Sonic 2011 Annual Report Download - page 44

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4 2
8. Property, Equipment and Capital Leases
Property, equipment and capital leases consist of the following at August 31:
Estimated Useful Life 2011 2010
Property and equipment:
Home office:
Leasehold improvements Life of lease $ 4,541 $ 4,541
Computer and other equipment 2 – 5 yrs 52,736 45,459
Drive-ins, including those leased to others:
Land 171,813 172,506
Buildings 8 – 25 yrs 356,536 357,173
Equipment 5 – 7 yrs 126,487 126,014
Property and equipment, at cost 712,113 705,693
Less accumulated depreciation 273,209 244,727
Property and equipment, net 438,904 460,966
Capital Leases:
Leased home office building Life of lease 9,990 9,990
Leased drive-in buildings, equipment and other assets under
capital leases, including those held for sublease Life of lease 38,675 40,795
Less accumulated amortization 22,694 22,487
Capital leases, net 25,971 28,298
Property, equipment and capital leases, net $464,875 $489,264
Depreciation expense for property and equipment was $40.8 million, $42.1 million and $47.6 million for fiscal years
2011, 2010 and 2009, respectively. Land, buildings and equipment with a carrying amount of $188.7 million at August
31, 2011 were leased under operating leases to franchisees or other parties. The accumulated depreciation related to
these buildings and equipment was $51.6 million at August 31, 2011. Amortization expense related to capital leases is
included within “depreciation and amortization” on the Consolidated Statements of Income. As of August 31, 2011, the
company had no drive-ins under construction with costs to complete.
9. Accrued Liabilities
Accrued liabilities consist of the following at August 31:
2011 2010
Wages and employee benefit costs $ 9,757 $ 5,120
Property taxes, sales and use taxes and employment taxes 9,441 9,631
Accrued interest 755 712
Unredeemed gift cards and gift certificates 8,864 8,586
Other 4,715 9,283
$ 33,532 $ 33,332
The company sells gift cards that do not have expiration dates. Gift card balances are recorded as a liability on the
company’s Consolidated Balance Sheets. Breakage is the amount on a gift card that is not expected to be redeemed and
that the company is not required to remit to a state under unclaimed property laws. The company estimates breakage
based upon the trend in redemption patterns from previously sold gift cards utilizing its history with the program. The
company’s policy is to recognize the breakage using the delayed recognition method when it is apparent that there is a
remote likelihood the gift card balance will be redeemed based on historical trends. The company reduces the gift card
liability for the estimated breakage and uses that amount to help defray the costs of operating the gift card program.
Notes to Consolidated Financial Statements
August 31, 2011, 2010 and 2009 (In thousands, except per share data)