Cinemark Outlook Revised to Stable by S&P; Rtgs Afrmd.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 10/19/98 -- Standard & Poor's today revised its ratings outlook for Cinemark USA Inc. to stable from positive. The double-'B'-minus corporate credit and senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. ratings, as well as the single-'B' subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". rating, for the company were affirmed. The ratings for Cinemark reflect the company's continued strong earnings growth and good profitability, balanced by the financial risks associated with its leverage and heavy capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. . Cinemark is the sixth-largest U.S. exhibitor based on screen count. The company's focus on small to midsize markets has enabled it to maintain a dominant position in 72% of its markets. Its ratio of screens per theater, a high 10.1, supports efficiencies in film scheduling, concession operations, and overhead, and enables the company to move films to larger or smaller auditoriums to suit film audiences. Cinemark's operating margins of roughly 19% compare favorably with those of most other industry competitors. Discount theaters, representing 20% of Cinemark's theater base, have maintained good profitability, contributing to strong overall profit margins and also providing a cushion against the volatility that first-run theaters can experience due to unpredictable film product. Cinemark's rapid pace of new theater construction has resulted in increasing negative discretionary cash flow Discretionary cash flow Cash flow that is available after the funding of all positive net present value (NPV) capital investment projects; it is available for paying cash dividends, repurchasing common stock, retiring debt, and so on. since 1993, which is characteristic of the industry. The company's expansion plans mean that negative discretionary cash flow will likely continue, making debt reduction unlikely in the near term, except through potential sale leasebacks. Earnings before interest, taxes, depreciation, amortization, and operating lease Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. rent expense (EBITDAR Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring Costs - EBITDAR An indicator of a company's financial performance calculated as: = Revenue - Expenses (excluding tax, interest, depreciation, amortization, and restructuring costs) ) to interest plus rent expense was about 1. 7 times (x) for the trailing 12 months ended June 30, 1998. For the trailing 12 months ended June 30, 1998, operating lease-adjusted debt to EBITDAR is estimated at 5.7x. Capital spending plans include continued expansion in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , as well as a new joint venture in Taiwan. International development should offer good long-term growth prospects, but inflation-related risks and other economy-related factors may be significant, particularly in Latin America. OUTOOK: STABLE Financial resources, including credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities , are adequate to support Cinemark's intermediate-term needs, and the company has no near-term maturities. However, the company's ongoing capital spending plans are likely to limit improvement in credit quality and postpone upgrade potential. -- CreditWire |
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