DEL TACO RESTAURANTS, INC., 10-K filed on 3/15/2018
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Jan. 2, 2018
Mar. 12, 2018
Jun. 20, 2017
Document And Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Jan. 02, 2018 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
TACO 
 
 
Entity Registrant Name
Del Taco Restaurants, Inc. 
 
 
Entity Central Index Key
0001585583 
 
 
Current Fiscal Year End Date
--01-02 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
38,445,409 
 
Entity Public Float
 
 
$ 475,000,000 
Consolidated Balance Sheets (Successor [Member], USD $)
In Thousands, unless otherwise specified
Jan. 2, 2018
Jan. 3, 2017
Current assets:
 
 
Cash and cash equivalents
$ 6,559 
$ 8,795 
Accounts and other receivables, net
3,828 
4,141 
Inventories
2,712 
2,718 
Prepaid expenses and other current assets
6,784 
4,204 
Total current assets
19,883 
19,858 
Property and equipment, net
156,124 
138,320 
Goodwill
320,638 
320,025 
Trademarks
220,300 
220,300 
Intangible assets, net
21,498 
24,782 
Other assets, net
3,881 
3,872 
Total assets
742,324 
727,157 
Current liabilities:
 
 
Accounts payable
18,759 
16,427 
Other accrued liabilities
35,257 
36,653 
Current portion of capital lease obligations and deemed landlord financing liabilities
1,415 
1,588 
Total current liabilities
55,431 
54,668 
Long-term debt, capital lease obligations and deemed landlord financing liabilities, excluding current portion, net
170,639 
173,743 
Deferred income taxes
68,574 
91,273 
Other non-current liabilities
31,431 
30,140 
Total liabilities
326,075 
349,824 
Commitments and contingencies
   
   
Shareholders’ equity:
 
 
(Predecessor) preferred stock, $0.01 par value; 200,000 shares authorized; no shares issued and outstanding/(Successor) preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding
0 
0 
(Predecessor) common stock, $0.01 par value; 5,800,000 shares authorized; 3,907,835 shares issued and outstanding at December 30, 2014/(Successor) common stock, $0.0001 par value; 400,000,000 shares authorized; 38,802,425 shares issued and outstanding at December 29, 2015
4 
4 
Additional paid-in capital
349,334 
360,131 
Accumulated other comprehensive income
14 
172 
Retained earnings
66,897 
17,026 
Total shareholders’ equity
416,249 
377,333 
Total liabilities and shareholders’ equity
$ 742,324 
$ 727,157 
Consolidated Balance Sheets (Parenthetical) (Successor [Member], USD $)
Jan. 2, 2018
Jan. 3, 2017
Successor [Member]
 
 
Preferred stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Preferred stock, shares authorized (in shares)
1,000,000 
1,000,000 
Preferred stock, shares issued (in shares)
0 
0 
Preferred stock, shares outstanding (in shares)
0 
0 
Common stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Common stock, shares authorized (in shares)
400,000,000 
400,000,000 
Common stock, shares issued (in shares)
38,434,274 
39,153,503 
Common stock, shares outstanding (in shares)
38,434,274 
39,153,503 
Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Thousands, except Share data, unless otherwise specified
6 Months Ended 12 Months Ended 6 Months Ended
Dec. 29, 2015
Successor [Member]
Jan. 2, 2018
Successor [Member]
Jan. 3, 2017
Successor [Member]
Jun. 30, 2015
Predecessor
Revenue:
 
 
 
 
Company restaurant sales
$ 206,939 
$ 452,148 
$ 434,064 
$ 200,676 
Franchise revenue
7,328 
16,464 
15,676 
6,693 
Franchise sublease income
1,183 
2,844 
2,343 
1,183 
Total revenue
215,450 
471,456 
452,083 
208,552 
Restaurant operating expenses:
 
 
 
 
Food and paper costs
59,263 
125,391 
120,116 
57,447 
Labor and related expenses
61,448 
145,012 
135,725 
61,120 
Occupancy and other operating expenses
43,191 
92,825 
88,908 
43,611 
General and administrative
17,501 
38,154 
37,220 
14,850 
Depreciation and amortization
11,276 
23,362 
23,129 
8,252 
Occupancy and other - franchise subleases
1,140 
2,608 
2,207 
1,109 
Pre-opening costs
366 
1,591 
700 
276 
Restaurant closure charges, net
2,015 
191 
435 
94 
Loss on disposal of assets, net
3 
1,075 
312 
99 
Total operating expenses
196,203 
430,209 
408,783 
186,858 
Income from operations
19,247 
41,247 
43,300 
21,694 
Other expense (income), net:
 
 
 
 
Interest expense
3,652 
7,200 
6,327 
11,491 
Other income
(220)
0 
0 
0 
Transaction-related costs
12,972 
0 
731 
7,255 
Debt modification costs
78 
0 
0 
139 
Change in fair value of warrant liability
0 
0 
0 
(35)
Total other expense, net
16,482 
7,200 
7,058 
18,850 
Income from operations before (benefit) provision for income taxes
2,765 
34,047 
36,242 
2,844 
(Benefit) provision for income taxes
112 
(15,824)
15,329 
740 
Net income
2,653 
49,871 
20,913 
2,104 
Other comprehensive (loss) income:
 
 
 
 
Change in fair value of interest rate cap, net of tax
0 
(162)
172 
(24)
Reclassification of interest rate cap amortization included in net income
0 
4 
0 
58 
Total other comprehensive (loss) income, net
0 
(158)
172 
34 
Comprehensive income
$ 2,653 
$ 49,713 
$ 21,085 
$ 2,138 
Earnings per share:
 
 
 
 
Basic (in dollars per share)
$ 0.07 
$ 1.29 
$ 0.54 
$ 0.38 
Diluted (in dollars per share)
$ 0.07 
$ 1.25 
$ 0.53 
$ 0.37 
Weighted-average shares outstanding:
 
 
 
 
Basic (in shares)
38,802,425 
38,689,508 
38,725,541 
5,492,417 
Diluted (in shares)
40,249,993 
39,949,907 
39,274,649 
5,610,859 
Consolidated Statements of Shareholders' Equity (USD $)
Total
Predecessor
Successor
Common Stock
Predecessor
Common Stock
Successor
Additional Paid-in Capital
Predecessor
Additional Paid-in Capital
Successor
Accumulated Other Comprehensive Loss
Predecessor
Accumulated Other Comprehensive Loss
Successor
Retained Earnings (Accumulated Deficit)
Predecessor
Retained Earnings (Accumulated Deficit)
Successor
Beginning Balance at Dec. 30, 2014
 
$ 81,404,000 
 
$ 39,000 
 
$ 110,941,000 
 
$ (409,000)
 
$ (29,167,000)
 
Beginning Balance, Shares at Dec. 30, 2014
 
 
 
3,907,835 
 
 
 
 
 
 
 
Net income (loss)
 
2,104,000 
 
 
 
 
 
 
 
2,104,000 
 
Other comprehensive income (loss), net of tax
 
34,000 
 
 
 
 
 
34,000 
 
 
 
Comprehensive income (loss)
 
2,138,000 
 
 
 
 
 
 
 
 
 
Stock-based compensation
 
532,000 
 
 
 
532,000 
 
 
 
 
 
Exercise and settlement of warrants
 
8,274,000 
 
2,000 
 
8,272,000 
 
 
 
 
 
Exercise and settlement of warrants (in shares)
 
 
 
213,025 
 
 
 
 
 
 
 
Exercise of options and distribution of restricted stock units, net of tax withholding
 
(7,533,000)
 
2,000 
 
(7,535,000)
 
 
 
 
 
Exercise of options and distribution of restricted stock units, net of tax withholding, Shares
 
 
 
237,948 
 
 
 
 
 
 
 
Issuance of common stock
 
91,236,000 
 
24,000 
 
91,212,000 
 
 
 
 
 
Tax withholdings on restricted stock vesting
 
(7,533,000)
 
 
 
 
 
 
 
 
 
Issuance of common stock (in shares)
 
 
 
2,348,968 
 
 
 
 
 
 
 
Ending Balance at Jun. 30, 2015
 
176,051,000 
 
67,000 
 
203,422,000 
 
(375,000)
0 
(27,063,000)
 
Ending Balance, Shares at Jun. 30, 2015
 
 
 
6,707,776 
 
 
 
 
 
 
 
Beginning Balance at Jun. 29, 2015
 
176,051,000 
 
 
 
 
 
 
 
 
 
Tax withholdings on restricted stock vesting
(7,500,000)
 
 
 
 
 
 
 
 
 
 
Issuance of common stock (in shares)
 
3,089,532 
 
 
 
 
 
 
 
 
 
Ending Balance at Jun. 30, 2015
 
 
3,318,000 
 
1,000 
 
9,857,000 
 
0 
 
(6,540,000)
Beginning Balance, Shares at Jun. 30, 2015
 
 
 
 
5,127,606 
 
 
 
 
 
 
Net income (loss)
 
 
2,653,000 
 
 
 
 
 
 
 
2,653,000 
Common stock of Del Taco Restaurants, Inc. released from possible redemption
 
 
136,213,000 
 
1,000 
 
136,212,000 
 
 
 
 
Common stock of Del Taco Restaurants, Inc. released from possible redemption, Shares
 
 
 
 
13,621,279 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
 
 
0 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
 
 
2,653,000 
 
 
 
 
 
 
 
 
Issuance of warrants
 
 
389,000 
 
 
 
389,000 
 
 
 
 
Stock-based compensation
 
 
1,498,000 
 
 
 
1,498,000 
 
 
 
 
Issuance of common stock
 
 
224,306,000 
 
2,000 
 
224,304,000 
 
 
 
 
Tax withholdings on restricted stock vesting
 
 
0 
 
 
 
 
 
 
 
 
Issuance of common stock (in shares)
 
 
 
 
20,053,540 
 
 
 
 
 
 
Ending Balance at Dec. 29, 2015
 
 
368,377,000 
 
4,000 
 
372,260,000 
 
0 
 
(3,887,000)
Ending Balance, Shares at Dec. 29, 2015
 
 
 
 
38,802,425 
 
 
 
 
 
 
Net income (loss)
 
 
20,913,000 
 
 
 
 
 
 
 
20,913,000 
Other comprehensive income (loss), net of tax
 
 
172,000 
 
 
 
 
 
172,000 
 
 
Comprehensive income (loss)
 
 
21,085,000 
 
 
 
 
 
 
 
 
Stock-based compensation
 
 
4,096,000 
 
 
 
4,096,000 
 
 
 
 
Stock Issued During Period, Shares, Other
 
 
 
 
1,533,542 
 
 
 
 
 
 
Tax withholdings on restricted stock vesting
 
 
(916,000)
 
 
 
(916,000)
 
 
 
 
Restricted stock awards vested, shares
 
 
 
 
164,336 
 
 
 
 
 
 
Restricted stock awards vested, value
 
 
 
 
0 
 
 
 
 
 
 
Exercise of stock options, shares
 
 
 
 
500 
 
 
 
 
 
 
Exercise of stock options, value
 
 
5,000 
 
 
 
5,000 
 
 
 
 
Repurchase of common stock, shares
 
 
 
 
(1,347,300)
 
 
 
 
 
 
Stock Repurchased During Period, Value
 
 
 
 
0 
 
 
 
 
 
 
Repurchase of common stock, value
 
 
(15,314,000)
 
 
 
(15,314,000)
 
 
 
 
Ending Balance at Jan. 03, 2017
 
 
377,333,000 
 
 
 
360,131,000 
 
172,000 
 
17,026,000 
Ending Balance, Shares at Jan. 03, 2017
 
 
 
 
39,153,503 
 
 
 
 
 
 
Beginning Balance at Sep. 06, 2016
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
8,039,000 
 
 
 
 
 
 
 
 
Ending Balance at Jan. 03, 2017
 
 
377,333,000 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
4,238,000 
 
 
 
 
 
 
 
 
Ending Balance at Mar. 28, 2017
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance at Jan. 03, 2017
 
 
377,333,000 
 
 
 
360,131,000 
 
172,000 
 
17,026,000 
Beginning Balance, Shares at Jan. 03, 2017
 
 
 
 
39,153,503 
 
 
 
 
 
 
Net income (loss)
 
 
49,871,000 
 
 
 
 
 
 
 
49,871,000 
Other comprehensive income (loss), net of tax
 
 
(158,000)
 
 
 
 
 
(158,000)
 
 
Comprehensive income (loss)
 
 
49,713,000 
 
 
 
 
 
 
 
 
Stock-based compensation
 
 
4,876,000 
 
 
 
4,876,000 
 
 
 
 
Tax withholdings on restricted stock vesting
 
 
(1,923,000)
 
 
 
(1,923,000)
 
 
 
 
Restricted stock awards vested, shares
 
 
 
 
257,518 
 
 
 
 
 
 
Restricted stock awards vested, value
 
 
 
 
0 
 
 
 
 
 
 
Exercise of stock options, shares
 
 
 
 
9,750 
 
 
 
 
 
 
Exercise of stock options, value
 
 
99,000 
 
 
 
99,000 
 
 
 
 
Repurchase of common stock, shares
 
 
 
 
(986,497)
 
 
 
 
 
 
Stock Repurchased During Period, Value
 
 
 
 
0 
 
 
 
 
 
 
Repurchase of common stock, value
 
 
(13,849,000)
 
 
 
(13,849,000)
 
 
 
 
Ending Balance at Jan. 02, 2018
 
 
416,249,000 
 
4,000 
 
349,334,000 
 
14,000 
 
66,897,000 
Ending Balance, Shares at Jan. 02, 2018
 
 
 
 
38,434,274 
 
 
 
 
 
 
Beginning Balance at Sep. 12, 2017
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
35,202,000 
 
 
 
 
 
 
 
 
Ending Balance at Jan. 02, 2018
 
 
$ 416,249,000 
 
 
 
 
 
 
 
 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended 6 Months Ended
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Jun. 30, 2015
Predecessor
Operating activities
 
 
 
 
Net income
$ 2,653 
$ 49,871 
$ 20,913 
$ 2,104 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
11,276 
23,362 
23,129 
8,249 
Amortization of favorable and unfavorable lease assets and liabilities, net
(364)
(809)
(607)
3 
Amortization of deferred financing costs and interest rate cap
155 
389 
392 
908 
Subordinated note interest paid-in-kind
0 
0 
0 
37 
Debt modification costs
78 
0 
0 
139 
Stock-based compensation
1,498 
4,876 
4,096 
532 
Change in fair value of warrant liability
0 
0 
0 
(35)
Deferred income taxes
88 
(22,594)
10,741 
551 
Loss on disposal of assets, net
3 
1,075 
312 
99 
Restaurant closure charges, net
0 
(379)
(179)
0 
Changes in operating assets and liabilities:
 
 
 
 
Accounts and other receivables, net
8 
313 
(921)
154 
Inventories
(265)
6 
88 
145 
Prepaid expenses and other current assets
653 
(2,580)
(659)
(426)
Increase (Decrease) in Other Noncurrent Assets
0 
(162)
(59)
0 
Accounts payable
(3,309)
2,332 
(404)
4,222 
Other accrued liabilities
3,434 
(1,526)
3,733 
(5,026)
Other non-current liabilities
1,177 
2,856 
(3,387)
(1,573)
Net cash provided by operating activities
17,085 
57,788 
57,546 
10,083 
Investing activities
 
 
 
 
Purchases of property and equipment
(18,593)
(50,627)
(45,853)
(14,813)
Proceeds from disposal of property and equipment
0 
9,907 
3,423 
42 
Proceeds from the Company’s trust account
149,989 
0 
0 
0 
Purchases of other assets
(589)
(1,033)
(1,333)
(513)
Acquisition of franchisees
0 
(1,128)
(3,891)
0 
Proceeds from Divestiture of Businesses
0 
2,192 
0 
0 
Proceeds from dissolution of investments in partnerships
1,586 
0 
0 
0 
Acquisition of Del Taco Holdings, net of cash acquired
(89,827)
0 
0 
0 
Net cash (used in) provided by investing activities
42,566 
(40,689)
(47,654)
(15,284)
Financing activities
 
 
 
 
Proceeds from term loan, net of debt discount
0 
0 
0 
23,654 
Proceeds from deemed landlord financing liabilities
1,208 
3,925 
1,974 
0 
Proceeds from issuance of common stock
35,000 
0 
0 
91,236 
Repurchase of common stock and warrants
0 
(13,849)
(15,314)
0 
Payment of tax withholding related to restricted stock vesting, option exercises and distribution of restricted stock units
0 
(1,923)
(916)
(7,533)
Payments on term loans
(227,100)
0 
0 
0 
Payments on capital leases and deemed landlord financing
(864)
(1,587)
(1,728)
(831)
Payment on subordinated notes
0 
0 
0 
(108,113)
Proceeds from revolving credit facility, net of debt discount
162,556 
31,500 
24,000 
10,000 
Payments on revolving credit facility
(14,000)
(37,500)
(19,000)
(6,000)
Payment for interest rate cap
0 
0 
(312)
0 
Payments for debt issue costs
(484)
0 
0 
(593)
Repayment of note payable
(500)
0 
0 
0 
Payment of deferred underwriter compensation
(5,250)
0 
0 
0 
Proceeds from Stock Options Exercised
0 
99 
5 
0 
Net cash (used in) provided by financing activities
(49,457)
(19,335)
(11,291)
1,820 
(Decrease) increase in cash and cash equivalents
10,194 
(2,236)
(1,399)
(3,381)
Cash and cash equivalents at beginning of period
0 
8,795 
10,194 
 
Cash and cash equivalents at end of period
10,194 
6,559 
8,795 
5,172 
Supplemental cash flow information:
 
 
 
 
Cash paid during the period for interest
3,216 
6,873 
6,328 
13,548 
Cash paid during the period for income taxes, net of tax refunds
161 
9,441 
3,531 
46 
Supplemental schedule of non-cash activities:
 
 
 
 
Accrued property and equipment purchases
306 
2,305 
64 
1,549 
Write-offs against bad debt reserves
0 
0 
72 
0 
Amortization of interest rate cap into net income, net of tax
0 
4 
0 
58 
Change in other asset for fair value of interest rate cap recorded to other comprehensive (loss) income, net of tax
0 
(162)
172 
(24)
Warrant liability reclassified to equity upon exercise of warrants
0 
0 
0 
8,274 
Issuance of shares for consideration in the acquisition of Del Taco Holdings, Inc.
189,306 
0 
0 
0 
Issuance of warrants as payment for working capital loans
389 
0 
0 
0 
Common stock of Del Taco Restaurants, Inc. reclassified to equity upon release from possible redemption
$ 136,213 
$ 0 
$ 0 
$ 0 
Description of Business
Description of Business
Description of Business
Del Taco Restaurants, Inc. (f/k/a Levy Acquisition Corp. (“LAC”)) is a Delaware corporation headquartered in Lake Forest, California. The consolidated financial statements include the accounts of Del Taco Restaurants, Inc. and its wholly owned subsidiaries (collectively, the “Company” or “Del Taco”). The Company develops, franchises, owns, and operates Del Taco quick-service Mexican-American restaurants. At January 2, 2018, there were 312 company-operated and 252 franchise-operated Del Taco restaurants located in 14 states, including one franchise-operated unit in Guam. At January 3, 2017, there were 310 company-operated and 241 franchise-operated Del Taco restaurants located in 15 states, including one franchise-operated unit in Guam.
The Company was originally incorporated in Delaware on August 2, 2013 as a special purpose acquisition company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. On June 30, 2015 (the “Closing Date”), the Company consummated its business combination with Del Taco Holdings, Inc. (“DTH”) pursuant to the agreement and plan of merger dated as of March 12, 2015 by and among LAC, Levy Merger Sub, LLC (“Levy Merger Sub”), LAC’s wholly owned subsidiary, and DTH (the “Merger Agreement”). Under the Merger Agreement, Levy Merger Sub merged with and into DTH, with DTH surviving the merger as a wholly-owned subsidiary of the Company (the “Business Combination” or “Merger”). In connection with the closing of the Business Combination, the Company changed its name from Levy Acquisition Corp. to Del Taco Restaurants, Inc. See Note 3 for further discussion of the Business Combination.
DTH has no material assets or operations. DTH's direct subsidiary, F&C Restaurant Holding Co. ("F&C RHC") also has no material assets or operations, but was the issuer of subordinated notes in May 2010. F&C RHCs' direct subsidiary, Sagittarius Restaurants LLC ("SAG Restaurants"), also has no material assets or operations and was also an issuer of subordinated notes in May 2010. The outstanding balances for the F&C RHC and SAG Restaurants subordinated notes were fully redeemed in March 2015. See Note 8 for additional discussion on the F&C RHC and SAG Restaurants subordinated notes.
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
As a result of the Business Combination, the Company is the acquirer for accounting purposes, and DTH is the acquiree and accounting predecessor. The Company’s financial statement presentation distinguishes a “Predecessor” for DTH for periods prior to the Closing Date. The Company is the “Successor” for periods after the Closing Date, which includes consolidation of DTH subsequent to the Business Combination on June 30, 2015. The Merger was accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting that is based on the fair value of the net assets acquired. See Note 3 for further discussion of the Business Combination. As a result of the application of the acquisition method of accounting as of the Closing Date, the financial statements for the Predecessor period and for the Successor period are presented on a different basis of accounting and are therefore, not comparable. The historical financial information of Del Taco, formerly LAC, prior to the Business Combination has not been reflected in the financial statements as those amounts have been considered de-minimus.
For the Consolidated Statements of Shareholders’ Equity, the Predecessor results reflect the equity balances and activities of DTH at December 30, 2014 through June 30, 2015 prior to the closing of the Business Combination and the Successor results reflect the LAC equity balances at June 30, 2015 prior to the closing of the Business Combination and the activities for Del Taco through January 2, 2018.
 
The Company’s fiscal year ends on the Tuesday closest to December 31. Fiscal years 2017 and 2015 are both a fifty-two week periods. In a fifty-two week fiscal year, the first, second and third quarters each include twelve weeks of operations and the fourth quarter includes sixteen weeks of operations. Fiscal year 2016 is a fifty-three week period. In a fifty-three week fiscal year, the first, second and third quarters each include twelve weeks of operations and the fourth quarter includes seventeen weeks of operations. For fiscal year 2017, the Company’s financial statements reflect the fifty-two weeks ended January 2, 2018 (Successor). For fiscal year 2016, the Company's financial statements reflect the fifty-three weeks ended January 3, 2017 (Successor). For fiscal year 2015, the Company’s financial statements reflect the twenty-six weeks ended December 29, 2015 (Successor) and the twenty-six weeks ended June 30, 2015 (Predecessor).
Principles of Consolidation
The consolidated financial statements included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules and regulations of Securities and Exchange Commission (“SEC”). The accompanying consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management believes that such estimates have been based on reasonable and supportable assumptions and the resulting estimates are reasonable for use in the preparation of the consolidated financial statements. Actual results could differ from these estimates. The Company’s significant estimates include estimates for impairment of goodwill, intangible assets and property and equipment, valuations provided in business combinations, insurance reserves, restaurant closure reserves, stock-based compensation, contingent liabilities, certain leasing activities and income tax valuation allowances.


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Variable Interest Entities
In accordance with Accounting Standards Codification ("ASC") 810, Consolidation, the Company applies the guidance related to variable interest entities ("VIE"), which defines the process for how an enterprise determines which party consolidates a VIE as primarily a qualitative analysis. The enterprise that consolidates the VIE (the primary beneficiary) is defined as the enterprise with (1) the power to direct activities of the VIE that most significantly affect the VIE's economic performance and (2) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. The Company franchises its operations through franchise agreements entered into with franchisees and therefore, the Company does not possess any ownership interests in franchise entities or other affiliates. The franchise agreements are designed to provide the franchisee with key decision-making ability to enable it to oversee its operations and to have a significant impact on the success of the franchise, while the Company’s decision-making rights are related to protecting the Company’s brand. Additionally, the Company held a 1% ownership interest in four public limited partnerships in which the Company served as general partner. The limited partners had substantive kick-out rights over the general partner giving the limited partners power to direct the activities of the limited partnerships. The partnerships were liquidated and dissolved in December 2015. See the Related Party Transactions policy below for more information. Based upon the Company’s analysis of all the relevant facts and considerations of the franchise entities and the four public limited partnerships, the Company has concluded that the franchise agreements are not variable interest entities and the four public limited partnerships were not variable interest entities.
Revenue Recognition
Company restaurant sales from the operation of company-operated restaurants are recognized when food and service is delivered to customers. Franchise revenue comprise (i) development fees, (ii) franchise fees, (iii) on-going royalties and (iv) renewal fees. Development and franchise fees, portions of which are collected in advance and are non-refundable, received pursuant to individual development agreements, grant the right to develop franchise-operated restaurants in future periods in specific geographic areas. Both development fees and franchise fees are deferred and recognized as revenue when the Company has substantially fulfilled its obligation pursuant to the development agreement. Development fees and franchise fees are generally recognized as revenue upon the opening of a franchise restaurant or upon termination of the development agreement with the franchisee. Deferred development fees and deferred franchise fees, which are included in other non-current liabilities on the consolidated balance sheets totaled $1.3 million and $1.4 million as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively. Royalties from franchise-operated restaurants are based on a percentage of franchise restaurant sales and are recognized in the period the related franchise-operated restaurant sales occur. Renewal fees are recognized when a renewal agreement becomes effective. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities. Promotional allowances totaled approximately $14.2 million during the fifty-two weeks ended January 2, 2018 (Successor), $13.6 million during the fifty-three weeks ended January 3, 2017 (Successor) and $5.8 million and $5.4 million during the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively. Franchise sublease income is comprised of rental income associated with properties leased or subleased to franchisees and is recognized as revenue on an accrual basis.
Gift Cards
The Company sells gift cards to customers in its restaurants. The gift cards sold to customers have no stated expiration dates and are subject to potential escheatment laws in the various jurisdictions in which the Company operates. Deferred gift card income totaled $2.5 million and $2.4 million as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively. The current portion of the deferred gift card income is included in other accrued liabilities on the consolidated balance sheets and totaled $1.3 million and $1.2 million as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively. The non-current portion of the deferred gift card income was $1.2 million as of both January 2, 2018 (Successor) and January 3, 2017 (Successor) and is included in other non-current liabilities on the consolidated balance sheets. The Company recognizes revenue from gift cards: (i) when the gift card is redeemed by the customer; or (ii) under the delayed recognition method, when the likelihood of the gift card being redeemed by the customer is remote (gift card breakage) and the Company determines that there is not a legal obligation to remit the unredeemed gift cards to the relevant jurisdiction. The determination of the gift card breakage rate is based upon Company specific historical redemption patterns. Recognized gift card breakage revenue was not significant to any period presented in the consolidated statements of comprehensive income. Any future revisions to the estimated breakage rate may result in changes in the amount of breakage revenue recognized in future periods but is not expected to be significant.
Cash and Cash Equivalents
The Company considers short-term, highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Amounts receivable from credit card issuers are typically converted to cash within 2 to 4 days of the original sales transaction and are considered to be cash equivalents.
Accounts and Other Receivables, Net
Accounts and other receivables, net consist primarily of receivables from franchisees, sublease tenants, a vendor and landlords. Receivables from franchisees include sublease rents, royalties, services and contractual marketing fees associated with the franchise agreements. Sublease tenant receivables relate to subleased properties where the Company is a party and obligated on the primary lease agreement. The vendor receivable is for earned reimbursements from a vendor and the landlord receivables are for earned landlord reimbursement related to restaurants opened. The allowance for doubtful accounts is based on historical experience and a review on a specific identification basis of the collectability of existing receivables and totaled $0.1 million as of both January 2, 2018 (Successor) and January 3, 2017 (Successor).
Vendor Allowances
The Company receives support from one of its vendors in the form of reimbursements. The reimbursements are agreed upon with the vendor, but do not represent specific, incremental, identifiable costs incurred by the Company in selling the vendor’s products. Such reimbursements are recorded as a reduction of the costs of purchasing the vendor’s products. The non-current portion of reimbursements received by the Company in advance is included in other non-current liabilities on the consolidated balance sheets and totaled $1.1 million and $1.6 million as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively. The current portion of these reimbursements is included in other accrued liabilities on the consolidated balance sheets and totaled $0.4 million as of both January 2, 2018 (Successor) and January 3, 2017 (Successor).
Inventories
Inventories, consisting of food items, packaging and beverages, are valued at the lower of cost (first-in, first-out method) or market.
Property and Equipment
Property and equipment includes land, buildings, leasehold improvements, restaurant and other equipment, and buildings under capital leases. Land, leasehold improvements, property and equipment acquired in business combinations are initially recorded at their estimated fair value. Land, leasehold improvements, property and equipment acquired or constructed in the normal course of business are initially recorded at cost. The Company provides for depreciation and amortization based on the estimated useful lives of assets using the straight-line method.
 
