Cinemark Holdings Inc (CNK) 2009 Q4 法說會逐字稿

Good morning. My name is Ametrice 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.

Mr. Rob Rinderman, Cinemark Investor Relations, sir, you may begin.

Thank you, Ametrice. Good morning, everyone. Thank you and welcome to Cinemark's 2009 fourth-quarter and year-end results call. Before we begin, let me remind you that in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, 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 Cinemark's actual performance to be materially different from the performance indicated or implied with such statements. Such risk factors are set forth in the Company's SEC filings.

Today, Cinemark's CEO, Alan Stock, and CFO, Robert Copple, will summarize the Company's fourth-quarter and 2009 full-year operating results and provide an update on the industry and recent developments. I will now turn the call over to Alan.

Thank you, Rob. We appreciate everyone joining us. This morning I will provide an overview of Cinemark's 2009 fourth-quarter and year-end results and briefly discuss how the overall industry box office performed. I will also preview the upcoming film slate and give you an update on Cinemark's Digital Cinema, 3D and XD initiatives. Following my comments, Robert will take you through additional financial details of our Q4- and full-year results. And he will also cover our capital structure. And then we'll be glad to address any questions that you may have.

We ended 2009 just as we began the year, on a very strong note. Cinemark's geographic diversity and operating discipline once again allowed us to outperform the overall industry in the fourth quarter. Comparing the fourth quarter of 2009 to 2008, our worldwide admission revenues increased 34.3% to $351.5 million. Our US admission revenues growth significantly exceeded comparable industry growth for the period, increasing 28% during the fourth quarter compared to an estimated industry growth of 19%.

Internationally, our admissions revenues increased 64.5% during the fourth quarter. Attendance in both our US and international circuits increased by more than 20% during the fourth quarter. Total revenues grew 31.5% to $536.4 million, driven by increases in average ticket prices of 10.8% and concession revenues per patron of 6.5%. Our revenues per average screen increased 27.7% for the period. Our adjusted EBITDA rose 44.9% to $121.9 million. And we maintained our industry-leading adjusted EBITDA margin which was 22.7% for the fourth quarter.

Our international operations, one of Cinemark's key differentiators, turned in another very strong quarter. Attendance in our international locations grew 23.8%, outpacing domestic industry increases. We also benefited from healthy increases in our average ticket prices and concession revenues per patron in local currencies compared to the fourth quarter of 2008.

The fourth quarter of 2009 was a record-setting quarter for the industry. And each month of the quarter set records for their respective periods. In fact, Christmas week of 2009 was reported to be the highest grossing week of all time, led by Sherlock Holmes, Alvin and the Chipmunks; The Squeakquel and, of course, Avatar, which is now the highest grossing motion picture of all time, both domestically and worldwide. In total, nine movies grossed $100 million or more during the three-month period compared to five movies during the fourth quarter of 2008.

Other films that performed very well during the 2009 fourth quarter included The Twilight Saga; New Moon; The Blind Side; 2012; and the 3D version of A Christmas Carol. Looking to the entire year, 2009 was a very successful year for our industry. According to industry sources, attendance grew by 4.5% to 5.5%, propelling an estimated overall US box office increase of approximately 9% to 10%. This was the third consecutive record-breaking year for the US motion picture industry, with 2009 topping $10 billion in box office revenues for the first time in history. In a year in which many industries were struggling, including many forms of entertainment, the exhibition industry set performance records in every quarter. The record-setting year reflects that theaters benefited from a shift in consumer spending habits as consumers selected the theater as a preferred value for their discretionary income.

Patronage trends in 2009 also reflected increasing demand for products unique to the exhibition industry, such as 3D. In the fourth quarter, over 14% of our box office was generated by our RealD 3D, XD and IMAX screens, commanding a $3 to $5 premium over our average prices. This strength and demand of 3D was reflected in the wide release of fourteen 3D movies whose collective gross was nearly $1.6 billion in 2009 The year fittingly ended with Avatar grossing in excess of $280 million in December of its record-setting $690 million in North American box office to date. Avatar introduced the excitement of 3D technology to more customers than ever before, increasing demand and enthusiasm for 3D films. Its success at the box office is enticing directors, producers and movie studios to create more 3D films and content.

Briefly reviewing Cinemark's performance for the year, we outperformed the industry with our worldwide box office revenues increasing 14.8% to $1.3 billion, including a domestic increase of 15.4%, approximately 50% above industry estimates. Our worldwide adjusted EBITDA increased 20.3% for the year to $445.5 million.

Looking now to 2010, the most important driver to box office performance is the quality of movies. The last couple of years have been great in terms of Hollywood content and we are optimistic about the year ahead. Some of the notable titles set for release this year include Iron Man 2; Sex and the City 2; Prince of Persia; The Sands of Time; The A-Team; Inception; Little Fockers; and of course, the widely anticipated third installment of the Twilight series, Eclipse.

Additionally, there are approximately twenty 3D releases in the pipeline for 2010, up from 14 in 2009, including Alice in Wonderland, Shrek Forever After, How to Train Your Dragon, Toy Story 3, and Tron Legacy. Based on the overall success of the 3D slate in 2009, several releases that were originally scheduled only for 2D format are now slated to be presented in 3D, including the remaining installments of the Harry Potter saga, the first of which is set for a November 2010 debut. Also, Clash of the Titans is now scheduled for a 3D opening the first week in April.

As the 3D movie pipeline builds, Cinemark continues to add more RealD 3D screens. During 2009 we added 300 3D screens. And at year end we had 398 3D screens worldwide, consisting of 299 in our US circuit and 99 in our international markets. With the expected funding of VCIP, our wider rollout of digital and 3D screens will begin in Q2. Our 2010 rollout of digital screens will primarily focus on adding 3D screens. We estimate at year-end that we will have an installed base of approximately 1,000 to 1,200 3D screens in operation worldwide.

