Discontinued Operations (Tables)

6 Months Ended

Apr. 15, 2018

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Disposal Groups, Including Discontinued Operations

The following table summarizes the Qdoba results for each period prior to sale (in thousands, except per share data):

	Quarter						Year-to-date
	April 15, 2018			April 16, 2017			April 15, 2018			April 16, 2017
Company restaurant sales	$	66,850		$	98,793		$	192,620		$	227,492
Franchise revenues	3,351			4,711			9,337			10,764
Company restaurant costs (excluding depreciation and amortization)	(57,504		)	(80,713		)	(166,122		)	(186,429		)
Franchise costs (excluding depreciation and amortization)	(930		)	(910		)	(2,338		)	(2,083		)
Selling, general and administrative expenses	(5,848		)	(7,956		)	(18,112		)	(20,385		)
Depreciation and amortization	—			(5,057		)	(5,012		)	(11,752		)
Impairment and other charges, net	(594		)	(3,811		)	(2,263		)	(7,715		)
Interest expense, net	(1,575		)	(2,044		)	(4,787		)	(4,559		)
Operating earnings from discontinued operations before income taxes	3,750			3,013			3,323			5,333
Gain on Qdoba Sale	35,729			—			35,729			—
Earnings from discontinued operations before income taxes	39,479			3,013			39,052			5,333
Income taxes	(16,819		)	(1,181		)	(17,024		)	(2,057		)
Earnings from discontinued operations, net of income taxes	$	22,660		$	1,832		$	22,028		$	3,276
Net earnings per share from discontinued operations:
Basic	$	0.78		$	0.06		$	0.75		$	0.10
Diluted	$	0.77		$	0.06		$	0.74		$	0.10

Disclosure of Long Lived Assets Held-for-sale

The following is a reconciliation of the gain recorded for the Qdoba sale (in thousands):

Net proceeds received from the Qdoba Sale (1)	$	301,904
Qdoba assets:
Cash	3,113
Accounts receivable, net	9,461
Inventories	3,112
Prepaid expenses and other current assets	5,007
Property and equipment, net	163,404
Intangible assets, net	12,518
Goodwill	117,636
Other assets, net	2,604
Total Qdoba assets	316,855
Qdoba liabilities:
Accounts payable	7,847
Accrued liabilities	20,265
Current maturities of long-term debt	180
Straight-line rent accrual	14,595
Deferred income tax liability	8,676
Other long-term liabilities	11,144
Total Qdoba liabilities	62,707
Other transaction costs incurred as part of the Qdoba Sale (2)	12,027
Gain on Qdoba Sale before income taxes	$	35,729

____________________________

(1) The proceeds received from the Qdoba Sale are net of working capital adjustments outlined in the Qdoba Purchase Agreement, which must be finalized within 90 days after the closing date of the Qdoba Sale, and the derecognition of foreign currency translation adjustments recorded in accumulated other comprehensive income of $0.1 million.

(2) Costs directly incurred as a result of the Qdoba Sale, including investment bank fees, legal fees, professional fees, employee transaction awards, transfer taxes and other administrative costs.

Qdoba [Member]

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Lease guarantees — While all operating leases held in the name of Qdoba were part of the Qdoba Sale, some of the leases remain guaranteed by the Company pursuant to one or more written guarantees (the “Guarantee(s)”). In the event Qdoba fails to meet its payment and performance obligations under such guaranteed leases, we may be required to make rent and other payments to the landlord under the requirements of the Guarantees. Should we, as guarantor of the lease obligations, be required to make any lease payments due for the remaining term of the subject lease(s) subsequent to March 21, 2018, the maximum amount we may be required to pay is the sum of the annual rent payments due for the remainder of the subject lease terms. The annual rent on these leases in the first year subsequent to the Qdoba Sale is approximately $6.2 million, and will increase an average of 1.8% annually based on the provisions of the subject leases. The lease terms extend for a maximum of approximately 18 more years as of April 15, 2018, and we would remain a guarantor of the leases in the event the leases are extended for any established renewal periods. In the event that we are obligated to make payments under the Guarantees, we believe the exposure is limited due to contractual protections and recourse available in the lease agreements, as well as the Qdoba Purchase Agreement, including a requirement of the landlord to mitigate damages by re-letting the properties in default, and indemnity from the Buyer. Qdoba continues to meet its obligations under these leases and there have not been any events that would indicate that Qdoba will not continue to meet the obligations of the leases. As such, we have not recorded a liability for the Guarantees as of April 15, 2018 as the likelihood of Qdoba defaulting on the assigned agreements was deemed to be less than probable.