Estimated useful lives for property and equipment are as follows:
 
Buildings
  
20–35 years
Leasehold improvements
  
Shorter of useful life (typically 20 years) or lease term
Buildings under capital leases
  
Shorter of useful life (typically 20 years) or lease term
Restaurant and other equipment
  
3–15 years

The estimated useful lives for leasehold improvements are based on the shorter of the estimated useful lives of the assets or the related lease term, which generally includes reasonably assured option periods expected to be exercised by the Company when the Company would suffer an economic penalty if not exercised. Depreciation and amortization expense associated with property and equipment totaled $21.0 million for the fifty-two weeks ended January 2, 2018 (Successor), $20.6 million for the fifty-three weeks ended January 3, 2017 (Successor) and $10.1 million and $7.1 million for the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively. These amounts include $1.2 million for the fifty-two weeks ended January 2, 2018 (Successor), $1.4 million for the fifty-three weeks ended January 3, 2017 (Successor) and $0.8 million and $0.3 million for the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively, related to buildings under capital leases. Accumulated depreciation and amortization associated with property and equipment includes $2.5 million and $2.2 million related to buildings under capital leases as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively.
The Company capitalizes construction costs which consist of internal payroll and payroll related costs and travel costs related to the successful acquisition, development, design and construction of the Company's new restaurants. Capitalized construction costs totaled $1.6 million for the fifty-two weeks ended January 2, 2018 (Successor), $1.3 million for the fifty-three weeks ended January 3, 2017 (Successor), respectively and $0.5 million for both the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor). If the Company subsequently makes a determination that a site for which development costs have been capitalized will not be acquired or developed, any previously capitalized development costs are expensed and included in general and administrative expenses in the consolidated statements of comprehensive income. The Company capitalizes interest in connection with the construction of its restaurants. Interest capitalized totaled approximately $0.1 million for both the fifty-two weeks ended January 2, 2018 (Successor) and the fifty-three weeks ended January 3, 2017 (Successor) and $25,000 and $40,000 for the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively.
Gains and losses on the disposal of assets are recorded as the difference between the net proceeds received and net carrying values of the assets disposed and are included in loss on disposal of assets, net in the consolidated statements of comprehensive income.
Deferred Financing Costs
Deferred financing costs represent third-party debt costs that are capitalized and amortized to interest expense over the associated term using the effective interest method. Deferred financing costs, along with lender debt discount, are presented net of the related debt balances on the consolidated balance sheets.
Goodwill and Trademarks
The Company’s goodwill and trademarks are not amortized, but tested annually for impairment and tested more frequently for impairment if events and circumstances indicate that the asset might be impaired. The Company conducts annual goodwill and trademark impairment tests in the fourth quarter of each fiscal year or whenever an indicator of impairment exists.
In assessing potential goodwill impairment, the Company has the option to first assess the qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the fair value of net assets, including goodwill, is less than its carrying amount. If the qualitative factors indicate that it is more likely than not that the fair value of net assets, including goodwill, is less than its carrying amount, the Company performs a two-step impairment test of goodwill. In the first step, the Company estimates the fair value of net assets, including goodwill, and compares it to the carrying value of net assets, including goodwill. If the carrying value exceeds the estimated fair value of net assets, including goodwill, the second step is performed to measure the amount of the impairment loss, if any. In the second step, the amount of the impairment loss is the excess of the carrying amount of the goodwill over its implied fair value.
The methods the Company uses to estimate fair value include discounted future cash flows analysis and market valuation based on similar companies. Key assumptions included in the cash flow model include future revenues, operating costs, working capital changes, capital expenditures and a discount rate that approximates the Company's weighted average cost of capital.
In assessing potential impairments for the fourth quarter test for 2017, the Company performed a qualitative assessment to determine whether it is more likely than not that the fair value of goodwill or indefinite-lived trademark are less than the carrying amount. Upon completion of the fourth quarter 2017 annual impairment assessment, the Company determined that no goodwill or trademark impairment was indicated. As of January 2, 2018, the Company is not aware of any significant indicators of impairment that exist for goodwill or trademark that would require additional analysis.
Intangible Assets, Net
Intangible assets primarily include favorable lease assets and franchise rights. Favorable lease assets represent the fair values of acquired lease contracts having contractual rents that are favorable compared to fair market rents as of the Closing Date of the Business Combination, and are amortized on a straight-line basis over the remaining lease term to expense in the consolidated statements of comprehensive income. Franchise rights, which represent the fair value of franchise agreements based on the projected royalty revenue stream as of the Closing Date of the Business Combination, are amortized on a straight-line basis to depreciation and amortization expense in the consolidated statements of comprehensive income over the remaining term of the franchise agreements.
Other Assets, Net
Other assets, net consist of security deposits and other capitalized costs. The Company capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use when both the preliminary project stage is completed and it is probable that the software will be used as intended. Capitalized software costs include only (i) external direct costs of materials and services utilized in developing or obtaining computer software, and (ii) compensation and related benefits for employees who are directly associated with the software projects. Capitalized software costs are amortized over the estimated useful life, typically 3 years. The net carrying value of capitalized software costs for the Company totaled $2.1 million and $2.0 million as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively, and is included in other assets, net in the consolidated balance sheets. Capitalized software costs totaled $1.0 million for the fifty-two weeks ended January 2, 2018 (Successor), $1.3 million for the fifty-three weeks ended January 3, 2017 (Successor) and $0.6 million and $0.5 million for the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively. Amortization expenses totaled $1.0 million for the fifty-two weeks ended January 2, 2018 (Successor), $0.9 million for the fifty-three weeks ended January 3, 2017 (Successor) and $0.4 million for both the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor).
Long-Lived Assets
Long-lived assets, including property and equipment and definite lived intangible assets (other than goodwill and indefinite-lived intangible assets), are reviewed by the Company for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Long-lived assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are independent of the cash flows of other groups of assets. The Company evaluates such cash flows for individual restaurants and franchise agreements on an undiscounted basis. If it is determined that the carrying amounts of such long-lived assets are not recoverable, the assets are written down to their estimated fair values. The Company generally estimates fair value using either the land and building real estate value for the respective restaurant or the discounted value of the estimated cash flows associated with the respective restaurant or agreement.
Rent Expense and Deferred Rent Liability
The Company has non-cancelable lease agreements for certain restaurant land and buildings under terms ranging up to 35 years, with one to four options to extend the lease generally for five to ten years per option period. At inception, each lease is evaluated to determine whether it will be classified as an operating or capital lease. Certain leases provide for contingent rentals based on percentages of net sales or have other provisions obligating the Company to pay related property taxes and certain other expenses. Contingent rentals are generally based on sales levels in excess of stipulated amounts as defined in the lease agreement, and thus are not considered minimum lease payments and are included in rent expense as incurred. Certain leases contain fixed and determinable escalation clauses for which the Company recognizes rental expense under these leases on the straight-line basis over the lease terms, which includes the period of time from when the Company takes possession of the leased space until the restaurant opening date (the rent holiday period), and the cumulative expense recognized on the straight-line basis in excess of the cumulative payments is included in other non-current liabilities. In addition, the Company subleases certain buildings to franchisees and other unrelated third parties, which are classified as operating leases.
In some cases, the land and building the Company will lease requires construction to ready the space for its intended use, and in certain cases, the Company has involvement with the construction of leased assets. The construction period begins when the Company executes the lease agreement with the landlord and continues until the space is substantially complete and ready for its intended use. In accordance with ASC 840, Leases, the Company must consider the nature and extent of its involvement during the construction period.
The Company may expend cash for structural additions on leased premises that may be reimbursed in whole or in part by landlords as construction contributions pursuant to agreed-upon terms in the leases. Depending on the specifics of the leased space and the lease agreement, the amounts paid for structural components will be recorded during the construction period as construction-in-progress and the landlord construction contributions will be recorded as a deferred rent liability. Upon completion of construction for those leases that meet certain criteria, the lease may qualify for sale-leaseback treatment. For these leases, the deferred rent liability and the associated construction-in-progress will be removed and any gain on sale will be recorded as deferred income and amortized over the lease term to gain on disposal of assets and any loss on sale will be expensed immediately to loss on disposal of assets, net. If the lease does not qualify for sale-leaseback treatment, the deferred rent liability will be reclassified to a deemed landlord financing liability and will be amortized over the lease term based on the rent payments designated in the lease agreement with rent payments applied to deemed landlord financing liability and interest expense.
Unfavorable lease liabilities represent the fair value of acquired lease contracts having contractual rents that are unfavorable compared to fair market rents and are amortized on a straight-line basis over the expected lease term to expense in the consolidated statements of comprehensive income. As of January 2, 2018 (Successor) and January 3, 2017 (Successor), unfavorable lease liabilities had a gross carrying value of $20.6 million and $21.0 million with accumulated amortization of $6.1 million and $3.9 million, respectively. The Company reclassified $2.6 million of unfavorable lease liabilities during the fourth quarter of fiscal 2015 related to the 12 closed underperforming locations and re-characterized the amount as restaurant closure liability, as described in Note 4. Amortization credits recorded for unfavorable lease liabilities were $2.7 million during the fifty-two weeks ended January 2, 2018 (Successor), $2.6 million during the fifty-three weeks ended January 3, 2017 (Successor) and $1.3 million and $0.3 million during the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively. The weighted-average amortization period as of January 2, 2018 (Successor) for unfavorable lease liabilities equaled 7.9 years. The estimated future amortization for unfavorable lease liabilities for the next five fiscal years is as follows (in thousands):
 
 
Unfavorable Lease Liabilities
2018
 
$
2,273

2019
 
2,055

2020
 
1,913

2021
 
1,630

2022
 
1,452


Insurance Reserves
Given the nature of the Company’s operating environment, the Company is subject to workers’ compensation and general liability claims. To mitigate a portion of these risks, the Company maintains insurance for individual claims in excess of deductibles per claim (the Company’s insurance deductibles range from $0.25 million to $0.50 million per occurrence for workers’ compensation and are $0.35 million per occurrence for general liability). The Company is not the primary obligor for its worker's compensation insurance policy. The amount of loss reserves and loss adjustment expenses is determined based on an estimation process that uses information obtained from both Company-specific and industry data, as well as general economic information. Loss reserves are based on estimates of expected losses for determining reported claims and as the basis for estimating claims incurred but not reported. The estimation process for loss exposure requires management to continuously monitor and evaluate the life cycle of claims. Management also monitors the reasonableness of the judgments made in the prior year’s estimation process (referred to as a hindsight analysis) and adjusts current year assumptions based on the hindsight analysis. The Company utilizes actuarial methods to evaluate open claims and estimate the ongoing development exposure related to workers’ compensation and general liability.
Advertising Costs
Franchisees pay a monthly fee to the Company of 4% of their restaurants’ net sales as reimbursement for advertising and promotional services that the Company provides. Fees received in advance of payment for provided services are included in other accrued liabilities and were $0.3 million and $0.7 million at January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively. Company-operated restaurants contribute to the advertising fund on the same basis as franchise-operated restaurants. At January 2, 2018 (Successor) and January 3, 2017 (Successor), the Company had an additional $0.4 million and $1.0 million, respectively, accrued for this requirement.
 
Production costs for radio and television advertising are expensed when the commercials are initially aired. Costs of distribution of advertising are charged to expense on the date the advertising is aired or distributed. These costs, as well as other marketing-related expenses for advertising are included in occupancy and other operating expenses in the consolidated statements of comprehensive income. Advertising expenses for the Company were $18.1 million for the fifty-two weeks ended January 2, 2018 (Successor), $17.2 million for the fifty-three weeks ended January 3, 2017 (Successor) and $7.6 million and $8.7 million for the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively.
Pre-opening Costs
Pre-opening costs, which include restaurant labor, supplies, cash and non-cash rent expense and other costs incurred prior to the opening of a new restaurant are expensed as incurred. Pre-opening costs were $1.6 million for the fifty-two weeks ended January 2, 2018 (Successor), $0.7 million for the fifty-three weeks ended January 3, 2017 (Successor) and $0.4 million and $0.3 million for the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively.
Restaurant Closure Charges, Net
The Company makes decisions to close restaurants based on their cash flows, anticipated future profitability and leasing arrangements. The Company determines if discontinued operations treatment is appropriate and estimates the future obligations, if any, associated with the closure of restaurants and records the corresponding restaurant closure liability at the time the restaurant is closed. These restaurant closure obligations primarily consist of the liability for the present value of future lease obligations, net of estimated sublease income. Restaurant closure charges, net are comprised of direct costs related to the restaurant closure and initial charges associated with the recording of the liability at fair value, accretion of the restaurant closure liability during the period, any positive or negative adjustments to the restaurant closure liability in subsequent periods as more information becomes available and sublease income from leases which are treated as deemed landlord financing. Changes to the estimated liability for future lease obligations based on new facts and circumstances are considered to be a change in estimate and are recorded prospectively. Accretion expense is recorded in order to appropriately reflect the present value of the lease obligations as of the end of a reporting period. Lease payments net of sublease income received related to these obligations reduce the overall liability. To the extent that the disposal or abandonment of related property and equipment results in gains or losses, such gains or losses are included in loss on disposal of assets, net in the consolidated statements of comprehensive income, except for gains or losses on the disposal of property and equipment related to the 12 underperforming restaurants, which are included in restaurant closure charges, net on the consolidated statements of comprehensive income.
Stock-Based Compensation Expense
The Company measures and recognizes compensation expense for all share-based payment awards made to employees based on their estimated grant date fair values using the Black-Scholes option pricing model for option grants and the closing price of the underlying common stock on the date of the grant for restricted stock awards. Stock-based compensation expense for the Company’s stock-based compensation awards is recognized ratably over the vesting period on a straight-line basis.
Income Taxes
The Company uses the liability method of accounting for income taxes. Deferred income taxes are provided for temporary differences between financial statement and income tax reporting, using tax rates scheduled to be in effect at the time the items giving rise to the deferred taxes reverse. The Company recognizes the impact of a tax position in the financial statements if that position is more likely than not of being sustained by the taxing authority. Accordingly, the Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Derivative Instruments and Hedging Activities
The Company is exposed to variability in future cash flows resulting from fluctuations in interest rates related to its variable rate debt. As part of its overall strategy to manage the level of exposure to the risk of fluctuations in interest rates, the Company has used various interest rate contracts including interest rate caps. The Company recognizes all derivative instruments as either assets or liabilities at fair value in the consolidated balance sheets. When they qualify as hedging instruments, the Company designates interest rate caps as cash flow hedges of forecasted variable rate interest payments on certain debt principal balances.
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current earnings.
The Company enters into interest rate derivative contracts with major banks and is exposed to losses in the event of nonperformance by these banks. The Company anticipates, however, that these banks will be able to fully satisfy their obligations under the contracts. Accordingly, the Company does not obtain collateral or other security to support the contracts.
Contingencies
The Company recognizes liabilities for contingencies when an exposure that indicates it is probable that an asset has been impaired or that a liability has been incurred and the amount of impairment or loss can be reasonably estimated. The Company’s ultimate legal and financial liability with respect to such matters cannot be estimated with certainty and requires the use of estimates. When the reasonable estimate is a range, the recorded loss will be the best estimate within the range. The Company records legal settlement costs when those costs are probable and reasonably estimable.
Comprehensive Income (Loss)
Comprehensive income (loss) includes changes in equity from transactions and other events and circumstances from nonoperational sources, including, among other things, the Company’s unrealized gains and losses on effective interest rate caps which are included in other comprehensive income (loss), net of tax.
Segment Information
An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, and about which separate financial information is regularly evaluated by the Company’s chief operating decision makers in deciding how to allocate resources. Similar operating segments can be aggregated into a single operating segment if the businesses are similar. Management has determined that the Company has one operating segment, and therefore one reportable segment. The Company’s chief operating decision maker (CODM) is its Chief Executive Officer; its CODM reviews financial performance and allocates resources at a consolidated level on a recurring basis.
Related Party Transactions
Of the 424,439 warrants purchased during the fifty-two weeks ended January 2, 2018 (Successor), 400,000 warrants were purchased from PW Acquisitions, LP, a related party, at $3.75 per warrant, representing a 5% discount from the closing price of $3.95 per warrant on the transaction date. A member of the Company's Board of Directors is the chief executive officer and managing member of the general partner of PW Acquisitions, LP.
The Company previously entered into long-term leases for 22 Del Taco restaurants whereby the lessors were one of four public partnerships where the Company served as general partner with a 1% ownership interest. The leases required monthly rent payments in an amount equal to 12% of gross sales which were recorded within occupancy and other operating expenses in the consolidated statements of comprehensive income and totaled $1.4 million for both the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor).
The Company recorded a fair value adjustment through the initial purchase price allocation, as described in Note 3, of $1.5 million for the estimated fair value of its investment in the four public partnerships.
On July 24, 2015, the four public partnerships entered into an agreement to sell all of the properties, subject to the approval by a majority in interest of the limited partners in each of the public partnerships, to a third party that is not affiliated with the Company. The sale of the properties included new long-term leases between the Company and the third party buyer and was approved by the respective limited partners on November 23, 2015. On December 14, 2015, the four public partnerships consummated the sale, and were subsequently liquidated and dissolved and the assets of the respective partnerships were distributed pursuant to the terms of their respective partnership agreements. During the twenty-six weeks ended December 29, 2015 (Successor), the Company recorded a gain of $0.2 million, included in other income in the consolidated statements of comprehensive income, based on the approximate $1.8 million distribution received in excess of the $1.6 million carrying value of its investment in the partnerships.
At December 30, 2014 (Predecessor), DTH had $108.1 million of subordinated notes outstanding due to its three largest shareholders that bore interest at 13.0%. On March 20, 2015, DTH used proceeds from the Step 1 of the Business Combination, as described in Note 3, a $10.0 million revolver borrowing and amended term loan proceeds of $25.1 million to fully redeem the then outstanding balance of $111.2 million of subordinated notes. Interest expense related to subordinated notes was $3.1 million for the twenty-six weeks ended June 30, 2015 (Predecessor). See Note 8 for further discussion regarding the subordinated notes.
Fair Value of Financial Instruments
The Company measures fair value using the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three tiers in the fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
 
•
Level 1, defined as observable inputs such as quoted prices in active markets;
•
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
•
Level 3, defined as unobservable inputs which reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques may include the use of third-party pricing services, option pricing models, discounted cash flow models and similar techniques.
 
Concentration of Risks
Financial instruments that potentially subject the Company to a concentration of credit risk are cash and cash equivalents. The Company maintains its day-to-day operating cash balances in non-interest-bearing accounts. Although the Company at times maintains balances that exceed amounts insured by the Federal Deposit Insurance Corporation, it has not experienced any losses related to these balances and management believes the credit risk to be minimal.
The Company extends credit to franchisees for franchise and advertising fees on customary credit terms, which generally do not require collateral or other security. In addition, management believes there is no concentration of risk with any single franchisee or small group of franchisees whose failure or nonperformance would materially affect the Company’s results of operations.
The Company has entered into a long-term purchase agreement with a distributor for delivery of essentially all food and paper supplies to all company-operated and franchise-operated restaurants except for one location in Guam. Disruption in shipments from this distributor could have a material adverse effect on the results of operations and financial condition of the Company. However, management of the Company believes sufficient alternative distributors exist in the marketplace although it may take some time to enter into replacement distribution arrangements and the cost of distribution may increase as a result.
As of January 2, 2018, Del Taco operated and franchised a total of 373 restaurants in California (252 company-owned and 121 franchise-operated locations). As a result, the Company is particularly susceptible to adverse trends and economic conditions in California. In addition, given this geographic concentration, negative publicity regarding any of the restaurants in California could have a material adverse effect on the Company’s business and operations, as could other regional occurrences such as local strikes, fires, earthquakes or other natural disasters.
Recently Adopted Accounting Standards
In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-01, Business Combinations (Topic 804): Clarifying the Definition of a Business. This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether certain transactions should be accounted for as acquisitions or disposals of assets or businesses. The Company elected, as permitted by the standard, to early adopt ASU 2017-01 in the third quarter of 2017. The adoption of ASU 2017-01 did not have a material impact to the Company's consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which is intended to simplify various aspects of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. This standard is effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period, with early adoption permitted. As ASU 2016-09 requires recognition of certain tax benefits associated with stock-based compensation on a discrete basis, the Company anticipates that its effective tax rate may vary from quarter to quarter depending on the Company’s stock price in each period. The Company anticipates that ASU 2016-09 will potentially increase or lower its effective tax rate, relative to the U.S. statutory rate, depending on the amount of stock-based compensation deductible for tax related to the vesting of restricted stock awards or exercise of stock options as compared to cumulative stock-based compensation recorded. The Company adopted ASU 2016-09 during the first fiscal quarter of 2017. The Company will continue to estimate forfeitures.
Recently Issued Accounting Standards
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact of the standard on its consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard simplifies the subsequent measurement of goodwill, requiring only a single-step quantitative test to identify and measure impairment based on the excess of a reporting unit's carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. This standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The standard requires adoption on a prospective basis. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-04, Liabilities-Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products, which is designed to provide guidance and eliminate diversity in the accounting for the derecognition of financial liabilities related to certain prepaid stored-value products using a revenue-like breakage model. This standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. This standard is to be applied retrospectively or using a cumulative effect transition method as of the date of adoption. The Company is currently evaluating the impact of the standard on its consolidated financial statements and related disclosures as well as the expected adoption method.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance will result in key changes to lease accounting and will aim to bring leases onto balance sheets to give investors, lenders, and other financial statement users a more comprehensive view of a company's long-term financial obligations as well as the assets it owns versus leases. The new leasing standard will be effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years. The new guidance requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with certain practical expedients available. Based on a preliminary assessment, the Company expects that substantially all of its operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a material increase in the assets and liabilities on the Company's consolidated balance sheets. The Company is continuing its evaluation, which may identify additional impacts this standard will have on its consolidated financial statements and related disclosures. The Company will adopt ASU 2016-02 during the first quarter of fiscal 2019.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a comprehensive new revenue recognition model that requires a company to recognize revenue in an amount that reflects the consideration it expects to receive for the transfer of promised goods or services to its customers. The standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This ASU is effective for annual periods and interim periods beginning after December 15, 2017. ASU 2014-09 is to be applied retrospectively or using a cumulative effect transition method. The Company will adopt ASU 2014-09 in fiscal year 2018, using the modified retrospective method of adoption.
ASU 2014-09 will not materially impact the recognition of company restaurant sales or franchise royalty income from franchisees included in franchise revenue. Franchise sublease income is not within the scope of this new guidance.
The adoption of ASU 2014-09 will change the timing of the recognition of initial franchise fees, including franchise and development fees, and renewal fees, both included in franchise revenue in the consolidated statements of comprehensive income. Currently, initial franchise fees are recognized when all material obligations have been performed and conditions have been satisfied, typically when operations of a new franchise restaurant have commenced, and renewal fees are recognized when a renewal agreement becomes effective. ASU 2014-09 requires franchise and renewal fees to be deferred and recognized over the term of the related franchise agreement for the respective restaurant. The impact of the deferral of initial franchise and renewal fees received in a given year may be offset by the recognition of revenue from fees retrospectively deferred from prior years. Upon adoption, the Company will record approximately $1.0 million as a cumulative effect adjustment to opening retained earnings and deferred revenue as of January 3, 2018 (the first day of fiscal 2018) related to franchise and renewal fees previously recognized since the Business Combination on June 30, 2015. During fiscal 2017 and 2016, the Company recorded initial franchise and renewal fees of $0.6 million and $0.3 million, respectively, as component of franchise revenue in the consolidated statements of comprehensive income.
The adoption of the new guidance will change the reporting of advertising fund contributions from franchisees and the related advertising fund expenditures, which are not currently included in the consolidated statements of comprehensive income. ASU 2014-09 requires these advertising fund contributions and expenditures to be reported on a gross basis in the consolidated statements of comprehensive income, which will have an impact to our total revenues and expenses. However, the Company expects such advertising fund contributions and expenditures will be largely offsetting and therefore does not expect a significant impact on its reported net income. Franchise contributions to the Company's advertising programs for fiscal 2017 and 2016 were $12.7 million and $12.1 million, respectively.
Additionally, certain other franchise expenses have been recorded net of the related fees received from franchisees. Under ASU 2014-09, the Company will include these revenues and expenditures on a gross basis within the consolidated statements of comprehensive income. While this change will materially impact the gross amount of reported franchise revenue and related expenses on the consolidated statements of comprehensive income, the impact will be an offsetting increase to both revenue and expense such that there will not be a significant, if any, impact on operating income and net income. Other franchise fees received from franchisees for fiscal 2017 and 2016 were $0.8 million and $0.8 million, respectively.
Business Combination
Business Combination
Business Combination
On June 30, 2015, the Company and DTH completed the Business Combination pursuant to the Merger Agreement under which the Company’s wholly-owned subsidiary, Levy Merger Sub, merged with and into DTH, with DTH surviving the merger as a wholly-owned subsidiary of the Company.
Concurrent with the execution of the Merger Agreement, Levy Epic Acquisition Company, LLC (“Levy Newco”), Levy Epic Acquisition Company II, LLC (“Levy Newco II” and with Levy Newco, the “Levy Newco Parties”), DTH and the DTH stockholders entered into a stock purchase agreement (the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, the Levy Newco Parties agreed to purchase 2,348,968 shares of DTH common stock from DTH for $91.2 million in cash, and to purchase 740,564 shares of DTH common stock directly from existing DTH shareholders for $28.8 million in cash (the “Initial Investment”). As a result of this Initial Investment, an aggregate of 3,089,532 shares of DTH common stock was purchased by the Levy Newco Parties for total cash consideration of $120.0 million. Concurrent with the consummation of the Initial Investment, DTH increased its borrowing capacity under its existing term loan credit facility by $25.1 million. Proceeds from the increased borrowings under the term loan, a $10.0 million revolver borrowing and the $91.2 million received by DTH from the sale of DTH common stock to the Levy Newco Parties was used to fully repay the outstanding balance of DTH’s subordinated notes (see Note 8), and pay approximately $15.7 million of transaction costs, which included $7.5 million of employee withholding taxes resulting from the acceleration of outstanding stock options and restricted stock units due to the change in control triggered by the Initial Investment. Employee equity redemptions were exchanged for such withholding taxes. The transactions described in this paragraph are hereafter collectively referred to as “Step 1.”
 
Also concurrent with Step 1, the Company entered into common stock purchase agreements pursuant to which certain investors committed to acquire 3,500,000 shares of the Company’s common stock upon the closing of the Business Combination for total consideration of $35 million (the “Step 2 Investment”). The additional funds provided by these investors were used as additional cash consideration in the Business Combination.
The consideration for the Business Combination was provided by (1) the funds remaining in the Company’s trust account of $150 million after Delaware franchise taxes, stockholder redemptions, and $10.2 million of expenses paid for by the Company, (2) the $35 million provided by the Step 2 Investment, and (3) shares of the Company’s common stock. The Levy Newco Parties received only stock merger consideration in the Business Combination. The common stock purchase agreements entered into in connection with the Step 1 Investment and the closing of the Business Combination is hereafter referred to as “Step 2.” Step 1 and Step 2 are collectively referred to herein as the “Transactions.”
Step 2 is accounted for as a business combination under the scope of the FASB’s ASC 805, Business Combinations, or ASC 805. Pursuant to ASC 805, the Company has been determined to be the accounting acquirer based on the evaluation of the following facts and circumstances:
 
•
The Company paid cash and equity consideration for all of the equity in DTH;
•
Investments by the Company and Levy Newco Parties were considered multiple arrangements that should be treated as a single transaction for accounting purposes; and
•
The existing stockholders of the Company and the Levy Newco Parties retain relatively more voting rights in the combined company than the historical DTH stockholders.
DTH constitutes a business, with inputs, processes, and outputs. Accordingly, the acquisition of DTH constitutes the acquisition of a business for purposes of ASC 805, and due to the change in control from the merger, is accounted for using the acquisition method.
The following summarizes the merger consideration paid to DTH stockholders (except for the Levy Newco Parties) (in thousands):
 
Calculation of
Purchase Price
Cash consideration paid (1)
$
105,164

Value of share consideration issued (2)
69,305

Fair value of equity interests acquired in Step 1 (3)
120,000

Less: Transaction expenses paid by the Company (1)
(10,164
)
Total purchase price
$
284,305

 
(1)
Each issued and outstanding share of DTH stock held by DTH stockholders other than the Levy Newco Parties was converted into the right to receive the per share merger consideration, which equaled $38.84 per DTH share, payable in cash and the Company’s common stock. Cash consideration was paid with respect to all common stock of DTH except for shares held by the Levy Newco Parties. The aggregate amount of cash consideration paid directly to DTH stockholders was $95 million. Total cash consideration paid also included $10.2 million of expenses paid by the Company for the closing of Step 2.
(2)
The stock merger consideration consisted of the Company’s common stock issued to DTH stockholders as part of the merger consideration in exchange for shares of DTH common stock. Company shares exchanged for the DTH shares held by the Levy Newco Parties are discussed in (3) below. The following summarizes the number of shares of the Company’s common stock issued to DTH stockholders other than the Levy Newco Parties:
(in thousands, except share and per share data)
Calculation of
Share
Consideration
Number of shares issued
4,553,540

Value per share as of June 30, 2015
$
15.22

Value of share consideration transferred
$
69,305

 
(3)
The Company exchanged its common stock for DTH shares held by the Levy Newco Parties acquired in Step 1. The Transactions were accounted for as related events transferring control of DTH to the Company through a minority investment in Step 1 and a controlling interest in Step 2. The Levy Newco Parties’ shares of DTH common stock were exchanged for shares of the Company’s common stock in the Business Combination, but represent a previously held equity interest in an acquired company. The previously held equity interest had the same value as its $120 million purchase price.

The Company recorded an allocation of the purchase price to DTH’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair value as of the Closing Date. The final purchase price allocation is as follows (in thousands):
 
 
Purchase Price
Allocation
Cash and cash equivalents
$
5,173

Accounts receivable and other receivables
3,228

Inventories
2,541

Prepaid expenses and other current assets
4,266

Total current assets
15,208

Property and equipment
105,524

Intangible assets
250,490

Other assets
4,194

Total identifiable assets acquired
375,416

Accounts payable
(18,866
)
Other accrued liabilities
(26,607
)
Current portion of capital lease obligations and deemed landlord financing liabilities
(1,670
)
Long-term debt, capital lease obligations and deemed landlord financing liabilities
(246,562
)
Deferred income taxes
(80,254
)
Other long-term liabilities
(36,208
)
Net identifiable liabilities assumed
(34,751
)
Goodwill
319,056

Total gross consideration
$
284,305



The final values allocated to intangible assets and the useful lives are as follows (in thousands):
 
 
Fair Value
 
Useful life
Favorable lease assets and other intangible assets
 
$
14,290

 
0.6 to 19 years
Trademarks
 
220,300

 
Indefinite
Franchise agreements
 
15,900

 
0.1 to 40 years
Total intangible assets
 
$
250,490

 
 
Unfavorable lease liabilities (1)
 
$
(23,652
)
 
1.5 to 19 years
Weighted average life of definite-lived intangibles
 
 
 
11 years
 
(1)
Included in other non-current liabilities on the consolidated balance sheets.

During the fifty-three weeks ended January 3, 2017 (Successor), the Company recorded a net $0.8 million adjustment to goodwill due to a change in estimate for the liability for deferred income taxes. The goodwill of $319.1 million arising from the Business Combination is primarily attributable to the market position and future growth potential of DTH for both company-operated and franchise-operated restaurants. Approximately $0.6 million of goodwill is expected to be deductible for income tax purposes.
For the fifty-three weeks ended January 3, 2017 (Successor), the Company recorded approximately $0.7 million of transaction-related expenses, of which $0.1 million related to the Business Combination. During the fifty-three weeks ended January 3, 2017 (Successor), the Company was able to recover legal defense costs related to a purported class action and derivative complaint (See Note 17 for further discussion) of $0.5 million from its insurance company related to costs previously expensed. For the twenty-six weeks ended December 29, 2015 (Successor) and the twenty-six weeks ended June 30, 2015 (Predecessor), the Company incurred approximately $12.3 million and $7.3 million, respectively, of transaction expenses directly related to Step 1 and Step 2 of the Business Combination. Also included in transaction-related costs on the consolidated statements of comprehensive income for the twenty-six weeks ended December 29, 2015 (Successor) was $0.7 million of costs related to the secondary offering as described in Note 13.
LAC incurred $4.5 million of transaction-related expenses not reported with DTH’s Predecessor consolidated statements of comprehensive income that were directly related to the Business Combination for the twenty-six weeks ended June 30, 2015 (Predecessor). Transaction-related expenses, which were $2.9 million through the second fiscal quarter ended June 16, 2015 and $0.5 million for the fiscal year 2014, were reported by LAC in prior 10-Q and 10-K filings which are also not reported with DTH’s Predecessor consolidated statements of comprehensive income (loss). Cash outflows of $4.3 million related to transaction-related expenses previously expensed by LAC are reported as a cash outflows for operating activities for the twenty-six weeks ended December 29, 2015 (Successor). In addition, in connection with the Business Combination, the Company paid deferred underwriter compensation of $5.3 million in connection with the Company’s initial public offering in November 2013 as well as repaid working capital loans of $0.5 million to the Company’s sponsor, Levy Acquisition Sponsor LLC, both of which were accrued on LAC’s balance sheet at June 16, 2015, and not included with DTH’s Predecessor consolidated balance sheet. Both of these payments are included as cash outflows for financing activities for the twenty-six weeks ended December 29, 2015 (Successor).
Property and Equipment, Net
Property and Equipment, Net
Property and Equipment, Net
Property and equipment, net at January 2, 2018 (Successor) and January 3, 2017 (Successor) consisted of the following (in thousands):
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
Land
 
$
9,800

 
$
13,919

Buildings
 
2,325

 
3,391

Restaurant and other equipment
 
74,075

 
58,699

Leasehold improvements
 
100,192

 
78,739

Buildings under capital leases
 
4,625

 
5,433

Restaurant property leased to others
 
3,090

 
—

Construction-in-progress
 
11,905

 
8,703

 
 
206,012

 
168,884

Less: Accumulated depreciation
 
(49,888
)
 
(30,564
)
Property and Equipment, Net
 
$
156,124

 
$
138,320

Summary of Refranchsing and Franchise Acquisitions (Notes)
Refranchising and Franchise Acquisitions
In connection with the sale of company-operated restaurants to franchisees, the Company typically enters into several agreements, in addition to an asset purchase agreement, with franchisees including franchise and lease agreements. The Company typically sells the restaurants' inventory and equipment and retains ownership of the leasehold interest on the real estate of the lease and/or sublease to the franchisee. The Company has determined that its restaurant dispositions usually represent multiple-element arrangements, and as such, the cash consideration is allocated to the separate elements based on their relative selling price. Cash consideration generally includes up-front consideration for the sale of the restaurants and franchise fees and future cash consideration for royalties and lease payments. The Company considers the future lease payments in allocating the initial cash consideration received. The Company compares the stated rent under the lease and/or sublease agreements with comparable market rents and the Company records favorable or unfavorable lease assets/liabilities with a corresponding offset to the gain or loss on the sale of the company-operated restaurants. The cash consideration per restaurant for franchise fees is consistent with the amounts stated in the related franchise agreements which are charged for separate standalone arrangements. Therefore, the Company recognizes the franchise fees when earned. Future royalty income is also recognized in revenue as earned.
The Company sold five company-operated restaurants to franchisees during the fifty-two weeks ended January 2, 2018 (Successor). There were no company-operated restaurants sold during the fifty-three weeks ended January 3, 2017 (Successor), the twenty-six weeks ended December 29, 2015 (Successor) or the twenty-six weeks ended June 30, 2015 (Predecessor). The following table provides detail of the related gain recognized during the fifty-two weeks ended January 2, 2018 (Successor) (dollars in thousands):
 
 
Successor
 
 
52 Weeks Ended January 2, 2018
Company-operated restaurants sold to franchisees
 
5
 
 
 
Proceeds from the sale of company-operated restaurants
 
$
2,192

Net assets sold (primarily furniture, fixtures and equipment)
 
(1,261
)
Goodwill related to the company-operated restaurants sold to franchisees
 
(247
)
Net unfavorable lease liabilities (a)
 
(548
)
Other costs
 
(5
)
Gain on sale of company-operated restaurants (b)
 
