|12 Months Ended|
Dec. 29, 2019
|Other Income and Expenses [Abstract]|
Other charges consist of the following (in thousands):
During 2019, the Company determined long-lived assets at 29 Company-owned restaurants were impaired and recognized a non-cash impairment charge of $15.1 million. During 2018 and 2017, the Company impaired long-lived assets of 41 and 13 Company-owned restaurants and recognized non-cash impairment charges of $28.1 million and $6.9 million, respectively. 19 of the 41 restaurants impaired in 2018 had immaterial impairments.
The Company recognized the asset impairment charges resulting from the continuing and projected future results of these restaurants, primarily through projected cash flows. The fair value measurement for asset impairment is based on significant inputs not observed in the market and thus represents a level 3 fair value measurement. Each restaurant’s past and present operating performance was reviewed in combination with projected future results, primarily through projected undiscounted cash flows. The Company compared the carrying amount of each restaurant’s assets to its fair value as estimated by management. The fair value of the long-lived assets is generally determined using a discounted cash flow projection model. In certain cases, management uses other market information, when available, to estimate the fair value of a restaurant. The impairment charges represent the excess of each restaurant’s carrying amount over its estimated fair value.
Executive Transition and Severance
During 2019, the Company recorded $3.5 million of executive transition and severance costs primarily related to the transition and realignment of our executive team, including the appointment of a new CEO in the third quarter of 2019.
Board and Stockholder Matter Costs
During 2019, the Company recorded $3.3 million of board and stockholder matter costs primarily related to the recruitment and appointment of the three new board members and the adoption of a shareholder rights plan.
During 2019, the Company recorded $1.0 million of executive retention costs related to payments made to retain executive leadership believed to be critical to the ongoing operation of the Company during the uncertainty created following the retirement of our CEO in early April 2019 and throughout the subsequent transition period. The retention agreement is filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the SEC on April 21, 2019.
Restaurant Closures and Refranchising
During 2019, the Company closed 18 restaurants resulting in a gain of $1.2 million. The gain on restaurant closures was driven by favorable lease terminations at the closed restaurant locations. Non-cash impairment charges relating to restaurant closures are included in Restaurant Closures and Refranchising component of other charges.
During 2018 and 2017, the Company closed four and three restaurants, respectively. The related restaurant closure costs were immaterial.
The Company evaluates restaurants that are sold or closed and allocates goodwill based on the relative fair value of the disposal restaurants to the Company’s reporting unit. Since restaurant operations are typically valued based on cash flow from operations, the Company compares the historical cash flow from the closed restaurants to the cash flow from the reporting unit to determine the relative value. The goodwill allocated to the restaurants closed in 2019, 2018, and 2017 was immaterial.
In 2018, the Company recorded $4.8 million of litigation contingencies for employment-related claims.
During 2018, the Company recorded $2.9 million of costs related to the disposal of smallwares.
During 2018, the Company recorded $3.3 million of severance costs related to the reorganization in first quarter 2018.
The entire disclosure for other income or other expense items (both operating and nonoperating). Sources of nonoperating income or nonoperating expense that may be disclosed, include amounts earned from dividends, interest on securities, profits (losses) on securities, net and miscellaneous other income or income deductions.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef