Cinemark, the third-largest theater chain in the U.S. has laid off thousands of employees, while issuing widespread furloughs and pay cuts. Movie theaters in the country have been shut down since mid-March, given the limitations on public gatherings, and that has had a major impact on the exhibition business. To help keep their doors open long-term, Cinemark has had to significantly cut costs, and that has led to sweeping job cuts.
According to a recent 8-K filing, 17,500 of the theater chains hourly employees have been laid off. Additionally, 50 percent of Cinemark's corporate employees were furloughed, receiving 20 percent of their salary and full benefits. The employees who remain have had their salaries reduced by 50 percent. Cinemark CEO Mark Zoradi is not taking a salary currently. Zoradi earned $6.3 million in $2019. The company's board of directors have also opted not to take a salary for the time being, while many executives are taking steep 80 percent pay cuts.
This comes just days after Cinemark announced it would issue $250 million in debt securities to help stay afloat during the shutdown. The company also expects to see a $20 million tax refund as part of the $2 trillion CARES Act passed by the government. In the filing, Cinemark explained that there is uncertainty surrounding these tax benefits, but they remain optimistic for the future.
"Although we are reviewing, and intend to seek, any available potential benefits under the CARES Act, including those described above, we cannot predict the manner in which such benefits will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all. We believe that the exhibition industry has historically fared well during recessions, and we remain optimistic that it will rebound and benefit from pent-up social demand as home sheltering subsides and people seek togetherness with a return to normalcy."
Cinemark is far from the only theater chain hurting right now. AMC Theatres is on the verge of bankruptcy, with nearly $5 billion in debt. Their stock has tanked in recent weeks and, even with money from the CARES Act, things are looking grim. Cinemark, however, is somewhat better positioned to weather the storm, as explained in the 8-K.
"Even if our theatres remained closed for the remainder of the year, Cinemark USA believes that it has sufficient cash to sustain its operations for the remainder of the year, even before giving effect to this offering,"
The big questions right now are, when will theaters reopen? And, when they do, will people still be willing to gather together in a crowded room for hours on end like they used to? The hope right now from exhibitors is that they will be able to resume operations in late July. Even if that does happen, the struggles will be numerous and difficult to predict. This news was previously reported by The Wrap.