$
131

(a) The Company recorded favorable lease assets of $0.1 million and unfavorable lease liabilities of $0.6 million as a result of subleasing land, buildings and leasehold improvements to franchisees, in connection with the sale of company-operated restaurants.
(b) Included in loss on disposal of assets, net on the consolidated statements of comprehensive income.
Franchise Acquisitions
The Company acquired one franchise-operated restaurant during the fifty-two weeks ended January 2, 2018 (Successor) and six franchise-operated restaurants during the fifty-three weeks ended January 3, 2017 (Successor). The Company accounts for the acquisition of franchise-operated restaurants using the acquisition method of accounting for business combinations. The purchase price allocations were based on fair value estimates determined using significant unobservable inputs (Level 3). The goodwill recorded primarily relates to the market position and future growth potential of the markets acquired and is expected to be deductible for income tax purposes. There were no franchise acquisitions during the twenty-six weeks ended December 29, 2015 (Successor) or the twenty-six weeks ended June 30, 2015 (Predecessor). The following table provides detail of the combined acquisitions for the fifty-two weeks ended January 2, 2018 (Successor) and the fifty-three weeks ended January 3, 2017 (dollars in thousands):

 
 
Successor
 
 
52 Weeks Ended January 2, 2018
 
53 Weeks Ended January 3, 2017
Franchise-operated restaurants acquired from franchisees
 
1
 
6
 
 
 
 
 
Goodwill
 
$
860

 
$
969

Property and equipment
 
360

 
821

Land and building
 
—

 
2,127

Unfavorable lease liability
 
(85
)
 
—

Liabilities assumed
 
(7
)
 
(26
)
Total Consideration
 
$
1,128

 
$
3,891


Total consideration for the franchise-operated restaurants excluding the land and building acquired from a franchisee was $1.8 million during the fifty-three weeks ended January 3, 2017 (Successor).
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill for the fifty-two weeks ended January 2, 2018 (Successor) are as follows (in thousands):
 
 
 
Goodwill
Balance as of January 3, 2017 (Successor)
$
320,025

Sale of company-operated restaurants
(247
)
Acquisition of franchise-operated restaurants
860

Balance as of January 2, 2018 (Successor)
$
320,638



The increase in goodwill was due to an adjustment of $0.9 million related to the acquisition of one franchise-operated restaurant offset by $(0.2) million related to the sale of five company-operated restaurants to franchisees during the fifty-two weeks ended January 2, 2018 (Successor), as described in more detail in Note 6.
The carrying value of trademarks was $220.3 million at both January 2, 2018 (Successor) and January 3, 2017 (Successor).
The Company’s other intangible assets at January 2, 2018 (Successor) and January 3, 2017 (Successor) consisted of the following (in thousands):
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
 
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Favorable lease assets
 
$
13,744

 
$
(4,442
)
 
$
9,302

 
$
14,176

 
$
(2,996
)
 
$
11,180

Franchise rights
 
15,284

 
(3,282
)
 
12,002

 
15,489

 
(2,038
)
 
13,451

Reacquired franchise rights
 
243

 
(49
)
 
194

 
161

 
(10
)
 
151

Total amortized other intangible assets
 
$
29,271

 
$
(7,773
)
 
$
21,498

 
$
29,826

 
$
(5,044
)
 
$
24,782



During the fifty-two weeks ended January 2, 2018 (Successor), $0.1 million of franchise rights associated with five franchise locations were fully amortized and the Company reclassified $0.1 million of franchise rights as reacquired franchise rights from the acquisition of one franchise location. During the fifty-three weeks ended January 3, 2017 (Successor), the Company wrote-off $0.2 million of franchise rights associated with the closure of four franchise locations and reclassified $0.2 million of franchise rights as reacquired franchise rights from the acquisition of six franchise locations.
Favorable lease assets are related to below-market leasing arrangements. Favorable lease assets are amortized on a lease-by-lease basis using the straight-line method over the remaining lease terms of the underlying leases. Franchise rights are amortized using the straight-line method over the remaining life of the franchise agreements or 40 years, whichever is less. The weighted-average amortization periods as of January 2, 2018 (Successor) for favorable lease assets and franchise rights equaled 7.3 years and 13.0 years, respectively.
Amortization expense for amortizable intangible assets totaled $3.3 million, $3.6 million, $1.7 million and $1.0 million for the fifty-two weeks ended January 2, 2018 (Successor), fifty-three weeks ended January 3, 2017 (Successor), twenty-six weeks ended December 29, 2015 (Successor) and twenty-six weeks ended June 30, 2015 (Predecessor), respectively, and includes amortization of favorable lease assets of $1.9 million, $2.0 million, $1.0 million and $0.3 million for the fifty-two weeks ended January 2, 2018 (Successor), fifty-three weeks ended January 3, 2017 (Successor), twenty-six weeks ended December 29, 2015 (Successor) and twenty-six weeks ended June 30, 2015 (Predecessor), respectively, and amortization of franchise rights of $1.3 million, $1.6 million, $0.7 million and $0.7 million for the fifty-two weeks ended January 2, 2018 (Successor), fifty-three weeks ended January 3, 2017 (Successor), twenty-six weeks ended December 29, 2015 (Successor) and twenty-six weeks ended June 30, 2015 (Predecessor), respectively. The estimated future amortization for favorable lease assets and franchise rights for the next five fiscal years is as follows (in thousands):

 
 
Favorable Lease Assets
 
Franchise Rights
2018
 
$
1,722

 
$
1,293

2019
 
1,447

 
1,255

2020
 
1,171

 
1,186

2021
 
1,005

 
1,074

2022
 
922

 
973

Debt, Obligations Under Capital Leases and Deemed Landlord Financing Liabilities
Debt, Obligations Under Capital Leases and Deemed Landlord Financing Liabilities
Debt, Obligations Under Capital Leases and Deemed Landlord Financing Liabilities
The Company’s debt, obligations under capital leases and deemed landlord financing liabilities at January 2, 2018 (Successor) and January 3, 2017 (Successor) consisted of the following (in thousands): 
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
2015 Senior Credit Facility, net of debt discount of $747 and $1,035 and deferred financing costs of $252 and $349 at January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively
 
$
152,001

 
$
157,616

Total outstanding indebtedness
 
152,001

 
157,616

Obligations under capital leases and deemed landlord financing liabilities
 
20,053

 
17,715

Total debt, net
 
172,054

 
175,331

Less: amounts due within one year
 
1,415

 
1,588

Total amounts due after one year, net
 
$
170,639

 
$
173,743

 
At January 2, 2018 (Successor) and January 3, 2017 (Successor), the Company assessed the amounts recorded under the 2015 Senior Credit Facility and determined that such amounts approximated fair value.
2015 Revolving Credit Facility (Successor)
On August 4, 2015, the Company refinanced its existing senior credit facility (“2013 Senior Credit Facility”) and entered into a new credit agreement (the “Credit Agreement”). The Credit Agreement, which matures on August 4, 2020, provides for a $250 million revolving credit facility (the “2015 Senior Credit Facility”). The Company utilized $164 million of proceeds from the Credit Agreement to refinance in total its 2013 Senior Credit Facility and pay costs associated with the refinancing. The 2013 Senior Credit Facility, as amended March 20, 2015, totaled $267.1 million, consisting of an initial $227.1 million term loan (“2013 Term Loan”) and a $40 million revolver (“2013 Revolver”). At the time of the refinance, a $162.5 million term loan balance was outstanding and $17.6 million of revolver capacity was utilized to support outstanding letters of credit under the 2013 Senior Credit Facility.
At the Company’s option, loans under the 2015 Senior Credit Facility may bear interest at a base rate or LIBOR, plus an applicable margin determined in accordance with a consolidated total lease adjusted leverage ratio-based pricing grid. The base rate is calculated as the highest of (a) the Federal Funds Rate plus 1⁄2 of 1%, (b) the prime rate of Bank of America, and (c) LIBOR plus 1.00%. For LIBOR loans, the applicable margin is in the range of 1.50% to 2.50%, and for base rate loans the applicable margin is in the range of 0.50% and 1.50%. The applicable margin was initially set at 2.00% for LIBOR loans and at 1.00% for base rate loans until delivery of financial statements and a compliance certificate for the fourth fiscal quarter ending after the closing date of the Credit Agreement. Following delivery of financial statements and a compliance certificate for the fourth fiscal quarter ending December 29, 2015 (Successor), the applicable margin decreased 0.25% for both LIBOR and base rate loans during the first fiscal quarter of 2016. The 2015 Senior Credit Facility capacity used to support letters of credit currently incurs fees equal to the applicable margin of 1.75%. The 2015 Senior Credit Facility unused commitment currently incurs a 0.20% fee.
The Credit Agreement contains certain financial covenants, including the maintenance of a consolidated total lease adjusted leverage ratio and a consolidated fixed charge coverage ratio. The Company was in compliance with the financial covenants as of January 2, 2018 (Successor). Substantially all of the assets of the Company are pledged as collateral under the 2015 Senior Credit Facility.
The Company capitalized lender debt discount costs and deferred financing costs of $1.4 million and $0.5 million, respectively, in connection with the refinancing and expensed $0.1 million as debt modification costs in the consolidated statements of comprehensive income for the twenty-six weeks ended December 29, 2015 (Successor). Lender debt discount costs and deferred financing costs associated with the 2015 Senior Credit Facility are presented net of the 2015 Senior Credit Facility balance on the consolidated balance sheets and will be amortized to interest expense over the term of the 2015 Senior Credit Facility. Amortization of deferred financing costs and debt discount related to the 2015 Senior Credit Facility totaled $0.4 million for both the fifty-two weeks ended January 2, 2018 (Successor) and the fifty-three weeks ended January 3, 2017 (Successor) and $0.2 million during the twenty-six weeks ended December 29, 2015 (Successor).
At January 2, 2018 (Successor), the weighted average interest rate on the outstanding balance of the 2015 Senior Credit Facility was 3.32%. At January 2, 2018 (Successor), the Company had a total of $78.8 million of availability for additional borrowings under the 2015 Senior Credit Facility as the Company had $153.0 million of outstanding borrowings and $18.2 million of letters of credit outstanding which reduce availability under the 2015 Senior Credit Facility.
DTH 2013 Senior Credit Facility
On April 21, 2014, DTH amended its 2013 Senior Credit Facility whereby the term loan was increased by $62.0 million to $220.0 million and the 2013 Revolver remained at $40.0 million, the proceeds of which were used for a $62.0 million partial redemption of SAG Restaurants subordinated notes (the "April 2014 Debt Refinance"). 
In March 2015, DTH amended its 2013 Senior Credit Facility to increase the 2013 Term Loan by $25.1 million to $227.1 million (the “March 2015 Debt Refinance”). A portion of the proceeds from Step 1 of the Business Combination, described in Note 3, proceeds of $10 million from the 2013 Revolver and the March 2015 Debt Refinance proceeds were used to fully redeem the then outstanding balance of subordinated notes of $111.2 million.
On March 12, 2015, DTH satisfied the rating condition in its 2013 Senior Credit Facility resulting in a decrease in interest rate to LIBOR (not to be less than 1.00%) plus a margin of 4.25%.
The Company incurred lender costs and third-party costs associated with the March 2015 Debt Refinance of $1.6 million of which $1.5 million was capitalized as lender debt discount and $0.1 million was expensed as debt modification costs in the consolidated statements of comprehensive income for the twenty-six weeks ended June 30, 2015 (Predecessor).
Lender debt discount costs and deferred financing costs associated with the 2013 Senior Credit Facility were amortized to interest expense over the term of the 2013 Term Loan using the effective interest method. Amortization of deferred financing costs including debt discount totaled $0.9 million during the twenty-six weeks ended June 30, 2015 (Predecessor).
Subordinated Notes (Predecessor)
In connection with Step 1 of the Business Combination and the March 2015 Debt Refinance discussed above, DTH fully redeemed the outstanding balance of the SAG Restaurants LLC (SAG Restaurants) subordinated notes ("SAG Restaurants Sub Notes") and F&C Restaurant Holding Co. (F&C RHC) subordinated notes ("F&C RHC Sub Notes") on March 20, 2015 of $111.2 million.
For the twenty-six weeks ended June 30, 2015 (Predecessor), interest expense related to the SAG Restaurants Sub Notes and F&C RHC Sub Notes was $3.1 million.
Other Debt Information

Based on debt agreements and leases in place as of January 2, 2018 (Successor), future maturities of debt, obligations under capital leases and deemed landlord financing liabilities were as follows (in thousands):
 
2018
 
$
1,415

2019
 
988

2020
 
153,847

2021
 
804

2022
 
791

Thereafter
 
15,208

Total maturities
 
173,053

Less: debt discount and deferred financing costs
 
(999
)
Total debt, net
 
$
172,054

Derivative Instruments
Derivative Instruments
Derivative Instruments
In June 2016, the Company entered into an interest rate cap agreement that became effective July 1, 2016, to hedge cash flows associated with interest rate fluctuations on variable rate debt, with a termination date of March 31, 2020 ("2016 Interest Rate Cap Agreement"). The 2016 Interest Rate Cap Agreement has a notional amount of $70.0 million of the 2015 Senior Credit Facility that effectively converted that portion of the outstanding balance of the 2015 Senior Credit Facility from variable rate debt to capped variable rate debt, resulting in a change in the applicable interest rate from an interest rate of one-month LIBOR plus the applicable margin (as provided by the 2015 Senior Credit Facility) to a capped interest rate of 2.00% plus the applicable margin. During the period from July 1, 2016 through January 2, 2018 (Successor), the 2016 Interest Rate Cap Agreement had no hedge ineffectiveness.
As of December 29, 2015 (Successor) and through June 30, 2016, the Company had an interest rate cap agreement to hedge cash flows associated with interest rate fluctuations on variable rate debt ("2013 Interest Rate Cap Agreement"). The 2013 Interest Rate Cap Agreement had a notional amount of $87.5 million as of December 29, 2015 (Successor). The individual caplet contracts within the interest rate cap agreement expired at various dates through June 30, 2016.
2016 Interest Rate Cap Agreement (Successor)
To ensure the effectiveness of the 2016 Interest Rate Cap Agreement, the Company elected the one-month LIBOR rate option for its variable rate interest payments on term balances equal to or in excess of the applicable notional amount of the interest rate cap agreement as of each reset date. The reset dates and other critical terms on the term loans perfectly match with the interest rate cap reset dates and other critical terms during the fifty-two weeks ended January 2, 2018 (Successor).
During the fifty-two weeks ended January 2, 2018 (Successor), the Company reclassified $4,000 of interest expense related to hedges of these transactions into earnings. As of January 2, 2018 (Successor), the Company was hedging forecasted transactions expected to occur through March 31, 2020. Assuming interest rates at January 2, 2018 (Successor) remain constant, $0.3 million of interest expense related to hedges of these transactions is expected to be reclassified into earnings over the next 27 months. The Company intends to ensure that this hedge remains effective, therefore, approximately $60,000 is expected to be reclassified into interest expense over the next 12 months.
The effective portion of the 2016 Interest Rate Cap Agreement through January 2, 2018 (Successor) was included in accumulated other comprehensive income.
2013 Interest Rate Cap Agreement (Predecessor)
To ensure the effectiveness of the 2013 Interest Rate Cap Agreement through June 30, 2015 (Predecessor), the Company elected the three-month LIBOR rate option for its variable rate interest payments on term balances equal to or in excess of the applicable notional amount of the interest rate cap agreement as of each reset date. The reset dates and other critical terms on the term loans perfectly match with the interest rate cap reset dates and other critical terms during the twenty-six weeks ended June 30, 2015 (Predecessor).
As of the July 1, 2015 interest reset date, the Company elected the one-month LIBOR rate option for its variable rate interest payments on term balances equal to or in excess of the applicable notional amount of the 2013 Interest Rate Cap Agreement,


and as a result, this hedge became ineffective. Therefore, after July 1, 2015 through June 30, 2016, any changes in fair value were recorded through interest expense.
The effective portion of the 2013 Interest Rate Cap Agreement through June 30, 2015 (Predecessor) was included in accumulated other comprehensive income and included as a fair value adjustment through the purchase price allocation as described in Note 3.

Warrant Liability (Predecessor)
On March 20, 2015, warrants to purchase 597,802 shares of DTH common stock held by a former large shareholder of DTH were exercised at a strike price of $25.00 per share based on a fair value of $8.3 million determined based on the common stock price of the Initial Investment discussed above in Note 3. Upon exercise, 384,777 shares of DTH common stock were redeemed as payment for the strike price resulting in 213,025 shares of DTH common stock being issued. DTH recorded a mark-to-market adjustment of $35,000 to reduce the liability during the twenty-six weeks ended June 30, 2015 (Predecessor) and then reclassified the balance of the warrant liability of $8.3 million to shareholders’ equity.
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements
The fair values of cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate their carrying amounts due to their short maturities. The carrying value of the 2015 Senior Credit Facility approximated fair value. The 2016 Interest Rate Cap Agreement is recorded at fair value in the Company’s consolidated balance sheets.
As of January 2, 2018 (Successor) and January 3, 2017 (Successor), the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis. For both periods, these included derivative instruments related to interest rates. The Company determined the fair values of the interest rate cap contracts based on counterparty quotes, with appropriate adjustments for any significant impact of nonperformance risk of the parties to the interest rate cap contracts. Therefore, the Company has categorized these interest rate cap contracts as Level 2 fair value measurements. The fair value of the 2016 Interest Rate Cap Agreement was $0.3 million at January 2, 2018 (Successor) and $0.6 million at January 3, 2017 (Successor) and is included in other assets in the Company’s consolidated balance sheets.
 
The following is a summary of the estimated fair values for the long-term debt instruments (in thousands):
 
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
 
 
Estimated
Fair Value
 
Book Value
 
Estimated
Fair Value
 
Book Value
2015 Senior Credit Facility
 
$
152,001

 
$
152,001

 
$
157,616

 
$
157,616


The Company’s assets and liabilities measured at fair value on a recurring basis as of January 2, 2018 (Successor) and January 3, 2017 (Successor) were as follows (in thousands):
 
January 2, 2018
 
Markets for Identical Assets
(Level 1)
 
Observable Inputs (Level 2)
 
Unobservable Inputs (Level 3)
2016 Interest Rate Cap Agreement
$
332

 
$
—

 
$
332

 
$
—

Total assets measured at fair value
$
332

 
$
—

 
$
332

 
$
—

 
 
 
 
 
 
 
 
 
January 3, 2017
 
Markets for Identical Assets (Level 1)
 
Observable Inputs (Level 2)
 
Unobservable Inputs (Level 3)
2016 Interest Rate Cap Agreement
$
598

 
$
—

 
$
598

 
$
—

Total assets measured at fair value
$
598

 
$
—

 
$
598

 
$
—

Other Accrued Liabilities and Other Non-current Liabilities
Other Accrued Liabilities and Other Non-current Liabilities
Other Accrued Liabilities and Other Non-Current Liabilities
A summary of other accrued liabilities follows (in thousands):
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
Employee compensation and related items
 
$
12,945

 
$
13,783

Accrued insurance
 
7,232

 
8,192

Accrued sales tax
 
3,987

 
3,916

Accrued real property tax
 
1,331

 
1,274

Restaurant closure liability
 
794

 
875

Accrued advertising
 
728

 
1,657

Other
 
8,240

 
6,956

 
 
$
35,257

 
$
36,653


 
A summary of other non-current liabilities follows (in thousands):
 
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
Unfavorable lease liabilities
 
$
14,469

 
$
17,072

Insurance reserves
 
5,965

 
4,269

Deferred rent liability
 
2,972

 
1,676

Restaurant closure liabilities
 
2,030

 
2,263

Deferred development and initial franchise fees
 
1,335

 
1,385

Deferred gift card income
 
1,234

 
1,182

Unearned trade discount, non-current
 
1,149

 
1,596

Other
 
2,277

 
697

 
 
$
31,431

 
$
30,140

Stock-Based Compensation
Stock-Based Compensation
Stock-Based Compensation
The Company recognizes compensation expense based on estimated grant date fair values for all stock-based awards issued to employees and directors. The Company estimates the fair value of stock-based awards based on assumptions as of the grant date. The Company recognizes these compensation costs for only those awards expected to vest, on a straight-line basis over the requisite service period of the award. The Company estimates the number of awards expected to vest based, in part, on historical forfeiture rates and also based on management’s expectations of employee turnover within the specific employee groups receiving the awards. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates.
2015 Omnibus Incentive Plan
In connection with the approval of the Business Combination, the Del Taco Restaurants, Inc. 2015 Omnibus Incentive Plan (the “2015 Plan”) was approved by shareholders to offer eligible employees, directors and consultants cash and stock-based incentive awards. Awards under the 2015 Plan are generally not restricted to any specific form or structure and could include, without limitation, stock options, stock appreciation rights, restricted stock, other stock-based awards, other cash-based compensation and performance awards. Under the 2015 Plan, there are 3,300,000 shares of common stock reserved and authorized. At January 2, 2018, there were 1,361,986 shares of common stock available for grant under the 2015 Plan.
Stock-Based Compensation Expense (Successor)
The total compensation expense related to the 2015 Plan was $4.9 million for the fifty-two weeks ended January 2, 2018 (Successor), $4.1 million for the fifty-three weeks ended January 3, 2017 (Successor) and $1.5 million during the twenty-six weeks ended December 29, 2015 (Successor).
Restricted Stock Awards (Successor)
During the fifty-two weeks ended January 2, 2018 (Successor), 534,690 shares of restricted stock were granted to certain directors, officers and employees of the Company under the 2015 Plan. These restricted stock awards vest on a straight-line basis in equal annual installments over four years from the grant date.
A summary of outstanding and unvested restricted stock activity as of January 2, 2018 (Successor) and changes during the period from January 3, 2017 (Successor) through January 2, 2018 (Successor) are as follows:
 
 
Shares
 
Weighted-Average
Grant Date
Fair Value
Nonvested at January 3, 2017 (Successor)
 
1,133,822

 
$
10.40

Granted
 
534,690

 
13.64

Vested
 
(397,727
)
 
10.60

Forfeited
 
(181,875
)
 
10.34

Nonvested at January 2, 2018 (Successor)
 
1,088,910

 
$
11.92



During the fifty-two weeks ended January 2, 2018 (Successor), the Company made payments of $1.9 million related to tax withholding obligations for the vesting of restricted stock awards in exchange for 140,209 shares withheld. As of January 2, 2018 (Successor), there was $8.5 million of unrecognized compensation expense, net of estimated forfeitures, related to restricted stock, which is expected to be recognized over a weighted-average period of 2.5 years. The weighted average grant date fair value of restricted stock awards granted was $13.64, $9.30 and $11.16 during the fifty-two weeks ended January 2, 2018 (Successor), fifty-three weeks ended January 3, 2017 (Successor) and twenty-six weeks ended December 29, 2015 (Successor), respectively. The total fair value of awards that became fully vested during the fifty-two weeks ended January 2, 2018 (Successor), fifty-three weeks ended January 3, 2017 (Successor) and twenty-six weeks ended December 29, 2015 (Successor) was $5.4 million, $2.4 million and zero, respectively.
Stock Options
During the fifty-two weeks ended January 2, 2018 (Successor), 132,000 stock options were granted to certain employees of the Company under the 2015 Plan. The stock options vest on a straight-line basis in equal annual installments over four years from the grant date.
A summary of stock option activity as of January 2, 2018 (Successor) and changes during the period from January 3, 2017 (Successor) through January 2, 2018 (Successor) are as follows:
 
 
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (in Years)
 
Aggregate Intrinsic Value
(in thousands)
Options outstanding at January 3, 2017 (Successor)
 
334,500

 
$
9.94

 
6.1
 
$
1,464

Granted
 
132,000

 
13.74

 

 

Exercised
 
(9,750
)
 
10.13

 

 

Forfeited / Expired
 
(39,750
)
 
10.98

 

 

Options outstanding at January 2, 2018 (Successor)
 
417,000

 
$
11.04

 
5.5
 
$
641

Options exercisable at January 2, 2018 (Successor)
 
121,498

 
$
10.12

 
4.8
 
$
242

Options exercisable and expected to vest at January 2, 2018 (Successor)
 
393,747

 
$
11.00

 
5.4
 
$
614


The aggregated intrinsic value in the table above is the amount by which the current market price of the Company's stock exceeds the exercise price on January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively.
The following table reflects the weighted-average assumptions used in the Black-Scholes option-pricing model to value the stock options granted in the fifty-two weeks ended January 2, 2018 (Successor), the fifty-three weeks ended January 3, 2017 (Successor) and the twenty-six weeks ended December 29, 2015 (Successor):
 
 
Successor
 
 
52 Weeks Ended
January 2, 2018
 
53 Weeks Ended
January 3, 2017
 
26 Weeks Ended
December 29, 2015
Expected volatility
 
36.09
%
 
37.64
%
 
38.01
%
Risk-free rate of return
 
1.86
%
 
1.12
%
 
1.84
%
Expected life (in years)
 
4.75

 
5.50

 
5.50

Dividend yield
 
—

 
—

 
—

Fair value per share at date of grant
 
$
4.63

 
$
3.31

 
$
3.93


Since the Company does not have a substantial history of traded common stock activity, expected volatility was based on historical data from selected peer public company restaurants. The risk-free rate is based on published U.S. Treasury rates in effect at the time of grant with a similar duration of the expected life of the options. The expected life of options granted is derived from the average of the contractual term of the option and the vesting periods. The Company has not paid any dividends to date, therefore, the Company used an expected dividend yield of zero for option valuation purposes.
As of January 2, 2018 (Successor), there was $0.9 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock options grants which is expected to be recognized over a weighted-average remaining period of 2.6 years. The total intrinsic value of stock options exercised was $25,000, $2,000 and zero during the fifty-two weeks ended January 2, 2018 (Successor), fifty-three weeks ended January 3, 2017 (Successor) and twenty-six weeks ended December 29, 2015 (Successor), respectively.
Stock-Based Compensation Expense (Predecessor)
In connection with Step 1 of the Business Combination consummated on March 20, 2015, all unvested restricted stock units (“RSUs”) under the Predecessor plan became fully vested and all vested RSUs were then immediately settled for shares of DTH common stock, net of shares withheld for minimum statutory employee tax withholding obligations and all unvested stock options under the Predecessor plan became fully vested and all vested stock options were also exercised and shares were issued, net of shares withheld for the applicable option strike price and employee tax withholding obligations. An aggregate of 237,948 shares of DTH common stock were issued and 247,552 shares of DTH common stock were redeemed for applicable option strike price and employee tax withholding obligations. In exchange for the shares withheld, DTH made payments of $7.5 million related to employee tax withholding obligations.
No RSUs or stock options remained outstanding under the Predecessor plan after March 20, 2015 or as of January 2, 2018. DTH recorded stock-based compensation expense of $0.5 million, which included all remaining unrecognized compensation expense related to the accelerated vesting on RSUs and stock options on March 20, 2015, for the twenty-six weeks ended June 30, 2015 (Predecessor).
A summary of RSUs activity as of June 30, 2015 (Predecessor) and changes during the period from December 30, 2014 to June 30, 2015 (Predecessor) are as follows:
 
 
Shares
 
Weighted-Average Grant Date Fair Value
Nonvested at December 30, 2014 (Predecessor)
 
94,100

 
25.00

Granted
 
—

 
—

Vested
 
(94,100
)
 
25.00

Forfeited
 
—

 
—

Nonvested at June 30, 2015 (Predecessor)
 
—

 
$
—


A summary of stock option activity as of June 30, 2015 (Predecessor) and changes during the period from December 30, 2014 to June 30, 2015 (Predecessor) are as follows:
 
 
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (in Years)
 
Aggregate Intrinsic Value
(in thousands)
Options outstanding at December 30, 2014 (Predecessor)
 
90,000

 
23.10

 
8.7

 
1,400

Granted
 
—

 
—

 


 

Exercised
 
(90,000
)
 
23.10

 


 

Forfeited
 
—

 
—

 


 

Options outstanding at June 30, 2015 (Predecessor)
 
—

 
$
—

 
—

 
$
—

Options exercisable at June 30, 2015 (Predecessor)
 
—

 
$
—

 
—

 
$
—

Options exercisable and expected to vest at June 30, 2015 (Predecessor)
 
—

 
$
—

 
—

 
$
—

Shareholders' Equity
Shareholders' Equity
Shareholders’ Equity
The authorized common stock of the Company consists of 400,000,000 shares. Holders of the Company’s common stock are entitled to one vote for each share of common stock. As of January 2, 2018 (Successor), there were 38,434,274 shares of common stock issued and outstanding and warrants to purchase 5,999,934 shares of the Company’s common stock outstanding at a strike price of $11.50. Originally, 12,250,000 warrants were issued in the Company’s initial public offering and in a private sale not involving a public offering (“Private Placement Warrants”), both in November 2013. An additional 389,623 Private Placement Warrants were issued in June 2015 to Levy Acquisition Sponsor LLC (the “Sponsor”), the Company’s sponsor, to satisfy outstanding working capital loans owed to the Sponsor by the Company. All the warrants became exercisable on July 30, 2015, 30 days after the completion of the Business Combination.
The Company previously had 15,000,000 common shares that were sold as part of the Company’s initial public offering in November 2013 which each contained a redemption feature that allows for the redemption of the common shares. The amount of the common shares subject to possible redemption was recorded as a liability on LAC’s consolidated balance sheet and as of June 16, 2015, 13,622,394 shares were classified outside of permanent equity at its redemption value of $136.2 million. On June 30, 2015, in connection with the Business Combination, 1,115 shares were redeemed at $10 per share and the remaining shares with a value of $136.2 million were reclassified into equity.
The Company is authorized to issue 1,000,000 preferred shares with designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. As of January 2, 2018 (Successor), there were no preferred shares issued or outstanding.
As described in Note 3, on March 20, 2015, the Levy Newco Parties made a $120 million minority equity investment in DTH in connection with a stock purchase agreement dated March 12, 2015. Proceeds of $91.2 million from Step 1 of the Business Combination were used to purchase 2,348,968 shares of DTH common stock.
Also on March 20, 2015, warrants to purchase 597,802 shares of DTH common stock held by a former large shareholder of DTH were exercised at a strike price of $25.00 per share based on a fair value of $8.3 million determined from Step 1 of the Business Combination. The former large shareholder redeemed 384,777 DTH shares upon exercise as payment for the strike price resulting in 213,025 shares of DTH common stock issued. The Company recorded a mark-to-market adjustment of $35,000 to reduce the warrant liability during the twenty-six weeks ended June 30, 2015 (Predecessor) and then reclassified the balance of the warrant liability of $8.3 million to shareholders’ equity on March 20, 2015.
In October 2015, the Company launched a secondary offering of 3,372,016 shares of its common stock held by entities affiliated with Goldman Sachs Mezzanine Partners, Leonard Green & Partners and Charlesbank Capital Partners (the “Selling Stockholders”). The underwriters exercised an option to purchase an additional 505,802 shares of common stock held by the Selling Stockholders. The Company did not sell any shares in this offering and did not receive any proceeds from the sale of the shares of common stock offered by the Selling Stockholders. In connection with the offering, the Company incurred costs of $0.7 million, included in transaction-related costs on the consolidated statements of comprehensive income, during the twenty-six weeks ended December 29, 2015 (Successor).
On February 26, 2016, the Company's Board of Directors authorized a share repurchase program covering up to $25.0 million in the aggregate of the Company's common stock and warrants which was effective immediately and expires upon completion of the repurchase program, unless terminated earlier by the Board of Directors. On August 23, 2016, the Company announced that the Board of Directors increased the repurchase program by $25.0 million, to $50.0 million. Purchases under the program may be made in open market or privately negotiated transactions. During the fifty-two weeks ended January 2, 2018 (Successor), the Company repurchased (1) 986,497 shares of common stock for an average price per share of $12.41 for an aggregate cost of approximately $12.3 million, including incremental direct costs to acquire the shares, and (2) 424,439  warrants for an average price per warrant of $3.72 for an aggregate cost of approximately $1.6 million, including incremental direct costs to acquire the warrants. The Company expects to retire the repurchased shares and warrants and therefore has accounted for them as constructively retired as of January 2, 2018 (Successor). As of January 2, 2018 (Successor), there was approximately $20.9 million remaining under the share repurchase program. The Company has no obligations to repurchase shares or warrants under this authorization, and the timing and value of shares and warrants purchased will depend on the Company's stock price, warrant price, market conditions and other factors.

