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Investment in National CineMedia LLC | 9 Months Ended
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Sep. 30, 2022
Investment in National CineMedia LLC | 8. Investment in National CineMedia LLC Below is a summary of activity with NCM included in each of Holdings' and CUSA's condensed consolidated financial statements:
|  | Investment in NCM |  | NCM Screen Advertising Advances |  | Equity in Loss |  | Other Revenue |  | Interest Expense - NCM |  | Cash Received (2) |
Balance as of January 1, 2022 |  | $ | 135.4 |  | $ | (346.0 | ) |  |  |  |  |  |  |  |
Receipt of common units due to annual common unit adjustment ("CUA") |  |  | 1.3 |  |  | (1.3 | ) |  |  |  |  |  |  |  |
Screen rental revenue earned under ESA (1) |  |  | — |  |  | — |  | $ | — |  | $ | (15.0 | ) | $ | — |  | $ | 15.0 |
Interest accrued related to significant financing component |  |  | — |  |  | (17.5 | ) |  | — |  |  | — |  |  | 17.5 |  |  | — |
Equity in loss |  |  | (10.3 | ) |  | — |  |  | 10.3 |  |  | — |  |  | — |  |  | — |
Impairment of investment in NCM |  |  | (98.0 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Amortization of screen advertising advances |  |  | — |  |  | 24.3 |  |  | — |  |  | (24.3 | ) |  | — |  |  | — |
Balance as of and for the nine months ended September 30, 2022 |  | $ | 28.4 |  | $ | (340.5 | ) | $ | 10.3 |  | $ | (39.3 | ) | $ | 17.5 |  | $ | 15.0 |
(1) Amounts include the per patron and per digital screen theatre access fees due to CUSA, net of amounts due to NCM for on-screen advertising time provided to the Company's beverage concessionaire of approximately $5.9. (2) The Company had a receivable from NCM of $5.1 as of September 30, 2022. Investment in National CineMedia NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. The Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM primarily provides advertising to our theatres. See Note 8 to Holdings' Annual Report on Form 10-K filed February 25, 2022 and Note 6 to CUSA's Annual Report on From 10-K filed March 9, 2022 for additional discussion of the Company's investment in NCM as well as the accounting for its original NCM membership units and subsequent common unit adjustments. Common Unit Adjustments The Company also periodically receives consideration in the form of common units from NCM. Annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens operated and the impact of these theatres on total attendance. The common units received are recorded at estimated fair value as an increase in the Company's investment in NCM with an offset to NCM screen advertising advances. During March 2022, 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 0.5 common units of NCM during April 2022 and recorded the additional common units received at their estimated fair value of $1.3 with a corresponding adjustment to NCM screen advertising advances. The fair value of the common units received was estimated based on the market price of National Cinemedia, Inc. ("NCMI") common stock (Level 1 input as defined in FASB ASC Topic 820) at the time the common units were determined, adjusted for volatility associated with the estimated time period it would take to convert the common units and register the respective shares. Impairment of NCM Investment As of September 30, 2022, the Company owned a total of 43.7 common units of NCM representing an ownership interest of approximately 25.5%. Each of the Company’s common units in NCM is convertible into one share of NCMI common stock. As of September 30, 2022, the estimated fair value of the Company’s investment in NCM was approximately $28.4 based on NCMI's stock price as of September 30, 2022 of $0.65 per share (Level 1 input as defined in FASB ASC Topic 820). Because the share price of NCMI was significantly below the Company’s carrying value of NCM per common unit and due to the prolonged recovery of NCM's business, the Company wrote down its investment in NCM to its estimated fair value during the nine months ended September 30, 2022. See Note 12 for impairment expense recorded during the three and nine months ended September 30, 2022 and 2021. Exhibitor Services Agreement As discussed above, the Company’s domestic theatres are part of the in-theatre digital network operated by NCM, the terms of which are defined in the ESA. NCM provides advertising to its theatres through its branded “Noovie” pre-show entertainment program and also handles lobby promotions and displays for our theatres. The Company receives a monthly theatre access fee for participation in the NCM network and also earns screen advertising or screen rental revenue on a per patron basis. See Note 8 to Holdings' Annual Report on Form 10-K filed February 25, 2022 and Note 6 to CUSA's Annual Report on Form 10-K filed March 9, 2022 for further discussion of the accounting for revenue earned under the ESA as well as the accounting related to NCM screen advertising advances. The deferred NCM screen advertising advances are recorded on a straight-line basis over the term of the amended ESA through February 2041. The table below summarizes when the Company expects to recognize this revenue:
|  | Twelve Months Ended September 30, |  |  |  |  |  |  |
Remaining Maturity |  | 2023 |  |  | 2024 |  |  | 2025 |  |  | 2026 |  |  | 2027 |  |  | Thereafter |  |  | Total |
NCM screen advertising advances (1) |  | $ | 9.6 |  |  | $ | 10.3 |  |  | $ | 11.0 |  |  | $ | 11.8 |  |  | $ | 12.6 |  |  | $ | 285.2 |  |  | $ | 340.5 |
(1) Amounts are net of the estimated interest to be accrued for the periods presented. See discussion of significant financing component below. Significant Financing Component As discussed in Note 8 to Holdings' Annual Report on Form 10-K filed February 25, 2022 and Note 6 to CUSA's Annual Report on Form 10-K filed March 9, 2022, CUSA's ESA with NCM includes an implied significant financing component, as per the guidance in ASC Topic 606. As a result of the significant financing component, the Company recognized incremental screen rental revenue and interest expense of $24.3 and $17.5, respectively, during the nine months ended September 30, 2022 and incremental screen rental revenue and interest expense of $24.0 and $17.7, respectively, during the nine months ended September 30, 2021. The interest expense was calculated using the Company's incremental borrowing rates at the time when the cash was received from the NCM, Inc. IPO and each tranche of common units was received from NCM, which ranged from 4.4% to 8.3%. NCM Financial Information Below is summary financial information for NCM for the periods indicated:
|  | Three Months Ended |  |  | Three Months Ended |  |  | Nine Months Ended |  |  | Nine Months Ended |
|  | September 29, 2022 |  |  | September 30, 2021 |  |  | September 29, 2022 |  |  | September 30, 2021 |
Gross revenue |  | $ | 54.5 |  |  | $ | 31.7 |  |  | $ | 157.5 |  |  | $ | 51.1 |
Operating loss |  | $ | (4.3 | ) |  | $ | (18.7 | ) |  | $ | (21.2 | ) |  | $ | (76.6 | )
Net loss |  | $ | (24.4 | ) |  | $ | (35.3 | ) |  | $ | (79.0 | ) |  | $ | (125.7 | )
|  | As of |  |  | As of |
|  | September 29, 2022 |  |  | December 30, 2021 |
Current assets |  | $ | 123.5 |  |  | $ | 115.4 |
Noncurrent assets |  | $ | 637.5 |  |  | $ | 658.0 |
Current liabilities |  | $ | 72.7 |  |  | $ | 67.2 |
Noncurrent liabilities |  | $ | 1,162.4 |  |  | $ | 1,114.7 |
Members deficit |  | $ | (474.1 | ) |  | $ | (408.5 | )

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI https://asc.fasb.org/topic&trid=2196965 + Details
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