Asset Impairments:

During the three months ended September 29, 2013, we recognized an asset impairment charge of $0.5 million primarily related to one store, which was previously impaired. During the three months ended September 30, 2012, we recognized an asset impairment charge of $0.8 million related to two stores, of which one store was previously impaired. During the nine months ended September 29, 2013, we recognized asset impairment charges of $0.8 million primarily related to two stores, of which one store was previously impaired. During the nine months ended September 30, 2012, we recognized asset impairment charges of $3.5 million related to 12 stores, of which seven stores were previously impaired. These impairment charges were the result of declines in the stores’ financial performance primarily due to various competitive and economic factors in the markets in which the stores are located. We continue to operate all but one of these stores.

As of September 29, 2013 and September 30, 2012, the aggregate carrying value of the property and equipment at the impaired stores, after the impairment charges, was $0.9 million and $4.5 million, respectively.

Asset impairments represent adjustments we recognize to write down the carrying amount of the property and equipment at our stores to their estimated fair value, as the store’s operations are not expected to generate sufficient projected future cash flows to recover the current net book value of its long-lived assets. We estimate the fair value of a store’s long-lived assets (property and equipment) by discounting the expected future cash flows of the store using a weighted average cost of capital commensurate with the risk. Accordingly, the fair value measurement of the stores for which we recognized an impairment charge is classified within Level 3 of the fair value hierarchy. The following estimates and assumptions used in the discounted cash flow analysis impact the fair value of a store’s long-lived assets:


•	Discount rate based on our weighted average cost of capital and the risk-free rate of return;


•	Sales growth rates and cash flow margins;


•	Strategic plans, including projected capital spending and intent to exercise lease renewal options for the store;


•	Salvage values; and


•	Other risks and qualitative factors specific to the asset or market conditions in which the asset is located at the time the assessment was made.

During the first nine months of 2013, the average discount rate, average sales growth rate and average cash flow margin used for impaired stores were 7%, 0% and 12%, respectively. We believe our assumptions in calculating the fair value of our long-lived assets are similar to those used by other marketplace participants. If actual results are not consistent with our estimates and assumptions, we may be exposed to additional impairment charges, which could be material to our Consolidated Statements of Earnings.