Impairments and Loss on Sale of Assets

9 Months Ended

Jan. 23, 2015

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. A long-lived asset group is considered impaired when the carrying value of the asset group exceeds its fair value. The impairment loss recognized is the excess of carrying value above its fair value. The estimation of fair value requires significant estimates of factors in future restaurant performance and real estate appraisals. To estimate fair value for locations where we own the land and building, we obtain appraisals from third party real estate valuation firms. We use discounted future cash flows to estimate fair value for leased locations. Our weighted average cost of capital is used as the discount rate in our fair value measurements for leased locations, which is considered a Level 3 measurement. A reasonable change in this discount rate would not have a significant impact on these fair value measurements.

In the three months ended January 23, 2015, we incurred noncash asset impairment losses of $1,672 in the Bob Evans Restaurant segment, as a result of adverse performance in the third quarter of fiscal 2015 and a reassessment of expected future cash flows at eight current and former restaurant locations. In the nine months ended January 23, 2015, we incurred noncash asset impairment losses of $2,991 in the Bob Evans Restaurant segment, as a result of adverse performance in the first three quarters of fiscal 2015 and a reassessment of expected future cash flows at 13 current and former restaurant locations. These impairment losses are recorded in the S,G&A line on the Consolidated Statements of Net Income. An additional $258 noncash asset impairment loss was recorded in the first quarter of fiscal 2015 in the Bob Evans Restaurants segment on the "Impairment of assets held for sale" line on the Consolidated Statements of Net Income. This charge related to one nonoperating location.

In the first quarter of fiscal 2014, we reached an agreement to sell 29 locations, resulting in a pretax noncash assets held for sale impairment charge in the Bob Evans Restaurants segment of $8,609. In the second quarter of the prior year, we closed on the sale of 27 of the 29 properties and recorded an additional impairment charge of $771 related to the two remaining properties. We closed on the sale of 28 of the 29 nonoperating properties at the end of the prior year. The remaining property was moved out of held for sale assets during the fourth quarter of fiscal 2014 and we resumed depreciation for this location. We recorded an additional noncash asset impairment charge in the Bob Evans Restaurants reporting segment of $1,769 on five restaurant locations in the three months ended January 24, 2014. The charge was recorded in the S,G&A line in the Consolidated Statements of Net Income.

In the second quarter of fiscal 2014, we announced our plans to close our food production plant in Richardson, Texas. Based on the estimated value of the facility, we recorded a pretax noncash assets held for sale impairment charge in the BEF Foods segment of $3,000 in the second quarter last year. 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 Sheet. Upon being classified as held for sale, depreciation ceased for these assets.

The following table represents noncash asset impairment charges for those assets remeasured to fair value during the three and nine months ended January 23, 2015, and January 24, 2014 (in thousands):



	Three Months Ended						Nine Months Ended
	January 23, 2015			January 24, 2014			January 23, 2015			January 24, 2014
Bob Evans Restaurants
Assets held and used	$	1,672	⁽¹⁾	$	1,769	⁽²⁾	$	2,991	⁽⁴⁾	$	4,133	⁽⁶⁾
Assets held for sale	—			—			258		⁽⁵⁾	9,380		⁽⁷⁾
BEF Foods
Assets held for sale	—			—			—			3,000		⁽³⁾

⁽¹⁾ Relates to six operating and two nonoperating locations

⁽²⁾ Relates to five operating locations

⁽³⁾ Relates to one nonoperating location

⁽⁴⁾ Relates to eleven operating and two nonoperating locations

⁽⁵⁾ Relates to one nonoperating location

⁽⁶⁾ Relates to seven operating locations

⁽⁷⁾ Relates to 29 nonoperating locations

Additionally in the third quarter of fiscal 2015 we recognized a loss of $1,728 on the sale of our ownership interest in an aircraft that was jointly owned. The loss was recorded in the S,G&A line in the Consolidated Statements of Net Income.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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