LEASES

Adoption of Topic 842

On September 28, 2019, the Company adopted ASU 2016-02 and all subsequent ASUs that modified accounting standards Topic 842 using a modified retrospective adoption method, in which right-of-use ("ROU") assets and lease liabilities are recognized in the condensed consolidated balance sheets. Under the effective date transition method, financial results reported in periods prior to fiscal year 2020 are unchanged. The Company also elected the package of practical expedients permitted under the standard, which does not require reassessment of prior conclusions related to contracts containing a lease, lease classification and initial direct lease costs. As an ongoing accounting policy election, the Company will exclude short-term leases (terms of 12 months or less) from the balance sheet presentation and will account for non-lease and lease components in a contract as a single lease component for most asset classes. All leases in which the Company is the lessee are classified as operating leases, and the Company does not have any finance leases or sublease agreements. Additionally, the Company does not have any leases in which it is the lessor.

The adoption of the new standard had a significant impact on the Company's condensed consolidated balance sheet due to the recognition of approximately $41 million of lease liabilities with corresponding ROU assets for operating leases. The new standard did not have a significant impact on the condensed consolidated statements of operations or cash flows, and did not impact our debt covenant compliance under our current credit agreements.

The Company determines if an arrangement is a lease at inception. The Company leases certain facilities and machinery and equipment under long-term, non-cancelable operating leases. As of December 27, 2019, the Company had approximately 200 leases, with remaining terms ranging from less than one year to 15 years. Some of the leases contain variable payment terms, such as payments based on fluctuations in the Consumer Price Index (CPI). Some leases also contain options to extend or terminate the lease. To the extent the Company is reasonably certain to exercise these options, they have been considered in the calculation of the ROU assets and lease liabilities. Under current lease agreements, there are no residual value guarantees or restrictive lease covenants. In calculating the ROU assets and lease liabilities, several assumptions and judgments are made, including whether a contract is or contains a lease under the new definition, and the determination of the discount rate, which is assumed to be the incremental borrowing rate. The incremental borrowing rate is derived from information available at the lease commencement date based on lease length and location.

As of December 27, 2019, the components of lease expense recognized in the condensed consolidated statements of operations were as follows:



	Three months ended
	December 27, 2019
Lease Cost
Operating lease costs	$	1,776
Short-term lease costs	483
Variable leases costs	43
Total lease cost	$	2,302

Included in the amounts in the table above, was rent expense to related parties of $246 for the quarter ended December 27, 2019.

As of December 27, 2019, the Company did not have any finance leases. There were no significant new leases entered into during the quarter ended December 27, 2019. Supplemental balance sheet, cash flow, and other information related to operating leases was as follows:



	Three months ended
	December 27, 2019
Operating leases:

Operating lease ROU assets	$	40,302

Current operating leases liabilities	5,835
Non-current operating lease liabilities	35,133
Total operating lease liabilities	$	40,968

Weighted average remaining lease term (in years)	10.67

Weighted average discount rate	2.83		%

Cash paid for amounts included in the measurement of lease liabilities	$	1,571

Future minimum rental commitments under non-cancelable operating leases with an initial lease term in excess of one year at December 27, 2019 were as follows:



Year	Related parties included in total			Total
Remainder of 2020	$	781		$	6,286
2021	1,067			6,184
2022	179			3,895
2023	—			3,362
2024	—			3,362
Thereafter	—			23,322
Total undiscounted lease payments	2,027			46,411
Less: Imputed interest	(38		)	(5,443		)
Total net lease liability	$	1,989		$	40,968

As of December 27, 2019, the Company did not have any additional significant operating leases commitments that have not yet commenced.

Disclosures related to periods prior to adoption of Topic 842

Rental expense under all leases was $2,274 for the three months ended December 28, 2018. Rent expense to related parties was $249 for the three months ended December 28, 2018.

Future minimum rent commitments under non-cancelable operating leases with an initial lease term in excess of one year at December 28, 2018 were as follows:



Year	Related parties included in total		Total
2019	$	755	$	5,792
2020	1,036		7,187
2021	1,067		5,835
2022	179		3,719
2023	—		2,517
Thereafter	—		24,832
Total	3,037		49,882