ck0000885975-10q_20180930.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 files). Yes ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 ☒

As of October 31, 2018, 1,500 shares of Class A common stock and 182,648 shares of Class B common stock were outstanding.

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 2, 2018 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.

	September 30,			December 31,
	2018			2017
Assets
Current assets
Cash and cash equivalents	$	366,787		$	522,415
Inventories		16,319			17,507
Accounts receivable		76,813			89,248
Current income tax receivable		3,977			11,730
Prepaid expenses and other		21,476			16,536
Accounts receivable from parent		19,314			14,581
Total current assets		504,686			672,017

Theatre properties and equipment		3,352,145			3,328,589
Less: accumulated depreciation and amortization		1,531,658			1,500,535
Theatre properties and equipment, net		1,820,487			1,828,054

Other assets
Goodwill		1,276,800			1,284,079
Intangible assets - net		330,938			336,761
Investment in NCM		279,456			200,550
Investments in and advances to affiliates		153,101			120,045
Long-term deferred tax asset		4,011			4,067
Deferred charges and other assets - net		47,386			39,767
Total other assets		2,091,692			1,985,269

Total assets	$	4,416,865		$	4,485,340

Liabilities and equity
Current liabilities
Current portion of long-term debt	$	7,984		$	7,099
Current portion of capital lease obligations		26,383			25,511
Current income tax payable		8,708			5,509
Current liability for uncertain tax positions		219			11,873
Accounts payable and accrued expenses		347,625			418,294
Total current liabilities		390,919			468,286

Long-term liabilities
Long-term debt, less current portion		1,774,456			1,780,381
Capital lease obligations, less current portion		228,162			251,151
Long-term deferred tax liability		142,281			121,787
Long-term liability for uncertain tax positions		13,169			8,358
Deferred lease expenses		39,555			40,929
Deferred revenue - NCM		291,307			351,706
Other long-term liabilities		47,024			41,247
Total long-term liabilities		2,535,954			2,595,559

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		1,274,181			1,264,505
Retained earnings		497,896			373,069
Accumulated other comprehensive loss		(320,166	)		(253,282	)
Total Cinemark USA, Inc.'s stockholder's equity		1,477,221			1,409,602
Noncontrolling interests		12,771			11,893
Total equity		1,489,992			1,421,495

Total liabilities and equity	$	4,416,865		$	4,485,340

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues
Admissions	$	427,616		$	425,128		$	1,389,110		$	1,351,477
Concession		264,165			247,027			831,243			777,573
Other		62,454			38,593			202,906			112,503
Total revenues		754,235			710,748			2,423,259			2,241,553
Cost of operations
Film rentals and advertising		230,121			226,229			758,242			725,603
Concession supplies		42,720			40,178			134,577			124,117
Salaries and wages		92,495			87,305			285,997			261,318
Facility lease expense		80,592			81,919			243,873			248,569
Utilities and other		112,832			92,341			337,866			271,751
General and administrative expenses		37,745			36,512			121,769			111,179
Depreciation and amortization		64,971			58,052			193,656			174,545
Impairment of long-lived assets		1,641			5,026			5,020			9,600
Loss on disposal of assets and other		7,826			8,576			28,666			9,464
Total cost of operations		670,943			636,138			2,109,666			1,936,146
Operating income		83,292			74,610			313,593			305,407
Other income (expense)
Interest expense		(27,144	)		(26,317	)		(82,725	)		(79,208	)
Loss on debt amendments and refinancing		—			-			(1,484	)		(246	)
Interest income		2,754			1,678			7,847			4,391
Foreign currency exchange gain (loss)		(3,126	)		584			(6,947	)		2,018
Distributions from NCM		2,386			2,144			12,168			11,704
Interest expense - NCM		(4,983	)		—			(14,875	)		—
Equity in income of affiliates		14,158			10,902			29,208			26,767
Total other expense		(15,955	)		(11,009	)		(56,808	)		(34,574	)

Income before income taxes		67,337			63,601			256,785			270,833
Income taxes		16,301			24,797			60,056			99,167
Net income	$	51,036		$	38,804		$	196,729		$	171,666
Less: Net income attributable to noncontrolling interests		393			401			878			1,438
Net income attributable to Cinemark USA, Inc.	$	50,643		$	38,403		$	195,851		$	170,228

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net income	$	51,036		$	38,804		$	196,729		$	171,666
Other comprehensive income (loss), net of tax
Other comprehensive income (loss) in equity method investments		(63	)		(11	)		(43	)		92
Foreign currency translation adjustments		(10,797	)		9,085			(66,841	)		5,578
Total other comprehensive income (loss), net of tax		(10,860	)		9,074			(66,884	)		5,670
Total comprehensive income, net of tax		40,176			47,878			129,845			177,336
Comprehensive income attributable to noncontrolling interests		(393	)		(401	)		(878	)		(1,438	)
Comprehensive income attributable to Cinemark USA, Inc.	$	39,783		$	47,477		$	128,967		$	175,898

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

	Nine Months Ended September 30,
	2018			2017
Operating activities
Net income	$	196,729		$	171,666
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		191,236			173,378
Amortization of intangible and other assets and favorable/unfavorable leases		2,420			1,167
Amortization of long-term prepaid rents		1,814			1,540
Amortization of debt issue costs		4,236			4,619
Loss on debt amendments and refinancing		1,484			246
Amortization of deferred revenues, deferred lease incentives and other		(16,264	)		(12,037	)
Impairment of long-lived assets		5,020			9,600
Share based awards compensation expense		9,676			8,862
Loss on disposal of assets and other		28,666			9,464
Deferred lease expenses		(952	)		(1,019	)
Equity in income of affiliates		(29,208	)		(26,767	)
Deferred income tax expenses		9,096			9,541
Distributions from equity investees		21,041			17,321
Changes in assets and liabilities and other		(75,375	)		(56,399	)
Net cash provided by operating activities		349,619			311,182
Investing activities
Additions to theatre properties and equipment		(245,962	)		(262,730	)
Acquisitions of theatres in the U.S. and international markets, net of cash acquired		(11,289	)		(41,000	)
Proceeds from sale of theatre properties and equipment and other		3,557			14,816
Acquisition of NCM common units		(78,393	)		—
Investment in joint ventures and other, net		(20,442	)		(1,178	)
Net cash used for investing activities		(352,529	)		(290,092	)
Financing activities
Dividends paid to parent		(111,550	)		(100,875	)
Payroll taxes paid as a result of stock withholdings		(2,905	)		(2,943	)
Repayments of long-term debt		(4,946	)		(2,855	)
Payment of debt issue costs		(5,103	)		(817	)
Fees paid related to debt amendments		(704	)		(246	)
Payments on capital leases		(18,778	)		(15,814	)
Proceeds from financing lease		—			10,200
Other		—			(620	)
Net cash used for financing activities		(143,986	)		(113,970	)
Effect of exchange rate changes on cash and cash equivalents		(8,732	)		1,051
Decrease in cash and cash equivalents		(155,628	)		(91,829	)
Cash and cash equivalents:
Beginning of period		522,415			561,138
End of period	$	366,787		$	469,309
Supplemental information (see Note 13)

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

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, Curacao and Paraguay.

The accompanying condensed consolidated balance sheet as of December 31, 2017, 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, 2017, included in the Annual Report on Form 10-K filed March 2, 2018 by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be achieved for the full year.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC Topic 606”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASC Topic 606 replaces most existing revenue recognition guidance in U.S. generally accepted accounting principles. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from the contracts with customers. The Company adopted ASC Topic 606 effective January 1, 2018. See Note 3 for further discussion.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), (“ASU 2016-02”). The purpose of ASU 2016-02 is to provide financial statement users a better understanding of the amount, timing, and uncertainty of cash flows arising from leases. The adoption of ASU 2016-02 will result in the recognition of a right-of-use asset and a lease liability for most operating leases. New disclosure requirements include qualitative and quantitative information about the amounts recorded in the financial statements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. ASU 2016-02 requires a modified retrospective transition by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective with the option to elect certain practical expedients. Early adoption is permitted. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, (“ASU 2018-10”). The amendments in ASU 2018-10 provide clarification of narrow aspects of the guidance issued in ASU 2016-02. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, (“ASU 2018-11”). The amendments in ASU 2018-11 provide an additional transition method to adopt the amendments in ASU 2016-02. Under this new transition method, an entity initially applies the amendments in ASU 2016-02 at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Under this transition method, an entity is not required to use the modified transition method described in ASU 2016-02. The Company plans to adopt the additional transition method provided in ASU 2018-11. The Company is currently evaluating the impact of ASU 2016-02, ASU 2018-10 and ASU 2018-11 on its condensed consolidated financial statements including, but not limited to, the impact of 1) the recognition of right-of-use assets and liabilities for operating leases, 2) the reassessment of certain leases previously evaluated under sale-leaseback accounting guidance and 3) the reclassification of certain rent related assets and liabilities as part of the right-of-use assets. The most significant impact of these amendments on the Company’s financial statements will be the recognition of new right-of-use assets and lease liabilities related to leased theatres and certain leased equipment that are currently classified as operating leases. The Company will adopt the amendments in ASU 2016-02, ASU 2018-10 and ASU 2018-11 in the first quarter of 2019.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments – a consensus of the FASB Emerging Issues Task Force, (“ASU 2016-15”). The purpose of ASU 2016-15 is to reduce the diversity in practice regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. A retrospective transition method should be used in the application of the amendments within ASU 2016-15. The Company adopted ASU 2016-15 effective January 1, 2018. As a result of the adoption of ASU 2016-15, cash paid of $246 related to the June 2017 amendment of the Company’s senior secured credit facility was reclassified from operating activities to financing activities for the nine months ended September 30, 2017.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, (“ASU 2018-13”). The purpose of ASU 2018-13 is to improve the disclosures related to fair value measurements in the financial statements. The improvements in ASU include the removal, modification and addition of certain disclosure requirements primarily related to Level 3 fair value measurements. ASU 2016-18 is effective for fiscal years beginning after December 15, 2019, including interim periods within that year. The amendments in ASU 2018-13 should be applied prospectively. The Company does not expect ASU 2018-13 to have a significant impact on its condensed consolidated financial statements.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation, the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act made changes to the U.S. tax code, which included (1) reduced U.S. corporate tax rate from 35 percent to 21 percent, (2) generally eliminated U.S. federal income taxes on dividends from foreign subsidiaries, and (3) a one-time transition tax on certain undistributed earnings of foreign subsidiaries. Under ASC 740, Income Taxes, reporting entities are required to recognize the effect(s) of the Act on current and deferred income taxes in the enactment period’s financial statements. As of September 30, 2018, the amounts recorded for the Tax Act pertaining to the transition tax impact for 2017 are final, however, the transition tax impact for 2018 remains provisional. The amounts recorded for the re-measurement of net deferred taxes, and the Company’s reassessment of valuation allowances remain provisional. These estimates may be impacted by further analysis due to future clarification and guidance regarding earnings and profits computations, state tax conformity to federal tax changes, and potential tax planning options under consideration.

The Company recognizes admissions and concession revenues when sales are made at the box office and concession stand, respectively. Other revenues include screen advertising, transactional fees and other ancillary revenues such as vendor marketing promotions and meeting rentals and events. The Company records proceeds from the sale of gift cards and other advanced sale-type certificates in current liabilities and recognizes admissions or concession revenue when a holder redeems the card or certificate. Additionally, the Company recognizes unredeemed gift cards and other advanced sale-type certificates as other revenues based on a proportion of redemptions, which is estimated primarily based on the Company’s historical experience with such cards and certificates.

Screen advertising revenues are generally recognized over the period that the related advertising is delivered on-screen or in-theatre. Advances collected on long-term screen advertising, concession and other contracts are recorded as deferred revenues. In accordance with the terms of the agreements, the advances collected on such contracts are recognized during the period in which the Company satisfies the related performance obligations, which may differ from the period in which the advances are collected. These advances are recognized on either a straight-line basis over the term of the contracts or as the Company has met its performance obligations in accordance with the terms of the contracts.

See additional revenue recognition policy considerations, updated for the adoption of ASC Topic 606, below.

The Company adopted ASC 606, Revenue from Contracts with Customers, effective January 1, 2018 under the modified retrospective method (cumulative-effect) and therefore, revenue amounts as presented on the condensed consolidated statements of income have not been adjusted for prior periods presented.

Changes to the way in which the Company recognizes revenue resulted in the following impacts to the condensed consolidated statements of income:

The above noted changes increased (decreased) admissions, concession and other revenue for the three and nine months ended September 30, 2018, disaggregated as follows:

The Company applied the practical expedient to exclude sales and other similar taxes collected from customers from its transaction price for purposes of recording revenues. As such, revenues are presented net of such taxes.

The following table presents revenues for the three and nine months ended September 30, 2018, disaggregated based on major type of good or service and by reportable operating segment.

	Three Months Ended						Nine Months Ended
	September 30, 2018						September 30, 2018
	U.S.		International				U.S.		International
	Operating		Operating				Operating		Operating
Major Goods/Services	Segment ⁽¹⁾		Segment		Consolidated		Segment ⁽¹⁾		Segment		Consolidated
Admissions revenues	$	333,274	$	94,342	$	427,616	$	1,091,489	$	297,621	$	1,389,110
Concession revenues		207,960		56,205		264,165		661,328		169,915		831,243
Screen advertising and promotional revenues		19,010		13,420		32,430		58,240		43,135		101,375
Other revenues		22,031		7,993		30,024		76,635		24,896		101,531
Total revenues	$	582,275	$	171,960	$	754,235	$	1,887,692	$	535,567	$	2,423,259

The following table presents revenues for the three and nine months ended September 30, 2018, disaggregated based on timing of revenue recognition (see Revenue Recognition Policy above).

	Three Months Ended						Nine Months Ended
	September 30, 2018						September 30, 2018

	U.S.		International				U.S.		International
	Operating		Operating				Operating		Operating
	Segment ⁽¹⁾		Segment		Consolidated		Segment ⁽¹⁾		Segment		Consolidated
Goods and services transferred at a point in time	$	561,849	$	155,291	$	717,140	$	1,824,138	$	482,790	$	2,306,928
Goods and services transferred over time		20,426		16,669		37,095		63,554		52,777		116,331
Total	$	582,275	$	171,960	$	754,235	$	1,887,692	$	535,567	$	2,423,259

The following table presents changes in the Company’s deferred revenues for the nine months ended September 30, 2018.

The table below summarizes the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of September 30, 2018 and when the Company expects to recognize this revenue.

Accounts receivable as of September 30, 2018 included approximately $49,224 of receivables related to contracts with customers. The Company did not record any assets related to the costs to obtain or fulfill a contract with customers during the nine months ended September 30, 2018.

As discussed further in Note 6, in connection with the completion of the NCM, Inc. (“NCMI”) initial public offering, the Company amended and restated its ESA with NCM and received approximately $174,000 in cash consideration from NCM. The proceeds were recorded as deferred revenue and are being amortized over the term of the modified ESA, or through February 2037. In addition to the consideration received upon the ESA modification during 2007, the Company also receives consideration in the form of common units from NCM, at each annual common unit adjustment settlement, in exchange for exclusive access to the Company’s newly opened domestic screens under the ESA. See Note 6 for additional information regarding the common unit adjustment and related accounting. Due to the significant length of time between receiving the consideration from NCM and fulfillment of the related performance obligation, the ESA includes an implied significant financing component, as per the guidance in ASC Topic 606.

As a result of the significant financing component on deferred revenue - NCM, the Company recognized incremental screen advertising revenue and an offsetting interest expense of $4,983 and $14,875 during the three and nine months ended September 30, 2018, respectively. The interest expense was calculated using the Company’s incremental borrowing rates at the time when the cash and each tranche of common units were received from NCM, which ranged from 5.5% to 8.0%.

On March 29, 2018, the Company amended its senior secured credit facility to extend the maturity of the term loan to March 29, 2025, reduce the rate at which the term loan bears interest by 0.25% and to reduce the amount of real property required to be mortgaged to secure the loans. Under the amended facility, quarterly principal payments of $1,649 are due on the term loan through December 31, 2024, with a final principal payment of $613,351 due on March 29, 2025. The Company incurred debt issue costs of approximately $4,962 in connection with the amendment, which are reflected as a reduction of long term debt on the condensed consolidated balance sheet as of September 30, 2018. As a result of the amendment, the Company wrote-off $780 of unamortized debt issue costs and incurred approximately $704 in legal and other fees, both of which are reflected as loss on debt amendments and refinancing on the condensed consolidated statements of income for the nine months ended September 30, 2018.

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 ASC 820, Fair Value Measurement (“ASC Topic 820”). The carrying value of the Company’s long-term debt was $1,812,349 and $1,817,295 as of September 30, 2018 and December 31, 2017, respectively, excluding unamortized debt discounts and debt issue costs. The fair value of the Company’s long-term debt was $1,804,535 and $1,840,918 as of September 30, 2018 and December 31, 2017, respectively.

Below is a summary of changes in stockholder’s equity attributable to Cinemark USA, Inc., noncontrolling interests and total equity for the nine months ended September 30, 2018 and 2017:

	Cinemark
	USA, Inc.
	Stockholder’s			Noncontrolling		Total
	Equity			Interests		Equity
Balance at January 1, 2018	$	1,409,602		$	11,893	$	1,421,495
Cumulative effect of change in accounting principle, net of taxes of $13,079 (see Note 3)		40,526			—		40,526
Share based awards compensation expense		9,676			—		9,676
Dividends paid to parent		(111,550	)		—		(111,550	)
Net income		195,851			878		196,729
Other comprehensive loss in equity method investees		(43	)		—		(43	)
Foreign currency translation adjustments		(66,841	)		—		(66,841	)
Balance at September 30, 2018	$	1,477,221		$	12,771	$	1,489,992

	Cinemark
	USA, Inc.
	Stockholder’s			Noncontrolling			Total
	Equity			Interests			Equity
Balance at January 1, 2017	$	1,272,938		$	11,142		$	1,284,080
Share based awards compensation expense		8,862		―				8,862
Tax expense related to share based award vesting		(32	)	―				(32	)
Dividends paid to parent		(100,875	)	―				(100,875	)
Dividends paid to noncontrolling interests	―				(588	)		(588	)
Net income		170,228			1,438			171,666
Other comprehensive income in equity method investees		92		―				92
Foreign currency translation adjustments		4,027		―				4,027
Balance at September 30, 2017	$	1,355,240		$	11,992		$	1,367,232

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 and promotions to our theatres. As described further in Note 3 to the Company’s financial statements as included in its 2017 Annual Report on Form 10-K, on February 13, 2007, National Cinemedia, Inc. (“NCMI”), an entity that serves as the sole manager of NCM, completed an initial public offering (“IPO”) of its common stock. In connection with the NCMI 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 Topic 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.

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

	Investment in NCM			Deferred Revenue			Distributions from NCM			Equity in Earnings			Other Revenue			Interest Expense - NCM (3)		Cash Received (Paid)
Balance as of January 1, 2018	$	200,550		$	(351,706	)
Impact of adoption of ASC Topic 606 ⁽¹⁾		—			53,605		$	—		$	—		$	—		$	—	$	—
Receipt of common units due to annual common unit adjustment ("CUA")		5,012			(5,012	)		—			—			—			—		—
Purchase of additional common units		78,393			—			—			—			—			—		(78,393	)
Revenues earned under ESA ^{(2) (3)}		—			—			—			—			(24,028	)		14,875		9,153
Receipt of excess cash distributions		(13,546	)		—			(10,120	)		—			—			—		23,666
Receipt under tax receivable agreement		(2,294	)		—			(2,048	)		—			—			—		4,342
Equity in earnings		11,341			—			—			(11,341	)		—			—		—
Amortization of deferred revenue		—			11,806			—			—			(11,806	)		—		—
Balance as of and for the nine months ended September 30, 2018	$	279,456		$	(291,307	)	$	(12,168	)	$	(11,341	)	$	(35,834	)	$	14,875	$	(41,232	)

During the three months ended September 30, 2018 and 2017, the Company recorded equity in earnings of $6,830 and $5,032, respectively. During the nine months ended September 30, 2018 and 2017, the Company recorded equity in earnings of $11,341 and $8,098, respectively.

The Company made payments to NCM of $67 and $75 during the nine months ended September 30, 2018 and 2017, respectively, related to installation of certain equipment used for digital advertising, which is included in theatre properties and equipment on the condensed consolidated balance sheets.

Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCMI and the Company, AMC Entertainment, Inc. (“AMC”) and Regal Entertainment Group (“Regal”) (collectively, “Founding Members”), 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 3 to the Company’s financial statements as included in its 2017 Annual Report on Form 10-K, the common units received (collectively referred to as the Company’s “Tranche 2 Investment”) are recorded at estimated fair value as an increase in the Company’s investment in NCM with an offset to deferred revenue. The Company’s Tranche 2 Investment is accounted for following the equity method, with undistributed equity earnings related to its Tranche 2 Investment included as a component of earnings in equity in income of affiliates and distributions received related to its Tranche 2 Investment are recorded as a reduction of investment basis.

During March 2018, NCM performed its annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, on March 29, 2018, the Company received an additional 908,042 common units of NCM, each of which is convertible into one share of NCMI common stock. The Company recorded the additional common units received at estimated fair value with a corresponding adjustment to deferred revenue of approximately $5,012. The fair value of the common units received was estimated based on the market price of NCMI common stock at the time the common units were determined, adjusted for volatility associated with the estimated time period it would take to convert the common units and register the respective shares. The deferred revenue will be recognized on a straight-line basis over the remaining term of the ESA, which is approximately 19 years.

On July 5, 2018 the Company acquired 10,738,740 common units of NCM from AMC for $78,393 in cash, or approximately $7.30 per common unit. As a result of the acquisition of these shares, the Company’s ownership of NCM increased from approximately 18% to 25%. The amount paid for the additional common units was recorded as an increase in the Company’s investment in NCM.

As of September 30, 2018, the Company owned a total of 39,518,644 common units of NCM, representing an ownership interest of approximately 25%. The estimated fair value of the Company’s investment in NCM was approximately $418,502 based on the price of NCMI common stock as of September 28, 2018 of $10.59 per share (Level 1 input as defined in FASB ASC Topic 820).

Below is summary financial information for NCM for the periods indicated. (The financial information for the three and nine months ended September 27, 2018 is not yet available.)

Below is a summary of activity for each of the Company’s other investments for the nine months ended September 30, 2018:

	DCIP			AC JV, LLC		DCDC			FE Concepts			Other			Total
Balance at January 1, 2018	$	106,215		$	5,916	$	3,598		$	104		$	4,212		$	120,045
Cash contributions made		1,714			—		—			20,000						21,714
Cash distributions received		(5,201	)		—		—			—			—			(5,201	)
Equity in income (loss)		16,378			648		898			(57	)		—			17,867
Equity in other comprehensive loss		(43	)		—		—			—			—			(43	)
Other		—			—		(1,168	)		(104	)		(9	)		(1,281	)
Balance at September 30, 2018	$	119,063		$	6,564	$	3,328		$	19,943		$	4,203		$	153,101

On February 12, 2007, the Company, AMC and Regal entered into a joint venture known as DCIP 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. As of September 30, 2018, 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.

As of September 30, 2018, the Company had 3,832 digital projection systems being leased under the master equipment lease agreement with Kasima LLC, which is an indirect subsidiary of DCIP and a related party to the Company. The Company had the following transactions with DCIP, reflected in utilities and other costs on the condensed consolidated statements of income, during the three and nine months ended September 30, 2018 and 2017:

During December 2013, the Company, Regal, AMC (the “AC Founding Members”) and NCM entered into a series of agreements that resulted in the formation of AC JV, LLC (“AC”), a joint venture that owns “Fathom 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, including concerts, 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 to AC of $8,516 and $9,448 for the nine months ended September 30, 2018 and 2017, respectively, which are included in film rentals and advertising costs on the condensed consolidated statements of income. Additionally, the remaining outstanding balance of a note payable from the Company to NCM, related to the formation of AC, was $2,778 as of September 30, 2018.

Digital Cinema Distribution Coalition (“DCDC”) is a joint venture among the Company, Universal, Warner Bros., AMC and Regal. DCDC 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 $657 and $637 to DCDC during the nine months ended September 30, 2018 and 2017, 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.

During April 2018, the Company, through its wholly-owned indirect subsidiary CNMK Texas Properties, LLC (“CNMK”), formed a joint venture, FE Concepts, LLC (“FE Concepts”) with AWSR Investments, LLC (“AWSR”), an entity owned by Lee Roy Mitchell and Tandy Mitchell. FE Concepts will develop and operate a family entertainment center that offers bowling, gaming, movies and other amenities. The Company and AWSR each invested approximately $20,000 and each have a 50% voting interest in FE Concepts. The Company accounts for its investment in FE Concepts under the equity method of accounting.

Restricted Stock – During the nine months ended September 30, 2018, Cinemark Holdings, Inc. granted 321,406 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 $35.81 to $39.26 per share. The Company assumed forfeiture rates ranging from 0% to 10% for the restricted stock awards. The restricted stock awards vest over periods ranging from one to four years. The recipients of restricted stock are entitled to receive non-forfeitable dividends and to vote their respective shares, however, the sale and transfer of the restricted shares is prohibited during the restriction period.

Below is a summary of restricted stock activity for the nine months ended September 30, 2018:

As of September 30, 2018, the estimated remaining unrecognized compensation expense related to unvested restricted stock awards was $17,360, of which $16,712 will be recognized by the Company and $648 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 nine months ended September 30, 2018, Cinemark Holdings, Inc. granted restricted stock units representing 228,194 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, 2019 based on a formula utilizing a multiple of Adjusted EBITDA subject to certain 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%, which is the threshold, one-third of the maximum 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 maximum restricted stock units vest. If the IRR for the two-year period is at least 13%, which is the maximum, 100% of the maximum 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. Further, as an example, if the Company achieves an IRR equal to 11%, the number of restricted stock units that shall vest will be greater than the target but less than the maximum number that would have vested had the Company achieved the highest IRR. All restricted stock units granted during 2018 will vest 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 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.

Below is a table summarizing the potential number of shares that could vest under restricted stock unit awards granted during the nine months ended September 30, 2018 at each of the three target levels of financial performance (excluding forfeiture assumptions):

Due to the fact that the IRR for the two-year performance period could not be determined at the time of the 2018 grant, the Company estimated that the most likely outcome is the achievement of the target IRR level. The fair value of the restricted stock unit awards was determined based on the closing price of Cinemark Holdings, Inc.’s common stock on the dates of grant, which ranged from $37.55 to $39.03 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 are expected to vest for the grant and adjust its compensation expense accordingly on a prospective basis over the remaining service period.

During the nine months ended September 30, 2018, the Company determined that the IRR reached for the restricted stock units granted in February 2016 was 7.2%, compared to a target IRR of 8.0%. The Company recorded a reduction in compensation expense of $69 during the nine months ended September 30, 2018 to reflect the revised number of shares expected to vest in February 2020 for the 2016 restricted stock unit grant.

As of September 30, 2018, the estimated remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $8,835. The weighted average period over which this remaining compensation expense will be recognized is approximately two years. As of September 30, 2018, the Company had restricted stock units outstanding that represented a total of 594,266 hypothetical shares of Cinemark Holdings, Inc.’s common stock, net of actual cumulative forfeitures of 18,667 units, assuming an IRR of 7.2% was achieved for the 2016 grants and the maximum IRR level is achieved for all other grants outstanding.

The Company evaluates goodwill for impairment annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of the goodwill may not be fully recoverable. 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. Management considers the reporting unit to be each of its nineteen regions in the U.S. and seven countries internationally with Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala considered one reporting unit (the Company does not have goodwill recorded for all of its international locations). For the year ended December 31, 2017, the Company performed a quantitative goodwill impairment assessment on all reporting units, in accordance with ASC Topic 350-20-35. No events or changes in circumstances occurred during the nine months ended September 30, 2018 that indicated the carrying value of goodwill might exceed its estimated fair value.

	Balance at											Balance at
	January 1,											September 30,
	2018			Additions ⁽¹⁾		Amortization			Other ⁽²⁾			2018
Intangible assets with finite lives:
Gross carrying amount	$	105,895		$	—	$	—		$	(2,049	)	$	103,846
Accumulated amortization		(68,869	)	―			(4,204	)	―				(73,073	)
Total net intangible assets with finite lives	$	37,026		$	—	$	(4,204	)	$	(2,049	)	$	30,773

Intangible assets with indefinite lives:
Tradename and other		299,735			791	―				(361	)		300,165
Total intangible assets — net	$	336,761		$	791	$	(4,204	)	$	(2,410	)	$	330,938

For the year ended December 31, 2017, the Company performed a quantitative assessment for all definite and indefinite-lived tradename assets. No events or changes in circumstances occurred during the nine months ended September 30, 2018 that indicated the carrying value of its tradename assets might exceed their estimated fair values.

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

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. See discussion of the Company’s long-lived asset impairment evaluation process in Note 1 to the Company’s financial statements as included in its 2017 Annual Report on Form 10-K. As noted in the discussion, fair value is determined based on a multiple of cash flows, which was six and a half times for the evaluations performed during the nine months ended September 30, 2018 and 2017. As of September 30, 2018, the estimated aggregate fair value of the long-lived assets impaired during the nine months ended September 30, 2018 was $178.

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.

The Company determines fair value measurements in accordance with 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 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.

The Company did not have any assets or liabilities measured at fair value on a recurring basis under ASC Topic 820 as of December 31, 2017 or September 30, 2018.

The Company 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). See additional explanation of fair value measurement techniques used for long-lived assets, goodwill and intangible assets in “Critical Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed March 2, 2018. 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 nine months ended September 30, 2018.

The accumulated other comprehensive loss account in stockholder’s equity of $320,166 and $253,282 as of September 30, 2018 and December 31, 2017, respectively, primarily includes cumulative foreign currency adjustments of $320,406 and $253,565, respectively, from translating the financial statements of the Company’s international subsidiaries.

As of September 30, 2018, all foreign countries where the Company has operations, other than Argentina, 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. The Company deemed Argentina to be highly inflationary beginning July 1, 2018. A highly inflationary economy is defined as an economy with a cumulative inflation rate of approximately 100 percent or more over a three-year period. If a country’s economy is classified as highly inflationary, the financial statements of the foreign entity operating in that country must be remeasured to the functional currency of the reporting entity. The financial information of the Company’s Argentina subsidiaries has been remeasured in U.S. dollars in accordance with ASC Topic 830, Foreign Currency Matters, effective beginning July 1, 2018.

Below is a summary of the impact of translating the September 30, 2018 financial statements of the Company’s international subsidiaries:

(1) Amount represents the cumulative comprehensive loss recorded for Argentina through September 30, 2018. Beginning July 1, 2018, Argentina was deemed highly inflationary. The impact of translating Argentina financial results to U.S. dollars, which was not significant, has been recorded in foreign currency exchange gain (loss) on the Company’s condensed consolidated statement of income.

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

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, Curacao and Paraguay. Each segment’s revenue is derived from admissions and concession sales and other ancillary revenues. The Company uses Adjusted EBITDA, as shown in the reconciliation table below, as the primary measure of segment profit and loss to evaluate performance and allocate its resources. The Company does not report total assets 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						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Revenues
U.S.	$	585,536		$	514,376		$	1,897,664		$	1,650,514
International		171,960			200,122			535,567			602,116
Eliminations		(3,261	)		(3,750	)		(9,972	)		(11,077	)
Total revenues	$	754,235		$	710,748		$	2,423,259		$	2,241,553

Adjusted EBITDA
U.S.	$	132,974		$	109,057		$	478,164		$	404,095
International		35,740			44,818			106,518			133,329
Total Adjusted EBITDA	$	168,714		$	153,875		$	584,682		$	537,424

Capital expenditures
U.S.	$	65,458		$	65,612		$	195,104		$	221,604
International		17,915			14,318			50,858			41,126
Total capital expenditures	$	83,373		$	79,930		$	245,962		$	262,730

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Net income	$	51,036		$	38,804		$	196,729		$	171,666
Add (deduct):
Income taxes		16,301			24,797			60,056			99,167
Interest expense ⁽¹⁾		27,144			26,317			82,725			79,208
Other income ⁽²⁾		(8,803	)		(13,164	)		(15,233	)		(33,176	)
Loss on debt amendments and refinancing		—			—			1,484			246
Other cash distributions from equity investees ⁽³⁾		4,786			2,402			21,041			17,321
Depreciation and amortization		64,971			58,052			193,656			174,545
Impairment of long-lived assets		1,641			5,026			5,020			9,600
Loss on disposal of assets and other		7,826			8,576			28,666			9,464
Deferred lease expenses		(20	)		(297	)		(952	)		(1,019	)
Amortization of long-term prepaid rents		578			551			1,814			1,540
Share based awards compensation expense		3,254			2,811			9,676			8,862
Adjusted EBITDA	$	168,714		$	153,875		$	584,682		$	537,424

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 8% 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 up to $50,000 and 3% of annual theatre revenues in excess of $50,000. The Company recorded $488 and $451 of management fee revenues during

the nine months ended September 30, 2018 and 2017, respectively. All such amounts are included in the Company’s condensed consolidated financial statements with the intercompany amounts eliminated in consolidation.

The Company has an Aircraft Time Sharing Agreement with Copper Beech Capital, LLC (“Copper Beech”) to use, on occasion, a private aircraft owned by Copper Beech. Copper Beech is owned by Mr. Mitchell and his wife, Tandy Mitchell. The private aircraft is used by Mr. Mitchell and other executives who accompany Mr. Mitchell to business meetings for the Company. The Company reimburses Copper Beech for the actual costs of fuel usage and the expenses of the pilots, landing fees, storage fees and similar expenses incurred during the trip. For the nine months ended September 30, 2018 and 2017, the aggregate amounts paid to Copper Beech for the use of the aircraft was $51 and $89, respectively.

The Company leases 14 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 15 leases, 14 have fixed minimum annual rent. The one lease without minimum annual rent has rent based upon a specified percentage of gross sales as defined in the lease. For the nine months ended September 30, 2018 and 2017, the Company paid total rent of approximately $19,465 and $18,844, 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 September 30, 2018 and December 31, 2017 was $19,314 and $14,581, respectively. The Company paid Cinemark Holdings, Inc. cash dividends of $111,550 and $100,875 during the nine months ended September 30, 2018 and 2017, respectively.

The Company has a 50% voting interest in FE Concepts, a joint venture with AWSR, an entity owned by Lee Roy Mitchell and Tandy Mitchell. FE Concepts will develop and operate a family entertainment center that offers bowling, gaming, movies and other amenities. See Note 7 for further discussion.

Silken Brown 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 penalties and attorney's fees arising from alleged violations of the California wage statement law. The claim is also asserted as a representative action under the California Private Attorney General Act (PAGA) for penalties. The Court granted class certification. The company denies the claims, denies that class certification is appropriate, denies that the plaintiff has standing to assert the claims alleged and is vigorously defending against the claims. The company denies any violation of law and plans to vigorously defend against all claims. The Company is unable to predict the outcome of this litigation or the range of potential loss.

Flagship Theatres of Palm Desert, LLC d/b/a Cinemas Palme D’Or v. Century Theatres, Inc., and Cinemark USA, Inc.; Superior Court of the State of California, County of Los Angeles. Plaintiff in this case alleges that the Company violated California antitrust and unfair competition laws by engaging in “circuit dealing” with various motion picture distributors and tortuously interfered with Plaintiff’s business relationships. Plaintiff seeks compensatory damages, trebling of those damages under California law, punitive damages, injunctive relief, attorneys’ fees, costs and interest. Plaintiff also alleges that the Company’s conduct ultimately resulted in closure of its theatre in June 2016. The Company denied the allegations. In 2008, the Company moved for summary judgment on Plaintiff’s claims, arguing primarily that clearances between the theatres at issue were lawful and that Plaintiff lacked proof sufficient to support certain technical elements of its antitrust claims. The trial court granted that motion and dismissed Plaintiff’s claims. Plaintiff appealed and, in 2011, the Court of Appeal reversed, holding, among other things, that Plaintiff’s claims were not about the illegality of clearances but were focused, instead, on “circuit dealing.” Having re-framed the claims in that manner, the Court of Appeal held that the trial court’s decision to limit discovery to the market where the theatres at issue operated was an error, as “circuit dealing” necessarily involves activities in different markets. Upon return to the trial court, the parties engaged in additional, broadened discovery related to Plaintiff’s “circuit dealing” claim. Thereafter, the Company moved again for summary judgment on all of Plaintiff’s claims. That new motion for summary judgment was pending when, on or about April 11, 2014, the trial court granted the Company’s motion for terminating sanctions and entered a judgment dismissing the case with prejudice. Plaintiff then appealed that second dismissal, seeking to have the judgment reversed and the case remanded to the trial court. The Court of Appeal issued a ruling on May 24, 2016, reversing the granting of terminating sanctions and instead imposed a lesser evidentiary and damages preclusion sanction. The case returned to the trial court on October 6, 2016. On May 10, 2018, after a five-week jury trial, the jury found no liability on one circuit dealing claim and awarded Plaintiff damages on the other claim, which are tripled for antitrust damage awards. Plaintiff would also be entitled to certain court costs and to seek at least some portion of its attorney’s fees. During the nine months ended September 30, 2018, the Company recorded a litigation reserve based on an estimate of the jury award, which is reflected in loss on disposal of assets and other on the condensed consolidated income statement. The trial court denied a motion for a judgment notwithstanding the verdict and a motion for a new trial. The Company intends to appeal the judgment.

Although the Company denies that it engaged in any form of circuit dealing, it cannot predict the outcome of its pending motions or future appeals.

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 other 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.

As of September 30, 2018, the Company had outstanding $400,000 aggregate principal amount of 5.125% senior notes due 2022, or the 5.125% Senior Notes, and $755,000 aggregate principal amount of 4.875% senior notes due 2023, or the 4.875% Senior Notes, (collectively the “Notes”). 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:

	Parent		Subsidiary		Subsidiary
	Company		Guarantors		Non-Guarantors		Eliminations			Consolidated

Assets
Current assets
Cash and cash equivalents	$	130,590	$	180,623	$	211,202	$	—		$	522,415
Other current assets		59,661		17,841		76,789		(19,270	)		135,021
Accounts receivable from parent or subsidiaries		117,972		119,616		—		(223,007	)		14,581
Total current assets		308,223		318,080		287,991		(242,277	)		672,017
Theatre properties and equipment - net		650,783		765,500		411,771		—			1,828,054
Investment in subsidiaries		1,691,626		121,795		—		(1,813,421	)		—
Other assets		1,427,328		134,845		536,816		(113,720	)		1,985,269
Total assets	$	4,077,960	$	1,340,220	$	1,236,578	$	(2,169,418	)	$	4,485,340
Liabilities and equity
Current liabilities
Current portion of long-term debt	$	5,710	$	—	$	1,389	$	—		$	7,099
Current portion of capital lease obligations		9,532		11,124		4,855		—			25,511
Accounts payable and accrued expenses		215,580		116,409		110,089		(6,402	)		435,676
Accounts payable to parent or subsidiaries		—		—		223,007		(223,007	)		—
Total current liabilities		230,822		127,533		339,340		(229,409	)		468,286
Long-term liabilities
Long-term debt, less current portion		1,878,992		—		11,211		(109,822	)		1,780,381
Capital lease obligations, less current portion		132,189		75,767		43,195		—			251,151
Other long-term liabilities and deferrals		426,355		60,567		93,871		(16,766	)		564,027
Total long-term liabilities		2,437,536		136,334		148,277		(126,588	)		2,595,559
Commitments and contingencies
Equity
Cinemark USA, Inc.'s stockholder's equity:
Common stock		49,543		457,368		10,238		(467,606	)		49,543
Other stockholder's equity		1,360,059		618,985		726,830		(1,345,815	)		1,360,059
Total Cinemark USA, Inc. stockholder's equity		1,409,602		1,076,353		737,068		(1,813,421	)		1,409,602
Noncontrolling interests		—		—		11,893		—			11,893
Total equity		1,409,602		1,076,353		748,961		(1,813,421	)		1,421,495
Total liabilities and equity	$	4,077,960	$	1,340,220	$	1,236,578	$	(2,169,418	)	$	4,485,340

	Parent		Subsidiary		Subsidiary
	Company		Guarantors		Non-Guarantors		Eliminations			Consolidated

Assets
Current assets
Cash and cash equivalents	$	160,708	$	6,186	$	199,893	$	—		$	366,787
Other current assets		83,612		19,262		64,364		(48,653	)		118,585
Accounts receivable from parent or subsidiaries		—		323,468		—		(304,154	)		19,314
Total current assets		244,320		348,916		264,257		(352,807	)		504,686
Theatre properties and equipment - net		669,825		778,773		371,889		—			1,820,487
Investment in subsidiaries		1,798,925		82,114		—		(1,881,039	)		—
Other assets		1,505,465		154,870		545,403		(114,046	)		2,091,692
Total assets	$	4,218,535	$	1,364,673	$	1,181,549	$	(2,347,892	)	$	4,416,865
Liabilities and equity
Current liabilities
Current portion of long-term debt	$	6,595	$	—	$	1,389	$	—		$	7,984
Current portion of capital lease obligations		12,145		9,324		4,914		—			26,383
Accounts payable and accrued expenses		236,624		84,470		82,578		(47,120	)		356,552
Accounts payable to parent or subsidiaries		85,803		—		218,351		(304,154	)		—
Total current liabilities		341,167		93,794		307,232		(351,274	)		390,919
Long-term liabilities
Long-term debt, less current portion		1,873,068		—		9,343		(107,955	)		1,774,456
Capital lease obligations, less current portion		126,274		61,903		39,985		—			228,162
Other long-term liabilities and deferrals		400,805		59,744		80,411		(7,624	)		533,336
Total long-term liabilities		2,400,147		121,647		129,739		(115,579	)		2,535,954
Commitments and contingencies
Equity
Cinemark USA, Inc.'s stockholder's equity:
Common stock		49,543		457,368		10,238		(467,606	)		49,543
Other stockholder's equity		1,427,678		691,864		721,569		(1,413,433	)		1,427,678
Total Cinemark USA, Inc. stockholder's equity		1,477,221		1,149,232		731,807		(1,881,039	)		1,477,221
Noncontrolling interests		—		—		12,771		—			12,771
Total equity		1,477,221		1,149,232		744,578		(1,881,039	)		1,489,992
Total liabilities and equity	$	4,218,535	$	1,364,673	$	1,181,549	$	(2,347,892	)	$	4,416,865

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated

Revenues	$	230,580		$	287,525		$	209,042		$	(16,399	)	$	710,748
Cost of operations
Theatre operating expenses		192,155			200,571			151,645			(16,399	)		527,972
General and administrative expenses		2,632			19,697			14,183			—			36,512
Depreciation and amortization		19,118			21,413			17,521			—			58,052
Impairment of long-lived assets		1,054			—			3,972			—			5,026
Loss on disposal of assets and other		3,075			4,277			1,224			—			8,576
Total cost of operations		218,034			245,958			188,545			(16,399	)		636,138
Operating income		12,546			41,567			20,497			—			74,610
Other income (expense)
Interest expense		(23,565	)		(1,984	)		(1,127	)		359			(26,317	)
Distributions from NCM		—			—			2,144			—			2,144
Equity in income of affiliates		46,446			13,101			9,578			(58,223	)		10,902
Other income		307			471			1,843			(359	)		2,262
Total other income (expense)		23,188			11,588			12,438			(58,223	)		(11,009	)
Income before income taxes		35,734			53,155			32,935			(58,223	)		63,601
Income taxes		(2,669	)		15,596			11,870			—			24,797
Net income		38,403			37,559			21,065			(58,223	)		38,804
Less: Net income attributable to noncontrolling interests		—			—			401			—			401
Net income attributable to Cinemark USA, Inc.	$	38,403		$	37,559		$	20,664		$	(58,223	)	$	38,403

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated

Revenues	$	264,247		$	314,542		$	181,866		$	(6,420	)	$	754,235
Cost of operations
Theatre operating expenses		205,693			224,592			134,895			(6,420	)		558,760
General and administrative expenses		2,344			23,451			11,950			—			37,745
Depreciation and amortization		22,678			24,969			17,324			—			64,971
Impairment of long-lived assets		745			519			377			—			1,641
Loss on disposal of assets and other		2,711			4,856			259			—			7,826
Total cost of operations		234,171			278,387			164,805			(6,420	)		670,943
Operating income		30,076			36,155			17,061			—			83,292
Other income (expense)
Interest expense		(24,469	)		(1,684	)		(1,333	)		342			(27,144	)
Distributions from NCM		—			—			2,386			—			2,386
Interest expense - NCM		(4,983	)		—			—			—			(4,983	)
Equity in income of affiliates		50,262			4,187			10,661			(50,952	)		14,158
Other income (expense)		1,088			1			(1,119	)		(342	)		(372	)
Total other income (expense)		21,898			2,504			10,595			(50,952	)		(15,955	)
Income before income taxes		51,974			38,659			27,656			(50,952	)		67,337
Income taxes		1,331			7,671			7,299			—			16,301
Net income		50,643			30,988			20,357			(50,952	)		51,036
Less: Net income attributable to noncontrolling interests		—			—			393			—			393
Net income attributable to Cinemark USA, Inc.	$	50,643		$	30,988		$	19,964		$	(50,952	)	$	50,643

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated

Revenues	$	748,282		$	903,500		$	631,035		$	(41,264	)	$	2,241,553
Cost of operations
Theatre operating expenses		594,731			618,160			459,731			(41,264	)		1,631,358
General and administrative expenses		9,257			60,906			41,016			—			111,179
Depreciation and amortization		58,969			63,574			52,002			—			174,545
Impairment of long-lived assets		1,340			71			8,189			—			9,600
(Gain) loss on disposal of assets and other		8,580			(405	)		1,289			—			9,464
Total cost of operations		672,877			742,306			562,227			(41,264	)		1,936,146
Operating income		75,405			161,194			68,808			—			305,407
Other income (expense)
Interest expense		(70,348	)		(5,717	)		(4,217	)		1,074			(79,208	)
Loss on debt amendments and refinancing		(246	)		—			—			—			(246	)
Distributions from NCM		—			—			11,704			—			11,704
Equity in income of affiliates		166,691			42,855			24,905			(207,684	)		26,767
Other income		2,194			633			4,656			(1,074	)		6,409
Total other income (expense)		98,291			37,771			37,048			(207,684	)		(34,574	)
Income before income taxes		173,696			198,965			105,856			(207,684	)		270,833
Income taxes		3,468			59,495			36,204			—			99,167
Net income		170,228			139,470			69,652			(207,684	)		171,666
Less: Net income attributable to noncontrolling interests		—			—			1,438			—			1,438
Net income attributable to Cinemark USA, Inc.	$	170,228		$	139,470		$	68,214		$	(207,684	)	$	170,228

