Note I - Closure and Impairments Expense

3 Months Ended

Sep. 02, 2014

Disclosure Text Block Supplement [Abstract]

Asset Impairment Charges [Text Block]

NOTE I – CLOSURES AND IMPAIRMENTS EXPENSE

Closures and impairments expense includes the following for the thirteen weeks ended September 2, 2014 and September 3, 2013 (in thousands):

	September 2, 2014			September 3, 2013
Closures and impairments from continuing operations
Property impairments	$	1,056		$	4,930
Closed restaurant lease reserves		466			2,595
Other closing expense		233			468
(Gain)/loss on sale of surplus properties		(273	)		40
Closures and impairments, net	$	1,482		$	8,033
Closures and impairments from discontinued operations				$	518

A rollforward of our reserve for future lease obligations associated with closed properties is as follows (in thousands):

	Reserve for Lease Obligations
Balance at June 3, 2014	$	10,873
Closing expense including rent and other lease charges		466
Payments		(1,326	)
Other adjustments		13
Balance at September 2, 2014	$	10,026

The amounts comprising future lease obligations in the table above are estimated using certain assumptions, including the period of time it will take to settle the lease with the landlord or find a suitable sublease tenant, and the amount of actual future cash payments could differ from our recorded lease obligations. Of the total future lease obligations included in the table above, $9.7 million and $10.5 million are included within the Accrued liabilities – Rent and other caption in our Consolidated Balance Sheets as of September 2, 2014 and June 3, 2014, respectively. For the remainder of fiscal 2015 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.

At September 2, 2014, we had 57 restaurants that had been open more than one year with rolling 12-month negative cash flows of which 36 have been impaired to salvage value. Of the 21 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 21 restaurants, eight of which are located on owned properties, was $24.1 million at September 2, 2014.

Should cash flows at these restaurants not improve within a reasonable period of time, further impairment charges are possible. Considerable management judgment is necessary to determine 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.