and international growth in our industry, competition from other exhibitors and alternative forms of entertainment and determinations in lawsuits in which we are defendants. 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. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. For a description of the risk factors, please review the “Risk Factors” section or other sections in the Company’s Annual Report on Form 10-K filed March 6, 2015 and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. 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.

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data, unaudited)


	June 30,			December 31,
	2015			2014
Assets
Current assets
Cash and cash equivalents	$	576,192		$	638,841
Inventories		13,969			13,419
Accounts receivable		96,921			47,917
Current income tax receivable		1,805			19,350
Current deferred tax asset		9,981			10,518
Prepaid expenses and other		15,309			10,882
Accounts receivable from parent		746			12,638

Total current assets		714,923			753,565

Theatre properties and equipment		2,630,597			2,549,092
Less accumulated depreciation and amortization		1,146,208			1,098,280

Theatre properties and equipment, net		1,484,389			1,450,812

Other assets
Goodwill		1,266,155			1,277,383
Intangible assets - net		343,954			348,024
Investment in NCM		184,771			178,939
Investments in and advances to affiliates		87,731			77,658
Long-term deferred tax asset		164			164
Deferred charges and other assets - net		82,625			77,990

Total other assets		1,965,400			1,960,158

Total assets	$	4,164,712		$	4,164,535

Liabilities and equity
Current liabilities
Current portion of long-term debt	$	8,423		$	8,423
Current portion of capital lease obligations		17,917			16,494
Current income tax payable		15,896			6,396
Current liability for uncertain tax positions		8,431			7,283
Accounts payable and accrued expenses		368,029			375,287

Total current liabilities		418,696			413,883
Long-term liabilities
Long-term debt, less current portion		1,811,056			1,814,574
Capital lease obligations, less current portion		201,493			201,978
Long-term deferred tax liability		132,104			140,973
Long-term liability for uncertain tax positions		8,523			8,410
Deferred lease expenses		44,038			46,003
Deferred revenue - NCM		346,491			335,219
Other long-term liabilities		65,342			66,772

Total long-term liabilities		2,609,047			2,613,929

Commitments and contingencies (see Note 16)

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		49,543			49,543
Treasury stock, 57,245 Class B shares at cost		(24,233	)		(24,233	)
Additional paid-in-capital		1,229,504			1,221,179
Retained Earnings		62,839			24,677
Accumulated other comprehensive loss		(191,732	)		(144,772	)

Total Cinemark USA, Inc.’s stockholder’s equity		1,125,921			1,126,394
Noncontrolling interests		11,048			10,329

Total equity		1,136,969			1,136,723

Total liabilities and equity	$	4,164,712		$	4,164,535

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

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data, unaudited)


	Three months ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Revenues
Admissions	$	502,963		$	455,726		$	903,625		$	836,640
Concession		259,530			226,417			473,957			419,440
Other		37,439			35,720			67,748			64,063

Total revenues		799,932			717,863			1,445,330			1,320,143
Cost of operations
Film rentals and advertising		285,303			249,198			500,962			449,855
Concession supplies		40,903			35,336			73,406			65,389
Salaries and wages		76,528			69,942			145,751			134,293
Facility lease expense		82,391			80,647			162,008			159,004
Utilities and other		85,138			78,570			160,495			154,502
General and administrative expenses		38,449			38,752			75,763			77,492
Depreciation and amortization		46,569			43,881			91,901			86,377
Impairment of long-lived assets		3,528			430			4,322			784
Loss on sale of assets and other		5,802			3,276			4,352			6,129

Total cost of operations		664,611			600,032			1,218,960			1,133,825

Operating income		135,321			117,831			226,370			186,318

Other income (expense)
Interest expense		(28,304	)		(28,286	)		(56,511	)		(56,766	)
Interest income		2,875			1,030			4,394			2,044
Foreign currency exchange gain (loss)		1,439			1,825			(6,767	)		4,877
Loss on amendment to debt agreement		(925	)		—			(925	)		—
Distributions from NCM		—			1,180			8,499			10,677
Equity in income of affiliates		4,086			3,600			9,325			7,220

Total other expense		(20,829	)		(20,651	)		(41,985	)		(31,948	)

Income before income taxes		114,492			97,180			184,385			154,370
Income taxes		43,089			24,446			69,700			45,549

Net income	$	71,403		$	72,734		$	114,685		$	108,821
Less: Net income attributable to noncontrolling interests		632			403			1,013			656

Net income attributable to Cinemark USA, Inc.	$	70,771		$	72,331		$	113,672		$	108,165

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

CINEMARK USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)


	Three months ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Net income	$	71,403		$	72,734		$	114,685		$	108,821
Other comprehensive income (loss), net of tax
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of settlements, net of taxes of $504, $391, $958 and $759		855			661			1,612			1,158
Unrealized gain (loss) due to fair value adjustments on available-for-sale securities, net of taxes of $(209), $724, $236 and $1,916		(354	)		1,221			412			3,244
Other comprehensive income (loss) in equity method investments		(3,322	)		134			(2,938	)		396
Foreign currency translation adjustments		628			8,346			(46,047	)		(843	)

Total other comprehensive income (loss), net of tax		(2,193	)		10,362			(46,961	)		3,955

Total comprehensive income, net of tax		69,210			83,096			67,724			112,776
Comprehensive income attributable to noncontrolling interests		(626	)		(405	)		(1,013	)		(664	)

Comprehensive income attributable to Cinemark USA, Inc.	$	68,584		$	82,691		$	66,711		$	112,112

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 thousands, unaudited)


	Six months ended June 30,
	2015			2014
Operating activities
Net income	$	114,685		$	108,821

Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		90,707			85,032
Amortization of intangible and other assets and favorable/unfavorable leases		1,194			1,345
Amortization of long-term prepaid rents		1,382			785
Amortization of debt issue costs		2,600			2,623
Amortization of deferred revenues, deferred lease incentives and other		(6,759	)		(6,732	)
Impairment of long-lived assets		4,322			784
Share based awards compensation expense		6,082			6,058
Loss on sale of assets and other		4,352			6,129
Deferred lease expenses		(1,288	)		1,848
Equity in income of affiliates		(9,325	)		(7,220	)
Deferred income tax expense		(7,942	)		(22,003	)
Distributions from equity investees		8,309			8,352
Changes in assets and liabilities and other		(27,911	)		(26,304	)

Net cash provided by operating activities		180,408			159,518
Investing activities
Additions to theatre properties and equipment and other		(155,712	)		(102,563	)
Acquisition of theatre in Brazil		(2,651	)		—
Proceeds from sale of theatre properties and equipment and other		4,973			1,547
Investment in joint ventures and other		(1,777	)		(1,896	)

Net cash used for investing activities		(155,167	)		(102,912	)
Financing activities
Dividends paid to parent		(57,575	)		(57,500	)
Payroll taxes paid as a result of restricted stock withholdings		(4,748	)		(9,776	)
Repayments of long-term debt		(3,516	)		(4,952	)
Payment of debt issue costs		(6,957	)		—
Payments on capital leases		(7,959	)		(6,827	)
Other		1,950			3,340

Net cash used for financing activities		(78,805	)		(75,715	)
Effect of exchange rate changes on cash and cash equivalents		(9,085	)		(2,748	)

Decrease in cash and cash equivalents		(62,649	)		(21,857	)
Cash and cash equivalents:
Beginning of period		638,841			599,894

End of period	$	576,192		$	578,037

Supplemental information (see Note 13)

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 thousands, except share and per share data

1. The Company and Basis of Presentation

Cinemark USA, Inc. and subsidiaries (the “Company”), a wholly-owned subsidiary of Cinemark Holdings, Inc., operates 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 and Curacao.

The accompanying condensed consolidated balance sheet as of December 31, 2014, 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 that the Company has control of 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, 2014, included in the Annual Report on Form 10-K filed March 6, 2015 by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the six months ended June 30, 2015 are not necessarily indicative of the results to be achieved for the full year.

2. New Accounting Pronouncements

In January 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, (“ASU 2015-01”). ASU 2015-01 eliminates the concept of an extraordinary item from GAAP. With this update, there is no longer a need to segregate extraordinary items from the results of ordinary operations, separately present an extraordinary item on its income statement, net of tax, after income from continuing operations or disclose income taxes and earnings-per-share data applicable to an extraordinary item. However, presentation and disclosure requirements for items that are unusual in nature and occur infrequently still apply. ASU 2015-01 is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company has elected to early adopt ASU 2015-01. There is no impact of adoption on the condensed consolidated financial statements.

In February 2015, the FASB issued Accounting Standards Update 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, (“ASU 2015-02”). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, ASU 2015-02 modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with certain VIEs. ASU 2015-02 also provides a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU 2015-02 is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2015-02 on its condensed consolidated financial statements.

In April 2015, the FASB issued Accounting Standards Update 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company plans to adopt this ASU effective January 1, 2016 and will revise its presentation of debt issue costs at that time.

In April 2015, the FASB issued Accounting Standards Update 2015-05, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in Cloud Computing Arrangement, (“ASU 2015-05”). ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP for a customer’s accounting for service contracts. In addition, the guidance in this Update supersedes paragraph 350-40-25-16. Consequently, all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets. ASU 2015-05 is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company has elected to early adopt ASU 2015-05. There is no impact of adoption on the condensed consolidated financial statements.

In July 2015, the FASB issued Accounting Standards Update 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, (“ASU 2015-11”). ASU 2015-11 affects reporting entities that measure inventory using first-in, first-out (FIFO) or average cost. Specifically, ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company does not expect ASU 2015-11 to have an impact on its condensed consolidated financial statements.

3. Long Term Debt Activity

Amended Senior Secured Credit Facility

On May 8, 2015, the Company amended its senior secured credit facility (“Amended and Restated Credit Agreement”), to extend the maturity of the $700,000 term loan from December 2019 to May 2022. Quarterly principal payments in the amount of $1,750 are due on the term loan through March 31, 2022, with the remaining principal of $635,250 due on May 8, 2022. The Company incurred debt issue costs of approximately $6,875 in connection with the amendment, which are reflected in deferred charges and other assets-net on the condensed consolidated balance sheet as of June 30, 2015. In addition, the Company incurred approximately $925 in legal and other fees that are reflected as loss on amendment to debt agreement on the condensed consolidated statements of income for the three and six months ended June 30, 2015.

Fair Value of Long-Term Debt

The Company estimates the fair value of its long-term debt using the market approach, which utilizes quoted market prices that fall under Level 2 of the U.S. GAAP fair value hierarchy as defined by FASB Accounting Standards Codification (“ASC”) Topic 820-10-35, Fair Value Measurement. The carrying value of the Company’s long-term debt was $1,819,479 and $1,822,997 as of June 30, 2015 and December 31, 2014, respectively. The fair value of the Company’s long-term debt was $1,809,866 and $1,790,987 as of June 30, 2015 and December 31, 2014, respectively.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

4. Equity

Below is a summary of changes in stockholder’s equity attributable to Cinemark USA, Inc., noncontrolling interests and total equity for the six months ended June 30, 2015 and 2014:


	Cinemark
	USA, Inc.
	Stockholder’s			Noncontrolling			Total
	Equity			Interests			Equity
Balance at January 1, 2015	$	1,126,394		$	10,329		$	1,136,723
Share based awards compensation expense		6,082			—			6,082
Tax benefit related to share based awards vesting		2,244			—			2,244
Cash and noncash dividends paid to parent		(75,510	)		—			(75,510	)
Dividends paid to noncontrolling interests		—			(294	)		(294	)
Net income		113,672			1,013			114,685
Fair value adjustments on interest rate swap agreements designated as hedges, net of settlements, net of taxes of $958		1,612			—			1,612
Fair value adjustments on available-for-sale securities, net of taxes of $236		412			—			412
Other comprehensive loss in equity method investees		(2,938	)		—			(2,938	)
Foreign currency translation adjustments		(46,047	)		—			(46,047	)

Balance at June 30, 2015	$	1,125,921		$	11,048		$	1,136,969


	Cinemark
	USA, Inc.
	Stockholder’s			Noncontrolling			Total
	Equity			Interests			Equity
Balance at January 1, 2014	$	1,095,286		$	8,995		$	1,104,281
Share based awards compensation expense		6,058			—			6,058
Tax benefit related to share based awards vesting		3,561			—			3,561
Dividends paid to parent		(57,500	)		—			(57,500	)
Dividends paid to noncontrolling interests		—			(221	)		(221	)
Net income		108,165			656			108,821
Fair value adjustments on interest rate swap agreements designated as hedges, net of settlements, net of taxes of $759		1,158			—			1,158
Fair value adjustments on available-for-sale securities, net of taxes of $1,916		3,244			—			3,244
Other comprehensive income in equity method investments		396			—			396
Foreign currency translation adjustments		(851	)		8			(843	)

Balance at June 30, 2014	$	1,159,517		$	9,438		$	1,168,955

5. Investment in National CineMedia

The Company has an investment in National CineMedia, LLC (“NCM”). NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. Upon joining NCM, the Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM provides advertising, promotion and event services to our theatres. As described further in Note 4 to the Company’s financial statements as included in its 2014 Annual Report on Form 10-K, on February 13, 2007, National CineMedia, Inc. (“NCM, Inc.”), an entity that serves as the sole manager of NCM, completed an initial public offering (“IPO”) of its common stock. In connection with the NCM Inc. initial public offering, the Company amended its operating agreement and the ESA. Following the NCM, Inc. IPO, the Company does not recognize undistributed equity in the earnings on its original NCM membership units (referred to herein as the Company’s Tranche 1 Investment) until NCM’s future net earnings, less distributions received, surpass the amount of the excess distribution. The Company recognizes equity in earnings on its Tranche 1 Investment only to the extent it receives cash distributions from NCM. The Company recognizes cash distributions it receives from NCM on its Tranche 1 Investment as a component of earnings as Distributions from NCM. The Company believes that the accounting model provided by ASC 323-10-35-22 for recognition of equity investee losses in excess of an investor’s basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

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


							Distributions									Other
	Investment			Deferred			from			Equity in			Other			Comprehensive		Cash
	in NCM			Revenue			NCM			Earnings			Revenue			Income		Received
Balance as of January 1, 2015	$	178,939		$	(335,219	)
Receipt of common units due to annual common unit adjustment		15,421			(15,421	)	$	—		$	—		$	—		$	—	$	—
Revenues earned under ESA ⁽¹⁾		—			—			—			—			(5,681	)		—		5,681
Receipt of excess cash distributions		(5,393	)		—			(6,258	)		—			—			—		11,651
Receipt under tax receivable agreement		(1,871	)		—			(2,241	)		—			—			—		4,112
Equity in earnings		409			—			—			(409	)		—			—		—
Equity in other comprehensive income		(2,734	)		—			—			—			—			2,734		—
Amortization of deferred revenue		—			4,149			—			—			(4,149	)		—		—

Balance as of and for the period ended June 30, 2015	$	184,771		$	(346,491	)	$	(8,499	)	$	(409	)	$	(9,830	)	$	2,734	$	21,444

⁽¹⁾	Amount includes 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 $4,980.

On May 5, 2014, NCM, Inc. announced that it had entered into a merger agreement to acquire Screenvision, LLC. On November 3, 2014, the U.S. Department of Justice (“DOJ”) filed an antitrust lawsuit seeking to enjoin the proposed merger between NCM, Inc. and Screenvision, LLC. On March 16, 2015, NCM, Inc. announced that it had agreed with Screenvision, LLC to terminate the merger agreement. The termination of the merger agreement resulted in a $26.8 million termination payment to Screenvision by NCM, Inc. NCM indemnified NCM, Inc. for the termination fee. The impact of the termination payment and related merger costs resulted in NCM not making an excess cash distribution to its shareholders during the second quarter of 2015.

During the three months ended June 30, 2015 and 2014, the Company recorded equity in loss of approximately $386 and $75, respectively. During the six months ended June 30, 2015 and 2014, the Company recorded equity in earnings of approximately $409 and $357, respectively

Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCM, Inc. and the Company, AMC Entertainment, Inc. (“AMC”) and Regal Entertainment Group (“Regal”), 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 by each Founding Member. As further discussed in Note 4 to the Company’s financial statements as included in its 2014 Annual Report on Form 10-K, the common units received are recorded at fair value as an increase in the Company’s investment in NCM with an offset to deferred revenue. The deferred revenue is amortized over the remaining term of the ESA. During March 2015, NCM performed its annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, the Company received an additional 1,074,910 common units of NCM, each of which is convertible into one share of NCM, Inc. common stock. The Company recorded the additional common units received at fair value with a corresponding adjustment to deferred revenue of approximately $15,421. The deferred revenue will be recognized over the remaining term of the ESA, which is approximately 21 years.

As of June 30, 2015, the Company owned a total of 25,631,046 common units of NCM, representing an ownership interest of approximately 20%.

Below is summary financial information for NCM for the three and six months ended June 26, 2014 and the three months ended April 2, 2015 (the financial information for the period ended June 25, 2015 is not yet available):


	Three Months Ended			Three Months Ended		Six Months Ended
	April 2, 2015			June 26, 2014		June 26, 2014
Gross revenues	$	76,867		$	99,958	$	170,173
Operating income	$	14,618		$	42,131	$	54,898
Net earnings (loss)	$	(38,729	)	$	26,467	$	23,703

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

6. Other Investments

The Company had the following other investments at June 30, 2015:


Digital Cinema Implementation Partners (“DCIP”), equity method investment	$	59,622
RealD, Inc. (“RealD”), investment in marketable security		15,077
AC JV, LLC, equity method investment		8,874
Digital Cinema Distribution Coalition (“DCDC”), equity method investment		2,562
Other		1,596

Total	$	87,731

Below is a summary of activity for each of the investments for the three months ended June 30, 2015:


	DCIP			RealD		AC JV, LLC		DCDC		Other			Total
Balance at January 1, 2015	$	51,277		$	14,429	$	7,899	$	2,438	$	1,615		$	77,658
Cash contributions, net of cash distributions received		732			—		—		—		—			732
Equity in income		7,817			—		975		124		—			8,916
Equity in comprehensive loss		(204	)		—		—		—		—			(204	)
Unrealized holding gain		—			648		—		—		—			648
Other		—			—		—		—		(19	)		(19	)

Balance at June 30, 2015	$	59,622		$	15,077	$	8,874	$	2,562	$	1,596		$	87,731

Digital Cinema Implementation Partners LLC

On February 12, 2007, the Company, AMC and Regal entered into a joint venture known as Digital Cinema Implementation Partners LLC 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. On March 10, 2010, the Company signed a master equipment lease agreement and other related agreements (collectively the “Agreements”) with Kasima LLC (“Kasima”), which is an indirect subsidiary of DCIP and a related party to the Company. Upon signing the Agreements, the Company contributed the majority of its U.S. digital projection systems to DCIP, which DCIP then contributed to Kasima. The Company has a variable interest in Kasima through the terms of its master equipment lease agreement; however, the Company has determined that it is not the primary beneficiary of Kasima, as the Company does not have the ability to direct the activities of Kasima that most significantly impact Kasima’s economic performance. As of June 30, 2015, the Company had a 33% voting interest in DCIP and a 24.3% economic interest in DCIP. The Company accounts for its investment in DCIP and its subsidiaries under the equity method of accounting.

Below is summary financial information for DCIP for the three and six months ended June 30, 2015 and 2014.


	Three Months Ended				Six Months Ended
	June 30, 2015		June 30, 2014		June 30, 2015		June 30, 2014
Revenues	$	39,852	$	43,396	$	80,593	$	86,084
Operating income	$	22,996	$	26,700	$	46,760	$	51,004
Net income	$	16,521	$	19,065	$	33,965	$	24,593

As of June 30, 2015, the Company had 3,714 digital projection systems being leased under the master equipment lease agreement with Kasima. The Company made equipment lease payments of approximately $2,049 and $2,000 during the six months ended June 30, 2015 and 2014, respectively, which are included in utilities and other costs on the condensed consolidated statements of income.

RealD, Inc.

The Company licenses 3-D systems from RealD. The Company owns 1,222,780 shares of RealD and accounts for its investment in RealD as a marketable security. The Company has determined that its RealD shares are available-for-sale securities in accordance with ASC Topic 320-10-35-1, therefore unrealized holding gains and losses are reported as a component of accumulated other comprehensive loss until realized.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

As of June 30, 2015, the estimated fair value of the Company’s investment in RealD was $15,077, which is based on the closing price of RealD’s common stock on June 30, 2015, and falls under Level 1 of the U.S. GAAP fair value hierarchy as defined by ASC Topic 820-10-35. The Company paid licensing fees of $7,881 and $8,822 during the six months ended June 30, 2015 and 2014, respectively, which are included in utilities and other costs on the condensed consolidated statements of income.

AC JV, LLC

During December 2013, the Company, Regal, AMC and NCM entered into a series of agreements that resulted in the formation of a new joint venture that now owns the “Fathom Events” division (consisting of Fathom Events and Fathom Consumer Events) formerly operated by NCM. The Fathom Events business focuses on the marketing and distribution of live and pre-recorded entertainment programming to various theatre operators to provide additional programs to augment their feature film schedule. The Fathom Consumer Events business includes live and pre-recorded concerts featuring contemporary music, opera and symphony, DVD product releases and marketing events, theatrical premieres, Broadway plays, live sporting events and other special events. The Company paid event fees of $5,970 and $0 for the six months ended June 30, 2015 and 2014, respectively, which are included in film rentals and advertising costs on the condensed consolidated statements of income.

The joint venture, AC JV, LLC (“AC”), was formed by the Founding Members and NCM. NCM, under a contribution agreement, contributed the assets associated with its Fathom Events division to AC in exchange for 97% ownership of the Class A Units of AC. Under a separate contribution agreement, the Founding Members each contributed cash of approximately $268 to AC in exchange for 1% of the Class A Units of AC. Subsequently, NCM and the Founding Members entered into a Membership Interest Purchase Agreement, under which NCM sold each of the Founding Members 31% of its Class A Units in AC, the aggregate value of which was determined to be $25,000, in exchange for a six-year Promissory Note. Each of the Founding Members’ Promissory Notes were originally for $8,333, bear interest at 5% per annum and require annual principal and interest payments, with the first of such payments made during December 2014.

Digital Cinema Distribution Coalition

The Company is a party to a joint venture with certain exhibitors and distributors called DCDC, which operates a satellite distribution network that distributes all digital content to U.S. theatres via satellite. The Company has an approximate 14.6% ownership in DCDC. The Company paid approximately $390 and $382 during the six months ended June 30, 2015 and 2014, respectively, related to content delivery services provided by DCDC. These fees are included in film rentals and advertising costs on the condensed consolidated statements of income.

7. Share Based Awards

Restricted Stock – During the six months ended June 30, 2015, Cinemark Holdings, Inc. granted 223,976 shares of restricted stock to its directors and employees of the Company. The fair value of the restricted stock granted was determined based on the market value of Cinemark Holdings, Inc.’s common stock on the dates of grant, which ranged from $40.75 to $43.28 per share. The Company assumed forfeiture rates ranging from 0% to 10% for the restricted stock awards. Restricted stock granted to Cinemark Holdings, Inc.’s directors vests over one year. Restricted stock granted to employees vests over service periods that range from one year to four years. The recipients of restricted stock are entitled to receive dividends and to vote their respective shares, however, the sale and transfer of the restricted shares is prohibited during the restriction period.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Below is a summary of restricted stock activity for the six months ended June 30, 2015:


	Shares of			Weighted Average
	Restricted			Grant Date
	Stock			Fair Value
Outstanding at January 1, 2015		878,897		$	24.92
Granted		223,976		$	42.80
Vested		(326,168	)	$	23.62
Forfeited		(11,937	)	$	25.98

Outstanding at June 30, 2015		764,768		$	30.71

Unvested restricted stock at June 30, 2015		764,768		$	30.71


	Six Months Ended June 30,
	2015		2014
Compensation expense recognized during the period ⁽¹⁾	$	4,343	$	4,455
Fair value of restricted shares held by Company employees that vested during the period	$	13,161	$	17,490
Fair value of restricted shares held by Cinemark Holdings, Inc.’s directors that vested during period	$	1,147	$	1,081
Income tax deduction upon vesting of restricted stock awards ⁽²⁾	$	3,305	$	6,655

⁽¹⁾	Cinemark Holdings, Inc. recorded an additional $393 and $531 of compensation expense related to these restricted stock awards during the quarters ended June 30, 2015 and 2014, respectively.

⁽²⁾	Cinemark Holdings, Inc. recognized an additional $483 and $454 in income tax deductions during the six months ended June 30, 2015 and 2014, respectively.

As of June 30, 2015, the estimated remaining unrecognized compensation expense related to restricted stock awards was $16,667, of which $15,824 will be recognized by the Company and an additional $843 of which will be recognized by Cinemark Holdings, Inc. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.

Restricted Stock Units – During the six months ended June 30, 2015, Cinemark Holdings, Inc. granted restricted stock units representing 142,922 hypothetical shares of its common stock to employees of the Company. The restricted stock units vest based on a combination of financial performance factors and continued service. The financial performance factors are based on an implied equity value concept that determines an internal rate of return (“IRR”) during the two fiscal year periods ending December 31, 2016 based on a formula utilizing a multiple of Adjusted EBITDA subject to certain specified adjustments as specified by the Compensation Committee of Cinemark Holdings, Inc.’s board of directors prior to the grant date. The financial performance factors for the restricted stock units have a threshold, target and maximum level of payment opportunity and vest on a prorata basis according to the IRR achieved by the Company during the performance period. If the IRR for the two-year period is at least 7.5%, which is the threshold, one-third of the restricted stock units vest. If the IRR for the two-year period is at least 9.5%, which is the target, two-thirds of the restricted stock units vest. If the IRR for the two-year period is at least 11.5%, which is the maximum, 100% of the restricted stock units vest. Grantees are eligible to receive a ratable portion of the common stock issuable if the IRR is within the targets previously noted. All payouts of restricted stock units that vest will be subject to an additional two-year service requirement and will be paid in the form of Cinemark Holdings, Inc.’s common stock if the participant continues to provide services through March 2019, which is the fourth anniversary of the grant date. Restricted stock unit award participants are eligible to receive dividend equivalent payments from the grant date if, and at the time that, the restricted stock unit awards vest.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Below is a table summarizing the potential number of shares that could vest under restricted stock unit awards granted during the six months ended June 30, 2015 at each of the three target levels of financial performance (excluding forfeiture assumptions):


	Number of
	Shares		Value at
	Vesting		Grant
at IRR of at least 7.5%		47,640	$	2,057
at IRR of at least 9.5%		95,282	$	4,115
at IRR of at least 11.5%		142,922	$	6,173

Due to the fact that the IRR for the two-year performance period could not be determined at the time of grant, the Company estimated that the most likely outcome is the achievement of the mid-point IRR level. The fair value of the restricted stock unit awards was determined based on the market value of Cinemark Holdings, Inc.’s common stock on the dates of grant, which ranged from $40.75 to $43.28 per share. The Company assumed forfeiture rates ranging from 0% to 5% for the restricted stock unit awards. If during the service period, additional information becomes available to lead the Company to believe a different IRR level will be achieved for the two-year performance period, the Company will reassess the number of units that will vest for the grant and adjust its compensation expense accordingly on a prospective basis over the remaining service period.


	Six Months Ended June 30,
	2015		2014
Number of restricted stock unit awards that vested during the period		123,769		392,238
Fair value of restricted stock unit awards that vested during the period	$	5,483	$	11,312
Accumulated dividends paid by Cinemark Holdings, Inc. upon vesting of restricted stock unit awards	$	442	$	1,341
Income tax benefit recognized upon vesting of restricted stock unit awards	$	2,303	$	4,751
Compensation expense recognized during the period	$	1,739	$	1,603

As of June 30, 2015, the estimated remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $7,008. The weighted average period over which this remaining compensation expense will be recognized is approximately two years. As of June 30, 2015, the Company had restricted stock units outstanding that represented a total of 544,081 hypothetical shares of common stock, net of actual cumulative forfeitures of 19,934 units, assuming an IRR of 11.1% was reached for the 2012 grant and the maximum IRR level is achieved for each of the 2013, 2014, and 2015 grants.

8. Interest Rate Swap Agreements

The Company is currently a party to three interest rate swap agreements that are used to hedge interest rate risk associated with the variable interest rates on the Company’s term loan debt and qualify for cash flow hedge accounting. The fair values of the interest rate swaps are recorded on the Company’s condensed consolidated balance sheet as an asset or liability with the effective portion of the interest rate swaps’ gains or losses reported as a component of accumulated other comprehensive loss and the ineffective portion reported in earnings. The changes in fair values 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 these agreements. Therefore, the Company’s measurements use significant unobservable inputs, which fall in Level 3 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35. There were no changes in valuation techniques during the period and no transfers in or out of Level 3. See Note 11 for a summary of unrealized gains or losses recorded in accumulated other comprehensive loss and earnings.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Below is a summary of the Company’s current interest rate swap agreements designated as cash flow hedges as of June 30, 2015:


Nominal Amount	Effective Date	Pay Rate			Receive Rate	Expiration Date	Estimated Total Fair Value at June 30, 2015⁽¹⁾
$ 175,000	December 2010		1.3975	%	1-Month LIBOR	September 2015	$	439
$ 175,000	December 2010		1.4000	%	1-Month LIBOR	September 2015		446
$ 100,000	November 2011		1.7150	%	1-Month LIBOR	April 2016		1,117

$ 450,000							$	2,002

⁽¹⁾	Included in accounts payable and accrued expenses on the condensed consolidated balance sheet as of June 30, 2015.

The changes in accumulated other comprehensive loss, net of taxes, related to the Company’s interest rate swap agreements for the three and six months ended June 30, 2015 and 2014 were as follows:


	Interest Rate Swaps
	2015			2014
Beginning balances – April 1	$	(2,113	)	$	(5,219	)

Other comprehensive loss before reclassifications, net of taxes		(646	)		(848	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of taxes		1,501			1,509

Net other comprehensive income		855			661

Ending balances - June 30	$	(1,258	)	$	(4,558	)


	Interest Rate Swaps
	2015			2014
Beginning balances – January 1	$	(2,870	)	$	(5,716	)

Other comprehensive loss before reclassifications, net of taxes		(1,335	)		(1,827	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of taxes		2,947			2,985

Net other comprehensive income		1,612			1,158

Ending balances – June 30	$	(1,258	)	$	(4,558	)

9. Goodwill and Other Intangible Assets

The Company’s goodwill was as follows:


	U.S. Operating Segment		International Operating Segment			Total
Balance at January 1, 2015 ⁽¹⁾	$	1,156,556	$	120,827		$	1,277,383
Acquisition of Brazil theatre		—		356			356
Foreign currency translation adjustments		—		(11,584	)		(11,584	)

Balance at June 30, 2015 ⁽¹⁾	$	1,156,556	$	109,599		$	1,266,155

⁽¹⁾	Balances are presented net of accumulated impairment losses of $214,031 for the U.S. operating segment and $27,622 for the international operating segment.

The Company evaluates goodwill for impairment on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of goodwill might exceed its estimated fair value. The Company evaluates goodwill for impairment at the reporting unit level and has allocated goodwill to the reporting unit based on an estimate of its relative fair value. The Company considers the reporting unit to be each of its eighteen regions in the U.S. and each of its nine countries internationally (Honduras, El Salvador, Nicaragua, Costa Rica,

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Panama and Guatemala are considered one reporting unit). Goodwill impairment is evaluated using a two-step approach requiring the Company to compute the fair value of a reporting unit and compare it with its carrying value. If the carrying value of the reporting unit exceeds the estimated fair value, a second step is performed to measure the potential goodwill impairment. Significant judgment is involved in estimating cash flows and fair value. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on historical and projected operating performance, recent market transactions and current industry trading multiples. Fair value is determined based on a multiple of cash flows, which was eight times for the evaluation performed during the fourth quarter of 2014.

No events or changes in circumstances occurred during the six months ended June 30, 2015 that indicated the carrying value of goodwill might exceed its estimated fair value.

Intangible assets consisted of the following:


	Balance at January 1,									Balance at June 30,
	2015			Amortization			Other ⁽¹⁾			2015
Intangible assets with finite lives:
Gross carrying amount	$	99,922		$	—		$	1,054		$	100,976
Accumulated amortization		(52,232	)		(2,909	)		(1,785	)		(56,926	)

Total net intangible assets with finite lives	$	47,690			(2,909	)		(731	)	$	44,050
Intangible assets with indefinite lives:
Tradename		300,334			—			(430	)		299,904

Total intangible assets — net	$	348,024		$	(2,909	)	$	(1,161	)	$	343,954

⁽¹⁾	Includes write-off of intangible assets for closed theatres, impairment of a favorable lease and foreign currency translation adjustments.

Estimated aggregate future amortization expense for intangible assets is as follows:


For the six months ended December 31, 2015	$	2,810
For the twelve months ended December 31, 2016		5,585
For the twelve months ended December 31, 2017		5,052
For the twelve months ended December 31, 2018		4,925
For the twelve months ended December 31, 2019		4,016
Thereafter		21,662

Total	$	44,050

10. Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment indicators on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable.

The Company considers actual theatre level cash flows, budgeted theatre level cash flows, theatre property and equipment carrying values, amortizing intangible asset carrying values, the age of a recently built theatre, competitive theatres in the marketplace, the impact of recent ticket price changes, available lease renewal options and other factors considered relevant in its assessment of impairment of individual theatre assets. Long-lived assets are evaluated for impairment on an individual theatre basis, which the Company believes is the lowest applicable level for which there are identifiable cash flows. The impairment evaluation is based on the estimated undiscounted cash flows from continuing use through the remainder of the theatre’s useful life. The remainder of the theatre’s useful life correlates with the available remaining lease period, which includes the probability of renewal periods, for leased properties and the lesser of twenty years or the building’s remaining useful life for fee owned properties. If the estimated undiscounted cash flows are not sufficient to recover a long-lived asset’s carrying value, the Company then compares the carrying value of the asset group with its estimated fair value. When estimated fair value is determined to be lower than the carrying value of the asset group, the asset group is written down to its estimated fair value. Significant

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

judgment is involved in estimating cash flows and fair value. Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on historical and projected operating performance, recent market transactions and current industry trading multiples. Fair value is determined based on a multiple of cash flows, which was six and a half times for the evaluations performed during the six months ended June 30, 2015 and 2014. As of June 30, 2015, the estimated aggregate fair value of the long-lived assets impaired during the six months ended June 30, 2015 was approximately $1,649.

The long-lived asset impairment charges recorded during each of the periods presented are specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
U.S. theatre properties	$	2,536	$	430	$	3,330	$	784
U.S. intangible assets		992		—		992		—
International theatre properties		—		—		—		—

Impairment of long-lived assets	$	3,528	$	430	$	4,322	$	784

11. Fair Value Measurements

The Company determines fair value measurements in accordance with FASB ASC Topic 820, which establishes a fair value hierarchy under which an asset or liability is categorized based on the lowest level of input significant to its fair value measurement. The levels of input defined by FASB ASC Topic 820 are as follows:

Level 1 – quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date;

Level 2 – other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3 – unobservable and should be used to measure fair value to the extent that observable inputs are not available.

Below is a summary of assets and liabilities measured at fair value on a recurring basis by the Company under FASB ASC Topic 820 as of June 30, 2015:


	Carrying			Fair Value
Description	Value			Level 1		Level 2		Level 3
Interest rate swap liabilities – current (see Note 8)	$	(2,002	)	$	—	$	—	$	(2,002	)
Investment in RealD (see Note 6)	$	15,077		$	15,077	$	—	$	—

Below is a summary of assets and liabilities measured at fair value on a recurring basis by the Company under FASB ASC Topic 820 as of December 31, 2014:


	Carrying			Fair Value
Description	Value			Level 1		Level 2		Level 3
Interest rate swap liabilities – current (see Note 8)	$	(4,255	)	$	—	$	—	$	(4,255	)
Interest rate swap liabilities – long term (see Note 8)	$	(317	)	$	—	$	—	$	(317	)
Investment in RealD (see Note 6)	$	14,429		$	14,429	$	—	$	—

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

Below is a reconciliation of the beginning and ending balance for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


	Liabilities
	2015			2014
Beginning balances - January 1	$	4,572		$	9,176
Total loss included in accumulated other comprehensive loss		377			1,068
Settlements		(2,947	)		(2,985	)

Ending balances – June 30	$	2,002		$	7,259

The Company also uses the market approach for fair value measurements on a nonrecurring basis in the impairment evaluations of its long-lived assets (see Note 9 and Note 10). Additionally, the Company uses the market approach to estimate the fair value of its long-term debt (see Note 3). There were no changes in valuation techniques and there were no transfers in or out of Level 1, Level 2 or Level 3 during the six months ended June 30, 2015.

12. Foreign Currency Translation

The accumulated other comprehensive loss account in stockholder’s equity of $191,732 and $144,772 at June 30, 2015 and December 31, 2014, respectively, includes cumulative foreign currency adjustments of $193,977 and $147,930, respectively, from translating the financial statements of the Company’s international subsidiaries, and also includes the change in fair values of the Company’s interest rate swap agreements that are designated as hedges and the change in fair value of the Company’s available-for-sale securities.

All foreign countries where the Company has operations are non-highly inflationary, and the local currency is the same as the functional currency in all of the locations. Thus, any fluctuation in the currency results in a cumulative foreign currency translation adjustment recorded to accumulated other comprehensive loss.

Below is a summary of the impact of translating the June 30, 2015 financial statements of the Company’s international subsidiaries:


					Other
					Comprehensive
					Loss for The
	Exchange Rate as of				Six Months Ended
Country	June 30, 2015		December 31, 2014		June 30, 2015
Brazil		3.16		2.69	$	(33,827	)
Argentina		9.15		8.55		(5,057	)
Peru		3.26		3.05		(2,514	)
Colombia		2,585.1		2,392.4		(2,423	)
All other						(2,226	)

					$	(46,047	)

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

13. Supplemental Cash Flow Information

The following is provided as supplemental information to the condensed consolidated statements of cash flows:


	Six Months Ended
	June 30,
	2015			2014
Cash paid for interest	$	53,667		$	53,890
Cash paid for income taxes, net of refunds received	$	44,701		$	64,540
Noncash investing and financing activities:
Change in accounts payable and accrued expenses for the acquisition of theatre properties and equipment ⁽¹⁾	$	(4,701	)	$	(4,617	)
Theatre properties acquired under capital lease	$	13,726		$	4,012
Investment in NCM – receipt of common units (see Note 5)	$	15,421		$	8,216
Noncash dividend to Cinemark Holdings, Inc.	$	17,935		$	—

⁽¹⁾	Additions to theatre properties and equipment included in accounts payable as of June 30, 2015 and December 31, 2014 were $17,936 and $13,235, respectively.

14. Segments

The Company manages its international market and its U.S. market as separate reportable operating segments, with the international segment consisting of operations in Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia and Curacao. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues, primarily screen advertising. The measure of segment profit and loss the Company uses to evaluate performance and allocate its resources is Adjusted EBITDA, as defined in the reconciliation table below. The Company does not report asset information by segment because that information is not used to evaluate the performance of or allocate resources between segments.

Below is a breakdown of selected financial information by reportable operating segment:


	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenues
U.S.	$	592,482		$	524,485		$	1,066,777		$	969,405
International		211,505			196,881			385,838			357,073
Eliminations		(4,055	)		(3,503	)		(7,285	)		(6,335	)

Total revenues	$	799,932		$	717,863		$	1,445,330		$	1,320,143

Adjusted EBITDA⁽¹⁾
U.S.	$	144,264		$	121,542		$	251,757		$	215,477
International		49,849			48,484			89,863			83,499

Total Adjusted EBITDA	$	194,113		$	170,026		$	341,620		$	298,976

Capital expenditures
U.S.	$	43,947		$	30,483		$	118,214		$	60,795
International		26,018			19,274			37,498			41,768

Total capital expenditures	$	69,965		$	49,757		$	155,712		$	102,563

⁽¹⁾	Distributions from NCM are reported entirely within the U.S. operating segment.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

The following table sets forth a reconciliation of net income to Adjusted EBITDA:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Net income	$	71,403		$	72,734		$	114,685		$	108,821
Add (deduct):
Income taxes		43,089			24,446			69,700			45,549
Interest expense ⁽¹⁾		28,304			28,286			56,511			56,766
Loss on amendment to debt agreement		925			—			925			—
Other income ⁽²⁾		(8,400	)		(6,455	)		(6,952	)		(14,141	)
Depreciation and amortization		46,569			43,881			91,901			86,377
Impairment of long-lived assets		3,528			430			4,322			784
Loss on sale of assets and other		5,802			3,276			4,352			6,129
Deferred lease expenses		(585	)		249			(1,288	)		1,848
Amortization of long-term prepaid rents		669			407			1,382			785
Share based awards compensation expense		2,809			2,772			6,082			6,058

Adjusted EBITDA	$	194,113		$	170,026		$	341,620		$	298,976

⁽¹⁾	Includes amortization of debt issue costs.

⁽²⁾	Includes interest income, foreign currency exchange gain (loss) and equity in income of affiliates and excludes distributions from NCM.

Financial Information About Geographic Areas

Below is a breakdown of selected financial information by geographic area:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
Revenues	2015			2014			2015			2014
U.S.	$	592,482		$	524,485		$	1,066,777		$	969,405
Brazil		84,320			97,501			162,613			172,900
Other international countries		127,185			99,380			223,225			184,173
Eliminations		(4,055	)		(3,503	)		(7,285	)		(6,335	)

Total	$	799,932		$	717,863		$	1,445,330		$	1,320,143


Theatre Properties and Equipment-net	June 30, 2015		December 31, 2014
U.S.	$	1,142,382	$	1,094,076
Brazil		188,667		204,107
Other international countries		153,340		152,629

Total	$	1,484,389	$	1,450,812

15. Related Party Transactions

The Company manages theatres for Laredo Theatre, Ltd. (“Laredo”). The Company is the sole general partner and owns 75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr. David Roberts, Lee Roy Mitchell’s son-in-law. Lee Roy Mitchell is Cinemark Holdings, Inc.’s Chairman of the Board of Directors and directly and indirectly owns approximately 9% of Cinemark Holdings, Inc.’s common stock. Under the agreement, management fees are paid by Laredo to the Company at a rate of 5% of annual theatre revenues. The Company recorded $313 and $279 of management fee revenues during the six months ended June 30, 2015 and 2014, respectively. All such amounts are included in the Company’s condensed consolidated financial statements with the intercompany amounts eliminated in consolidation.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

The Company leases 15 theatres and one parking facility from Syufy Enterprises, LP (“Syufy”) or affiliates of Syufy. Raymond Syufy is one of Cinemark Holdings, Inc.’s directors and is an officer of the general partner of Syufy. Of these 16 leases, 14 have fixed minimum annual rent. The two leases without minimum annual rent have rent based upon a specified percentage of gross sales as defined in the lease. For the six months ended June 30, 2015 and 2014, the Company paid total rent of approximately $11,036 and $11,643, respectively, to Syufy.

The Company has paid certain fees on behalf of its parent, Cinemark Holdings, Inc. and Cinemark Holdings, Inc. has paid income taxes and other items on behalf of the Company. The net receivable from Cinemark Holdings, Inc. as of June 30, 2015 and December 31, 2014 was $746 and $12,638, respectively.

16. Commitments and Contingencies

Joseph Amey, et al. v. Cinemark USA, Inc., Case No. 3:13cv05669, In the United States District Court for the Northern District of California, San Francisco Division. The case presents putative class action claims for damages and attorney’s fees arising from employee wage and hour claims under California law for alleged meal period, rest break, reporting time pay, unpaid wages, pay upon termination, and wage statements violations. The claims are also asserted as a representative action under the California Private Attorney General Act (“PAGA”). The Company denies the claims, denies that class certification is appropriate and denies that a PAGA representative action is appropriate, and is vigorously defending against the claims. The case is in pretrial discovery, no class action has been certified, and no representative action has been quantified or recognized. The Company denies any violation of law and plans to vigorously defend against all claims. The Company is unable to predict the outcome of the litigation or the range of potential loss, if any; however, the Company believes that its potential liability with respect to such proceeding is not material, in the aggregate, to its financial position, results of operations and cash flows. Accordingly, the Company has not established a reserve for loss in connection with this proceeding.

The Company received a Civil Investigative Demand (“CID”) from the Antitrust Division of the United States Department of Justice. The CID relates to an investigation under Sections 1 and 2 of the Sherman Act. The Company also received CIDs from the Antitrust Section of the Office of the Attorney General of the State of Ohio and later from other states regarding similar inquiries under state antitrust laws. The CIDs request the Company to answer interrogatories, and produce documents, or both, related to the investigation of matters including film clearances, potential coordination and/or communication with other major theatre circuits and related joint ventures. The Company intends to fully cooperate with all federal and state government agencies. Although the Company does not believe that it has violated any federal or state antitrust or competition laws, it cannot predict the ultimate scope, duration or outcome of these investigations.

From time to time, the Company is involved in various legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters, landlord-tenant disputes, patent claims and contractual disputes, some of which are covered by insurance. The Company believes its potential liability with respect to proceedings currently pending is not material, individually or in the aggregate, to the Company’s financial position, results of operations and cash flows.

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

17. Condensed Consolidating Financial Information of Subsidiary Guarantors

As of June 30, 2015, the Company had outstanding $400,000 aggregate principal amount of 5.125% senior notes due 2022, or the 5.125% Senior Notes, $530,000 aggregate principal amount of 4.875% senior notes due 2023, or the 4.875% Senior Notes, and $200,000 aggregate principal amount of 7.375% senior subordinated notes due 2021, or the Senior Subordinated Notes (collectively the “Notes”). The condensed consolidating financial statement information for the year ended December 31, 2014 has been recast to reflect the subsidiary guarantors as of June 30, 2015. These Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by the following subsidiaries of Cinemark USA, Inc.:

Sunnymead Cinema Corp., Cinemark Properties, Inc., Greeley Holdings, Inc., Cinemark Partners I, Inc., CNMK Investments, Inc., CNMK Texas Properties, LLC., Cinemark Concessions LLC, Century Theatres, Inc., Marin Theatre Management, LLC, Century Theatres NG, LLC, Cinearts LLC, Cinearts Sacramento, LLC, Corte Madera Theatres, LLC, Novato Theatres, LLC, San Rafael Theatres, LLC, Northbay Theatres, LLC, Century Theatres Summit Sierra, LLC and Century Theatres Seattle, LLC.

The following supplemental condensed consolidating financial information presents:

Condensed consolidating balance sheet information as of December 31, 2014 and June 30, 2015, condensed consolidating statements of income information for the three and six months ended June 30, 2014 and 2015, condensed consolidating statements of comprehensive income (loss) information for the three and six months ended June 30, 2014 and 2015 and condensed consolidating statements of cash flows information for the six months ended June 30, 2014 and 2015.

Cinemark USA, Inc. (the “Parent” and “Issuer”), combined Guarantor Subsidiaries and combined Non-Guarantor Subsidiaries with their investments in subsidiaries accounted for using the equity method of accounting and therefore, the Parent column reflects the equity income of its Guarantor Subsidiaries and Non-Guarantor Subsidiaries, which are also separately reflected in the stand-alone Guarantor Subsidiaries and Non-Guarantor Subsidiaries column. Additionally, the Guarantor Subsidiaries column reflects the equity income (loss) of its Non-Guarantor Subsidiaries, which are also separately reflected in the stand-alone Non-Guarantor Subsidiaries column.

Elimination entries necessary to consolidate the Parent and all of its Subsidiaries

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION

DECEMBER 31, 2014


	Parent Company		Subsidiary Guarantors		Subsidiary Non-Guarantors		Eliminations			Consolidated
	(In thousands)
Assets
Current assets
Cash and cash equivalents	$	129,505	$	74,643	$	434,693	$	—		$	638,841
Other current assets		126,091		18,471		67,826		(110,302	)		102,086
Accounts receivable from parent or subsidiaries		277,823		—		—		(265,185	)		12,638

Total current assets		533,419		93,114		502,519		(375,487	)		753,565

Theatre properties and equipment - net		498,446		575,652		376,714		—			1,450,812

Investment in subsidiaries		1,260,333		380,365		—		(1,640,698	)		—

Other assets		1,421,331		140,320		401,783		(3,276	)		1,960,158

Total assets	$	3,713,529	$	1,189,451	$	1,281,016	$	(2,019,461	)	$	4,164,535

Liabilities and equity

Current liabilities

Current portion of long-term debt	$	7,000	$	—	$	1,423	$	—		$	8,423
Current portion of capital lease obligations		5,411		9,125		1,958		—			16,494
Accounts payable and accrued expenses		259,973		105,761		125,638		(102,406	)		388,966
Accounts payable to parent or subsidiaries		—		84,555		180,630		(265,185	)		—

Total current liabilities		272,384		199,441		309,649		(367,591	)		413,883

Long-term liabilities
Long-term debt, less current portion		1,809,000		—		7,442		(1,868	)		1,814,574
Capital lease obligations, less current portion		103,786		75,416		22,776		—			201,978
Other long-term liabilities and deferrals		401,965		79,116		125,600		(9,304	)		597,377

Total long-term liabilities		2,314,751		154,532		155,818		(11,172	)		2,613,929

Commitments and contingencies

Equity
Cinemark USA, Inc.’s stockholder’s equity:
Common stock		49,543		457,369		10,219		(467,588	)		49,543
Other stockholder’s equity		1,076,851		378,109		795,001		(1,173,110	)		1,076,851

Total Cinemark USA, Inc. stockholder’s equity		1,126,394		835,478		805,220		(1,640,698	)		1,126,394
Noncontrolling interests		—		—		10,329		—			10,329

Total equity		1,126,394		835,478		815,549		(1,640,698	)		1,136,723

Total liabilities and equity	$	3,713,529	$	1,189,451	$	1,281,016	$	(2,019,461	)	$	4,164,535

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION

JUNE 30, 2015


	Parent Company		Subsidiary Guarantors		Subsidiary Non-Guarantors		Eliminations			Consolidated
	(In thousands)
Assets
Current assets
Cash and cash equivalents	$	64,724	$	52,439	$	459,029	$	—		$	576,192
Other current assets		107,490		28,964		70,125		(68,594	)		137,985
Accounts receivable from parent or subsidiaries		253,238		—		—		(252,492	)		746

Total current assets		425,452		81,403		529,154		(321,086	)		714,923

Theatre properties and equipment - net		510,265		610,725		363,399		—			1,484,389

Investment in subsidiaries		1,303,838		354,538		—		(1,658,376	)		—

Other assets		1,441,380		137,837		394,172		(7,989	)		1,965,400

Total assets	$	3,680,935	$	1,184,503	$	1,286,725	$	(1,987,451	)	$	4,164,712

Liabilities and equity

Current liabilities

Current portion of long-term debt	$	7,000	$	—	$	1,423	$	—		$	8,423
Current portion of capital lease obligations		5,651		9,909		2,357		—			17,917
Accounts payable and accrued expenses		233,515		100,571		114,111		(55,841	)		392,356
Accounts payable to parent or subsidiaries		—		69,058		183,434		(252,492	)		—

Total current liabilities		246,166		179,538		301,325		(308,333	)		418,696

Long-term liabilities
Long-term debt, less current portion		1,805,500		—		9,923		(4,367	)		1,811,056
Capital lease obligations, less current portion		100,760		72,248		28,485		—			201,493
Other long-term liabilities and deferrals		402,588		77,571		132,714		(16,375	)		596,498

Total long-term liabilities		2,308,848		149,819		171,122		(20,742	)		2,609,047

Commitments and contingencies

Equity
Cinemark USA, Inc.’s stockholder’s equity:
Common stock		49,543		457,368		10,221		(467,589	)		49,543
Other stockholder’s equity		1,076,378		397,778		793,009		(1,190,787	)		1,076,378

Total Cinemark USA, Inc. stockholder’s equity		1,125,921		855,146		803,230		(1,658,376	)		1,125,921
Noncontrolling interests		—		—		11,048		—			11,048

Total equity		1,125,921		855,146		814,278		(1,658,376	)		1,136,969

Total liabilities and equity	$	3,680,935	$	1,184,503	$	1,286,725	$	(1,987,451	)	$	4,164,712

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION

THREE MONTHS ENDED JUNE 30, 2014


	Parent Company			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Revenues	$	227,655		$	299,984		$	203,803		$	(13,579	)	$	717,863

Cost of operations
Theatre operating expenses		184,745			199,622			142,905			(13,579	)		513,693
General and administrative expenses		5,298			19,108			14,346			—			38,752
Depreciation and amortization		12,258			16,851			14,772			—			43,881
Impairment of long-lived assets		360			70			—			—			430
Loss on sale of assets and other		1,728			767			781			—			3,276

Total cost of operations		204,389			236,418			172,804			(13,579	)		600,032

Operating income		23,266			63,566			30,999			—			117,831

Other income (expense)
Interest expense		(25,053	)		(2,308	)		(925	)		—			(28,286	)
Distributions from NCM		—			—			1,180			—			1,180
Equity in income of affiliates		75,552			23,607			3,603			(99,162	)		3,600
Other income		6			2			2,847			—			2,855

Total other income		50,505			21,301			6,705			(99,162	)		(20,651	)

Income before income taxes		73,771			84,867			37,704			(99,162	)		97,180
Income taxes		1,440			23,728			(722	)		—			24,446

Net income		72,331			61,139			38,426			(99,162	)		72,734
Less: Net income attributable to noncontrolling interests		—			—			403			—			403

Net income attributable to Cinemark USA, Inc.	$	72,331		$	61,139		$	38,023		$	(99,162	)	$	72,331

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION

THREE MONTHS ENDED JUNE 30, 2015


	Parent Company			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Revenues	$	263,609		$	326,730		$	224,213		$	(14,620	)	$	799,932

Cost of operations
Theatre operating expenses		207,522			217,881			159,480			(14,620	)		570,263
General and administrative expenses		5,248			18,672			14,529			—			38,449
Depreciation and amortization		14,568			18,166			13,835			—			46,569
Impairment of long-lived assets		2,843			685			—			—			3,528
Loss on sale of assets and other		1,475			3,984			343			—			5,802

Total cost of operations		231,656			259,388			188,187			(14,620	)		664,611

Operating income		31,953			67,342			36,026			—			135,321

Other income (expense)
Interest expense		(25,085	)		(2,135	)		(1,126	)		42			(28,304	)
Distributions from NCM		—			—			—			—			—
Equity in income of affiliates		67,478			24,353			4,320			(92,065	)		4,086
Other income (expense)		(867	)		10			4,288			(42	)		3,389

Total other income		41,526			22,228			7,482			(92,065	)		(20,829	)

Income before income taxes		73,479			89,570			43,508			(92,065	)		114,492
Income taxes		2,708			25,171			15,210			—			43,089

Net income		70,771			64,399			28,298			(92,065	)		71,403
Less: Net income attributable to noncontrolling interests		—			—			632			—			632

Net income attributable to Cinemark USA, Inc.	$	70,771		$	64,399		$	27,666		$	(92,065	)	$	70,771

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION

SIX MONTHS ENDED JUNE 30, 2014


	Parent Company			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Revenues	$	423,910		$	549,820			369,264			(22,851	)	$	1,320,143

Cost of operations
Theatre operating expenses		349,327			373,540			263,027			(22,851	)		963,043
General and administrative expenses		10,643			40,188			26,661			—			77,492
Depreciation and amortization		24,592			33,421			28,364			—			86,377
Impairment of long-lived assets		689			95			—			—			784
Loss on sale of assets and other		3,622			1,543			964			—			6,129

Total cost of operations		388,873			448,787			319,016			(22,851	)		1,133,825

Operating income		35,037			101,033			50,248			—			186,318

Other income (expense)
Interest expense		(50,304	)		(4,668	)		(1,794	)		—			(56,766	)
Distributions from NCM		2,207			—			8,470			—			10,677
Equity in income of affiliates		119,906			37,898			7,223			(157,807	)		7,220
Other income (expense)		25			(1	)		6,897			—			6,921

Total other income		71,834			33,229			20,796			(157,807	)		(31,948	)

Income before income taxes		106,871			134,262			71,044			(157,807	)		154,370
Income taxes		(1,294	)		35,684			11,159			—			45,549

Net income		108,165			98,578			59,885			(157,807	)		108,821
Less: Net income attributable to noncontrolling interests		—			—			656			—			656

Net income attributable to Cinemark USA, Inc.	$	108,165		$	98,578		$	59,229		$	(157,807	)	$	108,165

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION

SIX MONTHS ENDED JUNE 30, 2015


	Parent Company			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Revenues	$	480,182		$	585,693		$	404,420		$	(24,965	)	$	1,445,330

Cost of operations
Theatre operating expenses		383,804			396,115			287,668			(24,965	)		1,042,622
General and administrative expenses		9,437			37,663			28,663			—			75,763
Depreciation and amortization		28,689			35,673			27,539			—			91,901
Impairment of long-lived assets		2,904			1,418			—			—			4,322
(Gain) loss on sale of assets and other		2,890			2,402			(940	)		—			4,352

Total cost of operations		427,724			473,271			342,930			(24,965	)		1,218,960

Operating income		52,458			112,422			61,490			—			226,370

Other income (expense)
Interest expense		(50,334	)		(4,334	)		(1,901	)		58			(56,511	)
Distributions from NCM		1,724			—			6,775			—			8,499
Equity in income of affiliates		112,563			35,968			9,520			(148,726	)		9,325
Other income (expense)		(821	)		21			(2,440	)		(58	)		(3,298	)

Total other income		63,132			31,655			11,954			(148,726	)		(41,985	)

Income before income taxes		115,590			144,077			73,444			(148,726	)		184,385
Income taxes		1,918			41,969			25,813			—			69,700

Net income		113,672			102,108			47,631			(148,726	)		114,685
Less: Net income attributable to noncontrolling interests		—			—			1,013			—			1,013

Net income attributable to Cinemark USA, Inc.	$	113,672		$	102,108		$	46,618		$	(148,726	)	$	113,672

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME INFORMATION

THREE MONTHS ENDED JUNE 30, 2014


	Parent Company		Subsidiary Guarantors		Subsidiary Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Net income	$	72,331	$	61,139	$	38,426		$	(99,162	)	$	72,734

Other comprehensive income, net of tax
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of settlements, net of taxes of $391		661		—		—			—			661
Unrealized gain due to fair value adjustments on available-for-sale securities, net of taxes of $724		1,221		—		—			—			1,221
Other comprehensive income of equity method investments		134		—		123			(123	)		134
Foreign currency translation adjustments		8,344		—		8,346			(8,344	)		8,346

Total other comprehensive income, net of tax		10,360		—		8,469			(8,467	)		10,362

Total comprehensive income, net of tax	$	82,691	$	61,139	$	46,895		$	(107,629	)	$	83,096
Comprehensive income attributable to noncontrolling interests		—		—		(405	)		—			(405	)

Comprehensive income attributable to Cinemark USA, Inc.	$	82,691	$	61,139	$	46,490		$	(107,629	)	$	82,691

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) INFORMATION

THREE MONTHS ENDED JUNE 30, 2015


	Parent Company			Subsidiary Guarantors		Subsidiary Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Net income	$	70,771		$	64,399	$	28,298		$	(92,065	)	$	71,403

Other comprehensive income (loss), net of tax
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of settlements, net of taxes of $504		855			—		—			—			855
Unrealized loss due to fair value adjustments on available-for-sale securities, net of taxes of $(209)		(354	)		—		—			—			(354	)
Other comprehensive loss of equity method investments		(3,322	)		—		(3,272	)		3,272			(3,322	)
Foreign currency translation adjustments		634			—		628			(634	)		628

Total other comprehensive loss, net of tax		(2,187	)		—		(2,644	)		2,638			(2,193	)

Total comprehensive income, net of tax	$	68,584		$	64,399	$	25,654		$	(89,427	)	$	69,210
Comprehensive income attributable to noncontrolling interests		—			—		(626	)		—			(626	)

Comprehensive income attributable to Cinemark USA, Inc.	$	68,584		$	64,399	$	25,028		$	(89,427	)	$	68,584

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME INFORMATION

SIX MONTHS ENDED JUNE 30, 2014


	Parent Company			Subsidiary Guarantors		Subsidiary Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Net income	$	108,165		$	98,578	$	59,885		$	(157,807	)	$	108,821

Other comprehensive income (loss), net of tax
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of settlements, net of taxes of $759		1,158			—		—			—			1,158
Unrealized gain due to fair value adjustments on available-for-sale securities, net of taxes of $1,916		3,244			—		—			—			3,244
Other comprehensive income of equity method investments		396			—		385			(385	)		396
Foreign currency translation adjustments		(851	)		—		(843	)		851			(843	)

Total other comprehensive income (loss), net of tax		3,947			—		(458	)		466			3,955

Total comprehensive income, net of tax	$	112,112		$	98,578	$	59,427		$	(157,341	)	$	112,776
Comprehensive income attributable to noncontrolling interests		—			—		(664	)		—			(664	)

Comprehensive income attributable to Cinemark USA, Inc.	$	112,112		$	98,578	$	58,763		$	(157,341	)	$	112,112

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) INFORMATION

SIX MONTHS ENDED JUNE 30, 2015


	Parent Company			Subsidiary Guarantors		Subsidiary Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Net income	$	113,672		$	102,108	$	47,631		$	(148,726	)	$	114,685

Other comprehensive income (loss), net of tax
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of settlements, net of taxes of $958		1,612			—		—			—			1,612
Unrealized gain due to fair value adjustments on available-for-sale securities, net of taxes of $236		412			—		—			—			412
Other comprehensive loss of equity method investments		(2,938	)		—		(2,905	)		2,905			(2,938	)
Foreign currency translation adjustments		(46,047	)		—		(46,047	)		46,047			(46,047	)

Total other comprehensive loss, net of tax		(46,961	)		—		(48,952	)		48,952			(46,961	)

Total comprehensive income (loss), net of tax	$	66,711		$	102,108	$	(1,321	)	$	(99,774	)	$	67,724
Comprehensive income attributable to noncontrolling interests		—			—		(1,013	)		—			(1,013	)

Comprehensive income (loss) attributable to Cinemark USA, Inc.	$	66,711		$	102,108	$	(2,334	)	$	(99,774	)	$	66,711

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION

SIX MONTHS ENDED JUNE 30, 2014


	Parent Company			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Operating activities
Net income	$	108,165		$	98,578		$	59,885		$	(157,807	)	$	108,821
Adjustments to reconcile net income to cash provided by (used for) operating activities		(109,780	)		2,499			26,475			157,807			77,001
Changes in assets and liabilities and other		107,181			(136,760	)		3,275			—			(26,304	)

Net cash provided by (used for) operating activities		105,566			(35,683	)		89,635			—			159,518

Investing activities
Additions to theatre properties and equipment and other		(40,591	)		(19,960	)		(42,012	)		—			(102,563	)
Proceeds from sale of theatre properties and equipment and other		1,032			26			489			—			1,547
Dividends received from subsidiaries		925			—			—			(925	)		—
Investment in joint ventures and other		—			—			(1,896	)		—			(1,896	)

Net cash used for investing activities		(38,634	)		(19,934	)		(43,419	)		(925	)		(102,912	)

Financing activities
Dividends paid to parent		(57,500	)		—			(925	)		925			(57,500	)
Repayments of long-term debt		(3,500	)		—			(1,452	)		—			(4,952	)
Payments on capital leases		(1,989	)		(3,863	)		(975	)		—			(6,827	)
Other		3,340			(9,776	)		—			—			(6,436	)

Net cash used for financing activities		(59,649	)		(13,639	)		(3,352	)		925			(75,715	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(2,748	)		—			(2,748	)


Increase (decrease) in cash and cash equivalents		7,283			(69,256	)		40,116			—			(21,857	)
Cash and cash equivalents:
Beginning of year		62,065			175,758			362,071			—			599,894

End of year	$	69,348		$	106,502		$	402,187		$	—		$	578,037

CINEMARK USA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION

SIX MONTHS ENDED JUNE 30, 2015


	Parent Company			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Operating activities
Net income	$	113,672		$	102,108		$	47,631		$	(148,726	)	$	114,685

Adjustments to reconcile net income to cash provided by operating activities		(91,036	)		8,498			27,446			148,726			93,634
Changes in assets and liabilities and other		23,093			(50,866	)		(138	)		—			(27,911	)

Net cash provided by operating activities		45,729			59,740			74,939			—			180,408

Investing activities
Additions to theatre properties and equipment and other		(42,263	)		(73,545	)		(39,904	)		—			(155,712	)
Acquisition of theatre in Brazil		—			—			(2,651	)		—			(2,651	)
Proceeds from sale of theatre properties and equipment and other		2,367			1,014			1,592			—			4,973
Intercompany note issuances		(2,500	)		—			—			2,500			—
Investment in joint ventures and other		—			—			(1,777	)		—			(1,777	)
Dividends received from subsidiaries		300			6			—			(306	)		—

Net cash used for investing activities		(42,096	)		(72,525	)		(42,740	)		2,194			(155,167	)

Financing activities
Dividends paid to parent		(57,575	)		(306	)		—			306			(57,575	)
Repayments of long-term debt		(3,500	)		—			(16	)		—			(3,516	)
Payment of debt issue costs		(6,957	)		—			—			—			(6,957	)
Payments on capital leases		(2,626	)		(4,365	)		(968	)		—			(7,959	)
Loan from parent		—			—			2,500			(2,500	)		—
Other		2,244			(4,748	)		(294	)		—			(2,798	)

Net cash provided by (used for) financing activities		(68,414	)		(9,419	)		1,222			(2,194	)		(78,805	)

Effect of exchange rate changes on cash and cash equivalents		—			—			(9,085	)		—			(9,085	)

Increase (decrease) in cash and cash equivalents		(64,781	)		(22,204	)		24,336			—			(62,649	)
Cash and cash equivalents:
Beginning of year		129,505			74,643			434,693			—			638,841

End of year	$	64,724		$	52,439		$	459,029		$	—		$	576,192

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes and schedules included elsewhere in this report.

We are a leader in the motion picture exhibition industry, with theatres in the U.S., Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia and Curacao. As of June 30, 2015, we managed our business under two reportable operating segments — U.S. markets and international markets. See Note 14 to our condensed consolidated financial statements.

We generate revenues primarily from box office receipts and concession sales with additional revenues from screen advertising sales and other revenue streams, such as vendor marketing promotions, meeting rentals and electronic video games located in some of our theatres. Our relationship with NCM has assisted us in expanding our offerings to domestic advertisers and broadening ancillary revenue sources such as digital video monitor advertising. Our Flix Media initiative has allowed us to expand screen advertising within our international circuit and to other international exhibitors. We also offer alternative entertainment, such as live and pre-recorded sports programs, concert events, the Metropolitan Opera, in-theatre gaming and other special events in our theatres through our recently formed Fathom joint venture, AC JV, LLC.

Films leading the box office for the six months ended June 30, 2015 included Jurassic World, Avengers: Age of Ultron, Furious 7, American Sniper, Home, Pitch Perfect 2, 50 Shades of Grey, The Spongebob Movie: Sponge Out of Water, Mad Max: Fury Road, Kingsman: The Secret Service, San Andreas, Cinderella, The Divergent Series: Insurgent, and Inside Out. Films currently scheduled for wide-release during the remainder of 2015 include Ant-Man, Star Wars: The Force Awakens, Hunger Games: Mockingjay Part II, Minions, the 24th James Bond film Spectre, The Good Dinosaur and Mission: Impossible 5, among other films.

Film rental costs are variable in nature and fluctuate with our admissions revenues. Film rental costs as a percentage of revenues are generally higher for periods in which more blockbuster films are released. Film rental costs can also vary based on the length of a film’s run. Advertising costs, which are expensed as incurred, are primarily fixed at the theatre level as daily movie directories placed in newspapers represent the largest component of advertising costs. The monthly cost of these advertisements is based on, among other things, the size of the directory and the frequency and size of the newspaper’s circulation.

