Cinemark CFO and COO Sean Gamble told investors and financial analysts in a conference call today that the chain is looking to “ramp up” and reopen by 1 July. Employees will return to work two weeks prior, in late June. Theater openings could be done “state by state, county by county,” scaled by “demand,” with possible reduced hours and days of the week. “As debt starts to settle and when the COVID crisis starts to decline, and we get confirmation of when theaters can re-open, we will certainly consider them,” said the company’s CEO Mark Zoradi, who rose to a $6.3 million salary in 2019 and is currently going without pay amid the crisis. “There’s going to be time and opportunity to consider that at a later date.”
Zoradi mentioned that there weren’t any plans “beyond what we already planned.” Every year, a handful of leases are expired, which the circuit considers renewing or not, but there aren’t any planned closings due to the economic impact resulting from the coronavirus. Zoradi and Gamble assured that Cinemark is preparing for a best-case July opening while also being ready for the worst in terms of a cash cushion. The company is relying on relief from the $2 trillion CARES Act and says it expects to receive a $20 million cash tax refund in 2020 related to qualified improvement property expenditures from 2018 and 2019.
The CEO mentioned that rents are the biggest fixed costs, making up about 45% of the monthly ‘cash burn’ rate. Cinemark is currently seeking relief from various landlords. Discussions range from a 90-day grace period, starting to pay when theaters reopen, waiting until 2021 or extending leases and tacking what’s owed onto the back end. The chain revealed that it has laid off more than 17,500 hourly employees and furloughed 50% of its corporate employees at 20% of their salary. On Monday, Cinemark also said it planned to issue $250 million worth of debt securities for general corporate purposes and to increase liquidity.
Gamble said that the ramp-up would include re-hiring and training, as well as renewed marketing efforts and a three-month slow build of operations. To be cautious and not overextend the business, Gamble said Cinemark would slowly build up its operations and expenditures from there depending on demand and whether management is confident attendance levels will sustain. He cautioned that it could take three months before the circuit is experiencing normal levels of business. Cinemark CEO and Board Director Mark Zoradi added there will be two weeks of “showing library product, high profile library product” “We won’t be everything back day 1, but dip our toe approach,” Gamble said. “In our current modeling we are anticipating that a return to normalcy could take a couple of months to fully get going as a result of staggered theater openings from ongoing governmental limitations, reduced operating hours and potentially ongoing social distancing needs.”
The chain expects a slow flow of attendance until big blast off anticipated the weekend of 17-19 July, which is when the premier of Warner Bros. "Christopher Nolan’s Tenet" takes place. With typical occupancy levels of 20% and 30%, the theater is still considering the implementation of some degree of social distancing, such as the sale of only 50% of the seats or certain spacing limitations between seats that are sold, according to Gamble. Zoradi also emphasized that given how 60% of the chain’s auditoriums have recliners, there’s already a degree of social distancing in place at the chain. He envisioned two possibilities in regards to spacing moviegoers, in which Cinemark would sell every other seat, or suspend reserved seating for some time, selling only 50% of the seats. He stated that upon opening, Cinemark will “let the consumer know that they’re walking into a highly clean, highly sanitized environment.” With theatrical repping 54% of movie revenues, studios are “very anxious” like the exhibition to return to form.