Cinemark Holdings Inc (CNK) 2012 Q4 法說會逐字稿

Good afternoon, my name is Britney 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. I would now like to turn the conference over to Miss Chanda Brashears.

Thank you, Britney, and good afternoon, everyone. At this time I would like to welcome you to Cinemark Holdings, Inc. fourth-quarter and fiscal year 2012 earnings release conference call, hosted by our Chief Executive Officer, Tim Warner, and our Chief Financial Officer, Robert Copple.

In accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, certain matters that are 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 by such statements. Such risk factors are set forth in the company's SEC filings.

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

Thank you and good afternoon everyone. We appreciate you joining us on the call today.

First, I will provide a brief summary of the overall North American box office and Cinemark's 2012 results. I will then highlight the Q1 2013 industry box office to date and preview the remaining 2013 film slate. Lastly, I will provide an update on a few of our strategic initiatives. Following my commentary, Robert will further discuss our financial results and capital structure. We will then open the lines for the customary question-and-answer session.

In 2012, Cinemark achieved a 6.6% increase in worldwide attendance, setting a company record of 263.7 million patrons. We also reached a milestone in Latin America, surpassing 100 million patrons. Cinemark's worldwide admission revenues increased 7.4% for the year, outperforming the estimated North American industry box office by approximately 130 basis points. Cinemark continues to be the number one attended worldwide exhibitor. Our increase in worldwide attendance lifted our total revenues to a new record of approximately $2.5 billion. Our theater personnel focus on operating efficiencies resulted in a 13.4% increase in our adjusted EBITDA to $589.2 million, and created a 100 basis point margin improvement for a year with a 23.8% worldwide adjusted EBITDA margin. Our domestic adjusted EBITDA margins continue to outperform, achieving 24.9% for Q4 2012, and 24.2% for the full-year, an increase of 300 basis points and 80 basis points respectively compared to the prior year period.

Our growth is reflective of a strong and consistently performing industry. This is the fourth straight year that the North American box office has exceeded $10 billion. A combination of attendance growth and modest ticket price increases lifted the North America box office to a new record of approximately $10.8 billion, a 6.1% increase compared to 2011, reiterating the demand for the theatrical out of home entertainment. We are encouraged by the films in the 3D product that has been announced today for 2013 including the 32 wide release 3D titles. There are several new concept films we are enthusiastic about such as the Superman reboot titled Man of Steel, Oblivion, After Earth, Pacific Rim, The Lone Ranger, Frozen, World War Z, the Great Gatsby, Epic, and Jack Ryan, among others. There are also a number of tent-poles and franchise sequels with proven track records that we are anxiously awaiting, including GI Joe Retaliation, Iron Man 3, Star Trek Into Darkness, Fast and Furious 6, The Hangover 3, Monsters University, Despicable Me 2, The Wolverine, Thor, The Dark World, The Hunger Games Catching Fire, and The Hobbit The desolation of Smaug to name a few.

We recognize the challenging comp the 2013 film slate will have to overcome with the box office success in 2012, especially in the first quarter. The January box office performed in line with the prior year due to the holiday carryover and Academy Award nominations. We face more difficult comps in February and March as both months set an all-time industry box office high last year for their respective months. We are looking forward to next months releases of Oz The Great and Powerful and The Croods, both in 3D. These films are up against The Lorax and The Hunger Games which were released in March last year.

With our goal to be 100% digital in our Latin American circuit, similar to our US circuit, we intend to fully digitize the remainder of our international circuit in 2013. We should be completing the agreements with the studios regarding virtual print fees and will accelerate our digital roll-out. We are currently 42% digital and 40% 3D capable in Latin America. The strength and the momentum of our proprietary extreme digital XD premium large format screens continues with both studio and patron recognition. 20th Century Fox created a national television advertising campaign featuring our XD brand for the last week's release of A Good Day to Die Hard. Notably, these trailers played nationally during peak television viewing including the NFL play-offs, which emphasize the impact and the success of our XD premium large format viewing experience. Patrons have also enjoyed the XD experience with our movie marathons, most recently the Die Hard series marathon. We are pleased to report that we broke through the 100 XD auditorium threshold and now have a total of 109 XD auditoriums worldwide, 70 domestically and 39 internationally. We expect to open an additional 40 to 50 XD screens worldwide in 2013.

After bringing the Brazil screen advertising in house last year, we are continuing to focus on our international screen advertising through Flixmedia. Flix is still in its early stages but we perceive this as a is a long-term ancillary revenue growth opportunity. Though Flix is currently concentrated in Brazil, we intend to expand the concept of an in-house screen advertising effort into our other Latin American countries.

With respect to the Digital Cinema Distribution Coalition, DCDC, the operating agreement has been signed and the studio and the exhibitor agreements are currently in final negotiations. Once all agreements are finalized, we will begin to roll out the satellite network that will be used to seamlessly distribute all digital content to theaters via satellite. Our team recently began testing certain equipment in preparation for the roll-out. We believe that DCDC will be fully operational within the next year and are anxiously anticipating the original alternative product DCDC makes accessible including live sports, concerts and opera performances.

CineMode, our exclusive smart phone interactive technology that rewards patrons for being courteous during the show, expanded its member base by 33% during the quarter. We continue to explore how our Cinemark app, with over 2 million downloads, may give us the ability to enrich the movie going experience, leveraging mobile technology and social media, while providing partnerships and promotion opportunities with our vendors and the studios through this medium. Our newest concept, the Cinemark movie bistro, will launch the summer of 2013 in two test theaters. The Cinemark movie bistro offers patrons an enhanced dining menu with high-quality food items such as fresh wraps, hot sandwiches, burgers and gourmet pizza, as well as a variety of beverage options including beer and wine and specialty cocktails that can be enjoined in the auditorium, along with our typical concession offerings.