Now I want to briefly update you on the success of our Cinemark Extreme Digital Initiative, or XD as we have successfully branded it. During the fourth quarter we built one new XD auditorium and converted 13 existing auditoriums, bringing our year-end count to 16 XD auditoriums throughout our circuit, including one in our international markets. We are delighted with the box office results of XD. In the fourth quarter, the 15 domestic XD auditoriums, representing 0.4% of our total screens, generated 1.3% of our admission revenues.

For those of you not yet familiar with XD, these auditoriums offer customers a premium state-of-the-art experience from wall-to-wall and floor-to-ceiling screens, to plush, comfortable stadium seating. We also utilize a customized JBL sound system featuring more than 30 digital speakers that produces crisp, clear sound. With XD we have the advantage of flexibility as we can show the top performing 2D or 3D film or alternative content each week or for a particular show time. We can also open an XD auditorium in any domestic or international market that we choose. Cinemark retains all of the upside associated with the attendance lift, ticket price premiums and concession revenues, paying only a film rental percentage to the studios. We charge a premium price of up to $5 for the XD experience over our average ticket price.

We intend to add an additional 30 to 40 XD auditoriums throughout our US and international circuits during 2010. Approximately two-thirds are retrofits in existing theaters, and the remainder will be in newly built theaters. We will continue to organically expand our worldwide circuit. We currently have commitments to open nine new theaters with 77 screens in 2010, including two theaters with 24 screens in the US and seven theaters with 53 screens internationally. The economic downturn and resulting credit crunch during the past year has slowed US real estate development. But the Company's unique geographic diversity has allowed us to take advantage of international growth opportunities.

Cinemark differs from its peers by focusing more on organic growth, although we are not adverse to purchasing existing quality circuits at the right valuation. We believe that there is significant opportunity for organic growth in our Latin American markets. And we continue to see growth opportunities in the US. We will also continue to explore both domestic and international acquisitions.

Our fourth quarter of 2009 capped off an incredible year that saw success on many fronts. Cinemark outperformed the US industry box office while achieving strong EBITDA margins and achieving record growth in Latin America. Audiences responded well to the film slate in all presentation formats, 2D, 3D and XD. We added 300 3D capable screens to our circuit and we introduced and then quickly expanded our XD concept as it proved very successful and popular with customers.

With a promising slate of upcoming films, a large list of 3D releases and more alternative content and development as our digital screen footprint expands, we believe Cinemark is uniquely well positioned to capitalize on these opportunities. The focus will remain on prudent, long-term strategic growth of our worldwide circuit. We will seek to maximize the performance of our existing theaters, expand the organic new growth, and pursue accretive and attractive acquisition opportunities that can further enhance Cinemark's industry leading adjusted EBITDA margin.

I will now turn the call over to Robert, whowill discuss our financial performance in more depth.

Thanks, Alan. I will review our 2009 fourth-quarter and full-year operating results and summarize Cinemark's balance sheet and capital position. Alan covered our worldwide Q4 consolidated numbers, soI will start off with a breakdown of the performance of our US and international segments, both of which significantly outperformed the domestic industry.

Cinemark's fourth-quarter domestic attendance grew 20.2%, which helped generate a 28% increase in our admission revenues to $277.3 million, and a 24.5% increase in our concession revenues to $128.2 million. Our average US ticket price increased 6.4% to $6.46, primarily driven by 3D and XD pricing. Concession revenue per patron increased 3.5% to $2.99 as a result of product mix and price increases. Total domestic revenues for the quarter were $418.6 million, representing a 26.3% increase.

Our international segment outperformed our US segment, led by an increase in attendance of 23.8%. International admissions revenues grew 64.5% to $74.2 million as a result of attendance increase and an increase in average ticket price of 32.9%. Concession revenues increased 48.4% to $32.8 million, with average concession revenue per patron increasing 20%. Total international revenues rose 54.4% to $117.8 million.

Consolidated worldwide adjusted EBITDA for Q4 of 2009 increased 44.9% to $121.9 million versus $84.2 million in Q4 of 2008. Cinemark's adjusted EBITDA margin improved to 22.7% for the quarter. Income before income taxes for the quarter was $54.2 million. Net income attributable to Cinemark Holdings, Inc. was $39.9 million or $0.36 per diluted share. The effective income tax rate for the quarter was 25.3%. The lower tax rate resulted from tax benefits that occurred during the period and is not indicative of future rates which would generally be 35% to 40% of income before income taxes.

Taking a look at some other key items for the quarter, consolidated film rentals and advertising costs were 55.3% of admission revenues compared to 53.9% in the 2008 period. The increase of 140 basis points over 2008 was largely due to the additional number of [tent pole] motion pictures in Q4 of 2009, including Avatar, all of which typically command a higher film rental.

Concessions supply costs improved 81 basis points to 15.3% of concession revenues in Q4 of 2009 versus 16.1% in Q4 of 2008. Salaries and wages for the quarter were $54.3 million or 10.1% of revenues compared to $45.7 million or 11.2% of revenues a year ago. The absolute increase in salaries and wages was primarily driven by new theater openings, increased staffing to support the higher attendance, a strengthening in certain foreign currencies, and an increase in Federal and certain states' minimum wage rates in July of 2009.

G&A expenditures were $27.5 million in Q4 of 2009 or 5.1% of revenues, compared to $23 million or 5.6% of revenues in Q4 of 2008. G&A also reflects an increase due to exchange rates, consulting fees and incentive compensation. Normalized G&A recurring cost before FX increased approximately 5.5%. During the fourth quarter of 2009 we recorded noncash asset impairment charges of $3.7 million compared to $105.4 million in 2008. The 2008 impairment charge was primarily the result of a change in the market value multiples that drive our fair value estimates.

Depreciation expense was $36.7 million compared to $42.6 million during 2008. The decline is primarily due to the burn-off of depreciation on certain assets acquired from the Century Theater circuit during 2006. Interest expense decreased to $25.5 million compared to $26.3 million in Q4 of 2008, reflecting the benefit of lower rates on our debt.

The Company's balance sheet position remains one of the strongest in the industry and was further enhanced with our successful refinancing of our former 9.75% Holdco notes in Q2 of 2009 to a new 10-year 8.625% senior debt facility. As you may have read, we recently launched an opportunistic amendment to our senior secured credit facility. This amendment is designed to extend all or a portion of our current outstanding term loans at 2016. Our term loan is currently due in 2013. The term of any nonextended portion will remain the same, due 2013.

At year end our cash position increased to $437.9 million resulting in a net debt position of $1.11 billion. This reduced level of net debt equates to a leverage ratio of approximately 2.5 times adjusted EBITDA. Cinemark's cash position, relative debt level, and the recently extended maturities on our long-term debt give us significant flexibility to capitalize on attractive acquisition and/or expansion opportunities.

Turning to DCIP, the total expected financing including equity is approximately $660 million. Exhibitors are expected to contribute a combined total of $80 million, of which Cinemark's commitment will be approximately $17 million. Our equity commitment will be funded through the contribution of 264 digital projectors we own and that are presently reflected on our balance sheet. We will begin paying an annual cash rent of $1,000 per projector, or $83 per month, as each projector is installed. Assuming we roll out approximately 1,000 screens during 2010, coupled with our contribution of existing screens, we estimate our cash rent to DCIP will be approximately $1 million in 2010, escalating to an annual cash rent of approximately $3.5 million when all screens are digitized.

We will accelerate the depreciation on our existing 35 millimeter projectors, resulting in an increase in depreciation expense of approximately $9 million per year or $2 million, $225 million per quarter --or $2.25 million per quarter, excuse me, in 2010 and 2011. This will begin in the later part of Q1 of 2010. We will also recognize a one-time loss in Q1 of approximately $2 million relating to the difference between the book value of our contributed equipment and agreed-upon contractual value to DCIP.

Since this is our year-end call, I will briefly touch on a few of our key metrics for the full year 2009. Total worldwide revenues were $1.98 billion, up 13.4% from the prior year. The international segment accounted for approximately 21.3% of our consolidated revenues. Total adjusted EBITDA rose 20.3% to $445.5 million. And our adjusted EBITDA margin expanded to 22.5%, maintaining our industry-leading position. Total attendance increased 12%, admission revenues rose 14.8%, and concession revenues were 12.6 -- 12.7% higher than 2008.

Cinemark revenues per average screen increased 9.8% for the full year. At December 31, 2009, our total domestic screen count was 3,830, including 12 screens in Canada. In the US, we built one new theater with 16 screens, including one XD screen, during the fourth quarter of 2009. We currently have signed commitments to open two new theaters with 24 screens domestically during 2010 and four new theaters with 60 screens subsequent to 2010.

Our total international screen count at December 31, 2009 was 1,066. We converted one auditorium in Mexico to our XD format during the quarter. We currently have signed commitments to open seven new theaters with 53 screens internationally in 2010.

During Q4 we invested $39.2 million in capital expenditures, including $4.4 million on new construction and theater additions, and $34.8 million in CapEx maintenance. The CapEx maintenance increase was primarily due to our continued investment in Cinemark's digital footprint, including the XD rollout. Our total CapEx for 2009 was $124.8 million before disposition proceeds.

We estimate that our total CapEx before disposition proceeds for 2010 will be approximately $160 million to $170 million. Maintenance CapEx includes approximately $30 million of costs related to XD, select theater upgrades including changing some concession stands to self-service, and digital cinema conversion costs. This $30 million enhanced level of maintenance CapEx should be reduced in half in 2011 and be completed by 2012. We have decided to proceed with the temporary increase in our level of maintenance CapEx investment based on the returns that can be generated on the capital expended such as for XD conversions. Our strong cash balance has provided us this opportunity to enhance returns on existing theaters.

Our Board of Directors declared a quarterly dividend of $0.18 per common share to be paid on March 19, 2010 to shareholders of record on March 5, 2010.

In summary, we finished a great year with an excellent quarter. Cinemark achieved superior results across our domestic and international circuits, capitalizing on a high quality, geographically diverse, theater network. Our circuit's performance was enhanced by the continued addition of new state-of-the-art theaters and a growing base of RealD, 3D and XD auditoriums. To date, Q1 2010 has picked up where Q4 2009 left off at the box office thanks to the continuous strong performance of Avatar and many other films. There are also promising 2D and 3D films in the pipeline for the remainder of the year, as Alan highlighted earlier.

Operator, that concludes our remarks. Please open up the lines for questions.

(Operator instructions.) Your first question comes from the line of Eric Handler with MKM Partners.

Thanks for taking my question. Two items. First, can you digin a little bit more about your domestic admissions revenue growth? I mean, 28% versus 19% for the industry, anything specific in there that was unusual or just what you're seeing and reasons for such strong success?

And then secondly, with regard to your 3D rollout, any reason why you're not just going forward and just ordering 3D projectors to get a greater number of screens for How to Train Your Dragon, and then contributing that equipment as equity for the mezzanine portion of DCFE?

Thanks, Eric. I mean, the first question, of course, Cinemark, as you have noted, had a very good quarter and a very good year. I don't think there was anything specific to what we did this year. We've always paid, as you're well aware, close attention to how we operate. Our footprint, both here in the US, internationally, just the way we play films, has produced the numbers. So I don't think there is anything necessarily unique or specific. There always is quarters where the film plays very, very strongly. And it has done so for us this quarter.

