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INVESTMENTS | 12 Months Ended
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Mar. 29, 2012
INVESTMENTS |
INVESTMENTS |
NOTE 7—INVESTMENTS Investments in non-consolidated affiliates and certain other investments accounted for under the equity method generally include all entities in which the Company or its subsidiaries have significant influence, but not more than 50% voting control. Investments in non-consolidated affiliates as of March 29, 2012, include a 15.47% interest in National CineMedia, LLC ("NCM"), a 50% interest in two U.S. motion picture theatres and one IMAX screen, a 26.22% equity interest in Movietickets.com, Inc. ("MTC"), a 50% interest in Midland Empire Partners, LLC, a 29% interest in Digital Cinema Implementation Partners, LLC ("DCIP") and a 50% interest in Open Road Releasing, LLC, operator of Open Road Films, LLC ("ORF"). Indebtedness held by equity method investees is non-recourse to the Company. RealD Inc. Common Stock The Company holds an investment in RealD Inc. common stock, which is accounted for as an equity security, available for sale, and is recorded in the Consolidated Balance Sheets in other long-term assets at fair value (Level 1). Under its RealD Inc. motion picture license agreement, the Company received a ten-year option to purchase 1,222,780 shares of RealD Inc. common stock at approximately $0.00667 per share. The stock options vested in 3 tranches upon the achievement of screen installation targets and were valued at the underlying stock price at the date of vesting. At the date of exercise, the fair market value of the RealD Inc. common stock was recorded in other long-term assets with an offsetting entry recorded to other long-term liabilities as a deferred lease incentive. The aggregate deferred lease incentive recorded in other long-term liabilities was $27,586,000 and is being amortized on a straight-line basis over the remaining terms of the license agreements, which at the exercise dates, range from approximately 8.6 years to approximately 9.9 years, to reduce RealD license expense recorded in the statement of operations under operating expense. As of March 29, 2012, the unamortized deferred lease incentive balance included in other long-term liabilities was $23,768,000. Fair value adjustments of RealD Inc. common stock are recorded to other long-term assets with an offsetting entry to accumulated other comprehensive loss. The investment in RealD Inc. common stock had been in an unrealized loss position for approximately six months at December 29, 2011. The Company reviewed the unrealized loss for a possible other-than-temporary impairment and determined that the loss as of December 29, 2011 was other-than-temporary and recognized an impairment loss of $17,751,000 within investment expense (income), related to unrealized losses previously recorded in accumulated other comprehensive loss, as the Company has determined the decline in fair value below historical cost to be other-than-temporary. Consideration was given to the financial condition and near-term prospects of the issuer, the length of time and extent to which the fair value has been less than cost and the Company's intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value. DCIP Transactions On March 10, 2010, DCIP completed its financing of $660.0 million for the deployment of digital projection systems to nearly 14,000 movie theatre screens across North America, including screens operated or managed by the Company, Cinemark Holdings, Inc. ("Cinemark") and Regal. At closing the Company contributed 342 projection systems that it owned to DCIP, which were recorded at estimated fair value as part of an additional investment in DCIP of $21,768,000. The Company also made cash investments in DCIP of $840,000 at closing and DCIP made a distribution of excess cash to the Company after the closing date and prior to fiscal 2010 year-end of $1,262,000. The Company recorded a loss on contribution of the 342 projection systems of $563,000, based on the difference between estimated fair value and the carrying value on the date of contribution. On March 26, 2010 the Company acquired 117 digital projectors from third party lessors for $6,784,000 and sold them together with seven digital projectors that it owned to DCIP for $6,570,000. The Company recorded a loss on the sale of these 124 systems to DCIP of $697,000. On September 20, 2010, the Company sold 29 digital projectors in a sale and lease back to DCIP from its Canadian theatres for $1,655,000 and incurred a loss of $110,000. On October 29, 2010, the Company sold 57 digital projectors from Kerasotes theatres in a sale and leaseback to DCIP for $3,250,000, with no gain or loss recorded on the projectors. On March 31, 2011, DCIP completed additional financing of $220.0 million, which is expected to complete the deployment of nearly 15,000 digital projection systems in the U.S. and Canada, including screens owned or managed by the Company. The digital projection systems leased from DCIP and its affiliates replaced most of the Company's existing 35 millimeter projection systems. The Company adjusted its estimated depreciable lives for its existing equipment that will be replaced and has accelerated the depreciation of these existing 35 millimeter projection systems, based on the estimated digital projection system deployment timeframe. The net book value of our existing 35 millimeter projection systems was $1,400,000 as of March 29, 2012. We currently estimate that the projector systems scheduled to be replaced will be fully depreciated in fiscal 2013. NCM Transactions On March 29, 2005, the Company along with Regal combined their screen advertising operations to form NCM. On July 15, 2005, Cinemark joined the NCM joint venture by contributing its screen advertising business. On February 13, 2007, National CineMedia, Inc. ("NCM, Inc."), a newly formed entity that now serves as the sole manager of NCM, closed its initial public offering, or IPO, of 42,000,000 shares of its common stock at a price of $21.00 per share. In connection with the completion of NCM, Inc.'s IPO, on February 13, 2007, the Company entered into the Third Amended and Restated Limited Liability Company Operating Agreement (the "NCM Operating Agreement") among the Company, Regal and Cinemark (the "Founding Members") and NCM, Inc.. Pursuant to the NCM Operating Agreement, the members are granted a redemption right to exchange common units of NCM for, at the option of NCM, Inc., NCM, Inc. shares of common stock on a one-for-one basis, or a cash payment equal to the market price of one share of NCM, Inc.'s common stock. Upon execution of the NCM Operating Agreement, each existing preferred unit of NCM held by the Founding Members was redeemed in exchange for $13.7782 per unit, resulting in the cancellation of each preferred unit. NCM used the proceeds of a new $725,000,000 term loan facility and $59,800,000 of net proceeds from the NCM, Inc. IPO to redeem the outstanding preferred units. The Company received approximately $259,347,000 in the aggregate for the redemption of all its preferred units in NCM. The Company received approximately $26,467,000 from selling common units in NCM to NCM, Inc. in connection with the exercise of the underwriters' over-allotment option in the NCM, Inc. IPO. Also in connection with the completion of NCM, Inc.'s IPO, the Company agreed to modify NCM's payment obligations under the prior Exhibitor Services Agreement ("ESA") in exchange for approximately $231,308,000. The ESA provides a term of 30 years for advertising and approximately five year terms (with automatic renewal provisions) for meeting event and digital programming services, and provides NCM with a five year right of first refusal for the services beginning one year prior to the end of the term. The ESA also changed the basis upon which the Company is paid by NCM from a percentage of revenues associated with advertising contracts entered into by NCM to a monthly theatre access fee. The theatre access fee is now composed of a fixed payment per patron and a fixed payment per digital screen, which increases by 8% every five years starting at the end of fiscal 2011 for payments per patron and by 5% annually starting at the end of fiscal 2007 for payments per digital screen. The theatre access fee paid in the aggregate to the Founding Members will not be less than 12% of NCM's aggregate advertising revenue, or it will be adjusted upward to meet this minimum payment. Additionally, the Company entered into the First Amended and Restated Loews Screen Integration Agreement with NCM on February 13, 2007, pursuant to which the Company paid NCM an amount that approximated the EBITDA that NCM would have generated if it had been able to sell advertising in the Loews Cineplex Entertainment Corporation ("Loews") theatre chain on an exclusive basis commencing upon the completion of NCM, Inc.'s IPO, and NCM issued to AMC common membership units in NCM, increasing the Company's ownership interest to approximately 33.7%; such Loews payments were made quarterly until the former screen advertising agreements expired in fiscal 2009. The Loews Screen Integration payments totaling $15,982,000 have been paid in full in fiscal 2010. The Company is also required to purchase from NCM any on-screen advertising time provided to the Company's beverage concessionaire at a negotiated rate. In addition, the Company expects to receive mandatory quarterly distributions of excess cash from NCM. Immediately following the NCM, Inc. IPO, the Company held an 18.6% interest in NCM. As a result of NCM, Inc.'s IPO and debt financing, the Company recorded a change of interest gain of $132,622,000 and received distributions in excess of its investment in NCM related to the redemption of preferred and common units of $106,188,000. The Company reduced its investment in NCM to zero and recognized the change of interest gain and the excess distribution in earnings as it has not guaranteed any obligations of NCM and is not otherwise committed to provide further financial support for NCM. Annual adjustments to the common membership units are made pursuant to the Common Unit Adjustment Agreement dated as of February 13, 2007 between NCM, Inc. and the Founding Members. The Common Unit Adjustment Agreement was created to account for changes in the number of theatre screens operated by each of the Founding Members. Prior to fiscal 2011, each of the Founding Members has increased the number of screens it operates through acquisitions and newly built theatres. Since these incremental screens and increased attendance in turn provide for additional advertising revenues to NCM, NCM agreed to compensate the Founding Members by issuing additional common membership units to the Founding Members in consideration for their increased attendance and overall contribution to the joint venture. The Common Unit Adjustment Agreement also provides protection to NCM in that the Founding Members may be required to transfer or surrender common units to NCM based on certain limited events, including declines in attendance and the number of screens operated. As a result, each Founding Member's equity ownership interests are proportionately adjusted to reflect the risks and rewards relative to their contributions to the joint venture. The Common Unit Adjustment Agreement provides that transfers of common units are solely between the Founding Members and NCM. There are no transfers of units among the Founding Members. In addition, there are no circumstances under which common units would be surrendered by the Company to NCM in the event of an acquisition by one of the Founding Members. However, adjustments to the common units owned by one of the Founding Members will result in an adjustment to the Company's equity ownership interest percentage in NCM. Pursuant to the Company's Common Unit Adjustment Agreement, from time to time common units of NCM held by the Founding Members will be adjusted up or down through a formula ("Common Unit Adjustment"), primarily based on increases or decreases in the number of theatre screens operated and theatre attendance generated by each Founding Member. The common unit adjustment is computed annually, except that an earlier common unit adjustment will occur for a Founding Member if its acquisition or disposition of theatres, in a single transaction or cumulatively since the most recent common unit adjustment, will cause a change of 2% or more in the total annual attendance of all of the Founding Members. In the event that a common unit adjustment is determined to be a negative number, the Founding Member shall cause, at its election, either (a) the transfer and surrender to NCM of a number of common units equal to all or part of such Founding Member's common unit adjustment or (b) pay to NCM an amount equal to such Founding Member's common unit adjustment calculated in accordance with the Common Unit Adjustment Agreement. Effective March 27, 2008, the Company received 939,853 common membership units of NCM as a result of the Common Unit Adjustment, increasing the Company's interest in NCM to 19.1%. The Company recorded the additional units received as a result of the Common Unit Adjustment at a fair value of $21,598,000, based on a price for shares of NCM, Inc. on March 26, 2008, of $22.98 per share, and as a new investment (Tranche 2 Investment), with an offsetting adjustment to deferred revenue. Effective May 29, 2008, NCM issued 2,913,754 common membership units to another Founding Member due to an acquisition, which caused a decrease in the Company's ownership share from 19.1% to 18.52%. Effective March 17, 2009, the Company received 406,371 common membership units of NCM as a result of the Common Unit Adjustment, increasing the Company's interest in NCM to 18.53%. The Company recorded these additional units at a fair value of $5,453,000, based on a price for shares of NCM, Inc. on March 17, 2009, of $13.42 per share, with an offsetting adjustment to deferred revenue. Effective March 17, 2010, the Company received 127,290 common membership units of NCM. As a result of the Common Unit Adjustment among the Founding Members, the Company's interest in NCM decreased to 18.23% as of April 1, 2010. The Company recorded the additional units received at a fair value of $2,290,000, based on a price for shares of NCM, Inc. on March 17, 2010, of $17.99 per share, with an offsetting adjustment to deferred