FIESTA RESTAURANT GROUP, INC., 10-Q filed on 11/12/2021
Quarterly Report
v3.21.2
Document and Entity Information - shares
9 Months Ended
Oct. 03, 2021
Nov. 05, 2021
Document And Entity Information [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Oct. 03, 2021  
Document Transition Report false  
Entity File Number 001-35373  
Entity Registrant Name FIESTA RESTAURANT GROUP, INC.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 90-0712224  
Entity Address, Address Line One 14800 Landmark Boulevard, Suite 500  
Entity Address, City or Town Dallas  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 75254  
City Area Code 972  
Local Phone Number 702-9300  
Title of 12(b) Security Common Stock, par value $0.01 per share  
Entity Trading Symbol FRGI  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Central Index Key 0001534992  
Current Fiscal Year End Date --01-02  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   25,961,408
v3.21.2
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Oct. 03, 2021
Jan. 03, 2021
Current assets:    
Cash $ 51,978 $ 49,778
Restricted cash 3,837 3,584
Accounts receivable 5,829 4,933
Inventories 2,371 2,101
Prepaid rent 110 107
Income tax receivable 4,151 9,399
Prepaid expenses and other current assets 5,912 5,646
Current assets held for sale 0 8,478
Total current assets 74,188 84,026
Property and equipment, net 92,807 97,867
Operating lease right-of-use assets 155,809 164,665
Goodwill 56,307 56,307
Other assets 5,838 5,855
Non-current assets held for sale 0 160,023
Total assets 384,949 568,743
Current liabilities:    
Current portion of long-term debt 72 816
Accounts payable 12,100 8,325
Accrued payroll, related taxes and benefits 8,332 9,738
Accrued real estate taxes 3,989 1,735
Other current liabilities 18,852 17,070
Current liabilities held for sale 0 27,225
Total current liabilities 43,345 64,909
Long-term debt, net of current portion 788 71,588
Operating lease liabilities 165,113 174,116
Deferred tax liabilities 2,075 2,269
Other non-current liabilities 9,640 9,757
Non-current liabilities held for sale 0 98,323
Total liabilities 220,961 420,962
Commitments and contingencies
Stockholders' equity:    
Preferred stock, $0.01 par value; 20,000,000 shares authorized, no shares issued 0 0
Common stock, $0.01 par value; 100,000,000 shares authorized, 28,448,709 and 28,278,320 shares issued, respectively, and 25,343,973 and 25,293,149 shares outstanding, respectively 277 273
Additional paid-in capital 181,651 176,614
Retained earnings (accumulated deficit) 6,763 (8,327)
Treasury stock, at cost; 2,331,718 and 1,993,495 shares, respectively (24,703) (20,779)
Total stockholders' equity 163,988 147,781
Total liabilities and stockholders' equity $ 384,949 $ 568,743
v3.21.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Oct. 03, 2021
Jan. 03, 2021
Statement of Financial Position [Abstract]    
Preferred stock, par value (usd per share) $ 0.01 $ 0.01
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued 0 0
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 28,448,709 28,278,320
Common stock, shares outstanding 25,343,973 25,293,149
Treasury Stock, Shares 2,331,718 1,993,495
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Oct. 03, 2021
Sep. 27, 2020
Oct. 03, 2021
Sep. 27, 2020
Costs and expenses:        
Impairment and other lease charges     $ (92) $ 8,922
Income (loss) from continuing operations before income taxes $ (3,994) $ 30 227 (13,397)
Provision for (benefit from) income taxes (763) (4,382) 1,473 (7,494)
Income (loss) from continuing operations (3,231) 4,412 (1,246) (5,903)
Income (loss) from discontinued operations 20,493 181 16,336 (5,164)
Net income (loss) $ 17,262 $ 4,593 $ 15,090 $ (11,067)
Earnings (loss) per common share:        
Continuing operations - basic (usd per share) $ (0.12) $ 0.17 $ (0.05) $ (0.23)
Discontinued operations - basic (usd per share) 0.78 0.01 0.62 (0.21)
Basic (usd per share) 0.66 0.18 0.57 (0.44)
Continuing operations - diluted (usd per share) (0.12) 0.17 (0.05) (0.23)
Discontinued operations - diluted (usd per share) 0.78 0.01 0.62 (0.21)
Diluted (usd per share) $ 0.66 $ 0.18 $ 0.57 $ (0.44)
Weighted average common shares outstanding:        
Basic (in shares) 25,508,930 25,290,357 25,443,341 25,359,004
Diluted (in shares) 25,508,930 25,291,719 25,443,341 25,359,004
Continuing Operations        
Revenues:        
Revenues $ 88,592 $ 77,940 $ 267,962 $ 227,503
Costs and expenses:        
Cost of sales 26,984 24,614 81,843 72,666
Restaurant wages and related expenses (including stock-based compensation expense of $13, $15, $44, and $53, respectively) 24,648 18,051 66,888 54,196
Restaurant rent expense 5,924 5,585 17,625 16,885
Other restaurant operating expenses 14,740 12,228 42,260 35,575
Advertising expense 2,757 814 8,030 5,492
General and administrative (including stock-based compensation expense of $1,097, $486, $3,137, and $1,834, respectively) 11,167 9,134 32,883 28,592
Depreciation and amortization 5,328 5,425 15,291 16,373
Impairment and other lease charges 30 2,395 (224) 8,023
Closed restaurant rent expense, net of sublease income 710 934 2,426 3,315
Other expense (income), net 138 (1,353) 431 (426)
Total operating expenses 92,426 77,827 267,453 240,691
Income (loss) from operations (3,834) 113 509 (13,188)
Interest expense 160 83 282 209
Income (loss) from continuing operations before income taxes (3,994) 30 227 (13,397)
Provision for (benefit from) income taxes (763) (4,382) 1,473 (7,494)
Income (loss) from discontinued operations (20,493) (181) (16,336) 5,164
Net income (loss) 17,262 4,593 15,090 (11,067)
Restaurant sales | Continuing Operations        
Revenues:        
Revenues 88,014 77,604 266,618 226,617
Franchise royalty revenues and fees | Continuing Operations        
Revenues:        
Revenues $ 578 $ 336 $ 1,344 $ 886
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - Continuing Operations - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Oct. 03, 2021
Sep. 27, 2020
Oct. 03, 2021
Sep. 27, 2020
Stock-based compensation $ 1,100 $ 500 $ 3,200 $ 1,900
Restaurant Wages And Related Expenses        
Stock-based compensation 13 15 44 53
General and Administrative Expense        
Stock-based compensation $ 1,097 $ 486 $ 3,137 $ 1,834
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($)
$ in Thousands
Total
Common Stock
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
Treasury Stock
Beginning shares at Dec. 29, 2019   25,612,597      
Beginning balance at Dec. 29, 2019 $ 158,236 $ 271 $ 173,132 $ 1,884 $ (17,051)
Increase (Decrease) in Stockholders' Equity          
Stock-based compensation 812   812    
Vesting of restricted shares (in shares)   73,998      
Vesting of restricted shares 0 $ 0 0    
Purchase of treasury stock (in shares)   (500,000)      
Purchase of treasury stock (3,728)       (3,728)
Net income (loss) (7,317)     (7,317)  
Ending shares at Mar. 29, 2020   25,186,595      
Ending balance at Mar. 29, 2020 148,003 $ 271 173,944 (5,433) (20,779)
Beginning shares at Dec. 29, 2019   25,612,597      
Beginning balance at Dec. 29, 2019 $ 158,236 $ 271 173,132 1,884 (17,051)
Increase (Decrease) in Stockholders' Equity          
Purchase of treasury stock (in shares) (500,000)        
Purchase of treasury stock $ (3,700)        
Net income (loss) (11,067)        
Ending shares at Sep. 27, 2020   25,291,941      
Ending balance at Sep. 27, 2020 145,925 $ 273 175,614 (9,183) (20,779)
Beginning shares at Mar. 29, 2020   25,186,595      
Beginning balance at Mar. 29, 2020 148,003 $ 271 173,944 (5,433) (20,779)
Increase (Decrease) in Stockholders' Equity          
Stock-based compensation 1,028   1,028    
Vesting of restricted shares (in shares)   101,661      
Vesting of restricted shares 0 $ 2 (2)    
Net income (loss) (8,343)     (8,343)  
Ending shares at Jun. 28, 2020   25,288,256      
Ending balance at Jun. 28, 2020 140,688 $ 273 174,970 (13,776) (20,779)
Increase (Decrease) in Stockholders' Equity          
Stock-based compensation 644   644    
Vesting of restricted shares (in shares)   3,685      
Vesting of restricted shares 0 $ 0 0    
Net income (loss) 4,593     4,593  
Ending shares at Sep. 27, 2020   25,291,941      
Ending balance at Sep. 27, 2020 $ 145,925 $ 273 175,614 (9,183) (20,779)
Beginning shares at Jan. 03, 2021 25,293,149 25,293,149      
Beginning balance at Jan. 03, 2021 $ 147,781 $ 273 176,614 (8,327) (20,779)
Increase (Decrease) in Stockholders' Equity          
Stock-based compensation 1,163   1,163    
Vesting of restricted shares (in shares)   109,528      
Vesting of restricted shares 0 $ 1 (1)    
Net income (loss) (2,089)     (2,089)  
Ending shares at Apr. 04, 2021   25,402,677      
Ending balance at Apr. 04, 2021 $ 146,855 $ 274 177,776 (10,416) (20,779)
Beginning shares at Jan. 03, 2021 25,293,149 25,293,149      
Beginning balance at Jan. 03, 2021 $ 147,781 $ 273 176,614 (8,327) (20,779)
Increase (Decrease) in Stockholders' Equity          
Purchase of treasury stock (in shares) (338,223)        
Purchase of treasury stock $ (3,900)        
Net income (loss) $ 15,090        
Ending shares at Oct. 03, 2021 25,343,973 25,343,973      
Ending balance at Oct. 03, 2021 $ 163,988 $ 277 181,651 6,763 (24,703)
Beginning shares at Apr. 04, 2021   25,402,677      
Beginning balance at Apr. 04, 2021 146,855 $ 274 177,776 (10,416) (20,779)
Increase (Decrease) in Stockholders' Equity          
Stock-based compensation 1,241   1,241    
Vesting of restricted shares (in shares)   126,791      
Vesting of restricted shares 0 $ 1 (1)    
Net income (loss) (83)     (83)  
Ending shares at Jul. 04, 2021   25,529,468      
Ending balance at Jul. 04, 2021 148,013 $ 275 179,016 (10,499) (20,779)
Increase (Decrease) in Stockholders' Equity          
Stock-based compensation 2,637   2,637    
Vesting of restricted shares (in shares)   152,728      
Vesting of restricted shares 0 $ 2 (2)    
Purchase of treasury stock (in shares)   (338,223)      
Purchase of treasury stock (3,924)       (3,924)
Net income (loss) $ 17,262     17,262  
Ending shares at Oct. 03, 2021 25,343,973 25,343,973      
Ending balance at Oct. 03, 2021 $ 163,988 $ 277 $ 181,651 $ 6,763 $ (24,703)
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
9 Months Ended
Oct. 03, 2021
Sep. 27, 2020
Operating activities:    
Net income (loss) $ 15,090 $ (11,067)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Gain on disposals of property and equipment, net (217) (1,047)
Stock-based compensation 5,041 2,484
Impairment and other lease charges (92) 8,922
Loss on extinguishment of debt 5,307 212
Gain on sale of Taco Cabana (24,066) 0
Depreciation and amortization 23,090 28,427
Amortization of deferred financing costs 506 261
Deferred income taxes (3,325) 552
Changes in other operating assets and liabilities (1,564) 18,230
Net cash provided by operating activities 19,770 46,974
Capital expenditures:    
New restaurant development 0 (1,846)
Restaurant remodeling (2,020) (1,087)
Other restaurant capital expenditures (11,848) (5,847)
Corporate and restaurant information systems (1,645) (3,136)
Total capital expenditures (15,513) (11,916)
Proceeds from sale of Taco Cabana 74,910 0
Proceeds from disposals of properties 1,307 2,864
Proceeds from sale-leaseback transactions 3,083 6,284
Net cash provided by (used in) investing activities 63,787 (2,768)
Financing activities:    
Borrowings on revolving credit facility 0 154,143
Repayments on revolving credit facility 0 (189,225)
Borrowings of unsecured debt 0 15,000
Repayments of unsecured debt 0 (15,000)
Repayment of secured debt (75,000) 0
Principal payments on finance leases (199) (166)
Financing costs associated with debt 0 (646)
Premium associated with debt extinguishment (2,238) 0
Payments to purchase treasury stock (3,924) (3,728)
Net cash used in financing activities (81,361) (39,622)
Net change in cash and restricted cash 2,196 4,584
Cash and restricted cash, beginning of period 53,362 13,089
Cash and restricted cash of discontinued operations, beginning of period 257 324
Cash and restricted cash of discontinued operations, end of period 0 (278)
Cash and restricted cash, end of period $ 55,815 $ 17,719
v3.21.2
Basis of Presentation
9 Months Ended
Oct. 03, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation Basis of Presentation
Business Description. Fiesta Restaurant Group, Inc. ("Fiesta Restaurant Group" or "Fiesta") owns, operates and franchises Pollo Tropical restaurants through its wholly-owned subsidiaries Pollo Operations, Inc. and Pollo Franchise, Inc. (collectively "Pollo Tropical"). Fiesta owned, operated and franchised Taco Cabana restaurants through its wholly-owned subsidiary, Taco Cabana, Inc. and its subsidiaries (collectively "Taco Cabana") through August 15, 2021. Unless the context otherwise requires, Fiesta and its subsidiaries are collectively referred to as the "Company." At October 3, 2021, the Company owned and operated 138 Pollo Tropical® restaurants located in Florida and franchised a total of 31 Pollo Tropical restaurants. The franchised Pollo Tropical restaurants include 17 in Puerto Rico, two in Panama, one in Guyana, two in Ecuador, one in the Bahamas, one in the U.S. Virgin Islands, five on college campuses in Florida, and locations at one hospital and one sports and entertainment stadium in Florida.
