Sale-Leaseback Transactions

9 Months Ended

Nov. 07, 2011

Sale-Leaseback Transactions [Abstract]

Sale-Leaseback Transactions

NOTE 8 — SALE-LEASEBACK TRANSACTIONS

During the forty weeks ended November 7, 2011, we entered into agreements with independent third parties under which we sold and leased back 8 Carl's Jr. and 21 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 net 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. 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 net proceeds received over the remaining net book value of the associated restaurant property.

During the forty weeks ended November 7, 2011, we received net proceeds of $40,702 in connection with these transactions, which are included in other long-term liabilities in our accompanying unaudited Condensed Consolidated Balance Sheet as of November 7, 2011. 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 Sheet, was $31,825 as of November 7, 2011. The net proceeds received exceeded the net book value of the associated restaurant properties by $8,877 as of November 7, 2011.

As of November 7, 2011, our future minimum cash obligations associated with these transactions from November 8, 2011 through January 31, 2012, for fiscal 2013, 2014, 2015, 2016, 2017 and thereafter are $746, $2,983, $2,983, $2,983, $2,983, $3,122 and $52,771, respectively.