Document
false--12-30Q320180001534992falseLarge Accelerated Filerfalse10.010.011000000001000000002708695827258395P91DP273DP364DP91DP273DP371DP364DP364D1711300000100000P4YP3YP3YP1YP5YP4Y97358 0001534992 2018-01-01 2018-09-30 0001534992 2018-10-31 0001534992 2017-12-31 0001534992 2018-09-30 0001534992 2018-07-02 2018-09-30 0001534992 2017-07-03 2017-10-01 0001534992 us-gaap:FoodAndBeverageMember 2017-01-02 2017-10-01 0001534992 2017-01-02 2017-10-01 0001534992 us-gaap:FoodAndBeverageMember 2018-01-01 2018-09-30 0001534992 us-gaap:FranchiseMember 2017-07-03 2017-10-01 0001534992 us-gaap:FranchiseMember 2018-07-02 2018-09-30 0001534992 us-gaap:FranchiseMember 2018-01-01 2018-09-30 0001534992 us-gaap:FranchiseMember 2017-01-02 2017-10-01 0001534992 us-gaap:FoodAndBeverageMember 2018-07-02 2018-09-30 0001534992 us-gaap:FoodAndBeverageMember 2017-07-03 2017-10-01 0001534992 frgi:RestaurantWagesAndRelatedExpensesMember 2017-07-03 2017-10-01 0001534992 us-gaap:GeneralAndAdministrativeExpenseMember 2017-07-03 2017-10-01 0001534992 us-gaap:GeneralAndAdministrativeExpenseMember 2017-01-02 2017-10-01 0001534992 frgi:RestaurantWagesAndRelatedExpensesMember 2017-01-02 2017-10-01 0001534992 us-gaap:GeneralAndAdministrativeExpenseMember 2018-01-01 2018-09-30 0001534992 us-gaap:GeneralAndAdministrativeExpenseMember 2018-07-02 2018-09-30 0001534992 frgi:RestaurantWagesAndRelatedExpensesMember 2018-01-01 2018-09-30 0001534992 frgi:RestaurantWagesAndRelatedExpensesMember 2018-07-02 2018-09-30 0001534992 us-gaap:RetainedEarningsMember 2018-01-01 2018-09-30 0001534992 us-gaap:RetainedEarningsMember 2017-01-02 2017-10-01 0001534992 2017-01-01 0001534992 us-gaap:CommonStockMember 2018-09-30 0001534992 us-gaap:RetainedEarningsMember 2017-10-01 0001534992 us-gaap:AdditionalPaidInCapitalMember 2017-01-02 2017-10-01 0001534992 us-gaap:TreasuryStockMember 2018-09-30 0001534992 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-09-30 0001534992 2017-10-01 0001534992 us-gaap:CommonStockMember 2017-12-31 0001534992 us-gaap:CommonStockMember 2017-01-02 2017-10-01 0001534992 us-gaap:AdditionalPaidInCapitalMember 2017-01-01 0001534992 us-gaap:RetainedEarningsMember 2017-01-01 0001534992 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001534992 us-gaap:RetainedEarningsMember 2018-09-30 0001534992 us-gaap:RetainedEarningsMember 2017-12-31 0001534992 us-gaap:TreasuryStockMember 2018-01-01 2018-09-30 0001534992 us-gaap:CommonStockMember 2017-01-01 0001534992 us-gaap:AdditionalPaidInCapitalMember 2018-09-30 0001534992 us-gaap:AdditionalPaidInCapitalMember 2017-10-01 0001534992 us-gaap:CommonStockMember 2018-01-01 2018-09-30 0001534992 us-gaap:TreasuryStockMember 2017-12-31 0001534992 us-gaap:CommonStockMember 2017-10-01 0001534992 us-gaap:FairValueInputsLevel2Member 2017-12-31 0001534992 country:PA us-gaap:FranchisedUnitsMember frgi:PolloTropicalMember 2018-09-30 0001534992 frgi:HospitalMember stpr:FL us-gaap:FranchisedUnitsMember frgi:PolloTropicalMember 2018-09-30 0001534992 stpr:TX us-gaap:FranchisedUnitsMember frgi:TacoCabanaMember 2018-09-30 0001534992 srt:MaximumMember us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-01-01 0001534992 us-gaap:EntityOperatedUnitsMember frgi:TacoCabanaMember 2018-09-30 0001534992 us-gaap:EntityOperatedUnitsMember frgi:PolloTropicalMember 2018-09-30 0001534992 country:PR us-gaap:FranchisedUnitsMember frgi:PolloTropicalMember 2018-09-30 0001534992 us-gaap:FranchisedUnitsMember frgi:TacoCabanaMember 2018-09-30 0001534992 frgi:GiftCardMember us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-01-01 0001534992 us-gaap:FranchisedUnitsMember frgi:PolloTropicalMember 2018-09-30 0001534992 frgi:CollegeCampusMember stpr:FL us-gaap:FranchisedUnitsMember frgi:PolloTropicalMember 2018-09-30 0001534992 country:BS us-gaap:FranchisedUnitsMember frgi:PolloTropicalMember 2018-09-30 0001534992 frgi:FranchiseRevenueMember us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-01-01 0001534992 country:GY us-gaap:FranchisedUnitsMember frgi:PolloTropicalMember 2018-09-30 0001534992 stpr:FL us-gaap:EntityOperatedUnitsMember frgi:PolloTropicalMember 2018-09-30 0001534992 us-gaap:FairValueInputsLevel2Member 2018-09-30 0001534992 stpr:NM us-gaap:FranchisedUnitsMember frgi:TacoCabanaMember 2018-09-30 0001534992 stpr:GA us-gaap:EntityOperatedUnitsMember frgi:PolloTropicalMember 2018-09-30 0001534992 2017-01-02 2017-12-31 0001534992 srt:MinimumMember us-gaap:ScenarioForecastMember 2018-01-01 2018-12-30 0001534992 us-gaap:ScenarioForecastMember 2018-01-01 2018-12-30 0001534992 stpr:TX us-gaap:EntityOperatedUnitsMember frgi:TacoCabanaMember 2018-09-30 0001534992 srt:MaximumMember us-gaap:ScenarioForecastMember 2018-01-01 2018-12-30 0001534992 frgi:PolloTropicalMember 2018-01-01 2018-09-30 0001534992 frgi:PolloTropicalMember 2018-09-30 0001534992 frgi:PolloTropicalMember 2017-01-02 2017-10-01 0001534992 frgi:PolloTropicalMember 2017-07-03 2017-10-01 0001534992 frgi:TacoCabanaMember 2018-07-02 2018-09-30 0001534992 frgi:PolloTropicalMember 2018-07-02 2018-09-30 0001534992 frgi:TacoCabanaMember 2017-01-02 2017-10-01 0001534992 frgi:TacoCabanaMember 2018-01-01 2018-09-30 0001534992 frgi:TacoCabanaMember 2017-07-03 2017-10-01 0001534992 us-gaap:FairValueInputsLevel3Member 2018-09-30 0001534992 us-gaap:FairValueInputsLevel3Member 2017-10-01 0001534992 frgi:TacoCabanaMember 2018-09-30 0001534992 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:FacilityClosingMember 2018-09-30 0001534992 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:FacilityClosingMember 2017-12-31 0001534992 us-gaap:FacilityClosingMember 2017-01-02 2017-12-31 0001534992 us-gaap:FacilityClosingMember 2018-01-01 2018-09-30 0001534992 us-gaap:FacilityClosingMember 2017-12-31 0001534992 us-gaap:FacilityClosingMember 2017-01-01 0001534992 us-gaap:FacilityClosingMember 2018-09-30 0001534992 2018-02-26 0001534992 srt:MaximumMember frgi:MarketPerformanceBasedRestrictedStockUnitsRSUsMember 2018-01-01 2018-09-30 0001534992 us-gaap:RestrictedStockMember 2018-01-01 2018-09-30 0001534992 us-gaap:RestrictedStockUnitsRSUMember 2017-01-02 2017-10-01 0001534992 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-09-30 0001534992 frgi:MarketPerformanceBasedRestrictedStockUnitsRSUsMember us-gaap:ExecutiveOfficerMember 2018-01-01 2018-09-30 0001534992 frgi:MarketPerformanceBasedRestrictedStockUnitsRSUsMember 2018-01-01 2018-09-30 0001534992 frgi:MarketPerformanceBasedRestrictedStockUnitsRSUsMember 2017-01-02 2017-10-01 0001534992 us-gaap:RestrictedStockMember 2017-01-02 2017-10-01 0001534992 frgi:MarketPerformanceBasedRestrictedStockUnitsRSUsMember us-gaap:ExecutiveOfficerMember 2018-09-30 0001534992 srt:MinimumMember frgi:MarketPerformanceBasedRestrictedStockUnitsRSUsMember 2018-01-01 2018-09-30 0001534992 us-gaap:RestrictedStockMember 2018-09-30 0001534992 us-gaap:RestrictedStockUnitsRSUMember 2017-12-31 0001534992 us-gaap:RestrictedStockMember 2017-12-31 0001534992 us-gaap:RestrictedStockUnitsRSUMember 2018-09-30 0001534992 us-gaap:RestrictedStockMember us-gaap:ManagementMember 2018-01-01 2018-09-30 0001534992 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ManagementMember 2017-01-02 2017-10-01 0001534992 us-gaap:RestrictedStockMember us-gaap:DirectorMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2018-01-01 2018-09-30 0001534992 us-gaap:RestrictedStockMember frgi:NonEmployeeMember 2018-01-01 2018-09-30 0001534992 us-gaap:RestrictedStockMember us-gaap:DirectorMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember frgi:PolloTropicalMember 2018-07-02 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember frgi:TacoCabanaMember 2018-07-02 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember frgi:TacoCabanaMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:TacoCabanaMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:GeneralAndAdministrativeExpenseMember frgi:PolloTropicalMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:TacoCabanaMember 2017-01-02 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:RestaurantWagesAndRelatedExpensesMember frgi:TacoCabanaMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember frgi:RestaurantWagesAndRelatedExpensesMember frgi:PolloTropicalMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:PolloTropicalMember 2017-01-02 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:RestaurantWagesAndRelatedExpensesMember frgi:TacoCabanaMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:PolloTropicalMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember frgi:PolloTropicalMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:RestaurantWagesAndRelatedExpensesMember frgi:PolloTropicalMember 2018-01-01 2018-09-30 0001534992 frgi:RenewalPlanMember 2017-01-02 2017-10-01 0001534992 frgi:RenewalPlanMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:RenewalPlanMember frgi:TacoCabanaMember 2017-01-02 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:RenewalPlanMember frgi:PolloTropicalMember 2017-01-02 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember us-gaap:GeneralAndAdministrativeExpenseMember frgi:PolloTropicalMember 2017-01-02 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember us-gaap:GeneralAndAdministrativeExpenseMember frgi:TacoCabanaMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:GeneralAndAdministrativeExpenseMember frgi:TacoCabanaMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:RestaurantWagesAndRelatedExpensesMember frgi:TacoCabanaMember 2017-01-02 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:RestaurantWagesAndRelatedExpensesMember frgi:TacoCabanaMember 2018-07-02 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember frgi:RenewalPlanMember frgi:PolloTropicalMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember us-gaap:GeneralAndAdministrativeExpenseMember frgi:PolloTropicalMember 2018-07-02 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember frgi:RestaurantWagesAndRelatedExpensesMember frgi:PolloTropicalMember 2018-07-02 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:GeneralAndAdministrativeExpenseMember frgi:PolloTropicalMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:GeneralAndAdministrativeExpenseMember frgi:TacoCabanaMember 2018-07-02 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember frgi:RestaurantWagesAndRelatedExpensesMember frgi:PolloTropicalMember 2017-01-02 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember frgi:RenewalPlanMember frgi:TacoCabanaMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember us-gaap:GeneralAndAdministrativeExpenseMember frgi:TacoCabanaMember 2017-01-02 2017-10-01 0001534992 us-gaap:CorporateNonSegmentMember 2018-07-02 2018-09-30 0001534992 us-gaap:CorporateNonSegmentMember us-gaap:FoodAndBeverageMember 2018-07-02 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember frgi:TacoCabanaMember 2017-07-03 2017-10-01 0001534992 us-gaap:CorporateNonSegmentMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember frgi:PolloTropicalMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember frgi:PolloTropicalMember 2018-07-02 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember frgi:PolloTropicalMember 2018-07-02 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember frgi:TacoCabanaMember 2017-07-03 2017-10-01 0001534992 us-gaap:CorporateNonSegmentMember us-gaap:FoodAndBeverageMember 2017-07-03 2017-10-01 0001534992 us-gaap:CorporateNonSegmentMember us-gaap:FranchiseMember 2018-07-02 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember frgi:PolloTropicalMember 2017-07-03 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember frgi:TacoCabanaMember 2018-07-02 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember frgi:TacoCabanaMember 2018-07-02 2018-09-30 0001534992 us-gaap:CorporateNonSegmentMember us-gaap:FranchiseMember 2017-07-03 2017-10-01 0001534992 us-gaap:CorporateNonSegmentMember us-gaap:FranchiseMember 2017-01-02 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember frgi:PolloTropicalMember 2018-01-01 2018-09-30 0001534992 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember frgi:TacoCabanaMember 2017-01-02 2017-10-01 0001534992 us-gaap:CorporateNonSegmentMember us-gaap:FranchiseMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember frgi:PolloTropicalMember 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember frgi:PolloTropicalMember 2017-12-31 0001534992 us-gaap:CorporateNonSegmentMember 2017-01-02 2017-10-01 0001534992 us-gaap:CorporateNonSegmentMember us-gaap:FoodAndBeverageMember 2017-01-02 2017-10-01 0001534992 us-gaap:CorporateNonSegmentMember us-gaap:FoodAndBeverageMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember frgi:TacoCabanaMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember frgi:TacoCabanaMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember frgi:TacoCabanaMember 2017-12-31 0001534992 us-gaap:CorporateNonSegmentMember 2017-12-31 0001534992 us-gaap:OperatingSegmentsMember frgi:TacoCabanaMember 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember frgi:PolloTropicalMember 2017-01-02 2017-10-01 0001534992 us-gaap:CorporateNonSegmentMember 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember frgi:TacoCabanaMember 2017-01-02 2017-10-01 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FranchiseMember frgi:PolloTropicalMember 2018-01-01 2018-09-30 0001534992 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember frgi:PolloTropicalMember 2017-01-02 2017-10-01 0001534992 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-09-30 0001534992 us-gaap:RestrictedStockUnitsRSUMember 2018-07-02 2018-09-30 0001534992 us-gaap:LossFromCatastrophesMember frgi:TacoCabanaMember 2017-12-31 0001534992 us-gaap:LossFromCatastrophesMember frgi:TacoCabanaMember 2018-01-01 2018-09-30 0001534992 frgi:HoustonMember us-gaap:LossFromCatastrophesMember frgi:TacoCabanaMember 2017-07-03 2017-10-01 0001534992 frgi:FairLaborStandardsActLegalDemandLetterMember 2016-09-30 2016-09-30 0001534992 frgi:FairLaborStandardsActLegalDemandLetterMember 2018-04-02 2018-07-01 0001534992 us-gaap:LossFromCatastrophesMember frgi:PolloTropicalMember 2017-12-31 0001534992 us-gaap:LossFromCatastrophesMember frgi:PolloTropicalMember 2018-01-01 2018-09-30 0001534992 2017-10-02 2017-12-31 iso4217:USD frgi:segment iso4217:USD xbrli:shares frgi:restaurant frgi:tranche xbrli:shares xbrli:pure frgi:plaintiff
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549 
__________________________________________________________
FORM 10-Q
__________________________________________________________
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-35373 
__________________________________________________________
FIESTA RESTAURANT GROUP, INC.
(Exact name of Registrant as specified in its charter)
__________________________________________________________
Delaware
90-0712224
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
14800 Landmark Boulevard, Suite 500
Dallas, Texas
75254
(Address of principal executive office)
(Zip Code)
Registrant’s telephone number, including area code: (972) 702-9300
__________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý  No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on their Corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated filer
ý
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨
Smaller reporting company
¨
 
