Quarterly report pursuant to Section 13 or 15(d)

Other Investments

v3.21.2
Other Investments
9 Months Ended
Sep. 30, 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. As of September 30, 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. 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 October 2021. The timing of cost recoupment is dependent on VPF payments from studios. Pursuant to the operating agreement between the Exhibitors and DCIP, DCIP could distribute excess cash to the Exhibitors upon the payoff of its outstanding debt, which began 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.

Below is summary financial information for DCIP for the periods indicated:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

September 30, 2021

 

 

September 30, 2020

 

Gross revenues

 

$

27,639

 

 

$

1,084

 

 

$

47,361

 

 

$

20,809

 

Operating income (loss)

 

$

18,427

 

 

$

(29,878

)

 

$

41,868

 

 

$

(72,422

)

Net income (loss)

 

$

18,976

 

 

$

(30,554

)

 

$

42,933

 

 

$

(79,660

)

 

 

 

As of

 

 

 

September 30, 2021

 

 

December 31, 2020

 

Current assets

 

$

41,625

 

 

$

36,372

 

Noncurrent assets

 

$

63

 

 

$

205

 

Current liabilities

 

$

14,562

 

 

$

39,844

 

Noncurrent liabilities

 

$

 

 

$

687

 

Members' equity (deficit)

 

$

27,126

 

 

$

(3,954

)

The Company had the following transactions with DCIP during the three and nine months ended September 30, 2021 and 2020:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

September 30, 2021

 

 

September 30, 2020

 

Equipment lease payments (1)(2)

 

$

 

 

$

346

 

 

$

 

 

$

1,384

 

Warranty reimbursements from DCIP (2)

 

$

(84

)

 

$

 

 

$

(784

)

 

$

(3,123

)

Management service fees (2)

 

$

21

 

 

$

 

 

$

36

 

 

$

84

 

Distributions from DCIP (3)

 

$

6,534

 

 

$

 

 

$

6,534

 

 

$

 

(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 nine months ended September 30, 2021 reduced the liability outstanding. The remaining termination liability of $174 as of September 30, 2021 is reflected in accrued other current liabilities on the condensed consolidated balance sheet.
(2)
Amounts reflected in utilities and other costs on the condensed consolidated statements of loss.
(3)
Cash distributions received from DCIP are not treated as a reduction of the investment balance because, as discussed above, the Company's equity investment in DCIP is zero. Reflected as distributions from DCIP on the condensed consolidated statements of loss.

Other Investment Activity

Below is a summary of activity for each of the Company’s other investments for the nine months ended September 30, 2021:

 

 

AC JV,
LLC

 

DCDC

 

FE Concepts

 

Other

 

Total

 

Balance at January 1, 2021

 

$

3,745

 

$

1,255

 

$

18,273

 

$

453

 

$

23,726

 

Equity income (loss)

 

 

(1,099

)

 

296

 

 

788

 

 

 

 

(15

)

Other

 

 

 

 

 

 

 

 

44

 

 

44

 

Balance at September 30, 2021

 

$

2,646

 

$

1,551

 

$

19,061

 

$

497

 

$

23,755

 

Below is a summary of transactions with each of the Company’s other investees for the nine months ended September 30, 2021:

 

 

 

Nine Months Ended

 

Investee

Transactions

 

September 30, 2021

 

 

September 30, 2020

 

AC JV, LLC

Event fees paid (1)

 

$

1,386

 

 

$

2,258

 

DCDC

Content delivery fees paid (1)

 

$

377

 

 

$

208

 

FE Concepts

Theatre service fees received (2)

 

$

(47

)

 

$

(19

)

(1)
Included in film rentals and advertising costs on the condensed consolidated statements of income.
(2)
Included in other revenues on the condensed consolidated statements of income.