Concession supplies expense is variable in nature and fluctuates with our concession revenues. We purchase concession supplies to replace units sold. We negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain volume rates.

Although salaries and wages include a fixed cost component (i.e. the minimum staffing costs to operate a theatre facility during non-peak periods), salaries and wages move in relation to revenues as theatre staffing is adjusted to respond to changes in attendance. In some international locations, staffing levels are also subject to local regulations.

Facility lease expense is primarily a fixed cost at the theatre level as most of our facility leases require a fixed monthly minimum rent payment. Certain of our leases are subject to percentage rent only while others are subject to percentage rent in addition to their fixed monthly rent if a target annual revenue level is achieved. Facility lease expense as a percentage of revenues is also affected by the number of theatres under operating leases, the number of theatres under capital leases and the number of fee-owned theatres.

Utilities and other costs include certain costs that have both fixed and variable components such as utilities, property taxes, janitorial costs, repairs and maintenance and security services.

Results of Operations

The following table sets forth, for the periods indicated, certain operating data and the percentage of revenues represented by certain items reflected in our condensed consolidated statements of income.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Operating data (in millions):
Revenues
Admissions	$	502.9		$	455.7		$	903.6		$	836.6
Concession		259.6			226.5			474.0			419.5
Other		37.4			35.7			67.7			64.1

Total revenues	$	799.9		$	717.9		$	1,445.3		$	1,320.2
Cost of operations
Film rentals and advertising		285.3			249.2			501.0			449.9
Concession supplies		40.9			35.4			73.4			65.4
Salaries and wages		76.5			69.9			145.7			134.3
Facility lease expense		82.4			80.6			162.0			159.0
Utilities and other		85.1			78.6			160.5			154.5
General and administrative expenses		38.5			38.8			75.7			77.5
Depreciation and amortization		46.6			43.9			91.9			86.4
Impairment of long-lived assets		3.5			0.4			4.3			0.8
Loss on sale of assets and other		5.8			3.3			4.4			6.1

Total cost of operations		664.6			600.1			1,218.9			1,133.9

Operating income	$	135.3		$	117.8		$	226.4		$	186.3

Operating data as a percentage of total revenues:
Revenues
Admissions		62.9	%		63.5	%		62.5	%		63.4	%
Concession		32.4	%		31.5	%		32.8	%		31.8	%
Other		4.7	%		5.0	%		4.7	%		4.8	%

Total revenues		100.0	%		100.0	%		100.0	%		100.0	%

Cost of operations ⁽¹⁾
Film rentals and advertising		56.7	%		54.7	%		55.4	%		53.8	%
Concession supplies		15.8	%		15.6	%		15.5	%		15.6	%
Salaries and wages		9.6	%		9.7	%		10.1	%		10.2	%
Facility lease expense		10.3	%		11.2	%		11.2	%		12.0	%
Utilities and other		10.6	%		10.9	%		11.1	%		11.7	%
General and administrative expenses		4.8	%		5.4	%		5.2	%		5.9	%
Depreciation and amortization		5.8	%		6.1	%		6.4	%		6.5	%
Impairment of long-lived assets		0.4	%		0.1	%		0.3	%		0.1	%
Loss on sale of assets and other		0.7	%		0.5	%		0.3	%		0.5	%
Total cost of operations		83.1	%		83.6	%		84.3	%		85.9	%
Operating income		16.9	%		16.4	%		15.7	%		14.1	%

Average screen count (month end average)		5,707			5,597			5,693			5,590

Revenues per average screen (dollars)	$	140,167		$	128,259		$	253,878		$	236,162

⁽¹⁾	All costs are expressed as a percentage of total revenues, except film rentals and advertising, which are expressed as a percentage of admissions revenues and concession supplies, which are expressed as a percentage of concession revenues.

Three months ended June 30, 2015 versus June 30, 2014

Revenues. Total revenues increased $82.0 million to $799.9 million for the three months ended June 30, 2015 (“second quarter of 2015”) from $717.9 million for the three months ended June 30, 2014 (“second quarter of 2014”), representing an 11.4% increase. The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenues.


	U.S. Operating Segment							International Operating Segment							Consolidated
	Three Months Ended							Three Months Ended							Three Months Ended
	June 30,							June 30,							June 30,
					%							%							%
	2015		2014		Change			2015		2014		Change			2015		2014		Change
Admissions revenues⁽¹⁾	$	375.6	$	334.7		12.2	%	$	127.3	$	121.0		5.2	%	$	502.9	$	455.7		10.4	%
Concession revenues⁽¹⁾	$	195.0	$	170.6		14.3	%	$	64.6	$	55.9		15.6	%	$	259.6	$	226.5		14.6	%
Other revenues⁽¹⁾⁽²⁾	$	17.8	$	15.7		13.4	%	$	19.6	$	20.0		(2.0	)%	$	37.4	$	35.7		4.8	%
Total revenues ⁽¹⁾⁽²⁾	$	588.4	$	521.0		12.9	%	$	211.5	$	196.9		7.4	%	$	799.9	$	717.9		11.4	%
Attendance⁽¹⁾		49.0		46.5		5.4	%		27.7		24.0		15.4	%		76.7		70.5		8.8	%

⁽¹⁾	Amounts in millions.

⁽²⁾	U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 14 of our condensed consolidated financial statements.

•

U.S. Admissions revenues increased $40.9 million due to a 5.4% increase in attendance and a 6.5% increase in average ticket price from $7.20 for the second quarter of 2014 to $7.67 for the second quarter of 2015. The increase in concession revenues of $24.4 million was attributable to an 8.4% increase in concession revenues per patron from $3.67 for the second quarter of 2014 to $3.98 for the second quarter of 2015 and the 5.4% increase in attendance. The increase in attendance was due to the solid slate of films released during the second quarter of 2015. The increase in average ticket price was primarily due to price increases and increased sales for premium concepts, such as 3-D and XD. The increase in concession revenues per patron was primarily due to incremental sales and price increases. Other revenues increased primarily due to increases in screen advertising revenues.

•

International. Admissions revenues increased $6.3 million due to a 15.4% increase in attendance, partially offset by an 8.7% decrease in average ticket price from $5.04 for the second quarter of 2014 to $4.60 for the second quarter of 2015. The increase in concession revenues of $8.7 million was primarily attributable to the 15.4% increase in attendance. Concession revenues per patron were consistent at $2.33 for the second quarter of 2014 and the second quarter of 2015. The increase in attendance was due to the solid slate of films released during the second quarter of 2015 and new theatres. The decrease in average ticket price was primarily due to the unfavorable impact of foreign currency exchange rates in certain countries in which we operate, partially offset by price increases and increased sales for premium concepts, such as 3-D and XD. Concession revenues per patron increased due to price increases, offset by the unfavorable impact of foreign currency exchange rates in certain countries in which we operate.

Cost of Operations. The table below summarizes certain of our year-over-year theatre operating costs by reportable operating segment (in millions).


	U.S. Operating Segment				International Operating Segment				Consolidated
	Three Months Ended June 30,				Three Months Ended June 30,				Three Months Ended June 30,
	2015		2014		2015		2014		2015		2014
Film rentals and advertising	$	221.5	$	190.4	$	63.8	$	58.8	$	285.3	$	249.2
Concession supplies		26.4		23.3		14.5		12.1		40.9		35.4
Salaries and wages		56.8		51.9		19.7		18.0		76.5		69.9
Facility lease expense		59.6		58.5		22.8		22.1		82.4		80.6
Utilities and other		58.1		55.1		27.0		23.5		85.1		78.6

•

U.S. Film rentals and advertising costs were $221.5 million, or 59.0% of admissions revenues, for the second quarter of 2015 compared to $190.4 million, or 56.9% of admissions revenues, for the second quarter of 2014. The increase in the film rentals and advertising rate was primarily due to the higher concentration of blockbuster films and higher box office performance during the second quarter of 2015. The second quarter of 2015 included such blockbuster releases as Jurassic World, The Avengers: Age of Ultron, Furious 7, and Inside Out, which grossed in excess of $500 million, $450 million, $350 million, and $200 million, respectively, and all of which had higher film rental rates due to their box office performance. Concession supplies expense was $26.4 million, or 13.5% of

concession revenues, for the second quarter of 2015 compared to $23.3 million, or 13.7% of concession revenues, for the second quarter of 2014. The decrease in the concession supplies rate was primarily due to the impact of sales price increases.

Salaries and wages increased to $56.8 million for the second quarter of 2015 from $51.9 million for the second quarter of 2014 primarily due to new theatres, increased staffing levels due to increased attendance and increases in minimum wages. Facility lease expense increased to $59.6 million for the second quarter of 2015 from $58.5 million for the second quarter of 2014 due to new theatres. Utilities and other costs increased to $58.1 million for the second quarter of 2015 from $55.1 million for the second quarter of 2014 due to new theatres and increases in property taxes, insurance costs and security expenses.

•

International. Film rentals and advertising costs were $63.8 million, or 50.1% of admissions revenues, for the second quarter of 2015 compared to $58.8 million, or 48.6% of admissions revenues, for the second quarter of 2014. The increase in the film rentals and advertising rate was due to the higher concentration of blockbuster films and higher box office performance during the second quarter of 2015. Concession supplies expense was $14.5 million, or 22.4% of concession revenues, for the second quarter of 2015 compared to $12.1 million, or 21.6% of concession revenues, for the second quarter of 2014.

Salaries and wages increased to $19.7 million for the second quarter of 2015 from $18.0 million for the second quarter of 2014 primarily due to increased staffing levels, new theatres and increased wage rates. Facility lease expense increased to $22.8 million for the second quarter of 2015 from $22.1 million for the second quarter of 2014 as a result of increased percentage rent expense due to increased revenues and new theatres. Utilities and other costs increased to $27.0 million for the second quarter of 2015 from $23.5 million for the second quarter of 2014, primarily due to increases in utility costs, 3-D presentation and other costs and new theatres. All of the above-mentioned theatre operating costs were also impacted by changes in foreign currency exchanges rates in certain countries in which we operate.

General and Administrative Expenses. General and administrative expenses decreased to $38.5 million for the second quarter of 2015 from $38.8 million for the second quarter of 2014. The decrease was primarily due to the impact of changes in foreign currency exchange rates in certain countries in which we operate and decreases in professional fees, partially offset by increased salaries and incentive compensation expense.

Depreciation and Amortization. Depreciation and amortization expense was $46.6 million during the second quarter of 2015 compared to $43.9 million during the second quarter of 2014. The increase was primarily due to new theatres.

Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $3.5 million during the second quarter of 2015 compared to $0.4 million during the second quarter of 2014. The long-lived asset impairment charges recorded during each of the periods presented were specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre. Impairment charges for the second quarter of 2015 consisted of U.S. theatre properties, impacting four of our twenty-seven reporting units, and certain intangible assets associated with these theatres. See Note 10 to our condensed consolidated financial statements.

Loss on Sale of Assets and Other. We recorded a loss on sale of assets and other of $5.8 million during the second quarter of 2015 compared to $3.3 million during the second quarter of 2014. The loss recorded during the second quarter of 2015 included lease termination costs and retirement of assets due to theatre remodels and closures. The loss recorded during the second quarter of 2014 was primarily due to the replacement of certain theatre assets.

Interest Expense. Interest costs incurred, including amortization of debt issue costs, were $28.3 million during the second quarter of 2015, consistent with the second quarter of 2014.

Distributions from NCM. We recorded a distribution from NCM of $1.2 million during the second quarter of 2014, which was in excess of the carrying value of our Tranche 1 investment. NCM did not distribute any excess cash during the second quarter of 2015 due to expenses incurred as the result of the termination of a proposed merger. See Note 5 to our condensed consolidated financial statements.

Equity in Income of Affiliates. We recorded equity in income of affiliates of $4.1 million during the second quarter of 2015 compared to $3.6 million during the second quarter of 2014. See Notes 5 and 6 to our condensed consolidated financial statements for information about our equity investments.

Income Taxes. Income tax expense of $43.1 million was recorded for the second quarter of 2015 compared to $24.4 million recorded for the second quarter of 2014. The effective tax rate was approximately 37.6% for the second quarter of 2015 compared to 25.2% for the second quarter of 2014. The effective tax rate for the second quarter of 2014 reflects the impact of items related to our Mexican subsidiaries. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.

Six months ended June 30, 2015 versus June 30, 2014

Revenues. Total revenues increased $125.1 million to $1,445.3 million for the six months ended June 30, 2015 (“the 2015 period”) from $1,320.2 million for the six months ended June 30, 2014 (“the 2014 period”), representing a 9.5% increase. The table below, presented by reportable operating segment, summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenues.


	U.S. Operating Segment							International Operating Segment							Consolidated
	Six Months Ended							Six Months Ended							Six Months Ended
	June 30,							June 30,							June 30,
					%							%							%
	2015		2014		Change			2015		2014		Change			2015		2014		Change
Admissions revenues ⁽¹⁾	$	671.4	$	617.4		8.7	%	$	232.2	$	219.2		5.9	%	$	903.6	$	836.6		8.0	%
Concession revenues ⁽¹⁾	$	354.6	$	316.1		12.2	%	$	119.4	$	103.4		15.5	%	$	474.0	$	419.5		13.0	%
Other revenues ^{(1) (2)}	$	33.5	$	29.6		13.2	%	$	34.2	$	34.5		(0.9	)%	$	67.7	$	64.1		5.6	%
Total revenues ^{(1) (2)}	$	1,059.5	$	963.1		10.0	%	$	385.8	$	357.1		8.0	%	$	1,445.3	$	1,320.2		9.5	%
Attendance ⁽¹⁾		90.5		87.1		3.9	%		51.7		44.9		15.1	%		142.2		132.0		7.7	%

⁽¹⁾	Amounts in millions.

⁽²⁾	U.S. operating segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 14 of our condensed consolidated financial statements.