 
 
 
 
Emerging growth company
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý


Table of Contents

As of October 31, 2018, Fiesta Restaurant Group, Inc. had 27,256,842 shares of its common stock, $0.01 par value, outstanding.


Table of Contents

FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 2018
 
 
 
Page
PART I   FINANCIAL INFORMATION
 
 
 
 
Item 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
Item 3
 
 
 
Item 4
 
 
 
 
 
 
Item 1
 
 
 
Item 1A
 
 
 
Item 2
 
 
 
Item 3
 
 
 
Item 4
 
 
 
Item 5
 
 
 
Item 6

3

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1—INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
 
September 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
5,743

 
$
3,599

Accounts receivable
9,462

 
9,830

Inventories
2,761

 
2,880

Prepaid rent
3,360

 
3,300

Income tax receivable
16,059

 
11,334

Prepaid expenses and other current assets
6,970

 
10,105

Total current assets
44,355

 
41,048

Property and equipment, net
235,609

 
234,561

Goodwill
123,484

 
123,484

Deferred income taxes
9,376

 
17,232

Other assets
7,074

 
6,988

Total assets
$
419,898

 
$
423,313

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
106

 
$
98

Accounts payable
16,042

 
20,293

Accrued payroll, related taxes and benefits
11,813

 
11,776

Accrued real estate taxes
6,525

 
5,860

Other current liabilities
15,052

 
21,817

Total current liabilities
49,538

 
59,844

Long-term debt, net of current portion
71,664

 
76,425

Deferred income—sale-leaseback of real estate
20,765

 
23,466

Other non-current liabilities
30,474

 
32,062

Total liabilities
172,441

 
191,797

Commitments and contingencies

 

