FIESTA RESTAURANT GROUP, INC., 10-K filed on 2/24/2016
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Jan. 3, 2016
Feb. 18, 2016
Jun. 28, 2015
Entity Information [Line Items]
 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Public Float
 
 
$ 1,309,838,255 
Entity Registrant Name
FIESTA RESTAURANT GROUP, INC. 
 
 
Entity Central Index Key
0001534992 
 
 
Current Fiscal Year End Date
--01-03 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Document Type
10-K 
 
 
Document Period End Date
Jan. 03, 2016 
 
 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
26,829,183 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jan. 3, 2016
Dec. 28, 2014
Current assets:
 
 
Cash
$ 5,281 
$ 5,087 
Trade receivables
9,217 
6,340 
Inventories
2,910 
2,719 
Prepaid rent
3,163 
2,894 
Income tax receivable
7,448 
4,974 
Prepaid expenses and other current assets
3,219 
3,166 
Total current assets
31,238 
25,180 
Property and equipment, net
248,992 
191,371 
Goodwill
123,484 
123,484 
Deferred income taxes
8,497 
13,980 
Deferred financing costs, net
918 
1,233 
Other assets
2,516 
2,708 
Total assets
415,645 
357,956 
Current liabilities:
 
 
Current portion of long-term debt
69 
61 
Accounts payable
12,405 
10,151 
Accrued payroll, related taxes and benefits
15,614 
15,857 
Accrued real estate taxes
6,121 
5,044 
Other liabilities
12,096 
8,310 
Total current liabilities
46,305 
39,423 
Long-term debt, net of current portion
72,612 
67,264 
Lease financing obligations
1,663 
1,660 
Deferred income--sale-leaseback of real estate
30,086 
34,079 
Other liabilities
20,997 
15,943 
Total liabilities
171,663 
158,369 
Commitments and contingencies (Note 13)
   
   
Stockholders' equity:
 
 
Common stock, par value $.01; authorized 100,000,000 shares, issued 26,829,220 and 26,782,945 shares, respectively, and outstanding 26,571,602 and 26,358,448 shares, respectively.
266 
264 
Additional paid-in capital
159,724 
153,867 
Retained earnings
83,992 
45,456 
Total stockholders' equity
243,982 
199,587 
Total liabilities and stockholders' equity
$ 415,645 
$ 357,956 
Consolidated Balance Sheets (Parenthetical) (USD $)
Jan. 3, 2016
Dec. 28, 2014
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
26,829,220 
26,782,945 
Common stock, shares outstanding
26,571,602 
26,358,448 
Consolidated Statements of Operations (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Jan. 3, 2016
Dec. 28, 2014
Dec. 29, 2013
Revenues:
 
 
 
Restaurant sales
$ 684,584 
$ 608,540 
$ 548,980 
Franchise royalty revenue and fees
2,808 
2,603 
2,357 
Total revenues
687,392 
611,143 
551,337 
Costs and expenses:
 
 
 
Cost of sales
217,328 
192,250 
176,123 
Restaurant wages and related expenses (including stock-based compensation expense of $156, $71 and $2, respectively)
174,222 1
155,140 1
143,392 1
Restaurant rent expense
33,103 
29,645 
26,849 
Other restaurant operating expenses
87,285 
78,921 
69,021 
Advertising expense
21,617 
19,493 
17,138 
General and administrative (including stock-based compensation expense of $4,137, $3,426 and $2,296, respectively)
54,521 2
49,414 2
48,521 2
Depreciation and amortization
30,575 
23,047 
20,375 
Pre-opening costs
4,567 
4,061 
2,767 
Impairment and other lease charges
2,382 
363 
199 
Other (income) expense
(679)
(558)
(554)
Total operating expenses
624,921 
551,776 
503,831 
Income from operations
62,471 
59,367 
47,506 
Interest expense
1,889 
2,228 
18,043 
Loss on extinguishment of debt
16,411 
Income before income taxes
60,582 
57,139 
13,052 
Provision for income taxes
22,046 
20,963 
3,795 
Net income
$ 38,536 
$ 36,176 
$ 9,257 
Basic net income per share
$ 1.44 
$ 1.35 
$ 0.39 
Diluted net income per share
$ 1.44 
$ 1.35 
$ 0.39 
Basic weighted average common shares outstanding
26,515,029 
26,293,714 
23,271,431 
Diluted weighted average common shares outstanding
26,522,196 
26,296,049 
23,271,431 
Consolidated Statements of Operations (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 3, 2016
Dec. 28, 2014
Dec. 29, 2013
Stock-based compensation
$ 4,300 
$ 3,500 
$ 2,300 
Restaurant Wages And Related Expenses
 
 
 
Stock-based compensation
156 
71 
General and Administrative Expense
 
 
 
Stock-based compensation
$ 4,137 
$ 3,426 
$ 2,296 
Consolidated Statements of Changes in Stockholders' Equity (USD $)
In Thousands, except Share data
Total
USD ($)
Common Stock [Member]
USD ($)
Additional Paid-in Capital [Member]
USD ($)
Retained Earnings [Member]
USD ($)
Shares [Member]
Stockholders' equity at Dec. 30, 2012
$ 10,504 
$ 227 
$ 10,254 
$ 23 
 
Shares beginning at Dec. 30, 2012
 
 
 
 
22,748,241 
Additional transfers from Carrols
96 
 
96 
 
 
Stock-based compensation
2,298 
 
2,298 
 
 
Issuance of shares
 
3,078,336 
 
 
3,078,336 
Vesting of restricted shares
 
 
 
 
256,223 
Vesting of restricted shares and related tax benefit
865 
862 
 
 
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 
Additional transfers from Carrols
(127)
 
(127)
 
 
Stock-based compensation
3,497 
 
3,497 
 
 
Vesting of restricted shares
 
 
 
 
275,648 
Vesting of restricted shares and related tax benefit
1,765 
1,762 
 
 
Share issuance costs
(30)
 
(30)
 
 
Net income
36,176 
 
 
36,176 
 
Stockholders' equity at Dec. 28, 2014
199,587 
264 
153,867 
45,456 
 
Shares ending at Dec. 28, 2014
26,358,448 
 
 
 
26,358,448 
Stock-based compensation
4,293 
 
4,293 
 
 
Vesting of restricted shares
 
 
 
 
213,154 
Vesting of restricted shares and related tax benefit
1,566 
1,564 
 
 
Net income
38,536 
 
 
38,536 
 
Stockholders' equity at Jan. 03, 2016
$ 243,982 
$ 266 
$ 159,724 
$ 83,992 
 
Shares ending at Jan. 03, 2016
26,571,602 
 
 
 
26,571,602 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 3, 2016
Dec. 28, 2014
Dec. 29, 2013
Cash flows provided from operating activities:
 
 
 
Net income
$ 38,536 
$ 36,176 
$ 9,257 
Adjustments to reconcile net income to net cash provided from operating activities:
 
 
 
Gain on disposals of property and equipment
(170)
(369)
(208)
Stock-based compensation
4,293 
3,497 
2,298 
Impairment and other lease charges
2,382 
363 
199 
Loss on extinguishment of debt
16,411 
Depreciation and amortization
30,575 
23,047 
20,375 
Amortization of deferred financing costs
315 
309 
1,487 
Amortization of deferred gains from sale-leaseback transactions
(3,618)
(3,671)
(3,489)
Deferred income taxes
5,483 
957 
(178)
Other
Accounts receivable
(2,877)
(329)
(77)
Accounts payable
283 
(529)
(1,817)
Accrued payroll, related taxes and benefits
(243)
1,561 
(423)
Accrued real estate taxes
1,077 
539 
1,139 
Other liabilities - current
3,325 
(113)
(3,966)
Other liabilities - long term
4,752 
3,441 
986 
Income tax receivable/payable
(2,474)
(477)
(4,423)
Other
(291)
(300)
(1,400)
Net cash provided from operating activities
81,352 
64,106 
36,176 
Capital expenditures:
 
 
 
New restaurant development
(70,841)
(57,102)
(32,610)
Restaurant remodeling
(4,802)
(7,588)
(3,089)
Other restaurant capital expenditures
(7,714)
(4,975)
(5,407)
Corporate and restaurant information systems
(4,213)
(4,414)
(5,919)
Total capital expenditures
(87,570)
(74,079)
(47,025)
Properties purchased for sale-leaseback
(250)
(4,438)
Proceeds from disposals of other properties
149 
1,729 
1,734 
Proceeds from sale-leaseback transactions
5,692 
15,662 
Net cash used in investing activities
(87,671)
(66,658)
(34,067)
Cash flows from financing activities:
 
 
 
Senior secured second lien note redemption
(200,000)
Proceeds from issuance stock, net of issuance costs
 
 
135,286 
Proceeds from issuance stock, net of issuance costs
(30)
 
Premium and other costs associated with debt redemption
(12,545)
Excess tax benefit from vesting of restricted shares
1,566 
1,765 
865 
Borrowings on revolving credit facility
28,500 
25,000 
81,000 
Repayments on revolving credit facility
(23,500)
(30,000)
(10,000)
Principal payments on capital leases
(53)
(61)
(59)
Financing costs associated with issuance of debt
(1,196)
Other financing costs
(13)
(15)
Net cash provided from (used in) financing activities
6,513 
(3,339)
(6,664)
Net increase (decrease) in cash
194 
(5,891)
(4,555)
Cash, beginning of year
5,087 
10,978 
15,533 
Cash, end of year
5,281 
5,087 
10,978 
Supplemental disclosures:
 
 
 
Interest paid on long-term debt (including capitalized interest of $335 in 2015 and $268 in 2014)
1,748 
1,971 
23,707 
Interest paid on lease financing obligations
140 
139 
137 
Accruals for capital expenditures
4,858 
2,889 
3,009 
Income tax payments, net
17,472 
18,718 
7,204 
Capital lease obligations incurred
410 
496 
Non-cash reduction of lease financing obligations
1,377 
Non-cash reduction of assets under lease financing obligations
965 
Non-cash transfers of income tax assets and liabilities from Carrols
$ 0 
$ (127)
$ 96 
Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 3, 2016
Dec. 28, 2014
Supplemental Cash Flow Information [Abstract]
 
