3.	Revenue Recognition

Revenue Recognition Policy

The Company recognizes admissions and concession revenues when sales are made at the box office and concession stand, respectively. Other revenues include screen advertising, transactional fees and other ancillary revenues such as vendor marketing promotions and meeting rentals located in the Company’s theatres. The Company records proceeds from the sale of gift cards and other advanced sale-type certificates in current liabilities and recognizes admissions or concession revenue when a holder redeems the card or certificate. Additionally, the Company recognizes unredeemed gift cards and other advanced sale-type certificates, as a proportion of actual redemptions, as other revenues, which is an estimate primarily based on the Company’s historical experience with such cards and certificates.

Screen advertising revenues are generally recognized over the period that the related advertising is delivered on-screen or in-theatre. Advances collected on long-term screen advertising, concession and other contracts are recorded as deferred revenues. In accordance with the terms of the agreements, the advances collected on such contracts are recognized during the period in which the Company satisfies 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 has met its performance obligations in accordance with the terms of the contracts.

See additional revenue recognition policy considerations, updated for the adoption of ASC Topic 606, below.

Adoption of ASC Topic 606

The Company adopted ASC 606, Revenue from Contracts with Customers, effective January 1, 2018 under the modified retrospective method (cumulative-effect) and therefore, revenue amounts as presented on the condensed consolidated statements of income have not been adjusted for prior periods presented.

Changes to the way in which the Company recognizes revenue resulted in the following impacts to the condensed consolidated statements of income:

Recording of incremental other revenue and interest expense related to the significant financing component of the Company’s Exhibitor Services Agreement (“ESA”) with NCM, LLC (“NCM”). See further discussion below, including the estimated interest rates assumed in determining the amount of interest expense.

Deferral of a portion of admissions and concession revenues for transactions that include the issuance of loyalty points to customers. To determine the amount of revenues to defer upon issuance of points to customers under its points-based loyalty programs, the Company estimated the values of the rewards expected to be redeemed by its customers for those points. The estimates are based on the rewards that have historically been offered under the loyalty programs, which the Company believes is representative of the rewards to be offered in the future.

Increase in other revenues and an increase in utilities and other expenses due to presentation of transactional fees on a gross versus net basis.

Increase in other revenues due to the change in amortization methodology for deferred revenue – NCM that is now amortized on a straight-line basis and effective for the entire term of the ESA. As a result of the change in amortization method, the Company recorded a cumulative effect of accounting change adjustment of $40,526, net of taxes, in retained earnings on January 1, 2018 (see also Note 6).

The above noted changes increased (decreased) admissions, concession and other revenue for the three and six months ended June 30, 2018 as follows:

	Three Months Ended			Six Months Ended
	June 30, 2018			June 30, 2018
Admissions revenues	$	(1,898	)	$	(3,200	)
Concession revenues	$	(662	)	$	(1,207	)
Other revenues	$	32,710		$	60,169

The Company applied the practical expedient to exclude sales and other similar taxes collected from customers from its transaction price for purposes of recording revenues, as such revenues are presented net of such taxes.

Disaggregation of Revenue

The following table presents revenues for the three and six months ended June 30, 2018, disaggregated based on major type of good or service and by reportable operating segment.

	Three Months Ended						Six Months Ended
	June 30, 2018						June 30, 2018
	U.S.		International				U.S.		International
	Operating		Operating				Operating		Operating
Major Goods/Services	Segment ⁽¹⁾		Segment		Consolidated		Segment ⁽¹⁾		Segment		Consolidated
Admissions revenues	$	408,863	$	100,007	$	508,870	$	758,215	$	203,279	$	961,494
Concession revenues		249,618		55,688		305,306		453,368		113,710		567,078
Screen advertising and promotional revenues		21,051		15,446		36,497		39,230		29,715		68,945
Other revenues		29,542		8,838		38,380		54,604		16,903		71,507
Total revenues	$	709,074	$	179,979	$	889,053	$	1,305,417	$	363,607	$	1,669,024

(1)

U.S. segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 15 for additional information on intercompany eliminations.

The following table presents revenues for the three and six months ended June 30, 2018, disaggregated based on timing of revenue recognition (see Revenue Recognition Policy above).

	Three Months Ended						Six Months Ended
	June 30, 2018						June 30, 2018

	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	$	686,463	$	161,350	$	847,813	$	1,262,289	$	327,499	$	1,589,788
Goods and services transferred over time		22,611		18,629		41,240		43,128		36,108		79,236
Total	$	709,074	$	179,979	$	889,053	$	1,305,417	$	363,607	$	1,669,024

(1)

U.S. segment revenues include eliminations of intercompany transactions with the international operating segment. See Note 15 for additional information on intercompany eliminations.

Deferred Revenues

The following table presents changes in the Company’s deferred revenues for the six months ended June 30, 2018.

Deferred Revenues	Deferred Revenue - NCM			Other Deferred Revenues ⁽¹⁾			Total
Balance at January 1, 2018	$	351,706		$	86,498		$	438,204
Impact of adoption of ASC Topic 606		(53,605	)		—			(53,605	)
Amounts recognized as accounts receivable		—			11,349			11,349
Cash received from customers in advance		—			53,398			53,398
Common units received from NCM (see Note 7)		5,012			—			5,012
Revenue recognized during period		(7,849	)		(64,996	)		(72,845	)
Foreign currency translation adjustments		—			(1,689	)		(1,689	)
Balance at June 30, 2018	$	295,264		$	84,560		$	379,824

(1)

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 condensed consolidated balance sheet.

The table below summarizes the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of June 30, 2018 and when the Company expects to recognize this revenue.

	Twelve Months Ended June 30,
Remaining Performance Obligations	2019		2020		2021		2022		2023		Thereafter		Total
Deferred revenue - NCM	$	15,831	$	15,831	$	15,831	$	15,831	$	15,831	$	216,109	$	295,264
Deferred revenue - other		72,053		12,039		282		186		—		—		84,560
Total	$	87,884	$	27,870	$	16,113	$	16,017	$	15,831	$	216,109	$	379,824

Accounts receivable as of June 30, 2018 included approximately $48,631 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 six months ended June 30, 2018.

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 2037. 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.

As a result of the significant financing component on deferred revenue - NCM, the Company recognized incremental screen advertising revenue and an offsetting interest expense of $4,913 and $9,892 during the three and six months ended June 30, 2018, respectively. 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 5.5% to 8.0%.