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Investment in National CineMedia Inc. | 6 Months Ended
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Jun. 30, 2024
Equity Method Investments and Joint Ventures [Abstract] |
Investment in National CineMedia Inc. | 8. Investment in National CineMedia Inc. 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”). The Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM primarily provides screen advertising to the Company’s theatres through its branded “Noovie” pre-show entertainment program and also handles lobby promotions and displays for the Company’s theatres. See further discussion below under Exhibitor Services Agreement. 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 Screen Advertising Advances |  | Other Revenue |  | Interest Expense - NCM |  | Cash Received (4) |
Balance at January 1, 2024 |  | $ | 18.1 |  | $ | (328.4 | ) | $ | — |  | $ | — |  | $ | — |
Screen rental revenue earned under ESA (1) |  |  | — |  |  | — |  |  | (10.4 | ) |  | — |  |  | 8.2 |
Interest accrued related to significant financing component |  |  | — |  |  | (11.1 | ) |  | — |  |  | 11.1 |  |  | — |
Receipt of common units in NCM due to annual common unit adjustment (2) |  |  | — |  |  | (0.5 | ) |  | — |  |  | — |  |  | — |
Change in unrealized gain on fair market adjustment of investment in NCMI (3) |  |  | 1.1 |  |  | — |  |  | — |  |  | — |  |  | — |
Amortization of screen advertising advances |  |  | — |  |  | 16.2 |  |  | (16.2 | ) |  | — |  |  | — |
Balance as of and for the six months ended June 30, 2024 |  | $ | 19.2 |  | $ | (323.8 | ) | $ | (26.6 | ) | $ | 11.1 |  | $ | 8.2 |
(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 $3.7. (2) See Common Unit Adjustments below. (3) See Investment in National CineMedia below. (4) The Company had a receivable from NCM of $2.2 as of June 30, 2024. Investment in National CineMedia The Company 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 loss of $3.3 and unrealized gain of $1.1 on its investment in NCMI in the Company’s condensed consolidated statement of income for the three and six months ended June 30, 2024, respectively. 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. During the first quarter of 2023, t he Company accounted for its investment in NCMI under the equity method and therefore did no t recognize unrealized holding gains and losses on its investment. As of June 30, 2024, the Company owned approximately 4.4 shares of NCMI, which represented an interest in NCMI of approximately 4.5%. See Note 9 to the Company’s Annual Report on Form 10-K filed February 16, 2024 for additional discussion of the Company's investment in NCMI. Common Unit Adjustments Under the Common Unit Adjustment Agreement, the Company periodically receives consideration in the form of common units from NCM 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. Each common unit from NCM is convertible to one share of NCMI. During March 2024, NCM performed the annual common unit adjustment calculation for 2023 and as a result of the calculation, the Company received approximately 0.1 common units of NCM on April 1, 2024. The Company recorded the common units at their estimated fair value of $0.5 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 NCMI’s common stock 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. On April 10, 2024, the Company delivered a redemption notice to NCM to redeem these common units in NCM for shares of NCMI common stock. On April 12, 2024, NCM delivered a notice to the Company that pursuant to its rights under the operating agreement, NCM would settle the Company’s redemption request with a cash settlement, effective on April 15, 2024, at a redemption price of approximately $4.95 per common unit, or approximately $0.6. The amount of the cash settlement represents the estimated fair value of the NCM common units based on the closing market price of NCMI’s common stock on April 10, 2024. During the three months ended June 30, 2024, as a result of the cash settlement, the Company recorded a reduction in its investment in NCM of $0.5 and a gain of $0.1 which is reflected in “Net (loss) gain on investment in NCMI” on the Company’s condensed consolidated statement of income (loss) for the three and six months ended June 30, 2024. Exhibitor Services Agreement As previously discussed, 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 16, 2024 for further discussion of the accounting for revenue earned under the ESA as well as the accounting related to NCM screen advertising advances. The NCM screen advertising advances are recognized as revenue on a straight-line basis over the term of the ESA through February 2041. The table below summarizes when the Company expects to recognize this deferred revenue:
|  | Twelve Months Ended June 30, |  |  |  |  |  |  |
Remaining Maturity |  | 2025 |  |  | 2026 |  |  | 2027 |  |  | 2028 |  |  | 2029 |  |  | Thereafter |  |  | Total |
NCM screen advertising advances (1) |  | $ | 10.8 |  |  | $ | 11.6 |  |  | $ | 12.4 |  |  | $ | 13.3 |  |  | $ | 14.2 |  |  | $ | 261.5 |  |  | $ | 323.8 |
(1) Amounts are net of the estimated interest to be accrued for the periods presented. Significant Financing Component As discussed in Note 9 to the Company’s Annual Report on Form 10-K filed February 16, 2024, 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 $11.1, respectively, during the six months ended June 30, 2024 and incremental screen rental revenue and interest expense of $16.2 and $11.4, respectively, during the six months ended June 30, 2023. 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%.

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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 -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (a)(3) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481687/323-10-50-3 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481687/323-10-50-3 Reference 3: http://www.xbrl.org/2003/role/recommendedDisclosureRef -Topic 323 -SubTopic 740 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481543/323-740-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 323 -Publisher FASB -URI https://asc.fasb.org//323/tableOfContent + Details
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