Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and is a market-based measurement based on assumptions of the market participants. As a basis for these assumptions, we classify fair value measurements under the following fair value hierarchy:


•	Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that are publicly accessible. Active markets have frequent transactions with enough volume to provide ongoing pricing information.


•	Level 2 inputs are other than Level 1 inputs that are directly or indirectly observable. These can include unadjusted quoted prices for similar assets or liabilities in active markets, unadjusted quoted prices for identical assets or liabilities in inactive markets or other observable inputs.


•	Level 3 inputs are unobservable inputs.

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of the periods presented:



	2014
	Total	Level 1	Level 2	Level 3
Assets
Cash and equivalents (1)	$7,826	$7,826	—	—
Short-term note receivable (2)	18	—	18	—
Long-term note receivable (3)	16,243	—	225	16,018
	$24,087	$7,826	$243	$16,018
Liabilities (4)
Long-term debt (5)	835	—	835	—



	2013
	Total	Level 1	Level 2	Level 3
Assets
Cash and equivalents (1)	$9,010	$9,010	—	—
Short-term note receivable (2)	18	—	18	—
Long-term note receivable (3)	13,815	—	245	13,570
	$22,843	$9,010	$263	$13,570
Liabilities (4)
Long-term debt (5)	816	—	816	—


(1)	Cash and equivalents primarily represent cash deposits as well as credit card receivables that generally settle in less than three days.


(2)	Short-term note receivable is the current portion of a note receivable from the sale of land with an interest rate of 7 percent.


(3)	Long-term note receivable includes a note receivable from the sale of land with an interest rate of 7 percent (Level 2) and a promissory note from SWH Mimi's Café Holding Company, LLC that is valued using a discounted cash flow model (Level 3).


(4)	Carrying value of our revolving credit facility, recorded as a current liability on our consolidated balance sheets, approximates fair value


(5)	The fair value of our interest-free long-term debt is based on the current interest rates offered for similar instruments. This loan provided funds to assist with the construction costs of our new corporate headquarters.

The following table presents the activity related to Level 3 fair value measurements for the periods presented (amounts in thousands):



	Long-term note receivable
	2014
Carrying value at the beginning of the period	$	13,570
Plus:
Accretion ⁽¹⁾	1,918
Interest, net realized/unrealized gains ⁽¹⁾	530
Carrying value at the end of the period	$	16,018

	2013
Carrying value at the beginning of the period	$	—
Note from SWH Mimi's Café Holding Company, LLC	13,570
Carrying value at the end of the period	$	13,570


(1)	Reflected in the line "Net interest expense" in the Consolidated Statements of Net Income

We use our weighted-average cost of capital as the discount rate to value the promissory note from SWH Mimi's Café Holding Company, LLC, which is an unobservable input. A reasonable change in the discount rate would not have a significant impact on the fair value of the promissory note.

In addition to the financial assets and liabilities that are measured at fair value on a recurring basis, we measure certain assets and liabilities at fair value on a nonrecurring basis, including, long-lived assets that have been reduced to fair value when they are held for sale and long-lived assets that are written down to fair value when they are impaired.

We evaluate the carrying amount of long-lived assets held and used in the business periodically and when events and circumstances warrant such a review to ascertain if any assets have been impaired. The carrying amount of a long-lived asset group is considered impaired when the carrying value of the asset group exceeds the expected future cash flows from the asset group. The impairment loss recognized is the excess of the carrying value of the asset group over its fair value, based on a discounted cash flow analysis using our weighted average cost of capital, and is recorded within S,G&A. The estimation of future cash flows requires significant estimates of factors that include future restaurant activities, sublease estimates and real estate appraisals. The inputs to determine the fair value are considered Level 3 measurements.

Based on a purchase agreement effective July 25, 2013, to sell nonoperating property, plant and equipment at 29 locations for $3,450, we determined that indicators of impairment existed for our held for sale asset group. As a result of signing the purchase agreement, we determined that the long-lived asset group’s then-current carrying value of $11,969 was greater than the fair value (the selling price less estimated selling costs). This resulted in pretax noncash assets held for sale impairment charges in the Bob Evans Restaurants reporting segment of $9,380. These impairment charges are included in the “Impairment of assets held for sale” line in the Consolidated Statements of Net Income. During the period these assets were classified as held for sale, depreciation ceased for these assets.

As of April 25, 2014, we have closed on the sale of 28 of the 29 nonoperating properties. The remaining property was moved out of held for sale assets during the fourth quarter of fiscal 2014 as the sale of the property was determined by management not to be probable in the next year. We have resumed depreciation for this location and the resulting impact to depreciation expense was immaterial for fiscal 2014.

On September 27, 2013, we announced our plans to close our food production plant in Richardson, Texas ("the Richardson plant"). Based on the estimated value of the facility, we determined that the long-lived asset group’s then-current carrying value of $8,111 was greater than the fair value of $5,111 (the selling price less estimated selling costs). This resulted in a pretax, noncash assets held for sale impairment charge in the BEF Foods segment of $3,000. This impairment charge is included in the "Impairment of assets held for sale" line in the Consolidated Statements of Net Income. The long-lived asset group related to this plant is included at its fair value in the “Current assets held for sale” line in the Consolidated Balance Sheets. Upon being classified as held for sale, depreciation ceased for these assets.

To be consistent with current period presentation, we have reclassified the assets for the Richardson plant to the “Long-term assets held for sale” line in the Consolidated Balance Sheets as of April 26, 2013.

In fiscal 2014 we incurred noncash asset impairment charges of $4,470 in the Bob Evans Restaurant segment, a result of current profitability trends at seven restaurant locations, as well as the impairment of various heavy commercial vehicles. These impairment charges are recorded in the SG&A line on the Consolidated Statements of Net Income. We use our weighted average cost of capital as the discount rate in our fair value measurements for the impairment charges incurred. A reasonable change in this discount rate would not have a significant impact on these fair value measurements.

The following table represents impairments for those assets remeasured to fair value on a nonrecurring basis during the fiscal year:



	Impairments
	2014			2013			2012
Bob Evans Restaurants
Assets held for use	$	4,470	⁽¹⁾	$	4,409	⁽²⁾	$	3,199	⁽³⁾
Assets held for sale	9,380		⁽⁴⁾	—			—
BEF Foods
Assets held for use	—			—			87
Assets held for sale	3,000		⁽⁵⁾	—			—


⁽¹⁾	$4,133 and $337 relates to impairment of seven operating locations and certain commercial vehicles, respectively


⁽²⁾	$1,717 and $2,692 relates to impairment of three operating and ten nonoperating locations, respectively


⁽³⁾	$993 and $2,206 relates to impairment of three operating and five nonoperating locations, respectively


⁽⁴⁾	$9,380 relates to impairment of 29 nonoperating locations, of which $714 relates to the impairment of one location no longer classified as held for sale.


⁽⁵⁾	$3,000 relates to impairment of one nonoperating location