The company’s leases consist of the following types of assets: two bakeries, corporate office space, warehouses, bakery equipment, transportation and IT equipment (Debt is discussed separately in Note 13, Debt and Other Obligations).

Real estate and equipment contracts normally do not provide for substitution of assets. These contracts occasionally contain multiple lease and non-lease components. Generally, non-lease components represent maintenance and utility related charges, and are primarily minor to the overall value of applicable contracts. These contracts also contain fixed payments with stated rent escalation clauses or fixed payments based on an index such as CPI. Additionally, some contracts contain tenant improvement allowances, rent holidays, lease premiums, and contingent rent provisions (which are treated as variable lease payments). Building and/or office space leases generally require the company to pay for common area maintenance (CAM), insurance, and taxes that are not included in the base rental payments, with the majority of these leases treated as net leases, and the remainder treated as gross or modified gross leases.

The lease term for real estate leases primarily ranges from one to 27 years, with a few leases that are month to month, and accounted for as short-term leases. See discussion on short-term leases below. The term of bakery equipment leases primarily ranges from less than a year up to eight years. Transportation equipment generally has terms of less than one year up to seven years. IT equipment is typically leased from less than a year up to five years. Certain equipment (i.e., equipment subject to management contracts) and IT equipment leases have terms shorter than a year, and are accounted for as short-term leases. See discussion on short-term leases below.

These contracts may contain renewal options for periods of one month up to 10 years at fixed percentages of market pricing, with some that are reasonably certain of exercise. For those contracts that contain leases, the company recognizes renewal options as part of right-of-use assets and lease liabilities. All other renewal and termination options are not reasonably certain of exercise or occurrence as of July 13, 2019.

These contracts may also contain right of first offer purchase options, along with expansion options that are not reasonably certain of exercise. Additionally, these contracts do not contain residual value guarantees, and there are no other restrictions or covenants in the contracts.

For these real estate contracts, the company’s exclusive use of specified real estate for a specific term and for consideration resulted in the company treating these contracts as leases under the new standard.

For those contracts that contain leases of buildings and land, the company has elected to not separate land components from leases of specified property, plant, and equipment, as it was determined to have no effect on lease classification for any lease component, and the amounts recognized for the land lease components would have been immaterial.

These contracts may also contain end term purchase options, whereby, the company may purchase the assets for stated pricing at the lesser of fair market value or a percentage of original asset cost. Yet, these purchase options were determined to not be reasonably certain of exercise or occurrence as of July 13, 2019. Additionally, these contracts do not contain residual value guarantees, and there are no other restrictions or covenants in the contracts.

The company’s ability to make those decisions that most effect the economic benefits derived from the use of the equipment, accompanied by receiving substantially all outputs and utility from the use of the equipment resulted in the company accounting for these contracts as leases.

These leases are classified as operating leases under the new standard because real estate leases do not transfer ownership at the end of the lease term, assets are not of such a specialized nature that real estate would not have alternative uses to lessors at the end of the lease term, lease terms do not represent a major part of the total useful life of real estate, and the present value of lease payments do not represent substantially all the fair value of leased assets at commencement.

The company has also entered into short-term leases of certain real estate assets, along with IT equipment, and various equipment used for short-term bakery needs through equipment placement or service contracts that require purchase of consumables. These leases extend for periods of 1-12 months. Lease term and amounts of payments are generally fixed. There are no purchase options present, however, there generally are renewals that could extend lease terms for additional periods. Generally, renewal options, as they cannot be unilaterally exercised, are not reasonably certain of exercise, do not contain residual value guarantees, and there are no other restrictions or covenants in the leases.

Therefore, the company recognizes lease payments from these short-term leases and variable payments on the Condensed Consolidated Statements of Income in the period in which obligation for those payments have been incurred.

During the twenty-eight weeks ended July 13, 2019, the company elected certain renewal options that were not previously certain of exercise. Election of these renewal options resulted in reassessment of lease terms for the applicable leases.

The company included the renewal periods in measurement of lease terms in fiscal 2019 for the applicable leases. Given that rental payments in the renewal periods were fixed, the company also remeasured the lease payments, and reallocated remaining contract consideration to the lease components within the applicable real estate leases. Although the triggering events did not result in changes to lease classification (i.e., all remained operating leases), they did affect the measurement of lease liabilities, ROU assets, and amounts recognized as lease expense for the applicable real estate leases.

The reassessments and modifications as of, and for, the twenty-eight weeks ended July 13, 2019 resulted in a net increase in lease assets and liabilities of $4.9 million.

There were no other circumstances and/or triggering events that required reassessment as of July 13, 2019.

During the twenty-eight weeks ended July 13, 2019, for all classes of assets, the company primarily used our incremental borrowing rates (“IBR”) to perform lease classification tests and measure lease liabilities because discount rates implicit in the company’s leases were not readily determinable.

See Note 2, Recent Pronouncements, of Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further details around adoption of the new lease standard, information around transition and effective date, along with the company’s significant accounting policies around the new standard.

The company maintains a transportation agreement with an entity that transports a portion of the company’s fresh bakery products from the company’s production facilities to outlying distribution centers. The company has concluded that this agreement contains embedded leases for the trucks and trailers used to satisfy the service provider’s obligations to the company. As of July 13, 2019, there were $16.7 million of financing right-of-use lease assets and $20.7 million of financing right-of-use lease liabilities for these trucks and trailers. As of December 29, 2018, there was $21.9 million, respectively, in net property, plant and equipment and capital lease obligations associated with these trucks and trailers.

Lease costs incurred by lease type, and/or type of payment for the twelve and twenty-eight weeks ended July 13, 2019 were as follows (in thousands):

	For the Twelve Weeks Ended		For the Twenty-Eight Weeks Ended
	July 13, 2019		July 13, 2019
Lease cost:
Amortization of right-of-use assets	$	1,541	$	3,599
Interest on lease liabilities		219		532
Operating lease cost		16,316		37,680
Short-term lease cost		548		1,362
Variable lease cost		6,086		13,991
Total lease cost	$	24,710	$	57,164

Other supplemental quantitative disclosures as of, and for, the twelve and twenty-eight weeks ended July 13, 2019 were as follows (in thousands):

	For the Twelve Weeks Ended		For the Twenty-Eight Weeks Ended
	July 13, 2019		July 13, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from financing leases	$	219	$	532
Operating cash flows from operating leases	$	16,734	$	38,971
Financing cash flows from financing leases	$	1,431	$	3,303
Right-of-use assets obtained in exchange for new financing lease liabilities	$	36	$	7,177
Right-of-use assets obtained in exchange for new operating lease liabilities	$	9,967	$	16,633

Weighted-average remaining lease term (years):
Financing leases			4.0
Operating leases			10.2
Weighted-average IBR (percentage):
Financing leases			3.5
Operating leases			4.1

Estimated undiscounted future lease payments under non-cancelable operating leases and financing leases, along with a reconciliation of the undiscounted cash flows to operating and financing lease liabilities, respectively, as of July 13, 2019 (in thousands) were as follows:

	Operating lease liabilities		Financing lease liabilities
Remainder of 2019	$	28,556	$	2,786
2020		68,613		8,161
2021		54,604		5,883
2022		44,589		4,653
2023		39,471		6,232
2024 and thereafter		233,503		2,094
Total minimum lease payments		469,336		29,809
Less: amount of lease payments representing interest		91,418		2,317
Present value of future minimum lease payments		377,918		27,492
Less: current obligations under leases		51,625		5,782
Long-term lease obligations	$	326,293	$	21,710

The company leases certain property and equipment under various operating and capital lease arrangements that expire over the next 18 years. The property leases include distribution facilities, thrift store locations, and two manufacturing facilities. The equipment leases include production, sales, distribution, transportation, and office equipment. Initial lease terms range from two to 26 years. Many of the operating leases provide the company with the option, after the initial lease term, either to purchase the property at the then fair value or renew its lease at fair value rents for periods from one month to 10 years. Rent escalations vary in these leases, from no escalation over the initial lease term, to escalations linked to changes in economic variables such as the consumer price index. Rental expense is recognized on a straight-line basis over the terms of the leases. The capital leases are primarily used for distribution vehicle financing and are discussed in Note 14, Variable Interest Entities, of Notes to Condensed Consolidated Financial Statements of this Form 10-Q. Future minimum lease payments under scheduled capital leases that have initial or remaining non-cancelable terms more than one year are as follows (amounts in thousands):

	Capital Leases
2019	$	6,392
2020		3,511
2021		4,191
2022		2,620
2023		2,263
Thereafter		4,631
Total minimum payments		23,608
Amount representing interest		1,666
Obligations under capital leases		21,942
Obligations due within one year		5,896
Long-term obligations under capital leases	$	16,046

The table below presents the total future minimum lease payments under scheduled operating leases that have initial or remaining non-cancelable terms more than one year as of December 29, 2018 (amounts in thousands):

	Operating Leases
2019	$	65,071
2020		60,378
2021		50,744
2022		44,798
2023		36,308
Thereafter		232,423
Total minimum payments	$	489,722