Note I - Closures and Impairments Expense

6 Months Ended

Dec. 03, 2013

Disclosure Text Block Supplement [Abstract]

Asset Impairment Charges [Text Block]

NOTE I – CLOSURES AND IMPAIRMENTS EXPENSE

Closures and impairments, net include the following for the 13 and 26 weeks ended December 3, 2013 and December 4, 2012 (in thousands):

	Thirteen weeks ended						Twenty-six weeks ended
	December 3, 2013			December 4, 2012			December 3, 2013		December 4, 2012
Closures and impairments from continuing operations:
Property impairments	$	12,318		$	2,212		$	17,248	$	2,660
Closed restaurant lease reserves		1,702			(99	)		4,297		375
Other closing costs		110			285			578		541
Loss/(gain) on sale of surplus properties		13			(507	)		53		(598	)
Closures and impairments, net	$	14,143		$	1,891		$	22,176	$	2,978
Closures and impairments from discontinued operations	$	(453	)	$	16,360		$	65	$	16,397

A roll forward of our future lease obligations associated with closed properties is as follows (in thousands):

	Lease Obligations
	Continuing Operations			Discontinued Concepts			Total
Balance at June 4, 2013	$	6,417		$	2,310		$	8,727
Closing expense including rent and other lease charges		4,297			(92	)		4,205
Payments		(2,503	)		(821	)		(3,324	)
Other adjustments		42		–				42
Balance at December 3, 2013	$	8,253		$	1,397		$	9,650

For the remainder of fiscal 2014 and beyond, our focus will be on obtaining settlements, or subleases as necessary, on as many of these leases as possible and these settlements could be higher or lower than the amounts recorded. The actual amount of any cash payments made by the Company for lease contract termination costs will be dependent upon ongoing negotiations with the landlords of the leased restaurant properties.

As also discussed in Note R to the Condensed Consolidated Financial Statements, on January 7, 2014, the Board of Directors of Ruby Tuesday, Inc. approved a plan to close approximately 27 Ruby Tuesday concept restaurants in the third quarter of fiscal 2014 and three more in the fourth quarter. Of the 30 restaurants, approximately half are planned to close upon expiration of their lease. Included within Closures and impairments, net for the 13 and 26 weeks ended December 3, 2013 are impairment charges of $4.4 million in connection with the planned closures.

In addition to the impairment charges recorded in connection with the planned closures discussed above, during the 13 weeks ended December 3, 2013 we recorded $5.7 million of impairments relating to nine open restaurants with deteriorating operational performance. At December 3, 2013, we had 58 restaurants that had been open more than one year with rolling 12-month negative cash flows of which 43 have been impaired to salvage value. Of the 15 which remained, we reviewed the plans to improve cash flows at each of the restaurants and determined that no impairment was necessary. The remaining net book value of these 15 restaurants, six of which are located on owned properties, was $13.7 million at December 3, 2013.

Should sales at these restaurants not improve within a reasonable period of time, further impairment charges are possible. Considerable management judgment is necessary to estimate future cash flows, including cash flows from continuing use, terminal value, closure costs, salvage value, and sublease income. Accordingly, actual results could vary significantly from our estimates.