Stockholders' equity:
 
 
 
Common stock, $0.01 par value; 100,000,000 shares authorized, 27,258,395 and 27,086,958 shares issued, respectively, and 26,865,639 and 26,847,458 shares outstanding, respectively
270

 
268

Additional paid-in capital
169,465

 
166,823

Retained earnings
80,206

 
64,425

Treasury stock, at cost; 97,358 shares
(2,484
)
 

Total stockholders' equity
247,457

 
231,516

Total liabilities and stockholders' equity
$
419,898

 
$
423,313



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

Table of Contents

FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND OCTOBER 1, 2017
(In thousands, except share and per share data)
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
October 1, 2017
 
September 30, 2018
 
October 1, 2017
Revenues:
 
 
 
 
 
 
 
Restaurant sales
$
173,966

 
$
158,100

 
$
518,951

 
$
505,082

Franchise royalty revenues and fees
682

 
591

 
2,008

 
1,840

Total revenues
174,648

 
158,691

 
520,959

 
506,922

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales
56,021

 
49,151

 
166,275

 
150,827

Restaurant wages and related expenses (including stock-based compensation expense of $6, $9, $56 and $44, respectively)
47,943

 
44,649

 
142,103

 
139,050

Restaurant rent expense
9,129

 
9,104

 
26,861

 
27,881

Other restaurant operating expenses
27,294

 
24,856

 
75,398

 
73,560

Advertising expense
6,472

 
5,885

 
18,046

 
17,716

General and administrative (including stock-based compensation expense of $732, $938, $2,588 and $2,723, respectively)
13,284

 
12,057

 
41,023

 
46,751

Depreciation and amortization
9,739

 
8,483

 
27,908

 
26,265

Pre-opening costs
223

 
544

 
1,481

 
1,878

Impairment and other lease charges
6,417

 
15,905

 
6,539

 
59,081

Other expense (income), net
47

 
469

 
(3,132
)
 
1,721

Total operating expenses
176,569

 
171,103

 
502,502

 
544,730

Income (loss) from operations
(1,921
)
 
(12,412
)
 
18,457

 
(37,808
)
Interest expense
924

 
672

 
2,979

 
1,910

Income (loss) before income taxes
(2,845
)
 
(13,084
)
 
15,478

 
(39,718
)
Benefit from income taxes
(4,892
)
 
(4,827
)
 
(246
)
 
(14,241
)
Net income (loss)
$
2,047

 
$
(8,257
)
 
$
15,724

 
$
(25,477
)
Earnings per common share:
 
 
 
 
 
 
 
Basic
$
0.08

 
$
(0.31
)
 
$
0.58

 
$
(0.95
)
Diluted
0.08

 
(0.31
)
 
0.58

 
(0.95
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
26,954,285

 
26,845,568

 
26,900,716

 
26,811,610

Diluted
26,958,874

 
26,845,568

 
26,905,391

 
26,811,610



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

Table of Contents

FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2018 AND OCTOBER 1, 2017
(In thousands, except share data) 
(Unaudited)

 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock
 
Total
Stockholders'
Equity
 
Shares
 
Amount
 
 
 
 
Balance at January 1, 2017
26,755,640

 
$
267

 
$
163,204

 
$
100,704

 
$

 
$
264,175

Stock-based compensation

 

 
2,767

 

 

 
2,767

Vesting of restricted shares
91,169

 
1

 

 

 

 
1

Cumulative effect of adopting a new accounting standard

 

 
73

 
(47
)
 

 
26

Net loss

 

 

 
(25,477
)
 

 
(25,477
)
Balance at October 1, 2017
26,846,809

 
$
268

 
$
166,044

 
$
75,180

 
$

 
$
241,492

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
26,847,458

 
$
268

 
$
166,823

 
$
64,425

 
$

 
$
231,516

Stock-based compensation

 

 
2,644

 

 

 
2,644

Vesting of restricted shares
115,539

 
2

 
(2
)
 

 

 

Cumulative effect of adopting a new accounting standard (Note 1)

 

 

 
57

 

 
57

Purchase of treasury stock
(97,358
)
 

 

 

 
(2,484
)
 
(2,484
)
Net income

 

 

 
15,724

 

 
15,724

Balance at September 30, 2018
26,865,639

 
$
270

 
$
169,465

 
$
80,206

 
$
(2,484
)
 
$
247,457





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

Table of Contents

FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2018 AND OCTOBER 1, 2017
(In thousands)
(Unaudited)
 
Nine Months Ended
 
September 30, 2018
 
October 1, 2017
Operating activities:
 
 
 
Net income (loss)
$
15,724

 
$
(25,477
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
(Gain) loss on disposals of property and equipment
(1,167
)
 
1,020

Stock-based compensation
2,644

 
2,767

Impairment and other lease charges
6,539

 
59,081

Depreciation and amortization
27,908

 
26,265

Amortization of deferred financing costs
203

 
231

Amortization of deferred gains from sale-leaseback transactions
(2,698
)
 
(2,703
)
Deferred income taxes
7,856

 
(16,886
)
Changes in other operating assets and liabilities
(12,721
)
 
3,355

Net cash provided by operating activities
44,288

 
47,653

Investing activities:
 
 
 
Capital expenditures:
 
 
 
New restaurant development
(17,897
)
 
(23,994
)
Restaurant remodeling
(234
)
 
(2,280
)
Other restaurant capital expenditures
(15,536
)
 
(7,650
)
Corporate and restaurant information systems
(6,256
)
 
(4,615
)
Total capital expenditures
(39,923
)
 
(38,539
)
Proceeds from disposals of properties
4,676

 

Proceeds from insurance recoveries
813

 

Net cash used in investing activities
(34,434
)
 
(38,539
)
Financing activities:
 
 
 
Borrowings on revolving credit facility
18,000

 
7,000

Repayments on revolving credit facility
(23,000
)
 
(16,000
)
Principal payments on capital leases
(76
)
 
(66
)
Financing costs associated with issuance of debt
(150
)
 

Payments to purchase treasury stock
(2,484
)
 

Net cash used in financing activities
(7,710
)
 
(9,066
)
Net change in cash
2,144

 
48

Cash, beginning of period
3,599

 
4,196

Cash, end of period
$
5,743

 
$
4,244

Supplemental disclosures:
 
 
 
Interest paid on long-term debt
$
2,505

 
$
1,756

Interest paid on lease financing obligations

 
83

Accruals for capital expenditures
5,338

 
7,950

Income tax payments (refunds), net
(3,360
)
 
3,003

Capital lease obligations incurred
322

 

Non-cash reduction of lease financing obligations

 
1,664

Non-cash reduction of assets under lease financing obligations

 
1,193


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

Table of Contents
FIESTA RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)



1. Basis of Presentation
Business Description. Fiesta Restaurant Group, Inc. ("Fiesta Restaurant Group" or "Fiesta") owns, operates and franchises two restaurant brands through its wholly-owned subsidiaries Pollo Operations, Inc. and its subsidiaries, Pollo Franchise, Inc. (collectively "Pollo Tropical") and Taco Cabana, Inc. and its subsidiaries (collectively "Taco Cabana"). Unless the context otherwise requires, Fiesta and its subsidiaries, Pollo Tropical and Taco Cabana, are collectively referred to as the "Company." At September 30, 2018, the Company owned and operated 150 Pollo Tropical® restaurants and 171 Taco Cabana® restaurants. The Pollo Tropical restaurants included 141 located in Florida and 9 located in Georgia. All of the Taco Cabana restaurants are located in Texas. At September 30, 2018, the Company franchised a total of 30 Pollo Tropical restaurants and eight Taco Cabana restaurants. The franchised Pollo Tropical restaurants included 17 in Puerto Rico, four in Panama, two in Guyana, one in the Bahamas, five on college campuses and one at a hospital in Florida. The franchised Taco Cabana restaurants included six in New Mexico and two on college campuses in Texas.
Basis of Consolidation. The unaudited condensed consolidated financial statements presented herein reflect the consolidated financial position, results of operations and cash flows of Fiesta and its wholly-owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
Fiscal Year. The Company uses a 5253 week fiscal year ending on the Sunday closest to December 31. The fiscal year ended December 31, 2017 contained 52 weeks. The three and nine months ended September 30, 2018 and October 1, 2017 each contained thirteen and thirty-nine weeks, respectively. The fiscal year ending December 30, 2018 will contain 52 weeks.
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2018 and October 1, 2017 have been prepared without an audit pursuant to the rules and regulations of the Securities and Exchange Commission and do not include certain information and footnotes required by U.S. Generally Accepted Accounting Principles ("GAAP") for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of such financial statements have been included. The results of operations for the three and nine months ended September 30, 2018 and October 1, 2017 are not necessarily indicative of the results to be expected for the full year.
These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2017 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. The December 31, 2017 balance sheet data is derived from those audited financial statements.
Reclassification. Write-offs of site development costs were reclassified from general and administrative expense to other expense (income), net in the condensed consolidated statement of operations to conform with the current year presentation.
Guidance Adopted in 2018. In May 2014, and in subsequent updates, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the guidance in former Topic 605, Revenue Recognition, and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company adopted this new accounting standard and all the related amendments as of January 1, 2018 using the modified retrospective method, and recognized a total cumulative effect adjustment to increase retained earnings by less than $0.1 million, which consisted of a $0.3 million increase related to gift card breakage and a $0.3 million decrease related to initial franchise and area development fees, as a result of adopting the standard. The new standard did not impact the Company’s recognition of revenue from Company-owned and operated restaurants or its recognition of sale-based royalties from restaurants operated by franchisees. The comparative period information has not been restated and continues to be reported under the accounting standard in effect for those periods. When compared to the previous accounting policies, the impact of adopting the new standard was immaterial to current and non-current other liabilities and retained earnings at January 1, 2018 and to net income for the three and nine months ended September 30, 2018. The adoption of the new standard had no impact on the Company's consolidated statements of cash flows.
Revenue Recognition. Revenue is recognized upon transfer of promised products or services to customers in an amount that reflects the consideration the Company received in exchange for those products or services. Revenues from the Company's owned and operated restaurants are recognized when payment is tendered at the time of sale. Franchise royalty revenues are based on a percent of gross sales and are recorded as income when earned. Initial franchise fees and area development fees associated with new franchise agreements are not distinct from the continuing rights and services offered by the Company during the term of the

8

Table of Contents
FIESTA RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



related franchise agreements and are recognized as income over the term of the related franchise agreements. A portion of the initial franchise fee is allocated to training services and is recognized as revenue when the Company completes the training services. Prior to adopting Topic 606, the Company recognized initial franchise fees as revenue in the period that a franchised location opened for business. See Note 6—Business Segment Information.
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. For unredeemed gift cards that the Company expects to be entitled to breakage, the Company recognizes expected breakage as revenue in proportion to the pattern of redemption by the customers. The gift cards have no stated expiration dates. Revenues from unredeemed gift cards and gift card liabilities, which are recorded in other current liabilities, are not material to the Company's financial statements. Prior to adopting Topic 606, the Company did not recognize breakage on its gift cards.
Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities; and Level 3 inputs are unobservable and reflect management's own assumptions. The following methods were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the fair value:
Current Assets and Liabilities. The carrying values reported on the balance sheet of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of those financial instruments.
Revolving Credit Borrowings. The fair value of outstanding revolving credit borrowings under the Company's senior credit facility, which is considered Level 2, is based on current LIBOR rates. The fair value of the Company's senior credit facility was approximately $69.9 million at September 30, 2018, and $75.0 million at December 31, 2017. The carrying value of the Company's senior credit facility was $70.0 million at September 30, 2018 and $75.0 million at December 31, 2017.
Long-Lived Assets. The Company assesses the recoverability of property and equipment and definite-lived intangible assets by determining whether the carrying value of these assets can be recovered over their respective remaining lives through undiscounted future operating cash flows. Impairment is reviewed when events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. See Note 3—Impairment of Long-Lived Assets.
Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements. Estimates also affect the reported amounts of expenses during the reporting periods. Significant items subject to such estimates and assumptions include: accrued occupancy costs, insurance liabilities, evaluation for impairment of goodwill and long-lived assets and lease accounting matters. Actual results could differ from those estimates.
2. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets, consist of the following:
 
September 30, 2018
 
December 31, 2017
Prepaid contract expenses
$
3,670

 
$
3,681

Assets held for sale(1)

 
2,705

Other
3,300

 
3,719

 
$
6,970

 
$
10,105


(1) Two closed Pollo Tropical restaurant properties owned by the Company that were classified as held for sale as of December 31, 2017 were sold in 2018 for a total of $3.3 million.

9

Table of Contents
FIESTA RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



3. 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. There is uncertainty in the projected undiscounted future cash flows used in the Company's impairment review analysis. If actual performance does not achieve the projections, the Company may recognize impairment charges in future periods, and such charges could be material. 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. There is uncertainty in the estimates of future lease costs and sublease recoveries. Actual costs and sublease recoveries could vary significantly from the estimated amounts and result in additional lease charges or recoveries, and such amounts could be material.

A summary of impairment on long-lived assets and other lease charges (recoveries) recorded by segment is as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
October 1, 2017
 
September 30, 2018
 
October 1, 2017
Pollo Tropical
$
3,295

 
$
13,729

 
$
3,439

 
$
56,336

Taco Cabana
3,122

 
2,176

 
3,100

 
2,745

 
$
6,417

 
$
15,905

 
$
6,539

 
$
59,081



The Company recognized impairment charges totaling $5.7 million in the three months ended September 30, 2018 related to management's ongoing assessment of the Company's restaurant portfolio in light of continued sales declines at certain underperforming restaurants. Impairment and other lease charges for the three and nine months ended September 30, 2018 for Pollo Tropical include impairment charges of $3.4 million and $3.6 million, respectively, related primarily to impairment of three underperforming restaurants that the Company continues to operate and a benefit of $(0.1) million in net lease charge recoveries related to certain previously closed restaurants due to adjustments to estimates of future lease costs. Impairment and other lease charges for the three and nine months ended September 30, 2018 for Taco Cabana include impairment charges of $2.4 million and $2.6 million, respectively, related primarily to impairment of five underperforming restaurants that the Company continues to operate and other lease charges, net of recoveries, of $0.7 million and $0.5 million, respectively, due primarily to lease charges related to an office relocation in the third quarter of 2018 and other lease charges, net of recoveries, related to certain previously closed restaurants due to adjustments to estimates of future lease costs.
In conjunction with the Strategic Renewal Plan to drive long-term shareholder value creation, Pollo Tropical recognized impairment charges of $15.6 million and $51.3 million for the three and nine months ended October 1, 2017, respectively. In addition, Pollo Tropical recognized a $(1.9) million net benefit related to lease charge recoveries and $5.0 million of lease charges, net of recoveries, for the three and nine months ended October 1, 2017, respectively. These charges were due primarily to impairment and closures of underperforming Pollo Tropical restaurants in 2017 and the net benefit related to lease charge recoveries during the third quarter of 2017 was due to closed restaurant lease terminations, assignments and other adjustments to estimates of future lease costs. Impairment and other lease charges for Taco Cabana consisted of impairment charges of $0.9 million and $1.4 million for the three and nine months ended October 1, 2017, respectively, and other lease charges of $1.3 million for the three and nine months ended October 1, 2017. These charges were due primarily to impairment and closures of underperforming Taco Cabana restaurants in 2017.

10

Table of Contents
FIESTA RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



The Company determined the fair value of restaurant equipment, for those restaurants reviewed for impairment, based on current economic conditions, the Company’s history of using these assets in the operation of its business and the Company's expectation of how a market participant would value the assets. In addition, for those restaurants reviewed for impairment where the Company owns the land and building, the Company utilized third-party information such as a broker quoted value 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 nine months ended September 30, 2018 and October 1, 2017 totaled $1.2 million and $13.5 million, respectively, which primarily consisted of equipment for the nine months ended September 30, 2018 and leasehold improvements related to Pollo Tropical restaurants that were or will be rebranded as Taco Cabana restaurants and the estimated fair value of owned properties for the nine months ended October 1, 2017.
4. Other Liabilities
Other current liabilities consist of the following:
 
September 30, 2018
 
December 31, 2017
Accrued workers' compensation and general liability claims
$
5,401

 
$
5,083

Sales and property taxes
2,299

 
2,279

Accrued occupancy costs
4,959

 
7,813

Other
2,393

 
6,642

 
$
15,052

 
$
21,817


Other non-current liabilities consist of the following:
 
September 30, 2018
 
December 31, 2017
Accrued occupancy costs
$
20,007

 
$
20,985

Deferred compensation
826

 
1,029

Accrued workers’ compensation and general liability claims
6,099

 
6,102

Other
3,542

 
3,946

 
$
30,474

 
$
32,062


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-restaurant reserve, of which $3.3 million and $5.3 million are included in non-current accrued occupancy costs at September 30, 2018 and December 31, 2017, respectively, with the remainder in current accrued occupancy costs.
 
Nine Months Ended September 30, 2018
 
Year Ended December 31, 2017
Balance, beginning of period
$
12,994

 
$
4,912

Provisions for restaurant closures

 
8,767

Additional lease charges (recoveries), net
413

 
(1,301
)
Payments, net
(5,741
)
 
(5,528
)
Other adjustments(1)
388

 
6,144

Balance, end of period
$
8,054

 
$
12,994


(1) For the year ended December 31, 2017, includes the transfer of accruals to expense operating lease payments on a straight-line basis.


11

Table of Contents
FIESTA RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



5. Stockholders' Equity

Purchase of Treasury Stock

On February 26, 2018, the Company announced that its board of directors approved a share repurchase program for up to 1,500,000 shares of the Company's common stock. Under the share repurchase program, shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The share repurchase program has no time limit and may be modified, suspended, superseded or terminated at any time by the Company's board of directors. The Company repurchased 97,358 shares of its common stock under the program in open market transactions during the nine months ended September 30, 2018 for $2.5 million. The repurchased shares are held as treasury stock at cost.