 
Capitalized interest
$ 335 
$ 268 
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 January 3, 2016, the Company owned and operated 155 Pollo Tropical® restaurants and 162 Taco Cabana® restaurants. The Pollo Tropical restaurants include 117 located in Florida, 23 located in Texas, eleven located in Georgia and four located in Tennessee. The Taco Cabana restaurants include 161 located in Texas and one located in Oklahoma. At January 3, 2016, Fiesta franchised a total of 35 Pollo Tropical restaurants and six Taco Cabana restaurants. The franchised Pollo Tropical restaurants include 17 in Puerto Rico, one in Honduras, one in the Bahamas, two in Trinidad & Tobago, one in Venezuela, five in Panama, three in Guatemala, and five on college campuses in Florida. The franchised Taco Cabana restaurants include four in New Mexico and two on college campuses in Texas.
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. All intercompany transactions have been eliminated in consolidation.
Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The fiscal year ended January 3, 2016 contained 53 weeks. The fiscal years ended December 28, 2014 and December 29, 2013 each contained 52 weeks.
Use of Estimates. The preparation of the consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles ("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: 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. Accrued interest was reclassified to current other liabilities, and current deferred income taxes were reclassified to non-current deferred income taxes as described under Recent Accounting Pronouncements. In addition, accrued interest was reclassified to other liabilities - current 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 amortized. Repairs 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, including new buildings constructed on leased land, 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 or more frequently if impairment indicators exist.
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.
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. 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 generally incurred beginning four to six months prior to a restaurant opening and generally include restaurant employee wages and related expenses, travel expenditures, recruiting, training, promotional costs associated with the restaurant opening and rent, including any non-cash rent expense recognized during the construction period.
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. 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 Borrowings. The fair value of outstanding revolving credit borrowings under our senior credit facility, which is considered Level 2, is based on current LIBOR rates and at January 3, 2016, 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.
Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board issued ASU 606, Revenue Recognition - Revenue from Contracts with Customers, which amends the guidance in former ASC 605, Revenue Recognition, and provides for either a full retrospective adoption in which the standard is applied to all of the periods presented or a modified retrospective adoption in which the cumulative effect of initially applying the standard is recognized at the date of initial application. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers unless the contracts are in the scope of other US GAAP requirements. The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain nonfinancial assets, such as property and equipment, including real estate. The Company is currently evaluating the impact of the provisions of ASC 606; however, the Company expects the provisions to primarily impact certain franchise revenues and does not expect the standard to have a material effect on its financial statements. For the Company, the new standard is effective for interim and annual periods beginning after December 15, 2017.
In April 2015, the Financial Accounting Standards Board issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs, and in August 2015, the Financial Accounting Standards Board issued ASU 2015-15, Interest-Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU 2015-03 changes the presentation of debt issuance costs and generally requires debt issuance costs related to a recognized liability to be reported as a direct reduction from the carrying amount of the debt. ASU 2015-15 clarifies that debt issuance costs incurred in connection with line of-credit arrangements may continue to be presented as an asset. The new standards do not change the recognition and measurement of debt issuance costs. Because the Company's debt issuance costs are related to its senior credit facility, the Company may continue to classify its debt issuance costs as an asset. For the Company, the new standard is effective for interim and annual periods beginning after December 15, 2015.
In November 2015, the Financial Accounting Standards Board issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which requires entities to present deferred tax assets and liabilities as non current in a classified balance sheet. Entities are permitted to apply the ASU prospectively or retrospectively. For the Company, the new standard is effective for annual periods beginning after December 15, 2016 and interim periods within those years. However, early adoption is permitted. The Company has adopted this standard and applied the new presentation retrospectively. This change decreased total current assets and increased non current deferred income taxes by $2.9 million as of December 28, 2014.
Property and Equipment
Property, Plant and Equipment Disclosure [Text Block]
Property and Equipment
Property and equipment consisted of the following:
 
January 3, 2016
 
December 28, 2014
Land
$
23,363

 
$
19,455

Owned buildings
20,101

 
14,863

Leasehold improvements (1)
206,293

 
168,719

Equipment
194,181

 
159,596

Assets subject to capital leases
2,057

 
1,647

 
445,995

 
364,280

Less accumulated depreciation and amortization
(197,003
)
 
(172,909
)
 
$
248,992

 
$
191,371


(1) Leasehold improvements include the cost of new buildings constructed on leased land.
Assets subject to capital leases primarily pertain to buildings leased for certain restaurant locations and certain office equipment and had accumulated amortization at January 3, 2016 and December 28, 2014 of $0.8 million and $0.7 million, respectively. At January 3, 2016 and December 28, 2014, land of $0.7 million and owned buildings of $0.8 million were subject to lease financing obligations accounted for under the lease financing method. See Note 8—Lease Financing Obligations. Accumulated depreciation pertaining to owned buildings subject to lease financing obligations at January 3, 2016 and December 28, 2014 was $0.3 million.
Depreciation and amortization expense for all property and equipment for the years ended January 3, 2016, December 28, 2014 and December 29, 2013 was $30.6 million, $23.0 million and $20.3 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 January 3, 2016 or the years ended December 28, 2014 and December 29, 2013. Goodwill balances are summarized below: 
 
Pollo
Tropical
 
Taco
Cabana
 
Total
Balance, January 3, 2016 and December 28, 2014
$
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 utilizes 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 January 3, 2016 totaled $0.3 million.
Impairment on long-lived assets for the Company’s segments and other lease charges recorded were as follows:
         
 
Year Ended
 
January 3, 2016
 
December 28, 2014
 
December 29, 2013
Pollo Tropical
$
510

 
$
254

 
$
(116
)
Taco Cabana
1,872

 
109

 
315

 
$
2,382

 
$
363

 
$
199


    Impairment and other lease charges in 2015 consisted primarily of impairment charges totaling $1.7 million and a $0.2 million lease charge related to the suspension of the Company's Cabana Grill concept at the end of fiscal 2015, a $0.3 million lease charge related to the closure of a Pollo Tropical restaurant that was relocated prior to the end of its lease term to a superior site in the same trade area and lease charges, net of recoveries, totaling $0.2 million related to previously closed Pollo Tropical restaurants. The Cabana Grill concept was an elevated, non-24 hour format for Taco Cabana that the Company was testing outside of Texas. One Cabana Grill restaurant was converted to a Pollo Tropical restaurant and the second Cabana Grill restaurant was closed.
Impairment and other lease charges in 2014 included a $0.3 million impairment charge representing the write-down of the carrying value to fair value of certain assets related to the Pollo Tropical restaurant that closed in 2015 and $0.1 million in impairment charges for additional assets acquired at previously impaired Taco Cabana locations.
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.
Other Liabilities
Other Liabilities Disclosure [Text Block]
Other Liabilities
Other liabilities, current, consisted of the following:
 
January 3, 2016
 
December 28, 2014
Accrued workers' compensation and general liability claims
$
5,540

 
$
3,996

Sales and property taxes
3,031

 
1,933

Accrued occupancy costs
980

 
508

Other
2,545

 
1,873

 
$
12,096

 
$
8,310


Other liabilities, long-term, consisted of the following:
 
January 3, 2016
 
December 28, 2014
Accrued occupancy costs
$
15,349

 
$
12,254

Deferred compensation
1,665

 
1,102

Accrued workers’ compensation and general liability claims
697

 
977

Other
3,286

 
1,610

 
$
20,997

 
$
15,943


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 $1.2 million and $1.0 million are included in long-term accrued occupancy costs above at January 3, 2016 and December 28, 2014, respectively, with the remainder in other current liabilities:
 
