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SEC Filings

10-Q
CINEMARK HOLDINGS, INC. filed this Form 10-Q on 08/09/2016
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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

 

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)

     —          —          —          —          (5,560     5,560   

Receipt of excess cash distributions

     (5,505     —          (5,795     —          —          11,300   

Receipt under tax receivable agreement

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

Equity in earnings

     1,845        —          —          (1,845     —          —     

Amortization of deferred revenue

     —          4,588        —          —          (4,588     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of and for the six month period ended June 30, 2016

   $ 188,441      $ (348,657   $ (8,736   $ (1,845   $ (10,148   $ 22,566   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 $5,236.

During the three months ended June 30, 2016 and 2015, the Company recorded equity in loss of approximately $28 and $386, respectively. During the six months ended June 30, 2016 and 2015, the Company recorded equity in earnings of approximately $1,845 and $409, respectively.

The Company made payments to NCM of approximately $28 and $24 during the six months ended June 30, 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.

On March 16, 2015, NCM, Inc. announced that it had agreed with Screenvision, LLC (“Screenvision”) to terminate a merger agreement under which it would have acquired Screenvision. The termination of the merger agreement resulted in a $26.8 million termination payment to Screenvision by NCM, Inc. NCM indemnified NCM, Inc. for the termination fee. The impact of the termination payment and related merger costs resulted in NCM paying reduced excess cash distributions to its shareholders during the second quarter of 2015 and 2016, as required by NCM’s Amended and Restated Operating Agreement.

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 deferred revenue is amortized over the remaining term of the ESA. During March 2016, NCM performed its annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, the Company received an additional 753,598 common units of NCM, each of which is convertible into one share of NCM, Inc. common stock. The Company recorded the additional common units received at fair value with a corresponding adjustment to deferred revenue of approximately $11,111. The deferred revenue will be recognized over the remaining term of the ESA, which is approximately 20 years.

As of June 30, 2016, the Company owned a total of 26,384,644 common units of NCM, representing an ownership interest of approximately 19%. The estimated fair value of the Company’s investment in NCM was approximately $408,434 as of June 30, 2016, using NCMI’s stock price as of June 30, 2016 of $15.48 per share.

 

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