Annual report pursuant to Section 13 and 15(d)

REVENUE RECOGNITION

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REVENUE RECOGNITION
12 Months Ended
Dec. 31, 2019
Revenue From Contract With Customer [Abstract]  
REVENUE RECOGNITION

4.

REVENUE RECOGNITION

Revenue Recognition Policy

The Company’s patrons have the option to purchase movie tickets well in advance of a movie showtime or right before the movie showtime, or at any point in between those two timeframes depending on seat availability.  The Company recognizes such admissions revenues when the showtime for a purchased movie ticket has passed.  Concession revenues are recognized when products are sold to the consumer.  Other revenues primarily consist of screen advertising and screen rental revenues, promotional income, studio trailer placements and transactional fees. The Company sells gift cards and discount ticket vouchers, the proceeds from which are recorded as deferred revenues.  Deferred revenues for gift cards and discount ticket vouchers are recognized when they are redeemed for movie tickets or concession items.  The Company offers a subscription program in the U.S. whereby patrons can pay a monthly fee to receive a monthly credit for use towards a future movie ticket purchase.  The Company records the monthly subscription program fees as deferred revenues and record admissions revenues when the showtime for a movie ticket purchased with a credit has passed.  The Company has loyalty programs in the U.S. and many of its international locations that either have a prepaid annual membership fee or award points to customers as purchases are made.  For those loyalty programs that have an annual membership fee, the Company recognizes the fee collected as other revenues on a straight-line basis over the term of the membership.  For those loyalty programs that award points to customers based on their purchases, the Company records a portion of the original transaction proceeds as deferred revenues based on the number of reward points issued to customers and recognizes the deferred revenues when the customer redeems such points.  The value of loyalty points issued is based on the estimated fair value of the rewards offered.  The Company records breakage revenue on gift cards and discount ticket vouchers generally based on redemption activity and historical experience with unused balances.  The Company records breakage revenue upon the expiration of loyalty points and subscription credits.  Breakage revenue is recorded as

other revenues on the consolidated income statements.  Advances collected on concession and other contracts are deferred and recognized during the period in which we satisfy the related performance obligations, which may differ from the period in which the advances are collected. These advances are recognized on either a straight-line basis over the term of the contracts or as the Company meets its performance obligations in accordance with the terms of the contracts.

Screen advertising and screen rental revenues for the U.S. operating segment primarily relate to the ESA with NCM and the Company’s beverage concessionaire agreement.  Prior to September 17, 2019, such screen advertising was accounted for under ASC Topic 606, Revenue from Contracts with Customers, and effective upon the amendment of the ESA, NCM screen advertising was accounted for under ASC Topic 842. See table at Note 7 for screen advertising revenues recorded in other revenue under ASC Topic 606 prior to the amendment of the ESA and screen rental revenues recorded in other revenue under ASC Topic 842 subsequent to the amendment of the ESA.  

 

Accounts receivable as of December 31, 2019 included approximately $31,620 of receivables related to contracts with customers.  The Company did not record any assets related to the costs to obtain or fulfill a contract with customers during the year ended December 31, 2019.

 

Disaggregation of Revenue

The following table presents revenues for the periods indicated, disaggregated based on major type of good or service and by reportable operating segment.

 

 

Twelve Months Ended

 

 

Twelve Months Ended

 

 

 

December 31, 2018

 

 

December 31, 2019

 

 

 

U.S.

 

 

International

 

 

 

 

 

 

U.S.

 

 

International

 

 

 

 

 

 

 

Operating

 

 

Operating

 

 

 

 

 

 

Operating

 

 

Operating

 

 

 

 

 

Major Goods/Services

 

Segment (1)

 

 

Segment

 

 

Consolidated

 

 

Segment (1)

 

 

Segment

 

 

Consolidated

 

Admissions revenues

 

$

1,461,151

 

 

$

373,022

 

 

$

1,834,173

 

 

$

1,431,790

 

 

$

373,531

 

 

$

1,805,321

 

Concession revenues

 

 

892,391

 

 

 

216,402

 

 

 

1,108,793

 

 

 

936,241

 

 

 

224,842

 

 

 

1,161,083

 

Screen advertising, screen rental and promotional revenues

 

 

78,591

 

 

 

61,269

 

 

 

139,860

 

 

 

128,839

 

 

 

35,888

 

 

 

164,727

 

Other revenues

 

 

106,824

 

 

 

32,085

 

 

 

138,909

 

 

 

84,033

 

 

 

67,935

 

 

 

151,968

 

Total revenues

 

$

2,538,957

 

 

$

682,778

 

 

$

3,221,735

 

 

$

2,580,903

 

 

$

702,196

 

 

$

3,283,099

 

 

(1)

U.S. segment revenues include eliminations of intercompany transactions with the international operating segment.  See Note 20 for additional information on intercompany eliminations.

