Cinemark CEO Says Shuttered Theaters May Reopen by July 1

Mark Zoradi also predicted staggered cinema screen openings due to "lingering social distancing" as the COVID-19 crisis recedes.

Cinemark CEO Mark Zoradi on Wednesday predicted it will take up to four months for shuttered cinema screens to fully reopen as the COVID-19 crisis recedes, likely starting July 1.

"A return to normalcy may span multiple months driven by staggered theater openings due to government limits, reduced operating hours, lingering social distancing and a ramp-up of consumer comfort with public gatherings," Zoradi said on a morning call to update Wall Street analysts. Cinemark execs said the chain would take June to bring back employees and begin classic movie screenings later that month to get patrons back to the multiplex.

And Cinemark in July expects to slowly ramp up to eventual normalcy with releases like Christopher Nolan's Tenet on July 17. "We're not completely certain, but we're planning on anywhere from one to three months to light up that engine again," Zoradi said.

The CEO added Cinemark was planning for contingencies as U.S. state and local officials had not yet told the chain a July reopening was not possible, but neither had they confirmed that timing to reopen was available to them.

The multi-month modeling by Cinemark for an eventual reopening of its theaters is echoed by Wall Street forecasts that see a midsummer return to the multiplex for Hollywood movies. "We anticipate theaters will remain closed at least until June. Once reopened, attendance and revenue may be materially lower due to lingering effects on consumer behavior or potential government-imposed mandates limiting capacity," Patrice Cucinello, director of U.S. corporate ratings at Fitch Ratings, said Wednesday in a ratings note on U.S. cinema chains.

How Cinemark and rival domestic exhibitors weather the financial impact of current cinema closures and ongoing public health measures like social distancing has put the major chains under the microscope for just how strong their balance sheets are to weather the storm, as well as the risk of debt defaults and even bankruptcy.

Cinemark temporarily shuttered its U.S. and Latin American theaters on March 18. But as the U.S. battles the novel coronavirus pandemic, Zoradi argued movie lovers would eventually leave their homes to see Hollywood tentpoles.

"We believe pent-up demand for out-of-home entertainment, along with a backlog of strong film content, bodes well for exhibition," Zoradi said as he looked ahead to summer theatrical releases like Disney's Mulan and Warner Bros.' Wonder Woman 1984 fueling a return of patrons to the multiplex.

The major studios delaying theatrical releases and sending movies direct to streaming platforms has posed a challenge for domestic exhibitors. "I can definitely report that the studios are anxious to get back into the theatrical business. It's an extremely important part of their revenue stream," said the exec.

Cinemark CFO Sean Gamble added that a recent $98.8 million draw down on its credit revolver and raising $250 million in new senior notes represented "prudent measures," rather than an emergency grab for new cash, and should allow Cinemark to navigate the COVID-19 crisis, even if it stretches into 2021.

Cinemark execs were also asked if they saw opportunities down the road to merge with rival exhibitors not as well positioned to remain in business amid theater shutdowns. "At this time, we're not considering any significant M&A opportunities," Zoradi answered.

He added Cinemark would prize "security" over growth as the exhibition industry continued to face severe headwinds. "What got us to this strength of position right now is we were relatively conservative and didn't chase deals at multiple that were beyond the levels we were willing to do, and that same philosophy is going to continue," Zoradi said.