Lease Commitments and Contingencies

9 Months Ended

Sep. 29, 2019

Lease Commitments and Contingencies:

Lease Commitments

We have commitments under various operating leases. Right-of-use assets and lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The discount rate used to determine the present value of the future lease payments is our incremental borrowing rate as the rate implicit in most of our leases is not readily determinable. As a practical expedient, we recognize lease payments for short-term leases on a straight-line basis over the lease term and have elected to not separate lease components from non-lease components.

Prior to the second quarter of 2019, our most significant lease commitment was for the land on which California's Great America is located in the City of Santa Clara, which had an initial term through 2039 with renewal options through 2074. On June 28, 2019, we purchased the land at California's Great America from the lessor, the City of Santa Clara, for $150.3 million. Following the purchase, our remaining lease commitments were immaterial to the condensed consolidated financial statements. However, we assumed lease commitments when we completed the acquisition of the Schlitterbahn parks on July 1, 2019 (see Note 3). In particular, we assumed a lease commitment for the land on which Schlitterbahn Waterpark Galveston is located. This land lease resulted in the recognition of an additional right-of-use asset totaling $6.8 million and an additional corresponding lease liability totaling $5.3 million during the third quarter of 2019.

We lease a portion of the California's Great America parking lot to the Santa Clara Stadium Authority during Levi's Stadium events. The lease is effective through the life of the stadium, or approximately 25 years, from the opening of the stadium through 2039. The lease payments were prepaid, and the corresponding revenue is being recognized over the life of the stadium. We have also entered into various operating leases for office space, office equipment, vehicles, and revenue-generating assets. These lease commitments are immaterial to the condensed consolidated financial statements.

Total lease cost and related supplemental information as of September 29, 2019 was as follows:



(In thousands, except for lease term and discount rate)	September 29, 2019
Operating lease expense	$	4,718
Variable lease expense	1,383
Short-term lease expense	3,739
Sublease income	(244		)
Total lease cost	$	9,596

Weighted-average remaining lease term	19.3 years
Weighted-average discount rate	4.4		%
Operating cash flows for operating leases	$	4,784
Leased assets obtained in exchange for new operating lease liabilities (non-cash activity)	$	1,516

Lease expense, which includes short-term rentals for equipment and machinery, for the nine months ended September 23, 2018 totaled $11.7 million.

Future undiscounted cash flows under our operating leases and a reconciliation to the operating lease liabilities recognized as of September 29, 2019 are included below:



(In thousands)	September 29, 2019
Undiscounted cash flows
Remainder of 2019	$	610
2020	2,129
2021	1,282
2022	690
2023	470
Thereafter	8,747
Total	$	13,928

Present value of cash flows
Current lease liability	$	1,926
Lease Liability	7,440
Total	$	9,366

Difference between undiscounted cash flows and discounted cash flows	$	4,562

Contingencies

We are a party to a number of lawsuits arising in the normal course of business. In the opinion of management, none of these matters are expected to have a material effect in the aggregate on the condensed consolidated financial statements.