•

U.S. The increase in admissions revenues of $54.0 million was attributable to a 3.9% increase in attendance and a 4.7% increase in average ticket price from $7.09 for the 2014 period to $7.42 for the 2015 period. The increase in concession revenues of $38.5 million was attributable to the 3.9% increase in attendance and an 8.0% increase in concession revenues per patron from $3.63 for the 2014 period to $3.92 for the 2015 period. The increase in attendance was due to the solid slate of films released during the 2015 period. The increase in average ticket price was primarily due to price increases. The increase in concession revenues per patron was primarily due to incremental sales and price increases. Other revenues increased primarily due to increases in screen advertising revenues.

•

International. Admissions revenues increased $13.0 million as a result of a 15.1% increase in attendance, partially offset by an 8.0% decrease in average ticket price from $4.88 for the 2014 period to $4.49 for the 2015 period. Concession revenues increased $16.0 million as a result of the 15.1% increase in attendance and a 0.4% increase in concession revenues per patron from $2.30 for the 2014 period to $2.31 for the 2015 period. The increase in attendance was due to the solid slate of films released during the 2015 period and new theatres. The decrease in average ticket price was primarily due to the unfavorable impact of foreign currency exchange rates in certain countries in which we operate. Concession revenues per patron increased primarily due to price increases, the impact of which was almost entirely offset by the unfavorable impact of foreign currency exchange rates in certain countries in which we operate.

Cost of Operations. The table below summarizes certain of our year-over-year theatre operating costs by reportable operating segment (in millions).


	U.S. Operating Segment				International Operating Segment				Consolidated
	Six Months Ended June 30,				Six Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014		2015		2014
Film rentals and advertising	$	387.4	$	344.4	$	113.6	$	105.5	$	501.0	$	449.9
Concession supplies		47.4		43.5		26.0		21.9		73.4		65.4
Salaries and wages		108.3		100.5		37.4		33.8		145.7		134.3
Facility lease expense		119.3		117.8		42.7		41.2		162.0		159.0
Utilities and other		111.5		108.9		49.0		45.6		160.5		154.5

•

U.S. Film rentals and advertising costs were $387.4 million, or 57.7% of admissions revenues for the 2015 period compared to $344.4 million, or 55.8% of admissions revenues for the 2014 period. The increase in the film rentals and advertising rate was primarily due to the higher concentration of blockbuster films and higher box office performance during the 2015 period and increased film presentation costs. The 2015 period included such blockbuster releases as Jurassic World, The Avengers: Age of Ultron, Furious 7, American Sniper and Inside Out, which grossed in excess of $500 million, $450 million, $350 million, $350 million, and $200 million, respectively, and all of which had higher film rental rates due to their box office performance. Concession supplies expense was $47.4 million, or 13.4% of concession revenues, for the 2015 period compared to $43.5 million, or 13.8% of concession revenues, for the 2014 period. The decrease in the concession supplies rate was primarily due to the impact of sales price increases.

Salaries and wages increased to $108.3 million for the 2015 period from $100.5 million for the 2014 period primarily due to new theatres, increased staffing levels due to increased attendance and increases in minimum wages. Facility lease expense increased to $119.3 million for the 2015 period from $117.8 million for the 2014 period primarily due to new theatres. Utilities and other costs increased to $111.5 million for the 2015 period from $108.9 million for the 2014 period due to new theatres and increases in property taxes, insurance costs and security expenses.

•

International. Film rentals and advertising costs were $113.6 million, or 48.9% of admissions revenues, for the 2015 period compared to $105.5 million, or 48.1% of admissions revenues, for the 2014 period. The increase in the film rentals and advertising rate was due to the higher concentration of blockbuster films and higher box office performance during the 2015 period. Concession supplies expense was $26.0 million, or 21.8% of concession revenues, for the 2015 period compared to $21.9 million, or 21.2% of concession revenues, for the 2014 period.

Salaries and wages increased to $37.4 million for the 2015 period from $33.8 million for the 2014 period due to new theatres and increased staffing levels and wage rates. Facility lease expense increased to $42.7 million for the 2015 period from $41.2 million for the 2014 period as a result of increased percentage rent expense due to increased revenues and new theatres. Utilities and other costs increased to $49.0 million for the 2015 period from $45.6 million for the 2014 period due to increases in utility costs and repairs and maintenance expenses and new theatres. All of the above-mentioned theatre operating costs were also impacted by changes in foreign currency exchanges rates in certain countries in which we operate.

General and Administrative Expenses. General and administrative expenses decreased to $75.7 million for the 2015 period from $77.5 million for the 2014 period. The decrease was primarily due to the impact of changes in foreign currency exchange rates in certain countries in which we operate and decreases in professional fees, partially offset by increases in salaries and incentive compensation expense.

Depreciation and Amortization. Depreciation and amortization expense was $91.9 million for the 2015 period compared to $86.4 million for the 2014 period. The increase was primarily due to new theatres.

Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $4.3 million for the 2015 period compared to $0.8 million for the 2014 period. The long-lived asset impairment charges recorded during each of the periods presented were specific to theatres that were directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or the conditions of the areas surrounding the theatre. Impairment charges for the 2015 period consisted of U.S. theatre properties, impacting four of our twenty-seven reporting units, and intangible assets associated with these theatres. See Note 10 to our condensed consolidated financial statements.

Loss on Sale of Assets and Other. We recorded a loss on sale of assets and other of $4.4 million during the 2015 period compared to $6.1 million during the 2014 period. The loss recorded during the 2015 period included lease termination costs, contract termination costs and the retirement of assets due to theatre remodels and closures, partially offset by a gain related to lease amendments that resulted in a reduction of certain capital lease liabilities. The loss recorded during the 2014 period was primarily due to the replacement of certain theatre assets.

Interest Expense. Interest costs incurred, including amortization of debt issue costs, were $56.5 million for the 2015 period compared to $56.8 million for the 2014 period.

Distributions from NCM. We recorded distributions from NCM of $8.5 million during the 2015 period and $10.7 million during the 2014 period, which were in excess of the carrying value of our Tranche 1 investment. NCM did not distribute any excess cash during the second quarter of 2015 due to expenses incurred as the result of the termination of a proposed merger. See Note 5 to our condensed consolidated financial statements.

Equity in Income of Affiliates. We recorded equity in income of affiliates of $9.3 million during the 2015 period compared to $7.2 million during the 2014 period. See notes 5 and 6 for information about the equity investments to our condensed consolidated financial statements.

Income Taxes. Income tax expense of $69.7 million was recorded for the 2015 period compared to $45.5 million recorded for the 2014 period. The effective tax rate was 37.8% for the 2015 period compared to 29.5% for the 2014 period. The effective tax rate for the 2014 period reflects the impact of items related to our Mexican subsidiaries. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.

Liquidity and Capital Resources

Operating Activities

We primarily collect our revenues in cash, mainly through box office receipts and the sale of concessions. In addition, nearly all of our theatres provide the patron a choice of using a credit card, debit card or advanced-sale type certificates such as a gift card, in place of cash. Because our revenues are received in cash prior to the payment of related expenses, we have an operating “float” and historically have not required traditional working capital financing. Cash provided by operating activities was $180.4 million for the six months ended June 30, 2015 compared to $159.5 million for the six months ended June 30, 2014.

Investing Activities

Our investing activities have been principally related to the development and acquisition of theatres. New theatre openings and acquisitions historically have been financed with internally generated cash and by debt financing, including borrowings under our senior secured credit facility. Cash used for investing activities was $155.2 million for the six months ended June 30, 2015 compared to $102.9 million for the six months ended June 30, 2014.

Capital expenditures for the six months ended June 30, 2015 and 2014 were as follows (in millions):


Period	New Theatres		Existing Theatres			Total
Six Months Ended June 30, 2015	$	56.0	$	99.7	^(a)	$	155.7
Six Months Ended June 30, 2014	$	47.0	$	55.6		$	102.6

^(a)	Includes approximately $26.3 million for the purchase of our corporate headquarters building in Plano, TX.

Our U.S. theatre circuit consisted of 4,491 screens at June 30, 2015. During the six months ended June 30, 2015, we built two new theatres with 22 screens and closed three theatres with 30 screens. At June 30, 2015, we had signed commitments to open seven new theatres with 77 screens in domestic markets during the remainder of 2015 and open nine new theatres with 98 screens subsequent to 2015. We estimate the remaining capital expenditures for the development of these 175 domestic screens will be approximately $93 million. Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities.

Our international theatre circuit consisted of 1,229 screens at June 30, 2015. During the six months ended June 30, 2015, we built eight new theatres with 48 screens, acquired one theatre with 5 screens and closed one screen. At June 30, 2015, we had signed commitments to open four new theatres and 34 screens in international markets during the remainder of 2015 and open three new theatres and 25 screens subsequent to 2015. We estimate the remaining capital expenditures for the development of these 59 international screens will be approximately $43 million. Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities.

We plan to fund capital expenditures for our continued development with cash flow from operations, borrowings under our senior secured credit facility, and proceeds from debt issuances, sale leaseback transactions and/or sales of excess real estate.

Financing Activities

Cash used for financing activities was $78.8 million for the six months ended June 30, 2015 compared to $75.7 million for the six months ended June 30, 2014.

We may from time to time, subject to compliance with our debt instruments, purchase our debt securities on the open market depending upon the availability and prices of such securities. Long-term debt consisted of the following as of June 30, 2015 (in millions):


Cinemark, USA, Inc. term loan	$	682.5
Cinemark USA, Inc. 4.875% senior notes due 2023		530.0
Cinemark USA, Inc. 5.125% senior notes due 2022		400.0
Cinemark USA, Inc. 7.375% senior subordinated notes due 2021		200.0
Other		7.0

Total long-term debt	$	1,819.5
Less current portion		8.4

Long-term debt, less current portion	$	1,811.1

As of June 30, 2015, Cinemark USA, Inc. had $100.0 million in available borrowing capacity on our revolving credit line.

Contractual Obligations

Due to the recent amendment to our Senior Secured Credit Facility, which extended the maturity of our outstanding term loan debt (see Note 3 to our condensed consolidated financial statements), we have included below our long-term debt and related estimated scheduled interest payments as of June 30, 2015.


	Payments Due by Period
	(in millions)
			Less Than						After
	Total		One Year		1 - 3 Years		3 - 5 Years		5 Years
Long-term debt	$	1,819.5	$	8.4	$	16.8	$	16.8	$	1,777.5
Scheduled interest payments on long-term debt ⁽¹⁾	$	592.2	$	84.5	$	165.3	$	164.1	$	178.3

⁽¹⁾

Amounts include scheduled interest payments on fixed rate and variable rate debt agreements. Estimates for the variable rate interest payments were based on interest rates currently in effect. The average interest rates currently in effect on our fixed rate and variable rate debt are 5.1% and 3.2%, respectively.

Other than the changes in our long term debt obligations discussed above, there have been no material changes in our contractual obligations previously disclosed in “Liquidity and Capital Resources” in our Annual Report on Form 10-K for the year ended December 31, 2014 filed March 6, 2015.

Off-Balance Sheet Arrangements

Other than the operating leases and purchase commitments disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014 filed March 6, 2015, we do not have any off-balance sheet arrangements.

Cinemark USA, Inc. 4.875% Senior Notes

On May 24, 2013, Cinemark USA, Inc. issued $530.0 million aggregate principal amount of 4.875% senior notes due 2023, at par value, (the “4.875% Senior Notes”). Interest on the 4.875% Senior Notes is payable on June 1 and December 1 of each year. The 4.875% Senior Notes mature on June 1, 2023.

The indenture to the 4.875% Senior Notes contains covenants that include limitations on the amount of dividends that Cinemark USA, Inc. can pay. As of June 30, 2015, Cinemark USA, Inc. could have distributed up to approximately $1,906.3 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 4.875% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. The indenture allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances. The required minimum coverage ratio is 2 to 1 and our actual ratio as of June 30, 2015 was approximately 7.0 to 1.

Senior Secured Credit Facility

Cinemark USA, Inc. has a senior secured credit facility that includes a seven year $700.0 million term loan and a five year $100.0 million revolving credit line (the “Senior Secured Credit Facility”). On May 8, 2015, Cinemark USA, Inc. amended the Senior Secured Credit Facility to extend the maturity of the term loan from December 2019 to May 2022. Quarterly principal payments in the amount of $1.75 million are due on the term loan through March 31, 2022, with the remaining principal of $635.3 million due on May 8, 2022. The maturity date of December 2017 for the revolving credit line did not change.

Interest on the term loan accrues at Cinemark USA, Inc.’s option at: (A) the base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5, or (2) the federal funds effective rate from time to time plus 0.50%, plus a margin of 2.0% per annum, or (B) a “eurodollar rate” plus a margin of 3.0% per annum. Interest on the revolving credit line accrues, at Cinemark USA, Inc.’s option, at: (A) a base rate equal to the higher of (1) the prime lending rate as set forth on the British Banking Association Telerate page 5 and (2) the federal funds effective rate from time to time plus 0.50%, plus a margin that ranges from 1.00% to 1.75% per annum, or (B) a “eurodollar rate” plus a margin that ranges from 2.00% to 2.75% per annum. The margin of the revolving credit line is determined by the consolidated net senior secured leverage ratio as defined in the credit agreement.

The Senior Secured Credit Facility contains usual and customary negative covenants for agreements of this type, including restrictions on Cinemark USA, Inc.’s ability to pay dividends. In addition, if Cinemark USA, Inc. has borrowings outstanding on the revolving credit line, it is required to satisfy a consolidated net senior secured leverage ratio covenant as determined in accordance with the Senior Secured Credit Facility. Under the restrictions outlined in the agreements, as of June 30, 2015, Cinemark USA, Inc. could have distributed up to approximately $1,806.7 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the Senior Secured Credit Facility, subject to its available cash and other borrowing restrictions outlined in the agreement.

At June 30, 2015, there was $682.5 million outstanding under the term loan and no borrowings outstanding under the revolving credit line. Cinemark USA, Inc. had $100.0 million in available borrowing capacity on the revolving credit line. The average interest rate on outstanding term loan borrowings under the Senior Secured Credit Facility at June 30, 2015 was approximately 4.0% per annum.

Cinemark USA, Inc. 5.125% Senior Notes

On December 18, 2012, Cinemark USA, Inc. issued $400.0 million aggregate principal amount of 5.125% senior notes due 2022, at par value (the “5.125% Senior Notes”). Interest on the 5.125% Senior Notes is payable on June 15 and December 15 of each year. The 5.125% Senior Notes mature on December 15, 2022.

The indenture to the 5.125% Senior Notes contains covenants including limitations on the amount of dividends that could be paid by Cinemark USA, Inc. As of June 30, 2015, Cinemark USA, Inc. could have distributed up to approximately $1,911.9 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the 5.125% Senior Notes, subject to its available cash and other borrowing restrictions outlined in the indenture. The indenture allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances. The required minimum coverage ratio is 2 to 1 and our actual ratio as of June 30, 2015 was approximately 7.2 to 1.

Cinemark USA, Inc. 7.375% Senior Subordinated Notes

On June 3, 2011, Cinemark USA, Inc. issued $200.0 million aggregate principal amount of 7.375% senior subordinated notes due 2021, at par value (the “Senior Subordinated Notes”). Interest on the Senior Subordinated Notes is payable on June 15 and December 15 of each year. The Senior Subordinated Notes mature on June 15, 2021.

The indenture to the Senior Subordinated Notes contains covenants including limitations on the amount of dividends that could be paid by Cinemark USA, Inc. As of June 30, 2015, Cinemark USA, Inc. could have distributed up to approximately $1,899.6 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the indenture to the Senior Subordinated Notes, subject to its available cash and other borrowing restrictions outlined in the indenture governing the Senior Subordinated Notes. The indenture allows Cinemark USA, Inc. to incur additional indebtedness if it satisfies the coverage ratio specified in the indenture, after giving effect to the incurrence of the additional indebtedness, and in certain other circumstances. The required minimum coverage ratio is 2 to 1, and our actual ratio as of June 30, 2015 was approximately 6.9 to 1.

Covenant Compliance

As of June 30, 2015, we believe we were in full compliance with all agreements, including all related covenants, governing our outstanding debt.

Seasonality

Our revenues have historically been seasonal, coinciding with the timing of releases of motion pictures by the major distributors. Generally, the most successful motion pictures have been released during the summer, extending from May to July, and during the holiday season, extending from early November through year-end. The unexpected emergence of a hit film during other periods can alter this seasonality trend. The timing of such film releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or for the same period in the following year.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We have exposure to financial market risks, including changes in interest rates, foreign currency exchange rates and other relevant market prices.

Interest Rate Risk

We are currently party to variable rate debt facilities. An increase or decrease in interest rates would affect our interest expense relating to our variable rate debt facilities. At June 30, 2015, there was an aggregate of approximately $232.5 million of variable rate debt outstanding under these facilities, which excludes $450.0 million of Cinemark USA, Inc.’s term loan debt that is hedged with the Company’s interest rate swap agreements in effect as of June 30, 2015 as discussed below. Based on the interest rates in effect on the variable rate debt outstanding at June 30, 2015, a 100 basis point increase in market interest rates would increase our annual interest expense by approximately $2.3 million.

Our interest rate swap agreements qualify for cash flow hedge accounting. The fair values of the interest rate swaps are recorded on our condensed consolidated balance sheet as an asset or liability with the effective portion of the interest rate swaps’ gains or losses reported as a component of accumulated other comprehensive loss and the ineffective portion reported in earnings.

Below is a summary of our interest rate swap agreements as of June 30, 2015:


Nominal Amount (in millions)		Effective Date	Pay Rate			Receive Rate	Expiration Date
$	175.0	December 2010		1.3975	%	1-month LIBOR	September 2015
$	175.0	December 2010		1.4000	%	1-month LIBOR	September 2015
$	100.0	November 2011		1.7150	%	1-month LIBOR	April 2016

$	450.0

The table below provides information about our fixed rate and variable rate long-term debt agreements as of June 30, 2015:


	Expected Maturity for the Twelve-Month Periods Ending June 30, (in millions)																Average Interest
	2016		2017		2018		2019		2020		Thereafter		Total		Fair Value		Rate
Fixed rate ⁽¹⁾	$	1.4	$	1.4	$	1.4	$	1.4	$	1.4	$	1,580.0	$	1,587.0	$	1,576.2		5.1	%
Variable rate		7.0		7.0		7.0		7.0		7.0		197.5		232.5		233.7		3.2	%

Total debt	$	8.4	$	8.4	$	8.4	$	8.4	$	8.4	$	1,777.5	$	1,819.5	$	1,809.9

⁽¹⁾	Includes $450.0 million of the Cinemark USA, Inc. term loan, which represents the debt hedged with the Company’s interest rate swap agreements in effect as of June 30, 2015 discussed above.

Foreign Currency Exchange Rate Risk

There have been no material changes in foreign currency exchange rate risk previously disclosed in “Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K filed March 6, 2015.

Item 4.

Controls and Procedures

Evaluation of the Effectiveness of Disclosure Controls and Procedures

As of June 30, 2015, we carried out an evaluation required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2015, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 that occurred during the quarter ended June 30, 2015 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

There have been no material changes from legal proceedings previously reported under “Business – Legal Proceedings” in the Company’s Annual Report on Form 10-K filed March 6, 2015, other than those disclosed in Note 16 to the financial statements included herein.

Item 1A.

Risk Factors

There have been no material changes from risk factors previously disclosed in “Risk Factors” in the Company’s Annual Report on Form 10-K filed March 6, 2015.

Item 5.

Other Information

As required by the indentures governing the Company’s 5.125% Senior Notes, 4.875% Senior Notes and Senior Subordinated Notes, the Company has included in this filing, interim financial information for its subsidiaries that have been designated as unrestricted subsidiaries, as defined by the indentures. As required by these indentures, the Company has included an unaudited condensed consolidating balance sheet and unaudited condensed consolidating statements of income, comprehensive income and cash flows for the Company and its subsidiaries. These supplementary schedules separately identify the Company’s restricted subsidiaries and unrestricted subsidiaries as required by the indentures.

Supplemental Schedules Specified by the Senior Notes Indentures and the Senior Subordinated Notes Indenture:


	Page

Unaudited Condensed Consolidating Balance Sheet Information as of June 30, 2015		48

Unaudited Condensed Consolidating Statement of Income Information for the six months ended June 30, 2015		49

Unaudited Condensed Consolidating Statement of Comprehensive Income Information for the six months ended June 30, 2015		50

Unaudited Condensed Consolidating Statement of Cash Flows Information for the six months ended June 30, 2015		51

CINEMARK USA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION

JUNE 30, 2015

(In thousands)


	Restricted Group		Unrestricted Group			Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	397,794	$	178,398		$	—		$	576,192
Other current assets		210,906		(72,175	)		—			138,731

Total current assets		608,700		106,223			—			714,923

Theatre properties and equipment, net		1,484,389		—			—			1,484,389

Other assets		1,839,585		232,834			(107,019	)		1,965,400

Total assets	$	3,932,674	$	339,057		$	(107,019	)	$	4,164,712

Liabilities and equity

Current liabilities
Current portion of long-term debt	$	7,034	$	1,389		$	—		$	8,423
Current portion of capital lease obligations		17,917		—			—			17,917
Accounts payable and accrued expenses		392,152		204			—			392,356

Total current liabilities		417,103		1,593			—			418,696

Long-term liabilities
Long-term debt, less current portion		1,805,500		5,556			—			1,811,056
Capital lease obligations, less current portion		201,493		—			—			201,493
Other long-term liabilities and deferrals		492,421		104,077			—			596,498

Total long-term liabilities		2,499,414		109,633			—			2,609,047

Commitments and contingencies

Equity		1,016,157		227,831			(107,019	)		1,136,969

Total liabilities and equity	$	3,932,674	$	339,057		$	(107,019	)	$	4,164,712

Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes and senior subordinated notes.

CINEMARK USA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF INCOME INFORMATION

SIX MONTHS ENDED JUNE 30, 2015

(In thousands)


	Restricted Group			Unrestricted Group			Eliminations		Consolidated
Revenues	$	1,445,330		$	—		$	—	$	1,445,330

Cost of operations
Theatre operating costs		1,042,622			—			—		1,042,622
General and administrative expenses		75,762			1			—		75,763
Depreciation and amortization		91,901			—			—		91,901
Impairment of long-lived assets		4,322			—			—		4,322
Loss on sale of assets and other		4,352			—			—		4,352

Total cost of operations		1,218,959			1			—		1,218,960

Operating income (loss)		226,371			(1	)		—		226,370

Other income (expense)		(58,106	)		16,121			—		(41,985	)

Income before income taxes		168,265			16,120			—		184,385
Income taxes		63,510			6,190			—		69,700

Net income		104,755			9,930			—		114,685
Less: Net income attributable to noncontrolling interests		1,013			—			—		1,013

Net income attributable to Cinemark USA, Inc.	$	103,742		$	9,930		$	—	$	113,672

Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes and senior subordinated notes.

CINEMARK USA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME INFORMATION

SIX MONTHS ENDED JUNE 30, 2015

(In thousands)


	Restricted			Unrestricted
	Group			Group			Eliminations		Consolidated
Net income	$	104,755		$	9,930		$	—	$	114,685

Other comprehensive income (loss), net of tax
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of settlements, net of taxes of $958		1,612			—			—		1,612
Unrealized gain due to fair value adjustments on available-for-sale securities, net of taxes of $236		412			—			—		412
Other comprehensive loss in equity method investments		(33	)		(2,905	)		—		(2,938	)
Foreign currency translation adjustments		(46,047	)		—			—		(46,047	)

Total other comprehensive loss, net of tax		(44,056	)		(2,905	)		—		(46,961	)

Total comprehensive income, net of tax		60,699			7,025			—		67,724
Comprehensive income attributable to noncontrolling interests		(1,013	)		—			—		(1,013	)

Comprehensive income attributable to Cinemark USA, Inc.	$	59,686		$	7,025		$	—	$	66,711

Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes and senior subordinated notes.

CINEMARK USA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION

SIX MONTHS ENDED JUNE 30, 2015

(In thousands)


	Restricted			Unrestricted
	Group			Group			Eliminations		Consolidated
Operating activities
Net income	$	104,755		$	9,930		$	—	$	114,685
Adjustments to reconcile net income to cash provided by operating activities		95,197			(1,563	)		—		93,634
Changes in assets and liabilities		(28,356	)		445			—		(27,911	)

Net cash provided by operating activities		171,596			8,812			—		180,408

Investing activities
Additions to theatre properties and equipment and other		(155,712	)		—			—		(155,712	)
Acquisition of theatre in Brazil		(2,651	)		—			—		(2,651	)
Proceeds from sale of theatre properties and equipment and other		4,973			—			—		4,973
Investment in joint ventures and other		—			(1,777	)		—		(1,777	)

Net cash used for investing activities		(153,390	)		(1,777	)		—		(155,167	)

Financing activities
Dividends paid to parent		(57,575	)		—			—		(57,575	)
Repayments of long-term debt		(3,516	)		—			—		(3,516	)
Payment of debt issue costs		(6,957	)		—			—		(6,957	)
Payments on capital leases		(7,959	)		—			—		(7,959	)
Other		(2,798	)		—			—		(2,798	)

Net cash used for financing activities		(78,805	)		—			—		(78,805	)

Effect of exchange rate changes on cash and cash equivalents		(9,085	)		—			—		(9,085	)

Increase (decrease) in cash and cash equivalents		(69,684	)		7,035			—		(62,649	)
Cash and cash equivalents:
Beginning of year		467,478			171,363			—		638,841

End of year	$	397,794		$	178,398		$	—	$	576,192

Note: “Restricted Group” and “Unrestricted Group” are defined in the indentures for the senior notes and senior subordinated notes.

Item 6.

Exhibits


+10.1		Second Amended and Restated Non-Employee Director Compensation Policy dated as of June 4, 2015 (incorporated by reference to Exhibit 10.1 to Cinemark Holdings, Inc.’s Quarterly Report on Form 10-Q, File No. 001-33401, filed August 6, 2015).

*31.1		Certification of Tim Warner, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2		Certification of Sean Gamble, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*32.1		Certification of Tim Warner, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2		Certification of Sean Gamble, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

*101		Financial Statements from the quarterly report on Form 10-Q of Cinemark USA, Inc. for the quarter ended June 30, 2015, filed August 7, 2015, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements tagged as detailed text.

*	filed herewith.

+	Any management contract, compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						CINEMARK USA, INC.
						Registrant
DATE: August 7, 2015

						/s/ Tim Warner
						Tim Warner
						Chief Executive Officer

						/s/ Sean Gamble
						Sean Gamble
						Chief Financial Officer

EXHIBIT INDEX


+10.1		Second Amended and Restated Non-Employee Director Compensation Policy dated as of June 4, 2015 (incorporated by reference to Exhibit 10.1 to Cinemark Holdings, Inc.’s Quarterly Report on Form 10-Q, File No. 001-33401, filed August 6, 2015).

*31.1		Certification of Tim Warner, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2		Certification of Sean Gamble, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*32.1		Certification of Tim Warner, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2		Certification of Sean Gamble, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

*101		Financial Statements from the quarterly report on Form 10-Q of Cinemark USA, Inc. for the quarter ended June 30, 2015, filed August 7, 2015, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements tagged as detailed text.

*	filed herewith.

+	Any management contract, compensatory plan or arrangement.

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company