Chili's 2005 Annual Report Download - page 50

Download and view the complete annual report

Please find page 50 of the 2005 Chili's annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 61

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22
Excluding capital lease obligations (see Note 8), the Company’s long-term debt maturities for the five years
following June 29, 2005 are as follows (in thousands):
Fiscal Year
2006 ................................................................... $ 48,766
2007 ................................................................... 632
2008 ................................................................... 531
2009 ................................................................... 576
2010 ................................................................... 15,624
Thereafter.............................................................. 307,159
$ 373,288
7. DERIVATIVE FINANCIAL INSTRUMENTS
The Company entered into three interest rate swaps in December 2001 with a total notional value of
$113.7 million at June 29, 2005. These fair value hedges change the fixed-rate interest component of an operating
lease commitment for certain real estate properties entered into in November 1997 to variable-rate interest.
Under the terms of the hedges (which expire in fiscal 2018), the Company pays monthly a variable rate based on
30-Day LIBOR (3.34% at June 29, 2005) plus 1.26%. The Company receives monthly the fixed interest rate of
7.156% on the lease. The estimated fair values of these agreements at June 29, 2005 and June 30, 2004 were
assets of approximately $13.0 million and $7.7 million, respectively. There was no hedge ineffectiveness during
fiscal 2005, 2004, or 2003. The Company’s interest rate swap hedges meet the criteria for the “short-cut method”
under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Accordingly, changes in
the fair value of the swaps are recorded in other assets with a like adjustment in other liabilities.
The interest rate swaps on the senior notes expired in conjunction with the Company’s payment of the
remaining principal in April 2005.
8. LEASES
(a) Capital Leases
The Company leases certain buildings under capital leases. The asset values of $27.5 million at June 29, 2005
and June 30, 2004, and the related accumulated amortization of $10.6 million and $9.5 million at June 29, 2005
and June 30, 2004, respectively, are included in property and equipment. Amortization of assets under capital
leases is included in depreciation and amortization expense.
(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, in some cases, have provisions for contingent rent based upon a percentage of
sales in excess of specified levels, as defined in the leases. Rent expense for fiscal 2005, 2004, and 2003 was $127.9
million, $119.6 million, and $108.1 million, respectively. Contingent rent included in rent expense for fiscal 2005,
2004, and 2003 was $12.2 million, $11.6 million, and $10.3 million, respectively.