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Impairment of Long-Lived Assets, Store Closings, Discontinued Operations and Property Held for Sale
 12 Months Ended
Aug. 26, 2020
Discontinued Operations and Disposal Groups [Abstract]  
Impairment of Long-Lived Assets, Store Closings, Discontinued Operations and Property Held for Sale Impairment of Long-Lived Assets, Store Closings, Discontinued Operations and Property Held for Sale
Impairment of Long-Lived Assets and Store Closings
We periodically evaluate long-lived assets held for use and held for sale whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. We analyze historical cash flows of operating locations and compare results of poorer performing locations to more profitable locations. We also analyze lease terms, condition of the assets and related need for capital expenditures or repairs, as well as construction activity and the economic and market conditions in the surrounding area.
We periodically evaluate our intangible assets, primarily the Fuddruckers trademarks and franchise agreements, to determine if events or changes in circumstances such as economic or market conditions indicate that the carrying amount of the assets may not be recoverable. We analyze historical cash flows of operating locations to determine trends that would indicate a need for impairment. We also analyze royalties and collectability from our franchisees to determine if there are trends that would indicate a need for impairment. Due to the effects of the COVID-19 pandemic on our operations, we identified a triggering event in the third quarter of fiscal 2020 and determined that no impairment provision was necessary.
For assets held for use, we estimate future cash flows using assumptions based on possible outcomes of the areas analyzed. If the estimated undiscounted future cash flows are less than the carrying value of the location’s assets, we record an impairment loss based on an estimate of discounted cash flows. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require management’s subjective judgments. Assumptions and estimates used include operating results, changes in working capital, discount rate, growth rate, anticipated net proceeds from disposition of the property and if applicable, lease terms. The span of time for which future cash flows are estimated is often lengthy, increasing the sensitivity to assumptions made. The time span is longer and could be 20 to 25 years for newer properties, but only 5 to 10 years for older properties. Depending on the assumptions and estimates used, the estimated future cash flows projected in the evaluation of long-lived assets can vary within a wide range of outcomes. The Company considers the likelihood of possible outcomes in determining the best estimate of future cash flows. The measurement for such an impairment loss is then based on the fair value of the asset as determined by discounted cash flows.
The Company recognized the following impairment charges and gains on asset disposals to income from operations:
 
Fiscal Year Ended
 August 26, 2020August 28, 2019
 (In thousands, except per share data)
Net provision for asset impairments and restaurant closings$10,193 $5,603 
Net gain on disposition of property and equipment(11,557)(12,832)
Total$(1,364)$(7,229)
Effect on EPS:  
Basic$0.05 $0.24 
Assuming dilution$0.05 $0.24 

The $10.2 million provision for asset impairments and restaurant closings in fiscal 2020 is primarily related to the write off of $5.4 million of right-of-use assets for 24 of our leased locations where we permanently ceased operations during the period, impairment losses of $4.8 million on 24 of our restaurant locations and $0.3 million on the remaining goodwill related to Cheeseburger in Paradise, $1.2 million for certain surplus equipment written down to fair value, as well as $1.8 million of store closing expenses. These losses were partially offset by $3.3 million net gain on the termination of 17 leases for locations where we permanently ceased operations and negotiated buyouts of the leases. See Abandoned Lease Facilities - Liability for Store Closing section of this Note 16, below.
The $11.6 million net gain on disposition of property and equipment in fiscal 2020 is primarily related to $8.4 million gains on the sales of seven previously held for sale properties and $3.9 million gains on two previously held for use properties, partially offset by routine asset retirements.
The $12.8 million net gain on disposition of property and equipment in fiscal 2019 is primarily related to the $12.9 million gain on the sale of two properties, partially offset by asset retirements at three locations.
The $5.6 million provision from asset impairments and restaurant closings in fiscal 2019 is primarily related to assets impaired at nine property locations, goodwill at one property location, seven properties held for sale written down to their fair value, and a reserve for eight restaurant closings of $0.2 million.
Discontinued Operations
As a result of the first quarter fiscal 2010 adoption of the Company’s Cash Flow Improvement and Capital Redeployment Plan, the Company reclassified 24 Luby’s Cafeterias to discontinued operations. As of August 26, 2020, one location remains held for sale.
The following table sets forth the assets and liabilities for all discontinued operations:  
 August 26,
2020		August 28,
2019
 (In thousands)
Property and equipment$1,715 $1,813 
Assets related to discontinued operations—non-current$1,715 $1,813 
Accrued expenses and other liabilities17 14 
Liabilities related to discontinued operations—current$17 $14 

As of August 26, 2020, under both closure plans, the Company had one property classified as discontinued operations. The asset carrying value of the owned property was $1.7 million and is included in assets related to discontinued operations. The Company is actively marketing this property for sale.
The following table sets forth the sales and pretax losses reported for all discontinued locations in fiscal 2020 and fiscal 2019: 
 
Fiscal Year Ended
 August 26,
2020		August 28,
2019
 (In thousands, except locations)
Sales$— $— 
Pretax loss$(29)$(7)
Income tax benefit on discontinued operations$— $— 
Loss on discontinued operations$(29)$(7)
Discontinued locations closed during the period— — 
 
The following table summarizes discontinued operations for fiscal 2020 and 2019:  
 
Fiscal Year Ended
 August 26,
2020		August 28,
2019
 (In thousands, except per share data)
Discontinued operating losses$(29)$(7)
Net loss$(29)$(7)
Income tax benefit (expense) from discontinued operations— — 
Loss from discontinued operations, net of income taxes$(29)$(7)
Effect on EPS from discontinued operations—decrease—basic$0.00 $0.00 
 
Property Held for Sale
We periodically review long-lived assets against its plans to retain or ultimately dispose of properties. If we decide to dispose of a property, it will be reclassified to property held for sale and actively marketed. The Company analyzes market conditions each reporting period and records additional impairments due to declines in market values of like assets. The fair value of the property is determined by observable inputs such as appraisals and prices of comparable properties in active markets for assets like the Company’s. Gains are not recognized until the properties are sold. 
Property held for sale includes unimproved land, closed restaurant properties and related equipment for locations not classified as discontinued operations. The specific assets are valued at the lower of net depreciable value or net realizable value. The Company actively markets all locations classified as property held for sale.
At August 26, 2020, the Company had 10 owned properties recorded at $11.2 million in property held for sale.
At August 28, 2019, the Company had 14 owned properties recorded at $16.5 million in property held for sale.
The pretax profit (loss) for the 10 held for sale locations was $(0.5) million and $0.2 million in fiscal 2020 and 2019, respectively.
The Company’s results of continuing operations will be affected to the extent proceeds from sales exceed or are less than net book value.
A roll forward of property held for sale for fiscal 2020, and 2019 is provided below (in thousands):  
Balance as of August 29, 2018$19,469 
Disposals(6,036)
Net transfers to property held for sale3,055 
Balance as of August 28, 2019$16,488 
Disposals(9,590)
Net transfers to (from) property held for sale4,351 
Balance as of August 26, 2020$11,249 

Abandoned Leased Facilities - Liability for Store Closing
As of August 26, 2020 and August 28, 2019, we classified 18 and 11 leased restaurants locations as abandoned. During fiscal 2020 we abandoned an additional 24 leased restaurants and we settled and terminated 17 leased restaurants. Although we remain obligated under the terms of the leases for the rent and other costs that may be associated with the leases, we decided to cease operations and we have no foreseeable plans to occupy the spaces as a company restaurant in the future. The total liability represents the present value of the total amount of rent and other direct costs (such as common area costs, property taxes, and insurance allocated by the landlord) for the remaining lease term less the present value of any sublease income expected to be collected.
The liability for our abandoned leases were as follows (in thousands):
August 26, 2020August 28, 2019
Short-term lease liability$365 $— 
Long-term lease liability2,348 — 
Accrued expenses and other liabilities2,088 1,441 
Total$4,801 $1,441