Leases

9 Months Ended

Sep. 28, 2019

The Company determines whether an arrangement is a lease at inception. The Company has operating leases for real estate (primarily retail stores and operating facilities) and certain equipment. The Company’s finance leases are not material. Leases with a term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these

leases on a straight-line basis over the lease term. For lease agreements entered into after adoption of Topic 842, the Company combines lease and nonlease components as a single component for all asset classes.

The Company’s leases have remaining lease terms of one to 38 years, some of which include options to extend the leases for up to 15 years, and some of which include options to terminate the leases within one year. The exercise of lease renewal options is at the Company’s sole discretion. In general, for leased retail real estate, the Company will not include renewal options in the underlying lease term. However, if a situation arises where the lessor has control over the option periods, then the Company will include these periods within the lease term. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

Certain of the Company’s lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Total operating lease costs, which includes short-term leases and variable cost, were $53,023 and $168,784 for the quarter and nine months ended September 28, 2019, respectively. For the quarter and nine months ended September 28, 2019, variable costs of $20,001 and $49,303 were included in total operating lease costs, respectively. Short-term lease costs were immaterial for the quarter and nine months ended September 28, 2019.

The following table presents supplemental cash flow and non-cash information related to leases:



	Nine Months Ended
	September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows from leases	$	114,805
Right-of-use assets obtained in exchange for lease obligations - non-cash activity	$	54,524

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. For operating leases that commenced prior to December 30, 2018, the Company used the incremental borrowing rate on December 27, 2018.

The following table presents supplemental information related to leases at September 28, 2019:



Weighted average remaining lease term	5.4 years
Weighted average discount rate	5.00	%

The following table presents future minimum rental commitments under noncancelable operating leases as of December 29, 2018:



2019	$	148,218
2020	129,660
2021	110,185
2022	91,411
2023	66,753
Thereafter	115,941
	$	662,168

The following table presents maturities of operating lease liabilities as of September 28, 2019:



2019	$	36,069
2020	155,343
2021	115,620
2022	83,524
2023	67,292
Thereafter	124,689
Total lease payments	582,537
Less interest	73,399
	$	509,138

As of September 28, 2019, the Company’s additional operating lease contracts that have not yet commenced are immaterial.