FIESTA RESTAURANT GROUP, INC., 10-K filed on 2/25/2014
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 29, 2013
Feb. 21, 2014
Jun. 30, 2013
Entity Information [Line Items]
 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Public Float
 
 
$ 762,237,876 
Entity Registrant Name
FIESTA RESTAURANT GROUP, INC. 
 
 
Entity Central Index Key
0001534992 
 
 
Current Fiscal Year End Date
--12-29 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 29, 2013 
 
 
Document Fiscal Year Focus
2013 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
26,780,728 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 29, 2013
Dec. 30, 2012
Current assets:
 
 
Cash
$ 10,978 
$ 15,533 
Trade receivables
6,011 
5,935 
Inventories
2,564 
2,750 
Prepaid rent
2,500 
2,094 
Income tax receivable
4,497 
Prepaid expenses and other current assets
3,357 
2,596 
Deferred income taxes
3,018 
2,049 
Total current assets
32,925 
30,957 
Property and equipment, net
144,527 
126,516 
Goodwill
123,484 
123,484 
Intangible assets, net
121 
202 
Deferred income taxes
12,046 
13,101 
Deferred financing costs, net
1,530 
5,690 
Other assets
4,152 
3,779 
Total assets
318,785 
303,729 
Current liabilities:
 
 
Current portion of long-term debt
61 
60 
Accounts payable
10,802 
10,411 
Accrued interest
118 
6,761 
Accrued payroll, related taxes and benefits
14,296 
14,719 
Accrued real estate taxes
4,505 
3,366 
Other liabilities
8,305 
5,961 
Total current liabilities
38,087 
41,278 
Long-term debt, net of current portion
72,324 
200,889 
Lease financing obligations
1,657 
3,029 
Deferred income--sale-leaseback of real estate
35,873 
36,096 
Other liabilities
12,538 
11,933 
Total liabilities
160,479 
293,225 
Commitments and contingencies
   
   
Stockholders' equity:
 
 
Common stock, par value $.01
261 
227 
Additional paid-in capital
148,765 
10,254 
Retained earnings
9,280 
23 
Total stockholders' equity
158,306 
10,504 
Total liabilities and stockholders' equity
$ 318,785 
$ 303,729 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 29, 2013
Dec. 30, 2012
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
26,710,111 
23,514,437 
Common stock, shares outstanding
26,082,800 
22,748,241 
Consolidated Statements of Operations (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 29, 2013
Dec. 30, 2012
Jan. 1, 2012
Revenues:
 
 
 
Restaurant sales
$ 548,980 
$ 507,351 
$ 473,249 
Franchise royalty revenue and fees
2,357 
2,375 
1,719 
Total revenues
551,337 
509,726 
474,968 
Costs and expenses:
 
 
 
Cost of sales
176,123 
163,514 
152,711 
Restaurant wages and related expenses
143,392 1
136,265 1
129,083 1
Restaurant rent expense
26,849 
21,595 
16,841 
Other restaurant operating expenses
69,021 
63,813 
61,398 
Advertising expense
17,138 
16,791 
16,082 
General and administrative
48,521 2
43,870 2
37,459 2
Depreciation and amortization
20,375 
18,278 
19,537 
Pre-opening costs
2,767 
1,673 
750 
Impairment and other lease charges
199 
7,039 
2,744 
Other expense (income)
(554)
(92)
146 
Total operating expenses
503,831 
472,746 
436,751 
Income from operations
47,506 
36,980 
38,217 
Interest expense
18,043 
24,424 
24,041 
Loss on extinguishment of debt
16,411 
Income before income taxes
13,052 
12,556 
14,176 
Provision for income taxes
3,795 
4,289 
4,635 
Net income
$ 9,257 
$ 8,267 
$ 9,541 
Basic and diluted net income per share
$ 0.39 
$ 0.35 
$ 0.41 
Basic and diluted weighted average common shares outstanding
23,271,431 
22,890,018 
23,161,822 
Consolidated Statements of Operations (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 29, 2013
Dec. 30, 2012
Jan. 1, 2012
Stock-based compensation
$ 2,300 
$ 2,000 
$ 1,700 
Restaurant Wages And Related Expenses [Member]
 
 
 
Stock-based compensation
11 
18 
General and Administrative Expense
 
 
 
Stock-based compensation
$ 2,296 
$ 2,025 
$ 1,690 
Consolidated Statements of Changes in Stockholder's Equity (USD $)
In Thousands, except Share data
Total
USD ($)
Common Stock [Member]
USD ($)
Additional Paid-in Capital [Member]
USD ($)
Accumulated Earnings (Deficit) [Member]
USD ($)
Shares [Member]
Stockholders' equity at Jan. 02, 2011
$ 57,911 
$ 227 
$ 0 
$ 57,684 
 
Shares beginning at Jan. 02, 2011
 
 
 
 
23,161,822 
Capital Contributions
3,345 
3,345 
 
Dividend to former parent
(75,469)
(75,469)
 
Net income
9,541 
9,541 
 
Stockholders' equity at Jan. 01, 2012
(4,672)
227 
3,345 
(8,244)
 
Shares beginning at Jan. 01, 2012
 
 
 
 
23,161,822 
Capital Contributions
5,075 
5,075 
 
Stock-based compensation
1,834 
1,834 
 
Issuance of non-vested shares at spin-off
 
 
 
 
(434,397)
Vesting of restricted shares
 
 
 
 
20,816 
Net income
8,267 
8,267 
 
Stockholders' equity at Dec. 30, 2012
10,504 
227 
10,254 
23 
 
Shares ending at Dec. 30, 2012
22,748,241 
 
 
 
22,748,241 
Capital Contributions
96 
 
96 
 
 
Stock-based compensation
2,298 
 
2,298 
 
 
Vesting of restricted shares
 
 
 
 
Vesting of restricted shares
 
 
 
 
256,223 
Vesting of restricted shares and related tax benefit
865 
 
862 
 
 
Issuance of shares
 
3,078,336 
 
 
3,078,336 
Issuance of shares
135,286 
31 
135,255 
 
 
Net income
9,257 
 
 
9,257 
 
Stockholders' equity at Dec. 29, 2013
$ 158,306 
$ 261 
$ 148,765 
$ 9,280 
 
Shares ending at Dec. 29, 2013
26,082,800 
 
 
 
26,082,800 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 29, 2013
Dec. 30, 2012
Jan. 1, 2012
Cash flows provided from operating activities:
 
 
 
Net income
$ 9,257 
$ 8,267 
$ 9,541 
Adjustments to reconcile net income to net cash provided from operating activities:
 
 
 
Loss (gain) on disposals of property and equipment
(208)
186 
325 
Stock-based Compensation
2,298 
1,834 
1,708 
Impairment and other lease charges
199 
7,039 
2,744 
Loss on extinguishment of debt
16,411 
Depreciation and amortization
20,375 
18,278 
19,537 
Amortization of deferred financing costs
1,487 
1,628 
840 
Amortization of deferred gains from sale-leaseback transactions
(3,489)
(2,328)
(270)
Deferred income taxes
(178)
(1,030)
(44)
Other
342 
48 
Accounts receivable
(77)
(1,093)
(1,361)
Accounts payable
(1,817)
2,398 
1,892 
Accrued payroll, related taxes and benefits
(423)
2,565 
1,718 
Accrued interest
(6,643)
(391)
7,152 
Accrued real estate taxes
1,139 
169 
25 
Other liabilities - current
2,677 
(28)
792 
Other liabilities - long term
986 
728 
(817)
Income tax receivable/payable
(4,423)
522 
 
Other
(1,400)
(1,111)
(663)
Net cash provided from operating activities
36,176 
37,975 
43,167 
Capital expenditures:
 
 
 
New restaurant development
(32,610)
(23,614)
(12,576)
Restaurant remodeling
(3,089)
(8,673)
(4,435)
Other restaurant capital expenditures
(5,407)
(6,917)
(5,040)
Corporate and restaurant information systems
(5,919)
(1,792)
(814)
Total capital expenditures
(47,025)
(40,996)
(22,865)
Properties purchased for sale-leaseback
(4,438)
(2,082)
Proceeds from sale of other properties
1,734 
2,426 
Proceeds from sale-leaseback transactions
15,662 
7,934 
7,783 
Net cash used for investing activities
(34,067)
(32,718)
(15,082)
Cash flows used for financing activities:
 
 
 
Proceeds from issuance of senior secured second lien notes
200,000 
Senior secured second lien note redemption
(200,000)
Proceeds from issuance stock, net of issuance costs
135,286 
Premium and other costs associated with debt redemption
(12,545)
Excess tax benefit from vesting of restricted shares
865 
Borrowings from (payments to) former parent, net
500 
(138,953)
Capital contribution from former parent
2,500 
3,345 
Dividend to former parent
(75,469)
Borrowings on revolving credit facility
81,000 
2,100 
Repayments on revolving credit facility
(10,000)
(2,100)
Principal payments on capital leases
(59)
(59)
(56)
Financing costs associated with issuance of debt
(1,196)
(288)
(7,512)
Settlement of lease financing obligations
(6,047)
Proceeds from issuance of lease financing obligations
1,736 
Payments of financing cost associated with lease financing obligations
(89)
Other financing costs
(15)
Net cash used for financing activities
(6,664)
(3,394)
(16,998)
Net increase (decrease) in cash
(4,555)
1,863 
11,087 
Cash, beginning of year
15,533 
13,670 
2,583 
Cash, end of year
10,978 
15,533 
13,670 
Supplemental disclosures:
 
 
 
Interest paid on long-term debt
23,707 
18,699 
280 
Interest paid on lease financing obligations
137 
4,207 
11,240 
Accruals for capital expenditures
3,009 
802 
161 
Income tax payments, net
7,204 
3,454 
Capital lease obligations incurred
496 
Non-cash reduction of lease financing obligations
1,377 
114,165 
1,740 
Non-cash reduction of assets under lease financing obligations
965 
80,419 
Non-cash capital contribution from former parent
$ 96 
$ 2,575 
$ 0 
Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 29, 2013
Supplemental Cash Flow Information [Abstract]
 
Capitalized interest
$ 600 
Basis of Presentation
Basis of Presentation
Basis of Presentation
Business Description. Fiesta Restaurant Group, Inc. ("Fiesta Restaurant Group" or "Fiesta") owns, operates and franchises two fast-casual restaurant brands through its wholly-owned subsidiaries Pollo Operations, Inc., and its subsidiaries, and Pollo Franchise, Inc., (collectively “Pollo Tropical”) and Taco Cabana, Inc. and its subsidiaries (collectively “Taco Cabana”). Unless the context otherwise requires, Fiesta and its subsidiaries, Pollo Tropical and Taco Cabana, are collectively referred to as the “Company”. At December 29, 2013, Fiesta owned and operated 102 Pollo Tropical® restaurants, of which 95 were located in Florida, five were located in Georgia and two in Tennessee, and franchised a total of 39 Pollo Tropical restaurants, 18 in Puerto Rico, one in Ecuador, two in Honduras, one in the Bahamas, two in Trinidad, three in Venezuela, three in Costa Rica, three in Panama, one in the Dominican Republic, one in India, and four on college campuses in Florida. At December 29, 2013, Fiesta also owned and operated 165 Taco Cabana® restaurants, of which 162 were located in Texas and three were located in Oklahoma, and franchised a total of seven Taco Cabana restaurants, including four in New Mexico and three non-traditional locations (two college campuses and one sports arena) in Texas.
Spin-Off from Carrols Restaurant Group, Inc. On May 7, 2012, Carrols Restaurant Group, Inc. ("Carrols Restaurant Group" or "Carrols") completed the spin-off of Fiesta into an independent public company, through the distribution of all of the outstanding shares of Fiesta Restaurant Group's common stock to the stockholders of Carrols Restaurant Group (the "Spin-off"). As a result of the Spin-off, Fiesta Restaurant Group is now an independent public company whose common stock is traded on The NASDAQ Global Select Market under the symbol “FRGI.”     
In connection with the Spin-off, Fiesta and Carrols entered into several agreements that govern Carrols' post Spin-off relationship with Fiesta, including a Separation and Distribution Agreement, Employee Matters Agreement, Tax Matters Agreement and Transition Services Agreement ("TSA"). See Note 7—Former Related Party Transactions.
Basis of Consolidation. The consolidated financial statements presented herein reflect the consolidated financial position, results of operations and cash flows of Fiesta and its wholly-owned subsidiaries. These consolidated financial statements have been prepared as if the Company was in existence for all periods presented. All intercompany transactions have been eliminated in consolidation.
Through the date of the Spin-off, these consolidated financial statements have been prepared on a stand-alone basis from the separate records maintained by Carrols and may not necessarily be indicative of the results of operations or cash flows that would have resulted had allocations and other related-party transactions been consummated with unrelated parties or had the Company been an independent, publicly traded company during all of the periods presented. The consolidated financial statements reflect the historical financial position, results of operations and cash flows of Fiesta as it has historically operated, in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). All intercompany transactions have been eliminated in consolidation.
In connection with the Spin-off, the board of directors of the Company authorized a 23,161.8 for one split of its outstanding common stock that was effective on April 19, 2012. Accordingly, all references to share and per share amounts related to common stock included in the consolidated financial statements and accompanying notes have been adjusted to reflect the stock split and change in the number of authorized shares. The stock split has been retroactively applied to the Company’s financial statements.
Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The fiscal years ended December 29, 2013, December 30, 2012 and January 1, 2012 each contained 52 weeks.
Allocations. Through the date of the consummation of the Spin-off, Carrols provided administrative support to the Company for executive management, information systems and certain accounting, legal and other administrative functions. The cost of these services were allocated to the Company based primarily on a pro-rata share of either the Company’s revenues, number of restaurants or number of employees. The allocations may not reflect the expense the Company would have incurred as an independent, publicly traded company for the periods presented. Following the Spin-off, certain of these functions were provided by Carrols under the TSA and the Company performed certain functions using its own resources or purchased services from third parties. Refer to Note 7—Former Related Party Transactions for further discussion related to agreements entered into effective as of the Spin-off.
The consolidated financial statements for the year ended January 1, 2012 also reflect interest expense allocated by Carrols to the Company. Effective with the refinancing discussed in Note 8, on August 5, 2011 the Company secured its own financing and interest allocations from Carrols ceased.
Management believes that its allocations are reasonable and based on a systematic and rational method; however, they are not necessarily indicative of the actual financial results of the Company, including such expenses that would have been incurred by the Company had it been operating as a separate, stand-alone entity for the periods presented. As a stand-alone entity, the Company expects to incur expenses that may not be comparable in future periods to what is presented for the historical periods presented in the consolidated financial statements. Consequently, the financial information herein may not reflect the financial position, results of operations and cash flows of the Company in the future or if the Company had been an independent stand-alone entity during all of the periods presented. In our opinion, the consolidated financial statements include all adjustments necessary for a fair presentation of its results of operations.
Use of Estimates. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements. Estimates also affect the reported amounts of expenses during the reporting periods. Significant items subject to such estimates and assumptions include: allocations of Carrols' general and administrative expenses and interest expense on amounts due to Carrols prior to the Spin-off, accrued occupancy costs, insurance liabilities, evaluation for impairment of goodwill and long-lived assets and lease accounting matters. Actual results could differ from those estimates.
Reclassifications. Certain amounts have been reclassified from Restaurant rent expense, Advertising expense and Other restaurant operating expenses to Pre-opening costs in order to conform to the current year presentation. In addition, Accrued income taxes were reclassified to Other liabilities in the consolidated balance sheets, and certain amounts were reclassified from Other to Income tax receivable/payable and Accrued real estate taxes in the consolidated statements of cash flows to conform with the current year presentation.
Cash and Cash Equivalents. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Inventories. Inventories, primarily consisting of food and paper, are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment. The Company capitalizes all direct costs incurred to construct and substantially improve its restaurants. These costs are depreciated and charged to expense based upon their property classification when placed in service. Property and equipment is recorded at cost. Application development stage costs for significant internally developed software projects are capitalized and depreciated. Repair and maintenance activities are expensed as incurred. Depreciation and amortization is provided using the straight-line method over the following estimated useful lives:
Buildings and improvements
5
to
30 years
Equipment
3
to
7 years
Computer hardware and software
3
to
7 years
Assets subject to capital lease
Shorter of useful life or lease term

Leasehold improvements are depreciated over the shorter of their estimated useful lives or the underlying lease term. In circumstances where an economic penalty would be presumed by the non-exercise of one or more renewal options under the lease, the Company includes those renewal option periods when determining the lease term. For significant leasehold improvements made during the latter part of the lease term, the Company amortizes those improvements over the shorter of their useful life or an extended lease term. The extended lease term would consider the exercise of renewal options if the value of the improvements would imply that an economic penalty would be incurred without the renewal of the option. Building costs incurred for new restaurants on leased land are depreciated over the lease term, which is generally a twenty-year period.
Goodwill. Goodwill represents the excess purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets acquired by Carrols from its acquisitions of Pollo Tropical in 1998 and Taco Cabana in 2000. Goodwill is not amortized but is tested for impairment at least annually as of the last day of the fiscal year.
Long-Lived Assets. The Company assesses the recoverability of property and equipment and definite-lived intangible assets by determining whether the carrying value of these assets can be recovered over their respective remaining lives through undiscounted future operating cash flows. Impairment is reviewed whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable.
Deferred Financing Costs. Financing costs incurred in obtaining long-term debt, credit facilities and lease financing obligations are capitalized and amortized over the life of the related obligation as interest expense using the effective interest method.
Leases.  All leases are reviewed for capital or operating classification at their inception. The majority of the Company's leases are operating leases. Many of the lease agreements contain rent holidays, rent escalation clauses and/or contingent rent provisions. Rent expense for leases that contain scheduled rent increases or rent holidays is recognized on a straight-line basis over the lease term, including any option periods included in the determination of the lease term. Contingent rentals are generally based upon a percentage of sales or a percentage of sales in excess of stipulated amounts and are not considered minimum rent payments but are recognized as rent expense when incurred.
Lease Financing Obligations. Lease financing obligations pertain to real estate sale-leaseback transactions accounted for under the financing method. In accordance with ASC 840-40-25-16 “Sale-Leaseback Transactions”, the Company has recorded lease financing obligations for sale-leaseback transactions that did not qualify for sale-leaseback accounting due to certain forms of continuing involvement. The assets (land and building) subject to these obligations remain on the Company's consolidated balance sheet at their historical costs and such assets (excluding land) continue to be depreciated over their remaining useful lives. The proceeds received by the Company from these transactions are recorded as lease financing obligations, and the lease payments are applied as payments of principal and interest. The selection of the interest rate on lease financing obligations is evaluated at inception of the lease based on the Company's incremental borrowing rate adjusted to the rate required to prevent recognition of a non-cash loss or negative amortization of the obligation through the end of the primary lease term.
Revenue Recognition. Revenues from the Company's owned and operated restaurants are recognized when payment is tendered at the time of sale. Franchise royalty revenues are based on a percent of gross sales and are recorded as income when earned. Franchise fees, which are associated with opening new franchised restaurants, are recognized as income when all required activities have been performed by the Company. Area development fees, which are associated with opening new franchised restaurants in a given market, are recognized as income over the term of the related agreement.
Income Taxes. For periods prior to the Spin-off, the Company's taxable income was included in the consolidated U.S. federal income tax return of Carrols and in income tax returns filed by Carrols with certain state taxing jurisdictions. The Company's income tax liability has been computed and presented in these consolidated financial statements for those periods as if it were a separate taxpaying entity.
Deferred income tax assets and liabilities are based on the difference between the financial statement and tax bases of assets and liabilities as measured by the tax rates that are anticipated to be in effect when those differences reverse. The deferred tax provision generally represents the net change in deferred tax assets and liabilities during the period. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is established when it is necessary to reduce deferred tax assets to amounts for which realization is more likely than not. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
Advertising Costs. All advertising costs are expensed as incurred.
Cost of Sales. The Company includes the cost of food, beverage and paper, net of any discounts, in cost of sales.
Pre-opening Costs. The Company's pre-opening costs are expensed as incurred and generally include payroll costs and travel expenditures associated with opening the new restaurant, rent and promotional costs.
Insurance.  The Company is insured for workers' compensation, general liability and medical insurance claims under policies where it pays all claims, subject to stop-loss limitations both for individual claims and claims in the aggregate. During 2012 and 2011, the Company was insured under policies covering both Carrols and the Company. During 2013, the Company was insured under separate policies. Losses are accrued based upon estimates of the aggregate liability for claims based on the Company's experience and certain actuarial methods used to measure such estimates. The Company does not discount any of its self-insurance obligations.
 Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities; and Level 3 inputs are unobservable and reflect our own assumptions. The following methods were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the fair value:
Current Assets and Liabilities. The carrying values reported on the balance sheet of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of those financial instruments.
Revolving Credit Facility. The fair value of outstanding credit facility borrowings, which is considered Level 2, is based on current LIBOR rates and at December 29, 2013, was approximately $71.0 million.
See Note 4 for discussion of the fair value measurement of non-financial assets.
Gift cards. The Company sells gift cards to its customers in its restaurants and through select third parties. The Company recognizes revenue from gift cards upon redemption by the customer. The gift cards have no stated expiration dates and are subject to escheatment rights in certain states. Revenues from unredeemed gift cards are not material to the Company's financial statements.
Property and Equipment
Property, Plant and Equipment Disclosure [Text Block]
Property and Equipment
Property and equipment consisted of the following:
 
