Burger King 2009 Annual Report Download - page 105

Table of Contents
BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
Property revenues are comprised primarily of rental income from operating leases and earned income on direct financing leases
with franchisees as follows (in millions):
Years Ended June 30,
2009 2008 2007
Rental income:
Minimum $ 69.9 $ 78.9 $ 76.1
Contingent 20.6 20.7 16.2
Total rental income 90.5 99.6 92.3
Earned income on direct financing leases 23.0 22.0 23.9
Total property revenues $ 113.5 $ 121.6 $ 116.2
Rent expense associated with the lease commitments is as follows (in millions):
Years Ended June 30,
2009 2008 2007
Rental expense:
Minimum $ 166.5 $ 150.2 $ 154.7
Contingent 7.7 7.4 7.3
Amortization of favorable and unfavorable leases contracts, net (18.2) (24.2) (24.6)
Total rental expense $ 156.0 $ 133.4 $ 137.4
Favorable leases are amortized on a straight line basis over the remaining lease term for a period of up to 20 years, with
amortization expense included in occupancy and other operating costs and property expenses in the consolidated statements of income.
Unfavorable leases are amortized over a period of up to 20 years as a reduction in occupancy and other operating costs and property
expenses in the consolidated statements of income.
Amortization of favorable leases totaled $2.6 million, $1.8 million and $2.1 million for the years ended June 30, 2009, 2008 and
2007, respectively. Amortization of unfavorable leases totaled $20.8 million, $26.0 million and $26.7 million for the years ended
June 30, 2009, 2008 and 2007, respectively.
Favorable leases, net of accumulated amortization totaled $36.5 million and $25.1 million as of June 30, 2009 and June 30, 2008,
respectively, and are classified as intangible assets in the accompanying consolidated balance sheets (See Note 9). Unfavorable leases,
net of accumulated amortization totaled $155.5 million and $189.6 million as of June 30, 2009 and June 30, 2008, respectively, and are
classified within other deferrals and liabilities in the accompanying consolidated balance sheets.
As of June 30, 2009, estimated future amortization expense of favorable lease contracts subject to amortization for each of the
years ended June 30 is $2.5 million in 2010 and 2011, $2.4 million in 2012, $2.3 million in 2013 and 2014 and $24.5 million thereafter.
As of June 30, 2009, estimated future amortization expense of unfavorable lease contracts subject to amortization for each of the years
ended June 30 is $17.9 million in 2010, $16.4 million in 2011, $15.2 million in 2012, $14.4 million in 2013, $13.4 million in 2014 and
$78.2 million thereafter.
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