 
Year Ended
 
 January 3, 2016
 
December 28, 2014
Balance, beginning of period
$
1,251

 
$
1,439

Provisions for restaurant closures
554

 

Additional lease charges, net of (recoveries)
258

 
5

Payments, net
(358
)
 
(321
)
Other adjustments
127

 
128

Balance, end of period
$
1,832

 
$
1,251

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 28, 2014 and December 29, 2013 the Company sold two and six restaurant properties in each year, respectively, in sale-leaseback transactions for net proceeds of $5.7 million and $15.7 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 $1.9 million and $4.0 million were recognized during the years ended December 28, 2014 and December 29, 2013, respectively and are being amortized over the term of the related leases. The amortization of deferred gains on sale-leaseback transactions was $3.6 million, $3.7 million and $3.5 million for the years ended January 3, 2016, December 28, 2014 and December 29, 2013, respectively.
Minimum rent commitments due under capital and non-cancelable operating leases at January 3, 2016 were as follows:
 
Capital
 
Operating
2016
$
256

 
$
39,038

2017
282

 
38,474

2018
282

 
37,531

2019
282

 
36,808

2020
286

 
35,148

Thereafter
1,841

 
294,126

Total minimum lease payments (1)
3,229

 
$
481,125

Less amount representing interest
(1,548
)
 
 
Total obligations under capital leases
1,681

 
 
Less current portion
(69
)
 
 
Long-term debt under capital leases
$
1,612

 
 
(1) Minimum operating lease payments have not been reduced by minimum sublease rentals of $2.8 million due in the future under noncancelable subleases.
Total rent expense on operating leases, including contingent rentals, was as follows:
 
Year Ended
 
January 3, 2016
 
December 28, 2014
 
December 29, 2013
Minimum rent on real property, excluding rent included in pre-opening costs
$
32,716

 
$
29,309

 
$
26,571

Additional rent based on percentage of sales
387

 
336

 
278

Restaurant rent expense
33,103

 
29,645

 
26,849

Rent included in pre-opening costs
1,736

 
1,421

 
842

Administrative and equipment rent
1,026

 
1,042

 
1,004

 
$
35,865

 
$
32,108

 
$
28,695

Long-term Debt
Long-term Debt
Long-term Debt
Long term debt at January 3, 2016 and December 28, 2014 consisted of the following:
 
January 3,
2016
 
December 28,
2014
Revolving credit facility
$
71,000

 
$
66,000

Capital leases
1,681

 
1,325

 
72,681

 
67,325

Less: current portion of long-term debt
(69
)
 
(61
)
 
$
72,612

 
$
67,264


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 is referred to as the "senior credit facility". The 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 senior credit facility also provides for potential incremental increases of up to $50 million to the revolving credit borrowings available under the senior credit facility. On January 3, 2016, there were $71.0 million in outstanding revolving credit borrowings under the senior credit facility.
Borrowings under the senior credit facility bear interest at a per annum rate, at the Company's option, equal to either (all terms as defined in the senior credit facility):
1) the Alternate Base Rate plus the applicable margin of 0.50% to 1.50% based on the Company's Adjusted Leverage Ratio (with a margin of 0.50% as of January 3, 2016), or
2) the LIBOR Rate plus the applicable margin of 1.50% to 2.50% based on the Company's Adjusted Leverage Ratio (with a margin of 1.50% at January 3, 2016).
In addition, the 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 the Company's Adjusted Leverage Ratio (with a margin of 0.25% at January 3, 2016) 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 senior credit facility are guaranteed by all of the Company's material domestic subsidiaries. In general, the Company's obligations under the 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 senior credit facility are prepayable without penalty (other than customary breakage costs). The senior credit facility requires the Company to comply with customary affirmative, negative and financial covenants, including, without limitation, those limiting Fiesta'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 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 senior credit facility).
The Company's 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 January 3, 2016, the Company was in compliance with the covenants under its senior credit facility. After reserving $5.5 million for letters of credit issued under the senior credit facility, $73.5 million was available for borrowing under the senior credit facility at January 3, 2016.
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"). The principal amount of Notes 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.
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.
At January 3, 2016, principal payments required on borrowings under the senior credit facility were $71.0 million in 2018. The weighted average interest rate on the borrowings under the senior credit facility was 2.08% and 1.79% at January 3, 2016 and December 28, 2014, respectively. Interest expense on the Company's long-term debt, excluding lease financing obligations, was $1.6 million, $2.1 million and $17.9 million for the years ended January 3, 2016, December 28, 2014, and December 29, 2013, respectively.
Lease Financing Obligations
Lease Financing Obligations [Text Block]
Lease Financing Obligations
The Company entered into a sale-leaseback transaction that did not qualify for sale-leaseback accounting due to a form of continuing involvement and, as a result, the lease was classified as a financing transaction 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 the transaction are recorded as a lease financing liability. Payments under the lease are applied as payments of imputed interest and deemed principal on the underlying financing obligations.
The lease provides for an initial term of 20 years plus renewal options and requires payment of property taxes, insurance and utilities.
At January 3, 2016, payments required on lease financing obligations were as follows:
2016
$
141

2017
143

2018
144

2019
146

2020
147

Thereafter, through 2023
2,076

Total minimum lease payments
2,797

Less: Interest implicit in obligations
(1,134
)
Total lease financing obligations
$
1,663

The interest rate on lease financing obligations was 8.6% at January 3, 2016. Interest expense associated with lease financing obligations was $0.1 million, $0.1 million and $0.1 million for the years ended January 3, 2016, December 28, 2014, and December 29, 2013, respectively.
Income Taxes
Income Tax Disclosure [Text Block]
Income Taxes
The Company’s income tax provision was comprised of the following:
    
 
Year Ended
 
January 3, 2016
 
December 28, 2014
 
December 29, 2013
Current:
 
 
 
 
 
Federal
$
14,086

 
$
17,335

 
$
2,550

Foreign
396

 
380

 
375

State
2,081

 
2,291

 
1,048

 
16,563

 
20,006

 
3,973

Deferred:
 
 
 
 
 
