Leases

9 Months Ended

Sep. 30, 2021

Leases

Leases

5. 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		13 Weeks		39 Weeks		39 Weeks
		Ended		Ended		Ended		Ended
Lease Cost	Classification	September 30, 2021		September 24, 2020		September 30, 2021		September 24, 2020
		(in thousands)
Finance lease costs:
Amortization of finance lease assets	Depreciation and amortization	$	677	$	707	$	2,057	$	2,137
Interest on lease liabilities	Interest expense		234		263		724		794
		$	911	$	970	$	2,781	$	2,931
Operating lease costs:
Operating lease costs	Rent expense	$	6,365	$	6,357	$	19,151	$	19,236
Variable lease cost	Rent expense		144		124		(29)		371
Short-term lease cost	Rent expense		35		113		107		269
		$	6,544	$	6,594	$	19,229	$	19,876

Additional information related to leases is as follows:

	13 Weeks		13 Weeks		39 Weeks		39 Weeks
	Ended		Ended		Ended		Ended
Other Information	September 30, 2021		September 24, 2020		September 30, 2021		September 24, 2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases	$	736	$	584	$	2,065	$	1,389
Operating cash flows from finance leases		234		263		724		794
Operating cash flows from operating leases		8,253		4,963		23,545	$	11,376
Right of use assets obtained in exchange for new lease obligations:
Finance lease liabilities		—		1,200		—		1,364
Operating lease liabilities		287		14		1,862		9,644

	September 30, 2021		December 31, 2020
	(in thousands)
Finance leases:
Property and equipment – gross	$	75,318	$	75,322
Accumulated depreciation and amortization		(57,684)		(55,547)
Property and equipment - net	$	17,634	$	19,775

Remaining lease terms and discount rates are as follows:

Lease Term and Discount Rate	September 30, 2021	December 31, 2020
Weighted-average remaining lease terms:
Finance leases	8 years	9 years
Operating leases	14 years	15 years
Weighted-average discount rates:
Finance leases	4.58%	4.62%
Operating leases	4.52%	4.53%

Due to the COVID-19 pandemic, the Company temporarily closed all of its theatres on March 17, 2020 and had temporarily closed all of its company-owned hotels by April 8, 2020. At that time, the Company began actively working with landlords to discuss changes to the timing of lease payments and contract terms of leases due to the pandemic. The lease terms were negotiated on a lease-by-lease basis with individual landlords. In conjunction with these lease discussions, the Company obtained lease concessions for the majority of its leases. Substantially all of the lease concessions were for the deferral of lease payments into future periods. This resulted in the total payments required by the modified contract being substantially the same as or less than the total payments required by the original contract. The Company has made the policy election to account for these lease concessions as if they were made under the enforceable rights included in the original agreement and are thus outside of the modification framework. The Company has elected to account for these concessions as if no changes to the lease contract were made and has continued to recognize rent expense during the deferral period. Deferred rent payments of approximately $3,649,000 for the Company’s operating leases have been included in the total operating lease obligations as of September 30, 2021, of which approximately $1,039,000 is included in long-term operating lease obligations.