Document and Entity Information
Document and Entity Information Document - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 30, 2015 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | Four Corners Property Trust, Inc. | |
Entity Central Index Key | 1,650,132 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, shares outstanding | 42,742,009 |
Combined Balance Sheets Stateme
Combined Balance Sheets Statement - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Four Corners Property Trust | ||
Current assets: | ||
Cash | $ 1 | |
Total assets | 1 | |
Parent company equity: | ||
Common stock and additional paid-in capital, par value $0.01 per share; 100 shares authorized, 10 shares issued and outstanding | 1 | |
Total shareholder’s equity | 1 | |
Longhorn San Antonio Business | ||
Current assets: | ||
Cash | 7 | $ 7 |
Inventories | 162 | 113 |
Prepaid expenses | 50 | 62 |
Deferred income tax assets | 45 | 38 |
Total current assets | 264 | 220 |
Land, buildings and equipment, net of accumulated depreciation | 11,189 | 11,722 |
Other assets | 7 | 7 |
Total assets | 11,460 | 11,949 |
Current liabilities: | ||
Accounts payable | 415 | 450 |
Accrued payroll | 101 | 136 |
Other accrued taxes | 313 | 407 |
Other current liabilities | 356 | 342 |
Total current liabilities | 1,185 | 1,335 |
Deferred income taxes | 984 | 1,033 |
Deferred rent | 543 | 484 |
Other liabilities | 107 | 99 |
Total liabilities | 2,819 | 2,951 |
Parent company equity: | ||
Total parent company equity | 8,641 | 8,998 |
Total liabilities and parent company equity | 11,460 | 11,949 |
Four Corners Properties | ||
Current assets: | ||
Land, buildings and equipment, net of accumulated depreciation | 822,967 | 843,088 |
Total assets | 822,967 | 843,088 |
Current liabilities: | ||
Deferred income taxes | 78,453 | 60,174 |
Total liabilities | 78,453 | 60,174 |
Parent company equity: | ||
Total parent company equity | 744,514 | 782,914 |
Total liabilities and parent company equity | $ 822,967 | $ 843,088 |
Combined Balance Sheets Parenth
Combined Balance Sheets Parenthetical - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Four Corners Property Trust | ||
Common stock, par value (in dollars per share) | $ 0.01 | |
Common stock, shares authorized | 100 | |
Common stock, shares issued | 10 | |
Common stock, shares outstanding | 10 | |
Longhorn San Antonio Business | ||
Accumulated depreciation | $ 4,433 | $ 3,860 |
Four Corners Properties | ||
Accumulated depreciation | $ 556,847 | $ 524,872 |
Combined Statements of Comprehe
Combined Statements of Comprehensive Income Statement - Longhorn San Antonio Business - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Sales, net | $ 4,413 | $ 4,339 | $ 13,927 | $ 13,365 |
Costs and expenses: | ||||
Food and beverage | 1,755 | 1,707 | 5,637 | 5,315 |
Restaurant labor | 1,137 | 1,145 | 3,577 | 3,457 |
Restaurant expenses | 655 | 710 | 2,154 | 2,310 |
Selling, general and administrative | 541 | 583 | 1,568 | 1,639 |
Depreciation | 208 | 213 | 605 | 631 |
Total costs and expenses | 4,296 | 4,358 | 13,541 | 13,352 |
Income (loss) before income taxes | 117 | (19) | 386 | 13 |
Income tax expense (benefit) | 6 | (40) | (5) | (98) |
Net income and comprehensive income | $ 111 | $ 21 | $ 391 | $ 111 |
Combined Statement of Changes i
Combined Statement of Changes in Parent Company Equity - 9 months ended Sep. 30, 2015 $ in Thousands | Longhorn San Antonio BusinessUSD ($) |
Balance at December 31, 2014 at Dec. 31, 2014 | $ 8,998 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |
Net income and comprehensive income | 391 |
Net transfers to parent | (748) |
Balance at September 30, 2015 at Sep. 30, 2015 | $ 8,641 |
Combined Statements of Cash Flo
Combined Statements of Cash Flows - Longhorn San Antonio Business - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows - operating activities | ||
Net income and comprehensive income | $ 391 | $ 111 |
Adjustments to reconcile net income and comprehensive income to cash flows provided by operating activities: | ||
Depreciation | 605 | 631 |
Loss on disposal of land, building and equipment | 25 | 6 |
Stock based compensation expense | 96 | 57 |
Deferred income taxes | (56) | (117) |
Changes in operating assets and liabilities: | ||
Inventories | (49) | (34) |
Prepaid expenses | 12 | (1) |
Accounts payable | (35) | (52) |
Accrued payroll | (35) | (8) |
Other accrued taxes | (94) | (92) |
Other current liabilities | 12 | 87 |
Other assets and liabilities | (86) | (73) |
Change in deferred rent liability | 59 | 59 |
Net cash provided by operating activities | 845 | 574 |
Cash flows - investing activities | ||
Purchases of land, buildings and equipment | (97) | (46) |
Net cash used in investing activities | (97) | (46) |
Cash flows - financing activities | ||
Net transfers to parent | (748) | (528) |
Net cash used in financing activities | (748) | (528) |
Change in cash | 0 | 0 |
Cash - beginning of period | 7 | 7 |
Cash - end of period | $ 7 | $ 7 |
Organization Note
Organization Note | 9 Months Ended |
Sep. 30, 2015 | |
Four Corners Property Trust | |
ORGANIZATION | ORGANIZATION Four Corners Property Trust, Inc. (“Four Corners”) was incorporated as a Maryland corporation on July 2, 2015 and capitalized on July 16, 2015 for the purpose of owning, acquiring and leasing properties, on a triple-net basis, for use in the restaurant industry and potentially other industries. As of September 30, 2015, Four Corners had no material assets or any operations. As of September 30, 2015, Four Corners’ sole shareholder was Rare Hospitality International, Inc., an indirect wholly owned subsidiary of Darden Restaurants, Inc. (together with its consolidated subsidiaries, “Darden”). On November 9, 2015, Darden completed a spin-off transaction, resulting in Four Corners being a separate company. See Note 4 - Subsequent Events - Spin-Off for a further discussion. Any references to “the Company,” “we,” “us,” or “our” for all periods ended November 9, 2015 and prior refer to Four Corners as owned by Darden and for all periods subsequent to November 9, 2015 refer to Four Corners as an independent, publicly traded, self-administered company. Four Corners intends to elect to be taxed, and to operate in a manner that will allow it to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with its taxable year beginning January 1, 2016. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it distribute at least 90% of its adjusted taxable income to its shareholders, subject to certain adjustments and excluding any net capital gain. As a REIT, Four Corners will not be subject to federal corporate income tax on that portion of net income that is distributed to its shareholders. However, Four Corners’ taxable REIT subsidiaries (“TRS”) will generally be subject to federal, state, and local income taxes. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2015 | |
Four Corners Property Trust | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited balance sheet reflects our financial position as of September 30, 2015 and has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (the “SEC”), as permitted by the SEC. Additionally, the unaudited balance sheet has been prepared consistent with Article 10 of Regulation S-X. The elements of the unaudited balance sheet are stated in accordance with accounting principles generally accepted in the United States (“GAAP”). Statements of income (loss), equity and cash flows have not been presented here as there was no activity for the period from capitalization through September 30, 2015, other than the issuance of common stock for cash in connection with the capitalization of Four Corners. |
Longhorn San Antonio Business | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Operations At September 30, 2015, Darden Restaurants, Inc. (together with its subsidiaries, “Darden”) owned and operated six LongHorn Steakhouse® restaurants located in the San Antonio, Texas area (the “LongHorn San Antonio Business”). The LongHorn San Antonio Business operates in the full-service dining segment of the restaurant industry. On November 9, 2015, Darden completed a spin-off transaction that resulted in the LongHorn San Antonio Business being contributed to Kerrow Restaurants, LLC (“Kerrow”). Kerrow is an indirect, wholly owned subsidiary of Four Corners Operating Partnership, LP (“Four Corners OP”). Four Corners Property Trust, Inc. (“Four Corners”) is the initial limited partner of Four Corners OP and is the sole general partner of Four Corners OP. See Note 2 - Subsequent Events - Spin-Off for further discussion. Any references to “the Company,” “we,” “us,” or “our” for all periods ended November 9, 2015 and prior refer to The LongHorn San Antonio Business as owned by Darden and for all periods subsequent to November 9, 2015 refer to the LongHorn San Antonio Business as owned by Kerrow. Basis of Presentation These accompanying unaudited combined financial statements have been prepared on a stand-alone basis and are derived from Darden’s unaudited consolidated financial statements and underlying accounting records. The unaudited combined financial statements reflect our historical results of operations, financial position and cash flows as though we were part of Darden prior to the spin-off transaction, in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X of the SEC. Accordingly, the unaudited combined financial statements do not include all of the disclosures required by GAAP for a complete set of annual audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of our financial position as of September 30, 2015, our results of operations for the three and nine months ended September 30, 2015 and 2014, and our cash flows for the nine months ended September 30, 2015 and 2014 have been included. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The unaudited combined financial statements should be read in conjunction with the audited financial statements and combined notes thereto included in Four Corners’ Information Statement filed as an exhibit to Four Corners’ Registration Statement on Form 10 filed with the Securities and Exchange Commission in final form on October 21, 2015. The combined financial statements include all revenues and costs allocable to us either through specific identification or allocation, and all assets and liabilities directly attributable to us as derived from the operations of the restaurants. The combined statements of comprehensive income include allocations of certain costs from Darden incurred on our behalf. There were no intercompany transactions to eliminate in combination. See Note 3 - Related Party Transactions for a further description of allocated expenses. Seasonality Our sales volumes fluctuate seasonally. Typically, our average sales per restaurant are highest in the spring and winter, followed by the summer, and lowest in the fall. Holidays, changes in the economy, severe weather and similar conditions may impact sales volumes. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full year. |
Four Corners Properties | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Operations At September 30, 2015, Four Corners Properties consisted of 418 properties in which Darden Restaurants, Inc. (together with its subsidiaries, “Darden”) operated restaurants representing five of their brands (the “Four Corners Properties”). On November 9, 2015, Darden completed a spin-off transaction whereby they contributed 100% of the equity interest in the entities that own the Four Corners Properties to Four Corners Operating Partnership, LP (together with its subsidiaries, “Four Corners OP”). See Note 2 - Subsequent Events below for further discussion. Any references to “the Company,” “we,” “us,” or “our” for all periods ended November 9, 2015 and prior refer to Four Corners Properties as owned by Darden and for all periods subsequent to November 9, 2015 refer to Four Corners Properties as owned by Four Corners OP. Basis of Presentation The accompanying unaudited combined balance sheet presents the restaurant property assets and liabilities that were transferred to Four Corners Properties in the separation and spin-off as though we were part of Darden prior to the distribution, in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X of the SEC. Accordingly, the unaudited combined financial statements do not include all of the disclosures required by GAAP for a complete set of annual audited financial statements. There were no intercompany transactions to eliminate in combination. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of our financial position as of September 30, 2015 have been included. The unaudited combined financial statements should be read in conjunction with the audited financial statements and combined notes thereto included in Four Corners’ Information Statement filed as an exhibit to its Registration Statement on Form 10 filed with the Securities and Exchange Commission in final form on October 21, 2015. The Four Corners Properties were owner-occupied by Darden and, accordingly, there are no historical results of operations related to these assets. The accompanying unaudited combined balance sheet reflects Darden’s historical carrying value of the assets and liabilities as of the financial statement date consistent with the accounting for spin-off transactions in accordance with GAAP. |
Shareholder's Equity
Shareholder's Equity | 9 Months Ended |
Sep. 30, 2015 | |
Four Corners Property Trust | |
SHAREHOLDER'S EQUITY | SHAREHOLDER’S EQUITY We have been capitalized with the issuance of 10 shares of common stock ( $0.01 par value per share) for a total of $1,000 . |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2015 | |
Four Corners Property Trust | |
Subsequent Event [Line Items] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Incentive Plan On October 20, 2015, the Board of Directors of Four Corners adopted, and Four Corners’ sole shareholder, Rare Hospitality International, Inc., approved, the Four Corners Property Trust, Inc. 2015 Omnibus Incentive Plan (the “Plan”). The Plan provides for the grant of awards of nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards (each, an “Award” and collectively, the “Awards”) to eligible participants. Subject to adjustment, the maximum number of shares of stock reserved for issuance under the Plan is equal to 2,100,000 shares. The Plan will terminate on the first to occur of (a) October 20, 2025, which is the tenth (10th) anniversary of the effective date of the Plan, (b) the date determined in accordance with the Board’s authority to terminate the Plan, or (c) the date determined in accordance with the provisions of the Plan addressing the effect of a Change in Control (as defined in the Plan). Upon such termination of the Plan, all outstanding Awards will continue to have full force and effect in accordance with the provisions of the terminated Plan and the applicable award agreement (or other documents evidencing such Awards). Separation and Distribution Agreement On October 21, 2015, we entered into a Separation and Distribution Agreement (the “Separation Agreement”) with Darden in connection with our separation and spin-off from Darden. See “Spin-Off” below. The Separation Agreement contains the key provisions relating to the separation and contains other agreements that govern certain aspects of our relationship with Darden that will continue after the spin-off as described in “Other Agreements with Darden” below. Articles of Amendment and Restatement and Bylaws On October 22, 2015, we filed Articles of Amendment and Restatement of Four Corners Property Trust, Inc. (the “Articles”) with the Maryland State Department of Assessments and Taxations amending and restating our charter. These Articles provide for, among other things, (i) an increase in our authorized number of shares of capital stock from 100 shares of common stock, par value $0.01 per share to 525,000,000 shares consisting of 25,000,000 shares of preferred stock, par value $0.0001 per share and 500,000,000 shares of common stock, par value $0.0001 per share, and (ii) restrictions on transfer and ownership intended to enable the Company to qualify and maintain its qualification as a real estate investment trust. No shares of preferred stock have been issued. On October 22, 2015, the Company also amended and restated its bylaws to provide terms appropriate as an ongoing publicly traded company. Revolving Credit and Term Loan Agreement On November 9, 2015 , immediately preceding the consummation of the spin-off transaction discussed below, Four Corners and our operating partnership, Four Corners Operating Partnership, LP (“Four Corners OP”), a Delaware limited partnership of which we are the initial limited partner and our wholly owned subsidiary is its sole general partner, entered into the Revolving Credit and Term Loan Agreement (the “Loan Agreement”) that provides for borrowings of up to $750.0 million and consists of (1) a $400.0 million non-amortizing term loan that matures on November 9, 2020 and (2) a $350.0 million revolving credit facility that provides for loans and letters of credits and matures on November 9, 2019. The revolving credit facility provides for a letter of credit sub-limit of $45.0 million . The Loan Agreement is a syndicated credit facility that contains an accordion feature such that the aggregate principal amount of the credit facilities can be increased by an additional $250.0 million to an amount not to exceed $1.0 billion in the aggregate, subject to certain conditions, including one or more new or existing lenders agreeing to provide commitments for such increased amounts. The obligations under the Loan Agreement are secured by a pledge of Four Corners OP’s ownership interests in substantially all of its material subsidiaries, subject to certain exceptions, and are guaranteed, on a joint and several basis, by substantially all of Four Corners OP’s material subsidiaries, subject to certain exceptions. The collateral will be released, if, as a result of growth in the value of our assets following the Spin-Off, the aggregate asset growth capitalization value (as defined in the Loan Agreement) exceeds $300.0 million . The Loan Agreement contains customary affirmative and negative covenants that, among other things, require customary reporting obligations, contain obligations to maintain REIT status, and restrict, subject to certain exceptions, the incurrence of debt and liens, the consummation of certain mergers, consolidations and asset sales, the making of distributions and other restricted payments, and entering into transactions with affiliates. In addition, Four Corners OP will be required to comply with the following financial covenants (all terms as defined in the Loan Agreement): (1) total indebtedness to consolidated capitalization value not to exceed 60% ; (2) mortgage-secured leverage ratio not to exceed 40% ; (3) total secured recourse indebtedness not to exceed 5% of consolidated capitalization value; (4) minimum fixed charge coverage ratio of 1.75 to 1.00; (5) minimum consolidated tangible net worth; (6) unhedged floating rate debt not to exceed 50% of all indebtedness; (7) maximum unencumbered leverage ratio not to exceed 60% ; and (8) minimum unencumbered debt service coverage ratio of 1.50 to 1.00. The Loan Agreement also contains customary events of default including, without limitation, payment defaults, violation of covenants cross acceleration to material indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain change of control events. The occurrence of an event of default will limit the ability of Four Corners and Four Corners OP to make distributions and may result in the termination of the credit facility, acceleration of repayment obligations and the exercise of remedies by the lenders under the Loan Agreement with respect to the collateral. The term loan and revolving credit facility interest rates are based on either (1) a LIBOR rate plus a margin ranging from 1.70% to 2.45% (in the case of the term loan) or 1.75% to 2.50% (in the case of the revolving credit facility) or, (2) at our option, an alternate base rate (the “ABR Rate”), plus a margin ranging from 0.70% to 1.45% (in the case of the term loan) or 0.75% to 1.50% (in the case of the revolving credit facility). The actual applicable margin is determined on a quarterly basis according to our total leverage ratio as defined by the Loan Agreement. The unused commitment fee on the revolving credit facility is 0.25% or 0.35% per year, depending on the amount of the unused portion of the revolving credit facility, is computed based on the average daily amount of the unused portion of the revolving credit facility, and is payable quarterly. The interest rate will increase by a rate of 2% per year over the prevailing interest rate on outstanding borrowings and other amounts due and owing following the occurrence and during the continuation of an event of default. Amounts owing under the Loan Agreement may be prepaid at any time without premium or penalty, subject to customary breakage costs in the case of borrowings with respect to which a LIBOR rate election is in effect. Immediately preceding the Spin-Off, Four Corners OP drew down the full amount of the term loan using a portion of the proceeds to pay Darden $315.0 million in connection with the Spin-Off discussed below. The remainder of the proceeds will be used to pay all or part of the cash portion of the purging distribution required in connection with qualifying as a REIT, for working capital purposes and for general corporate purposes. At the time of draw down, the effective interest rate on the term loan was 1.93% . As of December 4, 2015 , there were no outstanding borrowings under the revolving credit facility and no outstanding letters of credit. Interest Rate Hedges On November 10, 2015, Four Corners OP entered into two interest rate swaps pursuant to an International Swaps and Derivatives Association Master Agreement with J.P.Morgan Chase Bank, N.A. to economically hedge its exposure in cash flows associated with its variable rate debt obligations described above. One swap has a fixed notional value of $200.0 million that matures on November 9, 2018, where the fixed rate paid by Four Corners OP is equal to 1.16% and the variable rate received resets monthly to the one month LIBOR rate. The second swap has a fixed notional value of $200.0 million that matures on November 9, 2020, where the fixed rate paid by Four Corners OP is equal to 1.56% and the variable rate received resets monthly to the one month LIBOR rate. These hedging agreements were not entered into for trading purposes and have been designated as cash flow hedges. Changes in the effective portion of the fair value of these hedges will be recorded as a component of other comprehensive income and reclassified into earnings in the same periods during which the hedged transaction affect earnings. Changes in the fair value of the ineffective portion of these hedges will be recorded in earnings. Spin-Off On November 9, 2015 , in connection with the separation and spin-off of Four Corners from Darden, Darden contributed to us 100% of the equity interest in entities that held 418 properties in which Darden operates restaurants, representing five of their brands (the “Four Corners Properties”), and six LongHorn Steakhouse® restaurants located in the San Antonio, Texas area (the “LongHorn San Antonio Business”) and the underlying properties or interests therein associated with the LongHorn San Antonio Business. In exchange, we issued to Darden 42,741,995 shares of our common stock, par value $0.0001 per share and paid to Darden $ 315.0 million in cash, which we funded from the proceeds of our term loan borrowings under the Loan Agreement. Subsequently, Darden distributed the 42,741,995 shares of our common stock pro rata to holders of Darden common stock whereby each Darden shareholder received one share of Four Corners common stock for every three shares of Darden common stock held at the close of business on the record date, which was November 2, 2015, as well as cash in lieu of any fractional shares of our common stock which they would have otherwise received (the “Spin-Off”). The Spin-Off is intended to qualify as tax-free to Darden shareholders for U. S. federal income tax purposes, except for cash paid in lieu of fractional shares. Following completion of the Spin-Off on November 9, 2015, we became an independent, publicly traded, self-administered company, primarily engaged in the ownership, acquisition and leasing of restaurant properties. Currently, we generate revenues primarily by leasing the Four Corners Properties to Darden through triple-net lease arrangements under which Darden is primarily responsible for ongoing costs relating to the properties, including utilities, property taxes, insurance, common area maintenance charges, and maintenance and repair costs (“triple-net”). We also generate revenues by operating the LongHorn San Antonio Business pursuant to franchise agreements with Darden. Darden obtained a private letter ruling from the IRS regarding the tax-free treatment of the Spin-Off. To preserve that tax-free treatment to Darden, for the two years period following the Spin-Off, we may be prohibited, except in specific circumstances, from taking certain actions, including: (1) entering into any transaction pursuant to which all or a portion of our stock would be acquired, whether by merger or otherwise, (2) issuing equity securities beyond certain thresholds, or (3) repurchasing our common stock. In addition, we will be prohibited from taking or failing to take any other action that prevents the Spin-Off and related transactions from being tax-free. These restrictions may limit our ability to pursue strategic transactions or engage in new business or other transactions that may maximize the value of our business. However, these restrictions are inapplicable in the event that the IRS has granted a favorable ruling to Darden or Four Corners or in the event that Darden or Four Corners has received an opinion from counsel that Four Corners can take such actions under certain safe harbor exceptions without adversely affecting the tax-free status of the Spin-Off and related transactions. For a more detailed description, see “Other Agreements with Darden - (1) Tax Matters Agreement” below. Leases with Darden On November 9, 2015 , in connection with the Spin-Off, we entered into long-term leases with Darden for the Four Corners Properties (the “Leases”) from which most of our revenues are currently derived. These Leases are on a triple-net basis. Darden is a publicly traded company and is subject to the periodic filing requirements of the Securities and Exchange Act of 1934, as amended. Information filed with the SEC can be seen at www.sec.gov . As indicated in those filings, for the fiscal year ended May 31, 2015, Darden reported that it had sales of $6.8 billion and generated net cash from continuing operations of $874.3 million . Franchise Agreement On November 9, 2015 , in connection with the Spin-Off, Kerrow Restaurants, LLC (“Kerrow”), an indirect, wholly owned subsidiary of Four Corners OP, entered into franchise agreements with Darden that grant Kerrow the right and licenses to operate the LongHorn San Antonio Business (the “Franchise Agreements”). The Franchise Agreements include, among other things, a license to display trademarks, utilize trade secrets and purchase proprietary products from Darden. Other services included under the Franchise Agreements are marketing services, training and access to certain LongHorn operating procedures. The Franchise Agreements also contain provisions under which Darden may provide certain technical support for the LongHorn San Antonio Business. The fees and conditions of these franchising services are on terms comparable to similar franchising services negotiated on an arm’s length basis, are consistent with industry standard provisions and are not expected to have a material impact on our financial statements. Other Agreements with Darden On November 9, 2015 , in connection with the Spin-Off, we entered into the following other agreements with Darden: (1) Tax Matters Agreement. The Tax Matters Agreement that governs our and Darden’s respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the Spin-Off and certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, tax returns, tax contests and certain other tax matters. This agreement imposes certain restrictions on us and our subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) that are designed to preserve the tax-free status of the Spin-Off and certain related transactions, including: • generally, for two years after the Spin-Off, taking, or permitting any of its subsidiaries to take, an action that might be a disqualifying action without receiving the prior consent of Darden; • for two years after the Spin-Off, entering into any agreement, understanding or arrangement or engaging in any substantial negotiations with respect to any transaction involving the acquisition of Four Corners stock or the issuance of shares of Four Corners stock, or options to acquire or other rights in respect of such stock, unless, generally, the shares are issued to qualifying Four Corners employees or retirement plans, each in accordance with “safe harbors” under regulations issued by the IRS; • for two years after the Spin-Off, repurchasing our shares, except to the extent consistent with guidance issued by the IRS; and • for two years after the Spin-Off, voluntarily dissolving, liquidating, merging or consolidating with any other person. Nevertheless, we will be permitted to take any of the actions described above in the event that the IRS has granted a favorable ruling to Darden or Four Corners or in the event that Darden or Four Corners has received an opinion from counsel that Four Corners can take such actions under certain safe harbor exceptions without adversely affecting the tax-free status of the Spin-Off and related transactions. The Tax Matters Agreement provides special rules allocating tax liabilities in the event the Spin-Off, together with certain related transactions, is not tax-free. In general, under this agreement, each party is responsible for any taxes imposed on Darden that arise from the failure of the Spin-Off and certain related transactions to qualify as a tax-free transaction for U.S. federal income tax purposes to the extent the failure to qualify is attributable to action taken by such party. (2) Transition Services Agreement. The Transition Services Agreement which defines those certain administrative and support services that Darden will provide to us and our subsidiaries on a transitional basis for a period not to exceed one year. We have the right to terminate a transition service upon notice to Darden; provided, that if we provide less than 60 days’ notice then we will be required to compensate Darden for the cost of Darden providing such service through the end of such 60 -day period. The fees charged to us for the transition services in accordance with the Transition Services Agreement will approximate actual costs incurred by Darden in providing the transition services to us for the relevant period. The majority of these services are not expected to be recurring in nature and the fees charged to us are not expected to have a material impact on our financial statements. (3) Employee Matters Agreement. The Employee Matters Agreement that governs the respective compensation and employee benefit obligations of us and Darden with respect to the current and former employees of each company and generally allocates liabilities and responsibilities relating to employee compensation and benefit plans and programs. |
Longhorn San Antonio Business | |
Subsequent Event [Line Items] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Separation and Distribution Agreement On October 21, 2015, Four Corners entered into a Separation and Distribution Agreement (the “Separation Agreement”) with Darden in connection with Four Corners’ separation and spin-off from Darden. See “Spin-Off” below. The Separation Agreement contains the key provisions relating to the separation of the Four Corners Properties and the LongHorn San Antonio Business from Darden. It also contains other agreements that govern certain aspects of our relationship with Darden that will continue after the spin-off transaction as described in “Other Agreements with Darden” below. Spin-Off On November 9, 2015 , in connection with the separation and spin-off of Four Corners from Darden, Darden contributed to Four Corners 100% of the equity interest in entities that held 418 properties in which Darden operates restaurants, representing five of their brands (the “Four Corners Properties”), the LongHorn San Antonio Business and the underlying properties or interests therein associated with the LongHorn San Antonio Business. In exchange, Four Corners issued to Darden 42,741,995 shares of its common stock, par value $0.0001 per share and paid to Darden $ 315.0 million in cash, which was funded from the proceeds of Four Corners OP’s term loan borrowings under the Loan Agreement. Subsequently, Darden distributed the 42,741,995 shares of Four Corners common stock pro rata to holders of Darden common stock whereby each Darden shareholder received one share of Four Corners common stock for every three shares of Darden common stock held at the close of business on the record date, which was November 2, 2015, as well as cash in lieu of any fractional shares of our common stock which they would have otherwise received (the “Spin-Off”). The Spin-Off is intended to qualify as tax-free to Darden shareholders for U. S. federal income tax purposes, except for cash paid in lieu of fractional shares. Darden obtained a private letter ruling from the IRS regarding the tax-free treatment of the Spin-Off. To preserve that tax-free treatment to Darden, for the two years period following the Spin-Off, Four Corners’ may be prohibited, except in specific circumstances, from taking certain actions, including: (1) entering into any transaction pursuant to which all or a portion of its stock would be acquired, whether by merger or otherwise, (2) issuing equity securities beyond certain thresholds, or (3) repurchasing its common stock. In addition, Four Corners will be prohibited from taking or failing to take any other action that prevents the Spin-Off and related transactions from being tax-free. These restrictions may limit Four Corners’ ability to pursue strategic transactions or engage in new business or other transactions that may maximize the value of its business. However, these restrictions are inapplicable in the event that the IRS has granted a favorable ruling to Darden or Four Corners or in the event that Darden or Four Corners has received an opinion from counsel that Four Corners can take such actions under certain safe harbor exceptions without adversely affecting the tax-free status of the Spin-Off and related transactions. For a more detailed description, see “Other Agreements with Darden - (1) Tax Matters Agreement” contained in the Four Corners Property Trust, Inc. Notes to Unaudited Balance Sheet, Note 4 - Subsequent Events found within this Form 10-Q. Franchise Agreement On November 9, 2015 , in connection with the Spin-Off, Kerrow, entered into franchise agreements with Darden that grant Kerrow the right and licenses to operate the LongHorn San Antonio Business (the “Franchise Agreements”). The Franchise Agreements include, among other things, a license to display trademarks, utilize trade secrets and purchase proprietary products from Darden. Other services included under the Franchise Agreements are marketing services, training and access to certain LongHorn operating procedures. The Franchise Agreements also contain provisions under which Darden may provide certain technical support for the LongHorn San Antonio Business. The fees and conditions of these franchising services are on terms comparable to similar franchising services negotiated on an arm’s length basis and consistent with industry standard provisions. Other Agreements with Darden On November 9, 2015 , in connection with the Spin-Off, Four Corners entered into the following other agreements with Darden: (1) Transition Services Agreement. The Transition Services Agreement which defines those certain administrative and support services that Darden will provide to Four Corners and its subsidiaries on a transitional basis for a period not to exceed one year. Four Corners has the right to terminate a transition service upon notice to Darden; provided, that if it provides less than 60 days’ notice then it will be required to compensate Darden for the cost of Darden providing such service through the end of such 60 -day period. The fees charged for the transition services in accordance with the Transition Services Agreement approximate actual costs incurred by Darden in providing the transition services for the relevant period. The majority of these services are not expected to be recurring in nature and the fees charged to us are not expected to have a material impact on our financial statements. (2) Employee Matters Agreement. The Employee Matters Agreement that governs the respective compensation and employee benefit obligations of us and Darden with respect to the current and former employees of each company and generally allocates liabilities and responsibilities relating to employee compensation and benefit plans and programs. |
Four Corners Properties | |
Subsequent Event [Line Items] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Separation and Distribution Agreement On October 21, 2015, Four Corners entered into a Separation and Distribution Agreement (the “Separation Agreement”) with Darden in connection with Four Corners’ separation and spin-off from Darden. See “Spin-Off” below. The Separation Agreement contains the key provisions relating to the separation of the Four Corners Properties and the LongHorn San Antonio Business from Darden. It also contains other agreements that govern certain aspects of our relationship with Darden that will continue after the spin-off transaction as described in “Other Agreements with Darden” below. Revolving Credit and Term Loan Agreement On November 9, 2015 , immediately preceding the consummation of the spin-off transaction discussed below, Four Corners and its operating partnership, Four Corners OP, entered into the Revolving Credit and Term Loan Agreement (the “Loan Agreement”) that provides for borrowings of up to $750.0 million and consists of (1) a $400.0 million non-amortizing term loan that matures on November 9, 2020 and (2) a $350.0 million revolving credit facility that provides for loans and letters of credits and matures on November 9, 2019. The revolving credit facility provides for a letter of credit sub-limit of $45.0 million . The obligations under the Loan Agreement are secured by a pledge of Four Corners OP’s ownership interests in substantially all of its material subsidiaries, subject to certain exceptions, and are guaranteed, on a joint and several basis, by substantially all of Four Corners OP’s material subsidiaries, subject to certain exceptions. Spin-Off On November 9, 2015 , in connection with the separation and spin-off of Four Corners from Darden, Darden contributed to Four Corners 100% of the equity interest in entities that held the Four Corners Properties, and six LongHorn Steakhouse® restaurants located in the San Antonio, Texas area (the “LongHorn San Antonio Business”) and the underlying properties or interests therein associated with the LongHorn San Antonio Business. In exchange, Four Corners issued to Darden 42,741,995 shares of our common stock, par value $0.0001 per share and paid to Darden $ 315.0 million in cash, which we funded from the proceeds of Four Corners OP’s term loan borrowings under the Loan Agreement. Subsequently, Darden distributed the 42,741,995 shares of Four Corners common stock pro rata to holders of Darden common stock whereby each Darden shareholder received one share of Four Corners common stock for every three shares of Darden common stock held at the close of business on the record date, which was November 2, 2015, as well as cash in lieu of any fractional shares of our common stock which they would have otherwise received (the “Spin-Off”). The Spin-Off is intended to qualify as tax-free to Darden shareholders for U. S. federal income tax purposes, except for cash paid in lieu of fractional shares. Following completion of the Spin-Off on November 9, 2015, Four Corners became an independent, publicly traded, self-administered company, primarily engaged in the ownership, acquisition and leasing of restaurant properties. Currently, Four Corners generates revenues primarily by leasing the Four Corners Properties to Darden through triple-net lease arrangements under which Darden is primarily responsible for ongoing costs relating to the properties, including utilities, property taxes, insurance, common area maintenance charges, and maintenance and repair costs (“triple-net”). Darden obtained a private letter ruling from the IRS regarding the tax-free treatment of the Spin-Off. To preserve that tax-free treatment to Darden, for the two years period following the Spin-Off, Four Corners’ may be prohibited, except in specific circumstances, from taking certain actions, including: (1) entering into any transaction pursuant to which all or a portion of its stock would be acquired, whether by merger or otherwise, (2) issuing equity securities beyond certain thresholds, or (3) repurchasing its common stock. In addition, Four Corners will be prohibited from taking or failing to take any other action that prevents the Spin-Off and related transactions from being tax-free. These restrictions may limit Four Corners’ ability to pursue strategic transactions or engage in new business or other transactions that may maximize the value of its business. However, these restrictions are inapplicable in the event that the IRS has granted a favorable ruling to Darden or Four Corners or in the event that Darden or Four Corners has received an opinion from counsel that Four Corners can take such actions under certain safe harbor exceptions without adversely affecting the tax-free status of the Spin-Off and related transactions. For a more detailed description, see “Other Agreements with Darden - (1) Tax Matters Agreement” below. Leases with Darden On November 9, 2015 , in connection with the Spin-Off, Four Corners entered into long-term leases with Darden for the Four Corners Properties (the “Leases”) from which most of our revenues are currently derived. These Leases are on a triple-net basis. Darden is a publicly traded company and is subject to the periodic filing requirements of the Securities and Exchange Act of 1934, as amended. Information filed with the SEC can be seen at www.sec.gov . As indicated in those filings, for the fiscal year ended May 31, 2015, Darden reported that it had sales of $6.8 billion and generated net cash from continuing operations of $874.3 million . Other Agreements with Darden On November 9, 2015 , in connection with the Spin-Off, Four Corners entered into the following other agreements with Darden: (1) Tax Matters Agreement. The Tax Matters Agreement that governs our and Darden’s respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the Spin-Off and certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, tax returns, tax contests and certain other tax matters. This agreement imposes certain restrictions on Four Corners and its subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) that are designed to preserve the tax-free status of the Spin-Off and certain related transactions, including: • generally, for two years after the Spin-Off, taking, or permitting any of its subsidiaries to take, an action that might be a disqualifying action without receiving the prior consent of Darden; • for two years after the Spin-Off, entering into any agreement, understanding or arrangement or engaging in any substantial negotiations with respect to any transaction involving the acquisition of Four Corners stock or the issuance of shares of Four Corners stock, or options to acquire or other rights in respect of such stock, unless, generally, the shares are issued to qualifying Four Corners employees or retirement plans, each in accordance with “safe harbors” under regulations issued by the IRS; • for two years after the Spin-Off, repurchasing Four Corners shares, except to the extent consistent with guidance issued by the IRS; and • for two years after the Spin-Off, voluntarily dissolving, liquidating, merging or consolidating with any other person. Nevertheless, Four Corners will be permitted to take any of the actions described above in the event that the IRS has granted a favorable ruling to Darden or Four Corners or in the event that Darden or Four Corners has received an opinion from counsel that Four Corners can take such actions under certain safe harbor exceptions without adversely affecting the tax-free status of the Spin-Off and related transactions. The Tax Matters Agreement provides special rules allocating tax liabilities in the event the Spin-Off, together with certain related transactions, is not tax-free. In general, under this agreement, each party is responsible for any taxes imposed on Darden that arise from the failure of the Spin-Off and certain related transactions to qualify as a tax-free transaction for U.S. federal income tax purposes to the extent the failure to qualify is attributable to action taken by such party. (2) Transition Services Agreement. The Transition Services Agreement which defines those certain administrative and support services that Darden will provide to Four Corners and its subsidiaries on a transitional basis for a period not to exceed one year. Four Corners has the right to terminate a transition service upon notice to Darden; provided, that if it provides less than 60 days’ notice then it will be required to compensate Darden for the cost of Darden providing such service through the end of such 60 -day period. The fees charged for the transition services in accordance with the Transition Services Agreement approximate actual costs incurred by Darden in providing the transition services for the relevant period. The majority of these services are not expected to be recurring in nature and the fees charged to us are not expected to have a material impact on our financial statements. |
APPLICATION OF NEW ACCOUNTING S
APPLICATION OF NEW ACCOUNTING STANDARDS | 9 Months Ended |
Sep. 30, 2015 | |
APPLICATION OF NEW ACCOUNTING STANDARDS | APPLICATION OF NEW ACCOUNTING STANDARDS In September 2015, the FASB issued Accounting Standards Update No. (“ASU No.”) 2015-16, Business Combinations (Topic 805). This update modifies the requirements for recognizing adjustments to provisional amounts recognized in a business combination. Currently, GAAP requires that during the measurement period, the acquirer retrospectively adjust the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. To simplify the accounting for adjustments made to provisional amounts recognized in a business combination, the amendments in ASU No. 2015-16 eliminate the requirement to retrospectively account for such adjustments. This update is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, and is to be applied prospectively. We will adopt this guidance effective January 1, 2016. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2015 | |
Longhorn San Antonio Business | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS Allocation of Corporate Expenses We have historically been managed in the normal course of business by Darden and its subsidiaries. We have included all direct costs incurred in connection with our operations for which specific identification was practical. Additionally, certain shared costs have been allocated to us and reflected as expenses in the stand-alone combined financial statements. Management considers the allocation methodologies used to be reasonable and appropriate reflections of the historical Darden expenses allocable to us for purposes of the stand-alone financial statements; however, the expenses reflected in the combined financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if we had operated as a separate, stand-alone entity. Management does not believe, however, that it is practicable to estimate what these expenses would have been had we operated as a separate, stand-alone entity, including any expenses associated with obtaining any of these services from unaffiliated entities. Actual costs that would have been incurred had we been a stand-alone entity would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure . In addition, the expenses reflected in the combined financial statements may not be indicative of expenses that will be incurred by us in the future. The costs allocated to us were made on the basis of operating weeks, net sales or other relevant measures. Corporate expense allocations primarily relate to centralized corporate functions, including advertising, finance, accounting, treasury, tax, legal, internal audit, human resources, facilities, risk management functions, employee benefits and stock based compensation (except for specifically identified stock-based compensation benefits). In addition, corporate expenses include, among other costs, maintenance of existing software, technology and websites, development of new or improved software technology, professional fees for legal, accounting, and financial services, non-income taxes and reserves or expenses related to litigation, investigations, or similar matters. Corporate expenses of approximately $312,000 and $277,000 were allocated to us for the three months ended September 30, 2015 and 2014, respectively, and approximately $851,000 and $844,000 for the nine months ended September 30, 2015 and 2014, respectively. These allocations have been included within selling, general and administrative expenses in the combined statements of comprehensive income. All of the corporate allocations of costs are deemed to have been incurred and settled through parent company equity in the period where the costs were recorded. Following the Spin-Off, we will perform these functions using our own resources or purchased services. For an interim period, however, some of these functions will continue to be provided by Darden under the Transition Services Agreements discussed in Note 2 - Subsequent Events. Cash Management and Treasury Prior to the Spin-Off, Darden used a centralized approach to cash management and financing of operations. Our cash was deposited into a depository bank account on a regular schedule and Darden “swept” our account nightly to a zero balance, moving the funds to Darden’s corporate account. Darden also funded our operating and investing activities as needed. Transfers of cash both to and from Darden (including year-end receivable or payable balances) have been included within parent company investment on the combined statements of changes in parent company equity. Interest costs for intercompany borrowings associated with major capital outlays for the construction of land, buildings, and equipment associated with opening restaurants or significant remodelings, were charged to the restaurants. We have not included any interest charges for intercompany cash transactions, since historically, Darden has not allocated interest related to short term working capital intercompany advances to any of its businesses. Darden has issued debt for general corporate purposes and acquisitions but in no case has any such debt been guaranteed or assumed by the LongHorn San Antonio Business or otherwise secured by the assets of the LongHorn San Antonio Business. Aside from the aforementioned capital outlays, as Darden’s debt and related interest was not directly allocable to us, these amounts have not been reflected in these combined financial statements. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2015 | |
Longhorn San Antonio Business | |
INCOME TAXES | INCOME TAXES Income taxes settled through parent company equity were expenses of approximately $24,000 and $ 51,000 for the three and nine months ended September 30, 2015, respectively and approximately $ 7,000 and $ 18,000 for the three and nine months ended September 30, 2014. The effective income tax rate was 5.1% for the three months ended September 30, 2015 and a benefit of 1.3% for the nine months ended September 30, 2015 compared to an effective income tax rate of 210.5% and a benefit of 753.8% for the three and nine months ended September 30, 2014, respectively. The following table is a reconciliation of the U.S. statutory income tax rate to the effective income tax rate included in the accompanying combined statements of comprehensive income: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 U.S. statutory rate 34.0 % 34.0 % 34.0 % 34.0 % State and local income taxes, net of federal tax benefits 2.9 % (17.0 )% 2.7 % 74.5 % Benefit of federal income tax credits (40.4 )% 250.3 % (52.1 )% (1,126.1 )% Permanent differences 8.6 % (56.8 )% 14.1 % 263.8 % Effective income tax rate 5.1 % 210.5 % (1.3 )% (753.8 )% The change in the effective income tax rate for the three and nine months ended September 30, 2015 as compared to the three and nine months ended September 30, 2014 is primarily attributable to an increase in earnings before income taxes. |
Four Corners Properties | |
INCOME TAXES | INCOME TAXES The tax effects of temporary differences that gave rise to the deferred tax liabilities were related to the buildings and equipment and were approximately $ 78.5 million and $ 60.2 million as of September 30, 2015 and December 31, 2014, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2015 | |
Longhorn San Antonio Business | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES We are subject to private lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. A number of these lawsuits, proceedings and claims may exist at any given time. These matters typically involve claims from guests, employee wage and hour claims and others related to operational issues common to the restaurant industry. We record our best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss with no best estimate in the range, we record the minimum estimated liability related to the lawsuits, proceedings or claims. While the resolution of a lawsuit, proceeding or claim may have an impact on our financial results for the period in which it is resolved, we believe that the maximum liability related to probable lawsuits, proceedings and claims in which we are currently involved, individually and in the aggregate, will not have a material adverse effect on our financial position, results of operations or liquidity. |
SUMMARY OF SIGNIFICANT ACCOUN15
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Four Corners Property Trust | |
Basis of Presentation | The accompanying unaudited balance sheet reflects our financial position as of September 30, 2015 and has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (the “SEC”), as permitted by the SEC. Additionally, the unaudited balance sheet has been prepared consistent with Article 10 of Regulation S-X. The elements of the unaudited balance sheet are stated in accordance with accounting principles generally accepted in the United States (“GAAP”). |
Longhorn San Antonio Business | |
Basis of Presentation | Basis of Presentation These accompanying unaudited combined financial statements have been prepared on a stand-alone basis and are derived from Darden’s unaudited consolidated financial statements and underlying accounting records. The unaudited combined financial statements reflect our historical results of operations, financial position and cash flows as though we were part of Darden prior to the spin-off transaction, in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X of the SEC. Accordingly, the unaudited combined financial statements do not include all of the disclosures required by GAAP for a complete set of annual audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of our financial position as of September 30, 2015, our results of operations for the three and nine months ended September 30, 2015 and 2014, and our cash flows for the nine months ended September 30, 2015 and 2014 have been included. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The unaudited combined financial statements should be read in conjunction with the audited financial statements and combined notes thereto included in Four Corners’ Information Statement filed as an exhibit to Four Corners’ Registration Statement on Form 10 filed with the Securities and Exchange Commission in final form on October 21, 2015. The combined financial statements include all revenues and costs allocable to us either through specific identification or allocation, and all assets and liabilities directly attributable to us as derived from the operations of the restaurants. The combined statements of comprehensive income include allocations of certain costs from Darden incurred on our behalf. |
Commitments and Contingencies | We record our best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss with no best estimate in the range, we record the minimum estimated liability related to the lawsuits, proceedings or claims. |
Four Corners Properties | |
Basis of Presentation | Basis of Presentation The accompanying unaudited combined balance sheet presents the restaurant property assets and liabilities that were transferred to Four Corners Properties in the separation and spin-off as though we were part of Darden prior to the distribution, in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X of the SEC. Accordingly, the unaudited combined financial statements do not include all of the disclosures required by GAAP for a complete set of annual audited financial statements. There were no intercompany transactions to eliminate in combination. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of our financial position as of September 30, 2015 have been included. The unaudited combined financial statements should be read in conjunction with the audited financial statements and combined notes thereto included in Four Corners’ Information Statement filed as an exhibit to its Registration Statement on Form 10 filed with the Securities and Exchange Commission in final form on October 21, 2015. The Four Corners Properties were owner-occupied by Darden and, accordingly, there are no historical results of operations related to these assets. The accompanying unaudited combined balance sheet reflects Darden’s historical carrying value of the assets and liabilities as of the financial statement date consistent with the accounting for spin-off transactions in accordance with GAAP. |
INCOME TAXES Longhorn income ta
INCOME TAXES Longhorn income tax rate reconciliation (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Longhorn San Antonio Business | |
Schedule of Effective Income Tax Rate Reconciliation | The following table is a reconciliation of the U.S. statutory income tax rate to the effective income tax rate included in the accompanying combined statements of comprehensive income: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 U.S. statutory rate 34.0 % 34.0 % 34.0 % 34.0 % State and local income taxes, net of federal tax benefits 2.9 % (17.0 )% 2.7 % 74.5 % Benefit of federal income tax credits (40.4 )% 250.3 % (52.1 )% (1,126.1 )% Permanent differences 8.6 % (56.8 )% 14.1 % 263.8 % Effective income tax rate 5.1 % 210.5 % (1.3 )% (753.8 )% |
SUMMARY OF SIGNIFICANT ACCOUN17
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Operations (Details) | Nov. 09, 2015restaurant | Sep. 30, 2015restaurantpropertybrand |
Longhorn San Antonio Business | ||
Number of restaurants | 6 | |
Four Corners Properties | ||
Number of real estate properties | property | 418 | |
Number of brands | brand | 5 | |
Subsequent Event | Longhorn San Antonio Business | ||
Number of restaurants | 6 | |
Subsequent Event | Four Corners Properties | ||
Equity interest contributed, percentage | 1 |
SHAREHOLDER'S EQUITY (Details)
SHAREHOLDER'S EQUITY (Details) - Four Corners Property Trust $ / shares in Units, $ in Thousands | Sep. 30, 2015USD ($)$ / sharesshares |
Common stock, shares issued | shares | 10 |
Common stock, par value (in dollars per share) | $ 0.01 |
Common stock and additional paid-in capital | $ | $ 1 |
SUBSEQUENT EVENTS Incentive Pla
SUBSEQUENT EVENTS Incentive Plan (Details) | Oct. 20, 2015shares |
Scenario, Forecast | Four Corners Property Trust | |
Subsequent Event [Line Items] | |
Stock reserved for future issuance | 2,100,000 |
SUBSEQUENT EVENTS Articles of A
SUBSEQUENT EVENTS Articles of Amendment and Restatement (Details) - Four Corners Property Trust - $ / shares | Oct. 22, 2015 | Oct. 21, 2015 | Sep. 30, 2015 |
Subsequent Event [Line Items] | |||
Common stock, shares authorized | 100 | ||
Common stock, par value (in dollars per share) | $ 0.01 | ||
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Common stock, shares authorized | 500,000,000 | 100 | |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.01 | |
Capital stock, shares authorized | 525,000,000 | ||
Preferred stock, shares authorized | 25,000,000 | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | ||
Preferred stock, shares issued | 0 |
SUBSEQUENT EVENTS Revolving Cre
SUBSEQUENT EVENTS Revolving Credit and Term Loan Agreement (Details) - Subsequent Event - Four Corners Property Trust | Nov. 09, 2015USD ($) |
Letter of credit | |
Subsequent Event [Line Items] | |
Revolving credit and term loan, maximum borrowing capacity | $ 45,000,000 |
Revolving Credit and Term Loan | |
Subsequent Event [Line Items] | |
Revolving credit and term loan, maximum borrowing capacity | 750,000,000 |
Revolving credit and term loan, accordion feature, increase limit | 250,000,000 |
Revolving credit and term loan, Accordion Feature, Maximum | 1,000,000,000 |
Asset Growth Capitalization, Value, Aggregate | $ 300,000,000 |
Debt instrument, total indebtedness to capitalization value | 0.6 |
Debt instrument, mortgage-secured leverage ratio | 0.4 |
Debt instrument, total secured recourse indebtedness to consolidated capitalization, percent | 0.05 |
Debt instrument, fixed charge coverage ratio, minimum | 1.75 |
Debt instrument, unhedged floating rate debt, maximum | 0.5 |
Debt instrument, unencumbered leverage ratio, maximum | 0.6 |
Debt instrument, unencumbered debt service coverage ratio, minimum | 1.50 |
Debt instrument, interest rate, increase due an event of default (percent) | 2.00% |
Secured debt | Revolving Credit and Term Loan | |
Subsequent Event [Line Items] | |
Secured debt | $ 400,000,000 |
Line of credit facility, current borrowing capacity | 350,000,000 |
Payment from issuance of long-term debt | $ 315,000,000 |
Debt instrument, interest rate, effective percentage | 1.93% |
Minimum | Line of credit | Revolving Credit Facility | |
Subsequent Event [Line Items] | |
Line of credit facility, unused commitment fee percentage | 0.25% |
Minimum | London Interbank Offered Rate (LIBOR) | Revolving Credit Facility | |
Subsequent Event [Line Items] | |
Debt instrument, basis spread on variable rate | 1.75% |
Minimum | London Interbank Offered Rate (LIBOR) | Secured debt | Term Loan | |
Subsequent Event [Line Items] | |
Debt instrument, basis spread on variable rate | 1.70% |
Minimum | Base Rate | Revolving Credit Facility | |
Subsequent Event [Line Items] | |
Debt instrument, basis spread on variable rate | 0.75% |
Minimum | Base Rate | Secured debt | Term Loan | |
Subsequent Event [Line Items] | |
Debt instrument, basis spread on variable rate | 0.70% |
Maximum | Line of credit | Revolving Credit Facility | |
Subsequent Event [Line Items] | |
Line of credit facility, unused commitment fee percentage | 0.35% |
Maximum | London Interbank Offered Rate (LIBOR) | Revolving Credit Facility | |
Subsequent Event [Line Items] | |
Debt instrument, basis spread on variable rate | 2.50% |
Maximum | London Interbank Offered Rate (LIBOR) | Secured debt | Term Loan | |
Subsequent Event [Line Items] | |
Debt instrument, basis spread on variable rate | 2.45% |
Maximum | Base Rate | Revolving Credit Facility | |
Subsequent Event [Line Items] | |
Debt instrument, basis spread on variable rate | 1.50% |
Maximum | Base Rate | Secured debt | Term Loan | |
Subsequent Event [Line Items] | |
Debt instrument, basis spread on variable rate | 1.45% |
SUBSEQUENT EVENTS Interest Rate
SUBSEQUENT EVENTS Interest Rate Hedges (Details) - London Interbank Offered Rate (LIBOR) - Cash Flow Hedging - Four Corners Property Trust - Subsequent Event | Nov. 10, 2015USD ($) |
Swap agreement, maturity 2018 | |
Subsequent Event [Line Items] | |
Derivative, notional amount | $ 200,000,000 |
Derivative, fixed interest rate | 1.16% |
Swap agreement, maturity 2020 | |
Subsequent Event [Line Items] | |
Derivative, notional amount | $ 200,000,000 |
Derivative, fixed interest rate | 1.56% |
SUBSEQUENT EVENTS Spin-Off (Det
SUBSEQUENT EVENTS Spin-Off (Details) $ / shares in Units, $ in Millions | Nov. 09, 2015USD ($)restaurantpropertybrand$ / sharesshares | Oct. 22, 2015$ / shares | Oct. 21, 2015$ / shares | Sep. 30, 2015restaurant$ / sharesshares |
Four Corners Property Trust | ||||
Subsequent Event [Line Items] | ||||
Common stock, shares issued | shares | 10 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | |||
Tax-Free, accounting treatment, period of restriction (years) | 2 years | |||
Four Corners Property Trust | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Equity interest contributed, percentage | 1 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.01 | ||
Longhorn San Antonio Business | ||||
Subsequent Event [Line Items] | ||||
Number of restaurants | 6 | |||
Longhorn San Antonio Business | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Number of restaurants | 6 | |||
Secured debt | Revolving Credit and Term Loan | Four Corners Property Trust | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Payment from issuance of long-term debt | $ | $ 315 | |||
Darden | Four Corners Property Trust | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Equity interest contributed, percentage | 1 | |||
Number of real estate properties | property | 418 | |||
Number of brands | brand | 5 | |||
Common stock, shares issued | shares | 42,741,995 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.0001 | |||
Stockholder's equity, conversion ratio | 3 | |||
Tax-Free, accounting treatment, period of restriction (years) | 2 years | |||
Darden | Longhorn San Antonio Business | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Number of restaurants | 6 | |||
Darden | Secured debt | Revolving Credit and Term Loan | Four Corners Property Trust | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Payment from issuance of long-term debt | $ | $ 315 |
SUBSEQUENT EVENTS Leases with D
SUBSEQUENT EVENTS Leases with Darden (Details) - Darden $ in Millions | 12 Months Ended |
May. 31, 2015USD ($) | |
Subsequent Event [Line Items] | |
Sales revenue, services, net | $ 6,800 |
Cash from continuing operations | 874.3 |
Income (Loss) from continuing operations attributable to parent | $ 874.3 |
SUBSEQUENT EVENTS Other Agreeme
SUBSEQUENT EVENTS Other Agreements with Darden (Details) - Four Corners Property Trust | Nov. 09, 2015 |
Subsequent Event [Line Items] | |
Tax-Free, accounting treatment, period of restriction (years) | 2 years |
Darden | Subsequent Event | |
Subsequent Event [Line Items] | |
Tax-Free, accounting treatment, period of restriction (years) | 2 years |
Termination of Notice, Duration | 60 days |
Darden | Disqualifying Action | Subsequent Event | |
Subsequent Event [Line Items] | |
Tax-Free, accounting treatment, period of restriction (years) | 2 years |
Darden | Negotiations | Subsequent Event | |
Subsequent Event [Line Items] | |
Tax-Free, accounting treatment, period of restriction (years) | 2 years |
Darden | Repurchase | Subsequent Event | |
Subsequent Event [Line Items] | |
Tax-Free, accounting treatment, period of restriction (years) | 2 years |
Darden | Voluntary Dissolving | Subsequent Event | |
Subsequent Event [Line Items] | |
Tax-Free, accounting treatment, period of restriction (years) | 2 years |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Selling, General and Administrative Expenses | Longhorn San Antonio Business | ||||
Costs and expenses, related party | $ 312,000 | $ 277,000 | $ 851,000 | $ 844,000 |
INCOME TAXES Additional Informa
INCOME TAXES Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Longhorn San Antonio Business | |||||
Income taxes paid, net | $ 24 | $ 7 | $ 51 | $ 18 | |
Effective income tax rate reconciliation, percent | 5.10% | 210.50% | (1.30%) | (753.80%) | |
Four Corners Properties | |||||
Deferred tax liabilities, property, plant and equipment | $ 78,500 | $ 78,500 | $ 60,200 |
INCOME TAXES Income Tax Rate Re
INCOME TAXES Income Tax Rate Reconciliation (Details) - Longhorn San Antonio Business | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
U.S. statutory rate | 34.00% | 34.00% | 34.00% | 34.00% |
State and local income taxes, net of federal tax benefits | 2.90% | (17.00%) | 2.70% | 74.50% |
Benefit of federal income tax credits | (40.40%) | 250.30% | (52.10%) | (1126.10%) |
Permanent differences | 8.60% | (56.80%) | 14.10% | 263.80% |
Effective income tax rate reconciliation, percent | 5.10% | 210.50% | (1.30%) | (753.80%) |