Discontinued Operations. On July 1, 2021, the Company entered into a stock purchase agreement for the sale of Taco Cabana, Inc. and its subsidiaries (collectively "Taco Cabana"). On August 16, 2021, the Company completed the sale of Taco Cabana. The Company has classified the revenues, costs and expenses and income taxes attributable to the Taco Cabana business segment, together with certain costs related to the transaction, within income (loss) from discontinued operations, net of tax, on the condensed consolidated statements of operations for all periods presented. See Note 2—Dispositions. Unless otherwise noted, amounts and disclosures throughout these notes to the condensed consolidated financial statements relate to the Company's continuing operations.
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, 2021 contained 53 weeks. The three and nine months ended October 3, 2021 and September 27, 2020 each contained thirteen weeks. The fiscal year ending January 2, 2022 will contain 52 weeks.
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements for the three and nine months ended October 3, 2021 and September 27, 2020 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 3, 2021 and September 27, 2020 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, 2021 included in the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 2021. The January 3, 2021 balance sheet data is derived from those audited financial statements.
Reclassification. Certain reclassifications have been made in the 2020 condensed consolidated financial statements to conform with current year presentation related to the discontinued operations of Taco Cabana. See Note 2—Dispositions.
Guidance Adopted in 2021. In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-12, Income Taxes (Topic 740) ("ASU No. 2019-12"), which is a part of the Simplification Initiative being undertaken by the FASB to reduce complexity of accounting standards. The amendments in this update simplify the accounting for income taxes by removing certain exceptions, the most notable for the Company being the exception to the general methodology for calculating income taxes in an interim period when the year-to-date loss exceeds the anticipated loss for the full year. The Company adopted this new accounting standard on January 4, 2021, and will apply it prospectively in each period after the date of adoption. The impact of the standard is largely dependent on interim and anticipated profit or loss in a given period, however the Company does not expect ASU No. 2019-12 to have a significant impact on its financial statements.
Revenue Recognition. Revenue is recognized upon transfer of promised products or services to customers in an amount that reflects the consideration the Company received in exchange for those products or services. Revenues from the Company's owned and operated restaurants are recognized when payment is tendered at the time of sale. Franchise royalty revenues are based on a percentage of gross sales and are recorded as income when earned. Initial franchise fees and area development fees associated with new franchise agreements are not distinct from the continuing rights and services offered by the Company during the term of the related franchise agreements and are recognized as income over the term of the related franchise agreements. A portion of the initial franchise fee is allocated to training services and is recognized as revenue when the Company completes the training services.
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 on 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 management's 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 condensed consolidated balance sheets of cash and restricted cash, accounts receivable and accounts payable approximate fair value because of the short maturity of those financial instruments.
Term Loan Borrowings. The fair value of outstanding term loan borrowings under the Company's new senior credit facility, which is considered Level 2, is based on current LIBOR rates. The fair value of the Company's senior credit facility was approximately $74.4 million at January 3, 2021. The carrying value of the Company's senior credit facility was $71.5 million at January 3, 2021.
Long-Lived Assets. The Company assesses the recoverability of property and equipment and definite-lived intangible assets, including right-of-use ("ROU") lease 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 whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. See Note 4—Impairment of Long-Lived Assets and Other Lease Charges.
Leases. The Company assesses whether an agreement contains a lease at inception. All leases are reviewed for finance or operating classification once control is obtained. The majority of the Company's leases are operating leases. Operating leases are included within operating lease right-of-use assets, other current liabilities, and operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included within property and equipment, net, current portion of long-term debt, and long-term debt, net of current portion in the condensed consolidated balance sheets. Operating and financing leases related to discontinued operations are included within non-current assets held for sale, current liabilities held for sale, and non-current liabilities held for sale in the condensed consolidated balance sheet as of January 3, 2021.
ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made in advance and is reduced by lease incentives received. As most leases do not provide an implicit rate, the Company uses its incremental borrowing rate at commencement date in determining the present value of lease payments. Lease terms include options to extend the lease when it is reasonably certain that the Company will exercise that option. The Company assumes options are reasonably certain to be exercised when such options are required to achieve a minimum 20-year lease term for new restaurant properties and when it incurs significant leasehold improvement costs near the end of a lease term. The Company uses judgment and available data to allocate consideration in a contract when it leases land and a building. The Company also uses judgment in determining its incremental borrowing rate, which includes selecting a yield curve based on a synthetic credit rating determined using a valuation model. Lease expense for lease payments is recognized on a straight-line basis over the lease term unless the related ROU asset has been adjusted for an impairment charge. The Company has real estate lease agreements with lease and non-lease components, which are accounted for as a single lease component.
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: insurance liabilities, evaluation for impairment of goodwill and long-lived assets, lease accounting matters, and deferred income tax assets. Actual results could differ from those estimates. Due to the uncertainty associated with the unprecedented nature of the COVID-19 pandemic and the impact it will have on the Company's operations and future cash flows, it is reasonably possible that the estimates of future cash flows used in impairment assessments will change in the near term and the effect of the change could be material.
v3.21.2
Dispositions
9 Months Ended
Oct. 03, 2021
Discontinued Operations and Disposal Groups [Abstract]  
Dispositions Dispositions
On June 30, 2021, the Company's Board of Directors approved a stock purchase agreement, which was subsequently entered into by the Company on July 1, 2021, for the sale of all of the outstanding capital stock of Taco Cabana, Inc., including nearly all related assets and liabilities, for a cash purchase price of $85.0 million subject to reduction for (i) closing adjustments of approximately $4.6 million and (ii) certain other working capital adjustments as set forth in the stock purchase agreement. The transaction was completed August 16, 2021, and the Company recognized a gain on the sale of Taco Cabana of $24.1 million during the three months ended October 3, 2021, which is included within income from discontinued operations, net of tax, in the condensed consolidated statements of operations. Working capital adjustments are expected to be finalized in the fourth quarter of 2021.
The assets and liabilities of Taco Cabana that were sold are classified as current assets held for sale, non-current assets held for sale, current liabilities held for sale, and non-current liabilities held for sale, respectively, in the condensed consolidated balance sheet as of January 3, 2021.
All revenues, costs and expenses and income taxes attributable to Taco Cabana, together with certain costs related to the transaction, have been aggregated within income (loss) from discontinued operations, net of tax, in the condensed consolidated statements of operations for all periods presented. No amounts for shared general and administrative operating support expense were allocated to discontinued operations. Depreciation and amortization related to Taco Cabana property and equipment and lease ROU assets was not recorded after June 30, 2021, when Taco Cabana was classified as held for sale. As required by the terms of the senior credit facility, the proceeds from the sale were used to fully repay Fiesta's outstanding term loan borrowings on August 16, 2021. The early repayment was subject to a 103% loan prepayment premium. Interest expense and amortization of discount and debt issuance costs related to the term loan portion of the senior credit facility are included within income (loss) from discontinued operations, net of tax.
Upon completion of the sale of Taco Cabana, the Company began providing certain services to Taco Cabana subject to a transition services agreement which is expected to continue for up to 120 days. The Company recognized $0.3 million in income under the transition services agreement for the three months ended October 3, 2021, which was recorded as a reduction to general and administrative expense. The Company retained certain closed Taco Cabana restaurant leases, including the associated operating lease right-of-use assets and operating lease liabilities. The Company also retained liability for Taco Cabana's accrued worker's compensation and general liability claims for periods prior to the sale. These liabilities are recognized in other current liabilities and other non-current liabilities in the condensed consolidated balance sheets. As there are estimates and assumptions inherent in recording these insurance liabilities, including the ability to estimate the future development of incurred claims based on historical trends or the severity of the claims, differences between actual future events and prior estimates and assumptions could result in adjustments to these liabilities.
A summary of assets and liabilities of the discontinued operations is as follows:
January 3, 2021
Carrying amount of major classes of assets included as part of discontinued operations:
Accounts receivable$3,951 
Inventories2,104 
Prepaid expenses and other current assets2,423 
Total current assets of the disposal group classified as held for sale8,478 
Property and equipment, net63,214 
Operating lease right-of-use assets96,639 
Other assets170 
Total non-current assets of the disposal group classified as held for sale160,023 
Total assets of the disposal group classified as held for sale$168,501 
Carrying amount of major classes of liabilities included as part of discontinued operations:
Current portion of long-term debt$199 
Accounts payable5,014 
Accrued liabilities9,363 
Other current liabilities12,649 
Total current liabilities of the disposal group classified as held for sale27,225 
Long-term debt, net of current portion740 
Operating lease liabilities93,970 
Deferred tax liabilities1,840 
Other non-current liabilities1,773 
Total non-current liabilities of the disposal group classified as held for sale98,323 
Total liabilities of the disposal group classified as held for sale$125,548 
A summary of the results of the discontinued operations is as follows:
Three Months EndedNine Months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Major classes of line items constituting pretax loss of discontinued operations:
Revenues:
Total revenues$29,463 $59,392 $152,339 $178,396 
Costs and expenses:
Cost of sales8,872 17,138 43,480 53,169 
Restaurant wages and related expenses (including stock-based compensation expense of $122, $32, $172, and $99, respectively)
10,054 17,494 48,399 55,591 
Restaurant rent expense1,582 5,589 12,995 16,907 
Other restaurant operating expenses5,364 8,910 24,814 26,063 
General and administrative (including stock-based compensation expense of $1,405, $111, $1,688, and $498, respectively)
3,451 2,721 11,442 9,935 
Depreciation and amortization— 4,007 7,799 12,054 
Pre-opening costs— — — 69 
Other income and expense items that are not major490 1,824 4,871 7,808 
Total operating expenses29,813 57,683 153,800 181,596 
Income (loss) from operations(350)1,709 (1,461)(3,200)
Interest expense810 1,089 4,678 3,161 
Gain on sale of Taco Cabana(24,066)— (24,066)— 
Loss on extinguishment of debt5,307 212 5,307 212 
Income (loss) from discontinued operations before income taxes17,599 408 12,620 (6,573)
Provision for (benefit from) income taxes(2,894)227 (3,716)(1,409)
Income (loss) from discontinued operations, net of tax$20,493 $181 $16,336 $(5,164)
A summary of significant investing activity and non-cash operating, investing, and financing activity of the discontinued operations from the condensed consolidated statements of cash flows is as follows:
Nine Months Ended
October 3, 2021September 27, 2020
Non-cash operating activities:
Gain on disposals of property and equipment, net$(217)$(50)
Stock-based compensation1,860 597 
Impairment and other lease charges132 899 
Loss on extinguishment of debt5,307 212 
Gain on sale of Taco Cabana(24,066)— 
Depreciation and amortization7,799 12,054 
Investing activities:
Capital expenditures:
New restaurant development$— $(854)
Restaurant remodeling(1,283)(730)
Other restaurant capital expenditures(5,050)(2,621)
Corporate and restaurant information systems(169)(1,139)
Total capital expenditures(6,502)(5,344)
Proceeds from sale of Taco Cabana74,910 — 
Proceeds from disposals of properties1,307 1,193 
Proceeds from sale-leaseback transactions3,083 — 
Net cash provided by (used in) investing activities – discontinued operations$72,798 $(4,151)
Supplemental cash flow disclosures:
Interest paid on long-term debt$4,338 $2,891 
Supplemental cash flow disclosures of non-cash investing and financing activities:
Accruals for capital expenditures$410 $735 
Accruals for financing costs associated with debt amendment— 154 
Right-of-use assets obtained in exchange for lease liabilities:
Operating lease ROU assets5,156 14,225 
Finance lease ROU assets— 33 
Right-of-use assets and lease liabilities reduced for terminated leases:
Operating lease ROU assets2,695 628 
Operating lease liabilities3,443 872 
v3.21.2
Prepaid Expenses and Other Current Assets
9 Months Ended
Oct. 03, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Prepaid Expenses and Other Current Assets Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
October 3, 2021January 3, 2021
Prepaid contract expenses$3,834 $4,138 
Other2,078 1,508 
$5,912 $5,646 
v3.21.2
Impairment of Long-Lived Assets and Other Lease Charges
9 Months Ended
Oct. 03, 2021
Property, Plant and Equipment [Abstract]  
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 and lease ROU assets, for impairment at the restaurant level. The Company has elected to exclude operating lease payments and liabilities from future cash flows and carrying values, respectively, in its impairment review. 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, exclusive of operating lease payments, 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, exclusive of operating lease payments, over the life of the primary asset for each restaurant is compared to that long-lived asset group's carrying value, excluding operating lease liabilities. 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. There is uncertainty in the projected undiscounted future cash flows used in the Company's impairment review analysis. If actual performance does not achieve the projections, the Company may recognize impairment charges in future periods, and such charges could be material.
A summary of impairment of long-lived assets and other lease charges (recoveries) is as follows:
 Three Months EndedNine Months Ended
 October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Impairment of long-lived assets$30 $2,555 $172 $7,318 
Other lease charges (recoveries)— (160)(396)705 
$30 $2,395 $(224)$8,023 
Impairment and other lease charges for the three and nine months ended October 3, 2021 include impairment charges related primarily to impairment of equipment from previously impaired and closed restaurants. Additionally, impairment and other lease charges for the nine months ended October 3, 2021 include gains from lease terminations of $(0.4) million.
Impairment charges for the three months ended September 27, 2020 related primarily to the write-down of saucing islands and self-service soda machines that were removed from dining rooms as a result of COVID-19. For the nine months ended September 27, 2020, impairment charges also include the impairment of assets from three underperforming Pollo Tropical restaurants, two of which were closed in the third quarter of 2020, for which continued sales declines coupled with the impact of expected sales declines resulted in a decrease in the estimated future cash flows and the write-down of assets held for sale to their fair value less costs to sell. For the three months ended September 27, 2020, other lease charges related primarily to a gain from lease terminations of $(0.2) million. For the nine months ended September 27, 2020, other lease charges also included lease termination charges of $0.9 million for restaurant locations the Company decided not to develop.
The Company determines 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 and the Company's expectation of how a market participant would value the assets. In addition, for those restaurants reviewed for impairment where the Company owns the land and building, the Company utilizes third-party information such as a broker quoted value to determine the fair value of the property, when applicable. The Company also utilizes discounted future cash flows to determine the fair value of assets for certain leased restaurants with positive discounted projected future cash flows. The Company utilizes current market lease rent and discount rates to determine the fair value of right-of-use lease assets. These fair value asset measurements rely on significant unobservable inputs and are considered Level 3 in the fair value hierarchy. Impairment charges for the nine months ended October 3, 2021 related primarily to impairment of equipment from previously impaired restaurants.
v3.21.2
Other Liabilities
9 Months Ended
Oct. 03, 2021
Other Liabilities Disclosure [Abstract]  
Other Liabilities Other Liabilities
Other current liabilities consist of the following:
October 3, 2021January 3, 2021
Operating lease liabilities$10,189 $9,715 
Accrued workers' compensation and general liability claims3,354 3,619 
Sales and property taxes1,411 1,209 
Accrued occupancy costs(1)
212 269 
Other3,686 2,258 
$18,852 $17,070 
(1)    Accrued occupancy costs primarily consisted of obligations pertaining to closed restaurant locations.

Other non-current liabilities consist of the following:
October 3, 2021January 3, 2021
Accrued workers' compensation and general liability claims$6,791 $6,791 
Accrued payroll taxes(1)
1,530 1,318 
Deferred compensation293 491 
Other1,026 1,157 
$9,640 $9,757 
(1)    Includes employer Social Security payroll tax deferred as a result of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").
The following table presents the activity in the closed restaurant reserve, which is included within other current liabilities on the condensed consolidated balance sheets at October 3, 2021 and January 3, 2021.
Nine Months Ended October 3, 2021Year Ended January 3, 2021
Balance, beginning of period$163 $528 
Payments, net(14)(178)
Other adjustments(50)(187)
Balance, end of period$99 $163 
v3.21.2
Stockholders' Equity
9 Months Ended
Oct. 03, 2021
Equity [Abstract]  
Stockholders' Equity Stockholders' Equity
Purchase of Treasury Stock
In 2018, the Company's board of directors approved a share repurchase program for up to 1,500,000 shares of the Company's common stock. In 2019, the Company's board of directors approved increases to the share repurchase program of an additional 1,500,000 shares of the Company's common stock for an aggregate approval of 3,000,000 shares of the Company's common stock. Under the share repurchase program, shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The share repurchase program has no time limit and may be modified, suspended, superseded or terminated at any time by the Company's board of directors. The Company repurchased 338,223 shares of common stock valued at approximately $3.9 million and 500,000 shares of common stock valued at approximately $3.7 million during the nine months ended October 3, 2021 and September 27, 2020, respectively. The shares repurchased in 2020 were purchased on or before March 12, 2020. The repurchased shares are held as treasury stock at cost.
Stock-Based Compensation
On April 28, 2021, the stockholders of the Company approved the Fiesta Restaurant Group, Inc. 2021 Stock Incentive Plan (the "2021 Plan"). Following a grant of a total 37,874 shares to non-employee directors under the Company's 2012 Stock Incentive Plan (the "2012 Plan") on April 28, 2021, no additional shares will be granted under the 2012 Plan. During the nine months ended October 3, 2021, the Company did not grant any shares under the 2021 Plan.
During the nine months ended October 3, 2021, the Company granted certain employees and non-employee directors a total of 191,872 non-vested restricted shares under the 2012 Plan, of which 37,820 non-vested restricted shares related to discontinued operations. The shares granted to employees vest and become non-forfeitable over a four-year vesting period. The shares granted to non-employee directors vest and become non-forfeitable over a one-year vesting period. The weighted average fair value at grant date for non-vested shares issued during the nine months ended October 3, 2021 and September 27, 2020 was $16.83 and $8.27 per share, respectively.
During the nine months ended October 3, 2021, the Company also granted certain employees a total of 64,089 restricted stock units under the 2012 Plan subject to performance conditions, of which 4,619 restricted stock units related to discontinued operations. The restricted stock units vest and become non-forfeitable at the end of a three-year vesting period. The number of shares into which these restricted stock units convert is based on the attainment of certain financial performance conditions and ranges from no shares, if the minimum performance condition is not met, to 128,178 shares if the maximum performance condition is met. The weighted average fair value at grant date for the restricted stock units granted in the nine months ended October 3, 2021 was $17.43 per share.
During the nine months ended October 3, 2021, vested and released shares include restricted shares and restricted stock units that vested as a result of the Taco Cabana sale in the third quarter of 2021.
Stock-based compensation expense for the three and nine months ended October 3, 2021 was $1.1 million and $3.2 million, respectively, and for the three and nine months ended September 27, 2020 was $0.5 million and $1.9 million, respectively. Stock-based compensation expense from discontinued operations for the three and nine months ended October 3, 2021 was $1.5 million and $1.9 million, respectively, and for the three and nine months ended September 27, 2020 was $0.1 million and $0.6 million, respectively. At October 3, 2021, the total unrecognized stock-based compensation expense related to non-vested restricted shares and restricted stock units was approximately $6.9 million. At October 3, 2021, the remaining weighted average vesting period for non-vested restricted shares was 1.9 years and restricted stock units was 2.4 years.
A summary of all non-vested restricted shares and restricted stock units activity for the nine months ended October 3, 2021 is as follows:
Non-Vested SharesRestricted Stock Units
SharesWeighted
Average
Grant Date
Fair Value
UnitsWeighted
Average
Grant Date
Fair Value
Outstanding at January 3, 2021991,676 $10.26 150,585 $9.49 
Granted191,872 16.83 64,089 17.43 
Vested and released(387,017)11.45 (2,030)20.75 
Forfeited(23,513)12.90 (148,469)9.32 
Outstanding at October 3, 2021773,018 $11.21 64,175 $17.45 
The fair value of non-vested restricted shares and restricted stock units granted during the nine months ended October 3, 2021, is based on the closing stock price on the date of grant.
v3.21.2
Business Segment Information
9 Months Ended
Oct. 03, 2021
Segment Reporting [Abstract]  
Business Segment Information Business Segment Information
Prior to the sale of our Taco Cabana brand on August 16, 2021, the Company owned, operated and franchised two restaurant brands, Pollo Tropical® and Taco Cabana®, each of which was an operating segment. Pollo Tropical restaurants feature fire-grilled and crispy citrus marinated chicken and other freshly prepared menu items, while Taco Cabana restaurants specialize in Mexican-inspired food with most items made fresh. Following the sale of the Taco Cabana operating segment, Pollo Tropical is the only operating segment.
The segment's accounting policies are described 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, 2021. The primary measure of segment profit or loss used by the chief operating decision maker to assess performance and allocate resources is Adjusted EBITDA, which is defined as earnings attributable to the applicable operating segments before interest expense, income taxes, depreciation and amortization, impairment and other lease charges, goodwill impairment, closed restaurant rent expense, net of sublease income, stock-based compensation expense, other expense (income), net, and certain significant items for each segment that management believes are related to strategic changes and/or are not related to the ongoing operation of the Company's restaurants as set forth in the reconciliation table below.
The "Other" column includes corporate-related items not allocated to the reportable segment and consists primarily of corporate-owned property and equipment, lease assets, miscellaneous prepaid costs, capitalized costs associated with the issuance of indebtedness, corporate cash accounts, and a current income tax receivable. The "Other" column also includes corporate costs that were previously allocated to Taco Cabana and are not included in discontinued operations.
Three Months EndedPollo TropicalOtherContinuing Operations
October 3, 2021:
Restaurant sales$88,014 $— $88,014 
Franchise revenue578 — 578 
Cost of sales26,984 — 26,984 
Restaurant wages and related expenses(1)
24,648 — 24,648 
Restaurant rent expense5,924 — 5,924 
Other restaurant operating expenses14,671 69 14,740 
Advertising expense2,757 — 2,757 
General and administrative expense(2)
8,341 2,826 11,167 
Adjusted EBITDA6,324 (2,649)3,675 
Depreciation and amortization5,060 268 5,328 
Capital expenditures3,357 48 3,405 
September 27, 2020:
Restaurant sales$77,604 $— $77,604 
Franchise revenue336 — 336 
Cost of sales24,614 — 24,614 
Restaurant wages and related expenses(1)
18,051 — 18,051 
Restaurant rent expense5,585 — 5,585 
Other restaurant operating expenses12,125 103 12,228 
Advertising expense815 (1)814 
General and administrative expense(2)
6,604 2,530 9,134 
Adjusted EBITDA10,621 (2,451)8,170 
Depreciation and amortization5,171 254 5,425 
Capital expenditures1,457 72 1,529 
Nine Months EndedPollo TropicalOtherContinuing Operations
October 3, 2021:
Restaurant sales$266,618 $— $266,618 
Franchise revenue1,344 — 1,344 
Cost of sales81,843 — 81,843 
Restaurant wages and related expenses(1)
66,888 — 66,888 
Restaurant rent expense17,625 — 17,625 
Other restaurant operating expenses41,955 305 42,260 
Advertising expense8,030 — 8,030 
General and administrative expense(2)
24,556 8,327 32,883 
Adjusted EBITDA30,620 (8,144)22,476 
Depreciation and amortization14,842 449 15,291 
Capital expenditures8,418 593 9,011 
September 27, 2020:
Restaurant sales$226,617 $— $226,617 
Franchise revenue886 — 886 
Cost of sales72,666 — 72,666 
Restaurant wages and related expenses(1)
54,196 — 54,196 
Restaurant rent expense16,885 — 16,885 
Other restaurant operating expenses35,225 350 35,575 
Advertising expense5,497 (5)5,492 
General and administrative expense(2)
20,630 7,962 28,592 
Adjusted EBITDA24,394 (7,478)16,916 
Depreciation and amortization15,682 691 16,373 
Capital expenditures5,501 1,071 6,572 
Identifiable Assets:
October 3, 2021$314,824 $70,125 $384,949 
January 3, 2021311,942 88,300 400,242 
(1) Continuing operations includes stock-based compensation expense of $13 and $44 for the three and nine months ended October 3, 2021, respectively, and $15 and $53 for the three and nine months ended September 27, 2020, respectively.
(2) Continuing operations includes stock-based compensation expense of $1,097 and $3,137 for the three and nine months ended October 3, 2021, respectively, and $486 and $1,834 for the three and nine months ended September 27, 2020, respectively.
A reconciliation of consolidated net loss to Adjusted EBITDA follows:
Three Months EndedPollo TropicalOtherContinuing Operations
October 3, 2021:
Net income$17,262 
Income from discontinued operations, net of tax(20,493)
Benefit from income taxes(763)
Loss before taxes$(1,011)$(2,983)$(3,994)
Add:
     Non-general and administrative adjustments:
          Depreciation and amortization5,060 268 5,328 
          Impairment and other lease charges30 — 30 
          Interest expense502 (342)160 
Closed restaurant rent expense, net of sublease income566 144 710 
          Other expense (income), net120 18 138 
          Stock-based compensation expense13 — 13 
Total non-general and administrative adjustments6,291 88 6,379 
     General and administrative adjustments:
          Stock-based compensation expense670 427 1,097 
          Restructuring costs and retention bonuses60 (60)— 
          Digital and brand repositioning costs193 — 193 
  Transaction costs121 (121)— 
               Total general and administrative adjustments1,044 246 1,290 
Adjusted EBITDA$6,324 $(2,649)$3,675 
September 27, 2020:
Net income$4,593 
Income from discontinued operations, net of tax(181)
Benefit from income taxes(4,382)
Income (loss) before taxes$3,035 $(3,005)$30 
Add:
     Non-general and administrative adjustments:
          Depreciation and amortization5,171 254 5,425 
          Impairment and other lease charges2,395 — 2,395 
          Interest expense593 (510)83 
Closed restaurant rent expense, net of sublease income356 578 934 
          Other expense (income), net(1,404)51 (1,353)
          Stock-based compensation expense15 — 15 
Total non-general and administrative adjustments7,126 373 7,499 
     General and administrative adjustments:
          Stock-based compensation expense307 179 486 
          Restructuring costs and retention bonuses99 101 
          Digital and brand repositioning costs54 — 54 
Total general and administrative adjustments460 181 641 
Adjusted EBITDA$10,621 $(2,451)$8,170 
Nine Months EndedPollo TropicalOtherContinuing Operations
October 3, 2021:
Net income$15,090 
Income from discontinued operations, net of tax(16,336)
Provision for income taxes1,473 
Income (loss) before taxes$8,260 $(8,033)$227 
Add:
     Non-general and administrative adjustments:
          Depreciation and amortization14,842 449 15,291 
          Impairment and other lease charges(192)(32)(224)
          Interest expense2,466 (2,184)282 
Closed restaurant rent expense, net of sublease income1,373 1,053 2,426 
          Other expense (income), net316 115 431 
          Stock-based compensation expense44 — 44 
Total non-general and administrative adjustments18,849 (599)18,250 
     General and administrative adjustments:
          Stock-based compensation expense1,912 1,225 3,137 
          Restructuring costs and retention bonuses78 (60)18 
          Digital and brand repositioning costs844 — 844 
          Transaction costs677 (677)— 
Total general and administrative adjustments3,511 488 3,999 
Adjusted EBITDA$30,620 $(8,144)$22,476 
September 27, 2020:
Net loss$(11,067)
Loss from discontinued operations, net of tax5,164 
Benefit from income taxes(7,494)
Loss before taxes$(3,978)$(9,419)$(13,397)
Add:
     Non-general and administrative adjustments:
          Depreciation and amortization15,682 691 16,373 
          Impairment and other lease charges8,023 — 8,023 
          Interest expense1,701 (1,492)209 
Closed restaurant rent expense, net of sublease income1,629 1,686 3,315 
          Other expense (income), net(653)227 (426)
          Stock-based compensation expense53 — 53 
Total non-general and administrative adjustments26,435 1,112 27,547 
     General and administrative adjustments:
          Stock-based compensation expense1,140 694 1,834 
          Restructuring costs and retention bonuses551 135 686 
          Digital and brand repositioning costs246 — 246 
Total general and administrative adjustments1,937 829 2,766 
Adjusted EBITDA$24,394 $(7,478)$16,916 
v3.21.2
Earnings (Loss) Per Share
9 Months Ended
Oct. 03, 2021
Earnings Per Share [Abstract]  
Earnings (Loss) Per Share Earnings (Loss) Per Share
Basic earnings (loss) per share ("EPS") is computed by dividing net income (loss) applicable to common shares by the weighted average number of common shares outstanding during each period. 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 EPS pursuant to the two-class method. The two-class method of computing EPS 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. EPS 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 EPS reflects the potential dilution that could occur if the restricted stock units were to be converted into common shares. Restricted stock units with performance conditions are only included in the diluted EPS calculation to the extent that performance conditions have been met at the measurement date. Diluted EPS is computed 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.
All outstanding restricted stock units in the three months ended October 3, 2021 were performance based awards. For the nine months ended October 3, 2021 and September 27, 2020, all shares of outstanding restricted stock units were excluded from the computation of diluted EPS because including these restricted stock units would have been antidilutive as a result of the loss from continuing operations in the nine months ended October 3, 2021 and September 27, 2020. For the three months ended September 27, 2020, no shares of outstanding restricted stock units were excluded from the computation of diluted EPS because none were antidilutive.
The computation of basic and diluted EPS is as follows:
Three Months EndedNine Months Ended
October 3, 2021September 27, 2020October 3, 2021September 27, 2020
Basic and diluted EPS:
Income (loss) from continuing operations$(3,231)$4,412 $(1,246)$(5,903)
Income (loss) from discontinued operations20,493 181 16,336 (5,164)
Net income (loss)$17,262 $4,593 $15,090 $(11,067)
Less: income allocated to participating securities542 112 523 — 
Net income (loss) available to common shareholders$16,720 $4,481 $14,567 $(11,067)
Weighted average common shares—basic25,508,930 25,290,357 25,443,341 25,359,004 
Restricted stock units— 1,362 — — 
Weighted average common shares—diluted25,508,930 25,291,719 25,443,341 25,359,004 
Earnings (loss) from continuing operations per common share—basic$(0.12)$0.17 $(0.05)$(0.23)
Earnings (loss) from discontinued operations per common share—basic0.78 0.01 0.62 (0.21)
Earnings (loss) per common share—basic$0.66 $0.18 $0.57 $(0.44)
Earnings (loss) from continuing operations per common share—diluted$(0.12)$0.17 $(0.05)$(0.23)
Earnings (loss) from discontinued operations per common share—diluted0.78 0.01 0.62 (0.21)
Earnings (loss) per common share—diluted$0.66 $0.18 $0.57 $(0.44)
v3.21.2
Commitments and Contingencies
9 Months Ended
Oct. 03, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Lease Assignments. Pollo Tropical assigned two leases to third parties on properties where it no longer operates with lease terms expiring in 2033 and 2036. Although the assignees are responsible for making the payments required by the lease, the Company is a guarantor under the leases.
The maximum potential liability for future rental payments that the Company could be required to make under these leases at October 3, 2021 was $4.8 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.
Indemnity of Lease Guarantees. As discussed in Note 2—Dispositions, Taco Cabana, Inc., a former wholly-owned subsidiary of the Company, was sold in 2021 to YTC Enterprises through a stock purchase agreement. The Company's previous owners, Carrols Restaurant Group, Inc. ("Carrols") remains a guarantor under 14 Taco Cabana restaurant property leases with lease terms expiring on various dates through 2030, of which all but one are still operating, as of October 3, 2021. The Company has indemnified Carrols for all obligations under the guarantees per the terms of the Separation and Distribution Agreement entered into in connection with the spin-off of Fiesta. The Company remains liable for all obligations under the terms of the leases in the event YTC Enterprises fails to pay any sums due under the lease, subject to indemnification provisions under the stock purchase agreement.
The maximum potential amount of future undiscounted rental payments the Company could be required to make under these leases at October 3, 2021 was $11.8 million. The obligations under these leases will generally continue to decrease over time as these operating leases expire, except for any execution of renewal options that exist under the original leases. No payments related to these guarantees have been made by the Company to date and none are expected to be required to be made in the future. YTC Enterprises has indemnified the Company for all such obligations and the Company does not believe it is probable it will be required to perform under any of the guarantees or direct obligations.
Legal Matters. The Company is a party to various 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 condensed consolidated financial statements. 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.
Insurance Matter. The Company filed an insurance claim for winter storm damages in Texas and will record the insurance proceeds when the claim is resolved.
v3.21.2
Income Taxes
9 Months Ended
Oct. 03, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Tax Law Changes. On March 27, 2020, the CARES Act was signed into law. The CARES Act includes provisions that allow net operating losses in 2018, 2019, and 2020 to be carried back for up to five years and eliminates the 80% taxable income limitation on net operating loss deductions for 2018 through 2020. These changes allowed the Company to record an incremental benefit of $1.8 million during the first quarter of 2020 and $0.1 million during the third quarter of 2020, which represents the impact of carrying net operating losses from 2018 and 2019 back to years with a higher federal corporate income tax rate.
The CARES Act also includes technical amendments that are retroactive to 2018 which permit certain assets to be classified as qualified improvement property and expensed immediately. Reclassifying certain assets as qualified improvement property and other changes to depreciation methods for certain assets made in conjunction with a cost segregation study conducted prior to filing the Company's 2019 federal income tax return resulted in an incremental benefit of $1.9 million, which was recorded in the third quarter of 2020.
The Company is currently under examination by the Internal Revenue Service for the tax years 2014–2017 and 2019. It is not currently under examination by any other taxing jurisdictions. The tax years 2013–2020 remain open to examination by the taxing jurisdictions to which the Company is subject. Although it is not reasonably possible to estimate the amount by which unrecognized tax benefits may increase within the next twelve months due to uncertainties regarding the timing of any examinations, the Company does not expect unrecognized tax benefits to significantly change in the next twelve months.
v3.21.2
Related Party Transactions
9 Months Ended
Oct. 03, 2021
Related Party Transactions [Abstract]  
Related Party Transactions Related Party TransactionsThe Company engaged Jefferies LLC ("Jefferies"), an affiliate of one of the current members of Fiesta's board of directors, and a subsidiary of Jefferies Financial Group, Inc, a holder of more than 20 percent of the total outstanding shares of Fiesta, in the third quarter of 2020 in connection with a refinancing of the Company's former amended senior credit facility in 2020 and advisory services related to the sale of Taco Cabana. The engagement of Jefferies and the corresponding engagement letter was approved by the Audit Committee in accordance with the Company's Related Party Transaction Policy as disclosed in its most recent proxy statement for the Annual Meeting of Stockholders. The Company paid fees of $1.7 million to Jefferies and reimbursed Jefferies for reasonable out of pocket and ancillary expenses of less than $0.1 million when the refinancing was completed in the fourth quarter of 2020. The Company paid Jefferies a transaction advisory fee of $2.0 million upon the sale of Taco Cabana. As of October 3, 2021 and January 3, 2021, there were no amounts due to the related party recognized on the condensed consolidated balance sheets.
v3.21.2
Supplemental Cash Flow Information
9 Months Ended
Oct. 03, 2021
Supplemental Cash Flow Elements [Abstract]  
Supplemental Cash Flow Information Supplemental Cash Flow Information
The following table details supplemental cash flow disclosures of non-cash investing and financing activities from continuing operations: 
Nine Months Ended
October 3, 2021September 27, 2020
Supplemental cash flow disclosures:
Interest paid on long-term debt$178 $204 
Income tax payments (refunds), net(6,253)(2,155)
Supplemental cash flow disclosures of non-cash investing and financing activities:
Accruals for capital expenditures$2,357 $1,091 
Right-of-use assets obtained in exchange for lease liabilities:
Operating lease ROU assets2,956 14,573 
Right-of-use assets and lease liabilities reduced for terminated leases:
Operating lease ROU assets2,288 1,759 
Operating lease liabilities2,793 1,971 
Cash and restricted cash reconciliation:
Beginning of period
Cash$49,778 $13,089 
Restricted cash3,584 — 
Cash and restricted cash, beginning of period$53,362 $13,089 
End of period
Cash$51,978 $17,719 
Restricted cash3,837 — 
Cash and restricted cash, end of period$55,815 $17,719 
v3.21.2
Recent Accounting Pronouncements
9 Months Ended
Oct. 03, 2021
Accounting Policies [Abstract]  
Recent Accounting Pronouncements Recent Accounting PronouncementsIn March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) ("ASU No. 2020-04"), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective as of March 12, 2020 through December 31, 2022. As of October 3, 2021, the Company's only exposure to LIBOR rates was the undrawn $10.0 million revolving credit facility under its senior credit facility. Upon cessation of the LIBOR, the new senior credit facility would use a benchmark replacement rate. According to ASU No. 2020-04, modifications of contracts within the scope of Topic 470 Debt should be accounted for by prospectively adjusting the effective interest rate. The Company does not expect ASU No. 2020-04 to have a significant impact on its financial statements.