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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 5/04/16 Ignite Restaurant Group, Inc. 10-Q 3/28/16 42:2.6M RDG Filings/FA |
Document/Exhibit Description Pages Size 1: 10-Q Quarterly Report HTML 438K 2: EX-31.1 Certification -- §302 - SOA'02 HTML 24K 3: EX-31.2 Certification -- §302 - SOA'02 HTML 25K 4: EX-32.1 Certification -- §906 - SOA'02 HTML 17K 5: EX-32.2 Certification -- §906 - SOA'02 HTML 17K 12: R1 Document And Entity Information HTML 39K 13: R2 Condensed Consolidated Balance Sheets (Current HTML 80K Period Unaudited) 14: R3 Condensed Consolidated Balance Sheets (Current HTML 31K Period Unaudited) (Parentheticals) 15: R4 Condensed Consolidated Statements of Operations HTML 72K (Unaudited) 16: R5 Condensed Consolidated Statements of Operations HTML 18K (Unaudited) (Parentheticals) 17: R6 Condensed Consolidated Statements of Cash Flows HTML 102K (Unaudited) 18: R7 Note 1 - Business of Presentation HTML 31K 19: R8 Note 2 - Selected Balance Sheet Accounts HTML 45K 20: R9 Note 3 - Debt Obligations HTML 39K 21: R10 Note 4 - Net Income (Loss) per Share HTML 30K 22: R11 Note 5 - Commitments and Contingencies HTML 21K 23: R12 Note 6 - Income Taxes HTML 22K 24: R13 Note 7 - Segment Information HTML 74K 25: R14 Significant Accounting Policies (Policies) HTML 34K 26: R15 Note 2 - Selected Balance Sheet Accounts (Tables) HTML 45K 27: R16 Note 3 - Debt Obligations (Tables) HTML 31K 28: R17 Note 4 - Net Income (Loss) per Share (Tables) HTML 26K 29: R18 Note 7 - Segment Information (Tables) HTML 70K 30: R19 Note 1 - Business of Presentation (Details HTML 27K Textual) 31: R20 Note 2 - Components of Other Current Assets HTML 30K (Details) 32: R21 Note 2 - Components of Accrued Liabilities HTML 43K (Details) 33: R22 Note 3 - Debt Obligations (Details Textual) HTML 96K 34: R23 Note 3 - Summary of Debt Obligations (Details) HTML 30K 35: R24 Note 4 - Net Income (Loss) per Share (Details HTML 20K Textual) 36: R25 Note 4 - Components to Determine Numerator and HTML 23K Denominators of Basic and Diluted Net Income (Loss) per Share (Details) 37: R26 Note 6 - Income Taxes (Details Textual) HTML 16K 38: R27 Note 7 - Reportable Segments (Details) HTML 29K 39: R28 Note 7 - Reportable Segments, Assets (Details) HTML 25K 41: XML IDEA XML File -- Filing Summary XML 66K 40: EXCEL IDEA Workbook of Financial Reports XLSX 34K 6: EX-101.INS XBRL Instance -- irg-20160328 XML 575K 8: EX-101.CAL XBRL Calculations -- irg-20160328_cal XML 101K 9: EX-101.DEF XBRL Definitions -- irg-20160328_def XML 553K 10: EX-101.LAB XBRL Labels -- irg-20160328_lab XML 492K 11: EX-101.PRE XBRL Presentations -- irg-20160328_pre XML 571K 7: EX-101.SCH XBRL Schema -- irg-20160328 XSD 91K 42: ZIP XBRL Zipped Folder -- 0001437749-16-030789-xbrl Zip 65K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 28, 2016
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-35549
IGNITE RESTAURANT GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware |
94-3421359 |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
9900 Westpark Drive, Suite 300, Houston, Texas 77063
(Address of principal executive offices and zip code)
(713) 366-7500
(Registrant’s telephone number, including area code)
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: ☒ No: ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated filer ☐ |
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Non-accelerated filer ☐ |
Smaller reporting company ☒ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.). Yes: ☐ No: ☒
The number of shares of the issuer’s common stock, par value $0.01, outstanding as of April 30, 2016 was 26,160,695.
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Page |
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PART I - FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
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Condensed Consolidated Balance Sheets (unaudited) as of March 28, 2016 and December 28, 2015 |
3 |
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Condensed Consolidated Statements of Operations (unaudited) for the thirteen weeks ended March 28, 2016 and March 30, 2015 |
4 |
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Condensed Consolidated Statements of Cash Flows (unaudited) for the thirteen weeks ended March 28, 2016 and March 30, 2015 |
5 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
6 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
21 |
Item 4. |
Controls and Procedures |
22 |
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PART II - OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
22 |
Item 1A. |
Risk Factors |
22 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
22 |
Item 3. |
Defaults Upon Senior Securities |
23 |
Item 4. |
Mine Safety Disclosures |
23 |
Item 5. |
Other Information |
23 |
Item 6. |
Exhibits |
23 |
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SIGNATURES |
24 |
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
IGNITE RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
See accompanying notes to condensed consolidated financial statements.
IGNITE RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share)
(Unaudited)
Thirteen Weeks Ended |
Thirteen Weeks Ended |
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Revenues |
$ | 117,899 | $ | 122,219 | ||||
Costs and expenses |
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Restaurant operating costs and expenses |
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Cost of sales |
37,166 | 38,601 | ||||||
Labor expenses |
35,922 | 34,817 | ||||||
Occupancy expenses |
9,906 | 10,222 | ||||||
Other operating expenses |
19,663 | 22,099 | ||||||
General and administrative |
6,550 | 8,395 | ||||||
Depreciation and amortization |
6,026 | 6,229 | ||||||
Pre-opening costs |
881 | 468 | ||||||
Asset impairments and closures |
193 | 30 | ||||||
Loss on disposal of assets |
101 | 158 | ||||||
Total costs and expenses |
116,408 | 121,019 | ||||||
Income from operations |
1,491 | 1,200 | ||||||
Interest expense, net |
(3,020 | ) | (3,876 | ) | ||||
Loss on insurance settlements |
(8 | ) | - | |||||
Loss from continuing operations before income taxes |
(1,537 | ) | (2,676 | ) | ||||
Income tax expense |
89 | 520 | ||||||
Loss from continuing operations |
(1,626 | ) | (3,196 | ) | ||||
Loss from discontinued operations (net of tax expense of $366 for the thirteen weeks ended March 30, 2015) |
- | (19,039 | ) | |||||
Net loss |
$ | (1,626 | ) | $ | (22,235 | ) | ||
Basic and diluted net loss per share data: |
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Net loss per share |
||||||||
Basic and diluted |
||||||||
Loss from continuing operations |
$ | (0.06 | ) | $ | (0.12 | ) | ||
Loss from discontinued operations |
$ | - | $ | (0.74 | ) | |||
Net loss |
$ | (0.06 | ) | $ | (0.87 | ) | ||
Weighted average shares outstanding |
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Basic and diluted |
25,776 | 25,674 |
See accompanying notes to condensed consolidated financial statements.
IGNITE RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
See accompanying notes to condensed consolidated financial statements.
IGNITE RESTAURANT GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 — Basis of Presentation
As of March 28, 2016, Ignite Restaurant Group, Inc. (referred to herein as the “Company,” “Ignite,” “we,” “us” or “our”) operated two full service, casual dining restaurant brands under the names Joe’s Crab Shack (“Joe’s”) and Brick House Tavern + Tap (“Brick House”). As of March 28, 2016, we operated 130 Joe’s restaurants and 26 Brick House restaurants in 33 states within the United States and franchised one Joe’s restaurant in Dubai, U.A.E.
J.H. Whitney VI, L.P., an affiliate of J.H. Whitney Capital Partners, LLC, currently owns approximately 66.4% of our total outstanding common stock.
We prepared the accompanying unaudited condensed consolidated financial statements in accordance with Rule 10-01 of Regulation S-X, and hence, the financial statements do not contain certain information included in our annual financial statements and notes thereto. We have made adjustments consisting of normal recurring adjustments that are, in our opinion, necessary for a fair presentation of the results of the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results of operations for a full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 28, 2015, filed with the Securities and Exchange Commission (“SEC”) on March 3, 2016. The December 28, 2015 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Ignite and its wholly-owned subsidiaries as of March 28, 2016. All intercompany balances and transactions have been eliminated in consolidation.
Fiscal Year
Our fiscal year ends on the Monday nearest to December 31 of each year. Our quarterly accounting periods are comprised of four equal 13-week periods, except for 53-week fiscal years for which the fourth quarter will be comprised of 14 weeks. Fiscal year 2015 is a 52-week year, while fiscal year 2016 is a 53-week year.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board issued a converged standard on revenue recognition, Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). Under this guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer. Its disclosure guidance requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative information about contracts with customers, including revenue and impairments recognized, disaggregation of revenue and information about contract balances and performance obligations; significant judgments and changes in judgments; and assets recognized from the costs to obtain or fulfill a contract. This ASU’s effective date has been deferred by the issuance of ASU No. 2015-14, and is effective for us for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted, but not before the original effective date of December 15, 2016. This ASU permits the use of either the retrospective or cumulative effect transition method. We are in the process of selecting a transition method and are evaluating the impact of this guidance on our consolidated financial statements and related disclosures.
In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, to simplify the presentation of debt issuance costs in the balance sheet. The ASU specifies that debt issuance costs related to a note shall be reported in the balance sheet as a direct deduction from the face amount of that note, and that amortization of debt issuance costs also shall be reported as interest expense. The ASU does not affect the current guidance on the recognition and measurement of debt issuance costs. The update is effective for us in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods presented. Our adoption of this ASU effective December 29, 2015 did not have a significant impact on our consolidated financial statements. We reclassified $2.2 million of debt issuance costs related to our term loan from other assets to reduce the carrying value of our debt obligations as of December 28, 2015 to conform to current year financial statement presentation. The debt issuance costs balance related to our revolving credit facility will continue to be classified in other assets in our consolidated balance sheets.
In August 2015, the FASB issued ASU No. 2015-15, Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, to amend SEC paragraphs in Subtopic 835-30 pursuant to SEC Staff announcement at the Emerging Issues Task Force meeting on June 18, 2015. The ASU addresses presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements, which were not addressed in ASU No. 2015-03. Given the absence of authoritative guidance within ASU No 2015-03 for debt issuance costs related to line-of credit arrangements, the SEC Staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The effective date and transition guidance of this ASU is in conjunction with the effective date and transition guidance of ASU No. 2015-03. Our adoption of this ASU effective December 29, 2015 did not have a significant impact on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance requires the recognition of assets and liabilities that arise from lease transactions wherein current off-balance sheet leasing activities is required to be reflected in the balance sheet. The FASB lessee accounting model retains two types of leases, and is consistent with the lessee accounting model under existing GAAP. One type of lease (finance leases) will be accounted for in substantially the same manner as capital leases are accounted for under existing GAAP. The other type of lease (operating leases) will be accounted for (both in the income statement and statement of cash flows) in a manner consistent with operating leases under existing GAAP. However, as it relates to the balance sheet, lessees will recognize lease liabilities based upon the present value of remaining lease payments and corresponding lease assets for operating leases with limited exception. The new standard also will require lessees and lessors to provide additional qualitative and quantitative disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases. These disclosures are intended to supplement the amounts recorded in the financial statements and provide supplemental information about the nature of an organization’s leasing activities. We are evaluating our expected adoption method of ASU 2016-02 and we expect its adoption to have a significant impact on our consolidated financial position and results of operations.
Note 2 — Selected Balance Sheet Accounts
The components of other current assets are as follows (in thousands):
Prepaid insurance |
$ | 1,480 | $ | 1,663 | ||||
Prepaid taxes |
787 | 1,194 | ||||||
Prepaid licenses and fees |
771 | 742 | ||||||
Prepaid advertising |
641 | 135 | ||||||
Other |
826 | 943 | ||||||
$ | 4,505 | $ | 4,677 |
The components of accrued liabilities are as follows (in thousands):
Note 3 — Debt Obligations
Debt obligations consisted of the following (in thousands):
On August 13, 2014, we entered into a new senior secured credit facility (“2014 Credit Agreement”), which consists of a $30.0 million revolving credit facility (“2014 Revolving Credit Facility”) and a $165.0 million term loan (“2014 Term Loan”), which both mature on February 13, 2019. The 2014 Term Loan was issued at 98.5% of par. The principal amount of the 2014 Term Loan is payable in consecutive quarterly installments of $412,500, commencing on December 31, 2014, with the balance payable in full at maturity. In December 2015, we made a $35.0 million voluntary prepayment of our 2014 Term Loan, which reduced our quarterly installment payments to $324,116.
Interest rates for borrowings under the 2014 Credit Agreement for the revolver and the term loan are equal to, at our option, either LIBOR (subject to a 1% floor) or the base rate as defined in the agreement, plus a margin of 7.0% for LIBOR loans and 6.0% for base rate loans. The interest rate for the 2014 Term Loan was 8.0% as of March 28, 2016. In addition, we are required to pay commitment fees on the unused portion of the 2014 Revolving Credit Facility. The commitment fee rate is currently at 0.5%. The commitment fee is subject to adjustment on a quarterly basis based on our leverage ratio as defined by the credit agreement.
The 2014 Credit Agreement is guaranteed by each of our subsidiaries and secured by substantially all of our present and future assets and a lien on the capital stock or other equity interests of our direct and indirect subsidiaries. The 2014 Credit Agreement contains covenants which, among other things, limit our ability to incur additional indebtedness, create liens on our assets, make certain investments or loans, merge or otherwise dispose of assets other than in the ordinary course of business, make acquisitions, and pay dividends or make other restricted payments. The 2014 Credit Agreement also contains customary covenants regarding, among other matters, the maintenance of insurance, the preservation and maintenance of our corporate existence, material compliance with laws, and the payment of taxes and other material obligations.
The 2014 Credit Agreement provides that (a) the leverage ratio shall not exceed (i) 5.75x through December 29, 2014, (ii) 5.5x from December 30, 2014 through June 29, 2015, (iii) 5.25x from June 30, 2015 through December 28, 2015, (iv) 5.0x from December 29, 2015 through March 28, 2016, (v) 4.75x from March 29, 2016 through June 27, 2016, (vi) 4.25x from June 28, 2016 through September 26, 2016, (vii) 4.0x from September 27, 2016 through April 3, 2017, (viii) 3.75x from April 4, 2017 through October 2, 2017, (ix) 3.5x from October 3, 2017 through April 2, 2018, (x) 3.25x from April 3, 2018 through December 31, 2018, and (xi) 3.0x from January 1, 2019 through maturity date; and requires (b) an interest coverage ratio of at least (i) 2.0x through June 29, 2015, (ii) 2.25x from June 30, 2015 through March 28, 2016, (iii) 2.5x from March 29, 2016 through June 27, 2016, (iv) 2.75x from June 28, 2016 through January 2, 2017, (v) 3.0x from January 3, 2017 through July 3, 2017, (vi) 3.25x from July 4, 2017 through April 2, 2018, (vii) 3.5x from April 3, 2018 through December 31, 2018, and (viii) 3.75x from January 1, 2019 through maturity date. The 2014 Credit Agreement limits capital expenditures to an amount in respect of any period not to exceed (i) $29.5 million from the closing date through December 29, 2014, (ii) $45.5 million for fiscal 2015, (iii) $45.8 million for fiscal 2016, (iv) $52.5 million for fiscal 2017, (v) $53.7 million for fiscal 2018, and (vi) $58.6 million from January 1, 2019 through maturity date, provided that the amount of permitted capital expenditures in any period can be increased by the unused permitted capital expenditures from the immediately preceding period, subject to certain limitations as defined by the agreement. We were in compliance with these covenants as of March 28, 2016.
As of March 28, 2016, we had outstanding letters of credit of approximately $4.1 million and available borrowing capacity of approximately $25.9 million under the 2014 Revolving Credit Facility.
The carrying value of our long-term debt approximates fair value. The estimate of the fair value of our debt is based on observable market information from a third party pricing source, which is classified as a level 2 input within the fair value hierarchy.
Note 4 — Net Loss per Share
Basic net loss per share is computed using the weighted average number of common shares outstanding during the period, while diluted net loss per share is computed using the weighted average number of common shares outstanding plus all potentially dilutive common share equivalents outstanding during the period. The table below presents a reconciliation of weighted average common shares used in the calculation of basic and diluted net loss per share (in thousands):
For the thirteen weeks ended March 28, 2016, we excluded 880 thousand stock appreciation rights (“SARs”) and 388 thousand shares of restricted stock from the calculation of net loss per share, and for the thirteen weeks ended March 30, 2015, we excluded 1.5 million SARs and 473 thousand shares of restricted stock from the calculation of net loss per share because the effect was anti-dilutive due to the net loss during the respective periods.
Note 5 — Commitments and Contingencies
In the ordinary course of our business affairs and operations, we are subject to possible loss contingencies arising from third-party litigation and federal, state and local environmental, health and safety laws and regulations.
Litigation
We are a defendant or otherwise involved in a number of lawsuits in the ordinary course of business, including personal injury claims, contract claims, claims alleging violation of federal and state law regarding workplace and employment matters, discrimination claims and similar matters. When the potential liability can be estimated and the loss is considered probable, we record the estimated loss. Due to uncertainties related to the resolution of lawsuits and claims, the ultimate outcome may differ from our estimates. We believe that the ultimate exposure with respect to these pending lawsuits and claims is not expected to have a material adverse effect, individually or in the aggregate, on our consolidated financial position, results of operations, or cash flows.
