Cinemark Swings to $170M Quarterly Loss, Takes $19.5M Charge for Job, Theater Cuts

Cinemark Theaters - Publicity - H 2017
Courtesy of Business Wire

Cinemark is proceeding to convert its domestic theater circuits to the delivery network developed by cinema tech startup MetaMedia.

"We are thrilled that 97 percent of guests surveyed have expressed high satisfaction with how Cinemark is protecting their health and safety," said CEO Mark Zoradi, predicting "2021 will be a strong box office year."

Cinema giant Cinemark Holdings swung to a loss for its second quarter due to the financial hit from the novel coronavirus pandemic.

The company, led by CEO Mark Zoradi, on Tuesday reported a loss of $170 million, compared with a year-ago profit of $101 million. The latest quarter included a restructuring charge of $19.5 million due to "a permanent reduction in headcount and permanent closure of certain under-performing theaters." The company said it ended June with 5,977 screens.

"The company’s financial results continue to be impacted by the COVID-19 pandemic," it said. "During late June 2020, the company opened five theaters in the US, showing library content, to test its new health and safety protocols. .... The company’s U.S. operating segment had 13,000 patrons attend these test-and-learn theaters, generating $37,000 of admissions revenues and $57,000 of concession revenues."

On a morning analyst call, Zoradi outlined reopening plans for Cinemark, which will be tied to the availability of major studio movies, and in particular the planned release of Christopher Nolan's Tenet by Warner Bros. on Sept. 3. That should position Cinemark's domestic circuit reopening for late August and early September. More specifically, one third of Cinemark domestic screens are expected to open on Aug. 21, another third will follow on Aug. 25 and the rest will reopen in "a relatively short sequence," Zoradi told investors. To reopen, Cinemark has introduced stringent health and safety measures amid the pandemic.

"We believe we can safely operate our theaters, while prioritizing the health of our employees and communities," the Cinemark boss argued. Zoradi also addressed the five "test and learn" theaters recently reopened to measure the likely success of a wider-scale relaunch of the domestic circuit starting in late August.

He reported attendance at the initial test theaters had grown 20 percent over three weeks, while the five theaters had limited operating hours and reducing pricing. And despite shifting release dates for studio tentpoles, Zoradi was bullish about box office prospects for later this year and into 2021 thanks to titles like Tenet, Wonder Woman 1984, the James Bond franchise installment of No Time To Die and Black Widow.

"While there may be certain elements of a transition to occur over the course of the year, we expect 2021 will be a strong box office year, with several key titles shifting from 2020," Zoradi predicted. And he added 2022 could potentially offer a "more normalized release schedule and box office."

During the latest financial quarter, total revenue for Cinemark dropped from $957.8 million to $9.0 million, which also included "the amortization of deferred National Cinemedia screen advertising advances," the firm said.

Revenue for the second quarter, the first fully affected by the pandemic, fell sharply as cinemas were shuttered, wiping out ticket and concession sales for much of the period. The company not only operates in the U.S., but also has a big Latin American operation, which has been hit hard by the spread of the virus and the financial hit it brings.

"We are thrilled that 97 percent of guests surveyed have expressed high satisfaction with how Cinemark is protecting their health and safety," said Zoradi. "We greatly look forward to initiating the rollout of our theaters beginning Aug. 21 as we welcome our employees and guests back to our Cinemark theaters for great cinematic storytelling.”

Among its cost of operations, Cinemark disclosed that film rentals and advertising dropped from nearly $295 million to $388,000, while spending on salaries and wages fell from nearly $109 million to less than $9 million.