PROPERTY, EQUIPMENT, ASSETS HELD FOR SALE, OPERATING LEASES, AND SALE-LEASEBACK TRANSACTIONS

3 Months Ended

Sep. 04, 2012

PROPERTY, EQUIPMENT, ASSETS HELD FOR SALE, OPERATING LEASES, AND SALE-LEASEBACK TRANSACTIONS [Abstract]

PROPERTY, EQUIPMENT, ASSETS HELD FOR SALE, OPERATING LEASES, AND SALE-LEASEBACK TRANSACTIONS

NOTE G – PROPERTY, EQUIPMENT, ASSETS HELD FOR SALE, OPERATING LEASES, AND SALE-LEASEBACK TRANSACTIONS

Property and equipment, net, is comprised of the following (in thousands):

	September 4, 2012		June 5, 2012
Land	$	238,849	$	244,498
Buildings		482,341		494,537
Improvements		421,403		421,143
Restaurant equipment		273,208		276,576
Other equipment		91,341		95,400
Construction in progress and other*		23,351		26,473
		1,530,493		1,558,627
Less accumulated depreciation		590,783		592,022
	$	939,710	$	966,605

* Included in Construction in progress and other as of September 4, 2012 and June 5, 2012 are $18.4 million and $21.8 million, respectively, of assets held for sale that are not classified as such in the Condensed Consolidated Balance Sheets as we do not expect to sell these assets within the next 12 months. These assets primarily consist of parcels of land upon which we have no intention to build restaurants.

Included within the current assets section of our Condensed Consolidated Balance Sheets at September 4, 2012 and June 5, 2012 are amounts classified as held for sale totaling $7.9 million and $4.7 million, respectively. Assets held for sale primarily consist of parcels of land upon which we have no intention to build restaurants, land and buildings of closed restaurants, and various liquor licenses. With the exception of sale-leaseback transactions discussed below, we did not sell any properties during the 13 weeks ended September 4, 2012. During the 13 weeks ended August 30, 2011, we sold surplus properties consisting primarily of a liquor license with no carrying value for negligible proceeds and a negligible gain.

Approximately 54% of our 741 restaurants are located on leased properties. Of these, approximately 65% are land leases only; the other 35% are for both land and building. The initial terms of these leases expire at various dates over the next 24 years. These leases may also contain required increases in minimum rent at varying times during the lease term and have options to extend the terms of the leases at a rate that is included in the original lease agreement. Most of our leases require the payment of additional (contingent) rent that is based upon a percentage of restaurant sales above agreed upon sales levels for the year. These sales levels vary for each restaurant and are established in the lease agreements. We recognize contingent rental expense (in annual as well as interim periods) prior to the achievement of the specified target that triggers the contingent rental expense, provided that achievement of that target is considered probable.

During the 13 weeks ended September 4, 2012, we completed sale-leaseback transactions of the land and building for nine Company-owned Ruby Tuesday concept restaurants for gross cash proceeds of $20.2 million, exclusive of transaction costs of approximately $1.0 million. Equipment was not included. The carrying value of the properties sold was $14.2 million. The leases have been classified as operating leases and have initial terms of 15 years, with renewal options of up to 20 years. Net proceeds from the sale-leaseback transactions were used for general corporate purposes, including the repurchase of shares of our common stock, and debt payments.

We realized gains on these transactions during the 13 weeks ended September 4, 2012 of $5.0 million, which have been deferred and are being recognized on a straight-line basis over the initial terms of the leases. The current portion of the deferred gains on all sale-leaseback transactions to date was $0.6 million and $0.3 million as of September 4, 2012 and June 5, 2012, respectively, and is included in Accrued liabilities – Rent and other in our Condensed Consolidated Balance Sheets. The long-term portion of the deferred gains on all sale-leaseback transactions to date was $8.8 million and $4.2 million as of September 4, 2012 and June 5, 2012, respectively, and is included in Other deferred liabilities in our Condensed Consolidated Balance Sheets. Amortization of the deferred gains of $0.1 million is included within Other restaurant operating costs in our Condensed Consolidated Statement of Income and Comprehensive Income for the 13 weeks ended September 4, 2012.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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