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SEC Filings

10-K
CINEMARK HOLDINGS, INC. filed this Form 10-K on 02/23/2018
Entire Document
 

CINEMARK HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

Digital Cinema Implementation Partners LLC (“DCIP”)

On February 12, 2007, the Company, AMC and Regal entered into a joint venture known as DCIP to facilitate the implementation of digital cinema in the Company’s theatres and to establish agreements with major motion picture studios for the financing of digital cinema. As of December 31, 2017, the Company had a 33% voting interest in DCIP and a 24.3% economic interest in DCIP. The Company accounts for its investment in DCIP and its subsidiaries under the equity method of accounting.

Below is summary financial information for DCIP as of and for the years ended December 31, 2015, 2016 and 2017.

 

 

 

Year ended December 31,

 

 

 

2015

 

 

2016

 

 

2017

 

Revenues

 

$

171,203

 

 

$

178,836

 

 

$

177,382

 

Operating income

 

$

103,449

 

 

$

107,919

 

 

$

106,687

 

Net income

 

$

79,255

 

 

$

89,152

 

 

$

93,103

 

 

 

 

As of

 

 

 

December 31, 2016

 

 

December 31, 2017

 

Current assets

 

$

45,087

 

 

$

56,296

 

Noncurrent assets

 

$

861,290

 

 

$

772,438

 

Current liabilities

 

$

44,771

 

 

$

59,153

 

Noncurrent liabilities

 

$

464,246

 

 

$

296,889

 

Members' equity

 

$

397,360

 

 

$

472,692

 

 

The digital projection systems are being leased from Kasima LLC (“Kasima”), which is an indirect subsidiary of DCIP and a related party to the Company, under an operating lease with an initial term of twelve years that contains ten one-year fair value renewal options. The equipment lease agreement also contains a fair value purchase option. Under the equipment lease agreement, the Company pays annual rent of one thousand dollars per digital projection system. The Company may also be subject to various types of other rent if such digital projection systems do not meet minimum performance requirements as outlined in the agreements. Certain of the other rent payments are subject to either a monthly or an annual maximum. As of December 31, 2017, the Company had 3,805 digital projection systems being leased under the master equipment lease agreement with Kasima. The Company had the following transactions with DCIP during the years ended December 31, 2015, 2016 and 2017:

 

 

 

Year Ended December 31,

 

 

 

2015

 

 

2016

 

 

2017

 

Equipment lease payments

 

$

4,474

 

 

$

5,217

 

 

$

5,743

 

Warranty reimbursements from DCIP

 

$

(4,329

)

 

$

(6,091

)

 

$

(8,511

)

Management services fees

 

$

825

 

 

$

825

 

 

$

823

 

 

RealD, Inc. (“RealD”)

The Company licenses 3-D systems from RealD. Under its license agreement with RealD, the Company earned options to purchase shares of RealD common stock as it installed a certain number of 3-D systems as outlined in the license agreement.  During 2010 and 2011, the Company vested in a total of 1,222,780 RealD options. Upon vesting in these options, the Company recorded an investment in RealD and a deferred lease incentive liability using the estimated fair value of the RealD options at the time of vesting. During March 2011, the Company exercised all of its options to purchase shares of common stock in RealD for $0.00667 per share.

The Company owned 1,222,780 shares of RealD and accounted for its investment in RealD as a marketable security, specifically an available-for-sale security, in accordance with ASC Topic 320-10-35-1, therefore unrealized holding gains and losses were reported as a component of accumulated other comprehensive loss until realized.

On March 22, 2016, an affiliate of Rizvi Traverse Management, LLC acquired RealD for $11.00 per share. As a result of the transaction, the Company sold its shares for approximately $13,451 and recognized a gain of $3,742, which included the recognition of a cumulative unrealized holding gain of $3,191 previously recorded in

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