Cinemark Holdings Inc (CNK) 2008 Q4 法說會逐字稿

Good morning. My name is Tamia and I will be your conference operator today. At this time I would like to welcome everyone to the Cinemark fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (Operator Instructions) Thank you, Ms. Sacks.

You may begin your conference.

Thank you, and welcome to Cinemark fiscal fourth 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 and uncertainties and other factors that may cause Cinemark's actual performance to be materially different than the performance indicated or implied by such statements. Such risk factors set forth in the company's SEC filings. Today Cinemark's CEO, Alan Stock, and CFO, Robert Copple, will be discussing the fourth quarter and full year results. I will now turn the call over to Alan.

Thank you. On today's call I comment on the industries and Cinemark's full calendar 2008 results and the fourth quarter 2008 results, the outlook for the upcoming film slate and discuss Cinemark's digital cinema and 3D strategy. In 2008 the motion picture exhibition industry experienced one of the best performances in it's history, in a challenging economic environment which is causing many industries to experience significant revenue decline, the exhibition industry recorded the second best year in history. Almost equaling the industry record breaking 2007 box office based on industry sources. In addition to the strong performance of sequel films from existing franchisee such as: The Dark Knight and Indiana Jones, 2008 also saw the emergence of solid new film franchises, such as: Iron Man, Kung Fu Panda, Sex in the City and Twilight. Our performance during recent periods has reinforced what we have experienced historically during economic difficult periods. Our industry is relatively recession resistant as going to the movies continues to be one of the most convenient and affordable forms of out of home entertainment and allows escape from every day issues for many people. Industry wide box office revenues have increased in four of the last six recessions.

Turning briefly to Cinemark's performance in the fourth quarter of 2008. Cinemark's total revenues for the quarter increased to $407.8 million. Primarily due to a 5.9% increase in attendance. The growth in attendance was driven by a strong movie slate both domestically and internationally and the addition of new theaters, we experienced increases in domestic and international average ticket prices and concession revenues per patron before the impact of unfavorable changes in foreign exchange rates. Our domestic box office up 4.4% in the fourth quarter compared to a US industry box office increase of 2% to 3% for the calendar quarter according to industry sources. Our domestic attendance up 2.3% on the strength and diversity of films such as Twilight, James Bond's Quantum of Solace, Four Christmases, High School Musical III, Beverly Hill's Chihuahua, Madagascar II and Marley & Me. The fourth quarter also featured a Disney 3D movie titled Bolt, which performed well, grossing more than $100 million domestically. We continue to see that when there are movies that appealing to consumers that continue to go to the theater and purchase concession items even during economic downturns. Our domestic concession revenues per patron increased by approximately 2.8% for the quarter. Cinemark's international operations continue to be a strong differentiating factor that helps diversify our operations, while we faced some volatility due to recent currency fluctuations, our Latin American theatres outperformed our domestic operations in 2008 in both attendance and price increases for the quarter and year.

Our international operations we experienced a 15.7% growth in attendance in the fourth quarter almost four times a rate of domestic growth. International average ticket prices and concession revenue per patron also increased in local currencies. Increases in pricing were offset by the decline in the Brazilian real and Mexican peso relative to the dollar during late 2008. International revenues were still up for the quarter despite the foreign exchange rate impact. Since our international operations are conducted in local currency, and the majority of the cash generated remains in the respective country, currency fluctuations whether favorable or unfavorable do not impact the local currency cash flows. Looking ahead to 2009, the resiliency of the theater industry continue as the US industry box office is up a robust 12% to 13% through mid February on the strength of outperforming and long running films including Gran Torino, Paul Blart, Mall Cop, Taken, The Curious Case of Benjamin Button and Marley & Me.

We're optimistic about the line up for the remainder of 2009. There are a number of highly anticipated films scheduled for release this spring and summer. Including several sequels or franchise films such as: X-Men Origins: Wolverine, the followup to The Da Vinci Code, Angels and Demons, Night at the Museum II: Escape from the Smithsonian, the second Transformers: Revenge of the Fallen, another followup to Ice Age, Dawn of the Dinosaurs, which will also be in 3D and the next Harry Potter, Harry Potter and the Half-Blood Prince. In addition to the new Star Trek series, will be introduced as a prequel to the franchise. In 2009 we're seeing a meaningful ramp up in the number of 3D releases, unlike some of the previous years movies that were produced in a 2D format and then converted to 3D, this year's movies created with the intent to utilize the depth and presentation attributes unique to 3D presentations. This weekend the Jonas Brothers concert movie is opening, and DreamWorks animations Monsters vs. Aliens is scheduled to open during the last weekend in March. Followed up by two Disney films this summer: G-Force and Pixar's Up. Robert Zemekis' A Christmas Carol and the much anticipated Avitar are expected to open towards the end of the year.

