Discontinued Operations

12 Months Ended

Sep. 28, 2014

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 the Accounting Standards Codification (“ASC”) 205, Presentation of Financial Statements, the results are reported as discontinued operations for all periods presented.

The following is a summary of our distribution business results, which are included in discontinued operations for each fiscal year (in thousands):

	2014			2013			2012
Revenue	$	—		$	37,743		$	616,982
Loss before income tax benefit	$	(1,276	)	$	(6,446	)	$	(8,777	)

The loss in fiscal 2014 includes $0.9 million related to insurance settlements and $0.3 million for lease adjustments. The losses in fiscal 2013 and 2012 include costs incurred to exit the distribution business consisting of $1.9 million and $6.0 million, respectively, for accelerated depreciation of a long-lived asset disposed of upon completion of the transaction, $1.6 million (net of reversals for deferred rent of $0.4 million) and $0.7 million, respectively, for future lease commitments, $1.2 million and $1.1 million, respectively, primarily related to costs incurred to terminate certain vendor contracts, and in fiscal 2013, $1.3 million related to distribution center specific workers’ compensation claims. The loss on the sale of the distribution business was not material to our results of operations. Our liability for lease commitments related to our distribution centers is included in accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheets and changed as follows during each fiscal year (in thousands):

	2014			2013
Balance at beginning of year	$	1,318		$	697
Additions	—			1,846
Adjustments	285			119
Cash payments	(1,055		)	(1,344		)
Balance at end of year	$	548		$	1,318

Adjustments in 2014 relate to the termination of a lease agreement and the execution of a sublease agreement. Adjustments in 2013 primarily represent revisions to certain sublease and cost assumptions due to changes in market conditions. The balance at September 28, 2014 relates to one distribution center subleased at a loss. The future minimum lease payments and receipts for the next five fiscal years and thereafter are included in the amounts disclosed in Note 8, Leases.

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 restaurants 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.

The following is a summary of the results related to the 2013 Qdoba Closures for each fiscal year (in thousands):

	2014		2013		2012
Company restaurant sales	$	—	$	28,036	$	35,731

Asset impairments	$	(2,170	)	$	(22,239	)	$	—
Future lease commitments (1)	(4,536		)	(10,301		)	—
Brokers commissions	(652		)	—			—
Other exit costs	(889		)	(3,075		)	—
Operating losses	—			(8,961		)	(8,327		)
Loss before income tax benefit	$	(8,247	)	$	(44,576	)	$	(8,327	)

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(1) Future lease commitments in 2013 are shown net of reversals for deferred rent and tenant improvement allowances of $4.3 million.

We do not expect the remaining costs to be incurred related to the closures to be material however, the estimates we make related to our future lease obligations, primarily sublease income, 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 in the accompanying consolidated balance sheets and has changed as follows during each fiscal year (in thousands):

	2014			2013
Balance at beginning of year	$	10,712		$	—
Additions	—			14,072
Adjustments	4,536			530
Cash payments	(9,511		)	(3,890		)
Balance at end of year	$	5,737		$	10,712

In 2014, adjustments primarily relate to revisions to certain sublease and cost assumptions due to changes in market conditions as well as charges to terminate 19 lease agreements. These amounts were partially offset by favorable adjustments for locations that we have subleased. The balance at September 28,2014 relates to five locations subleased at a loss and 26 locations we are marketing for sublease. The future minimum lease payments and receipts for the next five fiscal years and thereafter are included in the amounts disclosed in Note 8, Leases.