---

 

---

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 September 28, 2015

 

☐

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 ☒
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 October 30, 2015 was 26,142,904.

 

---

 

---

 

 

TABLE OF CONTENTS

 

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (unaudited) as of September 28, 2015 and December 29, 2014	3
	Condensed Consolidated Statements of Operations (unaudited) for the thirteen and thirty-nine weeks ended September 28, 2015 and September 29, 2014	4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the thirty-nine weeks ended September 28, 2015 and September 29, 2014	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
SIGNATURES		33

 

 

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)

 

 

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 29, 2014. 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 and 2014 are 52-week years.

 

Overview

 

As of September 28, 2015, 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 September 28, 2015, we owned and operated 131 Joe’s restaurants and 23 Brick House restaurants in 33 states. On April 17, 2015, we completed the sale of Romano’s Macaroni Grill (“Macaroni Grill”). See Note 2 in our Notes to Condensed Consolidated Financial Statements for further information.

 

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 September 28, 2015, we closed seven Joe’s restaurants, of which two will be converted to Brick House restaurants.

 

Discontinued Operations

 

In April 2013, we acquired Macaroni Grill with the intent of reviving the brand and making it a positive contributor to our earnings. We implemented a number of operations and marketing strategies since our acquisition of Macaroni Grill, including a 22% reduction in the number of restaurants and the roll out of Romano’s Kitchen Counter. While these initiatives improved results, Macaroni Grill was still a negative contributor to our overall results. During the fourth quarter of 2014, we began to evaluate various strategic alternatives for this brand, including continued real estate portfolio reduction and sale of the entire business.

 

On April 17, 2015, we completed the sale of Macaroni Grill for $7.3 million, net of directly related selling expenses, of which $7.1 million was received as of June 29, 2015. During the thirteen weeks ended March 30, 2015, we recorded a $22.4 million impairment charge to write down the net assets of Macaroni Grill to their estimated fair value less cost to sell, which is included in loss from discontinued operations in our condensed consolidated statements of operations. In addition, during the thirteen weeks ended June 29, 2015, we recorded a $6.1 million loss on disposal of the Macaroni Grill business in loss from discontinued operations. We intend to use the net proceeds from the sale primarily for new restaurant development.

 

We believe that our exit from the Macaroni Grill business was a strategic shift which has a significant effect on our operations and financial results. Hence, we considered Macaroni Grill as a discontinued operation. As of December 29, 2014, the assets and associated liabilities of Macaroni Grill have been reclassified as held for sale. The operating results of Macaroni Grill for the current and prior periods have been aggregated and reclassified as discontinued operations in our condensed consolidated statements of operations for the thirteen and thirty-nine weeks ended September 28, 2015 and September 29, 2014.

 

 

Outlook

 

Our near term business strategy focuses on two primary elements: increasing comparable restaurant sales at Joe’s and continuing the growth of our Brick House brand through comparable restaurant sales growth and new unit development.

 

We have continued to experience sales declines at Joe’s with comparable restaurant sales decreasing 6.6% during the third quarter of 2015. We are testing several initiatives and promotions that are intended to improve sales and traffic. To date, these initiatives and promotions have generated some positive results but have yet to make a meaningful impact to sales and traffic. Even though sales are down, favorable shellfish and shrimp pricing compared to the prior year and reductions in general and administrative expenses due to our new streamlined operations management team have both contributed to increased operating margins at Joe’s, excluding the impacts of restaurant closures and impairments. We are also pursuing strategic alternatives for underperforming restaurants which led to the closure of seven Joe’s restaurants in the third quarter, two of which will be converted to Brick Houses and one that was sold for net proceeds of $1.6 million. We will continue to look for ways to optimize our real estate portfolio. Comparable restaurant sales at Brick House decreased by 0.7% in the current quarter but are still up for the year. We have introduced several new initiatives that we believe will improve sales and traffic in key day parts. Despite the decline in sales, we achieved increased operating margins at Brick House due to improved restaurant-level profit and lower general and administrative expenses.

  

If our initiatives do not improve the operating performance at Joe’s 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 2015 against some or all of our deferred tax assets.

 

Results of Operations

 

We completed the sale of the Macaroni Grill business on April 17, 2015, hence, the operating results of Macaroni Grill for the current and prior periods have been aggregated and reclassified as discontinued operations. We also reclassified to discontinued operations the loss from the sale of Macaroni Grill.

 

Thirteen Weeks Ended September 28, 2015 Compared to Thirteen Weeks Ended September 29, 2014

 

The following table presents the condensed consolidated statements of operations for the thirteen weeks ended September 28, 2015 and September 29, 2014, expressed as a percentage of revenue.

 

		Thirteen Weeks Ended
		September 28, 2015				September 29, 2014
Revenues			100.0	%			100.0	%
Costs and expenses
Restaurant operating costs and expenses
Cost of sales			31.1				32.6
Labor expenses			27.9				26.9
Occupancy expenses			7.9				7.3
Other operating expenses		19.1				19.4
General and administrative			4.9				6.9
Depreciation and amortization			5.8				4.3
Pre-opening costs			0.0				0.9
Asset impairments and closures			3.6				1.3
Loss (gain) on disposal of assets			(0.7	)			0.3
Total costs and expenses			99.6				99.9
Income from operations			0.4				0.1
Interest expense, net			(2.9	)			(3.6	)
Gain (loss) on insurance settlements			(0.3	)			0.1
Loss from continuing operations before income taxes			(2.8	)			(3.4	)
Income tax expense (benefit)			0.4				(1.7	)
Loss from continuing operations			(3.2	)			(1.7	)
Income (loss) from discontinued operations, net			0.3				(3.0	)
Net loss			(2.9	)%			(4.7	)%

 

---

*

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 September 28, 2015				Thirteen Weeks Ended September 29, 2014
		(dollars in thousands)
Selected Other Data(1):
Number of restaurants open (end of period):
Joe's Crab Shack			131				138
Brick House Tavern + Tap			23				21
Total restaurants - continuing operations			154				159
Restaurant operating weeks
Joe's Crab Shack			1,769				1,774
Brick House Tavern + Tap			299				269
Average weekly sales
Joe's Crab Shack		$	65			$	69
Brick House Tavern + Tap		$	62			$	64
Change in comparable restaurant sales
Joe's Crab Shack			(6.6	)%			(4.4	)%
Brick House Tavern + Tap			(0.7	)%			7.5	%
Income (loss) from operations
Joe's Crab Shack		$	4,207			$	7,468
Brick House Tavern + Tap			1,284				(54	)
Corporate			(4,977	)			(7,217	)
Total - continuing operations		$	514			$	197
Adjusted income from continuing operations(2)		$	1,880			$	335

 

 

 

(1)	Includes only results of Joe’s and Brick House due to the reclassification of Macaroni Grill’s operations to discontinued operations.

(2)	A reconciliation and discussion of this non-GAAP financial measure is included below under “Non-GAAP Financial Measures.” This measure should be considered in addition to, rather than as a substitute for, U.S. GAAP measures.

 

 

Revenues

 

Revenues were $133.4 million during the thirteen weeks ended September 28, 2015, a decrease of $5.9 million, or 4.2%, compared to revenues of $139.3 million during the thirteen weeks ended September 29, 2014. The decrease was primarily caused by a 6.6% decrease in comparable restaurant sales for Joe’s and a 0.7% decrease in comparable restaurant sales for Brick House, partially offset by the net increase in operating weeks.

 

Revenues at Joe’s decreased 6.0% to $114.8 million in the third quarter of 2015 versus $122.2 million in the third quarter of 2014. This decrease was primarily due to a 6.6% decrease in comparable restaurant sales. The comparable restaurant sales decrease was comprised of a 4.6% decrease in traffic and a 2.3% decrease in mix, partially offset by a 0.3% increase in pricing.

 

Brick House revenues increased 8.4% to $18.6 million in the third quarter of 2015 versus $17.1 million in the third quarter of 2014 due to two new restaurant openings since the third quarter of 2014, partially offset by a 0.7% decrease in comparable restaurant sales. The comparable restaurant sales decrease was comprised of a 4.8% decrease from traffic and mix, partially offset by a 4.1% increase in pricing due to less discounting.

 

 

Cost of Sales

 

Cost of sales decreased by $3.9 million, or 8.6%, to $41.5 million in the third quarter of 2015 versus $45.4 million in the comparable period of 2014. As a percent of revenue, cost of sales decreased to 31.1% from 32.6% in the prior year due primarily to improvement in seafood pricing at Joe’s and reduced discounting at Brick House compared to last year.

 

Labor Expenses

 

Labor expenses decreased by $310 thousand, or 0.8%, to $37.2 million in the current year third quarter versus $37.5 million in the comparable period last year. The decrease was primarily due to lower restaurant management bonuses, partially offset by decreased productivity in hourly labor at Joe’s. Labor expenses, as a percent of revenue, increased to 27.9% from 26.9% due to decreased productivity and deleverage from lower sales.

 

Occupancy Expenses

 

Occupancy expenses increased by $471 thousand, or 4.7%, to $10.6 million in the current year third quarter versus $10.1 million in the comparable period last year. The increase was primarily due to the increase in operating weeks. As a percent of revenue, occupancy expenses increased to 7.9% from 7.3% primarily due to deleverage from the lower sales volumes.

 

Other Operating Expenses

 

Other operating expenses decreased by $1.6 million, or 5.9%, to $25.4 million in the current year third quarter compared to $27.0 million in the comparable prior year period. This decrease was primarily due to lower advertising expense and utilities, offset partially by higher insurance costs. As a percent of revenue, other operating expenses decreased to 19.1% from 19.4% primarily due to lower advertising expense, partially offset by deleverage from lower sales.

 

General and Administrative

 

General and administrative expense decreased by $3.1 million, or 32.4%, to $6.5 million in the third quarter of 2015 versus $9.6 million in the third quarter of 2014, which was primarily due to downsizing and personnel reductions implemented in the fourth quarter of fiscal 2014 and in connection with the closing of the sale of Macaroni Grill in the second quarter of 2015, and a reduction in professional fees in the current quarter. As a percent of revenue, general and administrative expenses decreased to 4.9% from 6.9%.

 

Depreciation and Amortization

 

Depreciation and amortization expense increased by $1.8 million, or 30.2%, to $7.8 million in the current year third quarter compared to $6.0 million in the prior year. This increase is mainly due to $1.7 million in accelerated depreciation related to restaurant conversions. As a percent of revenue, depreciation and amortization increased to 5.8% from 4.3%.

 

Pre-Opening Costs

 

Pre-opening costs decreased by $1.2 million, or 98.2%, to $22 thousand in the third quarter of 2015 from $1.2 million in the comparable prior year period. We did not open any restaurants in the current year third quarter and opened three restaurants in the comparable period last year. We also incurred pre-opening costs in both periods for restaurants that opened in subsequent periods.

 

Asset impairments and closures

 

Asset impairments and closures increased by $2.9 million to $4.8 million in the third quarter of 2015 compared to $1.8 million in the comparable prior year period primarily due to the impact of seven restaurants closed in the current year third quarter compared to none in the comparable prior year period. Included in the amounts above are impairment charges of $3.9 million in the current year compared to $1.8 million in the prior year.

 

 

We periodically evaluate possible impairment of fixed assets at the restaurant level and intangible assets, and record an impairment loss whenever we determine that the fair value of these assets is less than their carrying value. We also periodically evaluate the criteria we use as an indication of asset impairment. As a result of our periodic impairment testing, we recorded an impairment charge of $3.9 million in the current quarter and $1.8 million in the prior year third quarter related to two Joe’s restaurants, which were closed in the third quarter of 2015.

 

Loss (Gain) on Disposal of Assets

 

Gain on disposal of assets was $0.9 million in the current year third quarter compared to a loss on disposal of assets of $0.4 million in the comparable prior year period. The change is primarily related to a $1.5 million gain from the sale of one Joe’s restaurant in the current quarter, offset partially by higher asset retirement losses for closed, converted and remodeled restaurants in the current quarter.

 

Income from Operations

 

As a result of the foregoing, consolidated income from operations increased by $0.3 million, or 160.9%, to $0.5 million in the current 13-week period compared to $0.2 million in the 13-week period of the prior year.

 

Income from operations for the Joe’s brand decreased by $3.3 million, or 43.7%, to $4.2 million in the current 13-week period from $7.5 million in the prior year 13-week period. As a percent of revenue, excluding the impact of non-cash impairment charges, accelerated depreciation on conversions and preopening expenses, Joe’s income from operations was 8.5% for the current quarter compared to 8.3% in the prior year. This increase was primarily attributable to improvement in seafood pricing and reduced general and administrative expenses, partially offset by decreased labor productivity and lower comparable restaurant sales.

