Chili's 2002 Annual Report Download - page 53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$5.7 million. The fair value hedges were fully effective during the fiscal year ended June 26, 2002. Accordingly,
the change in fair value of the swaps was recorded in other liabilities.
8. LEASES
(a) Capital Leases
The Company leases certain buildings under capital leases. The asset values of $26.4 million at June 26, 2002
and $6.5 million at June 27, 2001, respectively, and the related accumulated amortization of $6.8 million and
$6.1 million at June 26, 2002 and June 27, 2001, respectively, are included in property and equipment.
Amortization of assets under capital lease is included in depreciation and amortization expense. As part of the
Sydran acquisition in November 2001, the Company recorded $19.9 million in capital lease assets.
(b) Operating Leases
The Company leases restaurant facilities, office space, and certain equipment under operating leases having
terms expiring at various dates through fiscal 2095. The restaurant leases have renewal clauses of 1 to 35 years at
the option of the Company and have provisions for contingent rent based upon a percentage of gross sales, as
defined in the leases. Rent expense for fiscal 2002, 2001, and 2000 was $100.4 million, $89.2 million, and
$81.8 million, respectively. Contingent rent included in rent expense for fiscal 2002, 2001, and 2000 was
$9.7 million, $8.9 million, and $7.2 million, respectively.
In fiscal 1998 and 2000, the Company entered into equipment leasing facilities totaling $55.0 million and
$25.0 million, respectively. The leasing facilities were accounted for as operating leases and had expiration dates
of 2004 and 2006, respectively. The Company guaranteed a residual value of approximately 87% of the total
amount funded under the leases. The Company had the option to purchase all of the leased equipment for an
amount equal to the unamortized lease balance, which could not exceed 75% of the total amount funded through
the leases. In February 2002, the Company acquired the remaining assets leased under the equipment leasing
facilities for $36.2 million and terminated the lease arrangements.
In fiscal 2000, the Company entered into a $50.0 million real estate leasing facility. During fiscal 2001, the
Company increased the facility to $75.0 million. The real estate facility was accounted for as an operating lease
and was to expire in fiscal 2007. The Company guaranteed a residual value of approximately 87% of the total
amount funded under the lease. The Company had the option to purchase all of the leased real estate for an
amount equal to the unamortized lease balance. In February 2002, the Company acquired the remaining assets
leased under the real estate leasing facility for $56.8 million and terminated the lease arrangement.
(c) Commitments
At June 26, 2002, future minimum lease payments on capital and operating leases were as follows (in
thousands):
Fiscal Capital Operating
Ye a r Leases Leases
2003 ............................................... $ 3,506 $ 85,656
2004 ............................................... 3,469 83,512
2005 ............................................... 3,200 81,453
2006 ............................................... 3,165 77,618
2007 ............................................... 3,243 72,605
Thereafter........................................... 48,436 427,822
Total minimum lease payments .......................... 65,019 $828,666
Imputed interest (average rate of 8%) ..................... (28,972)
Present value of minimum lease payments .................. 36,047
Less current installments............................... (836)
Capital lease obligations—noncurrent ...................... $35,211
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