Leases

Leasing Arrangements as a Lessor

The Company’s leasing activities consist principally of leasing certain land and buildings as well as subleasing certain buildings to franchise operators. The land and building portions for the majority of these leases are classified as operating leases and have lease terms expiring through March 2032. The leases classified as direct financing leases are related to owned and subleased properties that were recently refranchised (see note 6 - Refranchising of Company Drive-Ins). The terms of these leases expire through September 2031. These leases include provisions for contingent rentals that may be received on the basis of a percentage of sales in excess of stipulated amounts. Income is not recognized on contingent rentals until sales exceed the stipulated amounts. Some leases contain escalation clauses over the lives of the leases. For property owned by third parties, the lease term runs concurrently with the term of the third-party lease arrangement. Most of the leases contain renewal option periods of five years at the end of the initial term.

Components of net investment in direct financing leases are as follows at August 31:



	2017			2016
Minimum lease payments receivable	$	18,156		$	15,108
Less unearned income	(5,932		)	(5,134		)
Net investment in direct financing leases	12,224			9,974
Less amount due within one year	(371		)	(115		)
Amount due after one year	$	11,853		$	9,859

Initial direct costs incurred in the negotiation and consummation of direct financing lease transactions have not been material. Accordingly, no portion of unearned income has been recognized to offset those costs.

Future minimum rental payments receivable as of August 31, 2017, are as follows:



	Operating		Direct Financing
Years ended August 31:
2018	$	5,510	$	1,087
2019	5,641		1,156
2020	5,619		1,269
2021	5,615		1,365
2022	5,664		1,362
Thereafter	46,155		11,917
	$	74,204	$	18,156
Less unearned income			$	(5,932	)
			$	12,224

Leasing Arrangements as a Lessee

Certain Company Drive-Ins lease land and buildings from third parties. These leases, with lease terms expiring through May 2037, include provisions for contingent rents that may be paid on the basis of a percentage of sales in excess of stipulated amounts. For the majority of leases, the land portions are classified as operating leases, and the building portions are classified as capital leases.

Future minimum lease payments on operating and capital leases as of August 31, 2017, are as follows:



	Operating		Capital
Years ended August 31:
2018	$	8,785	$	4,706
2019	8,703		3,699
2020	8,700		3,267
2021	8,056		3,186
2022	7,244		2,678
Thereafter	51,856		7,072
Total minimum lease payments ⁽¹⁾	$	93,344	24,608
Less amount representing interest averaging 5.5%			(4,977		)
Present value of net minimum lease payments			19,631
Less amount due within one year			(3,464		)
Amount due after one year			$	16,167

_______________


(1)	Minimum payments have not been reduced by future minimum rentals receivable under noncancellable operating subleases of $7.6 million. They also do not include contingent rentals which may be due under certain leases. Contingent rentals for capital leases amounted to $0.3 million, $0.9 million and $1.0 million in fiscal years 2017, 2016 and 2015, respectively.

Total rent expense for all operating leases consists of the following for the years ended August 31:



	2017			2016			2015
Minimum rentals	$	11,224		$	12,441		$	12,659
Contingent rentals	283			284			174
Total rent expense	11,507			12,725			12,833
Less sublease rentals	(2,513		)	(2,372		)	(2,235		)
Net rent expense	$	8,994		$	10,353		$	10,598