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Note 6 - Leases

9 Months Ended

Jun. 28, 2020

6	LEASES

In connection with the Transactions, the Company entered into a lease agreement between BH Media, as Landlord, and the Company, as Tenant, providing for the leasing of 68 properties and related fixtures (including production equipment) used in the BH Media Newspaper Business (the “BH Lease”). The Lease was signed and commenced on March 16, 2020. The BH Media Lease requires the Company to pay annual rent of $8,000,000, payable in equal monthly payments, as well as all operating costs relating to the properties (including maintenance, repairs, property taxes and insurance). Rent payments will be subject to a Rent Credit (as defined in the Lease) equal to 8.00% of the net consideration for any leased real estate sold by BH Media during the term of the Lease. In connection with the BH Lease, the Company recognized $56,226,000 and $56,226,000 in ROU assets and lease liabilities, respectively, as of March 16, 2020.

Total lease expense consists of the following:

	13 Weeks Ended		39 Weeks Ended
(Thousands of Dollars)	June 28, 2020		June 28, 2020
Operating lease costs		4,443		7,154
Variable lease costs		539		1,114
Short-term lease costs		146		465
Total Operating Lease Expense		5,128		8,733

Supplemental cash flow information related to our operating leases was as follows:

	13 Weeks Ended		39 Weeks Ended
(Thousands of Dollars)	June 28, 2020		June 28, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases		4,498		7,764

As of June 28, 2020, maturities of lease liabilities were as follows:



(Thousands of Dollars)	June 28, 2020
2020 (three months remaining)	3,872
2021	13,850
2022	11,623
2023	10,853
2024	10,319
Thereafter	50,718
Total lease payments	101,235
Less: interest	(29,764	)
Present value of lease liabilities	71,471

As of the year ended September 29, 2019, minimum lease payments during the five years ending September 2024 and thereafter were $3,403,000, $2,290,000, $2,238,000, $1,637,000, $1,367,000 and $4,991,000, respectively.

Our lease contracts are discounted using the incremental borrowing rate for the Company. We determined the incremental borrowing rate based on a senior secured collateral adjusted yield curve for the Company. This yield curve reflects the estimated rate that would have been paid by the Company to borrow on a collateralized basis over a similar term in a similar economic environment. This rate was reassessed as part of the Transactions and was utilized to re-measure the assumed lease liabilities as well as the BH Lease as of March 16, 2020. We will assess this rate annually to determine whether it needs to be updated. The weighted average revolving lease terms and discount rates for all of our operating leases were as follows.


	June 28, 2020
Weighted average remaining lease term (years)		8.88
Weighted Average discount rate		8.26	%