XML 45 R10.htm IDEA: XBRL DOCUMENT

Digital Link II Joint Venture

12 Months Ended

Dec. 31, 2011

3. Digital Link II Joint Venture

Investment in Digital Link II

On March 6, 2007, the Company entered into an agreement with RealD to form an operating entity Digital Link II, LLC (the "LLC"). Under the agreement, the LLC was formed with the Company and RealD as the only two members with membership interests of 44.4% and 55.6%, respectively. The LLC was formed for purposes of commercializing certain 3D technology and to fund the deployment of digital projector systems and servers to exhibitors. Summarized financial data for the LLC is as follows (unaudited):

Balance Sheet	December 23, 2011		December 24, 2010

	($ in thousands)
Current assets	$	3,758	$	3,316
Non-current assets		3,723		9,419
Current liabilities		1,890		3,011
Non-current liabilities		1,588		5,361
Equity	$	4,003	$	4,363

Statement of Operations	2011			2010			2009

	($ in thousands)
Revenue	$	5,669		$	8,240		$	22
Cost of sales		(5,709	)		(6,455	)		(1,553	)
Selling and administrative expenses		(159	)		(258	)		(295	)

Operating income (loss)		(199	)		1,527			(1,826	)
Other expense		(161	)		(358	)		(270	)

Net income (loss)	$	(360	)	$	1,169		$	(2,096	)

The Company accounts for its investment by the equity method. Under this method, the Company recorded its proportionate share of LLC net income or loss based on the LLC's financial statements as of December 23, 2011. The LLC uses four 13-week periods for a total of 52 weeks to align its fiscal year end with that of its majority interest holder, RealD.

The Company's portion of loss of the LLC was $0.2 million for the year ended December 31, 2011 as compared to the portion of income of the LLC of approximately $0.6 million for the year ended December 31, 2010 and a loss of $0.9 million for the year ended December 31, 2009.

The Company sold digital theatre projection equipment, in the normal course of business, to the LLC for approximately $4.7 million and $2.2 million during the twelve months ended December 31, 2010 and 2009, respectively. The LLC in turn provides and sells the digital projection equipment to third party customers under system use agreements or through sales agreements. Revenue recognized by the Company was $4.1 million and $1.2 million during the twelve months ended December 31, 2010 and 2009, respectively. Revenue recognized by the Company on the sale transaction to the LLC is limited by its 44.4% ownership in the joint venture which will be recognized upon sale of the equipment to the third parties. The total receivable balance due from the LLC was insignificant at December 31, 2011 and 2010. There were no sales to the LLC for the year ended December 31, 2011.

During the third quarter of 2011, the LLC made a significant sale of equipment to certain third party customers that resulted in a pre-tax gain of approximately $0.8 million. During the second quarter of 2010, the LLC made a significant sale of equipment to a third party customer that resulted in the LLC recording a pre-tax gain on the sale of assets of approximately $2.8 million.

During the third quarter of 2010 the Company received a $0.9 million return of the investment in the LLC. The Company received no distributions from the LLC during 2011.

Guarantees

The Company had provided guarantees to notes payable of $1.2 million at December 31, 2010 entered into by the LLC to finance digital projection equipment deployed in the ordinary course of business and had recorded an insignificant liability for the fair value of the obligations undertaken by issuing the guarantees. Under the terms of the guarantees, the Company would have been required to pay the obligation had the LLC been in default of its loans or contract terms. During the third quarter of 2011, the LLC paid off all notes payable effectively ending the Company's guarantee obligations.

- 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+ Details