Federal
5,318

 
417

 
136

State
139

 
46

 
(11
)

5,457

 
463

 
125

Valuation allowance
26

 
494

 
(303
)
 
$
22,046

 
$
20,963

 
$
3,795


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 January 3, 2016 and December 28, 2014 were as follows:
 
 
January 3, 2016
 
December 28, 2014
Deferred income tax assets (liabilities):
 
 
 
 
  Inventory and other reserves
 
$
161

 
$
(186
)
  Accrued vacation benefits
 
1,494

 
1,428

  Other accruals
 
2,540

 
2,164

  Deferred income on sale-leaseback of certain real estate
 
10,929

 
12,512

  Lease financing obligations
 
133

 
138

  Property and equipment depreciation
 
(12,176
)
 
(5,144
)
  Amortization of other intangibles, net
 
(3,211
)
 
(3,164
)
  Occupancy costs
 
5,840

 
4,567

  Tax credit carryforwards
 
1,036

 
1,010

  Other
 
2,787

 
1,665

Net deferred income tax assets
 
9,533

 
14,990

  Less: Valuation allowance
 
(1,036
)
 
(1,010
)
Carrying value of net deferred income tax assets
 
$
8,497

 
$
13,980


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 January 3, 2016 and December 28, 2014, the Company had a valuation allowance of $1,036 and $1,010 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 increased $26 and $494 in 2015 and 2014, respectively, primarily due to foreign tax credit carryforwards, net of expired foreign income 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.
The Company's effective tax rate was 36.4%, 36.7%, and 29.1% for the years ended January 3, 2016, December 28, 2014 and December 29, 2013, respectively. A reconciliation of the statutory federal income tax provision to the effective tax provision was as follows:
 
Year Ended
 
January 3, 2016
 
December 28, 2014
 
December 29, 2013
Statutory federal income tax provision
$
21,204

 
$
19,999

 
$
4,568

State income taxes, net of federal benefit
1,435

 
1,453

 
666

Change in valuation allowance
26

 
494

 
(303
)
Non-deductible expenses
260

 
293

 
334

Foreign taxes
396

 
380

 
654

Employment tax credits
(889
)
 
(1,174
)
 
(1,490
)
Foreign tax credits
(396
)
 
(380
)
 
(375
)
Other
10

 
(102
)
 
(259
)
 
$
22,046

 
$
20,963

 
$
3,795


The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. As of January 3, 2016 and December 28, 2014, the Company had no unrecognized tax benefits and no accrued interest related to uncertain tax positions.
The tax years 2012-2014 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 7. The Company used the remaining proceeds from the offering and $81.0 million in borrowings under its senior credit facility discussed in Note 7 to redeem the Notes not tendered in the tender offer.
Equity compensation
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 January 3, 2016, there were 2,233,698 shares available for future grants under the Fiesta Plan.
During the years ended January 3, 2016, December 28, 2014 and December 29, 2013, the Company granted in the aggregate 50,600, 80,290 and 161,546 non-vested restricted shares, respectively, under the Fiesta Plan to certain employees and directors. Shares granted to employees during the years ended January 3, 2016, December 28, 2014 and December 29, 2013 vest and become non-forfeitable over a four year vesting period, or for certain grants, at the end of a four year vesting period. Shares granted to directors during the years ended January 3, 2016, December 28, 2014 and December 29, 2013 vest and become non-forfeitable over a one year vesting period. The weighted average fair value at the grant date for restricted non-vested shares issued during the years ended January 3, 2016, December 28, 2014 and December 29, 2013 was $61.47, $44.22 and $21.35, respectively. 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.
During the years ended January 3, 2016 and December 28, 2014, the Company granted 27,508 and 24,252 restricted stock units, respectively, under the Fiesta Plan to certain employees. Certain of the restricted stock units vest and become non-forfeitable over a four year vesting period, certain of the restricted units vest and become non-forfeitable at the end of a four year vesting period, and certain of the restricted stock units vest at the end of a three year vesting period. The weighted average fair value at grant date for the restricted stock units issued to employees during the years ended January 3, 2016 and December 28, 2014 was $63.93 and $45.04. The grant date fair value of each restricted stock unit award was determined based on the closing price of the Company's stock on the date of grant.
During the year ended January 3, 2016, 17,501 non-vested restricted shares and 17,501 restricted stock units granted under the Fiesta Plan to certain employees were subject to performance conditions. The nonvested restricted shares vest and become non-forfeitable over a four year vesting period subject to the attainment of performance conditions, and the restricted stock units vest and become non-forfeitable at the end of a three year vesting period. The number of shares into which the restricted stock units convert is determined based on the attainment of certain performance conditions, and ranges from no shares if the minimum performance condition is not met to 35,002 shares if the maximum performance condition is met.
Stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable requisite service period of the award (the vesting period) using the straight-line method. Stock-based compensation expense for the years ended January 3, 2016, December 28, 2014 and December 29, 2013 was $4.3 million, $3.5 million and $2.3 million, respectively. As of January 3, 2016, the total unrecognized stock-based compensation expense relating to non-vested shares and restricted stock units was approximately $6.6 million and the remaining weighted average vesting period for non-vested shares and restricted stock units was 1.6 years.
A summary of all non-vested shares and restricted stock units activity for the year ended January 3, 2016 was as follows:
 
Non-Vested Shares
 
Restricted Stock Units
 
 
 
Weighted
 
 
 
Weighted
 
 
 
Average
 
 
 
Average
 
 
 
Grant Date
 
 
 
Grant Date
 
Shares
 
Price
 
Units
 
Price
Outstanding at December 28, 2014
424,497

 
$
20.50

 
20,783

 
$
45.04

Granted
50,600

 
61.47

 
27,508

 
63.93

Vested/Released
(212,963
)
 
17.51

 
(191
)
 
45.04

Forfeited
(4,516
)
 
39.51

 
(5,260
)
 
50.87

Outstanding at January 3, 2016
257,618

 
$
30.69

 
42,840

 
$
56.46


The fair value of the shares vested and released during the years ended January 3, 2016, December 28, 2014 and December 29, 2013 was $11.9 million, $12.8 million and $6.3 million, respectively.
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, freshly prepared 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. The primary measures of segment profit or loss used to assess performance and allocate resources are income before taxes and 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. Although the chief operating decision maker uses Adjusted EBITDA as a measure of segment profitability, in accordance with Accounting Standards Codification 280, Segment Reporting, the following table includes segment income before taxes, which is the measure of segment profit or loss determined in accordance with the measurement principles that are most consistent with the principles used in measuring the corresponding amounts in the consolidated financial statements.
The “Other” column includes corporate related items not allocated to reportable segments and consists primarily of corporate owned property and equipment, a current income tax receivable, miscellaneous prepaid costs, capitalized costs associated with the issuance of indebtedness, corporate cash accounts, and the loss on extinguishment of debt discussed in Note 7.
Year Ended
 
Pollo Tropical
 
Taco Cabana
 
Other
 
Consolidated
January 3, 2016:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
364,544

 
$
320,040

 


 
$
684,584

Franchise revenue
 
2,197

 
611

 


 
2,808

Cost of sales
 
121,689

 
95,639

 


 
217,328

Restaurant wages and related expenses (1)
 
81,647

 
92,575

 


 
174,222

Restaurant rent expense
 
16,003

 
17,100

 


 
33,103

Other restaurant operating expenses
 
45,376

 
41,909

 


 
87,285

Advertising expense
 
9,527

 
12,090

 


 
21,617

General and administrative expense (2)
 
31,142

 
23,379

 


 
54,521

Depreciation and amortization
 
18,000

 
12,575

 


 
30,575

Pre-opening costs
 
4,310

 
257

 


 
4,567

Impairment and other lease charges
 
510

 
1,872

 


 
2,382

Interest expense
 
806

 
1,083

 


 
1,889

Income before taxes
 
38,021

 
22,561

 


 
60,582

Capital expenditures
 
73,129

 
12,294

 
2,147

 
87,570

Year Ended
 
Pollo Tropical
 
Taco Cabana
 
Other
 
Consolidated
December 28, 2014:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
305,404

 
$
303,136

 


 
$
608,540

Franchise revenue
 
2,072

 
531

 


 
2,603

Cost of sales
 
100,468

 
91,782

 


 
192,250

Restaurant wages and related expenses (1)
 
67,487

 
87,653

 


 
155,140

Restaurant rent expense
 
12,473

 
17,172

 


 
29,645

Other restaurant operating expenses
 
38,331

 
40,590

 


 
78,921

Advertising expense
 
7,714

 
11,779

 


 
19,493

General and administrative expense (2)
 
26,672

 
22,742

 


 
49,414

Depreciation and amortization
 
11,596

 
11,451

 


 
23,047

Pre-opening costs
 
3,385

 
676

 


 
4,061

Impairment and other lease charges
 
254

 
109

 


 
363

Interest expense
 
1,035

 
1,193

 


 
2,228

Income (loss) before taxes
 
38,061

 
19,078

 


 
57,139

Capital expenditures
 
52,355

 
17,969

 
3,755

 
74,079

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

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

Identifiable Assets:
 
 
 
 
 
 
 
 
January 3, 2016
 
$
237,065

 
$
165,549

 
$
13,031

 
$
415,645

December 28, 2014
 
177,923

 
167,729

 
12,304

 
357,956

December 29, 2013
 
140,797

 
169,367

 
8,621

 
318,785


(1) Includes stock-based compensation expense of $156, $71 and $2 for the years ended  January 3, 2016, December 28, 2014 and December 29, 2013, respectively.
(2) Includes stock-based compensation expense of $4,137, $3,426 and $2,296 for the years ended January 3, 2016, December 28, 2014 and December 29, 2013, respectively.
(3) "Other" income (loss) before taxes for the year ended December 29, 2013 includes the loss on extinguishment of debt discussed in Note 7.
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.
Diluted earnings per share reflects the potential dilution that could occur if our restricted stock units were converted into
common shares. Restricted stock units with performance conditions are only included in the diluted earnings per share calculation to the extent that performance conditions have been met at the measurement date. We compute diluted earnings per share by adjusting the basic weighted average number of common shares by the dilutive effect of the restricted stock units, determined using the treasury stock method.
Weighted average outstanding restricted stock units totaling 4,491 and 5,899 shares were not included in the computation of diluted earnings per share for the twelve months ended January 3, 2016 and December 28, 2014, respectively, because to do so would have been antidilutive.
The computation of basic and diluted net income per share is as follows:
 
  
Year Ended
 
  
January 3, 2016
 
December 28, 2014
 
December 29, 2013
Basic and diluted net income per share:
  
 
 
 
 
 
Net income
  
$
38,536

 
$
36,176

 
$
9,257

Less: income allocated to participating securities
  
441

 
647

 
264

Net income available to common stockholders
  
$
38,095

 
$
35,529

 
$
8,993

 
 
 
 
 
 
 
Weighted average common shares, basic
  
26,515,029

 
26,293,714

 
23,271,431

Restricted stock units
 
7,167

 
2,335

 

Weighted average common shares, diluted
 
26,522,196

 
26,296,049

 
23,271,431

 
 
 
 
 
 
 
Basic net income per common share
  
$
1.44

 
$
1.35

 
$
0.39

Diluted net income per common share
 
$
1.44

 
$
1.35

 
$
0.39

Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Lease Assignments. The Company has assigned four leases on properties where it no longer operates restaurants 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 January 3, 2016 was $2.3 million. The obligations under these leases will generally continue to decrease over time as the operating leases expire. The assignee for two of these leases filed for Chapter 11 bankruptcy in the third quarter of 2015. Future rental payments as of January 3, 2016 for these two leases, which expire in 2020, totaled $0.8 million. The Company does not believe it is probable that it would be ultimately responsible for the obligations under these leases.
Legal Matters. The Company is a party to legal proceedings incidental to the conduct of business, including the matter described below. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and estimable, the Company does not establish an accrued liability.
On September 29, 2014, Daisy, Inc., an automotive repair shop in Cape Coral, Florida, filed a putative class action suit against Fiesta Restaurant Group's subsidiary, Pollo Operations, Inc. ("Pollo") in the United States District Court for the Middle District of Florida. The suit claims that Pollo allegedly engaged in unlawful activity in violation of the Telephone Consumer Protection Act, § 227 et seq. occurring in December 2010 and January 2011. As of January 3, 2016, Pollo has reached a settlement with the plaintiff and has recorded a charge of $1.1 million to cover the estimated costs related to the settlement, which include estimated payments to class members, plaintiffs attorneys' fees and related settlement administration costs, but does not include legal fees incurred by Pollo in defending the action. The settlement, which is subject only to final approval by the Court, will result in dismissal of the case.
The Company is also a party to various other litigation matters incidental to the conduct of business. The Company does not believe that the outcome of any of these matters will have a material effect on its consolidated financial statements.
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. Contributions made by Fiesta to the Retirement Plan for the Company's employees are made after the end of each plan year. For 2015, Fiesta's annual contribution will be equal to 50% of the employee's contribution to a maximum Fiesta contribution of 3% of eligible compensation per participating employee. For 2014 and 2013, Fiesta's annual contribution was equal to 50% of the employee's contribution up to a maximum Fiesta contribution $0.5 per participating employee. 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. Retirement Plan employer matching expense for the years ended January 3, 2016, December 28, 2014 and December 29, 2013 was $0.3 million, $0.2 million and $0.2 million 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 January 3, 2016 and December 28, 2014, a total of $1.7 million and $1.1 million, respectively, was deferred by the Company's employees under the Retirement Plan, including accrued interest.
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 January 3, 2016
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Revenue
$
163,875

 
$
171,900

 
$
172,105

 
$
179,512

 
Income from operations
17,458

 
18,646

 
13,009

 
13,358

 
Net income
10,501

 
11,249

 
7,945

 
8,841

 
Basic net income per share
$
0.39

 
$
0.42

 
$
0.30

 
$
0.33

 
Diluted net income per share
$
0.39

 
$
0.42

 
$
0.30

 
$
0.33

 
 
 
 
 
 
 
 
 
 
 
Year Ended December 28, 2014
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Revenue
$
145,436

 
$
154,185

 
$
155,298

 
$
156,224

 
Income from operations
14,735

 
15,663

 
15,373

 
13,596

 
Net income
8,719

 
9,314

 
9,155

 
8,988

 
Basic net income per share
$
0.33

 
$
0.35

 
$
0.34

 
$
0.34

 
Diluted net income per share
$
0.33

 
$
0.35

 
$
0.34

 
$
0.34

 

.
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 January 3, 2016:
 
 
 
 
 
 
 
 
 
Deferred income tax valuation allowance
 
$
1,010

 
$
26

$

 
$

 
$
1,036

Year Ended December 28, 2014:
 
 
 
 
 
 
 
 
 
Deferred income tax valuation allowance
 
516

 
494


 

 
1,010

Year Ended December 29, 2013:
 
 
 
 
 
 
 
 
 
Deferred income tax valuation allowance
 
819

 
(303
)

 

 
516

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. All intercompany transactions have been eliminated in consolidation.
Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The fiscal year ended January 3, 2016 contained 53 weeks. The fiscal years ended December 28, 2014 and December 29, 2013 each contained 52 weeks.
Use of Estimates. The preparation of the consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles ("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: 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. Accrued interest was reclassified to current other liabilities, and current deferred income taxes were reclassified to non-current deferred income taxes as described under Recent Accounting Pronouncements. In addition, accrued interest was reclassified to other liabilities - current 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 amortized. Repairs 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, including new buildings constructed on leased land, 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.
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.
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 utilizes 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 January 3, 2016 totaled $0.3 million.
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.
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. 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 generally incurred beginning four to six months prior to a restaurant opening and generally include restaurant employee wages and related expenses, travel expenditures, recruiting, training, promotional costs associated with the restaurant opening and rent, including any non-cash rent expense recognized during the construction period.
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. 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 Borrowings. The fair value of outstanding revolving credit borrowings under our senior credit facility, which is considered Level 2, is based on current LIBOR rates and at January 3, 2016, 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.
Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board issued ASU 606, Revenue Recognition - Revenue from Contracts with Customers, which amends the guidance in former ASC 605, Revenue Recognition, and provides for either a full retrospective adoption in which the standard is applied to all of the periods presented or a modified retrospective adoption in which the cumulative effect of initially applying the standard is recognized at the date of initial application. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers unless the contracts are in the scope of other US GAAP requirements. The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain nonfinancial assets, such as property and equipment, including real estate. The Company is currently evaluating the impact of the provisions of ASC 606; however, the Company expects the provisions to primarily impact certain franchise revenues and does not expect the standard to have a material effect on its financial statements. For the Company, the new standard is effective for interim and annual periods beginning after December 15, 2017.
In April 2015, the Financial Accounting Standards Board issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs, and in August 2015, the Financial Accounting Standards Board issued ASU 2015-15, Interest-Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU 2015-03 changes the presentation of debt issuance costs and generally requires debt issuance costs related to a recognized liability to be reported as a direct reduction from the carrying amount of the debt. ASU 2015-15 clarifies that debt issuance costs incurred in connection with line of-credit arrangements may continue to be presented as an asset. The new standards do not change the recognition and measurement of debt issuance costs. Because the Company's debt issuance costs are related to its senior credit facility, the Company may continue to classify its debt issuance costs as an asset. For the Company, the new standard is effective for interim and annual periods beginning after December 15, 2015.
In November 2015, the Financial Accounting Standards Board issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which requires entities to present deferred tax assets and liabilities as non current in a classified balance sheet. Entities are permitted to apply the ASU prospectively or retrospectively. For the Company, the new standard is effective for annual periods beginning after December 15, 2016 and interim periods within those years. However, early adoption is permitted. The Company has adopted this standard and applied the new presentation retrospectively. This change decreased total current assets and increased non current deferred income taxes by $2.9 million as of December 28, 2014.
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 utilizes 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 January 3, 2016 totaled $0.3 million.
Lease Financing Obligations (Policies)
Lease Financing Obligations [Policy Text Block]
The Company entered into a sale-leaseback transaction that did not qualify for sale-leaseback accounting due to a form of continuing involvement and, as a result, the lease was classified as a financing transaction 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 the transaction are recorded as a lease financing liability. Payments under the lease are applied as payments of imputed interest and deemed principal on the underlying financing obligations.
The lease provides for an initial term of 20 years plus renewal options and requires payment of property taxes, insurance and utilities.
Income Taxes Income Taxes (Policies)
Income Tax, Policy [Policy Text Block]
Income Taxes. 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, freshly prepared 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. The primary measures of segment profit or loss used to assess performance and allocate resources are income before taxes and 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. Although the chief operating decision maker uses Adjusted EBITDA as a measure of segment profitability, in accordance with Accounting Standards Codification 280, Segment Reporting, the following table includes segment income 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.
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.
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:
 
