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IMPAIRMENT OF ASSETS:

Real Estate – During 2017, certain real estate inventory under development with a carrying amount of $3,346,000 was written down to its fair value, less estimated selling costs, of $3,232,000, resulting in an impairment charge of $150,000. During 2016, certain real estate with carrying amounts of $23,757,000 was written down to its fair value, less estimated selling costs, of $21,264,000, resulting in an impairment charge of $2,506,000.

Fulfillment Services – The impairment of long-lived assets is determined using a two-step process. The first step involves a comparison of the estimated future undiscounted cash flows of the business unit to the carrying value of the long-lived assets. If the carrying amount of a business unit exceeds its undiscounted cash flows, then the second step of the long-lived assets impairment test must be performed. The second step of the long-lived assets impairment test compares the fair value of the long-lived assets with the carrying values to measure the amount of impairment loss, if any. The fair values of long-lived assets are determined using internal estimates, third party appraisals or market quotes for similar assets, where available. It was determined there was no impairment of long-lived assets in the fulfillment services business in 2017; however, the Company recorded impairment of long-lived assets in the fulfillment services business in 2016.

As a result of the long-lived asset impairment test performed as of April 30, 2016, the Company recorded a $7,900,000 non-cash impairment charge related to the long-lived assets of its fulfillment services business. The Company determined its intangible asset related to customer contracts and relationships was impaired by $4,806,000, its real estate was impaired by $2,970,000 and certain of its fixed assets were impaired by $124,000. The fair value of the customer contracts and relationships asset was determined based on a discounted cash flow approach using Level 3 inputs under ASC 820. The cash flows are those expected by market participants discounted at a rate based on an assessment of the risk inherent in the future cash flows of the fulfillment services business. The real estate fair value was determined based on third-party appraisals of properties and the fair value of fixed assets was determined based on quoted market prices or prices for similar assets.

The impairment charge is included in the 2016 Impairment of assets line item in the consolidated statements of operations and the 2016 consolidated statements of cash flows in the accompanying financial statements. In addition, the impairment charge in 2016 has been allocated on a pro-rata basis to the long-lived assets of the fulfillment services business using the relative carrying amounts of those assets but not reducing the assets below their fair values as of April 30, 2016.