FIESTA RESTAURANT GROUP, INC., 10-Q filed on 11/7/2016
Quarterly Report
Document and Entity Information
9 Months Ended
Oct. 2, 2016
Nov. 3, 2016
Document And Entity Information [Abstract]
 
 
Entity Registrant Name
FIESTA RESTAURANT GROUP, INC. 
 
Entity Central Index Key
0001534992 
 
Current Fiscal Year End Date
--01-01 
 
Entity Filer Category
Large Accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Oct. 02, 2016 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q3 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
26,889,637 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2016
Jan. 3, 2016
Current assets:
 
 
Cash
$ 4,862 
$ 5,281 
Trade receivables
10,259 
9,217 
Inventories
2,875 
2,910 
Prepaid rent
3,539 
3,163 
Income tax receivable
2,153 
7,448 
Prepaid expenses and other current assets
2,842 
3,219 
Total current assets
26,530 
31,238 
Property and equipment, net
271,055 
248,992 
Goodwill
123,484 
123,484 
Deferred income taxes
15,258 
8,497 
Deferred financing costs, net
687 
918 
Other assets
2,473 
2,516 
Total assets
439,487 
415,645 
Current liabilities:
 
 
Current portion of long-term debt
87 
69 
Accounts payable
23,608 
12,405 
Accrued payroll, related taxes and benefits
12,165 
15,614 
Accrued real estate taxes
7,584 
6,121 
Other liabilities
12,249 
12,096 
Total current liabilities
55,693 
46,305 
Long-term debt, net of current portion
67,446 
72,612 
Lease financing obligations
1,664 
1,663 
Deferred income—sale-leaseback of real estate
28,062 
30,086 
Other liabilities
25,735 
20,997 
Total liabilities
178,600 
171,663 
Commitments and contingencies
   
   
Stockholders' equity:
 
 
Common stock, par value $.01; authorized 100,000,000 shares, issued 26,896,611 and 26,829,220 shares, respectively, and outstanding 26,746,012 and 26,571,602 shares, respectively.
267 
266 
Additional paid-in capital
162,348 
159,724 
Retained earnings
98,272 
83,992 
Total stockholders' equity
260,887 
243,982 
Total liabilities and stockholders' equity
$ 439,487 
$ 415,645 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Oct. 2, 2016
Jan. 3, 2016
Statement of Financial Position [Abstract]
 
 
Common stock, par value (usd per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
26,896,611 
26,829,220 
Common stock, shares outstanding
26,746,012 
26,571,602 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2016
Sep. 27, 2015
Oct. 2, 2016
Sep. 27, 2015
Revenues:
 
 
 
 
Restaurant sales
$ 181,592 
$ 171,469 
$ 538,366 
$ 505,795 
Franchise royalty revenues and fees
664 
636 
2,099 
2,085 
Total revenues
182,256 
172,105 
540,465 
507,880 
Costs and expenses:
 
 
 
 
Cost of sales
54,726 
55,409 
163,383 
160,755 
Restaurant wages and related expenses (including stock-based compensation expense of $35, $40, $111, and $147, respectively)
47,503 
44,183 
139,536 
127,156 
Restaurant rent expense
9,488 
8,396 
27,522 
24,451 
Other restaurant operating expenses
25,715 
22,511 
72,366 
63,732 
Advertising expense
7,506 
4,831 
21,507 
15,529 
General and administrative (including stock-based compensation expense of $330, $1,127, $2,523, and $3,056, respectively)
14,520 
14,259 
42,621 
41,647 
Depreciation and amortization
9,513 
7,596 
26,474 
21,844 
Pre-opening costs
1,509 
1,689 
4,707 
3,851 
Impairment and other lease charges
18,513 
387 
18,607 
481 
Other income
(165)
(238)
(679)
Total operating expenses
188,993 
159,096 
516,485 
458,767 
Income (loss) from operations
(6,737)
13,009 
23,980 
49,113 
Interest expense
542 
493 
1,635 
1,345 
Income (loss) before income taxes
(7,279)
12,516 
22,345 
47,768 
Provision for (benefit from) income taxes
(2,748)
4,571 
8,065 
18,073 
Net income (loss)
$ (4,531)
$ 7,945 
$ 14,280 
$ 29,695 
Basic net income (loss) per share (usd per share)
$ (0.17)
$ 0.30 
$ 0.53 
$ 1.11 
Diluted net income (loss) per share (usd per share)
$ (0.17)
$ 0.30 
$ 0.53 
$ 1.11 
Basic weighted average common shares outstanding
26,716,219 
26,557,940 
26,658,739 
26,494,599 
Diluted weighted average common shares outstanding
26,716,219 
26,565,575 
26,665,091 
26,501,951 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2016
Sep. 27, 2015
Oct. 2, 2016
Sep. 27, 2015
Stock-based compensation
$ 400 
$ 1,200 
$ 2,600 
$ 3,200 
Restaurant Wages And Related Expenses [Member]
 
 
 
 
Stock-based compensation
35 
40 
111 
147 
General and Administrative Expense [Member]
 
 
 
 
Stock-based compensation
$ 330 
$ 1,127 
$ 2,523 
$ 3,056 
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Beginning balance at Dec. 28, 2014
$ 199,587 
$ 264 
$ 153,867 
$ 45,456 
Beginning shares at Dec. 28, 2014
26,358,448 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
Stock-based compensation
3,203 
 
3,203 
 
Vesting of restricted shares
 
 
 
Vesting of restricted shares and related tax benefit
1,527 
 
1,525 
 
Vesting of restricted shares (in shares)
210,983 
 
 
 
Net income
29,695 
 
 
29,695 
Ending balance at Sep. 27, 2015
234,012 
266 
158,595 
75,151 
Ending shares at Sep. 27, 2015
26,569,431 
 
 
 
Beginning balance at Jan. 03, 2016
243,982 
266 
159,724 
83,992 
Beginning shares at Jan. 03, 2016
26,571,602 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
Stock-based compensation
2,634 
 
2,634 
 
Vesting of restricted shares
 
 
 
Vesting of restricted shares and related tax deficiency
(9)
 
(10)
 
Vesting of restricted shares (in shares)
174,410 
 
 
 
Net income
14,280 
 
 
14,280 
Ending balance at Oct. 02, 2016
$ 260,887 
$ 267 
$ 162,348 
$ 98,272 
Ending shares at Oct. 02, 2016
26,746,012 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Oct. 2, 2016
Sep. 27, 2015
Cash flows from operating activities:
 
 
Net income
$ 14,280 
$ 29,695 
Adjustments to reconcile net income to net cash provided from operating activities:
 
 
Loss (gain) on disposals of property and equipment
178 
(236)
Stock-based compensation
2,634 
3,203 
Impairment and other lease charges
18,607 
481 
Depreciation and amortization
26,474 
21,844 
Amortization of deferred financing costs
232 
232 
Amortization of deferred gains from sale-leaseback transactions
(2,687)
(2,713)
Deferred income taxes
(6,761)
2,226 
Changes in other operating assets and liabilities
13,400 
4,236 
Net cash provided from operating activities
66,357 
58,968 
Capital expenditures:
 
 
New restaurant development
(52,828)
(55,057)
Restaurant remodeling
(956)
(2,723)
Other restaurant capital expenditures
(4,625)
(5,197)
Corporate and restaurant information systems
(4,634)
(3,242)
Total capital expenditures
(63,043)
(66,219)
Properties purchased for sale-leaseback
(2,663)
Proceeds from sale-leaseback transactions
3,642 
Proceeds from disposals of other properties
226 
149 
Net cash used in investing activities
(61,838)
(66,070)
Cash flows from financing activities:
 
 
Excess tax benefit from vesting of restricted shares
211 
1,527 
Borrowings on revolving credit facility
14,400 
23,500 
Repayments on revolving credit facility
(19,500)
(22,000)
Principal payments on capital leases
(49)
(40)
Net cash (used in) provided by financing activities
(4,938)
2,987 
Net decrease in cash
(419)
(4,115)
Cash, beginning of period
5,281 
5,087 
Cash, end of period
4,862 
972 
Supplemental disclosures:
 
 
Interest paid on long-term debt
1,393 
1,263 
Interest paid on lease financing obligations
106 
105 
Accruals for capital expenditures
9,591 
5,325 
Income tax payments, net
$ 9,540 
$ 13,101 
Basis of Presentation
Basis of Presentation
Basis of Presentation
Business Description. Fiesta Restaurant Group, Inc. ("Fiesta Restaurant Group" or "Fiesta") owns, operates and franchises two fast-casual restaurant brands through its wholly-owned subsidiaries Pollo Operations, Inc. and its subsidiaries, Pollo Franchise, Inc. (collectively ???Pollo Tropical???) and Taco Cabana, Inc. and its subsidiaries (collectively ???Taco Cabana???). Unless the context otherwise requires, Fiesta and its subsidiaries, Pollo Tropical and Taco Cabana, are collectively referred to as the ???Company???. At October 2, 2016, the Company owned and operated 181 Pollo Tropical?? restaurants and 164 Taco Cabana?? restaurants. The Pollo Tropical restaurants include 124 located in Florida, 36 located in Texas, 17 located in Georgia and four located in Tennessee. The Taco Cabana restaurants include 163 located in Texas and one located in Oklahoma. At October 2, 2016, the Company franchised a total of 34 Pollo Tropical restaurants and seven Taco Cabana restaurants. The franchised Pollo Tropical restaurants include 17 in Puerto Rico, one in the Bahamas, three in Trinidad & Tobago, one in Venezuela, four in Panama, two in Guatemala, and six on college campuses and at a hospital in Florida. The franchised Taco Cabana restaurants include five in New Mexico and two on college campuses in Texas.
Basis of Consolidation. The unaudited condensed consolidated financial statements presented herein reflect the consolidated financial position, results of operations and cash flows of Fiesta and its wholly-owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The fiscal year ended January 3, 2016 contained 53 weeks. The three and nine months ended October 2, 2016 and September 27, 2015 each contained thirteen and thirty-nine weeks, respectively. The fiscal year ending January 1, 2017 will contain 52 weeks.
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements for the three and nine months ended October 2, 2016 and September 27, 2015 have been prepared without an audit pursuant to the rules and regulations of the Securities and Exchange Commission and do not include certain information and footnotes required by U.S. Generally Accepted Accounting Principles ("GAAP") for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of such financial statements have been included. The results of operations for the three and nine months ended October 2, 2016 and September 27, 2015 are not necessarily indicative of the results to be expected for the full year.
These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended January 3, 2016 included in the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 2016. The January 3, 2016 balance sheet data is derived from those audited financial statements.
Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities; and Level 3 inputs are unobservable and reflect our own assumptions. The following methods were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the fair value:
???
Current Assets and Liabilities. The carrying values reported on the balance sheet of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of those financial instruments.
???
Revolving Credit Borrowings. The fair value of outstanding revolving credit borrowings under the Company's senior credit facility, which is considered Level 2, is based on current LIBOR rates. At October 2, 2016 and January 3, 2016, the fair value and carrying value of the Company's senior credit facility were approximately $65.9 million and $71.0 million, respectively.
Long-Lived Assets. The Company assesses the recoverability of property and equipment and definite-lived intangible assets by determining whether the carrying value of these assets can be recovered over their respective remaining lives through undiscounted future operating cash flows. Impairment is reviewed when events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable.
Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements. Estimates also affect the reported amounts of expenses
during the reporting periods. Significant items subject to such estimates and assumptions include: accrued occupancy costs, insurance liabilities, evaluation for impairment of goodwill and long-lived assets and lease accounting matters. Actual results could differ from those estimates.
Other Liabilities
Other Liabilities
Other Liabilities
Other liabilities, current, consist of the following:
 
October 2, 2016
 
January 3, 2016
Accrued workers' compensation and general liability claims
$
6,717

 
$
5,540

Sales and property taxes
2,531

 
3,031

Accrued occupancy costs
934

 
980

Other
2,067

 
2,545

 
$
12,249

 
$
12,096


Other liabilities, long-term, consist of the following:
 
October 2, 2016
 
January 3, 2016
Accrued occupancy costs
$
17,602

 
$
15,349

Deferred compensation
1,797

 
1,665

Accrued workers' compensation and general liability claims
1,910

 
697

Other
4,426

 
3,286

 
$
25,735

 
$
20,997


Accrued occupancy costs include obligations pertaining to closed restaurant locations and accruals to expense operating lease rental payments on a straight-line basis over the lease term.
The following table presents the activity in the closed-store reserve, of which $1.0 million and $1.1 million are included in long-term accrued occupancy costs at October 2, 2016 and January 3, 2016, respectively, with the remainder in other current liabilities.
 
Nine Months Ended October 2, 2016
 
Year Ended January 3, 2016
Balance, beginning of period
$
1,832

 
$
1,251

Provisions for restaurant closures
???

 
554

       Additional lease charges, net of (recoveries)
???

 
258

       Payments, net
(411
)
 
(358
)
Other adjustments
122

 
127

Balance, end of period
$
1,543

 
$
1,832

Impairment of Long-Lived Assets and Other Lease Charges
Impairment of Long-Lived Assets and Other Lease Charges
Impairment of Long-Lived Assets and Other Lease Charges
The Company reviews its long-lived assets, principally property and equipment, for impairment at the restaurant level. In addition to considering management???s plans, known regulatory or governmental actions and damage due to acts of God (hurricanes, tornadoes, etc.), the Company considers a triggering event to have occurred related to a specific restaurant if the restaurant???s cash flows for the last twelve months are less than a minimum threshold or if consistent levels of cash flows for the remaining lease period are less than the carrying value of the restaurant???s assets. If an indicator of impairment exists for any of its assets, an estimate of undiscounted future cash flows over the life of the primary asset for each restaurant is compared to that long-lived asset???s carrying value. If the carrying value is greater than the undiscounted cash flow, the Company then determines the fair value of the asset and if an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. For closed restaurant locations, the Company reviews the future minimum lease payments and related ancillary costs from the date of the restaurant closure to the end of the remaining lease term and records a lease charge for the lease liabilities to be incurred, net of any estimated sublease recoveries.
A summary of impairment on long-lived assets and other lease charges recorded by segment is as follows:
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2016
 
September 27, 2015
 
October 2, 2016
 
September 27, 2015
Pollo Tropical
$
18,390

 
$
387

 
$
18,390

 
$
387

Taco Cabana
123

 
???

 
217

 
94

 
$
18,513

 
$
387

 
$
18,607

 
$
481


In the third quarter of 2016, as part of a review of its strategic plan to enhance long-term shareholder value, the Company reviewed its restaurant portfolio and subsequently closed ten Pollo Tropical restaurants in the fourth quarter of 2016 including eight restaurants in Texas, one restaurant in Nashville, Tennessee, and one restaurant in Atlanta, Georgia. The Company plans to convert up to three of the closed restaurants in Texas to Taco Cabana restaurants. Impairment and other lease charges for the three and nine months ended October 2, 2016 primarily consisted of impairment charges of $18.5 million related to the closed restaurants and six additional Pollo Tropical restaurants and one Taco Cabana restaurant that the Company continues to operate. Impairment and other lease charges for the nine months ended October 2, 2016 also included other lease charges of $0.1 million related to previously closed Pollo Tropical and Taco Cabana restaurants. The Company will recognize lease and other charges related to the closed restaurants in the fourth quarter of 2016.
The Company determined the fair value of restaurant equipment, for those restaurants reviewed for impairment, based on current economic conditions, the Company???s history of using these assets in the operation of its business, the Company's plans to use this equipment in new restaurants that are scheduled to open in 2017 and 2018, and the Company's expectation of how a market participant would value the equipment. These fair value asset measurements rely on significant unobservable inputs and are considered Level 3 in the fair value hierarchy. The Level 3 assets measured at fair value associated with impairment charges recorded during the three and nine months ended October 2, 2016 totaled $8.6 million.
Impairment and other lease charges for the three and nine months ended September 27, 2015, consisted primarily of a $0.3 million lease charge related to the closure of a Pollo Tropical restaurant that was relocated to a superior site in the same trade area prior to the end of its lease term and lease charges, net of recoveries, totaling $0.1 million related to previously closed Pollo Tropical restaurants and for the nine months ended September 27, 2015 also included impairment charges totaling $0.1 million related to the suspension of the Company's Cabana Grill concept. The Cabana Grill concept was an elevated, non-24-hour format for Taco Cabana that the Company tested outside of Texas. One of the Cabana Grill restaurants was converted to a Pollo Tropical restaurant, and the second was closed.
Stock-Based Compensation
Stock-Based Compensation
Stock-Based Compensation
During the nine months ended October 2, 2016 and September 27, 2015, the Company granted certain employees 50,087 and 24,401 non-vested restricted shares, respectively, under the Fiesta Restaurant Group, Inc. 2012 Stock Incentive Plan (the "Fiesta Plan"). These shares generally vest and become non-forfeitable over a four year vesting period. The weighted average fair value at grant date for these non-vested shares issued to employees during the nine months ended October 2, 2016 and September 27, 2015 was $35.25 and $61.57, respectively.
During the nine months ended October 2, 2016 and September 27, 2015, the Company granted certain employees 5,762 and 10,007 restricted stock units, respectively, under the Fiesta Plan. The restricted stock units granted during the nine months ended October 2, 2016 vest and become non-forfeitable at the end of a four year vesting period. The restricted stock units granted during the nine months ended September 27, 2015 vest and become non-forfeitable over a four year vesting period or, for certain units, at the end of a four year vesting period. The weighted average fair value at grant date for these restricted stock units issued to employees during the nine months ended October 2, 2016 and September 27, 2015 was $35.25 and $62.05, respectively.
Also during the nine months ended October 2, 2016 and September 27, 2015, the Company granted 33,691 and 17,501 non-vested restricted shares, respectively, and 33,691 and 17,501 restricted stock units, respectively, under the Fiesta Plan to certain employees subject to performance conditions. The non-vested restricted shares vest and become non-forfeitable over a four year vesting period subject to the attainment of performance conditions. The restricted stock units vest and become non-forfeitable at the end of a three year vesting period. The number of shares into which the restricted stock units convert is based on the attainment of certain performance conditions and for the restricted stock units granted during the nine months ended October 2, 2016 and September 27, 2015, ranges from no shares, if the minimum performance condition is not met, to 67,382 and 35,002 shares, respectively, if the maximum performance condition is met. The weighted average fair value at grant date for both restricted non-
vested shares and restricted stock units subject to performance conditions granted during the nine months ended October 2, 2016 and September 27, 2015 was $35.25 and $65.01, respectively.
During the nine months ended October 2, 2016 and September 27, 2015, the Company granted 14,081 and 8,698 non-vested restricted shares, respectively, to non-employee directors. The weighted average fair value at the grant date for restricted non-vested shares issued to directors during the nine months ended October 2, 2016 and September 27, 2015, was $33.39 and $54.06, respectively. These shares vest and become non-forfeitable over a one-year vesting period.
Stock-based compensation expense for the three and nine months ended October 2, 2016 was $0.4 million and $2.6 million, respectively, and for the three and nine months ended September 27, 2015 was $1.2 million and $3.2 million, respectively. At October 2, 2016, the total unrecognized stock-based compensation expense related to non-vested restricted shares and restricted stock units was approximately $4.5 million. At October 2, 2016, the remaining weighted average vesting period for non-vested restricted shares was 1.9 years and 2.0 years for restricted stock units.
During the three and nine months ended October 2, 2016, a portion of the awards previously granted to the Company's Chief Executive Officer were modified and vested in connection with his retirement. The modification reduced stock compensation expense by $0.1 million.
A summary of all non-vested restricted shares and restricted stock units activity for the nine months ended October 2, 2016 is as follows:
 
Non-Vested Shares
 
Restricted Stock Units
 
 
 
Weighted
 
 
 
Weighted
 
 
 
Average
 
 
 
Average
 
 
 
Grant Date
 
 
 
Grant Date
 
Shares
 
Price
 
Units
 
Price
Outstanding at January 3, 2016
257,618

 
$
30.69

 
42,840

 
$
56.46

Granted
97,859

 
34.98

 
39,453

 
35.25

Vested/Released
(173,888
)
 
24.07

 
(522
)
 
51.23

Forfeited
(30,990
)
 
40.77

 
(24,751
)
 
45.73

Outstanding at October 2, 2016
150,599

 
$
38.16

 
57,020

 
$
46.48


The fair value of the non-vested restricted shares and restricted stock units is based on the closing price on the date of grant.
Business Segment Information
Business Segment Information
Business Segment Information
The Company is engaged in the fast-casual restaurant industry, with two restaurant concepts (each of which is an operating segment): Pollo Tropical and Taco Cabana. Pollo Tropical restaurants offer a wide variety of freshly prepared Caribbean-inspired food while our Taco Cabana restaurants offer a broad selection of hand-made, freshly prepared and authentic Mexican food.
Each segment's accounting policies are the same as those discussed in the summary of significant accounting policies in Note 1 to the Company's audited financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 2016. The Company reports more than one measure of segment profit or loss to the chief operating decision maker for the purposes of allocating resources to the segments and assessing their performance. The primary measures of segment profit or loss used to assess performance and allocate resources are income (loss) before taxes and Adjusted EBITDA, which is defined as earnings attributable to the applicable operating segment before interest, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense and other income and expense. Although the chief operating decision maker uses Adjusted EBITDA as a measure of segment profitability, in accordance with Accounting Standards Codification 280, Segment Reporting, the following table includes segment income (loss) before taxes, which is the measure of segment profit or loss determined in accordance with the measurement principles that are most consistent with the principles used in measuring the corresponding amounts in the consolidated financial statements.
The ???Other??? column includes corporate-related items not allocated to reportable segments and consists primarily of corporate-owned property and equipment, miscellaneous prepaid costs, capitalized costs associated with the issuance of indebtedness, corporate cash accounts, a current income tax receivable, and advisory fees related to a previously proposed separation transaction.
Three Months Ended
 
Pollo Tropical
 
Taco Cabana
 
Other
 
Consolidated
October 2, 2016:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
103,353

 
$
78,239

 
$
???

 
$
181,592

Franchise revenue
 
474

 
190

 
???

 
664

Cost of sales
 
32,565

 
22,161

 
???

 
54,726

Restaurant wages and related expenses (1)
 
24,383

 
23,120

 
???

 
47,503

Restaurant rent expense
 
5,059

 
4,429

 
???

 
9,488

Other restaurant operating expenses
 
14,361

 
11,354

 
???

 
25,715

Advertising expense
 
5,026

 
2,480

 
???

 
7,506

General and administrative expense (2)
 
9,091

 
5,355

 
74

 
14,520

Depreciation and amortization
 
6,337

 
3,176

 
???

 
9,513

Pre-opening costs
 
1,456

 
53

 
???

 
1,509

Impairment and other lease charges
 
18,390

 
123

 
???

 
18,513

Interest expense
 
229

 
313

 
???

 
542

Income (loss) before taxes
 
(13,070
)
 
5,865

 
(74
)
 
(7,279
)
Capital expenditures
 
18,146

 
2,791

 
(132
)
 
20,805

September 27, 2015:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
91,440

 
$
80,029

 
$
???

 
$
171,469

Franchise revenue
 
468

 
168

 
???

 
636

Cost of sales
 
31,054

 
24,355

 
???

 
55,409

Restaurant wages and related expenses (1)
 
20,984

 
23,199

 
???

 
44,183

Restaurant rent expense
 
4,158

 
4,238

 
???

 
8,396

Other restaurant operating expenses
 
11,741

 
10,770

 
???

 
22,511

Advertising expense
 
2,448

 
2,383

 
???

 
4,831

General and administrative expense (2)
 
8,419

 
5,840

 
???

 
14,259

Depreciation and amortization
 
4,504

 
3,092

 
???

 
7,596

Pre-opening costs
 
1,597

 
92

 
???

 
1,689

Impairment and other lease charges
 
387

 
???

 
???

 
387

Interest expense
 
204

 
289

 
???

 
493

Income before taxes
 
6,567

 
5,949

 
???

 
12,516

Capital expenditures
 
22,960

 
3,847

 
(488
)
 
26,319


 
Nine Months Ended
 
Pollo Tropical
 
Taco Cabana
 
Other
 
Consolidated
October 2, 2016:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
304,138

 
$
234,228

 
$
???

 
$
538,366

Franchise revenue
 
1,559

 
540

 
???

 
2,099

Cost of sales
 
96,435

 
66,948

 
???

 
163,383

Restaurant wages and related expenses (1)
 
71,259

 
68,277

 
???

 
139,536

Restaurant rent expense
 
14,528

 
12,994

 
???

 
27,522

Other restaurant operating expenses
 
40,654

 
31,712

 
???

 
72,366

Advertising expense
 
12,473

 
9,034

 
???

 
21,507

General and administrative expense (2)
 
25,619

 
16,180

 
822

 
42,621

Depreciation and amortization
 
17,043

 
9,431

 
???

 
26,474

Pre-opening costs
 
4,365

 
342

 
???

 
4,707

Impairment and other lease charges
 
18,390

 
217

 
???

 
18,607

Interest expense
 
708

 
927

 
???

 
1,635

Income (loss) before taxes
 
4,235

 
18,932

 
(822
)
 
22,345

Capital expenditures
 
52,713

 
8,058

 
2,272

 
63,043

September 27, 2015:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
267,898

 
$
237,897

 
$
???

 
$
505,795

Franchise revenue
 
1,626

 
459

 
???

 
2,085

Cost of sales
 
89,687

 
71,068

 
???

 
160,755

Restaurant wages and related expenses (1)
 
58,989

 
68,167

 
???

 
127,156

Restaurant rent expense
 
11,627

 
12,824

 
???

 
24,451

Other restaurant operating expenses
 
32,723

 
31,009

 
???

 
63,732

Advertising expense
 
6,710

 
8,819

 
???

 
15,529

General and administrative expense (2)
 
23,867

 
17,780

 
???

 
41,647

Depreciation and amortization
 
12,583

 
9,261

 
???

 
21,844

Pre-opening costs
 
3,611

 
240

 
???

 
3,851

Impairment and other lease charges
 
387

 
94

 
???

 
481

Interest expense
 
565

 
780

 
???

 
1,345

Income before taxes
 
29,065

 
18,703

 
???

 
47,768

Capital expenditures
 
55,104

 
9,505

 
1,610

 
66,219

Identifiable Assets:
 
 
 
 
 
 
 
 
October 2, 2016:
 
260,296

 
162,729

 
16,462

 
439,487

January 3, 2016
 
237,065

 
165,549

 
13,031

 
415,645


(1) Includes stock-based compensation expense of $35 and $111 for the three and nine months ended October 2, 2016, respectively, and $40 and $147 for the three and nine months ended September 27, 2015, respectively.
(2) Includes stock-based compensation expense of $330 and $2,523 for the three and nine months ended October 2, 2016, respectively, and $1,127 and $3,056 for the three and nine months ended September 27, 2015, respectively.
Net Income (Loss) per Share
Net Income (Loss) per Share
Net Income (Loss) per Share
The Company computes basic net income per share by dividing net income applicable to common shares by the weighted average number of common shares outstanding during each period. Our non-vested restricted shares contain a non-forfeitable right to receive dividends on a one-to-one per share ratio to common shares and are thus considered participating securities. The impact of the participating securities is included in the computation of basic net income per share pursuant to the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings attributable to common shares and participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistribute
d earnings. Net income per common share is computed by dividing undistributed earnings allocated to common stockholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and non-vested restricted shares based on the weighted average shares outstanding during the period.
Diluted earnings per share reflects the potential dilution that could occur if our restricted stock units were to be converted into common shares. Restricted stock units with performance conditions are only included in the diluted earnings per share calculation to the extent that performance conditions have been met at the measurement date. We compute diluted earnings per share by adjusting the basic weighted average number of common shares by the dilutive effect of the restricted stock units, determined using the treasury stock method.
For the three months ended October 2, 2016, all restricted stock units outstanding were excluded from the computation of diluted earnings per share because to do so would have been antidilutive as a result of the net loss in the third quarter of 2016. Weighted average outstanding restricted stock units totaling 11,489 and 3,214 shares for the nine months ended October 2, 2016 and September 27, 2015, respectively, were not included in the computation of diluted earnings per share because to do so would have been antidilutive.
The computation of basic and diluted net income per share is as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
  
October 2, 2016
 
September 27, 2015
 
October 2, 2016
 
September 27, 2015
Basic and diluted net income per share:
  
 
 
 
 
 
 
 
Net income (loss)
  
$
(4,531
)
 
$
7,945

 
$
14,280

 
$
29,695

Less: income allocated to participating securities
  
???

 
(81
)
 
(138
)
 
(359
)
Net income (loss) available to common stockholders
  
$
(4,531
)
 
$
7,864

 
$
14,142

 
$
29,336

Weighted average common shares, basic
 
26,716,219

 
26,557,940

 
26,658,739

 
26,494,599

Restricted stock units
 
???

 
7,635

 
6,352

 
7,352

Weighted average common shares, diluted
  
26,716,219

 
26,565,575

 
26,665,091

 
26,501,951

 
 
 
 
 
 
 
 
 
Basic net income (loss) per common share
  
$
(0.17
)
 
$
0.30

 
$
0.53

 
$
1.11

Diluted net income (loss) per common share
 
$
(0.17
)
 
$
0.30

 
$
0.53

 
$
1.11

Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Lease Assignments. Taco Cabana has assigned three leases to various parties on properties where it no longer operates restaurants with lease terms expiring on various dates through 2029. The assignees are responsible for making the payments required by the leases. The Company is a guarantor under one of the leases, and it remains secondarily liable as a surety with respect to two of the leases. The maximum potential liability for future rental payments that the Company could be required to make under these leases at October 2, 2016 was $1.7 million. The Company could also be obligated to pay property taxes and other lease related costs. The obligations under these leases will generally continue to decrease over time as the operating leases expire. The Company does not believe it is probable that it will be ultimately responsible for the obligations under these leases.
Legal Matters. The Company is a party to legal proceedings incidental to the conduct of business, including the matter described below. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and estimable, the Company does not establish an accrued liability.
On November 24, 2015, Pollo Tropical received a legal demand letter alleging that assistant managers were misclassified as exempt from overtime wages under the Fair Labor Standards Act. On September 30, 2016, prior to any suit being filed, Pollo Tropical reached a settlement with seven named individuals and a proposed collective action class that will allow current and former assistant managers to receive notice and opt-in to the settlement. Pollo Tropical denies any liability or unlawful conduct. The Company has recorded a charge of $0.8 million to cover the estimated costs related to the settlement, including estimated payments to individuals that opt-in to the settlement, premium payments to named individuals, attorneys??? fees for the individuals' counsel, and related settlement administration costs. The charge does not include legal fees incurred by Pollo Tropical in defending
the action. The settlement, which is subject to approval by an arbitrator and a judicial body, will result in dismissal with prejudice for the named individuals and all individuals that opt-in to the settlement. 
On September 29, 2014, Daisy, Inc., an automotive repair shop in Cape Coral, Florida, filed a putative class action suit against Pollo Tropical in the United States District Court for the Middle District of Florida. The suit alleged that Pollo Tropical engaged in unlawful activity in violation of the Telephone Consumer Protection Act, ?? 227 et seq. occurring in December 2010 and January 2011. During the first quarter of 2016, Pollo Tropical reached a settlement with the plaintiff that resulted in dismissal of the case and paid all settlement claims.
The Company is also a party to various other litigation matters incidental to the conduct of business. The Company does not believe that the outcome of any of these matters will have a material effect on its consolidated financial statements.
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Recent Accounting Pronouncements
In May 2014, and in subsequent updates, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the guidance in former Topic 605, Revenue Recognition, and provides for either a full retrospective adoption in which the standard is applied to all of the periods presented or a modified retrospective adoption in which the cumulative effect of initially applying the standard is recognized at the date of initial application. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers unless the contracts are in the scope of other US GAAP requirements. The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain non-financial assets, such as property and equipment, including real estate. The Company is currently evaluating the impact of the provisions of Topic 606; however, the Company expects the provisions to primarily impact certain franchise revenues and does not expect the standard to have a material effect on its financial statements. For the Company, the new standard is effective for interim and annual periods beginning after December 15, 2017.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessee recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. For the Company, the new standard is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. A modified retrospective approach is required with an option to use certain practical expedients. The new guidance is required to be applied at the beginning of the earliest comparative period presented. The Company is currently evaluating the impact on its financial statements. Although the impact is not currently estimable, the Company expects to recognize lease assets and lease liabilities for most of the leases it currently accounts for as operating leases.
In March 2016, the FASB issued ASU No. 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products (Topic 405-20), which creates an exception under Topic 405-20 to derecognize financial liabilities related to certain prepaid stored-value products using a breakage model consistent with the revenue breakage model in Topic 606. The new guidance will be effective concurrent with Topic 606, which is effective for the Company for interim and annual periods beginning after December 15, 2017. The Company does not expect this standard to have a material effect on its financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), to simplify various aspects of the accounting and presentation of share-based payments, including the income tax effects of awards and forfeiture assumptions. Currently, tax deductions in excess of compensation costs (excess tax benefits) are recorded in equity and tax deduction shortfalls (tax deficiencies), to the extent of previous excess tax benefits, are recorded in equity and then to income tax expense. Under the new guidance, all excess tax benefits and tax deficiencies will be recorded to income tax expense in the income statement, which could create volatility in the Company's income statement. The new guidance will also change the classification of excess tax benefits in the cash flow statement and impact the diluted earnings per share calculation. The guidance will be effective for interim and annual periods beginning after December 15, 2016, and early adoption is permitted. Different components of the guidance require prospective, retrospective and/or modified retrospective adoption. The Company is currently evaluating the impact on its financial statements and it is not currently estimable.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments, to reduce the diversity in practice in how certain transactions are classified in the statement of cash flows. The guidance will be effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted and a retrospective approach is required. The Company is currently evaluating the impact, if any, on its financial statements.
Basis of Presentation (Policies)
9 Months Ended
Oct. 2, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
Basis of Consolidation
Fiscal Year
Basis of Presentation
Fair Value of Financial Instruments
Long-Lived Assets
Use of Estimates
Segment Reporting
Net Income per Share
The Company computes basic net income per share by dividing net income applicable to common shares by the weighted average number of common shares outstanding during each period. Our non-vested restricted shares contain a non-forfeitable right to receive dividends on a one-to-one per share ratio to common shares and are thus considered participating securities. The impact of the participating securities is included in the computation of basic net income per share pursuant to the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings attributable to common shares and participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Net income per common share is computed by dividing undistributed earnings allocated to common stockholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and non-vested restricted shares based on the weighted average shares outstanding during the period. 
Recent Accounting Pronouncements
Basis of Consolidation. The unaudited condensed consolidated financial statements presented herein reflect the consolidated financial position, results of operations and cash flows of Fiesta and its wholly-owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The fiscal year ended January 3, 2016 contained 53 weeks. The three and nine months ended October 2, 2016 and September 27, 2015 each contained thirteen and thirty-nine weeks, respectively. The fiscal year ending January 1, 2017 will contain 52 weeks.
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements for the three and nine months ended October 2, 2016 and September 27, 2015 have been prepared without an audit pursuant to the rules and regulations of the Securities and Exchange Commission and do not include certain information and footnotes required by U.S. Generally Accepted Accounting Principles ("GAAP") for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of such financial statements have been included. The results of operations for the three and nine months ended October 2, 2016 and September 27, 2015 are not necessarily indicative of the results to be expected for the full year.These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended January 3, 2016 included in the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 2016. The January 3, 2016 balance sheet data is derived from those audited financial statements.
Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities; and Level 3 inputs are unobservable and reflect our own assumptions. The following methods were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the fair value:
???
Current Assets and Liabilities. The carrying values reported on the balance sheet of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of those financial instruments.
???
Revolving Credit Borrowings. The fair value of outstanding revolving credit borrowings under the Company's senior credit facility, which is considered Level 2, is based on current LIBOR rates.
Long-Lived Assets. The Company assesses the recoverability of property and equipment and definite-lived intangible assets by determining whether the carrying value of these assets can be recovered over their respective remaining lives through undiscounted future operating cash flows. Impairment is reviewed when events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable.
Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements. Estimates also affect the reported amounts of expenses during the reporting periods. Significant items subject to such estimates and assumptions include: accrued occupancy costs, insurance liabilities, evaluation for impairment of goodwill and long-lived assets and lease accounting matters. Actual results could differ from those estimates.
The Company is engaged in the fast-casual restaurant industry, with two restaurant concepts (each of which is an operating segment): Pollo Tropical and Taco Cabana. Pollo Tropical restaurants offer a wide variety of freshly prepared Caribbean-inspired food while our Taco Cabana restaurants offer a broad selection of hand-made, freshly prepared and authentic Mexican food. Each segment's accounting policies are the same as those discussed in the summary of significant accounting policies in Note 1 to the Company's audited financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 2016. The Company reports more than one measure of segment profit or loss to the chief operating decision maker for the purposes of allocating resources to the segments and assessing their performance. The primary measures of segment profit or loss used to assess performance and allocate resources are income (loss) before taxes and Adjusted EBITDA, which is defined as earnings attributable to the applicable operating segment before interest, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense and other income and expense.
Recent Accounting Pronouncements
In May 2014, and in subsequent updates, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the guidance in former Topic 605, Revenue Recognition, and provides for either a full retrospective adoption in which the standard is applied to all of the periods presented or a modified retrospective adoption in which the cumulative effect of initially applying the standard is recognized at the date of initial application. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers unless the contracts are in the scope of other US GAAP requirements. The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain non-financial assets, such as property and equipment, including real estate. The Company is currently evaluating the impact of the provisions of Topic 606; however, the Company expects the provisions to primarily impact certain franchise revenues and does not expect the standard to have a material effect on its financial statements. For the Company, the new standard is effective for interim and annual periods beginning after December 15, 2017.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessee recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. For the Company, the new standard is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. A modified retrospective approach is required with an option to use certain practical expedients. The new guidance is required to be applied at the beginning of the earliest comparative period presented. The Company is currently evaluating the impact on its financial statements. Although the impact is not currently estimable, the Company expects to recognize lease assets and lease liabilities for most of the leases it currently accounts for as operating leases.
In March 2016, the FASB issued ASU No. 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products (Topic 405-20), which creates an exception under Topic 405-20 to derecognize financial liabilities related to certain prepaid stored-value products using a breakage model consistent with the revenue breakage model in Topic 606. The new guidance will be effective concurrent with Topic 606, which is effective for the Company for interim and annual periods beginning after December 15, 2017. The Company does not expect this standard to have a material effect on its financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), to simplify various aspects of the accounting and presentation of share-based payments, including the income tax effects of awards and forfeiture assumptions. Currently, tax deductions in excess of compensation costs (excess tax benefits) are recorded in equity and tax deduction shortfalls (tax deficiencies), to the extent of previous excess tax benefits, are recorded in equity and then to income tax expense. Under the new guidance, all excess tax benefits and tax deficiencies will be recorded to income tax expense in the income statement, which could create volatility in the Company's income statement. The new guidance will also change the classification of excess tax benefits in the cash flow statement and impact the diluted earnings per share calculation. The guidance will be effective for interim and annual periods beginning after December 15, 2016, and early adoption is permitted. Different components of the guidance require prospective, retrospective and/or modified retrospective adoption. The Company is currently evaluating the impact on its financial statements and it is not currently estimable.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments, to reduce the diversity in practice in how certain transactions are classified in the statement of cash flows. The guidance will be effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted and a retrospective approach is required. The Company is currently evaluating the impact, if any, on its financial statements.
Other Liabilities (Tables)
Other liabilities, current, consist of the following:
 
October 2, 2016
 
January 3, 2016
Accrued workers' compensation and general liability claims
$
6,717

 
$
5,540

Sales and property taxes
2,531

 
3,031

Accrued occupancy costs
934

 
980

Other
2,067

 
2,545

 
$
12,249

 
$
12,096

Other liabilities, long-term, consist of the following:
 
October 2, 2016
 
January 3, 2016
Accrued occupancy costs
$
17,602

 
$
15,349

Deferred compensation
1,797

 
1,665

Accrued workers' compensation and general liability claims
1,910

 
697

Other
4,426

 
3,286

 
$
25,735

 
$
20,997

The following table presents the activity in the closed-store reserve, of which $1.0 million and $1.1 million are included in long-term accrued occupancy costs at October 2, 2016 and January 3, 2016, respectively, with the remainder in other current liabilities.
 
Nine Months Ended October 2, 2016
 
Year Ended January 3, 2016
Balance, beginning of period
$
1,832

 
$
1,251

Provisions for restaurant closures
???

 
554

       Additional lease charges, net of (recoveries)
???

 
258

       Payments, net
(411
)
 
(358
)
Other adjustments
122

 
127

Balance, end of period
$
1,543

 
$
1,832

Impairment of Long-Lived Assets and Other Lease Charges (Tables)
Schedule of Impairment on Long-Lived Assets and Other Lease Charges by Segment
A summary of impairment on long-lived assets and other lease charges recorded by segment is as follows:
 
Three Months Ended
 
Nine Months Ended
 
October 2, 2016
 
September 27, 2015
 
October 2, 2016
 
September 27, 2015
Pollo Tropical
$
18,390

 
$
387

 
$
18,390

 
$
387

Taco Cabana
123

 
???

 
217

 
94

 
$
18,513

 
$
387

 
$
18,607

 
$
481

Stock-Based Compensation (Tables)
Schedule of Non-vested Restricted Shares and Restricted Stock Units Activity
A summary of all non-vested restricted shares and restricted stock units activity for the nine months ended October 2, 2016 is as follows:
 
Non-Vested Shares
 
Restricted Stock Units
 
 
 
Weighted
 
 
 
Weighted
 
 
 
Average
 
 
 
Average
 
 
 
Grant Date
 
 
 
Grant Date
 
Shares
 
Price
 
Units
 
Price
Outstanding at January 3, 2016
257,618

 
$
30.69

 
42,840

 
$
56.46

Granted
97,859

 
34.98

 
39,453

 
35.25

Vested/Released
(173,888
)
 
24.07

 
(522
)
 
51.23

Forfeited
(30,990
)
 
40.77

 
(24,751
)
 
45.73

Outstanding at October 2, 2016
150,599

 
$
38.16

 
57,020

 
$
46.48

Business Segment Information (Tables)
Schedule of Segment Reporting Information, by Segment
Three Months Ended
 
Pollo Tropical
 
Taco Cabana
 
Other
 
Consolidated
October 2, 2016:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
103,353

 
$
78,239

 
$
???

 
$
181,592

Franchise revenue
 
474

 
190

 
???

 
664

Cost of sales
 
32,565

 
22,161

 
???

 
54,726

Restaurant wages and related expenses (1)
 
24,383

 
23,120

 
???

 
47,503

Restaurant rent expense
 
5,059

 
4,429

 
???

 
9,488

Other restaurant operating expenses
 
14,361

 
11,354

 
???

 
25,715

Advertising expense
 
5,026

 
2,480

 
???

 
7,506

General and administrative expense (2)
 
9,091

 
5,355

 
74

 
14,520

Depreciation and amortization
 
6,337

 
3,176

 
???

 
9,513

Pre-opening costs
 
1,456

 
53

 
???

 
1,509

Impairment and other lease charges
 
18,390

 
123

 
???

 
18,513

Interest expense
 
229

 
313

 
???

 
542

Income (loss) before taxes
 
(13,070
)
 
5,865

 
(74
)
 
(7,279
)
Capital expenditures
 
18,146

 
2,791

 
(132
)
 
20,805

September 27, 2015:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
91,440

 
$
80,029

 
$
???

 
$
171,469

Franchise revenue
 
468

 
168

 
???

 
636

Cost of sales
 
31,054

 
24,355

 
???

 
55,409

Restaurant wages and related expenses (1)
 
20,984

 
23,199

 
???

 
44,183

Restaurant rent expense
 
4,158

 
4,238

 
???

 
8,396

Other restaurant operating expenses
 
11,741

 
10,770

 
???

 
22,511

Advertising expense
 
2,448

 
2,383

 
???

 
4,831

General and administrative expense (2)
 
8,419

 
5,840

 
???

 
14,259

Depreciation and amortization
 
4,504

 
3,092

 
???

 
7,596

Pre-opening costs
 
1,597

 
92

 
???

 
1,689

Impairment and other lease charges
 
387

 
???

 
???

 
387

Interest expense
 
204

 
289

 
???

 
493

Income before taxes
 
6,567

 
5,949

 
???

 
12,516

Capital expenditures
 
22,960

 
3,847

 
(488
)
 
26,319


 
Nine Months Ended
 
Pollo Tropical
 
Taco Cabana
 
Other
 
Consolidated
October 2, 2016:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
304,138

 
$
234,228

 
$
???

 
$
538,366

Franchise revenue
 
1,559

 
540

 
???

 
2,099

Cost of sales
 
96,435

 
66,948

 
???

 
163,383

Restaurant wages and related expenses (1)
 
71,259

 
68,277

 
???

 
139,536

Restaurant rent expense
 
14,528

 
12,994

 
???

 
27,522

Other restaurant operating expenses
 
40,654

 
31,712

 
???

 
72,366

Advertising expense
 
12,473

 
9,034

 
???

 
21,507

General and administrative expense (2)
 
25,619

 
16,180

 
822

 
42,621

Depreciation and amortization
 
17,043

 
9,431

 
???

 
26,474

Pre-opening costs
 
4,365

 
342

 
???

 
4,707

Impairment and other lease charges
 
18,390

 
217

 
???

 
18,607

Interest expense
 
708

 
927

 
???

 
1,635

Income (loss) before taxes
 
4,235

 
18,932

 
(822
)
 
22,345

Capital expenditures
 
52,713

 
8,058

 
2,272

 
63,043

September 27, 2015:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
267,898

 
$
237,897

 
$
???

 
$
505,795

Franchise revenue
 
1,626

 
459

 
???

 
2,085

Cost of sales
 
89,687

 
71,068

 
???

 
160,755

Restaurant wages and related expenses (1)
 
58,989

 
68,167

 
???

 
127,156

Restaurant rent expense
 
11,627

 
12,824

 
???

 
24,451

Other restaurant operating expenses
 
32,723

 
31,009

 
???

 
63,732

Advertising expense
 
6,710

 
8,819

 
???

 
15,529

General and administrative expense (2)
 
23,867

 
17,780

 
???

 
41,647

Depreciation and amortization
 
12,583

 
9,261

 
???

 
21,844

Pre-opening costs
 
3,611

 
240

 
???

 
3,851

Impairment and other lease charges
 
387

 
94

 
???

 
481

Interest expense
 
565

 
780

 
???

 
1,345

Income before taxes
 
29,065

 
18,703

 
???

 
47,768

Capital expenditures
 
55,104

 
9,505

 
1,610

 
66,219

Identifiable Assets:
 
 
 
 
 
 
 
 
October 2, 2016:
 
260,296

 
162,729

 
16,462

 
439,487

January 3, 2016
 
237,065

 
165,549

 
13,031

 
415,645


(1) Includes stock-based compensation expense of $35 and $111 for the three and nine months ended October 2, 2016, respectively, and $40 and $147 for the three and nine months ended September 27, 2015, respectively.
(2) Includes stock-based compensation expense of $330 and $2,523 for the three and nine months ended October 2, 2016, respectively, and $1,127 and $3,056 for the three and nine months ended September 27, 2015, respectively.
Net Income (Loss) per Share (Tables)
Schedule of Earnings Per Share
The computation of basic and diluted net income per share is as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
  
October 2, 2016
 
September 27, 2015
 
October 2, 2016
 
September 27, 2015
Basic and diluted net income per share:
  
 
 
 
 
 
 
 
Net income (loss)
  
$
(4,531
)
 
$
7,945

 
$
14,280

 
$
29,695

Less: income allocated to participating securities
  
???

 
(81
)
 
(138
)
 
(359
)
Net income (loss) available to common stockholders
  
$
(4,531
)
 
$
7,864

 
$
14,142

 
$
29,336

Weighted average common shares, basic
 
26,716,219

 
26,557,940

 
26,658,739

 
26,494,599

Restricted stock units
 
???

 
7,635

 
6,352

 
7,352

Weighted average common shares, diluted
  
26,716,219

 
26,565,575

 
26,665,091

 
26,501,951

 
 
 
 
 
 
 
 
 
Basic net income (loss) per common share
  
$
(0.17
)
 
$
0.30

 
$
0.53

 
$
1.11

Diluted net income (loss) per common share
 
$
(0.17
)
 
$
0.30

 
$
0.53

 
$
1.11

Basis of Presentation - Narrative (Details)
3 Months Ended 9 Months Ended 12 Months Ended
Oct. 2, 2016
Sep. 27, 2015
Oct. 2, 2016
Sep. 27, 2015
Jan. 3, 2016
Jan. 1, 2017
Forecast [Member]
Jan. 1, 2017
Minimum [Member]
Forecast [Member]
Jan. 1, 2017
Maximum [Member]
Forecast [Member]
Oct. 2, 2016
Entity Operated Units [Member]
Pollo Tropical [Member]
restaurant
Oct. 2, 2016
Entity Operated Units [Member]
Pollo Tropical [Member]
Florida
restaurant
Oct. 2, 2016
Entity Operated Units [Member]
Pollo Tropical [Member]
Texas
restaurant
Oct. 2, 2016
Entity Operated Units [Member]
Pollo Tropical [Member]
Georgia
restaurant
Oct. 2, 2016
Entity Operated Units [Member]
Pollo Tropical [Member]
Tennessee
restaurant
Oct. 2, 2016
Entity Operated Units [Member]
Taco Cabana [Member]
restaurant
Oct. 2, 2016
Entity Operated Units [Member]
Taco Cabana [Member]
Texas
restaurant
Oct. 2, 2016
Entity Operated Units [Member]
Taco Cabana [Member]
Oklahoma
restaurant
Oct. 2, 2016
Franchised Units [Member]
Pollo Tropical [Member]
restaurant
Oct. 2, 2016
Franchised Units [Member]
Pollo Tropical [Member]
Florida
restaurant
Oct. 2, 2016
Franchised Units [Member]
Pollo Tropical [Member]
Puerto Rico
restaurant
Oct. 2, 2016
Franchised Units [Member]
Pollo Tropical [Member]
Bahamas
restaurant
Oct. 2, 2016
Franchised Units [Member]
Pollo Tropical [Member]
Trinidad & Tobago
restaurant
Oct. 2, 2016
Franchised Units [Member]
Pollo Tropical [Member]
Venezuela
restaurant
Oct. 2, 2016
Franchised Units [Member]
Pollo Tropical [Member]
Panama
restaurant
Oct. 2, 2016
Franchised Units [Member]
Pollo Tropical [Member]
Guatemala
restaurant
Oct. 2, 2016
Franchised Units [Member]
Taco Cabana [Member]
restaurant
Oct. 2, 2016
Franchised Units [Member]
Taco Cabana [Member]
Texas
restaurant
Oct. 2, 2016
Franchised Units [Member]
Taco Cabana [Member]
New Mexico
restaurant
Entity Information [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of restaurants
 
 
 
 
 
 
 
 
181 
124 
36 
17 
164 
163 
34 
17 
Fiscal period duration
91 days 
91 days 
273 days 
273 days 
371 days 
364 days 
364 days 
371 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis of Presentation - Fair Value Disclosures (Details) (USD $)
In Millions, unless otherwise specified
Oct. 2, 2016
Jan. 3, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Carrying value of senior credit facility
$ 65.9 
$ 71.0 
Level 2 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Fair value of senior credit facility
$ 65.9 
$ 71.0 
Other Liabilities - Current (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2016
Jan. 3, 2016
Other Liabilities Disclosure [Abstract]
 
 
Accrued workers' compensation and general liability claims
$ 6,717 
$ 5,540 
Sales and property taxes
2,531 
3,031 
Accrued occupancy costs
934 
980 
Other
2,067 
2,545 
Other liabilities, current
$ 12,249 
$ 12,096 
Other Liabilities - Noncurrent (Details) (USD $)
In Thousands, unless otherwise specified
Oct. 2, 2016
Jan. 3, 2016
Other Liabilities Disclosure [Abstract]
 
 
Accrued occupancy costs
$ 17,602 
$ 15,349 
Deferred compensation
1,797 
1,665 
Accrued workers' compensation and general liability claims
1,910 
697 
Other
4,426 
3,286 
Other liabilities, noncurrent
$ 25,735 
$ 20,997 
Other Liabilities - Narrative (Details) (Closed Stores [Member], USD $)
In Thousands, unless otherwise specified
Oct. 2, 2016
Jan. 3, 2016
Dec. 28, 2014
Restructuring Cost and Reserve [Line Items]
 
 
 
Closed-store reserve
$ 1,543 
$ 1,832 
$ 1,251 
Other Liabilities, Noncurrent [Member]
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
Closed-store reserve
$ 1,000 
$ 1,100 
 
Other Liabilities - Restructuring Reserve (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Oct. 2, 2016
Jan. 3, 2016
Activity in the Closed-Store Reserve
 
 
Provisions for restaurant closures
$ 100 
 
Closed Stores [Member]
 
 
Activity in the Closed-Store Reserve
 
 
Balance, beginning of period
1,832 
1,251 
Provisions for restaurant closures
554 
Additional lease charges, net of (recoveries)
258 
Payments, net
(411)
(358)
Other adjustments
122 
127 
Balance, end of period
$ 1,543 
$ 1,832 
Impairment of Long-Lived Assets and Other Lease Charges - Impairment on Long-Lived Assets and Other Lease Charges by Segment (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Oct. 2, 2016
Sep. 27, 2015
Oct. 2, 2016
Sep. 27, 2015
Impairment and Other Lease Charges [Line Items]
 
 
 
 
Impairment and other lease charges
$ 18,513 
$ 387 
$ 18,607 
$ 481 
Pollo Tropical [Member]
 
 
 
 
Impairment and Other Lease Charges [Line Items]
 
 
 
 
Impairment and other lease charges
18,390 
387 
18,390 
387 
Taco Cabana [Member]
 
 
 
 
Impairment and Other Lease Charges [Line Items]
 
 
 
 
Impairment and other lease charges
$ 123 
$ 0 
$ 217 
$ 94 
Impairment of Long-Lived Assets and Other Lease Charges - Narrative (Details) (USD $)
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Oct. 2, 2016
Oct. 2, 2016
Oct. 2, 2016
Level 3 [Member]
Sep. 27, 2015
Pollo Tropical [Member]
Sep. 27, 2015
Pollo Tropical [Member]
Sep. 27, 2015
Taco Cabana [Member]
Oct. 2, 2016
Restaurants, Open [Member]
Pollo Tropical [Member]
restaurant
Oct. 2, 2016
Restaurants, Open [Member]
Taco Cabana [Member]
restaurant
Nov. 7, 2016
Restaurants, Closed [Member]
Pollo Tropical [Member]
Subsequent Event [Member]
restaurant
Sep. 27, 2015
Restaurants, Closed [Member]
Taco Cabana [Member]
restaurant
Nov. 7, 2016
Restaurants, Closed [Member]
Texas
Pollo Tropical [Member]
Subsequent Event [Member]
restaurant
Nov. 7, 2016
Restaurants, Closed [Member]
Tennessee
Pollo Tropical [Member]
Subsequent Event [Member]
restaurant
Nov. 7, 2016
Restaurants, Closed [Member]
Georgia
Pollo Tropical [Member]
Subsequent Event [Member]
restaurant
Sep. 27, 2015
Restaurants, Brand Conversion [Member]
restaurant
Nov. 7, 2016
Restaurants, Brand Conversion [Member]
Maximum [Member]
Forecast [Member]
restaurant
Impairment and Other Lease Charges [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of restaurants
 
 
 
 
 
 
10 
Asset impairment charges
$ 18,500,000 
$ 18,500,000 
 
 
 
$ 100,000 
 
 
 
 
 
 
 
 
 
Lease charges
 
100,000 
 
300,000 
300,000 
 
 
 
 
 
 
 
 
 
 
Fair value of equipment for restaurants reviewed for impairment
 
 
8,600,000 
 
 
 
 
 
 
 
 
 
 
 
 
Additional lease charges, net of (recoveries)
 
 
 
 
$ 100,000 
 
 
 
 
 
 
 
 
 
 
</
Stock-Based Compensation - Narrative (Details) (USD $)
3 Months Ended 9 Months Ended
Oct. 2, 2016
Sep. 27, 2015
Oct. 2, 2016
Sep. 27, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Share-based compensation expense
$ 400,000 
$ 1,200,000 
$ 2,600,000 
$ 3,200,000 
Unrecognized stock-based compensation expense
4,500,000 
 
4,500,000 
 
Chief Executive Officer [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Reduced stock compensation expense due to awards modification
$ 100,000 
 
$ 100,000 
 
Restricted Stock [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Shares granted in period
 
 
97,859 
 
Weighted average grant date fair value, grants in period (usd per share)
 
 
$ 34.98 
 
Share-based compensation cost not yet recognized, period for recognition
 
 
1 year 10 months 24 days 
 
Restricted Stock [Member] |
Management [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Shares granted in period
 
 
50,087 
24,401 
Vesting period
 
 
4 years 
 
Weighted average grant date fair value, grants in period (usd per share)
 
 
$ 35.25 
$ 61.57 
Restricted Stock [Member] |
Executive Officer [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Shares granted in period
 
 
33,691 
17,501 
Vesting period
 
 
4 years 
 
Weighted average grant date fair value, grants in period (usd per share)
 
 
$ 35.25 
$ 65.01 
Restricted Stock [Member] |
Director [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Shares granted in period
 
 
14,081 
8,698 
Vesting period
 
 
1 year 
 
Weighted average grant date fair value, grants in period (usd per share)
 
 
$ 33.39 
$ 54.06 
Restricted Stock Units (RSUs) [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Shares granted in period
 
 
39,453 
 
Weighted average grant date fair value, grants in period (usd per share)
 
 
$ 35.25 
 
Share-based compensation cost not yet recognized, period for recognition
 
 
2 years 
 
Restricted Stock Units (RSUs) [Member] |
Management [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Shares granted in period
 
 
5,762 
10,007 
Vesting period
 
 
4 years 
4 years 
Weighted average grant date fair value, grants in period (usd per share)
 
 
$ 35.25 
$ 62.05 
Restricted Stock Units (RSUs) [Member] |
Executive Officer [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Shares granted in period
 
 
33,691 
17,501 
Vesting period
 
 
3 years 
 
Weighted average grant date fair value, grants in period (usd per share)
 
 
$ 35.25 
$ 65.01 
Restricted Stock Units (RSUs) [Member] |
Executive Officer [Member] |
Minimum [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Shares to be issued at end of performance period
 
 
Restricted Stock Units (RSUs) [Member] |
Executive Officer [Member] |
Maximum [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]