The following table presents revenues for the periods indicated, disaggregated based on timing of revenue recognition (as discussed above).

 

 

Twelve Months Ended

 

 

Twelve Months Ended

 

 

 

December 31, 2018

 

 

December 31, 2019

 

 

 

U.S.

 

 

International

 

 

 

 

 

 

U.S.

 

 

International

 

 

 

 

 

 

 

Operating

 

 

Operating

 

 

 

 

 

 

Operating

 

 

Operating

 

 

 

 

 

 

 

Segment (1)

 

 

Segment

 

 

Consolidated

 

 

Segment (1)

 

 

Segment

 

 

Consolidated

 

Goods and services transferred at a

   point in time

 

$

2,453,313

 

 

$

608,347

 

 

$

3,061,660

 

 

$

2,488,716

 

 

$

621,785

 

 

$

3,110,501

 

Goods and services transferred over

   time

 

 

85,644

 

 

 

74,431

 

 

 

160,075

 

 

 

92,187

 

 

 

80,411

 

 

 

172,598

 

Total

 

$

2,538,957

 

 

$

682,778

 

 

$

3,221,735

 

 

$

2,580,903

 

 

$

702,196

 

 

$

3,283,099

 

 

(1)

U.S. segment revenues include eliminations of intercompany transactions with the international operating segment.  See Note 20 for additional information on intercompany eliminations.

Screen Advertising Advances and Other Deferred Revenues

The following table presents changes in the Company’s deferred revenues for the year ended December 31, 2019.  

Deferred Revenues

 

NCM Screen Advertising Advances (1)

 

 

Other

Deferred

Revenues (2)

 

 

Total

 

Balance at January 1, 2019

 

$

350,242

 

 

$

106,075

 

 

$

456,317

 

Amounts recognized as accounts receivable

 

 

 

 

 

12,767

 

 

 

12,767

 

Cash received from customers in advance

 

 

 

 

 

227,125

 

 

 

227,125

 

Common units received from NCM (see Note 7)

 

 

1,552

 

 

 

 

 

 

1,552

 

Interest accrued related to significant financing component

 

 

28,624

 

 

 

 

 

 

28,624

 

Revenue recognized during period

 

 

(32,064

)

 

 

(206,367

)

 

 

(238,431

)

Foreign currency translation adjustments

 

 

 

 

 

(1,174

)

 

 

(1,174

)

Balance at December 31, 2019

 

$

348,354

 

 

$

138,426

 

 

$

486,780

 

 

(1)

See Significant Financing Component discussion below.  See Note 7 for the maturity of balances as of December 31, 2019.  

 

(2)

Includes liabilities associated with outstanding gift cards and SuperSavers, points or rebates outstanding under the Company’s loyalty and membership programs and revenues not yet recognized for screen advertising and other promotional activities. Classified as accounts payable and accrued expenses or other long-term liabilities on the consolidated balance sheet.

The table below summarizes the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of December 31, 2019 and when the Company expects to recognize this revenue.

 

 

Twelve Months Ended December 31,

 

 

 

 

 

 

 

 

 

Remaining Performance Obligations

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

Thereafter

 

 

Total

 

Deferred revenue - other

 

$

125,334

 

 

 

12,897

 

 

 

195

 

 

 

 

 

 

 

 

 

 

 

$

138,426

 

 

Significant Financing Component

As discussed further in Note 7, in connection with the completion of the NCM, Inc. (“NCMI”) initial public offering, the Company amended and restated its ESA with NCM and received approximately $174,000 in cash consideration from NCM. The proceeds were recorded as deferred revenue and are being amortized over the term of the modified ESA, or through February 2041. In addition to the consideration received upon the ESA modification during 2007, the Company also receives consideration in the form of common units from NCM, at each annual common unit adjustment settlement, in exchange for exclusive access to the Company’s newly opened domestic screens under the ESA. See Note 7 for additional information regarding the common unit adjustment and related accounting. Due to the significant length of time between receiving the consideration from NCM and fulfillment of the related performance obligation, the ESA includes an implied significant financing component, as per the guidance in ASC Topic 606. The interest expense was calculated using the Company’s incremental borrowing rates at the time when the cash and each tranche of common units were received from NCM, which ranged from 4.4% to 8.0%. See Note 7 for table detailing activity with NCM, which includes interest revenue and expense recorded in 2018 and 2019 related to the significant financing component.