December 29, 2013
 
December 30, 2012
Land
$
15,277

 
$
19,904

Owned buildings
13,813

 
16,706

Leasehold improvements
130,623

 
113,679

Equipment
136,088

 
118,489

Assets subject to capital leases
1,647

 
1,151

 
297,448

 
269,929

Less accumulated depreciation and amortization
(152,921
)
 
(143,413
)
 
$
144,527

 
$
126,516


Assets subject to capital leases primarily pertain to buildings leased for certain restaurant locations and certain office equipment and had accumulated amortization at December 29, 2013 and December 30, 2012 of $0.5 million and $0.5 million, respectively. At December 29, 2013 and December 30, 2012, land of $0.7 million and $1.3 million, respectively and owned buildings of $0.8 million and $1.5 million, respectively were subject to lease financing obligations accounted for under the lease financing method. See Note 9—Lease Financing Obligations. Accumulated depreciation pertaining to owned buildings subject to lease financing obligations at December 29, 2013 and December 30, 2012 was $0.3 million and $0.6 million, respectively.
Depreciation and amortization expense for all property and equipment for the years ended December 29, 2013, December 30, 2012 and January 1, 2012 was $20.3 million, $18.2 million, and $19.4 million, respectively.
Goodwill
Goodwill Disclosure [Text Block]
Goodwill
The Company is required to review goodwill for impairment annually or more frequently when events and circumstances indicate that the carrying amount may be impaired. If the determined fair value of goodwill is less than the related carrying amount, an impairment loss is recognized. The Company performs its annual impairment assessment as of the last day of the fiscal year and has determined its reporting units to be its operating segments, Pollo Tropical and Taco Cabana.
In performing its goodwill impairment test, the Company compared the net book values of its reporting units to their estimated fair values, the latter determined by employing a discounted cash flow analysis, which was corroborated with other value indicators where available, such as comparable company earnings multiples.
There have been no changes in goodwill or goodwill impairment losses recorded during the year ended December 29, 2013 or the year ended December 30, 2012. Goodwill balances are summarized below: 
 
Pollo
Tropical
 
Taco
Cabana
 
Total
Balance, December 29, 2013 and December 30, 2012
$
56,307

 
$
67,177

 
$
123,484

Impairment of Long-Lived Assets and Other Lease Charges
Impairment of Long Lived Assets and Other Lease Charges [Text Block]
Impairment of Long-Lived Assets and Other Lease Charges
The Company reviews its long-lived assets, principally property and equipment, for impairment at the restaurant level. In addition to considering management’s plans, known regulatory or governmental actions and damage due to acts of God (hurricanes, tornadoes, etc.), the Company considers a triggering event to have occurred related to a specific restaurant if the restaurant’s cash flows for the last twelve months are less than a minimum threshold or if consistent levels of cash flows for the remaining lease period are less than the carrying value of the restaurant’s assets. If an indicator of impairment exists for any of its assets, an estimate of undiscounted future cash flows over the life of the primary asset for each restaurant is compared to that long-lived asset’s carrying value. If the carrying value is greater than the undiscounted cash flow, the Company then determines the fair value of the asset and if an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. For closed restaurant locations, the Company reviews the future minimum lease payments and related ancillary costs from the date of the restaurant closure to the end of the remaining lease term and records a lease charge for the lease liabilities to be incurred, net of any estimated sublease recoveries.
The Company determined the fair value of restaurant equipment, for those restaurants reviewed for impairment, based on current economic conditions and the Company’s history of using these assets in the operation of its business. For those restaurants reviewed for impairment where the Company owns the land and building, the Company also utilized third-party information such as a broker market price opinion to determine the fair value of the property. These fair value asset measurements rely on significant unobservable inputs and are considered Level 3 in the fair value hierarchy. The Level 3 assets measured at fair value associated with impairment charges recorded during the year ending December 29, 2013 totaled less than $0.1 million.
Impairment on long-lived assets for the Company’s segments and other lease charges recorded were as follows:
         
 
Year Ended
 
December 29, 2013
 
December 30, 2012
 
January 1, 2012
Pollo Tropical
$
(116
)
 
$
6,035

 
$
2,457

Taco Cabana
315

 
1,004

 
287

 
$
199

 
$
7,039

 
$
2,744


During the year ended December 29, 2013, the Company recorded lease charge recoveries, net of other lease charges, of $0.2 million, related to previously closed locations. The Company also recorded an impairment charge of $0.4 million related to a Taco Cabana restaurant during the year ended December 29, 2013.
During the year ended December 30, 2012, the Company recorded other lease charges, net of recoveries, of $1.5 million and impairment charges of $4.1 million associated with the closure of the Company’s five Pollo Tropical restaurants in New Jersey in the first quarter of 2012. The remaining charges recorded in 2012 primarily consist of an impairment charge of $0.5 million related to a Pollo Tropical restaurant, $1.0 million related to two Taco Cabana restaurants and a recovery of $0.2 million related to a non-operating Pollo Tropical restaurant.
During the year ended January 1, 2012, the Company recorded other lease charges of $1.2 million associated with five closed Pollo Tropical restaurants and $0.1 million of lease charges for two closed Taco Cabana restaurants. The Company also recorded fixed asset impairment charges of $1.3 million for an underperforming Pollo Tropical restaurant.
Other Liabilities, Long-Term
Other Liabilities Disclosure [Text Block]
Other Liabilities, Long-Term
Other liabilities, long-term, consisted of the following:
 
December 29, 2013
 
December 30, 2012
Accrued occupancy costs
$
9,973

 
$
8,493

Accrued workers’ compensation and general liability claims
729

 
1,270

Deferred compensation
593

 
812

Other
1,243

 
1,358

 
$
12,538

 
$
11,933


Accrued occupancy costs include obligations pertaining to closed restaurant locations and accruals to expense operating lease rental payments on a straight-line basis over the lease term.

The following table presents the activity in the closed-store reserve, of which $1.1 million and $1.7 million are included in long-term accrued occupancy costs above at December 29, 2013 and December 30, 2012, respectively, with the remainder in other current liabilities:
 
 
Year Ended
 
 December 29, 2013
 
December 30, 2012
Balance, beginning of period
$
2,432

 
$
2,246

Provisions for restaurant closures

 
1,796

Recoveries, net of additional lease charges
(197
)
 
(377
)
Payments, net
(937
)
 
(1,496
)
Other adjustments
141

 
263

Balance, end of period
$
1,439

 
$
2,432

Leases
Leases of Lessee Disclosure [Text Block]
Leases
The Company utilizes land and buildings in its operations under various lease agreements. The Company does not consider any one of these individual leases material to the Company's operations. Initial lease terms are generally for twenty years and, in many cases, provide for renewal options and in most cases rent escalations. Certain leases require contingent rent, determined as a percentage of sales as defined by the terms of the applicable lease agreement. For most locations, the Company is obligated for occupancy related costs including payment of property taxes, insurance and utilities.
During the years ended December 29, 2013, December 30, 2012 and January 1, 2012 the Company sold six, five and five restaurant properties in each year, respectively, in sale-leaseback transactions for net proceeds of $15.7 million, $7.9 million and $7.8 million, respectively. These leases have been classified as operating leases and generally contain a twenty-year initial term plus renewal options.
Deferred gains on sale-leaseback transactions of $4.0 million, $34.3 million, and $0.4 million were recognized during the years ended December 29, 2013, December 30, 2012, and January 1, 2012, respectively and are being amortized over the term of the related leases. The amount recognized in 2012 includes $32.1 million resulting from the qualification for sale treatment of certain sale-leaseback transactions upon the Spin-off. (See Note 9 for further discussion.) The amortization of deferred gains on sale-leaseback transactions was $3.5 million, $2.3 million and $0.3 million for the years ended December 29, 2013, December 30, 2012 and January 1, 2012, respectively.
Minimum rent commitments due under capital and non-cancelable operating leases at December 29, 2013 were as follows:
 
Capital
 
Operating
2014
$
236

 
$
31,541

2015
224

 
31,177

2016
220

 
30,798

2017
220

 
29,813

2018
220

 
28,795

Thereafter
1,963

 
212,652

Total minimum lease payments (1)
3,083

 
$
364,776

Less amount representing interest
(1,698
)
 
 
Total obligations under capital leases
1,385

 
 
Less current portion
(61
)
 
 
Long-term debt under capital leases
$
1,324

 
 
(1) Minimum operating lease payments have not been reduced by minimum sublease rentals of $6.3 million due in the future under noncancelable subleases.
Total rent expense on operating leases, including contingent rentals, was as follows:
 
Year Ended
 
December 29, 2013
 
December 30, 2012
 
January 1, 2012
Minimum rent on real property, excluding rent included in pre-opening costs
$
26,571

 
$
21,349

 
$
16,632

Additional rent based on percentage of sales
278

 
246

 
209

Restaurant rent expense
26,849

 
21,595

 
16,841

Rent included in pre-opening costs
842

 
411

 
89

Administrative and equipment rent
1,004

 
781

 
819

 
$
28,695

 
$
22,787

 
$
17,749

Long-term Debt
Long-term Debt
Long-term Debt
Long term debt at December 29, 2013 and December 30, 2012 consisted of the following:
 
December 29,
2013
 
December 30,
2012
Collateralized:
 
 
 
Fiesta Restaurant Group 8.875% Senior Secured Second Lien Notes
$

 
$
200,000

       Revolving Credit Facility
71,000

 

Capital leases
1,385

 
949

 
72,385

 
200,949

Less: current portion of long-term debt
(61
)
 
(60
)
 
$
72,324

 
$
200,889


Repurchase of Notes. On November 12, 2013, the Company commenced a tender offer and consent solicitation for all of its outstanding $200.0 million in aggregate principal amount of 8.875% Senior Secured Second Lien Notes due 2016 (the "Notes"). Holders who validly tendered their Notes received total consideration of $1,062.50, payable in cash for each $1,000 principal amount of Notes accepted for payment, which included a consent payment of $30.00 per $1,000 principal amount of Notes tendered and accepted for payment. Accrued and unpaid interest, up to, but not including, the applicable settlement date, was paid in cash on all validly tendered and accepted Notes. The principal amount repurchased in the tender offer totaled $122.7 million.
On December 11, 2013, the Company irrevocably called for redemption the remaining $77.3 million principal amount of Notes that were not validly tendered and accepted for payment in the tender offer. In accordance with the terms of the indenture governing the Notes, the redemption price was equal to 100% of the principal amount of the Notes, plus the Applicable Premium (as defined in the indenture governing the Notes) as of, and accrued and unpaid interest, if any, to, but not including, December 16, 2013, the date of redemption.
The Notes were issued on August 5, 2011 pursuant to an indenture dated as of August 5, 2011 governing such Notes. The proceeds from the issuance of the Notes were used by Carrols to repay amounts outstanding under Carrols LLC's senior credit facility and Carrols Corp.'s 9% senior subordinated notes due 2013, as well as to pay related fees and expenses. The Notes matured and were payable on August 15, 2016. Interest was payable semi-annually on February 15 and August 15. The Notes were guaranteed by all of the Company’s subsidiaries and were secured by second-priority liens on substantially all of the Company’s and its subsidiaries’ assets (including a pledge of all of the capital stock and equity interests of its material subsidiaries).
The Company recognized a loss on extinguishment of debt of $16.4 million in the fourth quarter of 2013 related to the repurchase and redemption of the Notes. The loss on extinguishment of debt includes the write-off of $3.9 million in deferred financing costs related to the Notes and $12.5 million of debt redemption premiums, consent payments, additional interest and other fees related to the redemption of the Notes.
New Senior Credit Facility. In December 2013, the Company terminated its former senior secured revolving credit facility, referred to as the “former senior credit facility”, and entered into a new senior secured revolving credit facility with a syndicate of lenders, which we refer to as the "new senior credit facility". The new senior credit facility provides for aggregate revolving credit borrowings of up to $150 million (including $15 million available for letters of credit) and matures on December 11, 2018. The new senior credit facility also provides for potential incremental increases of up to $50 million to the revolving credit borrowings available under the new senior credit facility. On December 29, 2013, there were $71.0 million in outstanding borrowings under our new senior credit facility.
Borrowings under the new senior credit facility bear interest at a per annum rate, at our option, equal to either (all terms as defined in the new senior credit facility):
1) the Alternate Base Rate plus the applicable margin of 0.50% to 1.50% based on our Adjusted Leverage Ratio (with a margin of 0.75% as of December 29, 2013), or
2) the LIBOR Rate plus the applicable margin of 1.50% to 2.50% based on our Adjusted Leverage Ratio (with a margin of 1.75% at December 29, 2013).
In addition, the new senior credit facility requires the Company to pay (i) a commitment fee based on the applicable Commitment Fee margin of 0.25% to 0.45%, based on our Adjusted Leverage Ratio, (with a margin of 0.3% at December 29, 2013) and the unused portion of the facility and (ii) a letter of credit fee based on the applicable LIBOR margin and the dollar amount of outstanding letters of credit.
All obligations under the Company's new senior credit facility are guaranteed by all of Company's material domestic subsidiaries. In general, the Company's obligations under the new senior credit facility and its subsidiaries’ obligations under the guarantees are secured by a first priority lien and security interest on substantially all of its assets and the assets of its material subsidiaries (including a pledge of all of the capital stock and equity interests of its material subsidiaries), other than certain specified assets, including real property owned by the Company or its subsidiaries.
The outstanding borrowings under the Company's new senior credit facility are prepayable without penalty (other than customary breakage costs). The new senior credit facility requires the Company to comply with customary affirmative, negative and financial covenants, including, without limitation, those limiting the Company's and its subsidiaries’ ability to (i) incur indebtedness, (ii) incur liens, (iii) loan, advance, or make acquisitions and other investments or other commitments to construct, acquire or develop new restaurants (subject to certain exceptions), (iv) pay dividends, (v) redeem and repurchase equity interests, (vi) conduct asset and restaurant sales and other dispositions (subject to certain exceptions), (vii) conduct transactions with affiliates and (viii) change its business. In addition, the new senior credit facility requires the Company to maintain certain financial ratios, including a Fixed Charge Coverage Ratio and an Adjusted Leverage Ratio (all as defined under the new senior credit facility).
The Company's new senior credit facility contains customary default provisions, including without limitation, a cross default provision pursuant to which it is an event of default under this facility if there is a default under any of the Company's indebtedness having an outstanding principal amount of $5.0 million or more which results in the acceleration of such indebtedness prior to its stated maturity or is caused by a failure to pay principal when due.
As of December 29, 2013, the Company was in compliance with the covenants under its new senior credit facility. After reserving $8.4 million for letters of credit issued under the new senior credit facility, $70.6 million was available for borrowing at December 29, 2013.
Former Senior Credit Facility. The Company entered into the first lien senior secured credit facility providing for aggregate revolving credit borrowings of up to $25.0 million (including $10.0 million available for letters of credit) on August 5, 2011. The facility also provided for incremental increases of up to $5.0 million, in the aggregate, to the revolving credit borrowings available under the former senior credit facility, and matured on February 5, 2016. The first lien senior secured credit facility was terminated on December 11, 2013 and replaced with the new senior credit facility discussed above.
Borrowings under the former senior credit facility bore interest at a per annum rate, at the Company’s option, of either (all terms as defined in the former senior credit facility):
1) the Alternate Base Rate plus the applicable margin of 2.00% to 2.75% based on the Company’s Adjusted Leverage Ratio
2) the LIBOR Rate plus the applicable margin of 3.00% to 3.75% based on the Company’s Adjusted Leverage Ratio
At December 29, 2013, principal payments required on long-term debt were $71.0 million in 2018. The weighted average interest rate on all debt, excluding lease financing obligations, was 2.25% and 8.88% at December 29, 2013 and December 30, 2012, respectively. Interest expense on the Company's long-term debt, excluding lease financing obligations, was $17.9 million, $19.9 million and $8.0 million for the years ended December 29, 2013, December 30, 2012 and January 1, 2012, respectively.
Lease Financing Obligations
Lease Financing Obligations [Text Block]
Lease Financing Obligations
The Company entered into sale-leaseback transactions in various years that did not qualify for sale-leaseback accounting due to certain forms of continuing involvement and, as a result, the leases were classified as financing transactions in the Company’s consolidated financial statements.
Under the financing method, the assets remain on the consolidated balance sheet and the net proceeds received by the Company from these transactions are recorded as a lease financing liability. Payments under these leases are applied as payments of imputed interest and deemed principal on the underlying financing obligations.
These leases generally provide for an initial term of 20 years plus renewal options. The rent payable under such leases includes a minimum rent provision and in some cases, includes rent based on a percentage of sales. These leases also require payment of property taxes, insurance and utilities.
During the second quarter of 2012, the Company exercised its purchase options under the leases for five restaurant properties previously accounted for as lease financing obligations and purchased these properties from the lessor. As a result, the Company reduced its lease financing obligations by $6.0 million during the year ended December 30, 2012. The Company also recorded a loss of $0.1 million included in interest expense representing the net amount by which the purchase price of the restaurant properties acquired exceeded the balance of the respective lease financing obligations.
For certain of the Company’s historical sale-leaseback transactions, Carrols has guaranteed the lease payments on an unsecured basis or is the primary lessee on the leases associated with certain of the Company’s sale-leaseback transactions. Prior to the Spin-off, ASC 840-40 “Sale-Leaseback Transactions” required the Company to classify these leases as lease financing transactions in the Company’s consolidated financial statements because the guarantee from a related party constituted continuing involvement and caused the sale to not qualify for sale-leaseback accounting.
At the time of the Spin-off, these sale-leaseback transactions qualified for sale-leaseback accounting (and the treatment of such related leases as operating leases) due to the cure or elimination of the provisions that previously precluded sale-leaseback accounting in the Company's financial statements. As a result of the qualification for sale-leaseback accounting during the second quarter of 2012, the Company removed the associated lease financing obligations, property and equipment, and deferred financing costs from its balance sheet, and recognized deferred gains on sale-leaseback transactions related to the qualification of $32.1 million that will be amortized as a reduction of rent expense over the individual remaining lease terms. This resulted in a decrease in lease financing obligations of $114.2 million, a decrease in assets under lease financing obligations of $80.4 million, and a decrease of $1.6 million in deferred financing fees.
In 2013, the Company removed an additional lease financing obligation and the related property and equipment and deferred financing costs from its balance sheet and recognized a deferred gain of $0.4 million on the sale-leaseback transaction related to the expiration of a provision that previously precluded sale-leaseback accounting.
At December 29, 2013, payments required on all lease financing obligations were as follows:
2014
$
139

2015
140

2016
141

2017
143

2018
144

Thereafter, through 2030
2,369

Total minimum lease payments
3,076

Less: Interest implicit in obligations
(1,419
)
Total lease financing obligations
$
1,657

The interest rate on lease financing obligations was 8.6% at December 29, 2013. Interest expense associated with lease financing obligations was $0.1 million, $4.5 million and $11.3 million for the years ended December 29, 2013, December 30, 2012, and January 1, 2012, respectively.
Income Taxes
Income Tax Disclosure [Text Block]
Income Taxes
Prior to the Spin-off, the Company’s taxable income was included in the consolidated U.S. federal income tax return of Carrols and in income tax returns filed by Carrols on a consolidated basis with certain state taxing jurisdictions. Subsequent to the Spin-off, the Company is responsible for filing its own consolidated U.S. federal and state tax returns. Prior to the Spin-off, the Company determined its provision for income taxes on a separate return basis.
The Tax Matters Agreement governs the methodology for allocating responsibility for federal, state, local and foreign income and other taxes related to taxable periods prior to and subsequent to the Spin-off. Under the Tax Matters Agreement, Carrols is generally responsible for Federal income taxes related to the Company for all periods prior to the date of the Spin-off and the Company is responsible for Federal income taxes for periods after the date of the Spin-off. The Company is also responsible for state taxes that were filed on a consolidated basis both before and after the date of Spin-off, specifically Florida and Texas, and any other states where the Company was filing or will file separate state tax returns.
The Company’s income tax provision was comprised of the following:
    
