As filed with the Securities and Exchange Commission on February 1, 2007

Registration No. 333-      

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

Cinemark Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

 

3900 Dallas Parkway, Suite 500

Plano, Texas 75093

(972) 665-1000

(Address, Including Zip Code, and Telephone Number,

Including Area Code, of Registrant’s Principal Executive Offices)

 

Michael Cavalier

Senior Vice President-General Counsel

3900 Dallas Parkway, Suite 500

Plano, Texas 75093

(972) 665-1000

(Name, Address, Including Zip Code, and Telephone Number,

Including Area Code, of Agent for Service)

 

 

 

 

With a copy to:

 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  o

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o _ _

 

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o _ _

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o _ _

 

CALCULATION OF REGISTRATION FEE

 

 

 

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

Subject to Completion, dated February 1, 2007

 

 

PROSPECTUS

 

 

           Shares

 

 

 

Cinemark Holdings, Inc.

 

Common Stock

 

 

 

 

 

We are offering           shares of our common stock in this initial public offering. The selling stockholders named in this prospectus are offering an additional           shares of our common stock. We will not receive any proceeds from the sale of shares by the selling stockholders.

 

No public market currently exists for our common stock. We intend to apply to list our common stock on the New York Stock Exchange under the symbol “CNK.” We currently expect that the initial public offering price will be between $      and $      per share.

 

Investing in our common stock involves risks. See “Risk Factors” beginning on page 12.

 

 

The selling stockholders have granted the underwriter a 30-day option to purchase up to an additional           shares of our common stock on the same terms and conditions as set forth above if the underwriter sells more than           shares of our common stock in this offering.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

Lehman Brothers expects to deliver the shares on or about          , 2007.

 

 

 

 

Lehman Brothers

 

 

          , 2007

 

TABLE OF CONTENTS

 

 

You should rely only on the information contained in this prospectus. We have not, and the underwriter has not, authorized anyone to provide you with information that is different. This prospectus may only be used where it is legal to sell these securities. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

 

Dealer Prospectus Delivery Obligation

 

Until          , 2007 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

Market Information

 

Information regarding market share, market position and industry data pertaining to our business contained in this prospectus consists of estimates based on data and reports compiled by industry professional organizations (including the Motion Picture Association of America, or MPAA, PricewaterhouseCoopers LLP, or PwC, MPA Worldwide Market Research, the National Association of Theatre Owners, or NATO, and BIA Financial Network, Inc., or BIAfn), industry analysts and our knowledge of our business and markets.

 

We take responsibility for compiling and extracting, but have not independently verified, market and industry data provided by third parties, or by industry or general publications, and take no further responsibility for such data. Similarly, while we believe our internal estimates with respect to our industry are reliable, our estimates have not been verified by any independent sources, and we cannot assure you as to their accuracy.

 

Designated Market Area^®, or DMA^®, is a registered trademark of Nielsen Media Research, Inc.

About Us

 

Financial Presentation

 

Cinemark Holdings, Inc. was formed on August 2, 2006. On August 7, 2006, the Cinemark, Inc. stockholders entered into a share exchange agreement pursuant to which they agreed to exchange their shares of Class A common stock for an equal number of shares of common stock of Cinemark Holdings, Inc., hereinafter referred to as the Cinemark Share Exchange. The Cinemark Share Exchange and the acquisition of Century Theatres, Inc., or Century, were completed on October 5, 2006. Prior to October 5, 2006, Cinemark Holdings, Inc. had no assets, liabilities or operations. On October 5, 2006, Cinemark, Inc. became a wholly owned subsidiary of Cinemark Holdings, Inc.

 

On April 2, 2004, an affiliate of Madison Dearborn Partners, LLC, or MDP, acquired approximately 83% of the capital stock of Cinemark, Inc., pursuant to which a newly formed subsidiary owned by an affiliate of MDP was merged into Cinemark, Inc. with Cinemark, Inc. continuing as the surviving corporation, hereinafter referred to as the MDP Merger. Management, including Lee Roy Mitchell, Chairman and then Chief Executive Officer, retained at such time an approximately 17% ownership interest in Cinemark, Inc.

 

For purposes of the financial presentation in this prospectus, the historical financial information has been prepared in contemplation of this initial public offering and reflects the change in reporting entity that occurred as a result of the Cinemark Share Exchange. Cinemark Holdings, Inc.’s consolidated financial information reflects the historical accounting basis of its stockholders for all periods presented. Accordingly, financial information for periods preceding the MDP Merger is presented as Predecessor and for the periods subsequent to the MDP Merger is presented as Successor. The Century acquisition is not reflected in the historical financial information of Cinemark, Inc. or Cinemark Holdings, Inc. since the transaction occurred subsequent to September 30, 2006. Because of the significance of the Century acquisition, we have included in this prospectus historical financial statements for Century as well as pro forma financial information giving effect to the Century acquisition as more fully described in “Unaudited Pro Forma Condensed Consolidated Financial Information.”

 

Certain Definitions

 

Unless the context otherwise requires, all references to “we,” “our,” “us,” the “issuer” or “Cinemark” relate to Cinemark Holdings, Inc. or Cinemark, Inc., its predecessor, and its consolidated subsidiaries, including Cinemark USA, Inc. and Century. We use the term “pro forma” in this prospectus to refer to information presented after giving effect to the Century acquisition. Unless otherwise specified, all operating and other statistical data for the U.S. include one theatre in Canada. All references to Latin America are to Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Honduras, Mexico, Nicaragua, Panama and Peru. Unless otherwise specified, all operating and other statistical data are as of and for periods ended September 30, 2006 except for data relating to Century, which are as of and for the periods ended September 28, 2006, the end of its fiscal year.

Non-GAAP Financial Measures

 

Accounting principles generally accepted in the United States are commonly referred to as “GAAP.” A non-GAAP financial measure is generally defined by the Securities and Exchange Commission, or SEC, as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. In this prospectus, we present Adjusted EBITDA and Adjusted EBITDA margin, both non-GAAP financial measures, because these measures provide our Board of Directors, management and investors with additional information to measure our performance, estimate our value and evaluate our ability to service debt. Management uses Adjusted EBITDA and Adjusted EBITDA margin as a performance measure for internal monitoring and planning, including preparation of annual budgets, analyzing investment decisions and evaluating profitability and performance comparisons between us and our competitors. We also use these measures to calculate amounts of performance based compensation under employment contracts and incentive bonus programs. Adjusted EBITDA and Adjusted EBITDA margin should not be construed as alternatives to net income or operating income as indicators of operating performance or as alternatives to cash flow from operations as measures of liquidity (as determined in accordance with GAAP). Our definitions and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found at “Prospectus Summary — Non-GAAP Financial Measures and Reconciliations.”

 

PROSPECTUS SUMMARY

	•	Advertising:  NCM develops, produces, sells and distributes a branded, pre-feature entertainment and advertising program called “FirstLook,” along with an advertising program for its lobby entertainment network, or LEN, and various marketing and promotional products in theatre lobbies;
	•	CineMeetings:  NCM provides live and pre-recorded networked and single-site meetings and events in the theatres throughout its network; and
	•	Digital Programming Events:  NCM distributes live and pre-recorded concerts, sporting events and other entertainment programming to theatres across its digital network.

	•	our dependency on motion picture production and performance could have a material adverse effect on our business;
	•	a deterioration in relationships with film distributors could adversely affect our ability to license commercially successful films at reasonable rental rates;
	•	we may not be able to successfully execute our business strategy because of the competitive nature of our industry as well as competition from alternative forms of entertainment;
	•	our substantial lease and debt obligations could impair our liquidity and financial condition; and
	•	we may not be able to identify suitable locations for expansion or generate additional revenue opportunities.

Common stock offered by us		shares
Common stock offered by the selling stockholders		shares
Common stock to be outstanding after the offering		shares

Underwriter’s option		The selling stockholders have granted the underwriter a 30-day option to purchase up to an aggregate of           additional shares of our common stock if the underwriter sells more than           shares in this offering.
Dividend policy		Following this offering, we intend to pay a quarterly cash dividend at an annual rate initially equal to $      per share (or a quarterly rate initially equal to $      per share) of common stock, commencing in the           quarter of 2007, which will be a partial dividend paid on a pro rata basis depending on the closing date for this offering. The declaration of future dividends on our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, earnings, capital requirements, limitations in our debt agreements and legal requirements. See “Dividend Policy.”
Use of proceeds		We expect to use the net proceeds that we receive from this offering to repay outstanding debt and for working capital and other general corporate purposes. See “Use of Proceeds.” We will not receive any proceeds from the sale of shares by the selling stockholders.
Proposed New York Stock Exchange symbol		“CNK”

	•	shares of our common stock issuable upon the exercise of outstanding stock options, which have a weighted average exercise price of $      per share; and
	•	an aggregate of           shares of our common stock reserved for future issuance under our 2006 Long Term Incentive Plan.

	•	assumes no exercise of the underwriter’s option to purchase up to an aggregate of           additional shares of our common stock; and
	•	assumes an initial public offering price of $      per share, the midpoint of the price range set forth on the cover page of this prospectus.

		Cinemark, Inc.									Cinemark Holdings, Inc.
		Predecessor									Successor
						January 1,					April 2,																Pro Forma
						2004					2004																				Nine Months
		Year Ended				to					to				Year Ended				Nine Months								Year Ended				Ended
		December 31,				April 1,					December 31,				December 31,				Ended September 30,								December 31,				September 30,
		2003				2004					2004				2005				2005				2006				2005				2006
						(Dollars in thousand, except per share data)
Statement of Operations Data(1):
Revenues:
Admissions		$	597,548			$	149,134				$	497,865			$	641,240			$	470,535			$	514,183			$	982,699			$	779,085
Concession			300,568				72,480					249,141				320,072				234,564				260,223				457,190				369,864
Other			52,756				12,011					43,611				59,285				41,909				54,683				74,559				64,844
Total Revenue		$	950,872			$	233,625				$	790,617			$	1,020,597			$	747,008			$	829,089			$	1,514,448			$	1,213,793
Operating Income			135,563				556					73,620				63,501				78,838				98,187				118,440				145,745
Income (loss) from continuing operations			47,389				(9,068	)				(7,842	)			(25,408	)			12,578				21,170				(39,762	)			16,759
Net income (loss)		$	44,649			$	(10,633	)			$	(3,687	)		$	(25,408	)		$	12,578			$	21,170			$	(39,762	)		$	16,759
Net income (loss) per share:
Basic		$	1.10			$	(0.26	)			$	(0.13	)		$	(0.91	)		$	0.45			$	0.76			$	(1.28	)		$	0.54
Diluted		$	1.09			$	(0.26	)			$	(0.13	)		$	(0.91	)		$	0.45			$	0.74			$	(1.28	)		$	0.53
Weighted average shares outstanding:
Basic			40,516				40,614					27,675				27,784				27,746				27,896				31,172				31,285
Diluted			40,795				40,614					27,675				27,784				27,746				28,453				31,172				31,841