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated

Revenues	$	879,552		$	1,018,666		$	566,087		$	(41,046	)	$	2,423,259
Cost of operations
Theatre operating expenses		680,182			699,065			422,354			(41,046	)		1,760,555
General and administrative expenses		9,104			73,401			39,264			—			121,769
Depreciation and amortization		66,333			73,299			54,024			—			193,656
Impairment of long-lived assets		1,946			519			2,555			—			5,020
Loss on disposal of assets and other		7,479			20,265			922			—			28,666
Total cost of operations		765,044			866,549			519,119			(41,046	)		2,109,666
Operating income		114,508			152,117			46,968			—			313,593
Other income (expense)
Interest expense		(72,853	)		(5,045	)		(5,862	)		1,035			(82,725	)
Loss on debt amendments and refinancing		(1,484	)		—			—			—			(1,484	)
Distributions from NCM		—			—			12,168			—			12,168
Interest expense - NCM		(14,875	)		—			—			—			(14,875	)
Equity in income of affiliates		179,170			11,150			24,580			(185,692	)		29,208
Other income (expense)		3,292			(6	)		(1,351	)		(1,035	)		900
Total other income (expense)		93,250			6,099			29,535			(185,692	)		(56,808	)
Income before income taxes		207,758			158,216			76,503			(185,692	)		256,785
Income taxes		11,907			34,611			13,538			—			60,056
Net income		195,851			123,605			62,965			(185,692	)		196,729
Less: Net income attributable to noncontrolling interests		—			—			878			—			878
Net income attributable to Cinemark USA, Inc.	$	195,851		$	123,605		$	62,087		$	(185,692	)	$	195,851

	Parent			Subsidiary		Subsidiary
	Company			Guarantors		Non-Guarantors			Eliminations			Consolidated

Net income	$	38,403		$	37,559	$	21,065		$	(58,223	)	$	38,804
Other comprehensive income (loss), net of tax
Other comprehensive loss of equity method investments		(11	)		—		(11	)		11			(11	)
Foreign currency translation adjustments		9,085			—		9,085			(9,085	)		9,085
Total other comprehensive income, net of tax		9,074			—		9,074			(9,074	)		9,074
Total comprehensive income, net of tax	$	47,477		$	37,559	$	30,139		$	(67,297	)	$	47,878
Comprehensive income attributable to noncontrolling interests		—			—		(401	)		—			(401	)
Comprehensive income attributable to Cinemark USA, Inc.	$	47,477		$	37,559	$	29,738		$	(67,297	)	$	47,477

	Parent			Subsidiary		Subsidiary
	Company			Guarantors		Non-Guarantors			Eliminations			Consolidated

Net income	$	50,643		$	30,988	$	20,357		$	(50,952	)	$	51,036
Other comprehensive loss, net of tax
Other comprehensive loss of equity method investments		(63	)		—		(63	)		63			(63	)
Foreign currency translation adjustments		(10,797	)		—		(10,797	)		10,797			(10,797	)
Total other comprehensive loss, net of tax		(10,860	)		—		(10,860	)		10,860			(10,860	)
Total comprehensive income, net of tax	$	39,783		$	30,988	$	9,497		$	(40,092	)	$	40,176
Comprehensive income attributable to noncontrolling interests		—			—		(393	)		—			(393	)
Comprehensive income attributable to Cinemark USA, Inc.	$	39,783		$	30,988	$	9,104		$	(40,092	)	$	39,783

	Parent		Subsidiary		Subsidiary
	Company		Guarantors		Non-Guarantors			Eliminations			Consolidated

Net income	$	170,228	$	139,470	$	69,652		$	(207,684	)	$	171,666
Other comprehensive income, net of tax
Other comprehensive income of equity method investments		92		—		92			(92	)		92
Foreign currency translation adjustments		5,578		—		5,578			(5,578	)		5,578
Total other comprehensive income, net of tax		5,670		—		5,670			(5,670	)		5,670
Total comprehensive income, net of tax	$	175,898	$	139,470	$	75,322		$	(213,354	)	$	177,336
Comprehensive income attributable to noncontrolling interests		—		—		(1,438	)		—			(1,438	)
Comprehensive income attributable to Cinemark USA, Inc.	$	175,898	$	139,470	$	73,884		$	(213,354	)	$	175,898

	Parent			Subsidiary		Subsidiary
	Company			Guarantors		Non-Guarantors			Eliminations			Consolidated

Net income	$	195,851		$	123,605	$	62,965		$	(185,692	)	$	196,729
Other comprehensive loss, net of tax
Other comprehensive loss of equity method investments		(43	)		—		(43	)		43			(43	)
Foreign currency translation adjustments		(66,841	)		—		(66,841	)		66,841			(66,841	)
Total other comprehensive loss, net of tax		(66,884	)		—		(66,884	)		66,884			(66,884	)
Total comprehensive income (loss), net of tax	$	128,967		$	123,605	$	(3,919	)	$	(118,808	)	$	129,845
Comprehensive income attributable to noncontrolling interests		—			—		(878	)		—			(878	)
Comprehensive income attributable to Cinemark USA, Inc.	$	128,967		$	123,605	$	(4,797	)	$	(118,808	)	$	128,967

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated

Operating activities
Net income	$	170,228		$	139,470		$	69,652		$	(207,684	)	$	171,666
Adjustments to reconcile net income to cash provided by operating activities		(92,827	)		28,387			52,671			207,684			195,915
Changes in assets and liabilities		(38,534	)		(26,862	)		8,997			—			(56,399	)
Net cash provided by operating activities		38,867			140,995			131,320			—			311,182
Investing activities
Additions to theatre properties and equipment		(89,111	)		(130,816	)		(42,803	)		—			(262,730	)
Acquisition of theatres in the U.S. and international markets, net of cash acquired		(12,500	)		—			(28,500	)		—			(41,000	)
Proceeds from sale of theatre properties and equipment and other		2,147			12,267			402			—			14,816
Dividends received from subsidiaries		127,600			6			—			(127,606	)		—
Investment in joint ventures and other		—			(69	)		(1,109	)		—			(1,178	)
Net cash provided by (used for) investing activities		28,136			(118,612	)		(72,010	)		(127,606	)		(290,092	)
Financing activities
Dividends paid to parent		(100,875	)		(127,000	)		(606	)		127,606			(100,875	)
Repayments of long-term debt		(2,855	)		—			—			—			(2,855	)
Payments on capital leases		(5,745	)		(7,119	)		(2,950	)		—			(15,814	)
Proceeds from financing lease		—			10,200			—			—			10,200
Other		(1,095	)		(2,943	)		(588	)		—			(4,626	)
Net cash used for financing activities		(110,570	)		(126,862	)		(4,144	)		127,606			(113,970	)
Effect of exchange rate changes on cash and cash equivalents		—			—			1,051			—			1,051
Increase (decrease) in cash and cash equivalents		(43,567	)		(104,479	)		56,217			—			(91,829	)
Cash and cash equivalents:
Beginning of year		146,855			281,023			133,260			—			561,138
End of year	$	103,288		$	176,544		$	189,477		$	—		$	469,309

	Parent			Subsidiary			Subsidiary
	Company			Guarantors			Non-Guarantors			Eliminations			Consolidated

Operating activities
Net income	$	195,851		$	123,605		$	62,965		$	(185,692	)	$	196,729
Adjustments to reconcile net income to cash provided by (used for) operating activities		(90,311	)		91,492			41,392			185,692			228,265
Changes in assets and liabilities		201,287			(243,336	)		(33,326	)		—			(75,375	)
Net cash provided by (used for) operating activities		306,827			(28,239	)		71,031			—			349,619
Investing activities
Additions to theatre properties and equipment		(70,519	)		(118,468	)		(56,975	)		—			(245,962	)
Acquisition of theatres in international markets, net of cash acquired		—			—			(11,289	)		—			(11,289	)
Proceeds from sale of theatre properties and equipment and other		1,244			1,740			573			—			3,557
Proceeds from intercompany note repayment		1,867			—			—			(1,867	)		—
Acquisition of NCM common units		(78,393	)		—			—			—			(78,393	)
Investment in joint ventures and other		—			(19,896	)		(546	)		—			(20,442	)
Net cash used for investing activities		(145,801	)		(136,624	)		(68,237	)		(1,867	)		(352,529	)
Financing activities
Dividends paid to parent		(111,550	)		—			—			—			(111,550	)
Repayments of long-term debt		(4,946	)		—			—			—			(4,946	)
Payment of debt issue costs		(5,103	)		—			—			—			(5,103	)
Repayment of intercompany note		—			—			(1,867	)		1,867			—
Payments on capital leases		(8,605	)		(6,669	)		(3,504	)		—			(18,778	)
Other		(704	)		(2,905	)		—			—			(3,609	)
Net cash used for financing activities		(130,908	)		(9,574	)		(5,371	)		1,867			(143,986	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(8,732	)		—			(8,732	)
Increase (decrease) in cash and cash equivalents		30,118			(174,437	)		(11,309	)		—			(155,628	)
Cash and cash equivalents:
Beginning of year		130,590			180,623			211,202			—			522,415
End of year	$	160,708		$	6,186		$	199,893		$	—		$	366,787

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, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay. As of September 30, 2018, 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 filmed entertainment box office receipts and concession sales with additional revenues from screen advertising sales, transactional fees and other revenue streams, such as vendor marketing promotions and meeting rentals and events held at some of our theatres. 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 AC JV, LLC. NCM provides our domestic theatres with various forms of in-theatre advertising. Our Flix Media subsidiaries provide screen advertising and alternative content for our international circuit and to other international exhibitors.

Films leading the box office during the nine months ended September 30, 2018 included new releases such as Black Panther, Avengers: Infinity War, Incredibles 2, Jurassic World: Fallen Kingdom, Deadpool 2, Mission Impossible – Fallout, Ant-Man and the Wasp, Solo: A Star Wars Story, A Quiet Place, Crazy Rich Asians and other films, as well as the carryover of The Greatest Showman, Jumanji: Welcome to the Jungle and Star Wars: The Last Jedi. Films scheduled for release during the remainder of 2018 include well-known franchise films such as Venom, Halloween, Bumblebee, Ralph Breaks the Internet, Dr. Seuss’ The Grinch, Fantastic Beasts: The Crimes of Grindelwald and Mary Poppins Returns and original titles including A Star is Born, Bohemian Rhapsody and Aquaman, 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. Advertising costs, which are expensed as incurred, are primarily related to campaigns for new and renovated theatres, loyalty and membership programs and brand advertising that vary depending on the timing of such campaigns.

Concession supplies expense is variable in nature and fluctuates with our concession revenues. 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 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 performance 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 both fixed and variable costs and primarily consist of utilities, expenses for projection and sound equipment maintenance and monitoring, property taxes, janitorial costs, repairs, maintenance and security services.

General and administrative expenses are primarily fixed in nature and consist of the costs to support the overall management of the Company, including salaries and wages, incentive compensation and benefit costs for our corporate office personnel, facility expenses for our corporate offices, consulting fees, legal fees, audit fees, supplies and other costs that are not specifically associated with the operations of our theatres.

We adopted ASC Topic 606 effective January 1, 2018, therefore, our revenue recognition policy has been modified as discussed in Note 3 to our condensed consolidated financial statements.

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						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Operating data (in millions):
Revenues
Admissions	$	427.6		$	425.1		$	1,389.1		$	1,351.5
Concession		264.1			247.1			831.2			777.6
Other		62.5			38.6			202.9			112.5
Total revenues	$	754.2		$	710.8		$	2,423.2		$	2,241.6
Cost of operations
Film rentals and advertising		230.1			226.2			758.2			725.6
Concession supplies		42.7			40.2			134.6			124.1
Salaries and wages		92.5			87.3			286.0			261.3
Facility lease expense		80.6			82.0			243.9			248.6
Utilities and other		112.9			92.4			337.9			271.8
General and administrative expenses		37.8			36.5			121.8			111.2
Depreciation and amortization		64.9			58.1			193.6			174.5
Impairment of long-lived assets		1.6			5.0			5.0			9.6
Loss on disposal of assets and other		7.9			8.6			28.7			9.5
Total cost of operations		671.0			636.3			2,109.7			1,936.2
Operating income	$	83.2		$	74.5		$	313.5		$	305.4

Operating data as a percentage of total revenues:
Revenues
Admissions		56.7	%		59.8	%		57.3	%		60.3	%
Concession		35.0	%		34.8	%		34.3	%		34.7	%
Other		8.3	%		5.4	%		8.4	%		5.0	%
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of operations ⁽¹⁾
Film rentals and advertising		53.8	%		53.2	%		54.6	%		53.7	%
Concession supplies		16.2	%		16.3	%		16.2	%		16.0	%
Salaries and wages		12.3	%		12.3	%		11.8	%		11.7	%
Facility lease expense		10.7	%		11.5	%		10.1	%		11.1	%
Utilities and other		15.0	%		13.0	%		13.9	%		12.1	%
General and administrative expenses		5.0	%		5.1	%		5.0	%		5.0	%
Depreciation and amortization		8.6	%		8.2	%		8.0	%		7.8	%
Impairment of long-lived assets		0.2	%		0.7	%		0.2	%		0.4	%
Loss on disposal of assets and other		1.0	%		1.2	%		1.2	%		0.4	%
Total cost of operations		89.0	%		89.5	%		87.1	%		86.4	%
Operating income		11.0	%		10.5	%		12.9	%		13.6	%

Revenues. Total revenues increased $43.4 million to $754.2 million for the three months ended September 30, 2018 (“third quarter of 2018”) from $710.8 million for the three months ended September 30, 2017 (“third quarter of 2017”), representing a 6.1% increase. The table below, presented by reportable operating segment, summarizes our revenue performance and certain key performance indicators for the three months ended September 30, 2018 and 2017.

