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Description of Business and Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 30, 2018
Accounting Policies [Abstract] |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
(1) | Description of Business and Summary of Significant Accounting Policies
Description of Business Domino’s Pizza, Inc. (“DPI”), a Delaware corporation, conducts its operations and derives substantially all of its operating income and cash flows through its wholly-owned subsidiary, Domino’s, Inc. (“Domino’s”) and Domino’s wholly-owned subsidiary, Domino’s Pizza LLC (“DPLLC”). DPI and its wholly-owned subsidiaries (collectively, “the Company”) are primarily engaged in the following business activities: (i) retail sales of food through Company-owned Domino’s Pizza stores; (ii) sales of food, equipment and supplies to Company-owned and franchised Domino’s Pizza stores through Company-owned supply chain centers; (iii) receipt of royalties, advertising contributions and fees from U.S. Domino’s Pizza franchisees; and (iv) receipt of royalties and fees from international Domino’s Pizza franchisees. Principles of Consolidation The accompanying consolidated financial statements include the accounts of DPI and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Fiscal Year The Company’s fiscal year ends on the Sunday closest to December 31. The 2018 fiscal year ended on December 30, 2018, the 2017 fiscal year ended on December 31, 2017 and the 2016 fiscal year ended on January 1, 2017. The 2018, 2017 and 2016 fiscal years all consisted of fifty-two weeks. Cash and Cash Equivalents Cash equivalents consist of highly liquid investments with original maturities of three months or less at the date of purchase. These investments are carried at cost, which approximates fair value. Restricted Cash and Cash Equivalents Restricted cash and cash equivalents at December 30, 2018 includes approximately $130.3 million of restricted cash held for future principal and interest payments, $36.5 million of restricted cash held in a three-month interest reserve as required by the related debt agreements and $0.2 million of other restricted cash. As of December 30, 2018, the Company also held $45.0 million of advertising fund restricted cash and cash equivalents, which can only be used for activities that promote the Domino’s Pizza brand. Restricted cash and cash equivalents at December 31, 2017 includes $122.9 million of cash and cash equivalents held for future principal and interest payments, $32.1 million of cash equivalents held in a three-month interest reserve, $36.7 million of cash held as collateral for outstanding letters of credit and $0.1 million of other restricted cash. As of December 31, 2017, the Company also held $27.3 million of advertising fund restricted cash and cash equivalents, which can only be used for activities that promote the Domino’s Pizza brand. Inventories Inventories are valued at the lower of cost (on a first-in, first-out basis) or net realizable value. Inventories at December 30, 2018 and December 31, 2017 are comprised of the following (in thousands):
|  | 2018 |  |  | 2017 |
Food |  | $ | 42,921 |  |  | $ | 36,645 |
Equipment and supplies |  |  | 3,054 |  |  |  | 3,316 |
Inventories |  | $ | 45,975 |  |  | $ | 39,961 |
Other Assets Current and long-term other assets primarily include prepaid expenses such as insurance, rent and taxes, deposits, notes receivable, software licenses, covenants not-to-compete and other intangible assets primarily arising from franchise acquisitions. As of December 30, 2018 and December 31, 2017, all intangible assets with useful lives were fully amortized. Property, Plant and Equipment Additions to property, plant and equipment are recorded at cost. Repair and maintenance costs are expensed as incurred. Depreciation and amortization expense are provided using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives, other than the estimated useful life of the capital lease assets as described below, are generally as follows (in years):
Buildings |  |  | 20 |
Leasehold and other improvements |  |  | 7 –15 |
Equipment |  |  | 3 –15 |
Included in land and buildings as of December 30, 2018 are capital lease assets of approximately $22.2 million, which are related to the leases of five supply chain centers and the lease of one Company-owned store. Included in accumulated depreciation and amortization as of December 30, 2018 is $6.7 million of accumulated amortization related to these leases. Included in land and buildings as of December 31, 2017 are capital lease assets of approximately $10.5 million, which are related to the lease of one supply chain center building and the lease of one Company-owned store. Included in accumulated depreciation and amortization as of December 31, 2017 is $6.2 million of accumulated amortization related to these leases. The capital lease assets are being amortized using the straight-line method over the respective lease terms. Depreciation and amortization expense on property, plant and equipment was approximately $35.0 million, $29.6 million and $27.3 million in 2018, 2017 and 2016, respectively. Impairments of Long-Lived Assets The Company evaluates the potential impairment of long-lived assets at least annually based on various analyses including the projection of undiscounted cash flows and whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. For Company-owned stores, the Company performs this evaluation on an operating market basis, which the Company has determined to be the lowest level for which identifiable cash flows are largely independent of other cash flows. If the carrying amount of a long-lived asset exceeds the amount of the expected future undiscounted cash flows of that asset, the Company estimates the fair value of the assets. If the carrying amount of the asset exceeds the estimated fair value of the asset, an impairment loss is recognized, and the asset is written down to its estimated fair value. The Company did not record any impairment losses on long-lived assets in 2018, 2017 or 2016. Investments in Marketable Securities Investments in marketable securities consist of investments in various mutual funds made by eligible individuals as part of the Company’s deferred compensation plan (Note 7). These investments are stated at aggregate fair value, are restricted and have been placed in a rabbi trust whereby the amounts are irrevocably set aside to fund the Company’s obligations under the deferred compensation plan. The Company classifies and accounts for these investments in marketable securities as trading securities. Goodwill The Company’s goodwill amounts primarily relate to franchise store acquisitions and are not amortized. The Company performs its required impairment tests in the fourth quarter of each fiscal year and did not recognize any goodwill impairment charges in 2018, 2017 and 2016. Capitalized Software Capitalized software is recorded at cost and includes purchased, internally-developed and externally-developed software used in the Company’s operations. Amortization expense is provided using the straight-line method over the estimated useful lives of the software, which range from one to seven years. Capitalized software amortization expense was approximately $18.7 million, $14.8 million and $10.8 million in 2018, 2017 and 2016, respectively. As of December 30, 2018, scheduled amortization for the next five fiscal years for capitalized software that has been placed in service was approximately $16.6 million, $11.5 million, $7.7 million, $4.2 million and $1.7 million for 2019, 2020, 2021, 2022 and 2023, respectively. Debt Issuance Costs Debt issuance costs are recorded as a reduction to the Company’s debt balance and primarily include the expenses incurred by the Company as part of the 2018, 2017 and 2015 Recapitalizations. See Note 4 for a description of the 2018, 2017 and 2015 Recapitalizations. Amortization is recorded on a straight-line basis (which is materially consistent with the effective interest method) over the expected term of the respective debt instrument to which the costs relate and is included in interest expense. In connection with the 2018, 2017 and 2015 Recapitalizations, the Company recorded $8.2 million, $16.8 million and $17.4 million of debt issuance costs, respectively. In connection with 2018 Recapitalization, the Company repaid the 2015 Five-Year Fixed Rate Notes and expensed approximately $3.2 million for the remaining unamortized debt issuance costs associated with these notes. The remaining debt issuance costs are being amortized into interest expense over the expected terms of the 2018, 2017 and 2015 Notes, as described in Note 4. The Company expensed debt issuance costs of approximately $3.4 million, $5.7 million and $0.6 million in 2018, 2017 and 2016, respectively in connection with the write-off of debt issuance costs resulting from the repayment of the Company’s outstanding notes, including scheduled principal payments. Debt issuance cost expense, including these write-off amounts, was approximately $8.0 million, $11.0 million and $6.4 million in 2018, 2017 and 2016, respectively. Insurance Reserves The Company has retention programs for workers’ compensation, general liability and owned and non-owned automobile liabilities for certain periods prior to December 1998 and for periods after December 2001. The Company is generally responsible for up to $1.0 million per occurrence under these retention programs for workers’ compensation and general liability exposures. The Company is also generally responsible for between $500,000 and $3.0 million per occurrence under these retention programs for owned and non-owned automobile liabilities depending on the year. Total insurance limits under these retention programs vary depending on the year covered and range up to $110.0 million per occurrence for general liability and owned and non-owned automobile liabilities and up to the applicable statutory limits for workers’ compensation. Insurance reserves relating to our retention programs are based on undiscounted actuarial estimates. These estimates are based on historical information and on certain assumptions about future events. Changes in assumptions for such factors as medical costs and legal actions, as well as changes in actual experience, could cause these estimates to change in the near term. The Company receives estimates of outstanding insurance exposures from its independent actuary twice per year and differences between these estimated actuarial exposures and the Company’s recorded amounts are adjusted as appropriate. Contract Liabilities Contract liabilities consist of deferred franchise fees and deferred development fees. As of December 30, 2018, $4.0 million of deferred franchise fees and deferred development fees were included in current other accrued liabilities and $15.9 million of deferred franchise fees and deferred development fees were included in long-term other accrued liabilities. As of December 31, 2017, $1.4 million of deferred development fees were included in current other accrued liabilities and $3.0 million of deferred development fees were included in long-term other accrued liabilities. On January 1, 2018, the Company recorded a contract liability of approximately $15.0 million (of which $2.4 million was current and $12.6 million was long-term) associated with deferred franchise fees received through December 31, 2017 in connection with the adoption of new revenue recognition guidance, which is discussed in the new accounting pronouncements section below. Changes in deferred franchise fees and deferred development fees in 2018 were as follows:
|  | Fiscal Year Ended |
(In thousands) |  | December 30, 2018 |
Deferred franchise fees and deferred development fees at beginning of period |  | $ | 19,404 |
Revenue recognized during the period |  |  | (5,235 | )
New deferrals due to cash received and other |  |  | 5,731 |
Deferred franchise fees and deferred development fees at end of period |  | $ | 19,900 |
The Company expects to recognize revenue of $4.0 million in 2019, $3.1 million in 2020, $2.8 million in 2021, $2.5 million in 2022, $2.2 million in 2023 and $5.3 million thereafter associated with the total deferred franchise fee and deferred development fee amount above. The Company has applied the sales-based royalty exemption which permits exclusion of variable consideration in the form of sales-based royalties from the disclosure of remaining performance obligations. Other Accrued Liabilities Current and long-term other accrued liabilities primarily include accruals for income, sales, property and other taxes, legal reserves, store operating expenses, deferred rent expense, dividends payable and deferred compensation liabilities.
Foreign Currency Translation The Company’s foreign entities use their local currency as the functional currency. For these entities, the Company translates net assets into U.S. dollars at year end exchange rates, while income and expense accounts are translated at average annual exchange rates. Currency translation adjustments are included in accumulated other comprehensive income (loss) and foreign currency transaction gains and losses are included in determining net income. Revenue Recognition U.S. Company-owned stores revenues are comprised of retail sales of food through Company-owned Domino’s Pizza stores located in the U.S. and are recognized when the items are delivered to or carried out by customers. Customer payments are generally due at the time of sale. Sales taxes related to these sales are collected from customers and remitted to the appropriate taxing authority and are not reflected in the Company’s consolidated statements of income as revenue. U.S. franchise royalties and fees are primarily comprised of royalties and fees from Domino’s Pizza franchisees with operations in the U.S. Each franchisee is generally required to pay a 5.5% royalty fee on sales. In certain instances, the Company will collect lower rates based on area development agreements, sales initiatives and new store incentives. Royalty revenues are based on a percentage of franchise retail sales and are recognized when the items are delivered to or carried out by franchisees’ customers. U.S. franchise fee revenue primarily relates to per-transaction technology fees that are recognized as the related sales occur. Payments for U.S. royalties and fees are generally due within seven days of the prior week end date. Supply chain revenues are primarily comprised of sales of food, equipment and supplies to franchised Domino’s Pizza stores located in the U.S. and Canada. Revenues from the sale of food are recognized upon delivery of the food to franchisees and payments for food purchases are generally due within 30 days of the shipping date. Revenues from the sale of equipment and supplies are recognized upon delivery or shipment of the related products to franchisees, based on shipping terms, and payments for equipment and supplies are generally due within 90 days of the shipping date. The Company also offers profit sharing rebates and volume discounts to its franchisees. Obligations for profit sharing rebates are calculated based on actual results of its supply chain centers and are recognized as a reduction to revenue. Volume discounts are based on annual sales. The Company estimates the amount that will be earned and records a reduction to revenue. International franchise royalties and fees are primarily comprised of royalties and fees from Domino’s Pizza franchisees outside of the U.S. Royalty revenues are recognized when the items are delivered to or carried out by franchise customers. Store opening fees received from international franchisees are recognized as revenue on a straight-line basis over the term of each respective franchise store agreement, which is typically ten years. Development fees received from international master franchisees are also deferred when amounts are received and are recognized as revenue on a straight-line basis over the term of the respective master franchise agreement, which is typically ten years. International franchise royalties and fees are invoiced at least quarterly and payments are generally due within 60 days. U.S. franchise advertising revenues are primarily comprised of contributions from Domino’s Pizza franchisees with operations in the U.S. to the Domino’s National Advertising Fund Inc. (“DNAF”), the Company’s consolidated not-for-profit subsidiary that administers the Domino’s Pizza system’s national and market level advertising activities in the U.S. Each franchisee is generally required to contribute 6% of