We began redeploying digital projectors from our fully digital theaters late in the fourth quarter, and as a result we will have approximately 180 3D screens by the time Monsters vs Aliens is released compared to 40 screens at this time last year. Once the digital cinema agreements with DCIP are finalized and deployment begins we expect to have up to 1,500 real D 3D screens in the worldwide circuit. Regarding DCIP, credit markets continue to be challenging. However we feel that studios and exhibitors are aligned and prepared to approach the markets. DCIP is continuing to pursue financing alternatives that will provide its members a broad digital deployment. Finally we expect to continue our organic screen growth both domestically and internationally. In 2008 added 156 screens and 12 theaters in the US and 47 screens in seven theaters internationally.

Due to broader macroeconomic factors we expect new development to slow slightly in the US compared to last year, we have signed commitments to open five new domestic theaters with 62 screens in 2009 and five new domestic theaters with 78 screens during 2010 and 2011. We have signed commitments to open one new international theater with seven screens during 2009. We are also working on negotiations for another eight international theaters, with 50 screens to open in 2009. We will continue to seek high quality locations for organic builds and evaluate acquisition opportunities that meet our return metrics in both international and domestic markets as we believe there are opportunities for organic growth. We are well positioned with respect to liquidity, we have approximately $350 million of cash and no significant payments due on our long-term loan until December of 2012. We also have a revolving credit line under senior facility that remains undrawn which we have approximately $121.4 million available for borrowing, assuming Lehman Brothers would not fund its commitment under the revolving credit line.

The theater industry continues to display resiliency in the challenging economy. It is exciting time to be a theater operator with the roll out of the next generation technology and escalation of 3D on the horizon. We also believe there are incremental opportunities with alternative content, which is just in the early stages of the development. That being said, we know we are not immune to the economic challenges. And we are watching our cost structure and planning conservatively. We will continue to invest in areas that meet our investment return criteria, we remain focused on our long-term organic growth strategy and on enhancing industry leading position. With that I will now turn the call over to Robert to discuss the quarter's financial results in more detail.

Thanks Alan. I will review our fourth quarter and 2008 financial performance in more detail and discuss our balance sheet. During the fourth quarter our total revenues increased 3.7%, to $407.8 million, primarily due to a 5.9% increase in attendance. The growth in attendance was driven by a strong movie slate both domestically and internationally in addition of new theaters. Admissions revenues increased 3.7% to $261.7 million and concession revenues increased 5.5% to $125.1 million. We experienced increases in both our domestic and international average ticket prices and concession revenues per patron before the impact of changes in foreign exchange rates. Adjusted EBITDA for the fourth quarter of 2008 was $84.2 million, compared to $83.8 million for the fourth quarter of 2007. Our adjusted EBITDA margin 20.6% for the fourth quarter of 2008. On a segment basis for the quarter, US our operations experienced a 2.3% increase in attendance, a 2% in averages ticket price, and a 2.8% increase in concession revenues per patron. US admissions revenues were $216.6 million, representing a 4.4% increase over 2007, slightly above estimated calendar quarter industry box office results. Conception revenues increased 5% to $103 million. Our total domestic revenues increased 4.4% to $331.5 million. And adjusted EBITDA increased to $72.6 million.

Within our international segment for the quarter, attendance was up 15.7%. Average ticket prices and concession revenues per patron increased in local currencies, but were offset by unfavorable changes in foreign exchange rates. Admissions revenues increased slightly to $45.1 million, and concession revenues increased to $22.1 million. Total international revenues increased .8% due to the increase in attendance, adjusted EBITDA for international segment was $11.5 million, which was relatively flat with 2007, despite unfavorable changes in foreign exchange rates in 2008. We are pleased with the increase in attendance and pricing that led to the strong box office performance of our international theaters during the quarter. Films such as: Madagascar II, High School Musical III and James Bond: Quantum of Solace performed well in our international markets during the fourth quarter. We also benefited from the performance of local films, particularly in Mexico including [Rudy Acursey], which was one of the best grossing local films from Mexico during 2008. Our consolidated film rentals and advertising costs for the fourth quarter 2008 were $141 million or 53.9% of admissions revenues compared to $135.5 million or 53.7% of the admission revenues for 2007.

Concession supply costs $20.2 million or 16.1% of concession revenues for the fourth quarter 2008 compared to $18.4 million, or 15.5% of concession revenues for the fourth quarter of 2007. For the fourth quarter of 2008, salaries and wages $45.7 million compared to $42 million for the fourth quarter of 2007, primarily driven by increased attendance, minimum wage and new theatres openings. General and administrative expenses increased to $23 million or 5.6% of revenues up slightly from 5.5% of revenues in the fourth quarter of 2007. G&A expenses include non-cash share based compensation expense of $1.8 million for 2008, versus point $.9 million for 2007. During the fourth quarter we recorded asset impairment charges of $105.4 million, compared to $26.2 million in the fourth quarter of 2007. Although our theaters performed very similar in 2008 compared to 2007, the impairment test is also driven by market value multiples.

Our decline in stock price, our competitors stock prices and the overall perceived decline in market values resulted in ann impairment charge primarily of goodwill, when applying generally accepted accounting principals. As a reminder these impairments are non-cash charges to earnings, and did not affect the company's liquidity or cash flows from operating activities. The pretax loss for the quarter was $94.3 million, compared to $11.6 million in the fourth quarter of 2007. Net loss for if quarter was $89.5 million or a loss of $0.83 per share, compared to a net loss of $53.8 million or a loss of $0.50 per share in the fourth quarter of 2007. Our effective tax rate was 5.1% for the fourth quarter of 2008. Our 30% excluding good will impairment charges of $78.6 million which are not deductible for tax purposes. Moving to results for the full year, we increased admission revenues 3.6%, to $1.13 billion, that increased our concession revenues 3.5%, to $534.8 million. As a result, our total revenues increased 3.5% to $1.74 billion. These increases were primarily driven by increases in average ticket prices and concession revenues per patron, up 4.3% and 4.1% respectively, partially offset by 8.7% decline in attendance. Adjusted EBITDA for the year ended December 31st, 2008, was $370.3 million compared to $376.9 million for the year ended December 31st, 2007. Our adjusted EBITDA margin was 21.3%, for the year ended December 31st, 2008.

On a segment basis for the year, domestically we increased admission revenues to $889.1 million and our concession revenues to $426.5 million, leading to increase in total revenues to $1.356 billion. Adjusted EBITDA increased by 5.9% to $291.5 million. Our international operations performed well in 2008, as we increased our admissions revenues by 14.2%, our concession revenues by 17.6%, driven by an increase in attendance of 3.9%. Increases resulted in increase in total revenues of 15.6% to $385.8 million, an adjusted EBITDA increase of 17.4%, to $78.8 million. Net loss for the year ended December 31, 2008, was $48.3 million compared to net income of $88.9 million for the year ended December 31, 2007. Net income for the 2007 fiscal year benefited from a $129.6 million after tax gain on the national cinema IPO, we reported impairment charges of approximately $113.5 million during 2008, which included goodwill impairment of $78.6 million compared to impairment charges of $86.6 million during 2007.

Now on to our balance sheet, we believe our cash position, relative debt level and timing of long-term debt position us well to take advantage of opportunities that will arise as a result of the current economic environment including additional deleveraging. At December 31, 2008, our cash position was $349.6 million, and increase of $11.6 million compared to cash levels at December 31, 2007. We have used liquidity to reduce outstanding debt in the quarter by repurchasing approximately $37 million, aggregate principal net debt maturity at 9.75% notes for approximately $33.3 million, bringing the total purchases for the year to $47 million, aggregate principal amount at maturity. As a results our net debt at December 31, 2008, was $1.16 billion down $26.8 million from December 31, 2007. This level of net debt results in a leveraged ratio of approximately 3.1 times adjusted EBITDA. Our debt balance is composed primarily of two facilities: our senior secured credit facility and our senior discount notes. As of December 31, 2008, we had $1.1 billion outstanding on the term loan under senior secured facility.

Due to the [uncertainty] of one of our lenders and the facility and uncertain of whether that lender would fund his committment, we had approximately $121.4 million available for borrowing under revolving line of credit. Currently there are no borrowings outstanding under our revolver. We also have $419.4 million aggregate principal amount at maturity, 9.75% senior discount notes outstanding which are due in March 2014. As I previously mentioned we repurchased approximately $47 million of these notes for approximately $42.2 million during 2008. In terms of interest rates on our senior debt, approximately $800 million of our $1.1 billion term loan is floating rate debt, at a weighted average weight of 3.7%, as of December 31, 2008. Approximately $300 million is fixed under interest rate swap agreements that are discussed in our SEC filings. At December 31, 2008 our total domestic screen count was 3,742 screens, 12 of which in Canada, during the quarter we opened seven new theaters with 80 screens in domestic markets bringing our net screen additions for 2008 to 88. As of December 31, 2008, we had signed commitments to open five new theaters with 62 screens in domestic markets during 2009, and open five new theaters with 78 screens in domestic markets subsequent to 2009. We opened three theaters with 20 screens in the international markets during the quarter resulting in a total of 30 net screens added for the year. Our total international screen count at December 31, 2008, was 1,041 screens.

As of December 31, 2008, we had signed commitments to open one new theater with seven screens in international markets during 2009. We are also negotiating commitments for another eight international theatres with 50 screens to open in 2009. For the year ended December 31, 2008, we invested $106.1 million in capital expenditures, including $69.9 million on new construction and $36.2 million in CapEx maintenance. This was slightly below our prior estimates of $120 million for the full year. The figures noted did not reflect proceeds received from the sale of theater properties and other assets. Currently we estimate that our gross total CapEx before disposition proceeds for fiscal 2009 could be approximately $115 million to $125 million, which includes CapEx maintenance. The company declared its quarter dividend on February 26th, 2009, in the amount of $0.18 per share. The dividend will be paid on March 20th, 2009, to stockholders of record on March 5th, 2009, represents annual yield of approximately 9.4% based on yesterday's closing price.

In summary throughout 2008 we continued to grow domestic and international footprint, we reduced our outstanding debt as well. We are in a very favorable position with respect to cash and long-term debt levels with no significant principal payments until December 2012. Looking into 2009, while economic environment remains challenging consumers continue to value the cinema as an affordable source of entertainment evidenced by the 12% to 13% growth in the US industry box office through mid-February. While we believe the remainder of the film slate for 2009 looks promising, we're planning our business conservatively and we'll stay focused on controlling our costs. With the diversity of our international footprint, organic growth, acquisition opportunities and opportunities associated with digital and 3D technology, we remain optimistic about our long-term growth prospects. We will now be glad to answer your questions.

(Operator Instructions) We will pause for just a moment to compile the Q&A roster. Our first question comes from the line of James Marsh with Piper Jaffray.

Hi, good morning, guys. Two quick questions here. One, you mentioned 1,500 3D screens over time, I was wondering what time frame you are thinking about. And then if you could just differentiate how you will pay for US versus international, assuming the US is all through DCIP. And then the second questions relates to Latin America and South America, I was wondering if you could just discuss the health of consumer there, and review your expectations on attendance and pricing in that market, going forth. Thanks.

Good morning, James. In respect to the 1,500 screens and the timing of that it obviously has to do with the funding how we move forward with the funding on DCIP, the time frames have always been talked about that once you get started takes the two to three year period of time to roll out all of your digital screens, and during that process once you get your digital footprint on its way, then you supplement and you add the 3D screens on top of that. Now obviously we always have to determine as we are rolling out that in all of our digital screens we determine how to layer in our 3D screens and do you accelerate that based on products, there are still some things that have to be answered before you can fully determine how long and what it takes and how we move forward on the digital rollout and the 3D footprint as well. Again from the Latin America side, the 1,500 and the rollout initially is the domestic rollout and DCIP is the one focused on that.

We'll have to get into -- never really fully answered how we roll out the Latin American assets yet because we have to finish what we do here in the US. There have been many talks, there's been a lot of desire from the distributors of course and Cinemark's being a company that has a large footprint internationally, we are working on ways and ideas of how we would roll that out. But today and currently DCIP is a domestic concept and really affects our domestic theaters.

We do have, we have also been rolling out 3D screens internationally, and interesting enough there, we are looking at trying to do something similar to what we done in the US by creating a DCIP Latin America, and we've talked with other exhibitors down there and there's much interest in it. The other thing is much of our financing to date of the digital projectors deployed in Latin America, has been in a joint process with my of our developers, there is a strong desire to have 3D projectors in many of our markets, in doing so they've -- the local developers in many of our malls have also helped us pay for or totally pay for many of our projectors. I think you asked the same question of just generally Latin America and what we're seeing down there, the opportunity for pricing increases and just attendance. Yes, as we discussed in the call, the attendance in the fourth quarter was through the roof. What we saw during last year, the attendance in latin America would be up and down a quarter like the US would be, but it tended to be different quarters, we weren't expecting the fourth quarter to be nearly as strong as it was in attendance, and we are very excited by the fact that obviously people attended movies well and and there were great movies they wanted to see both locally made as well as US product.

We are -- just like the US we continue to see that into the first part of 2009. We don't -- the economies in Latin America are doing well, they're affected by the worldwide changes that we are seeing, we don't -- we haven't seen quite the slow down in maybe construction that you seen in the US, although I think that will happen over time, not necessarily being a bad thing, but the consumer is the same, we've seen that through the our history of this company and in our experience in last 15 years in Latin America. The economic environment in Latin America just like it is in the United States generally doesn't keep the consumer from going to the movie theaters if anything it tends to encourage them to go because it is a means of escape. And then secondly many people stay home during these kind of times and take their vacations at home and that also appears to drive consumer demand.

Your next question comes from the line of Ben Mogil with Thomas Weisel Partners.

Hi, guys. Good morning. So just a couple of questions, more of a longer term question, we've seen almost all the major US studios be quite open that they are going to start to produce more product -- sorry, start to produce less product over the next couple of years as sort of third party financing deals roll off and likely not to get renewed. Talk about sort of explain your domestic and international markets, how you guys fill your position for this and what your thoughts are, not just for you guys, but for the overall box office, if you start to see the major studios cut back by say a quarter to a third, the wider released products they are going to be introducing.

Ben I think I would initially answer and say just because the number of products decreases, you don't always -- doesn't necessarily relate to how it does in the box office, and it's kind of interesting as we looked at last fall, we saw a movie Harry Potter move out of the the slate, and back at that period of time people were nervous about it, what does that mean, what is going to happen to the fourth quarter numbers? What often times happens when there is less product, and it obviously depends on the quality of product and like happened when Harry Potter moved it allowed another movie, in this particular instance, Twilight, to do incredibly well. I don't know Twilight would have done quite as well if it was jammed up there next to Harry Potter and you had different choices. So sometimes, then again I will always qualify it depends on the quality and what is out there. But what did the studios claiming they are going to make less product, and very well could be the case. As we talked to many of them the quality of what they are making and as I looked at much of their line up at least we become aware of for the future it is very good products. Our job is obviously take what is there and try to do the best we can with it. Sometimes when you have few less films you can do a better job with what you've got.

The second part we have to make sure we realize too, and there is opportunity with things like alternative content that's becoming popular, and we don't know where some of those pieces go. So at the end of the day I always fall back and say the business is consistent now and it's obviously doing very well. It's producing good results for all of the studios. I'm a believer they are going to figure out ways to fund and make good product and help their bottom lines, because it is a healthy business now. On a international level, again, we obviously play -- international play, a vast majority of their product comes from here in the US. But on the same token and as we just stated on the call, there are times when local product can do very well. So I think at the end of the day, there is the opportunity for local film to do well for again the films that are produced here domestically, to continue to do well. So I believe as our outlook for the future continues to be healthy, and we are not overly worried that the economy is going to affect the quality and the production of the amount of what happens in the next few years.

Ben, also keep in mind, especially the staff out there, there is a lot of movies made last year, there were 700 plus movies that we feel like in our circuit we showed over 600 different movies, but about 30% of those made 99% of the box office revenue. So a number of the movies we think would go by the wayside are the smaller movies that while they are great and occasionally you get a real surprise that's very value, although many times those are independents that probably will produced anyway. A lot of the product that comes through doesn't generate that much revenues.

No, for sure, I was just focusing on the fact that the studios which are obviously focused on wide release and heavily supported P&A product are being quite open about reducing their numbers, focused on that top 50 to 75 kind of number if you will. Maybe sort of onto the domestic side on the ticket pricing trends, want to get a sense from you guys obviously you outperformed the box office domestically. Can you give us a since from a ticket pricing perspective, you were obviously in a good way, not particularly high on average ticket price, mid to average ticket price the attendance bump and the concession bump what are you looking for in general for 2009 on the domestic ticketing front and maybe even talk at all on a regional basis seeing any kind of discrepancies?

We're not really giving projection per se, we do feel like just reflecting the economy we'll see lower increases in 2009 than what we seen over the last two years, 2007 was great increases 2008 still did fairly well, as you said we tended to outperform. We think 2009, we're approaching it cautiously we think there are room for price increases, we always done increases on a market by market basis. Cinemark's in general has tended to be slightly underpriced to some of its competitors in a number of markets. And so it gives us a little more room, but being realistic about it, we all know the economy is difficult. We are going to be very cautious in what we do increase and it is selected. We will do some increase, we don't think nearly the levels you seen the last few years. And that will be both with concessions and ticket price, I would say we will probably be even more cautious in concessions, I think everybody's general feeling is that that's probably where the consumer will look first to pull back despite us not really having seen much of that.

I do think the consumer is probably from what we've seen moving in general to maybe buying conservatively and sometimes that means buying a large and splitting it, versus couple of mediums or smalls. But it hasn't had much impact so far on our numbers. Looking geographically we continue to watch that, it's a little difficult. I'd say with the data we have to date we are not seeing many changes geographically. We are definitely have a strong presence in California and many markets. We don't see that that is really underperforming. There is different theaters and different areas that perform differently quarter to quarter, but as far as a trend we have not seen that, obviously we will continue to watch it. We have a very dominant presence for our chain, very strong presence in Texas and Texas continues to do fairly well through all this. But realistically we are seeing good numbers throughout our circuit.

Okay. Sounds great, thanks, guys.

Your next question comes from the line of David Miller with Caris & Company.

Yes, hi, good morning. Robert, just a couple of housekeeping items for you. What portion of the long-term debt is due in 2012? I apologize in advance if you said that in your prepared remarks. And also in the table in the press release where you talk about consolidated operations on a per cap basis, you've got average ticket price here down 2.1% in the quarter, concessions per patron basically flat in the quarter. Do you have what those numbers would have been excluding foreign exchange? Thanks.

With respect to the debt our senior debt becomes due in 2012, or starts to mature is a better way to say that, or so we have four equal payments, the first one being December 2012, it's slightly above $260 million would be the first quarterly payment in that quarter. Then the next three quarters the same thing. I can give you -- consolidated and everything else, but I can give you a local currency what we call constant dollars. If you would have taken that in our overall Latin American markets combining them, for the quarter we would have seen a 4.2% increase in average ticket price, a 10.5% increase in concessions per patron. For the year we would have seen a 6.4% increase in average ticket price, and a 10.6% in average per patron.

Okay, and so that 10.5% in concession per patron for the quarter is that in -- is that cumulatively or just in dollar translations in Latin America?

Those are Latin American only. So you can take those numbers if you want, run those through, put the US numbers wouldn't change, and you will get what it would have been.

Got you. Perfect, thank you.

Your next question comes from the line of Tony Wible with Janney Montgomery.

Good morning. I was hoping you could answer a couple of questions. One is, DreamWorks was talking about a $5 ticket premium on Monsters vs. Aliens and given that your domestic ticket I guess is underneath kind of the average in the industry for the US, would you anticipate getting a $5 premium on Monsters or do you anticipate it being a little bit less?

Well, it's certainly a possibility that we would do that, I think what we are trying to evaluate and we always price our theaters obviously on a theater by theater basis, in the concept here, as Mr. Katzenberg and as the DreamWorks guys are pushing the idea here is that you are really trying to make sure you price according to the quality and the product that you got and what is out there. And there is certainly history as we have shown, obviously last year with Hannah Montana had a much higher than a $5 ticket price increase for it. This year Jonas Brothers is doing the same thing. So there is opportunity to introduce -- take a premium for 3D for quality product. So we are certainly looking at that right now. And again as you heard Mr. Katzenberg and DreamWorks animation guys and people pressing that concept, we are certainly taking a looking at that, and there is a possibility that people can charge that and can get that for a movie like Monsters vs Aliens.

In your ramp of getting the 3D systems in place you eluded to year-over-year and in the absence of DCIP in the US were there any other partners helping you to make these transition to get the screens ready?

Again, the screens are getting ready today and approximately the 180 number that we stated is really us taking 00 we had quite a few theaters we deployed fully digital as we were testing and experimenting and rolling out the product. And so what we really did was took all of those projectors left a few in each facility. You took the projectors from those fully digital theaters and redeployed them. So the numbers that we are able to achieve today for Monsters vs. Aliens are just really the fact that we did that. We've done all that working internally. We were already prepared, Cinemark was as a circuit, for the screens that were required for this, we had put those in some time ago in anticipation of 3D. That's really how we got and why we are achieving the numbers that we are today.

So we should not to expect to see an increase in cost as you go lights on with some the 3D stuff?

Not significantly, no.

Okay. And the last question is really again dealing with the local question, in the Latin American markets, while the vast majority of the films I imagine are still going to be US export films, are there any local films that you can comment on for the film slate for 2009 for instances I think in Brazil the best selling title right now is a local film?

That is correct. And I'm not sure if we do have, I can give you good visibility. Sometimes those local films pop up, I'm not sure we have a whole lot of length of time in visibility of what they are. I can tell you though that the Brazilian market and even some in Mexico continues to develop some good film and you never know, as is occuring right now and as you just stated in Brazil right now, those films can pop up and sometimes do very well. So I'm not sure I can tell you specifically of what the titles are today. But the way that market flows and the way we get international product, that local product internationally out there, hasn't changed over the years, and when there are successful films like happened here recently, it really sparks other guys interest and they get excited about it, and history says that we will continue to have that local product that is produced.

Great. Thank you.

Your next question comes from the line of Jake Hindelong with Monness, Crespi & Hardt.

Good morning, a few questions. Just first, can you confirm -- so in Latin America for the fourth quarter concessions per patron in local currency was up 10.5%?

Yes.

And how would you suggest we think about 2009 on that metric? In the first quarter more specifically.

Yes. Not really trying to get into first quarter or as specific as that. I mean I think again experience the same thing in Latin America we are experiencing here. Will have the opportunity to increase prices. I would tend to say not as strongly as we saw in the past would be our inclination. Much of the increases in the past have really been a result of inflation and other factors in these countries which have allowed us increase at the levels we did. I think as those economies slow down as well, --

It might help to talk about how that 10.5% compared with the average of the first three quarters on a local currency basis.

Yes, I mean again, for the year I said there are total increase for the year was 10.6%. So compare pretty evenly. So I tend to say that for going into this year we will see an increase but I -- it could reach those levels but I'd tend to say it'd be less than those levels.

Great, thanks. And then first quarter to date just internationally, on a average basis how are your international theaters performing on same store I guess attendance would be the best metric that would help?

Again, we are not providing projections of the numbers, domestically the post on domestic box office, not ours in particular, has been up 12% to 13% to date. We would say internationally films were performing similarly down there performing well.

Great, thanks. And then one more, internationally how many 3D screens do you have available right now?

Currently we have about 15 today. Now there are -- we as Robert said earlier, we have also working on some again minor amounts, probably get some more than that as we roll out to 2009, but --

We're actually ramping that up fairly quickly with a number of developers, 15 was -- actually at year end and we added a few since then, we are continuing to try to add more as we get to Monsters and Aliens.

Great. Thank you.

Your next question comes from the line of Barry Crockett with Lazard Capital.

Okay. Hi. It's Barton Crockett with Lazard Capital Markets and thanks for taking the question. I was wondering if you could talk a little bit about how you give the dividend. Obviously with a 9% yield to market, it's pricing risk that you are going the cut it, like Regal cut and some of the other companies have been cutting, you guys have a covenant like facility which are other ways out there. But tell us about how you view this -- the dividend in this environment, and your ability to support it and what could potentially prompt you to rethink that.

