Burger King 2006 Annual Report Download - page 103

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BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements Ì (Continued)
Rent expense associated with the lease commitments is as follows (in millions):
Years Ended
June 30,
2006 2005 2004
Rental expense:
Minimum ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $151 $145 $137
Contingent ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 6 5
Amortization of favorable and unfavorable lease contracts, net ÏÏÏÏÏÏÏÏÏÏ (24) (29) (52)
Total rental expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $133 $122 $ 90
Favorable and unfavorable lease contracts are amortized over a period of up to 20 years and are included
in occupancy and other operating costs and property expenses, respectively, in the consolidated statements of
operations. Amortization of unfavorable lease contracts totaled $28 million for the year ended June 30, 2006,
$32 million for the year ended June 30, 2005, and $57 million for the year ended June 30, 2004. Amortization
of favorable lease contracts totaled $4 million for the year ended June 30, 2006, $3 million for the year ended
June 30, 2005, and $5 million for the year ended June 30, 2004.
Unfavorable leases, net of accumulated amortization totaled $234 million and $261 million at June 30,
2006 and June 30, 2005, respectively. Unfavorable leases, net of amortization are classified within other
deferrals and liabilities in the consolidated balance sheets.
As of June 30, 2006, estimated future amortization expense of unfavorable lease contracts subject to
amortization for each of the years ended June 30 is $26 million in 2007, $24 million in 2008, $22 million in
2009, $21 million in 2010, $19 million in 2011, and $122 million thereafter.
Note 16. Stockholders' equity
Capital Stock
The Company was initially capitalized on December 13, 2002 with $398 million in cash, as a limited
liability company. On June 27, 2003, the Company was converted to a corporation and issued an aggregate
104,692,735 common shares to the private equity funds controlled by the Sponsors.
As described in Note 1, in connection with the initial public offering, the Board of Directors of the
Company authorized an increase in the number of shares of the Company's $0.01 par value common stock to
300 million shares, authorized a 26.34608 to one stock split on common stock and authorized 10 million shares
of a new class of preferred stock, with a par value of $0.01 per share. As of June 30, 2006, no shares of this new
class of preferred stock were issued or outstanding.
Dividends Paid and Return of Capital
On February 21, 2006, the Company paid a dividend of $367 million, or $3.42 per issued and outstanding
share, to holders of record of the Company's common stock on February 9, 2006, including members of senior
management. The payment of the dividend was financed primarily from proceeds of the amended facility (see
Note 10) and was recorded as a cash dividend of $100 million ($0.93 per share) charged to the Company's
historical cumulative retained earnings through the dividend date, and as a return of capital of $267 million
($2.49 per share) charged to additional paid-in capital in the accompanying consolidated statement of
stockholders' equity and other comprehensive income (loss) for the year ended June 30, 2006.
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