INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The components of the income tax provision (benefit) from continuing operations were as follows:

($ in millions)	2023		2022
Current
Federal	$	0.4	$	4.1
State	0.4		0.3
Total current income tax expense	0.8		4.4
Deferred
Federal	49.5		(62.5)
State	9.0		(13.9)
Total deferred income tax provision (benefit)	58.5		(76.4)
Income tax provision (benefit)	$	59.3	$	(72.0)

Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts used for tax purposes. The major components of deferred tax assets and liabilities are as follows:

($ in millions)	2023		2022
Deferred tax assets:
Net operating loss carryforward	$	26.5	$	16.8
Business interest carryforward	21.5		8.8
Stock-based compensation	0.3		0.5
Accounts receivable allowance	0.1		0.5
Lease liabilities	49.4		36.0
Inventory reserve	2.6		1.5
Goodwill and intangible assets	43.8		34.9
Transaction costs	1.2		1.3
Accrued liabilities	0.4		1.8
Total gross deferred tax assets	145.8		102.1
Valuation allowance	(93.6)		(0.7)
Deferred tax assets, net	52.2		101.4
Deferred tax liabilities:
Right-of-use assets	39.0		38.7
Property and equipment	12.5		3.8
Debt issuance costs amortization	0.7		0.8
Other	0.4		—
Deferred tax liabilities	52.6		43.3
Net deferred tax asset (liability)	$	(0.4)	$	58.1

A reconciliation of the statutory U.S. Federal income tax rate of 21% to our effective income tax rate follows:

	2023	2022
U.S. Federal statutory rate	21.0%	21.0%
State and local, net of federal benefit	(4.7)%	3.8%
Executive compensation	(0.3)%	—%
Other	(0.7)%	0.3%
Stock-based compensation	(0.9)%	(0.4)%
Goodwill impairment	—%	(5.6)%
IRC Section 338(h)(10) election	—%	4.7%
Change in valuation allowance	(52.7)%	(0.2)%
Effective tax rate	(38.3)%	23.6%

In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. In estimating future taxable income, the Company relies upon assumptions and estimates about future activities, including the amount of future federal and state pretax operating income that the Company will generate; the reversal of temporary differences; and the implementation of feasible and prudent tax planning strategies.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. As of December 31, 2023, management has evaluated the realizability of the Company’s deferred tax assets and recorded a valuation allowance against the Company’s federal and state deferred tax assets, as it is more likely than not that the deferred tax assets will not be realized based on the evidence evaluated.

The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. In estimating future taxable income, the Company relies upon assumptions and estimates about future activities, including the amount of future federal and state pretax operating income that the Company will generate; the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. Accordingly, a valuation allowance of $93.6 million has been established against the Company’s deferred tax assets. Management reevaluates the positive and negative evidence each period.

($ in millions)	2023		2022
Valuation allowance as of beginning of the year	$	0.7	$	—
Increases recorded to income tax provision	92.9		0.7
Decreases recorded as a benefit to income tax provision	—		—
Valuation allowance as of end of year	$	93.6	$	0.7

As of December 31, 2023 and 2022, the Company has federal net operating loss carryforwards of $112.4 million and $73.2 million, all of which were generated in years ending after December 31, 2017 and can be carried forward indefinitely. As of December 31, 2023, the Company had state net operating loss carryforwards of $64.8 million, a portion of which begin to expire in 2029. As a result of various ownership changes, the Company’s federal and state net operating losses are subject to limitations under Internal Revenue Code (“IRC”) Section 382. Pursuant to the Company’s Section 382 analysis, the net operating losses generated prior to 2017 were determined to be not realizable as they arose from a different trade or business and were written off as part of the Company’s income tax expense for 2022.

The Company does not have unrecognized tax benefits related to uncertain tax positions. The Company recognizes both accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has not recorded any interest and penalties on any unrecognized tax benefits since its inception. Based on the statutes of limitations in the applicable jurisdictions in which the Company operates, tax years 2018 through 2022 remain open to examination by the U.S. federal and state taxing jurisdictions, as carryforward attributes generated in prior years may still be adjusted upon examination by the Internal Revenue Service (“IRS”) or state tax authorities if they have or will be used in a future period. The Company files income tax returns in the U.S. federal and various state jurisdictions. There are currently no federal or state audits in progress for any tax years.