Note G - Property, Equipment, Assets Held for Sale, Operating Leases, and Sale-leaseback Transactions

9 Months Ended

Mar. 03, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

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):

	March 3, 2015		June 3, 2014
Land	$	212,073	$	214,277
Buildings		426,761		430,988
Improvements		362,481		365,599
Restaurant equipment		249,373		248,852
Other equipment		87,960		84,876
Surplus properties*		13,538		18,351
Construction in progress and other		3,188		3,895
		1,355,374		1,366,838
Less accumulated depreciation		593,574		571,992
	$	761,800	$	794,846

* Surplus properties represent 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, closed properties which include a building, and liquor licenses not needed for operations.

Included within the current assets section of our Condensed Consolidated Balance Sheets at March 3, 2015 and June 3, 2014 are amounts classified as held for sale totaling $5.1 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. During the 13 and 39 weeks ended March 3, 2015, we sold surplus properties with carrying values of $2.8 million and $7.3 million, respectively, at net gains of $0.2 million and $1.3 million, respectively. Cash proceeds, net of broker fees, from these sales during the 13 and 39 weeks ended March 3, 2015 totaled $3.0 million and $8.6 million, respectively. During the 13 and 39 weeks ended March 4, 2014, we sold surplus properties with carrying values of $1.9 million and $10.1 million, respectively, at net gains of $0.6 million and $0.8 million, respectively. Cash proceeds, net of broker fees, from these sales during the 13 and 39 weeks ended March 4, 2014 totaled $2.5 million and $10.8 million, respectively.

Approximately 55% of our 677 Company-owned restaurants are located on leased properties. Of these, approximately 69% are land leases only; the other 31% are for both land and building. The initial terms of these leases expire at various dates over the next 22 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 39 weeks ended March 4, 2014, we completed sale-leaseback transactions of the land and building for three Company-owned Ruby Tuesday concept restaurants for gross cash proceeds of $5.9 million, exclusive of transaction costs of approximately $0.3 million. Equipment was not included. The carrying value of the properties sold was $4.8 million. The leases have been classified as operating leases and have initial terms of 15 years, with renewal options of up to 20 years following a rent reset based on fair market value at the end of the initial term. Net proceeds from fiscal year 2014’s sale-leaseback transactions were used for general corporate purposes, including debt payments and the repurchase of shares of our common stock.

We realized gains on these sale-leaseback transactions during the 39 weeks ended March 4, 2014 of $0.8 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 was $1.1 million as of each of March 3, 2015 and June 3, 2014, 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 was $12.2 million and $13.0 million as of March 3, 2015 and June 3, 2014, respectively, and is included in Other deferred liabilities in our Condensed Consolidated Balance Sheets. Amortization of the deferred gains of $0.3 million and $0.8 million for each of the 13- and 39-week periods ended March 3, 2015 and March 4, 2014, respectively, is included within Other restaurant operating costs in our Condensed Consolidated Statements of Operations and Comprehensive Loss.