losure Costs and Asset Disposals

The following table presents restaurant impairments, closure costs and asset disposals for fiscal years 2016, 2015 and 2014 (in thousands):



	2016		2015		2014
Restaurant impairments⁽¹⁾	$	41,615	$	25,436	$	57
Closure costs⁽¹⁾	2,251		3,076		91
Loss on disposal of assets and other ⁽²⁾	3,445		1,104		1,243
	$	47,311	$	29,616	$	1,391

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(1)	Restaurant impairments and closure costs can include expenditures related to restaurants previously impaired or closed.


(2)	Included in loss on disposal of assets and other for the fiscal year 2016 is a $1.1 million charge to reduce capitalized labor and overhead as a result of the reduced growth for new restaurant development and a $0.5 million gain from insurance proceeds received for property damage in excess of the loss recognized.

Restaurant Impairments

During fiscal year 2016, 54 restaurants were identified as impaired, primarily related to management’s current assessment of the expected future cash flows of various restaurants based on recent results. During fiscal year 2015, 39 restaurants were identified as impaired. Fifteen of the 39 restaurants impaired in fiscal year 2015 were also closed in that year (see discussion under restaurant closures below). Additionally, the Company anticipates closing approximately 55 of such impaired restaurants in 2017.

In performing its impairment testing, the Company forecasts the future undiscounted cash flows by looking at recent restaurant level performance, restaurant level operating plans, sales trends and cost trends for cost of sales, labor and operating expenses. The Company compares this cash flow forecast to the asset’s carrying value at the restaurant. Based on this analysis, if the carrying amount of the assets is greater than the estimated future undiscounted cash flows, an impairment charge is recognized, measured as the amount by which the carrying amount exceeds the fair value of the asset. The fair value is determined based on a discounted cash flows analysis using a discount rate of 10% or at salvage value if expected cash flows are not material. The measurement of an impairment charge is a Level 3 fair value measure. These charges are included in the restaurant impairments, closure costs and asset disposals line item in the Consolidated Statements of Operations.

Restaurant Closures

During fiscal year 2015, the Company closed 16 restaurants that operated below acceptable profitability levels. The Company recognized $2.3 million, $3.1 million and $0.1 million of closure costs in fiscal years 2016, 2015 and 2014, respectively. The closure costs recognized during 2016 are primarily related to the ongoing costs of restaurants closed in during 2015, including fees from real estate advisors and brokers related to terminations of the leases and charges resulting from final adjustments to liabilities as lease terminations occur.

The Company provides for closed restaurant operating lease liabilities using a discount rate of 4.45% to calculate the present value of the remaining non-cancelable lease payments after the closing date, net of estimated subtenant income. The following table contains a summary of the changes in the liability for closed restaurants as of January 3, 2017 and December 29, 2015 (in thousands):



	2016			2015
Closed restaurant reserves, beginning of period	$	4,746		$	444
Additions—restaurant closing costs recognized and accretion	858			4,518
Decreases—payments	(3,724		)	(216		)
Closed restaurant reserves, end of period	$	1,880		$	4,746

The current portion of the liability, $0.9 million and $2.4 million as of January 3, 2017 and December 29, 2015, respectively, is included in accrued expenses and other current liabilities, and the long-term portion is reported in other long-term liabilities in the Company’s Consolidated Balance Sheets.