Texas Roadhouse, Inc. and SubsidiariesNotes to Consolidated Financial Statements(Tabular amounts in thousands, except share and per share data)F-9
weighted average cost of capital and comparable company and acquisition market multiples. In estimating the fair value
using the capitalization of earnings method or discounted cash flows, we consider the period of time the restaurant has
been open, the trend of operations over such period and future periods, expectations of future sales growth and terminal
value. Assumptions about important factors such as the trend of future operations and sales growth are limited to those
that are supportable based upon the plans for the restaurant and actual results at comparable restaurants. When
developing these key judgments and assumptions, we consider economic, operational and market conditions that could
impact fair value. The judgments and assumptions used are consistent with what we believe hypothetical market
participants would use. However, estimates are inherently uncertain and represent only our reasonable expectations
regarding future developments. If the estimates used in performing the impairment test prove inaccurate, the fair value
of the restaurants may ultimately prove to be significantly lower, thereby causing the carrying value to exceed the fair
value and indicating impairment has occurred.
In 2018, 2017 and 2016, as a result of our annual goodwill impairment analysis, we determined that there was no
goodwill impairment. Refer to note 7 for additional information related to goodwill and intangible assets.
(i) Other AssetsOther assets consist primarily of deferred compensation plan assets, investments in unconsolidated affiliates,
deposits and costs related to the issuance of debt. The debt issuance costs are being amortized to interest expense over
the term of the related debt. For further discussion of the deferred compensation plan, see note 15.
(j) Impairment or Disposal of Long - lived AssetsIn accordance with ASC 360, Property, Plant and Equipment, long-lived assets related to each restaurant to be held
and used in the business, such as property and equipment and intangible assets subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of a restaurant may not be
recoverable. When we evaluate restaurants, cash flows are the primary indicator of impairment. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of the restaurant to estimated
undiscounted future cash flows expected to be generated by the restaurant. Under our policies, trailing 12-month cash
flow results below $300,000 at the individual restaurant level signals potential impairment. In our evaluation of
restaurants that do not meet the cash flow threshold, we estimate future undiscounted cash flows from operating the
restaurant over its estimated useful life, which can be for a period of over 20 years. In the estimation of future cash
flows, we consider the period of time the restaurant has been open, the trend of operations over such period and future
periods and expectations of future sales growth. Assumptions about important factors such as the trend of future
operations and sales growth are limited to those that are supportable based upon the plans for the restaurant and actual
results at comparable restaurants. If the carrying amount of the restaurant exceeds its estimated undiscounted future
cash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the estimated fair
value of the assets. We generally measure fair value by independent third party appraisal or discounting estimated future
cash flows. When fair value is measured by discounting estimated future cash flows, the assumptions used are consistent
with what we believe hypothetical market participants would use. We also use a discount rate that is commensurate with
the risk inherent in the projected cash flows. The adjusted carrying amounts of assets to be held and used are
depreciated over their remaining useful life. In 2018, 2017 and 2016, as a result of our impairment analysis, we
determined that there was no impairment. For further discussion regarding closures and impairments recorded in 2018,
2017 and 2016 refer to note 16.