revenue. Effective June 14, 2010 and with a settlement date of June 28, 2010, the Company received 6,510,209 common membership units in NCM as a result of an Extraordinary Common Unit Adjustment in connection with the Company's acquisition of Kerasotes. The Company recorded the additional units at a fair value of $111,520,000, based on a price for shares of NCM, Inc. on June 14, 2010, of $17.13 per share, with an offsetting adjustment to deferred revenue. As a result of the Extraordinary Common Unit Adjustment, the Company's interest in NCM increased to 23.05%. All of the Company's NCM membership units are redeemable for, at the option of NCM, Inc., cash or shares of common stock of NCM, Inc. on a share-for-share basis. On August 18, 2010, the Company sold 6,500,000 shares of common stock of NCM, Inc. in an underwritten public offering for $16.00 per share and reduced the Company's related investment in NCM by $36,709,000, the carrying amount of all shares sold. Net proceeds received on this sale were $99,840,000 after deducting related underwriting fees and professional and consulting costs of $4,160,000, resulting in a gain on sale of $63,131,000. In addition, on September 8, 2010, the Company sold 155,193 shares of NCM, Inc. to the underwriters to cover over-allotments for $16.00 per share and reduced the Company's related investment in NCM by $867,000, the carrying amount of all shares sold. Net proceeds received on this sale were $2,384,000 after deducting related underwriting fees and professional and consulting costs of $99,000, resulting in a gain on sale of $1,517,000. As a result of the membership unit conversions and sales, the Company's ownership interest in NCM was reduced to 17.02% as of September 30, 2010. Effective March 17, 2011, the Company was notified by NCM that its Common Unit Adjustment Agreement was determined to be a negative number. The Company elected to surrender 1,479,638 common membership units to satisfy the Common Unit Adjustment, leaving it with 17,323,782 units, or a 15.66% ownership interest in NCM as of March 31, 2011. The Company recorded the surrendered common units as a reduction to deferred revenues for exhibitor services agreement at fair value of $25,361,000, based on a price per share of NCM, Inc. of $17.14 on March 17, 2011, and recorded the reduction of the Company's NCM investment at weighted average cost for Tranche 2 Investments of $25,568,000, resulting in a loss on the surrender of the units of $207,000. The gain from the NCM, Inc. stock sales and the loss from the surrendered NCM common units are reported as Gain from NCM transactions on the Consolidated Statements of Operations. As a result of theatre closings and a related decline in attendance, the NCM Common Unit Adjustment for calendar 2011 called for a reduction in common units. The Company elected to pay NCM $214,000 to retain 16,717 common units effective March 16, 2012. The amount paid to retain the units decreased the deferred revenues for exhibitor services agreement available for amortization to advertising income for future periods. The NCM, Inc. IPO and related transactions have the effect of reducing the amounts NCM, Inc. would otherwise pay in the future to various tax authorities as a result of an increase in its proportionate share of tax basis in NCM's tangible and intangible assets. On the IPO date, NCM, Inc. and the Founding Members entered into a tax receivable agreement. Under the terms of this agreement, NCM, Inc. will make cash payments to the Founding Members in amounts equal to 90% of NCM, Inc.'s actual tax benefit realized from the tax amortization of the intangible assets described above. For purposes of the tax receivable agreement, cash savings in income and franchise tax will be computed by comparing NCM, Inc.'s actual income and franchise tax liability to the amount of such taxes that NCM, Inc. would have been required to pay had there been no increase in NCM Inc.'s proportionate share of tax basis in NCM's tangible and intangible assets and had the tax receivable agreement not been entered into. The tax receivable agreement shall generally apply to NCM, Inc.'s taxable years up to and including the 30th anniversary date of the NCM, Inc. IPO and related transactions. Pursuant to the terms of the tax receivable agreement, the Company received payments of $3,796,000 from NCM, Inc. in fiscal year 2009 with respect to NCM, Inc.'s 2007 taxable year, in fiscal year 2010, the Company received payments of $8,788,000 with respect to NCM, Inc.'s 2008 and 2009 taxable year and in fiscal year 2011, the Company received $6,637,000 with respect to NCM, Inc.'s 2008 and 2010 taxable years. In fiscal 2012, the Company received $6,248,000 with respect to NCM, Inc.'s 2009, 2010 and 2011 taxable years. Distributions received under the tax receivable agreement from NCM, Inc. were recorded as additional proceeds received related to the Company's Tranche 1 or 2 Investments and were recorded in earnings in a similar fashion to the proceeds received from the NCM, Inc. IPO and the receipt of excess cash distributions. As of March 29, 2012, the Company owns 17,323,782 units or a 15.47% interest in NCM. As a founding member, the Company has the ability to exercise significant influence over the governance of NCM, and, accordingly accounts for its investment following the equity method. The fair market value of the units in National CineMedia, LLC was approximately $264,361,000 based on a price for shares of NCM, Inc. on March 29, 2012 of $15.26 per share. Related Party Transactions As of March 29, 2012 and March 31, 2011, the Company has recorded $1,909,000 and $1,708,000, respectively, of amounts due from NCM related to on-screen advertising revenue. As of March 29, 2012 and March 31, 2011, the Company had recorded $1,823,000 and $1,355,000, respectively, of amounts due to NCM related to the ESA. The Company recorded revenues for advertising from NCM of $24,351,000, $22,408,000 and $20,352,000 during the fiscal years ended March 29, 2012, March 31, 2011, and April 1, 2010, respectively. The Company recorded expenses related to its beverage advertising agreement with NCM of $13,447,000, $12,458,000 and $12,107,000 during fiscal years 2012, 2011, and 2010, respectively. As of March 29, 2012 and March 31, 2011, the Company has recorded $1,437,000 and $3,376,000, respectively, of amounts due from DCIP related to equipment purchases made on behalf of DCIP for the installation of digital projection systems. After the projectors are installed and the Company is reimbursed for its installation costs, the Company will make capital contributions to DCIP for projector and installation costs in excess of the cap ($68,000 per system for digital conversions). The Company pays equipment rent monthly and records the equipment rental expense on a straight-line basis including scheduled escalations of rent to commence after six and one-half years from the initial deployment date. The difference between the cash rent and straight-line rent is recorded to deferred rent, a long-term liability account. As of March 29, 2012 and March 31, 2011, the Company has recorded $5,003,000 and $1,471,000 of deferred rent, respectively. The Company recorded digital equipment rental expense of $6,969,000 and $2,975,000 during the fifty-two weeks ended March 29, 2012 and March 31, 2011, respectively. As of March 29, 2012, the Company has recorded $597,000 of amounts due from Open Road Films for promoted content and has recorded $1,843,000 of amounts payable for film rentals. The Company has incurred approximately $7,000,000 in film exhibition costs on titles distributed by Open Road Films during the fifty-two weeks ended March 29, 2012. Summary Financial Information Investments in non-consolidated affiliates accounted for under the equity method as of March 29, 2012, include interests in National CineMedia, LLC ("NCM"), two U.S. motion picture theatres and one IMAX screen, Movietickets.com, Inc. ("MTC"), Midland Empire Partners, LLC, Digital Cinema Implementation Partners, LLC ("DCIP"), and Open Road Films. Condensed financial information of the Company's non-consolidated equity method investments is shown below. Amounts are presented under U.S. GAAP for the periods of ownership by the Company. Financial Condition:
|  | March 29, 2012 |
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(In thousands) |  | NCM |  | Other |  | Total |
Current assets |  | $ | 84,700 |  | $ | 101,157 |  | $ | 185,857 |
Noncurrent assets |  |  | 321,700 |  |  | 1,189,041 |  |  | 1,510,741 |
Total assets |  |  | 406,400 |  |  | 1,290,198 |  |  | 1,696,598 |
Current liabilities |  |  | 54,200 |  |  | 93,734 |  |  | 147,934 |
Noncurrent liabilities |  |  | 864,000 |  |  | 1,028,647 |  |  | 1,892,647 |
Total liabilities |  |  | 918,200 |  |  | 1,122,381 |  |  | 2,040,581 |
Stockholders' equity (deficit) |  |  | (511,800 | ) |  | 167,817 |  |  | (343,983 | )
Liabilities and stockholders' deficit |  |  | 406,400 |  |  | 1,290,198 |  |  | 1,696,598 |
The Company's recorded investment(1) |  | $ | 71,517 |  | $ | 37,544 |  | $ | 109,061 |
|  | March 31, 2011 |
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(In thousands) |  | NCM |  | Other |  | Total |
Current assets |  | $ | 70,582 |  | $ | 68,500 |  | $ | 139,082 |
Noncurrent assets |  |  | 301,600 |  |  | 736,490 |  |  | 1,038,090 |
Total assets |  |  | 372,182 |  |  | 804,990 |  |  | 1,177,172 |
Current liabilities |  |  | 33,216 |  |  | 75,901 |  |  | 109,117 |
Noncurrent liabilities |  |  | 847,482 |  |  | 593,477 |  |  | 1,440,959 |
Total liabilities |  |  | 880,698 |  |  | 669,378 |  |  | 1,550,076 |
Stockholders' equity (deficit) |  |  | (508,516 | ) |  | 135,612 |  |  | (372,904 | )
