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INVESTMENTS | 6 Months Ended
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Sep. 27, 2012
INVESTMENTS |
INVESTMENTS |
NOTE 6—INVESTMENTS Investments in non-consolidated affiliates and certain other investments accounted for following 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 September 27, 2012, include a 15.47% interest in NCM, a 50% interest in two U.S. theatres and one IMAX screen, a 26.22% equity interest in Movietickets.com ("MTC"), 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"). The Company sold its 50% interest in Midland Empire Partners, LLC in June 2012. 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). Equity in Earnings of Non-Consolidated Entities Condensed financial information of the company's non-consolidated equity method investments for the thirteen weeks ended September 27, 2012 and September 29, 2011 is shown below:
|  | June 29, 2012 through August 30, 2012 |
--- | --- | --- | ---
(In thousands) |  | NCM |  | DCIP |  | ORF |  | Other |  | Total |
Revenues |  | $ | 121,500 |  | $ | 29,385 |  | $ | 9,663 |  | $ | 6,231 |  | $ | 166,779 |
Operating costs and expenses |  |  | 59,600 |  |  | 22,405 |  |  | 30,895 |  |  | 5,605 |  |  | 118,505 |
Net earnings (loss) |  | $ | 61,900 |  | $ | 6,980 |  | $ | (21,232 | ) | $ | 626 |  | $ | 48,274 |
|  | From Inception August 31, 2012 through September 27, 2012 |
--- | --- | --- | ---
(In thousands) |  | NCM |  | DCIP |  | ORF |  | Other |  | Total |
Revenues |  | $ | 22,200 |  | $ | 13,598 |  | $ | 21,311 |  | $ | 2,572 |  | $ | 59,681 |
Operating costs and expenses |  |  | 21,200 |  |  | 11,903 |  |  | 29,177 |  |  | 3,043 |  |  | 65,323 |
Net earnings (loss) |  | $ | 1,000 |  | $ | 1,695 |  | $ | (7,866 | ) | $ | (471 | ) | $ | (5,642 | )
|  | Thirteen Weeks Ended September 29, 2011 |
--- | --- | --- | ---
(In thousands) |  | NCM |  | DCIP |  | ORF |  | Other |  | Total |
Revenues |  | $ | 135,973 |  | $ | 32,212 |  | $ | 4,998 |  | $ | 13,606 |  | $ | 186,789 |
Operating costs and expenses |  |  | 79,267 |  |  | 37,567 |  |  | 27,127 |  |  | 12,910 |  |  | 156,871 |
Net earnings (loss) |  | $ | 56,706 |  | $ | (5,355 | ) | $ | (22,129 | ) | $ | 696 |  | $ | 29,918 |
Condensed financial information of the company's non-consolidated equity method investments for the twenty-six weeks ended September 27, 2012 and September 29, 2011 is shown below:
|  | March 30, 2012 through August 30, 2012 |
--- | --- | --- | ---
(In thousands) |  | NCM |  | DCIP |  | ORF |  | Other |  | Total |
Revenues |  | $ | 231,600 |  | $ | 71,560 |  | $ | 42,563 |  | $ | 14,680 |  | $ | 360,403 |
Operating costs and expenses |  |  | 167,900 |  |  | 55,378 |  |  | 55,395 |  |  | 14,820 |  |  | 293,493 |
Net earnings (loss) |  | $ | 63,700 |  | $ | 16,182 |  | $ | (12,832 | ) | $ | (140 | ) | $ | 66,910 |
|  | From Inception August 31, 2012 through September 27, 2012 |
--- | --- | --- | ---
(In thousands) |  | NCM |  | DCIP |  | ORF |  | Other |  | Total |
Revenues |  | $ | 22,200 |  | $ | 13,598 |  | $ | 21,311 |  | $ | 2,572 |  | $ | 59,681 |
Operating costs and expenses |  |  | 21,200 |  |  | 11,903 |  |  | 29,177 |  |  | 3,043 |  |  | 65,323 |
Net earnings (loss) |  | $ | 1,000 |  | $ | 1,695 |  | $ | (7,866 | ) | $ | (471 | ) | $ | (5,642 | )
|  | Twenty-six Weeks Ended September 29, 2011 |
--- | --- | --- | ---
(In thousands) |  | NCM |  | DCIP |  | ORF |  | Other |  | Total |
Revenues |  | $ | 249,936 |  | $ | 61,362 |  | $ | 4,998 |  | $ | 18,178 |  | $ | 334,474 |
Operating costs and expenses |  |  | 155,668 |  |  | 71,409 |  |  | 29,391 |  |  | 17,734 |  |  | 274,202 |
Net earnings (loss) |  | $ | 94,268 |  | $ | (10,047 | ) | $ | (24,393 | ) | $ | 444 |  | $ | 60,272 |
The components of the Company's recorded equity in earnings (losses) of non-consolidated entities are as follows:
|  | Thirteen Weeks Ended |  | Twenty-six Weeks Ended |
--- | --- | --- | --- | --- | ---
(In thousands) |  | From Inception August 31, 2012 through September 27, 2012 |  | June 29, 2012 through August 30, 2012 |  | Thirteen Weeks Ended September 29, 2011 |  | From Inception August 31, 2012 through September 27, 2012 |  | March 30, 2012 through August 30, 2012 |  | Twenty-six Weeks Ended September 29, 2011 |
|  | (Successor) |  | (Predecessor) |  | (Predecessor) |  | (Successor) |  | (Predecessor) |  | (Predecessor) |
National CineMedia, LLC |  | $ | 116 |  | $ | 7,027 |  | $ | 7,275 |  | $ | 116 |  | $ | 7,473 |  | $ | 10,514 |
Digital Cinema Implementation Partners, LLC |  |  | 541 |  |  | 2,132 |  |  | (1,438 | ) |  | 541 |  |  | 4,941 |  |  | (2,936 | )
Open Road Releasing, LLC |  |  | (3,933 | ) |  | (10,616 | ) |  | (11,065 | ) |  | (3,933 | ) |  | (6,416 | ) |  | (12,197 | )
Other |  |  | (102 | ) |  | 249 |  |  | 427 |  |  | (102 | ) |  | 1,547 |  |  | 314 |
The Company's recorded equity in earnings (losses) |  | $ | (3,378 | ) | $ | (1,208 | ) | $ | (4,801 | ) | $ | (3,378 | ) | $ | 7,545 |  | $ | (4,305 | )
DCIP Transactions. As of September 27, 2012 and March 29, 2012, the Company had recorded $885,000 and $1,437,000 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 over 12 years, including scheduled escalations of rent to commence after six and one-half years from the inception of the agreement. The difference between the cash rent and straight-line rent is recorded to deferred rent, a long-term liability account. As of September 27, 2012 and March 29, 2012, the Company had recorded $85,000 and $5,003,000 of deferred rent liability, respectively. The Company recorded digital equipment rental expense for continuing operations of $377,000, $1,485,000, and $1,678,000 for the period August 31, 2012 through September 27, 2012, the period June 29, 2012 through August 30, 2012, and the thirteen weeks ended September 29, 2011, respectively. The Company recorded digital equipment rental expense for continuing operations of $377,000, $3,624,000 and $3,180,000 for the period August 31, 2012 through September 27, 2012, the period March 30, 2012 through August 30, 2012, and the twenty-six weeks ended September 29, 2011, respectively. Open Road Films Transactions. As of September 27, 2012 and March 29, 2012, the Company had recorded $1,630,000 and $597,000 of amounts due from Open Road Films for promoted content and has recorded $2,667,000 and $1,843,000 of amounts payable for film rentals, respectively. The Company earns a percentage of the gross profits of certain films distributed by Open Road Films for promoted content by providing marketing services (including trailer coverage, website advertising and other promotional materials). The Company receives a distribution for promoted content annually and records the earned amount of promoted content monthly as a credit to film exhibition costs. The Company has incurred gross film exhibition costs on titles distributed by Open Road Films of $2,223,000, $448,000, and $1,065,000 for the period August 31, 2012 through September 27, 2012, the period June 29, 2012 through August 30, 2012, and the thirteen weeks ended September 29, 2011, respectively. The Company has incurred gross film exhibition costs on titles distributed by Open Road Films of $2,223,000, $1,550,000, and $1,065,000 for the period August 31, 2012 through September 27, 2012, the period March 30, 2012 through August 30, 2012, and the twenty-six weeks ended September 29, 2011, respectively. NCM Transactions. As of September 27, 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 estimated fair market value of the units in NCM was approximately $286,709,000, based on the publically quoted price per share of NCM, Inc. on September 27, 2012 of $16.55 per share. As of September 27, 2012 and March 29, 2012, the Company had recorded $1,149,000 and $1,909,000 respectively, of amounts due from NCM related to on-screen advertising revenue and theatre rent. As of September 27, 2012 and March 29, 2012, the Company had recorded $705,000 and $1,823,000 respectively, of amounts due to NCM related to the Exhibitor Services Agreement. The Company recorded revenues for advertising from NCM of $2,201,000, $5,088,000, and $6,133,000 for the period August 31, 2012 through September 27, 2012, the period June 29, 2012 through August 30, 2012, and the thirteen weeks ended September 29, 2011, respectively. The Company recorded NCM advertising expenses related to beverage advertising of $577,000, $6,326,000, and $7,198,000 for the period August 31, 2012 through September 27, 2012, the period March 30, 2012 through August 30, 2012, and the twenty-six weeks ended September 29, 2011, respectively. The Company recorded the following changes in the carrying amount of its investment in NCM and equity in earnings of NCM during the twenty-six weeks ended September 27, 2012:
(In thousands) |  | Investment in NCM(1) |  | Deferred Revenue(2) |  | Cash Received |  | Equity in (Earnings) |  | Advertising (Revenue) |
--- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Ending balance March 29, 2012 |  | $ | 71,517 |  | $ | (328,442 | ) |  |  |  |  |  |  |  |  |
Receipt of excess cash distributions |  |  | (1,701 | ) |  | — |  | $ | 6,667 |  | $ | (4,966 | ) | $ | — |
Change in interest loss |  |  | (16 | ) |  | — |  |  | — |  |  | 16 |  |  | — |
Amortization of deferred revenue |  |  | — |  |  | 2,367 |  |  | — |  |  | — |  |  | (2,367 | )
Equity in earnings(3) |  |  | 2,523 |  |  | — |  |  | — |  |  | (2,523 | ) |  | — |
Ending balance August 30, 2012 |  | $ | 72,323 |  | $ | (326,075 | ) | $ | 6,667 |  | $ | (7,473 | ) | $ | (2,367 | )
Purchase Price Adjustment |  |  | 177,832 |  |  | 3,453 |  |  |  |  |  |  |  |  |  |
Amortization of deferred revenue |  |  | — |  |  | 1,118 |  |  | — |  |  | — |  |  | (1,118 | )
Equity in earnings(3) |  |  | 116 |  |  | — |  |  | — |  |  | (116 | ) |  | — |
Ending balance September 27, 2012 |  | $ | 250,271 |  | $ | (321,504 | ) | $ | — |  | $ | (116 | ) | $ | (1,118 | )
(1) Represents AMC's investment through the date of the Merger on August 30, 2012 in 519,979 common membership units originally valued at March 27, 2008, 224,828 common membership units originally valued at March 17, 2009, 70,424 common membership units originally valued at March 17, 2010, and 3,601,811 common membership units originally valued at June 14, 2010 received under the Common Unit Adjustment Agreement dated as of February 13, 2007 (Tranche 2 Investments). AMC's investment in 12,906,740 common membership units (Tranche 1 Investment) is carried at zero cost through the date of the Merger on August 30, 2012. Subsequent to the date of the Merger, AMC has one investment in NCM which includes 17,323,782 membership units recorded at fair value (Level 1) August 30, 2012 in connection with the Merger. (2) Represents the unamortized portion of the Exhibitor Services Agreement (ESA) modifications payment received from NCM. Such amounts are being amortized to revenues over the remainder of the 30 year term of the ESA ending in 2036, using a units-of-revenue method, as described in ASC 470-10-35 (formerly EITF 88-18, Sales of Future Revenues). In connection with the Merger on August 30, 2012, the deferred revenue amounts related to the ESA were adjusted to estimated fair value. (3) Represents equity in earnings on the Tranche 2 investments only through August 30, 2012. Subsequent to August 30, 2012, AMC has one investment in NCM which includes 17,323,782 membership units recorded at fair value (Level 1) at August 30, 2012 in connection with the Merger.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=7658923&loc=d3e32787-111569 Reference 2: 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 3: 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 4: 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 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=7658923&loc=d3e32847-111569 + Details
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