 

Income from operations for Brick House was $1.3 million in the current quarter compared to a $54 thousand loss in the prior year quarter. As a percent of revenue, Brick House income from operations increased to 6.9% from (0.3%). This increase was primarily due to lower general and administrative expenses and pre-opening costs, partially offset by lower comparable restaurant sales.  

 

Interest Expense, Net

 

Interest expense, net decreased by $1.2 million, or 23.9%, to $3.8 million during the current 13-week period from $5.0 million during the prior year 13-week period primarily due to a $2.2 million write-off of debt issuance costs related to the debt refinancing in the prior year quarter.

 

Gain (Loss) on Insurance Settlements

 

Loss on insurance settlements was $428 thousand in the current quarter compared to a gain on insurance settlements of $89 thousand in the comparable prior year period. The current quarter loss relates to a restaurant closed in the prior year that was razed by fire in July 2015. The prior year quarter gain relates to insurance recoveries on a restaurant affected by Hurricane Sandy.

 

Income Tax Expense (Benefit)

 

Income tax expense increased by $2.9 million to a $537 thousand expense during the current 13-week period from a $2.4 million benefit during the prior year 13-week period. The increase is primarily due to a valuation allowance of $2.6 million recorded for continuing operations during the thirteen weeks ended September 28, 2015.

 

Discontinued Operations, net

 

Income (loss) from discontinued operations relates to a $0.4 million valuation allowance reversal in the current quarter, while the $4.2 million loss from discontinued operations relates to the net loss of Macaroni Grill’s operations in the prior year quarter, net of income tax benefit of $3.6 million.

 

 

Thirty-Nine Weeks Ended September 28, 2015 Compared to Thirty-Nine Weeks Ended September 29, 2014

 

The following table presents the condensed consolidated statements of operations for the thirty-nine weeks ended September 28, 2015 and September 29, 2014, expressed as a percentage of revenue.

 

 

		Thirty-Nine Weeks Ended
		September 28, 2015				September 29, 2014
Revenues			100.0	%			100.0	%
Costs and expenses
Restaurant operating costs and expenses
Cost of sales			31.1				32.4
Labor expenses			28.1				27.7
Occupancy expenses			7.8				7.2
Other operating expenses			18.8				18.5
General and administrative			5.8				7.3
Depreciation and amortization			5.1				4.4
Pre-opening costs			0.1				0.5
Asset impairments and closures			1.2				0.5
Loss (gain) on disposal of assets			(0.1	)			0.2
Total costs and expenses			98.0				98.7
Income from operations			2.0				1.3
Interest expense, net			(2.9	)			(2.1	)
Gain (loss) on insurance settlements			(0.1	)			0.0
Loss from continuing operations before income taxes			(1.0	)			(0.8	)
Income tax expense (benefit)			0.4				(0.8	)
Income (loss) from continuing operations			(1.4	)			0.0
Loss from discontinued operations, net			(5.1	)			(1.3	)
Net loss			(6.5	)%			(1.2	)%

 

---

*

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:

  

		Thirty-Nine Weeks Ended September 28, 2015				Thirty-Nine Weeks Ended September 29, 2014
		(dollars in thousands)
Selected Other Data(1):
Number of restaurants open (end of period):
Joe's Crab Shack			131				138
Brick House Tavern + Tap			23				21
Total restaurants			154				159
Restaurant operating weeks
Joe's Crab Shack			5,368				5,310
Brick House Tavern + Tap			877				789
Average weekly sales
Joe's Crab Shack		$	63			$	66
Brick House Tavern + Tap		$	67			$	67
Change in comparable restaurant sales
Joe's Crab Shack			(4.9	)%			(5.0	)%
Brick House Tavern + Tap			2.5	%			8.7	%
Income (loss) from operations
Joe's Crab Shack		$	21,224			$	25,544
Brick House Tavern + Tap			4,555				2,795
Corporate			(17,776	)			(22,955	)
Total		$	8,003			$	5,384
Adjusted income from continuing operations(2)		$	3,186			$	2,868

 

(1)	Includes only results of Joe’s and Brick House due to the reclassification of Macaroni Grill’s operations to discontinued operations.

(2)	A reconciliation and discussion of this non-GAAP financial measure is included below under “Non-GAAP Financial Measures.” This measure should be considered in addition to, rather than as a substitute for, U.S. GAAP measures.

 

 

Revenues

 

Revenues were $398.8 million during the thirty-nine weeks ended September 28, 2015, a decrease of $6.9 million, or 1.7%, compared to revenues of $405.7 million during the thirty-nine weeks ended September 29, 2014. The decrease was primarily caused by the 4.9% decrease in comparable restaurant sales for Joe’s, partially offset by the 2.5% increase in comparable restaurant sales for Brick House and the increase in operating weeks for both brands.

 

Revenues at Joe’s decreased 3.6% to $340.3 million in the year-to-date period of 2015 versus $353.0 million in the year-to-date period of 2014. This decrease was primarily due to a 4.9% decrease in comparable restaurant sales, partially offset by an increase in operating weeks from the prior year. The comparable restaurant sales decrease was comprised of a 5.3% decrease in traffic and a 1.2% decrease in mix, offset partially by a 1.6% increase in pricing.

 

Brick House revenues increased 11.0% to $58.5 million in the year-to-date period of 2015 versus $52.7 million in the year-to-date period of 2014 due to a 2.5% increase in comparable restaurant sales and two new restaurant openings since the third quarter of 2014. The comparable restaurant sales increase was comprised of a 3.1% increase in pricing, partially offset by a 0.6% decrease from traffic and mix.

 

 

Cost of Sales

 

Cost of sales decreased by $7.4 million, or 5.6%, to $124.2 million in the year-to-date period of 2015 versus $131.6 million in the comparable period of 2014. As a percent of revenue, cost of sales decreased to 31.1% from 32.4% in the prior year due primarily to improvement in seafood pricing at Joe’s and reduced discounting at Brick House compared to last year.

 

Labor Expenses

 

Labor expenses decreased by $368 thousand, or 0.3%, to $112.0 million in the year-to-date period of 2015 versus $112.4 million in the comparable period last year. The decrease was primarily due to lower restaurant management bonuses due to lower sales, partially offset by decreased productivity in hourly labor at Joe’s. Labor expenses, as a percent of revenue, was 28.1% in the year-to-date period of 2015 versus 27.7% in the year-to-date period of 2014 due to decreased productivity and deleverage from lower sales.

 

Occupancy Expenses

 

Occupancy expenses increased by $1.9 million, or 6.5%, to $31.2 million in the year-to-date period of 2015 versus $29.3 million in the comparable period last year. The increase was primarily due to the increase in operating weeks. As a percent of revenue, occupancy expenses increased to 7.8% from 7.2% primarily due to deleverage from the lower sales volumes.

 

Other Operating Expenses

 

Other operating expenses increased by $178 thousand, or 0.2%, to $75.1 million in the year-to-date period of 2015 compared to $74.9 million in the comparable prior year period. This increase was primarily due to increased insurance costs, offset partially by lower utilities, credit card fees, supplies and marketing expense spending. As a percent of revenue, other operating expenses increased to 18.8% from 18.5% primarily due to deleverage from lower sales volumes.

 

General and Administrative

 

General and administrative expense decreased by $6.4 million, or 21.6%, to $23.3 million in the year-to-date period of 2015 versus $29.7 million in the year-to-date period of 2014, which was primarily due to downsizing and personnel reductions implemented in the fourth quarter of fiscal 2014 and a reduction in professional fees, partially offset by higher severance costs. As a percent of revenue, general and administrative expenses decreased to 5.8% from 7.3% due to reduction of professional fees and personnel costs, offset by higher severance costs.

 

Depreciation and Amortization

 

Depreciation and amortization expense increased by $2.5 million, or 14.2%, to $20.2 million in the year-to-date period of 2015 compared to $17.7 million in the prior year. This increase is mainly due to a higher depreciable asset base from new restaurants opened and accelerated depreciation related to restaurant conversions. As a percent of revenue, depreciation and amortization increased to 5.1% from 4.4%.

 

Pre-Opening Costs

 

Pre-opening costs decreased by $1.4 million, or 72.8%, to $536 thousand in the year-to-date period of 2015 from $2.0 million in the comparable prior year period. We opened two restaurants in the year-to-date period of 2015 while three restaurants were opened for the comparable prior year period. We also incurred pre-opening costs in both periods for restaurants that opened in subsequent periods.

 

 

Asset impairments and closures

 

Asset impairments and closures increased by $2.9 million to $4.8 million in the year-to-date period of 2015 compared to $2.0 million in the comparable prior year period primarily due to the impact of eight restaurants closed in the current year compared to none in the comparable prior year period. Included in the amounts above are impairment charges of $3.9 million in the current year compared to $1.8 million in the prior year.

