Cinemark Holdings Inc (CNK) 2008 Q2 法說會逐字稿

Good morning. My name is Dennis and I will be your conference operator today. At this time I'd like to welcome everyone to the Cinemark's second quarter 2008 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer session. (OPERATOR INSTRUCTIONS) I will now turn the call over to Ms. Nikki Sacks with ICR. Please go ahead, ma'am.

Thank you and welcome to Cinemark's fiscal second quarter 2008 earnings call. Before we begin, let me remind you that in accord with the Safe Harbor provisions of the Private Securities Reform Act of 1995 the Company knows that certain matters to be discussed by members of management may constitute forward-looking statements. Such statements are subject to risks, uncertainties and other factors that may cause actual performance of Cinemark to be materially different from the performance indicated or implied by such statements. Such risk factors are set forth in the Company's SEC filing. Today Cinemark's CEO, Alan Stock, and CFO, Robert Copple, will be discussing the second quarter results. I will now turn the call over to Alan.

Thank you, Nikki. On today's call I will comment on the industry and Cinemark's second quarter 2008 results. The outlook for the upcoming film slate and provide an update on Cinemark's digital cinema and 3-D strategy. During the second quarter the strong slate of movies released at the end of May and throughout June helped contribute to a 4% year-over-year increase in our admission revenues and a 2.2% year-over-year increase in our concession revenues, driving a 3.9% improvement in total revenues and a 2.9% increase in adjusted EBITDA. According to industry sources, domestic admission revenues for the quarter ended June 30, 2008, finished up 1.2% to 1.6%. This is generally above expectations heading into the quarter.

We are pleased that our growth in admission revenues outperformed the latest industry estimates. This box office growth was driven by a strong and diverse film slate that appeals to a wide variety of patrons and reflected the defensive nature of this industry in a slow economic cycle. We were especially pleased to see the box office perform well during the quarter that featured many nonsequel films. Despite the three successful sequel films in 2007, that grossed $300 million each, namely Spider-Man III, Shrek III and Pirates of the Caribbean III, Hollywood created five potential new film franchises and delivered compelling product during the quarter with Iron Man, Kung Fu Panda, Sex in the City, Wanted, and Get Smart, all of which were widely attended by audiences. The month of June was especially strong and included family favorite WALL-E and the comic book remake of the Incredible Hulk.

Additionally Iron Man and Indiana Jones: The Kingdom of the Crystal Skull, which were both released in early mid May each grossed over $300 million during the quarter. While the third quarter also faces challenging compares to the high grossing 2007 films Transformers, the fifth Harry Potter film, The Simpsons Movie and The Bourne Ultimatum, the box office is off to a strong start with the overwhelming success of the Dark Knight. Not only did The Dark Knight set a single film box office record for a one day opening and a three day opening weekend, it also helped lead the box office to its highest grossing seven day week ever, exceeding the prior record by more than 10%. Dark Knight's performance has reduced the GAAP between our strong third perform innocence 2007 and expectations for the third quarter of 2008. However, industry sources still reflect domestic box for July being slightly down against last year.

In addition to the already successful release of Hancock, the Dark Knight and The Mummy: Tomb of the Dragon Emperor, releases for the remainder of the third quarter include Pineapple Express, Tropic Thunder, Sisterhood of the Traveling Pants II, as well as George Lucas' animated Star Wars, Clone Wars in August and Eagle Eye in September. Third quarter is also experiencing steady runs by Mamma Mia!, Stepbrothers and the 3-D film Journey to the Center of the Earth. We believe the performance of these solid films in the third quarter along with the record breaking June box office in the US is evidence of the resiliency of the industry even during challenging economic periods. Films are one of the lowest cost forms of entertainment outside of the home and consumers continue to visit theaters when there are quality films showing. Additionally while we were cognizant that concessions tend to be more of a discretionary purchase, we have historically found film mix to be the single most important driver of our concession revenues with a limited impact of the macro-economic environment.

