|12 Months Ended|
Dec. 31, 2020
|Financial Support For Nonconsolidated Legal Entity [Abstract]|
Below is a summary of activity for each of the Company’s other investments for the periods indicated:
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. 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.
As of December 31, 2020, the Company had a 33% voting interest in DCIP and a 24.3% economic interest in DCIP. Prior to the distribution received during November 2020, as discussed below, the Company accounted 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, 2018, 2019 and 2020:
Through October 31, 2020, the Company leased digital projection systems under a master equipment lease agreement with Kasima LLC (“Kasima”), which is an indirect subsidiary of DCIP and a related party to the Company. The Company amended the master equipment lease agreement (“MELA”) with Kasmia effective November 1, 2020, which resulted in the termination of the MELA and a lease termination fee to be paid by the Company on a monthly basis until a) cost recoupment is met or b) the DCDA agreements between DCIP and the major studios have been terminated. Upon termination of the MELA, DCIP distributed the digital projection equipment to the Company.
The Company accounted for the lease termination and projector distribution as follows:
In accordance with ASC 323-10-35, since the non-cash distribution exceeded the book value of its investment in DCIP, the Company suspended equity method accounting. The Company will resume equity method accounting when the value of its investment in DCIP exceeds the sum of the excess noncash distribution noted above and any future excess cash distributions.
In addition to the activity presented in the other investments table above, the Company had the following transactions with DCIP during the years ended December 31, 2018, 2019 and 2020:
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” (consisting of Fathom Events and Fathom Consumer 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 to provide additional programs to augment their feature film schedule. The Company paid event fees to AC of $12,481, $15,376 and $3,740 for the years ended December 31, 2018, 2019 and 2020, respectively, which are included in film rentals and advertising costs on the consolidated statements of income. The Company accounts for its investment in AC under the equity method of accounting.
Digital Cinema Distribution Coalition
The Company is a party to a joint venture with certain exhibitors and distributors called Digital Cinema Distribution Coalition (“DCDC”). 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 $927, $896 and $428 to DCDC during the years ended December 31, 2018, 2019 and 2020, respectively, related to content delivery services, which is included in film rentals and advertising costs on the consolidated statements of income. The Company accounts for its investment in DCDC under the equity method of accounting.
FE Concepts, LLC
During April 2018, the Company, through its wholly-owned indirect subsidiary CNMK Texas Properties, LLC (“CNMK”), formed a joint venture, FE Concepts, LLC (“FE Concepts”) with AWSR Investments, LLC (“AWSR”), an entity owned by Lee Roy Mitchell and Tandy Mitchell. In December of 2019, FE Concepts opened a family entertainment center that offers bowling, gaming, movies and other amenities. The Company and AWSR each invested approximately $20,000 and each have a 50% voting interest in FE Concepts. 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 receives service fees for providing film booking and equipment monitoring services for the facility. The Company recorded $64 and $34 of related service fees during the years ended December 31, 2019 and 2020, respectively.
Each of the investments above have been adversely impacted by the COVID-19 pandemic (see Note 3) due to the temporary closure of theatres across the U.S. The Company does not believe that any resulting decline in value of the underlying investments is other than temporary as the Company and other industry participants, who also have equity ownership interests in certain of the above investments, have reopened some theatres and will continue to reopen theatres as local government restrictions allow. The Company expects the industry to recover gradually over time. The Company performed a qualitative impairment analysis for its investments in AC and DCDC during the fourth quarter of 2020. Based on the analysis performed, no impairment was recorded for the year ended December 31, 2020.
The entire disclosure for the information summarizing investments in and advances to majority-owned subsidiaries, other controlled companies, and other affiliates. It reflects specified information about ownership, financial results from, and financial position in such entities.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef