CINEMARK LAYS OFF 17,500 EMPLOYEES, ISSUES PAY CUTS

The nation’s third largest exhibition chain, Cinemark specified in a recent filing that it will be laying off 17,500 domestic hourly theater employees as a result of closing theaters on 18 March due to the COVID-19 pandemic. In addition, 60% of their Plano, TX headquarter employees were furloughed 20% of their salary with full benefits. The reduction of the remaining employees’ salaries will be 50%. “While Cinemark was well-positioned with approximately $0.5 Billion in cash and 2x net leverage heading into this global pandemic, we are taking prudent steps to further safeguard our liquidity position during this unprecedented time,” Cinemark CEO, Mark Zoradi said. “We believe the Senior Secured Notes, along with our current cash balance and other cost reduction measures, will provide us sufficient liquidity to endure the COVID-19 crisis, even if prolonged, and once again open our theatres and welcome moviegoers to experience the magic of cinematic storytelling on our big screens.”

An annual proxy statement reported that Zoradi, earned $6.3 million in total compensation for 2019, up from $5.2 million the year before. Chairman Lee Roy Mitchell earned $2.4 million last year, an increase from $2 million in 2018. Zoradi and the company’s board of directors earlier said they’re forgoing their salaries during the COVID-19 crisis with other executives taking 80% pay cuts during the circuit’s closure. In addition, Cinemark will also sell $250M in debt securities and suspend a quarterly dividend to save $42 million quarterly.

The latest 8-K also mentioned that Cinemark is working with landlords and major suppliers “to modify the timing of certain contractual payments.” Also, thanks to the recent passing of the CARES Act, Cinemark said that they expect to receive an estimated $20M cash tax refund in 2020 “related to qualified improvement property expenditures from 2018 and 2019, benefit from the ability to defer social security payroll tax matches that would otherwise be required in 2020; receive a payroll tax credit in 2020 for expenses related to paying wages and health benefits to employees who are not working as a result of closures and reduced receipts associated with COVID-19, and apply any tax loss incurred in 2020 to prior year income for a refund when our 2020 tax return is filed.” “Although we are reviewing, and intend to seek, any available potential benefits under the CARES Act, including those described above, we cannot predict the manner in which such benefits will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all,” read the 8-K.

Cinemark has 345 theaters nationwide and operates 554 theaters with 6,132 screens in 42 states domestically and 15 countries throughout South and Central America. The company described its financial position as “strong” before COVID-19 hit with $479.4 Million in cash as of March 31 and that’s because they “maintained a healthy balance sheet with low leverage.” ”Even if our theatres remained closed for the remainder of the year, Cinemark USA believes that it has sufficient cash to sustain its operations for the remainder of the year, even before giving effect to this offering,” read the 8-K.