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Cinemark Holdings (NYSE:CNK)

Q4 2012 Earnings Call

February 20, 2013 4:30 pm ET

Executives

Chanda Brashears

Timothy Warner - Chief Executive Officer, President and Chief Operating Officer

Robert D. Copple - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer and Assistant Secretary

Analysts

Townsend Buckles - JP Morgan Chase & Co, Research Division

Bo Tang - Barclays Capital, Research Division

Eric O. Handler - MKM Partners LLC, Research Division

Eric Wold - B. Riley & Co., LLC, Research Division

Robert Fishman - Nomura Securities Co. Ltd., Research Division

Ryan Fiftal - Morgan Stanley, Research Division

Barton E. Crockett - Lazard Capital Markets LLC, Research Division

James M. Marsh - Piper Jaffray Companies, Research Division

James C. Goss - Barrington Research Associates, Inc., Research Division

Matthew J. Harrigan - Wunderlich Securities Inc., Research Division

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

Operator

Good afternoon. My name is Britney, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cinemark's Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Ms. Chanda Brashears.

Chanda Brashears

Thank you, Britney, and good afternoon, everyone. At this time, I would like to welcome you to Cinemark Holdings Inc.'s Fourth Quarter and Fiscal Year 2012 Earnings Release Conference Call hosted by our Chief Executive Officer, Tim Warner; and our Chief Financial Officer, Robert Copple.

In accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, certain matters that are discussed by members of management during this call may constitute forward-looking statements. Such statements are subject to risks, uncertainties and other factors that may cause Cinemark's actual performance to be materially different from the performance indicated or implied by such statements. Such risk factors are set forth in the company's SEC filings.

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

Timothy Warner

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

In 2012, Cinemark achieved a 6.6% increase in worldwide attendance, setting a company record of 263.7 million patrons. We also reached a milestone in Latin America, surpassing 100 million patrons. Cinemark's worldwide admission revenues increased 7.4% for the year, outperforming the estimated North American industry box office by approximately 130 basis points. Cinemark continues to be the #1 attended worldwide exhibitor.

Our increase in worldwide attendance lifted our total revenues to a new record of approximately $2.5 billion. Our theater personnel’s focus on operating efficiencies resulted in a 13.4% increase in our adjusted EBITDA to $589.2 million and created a 100-basis-point margin improvement for a year with a 23.8% worldwide adjusted EBITDA margin. Our domestic adjusted EBITDA margins continued to outperform, achieving 24.9% for Q4 2012 to 24.2% for the full year, an increase of 300 basis points and 80 basis points, respectively, compared to the prior year period.

Our growth is reflective of a strong and consistently performing industry. This is the fourth straight year that the North American box office has exceeded $10 billion. A combination of attendance growth and modest ticket price increases lifted the North America box office to a new record of approximately $10.8 billion, a 6.1% increase compared to 2011, reiterating the demand for the theatrical out-of-home entertainment.

We are encouraged by the films and the 3D products that has been announced to date for 2013, including the 32 wide-release 3D titles. There are several new concept films we are enthusiastic about such as the Superman reboot, titled Man of Steel, Oblivion, After Earth, Pacific Rim, The Lone Ranger, Frozen, World War Z, The Great Gatsby, Epic, and Jack Ryan, among others. There are also a number of tent poles and franchise sequels with proven track records that we're anxiously awaiting, including G.I. Joe: Retaliation, Iron Man 3, Star Trek Into Darkness, Fast & Furious 6, The Hangover III, Monsters University, Despicable Me 2, The Wolverine, Thor: The Dark World, The Hunger Games: Catching Fire and The Hobbit: The Desolation of Smaug, to name a few.

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

With our goal to be 100% digital in our Latin American circuit, similar to our U.S. circuit, we intend to fully digitize the remainder of our international circuit in 2013. We should be completing the agreements with the studios regarding virtual print fees, and we'll accelerate our digital rollout. We are currently 42% digital and 40% 3D-capable in Latin America.

The strength and the momentum of our proprietary Extreme Digital XD premium large-format screens continues with both studio and patron recognition. 20th Century Fox created a national television advertising campaign featuring our XD brand for the last week's release of A Good Day to Die Hard. Notably, these trailers played nationally during peak television view, including the NFL playoffs, which emphasized the impact and the success of our XD premium large-format viewing experience. Patrons have also enjoyed the XD experience with our movie marathons, most recently the Die Hard series marathon. We are pleased to report that we broke through the 100 XD auditorium threshold, now have a total of 109 XD auditoriums worldwide, 70 domestically and 39 internationally. We expect to open an additional 40 to 50 XD screens worldwide in 2013.

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

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

CineMode, our exclusive smartphone interactive technology that rewards patrons for being courteous during the show, expanded its member base by 33% during the quarter. We continue to explore how our Cinemark app, with over 2 million downloads, may give us the ability to enrich the movie-going experience, leveraging mobile technology and social media. We're providing partnerships and promotion opportunities with our vendors and the studios through this medium.

Our newest concept, the Cinemark Movie Bistro, will launch this summer of 2013 in 2 test theaters. The Cinemark Movie Bistro offers patrons an enhanced dining menu with high-quality food items such as fresh wraps, hot sandwiches, burgers and gourmet pizza, as well as a variety of beverage options, including beer and wine and specialty cocktails, that can be enjoyed in the auditorium, along with our typical concession offerings.

Our newly opened Napa theater is currently undergoing the review process to become the first LEED-certified theater. LEED is the acronym for the -- for Leadership in Energy and Environmental Design and is an independent third-party green building radiant system trademarked by the U.S. Green Building Council. Special environmental features of our Napa theater include highly efficient HVAC systems, solar energy, panels, LED lighting, rain water harvesting, recycling and green cleaning practices. We will also seek LEED certification on 2 additional projects we have in our construction pipeline and are incorporating features from our Napa theater into the construction of many of our new theaters. We are currently generating solar power energy at 2 of our theaters and have plans to incorporate additional solar arrays in approximately 20 other theaters.

We are awaiting the Department of Justice approval at our Rave acquisition of 32 theaters and 483 screens. The Rave theaters are high-quality, fully digital and 37% RealD 3D-capable with 7 IMAX screens and 9 premium large-format screens. The Rave circuit expands our diversified presence into 40 states and 99 DMAs, including the New England market.

As announced last week, we have entered into a stock purchase agreement with Cinemex to sell our Mexico theaters. The transaction is still subject to regulatory approval. The sale of our operations in Mexico allows us the opportunity to realize value and provide increased focus to the remainder of our Latin American operations, where we feel we have a greater opportunity for growth and to create shareholder value. As we discussed in prior calls, since our entry in 1994, Mexico experienced the most rapid growth of all our Latin American markets and has become a relatively mature market. While we believe in the future of the market, the offer from Cinemex allows us the ability to redeploy capital into markets that offer -- that are growth opportunities. As Robert will be discussing later in the call, we will be increasing our new build CapEx levels in both Latin America and the U.S.

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

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

Robert D. Copple

Good afternoon, and thank you again for joining us. We are pleased to report that we had a record performance in Q4, led by total revenue growth of 14.1% to $611.5 million and a 27.4% increase in adjusted EBITDA to $143.6 million, resulting in an adjusted EBITDA margin of 23.5%. The foundation for the quarter's success was attendance growth of 9.6% to 63.7 million patrons. Our domestic segment generated admissions revenues growth of 16.1% during Q4, outperforming the estimated North American industry box office. Our strong domestic box office growth was attributed to both attendance, which increased 10.3% for the quarter; and average ticket price, which increased 5.2% from $6.57 to $6.91. The average ticket price increase reflects the premium product mix, as well as price increases implemented during the quarter.

Our U.S. concession revenues grew 14.9% during the quarter to $137.5 million, reflecting attendance growth, incremental sales and price increases. U.S. total revenues for the quarter were $432.7 million, an increase of 15.5% from the year-ago period. Our domestic adjusted EBITDA margin increased to 24.9%. Adjusted EBITDA was $107.6 million. During Q4, our international segment generated admissions revenues growth of 10.7% to $105.6 million, also attributed to increases in both attendance and average ticket price. Attendance for the quarter was 23.1 million patrons, an increase of 8.5%. Average ticket price for the quarter increased 2% to $4.57. In constant currency, we experienced an increase of approximately 9.6% in average ticket price, resulting in constant currency box office growth of over 19%.

International concession revenues were $52.6 million for the quarter, an increase of 13.6%. Concession per patron was $2.28, an increase of 5.1%, which converts to approximately 10.6% increase on a constant currency basis. Other revenues for our international segment increased 4.6%, primarily due to increased screen advertising revenues in Brazil, Mexico and Argentina. Total revenues for our Latin American theaters were $178.8 million for the quarter, an increase of 10.8%. Adjusted EBITDA was $35.9 million, resulting in a margin of 20.1%.

Latin America also recorded historic highs for the fourth quarter and adjusted EBITDA in resulting margins despite a blended FX headwind of approximately 10%. The FX impact for the first quarter may be similar to Q4. However, starting in Q2, the rate impact should begin to diminish as some current rates stay relatively stable.

During Q4, our consolidated worldwide film rental improved 100 basis points to 54% of admissions revenues. International film rental and advertising improved 320 basis points from Q4 of 2011.

Interest expense decreased to $29.3 million for the quarter compared to $31.8 million in Q4 of 2011, primarily due to the expiration of 2 swap agreements during the year.

In December, we issued 400 million of 5 1/8 senior notes due in 2022. We also amended and restated our senior secured credit facility and paid down our term loan of approximately $200 million to $700 million and increased our revolver to $100 million, which is undrawn. The interest rate on the senior secured credit facility improved 25 basis points to LIBOR plus 300.

We expect quarterly interest expense in 2013 to be approximately $32 million, assuming rates applicable to our variable rate debt remain consistent with Q4.

Total income before taxes increased to $65.6 million in Q4 of 2012 from $30 million in Q4 of 2011. Included in this quarter's income is a pre-tax charge of $5.6 million related to the early retirement of debt associated with the senior secured credit facility amendment. Our Q4 effective tax rate was 57%, primarily due to taxes attributable to certain of our international operations.

Net income attributable to Cinemark Holdings was $27.8 million. Our EPS was $0.24 per diluted share. Our $0.24 earnings per share reflects the higher effective tax rate for the quarter compared to our rate of approximately 38% we have been incurring in prior quarters. It also reflects the $5.6 million write-off of debt-related costs.

Our balance sheet remains strong and the least levered among our peer group, with a net position of approximately $1.02 billion and net leverage ratio of 1.7x adjusted EBITDA.

Our U.S. circuit at year-end was comprised of 298 theaters and 3,916 screens in 39 states. During the fourth quarter, we opened 2 theaters with 28 screens and closed 3 theaters with 30 screens. We have signed commitments to open 9 theaters and 111 screens during 2013 and 5 theaters and 67 screens subsequent to 2013.

Our Latin American circuit at year-end was comprised of 167 theaters and 1,324 screens in 13 countries. During Q4, we opened 5 theaters and 35 screens. We presently have signed commitments to open 13 theaters with 88 screens during 2013 and 3 theaters with 21 screens subsequent to 2013.

During the fourth quarter, we reinvested $74.2 million of capital expenditures, including $33.7 million on new construction and $40.5 million on maintenance CapEx. These expenditures brought our total CapEx for the year to $220.7 million, which included CapEx of -- maintenance CapEx of $115.8 million.

Due to the delay in our digital projector rollout and the postponement of certain international projects until 2013, we spent substantially less than the originally estimated CapEx of $250 million to $300 million we announced at this time last year. However, 2013 is a catch-up year, and we will -- are projecting full year 2013 new build and maintenance CapEx capital expenditures to be $325 million to $350 million. This projection includes robust organic growth in Latin America of approximately 125 screens, as well as the full international digital conversion and the XD expansion of 40 to 50 screens which Tim discussed.

We currently have signed commitments to build 199 screens during 2013 and anticipate signing commitments for an additional 50 to 75 screens to be built this year. We estimate CapEx maintenance of $125 million to $150 million that should return to a normalized run rate of $75 million to $80 million in 2014 after our international digital conversion is complete.

As our financial performance and position demonstrate, we have sufficient free cash flow to fund the CapEx projections for 2013, as well as our quarterly dividend, which is subject to our board's discretion. Our Board of Directors recently declared a quarterly dividend of $0.21 per common share to be paid on March 15, 2013 to shareholders of record on March 4, 2013. Our strategy continues to focus on organic growth and lucrative acquisition opportunities to meet our high-quality and financial standards.

That concludes our prepared remarks. We're now opening the lines for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Townsend Buckles of JPMorgan.