Our concession revenue per patron for the second quarter of 2008 increased approximately 2.1% in the US. Jumping ahead to the fourth quarter release schedule, we were looking forward to a solid slate of films. In October, we will have the third High School Musical and in November we have a line up that includes a number of successful franchise films such as the sequel to Madagascar, the next James Bond film called Quantum of Solace, and the sixth Harry Potter film, Harry and the Half-Blood Prince. Also some nonsequel films that should have broad appeal to consumers include: Seven Pounds with Will Smith, as well as Disney's Bedtime Stories with Adam Sandler, and the family friendly animated 3-D release of Bolt. On the subject of digital and 3-D, we are excited to report that progress has been made on our digital cinema initiative or DCIP that joint venture between our company, AMC and Regal. DCIP achieved its first concrete step toward completion with a signing of a digital deployment agreement with a major studio. This should get the ball rolling for additional studios and we believe that negotiation with other major studios are in the final stages.

Once these agreements have been finalized, DCIP can start moving ahead with securing the necessary financing. While the credit markets are certainly more challenging today than when DCIP was formed, we continue to feel confident that they will be able to secure financing. If everything goes as planned, we expect to be able to begin our digital and 3-D rollout around the year end. We are excited about the potential for digital cinema and 3-D, given both the attractive attendance and ticket price growth opportunities that have historically come with 3-D releases, as well as growing number of 3-D films planned by major studios. Within the next few years over 30 3-D films are scheduled to be released including: DreamWorks films, Monsters versus Aliens, How to Train your Dragon and the fourth Shrek movie, Fox's Ice Age III, James Cameron's Avitar, Robert Zemeckis' A Christmas Carol with Jim Carrey, Disney's Bolt in 2008, Pixar's next release Up in 2009, and the Toy Story films. We plan on converting our entire circuit to digital in approximately three to four years and we will begin deploying 3-D screens on a screen by screen basis once we start our digital conversion.

As part of our recently signed agreement with Real D, we plan to add up to 1,500 Real D 3-D screens to our circuit. We continue to move forward with our organic expansion strategy. Year to indict we have opened a net two new theaters with 34 screens in the US and two theaters with seven screens internationally. We see plenty of opportunity to continue to realize attractive returns on our invested capital by expanding our existing markets and into new ones. We currently have signed commitments to open 11 new theaters with 107 screens during the remainder of the year and open eight new theaters with 120 screens thereafter. We continue to look for high quality locations and evaluate acquisition opportunities in both international and domestic markets. Despite overall weakening trends in the economy, the box office has shown resiliency and posted a solid performance in the first half of 2008. Against this backdrop, our company will remain focused on operating efficiencies, improving our overall financial performance and continuing to expand organically.

We have a solid new theater pipeline that continues to grow and we are positioning ourselves to be able to capitalize on the growth opportunities provided by a conversion to digital and a rollout in 3-D. I remain confident that we will be able to continue to drive positive cash flow and deliver attractive returns to our shareholders over the long term. With that I will now turn the call over to Robert to discuss the quarter's financial result in more detail.

Thanks, Alan. I will review our second quarter 2008 financial performance in more detail and discuss our balance sheet. During the second quarter we increased our admissions revenues 4% to $294.4 million and grew our concession revenues 2.2% to $141.5 million. As a result, our total revenues increased $17.2 million or 3.9% to $457.2 million. This performance was driven by an 8.3% increase in average ticket prices and the 6.4% increase in concession revenues per patron, partially offset by a 4.1% decline in attendance. Box office per average screen for the period was up 0.4% over 2007. Adjusted EBITDA for the quarter was $99.8 million, which represented a 2.9% increase over the prior year and a 21.8% adjusted EBITDA margin.

On a segment basis for the quarter, our US operations generated admissions revenues of $234.3 million representing 4% growth over 2007. Concession revenues grew to $114.3 million, a 1.4% increase over 2007. A slight decline in attendance of approximately 0.8% was offset with price increases in box concessions and box office prices. Average ticket prices for a domestic operations increased approximately 4.8%, resulting in an increase in admission revenues per screen of 1.4% over 2007. Concession revenues per patron increased approximately 2.1%. Our total domestic revenues improved by $11.1 million or 3.2% year-over-year. Our international operations generated admissions revenues of $60.1 million, which were 3.8% higher than 2007. In concession revenues of $27.2 million, which were 5.8% higher in 2007. Average ticket prices for our international operations increased 17.3% over 2007, and concession revenues for patron increased approximately 19.5%. Our total international revenues increased $6.1 million or 6.6% year-over-year despite an 11.9% decline in attendance.

As you may recall, our performance in our international segment in Q1 significantly outperformed our domestic box office for the same period. The impact of holidays and variances in the timing of product releases in our international locations versus the US can result in performance differences when compared to domestic statistics. Our second quarter reflected a shift in the holiday calendar as Easter fell in March of this year compared to April last year. Easter is historically an extended holiday and a strong attendance period in Latin America. That helped our first quarter but impacted our second quarter of 2008 compared to 2007. Another factor that had less of an impact but may help a little in the third quarter was that some very successful film releases in the US occurred near the end of the quarter and not yet been fully released in Latin America, including Wall-E, Wanted and You Don't Mess With The Zohan. Since the last two quarters have been unusual and create a variance it may be helpful to look at international performance on the year-to-date basis for a meaningful comparison.

Year to date through June 30 international box office has increased 14.7% in total revenues have increased 16.5%. This compares to domestic industry sources which reflect box office of approximately 2% for similar period. On a consolidated basis our film rentals and advertising costs were $163.8 million for the second quarter of 2008, which were up slightly from $159.1 million in 2007, driven by the increase in box office revenues. Our film rental and advertising rate was 55.6% for the second quarter of 2008, a 60 basis point improvement over 2007. Concession supplies costs were $23.2 million, compared to $22.7 million for the second quarter of 2007, resulting in a flat margin for the two periods of 16.4%. While we have seen slight increases in product costs from our concession suppliers, we have been able to offset the charges with price increases.

For the quarter salaries and wages were $45.3 million or 9.9% of total revenues which was down from 10.3% of revenues in the second quarter of 2007, primarily driven by improving operating efficiencies in the US, despite increases in minimum wages over last year. General and administrative expenses increased $24.5 million or 5.4% of revenues, up from 4.2% of revenues in the second quarter of 2007. This increase was primarily the result of higher incentive compensation due to stronger year to date performance and a change in our share base compensation expense. Additionally we had increased legal and professional fees, some of which relate to new costs associated with being a public company. The absolute increase in general administrative costs were higher than we would have anticipate our average run rate to be due to some essentially one time professional fees of approximately $1.5 million. Worldwide adjusted EBITDA for the quarter was $99.8 million, representing a 21.8% adjusted EBITDA margin. Domestic adjusted EBITDA increased 3.5% to $78.8 million driven primarily by increases in average ticket prices and concession per cap. Our international adjusted EBITDA increased to $21 million.

Pre-tax net income increased 23.4% to $27.4 million for the second quarter of 2008 from $22.2 million for the second quarter of 2007. Net income for the quarter was $15.5 million compared to $47.9 million in the second quarter of 2007. Our 2007 quarter included a $9.2 million gain from the sale of Fandango stock and significant tax benefit. Our effective tax rate was 43.3% for the second quarter of 2008, resulting in an expense of $11.8 million, which represents a normalized rate compared to the second quarter of 2007, when a $25.7 million income tax benefit was reported. So we previously stated we still intend to use the proceeds from our IPO to pay down our long-term debt, but given the ongoing challenges of credit markets we are proceeding carefully to make sure we maintain optimized set structure.

Looking briefly at our balance sheet, our cash position was $396 million at the end of the second quarter of 2008. And total long-term debt was $1.53 billion resulting in net debt at quarter end of approximately $1.13 billion. Taken with our adjusted EBITDA, this level of net debt results in a leveraged ratio of approximately 3.3 times with which we remain comfortable. June 30, 2008, our total domestic screen count was 3,688 screens, 12 of which are in Canada. During the second quarter we built three theaters with 48 screens and closed one theater with 10 screens. As of June 30, 2008, we had signed commitments to open seven new theaters with 80 screens in domestic markets during 2008 and open eight new theaters with 120 screens in the domestic market subsequent to 2008. Our total international screen count at June 30, 2008, was 1,018 screens. During the second quarter we built two theaters with 11 screens.

As of June 30, 2008, we had signed commitments to open four new theaters with 27 screens in international markets during 2008. On a year-to-date basis we have invested $51.9 million in capital expenditures including $36.4 million on new construction and $15.5 million in CapEx maintenance. We expect our gross total CapEx before disposition proceeds for fiscal 2008 to be approximately $145 million including CapEx maintenance. We expect CapEx net of proceeds of the sale of assets to be approximately $115 million. The Company declared its quarterly dividend on August 7, 2008 in the amount of $0.18 per common share. The dividend will be paid on September 12, 2008, to stock holders of record on August 25, 2008. It represents annualized yield of approximately 4.9% based on yesterday's closing price.

In accordance our NCM operating agreement, we will receive cash distributions of approximately $3.4 million from NCM during the second quarter of 2008. In summary, we were pleased to see that robust film content has continued to drive growth at the box office in light of a challenging economy. The film slate for the remainder of the year looks promising, particularly in the fourth quarter and we're optimistic that we'll be able to embark on our digital and 3-D rollout near the end of the year. Throughout all this we will continue to execute our organic growth strategy to drive long-term growth and revenues, EBITDA and cash flow. We will now be glad to answer your questions.

(OPERATOR INSTRUCTIONS) We'll pause for just a moment to compile the Q&A roster. And your first question will come from the line of Eric Handler with Lehman Brothers.

Thanks. Good morning. Couple quick items. The price increases you had for ticketing as well as perked up spending in concessions was substantial relative to your domestic increases. Besides in a currency impact there is anything going on in Latin America that's allowing you to take such big increases? And then secondly, if you start ruling out digital and 3-D towards the end of this year, when you look at Monsters Versus Aliens at the end of the first quarter, how many 3-D projector systems do you feel you can get up by then, and how many 3-D do you have right now?

Okay. We will separate those. And first on the price increases internationally, there is not necessarily anything unusual happening in the international markets other than again the whole benefit of our international strategy has been one of diversification. This clearly has benefited us with respect to when you have a weaker US economy we do get the benefit of currency benefits in Latin America, the Latin American economy overall, an incredibly strong economy, especially the South America with Brazil being our biggest country. It has allowed us to put through normal price increases down there. Some of them may be higher than historic amounts but definitely higher than the US, especially with respect to concessions. And so again, it's just created a nice balance to our overall company and ability to continue to drive overall numbers. Alan, you want to talk about digital a bit?

Yes, I think, Eric, the question on 3-D and the rollout, obviously it has a lot to do with how many we can get in time from Monsters Versus Aliens would depend obviously on when we get started and what time frame the DCIP venture gets finished up. I think as Regal previously stated and as we look at it, it's really a function of how many people you deploy and use to get those 3-D screens out. On a full digital basis I think it's estimated that we can approximately do around 200 a month on a digital. Then you just determine how many and how you proceed forward on a 3-D rollout. I think we are all a little trying to figure out right now the timing and how we roll those out.

Depends how many teams we deploy. There's many factors to roll into that. Currently Cinemark has -- we actually by the end of the year we will have approximately 74 3-D screens. We're -- as we open and finish out some of the things that are in the middle of ongoing for us right now. So I think again, as I had heard previously, Mr. Katzenberg had announced they should have it in industry 2,500 to 3,000 3-D screens for Monsters Versus Aliens. I would say that certainly it's still possible as I look at how DCIP could roll out their things and how the industry is going to react. Probably still a little bit early right now to tell you exactly how many because we would have to roll that plan out and determine what is best economically for us to do that.

Okay, thank you.

Your next question will come from the line of Hunter DuBose with Morgan Stanley.

Thanks. Good morning, guys. The first question I have for you is, I just want to clarify that your plans for opening screens for the remainder of the year domestically, I think you pointed towards 80 further new screen openings. Can you also comment on the plans for closing screens during that period and also subsequent to 2008?

Sure. Hunter, I would tend to say with respect to the opening is still consistent with where we are. We clearly are seeing in the real estate market some delays in projects, especially as we look out further into 2009. A lot of 2008 projects are really obviously underway. Even some of those screen counts could be pushed into early 2009, just because the general market conditions out there that we are seeing in the development community. Overall when you look at openings and closures, that we would expect probably see with respect to closures probably about maybe 20 more screens this year. I think that probably will be a ballpark to offset against what you're looking at. And again, some of that will depend -- we do have a few projects that we are closing in a new facility opening and new facility in the area not necessarily one for one-type deal. That will again depend on the results and the timing when that new build is ready.

Okay. And do you have a view about closures for 2009?

I think we've generally said that we would foresee somewhere in the per year around 50 screens. I think that's probably reasonable outside of a -- something that would come up and outside of sales. That would kind of be our normal run rate, somewhere in there.

Okay, now on the subject of concessions margins, how high corn commodity prices and share prices have to go before you would be concerned about your concessions margins?

Hunter, I would answer again, we historically, and there is no reason to think any differently in the future have always been able to manage increases in -- for our concession products inside of how we increase our prices. So we are obviously always watching what's going on with any of our price increases. But the nature of what we sell and how we manage that business, we do not feel like there is any reasons to believe that we can't control and keep those margins where they historically have been in a relative basis.

Hunter, I might follow up on the new builds that we talked about in 2008. And I think we actually talked about this in Q1 if I recall. But the majority -- vast majority of those if not all will be in the Q4 time frame as far as the timing of the openings. So --

The implication being fewer openings in Q3?

Yes.

Got it. That's helpful. And then the other question have I for you is can you give us some kind of guidance as to the per screen CapEx requirements for the deployment of Real D?

It's still being finalized. I mean in reality the DCIP negotiations are -- while we signed the first agreement and we think that has created significant momentum to get the finalized and get it to market and get it funded, that's not complete yet. As we said before we are trying to minimize obviously our cost in that and balance it where the benefits are with all of the parties involved, but there is no final numbers on that yes.

Okay. Just to clarify, is Real D -- are you suggesting that Real D may actually become a part of DCIP as well?

I thought you said digital, I didn't realize you had said Real D. On the 3-D side, we will get better guidance later. We are under a confidentiality agreement how we negotiated that with Real D and as far as what the specific nature of it is, but we will provide guidance as time goes on to the extent there is a cost for us.

Okay. And in terms of the screens that are part of the deal that you announced with Real D, a quick back of the envelope calculations suggests that's about 30% of your domestic and international screens. I think historically the number that's been thrown around by people in the industry is more like 20% of the screens. Does that imply that you are a little more more bullish about the 3-D opportunity, or you're just creating wiggle room that you may grow into or you may not?

I think we probably it's more the latter there are that we are making sure we get covered, I think as our announcements talked about it was presumably an up to number of 1,500 or so screens. We just want to make sure we along with the Real D guys evaluate what the potential is, where it's going. How many screens are needed and we certainly want to maximize on it. So there is -- as there is being a lot of excitement around it. I think we are just being cautious here that we were covering ourselves that we could potentially go to that number.

Okay. Can you comment on whether this is an exclusive arrangement with Real D or might you be considering alternative companies 3-D offering as well?

Yes. I think we are going to make sure where as we stated we were under confidentiality. Right now we were able to tell you it is an exclusive deal with Real D.

Okay. Great. That's all have I for you guys. Thank you very much.

Okay.

Your next question will come from the line of Barton Crockett with JPMorgan.

Okay. Great. Thanks for taking the question. Let me see. First thing I wanted to ask you was if you could give me your thoughts about Katzenberg's aspiration to have a $5 up-charge for his movies in 3-D. Does that feel like the right price for you, or are you trying to push back on that? What do you think about that?

I think certainly our job is just to evaluate each picture and the situation and try to determine what's best for us and for the film and how we proceed forward. And I think obviously Jeffrey is out there trying to make sure that people recognize in my opinion that what they are making and the quality of these films and what they are after today is just something better than it's ever been released before, and he wanted to make sure that people recognize that there is a premium out there. It's a little difficult to sit here right now and say is that $2, $3, $5, $8, where should that number go. And we really have to evaluate ticket price increases and what those premiums might be on a theater by theater basis, on a regional, on a basis for our company. So I think again at the end of the day as we have shown in the past and we believe in the future there is definitely a price premium that can pay for these 3-D films. And I believe that the quality and what's coming up product-wise with these 3-D films certainly commands a good number for us. So as you look at history and all I can tell you is, as you look at what happened with Hannah Montana. Hannah was getting probably an $8 to $10 ticket price premium. What does that mean and how does that relate to Mr. Katzenberg's films, Monsters Versus Aliens, we again feel that the quality and the potential and where this is going certainly justifies a decent and good price premium.

Okay. And I was wondering in your comments you said you look at the fourth quarter and feel good about the movies coming out. Can you go a little bit further? In other words, do you feel optimistic we could see year to year growth and industry box office in the fourth quarter based on the mix you see?

Again, we as a company have not given guidance toward the fourth quarter. All we can tell you is as we look at it, as you look at it, I think the general consensus is there is some pretty good films in the fourth quarter and people are excited about it. You are the one that will have to make everyone else have to make judgment calls as to what potentially those films can do. But all we can tell you is the footage and the things we have seen and understanding a little about that fourth quarter film there is certainly potential that will generate excitement and will be a good quarter for us.

Okay. And I wanted to ask if you can give two specific numbers. One of them can you tell us -- I know you said you had 74 3-D screens by the end of the year. How many do you have now or did you have for the opening of Journey?

When Journey opened, we had approximately through the opening of Journey approximately 57.

Okay.

And then we've got a handful more because we have some new openings and a few things that are occurring. So the next 3-D film that opens is Fly Me to the Moon, which that's kind of where we are getting that approximately 74ish number for us.

Okay. And then can you tell us how much FX lifted your international revenues in the quarter?

We didn't calculate kind of a net basis. If I took the FX prices or the -- if I took out the FX impact for concessions and again -- maybe let me step back a minute. The reason I mentioned look at year to date is Easter was important. We do have some films that opened in the US in Q2, especially toward the end of Q2 that some opened in -- it's not necessarily that something didn't fully open. It's that maybe a movie opened in Mexico and didn't open yet in Brazil or something opened in Brazil and didn't open yet in Mexico. That did have an impact. Again if I looked at it as a total year to date that pushed some of our attendance if you were in the US would have been in the US in Q2 will go to Q3. But even at that, I think if you look at year date you will find that international is performed as well as domestic company and actually better. The FX adjusted let's say, so I just did a year-over-year comp, if I took our average ticket price it would be a little over 4%. If I took our per session per cap, it will be again on a year-to-date basis it would be up around 7 1/2%.

That would be a cost to currency?

Yes, that would be a cost to currency.

Okay. That's great. Thanks a lot.

Again, compared to the US healthy increases. If you take what attendance was internationally year to date you will find that you significantly outperform the US.

Okay. Alright. That's great. Thanks a lot.

Your next question will come from the line of Jeff Logsdon of BMO Capital.

Thank you. Could you take a little time to talk about international film rental costs? I think the domestic side is well understood by most. Close, down a little bit, up a little bit from the US? And does it fluctuate a bit more on a per film basis?

Really the international film rental and again they are very consistent, it's really done more so probably on a country-by-country basis. So each country can vary on historically what those numbers are. But having said all that, the way film is settled, the way we approach it and how it goes about being done, is similar here to the US, the numbers just vary by country based on different reasons for that. So we settle it very much the same way and work through it very much the same way.

It is -- the concept is the same. We do have lower film rental internationally than domestically.

And historically, that's the way it's always been because of the nature of the countries and how they developed and the way it's been. It doesn't again, hasn't significantly changed in the past or do we foresee it to change in the future.

Internationally, do you do much co-op advertising, or is it much more dependent on the studio or distributor that may have prebought that particular film?

No. We don't do much co-op advertising. Most of the international obviously campaigns and the way they release and how they advertise their film product is driven by the studios and we don't -- we do not participate in much of that.

And then lastly, it looks like the international concessions per patron are accelerating exceptionally rapidly. Is this something we can keep watching for? Is this more demand driven? Is it pricing driven? The increase is far in excessive what we are seeing here in the US?

I wouldn't say that it's a trend that I suggest people use in their models if you are going out two or three years. I think it's something that really as with the US, if you go back to the US last year, we all had significant price increases. They are lower this year because the economy if -- we fortunately will be able to keep the US prices moving up. On the international side we don't have the same pressures as what we are seeing in the US. Clearly there is cost pressures everywhere in the world. But we are able to move up from the economic point of view to price better internationally. I don't know I would say when we look at 7%-type increases that is something I could sustain over a long period of time. The different -- and again I mentioned the 7% earlier that when you get higher than that it's an FX benefit. Clearly, the FX is just going to be subject to whatever is happening in the US economy versus the Latin American economies.

But I tend to say we've generally told people that our international performance on average when you look at a year should be similar to the domestic performance. We think there is more growth potential down there and some opportunities, especially in this kind of economic environment to push the revenues and hopefully the EBITDA better internationally just because you aren't seeing the same problems. But it's not by its nature asset that I will be able to push price our or anything more significantly than generally average should happen in the US.

Great. Thank you.

Your next question will come from the line of Jake [Hendlong] with [Monesk, Crespi, Hart].

Yes, good morning. Thank you for taking the questions. First, could you give us an idea how the international attendance is trending quarter to date? We were almost halfway through the quarter here.

We -- that is not something we generally provide. Sorry about that, Jake. Again, as we did say and I guess a little bit of a lead into it is the movies that were in the US at the end of Q2 which we mentioned some of them, Zohan, some of those. Actually even Panda was not fully released in Latin America in Q2. So Latin America will have the benefit of some films we did not see in the US. Probably the flip side of it is September tends to be a slower period worldwide. Once you get to your film releases July, August and then September is generally a slower film release period. So I think some the fluctuation we have seen probably will wash itself out by that period. But clearly we will get some benefit for some of the movies that we saw perform well in the US that are in July internationally.

Great. Thanks. Then on 3-D, I think Alan mentioned a screen by screen rollout. Will that indicate possibly two passes through the theaters and rolling out 3-D as quickly as possible?

Again, that's something we will have to evaluate as we get the things finalized at DCIP. That's certainly a possibility but not sure that is the best way to do it and so really with a we have to determine is economically for us and based on the films that are coming up and how we roll these things out is certainly one of the possibilities we looked at is the ability to accelerate the 3-D side of the equation for film and it's something we will entertain and look at as we finish up our DCIP agreements and determine the best way for us to proceed.

And just in general, the studio count has been an issue hopefully getting up to four for the DCIP. Would you expect one large announcement, or is the information just going to continue to trickle into the market as far as you would expect?

Again, it will depend on timing. We were obviously negotiating these things on a studio by studio basis. So that really is a function of how those agreements get finished up, and whether there is multiple announcements or individually not really sure yet. But as we stated previously, we were making good progress with the studios and feel comfortable that it is making moving in a very positive direction. Certainly we know that by signing one of the studios up that that motivates the other studios and motivates all of us to continue to drive this thing forward.

Okay. Great. Thanks. Then one last quick one. The NCM distribution, was that largely a tax receivable? This tends to be the lowest quarter for them.

Yes. The majority of that was the tax receivable, maybe not majority but a big part of that was tax receivable.

Very good. Thanks, guys.

Sure.

(OPERATOR INSTRUCTIONS) Your next question will come from the line of John Langston with Hodges Capital.

Thanks, guys. That last question actually answered what I was getting at. I'm assuming that the digital rollout and then converting those digital screens to 3-D screens is actually a separate process?

Well, in a perfect world what you're going to do is in the process of rolling out your digital converting the things over you would like to just do 3-D along the same time frame. If you had in a perfect world you can do it under the best economic way to do it. Because your teams are in there, you are doing the conversion and add those pieces and you do it. But as was asked, it certainly possible to go in there and not convert every screen in a complex, but to convert a few screens in the complex for the purpose of 3-D and then move on. But what you are obviously doing at that point in time is losing some of the efficiencies of having your crews and your team and the work already underway and the conversion going on. So that's when we describe to get 3-D, you of course have to realize that I have to convert that projector over to a digital projector. So while I'm doing that it's just a really function of do I convert a few screens in the complex and then move on to another one and then another one and another one, or do I maximize the efficiencies to convert all of them in that complex and just do 3-D as I'm going through process.

That's probably a pretty extensive analysis that you will eventually one day go through. In the short-term it it's just off-the-cuff it would seem it might make more sense to get some digital and some 3-D in all of your theatres to maximize the short-term revenue possibilities. Is that an analysis and something that you all are going to do as the plans are kind of ironed out and you all will disclose publicly?

Well, again, I'm not sure what we will be able to disclose or how we will disclose it. I think what we are a trying to make sure as you just stated it's a complex analysis to make sure we are best utilizing our teams, our people. How we roll this thing out that we are making sure that we are ready for 3-D films that are coming down the pipeline. And granted, we already have some 3-D screens out there, so we have to put that into the mix and just determine all these things. At the end of the day we are, of course, about maximizing shareholder value about making it make sense for all of us. And so we certainly don't want to go out and waste money just to the extent of some short-term problem. But on the flip side we also want to maximize if there is potential in benefit for that then we want to make sure. So as you stated, it's a fairly complex analysis and really we can't totally begin all of that. We spent a fair amount of time on it. But really the key here is when that whole thing gets started and when the rollout and the finishing of DCIP, that's the critical piece at the moment.

Okay. Is there anything you can talk about on activities going on with digital or activities you see coming down the pipe over the next 12 to 18 months outside of feature films, as far as digital products?

I don't know that we have a lot of insight into it. We know the studios are excited and we know they all have many type things out there. We have Cirque du Soleil that's coming up from Sony. Each of the studios has different products and different franchises and different items they are working on. And so we have not been disclosed what all those things are. Certainly again the -- if you talk to them, when Hannah Montana came out and it was a successful as it was and it really got people's attention. So not only the major studios but we got independent sources and a lot of people that are just thinking about ways to utilize 3-D and utilize the digital technology. So I'm not sure that we have a ton of things out there. We know there are other concert movies coming up in February. We were told there is a Jonas Brothers 3-D concert movie coming up and things like that.

At the end of the day what gets us excited is, is the potential for lots of neat things to be out there. Your imagination can take you in it different directions on what you can do with, and how these directors and producers, and just all the exciting things that are out around the 3-D realm. So that's at this point in time. I think people are probably a little reticent because they want to make sure there's enough screens and it's rolling out. But obviously we are on the cusp of that happening. So we do feel there is very good and very strong product that will be told to us at later dates that's coming up.

You talked previously about opportunities with the NBA and maybe the NFL. Is there anything going on there?

At this point in time we haven't heard anything further. We have seen those demonstrations. Hopefully many of you have and people have gotten excited about the potential for some of the sporting aspects. But I think a lot of it right now depends on getting -- they really need the platform to be out there and then they can start working on how do we translate that into something for us in the theaters. So we have not been given any further detail around that yet.

Okay. Thank you.

And at this time there are no further questions. Are there any closing comments?

Again, we appreciate your participation today. We look forward to our future calls, and then certainly just always tell everyone keep going to the movies. So thanks, everyone, and glad to participate today.

Ladies and gentlemen, this does conclude the Cinemark Holdings second quarter 2008 earnings call. You may now disconnect.