Our newly opened Napa theater is currently undergoing the review process to become the first LED certified theater. LED is the acronym for leadership in energy and environmental design and is an independent, third-party, green building rating system trademark by the US Green building Consult. Special environmental features of our Napa theater include highly efficient HVAC systems, solar energy panels, LED lighting, rainwater harvesting, recycling, and green cleaning practices. We will also seek recertification on two additional projects we have in our construction pipeline, and are incorporating features from our Napa theater into the construction of many of our new theaters. We are currently generating solar power energy at two of our theaters and have plans to incorporate additional solar arrays in approximately 20 other theaters.

We are awaiting the Department of Justice approval at our Rave acquisition of 32 theaters and 483 screens. The Rave theaters are high-quality, fully digital and 37% will be 3D capable with seven IMAX screens and nine premium large format screens. The Rave circuit expands our diversified presence into 40 states and 99 DMAs, including the New England market. As announced last week, we have entered into a stock purchase agreement with Cinemex to sell our Mexico theaters. The transaction is still subject to regulatory approval. The sale of our operations in Mexico allows us the opportunity to realize value and provide increased focus to the remainder of our Latin American operations where we feel we have a greater opportunity for growth and to create shareholder value. As we discussed in prior calls, since our entry in 1994, Mexico experienced the most rapid growth of all our Latin American markets and has become a relatively mature market. While we believe in the future of the market, the offer from Cinemex allows us the ability to redeploy capital into markets that offer -- that are growth opportunities. As Robert will be discussing later in the call, we will be increasing our new build CapEx levels in both Latin America and the US.

In summary, Cinemark continues to deliver strong financial results through our diversified domestic and international assets, creating an exceptional opportunity for value to our US operations and growth via our international operations.

Robert will now discuss the Company's financial performance for the fourth quarter.

Good afternoon and thank you again for joining us.

We are pleased to report that we had a record performance in Q4, led by total revenue growth of 14.1% to $611.5 million and a 27.4% increase in adjusted EBITDA to $143.6 million, resulting in an adjusted EBITDA margin of 23.5%. The foundation for the quarter's success was attendance growth of 9.6% to 63.7 million patrons. Our domestic segment generated admissions revenue growth of 16.1% during Q4, outperforming the estimated North American industry box office. Our strong domestic box office growth was attributed to both attendance, which increased 10.3% for the quarter, and average ticket price, which increased 5.2% from $6.57 to $6.91. The average ticket price increase reflects the premium product mix, as well as price increases implemented during the quarter. Our US concession revenues grew 14.9% during the quarter to $137.5 million, reflecting attendance growth, incremental sales, and price increases. US total revenues for the quarter were $432.7 million, an increase of 15.5% from the year ago period. Our domestic adjusted EBITDA margin increased to 24.9%. Adjusted EBITDA was $107.6 million.

During Q4, our international segment generated admissions revenue growth of 10.7% to $105.6 million, also attributed to increases in both attendance and average ticket price. Attendance for the quarter was 23.1 million patrons, an increase of 8.5%, average ticket price for the quarter increased 2% to $4.57. In constant currency, we experienced an increase of approximately 9.6% in average ticket price, resulting in constant currency box office growth of over 19%. International concession revenues were $52.6 million for the quarter, an increase of 13.6%. Concession per patron was $2.28, an increase of 5.1%, which converts to approximately 10.6% increase on a constant currency basis. Other revenues for our international segment increased 4.6%, primarily due to increased screen advertising revenues in Brazil, Mexico, and Argentina. Total revenues for our Latin American theaters were $178.8 million for the quarter, an increase of 10.8%. Adjusted EBITDA was $35.9 million, resulting in a margin of 20.1%. Latin America also recorded historic highs for the fourth quarter and adjusted EBITDA in resulting margins, despite a blended FX headwind of approximately 10%. The FX impact for the first quarter may be similar to Q4, however, starting in Q2, the rate impact should begin to diminish as some current rates stay relatively stable.

During Q4 our consolidated worldwide film rental improved 100 basis points to 54% of admissions revenues. International film rental and advertising improved 320 basis points from Q4 of 2011. Interest expense decreased to $29.3 million for the quarter, compared to $31.8 million in Q4 of 2011, primarily due to the expiration of two swap agreements during the year. In December, we issued $400 million of 5.125% senior notes due in 2022. We also amended and restated our senior secured credit facility and payed down our term loan approximately $200 million to $700 million and increased our revolver to $100 million, which is un-drawn. The interest rate on the senior secured credit facility improved 25 basis points to LIBOR plus 300. We expect quarterly interest expense in 2013 to be approximately $32 million, assuming rates applicable to our variable rate debt remain consistent with Q4.

Total income before taxes increased to $65.6 million in Q4 of 2012 from $30 million in Q4 of 2011. Included in this quarter's income is a pre-tax charge of $5.6 million related to the early retirement of debt associated with the senior secured credit facility amendment. Our Q4 effective tax rate was 57%, primarily due to taxes attributable to certain of our international operations. Net income attributable to Cinemark Holdings was $27.8 million. Our EPS was $0.24 per diluted share. Our $0.24 earnings per share reflects the higher effective tax rate for the quarter compared to our rate of approximately 38% we have been incurring in prior quarters, and also reflects the $5.6 million write off of debt related costs.

Our balance sheet remains strong and the least levered among our peer group, with a net position of approximately $1.02 billion and a net leverage ratio of 1.7 times adjusted EBITDA. Our US circuit at year-end was comprised of 298 theaters with 3,916 screens in 39 states. During the fourth quarter we opened 2 theaters with 28 screens and closed 3 theaters with 30 screens. We have signed commitments to open 9 theaters and 111 screens during 2013, and 5 theaters in 67 screens subsequent to 2013. Our Latin American circuit at year-end was comprised of 167 theaters and 1,324 screens in 13 countries. During Q4 we opened 5 theaters and 35 screens. We presently have signed commitments to open 13 theaters with 88 screens in 2013 and 3 theaters with 21 screens subsequent to 2013.

During the fourth quarter, we reinvested $74.2 million on capital expenditures, including $33.7 million on new construction and $40.5 million on maintenance CapEx. These expenditures brought our total CapEx for the year to $220.7 million which included CapEx of 115 -- maintenance CapEx of $115.8 million. Due to the delay in our digital projector roll-out and the postponement of certain international projects until 2013, we spent substantially less than originally estimated CapEx of $250 million to $300 million we announced at this time last year. However, 2013 is a catch up year and we are projecting full-year 2013 new build and maintenance CapEx capital expenditures to be $325 million to $350 million. This projection includes robust organic growth in Latin America of approximately 125 screens, as well as the full international digital conversion and XD expansion of 40 to 50 screens, which Tim discussed.

We currently have signed commitments to build 199 screens during 2013 and anticipate signing commitments for an additional 50 to 75 screens to be built this year. We estimate CapEx maintenance of $125 million to $150 million, which should return to a normalized run rate of $75 million to $80 million in 2014 after our international digital conversion is complete. As our financial performance and position demonstrate, we have sufficient free cash flow to fund the CapEx projections for 2013, as well as our quarterly dividend which is subject to our Board's discretion. Our Board of Directors recently declared a quarterly dividend of $0.21 per common share to be paid on March 15, 2013 to shareholders of record on March 4, 2013. Our strategy continues to focus on organic growth and lucrative acquisition opportunities that meet our high quality and financial standards.

That concludes the prepared remarks, we are now opening the lines for questions.

(Operator Instructions)

Townsend Buckles, JPMorgan.

Robert, any additional details you can provide on your Mexico sale in terms of pricing and also, is what came together for you in terms of making a decision to exit the market, was this a bid that recently materialized or something you have been in discussions with for a while?

Sure, the price can fluctuate a little bit. There is always the closing conditions and adjustments, but using today's FX rate it would be approximately $125 million, which if you do the math, probably gets you a little over 7.5% close ballpark about 7.7% somewhere in there. It is not something that we went and looked for. We were approached by Cinemex and entered into discussions with them that actually took a fairly long time for us to get comfortable of disposing of an asset, it's not something we have readily done in the past.

But as we looked at it and I'll give you some data and I think it will explain, one, why we did it and secondly, that it's really no change in our strategy because we remain very committed to Latin America. As Tim said, we are actually recommitting more effort in terms of screen growth where we grew about 50 screens last year. We're anticipating 125 this year. But what we found in Mexico, if we look at where we were in 2007, at the end of 2007, we had 304 screens. If I look at where we were at the end of the year and what we are selling, we had 290 screens. So it actually dropped 14 screens over that four of five year period. But if I look at Mexico itself, it actually grew, the screen count grew 31%.

So, it's not as though Mexico is set dormant, it is actually very vibrant competition among two local players there building theaters, but we haven't found a way to economically participate at a level we felt comfortable with. Now, we've actually held our EBITDA. We didn't drop EBITDA during that timeframe but obviously we didn't increase it. So, what we looked at is we started to analyzing the opportunity as we had a relatively flat investment in a very highly competitive market with two locals that have plenty of capital and have shown that they are willing to build many screens.

Now if I compare that to the rest of our international, what happened in Mexico during that four or five-year period was the 31% screen growth rate and that's what we've grown internationally. If you look at our other countries, we've grown over 30% screen growth in all of our remaining international circuit, while Mexico, again, just stayed flat. And so, we looked at it as if we stayed there great, but it was different than the rest of our story in Latin America. We feel like there is much more opportunity to invest in Latin America and the remainder of our assets and grow much more quickly. And while by no means was this a drag on our numbers, it wasn't improving our numbers and wasn't creating additional value. And so the opportunity to sell it just made a lot of sense to us.

And you talked in the past about how the limiting factor to screen growth for you in Latin America was more at the pace of mall development than your balance sheet. So if you could talk about the opportunities you have to reinvest these proceeds in the region, should we see it more through M&A if you are ready growing streams as fast as you can which I realize stepping up this year.

We are clearly very open to M&A. As we said last year with or in 2011 with the Argentine acquisition. We constantly are looking in the market and all the countries we're in to see if there is opportunity to expand, through acquisition as well as new built. There's no different kind than we always are, we are always looking for that opportunity to find a high-quality screen and I think as Tim said in the past, one of the things even when people look at screen count to out most of the remainder of Latin America, the quality of assets varies greatly. While you see decent numbers out there in some cases, it is not necessarily newer screens.

There is still a number of old screens and so if you really look at Stadium and compare that to other countries to even Mexico, Mexico had double the screen count relative to population of just about any other country but if you really broke that down into quality screens, there is probably less than these other countries. But which also limits who we look for but there are definitely companies we like. Obviously I can't comment on where we are going with that right now, but we are very open to acquisitions.

Okay thanks and just lastly, can you talk about the political and economic climate down in South America? As we've seen in Argentina recently, some price freezes and high wage increase negotiations around inflation fears, could this become something of a factor for you?

I think -- this is Tim speaking and nice talking with you Townsend -- the overall climate in Latin America is fairly stable and good and now, Argentina has been reported in the public press as a little bit all over the place right now. And just like a country like Venezuela, but that doesn't reflect the political or the economic climate in any of the other countries. But Argentina, we've been there for a long time and it's -- it seems to all play out. We have been there now for 17, 18 years and it's -- even though it appears to the outside world to be in turmoil from time to time, when you go down there, you will find it is a very stable country and it seems to work its way through these crises.

