Note 5 Lease Commitments

The adoption of ASU 2016-02 Leases (Topic 842) had a significant impact on the Company’s Consolidated Balance Sheets, resulting in operating lease right-to-use assets of $202 million and lease liabilities of $211 million. The difference between the operating lease right-to-use assets and lease liabilities represents prepaid and accrued rents, unfavorable lease obligations, favorable lease assets and deferred tenant allowances associated with operating leases as of December 30, 2018 and reclassified against the operating lease right-to-use asset upon adoption.

As of December 28, 2019, the Company leased approximately 52% of its open store facilities under operating leases that expire at various dates through 2035, with the remaining store facilities being owned. These leases generally provide for fixed annual rentals; however, several provide for minimum annual rentals plus variable lease costs related to real estate taxes and insurance as well as contingent rentals based on a percentage of annual sales or increases periodically based on inflation. These variable lease costs are not included in the measurement of the operating lease right-to-use assets or lease liabilities and are charged to the related expense category included in “Operating, general and administrative expenses.” Most of the leases contain multiple renewal options, under which the Company may extend the lease terms from 5 to 20 years. Additionally, the Company has operating leases for certain transportation and other equipment.

The Company leases or subleases space to tenants in owned, vacated and open store facilities. Rental income is recorded when earned as a component of “Operating, general and administrative expenses.”

The following is a schedule of the lease costs included in “Operating, general and administrative expenses” for the fiscal year ended December 28, 2019.


(dollars in thousands)	2019
Operating lease cost	$	46,063
Variable lease cost		10,998
Lease or sublease income		(7,749)
Net lease cost	$	49,312

The following is a schedule by years of the future minimum rental payments required under operating leases and total minimum sublease and lease rental income to be received as of December 28, 2019.


(dollars in thousands)		Leases	Subleases
2020	$	47,184	(4,044)
2021		42,607	(3,480)
2022		35,845	(2,901)
2023		31,063	(2,308)
2024		26,256	(1,663)
Thereafter		75,622	(6,336)
Total Lease Payments	$	258,577	(20,732)
Less: Interest		39,809	-
Present value of lease liabilities		218,768	(20,732)

The following is a schedule of weighted-average remaining lease terms and weighted-average discount rates as of December 28, 2019 and December 30, 2018.


Lease Term and Discount Rate	December 28, 2019	December 30, 2018
Weighted-average remaining lease term	4.44	4.69
Weighted-average discount rate	3.47%	3.84%

Prior to the adoption of the ASU, leases generally provide for fixed annual rentals, minimum annual rentals, contingent rentals and sublease income.

Rent expense and income on all leases for the fiscal years ended December 29, 2018 and December 30, 2017 consisted of:


(dollars in thousands)	2018		2017
Minimum annual rentals	$	47,253	$	46,804
Contingent rentals		419		432
Lease or sublease income		(7,757)		(7,612)
	$	39,915	$	39,624