Chuy's Holdings, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Leases

Leases

12 Months Ended

Dec. 29, 2019

Leases

The Company determines if a contract contains a lease at inception.The Company's material long-term operating lease agreements are for the land and buildings for our restaurants as well as our corporate offices. The initial lease terms range from 10 years to 15 years and currently expire between 2021 and 2040. The leases typically include renewal options for 10 to 15 years, which are exercisable at the Company's option. The lease term is generally the minimum of the noncancelable period or the lease term including renewal options which are reasonably certain of being exercised up to a term of approximately 20 years.

Some of the leases provide for base rent, plus additional rent based on gross sales, as defined in each lease agreement. The Company is also generally obligated to pay certain real estate taxes, insurance and common area maintenance (“CAM”) charges, and various other expenses related to properties. These charges are expensed as incurred.

Rent expense is paid to various landlords including several companies owned and controlled by the Company's founders and one of its former executive officers, who were considered related parties in prior years. For the year ended December 29, 2019, these entities are no longer related parties as defined by SEC regulations since the founders and former executive officer are either retired or otherwise left the Company in fiscal year 2018 or earlier.

As of December 29, 2019, all of the Company's leases were operating.

Components of operating lease costs are included in the occupancy, general and administrative expense and property and equipment, net:



	Year Ended
Lease cost	December 29, 2019
Operating lease cost ^(a)	$	24,544
Variable lease cost	1,103
	$	25,647

^(a) Includes short-term operating lease costs which are immaterial.

As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting, rent expense, excluding real estate taxes, CAM charges, insurance, deferred lease incentives and other expenses related to operating leases for the years ended December 30, 2018 and December 31, 2017 consists of the following:



	2018		2017
Minimum rent—unrelated parties	$	21,530	$	18,304
Contingent rent—unrelated parties	317		397
Total rent—unrelated parties	21,847		18,701
Minimum rent—related parties	2,276		2,215
Contingent rent—related parties	557		621
Total rent—related parties	2,833		2,836
Total minimum and contingent rent	$	24,680	$	21,537

Supplemental cash flow disclosures and other lease information for the year ended December 29, 2019:



Cash paid for operating lease liabilities	25,781
Operating lease assets obtained in exchange for operating lease liabilities (a)	177,701
Weighted average remaining lease term (in years)	15.0
Weighted average discount rate	7.8	%

^(a) Includes the transition adjustment for the adoption of Leases (Topic 842) as discussed in Note 2, Recent Accounting Pronouncements in the Notes to our Consolidated Financial Statements. As a result of the store closures, the Company also shortened the remaining life of the related leases and recorded a $4.3 million reduction to the operating lease assets and liabilities during 2019.

Supplemental balance sheet disclosures:



Operating leases	Classification	December 29, 2019
Right-of-use assets	Operating lease assets	$	169,299

Current lease liabilities	Operating lease liability	$	10,307
Non-current lease liabilities	Operating lease liability, less current portion	214,541
Total lease liabilities		$	224,848

Future minimum rent payments for our operating leases for each of the next five years as of December 29, 2019 are as follows:



Fiscal year ending:
2020	$	27,162
2021	27,592
2022	26,582
2023	26,957
2024	25,790
Thereafter	248,744
Total minimum lease payments	382,827
Less: imputed interest	157,979
Present value of lease liabilities	$	224,848

As of December 29, 2019, operating lease payments exclude approximately $12.0 million of legally binding minimum lease payments for leases signed but which we have not yet taken possession.