|4 Months Ended
Apr. 18, 2021
|Unusual or Infrequent Items, or Both [Abstract]
Due to the novel coronavirus ("COVID-19") pandemic, we continue to navigate unprecedented times for our business and industry. The COVID-19 pandemic has had a material adverse effect on our business; with approved vaccines being distributed and administered, we expect our restaurants’ dining room capacity to continue to increase as public health conditions improve and restrictions are eased. The extent of the reopening process, along with the potential impact of the COVID-19 pandemic on consumer spending behavior, will determine the continued significance of the impact of the COVID-19 pandemic to our operating results and financial position.
In response to the impact of COVID-19 on our operations, beginning April 1, 2020 the Company stopped making full lease payments under its existing lease agreements. During the suspension of payments, the Company continued to recognize expenses and liabilities for lease obligations and corresponding right-of-use assets on the balance sheet in accordance with ASC Topic 842.
We are nearing the conclusion of ongoing discussions with landlords regarding restructuring lease payments and rent concessions. As of April 18, 2021, the Company has contractually negotiated rent concessions with the majority of its landlords. The types of rent concessions the Company has negotiated include early termination, early renewal, rent deferral, and rent abatement.
For contractual rent concessions that do not substantially change the total cash flows of the lease, the Company has elected to account for these concessions assuming the existing lease agreements provide enforceable rights and obligations consistent with the relief issued by the Financial Accounting Standards Board titled ASC Topic 842 and ASC Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic ("FASB Relief"). For leases where the rent concession did not substantially change the total cash flows, the concession was accounted for as a remeasurement to the lease liability based on the original discount rate with a corresponding adjustment to the right-of-use asset. Additionally, the classification of the leases was not reassessed. For contractual rent concessions that substantially changed the total cash flows of the lease and did not qualify for the FASB relief, we applied the modification framework in accordance with ASC Topic 842, Leases. The Company reassessed lease classification for rent concessions that did not qualify for the FASB relief. During the first fiscal quarter of 2021, it was concluded no leases changed classification between operating and finance. Contractual rent concessions granted to the Company during the first fiscal quarter of 2021 did not grant the right to use additional assets not included in the original lease contracts, so no separate contracts were accounted for as part of the rent concession modifications.
During the sixteen weeks ended April 18, 2021, the Company recognized $1.2 million of asset impairment related to property, plant, and equipment assets at one Company-owned restaurant. During first quarter 2021, the Company determined to permanently close this restaurant after it had remained temporarily closed since the beginning of the COVID-19 pandemic. These impairment charges were included in Other charges on the Condensed Consolidated Statements of Operation and Comprehensive Loss.
The March 19, 2020 passage of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") created an opportunity for the Company to carry back 2019 and 2020 net operating losses ("NOL's"). The 2019 federal NOL’s were carried back to previous tax periods and resulted in refunds received and recorded during 2020. In 2021, the Company expects to receive approximately $16 million of cash tax refunds from remaining federal and state NOL carrybacks.
As of April 18, 2021, the Company had approximately $5.5 million of federal net operating loss carryforwards from the 2020 and 2021 tax years. The Company has approximately $12.6 million of net operating loss carryforwards for state income tax purposes that arose from the 2019, 2020, and 2021 tax years. The federal net operating loss carryforwards will be retained for an indefinite period. Of the state net operating loss carryforwards, approximately $0.2 million may expire, if unused, in 2024. The remaining state net operating losses approximating $12.4 million may expire, if unused, through 2039 or in some cases will be retained for an indefinite period. The utilization of net operating loss carryforwards may be limited to 80% of taxable income in any given year. The total $77.6 million valuation allowance includes $5.5 million federal NOL's and the $12.6 million state NOL's recorded as of April 18, 2021.