		Cinemark, Inc.									Cinemark Holdings, Inc.
		Predecessor									Successor
						January 1,					April 2,																Pro Forma
						2004					2004																				Nine Months
		Year Ended				to					to				Year Ended				Nine Months								Year Ended				Ended
		December 31,				April 1,					December 31,				December 31,				Ended September 30,								December 31,				September 30,
		2003				2004					2004				2005				2005				2006				2005				2006
		(Dollars in thousands)
Other Financial Data:
Cash flow provided by (used for):
Operating activities		$	135,522			$	10,100				$	112,986			$	165,270			$	84,070			$	80,425
Investing activities			(47,151	)			(16,210	)				(100,737	)			(81,617	)			(53,455	)			(76,395	)
Financing activities			(45,738	)			346,983					(361,426	)			(3,750	)			(1,477	)			(44,293	)
Capital expenditures			51,002				17,850					63,158				75,605				47,676				77,902
Non-GAAP Data(1):
Adjusted EBITDA(2)		$	210,122			$	50,608				$	178,632			$	210,135			$	152,127			$	180,285			$	323,750			$	267,535
Adjusted EBITDA margin(2)			22.1%				21.7%					22.6%				20.6%				20.4%				21.7%				21.4%				22.0%

		Cinemark, Inc.					Cinemark Holdings, Inc.
		Predecessor					Successor
																			Pro Forma
		As of					As of												As of
		December 31,					December 31,								As of September 30,				September 30,
		2003					2004				2005				2006				2006
		(In thousands)
Balance Sheet Data:
Cash and cash equivalents		$	107,322				$	100,248			$	182,199			$	142,204			$	78,594
Theatre properties and equipment, net			775,880					794,723				803,269				806,393				1,411,347
Total assets			960,736					1,831,855				1,864,852				1,830,803				3,152,165
Total long-term debt and capital lease obligations, including current portion			658,431					1,026,055				1,055,095				1,038,926				2,022,092
Stockholders’ equity			76,946					533,200				519,349				546,680				690,535

		Cinemark Inc.									Cinemark Holdings, Inc.
		Predecessor									Successor
		As of and				January 1,					April 2,				As of and												Cinemark and Century Combined
		for the				2004					2004				for the																Nine Months
		Year Ended				to					to				Year Ended												Year Ended				Ended
		December 31,				April 1,					December 31,				December 31,				As of and for Nine Months Ended September 30,								December 31,				September 30,
		2003				2004					2004				2005				2005				2006				2005				2006
		(Attendance in thousands)
Operating Data:
United States(3)(4)
Theatres operated (at period end)			189				191					191				200				197				202				276				279
Screens operated (at period end)			2,244				2,262					2,303				2,417				2,369				2,468				3,412				3,485
Total attendance(1)			112,581				25,790					87,856				105,573				78,257				81,558				152,093				117,506
International(5)
Theatres operated (at period end)			97				95					101				108				106				113				108				113
Screens operated (at period end)			852				835					869				912				898				945				912				945
Total attendance(1)			60,553				15,791					49,904				60,104				45,270				46,930				60,104				46,930
Worldwide(3)(4)(5)
Theatres operated (at period end)			286				286					292				308				303				315				384				392
Screens operated (at period end)			3,096				3,097					3,172				3,329				3,267				3,413				4,324				4,430
Total attendance(1)			173,134				41,581					137,760				165,677				123,527				128,488				212,197				164,436

(1)		Statement of Operations Data (other than net income (loss)), non-GAAP Data and attendance data exclude the results of the two United Kingdom theatres and the eleven Interstate theatres for all periods presented as these theatres were sold during the period from April 2, 2004 through December 31, 2004. The results of operations for these theatres in the 2003 and 2004 periods are presented as discontinued operations. See note 6 to our annual consolidated financial statements.
(2)		We set forth our definitions of Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of net income (loss) to Adjusted EBITDA at “— Non-GAAP Financial Measures and Reconciliations.”
(3)		The data excludes certain theatres operated by us in the U.S. pursuant to management agreements that are not part of our consolidated operations.
(4)		The data for 2003 excludes theatres, screens and attendance for eight theatres and 46 screens acquired on December 31, 2003, as the results of operations for these theatres are not included in our 2003 consolidated results of operations.
(5)		The data excludes certain theatres operated internationally through our affiliates that are not part of our consolidated operations.

		Cinemark Inc.									Cinemark Holdings, Inc.
		Predecessor									Successor
																											Pro Forma
																			Nine Months				Nine Months								Nine Months
		Year Ended				January 1, 2004					April 2, 2004				Year Ended				Ended				Ended				Year Ended				Ended
		December 31,				to April 1,					to December 31,				December 31,				September 30,				September 30,				December 31,				September 30,
		2003				2004					2004				2005				2005				2006				2005				2006
															(Dollars in thousands)
Net Income (loss)		$	44,649			$	(10,633	)			$	(3,687	)		$	(25,408	)		$	12,578			$	21,170			$	(39,762	)		$	16,759
Add (deduct):
Income taxes			25,041				(3,703	)				18,293				9,408				7,026				9,576				2,176				3,411
Interest expense(1)			54,163				12,562					58,149				84,082				61,996				67,108				162,131				125,200
Other (income) expense			8,970				765					5,020				(4,581	)			(2,762	)			333				(6,105	)			375
Cumulative effect of a change in accounting principle, net of taxes			—				—					—				—				—				—				—				—
(Income) loss from discontinued operations, net of taxes			2,740				1,565					(4,155	)			—				—				—				—				—
Depreciation and amortization			65,085				16,865					58,266				81,952				61,005				61,541				136,791				102,670
Amortization of net favorable leases			—				—					3,087				4,174				3,131				2,982				4,203				3,004
Amortization of tenant allowances			—				—					—				—				—				—				(1,738	)			(1,303	)
Impairment of long-lived assets			5,049				1,000					36,721				51,677				2,917				5,199				51,677				5,605
(Gain) loss on sale of assets and other			(1,202	)			(513	)				3,602				4,436				2,879				5,300				9,393				5,361
Deferred lease expenses			4,547				560					3,336				4,395				3,357				4,928				4,984				4,305
Stock option compensation and change of control expenses related to the MDP Merger			—				31,995					—				—				—				—				—				—
Amortized compensation — stock options			1,080				145					—				—				—				2,148				—				2,148
Adjusted EBITDA		$	210,122			$	50,608				$	178,632			$	210,135			$	152,127			$	180,285			$	323,750			$	267,535
Adjusted EBITDA margin			22.1	%			21.7	%				22.6	%			20.6	%			20.4	%			21.7	%			21.4	%			22.0	%

(1)	Includes amortization of debt issue costs.

		Century Theatres, Inc.
		Year Ended				Year Ended				Year Ended
		September 30,				September 29,				September 28,
		2004				2005				2006
		(Dollars in thousands)
Net Income		$	33,242			$	27,256			$	18,124
Add (deduct):
Income taxes			21,216				17,310				12,674
Interest expense			11,713				13,081				29,367
Other (income) expense			(1,045	)			(1,403	)			(282	)
Cumulative effect of change in accounting principle			—				—				—
Income (loss) from discontinued operations, net of taxes			—				—				—
Depreciation and amortization			45,635				49,500				47,116
Amortization of net favorable leases			—				—				—
Amortization of tenant allowances			(1,734	)			(1,738	)			(1,738	)
Impairment of long-lived assets			295				—				406
Loss on sale of assets and other			110				4,967				61
Deferred lease expenses			1,803				744				(565	)
Change of control expenses related to acquisition (1)			—				—				15,672
Amortized compensation-stock options(2)			—				—				—
Adjusted EBITDA		$	111,235			$	109,717			$	120,835
Adjusted EBITDA margin			22.3	%			22.5	%			23.4	%

(1)		Reflects change of control payments of $15.7 million as a result of the Century acquisition.
(2)		Century had no stock option plan during the periods presented.

 

Before you invest in our common stock, you should understand the high degree of risk involved. You should consider carefully the following risks and all other information in this prospectus, including the financial statements and related notes. The following risks and uncertainties are not the only ones we face. If any of the following risks actually occur, our business, financial condition and operating results could be adversely affected.

 

Risks Related to Our Business and Industry

 

Our business depends on film production and performance.

 

Our business depends on both the availability of suitable films for exhibition in our theatres and the success of those pictures in our markets. Poor performance of films, the disruption in the production of films, or a reduction in the marketing efforts of the film distributors to promote their films could have an adverse effect on our business by resulting in fewer patrons and reduced revenues.

 

A deterioration in relationships with film distributors could adversely affect our ability to obtain commercially successful films.

 

We rely on the film distributors for the motion pictures shown in our theatres. The film distribution business is highly concentrated, with ten major film distributors accounting for approximately 90% of U.S. box office revenues and 44 of the top 50 grossing films during 2005. Numerous antitrust cases and consent decrees resulting from these cases impact the distribution of motion pictures. The consent decrees bind certain major film distributors to license films to exhibitors on a theatre-by-theatre and film-by-film basis. Consequently, we cannot guarantee a supply of films by entering into long-term arrangements with major distributors. We are therefore required to negotiate licenses for each film and for each theatre. A deterioration in our relationship with any of the ten major film distributors could adversely affect our ability to obtain commercially successful films and to negotiate favorable licensing terms for such films, both of which could adversely affect our business and operating results.

 

We face intense competition for patrons and film licensing which may adversely affect our business.

 

The motion picture industry is highly competitive. We compete against local, regional, national and international exhibitors. We compete for both patrons and licensing of motion pictures. The competition for patrons is dependent upon such factors as the availability of popular motion pictures, the location and number of theatres and screens in a market, the comfort and quality of the theatres and pricing. Some of our competitors have greater resources and may have lower costs. The principal competitive factors with respect to film licensing include licensing terms, number of seats and screens available for a particular picture, revenue potential and the location and condition of an exhibitor’s theatres. If we are unable to license successful films, our business may be adversely affected.

 

The oversupply of screens in the motion picture exhibition industry and other factors may adversely affect the performance of some of our theatres.

 

During the period between 1996 and 2000, theatre exhibitor companies emphasized the development of large multiplexes. The strategy of aggressively building multiplexes was adopted throughout the industry and resulted in an oversupply of screens in the North American exhibition industry and negatively impacted many older multiplex theatres more than expected. Many of these theatres have long lease commitments making them financially burdensome to close prior to the expiration of the lease term, even theatres that are unprofitable. Where theatres have been closed, landlords have often made rent concessions to small independent or regional operators to keep the theatres open since theatre buildings are typically limited in alternative uses. As a result, some analysts believe that there continues to be an oversupply of screens in the North American exhibition industry, as screen counts have increased each year since 2003. If competitors build theatres in the markets we serve, the performance of some of our theatres could be adversely affected due to increased competition.

An increase in the use of alternative film distribution channels and other competing forms of entertainment may drive down movie theatre attendance and limit ticket price growth.

 

We face competition for patrons from a number of alternative motion picture distribution channels, such as DVD, network and syndicated television, video on-demand, satellite pay-per-view television and downloading utilizing the Internet. We also compete with other forms of entertainment competing for our patrons’ leisure time and disposable income such as concerts, amusement parks and sporting events. A significant increase in popularity of these alternative film distribution channels and competing forms of entertainment could have an adverse effect on our business and results of operations.

 

Our results of operations may be impacted by shrinking video release windows.

 

Over the last decade, the average video release window, which represents the time that elapses from the date of a film’s theatrical release to the date a film is available on DVD, has decreased from approximately six months to approximately four months. We cannot assure you that this release window, which is determined by the film studios, will not shrink further or be eliminated altogether, which could have an adverse impact on our business and results of operations.

 

We have substantial long-term lease and debt obligations, which may restrict our ability to fund current and future operations.

 

We have significant long-term debt service obligations and long-term lease obligations. As of September 30, 2006, on a pro forma basis, we had $2,017.2 million in long-term debt obligations (including the aggregate principal amount at maturity of our 93/4% senior discount notes), $116.7 million in capital lease obligations and $1,954.1 million in long-term operating lease obligations. On a pro forma basis, we incurred $162.1 million and $125.2 million of interest expense for the year ended December 31, 2005 and the nine months ended September 30, 2006, respectively. On a pro forma basis, we incurred $194.4 million and $157.9 million of rent expense for the year ended December 31, 2005 and the nine months ended September 30, 2006, respectively, under operating leases (with terms, excluding renewal options, ranging from one to 30 years). Our substantial lease and debt obligations pose risk to you by:

 

 

Our ability to make scheduled payments of principal and interest with respect to our indebtedness and service our lease obligations will depend on our ability to generate cash flow from our operations. To a certain extent, our ability to generate cash flow is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control. We cannot assure you that we will continue to generate cash flow at current levels. If we fail to make any required payment under the agreements governing our indebtedness or fail to comply with the financial and operating covenants contained in them, we would be in default and our lenders would have the ability to require that we immediately repay our outstanding indebtedness. If we fail to make any required payment under our leases, we would be in default and our landlords would have the ability to terminate our leases and re-enter the premises. Subject to the restrictions contained in our indebtedness agreements, we expect to incur additional indebtedness from time to time to finance acquisitions, capital expenditures, working capital requirements and other general business purposes. In addition, we may need to refinance all or a portion of our indebtedness, including our new senior secured credit facility, our 9% senior

subordinated notes and our 93/4% senior discount notes, on or before maturity. However, we may not be able to refinance all or any of our indebtedness on commercially reasonable terms or at all.

 

We are subject to various covenants in our debt agreements that restrict our ability to enter into certain transactions.

 

The agreements governing our debt obligations contain various financial and operating covenants that limit our ability to engage in certain transactions, that require us not to allow specific events to occur or that require us to apply proceeds from certain transactions to reduce indebtedness. If we fail to make any required payment under the agreements governing our indebtedness or fail to comply with the financial and operating covenants contained in them, we would be in default, and our debt holders would have the ability to require that we immediately repay our outstanding indebtedness. Any such defaults could materially impair our financial condition and liquidity. We cannot assure you that we would be able to refinance our outstanding indebtedness if debt holders require repayments as a result of a default.

 

General political, social and economic conditions can adversely affect our attendance.

 

Our results of operations are dependent on general political, social and economic conditions, and the impact of such conditions on our theatre operating costs and on the willingness of consumers to spend money at movie theatres. If consumers’ discretionary income declines as a result of an economic downturn, our operations could be adversely affected. If theatre operating costs, such as utility costs, increase due to political or economic changes, our results of operations could be adversely affected. Political events, such as terrorist attacks, could cause people to avoid our theatres or other public places where large crowds are in attendance.

 

Our foreign operations are subject to adverse regulations and currency exchange risk.

 

We have 113 theatres with 945 screens in twelve countries in Latin America. Brazil and Mexico represented approximately 7.4% and 4.9% of our consolidated 2005 pro forma revenues, respectively. Governmental regulation of the motion picture industry in foreign markets differs from that in the United States. Regulations affecting prices, quota systems requiring the exhibition of locally-produced films and restrictions on ownership of land may adversely affect our international operations in foreign markets. Our international operations are subject to certain political, economic and other uncertainties not encountered by our domestic operations, including risks of severe economic downturns and high inflation. We also face the additional risks of currency fluctuations, hard currency shortages and controls of foreign currency exchange and transfers abroad, all of which could have an adverse effect on the results of our international operations.

 

We may not be able to generate additional revenues or realize expected value from our investment in NCM.

 

We, along with Regal and AMC, are founding members of NCM, and we intend to enter into a new agreement with NCM pursuant to which it will promote and sell lobby and screen advertising and alternative uses of our auditoriums for non-film related events for a 30-year term. Cinema advertising is a small component of the U.S. advertising market. Accordingly, NCM competes with larger, established and well known media platforms such as broadcast radio and television, cable and satellite television, outdoor advertising and Internet portals. NCM also competes with other cinema advertising companies and with hotels, conference centers, arenas, restaurants and convention facilities for its non-film related events to be shown in our auditorium. There can be no guarantee that in-theatre advertising will continue to attract major advertisers or that NCM’s in-theatre advertising format will be favorably received by the theatre-going public. If NCM is unable to generate expected sales of advertising, it may not maintain the level of profitability we hope to achieve, its results of operations may be adversely affected and our investment in and revenues from NCM may be adversely impacted.

We are subject to uncertainties related to digital cinema, including potentially high costs of re-equipping theatres with projectors to show digital movies.

 

Digital cinema is still in an experimental stage in our industry. Some of our competitors have commenced a roll-out of digital equipment for exhibiting feature films. There are multiple parties vying for the position of being the primary generator of the digital projector roll-out for exhibiting feature films. However, significant obstacles exist that impact such a roll-out plan including the cost of digital projectors, the substantial investment in re-equipping theatres and determining who will be responsible for such costs. We cannot assure you that we will be able to obtain financing arrangements to fund our portion of the digital cinema roll-out nor that such financing will be available to us on acceptable terms, if at all.

 

We are subject to uncertainties relating to future expansion plans, including our ability to identify suitable acquisition candidates or site locations.

 

We have greatly expanded our operations over the last decade through targeted worldwide theatre development and the Century acquisition. We will continue to pursue a strategy of expansion that will involve the development of new theatres and may involve acquisitions of existing theatres and theatre circuits both in the U.S. and internationally. There is significant competition for potential site locations and existing theatre and theatre circuit acquisition opportunities. As a result of such competition, we may not be able to acquire attractive site locations, existing theatres or theatre circuits on terms we consider acceptable. We cannot assure you that our expansion strategy will result in improvements to our business, financial condition or profitability. Further, our expansion programs may require financing above our existing borrowing capacity and internally generated funds. We cannot assure you that we will be able to obtain such financing nor that such financing will be available to us on acceptable terms.

 

If we do not comply with the Americans with Disabilities Act of 1990, we could be subject to further litigation.

 

Our theatres must comply with Title III of the Americans with Disabilities Act of 1990, or the ADA, and analogous state and local laws. Compliance with the ADA requires among other things that public facilities “reasonably accommodate” individuals with disabilities and that new construction or alterations made to “commercial facilities” conform to accessibility guidelines unless “structurally impracticable” for new construction or technically infeasible for alterations. In March 1999, the Department of Justice, or DOJ, filed suit against us in Ohio alleging certain violations of the ADA relating to wheelchair seating arrangements in certain of our stadium-style theatres and seeking remedial action. We and the DOJ have resolved this lawsuit and a consent order was entered by the U.S. District Court for the Northern District of Ohio, Eastern Division, on November 17, 2004. Under the consent order, we are required to make modifications to wheelchair seating locations in fourteen stadium-style movie theatres and spacing and companion seating modifications in 67 auditoriums at other stadium-styled movie theatres. These modifications must be completed by November 2009. If we fail to comply with the ADA, remedies could include imposition of injunctive relief, fines, awards for damages to private litigants and additional capital expenditures to remedy non-compliance. Imposition of significant fines, damage awards or capital expenditures to cure non-compliance could adversely affect our business and operating results.

 

We depend on key personnel for our current and future performance.

 

Our current and future performance depends to a significant degree upon the continued contributions of our senior management team and other key personnel. The loss or unavailability to us of any member of our senior management team or a key employee could significantly harm us. We cannot assure you that we would be able to locate or employ qualified replacements for senior management or key employees on acceptable terms.

 

We are subject to impairment losses due to potential declines in the fair value of our assets.

 

We review long-lived assets for impairment on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable.

We assess many factors when determining whether to impair individual theatre assets, including actual theatre level cash flows, future years budgeted theatre level cash flows, theatre property and equipment carrying values, theatre goodwill carrying values, the age of a recently built theatre, competitive theatres in the marketplace, the sharing of a marketplace with our other theatres, changes in foreign currency exchange rates, the impact of recent ticket price changes, available lease renewal options and other factors considered relevant in our assessment of impairment of individual theatre assets. The evaluation is based on the estimated undiscounted cash flows from continuing use through the remainder of the theatre’s useful life. The remainder of the useful life correlates with the available remaining lease period, which includes the probability of renewal periods, for leased properties and a period of twenty years for fee owned properties. If the estimated undiscounted cash flows are not sufficient to recover a long-lived asset’s carrying value, we then compare the carrying value of the asset with its estimated fair value. Fair value is determined based on a multiple of cash flows. When estimated fair value is determined to be lower than the carrying value of the long-lived asset, the asset is written down to its estimated fair value.

 

We also test goodwill and other intangible assets for impairment at least annually in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” Goodwill and other intangible assets are tested for impairment at the reporting unit level at least annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable. Factors considered include significant underperformance relative to historical or projected business and significant negative industry or economic trends. Goodwill impairment is evaluated using a two-step approach requiring us to compute the fair value of a reporting unit (generally at the theatre level), and compare it with its carrying value. If the carrying value of the theatre exceeds its fair value, a second step would be performed to measure the potential goodwill impairment. Fair value is estimated based on a multiple of cash flows.

 

We recorded asset impairment charges, including goodwill impairment charges, of $5.0 million, $1.0 million, $36.7 million and $51.7 million for the year ended December 31, 2003, the period January 1, 2004 to April 1, 2004, the period April 2, 2004 to December 31, 2004 and the year ended December 31, 2005, respectively. We also recorded impairment charges of $5.2 million for the nine months ended September 30, 2006. We cannot assure you that additional impairment charges will not be required in the future, and such charges may have an adverse effect on our financial condition and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Our results of operations vary from period to period based upon the quantity and quality of the motion pictures that we show in our theatres.

 

Our results of operations vary from period to period based upon the quantity and quality of the motion pictures that we show in our theatres. The major film distributors generally release the films they anticipate will be most successful during the summer and holiday seasons. Consequently, we typically generate higher revenues during these periods. Due to the dependency on the success of films released from one period to the next, results of operations for one period may not be indicative of the results for the following period or the same period in the following year.

 

Risks Related to Our Corporate Structure

 

The interests of MDP may not be aligned with yours.

 

We are controlled by an affiliate of MDP. MDP will beneficially own approximately     % of our common stock after the offering (approximately     % of our common stock if the underwriter’s option to purchase additional shares is exercised in full). After the offering, MDP will continue to have the right to designate a majority of our Board of Directors. Accordingly, we expect that MDP will influence and effectively control our corporate and management policies and determine, without the consent of our other stockholders, the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including potential mergers or acquisitions, asset sales and other significant corporate transactions. MDP could take other actions that might be desirable to MDP but not to other stockholders.

Investors in this offering will experience immediate dilution.

 

Investors purchasing shares of our common stock in this offering will experience immediate dilution of $      per share, based upon an assumed initial offering price of $      per share. You will suffer additional dilution if stock, restricted stock, stock options or other equity awards, whether currently outstanding or subsequently granted, are exercised.

 

Our ability to pay dividends may be limited or otherwise restricted.

 

We have never declared or paid any dividends on our common stock. Our ability to pay dividends is limited by our status as a holding company and the terms of our indentures, our new senior secured credit facility and certain of our other debt instruments, which restrict our ability to pay dividends and the ability of certain of our subsidiaries to pay dividends, directly or indirectly, to us. Under our debt instruments, we may pay a cash dividend up to a specified amount, provided we have satisfied certain financial covenants in, and are not in default under, our debt instruments. Furthermore, certain of our foreign subsidiaries currently have a deficit in retained earnings which prevents them from declaring and paying dividends from those subsidiaries. The declaration of future dividends on our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, earnings, capital requirements, limitations in our debt agreements and legal requirements. We cannot assure you that any dividends will be paid in the anticipated amounts and frequency set forth in this prospectus, if at all.

 

Provisions in our corporate documents and certain agreements, as well as Delaware law, may hinder a change of control.

 

Provisions that will be in our amended and restated certificate of incorporation and bylaws, as well as provisions of the Delaware General Corporation Law, could discourage unsolicited proposals to acquire us, even though such proposals may be beneficial to you. These provisions include:

 

 

Certain provisions of the 93/4% senior discount notes indenture, 9% senior subordinated notes indenture and the new senior secured credit facility may have the effect of delaying or preventing future transactions involving a “change of control.” A “change of control” would require us to make an offer to the holders of our 9% senior subordinated notes and 93/4% senior discount notes to repurchase all of the outstanding notes at a purchase price equal to 101% of the aggregate principal amount outstanding plus accrued unpaid interest to the date of the purchase. A “change of control” would also be an event of default under our new senior secured credit facility.

 

Since we are a “controlled company” for purposes of the New York Stock Exchange’s corporate governance requirements, our stockholders will not have, and may never have, the protections that these corporate governance requirements are intended to provide.

 

Since we are a “controlled company” for purposes of the New York Stock Exchange’s corporate governance requirements, we are not required to comply with the provisions requiring a majority of independent directors, nominating and corporate governance and compensation committees composed entirely of independent directors as defined under the listing standards and written charters for these committees addressing specified matters. As a result, our stockholders will not have, and may never have, the protections that these rules are intended to provide.

We will be subject to the requirements of Section 404 of the Sarbanes-Oxley Act and if we are unable to timely comply with Section 404, our profitability, stock price and results of operations and financial condition could be materially adversely affected.

 

We will be required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 as of December 31, 2007. Section 404 requires that we document and test our internal control over financial reporting and issue management’s assessment of our internal control over financial reporting. This section also requires that our independent registered public accounting firm opine on those internal controls and management’s assessment of those controls as of December 31, 2008. We are currently evaluating our existing controls against the standards adopted by the Committee of Sponsoring Organizations of the Treadway Commission. During the course of our ongoing evaluation and integration of the internal control over financial reporting, we may identify areas requiring improvement, and we may have to design enhanced processes and controls to address issues identified through this review. We cannot be certain at this time that we will be able to successfully complete the procedures, certification and attestation requirements of Section 404. If we fail to comply with the requirements of Section 404 or if we or our auditors identify and report material weakness, the accuracy and timeliness of the filing of our annual and quarterly reports may be negatively affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

 

Risks Related to This Offering

 

The market price of our common stock may be volatile.

 

Prior to this offering, there has been no public market for our common stock, and there can be no assurance that an active trading market for our common stock will develop or continue upon completion of the offering. The securities markets have recently experienced extreme price and volume fluctuations and the market prices of the securities of companies have been particularly volatile. The initial price to the public of our common stock will be determined through our negotiations with the underwriter. This market volatility, as well as general economic or political conditions, could reduce the market price of our common stock regardless of our operating performance. In addition, our operating results could be below the expectations of investment analysts and investors and, in response, the market price of our common stock may decrease significantly and prevent investors from reselling their shares of our common stock at or above the offering price. In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. If we were the subject of securities class action litigation, it could result in substantial costs, liabilities and a diversion of management’s attention and resources.

 

Future sales of our common stock may adversely affect the prevailing market price.

 

If a large number of shares of our common stock is sold in the open market after this offering, or the perception that such sales will occur, the trading price of our common stock could decrease. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional common stock. After this offering, we will have an aggregate of           shares of our common stock authorized but unissued and not reserved for specific purposes. In general, we may issue all of these shares without any action or approval by our stockholders. We may issue shares of our common stock in connection with acquisitions.

 

Upon consummation of the offering, we will have           shares of our common stock outstanding. Of these shares, all shares sold in the offering, other than shares, if any, purchased by our affiliates, will be freely tradable. The remaining shares of our common stock will be “restricted securities” as that term is defined in Rule 144 under the Securities Act. Restricted securities may not be resold in a public distribution except in compliance with the registration requirements of the Securities Act or pursuant to an exemption therefrom, including the exemptions provided by Regulation S and Rule 144 promulgated under the Securities Act.

We, all of our directors and executive officers, holders of more than 5% of our outstanding stock and the selling stockholders have entered into lock-up agreements and, with limited exceptions, have agreed not to, among other things, sell or otherwise dispose of our common stock for a period of      days after the date of this prospectus. After this lock-up period, certain of our existing stockholders will be able to sell their shares pursuant to registration rights we have granted to them. We cannot predict whether substantial amounts of our common stock will be sold in the open market in anticipation of, or following, any divestiture by any of our existing stockholders, our directors or executive officers of their shares of common stock.

 

We also reserved      shares of our common stock for issuance under our 2006 Long Term Incentive Plan, of which           shares of common stock are issuable upon exercise of options outstanding as of the date hereof, of which           are currently exercisable or will become exercisable within 60 days after September 30, 2006. The sale of shares issued upon the exercise of stock options could further dilute your investment in our common stock and adversely affect our stock price.

 

This prospectus includes “forward-looking statements” based on our current expectations, assumptions, estimates and projections about our business and our industry. They include statements relating to:

 

 

You can identify forward-looking statements by the use of words such as “may,” “should,” “will,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions which are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. In evaluating forward-looking statements, you should carefully consider the risks and uncertainties described in “Risk Factors” and elsewhere in this prospectus. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements and risk factors contained in this prospectus. Forward-looking statements contained in this prospectus reflect our view only as of the date of this prospectus. Neither we nor the underwriter undertake any obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

We estimate that we will receive net proceeds from this offering of approximately $           million based upon an assumed initial public offering price of $      (the midpoint of the range set forth on the cover page of this prospectus) and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the net proceeds from the sale of shares by the selling stockholders.

 

We intend to use the net proceeds that we will receive to repay debt outstanding under our new senior secured credit facility or to redeem all or a part of our 9% senior subordinated notes or 93/4% senior discount notes, and for working capital and other general corporate purposes.

 

Our outstanding principal balance under our new senior credit facility was $1,117.2 million in term loans and there were no amounts outstanding under the revolving credit line as of the date hereof. The term loan matures on October 5, 2013 and the revolving credit line matures on October 5, 2012, except that, under certain circumstances, both would mature on August 1, 2012. Our effective interest rate on the term loan was 7.3% as of September 30, 2006. The net proceeds of the term loan were used to finance a portion of the purchase price for the Century acquisition, repay in full the loans outstanding under our former senior secured credit facility, repay certain existing indebtedness of Century and to pay for related fees and expenses. The revolving credit line is used for our general corporate purposes. As of the date hereof, we had outstanding approximately $535.6 million aggregate principal amount at maturity of our 93/4% senior discount notes and $332.3 million aggregate principal amount of our 9% senior subordinated notes. Our 93/4% senior discount notes and 9% senior subordinated notes mature in 2014 and 2013, respectively. For more information on our outstanding debt, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

 

Management will have significant flexibility in applying our net proceeds of this offering. Pending the application of the net proceeds, we expect to invest the proceeds in short-term, investment-grade marketable securities or money market obligations.

 

Lehman Brothers Inc. acted as initial purchaser in connection with the offerings of our 93/4% senior discount notes and our 9% senior subordinated notes. An affiliate of Lehman Brothers Inc. was the arranger and is a lender and the administrative agent under our new senior secured credit facility.

 

We have never declared or paid any dividends on our common stock. Following this offering and subject to legally available funds, we intend to pay a quarterly cash dividend at an annual rate initially equal to $           per share (or a quarterly rate initially equal to $           per share) of common stock, commencing in the           quarter of 2007, which will be a partial dividend paid on a pro rata basis depending on the closing date of this offering. Our ability to pay dividends is limited by our status as a holding company and the terms of our indentures, our new senior secured credit facility and certain of our other debt instruments, which restrict our ability to pay dividends to our stockholders and the ability of certain of our subsidiaries to pay dividends, directly or indirectly, to us. Under our debt instruments, we may pay a cash dividend up to a specified amount, provided we have satisfied certain financial covenants in, and are not in default under, our debt instruments. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for further discussion regarding the restrictions on our ability to pay dividends contained in our debt instruments. Furthermore, certain of our foreign subsidiaries currently have a deficit in retained earnings which prevents them from declaring and paying dividends from those subsidiaries. The declaration of future dividends on our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, earnings, capital requirements, limitations in our debt agreements and legal requirements. We cannot assure you that any dividends will be paid in the anticipated amounts and frequency set forth in this prospectus, if at all.

 

The following table presents our cash and cash equivalents and capitalization as of September 30, 2006. Our cash and cash equivalents and capitalization is presented:

 

 

You should read this table in conjunction with the historical consolidated financial statements and related notes and “Unaudited Pro Forma Condensed Consolidated Financial Information” included elsewhere in this prospectus.

 

 

 

The number of shares of our common stock to be outstanding immediately after this offering does not include           shares of common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of approximately $      per share, an aggregate of        shares of common stock reserved for future issuance under our 2006 Long Term Incentive Plan.

 

Purchasers of common stock offered by this prospectus will suffer an immediate and substantial dilution in net tangible book value per share. Our net tangible book value as of September 30, 2006 was approximately $      million, or approximately $      per share of common stock. Net tangible book value per share represents the amount of total tangible assets less total liabilities, divided by the number of shares of common stock outstanding.

 

Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of our common stock in this offering and the net tangible book value per share of our common stock immediately after this offering. After giving effect to our sale of           shares of common stock in this offering at an assumed initial public offering price of $           per share and after deduction of the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value as of           , 2007 would have been approximately $      million, or $           per share. This represents an immediate increase in net tangible book value of $           per share of common stock to existing stockholders and an immediate dilution of $           per share to purchasers of common stock in this offering.

 

 

The following table sets forth, as of September 30, 2006, the total consideration paid and the average price per share paid by our existing stockholders and by new investors, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us at an assumed initial public offering price of $           per share.

 

 

As of September 30, 2006, there were outstanding options to purchase a total of           shares of our common stock at a weighted average exercise price of approximately $           per share, which excludes           shares reserved for issuance under our 2006 Long Term Incentive Plan. To the extent that options are exercised in the future, there will be further dilution to new investors.

 

The following tables set forth our selected historical consolidated financial and operating information as of and for the periods indicated. The selected historical information for periods through April 1, 2004 are of Cinemark, Inc., the predecessor, and the selected historical information for all subsequent periods are of Cinemark Holdings, Inc., the successor. Our financial information for the year ended December 31, 2003, the period January 1, 2004 to April 1, 2004, the period April 2, 2004 to December 31, 2004 and the year ended December 31, 2005 is derived from our audited consolidated financial statements appearing elsewhere in this prospectus. Our financial information for each of the years ended December 31, 2001 and 2002 is derived from our audited consolidated financial statements which are not included in this prospectus. Our unaudited interim financial information for the nine months ended September 30, 2005 and 2006 is derived from our unaudited interim consolidated financial statements appearing elsewhere in this prospectus which, in the opinion of management, contain all adjustments necessary for a fair presentation of this information. The unaudited interim financial information for the nine months ended September 30, 2006 is not necessarily indicative of the results expected for the full year.

 

You should read the selected historical consolidated financial and operating information set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the financial statements and related notes appearing elsewhere in this prospectus.