Impairments and Loss on Sale of Assets

12 Months Ended

Apr. 24, 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. 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 carrying value above its fair value. The estimation of fair value requires significant estimates of factors in future restaurant performance and market-based 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 based on sales of comparable properties in the same area as our restaurant location, which approximates fair value. We use discounted future cash flows to estimate fair value for long-lived assets for our 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 fourth quarter of fiscal 2015 we incurred pretax impairment charges of $2,851 in the Bob Evans Restaurant segment related to our decision to close 20 underperforming restaurants in the following year. Eighteen of these stores were closed in the first quarter of fiscal 2016 and we plan to close the remaining two stores by the end of fiscal 2016. We believe these closures strengthened our restaurant portfolio by improving overall returns and freeing up resources for other uses.

The impairment charges related to eight owned locations classified as held for sale on the Consolidated Balance Sheets, and four leased locations. We also recorded impairment charges of $3,249 in the first and third quarters of the year as a result of adverse performance and a reassessment of expected future cash flows at ten current and former restaurant locations, one of which is classified as held for sale on the Consolidated Balance Sheets. In total for fiscal 2015, Bob Evans Restaurant impairment charges of $3,442 and $2,658 are recorded in the S,G&A line and the Impairment of assets held for sale line of the Consolidated Statements of Net Income, respectively. As of April 24, 2015, the net book value of restaurant assets remeasured during fiscal 2015 was $15,048.

In the first quarter of fiscal 2014, we reached an agreement to sell 29 locations, resulting in pretax impairment charges 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 reclassified out of held for sale assets during the fourth quarter of fiscal 2014 and we resumed depreciation for this location. We recorded an additional pretax impairment charges in the Bob Evans Restaurants reporting segment of $4,133 on seven restaurant locations in fiscal 2014. The charges were 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 impairment charge in the BEF Foods segment of $3,000 in the second quarter of fiscal 2014. The long-lived asset group related to this plant is included at its fair value, less costs to sell, 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.

To be consistent with current period presentation, we have reclassified the assets for nineteen restaurants and the Richardson plant to the “Long-term assets held for sale” line in the Consolidated Balance Sheets as of April 25, 2014.

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



(in thousands)	2015			2014			2013
Bob Evans Restaurants
Assets held for use	$	3,442	⁽¹⁾	$	4,470	⁽³⁾	$	4,409	⁽⁶⁾
Assets held for sale	2,658		⁽²⁾	9,380		⁽⁴⁾	—
BEF Foods
Assets held for sale	—			3,000		⁽⁵⁾	—


(1)	Relates to eleven operating and two nonoperating locations


(2)	Relates to eight operating and one nonoperating location


(3)	$4,133 and $337 relates to impairment of seven operating locations and certain commercial vehicles, 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


(6)	$1,717 and $2,692 relates to impairment of three operating and ten nonoperating locations, respectively

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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