What was the impairment of long-lived assets for Checkers for the period from January 3, 2023 through June 16, 2023?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
(26,178) | | (22,686) | | | | | Loss before income tax expense (benefit) | | (2,030) | | (98,648) | | (26,576) | | (10,272) | | | | | Income tax expense (benefit) | | 540 | | (7,542) | | (2,952) | | (206) | | | | | Net loss | $ | (2,570) | $ | (91,106) | $ | (23,624) | $ | (10,066) | | | |
| For the Periods Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| June 17, 20 through Janua 2024 (Succes | гу 1, | throug | ary 3, 2023 gh June 16, Predecessor) | ry 2, 2023 lecessor) | ry 3, 2022 decessor) | |||
| Operating activities | ||||||||
| Net loss | 2,570) | S | (91,106) | $ | (23,624) | $ | (10,066) | |
| Adjustments to reconcile net loss to net cash provided by (used in) operating acti | ivities: | |||||||
| Depreciation and amortization | 4,638 | 8,552 | 15,733 | 17,193 | ||||
| Amortization of deferred financing costs | 54 | 892 | 1,771 | 1,570 | ||||
| Provision for credit losses | 122 | 94 | 134 | 274 | ||||
| Deferred income tax expense (benefit) | 4 | (7,529) | (2,961) | (215) | ||||
| Noncash operating lease expense, net | 5,490 | 6,878 | 14,914 | |||||
| Right-of-use asset amortization for finance lease | 455 | 262 | 204 | |||||
| Change in favorable leasehold interests | 232 | 146 | - | - | ||||
| Change in unfavorable leasehold interests | (31) | (29) | * | - 4 | ||||
| Noncash stock based compensation | 132 | 5,720 | 1,208 | 758 | ||||
| Noncash interest on long-term debt | 2,534 | 13,808 | 9,882 | 9,198 | ||||
| Impairment of long-lived assets | 623 | 66,633 | 4,763 | |||||
| Net loss on disposal of fixed assets | 670 | 839 | 606 | 1,305 | ||||
| Net loss on sales of restaurants | - | 238 | 3 | |||||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||||
| Decrease (increase) in accounts and notes receivable, net | 1,693) | 221 | 522 | (685) | ||||
| Decrease (increase) in inventory | 927 | (564) | (153) | (449) | ||||
| Decrease (increase) in prepaid expenses | 1,618) | 1,137 | 1,009 | (797) | ||||
| Decrease (increase) in other current assets | ( | 1,241) | 105 | 931 | 159 | |||
| Decrease (increase) in other noncurrent assets | 231 | 602 | (78) | 9. | ||||
| (Decrease) increase in accounts payable | (16) | (247) | 895 | (142) | ||||
| (Decrease) increase in accrued liabilities, accrued wages and benefits, deferred | ||||||||
| revenue, self-insurance, and long-term liabilities | + | 7,774) | 9,416 | (1,598) | (1,205) | |||
| (Decrease) increase in reserve for restaurant retirement and refranchise costs | 12 | (544) | ||||||
| Change in operating lease liabilities | (8,154) | (8,250) | (18,476) | (5.1) | ||||
| Other changes, net | (237) | (584) | 490 | |||||
| Net cash (used in) provided by operating activities | _ | 7,222) | - | 6,996 | - | 6,422 | 16,354 | |
| Net cash (used m) provided by operating activities | - | 1,222) | - | 0,770 | 3,722 | |||
| Investing activities | (5.510) | (15054) | (04.000) | |||||
| Capital expenditures | (7,269) | (5,513) | (15,354) | (24,838) | ||||
| Acquisition of restaurants, net of cash acquired | - | (1,365) | - 7 | |||||
| Proceeds from sales of restaurants | - | _ | (5.512) | _ | 842 | _ | (24.020) | |
| Net cash used in investing activities | 7,269) | (5,513) | (15,877) |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the impairment of long-lived assets for the period from January 3, 2023, through June 16, 2023, was $66,633. This figure reflects the accounting recognition of a reduction in the recoverable amount of Checkers' assets, indicating that the assets' value on the balance sheet was higher than their actual worth.
Impairment of long-lived assets can occur due to various factors such as obsolescence, damage, or changes in market conditions that negatively impact the asset's future cash flows. For a prospective Checkers franchisee, a high impairment charge could signal underlying issues with the performance or valuation of certain assets within the Checkers system.
Franchisees should pay attention to these figures as they can reflect the overall financial health and stability of the franchise. While a single period's impairment charge may not be alarming on its own, consistent or increasing impairment charges could indicate broader problems that warrant further investigation. It would be prudent for potential franchisees to discuss the reasons behind these impairments with Checkers to fully understand the implications.