Cinemark Holdings Inc (CNK) 2008 Q3 法說會逐字稿

Good morning. My name is Tinia, and I will be your conference operator today. At this time I would like to welcome everyone to the Cinemark third-quarter earnings conference call. (Operator Instructions). Thank you. Ms. Sacks, you may begin the conference.

Thank you and welcome to Cinemark's fiscal third-quarter 2008 earnings call. Before we begin, let me remind you that in accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, the Company knows that certain matters to be discussed by members of management during this call may constitute forward-looking statements. Such statements are subject to risks, uncertainties and other factors that may cause the actual performance of Cinemark to be materially different from the performance indicated or implied by such statements. Such risk factors as set forth in the Company's SEC filings.

Today Cinemark's CEO Alan Stock and CFO Robert Copple will be discussing the third-quarter results.

I would now like to turn the call over to Alan.

Thank you. On today's call I will comment on the industry's and Cinemark's third-quarter 2008 results, the outlook for the upcoming film slate and discuss Cinemark's digital cinema and 3-D strategy.

During the third quarter, Cinemark's total revenues increased 1% year-over-year on a 0.2% increase in admission revenues and a 1.2% increase in concessions. This growth was driven by the strong performance of our international circuit, the addition of our new theaters and exchange rate benefits. Our domestic results were in line with industry performance.

During the third quarter of 2008, The Dark Knight set a new record for a one-day opening and a three-day opening weekend and helped lead the box office to its highest grossing seven-day week ever and grossed nearly $525 million during the quarter.

Our international operations produced 23.9% growth in admissions in the third quarter due to the success of The Dark Knight, Kung Fu Panda, Hancock, The Mummy, and WALL-E, which performed stronger than the top five films during the third quarter of last year. We believe our broad geographic presence remains a competitive advantage for Cinemark as it provides us with a diverse revenue base.

I would like to briefly discuss our liquidity, which Robert will cover in more detail later. As of September 30, 2008, our cash position was $371.3 million, and total long-term debt was $1.54 billion, resulting in a net debt at quarter-end of $1.17 billion. Our senior debt and our subordinated debt do not mature until 2013 and 2014.

As we head into the fourth quarter, we believe consumers will continue to seek low-cost forms of entertainment to escape the deteriorating economic conditions as they have done in the past. The domestic box office was up approximately 17% for the month of October, driven by solid openings of films such as High School Musical 3, Beverly Hills Chihuahua, Saw V and Max Payne. We also believe that our concession sales continue to be driven more by the mix of films showing rather than any other factor.

We experienced a 4% increase in concession revenues per patron in the US during the third quarter of 2008.

Looking at the remainder of the fourth-quarter release schedule, Madagascar opened this weekend to approximately 63 million, and the remaining lineup includes the next James Bond film called Quantum of Solace and some other promising films such as Twilight, a very popular youth novel series, Seven Pounds with Will Smith, Disney's Bedtime Stories with Adam Sandler, the animated 3-D release of Bolt, Yes Man with Jim Carrey and The Day the Earth Stood Still with Keanu Reeves.

Moving on to the subject of digital and 3-D, we have been pleased with the substantial progress on our digital cinema initiative, or DCIP, a joint venture between our Company, AMC, and Regal. Five studios have signed the digital deployment agreement, including four of the major ones. Giving the extreme volatility in the credit markets and the lack of liquidity and visibility, we cannot predict when financing will be obtained by DCIP, but we remain optimistic that when credit markets begin to stabilize, DCIP will progress, and we will be able to begin our digital and 3-D rollout.

We have been focused on testing the digital and 3-D conversions in some of our theaters and making sure our teams are ready for an efficient deployment when the financing is secured. We believe that digital cinema and 3-D will continue to provide significant opportunities for our Company given both the historical attendance and ticket price growth that has come with 3-D releases and the increasing number of 3-D films planned by major studios. Although we will roll out many more 3-D screens in the future, existing industry screens have been sufficient to generate significant box office revenue in 2008. In only two weeks, Hannah Montana generated box office revenues of approximately $63 million, and Journey to the Center of the Earth released in July of 2008 generated approximately $100 million in revenues.

