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Income Taxes | 6 Months Ended
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Jun. 27, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Our effective tax rate for the three months ended June 27, 2020, and June 29, 2019, was 33.9 percent and 27.2 percent, respectively. Our effective tax rate for the three months ended June 27, 2020 was impacted by (i) recording discrete tax expense of $0.4 million for a shortfall on the vesting of our restricted stock units, (ii) the permanent addback of certain nondeductible expenses, including meals and entertainment and officer’s compensation, and (iii) the effect of the partial valuation allowance for separate company state income tax losses and previously nondeductible interest under 163(j) of the Internal Revenue Code (“IRC”). Our effective tax rate for the three months ended June 29, 2019, was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, and the effect of the partial valuation allowance for separate company state income tax losses. In addition, we recorded discrete tax expense of $0.2 million for a shortfall on the vesting of our restricted stock units, which was offset by a $0.2 million discrete tax benefit for claiming tax credits. Our effective tax rate was (36.8) percent and 29.5 percent, for the first six months of fiscal 2020 and 2019, respectively. Our effective tax rate for the six months ended June 27, 2020 was impacted by (i) the discrete tax benefit of $3.9 million resulting from the release of the valuation allowance associated with the nondeductible interest expense under Section 163(j) of the IRC as a result of changes under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was enacted on March 27, 2020, and contained, among other things, several tax-based measures meant to counteract the effects of the COVID-19 pandemic, to increase the allowable percentage from 30 percent of adjusted taxable income to 50 percent of adjusted taxable income, (ii) recording discrete tax expense of $0.4 million for a shortfall on the vesting of our restricted stock units, (iii) the permanent addback of certain nondeductible expenses, including meals and entertainment and nondeductible compensation, and (iv) the effect of the partial valuation allowance for separate company state income tax losses and previously nondeductible interest expense under Section 163(j) of the IRC. Our effective tax rate for the six months ended June 29, 2019, was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation and the effect of the valuation allowance for separate company state income tax losses. In addition, during the first six months of fiscal 2019, we recorded discrete tax expense of $0.2 million for a shortfall on vesting of our restricted stock units, which was offset by a $0.2 million discrete tax benefit for claiming state tax credits. Our financial statements contain certain deferred tax assets which primarily resulted from tax benefits associated with the loss before income taxes in prior years, as well as net deferred income tax assets resulting from other temporary differences related to certain reserves, pension obligations, and differences between book and tax depreciation and amortization. We record a valuation allowance against our net deferred tax assets when we determine that, based on the weight of available evidence, it is more likely than not that our net deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences can be carried forward under tax law. Currently, we have a valuation allowance that covers (i) our separate company state net operating loss carryforwards and (ii) disallowed interest calculated pursuant to the changes made by the Tax Cuts and Jobs Act of 2017, as adjusted by the CARES Act. At the end of each quarter, we evaluate the weight of available evidence (both positive and negative). We considered the recent reported income generated in the current quarter and prior years (adjusted for unusual one-time items) and income generated in 2017, including the prior year income from Cedar Creek. We also considered evidence related to the four sources of taxable income to determine whether such positive evidence outweighed the negative evidence. The evidence considered included:
• | future reversals of existing taxable temporary differences;
• | future taxable income exclusive of reversing temporary differences and carryforwards;
• | taxable income in prior carryback years if carryback is permitted under the tax law; and
• | tax planning strategies.
At the end of the first two fiscal quarters of 2020 and 2019, in our evaluation of the weight of available evidence, we concluded that the weight of the positive evidence outweighed the negative evidence. In addition to the evidence discussed above, we considered as positive evidence forecasted future taxable income, the detail scheduling of the timing of the reversal of our deferred tax assets and liabilities, and the evidence from business and tax planning strategies described below. Although we believe our estimates are reasonable, the ultimate determination of the appropriate amount of valuation allowance involves significant judgments. We believe that the change in control under IRC Section 382 resulting from the completion of the secondary offering on October 23, 2017, will not cause any of our federal net operating losses to expire unused because management has been effectively implementing a real estate strategy involving the sale and leaseback of real estate. This strategy is further supported by the transactions involving four warehouses in January 2018 and two warehouses during 2019. In the first quarter of 2020, the Company executed three more sale and leaseback transactions, involving a total of fourteen warehouse locations. Additionally, the acquisition of Cedar Creek did not generate any limitations under IRC Section 382 on Cedar Creek’s tax assets. We will continue to monitor any changes to our results of operations that may affect our estimates, including any impact of COVID-19 if applicable.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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