In the end it's a board decision as you said Crocket, Barton, sorry. We -- I didn't say Barry, though, I said Barton. As you said we designed our company financially when we went public to pay the dividend, we have generated excess cash flow and the dividend historically has represented 60% to 65% of our free cash flow, so that we could absorb changes in the economy as well as changes in our building program. So in the end it's up to our board each quarter to make that decision. As we just announced we are paying our normal dividend for this quarter and the board still feels comfortable. The only direction they've given us is that that's their plan. So I think it's something the company can afford, with everybody we're always looking at alternatives, and what's the best use of capital, if there's better uses of it to create value for the shareholders, but currently we still have that policy in place.

Okay. Great. Great. Just to clarify the number of 3D screens that you said for Monsters vs. Aliens is that a domestic number, that excluded the 15 plus that you have?

Yes, in the domestic market again we'll have approximately 180 for Monsters vs. Aliens.

Okay. Also to be clear, is the ticket price for the Jonas Brothers basically the same as you guys charged for Hannah or a little bit less?

For the most part it's about the same as Hannah was being charged.

Okay. And I think that's it, thanks a lot.

Your next question comes from the line of Marla Backer with Research Associates.

Thank you. I have a couple of questions on the '09 slate, are there potential blockbusters that you think might not travel that well internationally, specifically thinking about GI Joe as one? Are there any titles that you are thinking may not have the same impact in your international markets?

I don't think there is anything in the slate of films that we look at in 2009 that's much different than years past. Obviously things do translate a little differently as we look in to the international market, and again many of the larger titles and the bigger things out there for next year look to be as appealing on a international basis and they love things like Transformers and some of those type movies that are out there. Probably the movie that you're referring to I'm trying to think the GI -- are you talking about the Disney film that's coming up, the G-Force? G-Force, that might be the one you are references to, it very well could do well on a international basis, more of an action type film. You really try to figure out at the end of the day how that film product and what is it going to do and again most of the larger titles we are looking at for 2009 I'm going to tell you are going to translate fairly well. I'm not sure -- you're probably talking about GI Joe.

Yes. That's the one I'm talking about.

That title that's out there. Some of those movies may or may not translate very well on a international basis, but then often times there are other product that doesn't do as well here, we have as many products that sometimes don't do a lot in this market but do better internationally. So there is always a give and take as you look at any film year in any amount of product that's out there, we don't necessarily see anything alarming in 2009.

Okay. And then just one little question in terms of the latest drama with the Screen Actors Guild. Are you hearing anything about that, are you thinking there may actually lead to a strike there? And if so, how would that impact, probably not the '09, but the 2010 slate in your opinion?

And obviously anything we would tell you today would be pure speculation, I'm a believer in today's economy and the way things are rolling, that it's hard to imagine much is going to occur on that front. You never really know. There is talk going on back and forth. We fall back on history and say that this is not unique and it's not something we haven't dealt with before in the industry and I think hopefully calmer heads will prevail and they will go forward. People are just scared in today's world of how to approach when they talk about strikes and things that they are going to do. How they are going to survive. We're not really openly worried about that, and all I can tell you is we continue ourselves to have conversations with all of the studios to talk about their upcoming slate of film and what it looks like for them. And as I sat down especially with the major distributors we have, they continue to show us product and assure us what they have they're working on and things that are out there, be it any of the strikes or talks or anything that are going on the business continues to perform well, and they are excited and continue to work on good projects for the upcoming years. So again we feel pretty comfortable as we look into especially 2009 in to 2010 that there is good product out there and will continue to flow to us.

Thanks. Two last questions one on the concession. Everyone remarked that the concessions metrics have held up incredibly well in this economy. Some of the other exhibitors are saying that they think maybe people are foregoing the dinner, of dinner and a movie, and that's one factor behind the strength of concessions. Are you adding any new concession items to benefit from that trend if in fact that is a trend? Any prepared foods?

Yes, and I would say certainly our job as a theater operators to make sure we offer concession products and items that are appealing, and so we are constantly always working on new items and shipping around items and trying to figure out what appeals at any given time to any consumer. And I would always tell you I think the biggest benefit we got is when people go to the movies and they have that experience as a customer group that they love just to go out and have that whole experience. Buying concessions and having food and having that popcorn in your hand is part of the experience of going to movies and that's why they continue to do well, I don't think people determine if they are going to do this thing and they want to be entertained and get out, then they want the whole package. We've talked to consumers about that and why they do what they do. But again we always want to make sure we have in their hand and put things that are appealing and things they desire. So that is constantly a goal for us as a company and I'm sure many of our competitors the same as you want appeal as best you can to that experience for them.

Okay. Thank you. And my last question is the overall health of the industry. As you said it's been extremely resilient because people still want the out of home entertainment. But do you think 3D will create a competitive disadvantage for some of the smaller circuits? I mean US 3D footprint is pretty significant for Monsters and for the other 3D content coming up, as are your DCIP partners, they have pretty big 3D footprints. Do you think that some of the smaller circuits may get hurt in '09 by significantly smaller if any 3D footprint? If so do you think that may create any kind of smaller M&A opportunities when we come out of the financial market volatility?

It's hard to guess. At the end of the day when movies perform very well on a 3D basis and it behooves everyone gets excited about getting that product. There are a number of smaller guys who can't afford or have actually gone out and funded. It is not unique to see the smaller guys with percentage wise or numbers when you compare the size of their little companies, that actually have a fair number of 3D projectors that are out there. So it could actually go either way, then on the same token as you're indicating, there could be some smaller guys that can't afford it. We certainly have seen in this past year some of the theater chains that have come up for sale perhaps have done so because they are a little reticent or they don't know how to fund or what to do with the whole 3D digital environment. It does present an opportunity for us to look at that. I think at the end whether it's brought to surface because of that or what reasons are out there, certainly we want to look at all of the acquisition opportunities and see how they could or if they can benefit Cinemark and again just based on price and quality of assets, but everybody does recognize when movies like My Bloody Valentine and some of the pictures that have come out recently and have done very well in a 3D format. Then obviously we have to all be thinking about how do we take advantage of that in the future. And those guys have to think through that themselves.

Thank you.

Your next question comes from the line of David Goldberg.

Good morning, guys. Thanks for taking the question. Just wanted to talk a little bit about the credit facility and the mix between fixed and floating interest. Given where LIBOR has been, would you guys consider entering in to longer dated swaps on the floating portion which at this point are pretty large?

Yes. Definitely we would. I mean, it's something we continue to monitor, obviously it's everybody's guess of when interest rates move and how long that takes. And if the market guess is reflected by one, two, three year, four year hedges are. We haven't much now -- we thought about locking in more, I think we probably will just for safety sake. Because even when you go forward, they are still fairly good rates at this point. But obviously we haven't done that for the moment.

And just going back to last question on acquisitions, are there any markets internationally either in [Latin] or elsewhere that seem attractive or have assets out there that may be particularly interesting for you guys?

The one thing I say there is maybe even in follow up on Marla's question, I think there will be exhibitors that consider selling in this environment. I'm sure there are some that might ultimately financially be in a position where they need to. But I don't think there will be a whole -- a large group of those. At least as we looked at over time seem to be in financial health. Their debt position seem pretty good. As we have been saying, box offices is -- part of the economy, that's a worldwide basis set boxes sold everywhere. People's cash flow remaining high and able to continue to service their company well as well as facilities probably have capabilities to look at 3D and digital.

But when we look at acquisitions, I mean so far to date we tend to focus where concentrated. We looked at the US, and mostly Latin America, there are opportunities in both, there are some companies in Latin America that occasionally come up. We know everybody really well. And so we do watch those both looking at individual theaters as well as some smaller companies. Don't know there is a lot of large companies down there. Domestically kind of the same thing, we are the largest company with Alan and knowing really all the different exhibitors out there. Something comes up they give us a call. And we are very open to it. But we do look at our criteria, what's the quality of the asset. What's best use of our capital. Is it something that we can buy in manner that would be accretive. And obviously with the debt markets what they are, that definitely limits the size of what you would be willing to do.

And David, just clarify too, most of what we look at is focused here either domestically or in Latin America. You asked the question if we look outside of that, not necessarily and we don't know the timing of purchasing anything outside of the core businesses, what we focus on, we are not spending much time around that at all.

Okay. Then just one last question on the overall business, I was wondering if you guys could talk about how the overall retail environment impacts you guys. And do you see any difference in the performance of individual theaters depending on where they are relative to retail locations and does that have much of an impact? I don't think movie going is really that much of an impulse decision, I'm trying to get a handle on whether or not that has a handle going forward.

From a history standpoint here I say it doesn't have a whole lot to do with it on what the retail location is. Now of course, what it does have to do with, which we mentioned as the retail community has effects, what that does is slow down the development of malls and shopping centers and development opportunities. So potentially because of those retail centers doing not as well right now, then our ability to grow with those retail centers and put new facilities in slows down to some degree. But as you look at what we currently have and as retailers are suffering to some degree right now, doesn't necessarily relate to how it changes or affects our business.

We are not really seeing differentiations in our standalones versus mall facilities or anything like that.

It's interesting, as you get out and go to the shopping centers and malls and other retailers are down, and I think perhaps a large part obviously people aren't buying, but as we go to our theaters that are sitting in the malls, you still find the malls people are in them and walking whether they are just going out to walk around and look at stuff I don't know. But at the end of the day they still want to go to our theaters and get out and have that entertainment experience. And obviously most of the time those are always going be located around popular retail type areas. And so it just naturally draws people to those areas.

Okay. That's helpful, thanks, guys.

I would now like to turn the conference over to Alan Stock for closing remarks.

Well we would like to thank everyone for participation in our call today. And we look forward to talking with you next quarter. Thanks, everyone.

That concludes today's conference call, you may now disconnect