Sonic 2004 Annual Report Download - page 32

7. Property, Equipment and Capital Leases
Property, equipment and capital leases consist of the following at August 31, 2004
and 2003:
Estimated
Useful Life 2004 2003
Property and equipment:
Home office:
Land and leasehold improvements Life of lease $ 3,011 $ 3,762
Computer and other equipment 2 – 5 yrs 29,188 25,972
Drive-ins, including those leased to others:
Land 113,778 105,883
Buildings 15 – 25 yrs 199,578 185,747
Equipment 5 – 7 yrs 119,971 114,170
Property and equipment, at cost 465,526 435,534
Less accumulated depreciation 126,998 115,933
Property and equipment, net 338,528 319,601
Capital Leases:
Leased home office building Life of lease 9,321 –
Leased drive-in buildings and equipment
under capital leases, including those
held for sublease Life of lease 36,320 31,943
Less accumulated amortization 7,854 5,993
Capital leases,net 37,787 25,950
Property, equipment and capital leases, net $ 376,315 $ 345,551
Land,buildings and equipment with a carrying amount of $39,671 at August 31, 2004
were leased under operating leases to franchisees or other parties. The accumulated
depreciation related to these buildings and equipment was $6,713 at August 31, 2004. As
of August 31, 2004, the Company had drive-ins under construction with costs to complete
which aggregated $4,818.
8. Accrued Liabilities
Accrued liabilities consist of the following at August 31, 2004 and 2003:
2004 2003
Wages and other employee benefits $ 5,751 $ 3,881
Taxes, other than income taxes 10,904 10,107
Income taxes payable 4,841 5,583
Accrued interest 2,920 2,975
Minority interest in consolidated drive-ins 2,012 1,917
Other 6,124 5,151
$ 32,552 $ 29,614
9. Long-Term Debt
Long-term debt consists of the following at August 31, 2004 and 2003:
2004 2003
Senior unsecured notes (A) $ 30,000 $ 30,000
Borrowings under line of credit (B) 14,075 79,340
Senior unsecured notes (C) 29,000 30,000
Other 9,094 247
82,169 139,587
Less long-term debt due within one year 3,495 82
Long-term debt due after one year $ 78,674 $ 139,505
(A) The Company has $30,000 of senior unsecured Series B notes maturing in April 2005.
The Company has the intent and the ability to refinance the $30,000 maturing in 2005
through availability under its line of credit and has classified that amount as long-term
debt as of August 31, 2004 on the consolidated balance sheet. Interest is payable
semi-annually and accrues at 6.76%. The related agreement requires, among other
things, the Company to maintain equity of a specified amount, maintain ratios of debt
to total capital and fixed charge coverage and limits additional borrowings.
(B) The Company has an agreement with a group of banks that provides for a $125,000
line of credit,including a $2,000 sub-limit for letters of credit,expiring in July 2006. The
Company plans to use the line of credit to finance the opening of newly-constructed
drive-ins, acquisitions of existing drive-ins, purchases of the Company’s common
stock, retirement of senior notes and for general corporate purposes. Borrowings
under the line of credit are unsecured and bear interest at a specified bank’s prime
rate or, at the Company’s option, LIBOR plus 0.50% to 1.25%. In addition, the Company
pays an annual commitment fee ranging from .125% to .25% on the unused portion
of the line of credit. As of August 31, 2004, the Company’s effective borrowing rate
was 4.5%. As of August 31, 2004 there were $676 in letters of credit outstanding under
the line of credit. The agreement requires, among other things, the Company to
maintain equity of a specified amount, maintain ratios of debt to EBITDA and fixed
charge coverage and limits additional borrowings and acquisitions and dispositions
of businesses.
(C) The Company has $29,000 of senior unsecured notes with $4,000 of Series A notes
maturing in August 2008 and $25,000 of Series B notes maturing in August 2011.
Interest is payable semi-annually and accrues at 6.58% for the Series A notes and
6.87% for the Series B notes. Required annual prepayments amount to $1,000 from
August 2004 to August 2007 on the Series A notes and $3,571 from August 2005 to
August 2010 on the Series B notes. The Company has the intent and the ability to
refinance the required annual prepayments in 2005 through availability under its line
of credit and has classified those amounts as long-term debt as of August 31, 2004 on
the consolidated balance sheet. The related agreement requires, among other things,
Notes to Consolidated Financial Statements
August 31, 2004, 2003 and 2002 (In thousands, except share data)
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