CNK
#Our primary focus ---+ and we said this in the past ---+ is to continue to invest and grow the Company.
We think we demonstrated over the years that, whether it is organic or M&A activity, that we delivered great results to our shareholders.
If you're a seller, this is a great time to come to the market because there's a lot of optimism for the industry over the next few years.
So if I'm a seller, I think this is a great time to come to the market.
As it relates to Latin America ---+ when we first went to Latin America there wasn't a lot of modern theaters that you could acquire.
But over these past 20 years a lot of good high-quality theaters and platforms have developed that would be very attractive.
Whether or not they'd come to the market is another story.
But obviously we think that Cinemark would be in a prime position to take the lead in those types of negotiations.
Here domestically, there's a lot of high-quality regional circuits that many of them are family-owned.
So that brings in a different matrix, just why are they may or may not decide to sell.
But there's some high-quality assets out there.
The thing that we like about our balance sheet is that we can enter into these transactions without financing being a condition of it because we have such a strong balance sheet.
And so we are actively out there looking for opportunity, but then also in expanding our Company where it is appropriate on an organic basis.
We've probably been the most conservative in raising our prices over the years because we feel that attendance is the main driver of the business.
And also, as you analyze Cinemark you will see that we focus a lot on screen utilization.
So as we look at the different platforms we bring to a marketplace, a lot of that focus is on if we think it is going to increase the utilization.
Or even as we look at alternative content or a lot of the things we are doing in the marketplace is, how we can increase the overall utilization of the theater and expand our margins.
Like many other circuits, we are looking at our screens that are underutilized.
And if they are underutilized, how we can reposition them in the market, whether it be recliners or different premium formats that we might bring to market.
Yes.
We operate in 41 states.
So obviously it performed in some states better than other states, just like Regal and AMC.
I think they have similar footprints.
They are probably in the 40 state-plus range, both those companies are, and we are in 41 states.
Also, and it's spring now, but to refresh everybody's memory, we had some tough weather conditions in the Midwest and the Northeast of the country that caused some closures for us.
Then a film like American Sniper, although it is a great movie and I wouldn't take anything away from it, but since it is more an American-related story, it probably didn't perform as well in Latin America as some of the other films.
So we face similar challenges from quarter to quarter and have a similar ---+ or probably similar ---+ impact as AMC or Regal because they have a broad footprint like our Company does.
We cannot comment on the DOJ.
We have seen the public announcement, but we have no comment beyond them.
As far as clearances themselves, they've always been part of this industry.
I've been in this industry obviously a long time, and clearance has always been part of the industry.
As a relates to Cinemark, only 8% of our theaters are in cleared zones and the vast majority of those clearances are with Regal or AMC or Carmike.
So we don't have a lot of clearance zones.
And so I cannot see it being a big factor either way in our Company.
I will take the first part, on salaries.
The focus of Cinemark, as we schedule our employees, has always been the amount of employees per customer.
So we use a technology called Kronos, and have for several years, both in the US and we've also introduced it in several of our Latin countries.
The thing we like about Kronos is that you can establish the ratio between the customers and the employees, because if you're understaffed you are probably losing money and if you're overstaffed you're losing money.
So it is a great technology that allows us to properly schedule.
Obviously, a lot of the states have already passed minimum wage laws and that, and we've complied with all of those laws.
Also, like with the Affordable Health Care Act, that's also already baked into our numbers.
If there is increased prices, you tend to offset a lot of those prices with ---+ or costs with price increase as much is possible, or operating efficiencies.
But Cinemark has always been ---+ feel that our number one asset is our people, and so as to how we treat our employees and how we relate to them.
So we don't see it as a major issue one way or the other going forward.
On the concessions.
I was just going to say on concessions ---+ without breaking out the specific percentage, price is a smaller part of our domestic per cap growth of 7.5%.
The lion's share is more volume increases, our strategic promotion activities, and I would say some of our floor concepts with lane dividers and things to basically drive increased throughput of sales.
<UNK>, good morning.
And Latin America, a lot like the US, is content-driven.
That's what drives the attendance.
As far as the price increases in all these countries, they tend to follow inflation.
And we try to do a little better than inflation in these countries.
And all businesses operate in the same way.
I've always been focused more on the attendance as the driver down in Latin America, which is driven more by content ---+ not unlike the US back in 2008, when you had the recession here, our industry performed very well because of content.
Then, as far as, in Latin America, prices fluctuate more just with inflation, and then we try to capitalize a little beyond that.
I was going to add, the bulk of our increase is really inflation-oriented.
If anything, that could've been higher.
We had some 3D mix working against us, just based on the total mix of 3D content, which that actually dragged down the price a bit, in particularly internationally.
It is inflation, but then also it's introducing new products just like we are in the US.
And it's also creating the expectation of what you do when you go to the movies, because in a lot of the markets that we just enter into when we open up a new theater, maybe concessions haven't been a big part of the theatrical experience.
So that's also part of it.
But we continue to expand.
And a lot of the same concepts that we use in the US, to have a variety of products that allows customers to make the choice.
And in the case of these countries, it might be sugared popcorn or it might be ---+ in Brazil it might be cheese bread.
So it's also adapting to those local tastes.
No, absolutely.
As you're aware, I'm very familiar with Brazil.
We've been down there for over 20 years.
And even when I was directly overseeing international there were some malls that were built ---+ I remember when the mall outside of Niteroi.
They were building the mall, so obviously we went ---+ they wanted us to put a theater in it.
I went out and took a look at it.
And I said to myself, why would anybody be building a mall here, let along putting a theater there.
That's always been part of the process, that you have to do the market-by-market on the ground evaluation.
We are very fortunate that our management team is from Brazil and they have been with us over 20 years as site selection.
And you have seen some of this where, in the past couple years sometimes we were being criticized that we weren't growing maybe as fast as the market when it was really exploding in Brazil, but that's because we are always very conscious about site selection, whether it is in Latin America or here in the US.
We don't have any of the situations where those malls are in trouble because of our local expertise and that local market knowledge, and also checking out to make sure it meets all the criteria as to why or why not we were going into a mall.
And even another example of that: we announced this year small-market initiative.
And it's with not only a great developer and Black Rock backing it, but they have all the primary tenants, or the top tenants that are already committed going into these malls with us.
We would never face, with this here lineup of tenants, that kind of a situation.
Sure.
We are pleased with our yield at 2.4% now.
We think that's pretty good.
When we think about dividends, we have been on a ---+ historically the dividend has been increased about every three years or so.
We do have a conservative Board when it comes to that.
As <UNK> mentioned earlier, I think our priority would be on continuing to invest in growing the Company and delivering the types of ROIs that we've seen in the past.
We think that's the best long-term way to reward our shareholders, with just Company growth.
So that's our first focus.
And then we evaluate the dividend in light of that and our overall forward-looking cash assumptions.
Thank you.
I think that George Lucas really said it best here about four or five years ago at CinemaCon, and I'm sort of paraphrasing.
But he says, getting to digital is going to open up all kinds of dramatic changes from a technical standpoint in our industry, and it is going to allow a lot of the expansions that are going to be really good for our industry.
In fact, our own premium large format is due to Disney; sustainable 3-D is due to Disney ---+ or, I mean, digital.
And so you're seeing a lot of announcements from various companies that all these advancements in technologies that are coming our way, and now with satellite delivery we do have the platform, to the point that you are making to ---+ and it is a very robust platform.
And it was designed to be able to handle all this type of content throughout the industry.
And so I think that you are going to see big technical breakthroughs coming in our industry, which will be good for all of us.
And Cinemark has a history of being very focused on technology and what it can do for us.
That's why ---+ I've been in this industry for a while, like I said earlier, but I've never seen a better time, because now technology is a real asset to us, where before, when we were on the film-based technology, it was a real hindrance.
But we have a very bright future ahead of us.
I would add, I think all the examples you raised are exactly what excites us about the prospects of alternative content and the platform that's now in place to take advantage of it.
We have been ---+ throughout my career in this industry, I've always viewed the studios as our partners and have always had an excellent business relationship with each and every one of them.
That doesn't mean from time to time that we don't have various business issues come up.
But on a long-term basis, I think both the studios and the exhibitors realize that we're very dependent upon each other, and so it is up to us to focus on how we grow the pie rather than fight over pieces of the pie.
What I like about Cinemark's relationship ---+ and I cannot speak to others ---+ with the studios is, the focus is always on how we grow the pie and expand the relationship and to bring more people into the theaters.
And that's our focus, and it is a win/win for both of us.
The thing we like about 3D and also our XD is that ---+ and I think this first quarter was an example.
We had great performance on our XD screens on American Sniper and on 50 Shades of Gray, and then also on Cinderella.
And also from a 3D standpoint, surprisingly, SpongeBob SquarePants had very good 3D performance.
So we focused on both those because we think it allows the customer a choice as to what format they want to see it in.
And if the customer makes the choice for the higher ticket price, the entire industry benefits.
And as far as overall pressure on the film, I don't want to get blown out of the sights that, yes, on really high performing films you are going to pay more rental but it tends to average out.
And it will tend to shift from studio to studio as to film rental.
But if you look at film rental over a long period of time, it tends to be probably one of the more stable areas of our business.
And we feel that we can easily manage it.
And if it goes up, that's probably a good sign for our shareholders because that means that the films are performing really well in the marketplace, and of course we are making more money.
So really high-performing films would be good news both for the studios and for us.
Not of note, but we've always felt, and we've been very clear about it, that we feel the number one driver of our business is attendance.
And we don't want price to be a barrier of why people go or don't go to the movies.
Our pricing model takes that into consideration.
And if you want to pay a lower price, you might go at a different time of the day or a different day of the week.
But we want to do whatever we can to increase people to enjoy Cinemark theaters.
That same concept plays through to concessions in offering varied products and varied sizes to keep them within reach of all our patrons.
Thank you, <UNK>.
Does that conclude our call.
I want to thank everybody for joining us this morning.
And we will look forward to speaking to you again to report our second-quarter results.
Thank you.
