NOTE I – CLOSURES AND IMPAIRMENTS EXPENSE

Closures and impairment expenses include the following for the 13 and 26 weeks ended November 29, 2011 and November 30, 2010 (in thousands):

	Thirteen weeks ended					Twenty-six weeks ended
	November 29, 2011			November 30, 2010		November 29, 2011			November 30, 2010
Property impairments	$	630		$	12	$	836		$	1,338
Closed restaurant lease reserves		(153	)		327		(74	)		663
Other closing costs		226			9		416			83
(Gain)/loss on sale of surplus properties		(50	)		–		(80	)		3
	$	653		$	348	$	1,098		$	2,087

A rollforward of our future lease obligations associated with closed properties is as follows (in thousands):

	Lease Obligations
Balance at May 31, 2011	$	2,660
Closing expense including rent and other lease charges		(74	)
Payments		(522	)
Other adjustments		(138	)
Balance at November 29, 2011	$	1,926

For the remainder of fiscal 2012 and beyond, our focus will be on obtaining settlements on as many of these leases as possible and these settlements could be higher or lower than the amounts recorded. The actual amount of any cash payments made by the Company for lease contract termination costs will be dependent upon ongoing negotiations with the landlords of the leased restaurant properties.

At November 29, 2011, we had 30 restaurants that had been open more than one year with rolling 12-month negative cash flows of which 21 have been impaired to salvage value. Of the nine which remained, we reviewed the plans to improve cash flows at each of the restaurants and recorded impairment expense as necessary. The remaining net book value of these nine restaurants was $13.3 million at November 29, 2011.

Should sales at these restaurants not improve within a reasonable period of time, further impairment charges are possible. Considerable management judgment is necessary to estimate future cash flows, including cash flows from continuing use, terminal value, closure costs, salvage value, and sublease income. Accordingly, actual results could vary significantly from our estimates.