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Revenue Recognition | 9 Months Ended
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Sep. 27, 2018
Revenue Recognition [Abstract] |
Revenue Recognition | Note 2 – Revenue Recognition Revenue Recognition Policy Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance of obligations by transferring the promised services to the customer. A service is transferred to a customer when, or as, the customer obtains control of that service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company’s progress in satisfying the performance obligation in a manner that depicts the transfer of the services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised service. The amount of revenue recognized reflects the consideration entitled to in exchange for those services. The disaggregation of revenues by business segment for the 13 and 39 weeks ended September 27, 2018 is as follows (in thousands):
|  | 13 Weeks Ended September 27, 2018 |
|  | Reportable Segment |  |  |  |
|  | Theatres |  |  | Hotels/ Resorts |  |  | Corporate |  |  | Total |
Theatre admissions |  | $ | 52,422 |  |  | $ | – |  |  | $ | – |  |  | $ | 52,422 |
Rooms |  |  | – |  |  |  | 34,467 |  |  |  | – |  |  |  | 34,467 |
Theatre concessions |  |  | 35,476 |  |  |  | – |  |  |  | – |  |  |  | 35,476 |
Food and beverage |  |  | – |  |  |  | 19,333 |  |  |  | – |  |  |  | 19,333 |
Other revenues (1) |  |  | 6,893 |  |  |  | 12,822 |  |  |  | 98 |  |  |  | 19,813 |
Cost reimbursements |  |  | 218 |  |  |  | 8,870 |  |  |  | – |  |  |  | 9,088 |
Total revenues |  | $ | 95,009 |  |  | $ | 75,492 |  |  | $ | 98 |  |  | $ | 170,599 |
|  | 39 Weeks Ended September 27, 2018 |
|  | Reportable Segment |  |  |  |
|  | Theatres |  |  | Hotels/ Resorts |  |  | Corporate |  |  | Total |
Theatre admissions |  | $ | 185,035 |  |  | $ | – |  |  | $ | – |  |  | $ | 185,035 |
Rooms |  |  | – |  |  |  | 84,256 |  |  |  | – |  |  |  | 84,256 |
Theatre concessions |  |  | 123,687 |  |  |  | – |  |  |  | – |  |  |  | 123,687 |
Food and beverage |  |  | – |  |  |  | 53,972 |  |  |  | – |  |  |  | 53,972 |
Other revenues (1) |  |  | 23,591 |  |  |  | 35,453 |  |  |  | 318 |  |  |  | 59,362 |
Cost reimbursements |  |  | 1,084 |  |  |  | 24,692 |  |  |  | – |  |  |  | 25,776 |
Total revenues |  | $ | 333,397 |  |  | $ | 198,373 |  |  | $ | 318 |  |  | $ | 532,088 |
| (1) | Included in other revenues is an immaterial amount related to rental income that is not considered contract revenue from contracts with customers under ASC No. 2014-09.
The Company recognizes revenue from its rooms as earned on the close of business each day. Revenue from theatre admissions, theatre concessions and food and beverage sales are recognized at the time of sale. Revenues from advanced ticket and gift card sales are recorded as deferred revenue and are recognized when tickets or gift cards are redeemed. Gift card breakage income is recognized based upon historical redemption patterns and represents the balance of gift cards for which the Company believes the likelihood of redemption by the customer is remote. Gift card breakage income is recorded in other revenues in the consolidated statements of earnings. The adoption of ASU No. 2014-09 did not have an effect on how revenue is recognized for these arrangements. Other revenues include management fees for theatres and hotels under management agreements. The management fees are recognized as earned based on the terms of the agreements. The management fees include variable consideration that is recognized based on the Company’s right to invoice as the amount invoiced corresponds directly to the value transferred to the customer. Other revenues also include family entertainment center revenues and revenues from Hotels/Resorts outlets such as spa, ski, golf and parking, each of which are recognized at the time of sale. In addition, other revenues include pre-show advertising income in the Company’s theatres. Pre-show advertising revenue includes variable consideration, primarily based on attendance levels, that is allocated to distinct time periods that make up the overall performance obligation. The adoption of ASU No. 2014-09 did not have an effect on how revenue is recognized for these arrangements. Cost reimbursements primarily consist of payroll and related expenses at managed properties where the Company is the employer and may include certain operational and administrative costs as provided for in the Company’s contracts with owners. These costs are reimbursed back to the Company. As these costs have no added markup, the revenue and related expense have no impact on operating income or net earnings. The adoption of ASU No. 2014-09 did not have an effect on how revenue is recognized for these arrangements. The timing of the Company’s revenue recognition may differ from the timing of payment by customers. However, the Company typically receives payment within a very short period of time of when the revenue is recognized. The Company records a receivable when revenue is recognized prior to payment and it has an unconditional right to payment. Alternatively, when payment precedes the provision for the related services, deferred revenue is recorded until the performance obligation is satisfied. Revenues do not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting sales tax. Adoption of ASU No. 2014-09 Due to adoption of ASU No. 2014-09, on the first day of fiscal 2018, the Company recorded a one-time cumulative effect adjustment to the balance sheet as follows:
|  | Balance at December 28, 2017 |  |  | Cumulative Adjustment |  |  | Balance at December 29, 2017 |
|  | ( in thousands ) |
Refundable income taxes |  | $ | 15,335 |  |  | $ | 945 |  |  | $ | 16,280 |
Other accrued liabilities |  |  | 53,291 |  |  |  | 3,296 |  |  |  | 56,587 |
Deferred compensation and other |  |  | 56,662 |  |  |  | 217 |  |  |  | 56,879 |
Retained earnings |  |  | 403,206 |  |  |  | (2,568 | ) |  |  | 400,638 |
The one-time cumulative effect adjustment to the balance sheet is due to a change in accounting for the Company’s loyalty programs. The Company offers a customer loyalty program to its theatre customers called Magical Movie Rewards. The program allows members to earn points for each dollar spent and access special offers available only to members. The rewards are redeemable at any Marcus Theatre box office, concession stand or food and beverage venue. The Company also offers a customer loyalty program to its Hotels and Resorts customers which allows members to earn points for each dollar spent in its restaurants. The rewards are redeemable at any of the Company’s hotel outlets including spas, restaurants, and golf. Under ASU No. 2014-09, the portion of Theatre admission revenues, Theatre concession revenues and Food and beverage revenues attributable to loyalty points earned by customers are deferred as a reduction of these revenues until related reward redemption. Through December 28, 2017, the Company recorded the estimated incremental cost of redeeming loyalty points at the time they were earned in Advertising and marketing expense. The change had the effect of an immaterial reduction of theatre admission revenues and a corresponding immaterial increase in theatre concession revenues with an offsetting increase in other long-term liabilities based upon historical customer reward redemption patterns. In accordance with ASU No. 2014-09, the Company has concluded that it is the principal (as opposed to agent) in the arrangement with third-party internet ticketing companies in regards to sale of internet tickets to customers, and therefore, recognizes ticket fee revenue based on a gross transaction price. As such, internet ticket fee revenue is deferred and recognized when the related film exhibition takes place on a gross transaction price basis. Through December 28, 2017, the Company recorded internet ticket fee revenues net of third-party commission or service fees. The change had the effect of increasing other revenues and other operating expense but had no impact on net earnings or cash flows from operations. The adoption of ASU No. 2014-09 had the following effect on our consolidated statement of earnings for the 13 and 39 weeks ended September 27, 2018 (in thousands):
|  | For the 13 Weeks Ended September 27, 2018 |  |  | For the 39 Weeks Ended September 27, 2018 |
|  | As Reported |  |  | ASU No. 2014-09 Impact |  |  | Adjusted (1) |  |  | As Reported |  |  | ASU No. 2014-09 Impact |  |  | Adjusted (1) |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Theatre admissions |  | $ | 52,422 |  |  | $ | (605 | ) |  | $ | 53,027 |  |  | $ | 185,035 |  |  | $ | (1,961 | ) |  | $ | 186,996 |
Theatre concessions |  |  | 35,476 |  |  |  | 503 |  |  |  | 34,973 |  |  |  | 123,687 |  |  |  | 1,467 |  |  |  | 122,220 |
Food and beverage |  |  | 19,333 |  |  |  | 3 |  |  |  | 19,330 |  |  |  | 53,972 |  |  |  | 23 |  |  |  | 53,949 |
Other revenues |  |  | 19,813 |  |  |  | 904 |  |  |  | 18,909 |  |  |  | 59,362 |  |  |  | 3,609 |  |  |  | 55,753 |
Total revenues |  |  | 170,599 |  |  |  | 805 |  |  |  | 169,794 |  |  |  | 532,088 |  |  |  | 3,138 |  |  |  | 528,950 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Theatre operations |  |  | 48,644 |  |  |  | 165 |  |  |  | 48,479 |  |  |  | 164,452 |  |  |  | 479 |  |  |  | 163,973 |
Theatre concessions |  |  | 10,168 |  |  |  | 159 |  |  |  | 10,009 |  |  |  | 35,105 |  |  |  | 469 |  |  |  | 34,636 |
Advertising and marketing |  |  | 6,178 |  |  |  | (496 | ) |  |  | 6,674 |  |  |  | 17,317 |  |  |  | (1,549 | ) |  |  | 18,866 |
Other operating expenses |  |  | 8,969 |  |  |  | 910 |  |  |  | 8,059 |  |  |  | 27,032 |  |  |  | 3,514 |  |  |  | 23,518 |
Total costs and expenses |  |  | 148,186 |  |  |  | 738 |  |  |  | 147,448 |  |  |  | 463,552 |  |  |  | 2,913 |  |  |  | 460,639 |
Operating income |  |  | 22,413 |  |  |  | 67 |  |  |  | 22,346 |  |  |  | 68,536 |  |  |  | 225 |  |  |  | 68,311 |
Income taxes |  |  | 2,626 |  |  |  | 9 |  |  |  | 2,617 |  |  |  | 12,254 |  |  |  | 48 |  |  |  | 12,206 |
Net earnings attributable to The Marcus Corporation |  |  | 16,231 |  |  |  | 58 |  |  |  | 16,173 |  |  |  | 44,671 |  |  |  | 177 |  |  |  | 44,494 |
| (1) | The amounts reflect each affected financial statement line item as they would have been reported under US GAAP prior to the adoption of ASU No. 2014-09.
The adoption of ASU No. 2014-09 had the following effect on our consolidated balance sheet as of September 27, 2018 (in thousands):
|  | As Reported |  |  | ASU No. 2014-09 Impact |  |  | Adjusted (1) |
Refundable income taxes |  | $ | 3,531 |  |  | $ | 945 |  |  | $ | 2,586 |
Total current assets |  |  | 57,368 |  |  |  | 945 |  |  |  | 56,423 |
Total assets |  |  | 986,686 |  |  |  | 945 |  |  |  | 985,741 |
Other accrued liabilities |  |  | 46,269 |  |  |  | 3,639 |  |  |  | 42,630 |
Total current liabilities |  |  | 120,981 |  |  |  | 3,639 |  |  |  | 117,342 |
Deferred compensation and other |  |  | 59,157 |  |  |  | 99 |  |  |  | 59,058 |
Retained Earnings |  |  | 433,022 |  |  |  | (2,793 | ) |  |  | 435,815 |
Shareholders’ equity attributable to The Marcus Corporation |  |  | 482,931 |  |  |  | (2,793 | ) |  |  | 485,724 |
Total equity |  |  | 483,036 |  |  |  | (2,793 | ) |  |  | 485,829 |
Total liabilities and shareholders’ equity |  |  | 986,686 |  |  |  | 945 |  |  |  | 985,741 |
| (1) | The amounts reflect each affected financial statement line item as they would have been reported under US GAAP prior to the adoption of ASU No. 2014-09.
The Company had deferred revenue from contracts with customers of $28,643,000 and $36,007,000 as of September 27, 2018 and December 29, 2017, respectively, which includes the one-time cumulative effect adjustment to the balance sheet on the first day of fiscal 2018. The Company had no contract assets as of September 27, 2018 and December 28, 2017. During the 13 and 39 weeks ended September 27, 2018 , respectively, the Company recognized revenue of $1,699,000 and $16,688,000 that was included in deferred revenues as of December 29, 2017. The decrease in deferred revenue from December 29, 2017 to September 27, 2018 was due to theatre gift card redemptions and advanced movie ticket redemptions during the 39 weeks ended September 27, 2018, offset by an increase in advanced sales/deposits for group events in the hotels and resorts division. A significant majority of the Company’s revenue is recorded in less than one year from the original contract. As of September 27, 2018, the amount of transaction price allocated to the remaining performance obligations under the Company’s advanced tickets sales was $4,396,000 and is reflected in the Company’s consolidated balance sheet as part of deferred revenues, which is included in other accrued liabilities. The Company recognizes revenue as the tickets are redeemed, which is expected to occur within the next 1.3 years. As of September 27, 2018, the amount of transaction price allocated to the remaining performance obligations under the Hotels and Resorts loyalty program was $192,000, of which, $73,000 is reflected in the Company’s consolidated balance sheet in deferred compensation and other. The Company recognizes revenue upon reward redemption, which is expected to occur within the next two years. As part of the Company’s adoption of ASU No. 2014-09, the Company elected to use the following practical expedients: (i) not to adjust the promised amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between the Company's transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less; (ii) not to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer; (iii) to expense costs as incurred for costs to obtain contracts when the amortization period would have been one year or less, which mainly includes internal sales and development compensation; (iv) not to disclose remaining performance obligations when the remaining performance obligations have original expected durations of one year or less; and (v) not to disclose remaining performance obligations when variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms a single performance obligation (which exists in the Company’s management fee contracts and its pre-show advertising contracts).

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