XML 97 R12.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Adoption of ASC Topic 842 - Lease Accounting | 12 Months Ended
--- | ---
Dec. 31, 2019
Leases [Abstract] |
Adoption of ASC Topic 842 - Lease Accounting |
3. | ADOPTION OF ASC TOPIC 842 – LEASE ACCOUNTING
The Company adopted ASC Topic 842 as of January 1, 2019 under the modified retrospective approach that resulted in the recognition of a cumulative-effect adjustment to the opening balance of retained earnings and elected certain practical expedients. The Company elected the following practical expedients, as allowed by ASC Topic 842:
| • | The Company chose not to separate nonlease components from lease components, accounting for lease components and nonlease components associated with a lease as a single lease component. More specifically, for theatre leases, the Company elected not to separate fixed common area maintenance costs from lease costs when calculating lease liabilities and assets.
| • | The Company did not reassess whether existing contracts in effect as of the transition date of January 1, 2019 were, or contained, a lease.
| • | The Company did not reassess the classification of existing leases as operating or finance as of the transition date.
| • | The Company did not reassess whether any initial direct costs were incurred for any of its existing leases.
| • | The Company did not elect to apply the recognition requirements of ASC 842 to short-term leases.
The adoption of ASC Topic 842 included the following primary impacts:
| 1. | The Company recorded a right-of-use asset and lease liability for all of its operating leases as required by the standard. The lease liability for each lease was determined based on the present value of lease payments. The right-of-use asset was based on the lease liability value, adjusted for offsets that existed as of adoption, including deferred rent liabilities of ($39,235), net favorable and unfavorable lease intangibles of ($5,780), deferred lease incentive liabilities of ($12,960) and long-term prepaid rents of $7,707. The Company recorded operating lease right-of-use assets of $1,491,245 and operating lease liabilities of $1,545,210 upon adoption.
| 2. | Certain of the Company’s existing lease assets and liabilities, which were accounted for under prior sale-leaseback accounting guidance, were derecognized in accordance with ASC Topic 842 and reevaluated for classification per the new accounting guidance. Several of these leases have been reestablished as operating leases based on ASC Topic 842.
| a. | For those leases that are now classified as operating leases in accordance with ASC Topic 842, approximately $110,442 and $126,376 of lease assets and liabilities, respectively, were recorded as an adjustment to beginning retained earnings. The related net deferred income tax asset for these accounts was also recorded as an adjustment to beginning retained earnings. See additional impact discussed in item 3 below.
| b. | The Company recognized finance lease assets and liabilities in the amount of $57,440 as of January 1, 2019 for the remaining leases that were determined to be finance leases under ASC Topic 842.
| 3. | For the leases noted in item 2a above, the Company will now record the related operating lease payments as facility lease expense, compared to prior periods in which the capitalized asset was depreciated and lease payments were recorded as a reduction of a lease liability and interest expense.
Real Estate Leases - The Company conducts a significant part of its theatre operations in leased properties under noncancelable operating and finance leases with terms generally ranging from 10 to 25 years. In addition to fixed lease payments, some of the leases provide for variable lease payments and some require the payment of taxes, insurance and other costs applicable to the property. Variable lease payments include payments based on a percentage of retail sales over contractual levels or payments adjusted periodically for inflation or changes in attendance. The Company can renew, at its option, a substantial portion of the leases at defined or then market rental rates for various periods. Some leases also provide for escalating rent payments throughout the lease term. The Company also leases certain office and warehouse facilities in the U.S. and in international locations. The lease terms for these facilities generally only include fixed payments. The Company recognizes fixed lease expense for the operating leases on a straight-line basis over the lease term. The Company’s real estate lease agreements do not contain any residual value guarantees or restrictive covenants. Equipment Leases - The Company has certain equipment operating leases primarily including projectors, trash compactors and various other equipment used in the day-to-day operation of the business. Certain of the leases require fixed lease payments to be made over the duration of the lease term, while others are variable in nature based on usage or sales. Certain of these leases are month-to-month, while others are noncancelable with terms generally ranging from 5 to 11 years. The Company’s equipment lease agreements do not contain any residual value guarantees or restrictive covenants. The following table represents the operating and finance right-of-use assets and lease liabilities as of December 31, 2019.
|  |  | As of |
Leases | Classification |  | December 31, 2019 |
Assets (1) |  |  |  |  |
Operating lease assets | Operating lease assets |  | $ | 1,383,080 |
Finance lease assets | Theatre properties and equipment, net of accumulated depreciation (2) |  |  | 116,135 |
Total lease assets |  |  | $ | 1,499,215 |
Liabilities (1) |  |  |  |  |
Current |  |  |  |  |
Operating | Current portion of operating lease obligations |  | $ | 217,406 |
Finance | Current portion of finance lease obligations |  |  | 15,432 |
Noncurrent |  |  |  |  |
Operating | Operating lease obligations, less current portion |  |  | 1,223,462 |
Finance | Finance lease obligations, less current portion |  |  | 141,017 |
Total lease liabilities |  |  | $ | 1,597,317 |
(1) | The operating lease right-of-use assets and liabilities recorded on the Company’s consolidated balance sheet generally do not include renewal options that have not yet been exercised. The Company does not consider a lease renewal as reasonably certain until immediately before the necessary notification is provided to the landlord.
(2) | Finance lease assets are net of accumulated amortization of $36,384 as of December 31, 2019.
As of December 31, 2019, the Company had signed lease agreements with total noncancelable lease payments of approximately $242,898 related to theatre leases that had not yet commenced. The timing of lease commencement is dependent on the completion of construction of the related theatre facility. Additionally, these amounts are based on estimated square footage and costs to construct each facility and may be subject to adjustment upon final completion of each construction project. In accordance with ASC Topic 842, fixed minimum lease payments related to these theatres are not included in the right-of-use assets and lease liabilities as of December 31, 2019. There were no significant noncancelable lease agreements signed, but not yet commenced, related to equipment leases. The following table represents the Company’s aggregate lease costs, by lease classification, for the year ended December 31, 2019.
|  | Year Ended |
Lease Cost | Classification | December 31, 2019 |
Operating lease costs |  |  |  |
Equipment (1) | Utilities and other | $ | 9,172 |
Real Estate (2)(3) | Facility lease expense |  | 346,222 |
Total operating lease costs |  | $ | 355,394 |
Finance lease costs |  |  |  |
Depreciation of leased assets | Depreciation and amortization | $ | 14,734 |
Interest on lease liabilities | Interest expense |  | 7,786 |
Total finance lease costs |  | $ | 22,520 |
(1) | Includes approximately $4,700 of short-term lease payments for the year ended December 31, 2019.
(2) | Includes approximately $68,799 of variable lease payments based on a change in index, such as CPI or inflation, variable payments based on revenues or attendance and variable common area maintenance costs for the year ended December 31, 2019
(3) | Approximately $1,614 of lease payments are included in general and administrative expenses primarily related to office leases for the year ended December 31, 2019.
The following table represents the maturity of lease liabilities, by lease classification, as of December 31, 2019.
