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Discontinued Operations | 12 Months Ended
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Sep. 29, 2019
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | DISCONTINUED OPERATIONS Qdoba — On December 19, 2017, we entered into a stock purchase agreement (the “Qdoba Purchase Agreement”) with the Buyer to sell all issued and outstanding shares of Qdoba (the “Shares”). The Buyer completed the acquisition of Qdoba on March 21, 2018 (the “Qdoba Sale”) for an aggregate purchase price of approximately $298.5 million. We also entered into a Transition Services Agreement with the Buyer pursuant to which the Buyer received certain services (the “Services”) to enable it to operate the Qdoba business after the closing of the Qdoba Sale. The Services included information technology, finance and accounting, human resources, supply chain and other corporate support services. Under the Agreement, the Services were provided at cost for a period of up to 12 months, with two 3-month extensions available for certain services. As of September 21, 2019, we are no longer providing transition services to Qdoba. In fiscal 2019 and 2018 we recorded $7.0 million and $7.9 million, respectively, related to the Services as a reduction of “Selling, general, and administrative expenses” in the consolidated statements of earnings. Further, in 2018, we entered into an Employee Agreement with the Buyer pursuant to which we continued to employ all Qdoba employees who work for the Buyer (the “Qdoba Employees”) from the date of closing of the Qdoba Sale through December 31, 2018. During the term of the Employee Agreement, we paid all wages and benefits of the Qdoba Employees and received reimbursement of these costs from the Buyer. From October 1, 2018 to December 31, 2018, we paid $35.4 million of Qdoba wages and benefits pursuant to the Employee Agreement. As the Qdoba Sale represented a strategic shift that had a major effect on our operations and financial results, in accordance with the provisions of FASB authoritative guidance on the presentation of financial statements, Qdoba results are classified as discontinued operations in our consolidated statements of earnings and our consolidated statements of cash flows for all periods presented. Income taxes — In fiscal 2019, the Company entered into a bilateral California election with Quidditch Acquisition, Inc. to retroactively treat the divestment of Qdoba Restaurant Corporation on March 21, 2018 as a sale of assets instead of a stock sale for income tax purposes. This election reduced the Company’s fiscal year 2018 California tax liability on the divestment by $2.8 million. The following table summarizes the Qdoba results for each period (in thousands, except per share data):
|  | 2019 |  | 2018 |  | 2017
Company restaurant sales |  | $ | — |  |  | $ | 192,620 |  |  | $ | 436,558 |
Franchise revenues |  | — |  |  | 9,337 |  |  | 20,065 |
Company restaurant costs (excluding depreciation and amortization) |  | — |  |  | (166,122 | ) |  | (357,370 | )
Franchise costs (excluding depreciation and amortization) |  | — |  |  | (2,338 | ) |  | (4,993 | )
Selling, general and administrative expenses |  | 174 |  |  | (19,286 | ) |  | (36,706 | )
Depreciation and amortization |  | — |  |  | (5,012 | ) |  | (21,500 | )
Impairment and other charges, net |  | (262 | ) |  | (2,305 | ) |  | (15,061 | )
Interest expense, net |  | — |  |  | (4,787 | ) |  | (9,025 | )
Operating (loss) earnings from discontinued operations before income taxes |  | (88 | ) |  | 2,107 |  |  | 11,968 |
(Loss) gain on Qdoba Sale |  | (85 | ) |  | 30,717 |  |  | — |
(Loss) earnings from discontinued operations before income taxes |  | (173 | ) |  | 32,824 |  |  | 11,968 |
Income tax benefit (expense) |  | 2,863 |  |  | (15,726 | ) |  | (4,518 | )
Earnings from discontinued operations, net of income taxes |  | $ | 2,690 |  |  | $ | 17,098 |  |  | $ | 7,450 |
Net earnings per share from discontinued operations: |  |  |  |  |  |
Basic |  | $ | 0.10 |  |  | $ | 0.60 |  |  | $ | 0.24 |
Diluted |  | $ | 0.10 |  |  | $ | 0.59 |  |  | $ | 0.24 |
Selling, general and administrative expenses presented in the table above include corporate costs directly in support of Qdoba operations. All other corporate costs were classified in results of continuing operations. Our credit facility required us to make a mandatory prepayment (“Qdoba Prepayment”) on our term loan upon the closing of the Qdoba Sale, which was $260.0 million. Interest expense associated with our credit facility was allocated to discontinued operations based on our estimate of the mandatory prepayment that was made upon closing of the Qdoba Sale. 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 “Guarantees”). 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 approximately $32.1 million as of September 29, 2019. The lease terms extend for a maximum of approximately 16 more years as of September 29, 2019, 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 September 29, 2019 as the likelihood of Qdoba defaulting on the assigned agreements was deemed to be less than probable.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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