When we address the 3D rollout, I think the biggest -- the challenge, of course, here is s this funding and as DCIP closes, the timeline can begin to get all the supply chain and everything in the pipeline to begin rolling out projectors. As we've noted in the past, our goal would be to first focus on 3D rollout. And that's how we get up to those numbers, as we stated, the 1,000 to 1,200. We will add some projectors here in the short term. There's not the ability, though, on a large scale to all of a sudden roll those out in the next 30 days. We can only roll them as projectors are produced and as we can go through that process. So we're comfortable. And as we have noted on this call, Cinemark has added in 2009 300 3D screens. So we're in a much different position this year than we were last year, and feel we can accommodate the movies that are coming up. And although it may be a little tight on 3D screens as we have that period of time where there's three movies in the marketplace, we'll get through that time. And again, as we continue to roll out month after month, that footprint will continue to expand to get up to the numbers that we get to at the end of the year.

And Eric, we were -- the limitation on the rollout of projectors, a little bit as we've said, is getting the manufacturers to gear up. And really to do that, you couldn't make a small order. You really had to commit to the long-term. And then so until DCIP was getting to the very end of the process and we can really make an absolute commitment, you just have a lead time there.

And you should be on track for roughly 200 a month once everything is up and rolling?

Yes, I mean, that number is an average. It will start out slower, as you get the supply chain going, as you kind of grease all the wheels. And we're very, again, confident that our plan gets us to that 1,000, 1,200 3D screens. And then in addition to those, you'll also be adding some 2Ds throughout the process. So there won't be a problem getting ourselves ramped and going to those levels once this gets kicked off.

Thank you.

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

Yes, hi, good morning. Just a few housekeeping questions, actually. So, Alan, with this sort of crunch of 3D films coming at the end of March, say for Alice in Wonderland, how many 3D screens do you expect to have, sort of ballpark by the end of March?

Well, I mean again, as we have stated right now, on a worldwide basis we have 400. I mean, again, I don't know that we -- we'll add a significant number. I mean, let's just say we'll be adding somewhere zero to 100 screens or something like that. I mean, we just have to get through. Quite honestly, this has got to get closed, and then the suppliers -- and I want you to all understand that a supplier is not willing to commit his neck or capital or anything else until he's got the funding secured. So that puts them in a difficult position to go start, as Robert mentioned, making equipment without the cash to do so. So once that closes, then they can begin getting all their pieces of the puzzle together to create projectors and get this rolling out.

So they're just physically between now and the time all of those movies go, that's a very short period of time. So they cannot generate huge volumes of projectors in that period of time. So what we will do, of course, is we'll get as many as we can and we'll put those into our theaters. And again, just make sure you do recognize, and I just said it a minute ago, we have significantly more 3D screens today than we had last year at this point in time. And we'll be able to do the best we can and accommodate these pictures. It's not like they're just not going to play or they're not going to do well. All three of them are great pictures. They'll do well in the marketplace. And we'll just have to do our job of figuring out how to allocate those 3D screens that we have among those movies.

David, it's one of those things, kind of like when one of my neighbors comes by and says, "I went to your theater the other day and there was no place to park." It's kind of rough. It's great when your problem is that you're hitting capacities.

Understood. Understood. And then with film rentals, it looks like film rentals came in at slightly over 55% of admissions revenues. It looks like that's, call it 200 basis points, maybe 250 basis points higher than usual. Was that just News Corp using negotiating leverage on Avatar with you guys or was there something else going on there?

Well, I think you're going to find in general always when there are bigger films and movies that generate a big box office, generally what terms are paid is higher on those films. So I think the quarter in general, of course, and the year in general, was generating huge volumes of box office and numbers which indicatively usually drives up the terms a little bit.

Okay, got you. And then Rob, could you just talk about the tax benefit a little bit and what drove that in the quarter?

Sure. It really had more to do with some specific tax planning that we had done recognizing some benefits related primarily to some of our international assets. They are period -- they're not technically period costs, they're just one-time type opportunities. And so it reflects money that we should receive back in the future or less taxes that we'll pay currently. But again, it was more related to a couple of special events rather than any kind of ongoing type operations. I will say, and as you have noticed with Cinemark, because of our international operations, our guidance is generally, I think, for people to model in that 35% to 40% range. We're absolutely going to have fluctuations because, again, having the international assets that we do, the way taxes are computed, it just occasionally will impact the rate. But this -- in particular, this quarter had to do with some special events.

Okay. And then I apologize if you stated it in your prepared remarks. Did you state what the foreign exchange benefit was in the quarter on the international portion?

We generally don't --won't -- we haven't historically disclosed the actual benefit. But you can get close to it. And what we do give is using constant dollars what our ticket price increases would have been. So where we said internationally that our increase for average ticket price was, I think, 32.9% on a constant dollar basis -- so adjusting for FX it would have been 12.4%. On concession per cap it was up 20%; on a constant dollar FX-adjusted it would have been 4%. So when you kind of take those numbers, average them, you're probably up about 18%, 19% on a FX basis if you looked to revenues. And you can kind of take that against revenues, multiply it by the EBITDA margin, and you'll get a ballpark estimate of the net effect of FX.

Okay, wonderful. Thank you.

Sure.

Your next question comes from the line of George Hawkey with Barclays.

Good morning, thanks for taking my question. Just a quick one. And looking at kind of return of capital to shareholders, assuming that there is continued success in 3D, what would the considerations be for incremental return of capital to shareholders?

George, it's not something we've really discussed in any depth at the board meeting. I do think that as we've said before, we primarily look at our capital -- or at our cash balances and our cash flow to determine first, are there opportunities in the industry where we could either acquire assets, expand our theater base in a way that -- and for that matter, do what we're doing right now. Use it, recognizing we have large cash balances to take advantage of it and find ways such as the XD and 3D to enhance existing theaters.

So that's our primary usage, to find incremental returns for shareholders through that. If -- presuming that we're not able to find sufficient uses for it, I would presume our board would constantly evaluate the best return to our shareholders. But again, that's very speculative. I mean, it's just simply an evaluation of where we're at at that time. And as you said, I'm sure as we continue the year, look at what 3D does for us and if we can continue to generate the kind of returns that we've seen, then they'll explore what the best uses are.