|  | Operating |  | Finance |  |  |  |
Years Ending |  | Leases |  | Leases |  | Total |
2020 |  | $ | 280,268 |  | $ | 22,416 |  | $ | 302,684 |
2021 |  |  | 263,978 |  |  | 22,671 |  |  | 286,649 |
2022 |  |  | 235,266 |  |  | 21,935 |  |  | 257,201 |
2023 |  |  | 205,210 |  |  | 21,246 |  |  | 226,456 |
2024 |  |  | 166,233 |  |  | 20,165 |  |  | 186,398 |
After 2024 |  |  | 580,852 |  |  | 88,913 |  |  | 669,765 |
Total lease payments |  | $ | 1,731,807 |  | $ | 197,346 |  | $ | 1,929,153 |
Less: Interest |  |  | 290,939 |  |  | 40,897 |  |  | 331,836 |
Present value of lease liabilities |  | $ | 1,440,868 |  | $ | 156,449 |  | $ | 1,597,317 |
The following table represents future minimum lease payments under noncancelable operating and capital leases at December 31, 2018 as presented in the Company’s Annual Report on Form 10-K filed February 28, 2019:
|  | Operating |  |  | Capital |
Years Ending |  | Leases |  |  | Leases |
2019 |  | $ | 253,323 |  |  | $ | 42,434 |
2020 |  |  | 242,336 |  |  |  | 41,502 |
2021 |  |  | 230,396 |  |  |  | 34,589 |
2022 |  |  | 204,628 |  |  |  | 32,462 |
2023 |  |  | 176,802 |  |  |  | 28,534 |
Thereafter |  |  | 677,091 |  |  |  | 166,375 |
Total |  | $ | 1,784,576 |  |  |  | 345,896 |
Amounts representing interest payments |  |  |  |  |  |  | (86,364 | )
Present value of future minimum payments |  |  |  |  |  |  | 259,532 |
Current portion of capital lease obligations |  |  |  |  |  |  | (27,065 | )
Capital lease obligations, less current portion |  |  |  |  |  | $ | 232,467 |
The following table represents the weighted-average remaining lease term and discount rate, disaggregated by lease classification, as of December 31, 2019.
|  | As of |
Lease Term and Discount Rate |  | December 31, 2019 |
Weighted-average remaining lease term (years) (1) |  |  |  |
Operating leases - equipment |  |  | 3.9 |
Operating leases - real estate |  |  | 7.9 |
Finance leases - equipment |  |  | 5.3 |
Finance leases - real estate |  |  | 10.0 |
Weighted-average discount rate (2) |  |  |  |
Operating leases - equipment |  |  | 4.3 | %
Operating leases - real estate |  |  | 4.8 | %
Finance leases - equipment |  |  | 4.6 | %
Finance leases - real estate |  |  | 4.8 | %
| (1) | The lease assets and liabilities recorded on the Company’s consolidated balance sheet generally do not include renewal options that have not yet been executed. The Company does not consider a lease renewal exercise as reasonably certain until immediately before the necessary notification is provided to the landlord. |
| (2) | The discount rate for each lease represents the incremental borrowing rate at which the Company would borrow, on a collateralized basis, over a similar term and at an amount equal to the lease payments in a similar economic environment. |
The following table represents the minimum cash lease payments included in the measurement of lease liabilities and the non-cash addition of right-of-use assets for the twelve months ended December 31, 2019.
|  | Year Ended |
Other Information |  | December 31, 2019 |
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Cash outflows for operating leases |  | $ | 281,895 |
Cash outflows for finance leases - operating activities |  | $ | 7,575 |
Cash outflows for finance leases - financing activities |  | $ | 14,600 |
Non-cash amount of leased assets obtained in exchange for: |  |  |  |
Operating lease liabilities - real estate |  | $ | 113,318 |
Operating lease liabilities - equipment |  | $ | 795 |
Finance lease liabilities |  | $ | 21,535 |
Lessor Arrangements As noted above, the Company did not reassess whether existing contracts in effect as of the transition date of January 1, 2019 were, or contained, a lease. However, effective September 17, 2019, the Company amended its Exhibitor Services Agreement (“ESA”) with National CineMedia, LLC (“NCM”) and, as a result of this amendment, the Company reassessed the ESA under ASC Topic 842. The Company’s assessment resulted in the determination that the nonconsecutive periods of use of the theatre screens by NCM under the ESA qualify as a lease in accordance with ASC Topic 842. See further discussion in Note 7. The Company rents its theatre auditoriums for corporate meetings, screenings, education and training sessions and other private events. These rentals, which are not significant to the Company, are generally one-time events and the related revenue is reflected as other revenue on the consolidated statement of income.

X
- References No definition available. + Details
Name: | us-gaap_LeasesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing. + References Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -URI http://asc.fasb.org/topic&trid=2208923 + Details
Name: | us-gaap_LeasesOfLesseeDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration