Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Buzz Zaino - Royce & Associates.
Buzz Zaino - Royce & Associates
Most restaurant companies seem to be reporting declines in comparable store sales but you had this nice increase. To what do you attribute that? Are there price increases involved there?
Douglas R. Muir
There is a little. We are doing a price test in about 24 company stores that started in the quarter. Of the total $5.9 comp store sales increase, my guess is about 2 points of that relate to the price test and that 4% is what I would call real growth.
What's behind it? A lot of things. Some of it I think is lower gasoline prices. Customers maybe are getting out more. I think our shop operators are really focusing on hospitality and the customer experience and making Krispy Kreme an increasingly attractive place for customers to go.
Buzz Zaino - Royce & Associates
If you look at the operating line, the one recurring, I would assume, the cost of probably a million dollars would lead you to operating income on an adjusted basis of over $4.0 million. Would you have a continuing non-recurring adjustments during the following quarters?
Douglas R. Muir
Could you give me an example? Everybody has their different view of what's recurring and non-recurring. If you can sharpen up the question, I will try and give you an answer.
Buzz Zaino - Royce & Associates
There were adjustments of $1.2 million before the operating income line for closing of stores. Will there be continuing charges of that?
Douglas R. Muir
You're talking the $1.4 million of impairment and lease termination costs?
Buzz Zaino - Royce & Associates
Correct.
Douglas R. Muir
There may be. In fact, there will be. The accounting rule on lease termination cost is that you record the cost of getting out of the lease, assuming you have a lease, in the quarter in which the store goes dark. So we might have a store that we close down the road, that we've already taken an impairment charge on, but the lease termination cost is a trailing cost because of the accounting rule.
The stores that we have said we are going to close and sell the real estate, we own that real estate, we've taken the write-down so I don't see a charge coming for those.
Again, restaurateurs are always looking at stores and as long as you're closing stores you should consider some amount of lease termination as an ongoing cost of business.
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