their retail sales to fund national marketing and advertising campaigns (subject, in certain instances, to lower rates based on certain incentives and waivers). These revenues are recognized when items are delivered to or carried out by franchisees’ customers. Payments for U.S. franchise advertising revenues are generally due within seven days of the prior week end date. Although these revenues are restricted to be used only for advertising and promotional activities to benefit franchised stores, the Company has determined there are not performance obligations associated with the franchise advertising contributions received by DNAF that are separate from its U.S. royalty payment stream and as a result, these franchise contributions and the related expenses are presented gross in the Company’s consolidated statement of income. Reclassification of Revenues In the first quarter of 2018, the Company began managing its franchised stores in Alaska and Hawaii as part of its U.S. Stores segment (Note 11). Prior to 2018, the revenues from these franchised stores were included in the Company’s International Franchise segment (Note 11). International franchise royalties and fees revenues in 2017 and 2016 included $2.6 million and $2.3 million, respectively, of franchise revenues related to these stores. These amounts have not been reclassified to conform to the current year presentation due to immateriality. Disaggregation of Revenue Current accounting standards require that companies disaggregate revenue from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The Company has included its revenues disaggregated in its consolidated statements of income to satisfy this requirement. Supply Chain Profit-Sharing Arrangements The Company enters into profit-sharing arrangements with U.S. and Canadian stores that purchase all of their food from Supply Chain (Note 11). These profit-sharing arrangements generally offer Company-owned stores and participating franchisees with 50% (or a higher percentage in the case of Company-owned stores and certain franchisees who operate a larger number of stores) of their regional supply chain center’s pre-tax profits based upon each store’s purchases from the supply chain center. Profit-sharing obligations are recorded as a revenue reduction in Supply Chain in the same period as the related revenues and costs are recorded, and were $132.7 million, $119.7 million and $99.8 million in 2018, 2017 and 2016, respectively. Advertising U.S. Stores (Note 11) are generally required to contribute 6% of sales to DNAF. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized, as DNAF is obligated to expend such revenues on advertising. Advertising costs funded by Company-owned stores are generally expensed as incurred and are included in general and administrative expense. The contributions from Company-owned stores that have not yet been expended are included in advertising fund assets, restricted on the Company’s consolidated balance sheet. As of December 30, 2018, advertising fund assets, restricted of $112.7 million included approximately $5.5 million of cash contributed from Company-owned stores that had not yet been expended and approximately $107.2 million of other assets which consisted of $95.1 million of cash, cash equivalents and investments, $15.3 million of accounts receivable and $2.3 million of prepaid expenses. U.S. franchise advertising costs expended by DNAF are included in U.S. franchise advertising expenses in the Company’s consolidated statement of income. Certain costs incurred by the Company on behalf of DNAF were included in general and administrative expense in years prior to 2018. Refer to the New Accounting Pronouncements section within Note 1 for the full impact of the adoption of ASC 606 on the Company’s financial statements. Rent The Company leases certain equipment, vehicles, retail store and supply chain center locations and its corporate headquarters under operating leases with expiration dates through 2034. Rent expenses totaled approximately $62.5 million, $57.9 million and $49.9 million during 2018, 2017 and 2016, respectively. Common Stock Dividends The Company declared and paid dividends of approximately $92.2 million (or $2.20 per share) in 2018, approximately $84.2 million (or $1.84 per share) in 2017 and approximately $74.0 million (or $1.52 per share) in 2016. Stock Options and Other Equity-Based Compensation Arrangements The cost of all of the Company’s stock options, as well as other equity-based compensation arrangements, is reflected in the financial statements based on the estimated fair value of the awards. Earnings Per Share The Company discloses two calculations of earnings per share (“EPS”): basic EPS and diluted EPS. The numerator in calculating common stock basic and diluted EPS is consolidated net income. The denominator in calculating common stock basic EPS is the weighted average shares outstanding. The denominator in calculating common stock diluted EPS includes the additional dilutive effect of outstanding stock options, unvested restricted stock grants and unvested performance-based restricted stock grants. Supplemental Disclosures of Cash Flow Information The Company paid interest of approximately $132.8 million, $107.4 million and $104.6 million during 2018, 2017 and 2016, respectively. Cash paid for income taxes was approximately $71.7 million, $122.6 million and $74.3 million in 2018, 2017 and 2016, respectively. The Company had $3.8 million, $4.0 million and $3.8 million of non-cash investing activities related to