Landstar’s

noncancelable leases are primarily comprised of finance leases for the acquisition of new trailing equipment. Each finance lease for the acquisition of trailing equipment is a five year lease with a $1 purchase option for the applicable equipment at lease expiration. Substantially all of Landstar’s operating lease

right-of-use

assets and operating lease liabilities represent leases for facilities maintained in support of the Company’s network of BCO Independent Contractors and office space used to conduct Landstar’s business. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives or other

build-out

clauses. Further, the leases do not contain contingent rent provisions. Landstar also rents certain trailing equipment to supplement the Company-owned trailer fleet under

“month-to-month”

lease terms, which are not required to be recorded on the balance sheet due to the less than twelve month lease term exemption. Sublease income is primarily comprised of weekly trailing equipment rentals to BCO Independent Contractors.

Most of Landstar’s operating leases include one or more options to renew. The exercise of lease renewal options is typically at Landstar’s sole discretion, and, as such, the majority of renewals to extend the lease terms are not included in the

right-of-use

assets and lease liabilities as they are not reasonably certain of exercise. Landstar regularly evaluates the renewal options, and when they are reasonably certain of exercise, Landstar includes the renewal period in the lease term.

As most of Landstar’s operating leases do not provide an implicit rate, Landstar utilized its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. Landstar has a centrally managed treasury function; therefore, based on the applicable lease terms and the current economic environment, the Company applies a portfolio approach for determining the incremental borrowing rate.

The components

of lease cost for finance leases and operating leases for the thirteen weeks ended March 26, 2022 were (in thousands):


Finance leases:
Amortization of right-of-use assets	$	5,327
Interest on lease liability		700

Total finance lease cost		6,027

Operating leases:
Lease cost		926
Variable lease cost		—
Sublease income		(1,213	)

Total net operating lease income		(287	)

Total net lease cost	$	5,740

A summary of the lease classification on our consolidated balance sheet as of March 26, 2022 is as follows (in thousands):

Assets:



Operating lease right-of-use assets	Other assets	$	1,916
Finance lease assets	Operating property, less accumulated depreciation and amortization		137,818

Total lease assets		$	139,734

Liabilities:

The following table reconciles the undiscounted cash flows for the finance and operating leases to the finance and operating lease liabilities recorded on the balance sheet at March 26, 2022 (in thousands):


	Finance Leases		Operating Leases
2022 Remainder	$	28,777	$	583
2023		31,916		638
2024		22,045		534
2025		15,820		282
2026		7,668		—
Thereafter		—		—

Total future minimum lease payments		106,226		2,037
Less amount representing interest (1.6% to 4.4%)		3,954		121

Present value of minimum lease payments	$	102,272	$	1,916


Current maturities of long-term debt		34,983
Long-term debt, excluding current maturities		67,289
Other current liabilities				744
Deferred income taxes and other noncurrent liabilities				1,172

The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of March 26, 2022 were:


	Finance Leases			Operating Leases
Weighted average remaining lease term (years)		3.4			3.4
Weighted average discount rate		2.5	%		4.0	%