Stock-Based Compensation

During the nine months ended September 30, 2018, the Company granted certain employees, non-employee directors and a non-employee food and beverage consultant a total of 187,747 non-vested restricted shares under the Fiesta Restaurant Group, Inc. 2012 Stock Incentive Plan (the "Fiesta Plan"). The shares granted to employees generally vest and become non-forfeitable over a four-year vesting period. The shares granted to non-employee directors, the non-employee food and beverage consultant and a new non-employee director vest and become non-forfeitable over a one-, three- and five-year vesting period, respectively. The weighted average fair value at grant date for non-vested shares issued during the nine months ended September 30, 2018 and October 1, 2017 was $19.02 and $20.84 per share, respectively.
During the nine months ended September 30, 2018, the Company granted certain executives a total of 112,169 restricted stock units under the Fiesta Plan, which vest in three tranches over a three-year vesting period. The restricted stock units granted to executives are subject to continued service and attainment of specified share prices of the Company's common stock for a specified period of time within each vesting period. Each tranche vests by the end of a one-year period if the specified target stock price condition for that year is met. If the specified target stock price condition for any tranche is not met for the year, the cumulative unearned units will be rolled over to subsequent tranches on a pro rata basis. For the restricted stock units granted to executives in the nine months ended September 30, 2018, the number of shares into which these restricted stock units convert ranges from no shares, if the service and market performance conditions are not met, to 112,169 shares, if the service and market performance conditions are met in the last vesting period. The weighted average fair value at grant date for the restricted stock units granted to executives in the nine months ended September 30, 2018 and October 1, 2017 was $6.96 and $12.13 per share, respectively.
During the nine months ended October 1, 2017, the Company granted certain employees restricted stock units under the Fiesta Plan. The restricted stock units granted during the nine months ended October 1, 2017 vest and become non-forfeitable at the end of a four-year vesting period. The weighted average fair value at grant date for these restricted stock units issued to employees during the nine months ended October 1, 2017 was $20.75 per share.
Stock-based compensation expense for the three and nine months ended September 30, 2018 was $0.7 million and $2.6 million, respectively, and for the three and nine months ended October 1, 2017 was $0.9 million and $2.8 million, respectively. At September 30, 2018, the total unrecognized stock-based compensation expense related to non-vested restricted shares and restricted stock units was approximately $5.8 million. At September 30, 2018, the remaining weighted average vesting period for non-vested restricted shares was 2.7 years and restricted stock units was 1.3 years.

12

Table of Contents
FIESTA RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



A summary of all non-vested restricted shares and restricted stock units activity for the nine months ended September 30, 2018 is as follows:
 
Non-Vested Shares
 
Restricted Stock Units
 
Shares
 
Weighted
Average
Grant Date
Fair Value
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2017
239,500

 
$
24.81

 
143,946

 
$
23.11

Granted
187,747

 
19.02

 
112,169

 
6.96

Vested and released
(105,240
)
 
25.62

 
(10,344
)
 
45.76

Forfeited
(26,609
)
 
22.56

 
(13,851
)
 
52.93

Outstanding at September 30, 2018
295,398

 
$
20.66

 
231,920

 
$
12.51


The fair value of the restricted stock units subject to market performance conditions was estimated using the Monte Carlo simulation method. The fair value of the non-vested restricted shares and all other restricted stock units is based on the closing price on the date of grant.
6. Business Segment Information
The Company owns, operates and franchises two restaurant brands, Pollo Tropical® and Taco Cabana®, each of which is an operating segment. Pollo Tropical restaurants feature 24-hour citrus marinated chicken and other freshly prepared tropical inspired menu items, while Taco Cabana restaurants specialize in Mexican inspired food.
Each segment's accounting policies are described in the summary of significant accounting policies in Note 1 to the Company's audited financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. The primary measure of segment profit or loss used by the chief operating decision maker to assess performance and allocate resources is Adjusted EBITDA, which is defined as earnings attributable to the applicable operating segments before interest expense, income taxes, depreciation and amortization, impairment and other lease charges, stock-compensation expense, other expense (income), net, and certain significant items for each segment that management believes are related to strategic changes and/or are not related to the ongoing operation of the Company's restaurants as set forth in the reconciliation table below.

13

Table of Contents
FIESTA RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



The "Other" column includes corporate-related items not allocated to reportable segments and consists primarily of corporate-owned property and equipment, miscellaneous prepaid costs, capitalized costs associated with the issuance of indebtedness, corporate cash accounts and a current income tax receivable.
Three Months Ended
 
Pollo Tropical
 
Taco Cabana
 
Other
 
Consolidated
September 30, 2018:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
93,592

 
$
80,374

 
$

 
$
173,966

Franchise revenue
 
453

 
229

 

 
682

Cost of sales
 
31,219

 
24,802

 

 
56,021

Restaurant wages and related expenses(1)
 
21,947

 
25,996

 

 
47,943

Restaurant rent expense
 
4,392

 
4,737

 

 
9,129

Other restaurant operating expenses
 
13,521

 
13,773

 

 
27,294

Advertising expense
 
3,413

 
3,059

 

 
6,472

General and administrative expense(2)
 
7,291

 
5,993

 

 
13,284

Adjusted EBITDA
 
12,544

 
2,493

 

 
15,037

Depreciation and amortization
 
5,438

 
4,301

 

 
9,739

Capital expenditures
 
4,621

 
7,489

 
525

 
12,635

October 1, 2017:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
87,888

 
$
70,212

 
$

 
$
158,100

Franchise revenue
 
396

 
195

 

 
591

Cost of sales
 
28,527

 
20,624

 

 
49,151

Restaurant wages and related expenses(1)
 
21,208

 
23,441

 

 
44,649

Restaurant rent expense
 
4,655

 
4,449

 

 
9,104

Other restaurant operating expenses
 
13,034

 
11,822

 

 
24,856

Advertising expense
 
4,980

 
905

 

 
5,885

General and administrative expense(2)
 
6,647

 
5,410

 

 
12,057

Adjusted EBITDA
 
9,396

 
3,776

 

 
13,172

Depreciation and amortization
 
5,187

 
3,296

 

 
8,483

Capital expenditures
 
6,302

 
5,471

 
613

 
12,386


14

Table of Contents
FIESTA RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)




 
Nine Months Ended
 
Pollo Tropical
 
Taco Cabana
 
Other
 
Consolidated
September 30, 2018:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
283,447

 
$
235,504

 
$

 
$
518,951

Franchise revenue
 
1,376

 
632

 

 
2,008

Cost of sales
 
93,716

 
72,559

 

 
166,275

Restaurant wages and related expenses(1)
 
65,652

 
76,451

 

 
142,103

Restaurant rent expense
 
13,024

 
13,837

 

 
26,861

Other restaurant operating expenses
 
38,270

 
37,128

 

 
75,398

Advertising expense
 
9,859

 
8,187

 

 
18,046

General and administrative expense(2)
 
22,256

 
18,767

 

 
41,023

Adjusted EBITDA
 
42,520

 
9,652

 

 
52,172

Depreciation and amortization
 
16,117

 
11,791

 

 
27,908

Capital expenditures
 
17,656

 
21,400

 
867

 
39,923

October 1, 2017:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
281,572

 
$
223,510

 
$

 
$
505,082

Franchise revenue
 
1,272

 
568

 

 
1,840

Cost of sales
 
87,430

 
63,397

 

 
150,827

Restaurant wages and related expenses(1)
 
66,945

 
72,105

 

 
139,050

Restaurant rent expense
 
14,502

 
13,379

 

 
27,881

Other restaurant operating expenses
 
39,353

 
34,207

 

 
73,560

Advertising expense
 
11,316

 
6,400

 

 
17,716

General and administrative expense(2)
 
26,161

 
20,590

 

 
46,751

Adjusted EBITDA
 
41,257

 
17,252

 

 
58,509

Depreciation and amortization
 
16,705

 
9,560

 

 
26,265

Capital expenditures
 
23,208

 
13,487

 
1,844

 
38,539

Identifiable Assets:
 
 
 
 
 
 
 
 
September 30, 2018
 
$
212,704

 
$
174,575

 
$
32,619

 
$
419,898

December 31, 2017
 
227,194

 
167,237

 
28,882

 
423,313


(1) Includes stock-based compensation expense of $6 and $56 for the three and nine months ended September 30, 2018, respectively, and $9 and $44 for the three and nine months ended October 1, 2017, respectively.
(2) Includes stock-based compensation expense of $732 and $2,588 for the three and nine months ended September 30, 2018, respectively, and $938 and $2,723 for the three and nine months ended October 1, 2017, respectively.

15

Table of Contents
FIESTA RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



A reconciliation of consolidated net income (loss) to Adjusted EBITDA follows:
Three Months Ended
 
Pollo Tropical
 
Taco Cabana
 
Consolidated
September 30, 2018:
 
 
 
 
 
 
Net income
 
 
 
 
 
$
2,047

Benefit from income taxes
 
 
 
 
 
(4,892
)
Income (loss) before taxes
 
$
2,976

 
$
(5,821
)
 
$
(2,845
)
Add:
 
 
 
 
 
 
     Non-general and administrative expense adjustments:
 
 
 
 
 
 
          Depreciation and amortization
 
5,438

 
4,301

 
9,739

          Impairment and other lease charges
 
3,295

 
3,122

 
6,417

          Interest expense
 
448

 
476

 
924

          Other expense (income), net
 
(29
)
 
76

 
47

          Stock-based compensation expense in restaurant wages
 
4

 
2

 
6

                Total non-general and administrative expense adjustments
 
9,156

 
7,977

 
17,133

     General and administrative expense adjustments:
 
 
 
 
 
 
          Stock-based compensation expense
 
407

 
325

 
732

          Strategic Renewal Plan restructuring costs and retention bonuses
 
5

 
12

 
17

               Total general and administrative expense adjustments
 
412

 
337

 
749

Adjusted EBITDA
 
$
12,544

 
$
2,493

 
$
15,037

 
 
 
 
 
 
 
October 1, 2017:
 
 
 
 
 
 
Net loss
 
 
 
 
 
$
(8,257
)
Benefit from income taxes
 
 
 
 
 
(4,827
)
Loss before taxes
 
$
(10,816
)
 
$
(2,268
)
 
$
(13,084
)
Add:
 
 
 
 
 
 
     Non-general and administrative expense adjustments:
 
 
 
 
 
 
          Depreciation and amortization
 
5,187

 
3,296

 
8,483

          Impairment and other lease charges
 
13,729

 
2,176

 
15,905

          Interest expense
 
329

 
343

 
672

          Other expense (income), net
 
574

 
(105
)
 
469

          Stock-based compensation expense in restaurant wages
 
(4
)
 
13

 
9

                Total non-general and administrative expense adjustments
 
19,815

 
5,723

 
25,538

     General and administrative expense adjustments:
 
 
 
 
 
 
          Stock-based compensation expense
 
587

 
351

 
938

          Board and shareholder matter costs
 
(89
)
 
(66
)
 
(155
)
          Strategic Renewal Plan restructuring costs and retention bonuses
 
51

 
36

 
87

          Office restructuring and relocation costs
 
(152
)
 

 
(152
)
               Total general and administrative expense adjustments
 
397

 
321

 
718

Adjusted EBITDA
 
$
9,396

 
$
3,776

 
$
13,172

 
 
 
 
 
 
 


16

Table of Contents
FIESTA RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



Nine Months Ended
 
Pollo Tropical
 
Taco Cabana
 
Consolidated
September 30, 2018:
 
 
 
 
 
 
Net income
 
 
 
 
 
$
15,724

Benefit from income taxes
 
 
 
 
 
(246
)
Income (loss) before taxes
 
$
21,901

 
$
(6,423
)
 
$
15,478

Add: