Quarterly report pursuant to Section 13 or 15(d)

Other Investments

v3.21.1
Other Investments
3 Months Ended
Mar. 31, 2021
Financial Support For Nonconsolidated Legal Entity [Abstract]  
Other Investments

10.

Other Investments

 

Digital Cinema Implementation Partners LLC (“DCIP”)

On February 12, 2007, the Company, AMC and Regal (the “Exhibitors”) 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. On March 10, 2010, DCIP and its subsidiaries completed an initial financing transaction to enable the purchase, deployment and leasing of digital projection systems to the Exhibitors under equipment lease and installation agreements.  On March 31, 2011, DCIP obtained incremental financing necessary to complete the deployment of digital projection systems.  DCIP also entered into long-term Digital Cinema Deployment Agreements (“DCDAs”) with six major motion picture studios pursuant to which Kasima LLC, one of DCIP’s subsidiaries, receives a virtual print fee ("VPF") each time the studio books a film or certain other content on the leased digital projection systems. Other content distributors entered into similar DCDAs that provide for the payment of VPFs for bookings of the distributor's content on a leased digital projection system.  The DCDAs end on the earlier to occur of (i) the tenth anniversary of the "mean deployment date" for all digital projection systems scheduled to be deployed over a period of up to five years, or (ii) the date DCIP achieves "cost recoupment", each as defined in the DCDAs.  Cost recoupment occurs when revenues attributable to the digital projection systems exceed the financing, deployment, administration and other costs associated with the purchase of the digital projection systems.  DCIP expects cost recoupment to occur during late 2021. The timing of cost recoupment is dependent on VPF payments from studios. Pursuant to the operating agreement between the Exhibitors and DCIP, DCIP began to distribute excess cash to the Exhibitors upon the payoff of its outstanding debt, which occurred during the year ended December 31, 2019.  

Effective November 1, 2020, the Company amended the master equipment lease agreement (“MELA”) with Kasima LLC, which is an indirect subsidiary of DCIP, resulting in the termination of the MELA.  Upon termination of the MELA, the Company received a distribution of the digital projection equipment that it previously leased.  As the fair value of the distributed projectors was greater than the Company’s investment in DCIP at the time of the distribution, the investment in DCIP was reduced to zero at the time of the distribution.  The Company does not recognize undistributed equity in the earnings or loss of its investment in DCIP until such time that future net earnings, less distributions received, surpass the amount of the excess distribution.

As of March 31, 2021, 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 for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31, 2021

 

 

March 31, 2020

 

Gross revenues

 

$

5,624

 

 

$

32,510

 

Operating income (loss)

 

$

3,980

 

 

$

(5,239

)

Net income (loss)

 

$

3,901

 

 

$

(11,140

)

 

 

 

As of

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Current assets

 

$

29,987

 

 

$

36,372

 

Noncurrent assets

 

$

172

 

 

$

205

 

Current liabilities

 

$

23,125

 

 

$

39,844

 

Noncurrent liabilities

 

$

940

 

 

$

687

 

Members' equity

 

$

6,094

 

 

$

(3,954

)

 

The Company had the following transactions with DCIP, reflected in utilities and other costs on the condensed consolidated statements of income, during the three months ended March 31, 2021 and 2020:

 

 

 

Three Months Ended

 

 

 

March 31, 2021

 

 

March 31, 2020

 

Equipment lease payments (1)

 

$

1,045

 

 

$

1,038

 

Warranty reimbursements from DCIP

 

$

(266

)

 

$

(3,123

)

Management service fees

 

$

11

 

 

$

84

 

 

(1)

As a result of the MELA amendment noted above, the Company recorded a lease termination liability during 2020.  The lease termination payments made during the three months ended March 31, 2021 reduced the liability outstanding.  The remaining termination liability of $2,084 as of March 31, 2021 is reflected in accrued other current liabilities on the condensed consolidated balance sheet.  

 

Other Investment Activity

Below is a summary of activity for each of the Company’s other investments for the three months ended March 31, 2021:

 

 

 

AC JV,

LLC

 

DCDC

 

FE Concepts

 

Other

 

Total

 

Balance at January 1, 2021

 

$

3,745

 

$

1,255

 

$

18,273

 

$

453

 

$

23,726

 

Equity loss

 

 

(453

)

 

16

 

 

(21

)

 

 

 

(458

)

Other

 

 

 

 

 

 

 

 

664

 

 

664

 

Balance at March 31, 2021

 

$

3,292

 

$

1,271

 

$

18,252

 

$

1,117

 

$

23,932

 

 

AC JV, LLC

During December 2013, the Company, Regal, AMC (the “AC Founding Members”) and NCM entered into a series of agreements that resulted in the formation of AC JV, LLC (“AC”), a joint venture that owns “Fathom Events” formerly operated by NCM.  The Fathom Events business focuses on the marketing and distribution of live and pre-recorded entertainment programming to various theatre operators, including concerts, opera and symphony, DVD product releases and marketing events, theatrical premieres, Broadway plays, live sporting events and other special events. The Company paid event fees to AC of $230 and $1,673 for the three months ended March 31, 2021 and 2020, respectively, which are included in film rentals and advertising costs on the condensed consolidated statements of income. The Company accounts for its investment in AC under the equity method of accounting.

Digital Cinema Distribution Coalition

Digital Cinema Distribution Coalition (“DCDC”) is a joint venture among the Company, Universal, Warner Bros., AMC and Regal.  DCDC operates a satellite distribution network that distributes all digital content to U.S. theatres via satellite. The Company has an approximate 14.6% ownership in DCDC. The Company paid approximately $64 and $105 to DCDC during the three months ended March 31, 2021 and 2020, respectively, related to content delivery services provided by DCDC.  These fees are included in film rentals and advertising costs on the condensed consolidated statements of income. The Company accounts for its investment in DCDC

under the equity method of accounting.

FE Concepts, LLC

The Company has a 50% voting interest in a joint venture, FE Concepts, LLC (“FE Concepts”) with AWSR Investments, LLC, an entity owned by Lee Roy Mitchell and Tandy Mitchell.  FE Concepts operates a family entertainment center that offers bowling, gaming, movies and other amenities.  The Company accounts for its investment in FE Concepts under the equity method of accounting.  The Company has a theatre services agreement with FE Concepts under which it provides film booking and equipment monitoring services. The Company recorded $16 and $10 of theatre services revenue under the agreement during the three months ended March 31, 2021 and 2020, respectively.