|12 Months Ended|
Dec. 30, 2018
|Other Income and Expenses [Abstract]|
Other charges consist of the following (in thousands):
Asset Impairment and Restaurant Closure Costs
For fiscal years 2018, 2017, and 2016, asset impairment and restaurant closure costs consisted of the following:
Restaurant Impairment. During 2018, the Company determined 41 Company-owned restaurants were impaired, 19 of which had immaterial impairments, and recognized a non-cash impairment charge of $28.1 million. During 2017 and 2016, the Company impaired long-lived assets of 13 and 19 Company-owned restaurants, and recognized non-cash impairment charges of $6.9 million and $24.4 million.
The Company recognized the 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.
The Company recognized a $0.8 million asset impairment charge due to the relocation of a restaurant during 2016.
Impairment of Software. During the fourth quarter of 2016, the Company determined certain software related to its Enterprise Resource Planning (“ERP”) system would be obsolete upon migration to a cloud-based ERP system in 2017. The Company also determined certain software in development for supply chain management would not meet the Company’s requirements if it were implemented. As a result, the Company recorded a $2.5 million impairment charge to write down the capitalized costs associated with this software.
Restaurant Closures. During 2018, the Company closed four restaurants. The related restaurant closure costs were immaterial.
During 2017, the Company closed two Red Robin restaurants at the end of their lease terms and closed one Red Robin restaurant that was underperforming relative to Company expectations. The related restaurant closure costs were immaterial.
During 2016, the Company closed nine Red Robin Burger Works restaurants, smaller non-traditional prototypes with a limited menu and limited service, that were underperforming relative to Company expectations; and recognized $6.7 million of restaurant closure costs, which comprised $3.7 million in fixed asset disposal costs, $2.7 million in charges related to future lease obligations and contract termination costs, immaterial termination benefits, inventory write off costs, and other closure-related costs.
During 2016, the Company closed two Red Robin restaurants at the end of their lease terms, closed one Red Robin restaurant and sold the property for an immaterial loss, and temporarily closed one Red Robin restaurant which reopened in 2017.
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 2018, 2017, and 2016 was immaterial.
In 2018, the Company recorded $4.8 million of litigation contingencies for employment-related claims. In 2016, the Company recorded $3.9 million of litigation contingencies for employment-related claims.
During 2018, the Company recorded $3.3 million of severance costs related to the reorganization in first quarter 2018. During the fourth quarter of 2016, the Company recorded $1.3 million of severance costs related to Company reorganization in the U.S. and Canada.
During 2018, the Company recorded $2.9 million of costs related to the disposal of smallwares.
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