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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549 
__________________________________________________________
FORM 10-Q
__________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 2020
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)
__________________________________________________________
DE
90-0712224
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
14800 Landmark Boulevard, Suite 500
75254
Dallas
TX
(Zip Code)
(Address of principal executive office)
 
Registrant's telephone number, including area code: (972) 702-9300
__________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share
 
FRGI
 
NASDAQ Global Select Market
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  ☒  No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    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. 
Large Accelerated Filer
Accelerated Filer
 
 
 
 
Non-accelerated Filer
Smaller Reporting Company
 
 
 
 
 
Emerging Growth Company


Table of Contents

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  ☒
As of July 30, 2020, Fiesta Restaurant Group, Inc. had 25,956,504 shares of its common stock, $0.01 par value, outstanding.


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FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 28, 2020
 
 
 
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

1

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)
 
June 28, 2020
 
December 29, 2019
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
101,375

 
$
13,413

Accounts receivable
7,604

 
7,933

Inventories
3,446

 
3,394

Prepaid rent
106

 
117

Income tax receivable
10,635

 
3,821

Prepaid expenses and other current assets
17,195

 
10,605

Total current assets
140,361

 
39,283

Property and equipment, net
187,928

 
211,944

Operating lease right-of-use assets
257,654

 
251,272

Goodwill
56,307

 
56,307

Other assets
8,134

 
9,835

Total assets
$
650,384

 
$
568,641

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
241

 
$
212

Accounts payable
29,525

 
14,776

Accrued payroll, related taxes and benefits
8,937

 
9,866

Accrued real estate taxes
5,558

 
6,497

Other current liabilities
34,836

 
32,269

Total current liabilities
79,097

 
63,620

Long-term debt, net of current portion
148,233

 
76,823

Operating lease liabilities
264,157

 
256,798

Deferred tax liabilities
7,866

 
4,759

Other non-current liabilities
10,343

 
8,405

Total liabilities
509,696

 
410,405

Commitments and contingencies

 

Stockholders' equity:
 
 
 
Preferred stock, $0.01 par value; 20,000,000 shares authorized, no shares issued

 

Common stock, $0.01 par value; 100,000,000 shares authorized, 27,950,982 and 27,461,697 shares issued, respectively, and 25,288,256 and 25,612,597 shares outstanding, respectively
273

 
271

Additional paid-in capital
174,970

 
173,132

Retained earnings (accumulated deficit)
(13,776
)
 
1,884

Treasury stock, at cost; 1,993,495 and 1,493,495 shares, respectively
(20,779
)
 
(17,051
)
Total stockholders' equity
140,688

 
158,236

Total liabilities and stockholders' equity
$
650,384

 
$
568,641


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2

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FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 28, 2020 AND JUNE 30, 2019
(In thousands, except share and per share data)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 28, 2020
 
June 30, 2019
 
June 28, 2020
 
June 30, 2019
Revenues:
 
 
 
 
 
 
 
Restaurant sales
$
121,547

 
$
170,713

 
$
267,633

 
$
335,894

Franchise royalty revenues and fees
321

 
668

 
934

 
1,339

Total revenues
121,868

 
171,381

 
268,567

 
337,233

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales
37,807

 
53,758

 
84,083

 
104,268

Restaurant wages and related expenses (including stock-based compensation expense of $69, $16, $105 and $43, respectively)
33,747

 
45,766

 
74,242

 
90,802

Restaurant rent expense
11,279

 
11,898

 
22,618

 
23,643

Other restaurant operating expenses
18,989

 
22,513

 
40,500

 
44,276

Advertising expense
2,143

 
5,883

 
7,926

 
11,404

General and administrative (including stock-based compensation expense of $959, $719, $1,735 and $1,484, respectively)
12,288

 
13,496

 
26,672

 
28,567

Depreciation and amortization
9,565

 
9,807

 
18,995

 
19,355

Pre-opening costs

 
385

 
69

 
786

Impairment and other lease charges
2,285

 
1,751

 
6,518

 
1,413

Goodwill impairment

 
46,485

 

 
46,485

Closed restaurant rent expense, net of sublease income
1,830

 
1,335

 
3,462

 
2,759

Other expense (income), net
784

 
154

 
1,692

 
856

Total operating expenses
130,717

 
213,231

 
286,777

 
374,614

Loss from operations
(8,849
)
 
(41,850
)
 
(18,210
)
 
(37,381
)
Interest expense
1,237

 
967

 
2,198

 
2,201

Loss before income taxes
(10,086
)
 
(42,817
)
 
(20,408
)
 
(39,582
)
Provision for (benefit from) income taxes
(1,743
)
 
623

 
(4,748
)
 
1,569

Net loss
$
(8,343
)
 
$
(43,440
)
 
$
(15,660
)
 
$
(41,151
)
Earnings (loss) per common share:
 
 
 
 
 
 
 
Basic
$
(0.33
)
 
$
(1.62
)
 
$
(0.62
)
 
$
(1.53
)
Diluted
(0.33
)
 
(1.62
)
 
(0.62
)
 
(1.53
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
25,267,404

 
26,807,068

 
25,393,325

 
26,825,286

Diluted
25,267,404

 
26,807,068

 
25,393,325

 
26,825,286



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE AND SIX MONTHS ENDED JUNE 28, 2020 AND JUNE 30, 2019
(In thousands, except share data) 
(Unaudited)

 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
(Accumulated Deficit)
 
Treasury
Stock
 
Total
Stockholders'
Equity
 
Shares
 
Amount
 
 
 
 
Balance at December 30, 2018
26,858,988

 
$
270

 
$
170,290

 
$
72,268

 
$
(2,769
)
 
$
240,059

Stock-based compensation

 

 
792

 

 

 
792

Vesting of restricted shares
68,286

 

 
(1
)
 

 

 
(1
)
Cumulative effect of adopting a new accounting standard

 

 

 
14,002

 

 
14,002

Purchase of treasury stock
(158,269
)
 

 

 

 
(2,199
)
 
(2,199
)
Net income

 

 

 
2,289

 

 
2,289

Balance at March 31, 2019
26,769,005

 
270

 
171,081

 
88,559

 
(4,968
)
 
254,942

Stock-based compensation

 

 
735

 

 

 
735

Vesting of restricted shares
57,547

 
1

 
(1
)
 

 

 

Net loss

 

 

 
(43,440
)
 

 
(43,440
)
Balance at June 30, 2019
26,826,552

 
$
271

 
$
171,815

 
$
45,119

 
$
(4,968
)
 
$
212,237

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 29, 2019
25,612,597

 
$
271

 
$
173,132

 
$
1,884

 
$
(17,051
)
 
$
158,236

Stock-based compensation

 

 
812

 

 

 
812

Vesting of restricted shares
73,998

 

 

 

 

 

Purchase of treasury stock
(500,000
)
 

 

 

 
(3,728
)
 
(3,728
)
Net loss

 

 

 
(7,317
)
 

 
(7,317
)
Balance at March 29, 2020
25,186,595

 
271

 
173,944

 
(5,433
)
 
(20,779
)
 
148,003

Stock-based compensation

 

 
1,028

 

 

 
1,028

Vesting of restricted shares
101,661

 
2

 
(2
)
 

 

 

Net loss

 

 

 
(8,343
)
 

 
(8,343
)
Balance at June 28, 2020
25,288,256

 
$
273

 
$
174,970

 
$
(13,776
)
 
$
(20,779
)
 
$
140,688





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 28, 2020 AND JUNE 30, 2019
(In thousands)
(Unaudited)
 
Six Months Ended
 
June 28, 2020
 
June 30, 2019
Operating activities:
 
 
 
Net loss
$
(15,660
)
 
$
(41,151
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Loss on disposals of property and equipment
571