Of the 424,439 warrants purchased during the fifty-two weeks ended January 2, 2018 (Successor), 400,000 warrants were purchased from PW Acquisitions, LP, a related party, at $3.75 per warrant, representing a 5% discount from the closing price of $3.95 per warrant on the transaction date. A member of the Company's Board of Directors is the chief executive officer and managing member of the general partner of PW Acquisitions, LP.
On July 11, 2016, the Company commenced an offer to exchange 0.2780 shares of the Company's common stock for each outstanding Company warrant exercisable for shares at an exercise price of $11.50 per share (approximately one share for every 3.6 warrants tendered), up to a maximum of 6,750,000 warrants, which amount was subsequently increased to 7,750,000 warrants. The offer to exchange expired on August 8, 2016. A total of 5,516,243 warrants were tendered in the exchange offer. All of the Company's directors and executive officers who control or beneficially owned warrants participated in the offer and in aggregate tendered 1,501,800 of their warrants. The Company accepted for exchange all such warrants and issued an aggregate of 1,533,542 shares of the Company's common stock in exchange for the warrants tendered, representing approximately 4% of the shares outstanding after such issuance. The warrants will expire on June 30, 2020, unless sooner exercised or redeemed by the Company in accordance with the terms of the warrants. For the fifty-three weeks ended January 3, 2017 (Successor), the Company incurred approximately $0.6 million of transaction expenses related to the offer to exchange.
Earnings per Share
Earnings per Share
Earnings per Share
Basic income per share is calculated by dividing net income attributable to Del Taco’s common shareholders for the Successor period and DTH’s common shareholders for the Predecessor period by the weighted average number of common shares outstanding for the period. In computing dilutive income per share, basic income per share is adjusted for the assumed issuance of all applicable potentially dilutive share-based awards, including warrants, restricted stock, common stock options and restricted stock units.
Below are basic and diluted net income per share for the periods indicated (amounts in thousands except share and per share data):
 
 
 
Successor
 
 
Predecessor
 
 
52 Weeks Ended
 
53 Weeks Ended
 
26 Weeks Ended
 
 
26 Weeks Ended
 
 
January 2, 2018
 
January 3, 2017
 
December 29, 2015
 
 
June 30, 2015
Numerator:
 
 
 
 
 
 
 
 
 
Net income
 
$
49,871

 
$
20,913

 
$
2,653

 
 
$
2,104

Denominator:
 
 
 
 
 
 
 
 
 
Weighted-average shares outstanding - basic
 
38,689,508

 
38,725,541

 
38,802,425

 
 
5,492,417

Dilutive effect of restricted shares and RSUs
 
417,371

 
263,003

 
744

 
 
13,972

Dilutive effect of stock options
 
28,931

 
—

 
—

 
 
93,634

Dilutive effect of warrants
 
814,097

 
286,105

 
1,446,824

 
 
10,836

Weighted-average shares outstanding - diluted
 
39,949,907

 
39,274,649

 
40,249,993

 
 
5,610,859

Net income per share - basic
 
$
1.29

 
$
0.54

 
$
0.07

 
 
$
0.38

Net income per share - diluted
 
$
1.25

 
$
0.53

 
$
0.07

 
 
$
0.37

Antidilutive options, unvested restricted stock awards, unvested RSUs and warrants excluded from the computations
 
69,722

 
8,343,842

 
5,365

 
 
—


Antidilutive stock options and unvested stock were excluded from the computation of diluted net income per share due to the assumed proceeds from the award’s exercise or vesting being greater than the average market price of the common shares.
Income Taxes
Income Taxes
Income Taxes
The component of the provision for income taxes are as follows (in thousands):
 
 
Successor
 
 
Predecessor
 
 
52 Weeks Ended
 
53 Weeks Ended
 
26 Weeks Ended
 
 
26 Weeks Ended
 
 
January 2, 2018
 
January 3, 2017
 
December 29, 2015
 
 
June 30, 2015
Current:
 
 
 
 
 
 
 
 
 
Federal
 
$
5,884

 
$
4,204

 
$
—

 
 
$
110

State
 
886

 
270

 
24

 
 
79

 
 
6,770

 
4,474

 
24

 
 
189

Deferred:
 
 
 
 
 
 
 
 
 
Federal
 
(24,636
)
 
7,145

 
(90
)
 
 
15

State
 
2,042

 
3,710

 
178

 
 
536

 
 
(22,594
)
 
10,855

 
88

 
 
551

Income tax (benefit) provision
 
$
(15,824
)
 
$
15,329

 
$
112

 
 
$
740


On December 22, 2017, the Tax Cuts and Jobs Act, (the “Act”) was enacted, reducing the U.S. federal corporate income tax rate from 35% to 21%, among other changes, for tax years beginning after December 31, 2017.
The SEC staff issued Staff Accounting Bulletin 118, ("SAB 118") which provides guidance on accounting for the tax effects of the Act for which the accounting under ASC 740, Income Taxes (“ASC 740”) is incomplete. To the extent that a company's accounting for certain income tax effects of the Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before enactment of the Act.

The Company re-measured the applicable deferred tax assets and liabilities based on the rates at which they are expected to reverse. However, the Company is still analyzing certain aspects of the Act and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of our deferred tax balance was a tax benefit of approximately $29.1 million based on currently available information and interpretations, which are continuing to evolve. The Company will continue to analyze additional information and guidance related to the Act as supplemental legislation, regulatory guidance, or evolving technical interpretations become available. The final impacts may differ from the recorded amounts as of January 2, 2018 (Successor), and the Company will continue to refine such amounts within the measurement period provided by SAB 118. The Company expects to complete its analysis no later than the fourth quarter of 2018.
The effective tax rates for the fifty-two weeks ended January 2, 2018 (Successor), fifty-three weeks ended January 3, 2017 (Successor), twenty-six weeks ended December 29, 2015 (Successor) and twenty-six weeks ended June 30, 2015 (Predecessor) were (46.5)%, 42.3%, 4.1% and 26.0%, respectively. The difference between the effective rates and the statutory federal income tax rate is composed of the following items (dollars in thousands):
 
 
Successor
 
 
Predecessor
 
 
52 Weeks Ended
 
 
 
53 Weeks Ended
 
 
 
26 Weeks Ended
 
 
 
 
26 Weeks Ended
 
 
 
 
January 2, 2018
 
 
 
January 3, 2017
 
 
 
December 29, 2015
 
 
 
 
June 30, 2015
 
 
Federal income taxes
 
$
11,916

 
35.0
 %
 
$
12,685

 
35.0
 %
 
$
968

 
35.0
 %
 
 
$
995

 
35.0
 %
State and local income taxes, net of federal tax benefit
 
1,688

 
5.0
 %
 
1,882

 
5.2
 %
 
280

 
10.1
 %
 
 
435

 
15.3
 %
Targeted job credits
 
(420
)
 
(1.2
)%
 
(448
)
 
(1.2
)%
 
(512
)
 
(18.5
)%
 
 
(34
)
 
(1.2
)%
Warrant liability
 
—

 
—
 %
 
—

 
—
 %
 
—

 
—
 %
 
 
(12
)
 
(0.4
)%
Investment in subsidiary
 
—

 
—
 %
 
570

 
1.6
 %
 
83

 
3.0
 %
 
 
383

 
13.5
 %
Change in valuation allowance
 
—

 
—
 %
 
—

 
—
 %
 
(1,927
)
 
(69.7
)%
 
 
(2,805
)
 
(98.6
)%
Tax reform
 
(29,111
)
 
(85.5
)%
 
—

 
—
 %
 
—

 
—
 %
 
 
—

 
—
 %
Transaction costs
 
—

 
—
 %
 
227

 
0.6
 %
 
1,194

 
43.2
 %
 
 
2,255

 
79.3
 %
Permanent tax differences and other
 
103

 
0.2
 %
 
413

 
1.1
 %
 
26

 
1.0
 %
 
 
(477
)
 
(16.9
)%
Income tax (benefit) provision
 
$
(15,824
)
 
(46.5
)%
 
$
15,329

 
42.3
 %
 
$
112

 
4.1
 %
 
 
$
740

 
26.0
 %

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
Deferred tax assets:
 
 
 
 
Deferred rent
 
$
741

 
$
630

Accrued insurance
 
3,332

 
4,699

Reserve for restructuring and closed restaurants
 
763

 
1,252

Net operating loss carryforwards and tax credits
 
485

 
988

Deferred income
 
1,069

 
1,801

Stock-based compensation
 
767

 
919

Accrued compensation
 
472

 
2,897

Other, net
 
355

 
650

Deferred tax assets
 
7,984

 
13,836

Less valuation allowance
 
—

 
—

Net deferred tax assets
 
7,984

 
13,836

Deferred tax liabilities:
 
 
 
 
Property, equipment and intangibles
 
(67,696
)
 
(96,929
)
Investment in subsidiary
 
(7,420
)
 
(6,045
)
Prepaid expenses
 
(1,442
)
 
(2,135
)
Deferred tax liabilities
 
(76,558
)
 
(105,109
)
Net deferred tax liabilities
 
$
(68,574
)
 
$
(91,273
)

The Company maintains deferred tax liabilities related to trademarks and other indefinite lived assets that are not netted against the deferred tax assets as reversal of the taxable temporary difference cannot serve as a source for realization of the deferred tax assets, because the deferred tax liability will not reverse until some indefinite future period when the assets are either sold or written down due to an impairment.
As part of purchase accounting, the Company was required to record all of DTH’s acquired assets and liabilities at their acquisition date fair value, including deferred income taxes. The Company considered the weight of both positive and negative evidence and concluded that it is more likely than not that DTH's deferred tax assets will be realized and that no valuation allowance on DTH's deferred tax asset was required as of the date of acquisition.
As a result, the Company established deferred tax assets as well as deferred tax liabilities related to indefinite-lived intangibles through the purchase price allocation (see Note 3). In addition, after considering the Business Combination, the projected post-combination results and all available evidence, the Company released $1.9 million of valuation allowance that was previously provided against the Company's deferred tax assets. In accordance with ASC 805-740-30-3, the Company recorded this release through income tax benefit during the twenty-six week period ended December 29, 2015 (Successor).
The Company did not have any federal or state net operating loss carryforwards as of January 2, 2018 (Successor). The Company had no federal tax credit carryfowards as of January 2, 2018 (Successor). State tax credit carryforwards as of January 2, 2018 (Successor) totaled $0.6 million and begin to expire in 2024.
As of January 2, 2018 (Successor) and January 3, 2017 (Successor), the Company considered the weight of both positive and negative evidence and concluded that it is more likely than not that the Company's deferred tax assets will be realized and no valuation allowance is required.
As of January 2, 2018 (Successor) and January 3, 2017 (Successor), the liability for unrecognized tax positions was $0.2 million, and is included in other non-current liabilities in the consolidated balance sheets. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of January 2, 2018 (Successor), the Company did not have any accrued interest and penalties related to uncertain tax positions. The Company does not expect any significant increases or decreases within the next twelve months to its unrecognized tax positions. The total amount of net unrecognized tax positions that would impact the Company's effective tax rate, if ever recognized, is $0.2 million.
The following table summarizes the changes to unrecognized tax positions (in thousands):
 
 
Successor
 
 
Predecessor
 
 
52 Weeks Ended
 
53 Weeks Ended
 
26 Weeks Ended
 
 
26 Weeks Ended
 
 
January 2,
2018
 
January 3,
2017
 
December 29,
2015
 
 
June 30,
2015
Balance at beginning of period
 
$
212

 
$
212

 
$
212

 
 
$
—

Increases (decreases) related to prior year tax positions
 
—

 
—

 
—

 
 
—

Increases (decreases) related to current year tax positions
 
—

 
—

 
—

 
 
212

Expiration of the statute of limitations for the assessment of taxes
 
—

 
—

 
—

 
 
—

Settlements
 
—

 
—

 
—

 
 
—

Balance at end of period
 
$
212

 
$
212

 
$
212

 
 
$
212


The Company is subject to U.S. and state income taxes. The Company is no longer subject to federal and state income tax examinations for years before 2014 and 2013, respectively. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses and tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss and tax credit carry forward amounts.
The Protecting Americans From Tax Hikes (PATH) Act was enacted on December 21, 2015. Included within this legislation was the work opportunity credit, and extension of the fifty percent first year bonus depreciation, both of which had previously expired on December 31, 2014. As the legislation was enacted during the fourth quarter of fiscal year 2015, the impact was not previously accounted for in the Company's effective tax rate or income tax payable calculations. The impact to the effective tax rate during the twenty-six weeks ended December 29, 2015 (Successor) was approximately (18.5)%.
Leases
Leases
Leases
As of January 2, 2018 (Successor) and January 3, 2017 (Successor), deferred rent liability was $17.4 million and $18.7 million, respectively, which includes unfavorable lease liabilities of $14.5 million and $17.1 million, respectively, net of accumulated amortization of $6.1 million and $3.9 million, respectively.
Franchise sublease income which includes minimum rent, percentage rent, real estate taxes and common area maintenance are classified separately under franchise sublease income on the consolidated statements of comprehensive income. Franchise sublease expenses which include minimum rent, percentage rent, real estate taxes and common area maintenance are classified separately under occupancy and other – franchise subleases on the consolidated statements of comprehensive income. Total franchise sublease income and franchise sublease expense for the Company comprise the following (in thousands):
 
 
Successor
 
 
Predecessor
 
 
52 Weeks Ended
 
53 Weeks Ended
 
26 Weeks Ended
 
 
26 Weeks Ended
 
 
January 2, 2018
 
January 3, 2017
 
December 29, 2015
 
 
June 30, 2015
Sublease rent income
 
$
(2,844
)
 
$
(2,343
)
 
$
(1,183
)
 
 
$
(1,183
)
Sublease rent expense
 
2,608

 
2,207

 
1,140

 
 
1,109

Sublease rent income includes contingent rentals based on sales totaling $0.1 million during both the fifty-two weeks ended January 2, 2018 (Successor) and the fifty-three weeks ended January 3, 2017 (Successor) and $0.3 million during both the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor).
Total rent expense for the Company for all non-cancelable operating leases comprise the following (in thousands):
 
 
Successor
 
 
Predecessor
 
 
52 Weeks Ended
 
53 Weeks Ended
 
26 Weeks Ended
 
 
26 Weeks Ended
 
 
January 2, 2018
 
January 3, 2017
 
December 29, 2015
 
 
June 30, 2015
Minimum rental expense
 
$
27,372

 
$
26,465

 
$
12,384

 
 
$
12,405

Favorable and unfavorable lease assets and liabilities amortization, net
 
(809
)
 
(607
)
 
(364
)
 
 
3

Straight-line rent expense
 
826

 
781

 
518

 
 
277

Contingent rent expense
 
685

 
805

 
2,033

 
 
2,063

 
 
$
28,074

 
$
27,444

 
$
14,571

 
 
$
14,748


As of January 2, 2018 (Successor), the Company is obligated under various capital leases having interest rates that average approximately 8%.
Minimum rental commitments and sublease minimum rental receipts as of January 2, 2018 (Successor), under capital and operating leases having an initial non-cancelable term of one year or more are shown in the following table (in thousands):
 
 
Rental Payments
 
Rental Receipts
 
 
 
 
Capital Lease and Deemed Landlord Financing Liabilities
 
Operating Leases
 
Operating Subleases
 
Net Lease Commitments
2018
 
$
3,600

 
$
31,763

 
$
(2,763
)
 
$
32,600

2019
 
3,102

 
29,471

 
(2,794
)
 
29,779

2020
 
2,858

 
27,558

 
(2,644
)
 
27,772

2021
 
2,727

 
26,082

 
(2,619
)
 
26,190

2022
 
2,597

 
24,052

 
(2,604
)
 
24,045

Thereafter
 
28,808

 
147,544

 
(20,188
)
 
156,164

Total minimum lease payments
 
$
43,692

 
$
286,470

 
$
(33,612
)
 
$
296,550

Imputed interest
 
(23,639
)
 
 
 
 
 
 
Present value of payments
 
$
20,053

 
 
 
 
 
 

The Company has subleased 31 properties to other third parties where the Company remains primarily liable to the landlord for the performance of all obligations in the event that the sub-lessee does not perform its obligations under the lease. As a result of the sublease arrangements, future minimum rental commitments under operating leases will be offset by sublease amounts to be paid by the sub-lessee. The total of minimum sublease amounts to be received in the future under non-cancelable subleases is $33.6 million as of January 2, 2018 (Successor).
The amounts in operating lease and operating subleases in the table above include amounts for restaurant operating leases related to 11 of the 12 restaurants closed in the fourth fiscal quarter of 2015 (one such lease was terminated) and related subleases both of which have been included in our restaurant closure liability on our consolidated balance sheets as of January 2, 2018 (Successor) on a present value basis.
During Fiscal 2017, the Company entered into two sale leaseback arrangements with third party private investors. These sale-leaseback transactions do not provide for any continuing involvement by the Company other than normal leases where the Company intends to use the property during the lease term. The leases have been accounted for as operating leases. The net proceeds from the transactions totaled approximately $9.9 million. Under one of the arrangements, the Company sold the land and building of an existing restaurant and leased it back for a term of 20 years. Under the other arrangement, the Company sold the land and building of a recently constructed restaurant and leased it back for a term of 20 years. The sale of these properties resulted in a loss of $0.3 million which is included in loss on disposal of assets, net in the consolidated statements of comprehensive income.
During Fiscal 2016, the Company entered into two sale-leaseback arrangements with third party private investors. These sale-leaseback transactions do not provide for any continuing involvement by the Company other than normal leases where the Company intends to use the properties during the lease terms. The leases have been accounted for as operating leases. The net proceeds from these transactions were $3.4 million. Under one of the arrangements, the Company sold the land and building of an existing restaurant and leased it back for a term of one year with the option to terminate with 60 days notice. Under the other arrangement, the Company sold the land and building of an acquired franchise-operated restaurant (see Note 6) and leased it back for a term of 20 years. The sale of these properties resulted in an immaterial loss which is included in loss on disposal of assets, net in the consolidated statements of comprehensive income.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
The primary claims in the Company’s business are workers’ compensation and general liabilities. These insurance programs are self-insured or high deductible programs with excess coverage that management believes is sufficient to adequately protect the Company. In the opinion of management, adequate provision has been made for all incurred claims up to the self-insured or high deductible limits, including provision for estimated claims incurred but not reported. Because of the uncertainty of the ultimate resolution of outstanding claims, as well as the uncertainty regarding claims incurred but not reported, it is possible that management’s provision for these losses could change materially. However, no estimate can currently be made of the range of additional losses.
Purchasing Commitments
The Company enters into various purchase obligations in the ordinary course of business, generally of short term nature. Those that are binding primarily relate to commitments for food purchases and supplies, amounts owed under contractor and subcontractor agreements, orders submitted for equipment for restaurants under construction, information technology service agreements and marketing initiatives, some of which are related to both company-operated and franchise-operated locations. The Company also has a long-term beverage supply agreement with a major beverage vendor whereby marketing rebates are provided to the Company and its franchisees based upon the volumes of purchases for system-wide restaurants which vary according to demand for beverage syrup. This contract has terms extending into 2021. The Company’s future estimated cash payments under existing contractual purchase obligations for goods and services as of January 2, 2018 (Successor), are approximately $70.4 million. The Company has excluded agreements that are cancelable without penalty. 
Severance and Executive Employment Agreements
The Company has Severance Agreements and Executive Employment Agreements with certain key officers of the Company, which provide for payment of one year base salary and bonus incentive plan payments, in the event that the officers are terminated without cause. As of January 2, 2018 (Successor) and January 3, 2017 (Successor) the Company’s total contingent liability with respect to the aforementioned agreements is $2.6 million and $3.5 million, respectively, which was not recorded in the consolidated financial statements.
Litigation
On April 23, 2015, a purported class action and derivative complaint, Jeffery Tomasulo, on behalf of himself and all others similarly situated v. Levy Acquisition Sponsor, LLC, Lawrence F. Levy, Howard B. Bernick, Marc S. Simon, Craig J. Duchossois, Ari B. Levy, Steven C. Florsheim, Gregory G. Flynn, Del Taco Holdings, Inc., and Levy Acquisition Corp. (“Complaint”), was filed in the Circuit Court of Cook County, Illinois (the “Circuit Court”), relating to the then proposed Business Combination pursuant to the Merger Agreement. The Complaint, which purported to be brought as a class action on behalf of all of the holders of the Company’s common stock, generally alleged that the Company’s pre-merger directors breached their fiduciary duties to stockholders by facilitating the then proposed Business Combination and that the Company's preliminary proxy statement that was filed with the SEC on April 2, 2015 was materially misleading and/or incomplete. On May 19, 2016, Tomasulo, on behalf of himself and members of a settlement class entered into a Stipulation of Settlement with the defendants pursuant to which the plaintiff class broadly released claims relating to the Merger, including all claims that the Company's preliminary proxy statement or definitive proxy statement were misleading or improper. Under the settlement, defendants were not required to make any payment to the plaintiff or the plaintiff class but agreed to pay a portion of the hourly fee accrued by plaintiff's counsel. On July 26, 2016, the Court held a final hearing and then certified a settlement class, approved the Stipulation of Settlement and entered a final judgment dismissing the action.
The Company has a directors and officers liability insurance policy to cover legal defense costs, judgments and settlements stemming from covered claims, subject to an insurance deductible of $0.25 million per claim. The Company's insurance company has acknowledged coverage for claims asserted in the Complaint against covered persons, subject to a reservation of rights. As of December 29, 2015 (Successor), the Company had an insurance receivable of $0.3 million for legal defense costs it paid in excess of the deductible. The reimbursement from the insurance company was received in January 2016. During the fifty-three weeks ended January 3, 2017 (Successor), and the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), the Company incurred $0.3 million, $0.1 million and $0.7 million, respectively, in legal defense fees for which the Company received reimbursement of $0.8 million from the insurance company which includes payment of the $0.3 million insurance receivable at December 29, 2015 (Successor). The legal defense fees incurred are reported in transaction-related costs on the accompanying consolidated statements of comprehensive income.
In July 2013, a former Del Taco employee filed a purported class action complaint alleging that Del Taco has failed to pay overtime wages and has not appropriately provided meal breaks to its California general managers. On March 4, 2016, the Court denied class certification on the overtime and meal period claims. At that time, the Court granted class certification on the wage statement issue only. On October 30, 2017, the Court granted Del Taco's Motion to Decertify the Wage Statement Class. Thereafter, the parties settled the matter with the former Del Taco employee on an individual basis. As a result, the case was dismissed with prejudice in its entirety.
In March 2014, a former Del Taco employee filed a purported class action complaint alleging that Del Taco has not appropriately provided meal breaks and failed to pay wages to its California hourly employees. Discovery is in process and Del Taco intends to assert all of its defenses to this threatened class action and the individual claims. Del Taco has several defenses to the action that it believes should prevent the certification of the class, as well as the potential assessment of any damages on a class basis. Legal proceedings are inherently unpredictable, and the Company is not able to predict the ultimate outcome or cost of the unresolved matter. However, based on management’s current understanding of the relevant facts and circumstances, the Company does not believe that these proceedings give rise to a probable or estimable loss and should not have a material adverse effect on the Company’s financial position, operations or cash flows. Therefore, Del Taco has not recorded any amount for the claim as of January 2, 2018 (Successor).
The Company and its subsidiaries are parties to other legal proceedings incidental to their businesses, including claims alleging the Company’s restaurants do not comply with the Americans with Disabilities Act of 1990. In the opinion of management, based upon information currently available, the ultimate liability with respect to those other actions will not have a material effect on the operating results, cash flows or the financial position of the Company.
Retirement Plans
Retirement Plans
Retirement Plans
The Company has a 401(k) retirement plan which covers all employees who meet certain age and minimum service hour requirements who elect to participate and provided for matching contributions totaling approximately $82,000 during the fifty-two weeks ended January 2, 2018 (Successor), $80,000 during the fifty-three weeks ended January 3, 2017 (Successor) and $40,000 during both the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively.
Quarterly Financial Data (Unaudited)
Quarterly Financial Data (Unaudited)
Quarterly Financial Data (Unaudited)
Summarized unaudited quarterly financial data (amounts in thousands except share and per share data):
 
 
Successor
 
 
 
16 Weeks Ended
 
12 Weeks Ended
 
Fiscal Year 2017
 
January 2, 2018
 
September 12, 2017
 
June 20, 2017
 
March 28, 2017
 
Total revenue
 
$
146,542

 
$
110,988

 
$
108,581

 
$
105,345

 
Income from operations
 
12,825

 
9,533

 
10,276

 
8,613

 
Net income
 
35,202

 
5,101

 
5,330

 
4,238

 
Earnings per share:
 
 
 
 
 
 
 
 
 
Basic
 
$
0.91

 
$
0.13

 
$
0.14

 
$
0.11

 
Diluted
 
$
0.89

 
$
0.13

 
$
0.13

 
$
0.10

 

 
 
Successor
 
 
 
17 Weeks Ended
 
12 Weeks Ended
 
Fiscal Year 2016
 
January 3, 2017
 
September 6, 2016
 
June 14, 2016
 
March 22, 2016
 
Total revenue
 
$
150,235

 
$
104,419

 
$
100,026

 
$
97,403

 
Income from operations
 
15,927

 
10,927

 
9,706

 
6,740

 
Net income
 
8,039


4,949

(1) 
4,864

(2) 
3,061

(3 
) 
Earnings per share:
 
 
 
 
 
 
 
 
 
Basic
 
$
0.21

 
$
0.13

 
$
0.13

 
$
0.08

 
Diluted
 
$
0.20

 
$
0.13

 
$
0.13

 
$
0.08

 
_______________________________________________
(1) Includes transaction-related costs of $0.5 million.
(2) Includes transaction-related costs of $0.1 million.
(3) Includes transaction-related costs of $0.1 million.
Schedule II - Valuation and Qualifying Accounts
Schedule II - Valuation and Qualifying Accounts
Del Taco Restaurants, Inc.
Schedule II - Valuation and Qualifying Accounts
Valuation Allowance for Deferred Tax Assets
(in thousands)
 
 
 
 
Additions
 
 
 
 
 
Description
 
Balance at beginning of period
 
 Charged to costs and expenses
 
Charge to other accounts
 
Deductions
 
Balance at end of period
 
Fifty-Two Weeks Ended January 2, 2018 (Successor)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Fifty-Three Weeks Ended January 3, 2017 (Successor)
 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Twenty-Six Weeks Ended December 29, 2015 (Successor)
 
1,926

(A) 
—

 
—

 
(1,926
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Twenty-Six Weeks Ended June 30, 2015 (Predecessor)
 
20,217

 
—

 
—

 
(2,819
)
 
$
17,398

(B) 

(A) Del Taco Restaurants, Inc. had a full valuation allowance on its deferred taxes assets of $1.9 million as of June 30, 2015 which was not presented with Del Taco Holdings, Inc.'s (DTH) predecessor financial results.
(B) As part of purchase accounting, Del Taco Restaurants, Inc. (the "Company") was required to record all of DTH's acquired assets and liabilities at their acquisition date fair value, including deferred income taxes. The Company considered the weight of both positive and negative evidence and concluded that it is more likely than not that DTH's deferred tax assets will be realized and that no valuation allowance on DTH's deferred tax asset was required as of the date of acquisition. As a result, the Company established deferred tax assets as well as deferred tax liabilities related to indefinite-lived intangibles through the purchase price allocation and the $17.4 million valuation allowance as of June 30, 2015 (Predecessor) was not established through purchase accounting.
Basis of Presentation and Summary of Significant Accounting Policies (Policies)
Basis of Presentation 
Basis of Presentation
As a result of the Business Combination, the Company is the acquirer for accounting purposes, and DTH is the acquiree and accounting predecessor. The Company’s financial statement presentation distinguishes a “Predecessor” for DTH for periods prior to the Closing Date. The Company is the “Successor” for periods after the Closing Date, which includes consolidation of DTH subsequent to the Business Combination on June 30, 2015. The Merger was accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting that is based on the fair value of the net assets acquired. See Note 3 for further discussion of the Business Combination. As a result of the application of the acquisition method of accounting as of the Closing Date, the financial statements for the Predecessor period and for the Successor period are presented on a different basis of accounting and are therefore, not comparable. The historical financial information of Del Taco, formerly LAC, prior to the Business Combination has not been reflected in the financial statements as those amounts have been considered de-minimus.
For the Consolidated Statements of Shareholders’ Equity, the Predecessor results reflect the equity balances and activities of DTH at December 30, 2014 through June 30, 2015 prior to the closing of the Business Combination and the Successor results reflect the LAC equity balances at June 30, 2015 prior to the closing of the Business Combination and the activities for Del Taco through January 2, 2018.
 
The Company’s fiscal year ends on the Tuesday closest to December 31. Fiscal years 2017 and 2015 are both a fifty-two week periods. In a fifty-two week fiscal year, the first, second and third quarters each include twelve weeks of operations and the fourth quarter includes sixteen weeks of operations. Fiscal year 2016 is a fifty-three week period. In a fifty-three week fiscal year, the first, second and third quarters each include twelve weeks of operations and the fourth quarter includes seventeen weeks of operations. For fiscal year 2017, the Company’s financial statements reflect the fifty-two weeks ended January 2, 2018 (Successor). For fiscal year 2016, the Company's financial statements reflect the fifty-three weeks ended January 3, 2017 (Successor). For fiscal year 2015, the Company’s financial statements reflect the twenty-six weeks ended December 29, 2015 (Successor) and the twenty-six weeks ended June 30, 2015 (Predecessor).
Principles of Consolidation 
Principles of Consolidation
The consolidated financial statements included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules and regulations of Securities and Exchange Commission (“SEC”). The accompanying consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates 
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management believes that such estimates have been based on reasonable and supportable assumptions and the resulting estimates are reasonable for use in the preparation of the consolidated financial statements. Actual results could differ from these estimates. The Company’s significant estimates include estimates for impairment of goodwill, intangible assets and property and equipment, valuations provided in business combinations, insurance reserves, restaurant closure reserves, stock-based compensation, contingent liabilities, certain leasing activities and income tax valuation allowances.

Variable Interest Entities 
Variable Interest Entities
In accordance with Accounting Standards Codification ("ASC") 810, Consolidation, the Company applies the guidance related to variable interest entities ("VIE"), which defines the process for how an enterprise determines which party consolidates a VIE as primarily a qualitative analysis. The enterprise that consolidates the VIE (the primary beneficiary) is defined as the enterprise with (1) the power to direct activities of the VIE that most significantly affect the VIE's economic performance and (2) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. The Company franchises its operations through franchise agreements entered into with franchisees and therefore, the Company does not possess any ownership interests in franchise entities or other affiliates. The franchise agreements are designed to provide the franchisee with key decision-making ability to enable it to oversee its operations and to have a significant impact on the success of the franchise, while the Company’s decision-making rights are related to protecting the Company’s brand. Additionally, the Company held a 1% ownership interest in four public limited partnerships in which the Company served as general partner. The limited partners had substantive kick-out rights over the general partner giving the limited partners power to direct the activities of the limited partnerships. The partnerships were liquidated and dissolved in December 2015. See the Related Party Transactions policy below for more information. Based upon the Company’s analysis of all the relevant facts and considerations of the franchise entities and the four public limited partnerships, the Company has concluded that the franchise agreements are not variable interest entities and the four public limited partnerships were not variable interest entities.
Revenue Recognition 
Revenue Recognition
Company restaurant sales from the operation of company-operated restaurants are recognized when food and service is delivered to customers. Franchise revenue comprise (i) development fees, (ii) franchise fees, (iii) on-going royalties and (iv) renewal fees. Development and franchise fees, portions of which are collected in advance and are non-refundable, received pursuant to individual development agreements, grant the right to develop franchise-operated restaurants in future periods in specific geographic areas. Both development fees and franchise fees are deferred and recognized as revenue when the Company has substantially fulfilled its obligation pursuant to the development agreement. Development fees and franchise fees are generally recognized as revenue upon the opening of a franchise restaurant or upon termination of the development agreement with the franchisee. Deferred development fees and deferred franchise fees, which are included in other non-current liabilities on the consolidated balance sheets totaled $1.3 million and $1.4 million as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively. Royalties from franchise-operated restaurants are based on a percentage of franchise restaurant sales and are recognized in the period the related franchise-operated restaurant sales occur. Renewal fees are recognized when a renewal agreement becomes effective. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities. Promotional allowances totaled approximately $14.2 million during the fifty-two weeks ended January 2, 2018 (Successor), $13.6 million during the fifty-three weeks ended January 3, 2017 (Successor) and $5.8 million and $5.4 million during the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively. Franchise sublease income is comprised of rental income associated with properties leased or subleased to franchisees and is recognized as revenue on an accrual basis.
Gift Cards 
Gift Cards
The Company sells gift cards to customers in its restaurants. The gift cards sold to customers have no stated expiration dates and are subject to potential escheatment laws in the various jurisdictions in which the Company operates. Deferred gift card income totaled $2.5 million and $2.4 million as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively. The current portion of the deferred gift card income is included in other accrued liabilities on the consolidated balance sheets and totaled $1.3 million and $1.2 million as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively. The non-current portion of the deferred gift card income was $1.2 million as of both January 2, 2018 (Successor) and January 3, 2017 (Successor) and is included in other non-current liabilities on the consolidated balance sheets. The Company recognizes revenue from gift cards: (i) when the gift card is redeemed by the customer; or (ii) under the delayed recognition method, when the likelihood of the gift card being redeemed by the customer is remote (gift card breakage) and the Company determines that there is not a legal obligation to remit the unredeemed gift cards to the relevant jurisdiction. The determination of the gift card breakage rate is based upon Company specific historical redemption patterns. Recognized gift card breakage revenue was not significant to any period presented in the consolidated statements of comprehensive income. Any future revisions to the estimated breakage rate may result in changes in the amount of breakage revenue recognized in future periods but is not expected to be significant.
Cash and Cash Equivalents 
Cash and Cash Equivalents
The Company considers short-term, highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Amounts receivable from credit card issuers are typically converted to cash within 2 to 4 days of the original sales transaction and are considered to be cash equivalents.
Accounts and Other Receivables, Net 
Accounts and Other Receivables, Net
Accounts and other receivables, net consist primarily of receivables from franchisees, sublease tenants, a vendor and landlords. Receivables from franchisees include sublease rents, royalties, services and contractual marketing fees associated with the franchise agreements. Sublease tenant receivables relate to subleased properties where the Company is a party and obligated on the primary lease agreement. The vendor receivable is for earned reimbursements from a vendor and the landlord receivables are for earned landlord reimbursement related to restaurants opened. The allowance for doubtful accounts is based on historical experience and a review on a specific identification basis of the collectability of existing receivables and totaled $0.1 million as of both January 2, 2018 (Successor) and January 3, 2017 (Successor).
Vendor Allowances 
Vendor Allowances
The Company receives support from one of its vendors in the form of reimbursements. The reimbursements are agreed upon with the vendor, but do not represent specific, incremental, identifiable costs incurred by the Company in selling the vendor’s products. Such reimbursements are recorded as a reduction of the costs of purchasing the vendor’s products. The non-current portion of reimbursements received by the Company in advance is included in other non-current liabilities on the consolidated balance sheets and totaled $1.1 million and $1.6 million as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively. The current portion of these reimbursements is included in other accrued liabilities on the consolidated balance sheets and totaled $0.4 million as of both January 2, 2018 (Successor) and January 3, 2017 (Successor).
Inventories 
Inventories
Inventories, consisting of food items, packaging and beverages, are valued at the lower of cost (first-in, first-out method) or market.
Property and Equipment 
Property and Equipment
Property and equipment includes land, buildings, leasehold improvements, restaurant and other equipment, and buildings under capital leases. Land, leasehold improvements, property and equipment acquired in business combinations are initially recorded at their estimated fair value. Land, leasehold improvements, property and equipment acquired or constructed in the normal course of business are initially recorded at cost. The Company provides for depreciation and amortization based on the estimated useful lives of assets using the straight-line method.
 
