Sonic 2012 Annual Report Download - page 41

Download and view the complete annual report

Please find page 41 of the 2012 Sonic 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 56

  • 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

39
7. Property, Equipment and Capital Leases
Property, equipment and capital leases consist of the following at August 31:
Estimated Useful Life 2012 2011
Property and equipment:
Home office:
Leasehold improvements Life of lease $ 4,541 $ 4,541
Computer and other equipment 2 – 5 yrs 61,492 52,736
Drive-ins, including those leased to others:
Land 171,102 171,813
Buildings 8 – 25 yrs 358,887 356,536
Equipment 5 – 7 yrs 118,975 126,487
Property and equipment, at cost 714,997 712,113
Accumulated depreciation (295,735) (273,209)
Property and equipment, net 419,262 438,904
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 39,906 38,675
Accumulated amortization (26,150) (22,694)
Capital leases, net 23,746 25,971
Property, equipment and capital leases, net $443,008 $464,875
Depreciation expense for property and equipment was $37.2 million, $37.3 million and $38.6 million for fiscal years
2012, 2011 and 2010, respectively. Land, buildings and equipment with a carrying amount of $219.8 million at August 31,
2012 were leased under operating leases to franchisees and other parties. The accumulated depreciation related to these
buildings and equipment was $69.7 million at August 31, 2012. Amortization expense related to capital leases is included
within “depreciation and amortization” on the Consolidated Statements of Income. As of August 31, 2012, the company had
no drive-ins under construction with costs to complete.
8. Accrued Liabilities
Accrued liabilities consist of the following at August 31:
2012 2011
Wages and employee benefit costs $ 11,061 $ 9,757
Property taxes, sales and use taxes and employment taxes 8,869 9,441
Unredeemed gift cards and gift certificates 7,274 8,864
Other 5,403 5,470
$ 32,607 $ 33,532
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, 2012, 2011 and 2010 (In thousands, except per share data)