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Accounting Standards No. 13. The accompanying financial statements have been restated to reflect the change.
Minimum future rentals under non-cancelable leases (primarily
real estate and shopping center space) are as follows:
12 Months Ended July,
1979
1980
1981
1982
1983
Thereafter
Total minimum lease payments
Amounts representing interest
Present value of net minimum lease
payments
Current portion of capital lease
obligations
Long term capital lease obligations
Rent expense consists of:
Minimum rentals on operating leases
Additional rentals based on sales
—operating leases
—capital leases
Rentals on operating leases based solely
on hotel profits
Capital
Leases
$ 2,803,000
2,803,000
2,798,000
2,793,000
2,737,000
29,569,000
43,503,000
(20,431,000)
23,072,000
(885,000)
$22,187,000
1978
Operating
Leases
$ 15,542,000
15,438,000
15,042,000
14,700,000
14,812,000
141,165,000
$216,699,000
1977
$16,031,000 $15,411,000
9,766,000
454,000
7,723,000
457,000
$26,251,000 $23,591,000
$13,894,000 $ 8,452,000
Most leases contain one or more renewal options, generally for
five- or ten-year periods.
On June 30,1978, the Company sold five hotels to The Equitable
Life Assurance Society of the United States. The Equitable
assum ed a mortgage of $31,811,000 and existing mortgages of
$32,018,000 were retired, resulting in net proceeds of $27,591,000
after selling costs. The Company will continue to operate the five
hotels under a long term agreement. In accordance with Statement of Financial Accounting Standards No. 13, the excess of the
purchase price over the carrying costs of these properties (approximately $6 million before income taxes) is being amortized over the
initial terms of the agreement (approximately 25 years). The long
term agreement with The Equitable may be renewed for an additional 50 years. Payments to The Equitable are based solely on
hotel profits.
CAPITAL STOCK
1,000,000 shares of preferred stock, without par value, are
authorized. As of July 28,1978, no preferred shares have been
issued.
60,000,000 shares of common stock, with a par value of $1
per share, are authorized, of which 36,855,351 and 36,668,489
were issued and outstanding at July 28,1978 and July 29,1977,
respectively.
Total common stock shares reserved at July 28,1978:
Employee stock option plan
Conversions of convertible subordinated debt, at prices
ranging from $29.26 to $38.44 per share
Deferred stock compensation program (401,742 shares
fully vested)
Employee qualified stock purchase plan
Restricted stock plan for key employees
Exercise of warrant, at $22.10 per share
Total shares reserved
1,947,139
941,780
915,567
161,587
89,500
13,576
4,069,149
Options to purchase shares of common stock may be granted to
key employees, under the 1974 and 1976 employee stock option
plans, at not less than 100% of the fair market value on the date of
grant. All options expire ten years after the date of grant and are
exercisable in cumulative installments of one-fourth each year
after a one-year waiting period. Activity under the plan is summarized below.
Shares Under Option
Balance, July 30,1976
Granted
Exercised
Canceled
Balance, July 29,1977
Granted
Exercised
Canceled
Balance, July 28,1978
Number of
Shares
739,680
296,911
(10,622)
(104,626)
921,343
363,650
(12,380)
(100,806)
1,171,807
Option Price
Per Share
$10.11-17.32
9.69-12.44
10.11-10.74
10.11-14.04
9.69-17.32
9.31-11.44
10.11-10.74
9.69-14.04
9.31-17.32
At July 28,1978, options for 458,465 shares were exercisable
and 775,332 shares were available for granting of additional
options. No accounting is made for options until they are exercised, at which time the proceeds from the options are credited to
common stock and capital surplus.
The purchase price for the shares reserved under the employee
qualified stock purchase plan is the market value on January 3,
1978 ($11.44 per share) or the purchase date (January 31,1979),
whichever is less.
REPLACEMENT COST (Unaudited)
In recent years inflation has had a material impact on the
Company's operating expenses and cost of replacing productive
capacity. However, the Company has generally been able to offset the impact of inflation by improved design of facilities and
equipment, price increases and emphasis on improved cost and
expense controls.
The Company's annual report on Form 10-K contains unaudited
information with respect to estimated replacement cost of productive capacity as of July 28,1978 and July 29,1977 and the
approximate effect which replacement cost would have had on the
computation of depreciation expense for the years then ended.
Replacement cost of inventories would be essentially the same as
historical cost.
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