NOTE I – CLOSURES AND IMPAIRMENTS EXPENSE

Closures and impairment expenses include the following for the 13 and 39 weeks ended February 28, 2012 and March 1, 2011 (in thousands):

	Thirteen weeks ended						Thirty-nine weeks ended
	February 28, 2012			March 1, 2011			February 28, 2012			March 1, 2011
Property impairments	$	11,534		$	888		$	12,370		$	2,226
Closed restaurant lease reserves		776			(432	)		702			231
Other closing costs		125			150			541			232
(Gain)/loss on sale of surplus properties		(118	)		177			(198	)		180
	$	12,317		$	783		$	13,415		$	2,869

Included in the amounts shown above for the 13 and 39 weeks ended February 28, 2012 are property impairments of $9.6 million resulting from management's third fiscal quarter decision to close 25 to 27 restaurants during the fourth quarter of fiscal 2012 and 10 restaurants thereafter upon expiration of the leases. As discussed further in Note Q to the Condensed Consolidated Financial Statements, the Board of Directors approved management's plan to close these restaurants at its regular Board meeting on April 4, 2012.

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		702
Payments		(685	)
Other adjustments		(138	)
Balance at February 28, 2012	$	2,539

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 February 28, 2012, we had 37 restaurants that had been open more than one year with rolling 12-month negative cash flows of which 28 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 $12.2 million at February 28, 2012.

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.