Note 4 - Leases

The Company leases the majority of its retail stores. Certain of the operating leases provide for minimum annual payments that change over the life of the lease. The Company expenses rental costs that are incurred during new store construction in the period incurred.

The aggregate minimum annual lease payments are expensed on the straight-line basis over the minimum lease term. The Company recognizes a deferred rent liability for minimum step rents when the amount of rent expense exceeds the actual lease payment and it reduces the deferred rent liability when the actual lease payment exceeds the amount of straight line rent expense. Rent holidays and tenant improvement allowances for store remodels are amortized on the straight-line basis over the initial term of the lease and any option period that is reasonably assured of being exercised. Certain of the Company's operating leases are subject to contingent rent based upon the sales volume of the store subject to the lease. The Company accrues for contingent rent when the amount of contingent rent exceeds minimum lease payments. Primary lease terms range from 3 to 55 years and substantially all leases provide for renewal options.

Following is a summary of future minimum lease payments and noncancelable sublease income as of September 25, 2011:


	Capital Leases		Operating Leases Minimum Payments		Noncancelable Sublease Income
	(In thousands)

2012	$	1,403	$	38,730	$	5,159
2013		943		36,317		4,614
2014		316		30,202		3,827
2015		—		28,344		3,160
2016		—		24,678		2,848
Thereafter		—		190,364		16,457

Total minimum lease payments		2,662	$	348,635	$	36,065

Less amounts representing interest		456

Present value of minimum lease payments		2,206
Less current portion		1,107

Long-term portion	$	1,099

Rental expense and sublease income were as follows:


	Fiscal Year Ended
	Sept. 27, 2009		Sept. 26, 2010		Sept. 25, 2011
	(In thousands)
Minimum rentals	$	30,326	$	29,087	$	28,850
Rentals based on sales	$	16,210	$	16,221	$	16,558
Sublease income	$	4,919	$	5,586	$	5,528

The Company has a fifteen year sublease with a third party (the "Sublessee") ending in May 2023, which contains three, five year lease options, for the lease of the Company's former headquarters building and certain former distribution facilities located in Colton, California (the "Former Facilities"). The current lease on the Former Facilities contains multiple lease options that gives the Company the right to control the property through May 2038. The Sublessee assumed all lease payments and other liabilities under the lease. The Company's lease payments on the Former Facilities are included in the "Operating leases minimum payments" and the Sublessee's lease payments are included in "Noncancelable sublease income" in the schedule above.