NOTE 2—LEASES The Company leases theatres and equipment under operating and finance leases. The Company typically does not believe that exercise of the renewal options is reasonably assured at the inception of the lease agreements and, therefore, considers the initial base term as the lease term. Lease terms vary but generally the leases provide for fixed and escalating rentals, contingent escalating rentals based on the Consumer Price Index and other indexes not to exceed certain specified amounts and variable rentals based on a percentage of revenues. The Company often receives contributions from landlords for renovations at existing locations. The Company records the amounts received from landlords as an adjustment to the right-of-use asset and amortizes the balance as a reduction to rent expense over the base term of the lease agreement. Equipment leases primarily consist of digital projectors and food and beverage equipment. The following table reflects the lease costs for the three months ended March 31, 2020 and March 31, 2019: | | | | | | | | | | | | | Three Months Ended | (In millions) | | Consolidated Statement of Operations | | March 31, 2020 | | March 31, 2019 | Operating lease cost | | | | | | | | Theatre properties | | Rent | | $ | 216.9 | | $ | 218.9 | Theatre properties | | Operating expense | | | 2.2 | | | 1.7 | Equipment | | Operating expense | | | 3.9 | | | 3.5 | Office and other | | General and administrative: other | | | 1.3 | | | 1.3 | Finance lease cost | | | | | | | | | Amortization of finance lease assets | | Depreciation and amortization | | | 1.9 | | | 2.7 | Interest expense on lease liabilities | | Finance lease obligations | | | 1.6 | | | 2.1 | Variable lease cost | | | | | | | | | Theatre properties | | Rent | | | 20.9 | | | 23.0 | Equipment | | Operating expense | | | 7.0 | | | 10.7 | Total lease cost | | | | $ | 255.7 | | $ | 263.9 |
Cash flow and supplemental information is presented below: | | | | | | | | | Three Months Ended | (In millions) | | March 31, 2020 | | March 31, 2019 | Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | Operating cash flows used in finance leases | | $ | (1.6) | | $ | (2.1) | Operating cash flows used in operating leases (1) | | | (240.3) | | | (236.0) | Financing cash flows used in finance leases | | | (2.3) | | | (3.8) | | | | | | | | Landlord contributions: | | | | | | | Operating cashflows provided by operating leases | | | 16.1 | | | 35.2 | Supplemental disclosure of noncash leasing activities: | | | | | | | Right-of-use assets obtained in exchange for new operating lease liabilities (2) | | | 69.7 | | | 21.0 |
| (1) | Reflects contractual amounts due to be paid in cash. For the three months ended March 31, 2020, the Company deferred cash payments of $17.5 million of these amounts, which are included in the condensed consolidated statements of cash flows as part of the change in accounts payable. |
| (2) | Includes lease extensions and option exercises. |
The following table represents the weighted-average remaining lease term and discount rate as of March 31, 2020: | | | | | | | | | As of March 31, 2020 | | | Weighted Average | | Weighted Average | | | Remaining | | Discount | Lease Term and Discount Rate | | Lease Term (years) | | Rate | Operating leases | | | 10.0 | | | 7.2% | Finance leases | | | 12.7 | | | 6.5% |
As of March 31, 2020, the Company had signed additional operating lease agreements for 9 theatres that have not yet commenced of approximately $194.9 million, which are expected to commence between 2020 and 2023, and carry lease terms of approximately 5 to 25 years. The timing of lease commencement is dependent on the landlord providing the Company with control and access to the related facility.
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