 
8

Stock-based compensation
1,840

 
1,527

Impairment and other lease charges
6,518

 
1,413

Goodwill impairment

 
46,485

Depreciation and amortization
18,995

 
19,355

Amortization of deferred financing costs
135

 
135

Deferred income taxes
3,107

 

Changes in other operating assets and liabilities
13,462

 
11,771

Net cash provided by operating activities
28,968

 
39,543

Investing activities:
 
 
 
Capital expenditures:
 
 
 
New restaurant development
(1,840
)
 
(7,835
)
Restaurant remodeling
(1,087
)
 
(268
)
Other restaurant capital expenditures
(3,741
)
 
(9,936
)
Corporate and restaurant information systems
(2,035
)
 
(3,632
)
Total capital expenditures
(8,703
)
 
(21,671
)
Proceeds from disposals of properties

 
1,774

Net cash used in investing activities
(8,703
)
 
(19,897
)
Financing activities:
 
 
 
Borrowings on revolving credit facility
146,940

 
11,000

Repayments on revolving credit facility
(75,420
)
 
(28,000
)
Borrowings of unsecured debt
15,000

 

Repayments of unsecured debt
(15,000
)
 

Principal payments on finance leases
(95
)
 
(59
)
Payments to purchase treasury stock
(3,728
)
 
(2,199
)
Net cash provided by (used in) financing activities
67,697

 
(19,258
)
Net change in cash
87,962

 
388

Cash, beginning of period
13,413

 
5,258

Cash, end of period
$
101,375

 
$
5,646


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

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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 June 28, 2020, the Company owned and operated 141 Pollo Tropical® restaurants and 146 Taco Cabana® restaurants. All of the Pollo Tropical restaurants are located in Florida and all of the Taco Cabana restaurants are located in Texas. At June 28, 2020, the Company franchised a total of 33 Pollo Tropical restaurants and seven Taco Cabana restaurants. The franchised Pollo Tropical restaurants include 17 in Puerto Rico, four in Panama, two in Guyana, one in Ecuador, one in the Bahamas, seven on college campuses and one at a hospital in Florida. The franchised Taco Cabana restaurants include six in New Mexico and one on a college campus in Texas.
The COVID-19 pandemic has affected and is continuing to affect the restaurant industry and the economy. In response to COVID-19 and in compliance with governmental restrictions, the Company closed the dining room seating areas in all Pollo Tropical and Taco Cabana restaurants, limiting service to take-out, drive-thru, and delivery operations beginning in mid-March 2020. During the second quarter of 2020, certain restrictions were lifted allowing restaurant dining rooms to open on a limited basis. The Company opened certain dining rooms on a limited basis during the second quarter of 2020; however, it temporarily closed all dining rooms on July 12, 2020, in response to increased COVID-19 infection rates in both Texas and Florida. The Company expects the COVID-19 restrictions and economic impact to result in reduced earnings. As the COVID-19 situation is dynamic, the Company does not currently know when it will be able to resume full operations or when its results of operations will return to pre-COVID-19 levels.
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 29, 2019 contained 52 weeks. The three and six months ended June 28, 2020 and June 30, 2019 each contained thirteen and twenty-six weeks, respectively. The fiscal year ending January 3, 2021 will contain 53 weeks.
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements for the three and six months ended June 28, 2020 and June 30, 2019 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 six months ended June 28, 2020 and June 30, 2019 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 29, 2019 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2019. The December 29, 2019 balance sheet data is derived from those audited financial statements.
Guidance Adopted in 2020. In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted this new accounting standard on December 30, 2019 and will apply it prospectively to all implementation costs incurred after the date of adoption. The adoption of this standard did not have a material effect on the Company's financial statements. The Company deferred and amortized application development stage costs for cloud-based computing arrangements over the life of the related service (subscription) agreement in the same line item that the fees associated with the subscription arrangement were presented prior to adoption of the new standard.
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