 
Year Ended
 
December 29, 2013
 
December 30, 2012
 
January 1, 2012
Current:
 
 
 
 
 
Federal
$
2,550

 
$
4,197

 
$
2,761

Foreign
375

 
365

 
286

State
1,048

 
757

 
1,632

 
3,973

 
5,319

 
4,679

Deferred (prepaid):
 
 
 
 
 
Federal
136

 
(1,405
)
 
155

State
(11
)
 
230

 
(324
)

125

 
(1,175
)
 
(169
)
Valuation allowance
(303
)
 
145

 
125

 
$
3,795

 
$
4,289

 
$
4,635


Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. The components of deferred income tax assets and liabilities at December 29, 2013 and December 30, 2012 were as follows:
 
 
December 29, 2013
 
December 30, 2012
Current deferred income tax assets (liabilities):
 
 
 
 
  Inventory and other reserves
 
$
(88
)
 
$
(173
)
  Accrued vacation benefits
 
1,392

 
1,446

  Other accruals
 
1,714

 
776

Current deferred income tax assets
 
3,018

 
2,049

Long term deferred income tax assets (liabilities):
 
 
 
 
  Deferred income on sale-leaseback of certain real estate
 
13,048

 
13,126

  Lease financing obligations
 
126

 
258

  Property and equipment depreciation
 
(3,423
)
 
(2,217
)
  Amortization of other intangibles, net
 
(3,136
)
 
(3,031
)
  Occupancy costs
 
3,645

 
3,104

  Tax credit carryforwards
 
516

 
819

  Other
 
1,786

 
1,861

Long-term net deferred income tax assets
 
12,562

 
13,920

  Less: Valuation allowance
 
(516
)
 
(819
)
Total long-term deferred income tax assets
 
12,046

 
13,101

Carrying value of net deferred income tax assets
 
$
15,064

 
$
15,150


The Company establishes a valuation allowance to reduce the carrying amount of deferred income tax assets when it is more likely than not that it will not realize some portion or all of the tax benefit of its deferred tax assets. The Company evaluates whether its deferred income tax assets are probable of realization on a quarterly basis. In performing this analysis, the Company considers all available evidence including historical operating results, the estimated timing of future reversals of existing taxable temporary differences and estimated future taxable income exclusive of reversing temporary differences and carryforwards. At December 29, 2013 and December 30, 2012, the Company had a valuation allowance of $516 and $819 respectively, against net deferred income tax assets due to foreign income tax credit carryforwards where it was determined to be more likely than not that the deferred income tax asset amounts would not be realized. The valuation allowance decreased $303 in 2013 primarily as the result of the expiration of foreign tax credits. The estimation of future taxable income for federal and state purposes and the Company's ability to realize deferred income tax assets can significantly change based on future events and operating results. Thus, recorded valuation allowances may be subject to future changes that could be material.
The Company's effective tax rate was 29.1%, 34.2%, and 32.7% for the years ended December 29, 2013, December 30, 2012 and January 1, 2012, respectively. A reconciliation of the statutory federal income tax provision to the effective tax provision was as follows:
 
Year Ended
 
December 29, 2013
 
December 30, 2012
 
January 1, 2012
Statutory federal income tax provision
$
4,568

 
$
4,395

 
$
4,962

State income taxes, net of federal benefit
666

 
520

 
850

Change in valuation allowance
(303
)
 
145

 
125

Increase in deferred tax assets at Spin-off

 
(182
)
 

Non-deductible expenses
334

 
94

 
67

Foreign taxes
654

 
365

 
286

Employment tax credits
(1,490
)
 
(202
)
 
(1,321
)
Foreign tax credits
(375
)
 
(365
)
 
(229
)
Miscellaneous
(259
)
 
(481
)
 
(105
)
 
$
3,795

 
$
4,289

 
$
4,635


The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. As of December 29, 2013 and December 30, 2012, the Company had no unrecognized tax benefits and no accrued interest related to uncertain tax positions.
The tax years 2009-2012 remain open to examination by the taxing jurisdictions to which the Company is subject. Although it is not reasonably possible to estimate the amount by which unrecognized tax benefits may increase within the next twelve months due to uncertainties regarding the timing of any examinations, the Company does not expect unrecognized tax benefits to significantly change in the next twelve months.
Stockholders' Equity
Stockholders' Equity Note Disclosure [Text Block]
Stockholders' Equity
Issuance of stock
On November 20, 2013, the Company sold 3,078,336 shares of Fiesta's common stock in an underwritten public offering at a price of $46.00 per share (excluding underwriting discounts and commissions) pursuant to a Registration Statement on Form S-3 (Registration No. 333-192254). The aggregate net proceeds to the Company from the offering were approximately $135.3 million, reflecting gross proceeds of $141.6 million, net of underwriting fees of approximately $5.7 million and other offering costs of approximately $0.7 million. The Company used the proceeds from the offering to repurchase its outstanding Notes tendered pursuant to a tender offer, as discussed in Note 8. The Company used the remaining proceeds from the offering and $81.0 million in borrowings under its new senior credit facility discussed in Note 8 to redeem the Notes not tendered in the tender offer.
Equity compensation
Prior to the Spin-off, certain of the Company's employees participated in the Carrols Restaurant Group, Inc. 2006 Stock Incentive Plan, as amended (the "Carrols Plan"). In conjunction with the Spin-off, the Company established the Fiesta Restaurant Group, Inc. 2012 Stock Incentive Plan (the "Fiesta Plan") in order to be able to compensate its employees and directors by issuing stock options, stock appreciation rights, or stock awards to them under this plan. The aggregate number of shares of stock authorized for distribution under the Fiesta Plan is 3,300,000. As of December 29, 2013, there were 2,395,650 shares available for future grants under the Fiesta Plan.
For the period from May 7, 2012 through December 29, 2013, the consolidated statement of operations includes expenses related to the Company's employees' and directors' participation in both the Carrols Plan and the Fiesta Plan. For the period from January 1, 2012 through the Spin-off, and the year ended January 1, 2012, the consolidated statement of operations includes expenses related to the Company's employees' and directors' participation in the Carrols Plan.
Effective as of the completion of the Spin-off, all holders of Carrols non-vested stock on April 26, 2012, the record date of the Spin-off, received one share of Fiesta Restaurant Group non-vested stock for every one share of Carrols non-vested stock held, with terms and conditions substantially similar to the terms and conditions applicable to the Carrols non-vested stock. In 2012, a total of 434,397 shares were converted to non-vested shares with a weighted average grant date fair value of $11.10 per share.
On June 8, 2012, the Company’s Chief Executive Officer was granted 165,563 shares of non-vested Fiesta common stock with an aggregate value of $2.0 million. These non-vested shares of Fiesta common stock vest over four years at the rate of 25% per annum beginning on the first anniversary of the date of grant and are subject to the Fiesta Plan.
Additionally, during the year ended December 30, 2012, the Company granted in the aggregate 203,693 non-vested shares to certain employees and directors. In general, these shares vest and become non-forfeitable over vesting periods ranging from three to five years and will be expensed according to the specific vesting period. The weighted average fair value at the grant date for restricted non-vested shares issued during the year ended December 30, 2012 was $14.00.
During the year ended December 29, 2013, the Company granted in the aggregate 152,703 non-vested restricted shares under the Fiesta Plan to certain employees. These shares vest and become non-forfeitable over a four year vesting period and will be expensed according to the vesting period. The weighted average fair value at the grant date for restricted non-vested shares issued to employees during the year ended December 29, 2013 was $20.54. Also during the year ended December 29, 2013, the Company granted 8,843 non-vested restricted shares to non-employee directors. The weighted average fair value at the grant date for restricted non-vested shares issued to directors was $35.36. These shares vest and become non-forfeitable over a one year vesting period.
Stock-based compensation expense for the years ended December 29, 2013, December 30, 2012 and January 1, 2012 was $2.3 million, $2.0 million and $1.7 million. Included in the year ended December 30, 2012 is $0.4 million of expense related to the accelerated vesting of the non-vested shares of the former Chairman of the Company's board of directors upon his departure from the Company's board of directors in the first quarter of 2012. As of December 29, 2013, the total unrecognized stock-based compensation expense relating to non-vested shares was approximately $5.8 million. At December 29, 2013, the remaining weighted average vesting period for non-vested shares was 2.0 years .
A summary of all non-vested shares activity for the year ended December 29, 2013 was as follows:
 
 
 
Weighted
 
 
 
Average
 
 
 
Grant Date
 
Shares
 
Price
Non-vested at December 30, 2012
766,196

 
$
12.49

Granted
161,546

 
21.35

Vested
(256,223
)
 
12.11

Forfeited
(44,208
)
 
14.22

Non-vested at December 29, 2013
627,311

 
$
14.81


The grant date fair value of each non-vested share award was determined based on the closing price of the Company's stock on the date of grant.
The fair value of the shares vested during the years ended December 29, 2013 and December 30, 2012 was $6.3 million and $0.3 million, respectively. These amounts include shares held by Fiesta and Carrols employees.
Business Segment Information
Business Segment Information
Business Segment Information
The Company is engaged in the fast-casual restaurant industry, with two restaurant concepts (each of which is an operating segment): Pollo Tropical and Taco Cabana. Pollo Tropical is a fast-casual restaurant brand offering a wide variety of freshly prepared Caribbean inspired food, while our Taco Cabana restaurants offer a broad selection of hand-made, fresh and authentic Mexican food.
The accounting policies of each segment are the same as those described in the summary of significant accounting policies discussed in Note 1. The Company reports more than one measure of segment profit or loss to the chief operating decision maker for the purposes of allocating resources to the segments and assessing their performance. Prior to January 2013, the primary measure of segment profit or loss used to assess performance and allocate resources was Adjusted EBITDA, which is defined as earnings attributable to the applicable operating segment before interest, loss on extinguishment of debt, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense and other income and expense. Beginning in January 2013, the primary measures of segment profit or loss used to assess performance and allocate resources are income before taxes and Adjusted EBITDA. Although the chief operating decision maker continues to use Adjusted EBITDA as a measure of segment profitability, in accordance with Accounting Standards Codification 280, Segment Reporting, the following table includes segment income before taxes, which is the measure of segment profit or loss determined in accordance with the measurement principles that are most consistent with the principles used in measuring the corresponding amounts in the consolidated financial statements. The Company has included the presentation of income before tax for all periods presented.
The “Other” column includes corporate related items not allocated to reportable segments and consists primarily of corporate owned property and equipment, a current income tax receivable, miscellaneous prepaid costs, capitalized debt issuance costs associated with the issuance of indebtedness and the loss on extinguishment of debt discussed in Note 8.
Year Ended
 
Pollo Tropical
 
Taco Cabana
 
Other
 
Consolidated
December 29, 2013:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
257,837

 
$
291,143

 
$

 
$
548,980

Franchise revenue
 
1,865

 
492

 

 
2,357

Cost of sales
 
85,532

 
90,591

 

 
176,123

Restaurant wages and related expenses (1)
 
57,893

 
85,499

 

 
143,392

Restaurant rent expense
 
10,110

 
16,739

 

 
26,849

Other restaurant operating expenses
 
30,790

 
38,231

 

 
69,021

Advertising expense
 
5,726

 
11,412

 

 
17,138

General and administrative expense (2)
 
24,966

 
23,555

 

 
48,521

Depreciation and amortization
 
9,248

 
11,127

 

 
20,375

Pre-opening costs
 
2,047

 
720

 

 
2,767

Impairment and other lease charges
 
(116
)
 
315

 

 
199

Other expense (income)
 
(497
)
 
(57
)
 

 
(554
)
Interest expense
 
7,954

 
10,089

 

 
18,043

Income (loss) before taxes (3)
 
26,049

 
3,414

 
(16,411
)
 
13,052

Capital expenditures
 
24,996

 
16,609

 
5,420

 
47,025

December 30, 2012:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
227,428

 
$
279,923

 
$

 
$
507,351

Franchise revenue
 
1,915

 
460

 

 
2,375

Cost of sales
 
75,388

 
88,126

 

 
163,514

Restaurant wages and related expenses (1)
 
53,624

 
82,641

 

 
136,265

Restaurant rent expense
 
7,688

 
13,907

 

 
21,595

Other restaurant operating expenses
 
26,825

 
36,988

 

 
63,813

Advertising expense
 
5,723

 
11,068

 

 
16,791

General and administrative expense (2)
 
21,358

 
22,512

 

 
43,870

Depreciation and amortization
 
8,153

 
10,100

 
25

 
18,278

Pre-opening costs
 
1,090

 
583

 

 
1,673

Impairment and other lease charges
 
6,035

 
1,004

 

 
7,039

Other expense (income)
 
(92
)
 


 

 
(92
)
Interest expense
 
10,501

 
13,923

 

 
24,424

Income (loss) before taxes
 
13,051

 
(468
)
 
(27
)
 
12,556

Capital expenditures
 
17,482

 
22,355

 
1,159

 
40,996

January 1, 2012
 
 
 
 
 
 
 
 
Restaurant sales
 
$
208,115

 
$
265,134

 
$

 
$
473,249

Franchise revenue
 
1,410

 
309

 

 
1,719

Cost of sales
 
69,466

 
83,245

 

 
152,711

Restaurant wages and related expenses (1)
 
49,025

 
80,058

 

 
129,083

Restaurant rent expense
 
5,945

 
10,896

 

 
16,841

Other restaurant operating expenses
 
25,827

 
35,571

 

 
61,398

Advertising expense
 
5,581

 
10,501

 

 
16,082

General and administrative expense (2)
 
18,355

 
19,104

 

 
37,459

Depreciation and amortization
 
9,121

 
10,416

 

 
19,537

Pre-opening costs
 
528

 
222

 

 
750

Impairment and other lease charges
 
2,457

 
287

 

 
2,744

Other expense (income)
 

 
146

 

 
146

Interest expense
 
9,214

 
14,827

 

 
24,041

Income before taxes
 
14,005

 
170

 
1

 
14,176

Capital expenditures
 
10,241

 
12,523

 
101

 
22,865

Identifiable Assets:
 
 
 
 
 
 
 
 
December 29, 2013
 
$
140,797

 
$
169,367

 
$
8,621

 
$
318,785

December 30, 2012
 
128,593

 
167,348

 
7,788

 
303,729

January 1, 2012
 
156,093

 
206,807

 
7,266

 
370,166


(1) Includes stock-based compensation expense of $2, $11 and $18 for the years ended December 29, 2013, December 30, 2012 and January 1, 2012, respectively.
(2) Includes stock-based compensation expense of $2,296, $2,025 and $1,690 for the years ended December 29, 2013, December 30, 2012 and January 1, 2012, respectively.
(3) "Other" income (loss) before taxes for the year ended December 29, 2013 includes the loss on extinguishment of debt discussed in Note 8.
Net Income (Loss) per Share
Earnings Per Share [Text Block]
Net Income per Share
 We compute basic net income per share by dividing net income applicable to common shares by the weighted average number of common shares outstanding during each period. Our non-vested restricted shares contain a non-forfeitable right to receive dividends on a one-to-one per share ratio to common shares and are thus considered participating securities. The impact of the participating securities is included in the computation of basic net income per share pursuant to the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings attributable to common shares and participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Net income per common share was computed by dividing undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and non-vested restricted shares based on the weighted average shares outstanding during the period.
For 2012, in determining the weighted average number of shares outstanding for basic income per share, the 23.2 million shares distributed from Carrols on May 7, 2012 were assumed to be outstanding for the period from January 2, 2012 through May 6, 2012. The computation of basic and diluted net income per share for 2011 is calculated assuming the number of shares of Fiesta common stock outstanding on May 7, 2012 had been outstanding at the beginning of the period.
The computation of basic and diluted net income per share is as follows:
 
  
Year Ended
 
  
December 29, 2013
 
December 30, 2012
 
January 1, 2012
Basic and diluted net income per share:
  
 
 
 
 
 
Net income
  
$
9,257

 
$
8,267

 
$
9,541

Less: income allocated to participating securities
  
264

 
247

 

Net income available to common stockholders
  
$
8,993

 
$
8,020

 
$
9,541

Weighted average common shares outstanding
  
23,271,431

 
22,890,018

 
23,161,822

Basic and diluted net income per share
  
$
0.39

 
$
0.35

 
$
0.41

Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Lease Assignments. As of December 29, 2013, the Company has assigned eight leases with lease terms expiring on various dates through 2029 to various parties. Although the Company is a not a guarantor under these leases, it remains secondarily liable as a surety for these leases. The maximum potential liability for future rental payments the Company could be required to make under these leases at December 29, 2013 was $3.7 million. The obligations under these leases will generally continue to decrease over time as the operating leases expire. The Company does not believe it is probable that it would be required to make any lease payments resulting from its secondary liability for these leases.
The Company is a party to various litigation matters incidental to the conduct of business. The Company does not believe that the outcome of any of these matters will have a material effect on its consolidated financial statements.
Retirement Plans Retirement Plans
Compensation and Employee Benefit Plans [Text Block]
Retirement Plans
Fiesta offers the Company's salaried employees the option to participate in the Fiesta Corporation Retirement Savings Plan (the “Retirement Plan”). The Retirement Plan includes a savings option pursuant to section 401(k) of the Internal Revenue Code in addition to a post-tax savings option. Fiesta may elect to contribute to the Retirement Plan on an annual basis. Fiesta's contribution, if any, is equal to 50% of the employee's contribution to a maximum Fiesta contribution of $0.5 per participating employee annually for any plan year that Fiesta participates in an employee match. Under the Retirement Plan, Fiesta contributions begin to vest after 1 year and fully vest after 5 years of service. A year of service is defined as a plan year during which an employee completes at least 1,000 hours of service. Participating employees may contribute up to 50% of their salary annually to either of the savings options, subject to other limitations. The employees have various investment options available under a trust established by the Retirement Plan. Contributions made by Fiesta to the Retirement Plan for the Company's employees were $0.2 million and $0.1 million for the years ended December 29, 2013 and December 30, 2012, respectively.
Fiesta also has a Deferred Compensation Plan which permits employees not eligible to participate in the Retirement Plan because they have been excluded as “highly compensated” employees (as so defined in the Retirement Plan) to voluntarily defer portions of their base salary and annual bonus. All amounts deferred by the participants earn interest at 8% per annum. There is no Company matching on any portion of the funds. At December 29, 2013 and December 30, 2012, a total of $0.6 million and $0.8 million, respectively, was deferred by the Company's employees under the Retirement Plan, including accrued interest.
Prior to fiscal 2012, Fiesta employees participated in the Carrols Corporation Retirement Savings Plan (the "Carrols Retirement Plan"), which had provisions similar to the Fiesta Corporation Retirement Savings Plan. Contributions made by Carrols were $0.1 million year ended January 1, 2012.
Selected Quarterly Financial and Earningd Data (Unaudited) Selected Quarterly Financial and Earnings Data (Unaudited)
Quarterly Financial Information [Text Block]
Selected Quarterly Financial and Earnings Data (Unaudited)
 
Year Ended December 29, 2013
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Revenue
$
133,624

 
$
140,880

 
$
140,678

 
$
136,155

 
Income from operations
11,499

 
12,947

 
12,095

 
10,965

 
Net income (loss)
4,799

 
4,969

 
5,042

 
(5,553
)
(1)
Basic and diluted net income (loss) per share
$
0.20

 
$
0.21

 
$
0.21

 
$
(0.22
)
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 30, 2012
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Revenue
$
126,142

 
$
128,833

 
$
128,173

 
$
126,578

 
Income from operations
4,622

(2)(3)
12,850

(3)
10,911

 
8,597

 
Net income (loss)
(1,865
)
 
3,921

 
3,649

 
2,562

 
Basic and diluted net income (loss) per share
$
(0.08
)
 
$
0.17

 
$
0.16

 
$
0.11

 

(1) The Company recognized a loss on extinguishment of debt of $16.4 million in the fourth quarter of 2013 (See Note 8).
(2) The Company recorded impairment and other lease charges of $6.9 million in the first quarter of 2012 (see Note 4).
(3) Costs related to the Spin-off of $0.6 million and $0.1 million are included in the first and second quarters of 2012, respectively.
Schedule II--Valuation and Qualifying Accounts Schedule II
Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]
 
 
Column B
 
Column C
 
Column D
 
Column E
 
 
Balance at
 
Charged to
Charged to
 
 
 
Balance
 
 
beginning
 
costs and
other
 
 
 
at end of
Description
 
of period
 
expenses
accounts
 
Deduction
 
period
Year Ended December 29, 2013:
 
 
 
 
 
 
 
 
 
Deferred income tax valuation allowance
 
$
819

 
(303
)

 

 
516

Year Ended December 30, 2012:
 
 
 
 
 
 
 
 
 
Deferred income tax valuation allowance
 
674

 
145


 

 
819

Year Ended January 1, 2012:
 
 
 
 
 
 
 
 
 
Deferred income tax valuation allowance
 
549

 
125


 

 
674

Basis of Presentation Accounting Policies (Policies)
Basis of Consolidation. The consolidated financial statements presented herein reflect the consolidated financial position, results of operations and cash flows of Fiesta and its wholly-owned subsidiaries. These consolidated financial statements have been prepared as if the Company was in existence for all periods presented. All intercompany transactions have been eliminated in consolidation.
Through the date of the Spin-off, these consolidated financial statements have been prepared on a stand-alone basis from the separate records maintained by Carrols and may not necessarily be indicative of the results of operations or cash flows that would have resulted had allocations and other related-party transactions been consummated with unrelated parties or had the Company been an independent, publicly traded company during all of the periods presented. The consolidated financial statements reflect the historical financial position, results of operations and cash flows of Fiesta as it has historically operated, in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). All intercompany transactions have been eliminated in consolidation.
In connection with the Spin-off, the board of directors of the Company authorized a 23,161.8 for one split of its outstanding common stock that was effective on April 19, 2012. Accordingly, all references to share and per share amounts related to common stock included in the consolidated financial statements and accompanying notes have been adjusted to reflect the stock split and change in the number of authorized shares. The stock split has been retroactively applied to the Company’s financial statements.
Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The fiscal years ended December 29, 2013, December 30, 2012 and January 1, 2012 each contained 52 weeks.
Allocations. Through the date of the consummation of the Spin-off, Carrols provided administrative support to the Company for executive management, information systems and certain accounting, legal and other administrative functions. The cost of these services were allocated to the Company based primarily on a pro-rata share of either the Company’s revenues, number of restaurants or number of employees. The allocations may not reflect the expense the Company would have incurred as an independent, publicly traded company for the periods presented. Following the Spin-off, certain of these functions were provided by Carrols under the TSA and the Company performed certain functions using its own resources or purchased services from third parties. Refer to Note 7—Former Related Party Transactions for further discussion related to agreements entered into effective as of the Spin-off.
Use of Estimates. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements. Estimates also affect the reported amounts of expenses during the reporting periods. Significant items subject to such estimates and assumptions include: allocations of Carrols' general and administrative expenses and interest expense on amounts due to Carrols prior to the Spin-off, accrued occupancy costs, insurance liabilities, evaluation for impairment of goodwill and long-lived assets and lease accounting matters. Actual results could differ from those estimates.
Reclassifications. Certain amounts have been reclassified from Restaurant rent expense, Advertising expense and Other restaurant operating expenses to Pre-opening costs in order to conform to the current year presentation. In addition, Accrued income taxes were reclassified to Other liabilities in the consolidated balance sheets, and certain amounts were reclassified from Other to Income tax receivable/payable and Accrued real estate taxes in the consolidated statements of cash flows to conform with the current year presentation.
Cash and Cash Equivalents. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Inventories. Inventories, primarily consisting of food and paper, are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment. The Company capitalizes all direct costs incurred to construct and substantially improve its restaurants. These costs are depreciated and charged to expense based upon their property classification when placed in service. Property and equipment is recorded at cost. Application development stage costs for significant internally developed software projects are capitalized and depreciated. Repair and maintenance activities are expensed as incurred. Depreciation and amortization is provided using the straight-line method over the following estimated useful lives:
Buildings and improvements
5
to
30 years
Equipment
3
to
7 years
Computer hardware and software
3
to
7 years
Assets subject to capital lease
Shorter of useful life or lease term

Leasehold improvements are depreciated over the shorter of their estimated useful lives or the underlying lease term. In circumstances where an economic penalty would be presumed by the non-exercise of one or more renewal options under the lease, the Company includes those renewal option periods when determining the lease term. For significant leasehold improvements made during the latter part of the lease term, the Company amortizes those improvements over the shorter of their useful life or an extended lease term. The extended lease term would consider the exercise of renewal options if the value of the improvements would imply that an economic penalty would be incurred without the renewal of the option. Building costs incurred for new restaurants on leased land are depreciated over the lease term, which is generally a twenty-year period.
Deferred Financing Costs. Financing costs incurred in obtaining long-term debt, credit facilities and lease financing obligations are capitalized and amortized over the life of the related obligation as interest expense using the effective interest method.
Leases.  All leases are reviewed for capital or operating classification at their inception. The majority of the Company's leases are operating leases. Many of the lease agreements contain rent holidays, rent escalation clauses and/or contingent rent provisions. Rent expense for leases that contain scheduled rent increases or rent holidays is recognized on a straight-line basis over the lease term, including any option periods included in the determination of the lease term. Contingent rentals are generally based upon a percentage of sales or a percentage of sales in excess of stipulated amounts and are not considered minimum rent payments but are recognized as rent expense when incurred.
Lease Financing Obligations. Lease financing obligations pertain to real estate sale-leaseback transactions accounted for under the financing method. In accordance with ASC 840-40-25-16 “Sale-Leaseback Transactions”, the Company has recorded lease financing obligations for sale-leaseback transactions that did not qualify for sale-leaseback accounting due to certain forms of continuing involvement. The assets (land and building) subject to these obligations remain on the Company's consolidated balance sheet at their historical costs and such assets (excluding land) continue to be depreciated over their remaining useful lives. The proceeds received by the Company from these transactions are recorded as lease financing obligations, and the lease payments are applied as payments of principal and interest. The selection of the interest rate on lease financing obligations is evaluated at inception of the lease based on the Company's incremental borrowing rate adjusted to the rate required to prevent recognition of a non-cash loss or negative amortization of the obligation through the end of the primary lease term.
Revenue Recognition. Revenues from the Company's owned and operated restaurants are recognized when payment is tendered at the time of sale. Franchise royalty revenues are based on a percent of gross sales and are recorded as income when earned. Franchise fees, which are associated with opening new franchised restaurants, are recognized as income when all required activities have been performed by the Company. Area development fees, which are associated with opening new franchised restaurants in a given market, are recognized as income over the term of the related agreement.
Income Taxes. For periods prior to the Spin-off, the Company's taxable income was included in the consolidated U.S. federal income tax return of Carrols and in income tax returns filed by Carrols with certain state taxing jurisdictions. The Company's income tax liability has been computed and presented in these consolidated financial statements for those periods as if it were a separate taxpaying entity.
Deferred income tax assets and liabilities are based on the difference between the financial statement and tax bases of assets and liabilities as measured by the tax rates that are anticipated to be in effect when those differences reverse. The deferred tax provision generally represents the net change in deferred tax assets and liabilities during the period. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is established when it is necessary to reduce deferred tax assets to amounts for which realization is more likely than not. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
Advertising Costs. All advertising costs are expensed as incurred.
Cost of Sales. The Company includes the cost of food, beverage and paper, net of any discounts, in cost of sales.
Pre-opening Costs. The Company's pre-opening costs are expensed as incurred and generally include payroll costs and travel expenditures associated with opening the new restaurant, rent and promotional costs.
Insurance.  The Company is insured for workers' compensation, general liability and medical insurance claims under policies where it pays all claims, subject to stop-loss limitations both for individual claims and claims in the aggregate. During 2012 and 2011, the Company was insured under policies covering both Carrols and the Company. During 2013, the Company was insured under separate policies. Losses are accrued based upon estimates of the aggregate liability for claims based on the Company's experience and certain actuarial methods used to measure such estimates. The Company does not discount any of its self-insurance obligations.
 Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities; and Level 3 inputs are unobservable and reflect our own assumptions. The following methods were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the fair value:
Current Assets and Liabilities. The carrying values reported on the balance sheet of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of those financial instruments.
Revolving Credit Facility. The fair value of outstanding credit facility borrowings, which is considered Level 2, is based on current LIBOR rates and at December 29, 2013, was approximately $71.0 million.
See Note 4 for discussion of the fair value measurement of non-financial assets.
Gift cards. The Company sells gift cards to its customers in its restaurants and through select third parties. The Company recognizes revenue from gift cards upon redemption by the customer. The gift cards have no stated expiration dates and are subject to escheatment rights in certain states. Revenues from unredeemed gift cards are not material to the Company's financial statements.
Goodwill Goodwill Policy (Policies)
Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]
The Company is required to review goodwill for impairment annually or more frequently when events and circumstances indicate that the carrying amount may be impaired. If the determined fair value of goodwill is less than the related carrying amount, an impairment loss is recognized. The Company performs its annual impairment assessment as of the last day of the fiscal year and has determined its reporting units to be its operating segments, Pollo Tropical and Taco Cabana.
In performing its goodwill impairment test, the Company compared the net book values of its reporting units to their estimated fair values, the latter determined by employing a discounted cash flow analysis, which was corroborated with other value indicators where available, such as comparable company earnings multiples.
Impairment of Long-Lived Assets and Other Lease Charges Impairment Accounting Policy (Policies)
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]
The Company reviews its long-lived assets, principally property and equipment, for impairment at the restaurant level. In addition to considering management’s plans, known regulatory or governmental actions and damage due to acts of God (hurricanes, tornadoes, etc.), the Company considers a triggering event to have occurred related to a specific restaurant if the restaurant’s cash flows for the last twelve months are less than a minimum threshold or if consistent levels of cash flows for the remaining lease period are less than the carrying value of the restaurant’s assets. If an indicator of impairment exists for any of its assets, an estimate of undiscounted future cash flows over the life of the primary asset for each restaurant is compared to that long-lived asset’s carrying value. If the carrying value is greater than the undiscounted cash flow, the Company then determines the fair value of the asset and if an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. For closed restaurant locations, the Company reviews the future minimum lease payments and related ancillary costs from the date of the restaurant closure to the end of the remaining lease term and records a lease charge for the lease liabilities to be incurred, net of any estimated sublease recoveries.
The Company determined the fair value of restaurant equipment, for those restaurants reviewed for impairment, based on current economic conditions and the Company’s history of using these assets in the operation of its business. For those restaurants reviewed for impairment where the Company owns the land and building, the Company also utilized third-party information such as a broker market price opinion to determine the fair value of the property. These fair value asset measurements rely on significant unobservable inputs and are considered Level 3 in the fair value hierarchy. The Level 3 assets measured at fair value associated with impairment charges recorded during the year ending December 29, 2013 totaled less than $0.1 million.
Lease Financing Obligations (Policies)
Lease Financing Obligations [Policy Text Block]
The Company entered into sale-leaseback transactions in various years that did not qualify for sale-leaseback accounting due to certain forms of continuing involvement and, as a result, the leases were classified as financing transactions in the Company’s consolidated financial statements.
Under the financing method, the assets remain on the consolidated balance sheet and the net proceeds received by the Company from these transactions are recorded as a lease financing liability. Payments under these leases are applied as payments of imputed interest and deemed principal on the underlying financing obligations.
These leases generally provide for an initial term of 20 years plus renewal options. The rent payable under such leases includes a minimum rent provision and in some cases, includes rent based on a percentage of sales. These leases also require payment of property taxes, insurance and utilities.
Income Taxes Income Taxes (Policies)
Income Tax, Policy [Policy Text Block]
Income Taxes. For periods prior to the Spin-off, the Company's taxable income was included in the consolidated U.S. federal income tax return of Carrols and in income tax returns filed by Carrols with certain state taxing jurisdictions. The Company's income tax liability has been computed and presented in these consolidated financial statements for those periods as if it were a separate taxpaying entity.
Deferred income tax assets and liabilities are based on the difference between the financial statement and tax bases of assets and liabilities as measured by the tax rates that are anticipated to be in effect when those differences reverse. The deferred tax provision generally represents the net change in deferred tax assets and liabilities during the period. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is established when it is necessary to reduce deferred tax assets to amounts for which realization is more likely than not. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
Business Segment Information Business Segment Policy (Policies)
Segment Reporting, Policy [Policy Text Block]
The Company is engaged in the fast-casual restaurant industry, with two restaurant concepts (each of which is an operating segment): Pollo Tropical and Taco Cabana. Pollo Tropical is a fast-casual restaurant brand offering a wide variety of freshly prepared Caribbean inspired food, while our Taco Cabana restaurants offer a broad selection of hand-made, fresh and authentic Mexican food.
The accounting policies of each segment are the same as those described in the summary of significant accounting policies discussed in Note 1. The Company reports more than one measure of segment profit or loss to the chief operating decision maker for the purposes of allocating resources to the segments and assessing their performance. Prior to January 2013, the primary measure of segment profit or loss used to assess performance and allocate resources was Adjusted EBITDA, which is defined as earnings attributable to the applicable operating segment before interest, loss on extinguishment of debt, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense and other income and expense. Beginning in January 2013, the primary measures of segment profit or loss used to assess performance and allocate resources are income before taxes and Adjusted EBITDA. Although the chief operating decision maker continues to use Adjusted EBITDA as a measure of segment profitability, in accordance with Accounting Standards Codification 280, Segment Reporting, the following table includes segment income before taxes, which is the measure of segment profit or loss determined in accordance with the measurement principles that are most consistent with the principles used in measuring the corresponding amounts in the consolidated financial statements. The Company has included the presentation of income before tax for all periods presented.
Net Income (Loss) per Share (Policies)
Earnings Per Share, Policy [Policy Text Block]
 We compute basic net income per share by dividing net income applicable to common shares by the weighted average number of common shares outstanding during each period. Our non-vested restricted shares contain a non-forfeitable right to receive dividends on a one-to-one per share ratio to common shares and are thus considered participating securities. The impact of the participating securities is included in the computation of basic net income per share pursuant to the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings attributable to common shares and participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Net income per common share was computed by dividing undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and non-vested restricted shares based on the weighted average shares outstanding during the period.
Retirement Plans (Policies)
Pension and Other Postretirement Plans, Policy [Policy Text Block]
Fiesta offers the Company's salaried employees the option to participate in the Fiesta Corporation Retirement Savings Plan (the “Retirement Plan”). The Retirement Plan includes a savings option pursuant to section 401(k) of the Internal Revenue Code in addition to a post-tax savings option. Fiesta may elect to contribute to the Retirement Plan on an annual basis. Fiesta's contribution, if any, is equal to 50% of the employee's contribution to a maximum Fiesta contribution of $0.5 per participating employee annually for any plan year that Fiesta participates in an employee match. Under the Retirement Plan, Fiesta contributions begin to vest after 1 year and fully vest after 5 years of service. A year of service is defined as a plan year during which an employee completes at least 1,000 hours of service. Participating employees may contribute up to 50% of their salary annually to either of the savings options, subject to other limitations.
Basis of Presentation Basis of Presentation (Tables)
Property, Plant and Equipment Useful Lives [Table Text Block]
Depreciation and amortization is provided using the straight-line method over the following estimated useful lives:
Buildings and improvements
5
to
30 years
Equipment
3
to
7 years
Computer hardware and software
3
to
7 years
Assets subject to capital lease
Shorter of useful life or lease term
Property and Equipment Property and Equipment (Tables)
Property, Plant and Equipment [Table Text Block]
Property and equipment consisted of the following:
 