	U.S. Operating Segment							International Operating Segment												Consolidated
															Constant Currency ⁽³⁾
	2018		2017		% Change			2018		2017		% Change			2018		% Change			2018		2017		% Change
Admissions revenues ⁽¹⁾	$	333.3	$	312.3		6.7	%	$	94.3	$	112.8		(16.4	)%	$	116.3		3.1	%	$	427.6	$	425.1		0.6	%
Concession revenues ⁽¹⁾	$	207.9	$	181.5		14.5	%	$	56.2	$	65.6		(14.3	)%	$	67.1		2.3	%	$	264.1	$	247.1		6.9	%
Other revenues ⁽¹⁾⁽²⁾	$	41.1	$	16.9		143.2	%	$	21.4	$	21.7		(1.4	)%	$	27.6		27.2	%	$	62.5	$	38.6		61.9	%
Total revenues ⁽¹⁾⁽²⁾	$	582.3	$	510.7		14.0	%	$	171.9	$	200.1		(14.1	)%	$	211.0		5.4	%	$	754.2	$	710.8		6.1	%
Attendance ⁽¹⁾		43.7		40.6		7.6	%		26.1		26.7		(2.2	)%							69.8		67.3		3.7	%
Average ticket price ⁽¹⁾	$	7.63	$	7.69		(0.8	)%	$	3.61	$	4.22		(14.5	)%	$	4.46		5.7	%	$	6.13	$	6.32		(3.0	)%
Concession revenues per patron ⁽¹⁾	$	4.76	$	4.47		6.5	%	$	2.15	$	2.46		(12.6	)%	$	2.57		4.5	%	$	3.78	$	3.67		3.0	%

Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the three months ended September 30, 2018 and 2017.

	U.S. Operating Segment				International Operating Segment						Consolidated
	2018		2017		2018		2017		Constant Currency ⁽¹⁾ 2018		2018		2017
Film rentals and advertising	$	185.1	$	171.5	$	45.0	$	54.7	$	55.5	$	230.1	$	226.2
Concession supplies	$	31.2	$	26.2	$	11.5	$	14.0	$	13.7	$	42.7	$	40.2
Salaries and wages	$	73.2	$	64.6	$	19.3	$	22.7	$	24.0	$	92.5	$	87.3
Facility lease expense	$	61.1	$	59.8	$	19.5	$	22.2	$	23.1	$	80.6	$	82.0
Utilities and other	$	83.0	$	64.0	$	29.9	$	28.4	$	36.8	$	112.9	$	92.4

Salaries and wages increased to $73.2 million for the third quarter of 2018 from $64.6 million for the third quarter of 2017 primarily due to increased staffing levels to support the growth in attendance and expanded concession offerings, staffing at new and recently remodeled theatres, as well as increases in minimum and other wage rates. Facility lease expense increased to $61.1 million for the third quarter of 2018 from $59.8 million for the third quarter of 2017 primarily due to higher percentage rent due to the increase in revenues. Utilities and other costs increased to $83.0 million for the third quarter of 2018 from $64.0 million for the third quarter of 2017 primarily due to the presentation of transactional fees on a gross basis versus net basis (see Note 3 to our condensed consolidated financial statements for further discussion).

Salaries and wages decreased to $19.3 million (increased to $24.0 million in constant currency) for the third quarter of 2018 compared to $22.7 million for the third quarter of 2017. The as reported decrease was due to the impact of changes in foreign currency exchange rates in certain countries in which we operate, partially offset by increased local currency wages that were primarily driven by inflation, new theatres and limited flexibility in scheduling staff caused by shifting government regulations. Facility lease expense decreased to $19.5 million (increased to $23.1 million in constant currency) for the third quarter of 2018 compared to $22.2 million for the third quarter of 2017. The as reported decrease was due to lower percentage rent due to the decline in revenues and the impact of changes in foreign currency exchange rates in certain countries in which we operate, partially offset by an increase in base rent due to new theatres. Utilities and other costs increased to $29.9 million (increased to $36.8 million in constant currency) for the third quarter of 2018 compared to $28.4 million for the third quarter of 2017. The as reported increase was primarily due to the presentation of transactional fees on a gross basis versus net basis (see Note 3 to our condensed consolidated financial statements for further discussion).

General and Administrative Expenses. General and administrative expenses increased to $37.7 million for the third quarter of 2018 from $36.5 million for the third quarter of 2017. The increase was primarily due to higher salaries and insurance costs, partially offset by the impact of changes in foreign currency exchange rates in certain countries in which we operate.

Depreciation and Amortization. Depreciation and amortization expense increased to $64.9 million during the third quarter of 2018 compared to $58.1 million during the third quarter of 2017. The increase was primarily due to theatre remodels and new theatres.

Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $1.6 million during the third quarter of 2018 compared to $5.0 million during the third quarter of 2017. 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 third quarter of 2018 impacted six of our twenty-seven reporting units. See Note 10 to our condensed consolidated financial statements.

Loss on Disposal of Assets and Other. We recorded a loss on disposal of assets and other of $7.9 million during the third quarter of 2018 compared to $8.6 million during the third quarter of 2017. Activity for the third quarter of 2018 and 2017 was primarily due to the retirement of assets related to theatre remodels.

Interest Expense. Interest costs incurred, including amortization of debt issue costs, were $27.1 million during the third quarter of 2018 compared to $26.3 million during the third quarter of 2017. The increase was primarily due to an increase in the variable rate at which our term loan accrues interest.

Distributions from NCM. We recorded distributions from NCM of $2.4 million during the third quarter of 2018 compared to $2.1 million recorded during the third quarter of 2017, which were in excess of the carrying value of our Tranche 1 investment. See Note 6 to our condensed consolidated financial statements.

Interest expense – NCM. We recorded non-cash interest expense of $5.0 million for the third quarter of 2018 related to the significant financing component associated with certain of our agreements with NCM. See Note 3 to our condensed consolidated financial statements for further discussion.

Equity in Income of Affiliates. We recorded equity in income of affiliates of $14.2 million during the third quarter of 2018 compared to $10.9 million during the third quarter of 2017. See Notes 6 and 7 to our condensed consolidated financial statements for information about our equity investments.

Income Taxes. Income tax expense of $16.3 million was recorded for the third quarter of 2018 compared to $24.8 million recorded for the third quarter of 2017. The effective tax rate was approximately 24.2% for the third quarter of 2018 compared to 39.0% for the third quarter of 2017. The effective tax rate in 2018 benefited from a lower U.S. federal tax rate. On December 22, 2017, the U.S. government enacted comprehensive tax legislation, the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act made changes to the U.S. tax code, which included (1) reduced U.S. corporate tax rate from 35 percent to 21 percent, (2) generally eliminated U.S. federal income taxes on dividends from foreign subsidiaries, and (3) a one-time transition tax on certain undistributed earnings of foreign subsidiaries.

As of September 30, 2018, the amounts recorded for the Tax Act pertaining to the transition tax impact for 2017 are final, however, the transition tax impact for 2018 remains provisional. The amounts recorded for the re-measurement of net deferred taxes, and our reassessment of valuation allowances remain provisional. These estimates may be impacted by further analysis due to future clarification and guidance regarding earnings and profits computations, state tax conformity to federal tax changes, and potential tax planning options under consideration.

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.

Revenues. Total revenues increased $181.6 million to $2,423.2 million for the nine months ended September 30, 2018 (“2018 period”) from $2,241.6 million for the nine months ended September 30, 2017 (“2017 period”), representing a 8.1% increase. The table below, presented by reportable operating segment, summarizes our revenue performance and certain key performance indicators for the nine months ended September 30, 2018 and 2017.

	U.S. Operating Segment							International Operating Segment												Consolidated
															Constant Currency ⁽³⁾
	2018		2017		% Change			2018		2017		% Change			2018		% Change			2018		2017		% Change
Admissions revenues ⁽¹⁾	$	1,091.5	$	1,003.5		8.8	%	$	297.6	$	348.0		(14.5	)%	$	335.7		(3.5	)%	$	1,389.1	$	1,351.5		2.8	%
Concession revenues ⁽¹⁾	$	661.3	$	582.2		13.6	%	$	169.9	$	195.4		(13.1	)%	$	188.7		(3.4	)%	$	831.2	$	777.6		6.9	%
Other revenues ⁽¹⁾⁽²⁾	$	134.9	$	53.8		150.7	%	$	68.0	$	58.7		15.8	%	$	79.1		34.8	%	$	202.9	$	112.5		80.4	%
Total revenues ⁽¹⁾⁽²⁾	$	1,887.7	$	1,639.5		15.1	%	$	535.5	$	602.1		(11.1	)%	$	603.5		0.2	%	$	2,423.2	$	2,241.6		8.1	%
Attendance ⁽¹⁾		138.9		130.1		6.8	%		75.8		80.9		(6.3	)%							214.7		211.0		1.8	%
Average ticket price ⁽¹⁾	$	7.86	$	7.71		1.9	%	$	3.93	$	4.30		(8.6	)%	$	4.43		3.0	%	$	6.47	$	6.41		0.9	%
Concession revenues per patron ⁽¹⁾	$	4.76	$	4.48		6.2	%	$	2.24	$	2.42		(7.4	)%	$	2.49		2.9	%	$	3.87	$	3.69		4.9	%

Cost of Operations. The table below summarizes our theatre operating costs (in millions) by reportable operating segment for the nine months ended September 30, 2018 and 2017.

	U.S. Operating Segment				International Operating Segment						Consolidated
	2018		2017		2018		2017		Constant Currency ⁽¹⁾ 2018		2018		2017
Film rentals and advertising	$	616.7	$	558.3	$	141.5	$	167.3	$	160.0	$	758.2	$	725.6
Concession supplies	$	98.1	$	82.1	$	36.5	$	42.0	$	40.5	$	134.6	$	124.1
Salaries and wages	$	224.3	$	194.5	$	61.7	$	66.8	$	70.7	$	286.0	$	261.3
Facility lease expense	$	183.1	$	181.1	$	60.8	$	67.5	$	66.9	$	243.9	$	248.6
Utilities and other	$	245.7	$	185.1	$	92.2	$	86.7	$	104.9	$	337.9	$	271.8

Salaries and wages increased to $224.3 million for the 2018 period from $194.5 million for the 2017 period primarily due to increased staffing levels to support the increased attendance and expanded concession offerings, staffing at new and recently remodeled theatres, as well as increases in minimum and other wage rates. Facility lease expense increased to $183.1 million for the 2018 period from $181.1 million for the 2017 period primarily due to higher percentage rent due to the increase in revenues. Utilities and other costs increased to $245.7 million for the 2018 period from $185.1 million for the 2017 period primarily due to the presentation of transactional fees on a gross basis versus net basis (see Note 3 to our condensed consolidated financial statements for further discussion).

Salaries and wages decreased to $61.7 million (increased to $70.7 million in constant currency) for the 2018 period compared to $66.8 million for the 2017 period. The as reported decrease was due to the impact of changes in foreign currency exchange rates in certain countries in which we operate, partially offset by increased local currency wages that were primarily driven by inflation, new theatres and limited flexibility in scheduling staff caused by shifting government regulations. Facility lease expense decreased to $60.8 million ($66.9 million in constant currency) for the 2018 period compared to $67.5 million for the 2017 period. The as reported decrease was due to the impact of changes in foreign currency exchange rates in certain countries in which we operate and lower percentage rent due to the decline in revenues, partially offset by an increase in base rent due to new theatres. Utilities and other costs increased to $92.2 million ($104.9 million in constant currency) for the 2018 period compared to $86.7 million for the 2017 period. The as reported increase was primarily due to the presentation of transactional fees on a gross basis versus net basis (see Note 3 to our condensed consolidated financial statements for further discussion).

General and Administrative Expenses. General and administrative expenses increased to $121.8 million for the 2018 period from $111.2 million for the 2017 period. The increase was primarily due to higher salaries, insurance costs, benefits costs and professional fees.

Depreciation and Amortization. Depreciation and amortization expense increased to $193.6 million during the 2018 period compared to $174.5 million during the 2017 period. The increase was primarily due to theatre remodels and new theatres.

Impairment of Long-Lived Assets. We recorded asset impairment charges on assets held and used of $5.0 million during the 2018 period compared to $9.6 million during the 2017 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 2018 period impacted 8 of our twenty-seven reporting units. See Note 10 to our condensed consolidated financial statements.

Loss on Disposal of Assets and Other. We recorded a loss on disposal of assets and other of $28.7 million during the 2018 period compared to $9.5 million during the 2017 period. Activity for the 2018 period was primarily due to the retirement of assets related to theatre remodels and the accrual of a reserve for outstanding litigation (see Note 16 to the condensed consolidated financial statements). Activity for the 2017 period was primarily due to the retirement of assets related to theatre remodels, partially offset by gains related to the sale of excess land parcels and a gain on a landlord buyout of a theatre lease.

Interest Expense. Interest costs incurred, including amortization of debt issue costs, were $82.7 million during the 2018 period compared to $79.2 million during the 2017 period. The increase was primarily due to an increase in the variable rate at which our term loan accrues interest.

Loss on Debt Amendments and Refinancing. We recorded a loss on debt amendments and refinancing of $1.5 million for the 2018 period compared to $0.2 million for the 2017 period related to amendments to our senior secured credit facility. See Note 4 to our condensed consolidated financial statements for further discussion.

Distributions from NCM. We recorded distributions from NCM of $12.2 million during the 2018 period compared to $11.7 million recorded during the 2017 period, which were in excess of the carrying value of our Tranche 1 investment. See Note 6 to our condensed consolidated financial statements.

Interest expense – NCM. We recorded non-cash interest expense of $14.9 million for the 2018 period related to the significant financing component associated with certain of our agreements with NCM. See Note 3 to our condensed consolidated financial statements for further discussion.

Equity in Income of Affiliates. We recorded equity in income of affiliates of $29.2 million during the 2018 period compared to $26.8 million during the 2017 period. See Notes 6 and 7 to our condensed consolidated financial statements for information about our equity investments.

Income Taxes. Income tax expense of $60.1 million was recorded for the 2018 period compared to $99.2 million recorded for the 2017 period. The effective tax rate was approximately 23.4% for the 2018 period compared to 36.6% for the 2017 period. The effective tax rate in 2018 benefited from a lower U.S. federal tax rate. On December 22, 2017, the U.S. government enacted comprehensive tax legislation, the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act made changes to the U.S. tax code, which included (1) reduced U.S. corporate tax rate from 35 percent to 21 percent, (2) generally eliminated U.S. federal income taxes on dividends from foreign subsidiaries, and (3) a one-time transition tax on certain undistributed earnings of foreign subsidiaries. Additionally, the Company recorded a benefit to tax expense of $7.1 million for the 2018 period related to the settlement of audits in the non-U.S. tax jurisdiction of Chile.

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 $349.6 million for the nine months ended September 30, 2018 compared to $311.2 million for the nine months ended September 30, 2017. The increase in cash provided by operating activities was primarily due to the increase in net income.

Our investing activities have been principally related to the development, remodel 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 $352.5 million for the nine months ended September 30, 2018 compared to $290.1 million for the nine months ended September 30, 2017. The increase was primarily due to the $78.4 million acquisition of NCM common units (see Note 6 to our condensed consolidated financial statements for further discussion).

Capital expenditures for the nine months ended September 30, 2018 and 2017 were as follows (in millions):

Capital expenditures for existing properties in the table above includes the costs of remodeling certain of our existing theatres to include Luxury Loungers and expanded concession offerings. During the nine months ended September 30, 2018 and 2017, we had an average of 79 and 151 of our domestic screens, respectively, temporarily closed for such remodels.

Our U.S. theatre circuit consisted of 340 theatres with 4,579 screens at September 30, 2018. During the nine months ended September 30, 2018, we built two new theatres and 25 screens and closed one theatre with seven screens. At September 30, 2018, we had signed commitments to open two screens in domestic markets during the remainder of 2018 and open 12 new theatres with 124 screens subsequent to 2018. We estimate the remaining capital expenditures for the development of these 126 domestic screens will be approximately $95 million.

Our international theatre circuit consisted of 201 theatres with 1,435 screens at September 30, 2018. During the nine months ended September 30, 2018, we built four theatres and 20 screens, acquired three theatres and 19 screens and closed 2 screens. At September 30, 2018, we had signed commitments to open five new theatres and 33 screens in international markets during the remainder of 2018 and open eight new theatres and 67 screens subsequent to 2018. We estimate the remaining capital expenditures for the development of these 100 international screens will be approximately $50 million.

Actual expenditures for continued theatre development, remodels 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.

Cash used for financing activities was $144.0 million for the nine months ended September 30, 2018 compared to $114.0 million for the nine months ended September 30, 2017. The increase was primarily due to the increase in the dividends paid to Cinemark Holdings, Inc.

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 September 30, 2018 (in millions):

As of September 30, 2018, Cinemark USA, Inc. had $100.0 million in available borrowing capacity on our revolving credit line.

In March 2018, we amended our senior secured credit facility, which extended the maturity of the term loan to March 2025. Included below is an updated summary of long-term debt obligations and related estimated scheduled interest payment obligations as of September 30, 2018, reflecting the amended agreement.

There have been no other 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, 2017 filed March 2, 2018.

Other than operating leases and purchase commitments disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017 filed March 2, 2018, we do not have any off-balance sheet arrangements.

Cinemark USA, Inc. has a senior secured credit facility that includes a $700.0 million term loan, with a maturity date of March 2025, and a $100.0 million revolving credit line, with a maturity date of December 2022 (collectively referred to as the “Credit Agreement”).

On March 29, 2018, Cinemark USA, Inc., amended the Credit Agreement to extend the maturity of the term loan to March 29, 2025, reduce the rate at which the term loan bears interest by 0.25% and to reduce the amount of real property required to be mortgaged to secure the loans. Under the amended Credit Agreement, quarterly principal payments of $1.6 million are due on the term loan through December 31, 2024, with a final principal payment of $613.4 million due on March 29, 2025.

Interest on the term loan accrues at Cinemark USA, Inc.’s option at: (A) the base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin of 0.75% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin of 1.75% per annum. Interest on the revolving credit line accrues, at our option, at: (A) a base rate equal to the greater of (1) the US “Prime Rate” as quoted in The Wall Street Journal or if no such rate is quoted therein, in a Federal Reserve Board statistical release, (2) the federal funds effective rate plus 0.50%, and (3) a one-month Eurodollar-based rate plus 1.0%, plus, in each case, a margin that ranges from 0.50% to 1.25% per annum, or (B) a Eurodollar-based rate for a period of 1, 2, 3, 6, 9 or 12 months plus a margin that ranges from 1.50% to 2.25% 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.

Cinemark USA, Inc.’s obligations under the Credit Agreement are guaranteed by Cinemark Holdings, Inc. and certain of Cinemark USA, Inc.’s domestic subsidiaries and are secured by mortgages on certain fee and leasehold properties and security interests in substantially all of Cinemark USA, Inc.’s and the guarantors’ personal property, including, without limitation, pledges of all of Cinemark USA, Inc.’s capital stock, all of the capital stock of certain of Cinemark USA, Inc.’s domestic subsidiaries and 65% of the voting stock of certain of its foreign subsidiaries.

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on Cinemark USA, Inc.’s ability, and in certain instances, its subsidiaries’ and our ability, to consolidate or merge or liquidate, wind up or dissolve; substantially change the nature of its business; sell, transfer or dispose of assets; create or incur indebtedness; create liens; pay dividends or repurchase stock; and make capital expenditures and investments. 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 defined in the Credit Agreement.

The dividend restriction contained in the Credit Agreement prevents the Company and any of its subsidiaries from paying a dividend or otherwise distributing cash to its stockholders unless (1) the Company is not in default, and the distribution would not cause Cinemark USA, Inc. to be in default, under the Credit Agreement; and (2) the aggregate amount of certain dividends, distributions, investments, redemptions and capital expenditures made since December 18, 2012, including dividends declared by the board of directors, is less than the sum of (a) the aggregate amount of cash and cash equivalents received by Cinemark Holdings, Inc. or Cinemark USA, Inc. as common equity since December 18, 2012, (b) Cinemark USA, Inc.’s consolidated EBITDA minus 1.75 times its consolidated interest expense, each as defined in the Credit Agreement, and (c) certain other defined amounts. As of September 30, 2018, Cinemark USA, Inc. could have distributed up to approximately $2,830.3 million to its parent company and sole stockholder, Cinemark Holdings, Inc., under the terms of the Credit Agreement, subject to its available cash and other borrowing restrictions outlined in the agreement.

At September 30, 2018, there was $654.6 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 Credit Agreement at September 30, 2018 was approximately 4.0% per annum.

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 September 30, 2018, Cinemark USA, Inc. could have distributed up to approximately $2,357.7 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 September 30, 2018 was approximately 6.4 to 1.

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”). On March 21, 2016, Cinemark USA, Inc. issued an additional $225.0 million aggregate principal amount of the 4.875% Senior Notes at 99.0% of the principal amount plus accrued and unpaid interest from December 1, 2015. Proceeds, after payment of fees, were used to finance the redemption of Cinemark, USA, Inc.’s $200.0 million 7.375% Senior Subordinated Notes. These additional notes have identical terms, other than the issue date, the issue price and the first interest payment date, and constitute part of the same series as the Company’s existing 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 September 30, 2018, Cinemark USA, Inc. could have distributed up to approximately $2,352.3 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 September 30, 2018 was approximately 6.3 to 1.

As of September 30, 2018, we believe we were in full compliance with all agreements, including all related covenants, governing our outstanding debt.

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

We are currently party to a variable rate debt facility. An increase or decrease in interest rates would affect our interest expense relating to our variable rate debt. At September 30, 2018, we had an aggregate of approximately $654.6 million of variable rate debt outstanding. Based on the interest rates in effect on the variable rate debt outstanding at September 30, 2018, a 100 basis point increase in market interest rates would increase our annual interest expense by approximately $6.5 million.

The table below provides information about our fixed rate and variable rate long-term debt agreements as of September 30, 2018:

	Expected Maturity for the Twelve-Month Periods Ending September 30,																Average
	(in millions)																Interest
	2019		2020		2021		2022		2023		Thereafter		Total		Fair Value		Rate
Fixed rate	$	1.4	$	1.4	$	—	$	—	$	1,155.0	$	—	$	1,157.8	$	1,147.5		5.0	%
Variable rate		6.6		6.6		6.6		6.6		6.6		621.6		654.6		657.0		4.0	%
Total debt	$	8.0	$	8.0	$	6.6	$	6.6	$	1,161.6	$	621.6	$	1,812.4	$	1,804.5

Other than the devaluation of the Argentine peso, discussed in Note 12 to the condensed consolidated financial statements, there have been no material changes in foreign currency exchange rate risk previously disclosed in “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2017 filed March 2, 2018.

As of September 30, 2018, we carried out an evaluation required by 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 September 30, 2018, 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.

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 September 30, 2018 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other than the recent developments noted at Note 16, there have been no material changes from legal proceedings previously reported under “Business – Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2017 filed March 2, 2018.

There have been no material changes from risk factors previously disclosed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017 filed March 2, 2018.

As required by the indentures governing the Company’s 5.125% Senior Notes and 4.875% Senior 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. The following supplementary schedules separately identify the Company’s restricted subsidiaries and unrestricted subsidiaries as required by the indentures.

	Restricted		Unrestricted
	Group		Group			Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	323,972	$	42,815		$	—		$	366,787
Other current assets		242,930		(97,720	)		(7,311	)		137,899
Total current assets		566,902		(54,905	)		(7,311	)		504,686
Theatre properties and equipment, net		1,820,487		—			—			1,820,487
Other assets		1,920,374		519,437			(348,119	)		2,091,692
Total assets	$	4,307,763	$	464,532		$	(355,430	)	$	4,416,865
Liabilities and equity
Current liabilities
Current portion of long-term debt	$	6,595	$	1,389		$	—		$	7,984
Current portion of capital lease obligations		26,383		—			—			26,383
Accounts payable and accrued expenses		363,373		490			(7,311	)		356,552
Total current liabilities		396,351		1,879			(7,311	)		390,919
Long-term liabilities
Long-term debt, less current portion		2,014,167		1,389			(241,100	)		1,774,456
Capital lease obligations, less current portion		228,162		—			—			228,162
Other long-term liabilities and deferrals		470,338		62,998			—			533,336
Total long-term liabilities		2,712,667		64,387			(241,100	)		2,535,954
Commitments and contingencies
Equity		1,198,745		398,266			(107,019	)		1,489,992
Total liabilities and equity	$	4,307,763	$	464,532		$	(355,430	)	$	4,416,865

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

	Restricted			Unrestricted
	Group			Group			Eliminations		Consolidated
Revenues	$	2,423,259		$	—		$	—	$	2,423,259
Cost of operations										—
Theatre operating costs		1,760,555			—			—		1,760,555
General and administrative expenses		121,775			(6	)		—		121,769
Depreciation and amortization		193,656			—			—		193,656
Impairment of long-lived assets		5,020			—			—		5,020
Loss on disposal of assets and other		28,666			—			—		28,666
Total cost of operations		2,109,672			(6	)		—		2,109,666
Operating income		313,587			6			—		313,593
Other income (expense)		(114,680	)		57,872			—		(56,808	)
Income before income taxes		198,907			57,878			—		256,785
Income taxes		43,361			16,695			—		60,056
Net income		155,546			41,183			—		196,729
Less: Net income attributable to noncontrolling interests		878			—			—		878
Net income attributable to Cinemark USA, Inc.	$	154,668		$	41,183		$	—	$	195,851

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

	Restricted			Unrestricted
	Group			Group			Eliminations		Consolidated
Net income	$	155,546		$	41,183		$	—	$	196,729
Other comprehensive loss, net of tax
Other comprehensive loss in equity method investments		—			(43	)		—		(43	)
Foreign currency translation adjustments		(66,841	)		—			—		(66,841	)
Total other comprehensive loss, net of tax		(66,841	)		(43	)		—		(66,884	)
Total comprehensive income, net of tax		88,705			41,140			—		129,845
Comprehensive income attributable to noncontrolling interests		(878	)		—			—		(878	)
Comprehensive income attributable to Cinemark USA, Inc.	$	87,827		$	41,140		$	—	$	128,967

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

	Restricted			Unrestricted
	Group			Group			Eliminations			Consolidated
Operating activities
Net income	$	155,546		$	41,183		$	—		$	196,729
Adjustments to reconcile net income to cash provided by operating activities		237,598			(9,333	)		—			228,265
Changes in assets and liabilities		(47,089	)		(28,286	)		—			(75,375	)
Net cash provided by operating activities		346,055			3,564			—			349,619
Investing activities
Additions to theatre properties and equipment		(245,962	)		—			—			(245,962	)
Acquisitions of theatres in international markets, net of cash acquired		(11,289	)		—			—			(11,289	)
Proceeds from sale of theatre properties and equipment and other		3,557			—			—			3,557
Loans to affiliates		—			(21,100	)		21,100			—
Acquisition of NCM common units		(78,393	)		—			—			(78,393	)
Investment in joint ventures and other, net		(19,896	)		(546	)		—			(20,442	)
Net cash used for investing activities		(351,983	)		(21,646	)		21,100			(352,529	)
Financing activities
Dividends paid to parent		(111,550	)		—			—			(111,550	)
Borrowings from affiliates		21,100			—			(21,100	)		—
Repayments of long-term debt		(4,946	)		—			—			(4,946	)
Payment of debt issue costs		(5,103	)		—			—			(5,103	)
Payments on capital leases		(18,778	)		—			—			(18,778	)
Other		(3,609	)		—			—			(3,609	)
Net cash used for financing activities		(122,886	)		—			(21,100	)		(143,986	)
Effect of exchange rate changes on cash and cash equivalents		(8,732	)		—			—			(8,732	)
Decrease in cash and cash equivalents		(137,546	)		(18,082	)		—			(155,628	)
Cash and cash equivalents:
Beginning of year		461,518			60,897			—			522,415
End of year	$	323,972		$	42,815		$	—		$	366,787

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

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.

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)

			Page
PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements	4

		Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (unaudited)	4

		Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2018 and 2017 (unaudited)	5

		Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017 (unaudited)	6

		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (unaudited)	7

		Notes to Condensed Consolidated Financial Statements (unaudited)	8

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49

	Item 4.	Controls and Procedures	49

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	50

	Item 1A.	Risk Factors	50

	Item 5	Other Information	50

	Item 6.	Exhibits	55

SIGNATURES			56

Deferred Revenues	Deferred Revenue - NCM			Other Deferred Revenues ⁽¹⁾			Total
Balance at January 1, 2018	$	351,706		$	86,498		$	438,204
Impact of adoption of ASC Topic 606		(53,605	)		—			(53,605	)
Amounts recognized as accounts receivable		—			13,693			13,693
Cash received from customers in advance		—			80,617			80,617
Common units received from NCM (see Note 7)		5,012			—			5,012
Revenue recognized during period		(11,806	)		(94,790	)		(106,596	)
Foreign currency translation adjustments		—			(2,468	)		(2,468	)
Balance at September 30, 2018	$	291,307		$	83,550		$	374,857

	Twelve Months Ended September 30,
Remaining Performance Obligations	2019		2020		2021		2022		2023		Thereafter		Total
Deferred revenue - NCM	$	15,831	$	15,831	$	15,831	$	15,831	$	15,831	$	212,152	$	291,307
Deferred revenue - other		70,468		12,682		264		136		—		—		83,550
Total	$	86,299	$	28,513	$	16,095	$	15,967	$	15,831	$	212,152	$	374,857

	Three Months Ended				Six Months Ended
	June 28, 2018		June 29, 2017		June 28, 2018		June 29, 2017
Gross revenues	$	113,700	$	97,100	$	193,900	$	169,000
Operating income	$	40,200	$	28,300	$	51,200	$	33,400
Net income	$	25,000	$	15,400	$	22,000	$	7,500

	As of			As of
	June 28, 2018			December 28, 2017
Current assets	$	146,900		$	174,400
Noncurrent assets	$	757,900		$	758,300
Current liabilities	$	88,000		$	123,300
Noncurrent liabilities	$	943,500		$	925,400
Members deficit	$	(126,700	)	$	(116,000	)

	As of
	September 30, 2018		December 31, 2017
Current assets	$	56,764	$	56,296
Noncurrent assets	$	708,470	$	772,438
Current liabilities	$	68,313	$	59,153
Noncurrent liabilities	$	172,232	$	296,889
Members' equity	$	524,689	$	472,692

	Shares of			Weighted Average
	Restricted			Grant Date
	Stock			Fair Value
Outstanding at January 1, 2018		650,581		$	35.81
Granted		321,406		$	38.79
Vested		(242,945	)	$	31.16
Forfeited		(20,925	)	$	38.57
Outstanding at September 30, 2018		708,117		$	38.67
Unvested restricted stock at September 30, 2018		708,117		$	38.67

	Nine Months Ended September 30,
	2018		2017
Compensation expense recognized by the Company during the period	$	6,578	$	5,673
Additional compensation expense recognized by Cinemark Holdings, Inc. during the period	$	688	$	625
Fair value of restricted shares held by Company employees that vested during the period	$	7,013	$	7,252
Fair value of restricted shares held by Cinemark Holdings, Inc.’s directors that vested during the period	$	802	$	917
Income tax benefit recognized upon vesting of restricted stock awards held by Company employees	$	1,550	$	2,280
Additional income tax benefit recognized upon vesting of restricted stock awards held by Cinemark Holdings, Inc.'s directors	$	201	$	385

	Number of
	Shares		Value at
	Vesting		Grant
at IRR of at least 7%		76,065	$	2,967
at IRR of at least 9.5%		152,129	$	5,938
at IRR of at least 13%		228,194	$	8,906

	U.S. Operating Segment		International Operating Segment			Total
Balance at January 1, 2018 ⁽¹⁾	$	1,174,041	$	110,038		$	1,284,079
Acquisition of theatres in Brazil ⁽²⁾		—		9,732			9,732
Foreign currency translation adjustments		—		(17,011	)		(17,011	)
Balance at September 30, 2018⁽¹⁾	$	1,174,041	$	102,759		$	1,276,800

For the three months ended December 31, 2018	$	1,356
For the twelve months ended December 31, 2019		5,124
For the twelve months ended December 31, 2020		5,255
For the twelve months ended December 31, 2021		3,546
For the twelve months ended December 31, 2022		3,190
Thereafter		12,302
Total	$	30,773

					Other
					Comprehensive
					Loss for the
	Exchange Rate as of				Nine Months Ended
Country	September 30, 2018		December 31, 2017		September 30, 2018
Brazil		4.05		3.31	$	(42,588	)
Argentina ⁽¹⁾		41.29		18.65		(18,272	)
Chile		658.22		615.97		(4,822	)
All other						(1,159	)
					$	(66,841	)

	As of		As of
Theatre Properties and Equipment-net	September 30, 2018		December 31, 2017
U.S.	$	1,474,184	$	1,439,168
Brazil		139,927		179,669
Other international countries		206,376		209,217
Total	$	1,820,487	$	1,828,054

Cinemark USA, Inc. term loan	$	654.6
Cinemark USA, Inc. 5.125% senior notes due 2022		400.0
Cinemark USA, Inc. 4.875% senior notes due 2023		755.0
Other	2.8
Total long-term debt	$	1,812.4
Less current portion		8.0
Subtotal long-term debt, less current portion	$	1,804.4
Less: Debt discounts and debt issuance costs, net of accumulated amortization		29.9
Long-term debt, less current portion, net of debt issuance costs	$	1,774.5

	Payments Due by Period
	(in millions)
			Less Than						After
Contractual Obligations	Total		One Year		1 - 3 Years		3 - 5 Years		5 Years
Long-term debt ⁽¹⁾	$	1,812.4	$	8.0	$	14.6	$	1,168.2	$	621.6
Scheduled interest payments on long-term debt⁽²⁾	$	422.8	$	83.5	$	165.9	$	136.4	$	37.0

		Page
Unaudited Condensed Consolidating Balance Sheet Information as of September 30, 2018		51

Unaudited Condensed Consolidating Statement of Income Information for the nine months ended September 30, 2018		52

Unaudited Condensed Consolidating Statement of Comprehensive Income Information for the nine months ended September 30, 2018		53

Unaudited Condensed Consolidating Statement of Cash Flows Information for the nine months ended September 30, 2018		54

*31.1		Certification of Mark Zoradi, 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 Mark Zoradi, 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 September 30, 2018, filed November 5, 2018, 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.

		CINEMARK USA, INC.
		Registrant

DATE:	November 5, 2018

		/s/Mark Zoradi
		Mark Zoradi
		Chief Executive Officer

		/s/Sean Gamble
		Sean Gamble
		Chief Financial Officer