Great. And then one final questionwhich is, in looking at the roughly 10.5% gains on ticket price, what's the, I guess, the normal rate we should probably be thinking about for ticket price growth in 2010?

Yes. When you kind of go forward, if you look at kind of where we would generally be at, I think what we've told people historically and it would hold true, I think, for 2010 -- Q4 was a great quarter, had huge ticket price growth. Now, a lot of that, again, was driven by international and FX rates. As I said, it was FX-adjusted [over] 12% internationally and it was 6% domestically. So you've got to be a little careful with that. But we were -- we felt like, again looking at the overall markets in 2010, what we think increases should be, we tell people that our general price increases would probably be in that 2% to 3% range, I think both for concession and for ticket prices. Clearly, with the 3D rollout and the number of 3D movies coming out, there's opportunity that that could be higher,that the 3D and our XD product does drive our ticket price significantly. But I'd say conservatively, again, in that 2% to 3% range.

Great. Thank you very much.

Sure.

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

[Do you think] you guys could provide a little bit of color on Avatar and what your attendance splits were on the 2D screens versus the 3D screens? And I know it's still a little early yet, but would you expect to start to see comparable splits as we get to this pipeline of 3D films in 2010?

Sure. With respect to Avatar and the 2D versus 3D, when we look at it probably around 30% was 2D and so that's, say, 70% was 3D and/or XD. Our XD actually for the limited number of screen counts significantly outperformed. We were very excited about how that part of our business did. But if you just generally look at -- so it's not necessarily that far off historics. The -- we've generally said that 3D is doing two to three times what 2D does when you look at the relative split. So -- which would normally say you're in that 60% to 70% range. So we think that was actually reasonable. But clearly, this movie carried on a lot longer and really had a significant amount of 3D impact. And more so, was even weighted towards -- it was such -- the film, seeing it on a large screen was such a great experience that you saw a lot of weighting to, in our case, our XD product and actually the IMAX screens we have as well.

And on the second half of that question, would you anticipate similar splits heading into the three, big 3D releases coming up? Or would you think that they would be more normalized and kind of close to what we saw with Monsters vs Aliens?

I think at the end of the day each of these movies is going to obviously carry a different aspect to it. We think those averages are pretty -- should be pretty consistent. The next three films that you're seeing here, Alice, Dragon, the Clash of the Titans, all seem to be the kind of films that would return similar results as others have done. And as you're stating here, that can vary within a range. But it seems to be -- just depending on it -- of course, Avatar being the science fiction, the big name, all the things that were there, maybe [reflects] toward some of the higher ends of those ranges. But it was pretty average, I think, in general of how they performed.

And the last part of the question is, does the Disney shorter DVD window change any of your views on how to place Alice versus Dragon versus Titans?

Well, again, we evaluate every movie and have to put those films in the theaters on a theater-by-theater, screen-by-screen basis. So those are things that are ongoing. And as you negotiate how you play those films, you just have to do it. I mean, I can't even answer that question, the movie has got to open, you've got to see how films are in the marketplace and those type things. So not necessarily, no.

Does that mean you're not as worried about the shorter DVD release on Alice?

Well, again, and let me just point out as you ask that question,every single movie has its parameters of what you have to book it, and certainly windows is something you think through and look at. And as you look at even the word "windows" and the average of where we are as an industry, none of the distributors have asked for any kind of fundamental change in the windows policy. As you look at those averages, those are generated by movies that are -- some of them are longer, some of them are shorter. I mean, there's averages that are generated. So although what Disney has requested on Alice is not unique, certainly has happened before,we just have to take a look at when that movie opens and how well it does. And then we have to evaluate it based on that. So fundamentally, the studios very much re-emphasize that the theater and theatrical windows are very important to the success of their movies and they are by no means trying to change or affect how those averages work and how they occur.

But having said that, you are going to occasionally have studios that request a shorter window, like they did on Alice. So again, we'll have to see how that picture opens and what it does and what kind of film it is. And then we'll have to go from there.

Great, thank you.

Your next question comes from the line of Alexia Quadrani with JPMorgan.

Thank you. If I could dig a little deeper on your impressive outperformance domestically in the fourth quarter, could you give us a bit more color in terms of what the components were behind it? Was there certain outperformance in certain geog- -- certain regions in the US? Did you feel you had certain market share gains in certain areas that goes beyond the obvious 3D/XD benefit?

And we -- Alexia, as you know we don't really break out or segment or report on any kind of basis like that. Just in general, though, I can tell you again, there wasn't anything that jumped out or specific to us within our circuit that those things popped out with. If you follow Cinemark a little bit, we generally always do very, very well with a family/kids film type of product. That just seems to play well for us throughout our markets. Those films, again, performed very well for us this quarter, and there was a number of them. But in general, we did not necessarily note or see or were aware of anything that was out of the normal for us. So at the end of the day we're just glad to see that the base that we have of theaters both here in the US and internationally, they're high quality theaters and people wanted to go to them and they did very well. So we did not see anything specific that we're aware of.

And then with regards to the first quarter and what you've seen so far, is it safe to assume that your outperformance versus the industry in terms of admission revenues has continued?

Well, and again, there's no way for an answer to that question right now. We , of course, don't -- haven't reported anything on the first quarter yet. And in general, all you can kind of go to is what's been going on in the industry, the films have opened well and box office has performed well. And again, remember that a large part of the especially January numbers were driven by Avatar. Avatar continued to do very well into the beginning of this

And then just a last question, if I may. In terms of your ticket price increase in the fourth quarter, could you give us a sense, I guess, what components were just driven by 3D versus any increases on the 2D side?

Sure. On the ticket price domestically, it was up I think 6.4%. Most of that was driven by 3D and XD. I'd say probably 60%, 70% of that was driven with respect to the incremental pricing we received. And so again, when you get back to kind of our base and looking into 2010, looking at a 2% to 3% base increase would kind of make sense to us.

Thank you.

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

-- for taking the question. Could you give us an update on film releases internationally, and the degree to which differences in timing of releases in Latin America advantaged or disadvantaged that market in the fourth quarter, and could advantage or disadvantage that market in the first quarter relative to the US?

I am not sure I have sitting in front of me exact release dates throughout the quarter. I will tell you in general, Barton, it really hasn't changed a whole lot. Some movies -- probably the fourth quarter is one of those, too, where movies -- they have different holiday periods, of course, for times of the year and their kids when they're out of school and those kind of things. And so movies tend to move around a little bit toward the end of the year as opposed to how they 're released up here. Again, but that's nothing new or changed. And so the release pattern down there -- and I will tell you in today's world many movies move toward the worldwide release date, and that's not uncommon for that to happen. So I, again, don't think there was anything out of the normal. Avatar and some of the bigger films were open and opened as they did here in the US. So I don't know that there was any wholesale or fundamental or differences in the way they're released in our international markets at all., either at the end of the year in the fourth quarter, or the beginning of this year.

You know, Bart, if you kind of look at least year's quarterly attendance patterns, they aren't that different from the US. I think internationally our biggest quarter was Q3 of last year. I think it was Q2 domestically. But when you look at the differences between each quarter and relative weights, they are reasonably similar both domestic and international. I mean, as Alan said, you do have a little bit of release pattern differential but it's pretty minor.

Okay. And then I know you can't talk much about this, but can you just update us where we are in the process with litigation versus IMAX?

You kind of started that question appropriately. We can't talk much about it. I mean, at the end of the day there's a lawsuit and we are continuing to work through that process. So how we settle that whole issue and where it goes from a lawsuit standpoint. So at the end of the day, we can just say that we're obviously comfortable on how we're proceeding with our XD and we continue to roll those things out. So we're hopeful that either, A, if there is a way to settle it with them, or B, we take that through litigation or whatever it requires here to get through that, that we're comfortable in our position.

But can you say are we in discovery, have any court dates been set, anything like that?

I think -- there has been activity on -- from the lawyers back and forth for everything that you're talking about. There are no, I think, court dates set that we're looking at an "X" date that this all gets done. It is a process. I mean, it's a pretty significant process.

And you're still in the beginning phases of that process, so I don't think we're quite to that level yet.

Okay. And is it safe to assume that the expense impact of this to date has not been meaningful and you don't see any reason to assume that it becomes meaningful near-term?

As I mentioned in our G&A costs for Q4, and by no means was this the driver of it, but we did have multiple costs for lawsuits. It will continue to be a cost, obviously. We don't -- we haven't gotten to a point where we look at it and say we have significant costs that we think we need to get everybody concerned about.

Okay. And I'll leave it there. Thanks a lot.

Thanks, Barton.

Your next question comes from the line of Eric Wold with Merriman, Curhan, Ford.

Good morning. A couple of questions on -- follow-up questions kind of on the XD. Can you give the average ticket prices you saw in Q4 for 3D, XD and IMAX?

Yes, the average ticket price for XD was about $11.75. I didn't give you primary domestic because we really didn't have that much. We just had the one international. And the US XDs were open during a fair- -- they kind of opened throughout Q4, but it's a reasonable average. So anyway, XDs, $11.75. I think the 3D was in the $9.40 range. And then the 2D was in the $6.15 range, somewhere in there. So you are seeing a good $5-plus on XD and $3 on 3D.

Remember, Eric, on the XD side of the equation, of course, that can play both 2D and 3D film. So the XD, the average ticket prices can vary to some degree. That number is going to reflect probably a higher percentage of 3D because, of course, Avatar was on the screen for the bulk of many of those that opened toward the end of the year. So that is going to fluctuate depending on what product is flowing through the XD theaters.

But it is generally reflective of where we felt it would it be in terms of -- against our base ticket price averaging close to a $5 upcharge and 3D averaging in the $3 range.

Understood. How about for IMAX?

You know what, actually I do not have the separate IMAX numbers. I would presume they're in the XD range and maybe a little bit higher, but pretty close. Our XD pricing and IMAX pricing are very similar.

Okay. And then given that you've now had some good experience with the XD screens throughout '09, anything you learned from them in terms of how you convert them, how you market them, how you get the message out that will change in 2010 to potentially be more effective?

I mean, at the end of the day we, of course, as mentioned, have gotten great results from our customer base really, really likes them. So I don' t know that we necessarily learn. I mean, you're hopefully always refining and getting better as you expand and grow and do the construction of these things. I think the bottom line that one of the great ways to get the word out on those things is just when these big movies flow through them it certainly gets the word out. So every market is going to have its nuances as to how and what and how people become aware of it. But we are very encouraged by the results that we've got and the way the customer base has responded to XD, which, again, is the reason for our expanding and continue to put them out throughout 2010.

Our XD and obviously this was -- Avatar helped anything along those lines. And so we're a little hesitant to over-evaluate and give data yet on the XDs because they significantly outperformed to the comparative screen percentage the amount of box they generated. I mean, it's just through the roof. But we also -- Avatar might have influenced that some. So I think we'll have a better feel as we get into Q1, Q2. But we do know the returns are easily meeting and exceeding our expectations. And so as Alan said, I think in his remarks earlier, we plan to roll out ten more in the first half of the year, ten at the end of the year, domestically, at least those levels if not more. Internationally we're going to be rolling out 10 to 15 as well. So it's something that we know is working great and we're really going to be pushing the brand.

And just a quick follow-up. I know that when XD first kind of came out, a lot of it was marketing kind of at the point of purchase and maybe a little bit in the actual theater. How much has that gone outside? I know you're doing some kind of door hanger advertisements in the San Francisco area for Wolfman. How much has gone to outside marketing versus just point of sale in the theater? And how are you going to judge how effective that is?

