8. Leases

The Company determines if an arrangement is a lease at inception. The Company evaluates each lease for classification as either a finance lease or an operating lease according to accounting guidance ASU No. 2016-02, Leases (Topic 842). The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. The Company leases real estate and equipment with lease terms of one year to 45 years, some of which include options to extend and/or terminate the lease. The exercise of lease renewal options is done at the Company’s sole discretion. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term and related right-of-use asset and lease liability. The depreciable life of the asset is limited to the expected term. The Company’s lease agreements do not contain any residual value guarantees or any restrictions or covenants.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and labilities are recognized at commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the implicit rate in the lease in determining the present value of lease payments. When the lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date, including the fixed rate the Company could borrow for a similar amount, over a similar lease term with similar collateral. The Company recognizes right-of-use assets for all assets subject to operating leases in an amount equal to the operating lease liabilities, adjusted for the balances of long-term prepaid rent, favorable lease intangible assets, deferred lease expense, unfavorable lease liabilities and deferred lease incentive liabilities. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

The majority of the Company’s lease agreements include fixed rental payments. Variable lease payments that do not depend on an index or rate, including those that depend on the Company’s performance or use of the underlying asset, are expensed as incurred.

The Company adopted ASC 842 on the first day of fiscal 2019 using the modified retrospective approach. Under this method, the Company was allowed to initially apply the new lease standard at the adoption date and recognize the assets and liabilities in the period of adoption. As such, upon adoption, no adjustments were made to prior period financial information or disclosures and the new lease standard did not result in a cumulative effect adjustment to retained earnings. Finance lease accounting remained substantially unchanged. The adoption of ASC 842 had the following effect on the Company’s financial statements (all relating to operating lease right-of-use assets and obligations):


	Balance at				Balance at
	December 27,		ASC 842		December 28,
	2018		Adjustments		2018
	(in thousands)
Assets
Other current assets	$	15,355	$	(690)	$	14,665
Operating lease right-of-use assets		—		76,178		76,178
Other assets (long term)		33,100		(8,868)		24,232

Liabilities
Other accrued liabilities		59,645		(4,396)		55,249
Current portion of operating lease obligations		—		5,909		5,909
Operating lease obligations		—		75,608		75,608
Deferred compensation and other		56,908		(10,501)		46,407

As part of the Company’s adoption of ASC 842, the Company elected the following practical expedients: i) to forego reassessment of its prior conclusion related to lease identification, lease classification and initial direct costs, ii) to not separate lease and non-lease components for all its leases, and iii) to make a policy election not to apply the lease recognition requirements for short-term leases. As a result, the Company does not recognize right-of use assets or lease liabilities for short-term leases that qualify for the policy election (those with an initial term of 12 months or less which do not include a purchase or renewal option which is reasonably certain to be exercised), but will recognize these lease payments as lease costs on a straight-line basis over the lease term.

Total lease cost consists of the following:


Lease Cost	Classification	Fiscal 2019
		(in thousands)
Finance lease costs:
Amortization of finance lease assets	Depreciation and amortization	$	3,507
Interest on lease liabilities	Interest expense		1,247
		$	4,754

Operating lease costs:
Operating lease costs	Rent expense	$	24,302
Variable lease cost	Rent expense		1,560
Short-term lease cost	Rent expense		237
		$	26,099

Additional information related to leases is as follows:


Other Information	Fiscal 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases	$	2,544
Operating cash flows from finance leases		1,247
Operating cash flows from operating leases		25,226
Right of use assets obtained in exchange for new lease obligations:
Finance lease liabilities		1,726
Operating lease liabilities, including from acquisitions		180,103


	December 26, 2019
Finance leases:	(in thousands)
Property and equipment – gross	$	74,357
Accumulated depreciation and amortization		(52,869)
Property and equipment - net	$	21,488

In fiscal 2017, the Company had the following non-cash transactions related to leases: 1) obtained $6,173,000 of new capital leases, and 2) exercised $3,675,000 in capital lease extensions.

Remaining lease terms and discount rates are as follows:


Lease Term and Discount Rate	December 26, 2019
Weighted-average remaining lease terms:
Finance leases	10	years
Operating leases	15	years

Weighted-average discount rates:
Finance leases	4.67	%
Operating leases	4.56	%

Maturities of lease liabilities as of December 26, 2019 are as follows (in thousands):


Fiscal Year	Operating Leases			Finance Leases
2020	$	24,369	$	3,606
2021		25,730		2,997
2022		26,313		2,950
2023		24,808		2,840
2024		24,534		2,859
Thereafter		214,060		14,093
Total lease payments		339,814		29,345
Less: amount representing interest		(94,368)		(5,972)
Total lease liabilities	$	245,446	$	23,373

Aggregate minimum lease commitments as of December 27, 2018 under Accounting Standard Codification Topic 840 are as follows (in thousands):


Fiscal Year	Operating Leases		Capital Leases
2019	$	11,317	$	3,073
2020		10,169		2,978
2021		9,670		2,679
2022		9,910		2,718
2023		9,038		2,718
2024 and thereafter		80,523		16,940
Total minimum lease payments	$	130,627		31,106
Less: amount representing interest				(6,978)
Total present value of minimum capital lease payments			$	24,128

As of December 26, 2019, the Company had a build-to-suit lease arrangement in which the Company is responsible for the construction of a new leased theatre and for paying construction costs during development. Construction costs will be reimbursed by the landlord up to an agreed upon amount. During construction, the Company is deemed to not have control of the assets or the leased premises and will record the development expenditures in other assets on the consolidated balance sheet. The lease commences when the Company has access to the right-of-use asset, which is expected to be upon project completion during fiscal 2020.