accruals for capital expenditures at December 30, 2018, December 31, 2017, and January 1, 2017. The Company also had non-cash financing activities related to capital assets and liabilities in 2018. During 2018, the Company renewed the leases of four supply chain center buildings and extended the terms of the leases. As a result, the Company recorded non-cash financing activities of $12.0 million for the increase in capital lease assets and liabilities during 2018. The Company also recorded $1.9 million in non-cash financing activities related to a build-to-suit arrangement in which the Company’s landlord is constructing a new building that will be leased to the Company upon completion, which is expected to occur in 2019. New Accounting Pronouncements Recently Adopted Accounting Standards Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) and has since issued various amendments which provide additional clarification and implementation guidance. This standard has been codified as ASC 606. This guidance outlines a single, comprehensive model for entities to use in accounting for revenue arising from contracts with customers and superseded most revenue recognition guidance issued by the FASB, including industry specific guidance. On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method. The Company recognized the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of retained deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company has determined that the store opening fees received from international franchisees do not relate to separate and distinct performance obligations from the franchise right and those upfront fees will therefore be recognized as revenue over the term of each respective franchise store agreement, which is typically 10 years. In the past, the Company recognized such fees as revenue when the related store opened. An adjustment to beginning retained deficit and a corresponding contract liability of approximately $15.0 million (of which $2.4 million was current and $12.6 million was long-term) was established on the date of adoption associated with the fees received through December 31, 2017 that would have been deferred and recognized over the term of each respective franchise store agreement if the new guidance had been applied in the past. A deferred tax asset of $3.5 million related to this contract liability was also established on the date of adoption. The Company has also determined that ASC 606 requires a gross presentation on the consolidated statement of income for franchisee contributions received by and related expenses of DNAF, the Company’s consolidated not-for-profit subsidiary. DNAF exists solely for the purpose of promoting the Domino’s Pizza brand in the U.S. Under prior accounting guidance, the Company had presented the restricted assets and liabilities of DNAF in its consolidated balance sheets and had determined that it acted as an agent for accounting purposes with regard to franchisee contributions and disbursements. As a result, the Company historically presented the activities of DNAF net in its statements of income and statements of cash flows. Under the requirements of ASC 606, the Company determined that there are not performance obligations associated with the franchise advertising contributions received by DNAF that are separate from the Company’s U.S. royalty payment stream and as a result, these franchise contributions and the related expenses are presented gross in the Company’s consolidated statement of income and consolidated statement of cash flows. While this change materially impacted the gross amount of reported franchise revenues and expenses, the impact is generally expected to be an offsetting increase to both revenues and expenses such that the impact on income from operations and net income is not expected to be material. An adjustment to beginning retained deficit and advertising fund liabilities of approximately $6.4 million related to the timing of advertising expense recognition was recorded on the date of adoption. A deferred tax liability (which is reflected net against deferred tax assets in the consolidated balance sheet) of approximately $1.6 million related to this adjustment was also established on the date of adoption. The cumulative effects of the changes made to the Company’s consolidated balance sheet as of January 1, 2018 for the adoption of ASC 606 were as follows (in thousands):
|  | Balance at December 31, 2017 |  |  | Adjustments Due to ASC 606 |  |  | Balance at January 1, 2018 |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |
Deferred income taxes |  | $ | 2,750 |  |  | $ | 1,878 |  |  | $ | 4,628 |
Liabilities and stockholders’ deficit |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Advertising fund liabilities |  |  | 120,223 |  |  |  | (6,425 | ) |  |  | 113,798 |
Other accrued liabilities |  |  | 58,578 |  |  |  | 2,365 |  |  |  | 60,943 |
Long-term liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Other accrued liabilities |  |  | 21,751 |  |  |  | 12,639 |  |  |  | 34,390 |
Stockholders’ deficit: |  |  |  |  |  |  |  |  |  |  |  |
Retained deficit |  |  | (2,739,437 | ) |  |  | (6,701 | ) |  |  | (2,746,138 | )
In accordance with the new revenue standard requirements, the impact of adoption on the Company’s consolidated statement of income for 2018 and consolidated balance sheet as of December 30, 2018 was as follows (in thousands):
|  | Fiscal Year Ended December 30, 2018 |
|  | As Reported |  |  | Balances without the Adoption of ASC 606 |  |  | Effect of Change Higher/ (Lower) |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |
U.S. franchise royalties and fees |  | $ | 391,493 |  |  | $ | 409,379 |  |  | $ | (17,886 | )
International franchise royalties and fees |  |  | 224,747 |  |  |  | 225,708 |  |  |  | (961 | )
U.S. franchise advertising |  |  | 358,526 |  |  |  | — |  |  |  | 358,526 |
General and administrative |  |  | 372,464 |  |  |  | 389,520 |  |  |  | (17,056 | )
U.S. franchise advertising |  |  | 358,526 |  |  |  | — |  |  |  | 358,526 |
Income from operations |  |  | 571,689 |  |  |  | 573,481 |  |  |  | (1,792 | )
Income before provision for income taxes |  |  | 428,678 |  |  |  | 430,470 |  |  |  | (1,792 | )
Provision for income taxes |  |  | 66,706 |  |  |  | 67,111 |  |  |  | (405 | )
Net income |  |  | 361,972 |  |  |  | 363,359 |  |  |  | (1,387 | )
|  | As of December 30, 2018 |
|  | As Reported |  |  | Balances without the Adoption of ASC 606 |  |  | Effect of Change Higher/ (Lower) |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |
Deferred income taxes |  | $ | 5,526 |  |  | $ | 3,243 |  |  | $ | 2,283 |
Liabilities and stockholders’ deficit |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Advertising fund liabilities |  |  | 107,150 |  |  |  | 112,744 |  |  |  | (5,594 | )
Other accrued liabilities |  |  | 55,001 |  |  |  | 52,396 |  |  |  | 2,605 |
Long-term liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Other accrued liabilities |  |  | 40,807 |  |  |  | 27,447 |  |  |  | 13,360 |
Stockholders’ deficit: |  |  |  |  |  |  |  |  |  |  |  |
Retained deficit |  |  | (3,036,471 | ) |  |  | (3,028,383 | ) |  |  | (8,088 | )
ASU 2016-04, Liabilities – Extinguishment of Liabilities (Subtopic 405-20) In March 2016, the FASB issued ASU 2016-04, Liabilities – Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products (“ASU 2016-04”). ASU 2016-04 aligns recognition of the financial liabilities related to prepaid stored value products (for example, gift cards) with ASC 606 for non-financial liabilities. In general, these liabilities may be extinguished proportionately in earnings as redemptions occur, or when redemption is remote if issuers are not entitled to the unredeemed stored value. The Company adopted this standard effective January 1, 2018 in connection with its adoption of ASC 606. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. ASU 2016-18, Statement of Cash Flows (Topic 230) In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which requires that restricted cash and cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. ASU 2016-18 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and a retrospective transition method is required. The Company adopted this guidance in 2018 using the retrospective approach. The Company historically presented changes in restricted cash and cash equivalents in the investing section of its consolidated statement of cash flows. This new standard did not impact the Company’s financial results but did result in a change in the presentation of restricted cash and restricted cash equivalents within the statement of cash flows. ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . The amendments in this updated standard allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The Company adopted this standard in 2018 and, as a result, recorded a $0.4 million reclassification from accumulated other comprehensive loss to the beginning balance of retained deficit in 2018. ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) In January 2017, the FASB issued ASU 2017-04 , Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test. ASU 2017-04 is effective for public companies’ annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted this standard in 2018 and the adoption of this standard did not have a material impact on its consolidated financial statements. Accounting Standards Not Yet Adopted The Company has considered all new accounting pronouncements issued by the FASB and concluded the following accounting pronouncements may have a material impact on its consolidated financial statements or represent accounting pronouncements for which the Company has not yet completed its assessment. ASU 2016-02, Leases (Topic 842) In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. The Company will adopt this standard as of December 31, 2018, the first day of its 2019 fiscal year, using the modified retrospective approach. The Company will elect an optional practical expedient to retain its current classification of leases, and as a result, anticipates that the initial impact of adopting this new standard on its consolidated statement of income and consolidated statement of cash flows will not be material. The Company is still finalizing its adoption procedures, but it anticipates that the adoption of this standard will result in the recognition of additional right-of-use assets and lease liabilities for minimum commitments under noncancelable operating leases of approximately $230 million as of the date of adoption. The Company’s undiscounted minimum lease commitments under its operating leases are disclosed in Note 5. The Company’s accounting for finance leases under the new guidance will remain consistent with the Company’s current accounting for capital leases. ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently assessing the impact of adopting this standard but does not expect the adoption of this guidance to have a material impact on its consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 + Details
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