January 3, 2016
 
December 28, 2014
Land
$
23,363

 
$
19,455

Owned buildings
20,101

 
14,863

Leasehold improvements (1)
206,293

 
168,719

Equipment
194,181

 
159,596

Assets subject to capital leases
2,057

 
1,647

 
445,995

 
364,280

Less accumulated depreciation and amortization
(197,003
)
 
(172,909
)
 
$
248,992

 
$
191,371

Goodwill (Tables)
Schedule of Intangible Assets and Goodwill [Table Text Block]
Goodwill balances are summarized below: 
 
Pollo
Tropical
 
Taco
Cabana
 
Total
Balance, January 3, 2016 and December 28, 2014
$
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
 
January 3, 2016
 
December 28, 2014
 
December 29, 2013
Pollo Tropical
$
510

 
$
254

 
$
(116
)
Taco Cabana
1,872

 
109

 
315

 
$
2,382

 
$
363

 
$
199

Other Liabilities (Tables)
Other liabilities, current, consisted of the following:
 
January 3, 2016
 
December 28, 2014
Accrued workers' compensation and general liability claims
$
5,540

 
$
3,996

Sales and property taxes
3,031

 
1,933

Accrued occupancy costs
980

 
508

Other
2,545

 
1,873

 
$
12,096

 
$
8,310

Other liabilities, long-term, consisted of the following:
 
January 3, 2016
 
December 28, 2014
Accrued occupancy costs
$
15,349

 
$
12,254

Deferred compensation
1,665

 
1,102

Accrued workers’ compensation and general liability claims
697

 
977

Other
3,286

 
1,610

 
$
20,997

 
$
15,943

The following table presents the activity in the closed-store reserve, of which $1.2 million and $1.0 million are included in long-term accrued occupancy costs above at January 3, 2016 and December 28, 2014, respectively, with the remainder in other current liabilities:
 
 
Year Ended
 
 January 3, 2016
 
December 28, 2014
Balance, beginning of period
$
1,251

 
$
1,439

Provisions for restaurant closures
554

 

Additional lease charges, net of (recoveries)
258

 
5

Payments, net
(358
)
 
(321
)
Other adjustments
127

 
128

Balance, end of period
$
1,832

 
$
1,251

Leases (Tables)
Minimum rent commitments due under capital and non-cancelable operating leases at January 3, 2016 were as follows:
 
Capital
 
Operating
2016
$
256

 
$
39,038

2017
282

 
38,474

2018
282

 
37,531

2019
282

 
36,808

2020
286

 
35,148

Thereafter
1,841

 
294,126

Total minimum lease payments (1)
3,229

 
$
481,125

Less amount representing interest
(1,548
)
 
 
Total obligations under capital leases
1,681

 
 
Less current portion
(69
)
 
 
Long-term debt under capital leases
$
1,612

 
 
(1) Minimum operating lease payments have not been reduced by minimum sublease rentals of $2.8 million due in the future under noncancelable subleases.
Total rent expense on operating leases, including contingent rentals, was as follows:
 
Year Ended
 
January 3, 2016
 
December 28, 2014
 
December 29, 2013
Minimum rent on real property, excluding rent included in pre-opening costs
$
32,716

 
$
29,309

 
$
26,571

Additional rent based on percentage of sales
387

 
336

 
278

Restaurant rent expense
33,103

 
29,645

 
26,849

Rent included in pre-opening costs
1,736

 
1,421

 
842

Administrative and equipment rent
1,026

 
1,042

 
1,004

 
$
35,865

 
$
32,108

 
$
28,695

Long-term Debt (Tables)
Schedule of Long-term Debt Instruments [Table Text Block]
Long term debt at January 3, 2016 and December 28, 2014 consisted of the following:
 
January 3,
2016
 
December 28,
2014
Revolving credit facility
$
71,000

 
$
66,000

Capital leases
1,681

 
1,325

 
72,681

 
67,325

Less: current portion of long-term debt
(69
)
 
(61
)
 
$
72,612

 
$
67,264

Lease Financing Obligations (Tables)
Future Payments on Lease Financing Obligations [Table Text Block]
At January 3, 2016, payments required on lease financing obligations were as follows:
2016
$
141

2017
143

2018
144

2019
146

2020
147

Thereafter, through 2023
2,076

Total minimum lease payments
2,797

Less: Interest implicit in obligations
(1,134
)
Total lease financing obligations
$
1,663

Income Taxes Income Taxes (Tables)
The Company’s income tax provision was comprised of the following:
    
 
Year Ended
 
January 3, 2016
 
December 28, 2014
 
December 29, 2013
Current:
 
 
 
 
 
Federal
$
14,086

 
$
17,335

 
$
2,550

Foreign
396

 
380

 
375

State
2,081

 
2,291

 
1,048

 
16,563

 
20,006

 
3,973

Deferred:
 
 
 
 
 
Federal
5,318

 
417

 
136

State