Restructuring and Asset Impairment

9 Months Ended

Oct. 08, 2022

Restructuring And Related Activities [Abstract]

Note 5 – Restructuring and Asset Impairment

The following table provides the activity of reserves for closed properties for the 40-week period ended October 8, 2022. Included in the liability are lease-related ancillary costs from the date of closure to the end of the remaining lease term, as well as related severance. Reserves for closed properties recorded in the condensed consolidated balance sheets are included in “Other accrued expenses” in Current liabilities and “Other long-term liabilities” in Long-term liabilities based on the timing of when the obligations are expected to be paid. Reserves for severance are recorded in “Accrued payroll and benefits”.


	Reserves for Closed Properties
	Lease
	Ancillary
(In thousands)	Costs			Severance			Total
Balance at January 1, 2022	$	3,124		$	—		$	3,124
Provision for closing charges		857			—			857
Provision for severance		—			9			9
Lease termination adjustments		(86	)		—			(86	)
Changes in estimates		(73	)		—			(73	)
Accretion expense		53			—			53
Payments		(806	)		(9	)		(815	)
Balance at October 8, 2022	$	3,069		$	—		$	3,069

Restructuring and asset impairment, net in the condensed consolidated statements of earnings consisted of the following:


	12 Weeks Ended						40 Weeks Ended
	October 8,			October 9,			October 8,			October 9,
(In thousands)	2022			2021			2022			2021
Asset impairment charges (a)	$	752		$	207		$	4,232		$	3,783
Provision for closing charges		857			—			857			1,410
Gain on sales of assets related to closed facilities (b)		(2,553	)		(358	)		(3,168	)		(2,544	)
Provision for severance		—			233			9			357
Other costs (income) associated with site closures (c)		58			196			(17	)		507
Lease termination adjustments (d)		—			(488	)		(102	)		(488	)
Changes in estimates (e)		—			15			(73	)		(44	)
Total	$	(886	)	$	(195	)	$	1,738		$	2,981

(a) Asset impairment charges in the current year were incurred in the Retail segment and relate to restructuring of the Retail segment's e-commerce delivery model and a current year store closure. In the prior year, asset impairment charges were incurred primarily in the Retail segment and relate to prior year store closures and previously closed locations, as well as site closures in connection with the Company's supply chain transformation within the Wholesale segment.

(b) Gain on sales of assets in the current year primarily relates to the sales of real property of previously closed locations within the Wholesale and Retail segments. In the prior year, the gain on sales of assets primarily related to the sales of pharmacy customer lists, equipment, and real estate associated with store closings in the Retail segment, in addition to gains on sale of vacant land in the Wholesale segment.

(c) Other income net activity in the current year primarily relates to restructuring activity within the Wholesale segment and Retail store closings. In the prior year, other costs net activity primarily related to Retail and Wholesale site closures and restructuring activities.

(d) Lease termination adjustments in the current year relates to the gain recognized to terminate a lease agreement in the current year, which includes a $16 thousand write-off of the lease liability and $86 thousand reduction of lease ancillary costs included in the reserve for closed properties. In the prior year, lease termination adjustments related to the gain recognized to terminate a lease agreement, which included a $0.3 million write-off of the lease liability and $0.2 million of lease ancillary costs included in the reserve for closed properties.

(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 all years presented.

Long-lived assets which are not recoverable are measured at fair value on a nonrecurring basis using Level 3 inputs under the fair value hierarchy, as further described in Note 6. In the current year, assets with a book value of $4.3 million were measured at a fair value of $0.1 million, resulting in impairment charges of $4.2 million. In the prior year, long-lived assets with a book value of $27.5 million were measured at a fair value of $23.7 million, resulting in impairment charges of $3.8 million. The fair value of long-lived assets is determined by estimating the amount and timing of net future cash flows, including the expected proceeds from the sale of assets, 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.

The Company has evaluated assets held for sale as of October 8, 2022 and concluded that a previously closed facility in Lakeland, Florida within the Wholesale segment, with a carrying value of $2.8 million, and one previously closed store within the Retail segment, with a carrying value of $0.9 million, meet the requirements for held for sale classification within ASC 360. The assets have been classified as property and equipment held for sale in the condensed consolidated balance sheet. Liabilities with a carrying value of $0.1 million are included as part of the disposal group. Subsequent to the end of the third quarter, the Company sold all property and equipment held for sale and received proceeds totaling $6.9 million.