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SEC Filings

10-Q
CINEMARK HOLDINGS, INC. filed this Form 10-Q on 05/10/2016
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Table of Contents

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

(1)  The Company’s board of directors declared a cash dividend for the fourth quarter of 2015 in the amount of $0.27 per share of common stock payable to stockholders of record on March 7, 2016. The dividend was paid on March 18, 2016.
(2)  The Company’s board of directors declared a cash dividend for the fourth quarter of 2014 in the amount of $0.25 per share of common stock payable to stockholders of record on March 4, 2015. The dividend was paid on March 18, 2015.

6. Investment in National CineMedia

The Company has an investment in National CineMedia, LLC (“NCM”). NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. Upon joining NCM, the Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM provides advertising, promotion and event services to our theatres. As described further in Note 6 to the Company’s financial statements as included in its 2015 Annual Report on Form 10-K, on February 13, 2007, National CineMedia, Inc. (“NCM, Inc.”), an entity that serves as the sole manager of NCM, completed an initial public offering (“IPO”) of its common stock. In connection with the NCM Inc. initial public offering, the Company amended its operating agreement and the ESA. Following the NCM, Inc. IPO, the Company does not recognize undistributed equity in the earnings on its original NCM membership units (referred to herein as the Company’s Tranche 1 Investment) until NCM’s future net earnings, less distributions received, surpass the amount of the excess distribution. The Company recognizes equity in earnings on its Tranche 1 Investment only to the extent it receives cash distributions from NCM. The Company recognizes cash distributions it receives from NCM on its Tranche 1 Investment as a component of earnings as Distributions from NCM. The Company believes that the accounting model provided by ASC 323-10-35-22 for recognition of equity investee losses in excess of an investor’s basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution.

Below is a summary of activity with NCM included in the Company’s condensed consolidated financial statements:

 

                 Distributions                    
     Investment     Deferred     from     Equity in     Other     Cash  
     in NCM     Revenue     NCM     Income     Revenue     Received  

Balance as of January 1, 2016

   $ 183,755      $ (342,134        

Receipt of common units due to annual common unit adjustment

     11,111        (11,111   $ —        $ —        $ —        $ —     

Revenues earned under ESA (1)

     —          —          —          —          (2,806     2,806   

Receipt of excess cash distributions

     (5,321     —          (5,602     —          —          10,923   

Receipt under tax receivable agreement

     (2,765     —          (2,941     —          —          5,706   

Equity in earnings

     1,873        —          —          (1,873     —          —     

Amortization of deferred revenue

     —          2,223        —          —          (2,223     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of and for the three month period ended March 31, 2016

   $ 188,653      $ (351,022   $ (8,543   $ (1,873   $ (5,029   $ 19,435   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Amount includes the per patron and per digital screen theatre access fees due to the Company, net of amounts due to NCM for on-screen advertising time provided to the Company’s beverage concessionaire of approximately $2,586.

During the three months ended March 31, 2016 and 2015, the Company recorded equity in earnings of approximately $1,873 and $795, respectively.

The Company made payments to NCM of approximately $22 and $20 during the three months ended March 31, 2016 and 2015, respectively, related to installation of certain equipment used for digital advertising, which is included in theatre properties and equipment on the condensed consolidated balance sheets.

Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCM, Inc. and the Company, AMC Entertainment, Inc. (“AMC”) and Regal Entertainment Group (“Regal”), annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens operated and theatre attendance generated by each Founding Member. As further discussed in Note 6 to the Company’s financial statements as included in its 2015 Annual Report on Form 10-K, the common units received are recorded at fair value as an increase in the Company’s investment in NCM with an offset to deferred revenue. The

 

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