We acquired the circuit we did in 2011 because we believe in Argentina and it has performed very well. People go to the movies actually probably more frequently over the last few years than what they have the past. And to Tim's point, if you live down there, I think people feel very comfortable. We read headlines in the paper, but that -- those don't necessarily reflect, I think, how business is occurring down there. And our margins have held up, our ability to increase price, everything has remained very stable and the benefit we have had is clearly attendance increases.

Okay, thanks a lot.

Anthony Di Clemente, Barclays.

This is actually Bo Tang in for Anthony. Robert, given that you ended the quarter with over $700 million of cash before giving effect to the proceeds from the sale of Mexico, could you just talk about how much cash on hand or dry powder you would like to maintain to run the business? And to follow-up on that if you could just please share with us your way of thinking with regards to return of capital? That would be great. Thanks.

Bo, I appreciate the question. I think with the $700 million, obviously it looks like a huge balance. As you know, we are buying Rave and we expect that to close hopefully sooner than later, we are hoping still may be sometime in this first quarter but we don't know that to be the case. But that would be a use of about $250 million of it, so it brings it back slightly to less than $500 million. As we've said, we are spending a fair amount of capital this year, significantly more than what we've done in the past years. It's usually over $100 million more than what we did in 2012 and pushing at the upper ends of any cash flow.

So, as far as where we are going to spend our money at the moment and our reinvestment, I think when you really go through all the math you will find that our capital is staying fairly stable. The margin or the multiple might actually improve because adding the rate group will increase our total EBITDA despite selling Mexico. But our overall cash plate, when it's all said and done, is probably not that different than the $400 million to $500 million we've carried over the last few years. And we are still obviously looking for opportunities, as we talked about earlier in Latin America and while many things have already changed hands in the US, we remain open to build in the US as well.

And, again, we are very committed to organic growth. As long as we can sustain the levels, we will continue to pursue it and we still see it in Latin America, as we said before, the 125 hopefully in 2013 and we would expect to build that or more even in 2014 and beyond. The US also has stepped up a little bit, as I've told you numbers there. That actually, we think, while it is not highly unusual growth, it is more than what we've experienced in the last few years. So, it is requiring a little more CapEx. So, right now, nothing at the moment has changed in our general outlook of our capital.

Got it, great. And then as it pertains to the rest of your Latin American circuit, you mentioned that you remain focused in that region, but perhaps in an effort to hide the value of that part of the business, would a spin off of Latin America, will that ever make sense in your view?

I don't want to say never, but it's not our focus. We see ourselves as a global player and, I think, like anybody that has foreign operations and sees those as an integral part of the company, if anything we would like to expand them and make them larger. And while we always want to maximize shareholder value, we think in the long-term growing those assets and improving that base down there and making it a bigger and bigger part of the Company and more so an important part of the studios, is very good for our shareholders. And again as we said, we have investments in Taiwan, we will continue to look at other parts of the world.

And also, we talked a little bit about the great performance of the North American box office, but the global box office really performed. And we don't site that as much as maybe we should, but that is why the focus we made a decision over 20 years ago to focus on developing international company. We strongly committed it and I think when you see the overall growth of the international market from an exhibition standpoint has just exploded to where it is almost twice the US or more than twice the US, or the North American box office. And so, we feel we have the right strategy to have a great presence in the US, which will always be probably the leading market in the world and then this international strategy.

Great, thank you very much.

Eric Handler, MKM Partners.

As a follow-up to that last question, as you sell off Mexico and recommit to faster growing cinema markets, at what point do you feel like you are going strong enough in Latin America that you can now explore some opportunities in the faster growing Eastern European markets or possibly in Asia as you look for either organic growth opportunities there or some acquisitions? And what would be the way to dip your toe in those markets M&A or just building from scratch? And then secondly, just going through some of your expense line items, G&A at $41.6 million picked up quite a bit from prior quarters, just wanted to know if there is anything specific in that line item that created some unusually high number there?

Okay well I will answer the international growth strategy, because in the process of building the international company, we have actually checked out a lot of different markets. In fact, we had a partnership in Japan which we -- Shochiku early on and we exited that at their request. And then we also have, like Robert pointed out, the minority interest in Taiwan and via Taiwan, I spent a lot of time looking at mainline China. We still think that mainland China would be a -- has great growth potential. The problem that we run into over there is that they don't allow a majority ownership of theaters, theater exhibition companies in China. Obviously, if that is changed, we feel that we are well-positioned because of our experience in Taiwan and the fact that we've really looked at the market to enter into the Chinese market if that law would ever change.

Also, we have looked at Eastern Europe and in fact and also even built a couple theaters in England at one time. And at that point, it was pretty slow going and so we just sold them off. They were very successful theaters and we have great relationships around the world, because of my previous positions in the industry and also as the head of international at Cinemark, I literally know all the players whether they are in Russia or whether they are in Eastern Europe or whether they are in Africa or Asia. We have great industry relationships that we could capitalize on if we feel the opportunity is right. And with that, I will turn the M&A question over to Robert.

With respect to G&A and stuff, this quarter was a little bit higher. We had some unusual costs going through there. I think if we look back to a general run rate, which again is increased over the last few years, primarily through new initiatives we have had, the Argentina acquisition, we still are operating two separate companies and we would like to tell you when that would go away, but for the moment it is still in -- going through a process but that will help.

And then as Flix is expanding, as well as we are expanding in other countries, we are -- that used to be a net revenue item to us because we had outside people performing that work. When we took it in house, obviously, we had to develop a G&A staff to work on it and now all the costs run through our income statement. And so that's actually increased it, but the revenue stream from that is growing significantly and helping as well. Those are probably the two biggest factors but again, this quarter we had a couple of unusual items. I would tend to say what we would hope is we would move back closer to what we've had in prior quarters.

Great and just one quick follow-up. Going back to the expansion opportunity, if you are going to make a move into so let's say in Eastern Europe or Asia, would it most likely be as a result of M&A to get a critical mass or would you be looking to start organically?

Well, I think the thing that Cinemark has demonstrated, because we have literally built theaters in Japan, we have built theaters in Taiwan and so we know all the building codes and how you need to design for a mainland China. And then we've also built theaters in Europe and building theaters in England. I think we could easily -- we demonstrated that we can negotiate the leases and we know how to build organically, but also if it was a market opportunity that there was a great company there, we could -- we've also demonstrated that we are very good at M&A activities.

And we've operated over there.

And we have operated over there but we've also shown we have done a great job in M&A activities, both here in the US and also in the international marketplace.

Great, thanks, guys.

Robert Fishman, Nomura.

I have one for Tim and a couple for Robert. Tim, given the recent LA Times article, the certain theaters chains starting to charge the studios for previews, can you share any thoughts on this from Cinemark's perspective and how you balance the potential revenue opportunity with keeping solid relationships with your partners there?

Yes, we think we are a big believer in trailers and are very supportive of our studio partners and marketing, because we realize that literally without film and without attendance we don't have customers. And so that isn't a big initiative of Cinemark. We are probably focused more on our relationship with the studios as to how we grow the pie and how we keep building attendance. And so, although there is some revenues in that area, it is not a significant driver for us. And we think we've got a great overall relationship with the studios and in fact, we are trying to come up with ways that we can expand those relationships into the social media, mobile apps, and all kinds of ways.

Great, and for Robert, maybe a couple. Can you help us break out what the international growth excluding Mexico would've been in fourth quarter for both revenue and EBITDA if possible?

That is not a number that we've really run into that is easy to do. What I would tell you is that the Mexico EBITDA was up slightly from what we published in the press release, but it is a fairly minor change by year-end. So, one way you could do it is take that set of numbers and back them out. That's the best I can tell for the quarter, obviously but give you an idea for the year what -- how it did.

Okay.

We don't really break out individual countries and stuff. I apologize but it is not something that we have that I can disclose.

Understood, maybe just one last one then, can you help us think about the go forward tax rate for 2013 given that increase that we saw in the fourth quarter?

I hope it doesn't stay this high. This quarter was unusual because of some different transactions we had throughout different countries, mostly Latin America. And I don't want to get too much in taxes because GAAP taxes are pretty confusing but mostly it had to do with some settlements of some different tax items we had in a couple of countries and then some cross -- some liquidation of some assets we had.

We would expect, as we've said in the past, that our tax rate would be somewhere around 38%. We think that is a reasonable normalized rate. I think it is what most everybody has been using. I will tell you the difficulty is when we close Mexico, that will have some unique tax issues with it and so that might throw off whatever quarter that occurs in, but I would say outside of that, we would expect normalized tax rates to run in that 38% range.

Thanks, guys.

Ben Swinburne, Morgan Stanley.

This is Ryan Fiftal for Ben. Couple of questions, first on the Lat Am side, I think this quarter attendance growth came in a little lighter than we expected although pricing was quite strong. I think you guys said pricing was up about 10% on a constant currency basis. So I was wondering if you could comment on what you are seeing on the pricing environment down there and whether you think you did under perform the space on the attendance side, or if you think that was more of a function of your specific footprint.

I think one on attendance, we felt like we did reasonably well with respect to the industry. Some countries we probably overbid and some countries we probably under performed a little bit. When we look at why or what the reasoning was, again, there definitely has been a fair amount of screen growth in Latin America and will continue to. We opened up, I think, we said about 35 screens, that was all done literally at the very end of the quarter so they had very little impact on us. And we didn't unfortunately open that many screens throughout the year. And so that is a bit of a driver of attendance.

Actually in Mexico the -- again not the reason we're selling it but it has impacts like that, because we actually had a fair amount of screen growth occur in Mexico, with our competitors because, as we have said, they continue to build and we didn't. A lot of the attendance shift in Mexico had to do with the these screens being added, not necessarily same store sales. So, overall, I think we felt reasonably good about our attendance. We look at where things are going in Q1. We feel very good. We looked at how Brazil did in particular since that is a big part of our business in Q4 and we felt very good about its performance.

As far as prices go, as you said, we felt like we are trying to price to the market where we should be and we haven't seen any issues around that and we will continue to do that this year as well.

Okay, thanks. And then a follow-up on the capital allocation side. Obviously, you guys have a number of different options for where to put capital to work, both on M&A and organic build and a variety of geographies. So, I am wondering if you could comment on where you're seeing or where you think the most attractive ROIs are across your different opportunities? Some of the context is we're seeing some pretty attractive multiples for M&A here in the US, I'm wondering if you see that as a big opportunity or if actually you would be willing to pass on an accretive deal in the US to keep putting capital to work in Lat Am, which is potentially even higher ROI for you?

Ryan, I think the benefit is that someone asked earlier when we talked about capital, we definitely have the resources to invest, whether it is in Latin America or the US. As you are aware, we bought the Rave assets last year, we felt like that will be very accretive and was some very high-quality assets. So we continue to look into the US for those type of deals and would not shy away from them. And to your point, I don't know we have per se -- when we look at strategic moves, especially in Latin America, or something that could be highly accretive, we have the wherewithal to execute multiple transactions if we needed to. And I think that's what is key to Cinemark is we have said, we want to continue to grow the Company. That has really been our focus. We look for those high growth markets, but, clearly, we are not opposed to buying accretive assets in the US as well.

And I think the big factor for us is that they have to be high-quality sustainable assets. And that we really believe that they are great theaters and great developments and they have a very sustainable future.

Okay, thank you.

Barton Crockett, Lazard Capital Markets.

I wanted to ask a little bit more about your CapEx outlook, this $325 million or so that you're talking about for 2013. And then a step down to 2014, when you look ahead to 2014, do you feel like the year in aggregate looks more like the $220 million you spent in 2012 or more like the $180 million that you spent in 2011, just some kind of broad gating around that CapEx step down to what degree should we expect that?

Barton, I think a critical part is the maintenance CapEx which we would argue is productive, but by far the big piece of maintenance CapEx this year is the rollout of digital in international. And so when that pulls back, if we say that is $75 million and so you move now down to that $250 million to $275 million range. What is really driving you at that point to push that kind of number is new build CapEx. And again, that will have maintenance, but maintenance drops from $150 million to $75 million or so, and that is probably a more normalized run rate and why I can always reduce some, in general I will be in that area.

So, that is arguing that you are spending -- the question of do you spend $100 million on new build or $200 million on new build? I think the key to us is are we able to find opportunities to spend $200 million and get the 20% plus returns we look for with also the 20% margins we look for. And if we can find those in Latin America and expand the way we would like to, and/or some of that in the US which we are also doing, I don't think we would be hesitant to consider those deals. So, the key is are they there and definitely in Latin America we feel they will be.

I think in 2014, you are still -- it's not a huge growth in the US, it's just there's a number of projects that over the last five years have been moving and trying to get going, and they are projects that are probably very reasonable to build and we will pursue those. I think as you go further out, probably the US drops back a little bit, international probably keeps going. So it is hard to say a real run rate. Is it $200 million, is it $275 million? I don't know, it is probably somewhere between those. But the key to it is what that differential is being spent on assets that create additional EBITDA or ROIs, it is not debt capital or anything.

Okay and then your spend per screen or per theater, is it in this new build outlook, is it consistent with what has been in the past or are you spending more on maybe more productive theaters?

It is probably reasonably consistent with the past. It might be a slightly more -- the hard part there is some years we've spent $600,000 to $700,000 a screen and other years we spend $1 million a screen, and I don't think it's that different from our historic.

It falls in that range.

Now in this quarter, your other revenues grew a lot slower than admissions revenues and concessions, 5% to 10% international, domestic. In international I would've thought if anything it might've grown quicker with some of the advertising initiative, so I was wondering if you could talk about why that's been growing slower than the other revenue lines?

I will take international and, again, the number we gave in the 4% was after FX impact, so it was a pure dollar base. If I broke out screen add and the growth there internationally was over 20%. Other revenue -- in local currency or constant currency I'll call it, was over 20% and then other revenue growth items were probably in the 6% range. So, we did definitely have some robust growth internationally in the screen ad side. Domestically, I think it was generally more flat and while it was up some, a big piece of ours is from screen advertising and that is more based on certain formulas and so that did not necessarily change as much.

Okay, and then one final question, as were looking at this Mexico sale, I know you haven't given us the amount that you will be received in payment for this, but I was wondering if you could talk a little bit about how we should think about the tax leakage implications of this because I assume your cost basis is almost nothing given that there was a new build. If you assume that you sell it for something like a multiple where you are trading, there is going to be significant tax leakage. Is there anything that can mitigate that, any losses that would offset the gains there, or how should we think about that?

And actually, Barton, I don't know if you heard, someone asked the question and we threw out ballpark $125 million, which to your point, would be close to our trading multiple times what the EBITDA we published was. We haven't talked about tax leakage. You are right, there is no doubt going to be some tax leakage. We haven't given that number out. It's not an easy assumption to make when there is taxes we will have to pay in Mexico, there is taxes that we will pay in the US on the deal. And in theory you'll get some credits for what you did in Mexico. But there will definitely be some leakage out of it. Again, I think when it is said and done and we take the net in our opportunities to use that money, we still think it's a great opportunity for us.

Okay, great. Thank you very much.

James Marsh, Piper Jaffray.

Two quick ones here, as we look at the slate in Latin America in 2013, is there any local language releases that we should be aware of that create some comparison issues? And then secondly, on the Rave deal, is it fair to say that this is taking a little bit longer than you expected to close and if that is true, should we read anything into this like potentially there might be more dispositions than originally planned to get approval?

No, first off, on the Latin America, there is always local product, especially in Brazil or Argentina and sometimes Chile that can really influence the market and we don't know if that's going to happen this year, but we wouldn't be surprised if it does happen this year because they are starting to develop some pretty good local film production centers. And regarding Rave, I think it's more of a timing issue with when we close on Rave. You've got to -- we ran into Christmas and New Year's and a bunch of holidays and so when you look at the timing of the process, I think you also have to consider all those holidays that came in the middle of that. And that, as much is anything, is delay. I wouldn't read anything into it beyond that.

Okay, great. Thanks very much.

Jim Goss, Barrington Research.

A couple for Tim and a couple for Robert. Tim, I am wondering that to the extent that international expansion into China or Europe or some other market, I suppose would have a goal of creating additional growth and mitigating risk. But I am wondering, within Latin America, if you feel the markets are sufficiently different and have that growth opportunity and your presence is still relatively low even after all these years of doing this, that you really don't need to go outside of the market to accomplish those dual goals.

No, that is true. We think that there is still tremendous growth rates in all the countries of Latin America. And to Robert's earlier remarks, Mexico, because of just the overall building of the market and the fact that it ma be started earlier than the other markets more aggressively, is without a doubt the most mature market in Latin America.

But the other markets continue to have excellent growth potential and we continue to be, I think, in a great position to be the leader in that growth effort, because of our knowledge of the market, our relationships in the market, and we have a great management team throughout Latin America. And so, it doesn't mean that we would have to go outside those markets to still have a great international story. That doesn't mean we wouldn't look outside Latin America if we felt it was the right thing for our shareholders and the right thing for the Company to continue our growth patterns.

And I think either you or Valmir outlined that in Brazil there was a certain social strata to the attendance at various cinemas based on what markets you are in or what parts of the cities you lived in, or that sort of thing. Is that true for other Latin American markets as well?

Well, we haven't seen a lot of differentiation in the markets. In fact, we are in -- because they do tend to break down markets by A, B, C, and D markets but we have built in C and D markets and the theaters do great, and we've built in A markets the theaters do great. There is usually probably a pricing difference in these markets, but as far as from an attendance or how the theaters are attended and people love going to movies.

And then the other thing we are finding, now in these markets we are also going out into, by their standards, smaller markets. By the US standards we wouldn't think of them as small markets 100,000, 200,000, 300,000 people and we are finding great success in those kind of markets. So, it's a little bit like if you build it they will come. And it seems to be true in pretty much any market you build in.

Okay, and Robert, just doing a quick and dirty trying to separate out the debt related costs and adjust to a 37% tax rate, it came to number something like $0.39 versus the $0.24, is that about where you stand for an adjusted EPS for the quarter?

We don't publish adjusted, so we don't do that, but I think if you do the math you just talked about you would pretty much be at that number.

Okay. And the other thing is, you mentioned that 1.7 times adjusted debt to adjusted EBITDA ratio, is that a comfortable level, too high, too low, what do you think you should have as a goal?

I think it's one where the success of the Company has allowed us to move to that level. We previously had a much higher debt to EBITDA ratio if you went back a number of years and over the last few years, it's been a little higher than that, but it -- every year it goes down a little bit and that is because of our increasing EBITDA that we are able to achieve because of reinvesting our money in the Company. And so, it's hard to say is there an exact goal. We are not looking at should we leverage the Company to a three-year or some other level and just go do something with cash, we are much more focused on how we deploy our capital.

And I think the resulting leverage ratio is more of a function of our success and that success arguably generates cash flow that, as people ask about dividends and where we go long-term, we can review that and understand more our long term cash needs and really the additional cash flow that is generated through this reinvestment. But the resulting net debt I think gives us the flexibility to take advantage of opportunities as we did with Rave and, again, we leveraged up a little bit for that deal which was very simple to do and had incredible rates. And so we would look at those opportunities as they come up, but we probably wouldn't necessarily target a specific level and say we ought to maintain that level.

Okay, thanks very much.

Eric Wold, B Riley.

Just a quick follow-up on that last one in terms of the leverage. So, you have no goal in terms of where you are trying to shoot for a leverage ratio, but if a great opportunity came about, possibly a large one or a number one internationally, would you have an issue going beyond historical leverage levels and take advantage of something?

Not at all, and if I probably didn't explain it well enough but to your point, as we did with Rave, if we have a great acquisition opportunity, the current leverage levels provide us incredible flexibility of how to -- not only what we can buy but how to finance what we can buy. And so, if there were to be a great acquisition out there whether it is the US or Latin America or somewhere else in the world, and it made sense to put leverage on that, we probably wouldn't hesitate to do that. And I think that is great position Cinemark is it. We have the wherewithal to pursue opportunities and the ability to lever if that is the best way to acquire something. And too your question, we wouldn't hesitate to do that, if that made the best sense for us.

I know the Rave deal is not closed yet, but had you taken a look at the Hollywood theater deal that Regal announced and any thoughts on why you may have passed on that?

Well, we look at all the transactions that come through the market. The Rave deal itself, because they are in quite a few of the same general markets we are in, Texas, and so from -- Hollywood, excuse me, it did create some DOJ issues for us.

Okay, understand.

Sorry, go ahead.

Final question with the sale of Mexico, given that it's the lack of growth there and the lack of growth prospects, where in Latin America -- I'm not saying you detail all of the nine theaters are when you initiate -- but where do you see the greatest opportunity for growth? Which countries would be the top one or two in terms of both new builds and maybe theaters that are in place, where the best opportunities for organic growth are increasing per capita due to this?

Eric, again, hard part for us was Mexico actually has grown as much as other places, we just haven't participated because of economics and primarily economics and the difficulty of competing with these guys on some of the projects. But when you look at the rest of Latin America, what is exciting is as you would expect, the large portion of what we are building will be in Brazil which again represents the largest market for us. But we are building in Argentina, Colombia, Chile, Central America, pretty much Ecuador, pretty much every market that we have theaters in today, we are building something.

And that's what to us is some exciting about where we are heading with -- this isn't just led by Brazil, it is not just led by Columbia or something. Last year we built a number of theaters in Peru. All these markets have great opportunities in it and we're seeing them everywhere and building everywhere. The one exception was Mexico. And it's not that there isn't significant competition there and new building, it's just we couldn't make the economics work for us.

Understand, thank you guys.

Matthew Harrigan, Wunderlich Securities.

Great exit multiple in Mexico by the way under the circumstances. I'm sure they were aware with the policy there as well. I think you said that Mexico was the one market where you couldn't do a National CineMedia equivalent on your own. I assume Cinemex is amenable to working with you on that, really having a comprehensive geography. Could you just update us on where you are on the whole region on that because it seems like a nice opportunity.

And then secondly, I know The Hobbit was literally the first at bat, let alone the first inning on 4K, but can you fill us in a little bit more about what is happening in the theaters in the new technology as far as the experience? Not just the mobile apps, because so much is happening in the home on the see side and clearly you are the window that creates the marketing excitement and the studios maximize their revenues per nose and all that, but it is obviously important that this is the best experience across the board and in the theater itself.

Yes, well, first off on the technology front, I will start with your last question first. We are really excited, because we feel we have for the first time really in the history of our industry that technology is our ally. When we were a film-based technology we had a lot of limitations, but we think this year, setting up DCDC is the final cap on being able to take advantage of all the technology that we now have in the theater. And digital has allowed a lot of developments. It gave us sustainable 3D, allowed us to create our own large premium format screens.

And another development that is taking place in that world is the Dolby Atmos sound that we are starting to test and we have it in four or five theaters, now, and the response, in fact I've seen Die Hard in the Dolby Atmos XD and it was absolutely spectacular and the sound was just incredible. So, we think on the technology front that there is a lot of good things happening that are bringing it into the theater experience. And we think that continues to expand.

And then the first part of your question was to? Flix, yes, we're starting to roll this out in Brazil and we've had great success with it. Were going to start rolling it out to our other countries and it will be a three or four year process. It is not an easy roll up. We need to get to be 100% digital. We also need to get a satellite distribution system in place to capitalize on it.

But, like we said at the start of our call, we will be 100% digital by the end of 2013 and so that will allow us to continue to expand and rollout Flix. We are -- have a great relationship with Cinemex but also a great relationship with the Cinepolis group, and they are aware of what we are able to achieve along with Regal AMC regarding NCM and they see that as a real upside to their businesses also. So, it is a mutual thing that is very attractive for all parties.

Okay, thank you.

Ben Mogil, Stifel Nicolaus.

So actually want to focus more in the domestic market. When I look at the per screen and I look at the aggregate, it looks like you were slightly ahead of the industry for the quarter. That has changed in the last couple of quarters. Can you talk about what has changed? And when you look at the average ticket price increase in the five range or so, 5.2, which is obviously a lot higher than you've done all year long, how much of that was mix, how much of that was base 2D increases? Kind of curious what you're seeing in the market.

Well, we feel, Ben, that we've always performed very well in the marketplace and we continue to perform very well and if you take our performance over the last couple of years, we've outperformed our peers and the industry. And when you compare us against last year, it is just that we had a higher comp. And so we continue to do very well in the marketplace.

And, Ben, to your point, we did outperform the quarter and we had a few quarters that were flattish. To Tim's point, I think if people go back and -- it's hard when you are doing a comp and if you outperformed, especially in some prior quarters or even in this one in the fourth quarter last year or anything, when you're trying to comp out, you've got that much more higher of a hurdle to go. But this was a very good quarter for us.

And as you said, where we've been driving those things through attendance, this quarter actually had a kicker more because of price. I think it was a combination of events. We actually rose our -- we raised prices twice a year. The price increase we had for this, would've hit this period, was slightly higher than what we've been doing. Again, nothing way out there, but we were just slightly more aggressive because we felt like we had some opportunities that, because of being a little bit conservative, we still try to keep a very broad pricing grid so we are giving openings for -- whatever price point somebody might have there is opportunity to go, but on our higher end and things we definitely raised them a little bit.

The other thing we saw that I think maybe we benefited from is, as Tim mentioned in his part of the discussion earlier, is that we continue to rollout XD and XD is performing extremely well as we keep adding more screens. Despite this being a little slower quarter for 3D than it was in Q4 2011, when we look at our premium product, not necessarily as a percentage of the total because as a percentage it was probably off a little bit but if we look at the gross amount, it did very well and it was really led by our XD screens which continue to do extremely well and become a bigger and bigger percentage of our total box.

I get that you obviously can't predict the '13 box office in terms of how much will be 3D and IMAX, or what would be 3D and XD exceptional, but when you look at '13 based on the price increases you've put together, does 3%, 3.25% sound like a reasonable range by just assuming that 3D meets the general expectation that you have?

Again, it is tough when you've been raising prices 1% to 2% and you suddenly jump up a little higher. If mix is right, to your point, if 3D does well this year and again that is not driving the whole thing but again, if it is improving slightly and XD as we continue to roll it out coupled with our price increases, you probably have that potential.

Okay. And then lastly just switching over to international. A lot of film rental split was obviously a lot lower than I think than it's been in the past, particularly off of what sounded like a decent quarter. Anything -- I don't mean on tours -- but anything interesting there in the quarter or is it just every quarter is different?

One of the things that it happening that we've talked about is that our are VPF benefits flow through that and so that is part of what is driving that. Again, we have made an investment to achieve that and so it's just getting some of the return on that investment. That is probably a fair amount of driver and then to your point also, just coupled with it's going to vary each quarter.

Remind me again, if you don't mind and then you can be done with me, when does VPF international start and which quarter? I'm looking from a comp perspective.

Well, so, I would say meaningfully, the beginning of this year. So probably Q1. We probably have had some benefits in prior years, but I think this is the year that as it impacted film rental and we've ramped up a lot at year-end the number of projectors in 2011, so you continue to through 2012. So I think you're -- the rates are seeing that it has impacted film rental, I would start with Q1 of 2012.

Okay, so we have come -- we will have largely anniversaried it with this last quarter, is that fair?

Again, it will change as we roll out more projectors, just because we are about 42% digitized internationally and actually we don't necessarily receive -- the VPF agreements are being settled and those will be the catalyst to get our full rollout, which we see all that being done this year. And, so we should receive more and again we are making, as we said, a $75 million investment to do that and so that's what we are getting that benefit.

Okay. That's it for me, thank you very much.

And this concludes today's conference call. You may now disconnect.

We appreciate everybody's time and participation today. And look forward to talking to you next quarter.

Thank you.