Liabilities and stockholders' deficit |  |  | 372,182 |  |  | 804,990 |  |  | 1,177,172 |
The Company's recorded investment(1) |  | $ | 74,551 |  | $ | 28,084 |  | $ | 102,635 |
(1) Certain differences in the Company's recorded investment, for one U.S. motion picture theatre where it has a 50% interest, and its proportional ownership share resulting from the acquisition of the asset in a business combination where the investment was initially recorded at fair value, are amortized to equity in (earnings) or losses over the estimated useful life of approximately 20 years for the underlying building. Operating Results:
|  | 52 Weeks Ended March 29, 2012 |
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(In thousands) |  | NCM |  | Other |  | Total |
Revenues |  | $ | 443,700 |  | $ | 215,240 |  | $ | 658,940 |
Operating costs and expenses |  |  | 311,100 |  |  | 240,821 |  |  | 551,921 |
Net earnings (loss) |  |  | 132,600 |  |  | (25,581 | ) |  | 107,019 |
The Company's recorded equity in earnings (loss) |  | $ | 28,489 |  | $ | (15,930 | ) | $ | 12,559 |
|  | 52 Weeks Ended March 31, 2011 |
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(In thousands) |  | NCM |  | Other |  | Total |
Revenues |  | $ | 413,639 |  | $ | 85,539 |  | $ | 499,178 |
Operating costs and expenses |  |  | 281,716 |  |  | 107,374 |  |  | 389,090 |
Net earnings (loss) |  |  | 131,923 |  |  | (21,835 | ) |  | 110,088 |
The Company's recorded equity in earnings |  | $ | 32,851 |  | $ | (15,673 | ) | $ | 17,178 |
|  | 52 Weeks Ended April 1, 2010 |
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(In thousands) |  | NCM |  | Other |  | Total |
Revenues |  | $ | 391,815 |  | $ | 40,736 |  | $ | 432,551 |
Operating costs and expenses |  |  | 262,578 |  |  | 48,241 |  |  | 310,819 |
Net earnings (loss) |  |  | 129,237 |  |  | (7,505 | ) |  | 121,732 |
The Company's recorded equity in earnings (loss) |  | $ | 34,436 |  | $ | (4,136 | ) | $ | 30,300 |
The Company reviews investments in non-consolidated subsidiaries accounted for under the equity method for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be fully recoverable. The Company reviews unaudited financial statements on a quarterly basis and audited financial statements on an annual basis for indicators of triggering events or circumstances that indicate the potential impairment of these investments as well as current equity prices for its investment in NCM and discounted projections of cash flows for certain of its other investees. Additionally, the Company has quarterly discussions with the management of significant investees to assist in the identification of any factors that might indicate the potential for impairment. In order to determine whether the carrying value of investments may have experienced an "other-than-temporary" decline in value necessitating the write-down of the recorded investment, the Company considers the period of time during which the fair value of the investment remains substantially below the recorded amounts, the investees financial condition and quality of assets, the length of time the investee has been operating, the severity and nature of losses sustained in current and prior years, a reduction or cessation in the investee's dividend payments, suspension of trading in the security, qualifications in accountant's reports due to liquidity or going concern issues, investee announcement of adverse changes, downgrading of investee debt, regulatory actions, changes in reserves for product liability, loss of a principal customer, negative operating cash flows or working capital deficiencies and the recording of an impairment charge by the investee for goodwill, intangible or long-lived assets. Once a determination is made that an other-than-temporary impairment exists, the Company writes down its investment to fair value. Included in equity in earnings of non-consolidated entities for the fifty-two weeks ended March 31, 2011 is an impairment charge of $8,825,000 related to a joint venture investment. The decline in the fair market value of the investment was considered other than temporary due to inadequate projected cash flows, the nature of losses sustained in current and prior years, negative operating cash flows and the length of time the investee has been operating. The decline in the fair market value of the investment was considered other than temporary due to competitive theatre builds. The impairment charges related to joint venture investments are included within equity in earnings of non-consolidated entities on the Consolidated Statements of Operations. The Company recorded the following changes in the carrying amount of its investment in NCM and equity in earnings of NCM during the fifty-two weeks ended April 1, 2010, March 31, 2011, and March 29, 2012.
(In thousands) |  | Investment in NCM(1) |  | Deferred Revenue(2) |  | Due to NCM |  | Cash Received (Paid) |  | Equity in (Earnings) Losses |  | Advertising (Revenue) |  | (Gain) on NCM Transactions |
--- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Ending balance April 2, 2009 |  | $ | 26,733 |  | $ | (253,164 | ) | $ | (81 | ) | $ | — |  | $ | — |  | $ | — |  | $ | — |
Receipt under Tax Receivable Agreement |  |  | — |  |  | — |  |  | — |  |  | 8,788 |  |  | (8,788 | ) |  | — |  |  | — |
Receipt of Common Units |  |  | 2,290 |  |  | (2,290 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Receipt of excess cash distributions |  |  | (1,847 | ) |  | — |  |  | — |  |  | 25,827 |  |  | (23,980 | ) |  | — |  |  | — |
Payments on Loews' Screen Integration Agreement |  |  | — |  |  | — |  |  | 81 |  |  | (81 | ) |  | — |  |  | — |  |  | — |
Receipt of tax credits |  |  | (1 | ) |  | — |  |  | — |  |  | 18 |  |  | (17 | ) |  | — |  |  | — |
Change in interest loss(3) |  |  | (57 | ) |  | — |  |  | — |  |  | — |  |  | 57 |  |  | — |  |  | — |
Amortization of deferred revenue |  |  | — |  |  | 3,132 |  |  | — |  |  | — |  |  | — |  |  | (3,132 | ) |  | — |
Equity in earnings(4) |  |  | 1,708 |  |  | — |  |  | — |  |  | — |  |  | (1,708 | ) |  | — |  |  | — |
Ending balance April 1, 2010 |  | $ | 28,826 |  | $ | (252,322 | ) | $ | — |  | $ | 34,552 |  | $ | (34,436 | ) | $ | (3,132 | ) | $ | — |
Receipt of Common Units(3) |  | $ | 111,520 |  | $ | (111,520 | ) | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |
Exchange and sale of NCM stock(5) |  |  | (37,576 | ) |  | — |  |  | — |  |  | 102,224 |  |  | — |  |  | — |  |  | (64,648 | )
Surrender of Common Units(6) |  |  | (25,568 | ) |  | 25,361 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 207 |
Receipt of excess cash distributions |  |  | (8,592 | ) |  | — |  |  | — |  |  | 28,843 |  |  | (20,251 | ) |  | — |  |  | — |
Receipt under Tax Receivable Agreement(7) |  |  | (1,815 | ) |  | — |  |  | — |  |  | 6,637 |  |  | (4,822 | ) |  | — |  |  | — |
Receipt of tax credits |  |  | (7 | ) |  | — |  |  | — |  |  | 22 |  |  | (15 | ) |  | — |  |  | — |
Amortization of deferred revenue |  |  | — |  |  | 4,689 |  |  | — |  |  | — |  |  | — |  |  | (4,689 | ) |  | — |
Equity in earnings(4) |  |  | 7,763 |  |  | — |  |  | — |  |  | — |  |  | (7,763 | ) |  | — |  |  | — |
Ending balance March 31, 2011 |  | $ | 74,551 |  | $ | (333,792 | ) | $ | — |  | $ | 137,726 |  | $ | (32,851 | ) | $ | (4,689 | ) | $ | (64,441 | )
Receipt of excess cash distributions |  | $ | (6,444 | ) | $ | — |  | $ | — |  | $ | 25,275 |  | $ | (18,831 | ) | $ | — |  | $ | — |
Receipt under Tax Receivable Agreement(7) |  |  | (1,840 | ) |  | — |  |  | — |  |  | 6,248 |  |  | (4,408 | ) |  | — |  |  | — |
Payment to retain Common Units(8) |  |  | — |  |  | 214 |  |  | — |  |  | (214 | ) |  | — |  |  | — |  |  | — |
Amortization of deferred revenue |  |  | — |  |  | 5,136 |  |  | — |  |  | — |  |  | — |  |  | (5,136 | ) |  | — |
Equity in earnings(4) |  |  | 5,250 |  |  | — |  |  | — |  |  | — |  |  | (5,250 | ) |  | — |  |  | — |
Ending balance March 29, 2012 |  | $ | 71,517 |  | $ | (328,442 | ) | $ | — |  | $ | 31,309 |  | $ | (28,489 | ) | $ | (5,136 | ) | $ | — |
(1) The NCM common membership units held by the Company immediately following the NCM, Inc. IPO are carried at zero cost (Tranche 1 Investment). As provided under the Common Unit Adjustment Agreement dated as of February 13, 2007, the Company received additional NCM common membership units in fiscal 2010 and 2011, valued at $2,290,000 and $111,520,000, respectively (Tranche 2 Investments). (2) Represents the unamortized portion of the Exhibitors Services Agreement (ESA) modification payments received from NCM. Such amounts are being amortized to "Other theatre revenues" over a 30 year period ending in 2036, using a units-of-revenue method, as described in ASC 470-10-35 (formerly EITF 88-18, Sales of Future Revenues). (3) AMC's ownership share decreased from 19.1% to 18.52% effective May 29, 2008 due to NCM's issuance of 2,913,754 common membership units to another founding member due to an acquisition. In fiscal 2010, AMC's ownership share decreased to 18.23% due to the allocation of the annual Common Unit Adjustment. (4) Represents equity in earnings on the Tranche 2 Investments only. (5) All of the Company's NCM membership units are redeemable for, at the option of NCM, cash or shares of common stock of NCM, Inc. on a share-for-share basis. On August 18, 2010, the Company sold 6,500,000 shares of common stock of NCM, Inc. in an underwritten public offering for $16.00 per share and reduced the Company's related investment in NCM by $36,709,000, the carrying amount of all shares sold. Net proceeds received on this sale were $99,840,000 after deducting related underwriting fees and professional and consulting costs of $4,160,000, resulting in a gain on sale of $63,131,000. In addition, on September 8, 2010, the Company sold 155,193 shares of NCM, Inc. to the underwriters to cover over-allotments for $16.00 per share and reduced the Company's related investment in NCM by $867,000, the carrying amount of all shares sold. Net proceeds received on this sale were $2,384,000 after deducting related underwriting fees and professional and consulting costs of $99,000, resulting in a gain on sale of $1,517,000. (6) As a result of theatre dispositions and closings and a related decline in attendance, the NCM Common Unit Adjustment for calendar 2010 called for a reduction in common units. The Company elected to surrender 1,479,638 common units effective March 17, 2011 at a fair value of $25,361,000 and a weighted average cost basis for Tranche 2 Investments of $25,568,000, resulting in a loss of $207,000. The fair value of the units surrendered reduced the deferred revenues for exhibitor services agreement available for amortization to advertising income for future periods. (7) Distributions received under the Tax Receivable Agreement in fiscal 2011 and 2012, were allocated among the Tranche 1 Investment and the Tranche 2 Investments based on the ownership percentages as of the date of the related NCM, Inc. taxable year to which the distribution relates. (8) As a result of theatre closings and a related decline in attendance, the NCM Common Unit Adjustment for calendar 2011 called for a reduction in common units. The Company elected to pay NCM $214,000 to retain 16,717 common units effective March 16, 2012. The amount paid to retain the units decreased the deferred revenues for exhibitor services agreement available for amortization to advertising income for future periods. Equity Method Accounting for Tranche 1 and Tranche 2 Investments in NCM Following the NCM IPO, the Company will not recognize undistributed equity in the earnings on the original NCM membership units (Tranche 1 Investment) until NCM's future net earnings, less distributions received, surpass the amount of the excess distribution. The Company will recognize equity in earnings only to the extent it receives cash distributions from NCM. The Company considers the excess distribution described above as an advance on NCM's future earnings and, accordingly, future earnings of NCM should not be recognized through the application of equity method accounting until such time as the Company's share of NCM's future earnings, net of distributions received, exceeds the excess distribution. The Company believes that the accounting model provided by ASC 323-10-35-22 for recognition of equity investee losses in excess of an investor's basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution. The Company has received 7,983,723 additional units in NCM subsequent to the IPO as a result of Common Unit Adjustments received from March 27, 2008 through June 14, 2010 (Tranche 2 Investments). The Company follows the guidance in ASC 323-10-35-29 (formerly EITF 02-18, Accounting for Subsequent Investments in an Investee after Suspension of Equity Loss Recognition) by analogy, which also refers to AICPA Technical Practice Aid 2220.14. Both sets of literature indicate that if a subsequent investment is made in an equity method investee that has experienced significant losses, the investor must determine if the subsequent investment constitutes funding of prior losses. The Company concluded that the construction or acquisition of new theatres that has led to the Common Unit adjustments included in its Tranche 2 Investments equates to making additional investments in NCM. The Company has evaluated the receipt of the additional common units in NCM and the assets exchanged for the additional units and has determined that the right to use its incremental new screens would not be considered funding of prior losses. This determination was formed by considering that (i) NCM does not receive any additional funds from the Tranche 2 Investments, (ii) both NCM and AMC record their respective increases to Members' Equity and Investment at the same amount (fair value of the units issued), (iii) the additional investments result in additional ownership in NCM and (iv) the investments in additional common units are not subordinate to the other equity of NCM. As such, the additional common units received would be accounted for as a Tranche 2 Investment separate from the Company's initial investment following the equity method. The Company's Tranche 2 Investments correspond with the NCM Members' equity amounts in its capital account.

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- Definition The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6382943&loc=d3e33918-111571 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=6903645&loc=d3e32787-111569 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 18 -Paragraph 20 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.12) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=6903645&loc=d3e32847-111569 + Details
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