Townsend Buckles - JP Morgan Chase & Co, Research Division

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

Robert D. Copple

Sure. The price can fluctuate a little bit. There's obviously closing conditions and adjustments. But using today's FX rates, it'd be approximately $125 million, which, if you do the math, probably get you a little over $7.5 million -- close -- ballpark price, $7.7 million, somewhere in there. It's not something that we went and looked for. We were approached by Cinemex and entered into discussions with them. It actually took a fairly long time for us to get comfortable of disposing of an asset. It's not something we've really done in the past. But as we looked at it -- and I'll give you some data. And I think we'll explain, one, why we did it, and secondly, that it's really no change in our strategy because we remain very committed to Latin America. And as Tim said, we're actually recommitting more effort in terms of screen growth, where we grew about 50 screens last year. We're anticipating 125 this year. But what we found in Mexico, if we looked at where we were in 2007 -- at the end of 2007, we had 304 screens. If I look at where we were at the end of the year and what we're selling, we had 290 screens. So we actually dropped 14 screens over that 4-, 5-year period. But if I look at Mexico itself, it actually grew -- the screen count grew 31%. So it's not as though Mexico is dormant, there's actually very vibrant competition among 2 local players there building theaters. But we haven't found a way to economically participate at a level we felt comfortable with. Now we've actually held our -- we held our EBITDA. We didn't really drop EBITDA during that time frame, but obviously, we didn't increase it. So what we looked at, as we started analyzing the offer and think through this and said we had a relatively flat investment in a very highly competitive market, with 2 locals that have plenty of capital and they have shown that they're willing to build many screens. Now if I compare that to the rest of our international, what happened in Mexico during that 4-, 5-year period was a 31% screen growth rate, and that's what we've grown internationally. If we look at our other countries, we've grown over 30% screen growth in all of our remaining international circuit, while Mexico, again, just stayed flat. And so we kind of looked at it as, if we stay there, great, but it was different than the rest of our story in Latin America. We felt like there's much more opportunity to invest in Latin America and the remainder of our assets and grow much more quickly. And while by no means was this a drag on our numbers, it wasn't improving our numbers, it wasn't creating additional value. And so the opportunity to sell it just made a lot of sense to us.

Townsend Buckles - JP Morgan Chase & Co, Research Division

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

Robert D. Copple

Yes, we're clearly very open to M&A. As we showed last year with -- in 2011, I guess, with the Argentine acquisition, we constantly are looking in the market, in all the countries we're in to see if there is opportunities to expand through acquisitions, as well as a new build. There's no different, kind of, than we always are. We're always out looking for that opportunity, find a high-quality screen. And I think as Tim has said in the past, one of the things even when people look at screen count to out most of the remainder of Latin America, the quality of the assets vary greatly. I mean, while you see decent numbers out there, in some cases, it's not necessarily newer screens. There's still a number of old screens. And so if you really look at stadium and compare to other countries to even Mexico, Mexico kind of had doubled the screen count relative to population of just about any other country. But if you really broke that down into quality screens, there's probably less in these other countries. But, which also limits who we look for, but there definitely are companies we like. We -- obviously, I can't comment on where we're going with that right now, but we're very open to acquisitions.

Townsend Buckles - JP Morgan Chase & Co, Research Division

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

Timothy Warner

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

Robert D. Copple

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

Operator

Our next question comes from Anthony DiClemente of Barclays.

Bo Tang - Barclays Capital, Research Division

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

Robert D. Copple

Bo, I appreciate the question. The -- I think with the $700 million, obviously, it looks like a huge balance. As you know, we're buying Rave, and we expect that to close hopefully sooner than later. We're hoping still maybe sometime in this first quarter, but we don't know that to be the case. But that would be a use of about $250 million of it. So it brings it back slightly to less than $500 million. As we've said, we're spending a fair amount of capital this year, I mean, significantly more than what we've done in the past years. It's easily over $100 million more than what we did in 2012 and pushing at the upper ends of any cash flow. So as far as where we're going to spend our money at the moment and our reinvestment, I think when you really go through all the math, you'll find that our capital is staying fairly stable. I mean, the margin or the multiple might actually improve because adding the Rave group will increase our total EBITDA despite selling Mexico. But our overall cash plate, when it's all said and done, probably isn't that different than the $400 million to $500 million we've carried over the last few years. And we're still obviously looking for opportunities as we talked about earlier in Latin America. And while many things have already changed hands in the U.S., we've remained open to deals in the U.S. as well. And, again, we're very committed to organic growth. Or as long as we can sustain the levels, we'll go -- we'll continue to pursue it. And we still see in Latin America, as we've said before, the 125 hopefully in 2013, and we would expect to build that or more even in 2014 and beyond. The U.S. also has stepped up a little bit, as I've told you the numbers there. That actually, we think, was not highly unusual growth, it's more than what we've experienced in the last few years. So it's requiring a little more CapEx. So really nothing at the moment has changed in our general outlook of our capital.

Bo Tang - Barclays Capital, Research Division

Got it. Great. And then as it pertains to the rest of your Latin American circuits, you mentioned that you remained focused and remain focused in that region. But perhaps in an effort to highlight the value of that part of your business, would a spinoff of Latin America, would that ever make sense in your view?

Robert D. Copple

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

Timothy Warner

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

Operator

Your next question comes from Eric Handler with MKM Partners.

Eric O. Handler - MKM Partners LLC, Research Division

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

Timothy Warner

Okay. Well, I'll answer the international growth strategy. Because in the process of building the international company, we've actually checked out a lot of different markets. In fact, we had a partnership in Japan, which we -- Shochiku early on and we exited that at their request. And then we also have, like Robert pointed out, the minority interest in Taiwan. And via Taiwan, we -- I spent a lot of time looking at Mainland China. We still think that Mainland China would be -- has great growth potential. The problem that we run into over there is that they don't allow a majority ownership of theaters -- theater exhibition companies in China. Obviously, if that is changed, we feel that we're well-positioned because of our experience in Taiwan and the fact that we really looked at the market to enter into the Chinese market if that law would ever change. Also, we have looked at Eastern Europe, and -- in fact, and also even built a couple of theaters in England at one time. And at that point, it was pretty slow going, and so we just sold them off. They were very successful theaters. And we have great relationships around the world because of my previous positions in the industry. And also, as the Head of International at Cinemark, I literally know all the players, whether they're in Russia or whether they're in Eastern Europe or whether they're in Africa or Asia. We have great industry relationships that we could capitalize on if we feel the opportunity is right. And with that, I'll turn the M&A question over to Robert.

Robert D. Copple

With respect to G&A and stuff, this quarter was a little bit higher. We had some unusual costs going through there. I think if we look back to kind of our general run rate, which, again, has increased over the last few years, primarily, the new initiatives we've had, the Argentina acquisition, we still are operating 2 separate companies. And we'd like to tell you when that will go away, but for the moment, it's still going through a process. But that will help. And then as Flix is expanding, as well as we're expanding in other countries, that used to be a kind of a net revenue item to us because we've had outside people performing that work. When we took it in-house, obviously, we had to develop a G&A staff to work on it, and now all the costs went to our income statement. And so that actually increased it. But the revenue stream from that is growing significantly and helping as well. Those are probably the 2 biggest factors, but again, this quarter, we had a couple of unusual items. I would tend to say what we would hope as we move back closer to what we've had in prior quarters.

Eric Wold - B. Riley & Co., LLC, Research Division

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

Timothy Warner

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

Robert D. Copple

And we've operated over there.

Timothy Warner

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

Operator

Our next question comes from Robert Fishman of Nomura.

Robert Fishman - Nomura Securities Co. Ltd., Research Division

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

Timothy Warner

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

Robert Fishman - Nomura Securities Co. Ltd., Research Division

All right, great. And for Robert, maybe a couple. Can you help us break out what the international growth, excluding Mexico, would have been in the fourth quarter for both revenue and EBITDA, if possible?

Robert D. Copple

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

Robert Fishman - Nomura Securities Co. Ltd., Research Division

Understood. Maybe just one last one then. Can you help us think about the go-forward tax rate for 2013 given that increase that we saw in the fourth quarter?

Robert D. Copple

I hope it doesn't stay this way. This quarter was unusual because of some different transactions we had throughout different countries but mostly Latin America. And I don't want to get too much in taxes because GAAP taxes are pretty confusing. But mostly, it had to do with some settlements of different tax items we had in a couple of countries and then some cross -- some liquidation of some assets we had. We would expect, as we've kind of said in the past, that our tax rate would be somewhere around 38%. We think that's a reasonable normalized rate. I think it's what most everybody has been using. I will tell you, the difficulty is, when we close Mexico, that will have some unique tax issues with it. And so that might throw off whatever quarter that occurs in. But I'd say, outside of that, we'd expect normalized tax rates to kind of run in that 38% range.

Operator

Your next question comes from Ben Swinburne of Morgan Stanley.

Ryan Fiftal - Morgan Stanley, Research Division

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

Robert D. Copple

I think, one, on attendance, we felt like we did reasonably well with respect to the industry. Some countries, we probably overdid; and some countries, we probably underperformed a little bit. But I don't -- when we look at why or what the reasoning was, again, there definitely has been a fair amount of screen growth in Latin America and will continue to. We opened up -- I think we've said about 35 screens. That was all done literally at the very end of the quarter, so they had very little impact on us. And we didn't unfortunately open that many screens throughout the year. And so that is a bit of driver of attendance. Actually, in Mexico, again, it will -- not the reason we're selling, but it has impacts like that because we've actually had a fair amount of screen growth occur in Mexico with our competitors. As we have said, they continue to build and we didn't. And so a lot of the attendance shift in Mexico had to do with new screens being added, not necessarily same-store sales. So overall, I think we felt reasonably good about our attendance. We look at where things are going in Q1. We feel very good. And we looked at how Brazil did, in particular, since that's a big part of our business in Q4, and we felt very good about its performance. As far as prices go, as you said, we felt like we're trying to price to the market where we should be. And we haven't seen any issues around that, and we'll continue to do that this year as well.

Ryan Fiftal - Morgan Stanley, Research Division

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

Robert D. Copple

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

Timothy Warner

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

Operator

Your next question comes from Barton Crockett with Lazard Capital Markets.

Barton E. Crockett - Lazard Capital Markets LLC, Research Division

I wanted to ask a little bit more about your CapEx outlook, this $3.25 million or so that you're talking about for 2013 and then a step-down in 2014. When you look ahead to 2014, do you feel like the year in aggregate looks more like the $220 million that you spent in 2012 or more like the $180 million that you spent in 2011? Just some kind of broad kind of gating around that CapEx step-down and what degree should we expect?

Robert D. Copple

Barton, I think a critical part is the maintenance CapEx, which we would argue as productive. But by far, the big piece of maintenance CapEx this year is the rollout of digital and international. So when that pulls back, if we say that's $75 million [ph] , and so you move now down to that, say, $250 million to $275 million range. But what's really driving you at that point to push that kind of number is new-built CapEx. And, again, that will help maintenance when maintenance drops from, say, $150 million to $75 million or so. And that's probably a more normalized run rate. Well, I can always reduce them, and, in general, I'll be in that area. So that's arguing that you're spending -- but the question, do you spend $100 million on new build or $200 million on new build? And I think the key to us is, are we able to find opportunities to spend, say, $200 million and get the 20%-plus returns we look for with also the 20% margins we look for. And if we can find those in Latin America and expand the way we like to and/or some of that in the U.S., which we're also doing, I don't think we would be hesitant to consider those deals. So the key is, are they there? And definitely, in Latin America, we feel like they will be. I think in 2014, you're still -- it's not a huge growth in the U.S., it's just -- there's a number of projects that over the last 5 years have been moving and trying to get going. And there are projects that are probably very reasonable to build, and we'll pursue those. I think as you go further out, probably the U.S. drops back a little bit, international probably keeps going. So it's hard to say a real run rate. Is it $200 million? Is it $275 million? I don't know. It's probably somewhere between those. But the key to it is what that differential is being spent on assets to create additional EBITDA ROIs, it's not dead capital or anything.

Barton E. Crockett - Lazard Capital Markets LLC, Research Division

Okay. And then your spend per screen or per theater, as it's in this new build outlook, is it consistent with what has been in the past? Are you spending more on maybe more productive theaters?

Robert D. Copple

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

Timothy Warner

It falls in that range, yes.

Barton E. Crockett - Lazard Capital Markets LLC, Research Division

Okay. In this quarter, your other revenues grew a lot slower than admissions revenues and concession, 5% to 10% international, domestic. In international, I would have thought, if anything, it might grow quicker with some of the advertising initiatives. So I was wondering if you could talk about why that's been growing slower than the other revenue lines.

Robert D. Copple

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

Barton E. Crockett - Lazard Capital Markets LLC, Research Division

Okay. And then one final question. As we're looking at this Mexico sale, I know you haven't given us the amount that you'll be -- receive in payment for this. But I was wondering if you could talk a little bit about how we should think about the tax leakage implications of this because I assume your cost base is just almost nothing, given that there was a new build. And if you assume you sell it for something like a multiple where you're trading, there's going to be significant tax leakage. So is there anything that can mitigate that, any losses that would offset the gains there? Or how should we think about that?

Robert D. Copple

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

Operator

Your next question comes from James Marsh of Piper Jaffray.

James M. Marsh - Piper Jaffray Companies, Research Division

Just 2 quick ones here. As we look at the slate in Latin America in 2013, are there any local language releases that we should be aware of that create some comparison issues? And then secondly, on the Rave deal, is it fair to say that it's taking a little bit longer than you expect it to close? And if that's true, should we read anything into this like potentially there might be more dispositions than originally planned to get approval?

Timothy Warner

First off on the Latin America, there's always local product, especially in Brazil or Argentina and sometimes Chile, that can really influence the market. And we don't know if that's going to happen this year, but we wouldn't be surprised if it does happen this year because they're starting to develop some pretty good local film production centers. And regarding Rave, I think it's more of a timing issue with when we closed on Rave. You got to -- we ran into Christmas and New Year's and a bunch of holidays. And so when you look at the timing of the process, I think you also got to consider all those holidays that came in the middle of it. And that, as much as anything, is the way -- I wouldn't read anything into it beyond that.

Operator

Your next question comes from Jim Goss of Barrington Research.

James C. Goss - Barrington Research Associates, Inc., Research Division

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

Timothy Warner

That's true. I mean, we think that there is still tremendous growth rates in all the countries in Latin America. And to Robert's earlier remarks, Mexico, because of the overall building of the market and the fact that it maybe started earlier than the other markets more aggressively, that is without a doubt the most mature market in Latin America. But the markets continue to have excellent growth potential, and we continue to be, I think, in a great position to be the leader in that growth effort because of our knowledge of the market, our relationships in the market. And we've got a great management team throughout Latin America. And so it doesn't mean that we have to go outside those markets to have -- still have a great international story. That doesn't mean we wouldn't look outside Latin America if we felt it was the right thing for our shareholders and the right thing for the company to continue our growth patterns.

James C. Goss - Barrington Research Associates, Inc., Research Division

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

Timothy Warner

We haven't seen a lot of differentiation in the markets. In fact, we're in because they do tend to break down markets by a, b, c and d markets. But we built in c and d markets, and the theaters do great. And we built in a markets, the theaters do great. There's usually probably a pricing difference in these markets. But as far as from an attendance or how the theaters are attended -- and people love going to movies. And then the other thing we're finding now in these markets, we're also going out into, by their standards, smaller markets. By the U.S. standards, we wouldn't think of in the small markets, 100,000, 200,000, 300,000 people. And we're finding great success in those kind of markets. So it's a little bit like, if you build, that they will come. And it seems to be true in pretty much any market you build in.

James C. Goss - Barrington Research Associates, Inc., Research Division

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

Robert D. Copple

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

James C. Goss - Barrington Research Associates, Inc., Research Division

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

Robert D. Copple

I think it's one where the success of the company has kind of allowed us to move to that level. I mean, we previously had a much higher debt to EBITDA ratio, if you went back a number of years. And over the last few years, it's been a little higher than that. But it's -- every year, it goes down a little bit, and that's because of our increasing EBITDA they were able to achieve because of reinvesting our money in the company. And so it's hard to say, is there an exact goal? We're not looking at, should we leverage the company to a 3 or some other level and just go do something with cash? We're much more focused on how we deploy our capital. And I think the resulting leverage ratio is more of a function of our success, and that success also arguably generates cash flow that if people ask about dividends and where do we go long-term, we can review that and understand more our long-term cash needs and, really, the additional cash flow that's generated by -- through this reinvestment. But the resulting kind of net debt, I think, gives us the flexibility to take advantage of opportunities as we did with Rave. And, again, we leveraged up a little bit for that deal, which was very simple to do and at incredible rates. And so we've looked at those opportunities as they come up. But I -- we probably won't necessarily target a specific level and say we ought to maintain that level.

Operator

Our next question comes from Eric Wold of B. Riley.

Eric Wold - B. Riley & Co., LLC, Research Division

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

Robert D. Copple

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

Eric Wold - B. Riley & Co., LLC, Research Division

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

Timothy Warner

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

Eric Wold - B. Riley & Co., LLC, Research Division

Okay. I understand. And just a final question. With the sale of Mexico, given that it's kind of the lack of growth there and the lack of growth prospects, where in Latin America -- I'm not saying you detail all of the 9 theaters other than the 11 screens you're doing this year, but where do you see the greatest opportunity for growth down by income [ph] ? Which countries may be the top 1 or 2 in terms of both new builds and maybe theaters that are in place where the best opportunities for organic growth kind of increasing per capita businesses?

Robert D. Copple

I mean, again, the kind of hard part for us was Mexico actually has grown as much as other places. We just haven't participated because the economics and I guess primarily the economics and the difficulty of competing with these guys on some of the projects. When we look at the rest of Latin America, what's exciting is, as you would expect, I mean, the large portion of what we're building will be in Brazil, which, again, represents the largest market for us. I mean, we're building in Argentina, Colombia, Chile, Central America, I mean, pretty much -- Ecuador. I mean, pretty much every market that we have theaters in today, we're building something. And that's what, for us, is some -- exciting about where we're heading with this is that this isn't just led by Brazil, it's not just led by Colombia or something. I mean, last year, we built a number of theaters. We're in Peru. All these markets have great opportunities in it, and we're seeing them everywhere and building everywhere. The one exception was Mexico, and it's not that -- there's a significant competition there in new building, it's just we can't make economics work for us.

Operator

Your next question comes from Matthew Harrigan with Wunderlich Securities.

Matthew J. Harrigan - Wunderlich Securities Inc., Research Division

Great exit multiple in Mexico, by the way, under the circumstances. I'm sure they were aware of the policy there as well. I think you said that Mexico was the one market where you couldn't do a National CineMedia equivalent on your own. I assume Cinemex isn't amenable to working with you on that, really having a comprehensive geography. Can you just update us on where you are on the whole region on that? Because it seems like a nice opportunity. And then secondly, I know The Hobbit was literally the first at bat, let alone the first inning on 4k. But can you fill us in a little bit more about what's happening in the theaters and the new technology as far as the experience, I mean, not just the mobile apps? Because so much is happening in the home on the CE side. And clearly, you're the window that creates the marketing excitement, and the studios maximize their revenues per nose and all that. But it's obviously important that, that's the best experience across the board and in the theater itself.

Timothy Warner

Yes, well, first off on the technology front. I guess I'll start with your last question first. We're really excited because we feel we have, for the first time, really, in the history of our industry, that technology is our ally. When we were a film-based technology, we had a lot of limitations. But we think this year, setting up DCDC is sort of the final cap on being able to take advantage of all the technology that we now have in the theater. And digital has a lot of developments. It gave us a sustainable 3D but allowed us to create our own large premium format screens. And another development that's sort of taking place in that world is the Dolby Atmos sound that we're starting to test and we have in 4 or 5 theaters now. And the response -- in fact, I've seen Die Hard in the Dolby Atmos XD, and it was absolutely spectacular. The sound was just incredible. And so we think on the technology front that there's a lot of good things happening that are sort of bringing that into the theater experience. And we think that continues to expand. And then the first part of your question was to Flix. Yes, we're starting to roll this out in Brazil, and we've had great success with it. We're going to start rolling it out to our other countries. It will be a 3- or 4-year process. It's not an easy roll-up. We need to get to be 100% digital. We also need to get a satellite distribution system in place to capitalize on it. But like we said at the start of our call, we'll be 100% digital by the end of 2013. And so that will allow us to continue to expand and roll out Flix. We have a great relationship with Cinemex but also a great relationship with the Cinépolis group. And they're aware of what we were able to achieve, along with Regal AMC regarding NCM, and they see that as a real upside to their businesses also. So it's sort of a mutual thing that's very attractive to all parties.

Operator

Your next question comes from Ben Mogil with Stifel, Nicolaus.

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

So I actually want to focus more in the domestic market. When I look at the per screen and I look at the aggregate, it looks like you were slightly ahead of the industry for the quarter. That's changed in the last couple of quarters. Can you talk about what's changed? And when you look at the average ticket price increase of kind of in the 5 range or so, 5.2, which is obviously a lot higher than you've done all year long, how much of that was mix? How much of that was based to the increases? Kind of curious on what you're seeing in the market.

Timothy Warner

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

Robert D. Copple

And, Ben, to your point, I mean, we did outperform the quarter, and we've had a few quarters that were more flattish. To Tim's point, I think if people go back and -- it's hard when you're doing a comp. And if you outperformed, especially in some prior quarters or even this one in the fourth quarter last year or anything, you're -- when you're trying to comp out, you've got that much higher of a hurdle to go. But this is a very good quarter for us. And as you said, where we've been driving most things to attendance, this quarter actually had a kicker more because of the price. I think it was a combination of events. We actually rose our -- we raise prices twice a year. The price increase we had for -- that would have hit this period was slightly higher than what we've been doing. Again, nothing way out there, but we were just slightly more aggressive because we felt like we had some opportunities that because of being a little bit conservative, we still try to keep a very broad pricing grid. So we're keeping openings for -- whatever price point somebody might have, there's opportunities to go. But on our higher end and things, we've definitely raised them a little bit. The other thing we saw that I think we benefited from is, as Tim mentioned in his part of the discussion earlier, is that we continue to roll out XD. And XD is performing extremely well. As we keep adding more screens, despite this being a little slower quarter for 3D than it was in Q4 of 2011, when we look at our premium product, not necessarily as a percentage of the total because as a percentage, it was probably off a little bit, but if we look at the gross amount, it did very well. And it was really kind of led by our XD screens, which continue to do extremely well and become a bigger and bigger percentage of our total box.

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

I get that you obviously can't predict the '13 box office in terms of how much will be 3D and IMAX or [indiscernible] but how much will be 3D and XD, et cetera. But when you look at '13 based on the pricing increases you've put together, does 3%, 3.25% sound like a reasonable range by just sort of assuming that 3D meets the general expectations that you have?

Robert D. Copple

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

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

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

Robert D. Copple

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

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

Remind me again, if you don't mind, and then you can be done with me. When does VPF international start and which quarter? So I'm sort of trying to look from a comp perspective.

Robert D. Copple

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

Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division

Okay. So we've kind of -- like we will have largely anniversary it with this last quarter. Is that fair?

Robert D. Copple

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

Operator

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

Robert D. Copple

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

Timothy Warner

Thank you.

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