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



percentage of gross sales and are recorded as income when earned. Initial franchise fees and area development fees associated with new franchise agreements are not distinct from the continuing rights and services offered by the Company during the term of the related franchise agreements and are recognized as income over the term of the related franchise agreements. A portion of the initial franchise fee is allocated to training services and is recognized as revenue when the Company completes the training services.
Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants 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 secured revolving credit facility (the " senior credit facility"), which is considered Level 2, is based on current LIBOR rates. The fair value of the senior credit facility was approximately $146.5 million at June 28, 2020, and $75.0 million at December 29, 2019. The carrying value of the senior credit facility was $146.5 million at June 28, 2020 and $75.0 million at December 29, 2019.
Long-Lived Assets. The Company assesses the recoverability of property and equipment and definite-lived intangible assets, including right-of-use ("ROU") lease assets, by determining whether the carrying value of these assets can be recovered over their respective remaining lives through undiscounted future operating cash flows. Impairment is reviewed whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. See Note 3—Impairment of Long-Lived Assets.
Leases. The Company assesses whether an agreement contains a lease at inception. All leases are reviewed for finance or operating classification once control is obtained. The majority of the Company's leases are operating leases. Operating leases are included within operating lease right-of-use assets, other current liabilities, and operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included within property and equipment, net, current portion of long-term debt, and long-term debt, net of current portion in the condensed consolidated balance sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made in advance and is reduced by lease incentives received. As most leases do not provide an implicit rate, the Company uses its incremental borrowing rate at commencement date in determining the present value of lease payments. Lease terms include options to extend the lease when it is reasonably certain that the Company will exercise that option. The Company assumes options are reasonably certain to be exercised when such options are required to achieve a minimum 20-year lease term for new restaurant properties and when it incurs significant leasehold improvement costs near the end of a lease term. The Company uses judgment and available data to allocate consideration in a contract when it leases land and a building. The Company also uses judgment in determining its incremental borrowing rate, which includes selecting a yield curve based on a synthetic credit rating determined using a valuation model. Lease expense for lease payments is recognized on a straight-line basis over the lease term unless the related ROU asset has been adjusted for an impairment charge. The Company has real estate lease agreements with lease and non-lease components, which are accounted for as a single lease component.
As a result of the COVID-19 pandemic the Company entered into rent deferral and abatement agreements with 185 landlords as of June 28, 2020. Under these agreements, certain rent payments are deferred without penalty for various periods, generally for up to three months, or abated. The Company has elected to account for lease concessions and deferrals resulting directly from COVID-19 as though the enforceable rights and obligations to the concessions and deferrals existed in the respective contracts at lease inception and did not account for the concessions and deferrals as lease modifications.
Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements. Estimates also affect the reported amounts of expenses during the reporting periods. Significant items subject to such estimates and assumptions include: insurance liabilities, evaluation

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



for impairment of goodwill and long-lived assets, lease accounting matters, and deferred income tax assets. Actual results could differ from those estimates. Due to the uncertainty associated with the unprecedented nature of the COVID-19 pandemic and the impact it will have on the Company's operations and future cash flows, it is reasonably possible that the estimates of future cash flows used in impairment assessments will change in the near term and the effect of the change could be material. The Company's current estimates assume that operating restrictions, regulations and directives for restaurants and other changes related to COVID-19 will continue to have a significant impact for the remainder of the year with the greatest impact in the near term.

2. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets, consist of the following:
 
June 28, 2020
 
December 29, 2019
Prepaid contract expenses
$
3,836

 
$
4,410

Assets held for sale(1)
9,856

 
4,110

Other
3,503

 
2,085

 
$
17,195

 
$
10,605


(1)
As of June 28, 2020, one operating and two closed Pollo Tropical restaurant properties and two operating and two closed Taco Cabana restaurant properties owned by the Company were classified as held for sale. As of December 29, 2019, one closed Pollo Tropical restaurant property and two closed Taco Cabana restaurant properties owned by the Company were classified as held for sale.

3. Impairment of Long-Lived Assets and Other Lease Charges
The Company reviews its long-lived assets, principally property and equipment and lease ROU assets, for impairment at the restaurant level. The Company has elected to exclude operating lease payments and liabilities from future cash flows and carrying values, respectively, in its impairment review. In addition to considering management's plans, known regulatory or governmental actions and damage due to acts of God (hurricanes, tornadoes, etc.), the Company considers a triggering event to have occurred related to a specific restaurant if the restaurant's cash flows, exclusive of operating lease payments, for the last twelve months are less than a minimum threshold or if consistent levels of cash flows for the remaining lease period are less than the carrying value of the restaurant's assets. If an indicator of impairment exists for any of its assets, an estimate of undiscounted future cash flows, exclusive of operating lease payments, over the life of the primary asset for each restaurant is compared to that long-lived asset group's carrying value, excluding operating lease liabilities. If the carrying value is greater than the undiscounted cash flow, the Company then determines the fair value of the asset and if an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. There is uncertainty in the projected undiscounted future cash flows used in the Company's impairment review analysis. If actual performance does not achieve the projections, the Company may recognize impairment charges in future periods, and such charges could be material.
A summary of impairment of long-lived assets and other lease charges (recoveries) recorded by segment is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 28, 2020
 
June 30, 2019
 
June 28, 2020
 
June 30, 2019
Pollo Tropical
$
1,932

 
$
52

 
$
5,628

 
$
(327
)
Taco Cabana
353

 
1,699

 
890

 
1,740

 
$
2,285

 
$
1,751

 
$
6,518

 
$
1,413


Impairment and other lease charges for the three and six months ended June 28, 2020, for Pollo Tropical include impairment charges of $1.1 million and $4.8 million, respectively, and other lease charges of $0.9 million for both periods. Pollo Tropical impairment charges for the three months ended June 28, 2020, related primarily to the write-down of assets held for sale to their fair value less costs to sell. For the six months ended June 28, 2020, impairment charges also include the impairment of assets from three underperforming Pollo Tropical restaurants for which the near-term impact of temporary COVID-19 related closure for two locations and sustained low sales resulted in a decline in expected future cash flows. For the three and six months ended June 28, 2020, other lease charges for Pollo Tropical related primarily to lease termination charges of $0.9 million for restaurant locations the Company decided not to develop. Impairment and other lease charges for the three and six months ended June 28,

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



2020 for Taco Cabana include impairment charges of $0.6 million and $1.1 million, respectively, and a gain from a lease termination of $(0.2) million for both periods. Taco Cabana impairment charges for the three months ended June 28, 2020, related primarily to the write-down of assets held for sale to their fair value less costs to sell. For the six months ended June 28, 2020, impairment charges also include the impairment of assets for two underperforming Taco Cabana restaurants for which continued sales declines coupled with the impact of expected sales declines resulted in a decrease in the estimated future cash flows.
Impairment and other lease charges for the three and six months ended June 30, 2019 for Pollo Tropical include impairment charges of $0.1 million and $0.4 million, respectively, related primarily to additional impairment of equipment from previously impaired restaurants and a lease charge recoveries benefit related to previously closed restaurant lease terminations of $(0.7) million for the six months ended June 30, 2019. Impairment and other lease charges for the three and six months ended June 30, 2019 for Taco Cabana include impairment charges of $1.7 million related primarily to impairment of assets for three underperforming Taco Cabana restaurants for which continued sales declines resulted in a decrease in the estimated future cash flows and equipment from previously impaired restaurants.
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. The Company also utilized discounted future cash flows to determine the fair value of assets for certain leased restaurants with positive discounted projected future cash flows. The Company utilized current market lease rent and discount rates to determine the fair value of right-of-use lease assets. These fair value asset measurements rely on significant unobservable inputs and are considered Level 3 in the fair value hierarchy. The Level 3 assets measured at fair value associated with impairment charges recorded during the six months ended June 28, 2020 totaled $7.7 million.

4. Other Liabilities
Other current liabilities consist of the following:
 
June 28, 2020
 
December 29, 2019
Operating lease liabilities
$
24,936

 
$
22,338

Accrued workers' compensation and general liability claims
4,228

 
4,354

Sales and property taxes
1,711

 
1,889

Accrued occupancy costs(1)
390

 
891

Other
3,571

 
2,797

 
$
34,836

 
$
32,269


(1) 
Accrued occupancy costs primarily consisted of obligations pertaining to closed restaurant locations.

Other non-current liabilities consist of the following:
 
June 28, 2020
 
December 29, 2019
Accrued workers' compensation and general liability claims
$
7,348

 
$
7,348

Accrued payroll taxes(1)
1,975

 

Deferred compensation
427

 
424

Accrued occupancy costs(2)
78

 
78

Other
515

 
555

 
$
10,343

 
$
8,405


(1) 
Includes employer Social Security payroll tax deferred as a result of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").
(2) 
Accrued occupancy costs primarily consisted of obligations pertaining to closed restaurant locations.


9

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



The following table presents the activity in the closed restaurant reserve, of which $0.1 million is included in non-current liabilities at both June 28, 2020 and December 29, 2019, with the remainder in other current liabilities.
 
Six Months Ended June 28, 2020
 
Year Ended December 29, 2019
Balance, beginning of period
$
752

 
$
8,819

Payments, net
(241
)
 
(1,405
)
Other adjustments(1)
(155
)
 
(6,662
)
Balance, end of period
$
356

 
$
752


(1)
As a result of adopting ASC 842 on December 31, 2018, the portion of the closed restaurant reserve related to operating lease rental payments totaling $6.0 million was reclassified and included as a component of the related ROU assets during the twelve months ended December 29, 2019. The portion of the closed restaurant reserve related to variable ancillary lease costs was not reclassified and was not included as a reduction to ROU assets.

5. Stockholders' Equity
Purchase of Treasury Stock
In 2018, the Company's board of directors approved a share repurchase program for up to 1,500,000 shares of the Company's common stock. In 2019, the Company's board of directors approved increases to the share repurchase program of an additional 1,500,000 shares of the Company's common stock for an aggregate approval of 3,000,000 shares of the Company's common stock. Under the share repurchase program, shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The share repurchase program has no time limit and may be modified, suspended, superseded or terminated at any time by the Company's board of directors. The Company repurchased 500,000 shares of common stock valued at approximately $3.7 million and 158,269 shares of common stock valued at approximately $2.2 million during the six months ended June 28, 2020 and June 30, 2019, respectively. The shares repurchased in 2020 were purchased on or before March 12, 2020. The repurchased shares are held as treasury stock at cost. The Company's senior credit facility as amended on July 10, 2020, prohibits share repurchases, and the Company currently does not intend to repurchase additional shares of its common stock for the foreseeable future.
Stock-Based Compensation
During the six months ended June 28, 2020, the Company granted certain employees and non-employee directors a total of 501,706 non-vested restricted shares under the Fiesta Restaurant Group, Inc. 2012 Stock Incentive Plan (the "Fiesta Plan"). The shares granted to employees vest and become non-forfeitable over a four-year vesting period. The shares granted to non-employee directors vest and become non-forfeitable over a one-year vesting period, or for an initial grant to a new director, over a five-year vesting period. The weighted average fair value at grant date for non-vested shares issued during the six months ended June 28, 2020 and June 30, 2019 was $8.27 and $13.32 per share, respectively.
The weighted average fair value at grant date for the restricted stock units subject to market conditions granted in the six months ended June 30, 2019 was $1.76 per share.
Stock-based compensation expense for the three and six months ended June 28, 2020 was $1.0 million and $1.8 million, respectively, and for the three and six months ended June 30, 2019 was $0.7 million and $1.5 million, respectively. At June 28, 2020, the total unrecognized stock-based compensation expense related to non-vested restricted shares and restricted stock units was approximately $6.1 million. At June 28, 2020, the remaining weighted average vesting period for non-vested restricted shares was 3.1 years and restricted stock units was 0.7 years.

10

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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 six months ended June 28, 2020 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 29, 2019
355,605

 
$
15.47

 
176,362

 
$
9.42

Granted
501,706

 
8.27

 

 

Vested and released
(174,912
)
 
15.29

 
(747
)
 
32.44

Forfeited
(13,168
)
 
13.83

 
(607
)
 
24.86

Outstanding at June 28, 2020
669,231

 
$
10.15

 
175,008

 
$
9.27


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. The fair value of the restricted stock units subject to market conditions was estimated using the Monte Carlo simulation method. The assumptions used to value grant restricted stock units subject to market conditions are detailed below:
 
 
2019
Grant date stock price
 
$
14.66

Fair value at grant date
 
$
1.76

Risk free interest rate
 
2.53
%
Expected term (in years)
 
2

Dividend yield
 
%
Expected volatility
 
43.18
%


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 fire-grilled and crispy 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 29, 2019. The primary measure of segment profit or loss used by the chief operating decision maker to assess performance and allocate resources is Adjusted EBITDA, which is defined as earnings attributable to the applicable operating segments before interest expense, income taxes, depreciation and amortization, impairment and other lease charges, goodwill impairment, closed restaurant rent expense, net of sublease income, stock-based compensation expense, other expense (income), net, and certain significant items for each segment that management believes are related to strategic changes and/or are not related to the ongoing operation of the Company's restaurants as set forth in the reconciliation table below.
The "Other" column includes corporate-related items not allocated to reportable segments and consists primarily of corporate-owned property and equipment, lease assets, miscellaneous prepaid costs, capitalized costs associated with the issuance of indebtedness, corporate cash accounts, and a current income tax receivable.

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



Three Months Ended
 
Pollo Tropical
 
Taco Cabana
 
Other
 
Consolidated
June 28, 2020:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
63,292

 
$
58,255

 
$

 
$
121,547

Franchise revenue
 
146

 
175

 

 
321

Cost of sales
 
20,321

 
17,486

 

 
37,807

Restaurant wages and related expenses(1)
 
15,108

 
18,639

 

 
33,747

Restaurant rent expense
 
5,660

 
5,619

 

 
11,279

Other restaurant operating expenses
 
10,714

 
8,275

 

 
18,989

Advertising expense
 
1,178

 
965

 

 
2,143

General and administrative expense(2)
 
6,538

 
5,750

 

 
12,288

Adjusted EBITDA
 
4,993

 
2,672

 

 
7,665

Depreciation and amortization
 
5,233

 
4,332

 

 
9,565

Capital expenditures
 
763

 
1,060

 
797

 
2,620

June 30, 2019:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
92,620

 
$
78,093

 
$

 
$
170,713

Franchise revenue
 
438

 
230

 

 
668

Cost of sales
 
29,318

 
24,440

 

 
53,758

Restaurant wages and related expenses(1)
 
21,290

 
24,476

 

 
45,766

Restaurant rent expense
 
5,495

 
6,403

 

 
11,898

Other restaurant operating expenses
 
11,900

 
10,613

 

 
22,513

Advertising expense
 
3,189

 
2,694

 

 
5,883

General and administrative expense(2)
 
7,700

 
5,796

 

 
13,496

Adjusted EBITDA
 
14,646

 
4,120

 

 
18,766

Depreciation and amortization
 
5,376

 
4,431

 

 
9,807

Capital expenditures
 
4,648

 
5,930

 
(444
)
 
10,134



12

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



Six Months Ended
 
Pollo Tropical
 
Taco Cabana
 
Other
 
Consolidated
June 28, 2020:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
149,013

 
$
118,620

 
$

 
$
267,633

Franchise revenue
 
550

 
384

 

