XML 29 R15.htm IDEA: XBRL DOCUMENT
v3.23.2

Investment in NCMI/NCM | 6 Months Ended
--- | ---
Jun. 30, 2023
Investment in National CineMedia LLC | 8. Investment in NCMI/NCM Below is a summary of activity with NCMI and NCM included in each of Holdings' and CUSA's condensed consolidated financial statements:
|  | Investment in NCMI/NCM |  | NCM Screen Advertising Advances |  | Equity in Loss (2) |  | Other Revenue (3) |  | Interest Expense - NCM |
Balance as of January 1, 2023 |  | $ | 9.6 |  | $ | (338.2 | ) | $ | — |  | $ | — |  | $ | — |
Screen rental revenue earned under ESA (1) |  |  | — |  |  | — |  |  | — |  |  | (10.4 | ) |  | — |
Interest accrued related to significant financing component |  |  | — |  |  | (11.4 | ) |  | — |  |  | — |  |  | 11.4 |
Equity in loss (2) |  |  | (3.2 | ) |  | — |  |  | (3.2 | ) |  | — |  |  | — |
Redemption of common units of NCM for common stock of NCMI (4) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Unrealized gain on fair market value adjustment of investment in NCMI (4) |  |  | 9.2 |  |  | — |  |  | — |  |  | — |  |  | — |
Impairment of investment in NCMI |  |  | (0.7 | ) |  | — |  |  | — |  |  | — |  |  | — |
Amortization of screen advertising advances |  |  | — |  |  | 16.2 |  |  | — |  |  | (16.2 | ) |  | — |
Balance as of and for the six months ended June 30, 2023 |  | $ | 14.9 |  | $ | (333.4 | ) | $ | (3.2 | ) | $ | (26.6 | ) | $ | 11.4 |
(1) Amounts include the per patron and per digital screen theatre access fees, net of amounts due to NCM for on-screen advertising time provided to the Company's beverage concessionaire of approximately $4.5. (2) Equity in loss is recorded one month in arrears. See Investment in National CineMedia below for discussion of accounting for investment in NCMI. (3) The Company had a receivable from NCM of $10.4 as of June 30, 2023. (4) See Investment in National CineMedia below. NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. The Company has an investment in NCM’s parent National Cinemedia, Inc. (”NCMI”), and previously held an investment in NCM. See further discussion below under Investment in National CineMedia. The Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM primarily provides advertising to our theatres through its branded “Noovie” pre-show entertainment program and also handles lobby promotions and displays for our theatres. Investment in National CineMedia On February 17, 2023, the Company delivered a redemption notice to NCM pursuant to the redemption right under its operating agreement with NCM to redeem approximately 42.0 of the Company’s 43.7 common units in NCM in exchange for approximately 42.0 newly issued shares of NCMI common stock, with a redemption date of February 23, 2023 (the “Redemption”). On March 20, 2023, the Company delivered a second redemption notice to NCM to redeem the Company’s remaining 1.7 common units in NCM in exchange for 1.7 newly issued shares of NCMI common stock, with a redemption date of March 23, 2023 (collectively with the February 23, 2023 redemption, the “Redemptions”). NCMI is a holding company and the sole manager of NCM. NCM comprises approximately the entire balance of NCMI’s assets, liabilities and operating cash flows. See Note 19 for discussion of subsequent event related to NCMI. On April 11, 2023, NCM filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code. NCMI expects to continue to manage NCM, the “debtor in possession,” under the jurisdiction of the bankruptcy court and in accordance with the applicable bankruptcy laws and orders of the bankruptcy court. In general, as debtor in possession under the Bankruptcy Code, NCM is authorized to continue to operate as an ongoing business but may not engage in transactions outside the ordinary course of business without the prior approval of the bankruptcy court. Due to NCM’s bankruptcy proceedings, the Company reassessed its rights and level of influence over NCM. The Company determined that effective April 11, 2023, the date NCM filed its bankruptcy petition, it no longer had significant influence over NCM and therefore ceased accounting for its investment in NCMI under the equity method of accounting in the second quarter of 2023. The Company now accounts for its investment in NCMI in accordance with the guidance set forth in FASB ASC Topic 321 Investments - Equity Securities, which requires the Company to measure its investment in common stock of NCMI at fair value and recognize unrealized holding gains and losses on its investment in earnings. The Company recognized an unrealized gain of $9.2 on its investment in NCMI in the Company’s condensed consolidated statement of income for the three and six months ended June 30, 2023. See Note 9 to the Company’s Annual Report on Form 10-K filed February 24, 2023 for additional discussion of the Company's investment in NCM. Common Unit Adjustments The Company 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. In March 2023, NCM provided CUSA notice that is was entitled to 4.8 common units of NCM as part of the annual common unit adjustment. The issuance of these additional common units of NCM was stayed by NCM’s bankruptcy filing on April 11, 2023. In June 2023 the bankruptcy court issued an order cancelling the issuance of these common units of NCM and found that these common units were never issued. Impairment of NCMI Investment During the first quarter of 2023, the Company accounted for its investment in NCMI under the equity method of accounting, and therefore assessed its investment for other than temporary impairment. The Company recorded an impairment charge totaling $0.7 on its investment in NCMI during the first quarter of 2023 because the share price of NCMI was significantly below the Company’s carrying value of NCMI per common share and due to the lag in the pace of recovery pace of NCM’s business from the COVID-19 pandemic compared to that of the Company and the movie theatre industry. 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. 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 9 to the Company’s Annual Report on Form 10-K filed February 24, 2023 for further discussion of the accounting for revenue earned under the ESA as well as the accounting related to NCM screen advertising advances. As discussed in Note 9 to the Company’s Annual Report on Form 10-K filed February 24, 2023, the Company’s ESA with NCM includes an implied significant financing component, as per the guidance in ASC Topic 606, Revenue from Contracts with Customers. As a result of the significant financing component, the Company recognized incremental screen rental revenue and interest expense of $16.2 and $11.4, respectively, during the six months ended June 30, 2023 and incremental screen rental revenue and interest expense of $16.2 and $11.7 respectively, during the six months ended June 30, 2022. The interest expense was calculated using the Company's incremental borrowing rates at the time when the cash and each tranche of common units were received from NCM, which ranged from 4.4% to 8.3%. The recognition of revenue related to the NCM screen advertising advances is 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 June 30, |  |  |  |  |  |  |
Remaining Maturity |  | 2024 |  |  | 2025 |  |  | 2026 |  |  | 2027 |  |  | 2028 |  |  | Thereafter |  |  | Total |
NCM screen advertising advances (1) |  | $ | 10.1 |  |  | $ | 10.8 |  |  | $ | 11.6 |  |  | $ | 12.4 |  |  | $ | 13.3 |  |  | $ | 275.2 |  |  | $ | 333.4 |
(1) Amounts are net of the estimated interest to be accrued for the periods presented. See discussion of significant financing component below.

X
- 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
Name: | us-gaap_EquityMethodInvestmentsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration