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Restructuring, Asset Impairment and Other Charges

12 Months Ended

Dec. 28, 2019

Restructuring And Related Activities [Abstract]

Restructuring, Asset Impairment and Other Charges

Note 6 – Restructuring, Asset Impairment and Other Charges

The following table provides the activity of reserves for closed properties for 2019, 2018 and 2017. Reserves for closed properties recorded in the consolidated balance sheets are included in “Other accrued expenses” in Current liabilities and “Other long-term liabilities” in Long-term liabilities based on when the obligations are expected to be paid.

(In thousands)	2019			2018			2017
Balance at beginning of year	$	16,386		$	17,892		$	21,932
Provision for closing charges		1,299			4,499			3,852
Provision for severance		447			153			624
Changes in estimates		(635	)		(1,181	)		1,028
Reclassification of lease liabilities		(8,177	)		—			—
Lease termination adjustments		(62	)		—			(2,600	)
Other		—			554			—
Accretion expense		271			579			526
Payments		(4,541	)		(6,110	)		(7,470	)
Balance at end of year	$	4,988		$	16,386		$	17,892

Included in the liability are lease-related ancillary costs from the date of site closure to the end of the remaining lease term. Prior to the adoption of ASU 2016-02 (Note 1), the liability also included lease obligations recorded at the present value of future minimum lease payments, calculated using a risk-free interest rate, net of estimated sublease income. Upon the adoption of ASU 2016-02, these liabilities were reclassified to operating lease liabilities within the consolidated balance sheets.

Restructuring, asset impairment and other charges included in the consolidated statements of operations consisted of the following:

(In thousands)	2019			2018			2017
Asset impairment charges (a)	$	17,925		$	2,630		$	33,679
Charge on customer advance (b)		2,351			32,000			—
Provision for closing charges		1,299			4,499			3,852
(Gain) loss on sales of assets related to closed facilities (c)		(8,532	)		(1,352	)		998
Provision for severance for closed sites		447			153			624
Other costs associated with distribution center and store closings (d)		2,135			797			1,851
Changes in estimates (e)		(635	)		(1,181	)		1,028
Lease termination adjustments (f)		(1,940	)		—			(2,600	)
	$	13,050		$	37,546		$	39,432

(a)

In 2019, asset impairment charges primarily related to Food Distribution segment, including the Caito trade name. In 2018 and 2017, asset impairment charges were incurred primarily in the Retail segment due to the economic and competitive environment of certain stores and in conjunction with the Company’s retail store rationalization plan.

(b)	The charge on customer advance relates to an advance to an independent retailer customer which was not fully recoverable. See Note 15 “Concentration of Credit Risk” for further discussion.

(c)	Gain (loss) on sales of assets were primarily related to the sale of a closed Food Distribution warehouse in 2019, a closed Military warehouse and closed Retail stores in 2018 and closed Retail stores in 2017.

(d)	Other costs associated with distribution center and store closings represent additional costs, including labor, inventory transfer and other administrative costs, incurred in connection with restructuring operations in the Food Distribution and Retail segments.

(e)

Changes in estimates primarily relate to revised estimates for turnover and other lease ancillary costs associated with previously closed locations, which were generally lower than the initial estimates at certain properties in 2019 and 2018 and reflected the deterioration of the condition of certain properties in 2017.

(f)	Lease termination adjustments represent the benefits recognized in connection with early lease buyouts for previously closed sites. Payments made in connection with lease buyouts were applied to reserves for closed properties and lease liabilities, as applicable.

In the second quarter of 2019 the Company announced a plan to reposition the Caito fresh production operations and to focus on traditional produce distribution and production of fresh cut produce and deli items. As a result of this plan, the Company evaluated the related indefinite-lived trade name and long-lived assets for potential impairment. The indefinite-lived trade name with a book value of $35.5 million was measured at a fair value of $21.5 million, resulting in an impairment charge of $14.0 million. During the fourth quarter of 2019, the operations of the fresh kitchen ceased and the related property and equipment assets were listed for sale. As of December 28, 2019, these assets were classified as Property and equipment held for sale within the consolidated balance sheet and written down to their fair value less costs to sell, resulting in a $2.4 million impairment within the Food Distribution segment. The Company entered into an agreement to sell the assets in January 2020 and expects the transaction to close during the first quarter of 2020.

Indefinite lived intangible assets are tested for impairment at least annually, and as needed if an indicator of potential impairment exists. Indefinite lived intangible assets are measured at fair value using Level 3 inputs under the fair value hierarchy, as further described in Note 8 – Fair Value Measurements. The fair value of indefinite lived intangible assets is determined by estimating the amount and timing of net future cash flows generated from the use of the asset, generally using estimated revenue growth rates and profitability rates and, in the case of the relief-from-royalty methodology, royalty rates. Future cash flows are discounted based on the WACC of the reporting unit in which the asset resides, determined using current interest rates, equity risk premiums, and other market-based expectations regarding expected investment returns, as well as estimates of industry specific equity and debt rates of return.

Long-lived assets are measured at fair value on a nonrecurring basis using Level 3 inputs under the fair value hierarchy, as further described in Note 8, Fair Value Measurements. Assets consisting of property and equipment with a book value of $32.8 million were measured at a fair value of $28.9 million, resulting in impairment charges of $3.9 million in 2019. Fair value of long-lived assets is determined by estimating the amount and timing of net future cash flows, discounted using a risk-adjusted rate of interest. The Company estimates future cash flows based on historical results of operations, external factors expected to impact future performance, experience and knowledge of the geographic area in which the assets are located, and when necessary, uses real estate brokers. Assets classified as held for sale in the consolidated balance sheet are valued at the expected net proceeds.