NOTE I – CLOSURES AND IMPAIRMENTS EXPENSE

Closures and impairment expenses include the following for the thirteen weeks ended September 4, 2012 and August 30, 2011 (in thousands):

	September 4, 2012			August 30, 2011

Property impairments	$	448		$	206
Closed restaurant lease reserves		478			79
Other closing expense		289			190
Gain on sale of surplus properties		(91	)		(30	)
	$	1,124		$	445

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

	Lease Obligations
Balance at June 5, 2012	$	6,813
Closing expense including rent and other lease charges		478
Payments		(792	)
Transfer of deferred escalating minimum rent balance		348
Other adjustments		(5	)
Balance at September 4, 2012	$	6,842

For the remainder of fiscal 2013 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.

Included within closing expense in the table above are $0.2 million in charges we recorded during the first quarter associated with lease obligations on a restaurant subleased to RT Midwest that has closed. As of September 4, 2012, we subleased to RT Midwest three sites upon which the restaurants are still open. Cash rents of $0.8 million are required under the terms of the subleases. Should RT Midwest decide to close any of these restaurants we may incur further lease obligations associated with these subleases.

At September 4, 2012, we had 26 restaurants that had been open more than one year with rolling 12-month negative cash flows of which 15 have been impaired to salvage value. Of the 11 which remained, we reviewed the plans to improve cash flows at each of the restaurants and determined that no impairment was necessary. The remaining net book value of these 11 restaurants was $8.6 million at September 4, 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.