Other Operating Income

9 Months Ended

May 31, 2013

Other Operating Income [Abstract]

Other Operating Income

7.Other Operating Income

During the second quarter of fiscal year 2013, a franchisee exercised an option to acquire land and buildings leased or subleased from the Company relating to previously refranchised drive-ins.  In December 2012, at the time of the sale, these assets had a carrying value of $38.4 million.  The Company received $29.7 million in cash at closing and will receive the remaining $8.7 million (plus interest) over 24 months through the combination of a note receivable and a direct financing lease.  In conjunction with the sale and the assignment of third party leases, the Company removed its escalating lease liability related to the sold properties.  This resulted in a gain of $1.0 million, which is reflected in “Other operating income, net” on the Condensed Consolidated Statements of Income.  For fiscal year 2012, lease revenue, net of sublease payments, related to these assets was approximately $4.8 million.  The Company’s debt covenants require the application of certain asset disposition proceeds as note prepayments, after a $5 million annual exclusion, if the proceeds are not reinvested in eligible assets within a twelve-month period.  During the second quarter of fiscal year 2013, the Company prepaid $20.0 million of debt which was applied toward the prepayment requirements noted above.  See note 9 – Debt for additional information.  In addition, during the second quarter of fiscal year 2013, the Company recorded a charge of $0.8 million in “Other operating income, net” related to a straight-line lease adjustment and franchise rights that should have been expensed in prior years.  Management of the Company evaluated the impact of these adjustments and concluded the effect was immaterial to the current and prior-year financial statements.