On August 28, 2013, in the United States District Court, Western District of New York, six former tipped employees of various Joe’s Crab Shack locations filed a complaint against us and certain of our officers alleging that the employees were not paid the minimum wage required by federal law as well as the wage-hour laws of the respective states in which they worked. These former employees purport to represent a nationwide class of tipped employees on their federal claims and separate subclasses of tipped employees regarding their state law claims. By order dated January 27, 2015, the court granted conditional certification to the class. We are vigorously contesting this matter and have answered and asserted affirmative defenses. There are pending motions and discovery issues regarding members of the putative class. At this early stage, we cannot predict with any certainty whether the former employees will prevail or the amount of damages they might recover were they to prevail.
Note 6 — Income Taxes
Our effective tax rate from continuing operations is generally the combined federal and state statutory rate reduced by the effect of tax credits primarily due to the tax benefit of FICA tax credits for employee reported tip income. The change in the effective tax rate is primarily due to the valuation allowance in the current year and the change in FICA tax credits being generated in the current year compared to the prior year proportionate to the income (loss) before income taxes.
Income taxes for the thirteen weeks ended March 28, 2016 and March 30, 2015 were estimated using the discrete method, which is based on actual year-to-date loss before income taxes and estimated tax credits generated primarily related to FICA and Medicare taxes paid on employee tip income. We believe that this method yields a more reliable income tax calculation for the interim periods. The estimated annual effective tax rate method was not reasonable due to its sensitivity to small changes in forecasted annual loss before income taxes, which would result in significant variations in the customary relationship between income tax expense and loss before income taxes for interim periods.
We evaluate our deferred tax assets on a quarterly basis to determine whether a valuation allowance is required. We assess whether a valuation allowance should be established based on our determination of whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and prior to the expiration of our credit carryforwards which begin to expire in 2031. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. According to ASC Topic No. 740, Income Taxes, cumulative losses in recent years represent significant negative evidence in considering whether deferred tax assets are realizable. Therefore, during the thirteen weeks ended March 28, 2016 and March 30, 2015, we recorded a valuation allowance of $0.5 million and $2.1 million for continuing operations against our deferred tax assets, respectively. We excluded the deferred tax liabilities related to certain indefinite-lived intangibles when calculating the amount of valuation allowance needed as these liabilities cannot be considered as a source of income when determining the realizability of the net deferred tax assets. The valuation allowance was recorded as an addition to our income tax expense in our consolidated statement of operations. If we are able to generate sufficient taxable income in the future and it becomes more likely than not that we will be able to fully utilize the net deferred tax assets on which a valuation allowance was recorded, our effective tax rate may decrease if the valuation allowance is reversed.
Note 7 — Segment Information
All of our restaurants compete in the full-service casual dining industry. We manage our restaurant brands, Joe’s and Brick House, as operating segments. We believe reporting information about each of our brands would be useful to readers of our financial statements and is consistent with how management evaluates brand performance. We also believe that providing this additional financial information for each of our brands will provide a better understanding of our overall operating results. Income (loss) from operations represents revenues less restaurant operating costs and expenses, directly allocable general and administrative expenses, and other restaurant-level expenses directly associated with each brand including depreciation and amortization, pre-opening costs, asset impairments and closures, and loss on disposal of assets. Unallocated corporate expenses, capital expenditures, property and equipment, and intangible assets are presented below as reconciling items to the amounts presented in the condensed consolidated financial statements.
The following tables present information about our reportable segments for the respective periods (in thousands).
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
You should read the following discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations with the consolidated financial statements and related notes included elsewhere herein. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” and “Forward-Looking Statements” in our most recent Annual Report on Form 10-K for the fiscal year ended December 28, 2015. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Our fiscal year ends on the Monday nearest to December 31 of each year. Our quarterly accounting periods are comprised of 13 weeks, except for 53-week fiscal years for which the fourth quarter will be comprised of 14 weeks. Fiscal years 2015 is a 52-week year, while fiscal year 2016 is a 53-week year.
Overview
As of March 28, 2016, Ignite Restaurant Group, Inc. operated two restaurant brands in the casual dining segment, Joe’s Crab Shack (“Joe’s”) and Brick House Tavern + Tap (“Brick House”). Both of our restaurant brands offer a variety of high-quality food in a distinctive, casual, high-energy atmosphere. Joe’s and Brick House operate in a diverse set of markets across the United States. As of March 28, 2016, we operated 130 Joe’s restaurants and 26 Brick House restaurants in 33 states and franchised one Joe’s restaurant in Dubai, U.A.E.
Joe’s is an established, national chain of casual dining seafood restaurants. Joe’s serves a variety of high-quality seafood items, with an emphasis on crab. Joe’s is a high-energy, family-friendly restaurant that encourages guests to “roll up your sleeves and crack into some crab.” Brick House is a casual restaurant brand that provides guests an elevated experience appropriate for every day usage.
During the thirteen weeks ended March 28, 2016, we opened three Brick House restaurants, all of which were conversions from Joe’s restaurants.
Outlook
Our near term business strategy focuses on two primary elements: increasing comparable restaurant sales and operating margins at Joe’s and Brick House. We have continued to experience sales declines at Joe’s with comparable restaurant sales decreasing 1.3% during the first quarter of 2016. In order to reverse these negative trends, we have initiated a renewed focus to improve operational and menu execution in order to enhance the food quality and overall dining experience for the guest. We also initiated new weekday value promotions including all-you-can-eat crab on Wednesdays that have positively impacted both sales and guest traffic. We will continue to evaluate our menu offerings and look for other weekday value offerings that could increase sales and traffic. Even though sales are down, reductions in advertising and general and administrative expenses have both contributed to us maintaining consistent operating margins at Joe’s despite increases in labor costs. We are also pursuing strategic alternatives for underperforming restaurants.
Brick House has also been experiencing declines in operating performance. During the first quarter of 2016, the comparable restaurant sales of Brick House decreased 4.5%. We are continuing to evaluate our menu to ensure we are offering compelling menu items that are consistent with the expectations of our guests. Despite the decline in comparable restaurant sales, income from operations at Brick House was consistent with the prior year excluding pre-opening expenses for new restaurant openings.
If our initiatives do not improve the operating performance at Joe’s or Brick House and more specifically at certain underperforming restaurants, we may have to recognize additional asset impairments or closure-related expenses and increase our valuation allowance during 2016 against some or all of our deferred tax assets.
Results of Operations
The following table presents the condensed consolidated statements of operations for the thirteen weeks ended March 28, 2016 and March 30, 2015, expressed as a percentage of revenue.
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The percentages reflected are subject to rounding adjustments. They may not foot due to rounding. |
The following table sets forth additional operating information for the periods indicated that we use in assessing our performance:
Thirteen Weeks Ended |
Thirteen Weeks Ended |
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2015(1) |
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(dollars in thousands) |
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Selected Other Data: |
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Number of restaurants open (end of period): |
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Joe's Crab Shack |
130 | 138 | ||||||
Brick House Tavern + Tap |
26 | 23 | ||||||
Total restaurants - continuing operations |
156 | 161 | ||||||
Restaurant operating weeks |
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Joe's Crab Shack |
1,690 | 1,805 | ||||||
Brick House Tavern + Tap |
321 | 279 | ||||||
Average weekly sales |
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Joe's Crab Shack |
$ | 57 | $ | 57 | ||||
Brick House Tavern + Tap |
$ | 67 | $ | 68 | ||||
Change in comparable restaurant sales |
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Joe's Crab Shack |
(1.3 | %) | (3.8 | %) | ||||
Brick House Tavern + Tap |
(4.5 | %) | 5.4 | % | ||||
Income (loss) from operations |
||||||||
Joe's Crab Shack |
$ | 5,455 | $ | 6,507 | ||||
Brick House Tavern + Tap |
$ | 786 | 1,221 | |||||
Corporate |
$ | (4,750 | ) | (6,528 | ) | |||
Total - continuing operations |
$ | 1,491 | $ | 1,200 | ||||
Adjusted loss from continuing operations(2) |
$ | (1,050 | ) | $ | (1,040 | ) |
(1) |
Includes only results of Joe’s and Brick House due to the reclassification of Macaroni Grill’s operations to discontinued operations. |
Thirteen Weeks Ended March 28, 2016 Compared to Thirteen Weeks Ended March 30, 2015
Revenues
Revenues were $117.9 million during the thirteen weeks ended March 28, 2016, a decrease of $4.3 million, or 3.5%, compared to revenues of $122.2 million during the thirteen weeks ended March 30, 2015. The decrease was primarily caused by a decrease in comparable restaurant sales for Joe’s and Brick House, and a net decrease in operating weeks due to the closure of nine Joe’s restaurants in fiscal year 2015.
Revenues at Joe’s decreased 6.7% to $96.2 million in the first quarter of 2016 versus $103.1 million in the first quarter of 2015. This decrease was primarily due to a 1.3% decrease in comparable restaurant sales and restaurant closures during the prior year. The comparable restaurant sales decrease was comprised of a 1.1% decrease in traffic and a 2.0% decrease in mix, partially offset by a 1.8% increase in pricing.
Brick House revenues increased 13.4% to $21.7 million in the first quarter of 2016 versus $19.1 million in the first quarter of 2015 due to three new restaurant openings since the first quarter of 2015, partially offset by a 4.5% decrease in comparable restaurant sales. The comparable restaurant sales decrease was comprised of a 5.3% decrease from traffic and mix, partially offset by a 0.8% increase in pricing.
Cost of Sales
Cost of sales decreased by $1.4 million, or 3.7%, to $37.2 million in the first quarter of 2016 versus $38.6 million in the comparable period of 2015. As a percent of revenue, cost of sales decreased to 31.5% from 31.6% in the prior year.
Labor Expenses
Labor expenses increased by $1.1 million, or 3.2%, to $35.9 million in the current year first quarter versus $34.8 million in the comparable period last year. The increase was primarily due to the opening of additional Brick House restaurants. Labor expenses, as a percent of revenue, increased to 30.5% from 28.5% due to labor inefficiencies incurred related to the three Brick House restaurants opened during the first quarter of 2016, as well as the impact of increased labor expenses at the no-tipping restaurants in Joe’s.
Occupancy Expenses
Occupancy expenses decreased by $316 thousand, or 3.1%, to $9.9 million in the current year first quarter versus $10.2 million in the comparable period last year. The decrease was primarily due to the decrease in operating weeks. As a percent of revenue, occupancy expenses were 8.4% for both periods.
Other Operating Expenses
Other operating expenses decreased by $2.4 million, or 11.0%, to $19.7 million in the current year first quarter compared to $22.1 million in the comparable prior year period. This decrease was primarily due to a decrease of $1.9 million in advertising expense and lower insurance and utilities expenses. These decreases were offset partially by increased operating supplies and repairs and maintenance expenses. As a percent of revenue, other operating expenses decreased to 16.7% from 18.1% primarily due to lower advertising expense.
General and Administrative
General and administrative expense decreased by $1.8 million, or 22.0%, to $6.6 million in the first quarter of 2016 versus $8.4 million in the first quarter of 2015, which was primarily due to personnel reductions in connection with the closing of the sale of Macaroni Grill in the second quarter of 2015, and a reduction in professional fees. As a percent of revenue, general and administrative expenses decreased to 5.6% from 6.9%.
Depreciation and Amortization
Depreciation and amortization expense decreased by $203 thousand, or 3.3%, to $6.0 million in the current year first quarter compared to $6.2 million in the prior year. This decrease is mainly due to restaurant closures. As a percent of revenue, depreciation and amortization were 5.1% for both periods.
Pre-Opening Costs
Pre-opening costs increased to $881 thousand in the first quarter of 2016 from $468 thousand in the comparable prior year period. We opened three new restaurants in the current year first quarter compared to two restaurants opened in the comparable period last year.
Income from Operations
As a result of the foregoing, consolidated income from operations increased by $291 thousand, or 24.3%, to $1.5 million in the current 13-week period compared to $1.2 million in the 13-week period of the prior year.
Income from operations for the Joe’s brand decreased by $1.1 million, or 16.2%, to $5.5 million in the current 13-week period from $6.5 million in the prior year 13-week period. As a percent of revenue, Joe’s income from operations was 5.7% for the current quarter compared to 6.3% in the prior year. This decrease was primarily attributable to higher labor expenses at the no-tipping restaurants, partially offset by lower advertising expense.
Income from operations for Brick House was $0.8 million in the current quarter compared to $1.2 million in the prior year quarter. As a percent of revenue, Brick House income from operations decreased to 3.6% from 6.4%. Excluding the impact of pre-opening costs, Brick House income from operations decreased to 7.7% from 8.8% primarily due to higher labor expenses.
Interest Expense, Net
Interest expense, net decreased by $856 thousand, or 22.1%, to $3.0 million during the current quarter from $3.9 million during the prior year quarter primarily due to a lower average debt balance after the $35.0 million voluntary prepayment in December 2015.
Income Tax Expense
Income tax expense decreased by $431 thousand to $89 thousand during the current quarter from $520 thousand during the prior year quarter primarily due to an increase of $0.5 million in the valuation allowance in the current quarter compared to an increase of $2.1 million in the valuation allowance in the prior year quarter. This decrease was partially offset by a $720 thousand increase in tax benefit shortfalls related to vested stock-based compensation awards that were forfeited by terminated employees.
Discontinued Operations, net
Loss from discontinued operations was $0 for the thirteen weeks ended March 28, 2016 compared to $19.0 million for the thirteen weeks ended March 30, 2015. In April 2015, we completed the sale of Macaroni Grill. We recorded a $22.4 million impairment charge during the first quarter of 2015 to write down the net assets of Macaroni Grill to their estimated fair value less cost to sell. During the first quarter of 2015, we also recorded a net gain of $2.1 million on the sale of certain assets of Macaroni Grill and a $1.0 million gain on insurance settlements.
Seasonality
There is a seasonal component to the Joe’s business which typically peaks in the summer months (June, July and August) and slows in the winter months (November, December and January). Because of the seasonality of our business, results for any fiscal quarter are not necessarily indicative of the results that may be achieved for future fiscal quarters or for the full fiscal year.
Liquidity and Capital Resources
General
Our primary sources of liquidity and capital resources are cash provided from operating activities, cash and cash equivalents, and our senior secured credit facility. Our primary requirements for liquidity and capital are new restaurant development, working capital and general corporate needs. Our operations have not required significant working capital and, like many restaurant companies, we have been able to operate, and will continue to operate, with negative working capital. Our requirement for working capital is not significant since our restaurant guests pay for their food and beverage purchases in cash or payment cards (credit or debit) at the time of sale. Thus, we are able to sell and collect payment for many of our inventory items before we have to pay our suppliers for such items. Our restaurants do not require significant inventories or receivables.
We have experienced declines in comparable restaurant sales and income from operations at Joe’s and Brick House. If we continue experiencing declines in our operating results, we may be unable to remain in compliance with our financial covenants. However, we can manage and supplement our liquidity position by closing or selling underperforming restaurants, postponing restaurant development, cutting discretionary capital expenditure spending, and divesting non-core assets. We may also decide to raise additional funds through the sale of common stock or debt in the public capital markets or in privately negotiated transactions. There can be no assurance, however, that any of these financing options would be available on favorable terms, if at all.
We believe that these sources of liquidity and capital will be sufficient to finance our continued operations for at least the next twelve months.
The following table shows summary cash flows information for the thirteen weeks ended March 28, 2016 and March 30, 2015 (in thousands):
Operating Activities
Net cash provided by operating activities – continuing operations was $6.1 million for the thirteen weeks ended March 28, 2016 and $10.5 million for the thirteen weeks ended March 30, 2015. The $4.4 million decrease from the prior year period is primarily due lower sales and changes in working capital, partially offset by lower general and administrative expenses and interest payments.
Investing Activities
Net cash used in investing activities – continuing operations increased by $480 thousand to $6.1 million for the thirteen weeks ended March 28, 2016 compared to $5.7 million for the thirteen weeks ended March 30, 2015 mainly due to the increase in capital expenditures from prior year, partially offset by proceeds from the sale of two liquor licenses in the current quarter. Capital expenditures increased primarily due to the timing of new restaurant openings.
We estimate that total capital expenditures for fiscal year 2016 will be approximately $15.0 million to $20.0 million.
Financing Activities
Net cash used in financing activities was $319 thousand for the thirteen weeks ended March 28, 2016 compared to $407 thousand for the thirteen weeks ended March 30, 2015 due to scheduled quarterly payments on the term loan.
Senior Secured Credit Facility
On August 13, 2014, we entered into a new senior secured credit facility (“2014 Credit Agreement”), which consists of a $30.0 million revolving credit facility (“2014 Revolving Credit Facility”) and a $165.0 million term loan (“2014 Term Loan”), which both mature on February 13, 2019. The 2014 Term Loan was issued at 98.5% of par. The principal amount of the 2014 Term Loan is payable in consecutive quarterly installments of $412,500, commencing on December 31, 2014, with the balance payable in full at maturity. In December 2015, we made a $35.0 million voluntary prepayment of our 2014 Term Loan, which reduced our quarterly installment payments to $324,116.
Interest rates for borrowings under the 2014 Credit Agreement for the revolver and the term loan are equal to, at our option, either LIBOR (subject to a 1% floor) or the base rate as defined in the agreement, plus a margin of 7.0% for LIBOR loans and 6.0% for base rate loans. The interest rate for the 2014 Term Loan was 8.0% as of March 28, 2016. In addition, we are required to pay commitment fees on the unused portion of the 2014 Revolving Credit Facility. The commitment fee rate is currently at 0.5%. The commitment fee is subject to adjustment on a quarterly basis based on our leverage ratio as defined by the credit agreement.
The 2014 Credit Agreement is guaranteed by each of our subsidiaries and secured by substantially all of our present and future assets and a lien on the capital stock or other equity interests of our direct and indirect subsidiaries. The 2014 Credit Agreement contains covenants which, among other things, limit our ability to incur additional indebtedness, create liens on our assets, make certain investments or loans, merge or otherwise dispose of assets other than in the ordinary course of business, make acquisitions, and pay dividends or make other restricted payments. The 2014 Credit Agreement also contains customary covenants regarding, among other matters, the maintenance of insurance, the preservation and maintenance of our corporate existence, material compliance with laws, and the payment of taxes and other material obligations.
The 2014 Credit Agreement provides that (a) the leverage ratio shall not exceed (i) 5.75x through December 29, 2014, (ii) 5.5x from December 30, 2014 through June 29, 2015, (iii) 5.25x from June 30, 2015 through December 28, 2015, (iv) 5.0x from December 29, 2015 through March 28, 2016, (v) 4.75x from March 29, 2016 through June 27, 2016, (vi) 4.25x from June 28, 2016 through September 26, 2016, (vii) 4.0x from September 27, 2016 through April 3, 2017, (viii) 3.75x from April 4, 2017 through October 2, 2017, (ix) 3.5x from October 3, 2017 through April 2, 2018, (x) 3.25x from April 3, 2018 through December 31, 2018, and (xi) 3.0x from January 1, 2019 through maturity date; and requires (b) an interest coverage ratio of at least (i) 2.0x through June 29, 2015, (ii) 2.25x from June 30, 2015 through March 28, 2016, (iii) 2.5x from March 29, 2016 through June 27, 2016, (iv) 2.75x from June 28, 2016 through January 2, 2017, (v) 3.0x from January 3, 2017 through July 3, 2017, (vi) 3.25x from July 4, 2017 through April 2, 2018, (vii) 3.5x from April 3, 2018 through December 31, 2018, and (viii) 3.75x from January 1, 2019 through maturity date. The 2014 Credit Agreement limits capital expenditures to an amount in respect of any period not to exceed (i) $29.5 million from the closing date through December 29, 2014, (ii) $45.5 million for fiscal 2015, (iii) $45.8 million for fiscal 2016, (iv) $52.5 million for fiscal 2017, (v) $53.7 million for fiscal 2018, and (vi) $58.6 million from January 1, 2019 through maturity date, provided that the amount of permitted capital expenditures in any period can be increased by the unused permitted capital expenditures from the immediately preceding period, subject to certain limitations as defined by the agreement. We were in compliance with these covenants as of March 28, 2016.
As of March 28, 2016, we had outstanding letters of credit of approximately $4.1 million and available borrowing capacity of approximately $25.9 million under the 2014 Revolving Credit Facility.
Off-Balance Sheet Arrangements
Except for restaurant operating leases, we have no material off-balance sheet arrangements.
Non-GAAP Financial Measures
We utilize financial measures and terms not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”) to evaluate our operating performance. These non-GAAP measures are provided to enhance the reader’s overall understanding of our current financial performance. These measurements are used by many investors as a supplemental measure to evaluate the overall operating performance of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. Many investors are interested in understanding the performance of our business by comparing our results from ongoing operations from one period to the next and would ordinarily add back events that are not part of normal day-to-day operations of our business. Management and our principal stockholder also use such measures as measurements of operating performance, for planning purposes, and to evaluate the performance and effectiveness of our operational strategies.
These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. We have provided a definition below for these non-GAAP financial measures, together with an explanation of why management uses these measures and why management believes that these non-GAAP financial measures are useful to investors. In addition, we have provided a reconciliation of these non-GAAP financial measures utilized to their equivalent GAAP financial measures.
Adjusted loss from continuing operations and adjusted loss from continuing operations per share
We calculate adjusted income from continuing operations by eliminating from loss from continuing operations the impact of items we do not consider indicative of our ongoing operations. Specifically, we believe that these non-GAAP measures provide greater comparability and enhanced visibility into our results of operations, excluding the impact of special charges and certain other expenses. Adjusted loss from continuing operations represents loss from continuing operations less items such as (a) costs related to conversions, remodels and closures, (b) loss on insurance settlements, (c) the income tax effect of the above described adjustment, and (d) the deferred tax asset valuation allowance. We believe these measures provide additional information to facilitate the comparison of our past and present financial results. We utilize results that both include and exclude the identified items in evaluating business performance. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. In the future, we may incur expenses or generate income similar to these adjustments.
A reconciliation of loss from continuing operations to adjusted loss from continuing operations is as follows (in thousands, except earnings per share):
Recent Accounting Pronouncements
Disclosure regarding recent accounting pronouncements can be found in Note 1 of our condensed consolidated financial statements (unaudited) contained in this Form 10-Q.
Critical Accounting Policies
The preparation of the unaudited financial statements requires that we make estimates that affect the reported accounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
During the thirteen weeks ended March 28, 2016, there were no significant changes in our accounting policies or estimates.
For a description of those accounting policies that, in our opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgments or estimates were made, materially affect our reported results of operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 28, 2015 filed with the SEC on March 3, 2016.
Forward-Looking Statements
This quarterly report on Form 10-Q includes and incorporates by reference “forward-looking statements” within the meaning of the Securities Act of 1933, as amended (“Securities Act”) and the Securities Exchange Act of 1934, as amended (“Exchange Act”). Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that the forward-looking information presented in this quarterly report is not a guarantee of future events, and that actual events and results may differ materially from those made in or suggested by the forward-looking information contained in this quarterly report. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “plan,” “seek,” “comfortable with,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. An example of forward-looking statements in this quarterly report is our fiscal year 2016 capital expenditure expectations. A number of important factors could cause actual events and results to differ materially from those contained in or implied by the forward-looking statements, including the risk factors discussed in Item 1A of this Form 10-Q and our Annual Report on Form 10-K, filed on March 3, 2016 with the Securities and Exchange Commission. Any forward-looking information presented herein is made only as of the date of this quarterly report, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk. |
Commodity Price Risk
Many of the food products we purchase are affected by commodity pricing that is subject to price volatility caused by weather, production problems, delivery difficulties and other factors that are outside our control and are generally unpredictable. For the thirteen weeks ended March 28, 2016, crab, lobster and shrimp accounted for approximately 50% of total food purchases. Crab and lobster are wild caught and sourced from government regulated and sustainable fisheries. Other categories affected by the commodities markets, such as seafood, beef and fish, each account for approximately 4% to 11% of our food purchases. While we have some of our food items prepared to our specifications, our food items are based on generally available products, and if any existing suppliers fail, or are unable to deliver in quantities we require, we believe that there are sufficient other quality suppliers in the marketplace that our sources of supply can be replaced as necessary. We also recognize, however, that commodity pricing is extremely volatile and can change unpredictably and over short periods. Our purchasing department negotiates prices and quantities for all of our ingredients through either cancellable contracts (with varying length terms), spot market purchases or commodity pricing formulas. Changes in commodity prices would generally affect us and our competitors similarly, depending on the terms and duration of supply contracts. We also enter into fixed price supply contracts for certain products in an effort to minimize volatility of supply and pricing. In many cases, or over the longer term, we believe we will be able to pass through some or all of the increased commodity costs by adjusting menu pricing. From time to time, competitive circumstances, or judgments about consumer acceptance of price increases, may limit menu price flexibility, and in those circumstances, increases in commodity prices can have an adverse effect on margins.
Interest Rate Risk
We are subject to interest rate risk in connection with borrowings under our 2014 Credit Facility, which bear interest at variable rates. As of March 28, 2016, we had $128.0 million outstanding under our 2014 Credit Facility. Derivative financial instruments, such as interest rate swap agreements and interest rate cap agreements, may be used for the purpose of managing fluctuating interest rate exposures that exist from our variable rate debt obligations that are expected to remain outstanding. We do not currently have any such derivative financial instruments in place. Interest rate changes do not affect the market value of such debt, but could impact the amount of our interest payments, and accordingly, our future earnings and cash flows, assuming other factors are held constant. Taking into account the 1% floor on our LIBOR borrowings under our senior secured credit facility, a 1% increase in the interest rate on the outstanding balance of our variable rate debt would result in a $0.8 million change in our annual results of operations.
Item 4. |
Controls and Procedures. |
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that the information required to be disclosed in the reports that it files or submits with the SEC under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management of the company with the participation of its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended March 28, 2016, an evaluation was performed under the supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the chief executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures were effective as of March 28, 2016.
Limitations on Effectiveness of Controls and Procedures
Because of their inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness of internal controls to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In addition, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the date we are no longer an “emerging growth company” as defined in the JOBS Act, if we continue to take advantage of the exemptions contained in the JOBS Act. We expect that we will remain an “emerging growth company” until the earliest of (i) the last day of our fiscal year following the fifth anniversary of our IPO; (ii) the last day of our fiscal year in which we have annual gross revenue of $1.0 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; and (iv) the date on which we are deemed to be a “large accelerated filer,” which will occur at such time as we have (1) an aggregate worldwide market value of common equity securities held by non-affiliates of $700.0 million or more as of the last business day of our most recently completed second fiscal quarter, (2) been required to file annual, quarterly, and current reports under the Exchange Act for a period of at least 12 calendar months and (3) filed at least one annual report pursuant to the Exchange Act. As a result, we may qualify as an “emerging growth company” until as late as May 10, 2017. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
Changes in Internal Control over Financial Reporting
No changes in our internal control over financial reporting occurred during the quarter ended March 28, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. |
Legal Proceedings. |
Disclosure regarding legal proceedings can be found in Note 5 of our condensed consolidated financial statements (unaudited) contained in this Form 10-Q.
Item 1A. |
Risk Factors. |
There were no material changes in our Risk Factors as previously disclosed in Item 1A of the our Annual Report on Form 10-K for the year ended December 28, 2015.
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds. |
Not applicable.
Item 3. |
Defaults Upon Senior Securities. |
None.
Item 4. |
Mine Safety Disclosures. |
Not applicable.
Item 5. |
Other Information. |
None.
Item 6. |
Exhibits. |
Exhibit |
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Description |
3.1 |
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Amended and Restated Certificate of Incorporation of Ignite Restaurant Group, Inc. (filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the twelve weeks ended June 18, 2012 filed on October 30, 2012 and incorporated herein by reference). |
3.2 |
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Amended and Restated Bylaws of Ignite Restaurant Group, Inc. (filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the twelve weeks ended June 18, 2012 filed on October 30, 2012 and incorporated herein by reference). |
31.1 |
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Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 |
|
Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 |
|
Certificate of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 |
|
Certificate of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101 |
|
The following financial information for the Company, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Condensed Consolidated Financial Statements. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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IGNITE RESTAURANT GROUP, INC. | ||
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By: |
/s/ Brad A. Leist | ||
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Name: |
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Title: |
Senior Vice President and Chief Financial Officer |
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(On behalf of the Registrant and as Principal Financial Officer) |
24
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4/3/17 | 10-K, 10-Q, 3, S-8 POS | |||
1/3/17 | ||||
1/2/17 | 10-K | |||
12/15/16 | ||||
9/27/16 | ||||
9/26/16 | 10-Q | |||
6/28/16 | ||||
6/27/16 | 10-Q | |||
Filed on: | 5/4/16 | 8-K | ||
4/30/16 | ||||
3/29/16 | ||||
For Period end: | 3/28/16 | |||
3/3/16 | 10-K, 8-K | |||
12/29/15 | ||||
12/28/15 | 10-K | |||
12/15/15 | ||||
6/30/15 | ||||
6/29/15 | 10-Q | |||
6/18/15 | ||||
3/30/15 | 10-Q | |||
1/27/15 | ||||
12/31/14 | ||||
12/30/14 | ||||
12/29/14 | 10-K | |||
8/13/14 | 8-K | |||
8/28/13 | ||||
10/30/12 | 10-Q, 8-K | |||
6/18/12 | 10-Q, NT 10-Q | |||
List all Filings |