Quarterly report pursuant to Section 13 or 15(d)

Lease Accounting

v3.21.2
Lease Accounting
6 Months Ended
Jun. 30, 2021
Leases [Abstract]  
Lease Accounting

4.

Lease Accounting

Lease Deferrals and Abatements

Upon the temporary closure of theatres in March 2020, the Company initiated discussions with landlords to negotiate the deferral of rent and other lease-related payments with certain of its landlords.  The amendments signed with the landlords involve varying concessions, including the abatement of rent payments during closure, deferral of all or a portion of rent payments to later periods and deferrals of rent payments to later periods combined with an early exercise of an existing renewal option or extension of the lease term.  In some cases, the Company is entitled to rent-free periods while theatres remain closed in certain locations due to local regulations.  Total payments deferred as of June 30, 2021 were $56,022, of which $45,573 is included in accounts payable and accrued expenses and $10,449 is included in other long-term liabilities in the condensed consolidated balance sheet.

In April 2020, the FASB staff released guidance indicating that in response to the COVID-19 crisis, an entity would not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts.  The election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.

The Company elected to not remeasure the related lease liabilities and right-of-use assets for those leases where the concessions and deferrals did not result in a significant change in total payments under the lease and where the remaining lease term did not change as a result of the negotiation.  For those leases that were renewed or extended as a result of the negotiation to defer rent payments, the Company recalculated the related lease liability and right-of-use asset based on the new terms.

The following table represents the Company’s aggregate lease costs, by lease classification, for the periods presented.

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30

 

 

June 30

 

Lease Cost

Classification

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating lease costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment (1)

Utilities and other

$

423

 

 

$

131

 

 

$

868

 

 

$

1,672

 

Real Estate (2)(3)

Facility lease expense

 

67,679

 

 

 

63,460

 

 

 

131,438

 

 

 

145,118

 

Total operating lease costs

 

$

68,102

 

 

$

63,591

 

 

$

132,306

 

 

$

146,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance lease costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of leased assets

Depreciation and amortization

$

3,141

 

 

$

3,680

 

 

$

6,391

 

 

$

7,387

 

Interest on lease liabilities

Interest expense

 

1,491

 

 

 

1,757

 

 

 

3,061

 

 

 

3,608

 

Total finance lease costs

 

$

4,632

 

 

$

5,437

 

 

$

9,452

 

 

$

10,995

 

 

(1)

Includes approximately $313 and $(985) of short-term lease payments for the three months ended June 30, 2021 and 2020, respectively.  Includes approximately $628 and $(572) of short-term lease payments for the six months ended June 30, 2021 and 2020, respectively.    

 

 

(2)

Includes approximately $401 and $(2,910) 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 three months ended June 30, 2021 and 2020, respectively.   Includes approximately $(1,943) and $9,337 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 six months ended June 30, 2021 and 2020, respectively.

 

 

(3)

Approximately $285 and $327 of lease payments are included in general and administrative expenses primarily related to office leases for the three months ended June 30, 2021 and 2020, respectively.   Approximately $649 and $787 of lease payments are included in general and administrative expenses primarily related to office leases for the six months ended June 30, 2021 and 2020, respectively.

 

The following table represents the minimum cash lease payments recorded as lease expense, interest expense and a reduction of lease liabilities, as well as the non-cash addition of lease assets for the periods indicated.

 

 

Six Months Ended

 

 

 

June 30,

 

Other Information

 

2021

 

 

2020

 

Contractual cash payments included in the measurement of lease liabilities(1)

 

 

 

 

 

 

 

 

Cash outflows for operating leases

 

$

133,621

 

 

$

138,025

 

Cash outflows for finance leases - operating activities

 

$

3,056

 

 

$

3,579

 

Cash outflows for finance leases - financing activities

 

$

7,373

 

 

$

7,620

 

Non-cash amount of leased assets obtained in exchange for:

 

 

 

 

 

 

 

 

Operating lease liabilities

 

$

55,227

 

 

$

60,844

 

Finance lease liabilities

 

$

 

 

$

 

 

(1)

As discussed above at Lease Deferrals and Abatements, the Company negotiated certain lease amendments to defer and/or abate contractual payments as a result of the COVID-19 pandemic and temporary closure of theatres.  In accordance with FASB Staff guidance, the Company did not recalculate lease liabilities and right of use assets for amendments that did not result in a substantial increase in the rights of the lessor or the obligations of the lessee.  Contractual payment amounts for the six months ended June 30, 2021 above are prior to the impact of deferred or abated rent amounts.  

 


 

As of June 30, 2021, the Company had signed lease agreements with total contractual minimum lease payments of approximately $158,149 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 theatre leases which have not yet commenced are excluded from the right-of-use assets and lease liabilities as of June 30, 2021.