Estimated useful lives for property and equipment are as follows:
 
Buildings
  
20–35 years
Leasehold improvements
  
Shorter of useful life (typically 20 years) or lease term
Buildings under capital leases
  
Shorter of useful life (typically 20 years) or lease term
Restaurant and other equipment
  
3–15 years

The estimated useful lives for leasehold improvements are based on the shorter of the estimated useful lives of the assets or the related lease term, which generally includes reasonably assured option periods expected to be exercised by the Company when the Company would suffer an economic penalty if not exercised. Depreciation and amortization expense associated with property and equipment totaled $21.0 million for the fifty-two weeks ended January 2, 2018 (Successor), $20.6 million for the fifty-three weeks ended January 3, 2017 (Successor) and $10.1 million and $7.1 million for the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively. These amounts include $1.2 million for the fifty-two weeks ended January 2, 2018 (Successor), $1.4 million for the fifty-three weeks ended January 3, 2017 (Successor) and $0.8 million and $0.3 million for the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively, related to buildings under capital leases. Accumulated depreciation and amortization associated with property and equipment includes $2.5 million and $2.2 million related to buildings under capital leases as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively.
The Company capitalizes construction costs which consist of internal payroll and payroll related costs and travel costs related to the successful acquisition, development, design and construction of the Company's new restaurants. Capitalized construction costs totaled $1.6 million for the fifty-two weeks ended January 2, 2018 (Successor), $1.3 million for the fifty-three weeks ended January 3, 2017 (Successor), respectively and $0.5 million for both the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor). If the Company subsequently makes a determination that a site for which development costs have been capitalized will not be acquired or developed, any previously capitalized development costs are expensed and included in general and administrative expenses in the consolidated statements of comprehensive income. The Company capitalizes interest in connection with the construction of its restaurants. Interest capitalized totaled approximately $0.1 million for both the fifty-two weeks ended January 2, 2018 (Successor) and the fifty-three weeks ended January 3, 2017 (Successor) and $25,000 and $40,000 for the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively.
Gains and losses on the disposal of assets are recorded as the difference between the net proceeds received and net carrying values of the assets disposed and are included in loss on disposal of assets, net in the consolidated statements of comprehensive income.
Deferred Financing Costs 
Deferred Financing Costs
Deferred financing costs represent third-party debt costs that are capitalized and amortized to interest expense over the associated term using the effective interest method. Deferred financing costs, along with lender debt discount, are presented net of the related debt balances on the consolidated balance sheets.
Goodwill and Trademarks 
Goodwill and Trademarks
The Company’s goodwill and trademarks are not amortized, but tested annually for impairment and tested more frequently for impairment if events and circumstances indicate that the asset might be impaired. The Company conducts annual goodwill and trademark impairment tests in the fourth quarter of each fiscal year or whenever an indicator of impairment exists.
In assessing potential goodwill impairment, the Company has the option to first assess the qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the fair value of net assets, including goodwill, is less than its carrying amount. If the qualitative factors indicate that it is more likely than not that the fair value of net assets, including goodwill, is less than its carrying amount, the Company performs a two-step impairment test of goodwill. In the first step, the Company estimates the fair value of net assets, including goodwill, and compares it to the carrying value of net assets, including goodwill. If the carrying value exceeds the estimated fair value of net assets, including goodwill, the second step is performed to measure the amount of the impairment loss, if any. In the second step, the amount of the impairment loss is the excess of the carrying amount of the goodwill over its implied fair value.
The methods the Company uses to estimate fair value include discounted future cash flows analysis and market valuation based on similar companies. Key assumptions included in the cash flow model include future revenues, operating costs, working capital changes, capital expenditures and a discount rate that approximates the Company's weighted average cost of capital.
In assessing potential impairments for the fourth quarter test for 2017, the Company performed a qualitative assessment to determine whether it is more likely than not that the fair value of goodwill or indefinite-lived trademark are less than the carrying amount. Upon completion of the fourth quarter 2017 annual impairment assessment, the Company determined that no goodwill or trademark impairment was indicated. As of January 2, 2018, the Company is not aware of any significant indicators of impairment that exist for goodwill or trademark that would require additional analysis.
Intangible Assets, Net 
Intangible Assets, Net
Intangible assets primarily include favorable lease assets and franchise rights. Favorable lease assets represent the fair values of acquired lease contracts having contractual rents that are favorable compared to fair market rents as of the Closing Date of the Business Combination, and are amortized on a straight-line basis over the remaining lease term to expense in the consolidated statements of comprehensive income. Franchise rights, which represent the fair value of franchise agreements based on the projected royalty revenue stream as of the Closing Date of the Business Combination, are amortized on a straight-line basis to depreciation and amortization expense in the consolidated statements of comprehensive income over the remaining term of the franchise agreements.
Other Assets, Net 
Other Assets, Net
Other assets, net consist of security deposits and other capitalized costs. The Company capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use when both the preliminary project stage is completed and it is probable that the software will be used as intended. Capitalized software costs include only (i) external direct costs of materials and services utilized in developing or obtaining computer software, and (ii) compensation and related benefits for employees who are directly associated with the software projects. Capitalized software costs are amortized over the estimated useful life, typically 3 years. The net carrying value of capitalized software costs for the Company totaled $2.1 million and $2.0 million as of January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively, and is included in other assets, net in the consolidated balance sheets. Capitalized software costs totaled $1.0 million for the fifty-two weeks ended January 2, 2018 (Successor), $1.3 million for the fifty-three weeks ended January 3, 2017 (Successor) and $0.6 million and $0.5 million for the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively. Amortization expenses totaled $1.0 million for the fifty-two weeks ended January 2, 2018 (Successor), $0.9 million for the fifty-three weeks ended January 3, 2017 (Successor) and $0.4 million for both the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor).
Long-Lived Assets 
Long-Lived Assets
Long-lived assets, including property and equipment and definite lived intangible assets (other than goodwill and indefinite-lived intangible assets), are reviewed by the Company for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Long-lived assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are independent of the cash flows of other groups of assets. The Company evaluates such cash flows for individual restaurants and franchise agreements on an undiscounted basis. If it is determined that the carrying amounts of such long-lived assets are not recoverable, the assets are written down to their estimated fair values. The Company generally estimates fair value using either the land and building real estate value for the respective restaurant or the discounted value of the estimated cash flows associated with the respective restaurant or agreement.
Rent Expense and Deferred Rent 
Rent Expense and Deferred Rent Liability
The Company has non-cancelable lease agreements for certain restaurant land and buildings under terms ranging up to 35 years, with one to four options to extend the lease generally for five to ten years per option period. At inception, each lease is evaluated to determine whether it will be classified as an operating or capital lease. Certain leases provide for contingent rentals based on percentages of net sales or have other provisions obligating the Company to pay related property taxes and certain other expenses. Contingent rentals are generally based on sales levels in excess of stipulated amounts as defined in the lease agreement, and thus are not considered minimum lease payments and are included in rent expense as incurred. Certain leases contain fixed and determinable escalation clauses for which the Company recognizes rental expense under these leases on the straight-line basis over the lease terms, which includes the period of time from when the Company takes possession of the leased space until the restaurant opening date (the rent holiday period), and the cumulative expense recognized on the straight-line basis in excess of the cumulative payments is included in other non-current liabilities. In addition, the Company subleases certain buildings to franchisees and other unrelated third parties, which are classified as operating leases.
In some cases, the land and building the Company will lease requires construction to ready the space for its intended use, and in certain cases, the Company has involvement with the construction of leased assets. The construction period begins when the Company executes the lease agreement with the landlord and continues until the space is substantially complete and ready for its intended use. In accordance with ASC 840, Leases, the Company must consider the nature and extent of its involvement during the construction period.
The Company may expend cash for structural additions on leased premises that may be reimbursed in whole or in part by landlords as construction contributions pursuant to agreed-upon terms in the leases. Depending on the specifics of the leased space and the lease agreement, the amounts paid for structural components will be recorded during the construction period as construction-in-progress and the landlord construction contributions will be recorded as a deferred rent liability. Upon completion of construction for those leases that meet certain criteria, the lease may qualify for sale-leaseback treatment. For these leases, the deferred rent liability and the associated construction-in-progress will be removed and any gain on sale will be recorded as deferred income and amortized over the lease term to gain on disposal of assets and any loss on sale will be expensed immediately to loss on disposal of assets, net. If the lease does not qualify for sale-leaseback treatment, the deferred rent liability will be reclassified to a deemed landlord financing liability and will be amortized over the lease term based on the rent payments designated in the lease agreement with rent payments applied to deemed landlord financing liability and interest expense.
Unfavorable lease liabilities represent the fair value of acquired lease contracts having contractual rents that are unfavorable compared to fair market rents and are amortized on a straight-line basis over the expected lease term to expense in the consolidated statements of comprehensive income.
Insurance Reserves 
Insurance Reserves
Given the nature of the Company’s operating environment, the Company is subject to workers’ compensation and general liability claims. To mitigate a portion of these risks, the Company maintains insurance for individual claims in excess of deductibles per claim (the Company’s insurance deductibles range from $0.25 million to $0.50 million per occurrence for workers’ compensation and are $0.35 million per occurrence for general liability). The Company is not the primary obligor for its worker's compensation insurance policy. The amount of loss reserves and loss adjustment expenses is determined based on an estimation process that uses information obtained from both Company-specific and industry data, as well as general economic information. Loss reserves are based on estimates of expected losses for determining reported claims and as the basis for estimating claims incurred but not reported. The estimation process for loss exposure requires management to continuously monitor and evaluate the life cycle of claims. Management also monitors the reasonableness of the judgments made in the prior year’s estimation process (referred to as a hindsight analysis) and adjusts current year assumptions based on the hindsight analysis. The Company utilizes actuarial methods to evaluate open claims and estimate the ongoing development exposure related to workers’ compensation and general liability.
Advertising Costs 
Advertising Costs
Franchisees pay a monthly fee to the Company of 4% of their restaurants’ net sales as reimbursement for advertising and promotional services that the Company provides. Fees received in advance of payment for provided services are included in other accrued liabilities and were $0.3 million and $0.7 million at January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively. Company-operated restaurants contribute to the advertising fund on the same basis as franchise-operated restaurants. At January 2, 2018 (Successor) and January 3, 2017 (Successor), the Company had an additional $0.4 million and $1.0 million, respectively, accrued for this requirement.
 
Production costs for radio and television advertising are expensed when the commercials are initially aired. Costs of distribution of advertising are charged to expense on the date the advertising is aired or distributed. These costs, as well as other marketing-related expenses for advertising are included in occupancy and other operating expenses in the consolidated statements of comprehensive income. Advertising expenses for the Company were $18.1 million for the fifty-two weeks ended January 2, 2018 (Successor), $17.2 million for the fifty-three weeks ended January 3, 2017 (Successor) and $7.6 million and $8.7 million for the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor), respectively.
Pre-opening Costs 
Pre-opening Costs
Pre-opening costs, which include restaurant labor, supplies, cash and non-cash rent expense and other costs incurred prior to the opening of a new restaurant are expensed as incurred.
Restaurant Closure Charges, Net 
Restaurant Closure Charges, Net
The Company makes decisions to close restaurants based on their cash flows, anticipated future profitability and leasing arrangements. The Company determines if discontinued operations treatment is appropriate and estimates the future obligations, if any, associated with the closure of restaurants and records the corresponding restaurant closure liability at the time the restaurant is closed. These restaurant closure obligations primarily consist of the liability for the present value of future lease obligations, net of estimated sublease income. Restaurant closure charges, net are comprised of direct costs related to the restaurant closure and initial charges associated with the recording of the liability at fair value, accretion of the restaurant closure liability during the period, any positive or negative adjustments to the restaurant closure liability in subsequent periods as more information becomes available and sublease income from leases which are treated as deemed landlord financing. Changes to the estimated liability for future lease obligations based on new facts and circumstances are considered to be a change in estimate and are recorded prospectively. Accretion expense is recorded in order to appropriately reflect the present value of the lease obligations as of the end of a reporting period. Lease payments net of sublease income received related to these obligations reduce the overall liability. To the extent that the disposal or abandonment of related property and equipment results in gains or losses, such gains or losses are included in loss on disposal of assets, net in the consolidated statements of comprehensive income, except for gains or losses on the disposal of property and equipment related to the 12 underperforming restaurants, which are included in restaurant closure charges, net on the consolidated statements of comprehensive income.
Stock-Based Compensation Expense 
Stock-Based Compensation Expense
The Company measures and recognizes compensation expense for all share-based payment awards made to employees based on their estimated grant date fair values using the Black-Scholes option pricing model for option grants and the closing price of the underlying common stock on the date of the grant for restricted stock awards. Stock-based compensation expense for the Company’s stock-based compensation awards is recognized ratably over the vesting period on a straight-line basis.
Income Taxes 
Income Taxes
The Company uses the liability method of accounting for income taxes. Deferred income taxes are provided for temporary differences between financial statement and income tax reporting, using tax rates scheduled to be in effect at the time the items giving rise to the deferred taxes reverse. The Company recognizes the impact of a tax position in the financial statements if that position is more likely than not of being sustained by the taxing authority. Accordingly, the Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Derivative Instruments and Hedging Activities 
Derivative Instruments and Hedging Activities
The Company is exposed to variability in future cash flows resulting from fluctuations in interest rates related to its variable rate debt. As part of its overall strategy to manage the level of exposure to the risk of fluctuations in interest rates, the Company has used various interest rate contracts including interest rate caps. The Company recognizes all derivative instruments as either assets or liabilities at fair value in the consolidated balance sheets. When they qualify as hedging instruments, the Company designates interest rate caps as cash flow hedges of forecasted variable rate interest payments on certain debt principal balances.
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current earnings.
The Company enters into interest rate derivative contracts with major banks and is exposed to losses in the event of nonperformance by these banks. The Company anticipates, however, that these banks will be able to fully satisfy their obligations under the contracts. Accordingly, the Company does not obtain collateral or other security to support the contracts.
Contingencies 
Contingencies
The Company recognizes liabilities for contingencies when an exposure that indicates it is probable that an asset has been impaired or that a liability has been incurred and the amount of impairment or loss can be reasonably estimated. The Company’s ultimate legal and financial liability with respect to such matters cannot be estimated with certainty and requires the use of estimates. When the reasonable estimate is a range, the recorded loss will be the best estimate within the range. The Company records legal settlement costs when those costs are probable and reasonably estimable.
Comprehensive Income (Loss) 
Comprehensive Income (Loss)
Comprehensive income (loss) includes changes in equity from transactions and other events and circumstances from nonoperational sources, including, among other things, the Company’s unrealized gains and losses on effective interest rate caps which are included in other comprehensive income (loss), net of tax.
Segment Information 
Segment Information
An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, and about which separate financial information is regularly evaluated by the Company’s chief operating decision makers in deciding how to allocate resources. Similar operating segments can be aggregated into a single operating segment if the businesses are similar. Management has determined that the Company has one operating segment, and therefore one reportable segment. The Company’s chief operating decision maker (CODM) is its Chief Executive Officer; its CODM reviews financial performance and allocates resources at a consolidated level on a recurring basis.
Related Party Transactions 
Related Party Transactions
Of the 424,439 warrants purchased during the fifty-two weeks ended January 2, 2018 (Successor), 400,000 warrants were purchased from PW Acquisitions, LP, a related party, at $3.75 per warrant, representing a 5% discount from the closing price of $3.95 per warrant on the transaction date. A member of the Company's Board of Directors is the chief executive officer and managing member of the general partner of PW Acquisitions, LP.
The Company previously entered into long-term leases for 22 Del Taco restaurants whereby the lessors were one of four public partnerships where the Company served as general partner with a 1% ownership interest. The leases required monthly rent payments in an amount equal to 12% of gross sales which were recorded within occupancy and other operating expenses in the consolidated statements of comprehensive income and totaled $1.4 million for both the twenty-six weeks ended December 29, 2015 (Successor) and June 30, 2015 (Predecessor).
The Company recorded a fair value adjustment through the initial purchase price allocation, as described in Note 3, of $1.5 million for the estimated fair value of its investment in the four public partnerships.
On July 24, 2015, the four public partnerships entered into an agreement to sell all of the properties, subject to the approval by a majority in interest of the limited partners in each of the public partnerships, to a third party that is not affiliated with the Company. The sale of the properties included new long-term leases between the Company and the third party buyer and was approved by the respective limited partners on November 23, 2015. On December 14, 2015, the four public partnerships consummated the sale, and were subsequently liquidated and dissolved and the assets of the respective partnerships were distributed pursuant to the terms of their respective partnership agreements. During the twenty-six weeks ended December 29, 2015 (Successor), the Company recorded a gain of $0.2 million, included in other income in the consolidated statements of comprehensive income, based on the approximate $1.8 million distribution received in excess of the $1.6 million carrying value of its investment in the partnerships.
At December 30, 2014 (Predecessor), DTH had $108.1 million of subordinated notes outstanding due to its three largest shareholders that bore interest at 13.0%. On March 20, 2015, DTH used proceeds from the Step 1 of the Business Combination, as described in Note 3, a $10.0 million revolver borrowing and amended term loan proceeds of $25.1 million to fully redeem the then outstanding balance of $111.2 million of subordinated notes. Interest expense related to subordinated notes was $3.1 million for the twenty-six weeks ended June 30, 2015 (Predecessor)
Fair Value of Financial Instruments 
Fair Value of Financial Instruments
The Company measures fair value using the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three tiers in the fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
 
•
Level 1, defined as observable inputs such as quoted prices in active markets;
•
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
•
Level 3, defined as unobservable inputs which reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques may include the use of third-party pricing services, option pricing models, discounted cash flow models and similar techniques.
Concentration of Risks 
Concentration of Risks
Financial instruments that potentially subject the Company to a concentration of credit risk are cash and cash equivalents. The Company maintains its day-to-day operating cash balances in non-interest-bearing accounts. Although the Company at times maintains balances that exceed amounts insured by the Federal Deposit Insurance Corporation, it has not experienced any losses related to these balances and management believes the credit risk to be minimal.
The Company extends credit to franchisees for franchise and advertising fees on customary credit terms, which generally do not require collateral or other security. In addition, management believes there is no concentration of risk with any single franchisee or small group of franchisees whose failure or nonperformance would materially affect the Company’s results of operations.
The Company has entered into a long-term purchase agreement with a distributor for delivery of essentially all food and paper supplies to all company-operated and franchise-operated restaurants except for one location in Guam. Disruption in shipments from this distributor could have a material adverse effect on the results of operations and financial condition of the Company. However, management of the Company believes sufficient alternative distributors exist in the marketplace although it may take some time to enter into replacement distribution arrangements and the cost of distribution may increase as a result.
As of January 2, 2018, Del Taco operated and franchised a total of 373 restaurants in California (252 company-owned and 121 franchise-operated locations). As a result, the Company is particularly susceptible to adverse trends and economic conditions in California. In addition, given this geographic concentration, negative publicity regarding any of the restaurants in California could have a material adverse effect on the Company’s business and operations, as could other regional occurrences such as local strikes, fires, earthquakes or other natural disasters.
Recently Adopted and Recently Issued Accounting Standards 
Recently Adopted Accounting Standards
In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-01, Business Combinations (Topic 804): Clarifying the Definition of a Business. This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether certain transactions should be accounted for as acquisitions or disposals of assets or businesses. The Company elected, as permitted by the standard, to early adopt ASU 2017-01 in the third quarter of 2017. The adoption of ASU 2017-01 did not have a material impact to the Company's consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which is intended to simplify various aspects of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. This standard is effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period, with early adoption permitted. As ASU 2016-09 requires recognition of certain tax benefits associated with stock-based compensation on a discrete basis, the Company anticipates that its effective tax rate may vary from quarter to quarter depending on the Company’s stock price in each period. The Company anticipates that ASU 2016-09 will potentially increase or lower its effective tax rate, relative to the U.S. statutory rate, depending on the amount of stock-based compensation deductible for tax related to the vesting of restricted stock awards or exercise of stock options as compared to cumulative stock-based compensation recorded. The Company adopted ASU 2016-09 during the first fiscal quarter of 2017. The Company will continue to estimate forfeitures.
Recently Issued Accounting Standards
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact of the standard on its consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The standard simplifies the subsequent measurement of goodwill, requiring only a single-step quantitative test to identify and measure impairment based on the excess of a reporting unit's carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. This standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The standard requires adoption on a prospective basis. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-04, Liabilities-Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products, which is designed to provide guidance and eliminate diversity in the accounting for the derecognition of financial liabilities related to certain prepaid stored-value products using a revenue-like breakage model. This standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. This standard is to be applied retrospectively or using a cumulative effect transition method as of the date of adoption. The Company is currently evaluating the impact of the standard on its consolidated financial statements and related disclosures as well as the expected adoption method.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance will result in key changes to lease accounting and will aim to bring leases onto balance sheets to give investors, lenders, and other financial statement users a more comprehensive view of a company's long-term financial obligations as well as the assets it owns versus leases. The new leasing standard will be effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years. The new guidance requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with certain practical expedients available. Based on a preliminary assessment, the Company expects that substantially all of its operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a material increase in the assets and liabilities on the Company's consolidated balance sheets. The Company is continuing its evaluation, which may identify additional impacts this standard will have on its consolidated financial statements and related disclosures. The Company will adopt ASU 2016-02 during the first quarter of fiscal 2019.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a comprehensive new revenue recognition model that requires a company to recognize revenue in an amount that reflects the consideration it expects to receive for the transfer of promised goods or services to its customers. The standard also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This ASU is effective for annual periods and interim periods beginning after December 15, 2017. ASU 2014-09 is to be applied retrospectively or using a cumulative effect transition method. The Company will adopt ASU 2014-09 in fiscal year 2018, using the modified retrospective method of adoption.
ASU 2014-09 will not materially impact the recognition of company restaurant sales or franchise royalty income from franchisees included in franchise revenue. Franchise sublease income is not within the scope of this new guidance.
The adoption of ASU 2014-09 will change the timing of the recognition of initial franchise fees, including franchise and development fees, and renewal fees, both included in franchise revenue in the consolidated statements of comprehensive income. Currently, initial franchise fees are recognized when all material obligations have been performed and conditions have been satisfied, typically when operations of a new franchise restaurant have commenced, and renewal fees are recognized when a renewal agreement becomes effective. ASU 2014-09 requires franchise and renewal fees to be deferred and recognized over the term of the related franchise agreement for the respective restaurant. The impact of the deferral of initial franchise and renewal fees received in a given year may be offset by the recognition of revenue from fees retrospectively deferred from prior years. Upon adoption, the Company will record approximately $1.0 million as a cumulative effect adjustment to opening retained earnings and deferred revenue as of January 3, 2018 (the first day of fiscal 2018) related to franchise and renewal fees previously recognized since the Business Combination on June 30, 2015. During fiscal 2017 and 2016, the Company recorded initial franchise and renewal fees of $0.6 million and $0.3 million, respectively, as component of franchise revenue in the consolidated statements of comprehensive income.
The adoption of the new guidance will change the reporting of advertising fund contributions from franchisees and the related advertising fund expenditures, which are not currently included in the consolidated statements of comprehensive income. ASU 2014-09 requires these advertising fund contributions and expenditures to be reported on a gross basis in the consolidated statements of comprehensive income, which will have an impact to our total revenues and expenses. However, the Company expects such advertising fund contributions and expenditures will be largely offsetting and therefore does not expect a significant impact on its reported net income. Franchise contributions to the Company's advertising programs for fiscal 2017 and 2016 were $12.7 million and $12.1 million, respectively.
Additionally, certain other franchise expenses have been recorded net of the related fees received from franchisees. Under ASU 2014-09, the Company will include these revenues and expenditures on a gross basis within the consolidated statements of comprehensive income. While this change will materially impact the gross amount of reported franchise revenue and related expenses on the consolidated statements of comprehensive income, the impact will be an offsetting increase to both revenue and expense such that there will not be a significant, if any, impact on operating income and net income. Other franchise fees received from franchisees for fiscal 2017 and 2016 were $0.8 million and $0.8 million, respectively.
Basis of Presentation and Summary of Significant Accounting Policies (Tables)
Schedule of Property and Equipment Estimated Useful Lives 
Estimated useful lives for property and equipment are as follows:
 
Buildings
  
20–35 years
Leasehold improvements
  
Shorter of useful life (typically 20 years) or lease term
Buildings under capital leases
  
Shorter of useful life (typically 20 years) or lease term
Restaurant and other equipment
  
3–15 years
Property and equipment, net at January 2, 2018 (Successor) and January 3, 2017 (Successor) consisted of the following (in thousands):
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
Land
 
$
9,800

 
$
13,919

Buildings
 
2,325

 
3,391

Restaurant and other equipment
 
74,075

 
58,699

Leasehold improvements
 
100,192

 
78,739

Buildings under capital leases
 
4,625

 
5,433

Restaurant property leased to others
 
3,090

 
—

Construction-in-progress
 
11,905

 
8,703

 
 
206,012

 
168,884

Less: Accumulated depreciation
 
(49,888
)
 
(30,564
)
Property and Equipment, Net
 
$
156,124

 
$
138,320

Estimated Future Amortization for Lease Liabilities 
The estimated future amortization for unfavorable lease liabilities for the next five fiscal years is as follows (in thousands):
 
 
Unfavorable Lease Liabilities
2018
 
$
2,273

2019
 
2,055

2020
 
1,913

2021
 
1,630

2022
 
1,452

Business Combination (Tables)
Summary of Merger Consideration Paid to DTH Stockholders (except for the Levy Newco Parties) 
The following summarizes the merger consideration paid to DTH stockholders (except for the Levy Newco Parties) (in thousands):
 
Calculation of
Purchase Price
Cash consideration paid (1)
$
105,164

Value of share consideration issued (2)
69,305

Fair value of equity interests acquired in Step 1 (3)
120,000

Less: Transaction expenses paid by the Company (1)
(10,164
)
Total purchase price
$
284,305

 
(1)
Each issued and outstanding share of DTH stock held by DTH stockholders other than the Levy Newco Parties was converted into the right to receive the per share merger consideration, which equaled $38.84 per DTH share, payable in cash and the Company’s common stock. Cash consideration was paid with respect to all common stock of DTH except for shares held by the Levy Newco Parties. The aggregate amount of cash consideration paid directly to DTH stockholders was $95 million. Total cash consideration paid also included $10.2 million of expenses paid by the Company for the closing of Step 2.
(2)
The stock merger consideration consisted of the Company’s common stock issued to DTH stockholders as part of the merger consideration in exchange for shares of DTH common stock. Company shares exchanged for the DTH shares held by the Levy Newco Parties are discussed in (3) below. The following summarizes the number of shares of the Company’s common stock issued to DTH stockholders other than the Levy Newco Parties:
(in thousands, except share and per share data)
Calculation of
Share
Consideration
Number of shares issued
4,553,540

Value per share as of June 30, 2015
$
15.22

Value of share consideration transferred
$
69,305

 
(3)
The Company exchanged its common stock for DTH shares held by the Levy Newco Parties acquired in Step 1. The Transactions were accounted for as related events transferring control of DTH to the Company through a minority investment in Step 1 and a controlling interest in Step 2. The Levy Newco Parties’ shares of DTH common stock were exchanged for shares of the Company’s common stock in the Business Combination, but represent a previously held equity interest in an acquired company. The previously held equity interest had the same value as its $120 million purchase price.
Schedule of Preliminary Allocation of Purchase Price to Tangible and Identifiable Intangible Assets Acquired and Liabilities Assumed Based on Fair Value 
The Company recorded an allocation of the purchase price to DTH’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair value as of the Closing Date. The final purchase price allocation is as follows (in thousands):
 
 
Purchase Price
Allocation
Cash and cash equivalents
$
5,173

Accounts receivable and other receivables
3,228

Inventories
2,541

Prepaid expenses and other current assets
4,266

Total current assets
15,208

Property and equipment
105,524

Intangible assets
250,490

Other assets
4,194

Total identifiable assets acquired
375,416

Accounts payable
(18,866
)
Other accrued liabilities
(26,607
)
Current portion of capital lease obligations and deemed landlord financing liabilities
(1,670
)
Long-term debt, capital lease obligations and deemed landlord financing liabilities
(246,562
)
Deferred income taxes
(80,254
)
Other long-term liabilities
(36,208
)
Net identifiable liabilities assumed
(34,751
)
Goodwill
319,056

Total gross consideration
$
284,305

Schedule of Preliminary Values Allocated to Intangible Assets and Useful Lives 
The final values allocated to intangible assets and the useful lives are as follows (in thousands):
 
 
Fair Value
 
Useful life
Favorable lease assets and other intangible assets
 
$
14,290

 
0.6 to 19 years
Trademarks
 
220,300

 
Indefinite
Franchise agreements
 
15,900

 
0.1 to 40 years
Total intangible assets
 
$
250,490

 
 
Unfavorable lease liabilities (1)
 
$
(23,652
)
 
1.5 to 19 years
Weighted average life of definite-lived intangibles
 
 
 
11 years
 
(1)
Included in other non-current liabilities on the consolidated balance sheets.
Property and Equipment, Net (Tables)
Schedule of Property and Equipment
Estimated useful lives for property and equipment are as follows:
 
Buildings
  
20–35 years
Leasehold improvements
  
Shorter of useful life (typically 20 years) or lease term
Buildings under capital leases
  
Shorter of useful life (typically 20 years) or lease term
Restaurant and other equipment
  
3–15 years
Property and equipment, net at January 2, 2018 (Successor) and January 3, 2017 (Successor) consisted of the following (in thousands):
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
Land
 
$
9,800

 
$
13,919

Buildings
 
2,325

 
3,391

Restaurant and other equipment
 
74,075

 
58,699

Leasehold improvements
 
100,192

 
78,739

Buildings under capital leases
 
4,625

 
5,433

Restaurant property leased to others
 
3,090

 
—

Construction-in-progress
 
11,905

 
8,703

 
 
206,012

 
168,884

Less: Accumulated depreciation
 
(49,888
)
 
(30,564
)
Property and Equipment, Net
 
$
156,124

 
$
138,320

Summary of Refranchsing and Franchise Acquisitions (Tables)
Summary of refranchising 
The following table provides detail of the related gain recognized during the fifty-two weeks ended January 2, 2018 (Successor) (dollars in thousands):
 
 
Successor
 
 
52 Weeks Ended January 2, 2018
Company-operated restaurants sold to franchisees
 
5
 
 
 
Proceeds from the sale of company-operated restaurants
 
$
2,192

Net assets sold (primarily furniture, fixtures and equipment)
 
(1,261
)
Goodwill related to the company-operated restaurants sold to franchisees
 
(247
)
Net unfavorable lease liabilities (a)
 
(548
)
Other costs
 
(5
)
Gain on sale of company-operated restaurants (b)
 
$
131

(a) The Company recorded favorable lease assets of $0.1 million and unfavorable lease liabilities of $0.6 million as a result of subleasing land, buildings and leasehold improvements to franchisees, in connection with the sale of company-operated restaurants.
(b) Included in loss on disposal of assets, net on the consolidated statements of comprehensive income.
Business Combination 
The following table provides detail of the combined acquisitions for the fifty-two weeks ended January 2, 2018 (Successor) and the fifty-three weeks ended January 3, 2017 (dollars in thousands):

 
 
Successor
 
 
52 Weeks Ended January 2, 2018
 
53 Weeks Ended January 3, 2017
Franchise-operated restaurants acquired from franchisees
 
1
 
6
 
 
 
 
 
Goodwill
 
$
860

 
$
969

Property and equipment
 
360

 
821

Land and building
 
—

 
2,127

Unfavorable lease liability
 
(85
)
 
—

Liabilities assumed
 
(7
)
 
(26
)
Total Consideration
 
$
1,128

 
$
3,891

Goodwill and Other Intangible Assets (Tables)
Schedule of Changes in Carrying Amount of Goodwill 
Changes in the carrying amount of goodwill for the fifty-two weeks ended January 2, 2018 (Successor) are as follows (in thousands):
 
 
 
Goodwill
Balance as of January 3, 2017 (Successor)
$
320,025

Sale of company-operated restaurants
(247
)
Acquisition of franchise-operated restaurants
860

Balance as of January 2, 2018 (Successor)
$
320,638

Schedule of Other Intangible Assets 
The Company’s other intangible assets at January 2, 2018 (Successor) and January 3, 2017 (Successor) consisted of the following (in thousands):
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
 
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Favorable lease assets
 
$
13,744

 
$
(4,442
)
 
$
9,302

 
$
14,176

 
$
(2,996
)
 
$
11,180

Franchise rights
 
15,284

 
(3,282
)
 
12,002

 
15,489

 
(2,038
)
 
13,451

Reacquired franchise rights
 
243

 
(49
)
 
194

 
161

 
(10
)
 
151

Total amortized other intangible assets
 
$
29,271

 
$
(7,773
)
 
$
21,498

 
$
29,826

 
$
(5,044
)
 
$
24,782

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense 
The estimated future amortization for favorable lease assets and franchise rights for the next five fiscal years is as follows (in thousands):

 
 
Favorable Lease Assets
 
Franchise Rights
2018
 
$
1,722

 
$
1,293

2019
 
1,447

 
1,255

2020
 
1,171

 
1,186

2021
 
1,005

 
1,074

2022
 
922

 
973

Debt, Obligations Under Capital Leases and Deemed Landlord Financing Liabilities (Tables)
Schedule of Debt 
The Company’s debt, obligations under capital leases and deemed landlord financing liabilities at January 2, 2018 (Successor) and January 3, 2017 (Successor) consisted of the following (in thousands): 
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
2015 Senior Credit Facility, net of debt discount of $747 and $1,035 and deferred financing costs of $252 and $349 at January 2, 2018 (Successor) and January 3, 2017 (Successor), respectively
 
$
152,001

 
$
157,616

Total outstanding indebtedness
 
152,001

 
157,616

Obligations under capital leases and deemed landlord financing liabilities
 
20,053

 
17,715

Total debt, net
 
172,054

 
175,331

Less: amounts due within one year
 
1,415

 
1,588

Total amounts due after one year, net
 
$
170,639

 
$
173,743

 
Schedule of Maturities of Debt 
Based on debt agreements and leases in place as of January 2, 2018 (Successor), future maturities of debt, obligations under capital leases and deemed landlord financing liabilities were as follows (in thousands):
 
2018
 
$
1,415

2019
 
988

2020
 
153,847

2021
 
804

2022
 
791

Thereafter
 
15,208

Total maturities
 
173,053

Less: debt discount and deferred financing costs
 
(999
)
Total debt, net
 
$
172,054

Fair Value Measurements (Tables)
Summary of Estimated Fair Values of Long-term Debt Instruments, Warrant Liability and Interest Rate Cap Agreement 
The following is a summary of the estimated fair values for the long-term debt instruments (in thousands):
 
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
 
 
Estimated
Fair Value
 
Book Value
 
Estimated
Fair Value
 
Book Value
2015 Senior Credit Facility
 
$
152,001

 
$
152,001

 
$
157,616

 
$
157,616

Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis 
The Company’s assets and liabilities measured at fair value on a recurring basis as of January 2, 2018 (Successor) and January 3, 2017 (Successor) were as follows (in thousands):
 
January 2, 2018
 
Markets for Identical Assets
(Level 1)
 
Observable Inputs (Level 2)
 
Unobservable Inputs (Level 3)
2016 Interest Rate Cap Agreement
$
332

 
$
—

 
$
332

 
$
—

Total assets measured at fair value
$
332

 
$
—

 
$
332

 
$
—

 
 
 
 
 
 
 
 
 
January 3, 2017
 
Markets for Identical Assets (Level 1)
 
Observable Inputs (Level 2)
 
Unobservable Inputs (Level 3)
2016 Interest Rate Cap Agreement
$
598

 
$
—

 
$
598

 
$
—

Total assets measured at fair value
$
598

 
$
—

 
$
598

 
$
—

Other Accrued Liabilities and Other Non-current Liabilities (Tables)
Summary of Other Accrued Liabilities 
A summary of other accrued liabilities follows (in thousands):
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
Employee compensation and related items
 
$
12,945

 
$
13,783

Accrued insurance
 
7,232

 
8,192

Accrued sales tax
 
3,987

 
3,916

Accrued real property tax
 
1,331

 
1,274

Restaurant closure liability
 
794

 
875

Accrued advertising
 
728

 
1,657

Other
 
8,240

 
6,956

 
 
$
35,257

 
$
36,653

Summary of Other Non-current Liabilities 
A summary of other non-current liabilities follows (in thousands):
 
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
Unfavorable lease liabilities
 
$
14,469

 
$
17,072

Insurance reserves
 
5,965

 
4,269

Deferred rent liability
 
2,972

 
1,676

Restaurant closure liabilities
 
2,030

 
2,263

Deferred development and initial franchise fees
 
1,335

 
1,385

Deferred gift card income
 
1,234

 
1,182

Unearned trade discount, non-current
 
1,149

 
1,596

Other
 
2,277

 
697

 
 
$
31,431

 
$
30,140

Stock-Based Compensation (Tables)
Nonvested Restricted Stock Shares Activity 
A summary of outstanding and unvested restricted stock activity as of January 2, 2018 (Successor) and changes during the period from January 3, 2017 (Successor) through January 2, 2018 (Successor) are as follows:
 
 
Shares
 
Weighted-Average
Grant Date
Fair Value
Nonvested at January 3, 2017 (Successor)
 
1,133,822

 
$
10.40

Granted
 
534,690

 
13.64

Vested
 
(397,727
)
 
10.60

Forfeited
 
(181,875
)
 
10.34

Nonvested at January 2, 2018 (Successor)
 
1,088,910

 
$
11.92

Summary of Outstanding and Unvested Restricted Stock Activity 
A summary of RSUs activity as of June 30, 2015 (Predecessor) and changes during the period from December 30, 2014 to June 30, 2015 (Predecessor) are as follows:
 
 
Shares
 
Weighted-Average Grant Date Fair Value
Nonvested at December 30, 2014 (Predecessor)
 
94,100

 
25.00

Granted
 
—

 
—

Vested
 
(94,100
)
 
25.00

Forfeited
 
—

 
—

Nonvested at June 30, 2015 (Predecessor)
 
—

 
$
—

Summary of Stock Options Activity 
A summary of stock option activity as of January 2, 2018 (Successor) and changes during the period from January 3, 2017 (Successor) through January 2, 2018 (Successor) are as follows:
 
 
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (in Years)
 
Aggregate Intrinsic Value
(in thousands)
Options outstanding at January 3, 2017 (Successor)
 
334,500

 
$
9.94

 
6.1
 
$
1,464

Granted
 
132,000

 
13.74

 

 

Exercised
 
(9,750
)
 
10.13

 

 

Forfeited / Expired
 
(39,750
)
 
10.98

 

 

Options outstanding at January 2, 2018 (Successor)
 
417,000

 
$
11.04

 
5.5
 
$
641

Options exercisable at January 2, 2018 (Successor)
 
121,498

 
$
10.12

 
4.8
 
$
242

Options exercisable and expected to vest at January 2, 2018 (Successor)
 
393,747

 
$
11.00

 
5.4
 
$
614

A summary of stock option activity as of June 30, 2015 (Predecessor) and changes during the period from December 30, 2014 to June 30, 2015 (Predecessor) are as follows:
 
 
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (in Years)
 
Aggregate Intrinsic Value
(in thousands)
Options outstanding at December 30, 2014 (Predecessor)
 
90,000

 
23.10

 
8.7

 
1,400

Granted
 
—

 
—

 


 

Exercised
 
(90,000
)
 
23.10

 


 

Forfeited
 
—

 
—

 


 

Options outstanding at June 30, 2015 (Predecessor)
 
—

 
$
—

 
—

 
$
—

Options exercisable at June 30, 2015 (Predecessor)
 
—

 
$
—

 
—

 
$
—

Options exercisable and expected to vest at June 30, 2015 (Predecessor)
 
—

 
$
—

 
—

 
$
—

Assumptions Used in Option-pricing Valuation 
The following table reflects the weighted-average assumptions used in the Black-Scholes option-pricing model to value the stock options granted in the fifty-two weeks ended January 2, 2018 (Successor), the fifty-three weeks ended January 3, 2017 (Successor) and the twenty-six weeks ended December 29, 2015 (Successor):
 
 
Successor
 
 
52 Weeks Ended
January 2, 2018
 
53 Weeks Ended
January 3, 2017
 
26 Weeks Ended
December 29, 2015
Expected volatility
 
36.09
%
 
37.64
%
 
38.01
%
Risk-free rate of return
 
1.86
%
 
1.12
%
 
1.84
%
Expected life (in years)
 
4.75

 
5.50

 
5.50

Dividend yield
 
—

 
—

 
—

Fair value per share at date of grant
 
$
4.63

 
$
3.31

 
$
3.93

Earnings per Share (Tables)
Schedule of Basic and Diluted Net Income (Loss) Per Share Data
Below are basic and diluted net income per share for the periods indicated (amounts in thousands except share and per share data):
 
 
 
Successor
 
 
Predecessor
 
 
52 Weeks Ended
 
53 Weeks Ended
 
26 Weeks Ended
 
 
26 Weeks Ended
 
 
January 2, 2018
 
January 3, 2017
 
December 29, 2015
 
 
June 30, 2015
Numerator:
 
 
 
 
 
 
 
 
 
Net income
 
$
49,871

 
$
20,913

 
$
2,653

 
 
$
2,104

Denominator:
 
 
 
 
 
 
 
 
 
Weighted-average shares outstanding - basic
 
38,689,508

 
38,725,541

 
38,802,425

 
 
5,492,417

Dilutive effect of restricted shares and RSUs
 
417,371

 
263,003

 
744

 
 
13,972

Dilutive effect of stock options
 
28,931

 
—

 
—

 
 
93,634

Dilutive effect of warrants
 
814,097

 
286,105

 
1,446,824

 
 
10,836

Weighted-average shares outstanding - diluted
 
39,949,907

 
39,274,649

 
40,249,993

 
 
5,610,859

Net income per share - basic
 
$
1.29

 
$
0.54

 
$
0.07

 
 
$
0.38

Net income per share - diluted
 
$
1.25

 
$
0.53

 
$
0.07

 
 
$
0.37

Antidilutive options, unvested restricted stock awards, unvested RSUs and warrants excluded from the computations
 
69,722

 
8,343,842

 
5,365

 
 
—

Income Taxes (Tables)
Schedule of Components of Income Tax Expense (Benefit) 
The component of the provision for income taxes are as follows (in thousands):
 
 
Successor
 
 
Predecessor
 
 
52 Weeks Ended
 
53 Weeks Ended
 
26 Weeks Ended
 
 
26 Weeks Ended
 
 
January 2, 2018
 
January 3, 2017
 
December 29, 2015
 
 
June 30, 2015
Current:
 
 
 
 
 
 
 
 
 
Federal
 
$
5,884

 
$
4,204

 
$
—

 
 
$
110

State
 
886

 
270

 
24

 
 
79

 
 
6,770

 
4,474

 
24

 
 
189

Deferred:
 
 
 
 
 
 
 
 
 
Federal
 
(24,636
)
 
7,145

 
(90
)
 
 
15

State
 
2,042

 
3,710

 
178

 
 
536

 
 
(22,594
)
 
10,855

 
88

 
 
551

Income tax (benefit) provision
 
$
(15,824
)
 
$
15,329

 
$
112

 
 
$
740

Schedule of Effective Income Tax Rate Reconciliation 
The difference between the effective rates and the statutory federal income tax rate is composed of the following items (dollars in thousands):
 
 
Successor
 
 
Predecessor
 
 
52 Weeks Ended
 
 
 
53 Weeks Ended
 
 
 
26 Weeks Ended
 
 
 
 
26 Weeks Ended
 
 
 
 
January 2, 2018
 
 
 
January 3, 2017
 
 
 
December 29, 2015
 
 
 
 
June 30, 2015
 
 
Federal income taxes
 
$
11,916

 
35.0
 %
 
$
12,685

 
35.0
 %
 
$
968

 
35.0
 %
 
 
$
995

 
35.0
 %
State and local income taxes, net of federal tax benefit
 
1,688

 
5.0
 %
 
1,882

 
5.2
 %
 
280

 
10.1
 %
 
 
435

 
15.3
 %
Targeted job credits
 
(420
)
 
(1.2
)%
 
(448
)
 
(1.2
)%
 
(512
)
 
(18.5
)%
 
 
(34
)
 
(1.2
)%
Warrant liability
 
—

 
—
 %
 
—

 
—
 %
 
—

 
—
 %
 
 
(12
)
 
(0.4
)%
Investment in subsidiary
 
—

 
—
 %
 
570

 
1.6
 %
 
83

 
3.0
 %
 
 
383

 
13.5
 %
Change in valuation allowance
 
—

 
—
 %
 
—

 
—
 %
 
(1,927
)
 
(69.7
)%
 
 
(2,805
)
 
(98.6
)%
Tax reform
 
(29,111
)
 
(85.5
)%
 
—

 
—
 %
 
—

 
—
 %
 
 
—

 
—
 %
Transaction costs
 
—

 
—
 %
 
227

 
0.6
 %
 
1,194

 
43.2
 %
 
 
2,255

 
79.3
 %
Permanent tax differences and other
 
103

 
0.2
 %
 
413

 
1.1
 %
 
26

 
1.0
 %
 
 
(477
)
 
(16.9
)%
Income tax (benefit) provision
 
$
(15,824
)
 
(46.5
)%
 
$
15,329

 
42.3
 %
 
$
112

 
4.1
 %
 
 
$
740

 
26.0
 %
Schedule of Deferred Tax Assets and Liabilities 
Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):
 
 
Successor
 
 
January 2, 2018
 
January 3, 2017
Deferred tax assets:
 
 
 
 
Deferred rent
 
$
741

 
$
630

Accrued insurance
 
3,332

 
4,699

Reserve for restructuring and closed restaurants
 
763

 
1,252

Net operating loss carryforwards and tax credits
 
485

 
988

Deferred income
 
1,069

 
1,801

Stock-based compensation
 
767

 
919

Accrued compensation
 
472

 
2,897

Other, net
 
355

 
650

Deferred tax assets
 
7,984

 
13,836

Less valuation allowance
 
—

 
—

Net deferred tax assets
 
7,984

 
13,836

Deferred tax liabilities:
 
 
 
 
Property, equipment and intangibles
 
(67,696
)
 
(96,929
)
Investment in subsidiary
 
(7,420
)
 
(6,045
)
Prepaid expenses
 
(1,442
)
 
(2,135
)
Deferred tax liabilities
 
(76,558
)
 
(105,109
)
Net deferred tax liabilities
 
$
(68,574
)
 
$
(91,273
)
Schedule of Unrecognized Tax Benefits 
The following table summarizes the changes to unrecognized tax positions (in thousands):
 
 
Successor
 
 
Predecessor
 
 
52 Weeks Ended
 
53 Weeks Ended
 
26 Weeks Ended
 
 
26 Weeks Ended
 
 
January 2,
2018
 
January 3,
2017
 
December 29,
2015
 
 
June 30,
2015
Balance at beginning of period
 
$
212

 
$
212

 
$
212

 
 
$
—

Increases (decreases) related to prior year tax positions
 
—

 
—

 
—

 
 
—

Increases (decreases) related to current year tax positions
 
—

 
—

 
—

 
 
212

Expiration of the statute of limitations for the assessment of taxes
 
—

 
—

 
—

 
 
—

Settlements
 
—

 
—

 
—

 
 
—

Balance at end of period
 
$
212

 
$
212

 
$
212

 
 
$
212

Leases (Tables)
Schedule of Rent Expense 
Franchise sublease income which includes minimum rent, percentage rent, real estate taxes and common area maintenance are classified separately under franchise sublease income on the consolidated statements of comprehensive income. Franchise sublease expenses which include minimum rent, percentage rent, real estate taxes and common area maintenance are classified separately under occupancy and other – franchise subleases on the consolidated statements of comprehensive income. Total franchise sublease income and franchise sublease expense for the Company comprise the following (in thousands):
 
 
Successor
 
 
Predecessor
 
 
52 Weeks Ended
 
53 Weeks Ended
 
26 Weeks Ended
 
 
26 Weeks Ended
 
 
January 2, 2018
 
January 3, 2017
 
December 29, 2015
 
 
June 30, 2015
Sublease rent income
 
$
(2,844
)
 
$
(2,343
)
 
$
(1,183
)
 
 
$
(1,183
)
Sublease rent expense
 
2,608

 
2,207

 
1,140

 
 
1,109

Sublease rent income includes contingent rentals based on sales totaling $0.1 million during both the fifty-two weeks ended January 2, 2018 (
Schedule of Future Minimum Rental Payments for Operating Leases 
Minimum rental commitments and sublease minimum rental receipts as of January 2, 2018 (Successor), under capital and operating leases having an initial non-cancelable term of one year or more are shown in the following table (in thousands):
 
 
Rental Payments
 
Rental Receipts
 
 
 
 
Capital Lease and Deemed Landlord Financing Liabilities
 
Operating Leases
 
Operating Subleases
 
Net Lease Commitments
2018
 
$
3,600

 
$
31,763

 
$
(2,763
)
 
$
32,600

2019
 
3,102

 
29,471

 
(2,794
)
 
29,779

2020
 
2,858

 
27,558

 
(2,644
)
 
27,772

2021
 
2,727

 
26,082

 
(2,619
)
 
26,190

2022
 
2,597

 
24,052

 
(2,604
)
 
24,045

Thereafter
 
28,808

 
147,544

 
(20,188
)
 
156,164

Total minimum lease payments
 
$
43,692

 
$
286,470

 
$
(33,612
)
 
$
296,550

Imputed interest
 
(23,639
)
 
 
 
 
 
 
Present value of payments
 
$
20,053

 
 
 
 
 
 
Schedule of Future Minimum Lease Payments for Capital Leases 
Minimum rental commitments and sublease minimum rental receipts as of January 2, 2018 (Successor), under capital and operating leases having an initial non-cancelable term of one year or more are shown in the following table (in thousands):
 
 
Rental Payments
 
Rental Receipts
 
 
 
 
Capital Lease and Deemed Landlord Financing Liabilities
 
Operating Leases
 
Operating Subleases
 
Net Lease Commitments
2018
 
$
3,600

 
$
31,763

 
$
(2,763
)
 
$
32,600

2019
 
3,102

 
29,471

 
(2,794
)
 
29,779

2020
 
2,858

 
27,558

 
(2,644
)
 
27,772

2021
 
2,727

 
26,082

 
(2,619
)
 
26,190

2022
 
2,597

 
24,052

 
(2,604
)
 
24,045

Thereafter
 
28,808

 
147,544

 
(20,188
)
 
156,164

Total minimum lease payments
 
$
43,692

 
$
286,470

 
$
(33,612
)
 
$
296,550

Imputed interest
 
(23,639
)
 
 
 
 
 
 
Present value of payments
 
$
20,053

 
 
 
 
 
 
Quarterly Financial Data (Unaudited) (Tables)
Schedule of Quarterly Financial Information
Summarized unaudited quarterly financial data (amounts in thousands except share and per share data):
 
 
Successor
 
 
 
16 Weeks Ended
 
12 Weeks Ended
 
Fiscal Year 2017
 
January 2, 2018
 
September 12, 2017
 
June 20, 2017
 
March 28, 2017
 
Total revenue
 
$
146,542

 
$
110,988

 
$
108,581

 
$
105,345

 
Income from operations
 
12,825

 
9,533

 
10,276

 
8,613

 
Net income
 
35,202

 
5,101

 
5,330

 
4,238

 
Earnings per share:
 
 
 
 
 
 
 
 
 
Basic
 
$
0.91

 
$
0.13

 
$
0.14

 
$
0.11

 
Diluted
 
$
0.89

 
$
0.13

 
$
0.13

 
$
0.10

 

 
 
Successor
 
 
 
17 Weeks Ended
 
12 Weeks Ended
 
Fiscal Year 2016
 
January 3, 2017
 
September 6, 2016
 
June 14, 2016
 
March 22, 2016
 
Total revenue
 
$
150,235

 
$
104,419

 
$
100,026

 
$
97,403

 
Income from operations
 
15,927

 
10,927

 
9,706

 
6,740

 
Net income
 
8,039


4,949

(1) 
4,864

(2) 
3,061

(3 
) 
Earnings per share:
 
 
 
 
 
 
 
 
 
Basic
 
$
0.21

 
$
0.13

 
$
0.13

 
$
0.08

 
Diluted
 
$
0.20

 
$
0.13

 
$
0.13

 
$
0.08

 
_______________________________________________
(1) Includes transaction-related costs of $0.5 million.
(2) Includes transaction-related costs of $0.1 million.
(3) Includes transaction-related costs of $0.1 million.
Description of Business - Additional Information (Detail)
0 Months Ended
Mar. 12, 2015
Jan. 2, 2018
state
Jan. 3, 2017
state
Dec. 29, 2015
restaurant
Franchisor Disclosure [Line Items]
 
 
 
 
Number of restaurants
 
 
 
22 
Number of states in which entity operates
 
14 
15 
 
Stock purchase agreement date
Mar. 12, 2015 
 
 
 
Entity operated units
 
 
 
 
Franchisor Disclosure [Line Items]
 
 
 
 
Number of restaurants
 
312 
310 
 
Franchised units
 
 
 
 
Franchisor Disclosure [Line Items]
 
 
 
 
Number of restaurants
 
252 
241 
 
Franchised units |
GUAM
 
 
 
 
Franchisor Disclosure [Line Items]
 
 
 
 
Number of restaurants
 
1 
1 
 
Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
4 Months Ended 12 Months Ended 12 Months Ended 0 Months Ended 4 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 12 Months Ended 6 Months Ended 0 Months Ended
Jan. 2, 2018
location
Jan. 2, 2018
Segment
vendor
Jan. 3, 2017
Dec. 29, 2015
partnership
restaurant
Mar. 31, 2015
Jan. 2, 2018
Entity operated units
restaurant
Jan. 3, 2017
Entity operated units
restaurant
Jan. 2, 2018
Franchised units
restaurant
Jan. 3, 2017
Franchised units
restaurant
Jan. 2, 2018
CALIFORNIA
restaurant
Jan. 2, 2018
CALIFORNIA
Entity operated units
restaurant
Jan. 2, 2018
CALIFORNIA
Franchised units
restaurant
Jan. 2, 2018
Minimum
renewal
Jan. 2, 2018
Maximum
renewal
Jan. 2, 2018
Capitalized software
Jan. 2, 2018
Buildings under capital leases
Jan. 2, 2018
Restaurant and other equipment
Minimum
Jan. 2, 2018
Restaurant and other equipment
Maximum
Dec. 14, 2015
Successor
partnership
Jul. 24, 2015
Successor
Dec. 29, 2015
Successor
location
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Jan. 2, 2018
Successor
Entity operated units
Jan. 3, 2017
Successor
Entity operated units
Jan. 2, 2018
Successor
Franchised units
Jan. 3, 2017
Successor
Franchised units
Dec. 29, 2015
Successor
Buildings under capital leases
Jan. 2, 2018
Successor
Buildings under capital leases
Jan. 3, 2017
Successor
Buildings under capital leases
Dec. 29, 2015
Successor
Construction-in-progress
Jan. 2, 2018
Successor
Construction-in-progress
Jan. 3, 2017
Successor
Construction-in-progress
Jun. 30, 2015
Predecessor
Dec. 30, 2014
Predecessor
shareholder
Mar. 20, 2015
Predecessor
Dec. 30, 2014
Predecessor
Subordinated debt
Jun. 30, 2015
Predecessor
Buildings under capital leases
Jun. 30, 2015
Predecessor
Construction-in-progress
Jan. 2, 2018
Development and Franchise Fees
Successor
Other Noncurrent Liabilities
Jan. 3, 2017
Development and Franchise Fees
Successor
Other Noncurrent Liabilities
Jan. 3, 2017
Insurance Claims
Successor
Dec. 29, 2015
Insurance Claims
Successor
Mar. 20, 2015
Revolver
DTH 2013 Senior Credit Facility
Predecessor
Mar. 20, 2015
Term Loan
DTH 2013 Senior Credit Facility
Predecessor
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GiftCardBreakage
 
$ 800,000 
$ 800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DeferredGiftCardIncomeTotal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,500,000 
2,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share Price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 3.93 
$ 3.93 
$ 4.63 
$ 3.31 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of ownership interest in partnerships
 
 
 
1.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of partnership units
 
 
 
4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred development fees and deferred franchise fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,300,000 
1,400,000 
 
 
 
 
Promotional allowances
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,800,000 
14,200,000 
13,600,000 
 
 
 
 
 
 
 
 
 
 
5,400,000 
 
 
 
 
 
 
 
 
 
 
 
Deferred gift card income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,200,000 
1,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance claim receivable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800,000 
300,000 
 
 
Allowance for doubtful accounts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100,000 
100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of vendors
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncurrent portion of advanced reimbursements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,100,000 
1,600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current portion of advanced reimbursements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
400,000 
400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10,100,000 
21,000,000 
20,600,000 
 
 
 
 
800,000 
1,200,000 
1,400,000 
 
 
 
7,100,000 
 
 
 
300,000 
 
 
 
 
 
 
 
Property and equipment depreciation expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
49,888,000 
30,564,000 
 
 
 
 
 
2,500,000 
2,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated useful lives of assets (in years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3 years 
20 years 
3 years 
15 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Carrying value of capitalized software costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,100,000 
2,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capitalized software costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
600,000 
1,000,000 
1,300,000 
 
 
 
 
 
 
 
 
 
 
500,000 
 
 
 
 
 
 
 
 
 
 
 
Capitalized software amortization expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
400,000 
1,000,000 
900,000 
 
 
 
 
 
 
 
 
 
 
400,000 
 
 
 
 
 
 
 
 
 
 
 
Capitalized construction costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
500,000 
1,600,000 
1,300,000 
 
 
 
 
 
500,000 
 
 
 
 
 
 
Interest capitalized in connection with construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25,000 
100,000 
100,000 
 
 
 
 
 
 
 
 
 
 
0 
 
 
 
 
 
 
 
 
 
 
 
Lease agreement term (in years)
 
35 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of lease renewal options
 
 
 
 
 
 
 
 
 
 
 
 
1 
4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease renewal term (in years)
 
 
 
 
 
 
 
 
 
 
 
 
5 years 
10 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Carrying value of unfavorable lease liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20,600,000 
21,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease accumulated amortization
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,100,000 
3,900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unfavorable lease liabilities reclassification
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of underperforming locations
12 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization credits for unfavorable lease liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,300,000 
2,700,000 
2,600,000 
 
 
 
 
 
 
 
 
 
 
300,000 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average amortization period (in years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7 years 10 months 28 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance coverage deductibles range for claims
 
 
 
 
 
 
 
 
 
 
 
 
250,000 
500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deductible per occurrence for general liability
 
350,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of net sales for advertising
 
4.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued advertising
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
400,000 
1,000,000 
300,000 
700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advertising expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,600,000 
18,100,000 
17,200,000 
 
 
 
 
 
 
 
 
 
 
8,700,000 
 
 
 
 
 
 
 
 
 
 
 
Pre-opening costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
366,000 
1,591,000 
700,000 
 
 
 
 
 
 
 
 
 
 
276,000 
 
 
 
 
 
 
 
 
 
 
 
Number of operating segments
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of reportable segments
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of restaurants
 
 
 
22 
 
312 
310 
252 
241 
373 
252 
121 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage gross sales of restaurants
 
 
 
12.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partnership monthly rental income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
1,400,000 
 
 
 
 
 
 
 
 
 
 
 
Adjustment to estimated fair value of investment
 
 
 
1,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Date of agreement, to sale properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jul. 24, 2015 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of investments sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gain on sale of equity method investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from sale of equity method investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity method investment sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding amount of subordinated notes
 
 
 
 
111,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108,100,000 
111,200,000 
 
 
 
 
 
 
 
 
 
Number of largest shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3 
 
 
 
 
 
 
 
 
 
 
Interest rate of subordinated notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13.00% 
 
 
 
 
 
 
 
 
Proceeds from credit facility
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
162,556,000 
31,500,000 
24,000,000 
 
 
 
 
 
 
 
 
 
 
10,000,000 
 
 
 
 
 
 
 
 
 
10,000,000 
25,100,000 
Interest expenses related to subordinated notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,100,000 
 
 
 
 
 
 
 
 
 
 
 
Cash paid in connection with debt refinancing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
484,000 
0 
0 
 
 
 
 
 
 
 
 
 
 
593,000 
 
 
 
 
 
 
 
 
 
 
 
Gift Card Liability, Current
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 1,300,000 
$ 1,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Property and Equipment Estimated Useful Lives (Detail)
12 Months Ended
Jan. 2, 2018
Leasehold improvements
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives of assets (in years)
20 years 
Estimated useful lives of assets
Shorter of useful life (typically 20 years) or lease term 
Buildings under capital leases
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives of assets (in years)
20 years 
Estimated useful lives of assets
Shorter of useful life (typically 20 years) or lease term 
Minimum |
Buildings
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives of assets (in years)
20 years 
Minimum |
Restaurant and other equipment
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives of assets (in years)
3 years 
Maximum |
Buildings
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives of assets (in years)
35 years 
Maximum |
Restaurant and other equipment
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives of assets (in years)
15 years 
Basis of Presentation and Summary of Significant Accounting Policies - Estimated Future Amortization for Lease Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Jan. 2, 2018
Contractual Obligation, Fiscal Year Maturity Schedule [Abstract]
 
2018
$ 2,273 
2019
2,055 
2020
1,913 
2021
1,630 
2022
$ 1,452 
Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Summary of Significant Accounting Policies - New Accounting Pronouncements or Change in Accounting Principle (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 2, 2018
Jan. 3, 2017
Jan. 3, 2018
Successor
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
 
Cumulative Effect of New Accounting Principle in Period of Adoption
 
 
$ 1.0 
Initial Franchise Fees
0.6 
0.3 
 
FranchiseAdvertisingContributions
$ 12.7 
$ 12.1 
 
Business Combination - Additional Information (Detail) (USD $)
0 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 12 Months Ended 0 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended
Aug. 8, 2016
Jun. 30, 2015
Jun. 30, 2015
Jun. 30, 2015
DTH 2013 Senior Credit Facility
Jun. 30, 2015
DTH
Mar. 20, 2015
DTH
Jan. 3, 2017
DTH
Jun. 30, 2015
DTH
Jun. 30, 2015
Step Two [Member]
Jun. 30, 2015
Predecessor
Mar. 20, 2015
Predecessor
Jun. 30, 2015
Predecessor
Jun. 30, 2015
Predecessor
DTH
Dec. 29, 2015
Predecessor
Levy Acquisition Corporation [Member]
Jun. 16, 2015
Predecessor
Levy Acquisition Corporation [Member]
Jun. 30, 2015
Predecessor
Levy Acquisition Corporation [Member]
Dec. 30, 2014
Predecessor
Levy Acquisition Corporation [Member]
Jun. 30, 2015
Predecessor
DTH Share Holders [Member]
Sep. 6, 2016
Successor
Jun. 14, 2016
Successor
Mar. 22, 2016
Successor
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Dec. 29, 2015
Secondary Offering
Successor
Jan. 3, 2017
Insurance Claims
Successor
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Merger consideration Per share
 
$ 38.84 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash consideration paid
 
$ 95,000,000 
 
 
$ 105,164,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock (in shares)
1,533,542 
 
 
 
4,553,540 
 
 
 
3,500,000 
3,089,532 
 
 
2,348,968 
 
 
 
 
740,564 
 
 
 
 
 
 
 
 
Proceeds from issuance of common stock
 
 
 
 
 
91,200,000 
 
 
 
91,200,000 
 
91,236,000 
91,200,000 
 
 
 
 
28,800,000 
 
 
 
35,000,000 
0 
0 
 
 
Payments to acquire businesses, gross
 
120,000,000 
 
 
284,305,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceed from revolver
 
 
 
10,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payments of transaction cost
 
10,200,000 
 
 
10,164,000 
 
 
 
 
 
 
7,300,000 
15,700,000 
4,300,000 
 
 
 
 
500,000 
100,000 
100,000 
12,300,000 
 
100,000 
 
 
Reimbursement from insurance claims
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
500,000 
Tax withholdings on restricted stock vesting
 
7,500,000 
 
 
 
 
 
 
 
 
7,500,000 
7,533,000 
 
 
 
 
 
 
 
 
 
0 
1,923,000 
916,000 
 
 
Issuance of common stock, value
 
 
 
 
69,305,000 
 
 
 
35,000,000 
 
 
91,236,000 
 
 
 
 
 
 
 
 
 
224,306,000 
 
 
 
 
Funds remaining in trust account
 
 
150,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill adjustment
 
 
 
 
 
 
800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transaction-related costs
 
 
 
 
 
 
 
 
 
 
 
7,255,000 
 
 
 
 
 
 
 
 
 
12,972,000 
0 
731,000 
700,000 
 
Business combination, goodwill
 
 
 
 
 
 
 
319,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
320,638,000 
320,025,000 
 
 
Business combination, goodwill expected to be deductible for income tax purpose
 
 
 
 
 
 
 
600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payment of deferred underwriter compensation
 
 
 
 
 
 
 
 
 
 
 
0 
 
 
 
 
 
 
 
 
 
5,250,000 
0 
0 
700,000 
 
Acquisition related costs, not reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,900,000 
4,500,000 
500,000 
 
 
 
 
 
 
 
 
 
Repayment of note payable
 
 
 
 
 
 
 
 
 
 
 
$ 0 
 
 
 
 
 
 
 
 
 
$ 500,000 
$ 0 
$ 0 
 
 
Business Combination - Schedule of Preliminary Allocation of Purchase Price to Tangible and Identifiable Intangible Assets Acquired and Liabilities Assumed Based on Fair Value (Detail) (DTH, USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
DTH
 
Business Acquisition [Line Items]
 
Cash and cash equivalents
$ 5,173 
Accounts receivable and other receivables
3,228 
Inventories
2,541 
Prepaid expenses and other current assets
4,266 
Total current assets
15,208 
Property and equipment
105,524 
Intangible assets
250,490 
Other assets
4,194 
Total identifiable assets acquired
375,416 
Accounts payable
(18,866)
Other accrued liabilities
(26,607)
Current portion of capital lease obligations and deemed landlord financing liabilities
(1,670)
Long-term debt, capital lease obligations and deemed landlord financing liabilities
(246,562)
Deferred income taxes
(80,254)
Other long-term liabilities
(36,208)
Net identifiable liabilities assumed
(34,751)
Goodwill
319,100 
Total gross consideration
$ 284,305 
Business Combination - Schedule of Preliminary Values Allocated to Intangible Assets and Useful Lives (Detail) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended
Jan. 2, 2018
Franchise rights
Jun. 30, 2015
DTH
Jun. 30, 2015
DTH
Jun. 30, 2015
DTH
Trademarks
Jun. 30, 2015
DTH
Trademarks
Jun. 30, 2015
DTH
Favorable Leasehold Interests and Other Intangible Assets
Jun. 30, 2015
DTH
Franchise agreements
Jun. 30, 2015
DTH
Minimum
Jun. 30, 2015
DTH
Minimum
Favorable Leasehold Interests and Other Intangible Assets
Jun. 30, 2015
DTH
Minimum
Franchise rights
Jun. 30, 2015
DTH
Maximum
Jun. 30, 2015
DTH
Maximum
Favorable Leasehold Interests and Other Intangible Assets
Jun. 30, 2015
DTH
Maximum
Franchise rights
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
Finite lived intangible assets acquired
 
 
 
 
 
$ 14,290 
$ 15,900 
 
 
 
 
 
 
Indefinite lived intangible assets acquired
 
 
 
 
220,300 
 
 
 
 
 
 
 
 
Total intangible assets
 
 
250,490 
 
 
 
 
 
 
 
 
 
 
Unfavorable leasehold interests
 
 
$ (23,652)
 
 
 
 
 
 
 
 
 
 
Useful life of finite lived intangible assets (in years)
40 years 
 
 
 
 
 
 
 
7 months 6 days 
1 month 6 days 
 
19 years 
40 years 
Useful life of indefinite lived intangible assets
 
 
 
Indefinite 
 
 
 
 
 
 
 
 
 
Useful life of unfavorable leasehold interests (in years)
 
 
 
 
 
 
 
1 year 6 months 
 
 
19 years 
 
 
Weighted average life of definite-lived intangibles (in years)
 
11 years 
 
 
 
 
 
 
 
 
 
 
 
Restaurant Closure and Other Related Charges - Additional Information (Details) (USD $)
4 Months Ended 4 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 4 Months Ended 6 Months Ended 12 Months Ended
Jan. 2, 2018
location
Dec. 29, 2015
restaurant
Dec. 29, 2015
Successor
location
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Dec. 29, 2015
Facility Closing [Member]
Successor
Jan. 2, 2018
Facility Closing [Member]
Successor
restaurants
Jan. 3, 2017
Facility Closing [Member]
Successor
Jun. 30, 2015
Facility Closing [Member]
Successor
Dec. 29, 2015
12 Underperforming Restaurants
Successor
location
Dec. 29, 2015
12 Underperforming Restaurants
Successor
Jan. 2, 2018
12 Underperforming Restaurants
Successor
Jan. 3, 2017
12 Underperforming Restaurants
Successor
Restructuring Cost and Reserve [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restaurant closure liability
 
 
 
 
$ 2,800,000 
$ 3,100,000 
 
$ 1,213,000 
$ 1,365,000 
$ 1,023,000 
$ 3,800,000 
$ 3,800,000 
$ 1,611,000 
$ 1,773,000 
Number of restaurants
 
22 
 
 
 
 
 
1 
 
 
 
 
 
 
Current portion of restaurant closure liability
 
 
 
 
794,000 
875,000 
 
500,000 
300,000 
 
 
 
300,000 
600,000 
Non-current portion of restaurant closure liability
 
 
 
 
2,030,000 
2,263,000 
 
700,000 
1,100,000 
 
 
 
1,300,000 
1,200,000 
Number of underperforming locations
12 
 
12 
 
 
 
 
 
 
 
12 
 
 
 
Restructuring cost incurred
 
 
 
 
 
 
 
 
 
 
4,500,000 
 
100,000 
 
Reclassification of lease related liabilities
 
 
 
 
 
 
 
 
 
 
2,700,000 
2,672,000 
 
 
Charges for accretion in current period
 
 
 
$ 0 
$ 379,000 
$ 179,000 
$ 80,000 
$ 97,000 
 
 
$ 1,800,000 
$ 1,845,000 
$ 70,000 
$ 133,000 
Restaurant Closure and Other Related Charges - Restaurant Closure Liability Activity (Details) (USD $)
4 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 4 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended
Jan. 2, 2018
location
Dec. 29, 2015
Successor
location
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Jun. 30, 2015
Predecessor
Dec. 29, 2015
Facility Closing [Member]
Successor
Jan. 2, 2018
Facility Closing [Member]
Successor
Jan. 3, 2017
Facility Closing [Member]
Successor
Jun. 30, 2015
Facility Closing [Member]
Predecessor
Dec. 29, 2015
Facility Closing [Member]
Predecessor
Dec. 29, 2015
12 Underperforming Restaurants
Successor
location
Dec. 29, 2015
12 Underperforming Restaurants
Successor
Jan. 2, 2018
12 Underperforming Restaurants
Successor
Jan. 3, 2017
12 Underperforming Restaurants
Successor
Jun. 30, 2015
12 Underperforming Restaurants
Predecessor
Dec. 29, 2015
12 Underperforming Restaurants
One-time Termination Benefits [Member]
Successor
Jan. 2, 2018
12 Underperforming Restaurants
One-time Termination Benefits [Member]
Successor
Jan. 3, 2017
12 Underperforming Restaurants
One-time Termination Benefits [Member]
Successor
Jun. 30, 2015
12 Underperforming Restaurants
One-time Termination Benefits [Member]
Predecessor
Dec. 29, 2015
12 Underperforming Restaurants
Contract Termination [Member]
Successor
Jan. 2, 2018
12 Underperforming Restaurants
Contract Termination [Member]
Successor
Jan. 3, 2017
12 Underperforming Restaurants
Contract Termination [Member]
Successor
Jun. 30, 2015
12 Underperforming Restaurants
Contract Termination [Member]
Predecessor
Dec. 29, 2015
12 Underperforming Restaurants
Other Restructuring [Member]
Successor
Jan. 2, 2018
12 Underperforming Restaurants
Other Restructuring [Member]
Successor
Jan. 3, 2017
12 Underperforming Restaurants
Other Restructuring [Member]
Successor
Jun. 30, 2015
12 Underperforming Restaurants
Other Restructuring [Member]
Predecessor
Restructuring Cost and Reserve [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring cost incurred
 
 
 
 
 
 
 
 
 
 
 
$ 4,500,000 
 
$ 100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring Reserve [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Closure liability at beginning of period
 
 
 
3,100,000 
 
 
1,023,000 
1,365,000 
 
1,143,000 
1,143,000 
 
 
1,773,000 
3,800,000 
0 
 
0 
0 
0 
 
1,773,000 
3,637,000 
0 
 
0 
163,000 
0 
Adjustments to estimate based on current activity
 
 
 
 
 
 
439,000 
22,000 
 
129,000 
54,000 
 
 
144,000 
(553,000)
 
 
0 
0 
 
 
144,000 
(553,000)
 
 
0 
0 
 
Restructuring Reserve, Period Increase (Decrease)
 
 
 
 
 
 
0 
46,000 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charges for accretion in current period
 
 
0 
379,000 
179,000 
0 
80,000 
97,000 
 
41,000 
40,000 
1,800,000 
1,845,000 
70,000 
133,000 
 
168,000 
0 
0 
 
1,289,000 
70,000 
133,000 
 
388,000 
0 
0 
 
Cash payments
 
 
 
 
 
 
(177,000)
(317,000)
 
(184,000)
(200,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash payments
 
 
 
 
 
 
 
 
 
 
 
 
(717,000)
(376,000)
(1,607,000)
 
(168,000)
0 
0 
 
(324,000)
(376,000)
(1,444,000)
 
(225,000)
0 
(163,000)
 
Reclassification of lease related liabilities
 
 
 
 
 
 
 
 
 
 
 
2,700,000 
2,672,000 
 
 
 
0 
 
 
 
2,672,000 
 
 
 
0 
 
 
 
Closure liability at end of period
 
 
 
$ 2,800,000 
$ 3,100,000 
 
 
$ 1,213,000 
$ 1,365,000 
$ 1,023,000 
$ 1,037,000 
$ 3,800,000 
$ 3,800,000 
$ 1,611,000 
$ 1,773,000 
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
$ 3,637,000 
$ 1,611,000 
$ 1,773,000 
$ 0 
$ 163,000 
$ 0 
$ 0 
$ 0 
Number of underperforming locations
12 
12 
 
 
 
 
 
 
 
 
 
12 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and Equipment, Net - Schedule of Property and Equipment (Details) (Successor, USD $)
In Thousands, unless otherwise specified
Jan. 2, 2018
Jan. 3, 2017
Property, Plant and Equipment [Line Items]
 
 
Property and equipment
$ 206,012 
$ 168,884 
Less: Accumulated depreciation
(49,888)
(30,564)
Property and Equipment, Net
156,124 
138,320 
Land
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment
9,800 
13,919 
Buildings
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment
2,325 
3,391 
Restaurant and other equipment
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment
74,075 
58,699 
Leasehold improvements
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment
100,192 
78,739 
Buildings under capital leases
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment
4,625 
5,433 
Less: Accumulated depreciation
(2,500)
(2,200)
RestaurantPropertyLeasedToOthers [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment
3,090 
0 
Construction-in-progress
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment
$ 11,905 
$ 8,703 
Summary of Refranchsing and Franchise Acquisitions Summary of refranchising (Details) (Sale of company-operated restaurants [Member], USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 2, 2018
restaurant
Sale of company-operated restaurants [Member]
 
Franchisor Disclosure [Line Items]
 
Company-operated restaurants sold to franchisees
5 
Proceeds from Divestiture of Businesses
$ 2,192 
Net assets sold (primarily furniture, fixtures and equipment)
(1,261)
Goodwill related to the company-operated restaurants sold to franchisees
(247)
(Unfavorable)/favorable lease assets/liabilities
(548)
Other costs related to the sale of company-operated restaurants
(5)
Gain on sale of company-operated restaurants
131 
Favorable lease assets
100 
Unfavorable Leasehold Interests Noncurrent
$ 600 
Summary of Refranchsing and Franchise Acquisitions Franchise Acquisitions (Details) (Successor, USD $)
12 Months Ended
Jan. 2, 2018
location
Jan. 3, 2017
location
Business Acquisition [Line Items]
 
 
Goodwill
$ 320,638,000 
$ 320,025,000 
Total consideration excluding land and building
 
1,800,000 
Franchise [Member]
 
 
Business Acquisition [Line Items]
 
 
Franchise-operated restaurants acquired from franchisees
1 
6 
Goodwill
860,000 
969,000 
Property and equipment
360,000 
821,000 
Land and building
0 
2,127,000 
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Liabilities
(85,000)
0 
Liabilities assumed
(7,000)
(26,000)
Total gross consideration
$ 1,128,000 
$ 3,891,000 
Goodwill and Other Intangible Assets - Schedule of Changes in Carrying Amount of Goodwill (Detail) (Successor, USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 2, 2018
Successor
 
Goodwill And Other Intangible Asset [Line Items]
 
January 3, 2017
$ 320,025 
Sale of company-operated restaurants
200 
Acquisition of franchise-operated restaurants
860 
January 2, 2018
$ 320,638 
Goodwill and Other Intangible Assets - Schedule of Other Intangible Assets (Detail) (Successor, USD $)
In Thousands, unless otherwise specified
Jan. 2, 2018
Jan. 3, 2017
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
$ 29,271 
$ 29,826 
Accumulated Amortization
(7,773)
(5,044)
Net
21,498 
24,782 
Favorable lease assets
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
13,744 
14,176 
Accumulated Amortization
(4,442)
(2,996)
Net
9,302 
11,180 
Franchise rights
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
15,284 
15,489 
Accumulated Amortization
(3,282)
(2,038)
Net
12,002 
13,451 
Reacquired franchise rights
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
243 
161 
Accumulated Amortization
(49)
(10)
Net
$ 194 
$ 151 
Goodwill and Other Intangible Assets - Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Details) (USD $)
In Thousands, unless otherwise specified
Jan. 2, 2018
Favorable lease assets
 
Finite-Lived Intangible Assets [Line Items]
 
2018
$ 1,722 
2019
1,447 
2020
1,171 
2021
1,005 
2022
922 
Franchise rights
 
Finite-Lived Intangible Assets [Line Items]
 
2018
1,293 
2019
1,255 
2020
1,186 
2021
1,074 
2022
$ 973 
Goodwill and Other Intangible Assets - Additional Information (Details) (USD $)
12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 0 Months Ended 12 Months Ended
Jan. 2, 2018
Franchise rights
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
location
Jan. 2, 2018
Successor
restaurant
Jan. 3, 2017
Successor
restaurant
Dec. 29, 2015
Successor
Franchise rights
Jan. 2, 2018
Successor
Franchise rights
Jan. 3, 2017
Successor
Franchise rights
Dec. 29, 2015
Successor
Favorable lease assets
Jan. 2, 2018
Successor
Favorable lease assets
Jan. 3, 2017
Successor
Favorable lease assets
Jun. 30, 2015
Predecessor
Jun. 30, 2015
Predecessor
Franchise rights
Jun. 30, 2015
Predecessor
Favorable lease assets
Jun. 30, 2015
DTH
Jan. 3, 2017
DTH
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company-operated restaurants sold to franchisees
 
 
5 
5 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill adjustment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 800,000 
Trademarks
 
 
220,300,000 
220,300,000 
220,300,000 
 
 
 
 
 
 
 
 
 
 
 
Number of franchise locations
 
 
5 
5 
4 
 
 
 
 
 
 
 
 
 
 
 
Number of franchised restaurants acquired
 
 
1 
1 
6 
 
 
 
 
 
 
 
 
 
 
 
Finite-Lived Intangible Assets, Period Increase (Decrease)
 
 
 
 
 
 
67,000 
 
 
 
 
 
 
 
 
 
Franchise rights written off
 
 
 
 
 
 
 
200,000 
 
 
 
 
 
 
 
 
Intangible assets acquired
 
 
 
100,000 
200,000 
 
 
 
 
 
 
 
 
 
 
 
Useful life of finite lived intangible assets (in years)
40 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average life of definite-lived intangibles (in years)
 
 
 
 
 
 
13 years 7 days 
 
 
7 years 3 months 11 days 
 
 
 
 
11 years 
 
Amortization expense
 
$ 1,700,000 
 
$ 3,300,000 
$ 3,600,000 
$ 700,000 
$ 1,300,000 
$ 1,600,000 
$ 1,000,000 
$ 1,900,000 
$ 2,000,000 
$ 1,000,000 
$ 700,000 
$ 300,000 
 
 
Debt, Obligations Under Capital Leases and Deemed Landlord Financing Liabilities - Schedule of Debt (Details) (USD $)
6 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended
Jan. 2, 2018
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Aug. 4, 2015
Successor
2015 Senior Credit Facility
Jan. 2, 2018
Successor
2015 Senior Credit Facility
Jan. 3, 2017
Successor
2015 Senior Credit Facility
Aug. 4, 2015
Successor
2015 Senior Credit Facility
Jan. 2, 2018
Base Rate
Successor
2015 Senior Credit Facility
Jan. 2, 2018
LIBOR
Successor
2015 Senior Credit Facility
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
Total outstanding indebtedness
 
 
$ 152,001,000 
$ 157,616,000 
 
$ 152,001,000 
$ 157,616,000 
 
 
 
Obligations under capital leases and deemed landlord financing liabilities
 
 
20,053,000 
17,715,000 
 
 
 
 
 
 
Total debt, net
172,054,000 
 
172,054,000 
175,331,000 
 
 
 
 
 
 
Less: amounts due within one year
 
 
1,415,000 
1,588,000 
 
 
 
 
 
 
Total amounts due after one year, net
 
 
170,639,000 
173,743,000 
 
 
 
 
 
 
Unamortized debt discount
 
 
 
 
 
747,000 
1,035,000 
1,400,000 
 
 
Deferred financing costs
 
 
 
 
 
252,000 
349,000 
 
 
 
Unused commitment fee percentage (percent)
 
 
 
 
0.20% 
 
 
 
 
 
Debt Instrument, Basis Spread on Variable Rate, Increase (Decrease)
 
 
 
 
 
 
 
 
0.25% 
0.25% 
Amortization of Debt Issuance Costs and Discounts
 
$ 200,000 
$ 400,000 
$ 400,000 
 
 
 
 
 
 
Debt, Obligations Under Capital Leases and Deemed Landlord Financing Liabilities - 2015 Revolving Credit Facility (Successor) (Details) (USD $)
6 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 0 Months Ended
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Aug. 4, 2015
Successor
2015 Senior Credit Facility
Jan. 2, 2018
Successor
2015 Senior Credit Facility
Jan. 3, 2017
Successor
2015 Senior Credit Facility
Aug. 4, 2015
Successor
2015 Senior Credit Facility
Aug. 4, 2015
Successor
2015 Senior Credit Facility
Federal Funds Effective Swap
Aug. 4, 2015
Successor
2015 Senior Credit Facility
LIBOR
Jun. 30, 2015
Predecessor
Aug. 4, 2015
DTH 2013 Senior Credit Facility
Aug. 4, 2015
DTH 2013 Senior Credit Facility
Successor
2013 Term Loan
Aug. 4, 2015
DTH 2013 Senior Credit Facility
Successor
Secured Debt
Mar. 20, 2015
DTH 2013 Senior Credit Facility
Predecessor
Mar. 20, 2015
DTH 2013 Senior Credit Facility
Predecessor
2013 Revolver
Mar. 20, 2015
Term Loan
Predecessor
DTH 2013 Senior Credit Facility
Apr. 21, 2014
Term Loan
Predecessor
DTH 2013 Senior Credit Facility
Aug. 4, 2015
Minimum
Successor
2015 Senior Credit Facility
LIBOR
Aug. 4, 2015
Minimum
Successor
2015 Senior Credit Facility
Base Rate
Aug. 4, 2015
Maximum
Successor
2015 Senior Credit Facility
LIBOR
Aug. 4, 2015
Maximum
Successor
2015 Senior Credit Facility
Base Rate
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit agreement issuance date
 
 
 
Aug. 04, 2015 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit agreement maturity date
 
 
 
Aug. 04, 2020 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit facility amount
 
 
 
 
 
 
$ 250,000,000 
 
 
 
 
 
 
$ 267,100,000.0 
$ 40,000,000 
 
$ 220,000,000 
 
 
 
 
Payments on revolving credit facility
14,000,000 
37,500,000 
19,000,000 
 
 
 
 
 
 
6,000,000 
 
 
164,000,000 
 
 
 
 
 
 
 
 
Credit facility
 
 
 
 
 
 
 
 
 
 
 
162,500,000 
 
 
 
227,100,000 
 
 
 
 
 
Credit facility
 
 
 
 
18,200,000 
 
 
 
 
 
17,600,000 
 
 
 
 
 
 
 
 
 
 
Effective base rate, margins on variable rate (percent)
 
 
 
 
 
 
 
0.50% 
1.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Credit facility margins on variable rate (percent)
 
 
 
 
 
 
 
 
2.00% 
 
 
 
 
 
 
 
 
1.50% 
0.50% 
2.50% 
1.50% 
Credit fees applicable margin percentage (percent)
 
 
 
2.00% 
1.75% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unused commitment fee percentage (percent)
 
 
 
0.20% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unamortized debt discount
 
 
 
 
747,000 
1,035,000 
1,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred financing costs
 
 
 
 
 
 
500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of deferred financing costs including debt discount
200,000 
400,000 
400,000 
 
 
 
 
 
 
900,000 
 
 
 
 
 
 
 
 
 
 
 
Interest rate on outstanding balance of credit facility (percent)
 
 
 
 
3.30% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Availability for additional borrowings under credit facility
 
 
 
 
78,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015 Senior Credit Facility
 
 
 
 
$ 153,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt, Obligations Under Capital Leases and Deemed Landlord Financing Liabilities - DTH 2013 Senior Credit Facility (Details) (USD $)
1 Months Ended 6 Months Ended 0 Months Ended 1 Months Ended 1 Months Ended 6 Months Ended 0 Months Ended 0 Months Ended
Mar. 31, 2015
Mar. 31, 2015
DTH 2013 Senior Credit Facility
Jun. 30, 2015
Predecessor
Mar. 20, 2015
Predecessor
Dec. 30, 2014
Predecessor
Apr. 21, 2014
Term Loan
Predecessor
DTH 2013 Senior Credit Facility
Mar. 31, 2015
Term Loan
Predecessor
DTH 2013 Senior Credit Facility
Mar. 20, 2015
Term Loan
Predecessor
DTH 2013 Senior Credit Facility
Apr. 21, 2014
Term Loan
Predecessor
DTH 2013 Senior Credit Facility
Mar. 31, 2015
Line of Credit
Predecessor
DTH 2013 Senior Credit Facility
Jun. 30, 2015
Line of Credit
Predecessor
DTH 2013 Senior Credit Facility
Mar. 12, 2015
Line of Credit
Predecessor
DTH 2013 Senior Credit Facility
LIBOR
Apr. 21, 2014
Revolver
Predecessor
DTH 2013 Senior Credit Facility
Mar. 12, 2015
Maximum
Line of Credit
Predecessor
DTH 2013 Senior Credit Facility
LIBOR
Apr. 21, 2014
Subordinated debt
Predecessor
SAG Restaurants Sub Notes
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit facility amount
 
 
 
 
 
 
 
 
$ 220,000,000 
 
 
 
$ 40,000,000 
 
 
Extinguishment of debt, amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
62,000,000 
Debt financing costs, including debt modification
 
 
 
 
 
 
 
 
 
1,600,000 
 
 
 
 
 
Unamortized debt discount
 
 
 
 
 
 
 
 
 
1,500,000 
 
 
 
 
 
Debt modification costs
 
 
 
 
 
 
 
 
 
 
100,000 
 
 
 
 
Increase (decrease) in borrowing capacity
 
 
 
 
 
62,000,000 
25,100,000 
 
 
 
 
 
 
 
 
Credit facility
 
 
 
 
 
 
 
227,100,000 
 
 
 
 
 
 
 
Proceed from revolver
 
10,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding amount of subordinated notes
111,200,000 
 
 
111,200,000 
108,100,000 
 
 
 
 
 
 
 
 
 
 
Increase (decrease) in interest rate (percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
1.00% 
 
Credit facility margins on variable rate (percent)
 
 
 
 
 
 
 
 
 
 
 
4.25% 
 
 
 
Amortization of deferred financing costs including debt discount
 
 
$ 900,000 
 
 
 
 
 
 
 
 
 
 
 
 
Debt, Obligations Under Capital Leases and Deemed Landlord Financing Liabilities - Subordinated Notes (Details) (USD $)
6 Months Ended
Mar. 31, 2015
Jun. 30, 2015
Predecessor
Mar. 20, 2015
Predecessor
Dec. 30, 2014
Predecessor
Debt Instrument [Line Items]
 
 
 
 
Outstanding amount of subordinated notes
$ 111,200,000 
 
$ 111,200,000 
$ 108,100,000 
Interest expenses related to subordinated notes
 
3,100,000 
 
 
Payments for debt issue costs
 
$ 593,000 
 
 
Debt, Obligations Under Capital Leases and Deemed Landlord Financing Liabilities - Other Debt Information (Details) (USD $)
In Thousands, unless otherwise specified
Jan. 2, 2018
Debt Disclosure [Abstract]
 
2018
$ 1,415 
2019
988 
2020
153,847 
2021
804 
2022
791 
Thereafter
15,208 
Total maturities
173,053 
Less: debt discount and deferred financing costs
(999)
Total debt, net
$ 172,054 
Derivative Instruments - Additional Information (Detail) (USD $)
12 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended
Jan. 2, 2018
Jul. 11, 2016
Jan. 2, 2018
Successor
Mar. 20, 2015
Predecessor
Jun. 30, 2015
Predecessor
Mar. 20, 2015
GSMP
Predecessor
Mar. 20, 2015
GSMP
Predecessor
Jan. 2, 2018
Cash Flow Hedging
Interest Rate Cap
Successor
Jan. 3, 2017
Cash Flow Hedging
Interest Rate Cap
Predecessor
Derivative [Line Items]
 
 
 
 
 
 
 
 
 
Notional amount
 
 
 
 
 
 
 
$ 70,000,000.0 
$ 87,500,000.0 
Interest Rate Cash Flow Hedge Gain (Loss) Reclassified to Earnings, Net
4,000 
 
 
 
 
 
 
 
 
Cap interest rate
 
 
 
 
 
 
 
2.00% 
 
Amount expected to be reclassified into earnings over the remaining term of the agreement.
 
 
 
 
 
 
 
300,000 
 
Amount expected to be reclassified into interest expense over the next 12 months
 
 
 
 
 
 
 
60,000 
 
Warrants to purchase of common stock (in shares)
 
 
5,999,934 
 
 
 
597,802 
 
 
Warrant exercise price per share (in dollars per share)
 
$ 11.50 
$ 11.50 
 
 
 
$ 25.00 
 
 
Fair value of warrant liability
 
 
 
 
 
 
8,300,000 
 
 
Common shares redeemed (in shares)
 
 
 
 
 
384,777 
 
 
 
Exercise and settlement of warrants (in shares)
 
 
 
213,025 
 
 
 
 
 
Reduction in warrant liability due to mark-to-market adjustment
 
 
 
 
$ 35,000 
 
 
 
 
Fair Value Measurements - Additional Information (Detail) (Successor, Interest Rate Cap, USD $)
Jan. 2, 2018
Jan. 3, 2017
Successor |
Interest Rate Cap
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
Fair value of interest rate cap
$ 332,000 
$ 598,000 
Fair Value Measurements - Summary of Estimated Fair Values of Long-term Debt Instruments, Warrant Liability and Interest Rate Cap Agreement (Detail) (Successor, 2015 Senior Credit Facility, USD $)
In Thousands, unless otherwise specified
Jan. 2, 2018
Jan. 3, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
2015 Senior Credit Facility
$ 153,000 
 
Estimated Fair Value
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
2015 Senior Credit Facility
152,001 
157,616 
Book Value
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
2015 Senior Credit Facility
$ 152,001 
$ 157,616 
Fair Value Measurements - Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $)
In Thousands, unless otherwise specified
Jan. 2, 2018
Jan. 3, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Interest rate cap
$ 332 
$ 598 
Total assets measured at fair value
332 
598 
Markets for Identical Assets (Level 1)
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Interest rate cap
0 
0 
Total assets measured at fair value
0 
0 
Observable Inputs (Level 2)
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Interest rate cap
332 
598 
Total assets measured at fair value
332 
598 
Unobservable Inputs (Level 3)
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Interest rate cap
0 
0 
Total assets measured at fair value
$ 0 
$ 0 
Other Accrued Liabilities and Other Non-current Liabilities - Summary of Other Accrued Liabilities (Detail) (Successor, USD $)
In Thousands, unless otherwise specified
Jan. 2, 2018
Jan. 3, 2017
Successor
 
 
Accounts Payable And Accrued Liabilities Current And Noncurrent [Line Items]
 
 
Employee compensation and related items
$ 12,945 
$ 13,783 
Accrued insurance
7,232 
8,192 
Accrued sales tax
3,987 
3,916 
Accrued real property tax
1,331 
1,274 
Restaurant closure liability
794 
875 
Accrued advertising
728 
1,657 
Other
8,240 
6,956 
Other accrued liabilities
$ 35,257 
$ 36,653 
Other Accrued Liabilities and Other Non-current Liabilities - Summary of Other Non-current Liabilities (Detail) (Successor, USD $)
Jan. 2, 2018
Jan. 3, 2017
Successor
 
 
Other Non Current Liabilities [Line Items]
 
 
Unfavorable lease liabilities
$ 14,500,000 
$ 17,100,000 
Insurance reserves
5,965,000 
4,269,000 
Deferred rent liability
2,972,000 
1,676,000 
Restaurant closure liabilities
2,030,000 
2,263,000 
Deferred development and initial franchise fees
1,335,000 
1,385,000 
Deferred gift card income
1,200,000 
1,200,000 
Unearned trade discount, non-current
1,149,000 
1,596,000 
Other
2,277,000 
697,000 
Other non-current liabilities
$ 31,431,000 
$ 30,140,000 
Stock-Based Compensation - Additional Information (Detail) (USD $)
0 Months Ended 4 Months Ended 12 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 4 Months Ended 6 Months Ended 12 Months Ended 0 Months Ended 6 Months Ended
Jun. 30, 2015
Jan. 2, 2018
Jan. 2, 2018
Jan. 2, 2018
2015 Plan [Member]
Jan. 2, 2018
Employee Stock Option
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Dec. 29, 2015
Successor
2015 Plan [Member]
Jan. 2, 2018
Successor
2015 Plan [Member]
Jan. 3, 2017
Successor
2015 Plan [Member]
Dec. 29, 2015
Successor
Restricted Shares
Jan. 2, 2018
Successor
Restricted Shares
Jan. 3, 2017
Successor
Restricted Shares
Jan. 2, 2018
Successor
Restricted Shares
2015 Plan [Member]
Dec. 29, 2015
Successor
Employee Stock Option
Jan. 2, 2018
Successor
Employee Stock Option
Jan. 3, 2017
Successor
Employee Stock Option
Mar. 20, 2015
Predecessor
Jun. 30, 2015
Predecessor
Dec. 30, 2014
Predecessor
Jan. 2, 2018
Predecessor
Restricted Stock Units (RSUs)
Mar. 20, 2017
Predecessor
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock reserved and authorized for issuance
 
 
 
3,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock authorized and available for grant
 
 
 
1,361,986 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense recorded
 
 
 
 
 
 
 
 
$ 1,500,000 
$ 4,900,000 
$ 4,100,000 
 
 
 
 
 
 
 
$ 500,000 
$ 500,000 
 
 
 
Weighted average period of recognition
 
 
 
 
 
 
 
 
 
 
 
 
2 years 6 months 
 
 
 
2 years 7 months 6 days 
 
 
 
 
 
 
Vesting period
 
 
 
 
4 years 
 
 
 
 
 
 
 
 
 
4 years 
 
 
 
 
 
 
 
 
Weighted-average grant date fair value
 
 
 
 
 
 
$ 13.64 
 
 
 
 
$ 11.16 
$ 13.64 
$ 9.30 
 
 
 
 
 
$ 0.00 
 
 
 
Total fair value of awards vested
 
 
 
 
 
 
 
 
 
 
 
0 
5,400,000 
2,400,000 
 
 
 
 
 
 
 
 
 
Total intrinsic value of stock options exercised
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0 
0 
0 
 
 
 
 
 
Additional shares granted during period (in shares)
 
 
 
 
 
 
534,690 
 
 
 
 
 
 
 
534,690 
 
 
 
 
0 
 
 
 
Unrecognized compensation expense, net
 
 
 
 
 
 
 
 
 
 
 
 
8,500,000 
 
 
 
 
 
 
 
 
 
 
Granted (in shares)
 
132,000 
 
 
 
 
132,000 
 
 
 
 
 
 
 
 
 
 
 
 
0 
 
 
 
Unrecognized compensation expense, net
 
 
 
 
 
 
900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued for employee tax withholding obligations (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
237,948 
 
 
 
 
Tax withholdings on restricted stock vesting
 
 
140,209 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
247,552 
 
 
 
 
Payments related to employee tax withholding obligations
$ 7,500,000 
 
 
 
 
$ 0 
$ 1,923,000 
$ 916,000 
 
 
 
 
$ 1,900,000 
 
 
 
 
 
$ 7,500,000 
$ 7,533,000 
 
 
 
Number of awards outstanding
 
 
 
 
 
 
1,088,910 
1,133,822 
 
 
 
 
 
 
 
 
 
 
 
0 
94,100 
0 
0 
Number of stock options outstanding
 
 
 
 
 
 
417,000 
334,500 
 
 
 
 
 
 
 
 
 
 
 
0 
90,000 
 
 
Stock-Based Compensation - Summary of Outstanding and Unvested Restricted Stock Activity (Detail) (USD $)
6 Months Ended 12 Months Ended
Jun. 30, 2015
Predecessor
Jan. 2, 2018
Successor
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
 
 
Nonvested, beginning balance (in shares)
94,100 
1,133,822 
Granted (in shares)
0 
534,690 
Vested (in shares)
(94,100)
(397,727)
Forfeited (in shares)
0 
(181,875)
Nonvested, ending balance (in shares)
0 
1,088,910 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
 
 
Weighted-Average Grant Date Fair Value, beginning balance (in dollars per share)
$ 25.00 
$ 10.40 
Weighted-Average Grant Date Fair Value, Granted (in dollars per share)
$ 0.00 
$ 13.64 
Weighted-Average Grant Date Fair Value, Vested (in dollars per share)
$ 25.00 
$ 10.60 
Weighted-Average Grant Date Fair Value, Forfeited (in dollars per share)
$ 0.00 
$ 10.34 
Weighted-Average Grant Date Fair Value, ending balance (in dollars per share)
$ 0.00 
$ 11.92 
Stock-Based Compensation - Summary of Stock Options Activity (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
4 Months Ended 6 Months Ended 12 Months Ended
Jan. 2, 2018
Jun. 30, 2015
Predecessor
Dec. 30, 2014
Predecessor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Shares
 
 
 
 
 
Options outstanding, beginning of period (in shares)
 
90,000 
 
334,500 
 
Granted (in shares)
132,000 
0 
 
132,000 
 
Exercised (in shares)
 
(90,000)
 
(9,750)
 
Forfeited (in shares)
 
0 
 
(39,750)
 
Options outstanding, end of period (in shares)
 
0 
90,000 
417,000 
334,500 
Options exercisable (in shares)
 
0 
 
121,498 
 
Options exercisable and expected to vest (in shares)
 
0 
 
393,747 
 
Weighted Average Exercise Price
 
 
 
 
 
Weighted Average Exercise Price, beginning balance (in dollars per share)
 
$ 23.10 
 
$ 9.94 
 
Weighted Average Exercise Price, Granted (in dollars per share)
 
$ 0.00 
 
$ 13.74 
 
Weighted Average Exercise Price, Exercised (in dollars per share)
 
$ 23.10 
 
$ 10.13 
 
Weighted Average Exercise Price, Forfeited (in dollars per share)
 
$ 0.00 
 
$ 10.98 
 
Weighted Average Exercise Price, end of period (in dollars per share)
 
$ 0.00 
$ 23.10 
$ 11.04 
$ 9.94 
Weighted Average Exercise Price, Options exercisable (in dollars per share)
 
$ 0.00 
 
$ 10.12 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term
 
 
 
4 years 9 months 19 days 
 
Weighted Average Exercise Price, Options exercisable and expected to vest (in dollars per share)
 
$ 0.00 
 
$ 11.00 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
 
 
 
 
 
Weighted Average Remaining Contractual Term, Options outstanding (in years)
 
 
8 years 8 months 12 days 
5 years 6 months 
6 years 1 month 6 days 
Weighted Average Remaining Contractual Term, Options excercisable and expected to vest (in years)
 
 
 
5 years 4 months 24 days 
 
Aggregate Intrinsic Value, Options outstanding
 
 
$ 1,400 
$ 641 
$ 1,464 
Aggregate Intrinsic Value, Options exercisable
 
 
 
242 
 
Aggregate Intrinsic Value, Options exercisable and expected to vest
 
 
 
$ 614 
 
Stock-Based Compensation - Assumptions Used in Option-pricing Valuation (Details) (Successor, USD $)
6 Months Ended 12 Months Ended
Dec. 29, 2015
Jan. 2, 2018
Jan. 3, 2017
Successor
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Expected volatility (percent)
38.01% 
36.09% 
37.64% 
Risk-free rate of return (percent)
1.84% 
1.86% 
1.12% 
Expected life (in years)
5 years 6 months 
4 years 9 months 
5 years 6 months 
Dividend yield
$ 0 
$ 0 
$ 0 
Fair value per share at date of grant (in dollars per share)
$ 3.93 
$ 4.63 
$ 3.31 
Shareholders' Equity - Additional Information (Detail) (USD $)
0 Months Ended 12 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended
Aug. 8, 2016
Jul. 25, 2016
Jul. 11, 2016
Jun. 30, 2015
Mar. 12, 2015
Jan. 2, 2018
vote
Jun. 20, 2017
Jul. 11, 2016
Jun. 30, 2015
Nov. 30, 2013
IPO
Jun. 30, 2015
Private Placement
Oct. 31, 2015
Secondary Offering
Oct. 31, 2015
Over-Allotment Option
Jun. 30, 2015
DTH
Mar. 20, 2015
DTH
Jan. 2, 2018
DTH
Jun. 30, 2015
DTH
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Dec. 29, 2015
Successor
Secondary Offering
Jun. 30, 2015
Predecessor
Mar. 20, 2015
Predecessor
Jun. 30, 2015
Predecessor
Mar. 20, 2015
Predecessor
GSMP
Mar. 20, 2015
Predecessor
GSMP
Jun. 30, 2015
Predecessor
DTH
Jan. 2, 2018
Common Stock and Warrants [Member]
Aug. 23, 2016
Common Stock and Warrants [Member]
Feb. 26, 2016
Common Stock and Warrants [Member]
Jan. 2, 2018
Common Stock and Warrants [Member]
Successor
Jan. 2, 2018
Common Stock
Successor
Mar. 29, 2017
Warrants
Successor
Jan. 2, 2018
Warrants
Successor
Mar. 29, 2017
Warrants
Successor
Class of Stock [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares authorized (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
400,000,000 
400,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of votes entitled to each share
 
 
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares issued (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
38,434,274 
39,153,503 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares outstanding (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
38,434,274 
39,153,503 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants to purchase of common stock (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,999,934 
 
 
 
 
 
 
597,802 
 
 
 
 
 
 
 
 
 
Warrant exercise price per share (in dollars per share)
 
 
 
 
 
 
 
$ 11.50 
 
 
 
 
 
 
 
 
 
 
$ 11.50 
 
 
 
 
 
 
$ 25.00 
 
 
 
 
 
 
 
 
 
Warrants issued (in shares)
 
 
 
 
 
 
 
 
 
12,250,000 
389,623 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants exercisable, term (in days)
 
 
 
30 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock (in shares)
1,533,542 
 
 
 
 
 
 
 
 
15,000,000 
 
 
 
4,553,540 
 
 
 
 
 
 
 
3,089,532 
 
 
 
 
2,348,968 
 
 
 
 
 
 
 
 
Number of shares, classified outside of permanent equity (in shares)
 
 
 
 
 
 
13,622,394 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redemption value of shares, classified outside of permanent equity
 
 
 
 
 
 
$ 136,200,000 
 
$ 136,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination, shares redeemed (in shares)
 
 
 
 
 
 
 
 
1,115 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redemption price of shares redeemed (in dollars per share)
 
 
 
 
 
 
 
 
$ 10 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, shares authorized (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000 
1,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, shares issued (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, shares outstanding (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minority equity investment of wholly-owned subsidiaries in connection with stock purchase agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
120,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from issuance of common stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
91,200,000 
 
 
35,000,000 
0 
0 
 
91,200,000 
 
91,236,000 
 
 
91,200,000 
 
 
 
 
 
 
 
 
Purchase of new shares of common stock (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,348,968 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock purchase agreement date
 
 
 
 
Mar. 12, 2015 
 
 
 
 
 
 
 
 
 
 
Mar. 12, 2015 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of warrant liability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,300,000 
 
 
 
 
 
 
 
 
 
Common shares redeemed (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
384,777 
 
 
 
 
 
 
 
 
 
 
Shares of common stock warrants issued (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
213,025 
 
 
 
 
 
 
 
 
 
 
 
 
Reduction in warrant liability due to mark-to-market adjustment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
35,000 
 
 
 
 
 
 
 
 
 
 
 
Shareholders disclosure, sale of stock (in shares)
 
 
 
 
 
 
 
 
 
 
 
3,372,016 
505,802 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payment of deferred underwriter compensation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,250,000 
0 
0 
700,000 
 
 
0 
 
 
 
 
 
 
 
 
 
 
 
Maximum authorized stock & warrant repurchase amount (up to)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50,000,000 
25,000,000 
25,000,000.0 
 
 
 
 
 
Shares/warrants repurchased (in shares/warrants)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
986,497 
400,000 
424,439 
 
Average cost per share/warrant (in dollars per share/warrant)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 12.41 
$ 3.75 
$ 3.72 
 
Discount on repurchase
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5.00% 
 
 
Share Price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 15.22 
$ 3.93 
$ 4.63 
$ 3.31 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 3.95 
Shares/warrants repurchased, value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13,849,000 
15,314,000 
 
 
 
 
 
 
 
 
 
 
 
12,300,000 
 
1,600,000 
 
Remaining authorized stock/warrant repurchase amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20,900,000 
 
 
 
 
Number of shares received in exchange for each warrant
 
 
 
 
 
 
 
0.2780 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares received in exchange offer
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of warrants exchanged for each share
 
 
 
 
 
 
 
3.6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of warrants eligible for exchange offer, maximum
 
7,750,000 
6,750,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of warrants tendered in the exchange offer
5,516,243 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of warrants tendered by directors and executive officers
1,501,800 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Transaction costs related to exchange offer
 
 
 
 
 
$ 600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per Share - Schedule of Basic and Diluted Net Income per Share Data (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 4 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 3 Months Ended 6 Months Ended
Sep. 12, 2017
Successor
Jun. 20, 2017
Successor
Mar. 28, 2017
Successor
Sep. 6, 2016
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Dec. 29, 2015
Successor
Dilutive effect of restricted shares and RSUs
Jan. 2, 2018
Successor
Dilutive effect of restricted shares and RSUs
Jan. 3, 2017
Successor
Dilutive effect of restricted shares and RSUs
Dec. 29, 2015
Successor
Dilutive effect of stock options
Jan. 2, 2018
Successor
Dilutive effect of stock options
Jan. 3, 2017
Successor
Dilutive effect of stock options
Dec. 29, 2015
Successor
Dilutive effect of warrants
Jan. 2, 2018
Successor
Dilutive effect of warrants
Jan. 3, 2017
Successor
Dilutive effect of warrants
Jun. 14, 2016
Predecessor
Mar. 22, 2016
Predecessor
Jun. 30, 2015
Predecessor
Jun. 30, 2015
Predecessor
Dilutive effect of restricted shares and RSUs
Jun. 30, 2015
Predecessor
Dilutive effect of stock options
Jun. 30, 2015
Predecessor
Dilutive effect of warrants
Numerator:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$ 5,101 
$ 5,330 
$ 4,238 
$ 4,949 
$ 35,202 
$ 8,039 
$ 2,653 
$ 49,871 
$ 20,913 
 
 
 
 
 
 
 
 
 
$ 4,864 
$ 3,061 
$ 2,104 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares outstanding - basic (in shares)
 
 
 
 
 
 
38,802,425 
38,689,508 
38,725,541 
 
 
 
 
 
 
 
 
 
 
 
5,492,417 
 
 
 
Dilutive effect (in shares)
 
 
 
 
 
 
 
 
 
744 
417,371 
263,003 
0 
28,931 
0 
1,446,824 
814,097 
286,105 
 
 
 
13,972 
93,634 
10,836 
Weighted-average shares outstanding - diluted (in shares)
 
 
 
 
 
 
40,249,993 
39,949,907 
39,274,649 
 
 
 
 
 
 
 
 
 
 
 
5,610,859 
 
 
 
Net (loss) income per share - basic (in dollars per share)
$ 0.13 
$ 0.14 
$ 0.11 
$ 0.13 
$ 0.91 
$ 0.21 
$ 0.07 
$ 1.29 
$ 0.54 
 
 
 
 
 
 
 
 
 
$ 0.13 
$ 0.08 
$ 0.38 
 
 
 
Net (loss) income per share - diluted (in dollars per share)
$ 0.13 
$ 0.13 
$ 0.10 
$ 0.13 
$ 0.89 
$ 0.20 
$ 0.07 
$ 1.25 
$ 0.53 
 
 
 
 
 
 
 
 
 
$ 0.13 
$ 0.08 
$ 0.37 
 
 
 
Antidilutive options, unvested restricted stock awards, unvested RSUs and warrants excluded from the computations (in shares)
 
 
 
 
 
 
5,365 
69,722 
8,343,842 
 
 
 
 
 
 
 
 
 
 
 
0 
 
 
 
Income Taxes - Schedule of Components of Provision for Income Tax Expense (Benefit) (Details) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended 6 Months Ended
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Jun. 30, 2015
Predecessor
Current:
 
 
 
 
Federal
$ 0 
$ 5,884 
$ 4,204 
$ 110 
State
24 
886 
270 
79 
Total current income tax expense (benefit)
24 
6,770 
4,474 
189 
Deferred:
 
 
 
 
Federal
(90)
(24,636)
7,145 
15 
State
178 
2,042 
3,710 
536 
Total deferred income tax expense (benefit)
88 
(22,594)
10,855 
551 
Income tax (benefit) provision
$ 112 
$ (15,824)
$ 15,329 
$ 740 
Income Taxes - Schedule of Effective Rates and the Statutory Federal Income Tax Rate Reconciliation (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended
Jan. 2, 2018
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Jun. 30, 2015
Predecessor
Effective Income Tax Rate Reconciliation, Amount [Abstract]
 
 
 
 
 
Federal income taxes
 
$ 968 
$ 11,916 
$ 12,685 
$ 995 
State and local income taxes, net of federal tax benefit
 
280 
1,688 
1,882 
435 
Targeted job credits
 
(512)
(420)
(448)
(34)
Warrant liability
 
0 
0 
0 
(12)
Investment in subsidiary
 
83 
0 
570 
383 
Change in valuation allowance
 
(1,927)
0 
0 
(2,805)
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount
29,100 
0 
(29,111)
0 
0 
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Percent
 
0.00% 
(85.50%)
0.00% 
0.00% 
Transaction costs
 
1,194 
0 
227 
2,255 
Permanent tax differences and other
 
26 
103 
413 
(477)
Income tax (benefit) provision
 
$ 112 
$ (15,824)
$ 15,329 
$ 740 
Effective Income Tax Rate Reconciliation, Percent [Abstract]
 
 
 
 
 
Federal income taxes (percent)
35.00% 
35.00% 
35.00% 
35.00% 
35.00% 
State and local income taxes, net of federal tax benefit (percent)
 
10.10% 
5.00% 
5.20% 
15.30% 
Targeted job credits (percent)
 
(18.50%)
(1.20%)
(1.20%)
(1.20%)
Warrant liability (percent)
 
0.00% 
0.00% 
0.00% 
(0.40%)
Investment in subsidiary (percent)
 
3.00% 
0.00% 
1.60% 
13.50% 
Change in valuation allowance (percent)
 
(69.70%)
0.00% 
0.00% 
(98.60%)
Transaction costs (percent)
 
43.20% 
0.00% 
0.60% 
79.30% 
Permanent tax differences and other (percent)
 
1.00% 
0.20% 
1.10% 
(16.90%)
Effective income tax rates (percent)
 
4.10% 
(46.50%)
42.30% 
26.00% 
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) (Successor, USD $)
In Thousands, unless otherwise specified
Jan. 2, 2018
Jan. 3, 2017
Successor
 
 
Deferred tax assets:
 
 
Deferred rent
$ 741 
$ 630 
Accrued insurance
3,332 
4,699 
Reserve for restructuring and closed restaurants
763 
1,252 
Net operating loss carryforwards and tax credits
485 
988 
Deferred income
1,069 
1,801 
Stock-based compensation
767 
919 
Deferred Tax Assets, Tax Deferred Expense, Compensation and Benefits, Employee Compensation
472 
2,897 
Other, net
355 
650 
Deferred tax assets
7,984 
13,836 
Less valuation allowance
0 
0 
Net deferred tax assets
7,984 
13,836 
Deferred tax liabilities:
 
 
Property, equipment and intangibles
(67,696)
(96,929)
Investment in subsidiary
(7,420)
(6,045)
Prepaid expenses
(1,442)
(2,135)
Deferred tax liabilities
(76,558)
(105,109)
Net deferred tax liabilities
$ (68,574)
$ (91,273)
Income Taxes - Schedule of Unrecognized Tax Benefits (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 6 Months Ended
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Dec. 29, 2015
Predecessor
Jun. 30, 2015
Predecessor
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
 
 
 
 
Balance at beginning of period
$ 212 
 
$ 212 
$ 0 
Increases (decreases) related to prior year tax positions
0 
0 
0 
0 
Increases (decreases) related to current year tax positions
0 
0 
0 
212 
Expiration of the statute of limitations for the assessment of taxes
0 
0 
0 
0 
Settlements
0 
0 
0 
0 
Balance at end of period
$ 212 
$ 212 
$ 212 
$ 212 
Income Taxes - Additional Information (Detail) (USD $)
12 Months Ended 6 Months Ended 12 Months Ended
Jan. 2, 2018
Jan. 2, 2018
Tax Year 2018 [Member]
Jun. 30, 2015
Predecessor
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Jan. 2, 2018
Domestic Tax Authority
Successor
Jan. 2, 2018
State and Local Jurisdiction [Member]
Successor
Jun. 30, 2015
Valuation Allowance of Deferred Tax Assets [Member]
Predecessor
Dec. 30, 2014
Valuation Allowance of Deferred Tax Assets [Member]
Predecessor
Jan. 2, 2018
Valuation Allowance of Deferred Tax Assets [Member]
Successor
Jan. 3, 2017
Valuation Allowance of Deferred Tax Assets [Member]
Successor
Dec. 29, 2015
Valuation Allowance of Deferred Tax Assets [Member]
Successor
Jun. 30, 2015
Valuation Allowance of Deferred Tax Assets [Member]
Successor
Income Tax Disclosure [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal income taxes (percent)
35.00% 
21.00% 
35.00% 
35.00% 
35.00% 
35.00% 
 
 
 
 
 
 
 
 
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount
$ 29,100,000 
 
$ 0 
$ 0 
$ (29,111,000)
$ 0 
 
 
 
 
 
 
 
 
Effective income tax rates (percent)
 
 
26.00% 
4.10% 
(46.50%)
42.30% 
 
 
 
 
 
 
 
 
Deferred tax assets, valuation allowance
 
 
 
 
0 
0 
 
 
 
 
 
 
 
 
Income tax benefit attributable to change in valuation allowance
 
 
 
1,900,000 
 
 
 
 
 
 
 
 
 
 
Operating loss carryforwards
 
 
 
 
 
 
0 
0 
 
 
 
 
 
 
Tax credit carryforward
 
 
 
 
 
 
0 
600,000 
 
 
 
 
 
 
Liability for uncertain tax positions
 
 
 
 
200,000 
200,000 
 
 
 
 
 
 
 
 
Unrecognized tax benefits that would impact effective tax rate
 
 
 
 
200,000 
 
 
 
 
 
 
 
 
 
Impact to effective tax due to change in legislation
 
 
 
(18.50%)
 
 
 
 
 
 
 
 
 
 
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued
 
 
 
 
0 
0 
 
 
 
 
 
 
 
 
Valuation allowance
 
 
 
 
 
 
 
 
$ 17,398,000 
$ 20,217,000 
$ 0 
$ 0 
$ 0 1 2
$ 1,900,000 
Leases - Additional Information (Details) (USD $)
4 Months Ended 12 Months Ended 6 Months Ended 4 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended
Jan. 2, 2018
location
property
Jan. 2, 2018
location
property
Jan. 3, 2017
Jun. 30, 2015
Predecessor
Dec. 29, 2015
Successor [Member]
location
Dec. 29, 2015
Successor [Member]
Jun. 30, 2015
Successor [Member]
Jan. 2, 2018
Successor [Member]
location
Jan. 3, 2017
Successor [Member]
Jan. 2, 2018
Costa Mesa [Member]
Jan. 2, 2018
Las Vegas [Member]
Jan. 3, 2017
Sale of Land and Building in Victorville
Jan. 3, 2017
Sale of Land and Building in Bakersfield
Jan. 2, 2018
Capital Lease Obligations
Successor [Member]
Dec. 29, 2015
Occupancy and Other - Franchise Subleases
Successor [Member]
Jun. 30, 2015
Occupancy and Other - Franchise Subleases
Successor [Member]
Jan. 2, 2018
Occupancy and Other - Franchise Subleases
Successor [Member]
Jan. 3, 2017
Occupancy and Other - Franchise Subleases
Successor [Member]
Operating Leased Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred rent liability
 
 
 
 
 
 
 
$ 17,400,000 
$ 18,700,000 
 
 
 
 
 
 
 
 
 
Unfavorable lease liabilities, net
 
 
 
 
 
 
 
14,500,000 
17,100,000 
 
 
 
 
 
 
 
 
 
Unfavorable leases, accumulated amortization
 
 
 
 
 
 
 
6,100,000 
3,900,000 
 
 
 
 
 
 
 
 
 
Sublease rent income
 
 
 
 
 
1,183,000 
1,183,000 
2,844,000 
2,343,000 
 
 
 
 
 
1,140,000 
1,109,000 
2,608,000 
2,207,000 
Sublease contingent rental income
 
 
 
300,000 
 
300,000 
 
100,000 
100,000 
 
 
 
 
 
 
 
 
 
Interest rate on capital lease
 
 
 
 
 
 
 
 
 
 
 
 
 
8.00% 
 
 
 
 
Number of properties subleased
31 
31 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total sublease amounts receivable
 
 
 
 
 
 
 
33,600,000 
 
 
 
 
 
 
 
 
 
 
Number of Underperforming Restaurant Locations, Subleased
 
 
 
 
 
 
 
11 
 
 
 
 
 
 
 
 
 
 
Number of underperforming locations
12 
 
 
 
12 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Underperforming Restaurant Locations, Terminated
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net proceeds from sale-leaseback arrangements
 
9,900,000 
3,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leaseback arrangement term (in years)
 
35 years 
 
 
 
 
 
 
 
20 years 
20 years 
1 year 
20 years 
 
 
 
 
 
Sale Leaseback Transaction, Deferred Gain, Net
 
$ 300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lessee Leasing Arrangements, Operating Leases, Termination Notice
 
 
 
 
 
 
 
 
 
 
 
60 days 
 
 
 
 
 
 
Leases - Schedule of Rent Expense (Details) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Dec. 29, 2015
Jun. 30, 2015
Jan. 2, 2018
Jan. 3, 2017
Successor
 
 
 
 
Operating Leased Assets [Line Items]
 
 
 
 
Minimum rental expense
$ 12,384 
 
$ 27,372 
$ 26,465 
Favorable and unfavorable lease assets and liabilities amortization, net
(364)
 
(809)
(607)
Straight-line rent expense
518 
 
826 
781 
Contingent rent expense
2,033 
 
685 
805 
Rent expense
14,571 
 
28,074 
27,444 
Sublease rent income
(1,183)
(1,183)
(2,844)
(2,343)
Predecessor
 
 
 
 
Operating Leased Assets [Line Items]
 
 
 
 
Minimum rental expense
 
12,405 
 
 
Favorable and unfavorable lease assets and liabilities amortization, net
 
3 
 
 
Straight-line rent expense
 
277 
 
 
Contingent rent expense
 
2,063 
 
 
Rent expense
 
14,748 
 
 
Occupancy and Other - Franchise Subleases [Member] |
Successor
 
 
 
 
Operating Leased Assets [Line Items]
 
 
 
 
Sublease rent income
$ (1,140)
$ (1,109)
$ (2,608)
$ (2,207)
Leases - Minimum Commitments and Receipts (Details) (Successor, USD $)
In Thousands, unless otherwise specified
Jan. 2, 2018
Successor
 
Capital Leases, Future Minimum Payments, Net Present Value [Abstract]
 
Capital Lease and Deemed Landlord Financing Liabilities, 2017
$ 3,600 
Capital Lease and Deemed Landlord Financing Liabilities, 2018
3,102 
Capital Lease and Deemed Landlord Financing Liabilities, 2019
2,858 
Capital Lease and Deemed Landlord Financing Liabilities, 2020
2,727 
Capital Lease and Deemed Landlord Financing Liabilities, 2021
2,597 
Capital Lease and Deemed Landlord Financing Liabilities, Thereafter
28,808 
Capital Lease and Deemed Landlord Financing Liabilities, Total minimum lease payments
43,692 
Capital Lease and Deemed Landlord Financing Liabilities, Imputed Interest
(23,639)
Capital Lease and Deemed Landlord Financing Liabilities, Present value of payments
20,053 
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
 
Operating Leases, 2018
31,763 
Operating Leases, 2019
29,471 
Operating Leases, 2020
27,558 
Operating Leases, 2021
26,082 
Operating Leases, 2022
24,052 
Operating Leases, Thereafter
147,544 
Operating Leases, Total minimum lease payments
286,470 
Operating Leases, Future Minimum Payments Receivable [Abstract]
 
Operating Subleases, 2018
(2,763)
Operating Subleases, 2019
(2,794)
Operating Subleases, 2020
(2,644)
Operating Subleases, 2021
(2,619)
Operating Subleases, 2022
(2,604)
Operating Subleases, Thereafter
(20,188)
Operating Subleases, Total minimum lease payments
(33,612)
Net Lease Commitments, 2018
32,600 
Net Lease Commitments, 2019
29,779 
Net Lease Commitments, 2020
27,772 
Net Lease Commitments, 2021
26,190 
Net Lease Commitments, 2022
24,045 
Net Lease Commitments, Thereafter
156,164 
Net Lease Commitments, Total minimum lease payments
$ 296,550 
Commitments and Contingencies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended
Jan. 2, 2018
Jan. 2, 2018
Successor
Jan. 2, 2018
Officers
Termination Incentive Payments
Jan. 2, 2018
Officers
Termination Incentive Payments
Successor
Jan. 3, 2017
Officers
Termination Incentive Payments
Successor
Jan. 2, 2018
Litigation Case on April 2015
Dec. 29, 2015
Litigation Case on April 2015
Successor
Jan. 3, 2017
Litigation Case on April 2015
Successor
Jun. 30, 2015
Litigation Case on April 2015
Predecessor
Jan. 3, 2017
Insurance Claims
Successor
Dec. 29, 2015
Insurance Claims
Successor
Loss Contingencies [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Purchasing commitments contract extended terms
2021 
 
 
 
 
 
 
 
 
 
 
Contractual purchase obligations for goods and services
 
$ 70.4 
 
 
 
 
 
 
 
 
 
Base salary and bonus incentive payments after termination, term (in years)
 
 
1 year 
 
 
 
 
 
 
 
 
Contingent liability related to Severance Agreements and Executive Employment Agreements
 
 
 
2.6 
3.5 
 
 
 
 
 
 
Insurance deductible per claim
0.35 
 
 
 
 
0.25 
 
 
 
 
 
Legal defense fees
 
 
 
 
 
 
0.1 
0.3 
0.7 
 
 
Reimbursement from insurance claims
 
 
 
 
 
 
 
 
 
$ 0.8 
$ 0.3 
Retirement Plans - Additional Information (Details) (USD $)
12 Months Ended 6 Months Ended
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Dec. 29, 2015
Successor
Jun. 30, 2015
Predecessor
Defined Contribution Plan Disclosure [Line Items]
 
 
 
 
Matching contributions
$ 82,000 
$ 80,000 
$ 40,000 
$ 40,000 
Quarterly Financial Data (Unaudited) - Schedule of Quarterly Financial Information (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
0 Months Ended 3 Months Ended 4 Months Ended 6 Months Ended 12 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2015
Sep. 12, 2017
Successor
Jun. 20, 2017
Successor
Mar. 28, 2017
Successor
Sep. 6, 2016
Successor
Jun. 14, 2016
Successor
Mar. 22, 2016
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Jun. 14, 2016
Predecessor
Mar. 22, 2016
Predecessor
Jun. 30, 2015
Predecessor
Condensed Financial Statements, Captions [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
$ 110,988 
$ 108,581 
$ 105,345 
$ 104,419 
 
 
$ 146,542 
$ 150,235 
$ 206,939 
$ 452,148 
$ 434,064 
$ 100,026 
$ 97,403 
$ 200,676 
Income from operations
 
9,533 
10,276 
8,613 
10,927 
 
 
12,825 
15,927 
19,247 
41,247 
43,300 
9,706 
6,740 
21,694 
Net income
 
5,101 
5,330 
4,238 
4,949 
 
 
35,202 
8,039 
2,653 
49,871 
20,913 
4,864 
3,061 
2,104 
Earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic (in dollars per share)
 
$ 0.13 
$ 0.14 
$ 0.11 
$ 0.13 
 
 
$ 0.91 
$ 0.21 
$ 0.07 
$ 1.29 
$ 0.54 
$ 0.13 
$ 0.08 
$ 0.38 
Diluted (in dollars per share)
 
$ 0.13 
$ 0.13 
$ 0.10 
$ 0.13 
 
 
$ 0.89 
$ 0.20 
$ 0.07 
$ 1.25 
$ 0.53 
$ 0.13 
$ 0.08 
$ 0.37 
Transaction-related costs
$ 10,200 
 
 
 
$ 500 
$ 100 
$ 100 
 
 
$ 12,300 
 
$ 100 
 
 
$ 7,300 
Schedule II - Valuation and Qualifying Accounts (Details) (Valuation Allowance of Deferred Tax Assets [Member], USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended 6 Months Ended
Dec. 29, 2015
Successor
Jan. 2, 2018
Successor
Jan. 3, 2017
Successor
Jun. 30, 2015
Predecessor
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
 
Balance at beginning of period
$ 1,900 
$ 0 
$ 0 1 2
$ 20,217 
Charged to costs and expenses
0 
0 
0 
0 
Charge to other accounts
0 
0 
0 
0 
Deductions
(1,926)
0 
0 
(2,819)
Balance at end of period
$ 0 1 2
$ 0 
$ 0 
$ 17,398