 
934

Cost of sales
 
48,052

 
36,031

 

 
84,083

Restaurant wages and related expenses(1)
 
36,145

 
38,097

 

 
74,242

Restaurant rent expense
 
11,300

 
11,318

 

 
22,618

Other restaurant operating expenses
 
23,100

 
17,400

 

 
40,500

Advertising expense
 
4,682

 
3,244

 

 
7,926

General and administrative expense(2)
 
14,026

 
12,646

 

 
26,672

Adjusted EBITDA
 
13,773

 
1,765

 

 
15,538

Depreciation and amortization
 
10,511

 
8,484

 

 
18,995

Capital expenditures
 
4,044

 
3,660

 
999

 
8,703

June 30, 2019:
 
 
 
 
 
 
 
 
Restaurant sales
 
$
183,646

 
$
152,248

 
$

 
$
335,894

Franchise revenue
 
893

 
446

 

 
1,339

Cost of sales
 
57,616

 
46,652

 

 
104,268

Restaurant wages and related expenses(1)
 
42,443

 
48,359

 

 
90,802

Restaurant rent expense
 
10,916

 
12,727

 

 
23,643

Other restaurant operating expenses
 
23,858

 
20,418

 

 
44,276

Advertising expense
 
6,221

 
5,183

 

 
11,404

General and administrative expense(2)
 
16,047

 
12,520

 

 
28,567

Adjusted EBITDA
 
28,963

 
7,015

 

 
35,978

Depreciation and amortization
 
10,589

 
8,766

 

 
19,355

Capital expenditures
 
11,793

 
9,967

 
(89
)
 
21,671

Identifiable Assets:
 
 
 
 
 
 
 
 
June 28, 2020
 
$
332,391

 
$
191,260

 
$
126,733

 
$
650,384

December 29, 2019
 
340,012

 
195,883

 
32,746

 
568,641


(1) Includes stock-based compensation expense of $69 and $105 for the three and six months ended June 28, 2020, respectively, and $16 and $43 for the three and six months ended June 30, 2019, respectively.
(2) Includes stock-based compensation expense of $959 and $1,735 for the three and six months ended June 28, 2020, respectively, and $719 and $1,484 for the three and six months ended June 30, 2019, respectively.

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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
June 28, 2020:
 
 
 
 
 
 
Net loss
 
 
 
 
 
$
(8,343
)
Benefit from income taxes
 
 
 
 
 
(1,743
)
Loss before taxes
 
$
(5,186
)
 
$
(4,900
)
 
$
(10,086
)
Add:
 
 
 
 
 
 
     Non-general and administrative expense adjustments:
 
 
 
 
 
 
          Depreciation and amortization
 
5,233

 
4,332

 
9,565

          Impairment and other lease charges
 
1,932

 
353

 
2,285

          Interest expense
 
625

 
612

 
1,237

          Closed restaurant rent expense, net of sublease income
 
671

 
1,159

 
1,830

          Other expense (income), net
 
644

 
140

 
784

          Stock-based compensation expense in restaurant wages
 
27

 
42

 
69

                Total non-general and administrative expense adjustments
 
9,132

 
6,638

 
15,770

     General and administrative expense adjustments:
 
 
 
 
 
 
          Stock-based compensation expense
 
523

 
436

 
959

          Restructuring costs and retention bonuses
 
452

 
439

 
891

          Digital and brand repositioning costs
 
72

 
59

 
131

               Total general and administrative expense adjustments
 
1,047

 
934

 
1,981

Adjusted EBITDA
 
$
4,993

 
$
2,672

 
$
7,665

 
 
 
 
 
 
 
June 30, 2019:
 
 
 
 
 
 
Net loss
 
 
 
 
 
$
(43,440
)
Provision for income taxes
 
 
 
 
 
623

Income (loss) before taxes
 
$
6,918

 
$
(49,735
)
 
$
(42,817
)
Add: