Leases

The Company utilizes land and buildings in its operations under various lease agreements. The Company does not consider any one of these individual leases material to the Company's operations. Initial lease terms are generally for twenty years and, in many cases, provide for renewal options and in most cases rent escalations. Certain leases require contingent rent, determined as a percentage of sales as defined by the terms of the applicable lease agreement. For most locations, the Company is obligated for occupancy related costs including payment of property taxes, insurance and utilities.

Right-of-use (“ROU”) lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make payments in exchange for that right of use. Operating lease ROU assets are presented as operating right-of-use assets, net, the current portion of operating lease liabilities are presented as current portion of operating lease liabilities, and the non-current portion of operating lease liabilities are presented as operating lease liabilities in the condensed consolidated balance sheets.

The current portion of operating lease liabilities was $32.7 million as of March 31, 2019. Leases with a term of 12 months or less are not recorded on the balance sheet.

The discount rate implicit within our leases is generally not readily determinable, and therefore, the Company uses its estimated incremental borrowing rate in determining the present value of lease payments. The incremental borrowing rate considers the Company’s recent debt issuances and lease term.

The Company’s real estate leases often contain options to renew, and less frequently, termination options. The exercise of such renewal and termination options are generally at the Company’s sole discretion. The Company evaluates renewal and termination options at lease commencement to determine if such options are reasonably certain to be exercised based on economic factors. As of March 31, 2019, the Company had additional leases that have not yet commenced of $9.2 million. These leases will commence between fiscal 2019 and 2020 with lease terms of 15 years to 20 years.

In addition, the Company utilizes certain restaurant equipment under various finance lease agreements. The Company does not consider any one of these individual leases material to the Company's operations. Initial lease terms are generally eight years.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized as lease expense on a straight-line basis over the lease term. The Company does not account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components.

Lease Position

Supplemental balance sheet information related to leases was as follows:



		As of
Leases	Classification	March 31, 2019
Assets
Operating leases	Operating right-of-use assets, net	$	525,008
Finance leases	Property and equipment, net	2,663
Total leased assets		$	527,671

Liabilities
Current
Operating leases	Current portion of operating lease liabilities	$	32,732
Finance leases	Current portion of long-term debt and finance lease liabilities	1,969
Long-term
Operating leases	Operating lease liabilities	518,113
Finance leases	Long-term debt and finance lease liabilities, net	1,496
Total lease liabilities		$	554,310

Weighted Average Remaining Lease Term
Operating leases		13.7 years
Finance leases		1.9 years

Weighted Average Discount Rate
Operating leases		7.0		%
Finance leases		7.4		%

For certain leases where rent escalates based upon a change in a financial index, such as the Consumer Price Index, the difference between the rate at lease inception and the subsequent fluctuations in that rate are included in variable lease costs. Additionally, because the Company has elected to not separate lease and non-lease components, in limited instances, variable costs also include payments to the landlord for common area maintenance, real estate taxes, insurance and other operating expenses. Lease expense is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred.

Lease Cost

The components and classification of lease expense for the three months ended March 31, 2019 are as follows:



		Three Months Ended
Lease cost	Classification	March 31, 2019
Operating lease cost (1)	Rent expense	$	18,294
Variable lease cost	Rent expense	3,800
Sublease income	Rent expense	(178		)
Finance lease cost:
Amortization of right-of-use assets	Depreciation and amortization	476
Interest on lease liabilities	Interest expense	71
Total lease cost		$	22,463


(1)	Includes short-term leases, which are not material.

Other Information

Supplemental cash flow information related to leases was as follows:



	Three Months Ended
	March 31, 2019
Gain on sale-leaseback transactions	$	93
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	17,366
Operating cash flows from finance leases	$	71
Financing cash flows from finance leases	$	476

Undiscounted Cash Flows

Maturities of lease liabilities were as follows:



Fiscal year ending:	Operating Leases			Finance Leases
December 29, 2019	$	52,148		$	1,633
January 3, 2021	66,866			1,454
January 2, 2022	65,139			345
January 1, 2023	64,211			190
December 31, 2023	62,836			68
Thereafter	558,864			129
Total minimum lease payments	870,064			3,819
Less: imputed interest	(319,219		)	(354		)
Present value of lease liabilities	550,845			3,465
Less: current portion	(32,732		)	(1,969		)
Total long-term lease liabilities	$	518,113		$	1,496

Disclosures Related to Periods Prior to Adoption of the New Lease Standard

As previously disclosed in the Company's 2018 Annual Report on Form 10-K and under the previous lease accounting standard, the maturities of lease liabilities at December 30, 2018 were as follows:



Fiscal year ending:	Operating Leases		Capital Leases
December 29, 2019	$	73,304	$	2,180
January 3, 2021	71,764		1,454
January 2, 2022	70,607		345
January 1, 2023	70,160		190
December 31, 2023	69,221		68
Thereafter	640,793		129
Total minimum lease payments	$	995,849	4,366
Less amount representing interest			(425		)
Total obligations under capital leases			3,941
Less current portion			(1,948		)
Long-term obligations under capital leases			$	1,993