Discontinued Operations

9 Months Ended

Jul. 05, 2015

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

Distribution business — During fiscal 2012, we entered into an agreement with a third party distribution service provider pursuant to a plan approved by our board of directors to sell our Jack in the Box distribution business. During the first quarter of fiscal 2013, we completed the transition of our distribution centers. The operations and cash flows of the business have been eliminated and in accordance with the provisions of ASC 205, Presentation of Financial Statements, the results are reported as discontinued operations for all periods presented.

In 2015 and 2014, we recognized operating losses before taxes of $0.3 million and $0.6 million, respectively, in the quarter, and $0.5 million and $1.3 million, respectively, year-to-date. In the year-to-date period, operating losses before taxes include $0.3 million and $0.9 million in 2015 and 2014, respectively, related to insurance and other settlements, and $0.2 million and $0.3 million, respectively, related to our lease commitments.

Our liability for lease commitments related to our distribution centers is included in accrued liabilities and other long-term liabilities, and was $0.3 million and $0.5 million as of July 5, 2015 and September 28, 2014, respectively. The lease commitment balance as of July 5, 2015 relates to one distribution center subleased at a loss.

2013 Qdoba Closures — During the third quarter of fiscal 2013, we closed 62 Qdoba restaurants. The decision to close these restaurants was based on a comprehensive analysis that took into consideration levels of return on investment and other key operating performance metrics. Since the closed locations were not predominantly located near those remaining in operation, we did not expect the majority of cash flows and sales lost from these closures to be recovered. In addition, we did not anticipate any ongoing involvement or significant direct cash flows from the closed stores. Therefore, in accordance with the provisions of ASC 205, Presentation of Financial Statements, the results of operations for these restaurants are reported as discontinued operations for all periods presented. In the quarter and year-to-date periods, we recognized operating losses before income taxes of $2.2 million and $4.6 million, respectively, in 2015, and $1.7 million and $6.1 million, respectively, in 2014.

In 2015, the year-to-date operating losses include $3.9 million of unfavorable lease commitment adjustments, $0.3 million of bad debt expense related to a subtenant, $0.2 million of ongoing facility related costs and $0.2 million of broker commissions. In 2014, the year-to-date operating losses include $4.2 million of unfavorable lease commitment adjustments, $0.4 million for asset impairments, $0.7 million of ongoing facility related costs and $0.5 million of broker commissions. We do not expect the remaining costs to be incurred related to these closures to be material; however, the estimates we make related to our future lease obligations, primarily the sublease income we anticipate, are subject to a high degree of judgment and may differ from actual sublease income due to changes in economic conditions, desirability of the sites and other factors.

Our liability for lease commitments related to the 2013 Qdoba Closures is included in accrued liabilities and other long-term liabilities and changed as follows in 2015 (in thousands):

Balance as of September 28, 2014	$	5,737
Adjustments	3,853
Cash payments	(5,225		)
Balance as of July 5, 2015	$	4,365

Adjustments primarily relate to revisions to certain sublease and cost assumptions due to changes in market conditions as well as charges to terminate four lease agreements. These amounts were partially offset by favorable adjustments for locations that we have subleased.