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LEASES
 6 Months Ended
Jun. 27, 2020
Leases [Abstract]  
LEASES LEASES
We determine if an arrangement is or contains a lease at contract inception and determine its classification as an operating or finance lease at lease commencement. We lease certain retail locations, office space, distribution facilities, manufacturing space, and machinery and equipment. While the substantial majority of these leases are operating leases, certain machinery and equipment agreements are finance leases. As of June 27, 2020, the initial lease terms of the various leases range from one to 20 years. ROU lease assets and liabilities associated with leases with an initial term of twelve months or less are not recorded on the balance sheet.

Operating lease assets represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. We use our collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. Our operating leases also typically require payment of real estate taxes, common area maintenance and insurance. These components compromise the majority of our variable lease cost and are excluded from the present value of our lease obligations. In instances where they are fixed, they are included due to our election to combine lease and non-lease components, with the exception of our distribution facility asset class. Operating lease assets include prepaid lease payments and initial direct costs and are reduced by lease incentives. Our lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.

The following table presents the assets and liabilities related to operating and finance leases (in thousands):

Balance Sheet LocationJune 27, 2020
Assets:
Operating lease assetsOperating lease right-of-use assets$34,963  
Finance lease assetsProperty and equipment1,015  
Total lease assets$35,978  
Liabilities:
Current
Operating lease liabilitiesOperating lease liabilities$8,086  
Finance lease liabilitiesCurrent maturities of long-term debt191  
Non-current
Operating lease liabilitiesOperating lease liabilities, non-current38,589  
Finance lease liabilitiesLong-term debt, net of current portion853  
Total lease liabilities$47,719  

The following table presents the components of lease costs (in thousands):
Three Months EndedSix Months Ended
June 27, 2020June 27, 2020
Operating lease costs$2,314  $4,611  
Finance lease cost - amortization of right-of-use assets53  106  
Finance lease cost - interest on lease liabilities17  34  
Short-term lease cost49  104  
Variable lease cost816  1,654  
Sublease income(185) (371) 
Total lease cost$3,064  $6,138  
The following table presents lease terms and discount rates:

June 27, 2020
Weighted average remaining lease term:
Operating leases6.63 years
Finance leases4.18 years
Weighted average discount rate:
Operating leases6.61 %
Finance leases6.24 %

Minimum lease payments have not been reduced by minimum sublease rentals of $3.6 million due in the future under non-cancelable subleases. We received $0.2 million in sublease income for both the three months ended June 27, 2020 and June 29, 2019, and $0.4 million in sublease income for both the six months ended June 27, 2020 and June 29, 2019. The following table presents the minimum lease payment obligations of operating and finance lease liabilities (leases with terms in excess of one year) for the next five years and thereafter as of June 27, 2020 (in thousands):

Operating LeasesFinance LeasesTotal
2020$5,891  $125  $6,016  
20219,861  249  10,110  
20226,991  249  7,240  
20237,716  249  7,965  
20247,474  330  7,804  
Thereafter20,048  —  20,048  
Total lease payments57,981  1,202  59,183  
Less: Effect of discounting to net present value11,306  158  11,464  
Present value of lease liabilities$46,675  $1,044  $47,719  

The following table presents supplemental cash flow information related to our leases (in thousands):

Six Months Ended June 27, 2020
Cash paid for amounts included in measurement of liabilities:
Operating cash flows used in operating leases$5,100  
Operating cash flows used in finance leases34
Financing cash flows used in finance leases91
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases$231  
LEASES LEASES
We determine if an arrangement is or contains a lease at contract inception and determine its classification as an operating or finance lease at lease commencement. We lease certain retail locations, office space, distribution facilities, manufacturing space, and machinery and equipment. While the substantial majority of these leases are operating leases, certain machinery and equipment agreements are finance leases. As of June 27, 2020, the initial lease terms of the various leases range from one to 20 years. ROU lease assets and liabilities associated with leases with an initial term of twelve months or less are not recorded on the balance sheet.

Operating lease assets represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. We use our collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. Our operating leases also typically require payment of real estate taxes, common area maintenance and insurance. These components compromise the majority of our variable lease cost and are excluded from the present value of our lease obligations. In instances where they are fixed, they are included due to our election to combine lease and non-lease components, with the exception of our distribution facility asset class. Operating lease assets include prepaid lease payments and initial direct costs and are reduced by lease incentives. Our lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.

The following table presents the assets and liabilities related to operating and finance leases (in thousands):

Balance Sheet LocationJune 27, 2020
Assets:
Operating lease assetsOperating lease right-of-use assets$34,963  
Finance lease assetsProperty and equipment1,015  
Total lease assets$35,978  
Liabilities:
Current
Operating lease liabilitiesOperating lease liabilities$8,086  
Finance lease liabilitiesCurrent maturities of long-term debt191  
Non-current
Operating lease liabilitiesOperating lease liabilities, non-current38,589  
Finance lease liabilitiesLong-term debt, net of current portion853  
Total lease liabilities$47,719  

The following table presents the components of lease costs (in thousands):
Three Months EndedSix Months Ended
June 27, 2020June 27, 2020
Operating lease costs$2,314  $4,611  
Finance lease cost - amortization of right-of-use assets53  106  
Finance lease cost - interest on lease liabilities17  34  
Short-term lease cost49  104  
Variable lease cost816  1,654  
Sublease income(185) (371) 
Total lease cost$3,064  $6,138  
The following table presents lease terms and discount rates:

June 27, 2020
Weighted average remaining lease term:
Operating leases6.63 years
Finance leases4.18 years
Weighted average discount rate:
Operating leases6.61 %
Finance leases6.24 %

Minimum lease payments have not been reduced by minimum sublease rentals of $3.6 million due in the future under non-cancelable subleases. We received $0.2 million in sublease income for both the three months ended June 27, 2020 and June 29, 2019, and $0.4 million in sublease income for both the six months ended June 27, 2020 and June 29, 2019. The following table presents the minimum lease payment obligations of operating and finance lease liabilities (leases with terms in excess of one year) for the next five years and thereafter as of June 27, 2020 (in thousands):

Operating LeasesFinance LeasesTotal
2020$5,891  $125  $6,016  
20219,861  249  10,110  
20226,991  249  7,240  
20237,716  249  7,965  
20247,474  330  7,804  
Thereafter20,048  —  20,048  
Total lease payments57,981  1,202  59,183  
Less: Effect of discounting to net present value11,306  158  11,464  
Present value of lease liabilities$46,675  $1,044  $47,719  

The following table presents supplemental cash flow information related to our leases (in thousands):

Six Months Ended June 27, 2020
Cash paid for amounts included in measurement of liabilities:
Operating cash flows used in operating leases$5,100  
Operating cash flows used in finance leases34
Financing cash flows used in finance leases91
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases$231