Divestitures

9 Months Ended

Sep. 29, 2019

Divestitures

Divestitures

10. Divestitures

On August 1, 2019, the Company refranchised 19 Company-owned restaurants in Macon, Georgia for $5.6 million in cash proceeds. The assets and liabilities associated with the Macon stores were previously classified as Assets held for sale in the Condensed Consolidated Balance Sheet as of June 30, 2019. The sale resulted in a pre-tax gain of $1.7 million shown in Refranchising gains (losses), net on the Condensed Consolidated Statement of Operations.

As a result of assigning our interest in obligations under property leases as a condition of the refranchising of the Macon market, we are contingently liable for payment on the 19 leases. These leases have varying terms, the latest of which expires in 2036. As of September 29, 2019, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $5.7 million. The fair value of the guarantee is not material.

Subsequent to the third quarter, on September 30, 2019, the Company completed the refranchising of 23 Company-owned restaurants in South Florida for $7.5 million in cash proceeds. The assets and liabilities associated with the South Florida restaurants are classified as Assets held for sale in the Condensed Consolidated Balance Sheet as of September 29, 2019. Upon the reclassification of these assets to Assets held for sale, no loss was recognized as their fair value exceeded their carrying value. The Company expects to recognize a gain on the sale in the fourth quarter of 2019.

The following table summarizes the associated assets and liabilities that are classified as Assets held for sale (in thousands):

	Held for Sale
	September 29, 2019
Cash and cash equivalents	$	13
Inventories		119
Property and equipment, net		2,139
Right-of-use assets		2,336
Goodwill		2,532
Total assets held for sale	$	7,139
Lease liabilities	$	2,420
Total liabilities held for sale (a)	$	2,420

(

(a) Liabilities held for sale are included under the caption “Accrued expenses and other current liabilities”.

The Company-owned restaurants classified as held for sale reported income before income taxes of $197,000 and $195,000 for the three months ended September 29, 2019 and September 30, 2018, respectively, and $968,000 and $906,000 for the nine months ended September 29, 2019 and September 30, 2018. All stores were included in the Domestic Company-owned restaurants segment.