Sale-Leaseback Transactions

9 Months Ended

Nov. 05, 2012

Financing Method Sale-Leaseback Transactions [Abstract]

Sale-Leaseback Transactions

SALE-LEASEBACK TRANSACTIONS

During the forty weeks ended November 5, 2012, we entered into agreements with independent third parties under which we sold and leased back 2 Carl’s Jr. and 60 Hardee’s restaurant properties. The initial minimum lease terms are 20 years, and the leases include renewal options and right of first offer provisions that, for accounting purposes, constitute continuing involvement with the associated restaurant properties. Due to this continuing involvement, these sale-leaseback transactions are accounted for under the financing method, rather than as completed sales. Under the financing method, we include the sales proceeds received in other long-term liabilities until our continuing involvement with the properties is terminated, report the associated property as owned assets, continue to depreciate the assets over their remaining useful lives, and record the rental payments as interest expense. Closing costs and other fees related to these sale-leaseback transactions are recorded as deferred financing costs and amortized to interest expense over the initial minimum lease term. When and if our continuing involvement with a property terminates and the sale of that property is recognized for accounting purposes, we expect to record a gain equal to the excess of the proceeds received over the remaining net book value of the associated restaurant property and any unamortized deferred financing costs.

During the forty weeks ended November 5, 2012, we received proceeds of $91,063 and capitalized deferred financing costs of $5,210 in connection with 62 financing method sale-leaseback transactions. During the forty weeks ended November 7, 2011, we received proceeds of $43,159 and capitalized deferred financing costs of $2,457 in connection with 29 financing method sale-leaseback transactions.

The cumulative proceeds received in connection with financing method sale-leaseback transactions of $158,517 and $67,454 are included in other long-term liabilities in our accompanying unaudited Condensed Consolidated Balance Sheets as of November 5, 2012 and January 31, 2012, respectively. The net book value of the associated assets, which is included in property and equipment, net of accumulated depreciation and amortization in our accompanying unaudited Condensed Consolidated Balance Sheets, was $112,714 and $48,722 as of November 5, 2012 and January 31, 2012, respectively. With respect to the financing method sale-leaseback transactions, our future minimum cash obligations as of November 5, 2012 are $2,893, $11,571, $11,571, $11,571, $11,744, $12,469 and $198,865 for the period from November 6, 2012 through January 31, 2013, for fiscal 2014, 2015, 2016, 2017, 2018 and thereafter, respectively.