Leased Property
3 Months Ended
Sep. 20, 2011
Leased Property 
Leased Property

NOTE C — LEASED PROPERTY

Although the Company's policy is to own the property on which it operates restaurants, the Company occupies certain of its restaurants pursuant to lease agreements. As of September 20, 2011, 22 restaurants were in operation on non-owned premises, 21 of which were classified as operating leases and one was a capital lease. Most of the operating leases are for 15 or 20 years and contain multiple five year renewal options. However, two operating leases (both for Big Boy) will expire over the course of fiscal year 2012, with the underlying properties expected to be vacated.

Seven of the operating leases are for Golden Corral operations. Big Boy restaurants are operated under the terms of 14 operating leases and one capital lease. In addition, an operating lease was in place for land on which construction of a Big Boy restaurant was in progress as of September 20, 2011.

Office space is occupied under an operating lease that expires during fiscal year 2013, with renewal options available through fiscal year 2023. A purchase option is available in 2023 to acquire the office property in fee simple estate.

Rent expense under operating leases for the 16 week periods ended:

 

     September 20,      September 21,  
     2011      2010  
     (in thousands)  

Minimum rentals

    $ 563       $ 519   

Contingent payments

      —           —     
  

 

 

     

 

 

  
   $ 563       $ 519   
  

 

 

     

 

 

  

The capital lease used in Big Boy operations is for land on which a Big Boy restaurant opened for business in July 2010. Under the terms of the lease, the Company is required to purchase the land in fee simple estate after the 10th year. Delivery and other equipment is held under capitalized leases expiring during various periods extending into fiscal year 2019.

An analysis of the capitalized leased property is shown in the following table. Amortization of capitalized delivery and other equipment is based on the straight-line method over the primary terms of the leases.

 

September 20, September 20,
    Asset balances at  
    September 20,     May 31,  
    2011     2011  
    (in thousands)  

Restaurant property (land)

   $ 825      $ 825   

Delivery and other equipment

     1,730        1,730   

Less accumulated amortization

     (729 )      (662 ) 
 

 

 

    

 

 

  
  $ 1,826      $ 1,893   
 

 

 

    

 

 

  

Future minimum lease payments under capitalized leases and operating leases are summarized in the table below. The column for capitalized leases includes the requirement to acquire land, currently leased by the Company, in fee simple estate after the 10th year of the lease.

 

     Capitalized     Operating  

Annual period ending September 20,

    leases     leases  
     (in thousands)  

2012

    $ 354      $ 1,711   

2013

      245        1,590   

2014

      245        1,599   

2015

      245        1,449   

2016

      245        1,437   

2017 to 2033

      1,360        13,752   
  

 

 

    

 

 

  

Total

      2,694      $ 21,538   
    

 

 

  

Amount representing interest

      (813 )   
  

 

 

    

Present value of obligations

      1,881     

Portion due within one-year

      (249 )   
  

 

 

    

Long-term obligations

    $ 1,632