2. Asset Impairments:

We did not recognize an asset impairment charge during the three months ended March 31, 2013. During the three months ended April 1, 2012, we recognized an asset impairment charge of $0.3 million relating to one store, which was not previously impaired. This impairment charge was the result of declines in the store’s financial performance primarily due to various economic factors in the market in which the store is located. We continue to operate this store.

As of April 1, 2012, the aggregate carrying value of the property and equipment at the impaired store, after the impairment charge, was $0.3 million.

Asset impairments represent adjustments we recognize to write down the carrying amount of the property and equipment at our stores to their estimated fair value, as the store’s operation is not expected to generate sufficient projected future cash flows to recover the current net book value of its long-lived assets. We estimate the fair value of a store’s long-lived assets (property and equipment) by discounting the expected future cash flows of the store over its estimated remaining lease term using a weighted average cost of capital commensurate with the risk. Accordingly, the fair value measurement of the stores for which we recognized an impairment charge is classified within Level 3 of the fair value hierarchy. The following estimates and assumptions used in the discounted cash flow analysis impact the fair value of a store’s long-lived assets:

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Discount rate based on our weighted average cost of capital and the risk-free rate of return;

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Sales growth rates and cash flow margins over the expected remaining lease terms;

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Strategic plans, including projected capital spending and intent to exercise renewal options for the store;

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Salvage values; and

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Other risks and qualitative factors specific to the asset or market conditions in which the asset is located at the time the assessment was made.

We believe our assumptions in calculating the fair value of our long-lived assets are similar to those used by other marketplace participants. If actual results are not consistent with our estimates and assumptions, we may be exposed to additional impairment charges, which could be material to our Consolidated Statements of Earnings.