December 29, 2013
 
December 30, 2012
Land
$
15,277

 
$
19,904

Owned buildings
13,813

 
16,706

Leasehold improvements
130,623

 
113,679

Equipment
136,088

 
118,489

Assets subject to capital leases
1,647

 
1,151

 
297,448

 
269,929

Less accumulated depreciation and amortization
(152,921
)
 
(143,413
)
 
$
144,527

 
$
126,516

Goodwill (Tables)
Schedule of Intangible Assets and Goodwill [Table Text Block]
Goodwill balances are summarized below: 
 
Pollo
Tropical
 
Taco
Cabana
 
Total
Balance, December 29, 2013 and December 30, 2012
$
56,307

 
$
67,177

 
$
123,484

Impairment of Long-Lived Assets and Other Lease Charges Impairment by segment (Tables)
Impairment of long lived assets and other lease charge [Table Text Block]
Impairment on long-lived assets for the Company’s segments and other lease charges recorded were as follows:
         
 
Year Ended
 
December 29, 2013
 
December 30, 2012
 
January 1, 2012
Pollo Tropical
$
(116
)
 
$
6,035

 
$
2,457

Taco Cabana
315

 
1,004

 
287

 
$
199

 
$
7,039

 
$
2,744

Other Liabilities, Long-Term Other Liabilities (Tables)
Other liabilities, long-term, consisted of the following:
 
December 29, 2013
 
December 30, 2012
Accrued occupancy costs
$
9,973

 
$
8,493

Accrued workers’ compensation and general liability claims
729

 
1,270

Deferred compensation
593

 
812

Other
1,243

 
1,358

 
$
12,538

 
$
11,933

The following table presents the activity in the closed-store reserve, of which $1.1 million and $1.7 million are included in long-term accrued occupancy costs above at December 29, 2013 and December 30, 2012, respectively, with the remainder in other current liabilities:
 
 
Year Ended
 
 December 29, 2013
 
December 30, 2012
Balance, beginning of period
$
2,432

 
$
2,246

Provisions for restaurant closures

 
1,796

Recoveries, net of additional lease charges
(197
)
 
(377
)
Payments, net
(937
)
 
(1,496
)
Other adjustments
141

 
263

Balance, end of period
$
1,439

 
$
2,432

Leases (Tables)
Minimum rent commitments due under capital and non-cancelable operating leases at December 29, 2013 were as follows:
 
Capital
 
Operating
2014
$
236

 
$
31,541

2015
224

 
31,177

2016
220

 
30,798

2017
220

 
29,813

2018
220

 
28,795

Thereafter
1,963

 
212,652

Total minimum lease payments (1)
3,083

 
$
364,776

Less amount representing interest
(1,698
)
 
 
Total obligations under capital leases
1,385

 
 
Less current portion
(61
)
 
 
Long-term debt under capital leases
$
1,324

 
 
(1) Minimum operating lease payments have not been reduced by minimum sublease rentals of $6.3 million due in the future under noncancelable subleases.
Total rent expense on operating leases, including contingent rentals, was as follows:
 
Year Ended
 
December 29, 2013
 
December 30, 2012
 
January 1, 2012
Minimum rent on real property, excluding rent included in pre-opening costs
$
26,571

 
$
21,349

 
$
16,632

Additional rent based on percentage of sales
278

 
246

 
209

Restaurant rent expense
26,849

 
21,595

 
16,841

Rent included in pre-opening costs
842

 
411

 
89

Administrative and equipment rent
1,004

 
781

 
819

 
$
28,695

 
$
22,787

 
$
17,749

Long-term Debt (Tables)
Schedule of Long-term Debt Instruments [Table Text Block]
Long term debt at December 29, 2013 and December 30, 2012 consisted of the following:
 
December 29,
2013
 
December 30,
2012
Collateralized:
 
 
 
Fiesta Restaurant Group 8.875% Senior Secured Second Lien Notes
$

 
$
200,000

       Revolving Credit Facility
71,000

 

Capital leases
1,385

 
949

 
72,385

 
200,949

Less: current portion of long-term debt
(61
)
 
(60
)
 
$
72,324

 
$
200,889

Lease Financing Obligations (Tables)
Future Payments on Lease Financing Obligations [Table Text Block]
At December 29, 2013, payments required on all lease financing obligations were as follows:
2014
$
139

2015
140

2016
141

2017
143

2018
144

Thereafter, through 2030
2,369

Total minimum lease payments
3,076

Less: Interest implicit in obligations
(1,419
)
Total lease financing obligations
$
1,657

Income Taxes Income Taxes (Tables)
The Company’s income tax provision was comprised of the following:
    
 
Year Ended
 
December 29, 2013
 
December 30, 2012
 
January 1, 2012
Current:
 
 
 
 
 
Federal
$
2,550

 
$
4,197

 
$
2,761

Foreign
375

 
365

 
286

State
1,048

 
757

 
1,632

 
3,973

 
5,319

 
4,679

Deferred (prepaid):
 
 
 
 
 
Federal
136

 
(1,405
)
 
155

State
(11
)
 
230

 
(324