Leases

3 Months Ended

Mar. 26, 2020

Leases

Leases

6. 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 majority of the Company’s lease agreements include fixed rental payments. For those leases with variable payments based on increases in an index subsequent to lease commencement, such payments are recognized as variable lease expense as they occur. 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 also expensed as incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

Total lease cost consists of the following:

		13 Weeks
		Ended
Lease Cost	Classification	March 26, 2020
		(in thousands)
Finance lease costs:
Amortization of finance lease assets	Depreciation and amortization	$	711
Interest on lease liabilities	Interest expense		269
		$	980
Operating lease costs:
Operating lease costs	Rent expense	$	6,667
Variable lease cost	Rent expense		227
Short-term lease cost	Rent expense		60
		$	6,954

Additional Information related to leases is as follows:

	13 Weeks
	Ended
Other Information	March 26, 2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases	$	635
Operating cash flows from finance leases		269
Operating cash flows from operating leases		4,644
Right of use assets obtained in exchange for new lease obligations:
Finance lease liabilities		25
Operating lease liabilities		9,630

	March 26, 2020
	(in thousands)
Finance leases:
Property and equipment – gross	$	74,382
Accumulated depreciation and amortization		(53,631)
Property and equipment - net	$	20,751

Remaining lease terms and discount rates are as follows:

Lease Term and Discount Rate	March 26, 2020
Weighted-average remaining lease terms:
Finance leases	10	years
Operating leases	15	years
Weighted-average discount rates:
Finance leases	4.67	%
Operating leases	4.54	%

As of March 26, 2020, 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 has recorded the development expenditures in other assets on the consolidated balance sheet. The project is currently on hold due to the COVID-19 pandemic, so a completion date is not known at this time.

Subsequent to March 26, 2020, the Company began actively working with landlords to discuss changes to the timing of lease payments and contract terms of leases due to the COVID-19 pandemic. The lease terms are being negotiated on a lease by lease basis with individual landlords. In conjunction with these lease discussions, the Company anticipates electing the policy election to account for lease concessions as if they were made under the enforceable rights included in the original agreement and are thus outside of the modification framework. Therefore, in making this election, the Company will not need to perform a lease-by-lease analysis to evaluate the enforceable rights and will instead simply treat the change as if the enforceable rights were included or excluded in the original agreement.