Summary of Significant Accounting Policies (Tables)

12 Months Ended

Jun. 04, 2013

Summary of Significant Accounting Policies [Abstract]

Weighted-average common and dilutive potential common shares outstanding

Basic (loss)/earnings per share is computed by dividing net (loss)/income by the weighted average number of common shares outstanding during each period presented.  Diluted (loss)/earnings per share gives effect to stock options and restricted stock outstanding during the applicable periods.  The following table reflects the calculation of weighted-average common and dilutive potential common shares outstanding as presented in the accompanying Consolidated Statements of Operations and Comprehensive (Loss)/Income (in thousands, except per-share data):

		2013		2012		2011
(Loss)/income from continuing operations	$	(23,434)	$	3,526	$	49,555
Loss from discontinued operations		(15,979)		(3,714)		(2,677)
Net (loss)/income	$	(39,413)	$	(188)	$	46,878
Weighted-average common shares outstanding		61,040		62,916		64,029
Dilutive effect of stock options and restricted stock		–		592		919
Weighted average common and dilutive potential
common shares outstanding		61,040		63,508		64,948
(Loss)/earnings per share – Basic
(Loss)/income from continuing operations	$	(0.38)	$	0.06	$	0.77
Loss from discontinued operations		(0.27)		(0.06)		(0.04)
Net (loss)/earnings per share	$	(0.65)	$	(0.00)	$	0.73
(Loss)/earnings per share – Diluted
(Loss)/income from continuing operations	$	(0.38)	$	0.06	$	0.76
Loss from discontinued operations		(0.27)		(0.06)		(0.04)
Net (loss)/earnings per share	$	(0.65)	$	(0.00)	$	0.72

Antidilutive shares excluded from computation of diluted earnings/(loss) per share

Stock options with an exercise price greater than the average market price of our common stock and certain options with unrecognized compensation expense do not impact the computation of diluted (loss)/earnings per share because the effect would be anti-dilutive.  The following table summarizes stock options and restricted shares that did not impact the computation of diluted (loss)/earnings per share because their inclusion would have had an anti-dilutive effect (in thousands):

	2013	2012	2011
Stock options	2,161*	2,229	2,517
Restricted shares	1,492*	819	421
Total	3,653*	3,048	2,938

*Due to a loss from continuing operations for the year ended June 4, 2013, all then outstanding share-based awards were excluded from the computation of diluted loss per share.

Changes in carrying amount of goodwill

The changes in the carrying amount of goodwill are as follows (in thousands):

Balance at May 31, 2011	$	15,571
Adjustments to fiscal year 2011
purchase price allocations		1,348
Acquisition		7,989
Impairment		(16,919	)
Balance at June 5, 2012	$	7,989
Adjustments to fiscal year 2012
purchase price allocation		1,033
Impairment		(9,022	)
Balance at June 4, 2013	$	–

Other intangible assets

Other intangible assets which are included in Other assets, net in the Consolidated Balance Sheets consist of the following (in thousands):

	2013		2012
	Gross Carrying Amount	Accumulated Amortization	Gross Carrying Amount	Accumulated Amortization
Reacquired franchise rights	$ 14,723	$ 6,847	$ 14,825	$ 4,961
Trademarks	6,025	854	11,961	847
Acquired franchise agreements	1,500	248	2,460	39
Favorable lease valuations *	2,205	255	2,205	168
Other	100	22	150	4
	$ 24,553	$8,226	$ 31,601	$ 6,019

* As of June 4, 2013 and June 5, 2012, we also had $1.0 million and $1.3 million, respectively, of unfavorable lease valuation liabilities which resulted from the terms of acquired franchise operating lease contracts being unfavorable relative to market terms of comparable leases on the acquisition date.  In addition, as of June 4, 2013 and June 5, 2012, we had a liability for both periods of $0.2 million which resulted from the terms of a Lime Fresh license agreement being unfavorable relative to market terms of a comparable license agreement.  The majority of these liabilities are included within Other deferred liabilities in our Consolidated Balance Sheets.  See Note 4 to the Consolidated Financial Statements for more information on the favorable and unfavorable lease valuations from our acquisition of Lime Fresh in fiscal 2012 and acquisitions of Ruby Tuesday franchise partnerships during fiscal 2011.

Reclassifications and Immaterial Adjustments to Consolidated Statement of Operations and Comprehensive (Loss)/Income for Prior Years

Further, we made the following other reclassifications and/or corrections to our Consolidated Statements of Operations and Comprehensive (Loss)/Income for the fiscal years ended June 5, 2012 and May 31, 2011 (in thousands):

·   reclassified certain non-restaurant related sales from Restaurant sales and operating revenue to Selling, general, and administrative, net;

·   reclassified and/or corrected certain employee fringe benefit and payroll tax expenses for corporate employees and field executives from Payroll and related costs, which is intended to capture payroll and related expenses for restaurant level employees, to Selling, general and administrative, net.  Salaries and wages for these employees were already captured within the Selling, general and administrative, net caption;

·   reclassified certain expenses not directly related to restaurant operations from Other restaurant operating costs to Selling, general and administrative, net; and

·   corrected amortization expense of debt issuance costs and fees relating to our revolving credit facility from Other restaurant operating costs to Interest expense, net.

	As presented - Fiscal year ended June 5, 2012	Reclassifications for Discontinued Operations	Other Reclassifications and Corrections	As adjusted - Fiscal year ended June 5, 2012
Restaurant sales and operating revenue	$ 1,320,098	$       (14,015)	$      (58)	$ 1,306,025
Cost of merchandise	380,520	(4,947)	–	375,573
Payroll and related costs	455,087	(6,642)	(7,692)	440,753
Other restaurant operating costs	270,132	(4,074)	(3,485)	262,573
Depreciation	65,297	(1,153)	–	64,144
Selling, general and administrative, net	114,534	(1,597)	7,427	120,364
Closures and impairments, net	18,665	(1,914)	–	16,751
Interest expense, net	19,620	–	3,692	23,312
Loss from continuing operations
before income taxes	(14,938)	6,312	–	(8,626)
Benefit for income taxes from
continuing operations	(14,750)	2,598	–	(12,152)
Loss from discontinued operations, net
of tax	–	(3,714)	–	(3,714)
Net loss	(188)	–	–	(188)
	As presented - Fiscal year ended May 31, 2011	Reclassifications for Discontinued Operations	Other Reclassifications and Corrections	As adjusted - Fiscal year ended May 31, 2011
Restaurant sales and operating revenue	$ 1,258,015	$       (3,989)	$          –	$ 1,254,026
Cost of merchandise	365,653	(1,373)	–	364,280
Payroll and related costs	422,230	(2,146)	(7,030)	413,054
Other restaurant operating costs	256,632	(1,588)	(1,268)	253,776
Depreciation	62,878	(281)	–	62,597
Selling, general and administrative, net	85,971	(1,023)	7,143	92,091
Closures and impairments, net	6,249	(2,074)	–	4,175
Interest expense, net	12,353	–	1,155	13,508
Income from continuing operations
before income taxes	52,622	4,496	–	57,118
Provision for income taxes	5,744	1,819	–	7,563
Loss from discontinued operations, net
of tax	–	(2,677)	–	(2,677)
Net income	46,878	–	–	46,878