And I think that depends probably on the market and where and what has been done. I mean, every market has -- for instance, here in the Dallas area, the local paper and many of the news people came and it becomes more of a news story as they're curious and trying to understand what it's about. So we do do both. Of course, print advertising, we do internet advertising, we try to get interest levels being talked about both through the news community and whatever ways we can do it. Every community is going to take that on in a different way depending on the size and where and what it is. But the bottom line, as I mentioned, one of the most effective ways is just results of people going in there and talking about it. And our moviegoers that attend those theaters on a regular basis getting to better understand it and the word spreads pretty quickly. So we certainly would want to enhance that as much as we can with other types of media. And we definitely do that.

And Eric, we're just getting to a point -- and you mentioned San Francisco. That's probably -- that area is probably where our highest concentration of XDs are at the moment. As we go through this next year and we start putting two or three into a market so that we really now have some breadth and ability to more effectively advertise on a broader basis and create name recognition, we'll begin doing that. San Francisco is really the first place we have enough in place to even consider doing that. Most markets at this point, considering we just have 15 out there, tend to have one in the market.

And the last question, I know it's maybe only a few areas. But is there -- do you have any sense of -- for the same comparable movies what an XD screen was doing in an market versus an IMAX theater, either one that you operate or one that you know about?

Hard to compare there. I will say, again, our XDs, because we really don't have much market overlap and we don't really compare to the other groups. But I mean, our XDs, if I look at screen count compared to the box they generated, in general they generated over three times, nearly 3.5 times their relative weight.

Okay. Thank you, guys.

Your next question comes from the line of James Marsh with Piper Jaffray.

Quick question on DCIP and international. Can you remind me how that works with international? My recollection was it was not included. Assuming it's not, how are you currently financing those digital projectors internationally and just give me a sense of what percentage of those 1,000 to 1,200 3D installs might be done internationally in 2010?

I'll take that one. Currently -- you are correct. DCIP does not include our international circuit. We had waited or had been waiting on DCIP to close in order to look at pursuing something similar. When I say that, we've already started the groundwork for a -- let's call it an international DCIP. We haven't waited for that to happen. We've been rolling out -- as Alan mentioned, we've been rolling out 3D screens. We have 100 already internationally. When we talked about 1,200 or so, that probably will also include an increase of another 100 to 200 international 3D screens. We would hope to finance those ultimately through something similar to DCIP. What we've negotiated in the interim has been some direct opportunities with our international group, with the studios to recognize that they are saving money, so putting VPFs in place directly with the company rather than through a DCIP. But we will continue to roll out international screens because the returns, just like the US, are great. There's good opportunity there. But we do look for the studios to recognize that there is a benefit to them as well.

Is it fair to say that if you did a DCIP internationally you might contribute those projectors in kind like you did here in the States?

Yes, I would say the easiest thing, obviously, for us is to do something very similar internationally to what we've done domestically because we know how to do it. And that we're trying to work off that knowledge that we gained to pursue it. But in the meantime, a little bit I think is -- somebody had asked very early, I think Eric Handler might have asked early on and said why aren't we rolling out more. We are looking at international. We're not going to let that part of our business get behind. But we're also making sure that we're being reasonably compensated for the money we're investing.

Good. Thank you.

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

Guys, good morning, and thanks for taking the question. So a lot of my questions have been asked already. But not sort of to ask, sort of to pick on one film in particular, but what are your thoughts when you're sort of seeing some 2D movies that are converted to 3D? Are you sort of concerned about the quality vis-a-vis what people came out of expecting from Avatar? Are you concerned about some pushback on pricing for those kind of films? And I'm not trying to sort of pick on the Warner Brothers film in particular. Obviously, you've seen a lot of the studios being interested in doing this, too. So I'm kind of curious on your thoughts.

Well, at the end of the day, of course, it's a little hard to respond without seeing or understanding what it is they've done. I can answer it this way, Ben. We have certainly seen some very high quality conversions done. So I don't know that there is necessarily a way to single it out. Of course, movies like Avatar, when you're doing it with special equipment and you're pushing the envelope in one direction, there's probably going to be varying degrees of how the public perceives 3D in general anyway. How do you perceive an animated versus a live action versus all of the many things that are in the marketplace. But now in general, as I think again, that they can and as they do convert, we have from time to time seen very high quality conversions. So I guess we'll have to see what and how those look like when they come out each time.

Okay, Alan, thank you. And then on the M&A front, this was the first fourth quarter, if I remember correctly, that you had the Muvico venues as part of your circuit. Is that correct?

Yes, that's correct.

So I mean, I know historically those were movie theaters that were among the best grossing in North America. Do you sort of still find that to be the case?

I mean, yes, they're still great theaters. I mean, again, it was -- when we bought those theaters there was only four of them. But they were some very, very good theaters. And they continue to do very well, yes.

And actually some of our CapEx maintenance that we incurred in Q4 as well as going forward with some of the $30 million I mentioned is we're upgrading those theaters. We're looking at putting XD. We actually added XD to one of them already. We're looking at adding XDs to some of the others.

Okay. And Robert, and thank you, because that was leading to my question. I apologize. I sort of didn't get a chance to hear all the CapEx numbers that you mentioned on the call sort of for 2010. Do you mind repeating them? And I apologize for that.

Fair enough. The range I gave for 2010 was $160 million to $170 million in total CapEx, which includes maintenance CapEx. It is a -- the number is higher than what we incurred this year. This year we had ballpark about $125 million. $30 million of the increase we've kind of segregated into what we call special projects. They're XD, they're digital rollout. There are some enhancements to theaters such as Muvicos where we've -- recognizing that the strong cash balances we've had, we've decided to go in and reinvest in some of the technologies that we've developed and some of the operational concepts that we've developed, to enhance some of the bigger existing theaters we have and take advantage of those. And feel like that we'll get a great return on those assets.

When you look at as we go out to 2011 and '12, we feel like that $30 million will start decreasing. I mean, obviously, XD is going to be a little bit of a fluctuation. It's not -- doesn't by any means make up the whole number, but does make up some of it. We'll continue to keep rolling out XD as long as we can make all the economics fit with the size of the screen, theater and all that, for the returns. But we do see a decrease over the next few years of that amount. So this would be the bigger year. Again, also it encompasses rolling out some of our digital and the costs relating to that conversion, too, which will [tail] off.

Sure. So if I were to look at it sort of on a apples to apples basis, it's kind of like $130 million to $140 million of CapEx in 2010, and then an extra $30 million for the special projects, if you will? Is that a decent way to look at it?

Yes, it is. And embedded -- just for what it's worth, embedded in there, I don't know I addressed this, if anyone asks, we did give numbers in our prepared statements regarding the new screen additions for 2010. That represents the number of screens that we've committed to. And as you would normally expect, we feel like we'll build more theaters than what we actually have signed leases at the moment as the year progresses and you sign up more of these. So the numbers that we're currently feeling like in terms of new screen development for 2010 would be we think somewhere between probably 140 and 175 screens, a bit of a -- a pretty wide range there. But a lot of it, as you know, has to do with the US and looking at the US and feeling like the domestic market is still a little bit slow in the developer capabilities to build new projects that we will want to be part of.

Internationally, we think there's more opportunity but we've kind of -- we have a pretty big weight of theaters at year-end, especially internationally that could roll over into 2011. And that's why I'm putting a fair amount of variance. Unlike historical amounts where it tended to be about 20% of those screens would be in Latin America and 70%, 80% would be in the US, this well could be a year where we see at least 50% of our new screens in Latin America, if not slightly more than that. So if we're looking at, especially on the high side, in the 175, we might well see 75 US screens and 100 international screens. I think that would be a very high side and a lot of things would have to work to make that occur. But we think in the 140 range you well could see more in the 70/70 in terms of the screens.

Okay, that's great. And then the last question and I'll let someone else get on the queue. In terms of M&A, I think since the last call you guys had, we've seen Rave do a deal with National Amusements and we've seen Kerasotes get bought by Regal -- I'm sorry, by AMC, I'm sorry. What are your thoughts, and not looking for targets specifically, but what are your thoughts on M&A? Are we going to see sort of some of these sort of 6 to 10 largest chains look to possibly sell some more stuff as they don't have the capacity for 3D but they're in the markets where you operate in? Kind of curious to your thoughts in the general M&A market and on valuation as well.

I mean, I think in general, Ben, I think that's -- it's hard to -- we don't have anything, let's put it this way, that's out on the -- that's being presented right now and we're not aware of anything specifically. But as you kind of mentioned, I think the what our guess is is that there could be some of those groups that, again, whether it's concern or fear of what to do with 3D because some of them have converted. It's just they're always looking for opportunities and ways. And we will continue to monitor and look at those, So yes, we do think there will be some things that will come to fruition in 2010. But it's early and don't really specifically have anything that's out there right now.

I think valuation-wise, of course it seems to be more an issue of what it is you're buying and what the quality of that circuit is and what you're going to do with it. That 's probably the bigger question you have to answer on valuation. Obviously, from a public standpoint, the values of both Cinemark, Regal, Carmike, those that are in the public sector, that's a change over the last year. But our approach on how we value and what we do with it really has to do with what is that asset and what can we do with it. Of course, last year we were able to do the Muvico acquisition of those four theaters. So we're always going to try to be out there looking for and visiting with people that have an interest in selling their theaters and we'll try to see if we can't something done.

Has the market shifted just in a general trend, do you think from a buyer's market back when you bought the Muvico stuff to a little bit more of a seller's market now, given the box office numbers, given 3D, given the opening of the credit markets? Like are you sort of seeing the pendulum switch a little bit?

Yes, it probably works both ways. I mean, of course, the market -- the business has been very good. And so the numbers are good and it's a great business to be in,. And even though you say the markets opened up, the key there is is that I have access to or the ability to buy those things in some fashion. So I still will tell you I think capital is a little bit tight and I don't think the availability of going out and funding and getting things done still is not as easy as perhaps it was some years ago. So I would tend to say that it may still be a buyer's market to some degree. And maybe that's shifted over a little bit more toward the seller, but still you've got to have the capital to be able to do that.

Okay, that's sounds great. Thanks, Alan, I appreciate the update. Thanks, Robert.

You bet.

Your next question comes from the line of Jeff Logsdon with BMO Capital.

Great quarter, gang. Two thoughts or two questions. Number one, where does Texas Instruments stand on the 4K chip and will that predominantly be the designation on the digital projectors you add? And secondly, in your agreement with RealD, is there any scale benefits as you now start to ramp up so significantly in terms of number of 3D screens? Does that cents per ticket number come down over time?

So the first question here, the 4K chip from TI. The anticipated rollout of that is toward the latter half of this year of when that chip will come out. Any projector that is installed or will be installed here, the agreement is is those will be converted over to that 4K chip. So even though they are being installed and manufactured right now, the style and way -- and this was always anticipated -- the way in which they're assembling and making these things is they'll just simply upgrade it to the 4K chip when that becomes available, again, toward the end of the year.

Part two of your question, I don't know that we anticipate any significant change in ticket price averages or the way the numbers -- the way you look at them in the 3D market. Again, even as we've been sitting here discussing the supply of 3D film and what's coming down the pipeline, we need those screens just to accommodate what's out there. And in fact, could very conceivably see that if the trend continues and more and more product as the years roll on, we'll be adding more 3D screens than the numbers we have been telling you about.

But the general number people, I think, have been using is the per patron amount. We would not see a shift in that number.

Okay, great. Thank you.

At this time there are no further questions.

All right. Well, we'd like to thank everyone and we look forward to talking to you again for our first quarter of 2010 results. Have a good day.

Thank you for participating in today's teleconference. You may now all disconnect.