The fourth quarter also features a new Disney 3-D movie called Bolt. Within the next few years, over 30 3-D films are scheduled to be released including DreamWorks Films' Monsters Vs. Aliens, How to Train Your Dragon and the fourth Shrek movie. Fox's Ice Age 3, James Cameron's Avatar, Robert Zemeckis' A Christmas Carol with Jim Carrey, Pixar's next release Up in 2009 and the Toy Story films. Our plan is to still convert our entire circuit of 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 we have previously stated, as part of our agreement with Real D, we plan to add up to 1500 Real D 3-D screens to our circuit.

We continue to move forward with our organic expansion strategy. Year-to-date we have opened five new theaters with 76 screens in the US and four theaters with 27 screens internationally. While tight lending conditions in the credit markets are delaying some new development projects in the US, we believe this could be partially offset by the expansion opportunities in our international markets and an increasing number of potential acquisition opportunities.

During the third quarter, we acquired two theaters with 16 screens internationally, which are included in the four theater total that I mentioned earlier.

In terms of our future organic expansion plans, we will open 10 new theaters with 98 screens during the remainder of the year and have signed commitments to open 11 new theaters with 147 screens during 2009 and 2010. We will continue to seek high-quality locations for our organic builds and acquisition opportunities in both international and domestic markets that meet our return metrics.

We're pleased to see the box office continue to perform despite weakening trends in the economy. Movie product is the most significant driver of attendance and a reason the fourth quarter is off to a good start. We believe this is both a function of quality product and the fact that we're able to offer consumers one of the lowest cost forms of out of home entertainment.

Having said this, we acknowledge that the economy is difficult. We will remain focused on operating our business as efficiently as possible in this environment and continue to improve our financial performance and pursue expansion opportunities that provide attractive returns. Our business continue to generate steady free cash flow, and we have built a solid balance sheet. I believe that our industry has a strong long-term growth profile, and Cinemark is well positioned as one of the market leaders to continue to drive shareholder value over time. With that, I will now turn the call over to Robert to discuss the quarter's financial results in more detail.

Thanks, Alan. Before I review our third-quarter 2008 financial performance, I would like to address our debt and liquidity position due to the strong current credit market conditions -- excuse me, due to current credit market conditions.

We feel our strong cash position, coupled with our low-level of leveraged long-term maturities, positions us well to take advantage of opportunities that may arise as a result of the current economic environment.

At September 30 our cash position was a solid $371.3 million, and total long-term debt was $1.54 billion, resulting in net long-term debt at quarter-end of approximately $1.17 billion.

Taken with our adjusted EBITDA, this level of net long-term debt results in a leverage ratio of approximately 3.2 times adjusted EBITDA. Our debt balance is composed primarily of two facilities, our senior loan and our senior discount notes. We have what is generally referred to in the debt community as a covenant-light senior debt, which means our agreement contains less financial covenants than a normal senior agreement. Under our senior facility, we have a term loan and a revolver. Our primary financial covenant is a consolidated net senior secured leverage ratio. This ratio includes only our senior secured debt. It does not pick up the senior discount notes. This ratio is fixed at a maximum ratio for the term of our agreement. So in measuring our compliance, we do not face steep future stepdowns that would tighten liquidity tests.

Additionally this covenant is only applicable if we have drawn on our revolver. It does not apply if there is only term loan outstandings, and there are no borrowings outstanding under our revolver.

If you have any concerns regarding our covenants, we encourage you to read our credit agreement. It is part of our public filings. Additionally our debt is discussed in our 10-Ks and our 10-Qs. The agreement contains the definitions of the terms used to calculate this covenant and other terms applicable to our debt.

At the end of our third quarter, we had $1.1 billion outstanding on the term loan under our senior secured facility. We are required to pay principal payments of $2.8 million each calendar quarter or $11.2 million on an annual basis through September of 2012.

The remainder is due in equal quarterly payments from December 2012 until it reaches in maturity in October 2013. So essentially only a minor amount of principal is due for the next four years.

We also have a $150 million revolving credit line under our senior facility that is undrawn under then a letter of credit for less than $100,000 that can be easily paid off if we desire.

Due to Lehman's participation in this credit line and the probability that they will be unable to fund their proportion, we have approximately $121.5 million available for borrowing under this revolver.

I would like to point out that we have not drawn on this revolver since its inception in 2006 other than the minor letter of credit.

We also have $437 million of 9 3/4 senior discount notes outstanding, which are due in March 2014. There are no regular principal payments due on this debt until it's maturity almost five and a half years from now.

During October 2008 we repurchased approximately 30 million in aggregate principal amount at maturity of these notes for approximately $27.3 million, including accreted interest.

In terms of interest rates on our debt, approximately $800 million of our $1.1 billion of term loan is floating-rate debt at a weighted average rate of approximately 4.6% as of September 30, 2008. Approximately $300 million is fixed under interest rate swap agreements that are discussed in our 10-Q.

Now focusing on our results for the quarter, during the third quarter, we increased our admission revenues 0.2% to $308.5 million and grew our concession revenues 1.2% to $146.1 million. As a result, our total revenues increased $4.7 million or 1% to $476.2 million. This performance was driven by a 4.5% increase in average ticket prices and a 5.4% increase in concession revenues per patron, partially offset by a 4% decline in attendance.

Adjusted EBITDA for the quarter was $102.1 million, representing a 21.4% adjusted EBITDA margin.

On a segment basis for the quarter, our US operations experienced a 3.1% increase in average ticket price and an approximately 4% increase in concession revenues per patron. These price increases partially offset lower attendance of 8.4%. US admissions revenues were $235.4 million, representing a 5.5% decrease over 2007 consistent with estimated industry results.

Concession revenues decreased 4.7% to $112.5 million. Our total domestic revenues declined 5.2% to $357.8 million. We did experience some impact from Hurricane Ike, which led to the temporary closure of 26 of our theaters due to water damage and power outages. Repair costs were minimal at approximately $0.5 million. These theaters are now back to full schedules.

Our international operations generated admission revenues of $73.1 million, which were 23.9% higher than 2007, driven by a 16.4% increase in average ticket prices and a 7% increase in attendance. Concession revenues for our international operations were $33.6 million, a 27.8% increase over 2007, including a 20.4% increase in concession revenues per patron. Our total international revenues increased $24.5 million or 26.1% year-over-year, primarily due to the 7% increase in attendance and price increases, including the benefit of favorable exchange rates.

Our international adjusted EBITDA increased 26.8% to $27 million. We were pleased with the strong box office performance of our international theaters during the quarter. Some of the quarter to quarter variability is due to the timing of product releases in our international locations versus the US. There were some very successful films released that opened in the US in the second quarter but opened in the third quarter internationally, including WALL-E, Wanted and You Don't Mess with the Zohan.

Additionally films such as The Dark Knight performed well in our international markets during the third quarter.

As we have said in the past, we would generally assume the product performed similarly in domestic and international markets on an annual basis. There will be quarterly differences primarily due to timing of releases in different holiday seasons.

On a consolidated basis, our film rentals and advertising costs were $169.3 million or 54.9% of admission revenues for the third quarter of 2008 compared to $166.8 million or 54.2% of admission revenues for 2007. The increase was primarily driven by the higher film rental on the record-breaking film, The Dark Knight.

Concession supplies costs were $24.5 million or 16.8% of concession revenues for 2008 compared to $22.5 million or 15.6% of concession revenues for 2007. The increase was primarily due to the relative wait of our international concessions revenues as a percent of a total concession revenues compared to last year and increases in product costs from some of our international concession players.

Some of these costs may improve with the global changes in commodity prices we are seeing. Domestically we have only seen slight increases in product costs from our concession suppliers.

For the quarter salaries and wages were $47.4 million or 10% of total revenues, which was up slightly from 9.7% of revenues in the third quarter of 2007, primarily driven by lower attendance levels in the US. General and administrative expenses increased to $22.7 million or 4.8% of revenues, up from 4.4% of revenues in the third quarter of 2007. This increase was primarily the result of our incentive compensation program and increased share-based compensation expense due to awards granted to employees during 2008. Additionally we had increased professional fees and increased credit card service charges.

Total adjusted EBITDA for the quarter was $102.1 million, representing a 21.4 adjusted EBITDA margin. Domestic adjusted EBITDA decreased 20.7% to $75.2 million, driven primarily by the decrease in admissions, while our international adjusted EBITDA increased 26.8% to $27 million driven by the increased revenues, which include beneficial exchange rates. Pre-tax income was $30.8 million for the third quarter of 2008 compared to $36.7 million in the third quarter of 2007.

Net income for the quarter was $20.4 million or $0.19 per diluted share compared to a loss of 23.4 million or negative $0.22 per diluted share in the third quarter of 2007.

Our effective tax rate was 33.6% for the third quarter of 2008. In the third quarter of 2007, we reported income tax expense of $16.1 million, resulting in an abnormally high effective tax rate that was due to the amendment to our national CineMedia exhibitor service agreement, coupled with the gain recognized upon NCM's IPO and non-cash goodwill impairment charges.

We expect a normalized tax rate in the 38 to 40% range for the full-year of 2008.

At September 30, 2008, our total domestic screen count was 3688 screens, 12 of which are in Canada. As of September 30, 2008, we had signed commitments to open seven new theaters with 80 screens in domestic markets during 2008 and open 10 theaters with 140 screens in domestic markets subsequent to 2008.

Our total international screen count at September 30, 2008 was 1029 screens. During the third quarter, we acquired two theaters with 16 screens. As of September 30, 2008, we had signed commitments to open three theaters with 18 screens in the international markets during 2008 and open one new theater with seven screens during 2009.

On a year-to-date basis, we have invested approximately $71.3 million in capital expenditures, including $48.4 million for new construction and $22.9 million in CapEx maintenance. We expect our gross total CapEx before disposition proceeds for fiscal 2008 to be approximately $120 million, which includes CapEx maintenance. We expect CapEx net of proceeds and the sale of assets that primarily occurred in the first half of the year to be approximately $91 million.

The Company declared its quarterly dividend on November 6, 2008 in the amount of $0.18 per common share. The dividend will be paid on December 11, 2008 to shareholders of record on November 26, 2008 and represents an annualized yield of approximately 8.4% based on Friday's closing price.

In accordance with our NCM operating agreement, we will receive cash distributions of approximately $3.8 million from NCM during the third quarter of 2008, a portion of which was recorded against our investment compared to $4.4 million during the third quarter of 2007.

In summary, we remain confident that even during these difficult times, consumers will continue to seek an affordable entertainment outlet, and movies fit that criteria. The film slate for the remainder of the year looks promising, and the fourth quarter has had a solid start. With Cinemark's international footprint, diversifying our revenue streams, organic growth and acquisition opportunities, along with the potential associated with digital and 3-D, we are optimistic about our ongoing ability to drive long-term growth in revenue EBITDA and cash flow.

We are also very comfortable with our cash levels, our ability to be in compliance with our debt covenants and the timing of our debt maturities.

We will now be glad to answer your questions.

(Operator Instructions). Barton Crockett.

I was wondering first, Robert, if there's any way you can give us a better sense of how much foreign exchange lifted the international topline? What would have the percentage growth been without FX impact?

With respect to admission revenues without our -- using a constant FX compared to last year, they would have been up 13.2% in our -- so that is admissions, and then our concessions would have been up 17.8%. So that would represent an average ticket price being up 6.2% and per capita up 10.5%.

Okay. Alrighty. And then would you say that the principal driver of the difference in the admissions and the attendance growth international versus domestic was the difference in the timing of the releases, or is there something else happening there that is driving up performance?

You know, I would generally say it had to do with the timing of films. It was a very good quarter, and some films played better there, but in general I would say it is the product. I mean again we would rather tell people to be a little cautious and look at both domestic and international will perform similarly throughout the year. I think international clearly is probably going to outperform the US slightly, but I would not expect the overperformance in Q3 to be the same in Q4.

Okay. And then one other question here, and then I will step aside. I mean everyone seems to be very worried about the recessionary impact on a whole bunch of industries, and obviously I think that is one of the things that is affecting the movie theater stocks, even though the industry domestically suggests there's not very much of a correlation between the recession and the box office at least in modern history. But I was wondering if you have any data about international box office and recessions and whether there is more of a correlation there, whether it's kind of similar to what we have seen in the US?

You know, I don't have any imperical data that we have come back and looked at, but I can tell you we have been in Latin America for about 15 years. We have gone through a number of different crises in different countries, and very similar to the US, what we have always found is that no matter what the -- I mean clearly during that time you've had all kinds of different turmoils that have happened, primarily financially-oriented in different countries. And just like the US, we have always performed similar if not actually better during those times because again people see movies as an escape. So we feel like there's a very similar correlation to what we have seen in the US.

