Commitments and Contingencies

3 Months Ended

Jul. 03, 2011

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Commitments and contingencies

Lease commitments

The Company leases all of its retail and office space under operating leases, which have expiration dates through 2020. The leases provide for minimum annual payments, and (in certain cases) contingent rentals based upon gross sales, escalation clauses and/or options to renew. Rental expense is recorded on a straight-line basis over the respective terms of the leases.

In connection with certain leases, lessors have granted tenant improvement allowances. These amounts, included in liabilities under the caption “deferred lease costs,” are amortized into income on a straight-line basis over the life of the related lease. Also recorded in deferred lease costs is the “stepped rent” excess of rental expense computed on a straight-line basis over the actual rent payments required by the terms of these leases.

Minimum future rental payments under non-cancellable operating leases as of July 3, 2011 are summarized as follows:

Fiscal year
(dollars in thousands)
Remainder of Fiscal 2012	3,325
2013	2,768
2014	2,116
2015	1,559
2016	897
2017	499
Thereafter	1,139
Total	$	12,303

The Company has subleased some of its leased premises to third parties under agreements with varying terms through 2013. Expected future sublease receipts under such sub-lease agreements are summarized as follows:

Fiscal year
(dollars in thousands)
Remainder of Fiscal 2012	$	27
2013	15
Total	$	42

Contingencies

On May 17, 2011, a lawsuit was filed against the Company in California state court by JH Development, LLC, a franchise area developer, alleging that (i) at the time the Company entered into agreements with the plaintiff, the Company concealed its financial strength and the fact that it was contemplating a sale of its wholesale division and rights to the “Tully’s” trademark; (ii) the Company breached the franchise agreements with the plaintiff; (iii) the Company made false promises to the plaintiff; and (iv) the Company violated certain provisions of the California Corporations Code governing the sale of franchises.  The plaintiff is seeking damages, rescission, and attorneys’ fees and costs.  We are investigating the claims, have retained California counsel, have removed the case to federal court in the Central District of California, and intend to vigorously defend this litigation, but cannot predict the outcome or financial impact to the Company at this time.

We are a party to various other legal proceedings arising in the ordinary course of our business, but are not currently a party to any other legal proceeding that we believe could have a material adverse effect on our financial position or results of operations.

Tully’s Coffee Asia Pacific – Limited Partnership Interest

On March 27, 2009, TCAP agreed to purchase, or cause a third party to purchase, one-half of AFCM’s partnership interest in TCAPPLP, equal to twenty-five percent (25%) of the total partnership interests outstanding, at a purchase price of US $4.0 million by March 27, 2010. As of July 3, 2010, TCAP had not met its obligation. TCAP and AFCM continue to work on a settlement and to seek a buyer for AFCM’s partnership interest. If TCAP is unsuccessful in either finding a buyer for AFCM’s interest or in its settlement negotiations, the Company could face adverse economic consequences surrounding its wholly owned subsidiary TCAP.