Cracker Barrel 2005 Annual Report Download - page 64

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obligations as lessee. At this time, the Company has
no reason to believe that the assignee will not
perform and, therefore, no provision has been made in
the accompanying consolidated financial statements
for amounts to be paid as a result of non-performance
by the assignee.
The Company also is secondarily liable for lease
payments under the terms of another operating lease
that has been sublet to a third party. The operating
lease has a remaining life of approximately 11.2 years
with annual lease payments of $107. The Company’s
performance is required only if the sublessee fails to
perform the obligations as lessee. The Company has a
liability of $444 in the accompanying consolidated
financial statements for estimated amounts to be paid
in case of non-performance by the sublessee.
The Company maintains insurance coverage for
various aspects of its business and operations. The
Company has elected, however, to retain all or a
portion of losses that occur through the use of various
deductibles, limits and retentions under its insurance
programs. This situation may subject the Company to
some future liability for which it is only partially
insured, or completely uninsured. The Company intends
to mitigate any such future liability by continuing
to exercise prudent business judgment in negotiating
the terms and conditions of its contracts. See
Note 2 for a further discussion of insurance and
insurance reserves.
As of July 29, 2005, the Company operated 148
Cracker Barrel stores and 62 Logan’s Roadhouse
restaurants in leased facilities and also leased certain
land and advertising billboards (see Note 12). These
leases have been classified as either capital or operat-
ing leases. The interest rates for capital leases vary
from 5% to 17%. Amortization of capital leases is
included with depreciation expense. A majority of the
Company’s lease agreements provide for renewal
options and some of these options contain escalation
clauses. Additionally, certain store leases provide for
percentage lease payments based upon sales volume
in excess of specified minimum levels.
The following is a schedule by year of future
minimum lease payments under capital leases,
together with the present value of the minimum lease
payments as of July 29, 2005:
Year
2006 $235
2007 124
2008 43
Total minimum lease payments 402
Less amount representing interest 35
Present value of minimum lease payments 367
Less current portion 210
Long-term portion of capital lease obligations $157
The following is a schedule by year of the future
minimum rental payments required under operating
leases, excluding leases for advertising billboards, as
of July 29, 2005. Included in the amounts below are
optional renewal periods associated with such leases
that the Company is currently not legally obligated
to exercise; however, it is reasonably assured that the
Company will exercise these options.
Base Term Renewal
and Exercised Periods Not Yet
Year Options* Exercised** Total
2006 $ 33,310 $ 190 $ 33,500
2007 33,348 343 33,691
2008 33,324 610 33,934
2009 33,243 880 34,123
2010 31,902 1,239 33,141
Later years 284,285 333,574 617,859
Total $449,412 $336,836 $786,248
** Includes base terms and certain optional renewal periods that have
been exercised and are included in the lease term in accordance with
SFAS No. 13 (see Note 2).
** Includes certain optional renewal periods that have not yet
been exercised, but are included in the lease term for the
straight-line rent calculation. Such optional renewal periods are
included because it is reasonably assured by the Company that
it will exercise such renewal options (see Note 2).
The following is a schedule by year of the future
minimum rental payments required under operating
leases for advertising billboards as of July 29, 2005:
Year
2006 $21,854
2007 12,491
2008 4,909
2009 150
Total $39,404
Rent expense under operating leases, excluding
leases for advertising billboards are recognized on a
straight-line, or average, basis and include any pre-
opening periods during construction for which the
Company is legally obligated under the terms of the
lease, and any optional renewal periods, for which at
the inception of the lease, it is reasonably assured
that the Company will exercise those renewal options.