Cinemark Holdings, Inc. (CNK) Q4 2013 Earnings Report, Transcript and Summary

Good afternoon. My name is Destiny, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cinemark's Q4 and Full Year 2013 Earnings Call. [Operator Instructions] Chanda Brashears, you may begin.

Thank you, Destiny, and good afternoon, everyone. At this time, I would like to welcome you to Cinemark Holdings Inc.'s fourth quarter 2013 earnings release conference call hosted by Tim Warner, our Chief Executive Officer; and Robert Copple, our recently promoted President and Chief Operating Officer and Interim Chief Financial Officer. 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. The company undertakes no obligation to publicly update or revise any forward-looking statements. Today's call and webcast may include non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most directly comparable financial measures, calculated and presented in accordance with GAAP, can be found in today's press release and on the company's website, investors.cinemark.com. I would now like to turn the call over to Tim.

Good afternoon, everyone. Thank you for joining us for our fourth quarter 2013 results call. First of all, I would like to congratulate Robert on his promotion to President and COO. Robert has been an integral part of our management team, contributing to our strong financial success and navigating us through the numerous strategic initiatives, acquisitions and joint ventures. I look forward to working with Robert to fully transition the President and COO duties once we hire a replacement CFO. This afternoon, I will provide an overview of the fourth quarter and the full year box office for both the North American industry and Cinemark, highlight the upcoming film slate and provide an update on a few of our strategic initiatives. After my remarks, Robert will provide additional commentary on our financial results and capital structure. And then we will conduct our customary question-and-answer session. The annual 2013 North American industry celebrated another record year, achieving nearly $11 billion in admission revenues, exceeding 2012's record box office and establishing a new all-time high for the industry. This year's box office success was driven by a diverse film slate, including blockbusters such as The Hunger Games, Iron Man 3, Despicable Me 2 and Frozen, as well as a strong slate of mid-tier films that outperformed expectations. Films such as Lee Daniels' The Butler, We're the Millers, American Hustle and the limited release, 12 Years a Slave demonstrated that studios continue to invest in a diversity of films other than strictly tent poles [ph]. The success of the North American industry over the past several years reiterates the capability and demand for the premium out-of-home experience that theaters provide. Cinemark's worldwide attendance set a new all-time high of 276.6 million patrons for the year, an increase of 4.9%. Operations were able to leverage the attendance increase while simultaneously managing costs, resulting in a record for adjusted EBITDA of over $625 million. Our 2013 worldwide adjusted EBITDA margin continues to lead the industry at 23.3%. The rise in attendance, along with the increase in ticket pricing, generated $1.7 billion in admission revenues and established a new company milestone. Our full year box office growth of 8% overindexed the North American industry by 700 basis points. Our total worldwide revenues for the year grew 8.5% for a record of $2.7 billion. The fourth quarter North American industry also accomplished a new high for admission revenues, surpassing the previous record set in 2009 by the release of Avatar. Although attendance declined by approximately 2.5% for the industry, Cinemark increased attendance 10.7% for the quarter. Premium product propelled the fourth quarter box office with strong 3D rates for Gravity, Hobbit and Frozen. With the success of our XD screens and 3D take rates, Cinemark's worldwide premium percentage of box office for the fourth quarter was 24.5%, approximately a 620-basis-point increase over the prior-year period. Our expanded base of XD-branded premium large-format screens also set a new record, accounting for 5.5% of our fourth quarter domestic box office. Our XD screens led Cinemark's worldwide box office increase of 6.9% for the quarter. We can commend our entire worldwide operation teams for exceeding the North American industry box office for 18 of the last 19 consecutive quarters on a currency adjusted basis. The North American industry Q1 2014 box office is off to a strong start. The carryover of the fourth quarter holiday box office, including Lone Survivor and the sing-along version of Frozen, combined with the success of films such as Ride Along, The LEGO Movie, The Nut Job, has generated an estimated growth of approximately 10% from the prior year. The summer season continues with Amazing Spider-Man 2, X-Men: Days of Future Past, Maleficent starring Angelina Jolie as the iconic Disney villain, How to Train Your Dragon 2, Transformers: Age of Extinction and the Dawn of the Planet of the Apes. The fourth quarter film lineup includes Hunger Games: Mockingjay Part 1, Hobbit: There and Back Again and Interstellar, the epic space adventure from the creative genius, Christopher Nolan. We are looking forward to -- for the first time in the industry, we have great visibility into the film slate for 2015 and even into 2016 and are excited about the film product already announced including the Avengers: Age of Ultron, Despicable Me minion sequel, Star Wars: Episode VII, Bond 24, Hunger Games: Mockingjay Part 2, Batman vs. Superman, Avatar sequel, amazing man -- Spider-Man 3, How to Train Your Dragon 3 and Finding Dory, a Nemo spinoff, and many others. 2013 was a pivotal year for Cinemark, and we accomplished numerous key initiatives, including the accretive acquisition and seamless integration of 34 high-quality theaters with 513 screens, which would rank as the seventh largest circuit in the U.S.; the disposition of our Mexican -- Mexico assets in Q4, encompassing 31 theaters and 290 screens, allowing our management team to refocus both our strategic and financial resources throughout South and Central America where we see considerable opportunities for organic growth and accretive returns for our shareholders; the opening of 23 new state-of-the-art theaters with 196 screens worldwide; the refinancing of our debt, resulting in a significantly reduced interest rate and an extension of the term by 4 years; the expansion of our worldwide XD screen footprint with an additional 47 screens worldwide, recognizing 46% growth in 1 year and further establishing our XD brand as the #1 privately owned premium large-format brand; the completion of the DPF agreements for our international circuit with most studios. We have digitized 86% of our international segments, and we'll be 100% digital in early 2014. Laying the groundwork for alternative content expansion with the rollout of the technology platform of DCDC and the acquisition of Fathom in conjunction with AMC and Regal, we can now focus on developing the business model of bringing a wide variety of entertainment options into the theater. Although we've had some success with alternative content with the Myth and the Mayweather versus Canelo fight and Dr. Who, we know from our test cinema's wide variety of entertainment options that the public is very supportive of additional and broader alternative entertainment. The continued development of our market adaptive premium concepts that offer our patrons the highest quality amenities and experience through Cinemark Movie Bistro, VIP and NextGen concepts. We are eagerly awaiting the opening of our Cinemark premium concept in Playa Vista, California and Towson, Maryland later this year. Last but not least, our progress on the Flix Media initiative. In Latin America, Flix remains a long-term initiative with the 3- to 5-year rollout throughout our Latin American theaters. Flix Media also provides us with an opportunity for additional revenue share with other exhibitors. In line with our expansion strategy throughout South and Central America, we are pleased to announce the opening of our first Bolivian theater with 13 screens, including 4 VIP auditoriums and an XD auditorium. As you can see, our company accomplished a great deal in 2013, illustrating the depth, talent and dedication of our team and ability to seamlessly execute many complex initiatives. We look forward to continuing to push the company and the industry forward in 2014. I've been in this industry for many years now and have never been more excited about the business due to the opportunities that technological advancements are providing. I'm proud to say that Cinemark continues to be at the forefront of innovation in our industry. We continue to focus on technology to remove cost from the system, enhance the customer experience, increase utilization of our theatrical platform and continue to grow our company through accretive acquisitions and targeted organic new builds. Robert will now discuss the company's financial performance for the fourth quarter and provide an overview of the capital structure.

Good afternoon, everyone. We surpassed our records for annual attendance, worldwide revenues and adjusted EBITDA. We remain the #1 attended worldwide exhibitor with the highest adjusted EBITDA. Our total worldwide revenues for the fourth quarter increased 6.6% to $651.9 million. Worldwide admissions revenues were $412.6 million, an increase of 6.9%. Our worldwide adjusted EBITDA was $140.9 million, resulting in an adjusted EBITDA margin of 21.6%. Our U.S. segment's total revenues for the quarter grew 14.8% to $496.7 million, driven by the diverse film slate and successful premium product, as well the addition of our acquired Rave assets. Admissions revenues for the U.S. segment increased 15.2% to $323 million for the quarter. Our U.S. attendance for the quarter was 45 million patrons, an increase of 10.8%. Average ticket price rose 3.9% to $7.18, primarily due to price increases, pricing at acquired theaters and premium products. U.S. concession revenues were $156 million, an increase of 13.5%, primarily due to incremental sales and price increases. Our domestic concessions per patron grew 2.4% to $3.47, marking our 28th consecutive quarter of concession per cap increases. We remain focused on growing our concessions with the introduction of new theater concepts such Cinemark Movie Bistro, expanded offerings and concession discount combos and promotions. Our U.S. segment generated adjusted EBITDA of $113.9 million with an adjusted EBITDA margin of 22.9%. The impact of our acquired Rave theaters provides a slight headwind for adjusted EBITDA margins during lower-attended months such as October. Our international total revenues this quarter were $155.2 million. Admission revenues were $89.6 million. In constant currency and eliminating Mexico's performance, admission revenues declined 0.9%. Our international segment's average ticket price was $4.53. In constant currency, the average ticket price improved 10.5%. Our international concession revenue was $45.8 million. Concession per patron maintained its growth trend at $2.31 for the fourth quarter, an increase of 12.3% in constant currency, primarily due to incremental sales, premium product, price mix and price increases. The Mexican Competition Commission approved the sale of our Mexican circuit in the fourth quarter. Because we cannot anticipate the closing time frame, consensus estimates are now properly reflective of the impact of the sale. Due to the sale, we incurred a number of operating costs, resulted in a $6.2 million negative impact on comparable operating income for the quarter. This is in addition to the after-tax loss of $17.9 million resulting from the sale, primarily due to taxes associated with the sale. As Tim said, the sale of Mexico was a major initiative accomplished in 2013, provides us opportunities to provide greater focus to our Central and South American assets which offer greater growth opportunities. Our Latin American segment generated adjusted EBITDA of $27 million, impacted by the 9.5% FX headwind in the disposition of our Mexico assets. Consolidated film rental and advertising costs increased 110 basis points compared to the same period last year at 55.1% of admission revenues due to the overweighted performance of the top films at the box office. Concession supplies were 15.7% of concession revenues, an improvement of 20 basis points due to the mix of product and concession price increases. Total income before income taxes was $66.5 million compared to pretax income of $65.6 million in Q4 of 2012. Net income attributable to Cinemark Holdings, Inc. was approximately $15.6 million or $0.13 per diluted share. Our fourth quarter effective tax rate was 76.1% which was a result of the tax impact with the sale of our Mexican subsidiary. Cinemark continues to have the strongest and least-levered balance sheet in the industry with a cash balance of $600 million. Our net debt position is approximately $1.23 billion and a net leverage ratio of 2.0x adjusted EBITDA. At quarter end, our U.S. circuit consisted of 334 theaters and 4,457 screens in 40 states and 99 DMAs. During the quarter, we built 6 theaters with 68 screens and closed 3 theaters with 24 screens. We have signed commitments to open 8 theaters with 90 screens during 2014 and 5 theaters with 62 screens subsequent to 2014. We expect to incur approximately $90 million in CapEx for these additional 152 screens. Our total Latin American circuit at December 31 consisted of 148 theaters with 1,106 screens. During the quarter, we opened 5 theaters and 25 screens and divested of 32 theaters and 300 screens. We presently have signed commitments to open 13 new theaters representing 88 screens during 2014 and 3 theaters representing 23 screens subsequent to 2014. Our estimated CapEx to develop these additional 111 international screens is approximately $70 million. We remain committed to reinvesting in the company. During 2013, we invested $259.7 million in capital expenditures, including $134.7 million on new construction and an additional $125 million on maintenance CapEx, which includes the Latin American digital conversion cost and expansion of our XD premium large-format screens. As a reminder, we will be reimbursed with the majority of the costs as digital projectors to DPF fees collected from the studios. We expect 2014 CapEx to be approximately $275 million to $300 million, slightly elevated from our run rate of $250 million due to the completion of the digitization of Brazil and the new build projects that shifted from 2013 to 2014. We expect our new build CapEx to continue to be accretive to shareholders given our investment thresholds of 20% returns and 20% EBITDA margin in our commitment to expanding our diversified footprint. Operator, that concludes our prepared remarks. Please open up the lines for questions.

[Operator Instructions] And your first question comes from the line of Robert Fishman with MoffettNathanson.

Tim, can you just share with us your early thoughts on how the potential Comcast-Time Warner Cable deal might impact your attempt to push more aggressively into premium VOD given their history and with the larger subscriber base and whether you'll consider working with them as partners on that initiative?

We have a great relationship with NBCUniversal. I guess, it's an indirect relationship with Comcast, and they're one of our major film suppliers. And from time to time, we have a lot of different business discussions. In fact, I'm -- they have a new Chairman of NBCUniversal. I'm going out to meet with him early March. But I don't know how that -- the whole Comcast merger whether -- I'm sure that's going to get a governmental review, and I'm not sure where it ends up. But we would anticipate a continued, good relationship with NBCUniversal.

And Robert, are you able to give us a base on how international attendance, average ticket price and concession spending would look like for the full year 2013 if you backed out Mexico?

I actually -- if I backed out Mexico, I didn't run the full year. Actually, I might be able to grab that number real quick. But for the quarter, I actually ran, without Mexico, then attendance would've been off -- it would've been off about 4%. Now if I remember, overall for -- international attendance, overall, was -- despite actually even selling Mexico, was only off less than 1%. And so I don't know for the year, it changes a whole lot. I mean, Mexico did underperform slightly, but for the year, the attendance was pretty good. And Q4, to me, was the time period that is kind of difficult to look at in our financials because of the fact that you had a partial period of Mexico in actuality, while we did operate it for about 30 days -- 45 days. It -- we're really transferring the theaters over, which meant we had just the issues that come up whenever people are leaving the company and going to a new company and trying to remain focused in really spending much more time on the sale than operations. But -- and that's why we had some of the losses, as well some of the termination costs. I did just pull something, if I do a pure comparative of attendance year-over-year, it'd be up 1.4%, so internationally. So again, we're -- for the year, we're slightly down with it. We're up without it, which, as I recall, I think the numbers domestically for the industry were about, if I recall, around 1% or 2% down in attendance. So international did, as a group, outperform. Does that help?

Your next question comes from the line of Barton Crockett with FBR Markets. Barton E. Crockett - FBR Capital Markets & Co., Research Division: I wanted to ask a little bit more about Latin America. And really, one of the things is can you give us any sense of the performance relative to the U.S. that's historically been better per screen. In the fourth quarter, it really wasn't. And are you seeing things turn around and go back to the old norm of outperformance in the U.S. so far this year? And does the economy have any role in this? I mean, there's so much about Brazil and the economy. Is that in any way kind of slowing people down to going to see [ph] movies?

Great. Well, the U.S., as we discussed in the call, off to a very strong start. And for the remaining of the quarter, you got 300: Rise of an Empire and Mr. Peabody & Sherman, Divergent, which is the first in the trilogy and also Noah. So you know, the U.S. is -- has a strong -- so we also think that Latin America, when you look at the economies and I would compare that their economies other than -- and I'm going to sort of segment out Argentina because Argentina, besides a currency issue, is also facing some political headwinds in Argentina. But the overall emerging market is -- the sort of the -- and the rest of the countries is the typical ebb and flow of emerging markets. And what we found here in the U.S. and also in Latin America, because we've been down there for over 20 years now, is that our business is primarily product-driven. And I can go back to the economic crisis we had here in the U.S., 2008 up until -- whether you want to call it a recession or -- and it continues to perform very well. That same kind of thing works in Latin America. However, you do run, from time to time, as a result of the film products -- that some film product doesn't translate as well and an example of that in last year, in -- Hunger Games vastly underperformed Twilight. And so for whatever reason and from a translation basis, where in the U.S., Hunger Games performed on a similar basis to Twilight. And so you -- from time to time, we'll hit these variances as to how a film translated. But we believe that the #1 driver of our attendance will still be film and film product and how it translates.

And Barton, you might -- if you actually go back to Cinemark's, our LatAm numbers -- domestically, Q4 is always the big quarter and could easily be a big as some of the middle quarters we have. In LatAm, it tends to be a slower quarter because their Christmas time is as a practical side is -- their holidays are deferred until early in the start of the year. And so they don't have the big Thanksgiving, Christmas of course that we normally have. And so it tends to be -- if you look at our history, it tends to be one of our lightest quarters every year. So the comparative wasn't that bad. I mean, again, if -- as I mentioned, if you compare it -- if you take out Mexico, it's about a 4% decrease. In attendance, you look at that compared to the U.S., it's pretty applicable. I think the U.S. was down to an industry 2.5% or so. Barton E. Crockett - FBR Capital Markets & Co., Research Division: Okay. And then if I can just ask one other question. AMC is out there, IPO-ing with a plan to spend like $1 billion over 5 years, redoing their theaters, including like $600 million on reseats. You guys are spending maybe some of those that throw their CapEx over a similar number of years but more on kind of a new builds and digital projectors. What do you think about -- is there any argument at Cinemark for refocusing on a lot of capital on reseats and just redoing the interior of the theater? Do you think that makes sense of you or not really?

Well, first off, I would say that Cinemark invests a lot in renewing our basic platform. And if you study our history of our company, maintenance CapEx tends to be higher than the rest of the industry because we're constantly reinvesting in our theaters. And also, we probably do more new organic builds than the rest of the industry, and so we're constantly expanding the market. But the other philosophy at Cinemark that it probably sort of differentiates us from our competitors is that we tend to go into each market with a specific market-adaptive platform, that we don't say, hey, look, the answer for every place is a 30-plex or a 20-plex or -- we don't say the answer for everything is a VIP theater. And so, as you look at the performance of our new builds, I mean, our NextGen theater has very, very been well received. It's more of a technological great movie experience with wall-to-wall, floor-to-ceiling screens in all auditoriums with enhanced sound, and because we believe that the #1 reason people go to the movies is to see the movie. And we think that, that trend will continue. But however, we are going into specific markets with, as we talked about in our call, Playa Vista and Towson, Maryland are sort of pretty high-profile markets, and we're going in with our premium Cinemark concept, which does include some in Playa -- reclining seats as a segment of that or in Boca Raton, if you went to our Palace theater, you'd see that it has VIP sections. And we are also refitting some of our older sloped floors with reclining seats, and so -- but it's all market by market to where we just don't have a broad program that we feel that one-size-fits-all.

Your next question comes from the line of Eric Handler with MKM Partners.

Just a couple things on Latin America. Robert, if I heard you correctly, you've got scheduled to open 88 screens. In the past, you've talked about 100 to 125. Is -- could we see more than that 88? Or is that a number that we should be looking for? And then secondly, when you look at the distribution of your screens in Latin America, how is that going to be spread out in terms of how much Brazil, how much Colombia, Peru, et cetera? And with the Brazilian currency and Argentinian currency falling the way it has relative to the U.S. dollar, do you think possibly about focusing a little bit more on some of the other fast-growing markets to maybe diversify some of that FX exposure in Brazil?

First, on the 88 screens. Those are the screens where we've signed commitments to. We generally will sign up additional screens during the year, so our goal is still to be to open at 100 to 125 screens. We feel like we'll find another theater or 2 that's -- and when I say that, we're obviously have a number of theaters that we're working on. But we only reflect those that actually have signed contracts right now. So it's still the general goal we've had before. This year, we actually came in just slightly light. We would have hit it if we would have had opened our new theater in Bolivia on time. But unfortunately, we had a kind of a customs issue at the last second that held us up a little bit. But it -- definitely that was our goal, and we see it again this year hitting that number. The allocation of product is pretty diverse just like it's been in the past. We have some theaters in Chile, Brazil, Colombia, Argentina, and that's mostly screens, I guess, that we're adding some screens in some places such as Argentina. We have some things going on in Peru. So it's pretty across the whole group of theaters. Central America will have something. So I don't know -- people get concerned when you see things, read about currency and issues that could be coming up. And what we would say is what we've been in the country a long time, our experience is really just like the United States if you go back to 2008 and consider what everybody was feeling in the United States with the change in the stock market and the recession and how well our industry did over those next years, which is also reflective if you went back to Argentina in 2001 and looked at what we did for the next 3 years after that. People go to the movies as an escape. So crises or concerns with the economy really have never been something that scares us away from building. And we do everything in local currency, and so we're -- really from our perspective, we're generating excess cash flow, we're rolling that money back into the country. We're keeping it down there, and if anything -- if things become concerning in some industries, occasionally, that provides us opportunities to take advantage of it where maybe we can reduce rents or get new projects at better rates.

Well, you know also, to the point you're making, though, about would we be diversifying into other countries. Cinemark by design is very diversified. We're -- I think, we're in every Central American country but Belize. And then in South America, the only countries that we're not in are Venezuela, which I'm sure everybody agrees that's probably a good idea right now. And then we're not in Paraguay or Uruguay at this time, but when you look at our platform, we do have a really broad-based approach and platform in Latin America.

Great. And just one quick follow-up, if I may. With ticket pricing, you said in local currency terms, was up over 10% in the fourth quarter. Do you worry at all about inflationary pricing and maybe people getting priced out of the market at all?

Generally, Eric, our pricing is going to follow, I'd say, local inflation, but in the end, it's wage rates, things like that. In Latin America, many of the countries are unionized, if not all, and a lot of times the government set ranges for wages. And so you're usually adjusting your -- the ticket prices in accordance with where you see those -- the wages being adjusted. So I don't see our sales pricing out of the market. We're not trying to get above those amounts. We're staying in line with what general disposable income should be.

And also, just like the U.S. with our price grids, if price is an issue for you, you might go on a different time of the day or different day of the week to take advantage of lower pricing. And so we have incentive pricing if price is an issue.

Your next question comes from the line of David Miller with Topeka Capital Markets.

A few questions, actually. Rob, what was the sort of the same-theater top line sales in the quarter excluding acquisitions? Just trying to get you to kind of fill that out, if you could. And then could you just talk about the charge and just the losses on the Mexican subsidiary? Why did you have to pay taxes on that? If we could just get some of the mechanics around that, that'd be helpful. And then I have a follow-up.

Yes, sure. We don't forsake same theaters without the acquisition. I mean, obviously, the acquisitions are meaningful to us. But I'd say, in line -- that if I looked at for the quarter, how we performed without the acquisition, domestically, we -- again, where I think the industry was down to 2.5% attendance, we're down less than that, probably around 2%. Our box office was probably up around -- I'd have to guess that, estimate. I mean, in theory our box office probably would've been up around 2% or 3% because you have senior [ph] pricing going into it. As far as the Mexico sale, most of it -- most of the impact of it on the income statement this quarter really comes through taxes, which we had mentioned before to people when we sell Mexico, we would expect to pay taxes of 30%, 35% on it. It's really more of an accounting issue. It isn't like just a cash flow issue. Whenever you've had a country that you've been reinvesting in, all of the equity buildups from an accounting point of view stays in that country because you're not really making normal distributions of the income. When you sell it and you have to recognize all that built-up deferred revenue and everything, not from a deferred revenue income basis, but from a pure tax where you have deferred liabilities on that. And so all those kinds of things turn around on you whenever you have this type of sale. And that's really what's pushing to that income tax expense on the bottom line.

Got it. And then what was the aggregate free cash flow number for the quarter?

For this quarter, I'll have to see if I can grab that. It's probably going to be, ballpark, about $35 million to $40 million, somewhere in there.

Your next question comes from the line of Townsend Buckles with JPMorgan. Townsend Buckles - JP Morgan Chase & Co, Research Division: Any noticeable disruption you're seeing in attendance trends so far this quarter? And you've been down there for a long time, as you mentioned. So if you can maybe outline the biggest challenges for operating in this type of environment that you're seeing with inflation in the currency. And Robert, you alluded to some opportunities or positives that can come out of this. Do you expect to see these types of benefits to develop in the current environment?

Yes, well, like I said, we have a long history in Latin America and the -- and even in Argentina, we went through the currency and political crisis back in 2001. And so we also have the experience in operating in the kind of environment that we currently are in Argentina. And to Robert's point, this does -- since all our business is done in local currency and we don't really need to pull any cash up, we're in a strong position to really take advantage of the marketplace if anything does open up or any opportunity presents itself because we have the cash down there, and we don't have to push dollars down. And so -- but I mean, I think that they continue to hold up more on the basis as product translates or local product emerges, and that we have a long -- from the time we went to Latin America, we've considered ourselves longtime players in Latin America. And we think it's still a great, great opportunity for us and a unique opportunity for Cinemark versus our other U.S. companies. And because we got this great U.S. engine that sort of pulls the train, and then there's a great growth opportunity in Latin America that continues to perform. And we strongly believe that we'll be there year in, year out in the future.

As far as timing of taking advantage of opportunities, I think, as Tim said, it's kind of early right now. But I think what we've seen in the past is if some other industries are having any issues that tend to put pressure on, whether it's landlords or developers or somebody who wants to get a project done, because we do generate significant cash flow, we're there to kind of step in and take advantage of it. And I don't think you're going to see that necessarily early this year, but maybe towards the end of this year. Or early next year, maybe there'll be some opportunities.

Well, and also there are opportunities that we know of like -- and we talked about developing Flix as the NCM version of Latin America. And so we know that's an opportunity where we've obviously been involved in the execution of NCM, and so we know how to execute it. We also know all the advantages that digital and DCDC or satellite delivery bring to the marketplace and the potential of alternative entertainment in Latin America. In fact, we played the Super Bowl down in Brazil on a test in 5 different cities and had very, very good results. And so those are known opportunities, and they're just -- will require us to execute. And I think when you look at our history, the ones that we've been very good at is executing what we say we're going to do. Townsend Buckles - JP Morgan Chase & Co, Research Division: And so from an operating perspective, do things like ticket pricing and wages and leases tend to fluctuate together in a high inflation environment? Or does one tend to maybe outpace the other?

No. They tend to sort of fluctuate together. Townsend Buckles - JP Morgan Chase & Co, Research Division: Got it. And then just separately. On the M&A side in Latin America, a lot has been made about the industry conversion to digital pushing smaller U.S. exhibitors to sell. Is this maybe a bigger opportunity in Latin America where financing DPF [ph] agreements are more difficult to obtain?

Well, it would be sort of the issue you face in Latin America is whether it's a modern platform or not, and it would go country to country. Like there's really great potential targets, not that they're for sale in, like, Peru and Chile. And then there's also some really good modern assets in Brazil. And again, whether they're for sale or not right now, we don't know. And so in addition to the digital issue, they'd have to be sort of a modern-based theatrical platform. Townsend Buckles - JP Morgan Chase & Co, Research Division: Got it. So not much going on, on the LatAm side in terms of acquisition activity?

Whether there's plenty of attractive opportunities -- that we're in a great position because, again, since we've been down there a lot, we know all the people very well. They know we have the cash to execute. And also, we demonstrated with the Hoyts acquisition and then also some smaller acquisitions in Brazil that we're very capable of acquiring and executing.

I don't know if there's anything on the market right now. But as Tim said, and we see -- we try to stay in touch with a number of exhibitors to see if opportunities will arise.

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

I just want to circle back on Latin America here. Hopefully, you guys could discuss how you evaluate the macroeconomic and political risks associated with these individual Latin America markets that you choose to invest in. And I'm going to use just a couple of factors to consider when you're deploying this capital, but just obviously in the face of all volatility there it would just be helpful to understand how you guys think about that. And then I guess, relatedly, if you can just give us your updated view on how currency might impact your business in the first quarter?

On the -- I'll let Robert address the currency issue. But keep in mind, when we entered Latin America, 17, 18 years ago, depending on the country, is that all these countries were coming out of very unstable political environments. And so -- and it was a great opportunity to enter them because we have the opportunity to build the first modern theatrical platform or theater in every country we entered. And so we sort of started the whole growth of Latin America from a theatrical basis. And so at the time when we went there, we knew we were taking a risk because we were betting on the fact that these countries were going to emerge into -- from emerging democracies to sound democracies. And all these countries, when you look at them, whether Brazil or Colombia or Central American countries, they're all sort of stable from a political standpoint that there might be some currency fluctuations, but they've all demonstrated because they've had several elections since from the time we entered them. And the one exception, but even in Argentina, you're going to see a successful, I think, transfer of power. It's going through a little political crisis now. They have the elections next year, but I think it will be a very peaceful transfer of power. And so from the political standpoint, they're a fairly stable democracies facing some challenges. But we're very comfortable in the region. So we've got great management teams that really -- that are all from these local countries. They really know the countries. We really know the countries. And so we're not overly concerned about either the political or even the long-term economic viability of these countries.

James, we had -- when we entered most of these countries, we entered with fairly significant, I'd say, economic and financial partners that we stay in touch with. As a matter fact, our partner in Colombia, part of that family is now -- a member of that family is now the president of Colombia.

Santos family was one of our original partners in Colombia.

And so we've maintained those relationships to understand what's going on in government. We have -- obviously, we have people on the ground that our meeting with bankers and things like that. Tim and I do that as well. So we're trying to, also, to your point, stay in touch with and understand what the political arena, where it's heading. The good part, and I think this is what's hard when we've learned, as Tim said, over the last, really, 15 to 20 years, you go into these countries and you realize there's going to be some variance that people in the United States aren't as used to. But the people in those countries actually are, and you adapt to it. And we've been fortunate that we have a very strong cash flow business, the type of business this is, and you're able to take advantage of when there are downshifts and then when the economies come back, which is you can go back and look when that's happened before, we're in even better shape than when we start, and so we proceed doing the same thing. I think that's it's just hard when you're reading the papers, some of changes. But I also tell people to keep it in perspective of where the U.S. is, I mean, the U.S. is coming from nearly 0 to try to get 1% or 2% growth, and these countries are coming down from 8% growth to 2% or 3% growth. And so they still offer, just from a pure economic point of view, generally a better outlook than where the U.S. has been. And then secondly, in our particular industry, it's heavily under-screened just with where it exists today.

That's helpful. And then just your outlook on the first quarter currency boost?

It's a bit of a tough call right now. But I mean, clearly, with some of the valuations that started at the end of last year, and things seem to be settling out a little bit better, but our guess is it could easily be in the 15% to 20% hit for this first quarter.

Your next question comes from the line of Matthew Harrigan with Wunderlich Securities.

A question on what could affect your operations in terms of better MIS and planning. But when you look at physiology, pre-act and everything across the board that's aimed at better predict film performance, I think we've had a few -- certainly, Q1 has been a lot better than people expect it for a number of movies like Ride Along. But are you getting more confident in your ability to do that to an extent? And does it really just -- at the periphery or is that something that enables you to be even more efficient on the operational side?

Well, I mean, I think the studios have been -- done a much better job in identifying their audience for specific films through the social media aspect besides their marketing campaign. And -- but from time to time, a movie will either underperform or way overperform, and I'll use Frozen as an example. We thought it would be a very good film. Did we think it would still be running extremely strong in its 12th week and that it might be a $1 billion global picture? No, we didn't. And I mean, I don't even think that Disney thought that, but it's a great story. And the studios have -- they seem to be doing a lot better to be able to predict their -- the type of movies and the type of marketing campaigns. And then the thing I think they've also done to one of the points that you are going to, I think, is they've gotten better at bringing a diverse slate to the market to where they're not all competing for that same customer. And I think that, that has really helped expand the market because of the diversity in the marketplace and as your first quarter has been off to a good start. And then the other thing they're doing is they're sort of broadening the year. An example of that is that summer starts early and we're -- traditionally, summer sort of started like at the end of April or the 1st of May. And Marvel is going to release Captain America: Winter Soldier on April 4 and then Rio 2, which was a big animated picture, is on April 11. And then Transcendence, which is a big budget sci-fi epic starring Johnny Depp, goes on April 18. And so that's almost a month earlier than last year as to when they started. And so that's also encouraging that they're broadening the year.

Your next question comes from the line of Jim Goss with Barrington Research.

You made note of the number of theaters and screens you've acquired. And I'm wondering if you had picked up any ideas from these acquired properties that have inspired action elsewhere in the film or in your theater base?

Yes. No, we -- I mean, my personal philosophy is that I always think that when you acquire a company or a theater that it's the opportunity to learn something new. And so I tend to say, hey, for the first 3 to 6 months, we'll just listen and learn and not go in and just immediately say, "Okay, here's how Cinemark does it." And the Rave was an example of that. They were a well-operated company, and I do think that we learned a lot. But I would say the same thing about the acquisition of Muvico. Another idea that we purchased a company called Century, and they had a concept of a self-service concession stand. And we've seen that, that tends to perform better than our traditional stands. And so we sort of changed our model. And so we do try to look, listen and learn and adapt because we realize that all -- not all the best ideas are residing here in Cinemark. And also, we're constantly looking at what our competitors do and are doing in the market not only here, but around the world that we think is a great idea and try to put the Cinemark adaptation on it.

Okay. Are there -- is there any pace -- are there any ideas that you think might have a certain rollout that would be more quick than other ideas that you picked up so far?

Yes. One thing we've announced that we've opened up a couple of them, and we're working on expanding because the initial ones that we opened up. The Cinemark Bistro concept, again, we think, is really market-specific to my earlier remarks, and we're doing that. And then in Boca, when we acquired the movie theater in Boca, they had this concept where you build a VIP section in the back of the balcony and then -- or in the balcony section, in the front section is a regular theater. And you'll see when we open up Playa and Towson that we sort of expanded on that concept and are doing that. And then in Latin America, we were -- it was sort of required that you have a certain number of VIP auditoriums. And so here in the U.S., we're expanding that concept. Again, it's really market-specific here just like it is in Latin America. But all these concepts, I think you have to look at each individual marketplace to decide which one you think will work.

I noticed you had made a comment in a presentation you've made recently that AMC with some of the lowest theaters provided a good opportunity for the reseating. Do you feel you need a challenged property in order to make that sort of investment workable ROI?

No, I mean, I don't think you need a challenged property. I think it's more market-specific and volume of the theaters in the marketplace. But I thought that AMC come up with a great solution for some of those properties, and I commend them for it.

Okay. And the last one final follow-up on this South American situation. I think Argentina went through something like this 10 or 12 years ago as well. I believe you were operating in that country at that time. What -- how did you react at that time? And is this a country that you might isolate from the rest of the properties as a special situation that you might have to take a different set of actions on, even though, I believe, Hoyts was in Argentina if I recall?

Yes, Hoyts was, and as you pointed out, we were there too. And we've seen it as a real market opportunity to either buy down rents or to reset them because we had a lot of capital because -- and we keep trying to say to people that you need to keep in mind that all our business is done in local currencies, and of course, we generate a lot of cash. And so we can be very adaptive to the market and see adjacent opportunities present themselves. I don't think the crisis in Argentina this time around because their currency is based on the peso, where it was a dollar arise economy at that time, and you had sort of the collapse of the dollar and the change-over to the peso. And so it was a much more dramatic downturn where you aren't going to see that kind of economic upset at this point in time.

Your next question comes from the line of Ben Mogil with Stifel. Benjamin E. Mogil - Stifel, Nicolaus & Company, Incorporated, Research Division: Honestly, all my questions have been answered, but thank you very much.

Your next question comes from the line of Ben Swinburne with Morgan Stanley.

This is Don [ph] for Ben. I was just wondering if you could give a quick update on how you're thinking about the balance sheet. I think you ended the year at about 2 turns net. So should we think about that as the trough as you look to the redeploy a cash for Mexico? Or could we see further delevering?

I think for the moment, we'll continue to look at opportunities to reinvest it. As some people brought up, we don't know what will happen in Latin America with opportunities, but we want to be prepared for it if something were to come up down there. I think in the U.S, I don't know the acquisition market is as robust as what had been. We'll continue to look for some deals here, and then mostly, just pull it back into our theaters as well as new builds. With our dividend rate [ph] at the end of last year, I think we've tried to address capital allocation for shareholders with our current plans of CapEx generation. So I think, all in all, we feel pretty good about where we're at. Most of all of our debt is long-term debt at this point. I mean, all of it is. The only thing that I have that's high priced any more is a $200 million bond, so we'll have to look at that over time. But it's still a few years before I can do anything with it.

Okay. And then does the macro risk in LatAm at all influence your appetite for leverage?

No, not really because again, everything down there is done in local currency. We don't have debt in LatAm. We generate excess cash, so -- and we've designed the company such that the U.S. is really responsible for the debt payment, interest debt. Dividends is really all handled from the cash flow out of here. And so it's not that we wanted to be independent, but we already designed it as a growth engine down there, not to be dependent upon the U.S. And the U.S. realistically not to be dependent upon the international for cash needs. So we're designed to continue to operate just as it is today.

Your next question is from the line of Chad Beynon with Macquarie.

Two quick ones here. First on LatAm, on the film side. Could you talk about what you saw during the quarter from a local production standpoint and maybe how 2014 looks kind of throughout the region from a local product standpoint as well?

Yes. On the local product, even though our buyers and our people go to the local film festivals and that, it's a lot more difficult to gauge as their ultimate success in the marketplace. And so it's -- and -- but we're constantly working with all the local film producers and directors in that on their products and as to how they're going to bring them to the marketplace. But where -- in the U.S, there seems to be -- you have a much better feel based on the information you're getting as to how they're going to perform, and Latin America is not quite so advanced.

Okay. And then with regards to the World Cup this summer, could you talk about anything you're doing in your theaters down there to drive business and maybe how the film scheduling may differ if the World Cup wasn't at that time?

No, absolutely. Now they -- the studios themselves will tend to maybe shift some of their product that they think might be going after that same audience around. And so that will happen, so it will just play at a different time of the year. It's not that it won't play in the market. And so they tend to book more films that might compete for the family business or maybe more female-oriented or not so much male, young male or adult male. And so you'll see some shifting of product during that period. Now also, obviously, we're trying to set up different promotions to also tie in to the World Cup as much as we can throughout the region. And then with the World Cup itself, a lot of it will depend really on how it plays out. I mean, going into it, I'm sure every country thinks they're going to be in the finals. And so -- but if it turns out like it did last time around where it's 2 European countries in the finals, I'm sure Brazil and Argentina, especially, will be very, very disappointed. But you know that could also influence our business. So...

At this time, there are no further questions.

Well, thank you for joining us on the call today. We really appreciate it. We look forward to talking to you after the first quarter with our results.

Ladies and gentlemen, this does conclude today's conference call. At this time, you may disconnect.