Note I - Closures and Impairments Expense, Including Trademark Impairments

9 Months Ended

Mar. 04, 2014

Disclosure Text Block Supplement [Abstract]

Asset Impairment Charges [Text Block]

NOTE I – CLOSURES AND IMPAIRMENTS EXPENSE, INCLUDING TRADEMARK IMPAIRMENTS

Closures and impairments, net include the following for the 13 and 39 weeks ended March 4, 2014 and March 5, 2013 (in thousands):

	Thirteen weeks ended						Thirty-nine weeks ended
	March 4, 2014			March 5, 2013			March 4, 2014			March 5, 2013
Closures and impairments from continuing operations:
Property impairments	$	2,908		$	543		$	20,156		$	3,203
Closed restaurant lease reserves		257			1,340			4,554			1,714
Other closing costs		983			263			1,561			805
Loss/(gain) on sale of surplus properties		(377	)		(50	)		(324	)		(648	)
Closures and impairments, net	$	3,771		$	2,096		$	25,947		$	5,074
Closures and impairments from discontinued operations	$	(77	)	$	3,958		$	(12	)	$	20,355

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		4,554			(6	)		4,548
Payments		(3,628	)		(1,080	)		(4,708	)
Other adjustments		591			2			593
Balance at March 4, 2014	$	7,934		$	1,226		$	9,160

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.

During the quarter ended March 4, 2014, we closed 24 Ruby Tuesday concept restaurants in connection with a plan approved by the Board of Directors of Ruby Tuesday, Inc. on January 7, 2014. Of these closures, 11 of these restaurants closed upon expiration of their lease. We plan to close approximately six to nine additional Ruby Tuesday concept restaurants during the fourth quarter of fiscal 2014 in connection with this plan as currently modified. Included within Closures and impairments, net for the 39 weeks ended March 4, 2014 are impairment charges recognized during the second quarter of the current year of $4.4 million in connection with the early restaurant closures.

In addition to the impairment charges recorded in connection with the planned closures discussed above, during the 13 and 39 weeks ended March 4, 2014, we recorded $2.2 million and $12.5 million, respectively, of impairments relating to five and 27 open restaurants, respectively, with deteriorating operational performance and a $0.9 million impairment charge during the 13 weeks ended March 4, 2014 for the Lime Fresh trademark. The Lime Fresh trademark, which previously had been impaired by $5.0 million in the fourth quarter of fiscal 2013, has a net book value of $3.7 million remaining at March 4, 2014.

At March 4, 2014, we had 58 restaurants that had been open more than one year with rolling 12-month negative cash flows of which 39 have been impaired to salvage value. Of the 19 which remained, we reviewed the plans to improve cash flows at each of the restaurants and determined that no impairment was currently necessary. The remaining net book value of these 19 restaurants, seven of which are located on owned properties, was $19.7 million at March 4, 2014.

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.