Hunter DuBose.

When I back out the salary and wages expense you just gave out in your prepared remarks from your overall other line, it looks as if the remaining part of the other expense line grew about 11% year-over-year relative to Q3 '07. Can you comment on what were the principal drivers of that increase in that expense?

You know, the other costs -- I mean there is a couple of different items, but I would say the primary ones we did have some professional fees, we have some service fees, utilities were in there, and repair and maintenance. As I said, we had $0.5 million in repair and maintenance related to the theaters that were damaged by the hurricane, so that flowed through there. So those are the type of -- not necessarily all onetime costs. Some of them were. Utility costs were up over the quarter.

We would feel like that would go down again not necessarily permanently but in the future as you have seen gas and oil prices drop that generally utilities would go down with that. (multiple speakers). Go ahead, I'm sorry.

Yes, I was going to ask more broadly when we look at your adjusted EBITDA margin for the quarter, it represents about 300 basis points of margin contraction relative to 3Q '07, a lot of which is probably attributable to the fact that you've got a pretty much constant revenue base, but a larger expense base now that you have extended your screen count in the context of a industry box office, which has been declining over the last year. Can you just sort of speak more broadly to how you think about your organic domestic expansion strategy in that kind of a context?

Yes, you know, I mean I don't think the fact that one quarter our margin was down. I think you've got -- if you really put it in context, you have got to go back to 2007 and look at how large Q3 was in 2007. That was probably, if not the largest quarter ever, one of the largest quarters during the decade. It was a 15% growth rate, plus over the 2006 quarter for Q3.

So you're coming off an incredible comp, and in particular, when you have that kind of performance in a quarter, your margin is greatly expanded. So when we look at Q3 of 2008 compared to a run-rate of '05, '06, it actually has a fairly decent CAGR on it. Again, the margin would be consistent with really the performance in the quarter. As you pointed out, we did have some costs that went up. During Q3 you still had a number of commodity prices that drove different costs in different areas up such as utilities. There's one fortunate part where the economy is heading those costs are coming down. So we think we will go back and benefit from some price changes.

With respect to our organic strategy, we feel like we have been very successful in it. Again, I mean we are able to achieve all that as a Company overall, a slightly increase in admission revenues without any acquisitions or anything like that. So I mean I think we have performed -- it is staying on track with our desired performance.

Got it. And then my final question, just picking up on what Barton was asking about, the data that we have points towards industry attendance being relatively resilient to macroeconomic cycles. But can you give us some insights into the typical pattern for average ticket prices and average concessions per cap during recessionary periods?

You know, I mean I think the way I would address that would be more of a logic answer of saying that we will be very cautious. But if you go back and look at box office charts, I think over the years where we have had recessions generally we have still increased price.

Now I think everyone is very conscious of where the consumer is at today, but I think also if you look at what the industry has already done and started to do for Q4, there have been some price increases. But clearly more modest than what you saw in '06 and '07 was a little less than I think what '06 was, but my gut is '05 you would be -- you can raise prices but again not necessarily in line with historic averages.

James Marsh.

I was wondering if you could discuss the currency impacts for fourth quarter and beyond. It seemed like there was a lot of volatility in currencies beginning in September. So I was hoping you could quantify that and help us understand the best way to look at that.

And then secondly, related to digital and 3-D rollout, I was hoping you could give us some visibility on how fast you could roll out those digital screens per month deploying them and then also talk about your prioritization of 3-D screens.

Sure. You know, on FX, one, we do not give forecasts. The best way obviously I would say if somebody wanted to try to quantify or estimate that would just be to go back and look at the general FX rate for Brazil and Mexico during the fourth quarter of last year, and then the difficulty obviously is guessing where will those be in the fourth quarter of this year and where do they settle down at.

But that would probably be the best guidance I could give you on that because we don't want to predict where they will be at. But clearly those are our two biggest countries in Latin America, so they will have the most influence. If you wanted to kind of look at a relative proportion in our Qs, we do have some data regarding revenues with respect to our foreign countries that breakdown Mexico and Brazil, and actually on that we have not released our Q yet. That ought to go out sometime between 10:00 and noon Central time today, so you will have all that data pretty quickly.

I will let Alan address the 3-D and the priorities.

I think we have on previous calls or when the question has been asked, I think most people are thinking we could roll out somewhere around 200 screens a month is kind of where they anticipate that roll out schedule going. Again, a lot of that, to be honest with you, is really just a function of how many teams and how you deploy it and how you want to go about that process. Because obviously you can deploy more people at different ways to go about it.

And so that is still something we have to kind of work through as we better understand exactly when the funding would come through and how you would proceed with that.

As far as -- and that kind of applies again along with the 3-D rollout. You can also ramp up or focus exclusively on 3-D or put your resources in different areas just depending on what you're trying to achieve.

So the hard part here is to better answer that question, you have to really define when the funding comes in and what your goals are to try to achieve. I guess my point is, there's a lot of flexibility behind that to leave us latitude to ramp things up or ramp them in a direction that is most efficient and best for our Company and best for our distribution partners and to make sure we are capitalized on what lays before us.

Okay. So just circle back on the currencies. If you could just talk about what percentage of the total costs are in local currencies, and are there any dollar-denominated costs?

Sure, I'm sorry. Basically there's always exceptions to this, but by far the most significant amount of revenue and expenses are all in local currency. So, for instance, obviously we collect our admissions and concession revenues, but we also pay our admissions just like you do in the US, you pay it as a percentage of revenues, and that is paid in local currency. Concessions we buy our local goods in local currency. Again, salaries, wages, rent, all that is in local currency. So there's a few exceptions where there's some dollar amounts here and there in different countries, but they are very minor to the total.

So the whole EBITDA in our international just flows up and down with that, the conversion of that currency into dollars.

David Miller.

A couple of housekeeping questions and then kind of a thematic question. So for Bolt how many screens on 3-D do you think you will have in time for the release? I guess it is in two weeks.

And then on your screen count by the end of the year, I have you guys modeled as having roughly 4796 total screens by the end of the year. I am wondering if you can confirm that, thanks.

Okay. I think for the 3-D screens, we currently have 81, which would probably be a pretty accurate number obviously for the Bolt opening, which happens in two weeks or so. And Robert, I guess we just confirm -- (multiple speakers)

Yes, I think on we had a screen count, we had 4717, and so we would be at about 4763 net because we will have some (multiple speakers). So there's going to be closures. That is going to be ballpark.

Okay. Great and then thematically I mean I just want to get your guys opinion on this, and hopefully you can just sort of level with me on DCIP and what is really going on here. I mean a $1.1 billion deal, I'm sort of at a loss as to why JPMorgan thinks they need a consortium for this at all. They are the advisor to DCIP. They are also the commercial bank on the deal. There's a lot of mixed messages kind of flowing around here on maybe JPMorgan just blows off the consortium and just does this thing themselves. And if that is true, then what is to stop this deal from happening now? I just want to get your opinion on that, thanks.

I mean clearly we would love JPMorgan to step up and fund $1.1 billion. I think we're just being realistic in this current market where the cost of capital is extremely high, assuming that even the capital is available. I still think while there have been some deals done lately, there has really been a very minimal amount of deals done with the need in both investment rated companies and non-investment -- you know the pull-on capital is pretty high, and so, therefore, the costs gets significant, especially when you have a non-investment grade piece of paper.

So while we're exploring that, and I think JPMorgan is being very helpful in the role of advisor, as well as participation in this, I think everyone feels like the credit market just has to loosen up a little bit before anyone is going to be able to fund debt at the levels that we're looking at. And obviously we're looking at all kinds of alternatives, whether there is partial fundings, other types of sources to fund this in the interim. And so everyone is very active in it, and JPMorgan is helping us do that. But I would not foresee them stepping up to the plate with a full commitment right now.

Jake Hindelong.

Monness, Crespi & Hardt. A quick question on international, just to follow-up on the previous question. Third quarter versus fourth quarter given the recent weakness in the real and the peso, is it reasonable to think that in the fourth quarter there will be some real relative pressure here? It looks like in the third quarter you probably had a mid single digit boost, and it might even be as high as a double-digit pressure on international box office in the fourth quarter based on the change in the exchange rates.

You know, clearly with the exchange rates fluctuating at the levels they have, there will be pressure in the fourth quarter. Again, just looking at the conversion, we will do extremely well. We will perform well on a local basis just as we think the US will do. But when you convert that back to dollars, there will be some pressure on it.

I mean it is hard to say how much because it just depends where everything sales right now, and if things go up and they start coming down a little bit and getting where you feel more comfortable and then something else happens in the market and rates move around. So it is hard to say is it a single digit pressure or is it a double-digit pressure, but obviously rates will not be what they were last year.

Great. Okay and then I just had a similar question. Fourth quarter to date box office internationally down about mid single digits. Is that reasonable?

Just fourth-quarter to date box office itself?

Not for Cinemark internationally but for the markets that you participate in internationally?

Yes, you know, what, I don't know. I would say that they are down at this point. Some of the releases are still hitting a few of the markets, but the primary markets have -- most of the films have been hitting. I mean I would probably say if I looked at international box in general and again, like, let's say, let's look at Latin America for October, and again I can speak with respect to Cinemark, but I would probably say that the international markets are generally -- the Latin American markets are generally flat through October.

Great. Thanks and then just one quick question on 3-D and the upcoming release of Bolt. Is there any chance that significant outperformance of that film might spur the investment needed for the DCIP to move forward?

No, again, DCIP is not driven by one film, and obviously we recognized there a lot of 3-D films coming up, Bolt and many movies beyond. And so we're all motivated to get that thing to happen, and as we have discussed, it is really just a function at this point in time of figuring out when capital is available and how to roll that thing out.

(Operator Instructions). Barton Crockett.

I just wanted to jump back in the queue. Could you give us a sense from your perspective what credit markets generally would have to look like in order for the DCIP financing to move ahead? You know, because I know you guys talked the studio deals a few weeks before the TARP thing happened. And would it be reasonable to assume for instance that if credit markets looked like they did, let's say, a month before TARP, that that would be an environment where they could potentially move ahead?

You know, I mean obviously it would all be speculation, but I think basically you are just waiting for the markets to become more liquid. And then once they do, we will have to determine if the current -- if all the pieces we have in our current structure work with what the cost of that capital will be and the ability of the capital. And if not then, you try to work through your agreement.

So I mean kind of hard question to answer, but maybe, as I said, if you looked at where everything was a month before, yes, we're running down the road. We had a lot of interest in the deal we think from various banking groups that would allow us to form the syndicate we were after, and we could have fund it. So if you assume the kind of -- the needle kind of moves back towards that level, we would think, yes, we could get this funded.

Okay. And then on M&A, the environment, could you talk a little bit about your interest in this market? I mean obviously there are some theater chains that probably would not want to sell given where valuations are right now, but some maybe forced to buy their lenders. One thing that has been in the press is national amusements. Could you talk about in particular with national amusements whether that would be attractive to you in terms of the fit and generally whether you see much opportunity in M&A right now?

I think we would answer as we have in the past. We always, of course, have a strong balance sheet and ability to go out and try to make that work for us. It is really just a function of, as you stated, what are these people willing to sell for? Is it something we feel is attractive, is accretive to our shareholder base?

Unfortunately for a lot of the theater chains and how they sit with us, national amusements or any of those on the East Coast fit very well with Cinemark. So really it is our job to sit down just really based on price, based on the quality of the circuit that we're looking at and what we feel we can do with that asset, then that is why we say they potentially are acquisition opportunities out there, and we will just have to wade through those as the time -- as they present themselves.

Okay. Great and then one final question here. Your theaters, a lot of them are in markets that generally would be seen as those pressured by housing downturn, perhaps more than the national average in maybe areas like California or Texas. Are you seeing any difference in areas that are affected by housing markets in terms of the box office or concession spend? Is there any variance there at all that you are seeing?

We have not really. I mean let's be clear, too, when you say, Texas has actually been pretty strong in terms of the recession or anything else that has been going on. But, as we look at our circuit throughout the US, our circuit continues to perform as it has in the past. And all those many aspects we describe on recessionary, whether people are motivated to get out because it's a great place to get away from their woes or whatever it is, but the state of California continues to perform good for us and have not necessarily seen any regional or any issues like that that we can tell at this point.

At this time we have no further questions. I would now like to turn the conference back over to Mr. Alan Stock.

Well, we would like to thank everyone for participation in our third-quarter call this morning, and we will look forward to talking to you again next quarter. Thanks, everyone.

That concludes today's conference call. You may now disconnect.