 

We periodically evaluate possible impairment of fixed assets at the restaurant level and intangible assets, and record an impairment loss whenever we determine that the fair value of these assets is less than their carrying value. We also periodically evaluate the criteria we use as an indication of asset impairment. As a result of our periodic impairment testing, we recorded an impairment charge of $3.9 million in the current year and $1.8 million in the prior year related to two Joe’s restaurants, which were closed in the third quarter of 2015.

 

Loss (Gain) on Disposal of Assets

 

Gain on disposal of assets was $0.6 million in the current year compared to a loss on disposal of assets of $0.8 million in the comparable prior year period. The change is primarily related to a $1.5 million gain from the sale of one Joe’s restaurant in the current quarter, offset partially by higher asset retirement losses for closed, converted and remodeled restaurants in the current year.

 

Income from Operations

 

As a result of the foregoing, consolidated income from operations increased by $2.6 million, or 48.6%, to $8.0 million in the year-to-date period of 2015 compared to $5.4 million in the comparable prior year period.

 

Income from operations for the Joe’s brand decreased by $4.3 million, or 16.9%, to $21.2 million in the year-to-date period of 2015 from $25.5 million in the comparable prior year period. As a percent of revenue, excluding the impact of non-cash impairment charges, accelerated depreciation on conversions and preopening expenses, Joe’s income from operations was 7.9% for the year-to-date period of 2015 compared to 8.2% in the prior year. This decrease was primarily attributable to lower comparable restaurant sales and decreased productivity in hourly labor, partially offset by improvement in seafood pricing lower general and administrative expenses.

 

Income from operations for Brick House increased by $1.8 million, or 63.0%, to $4.6 million in the year-to-date period of 2015 compared to $2.8 million in the prior year. As a percent of revenue, Brick House income from operations increased to 7.8% from 5.3%. This increase was due to higher comparable restaurant sales, increased operating weeks and lower general and administrative expenses.

 

Interest Expense, Net

 

Interest expense, net increased by $2.9 million, or 33.2%, to $11.6 million during the year-to-date period of 2015 from $8.7 million during the comparable prior year period primarily due to a higher average debt balance and higher interest rate in the current year, partially offset by a $2.2 million write-off of debt issuance costs related to the debt refinancing in the prior year.

 

Gain (Loss) on Insurance Settlements

 

Loss on insurance settlements was $428 thousand in the current 39-week period compared to a gain on insurance settlements of $89 thousand in the comparable prior year period. The current 39-week period loss relates to a restaurant we closed in a prior year that was razed by fire in July 2015. The prior year 39-week period gain relates to insurance recoveries on a restaurant affected by Hurricane Sandy.

 

Income Tax Expense (Benefit)

 

Income tax expense (benefit) increased by $5.1 million, or 153.3% to a $1.8 million expense during the current 39-week period from a $3.3 million benefit during the prior year 39-week period. The increase was primarily due to a valuation allowance of $5.4 million recorded for continuing operations during the thirty-nine weeks ended September 28, 2015.

 

 

Discontinued Operations, net

 

Loss from discontinued operations was $20.3 million for the thirty-nine weeks ended September 28, 2015 compared to $5.1 million for the thirty-nine weeks ended September 29, 2014. 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. During the second quarter of 2015, we recorded a $6.1 million loss on disposal of the Macaroni Grill, which was partially offset by the related tax benefit.

 

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. In August 2014, we entered into a new senior secured credit facility, which provided us with net proceeds of $41.8 million after repayment of the previous credit facility and payment of debt issuance costs. 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 believe that these sources of liquidity and capital will be sufficient to finance our continued operations and expansion plans for at least the next twelve months.

 

 

The following table shows summary cash flows information for the thirty-nine weeks ended September 28, 2015 and September 29, 2014 (in thousands):

 

		Thirty-Nine Weeks Ended September 28, 2015				Thirty-Nine Weeks Ended September 29, 2014
Net cash provided by (used in):
Operating activities
Continuing operations		$	29,776			$	26,170
Discontinued operations			3,891				268
Investing activities
Continuing operations			(10,589	)			(19,155	)
Discontinued operations			11,639				(959	)
Financing activities			(1,353	)			25,636
Net increase in cash and cash equivalents			33,364				31,960
Increase in cash and cash equivalents - discontinued operations			(2,291	)			(2,528	)
Net increase in cash and cash equivalents - continuing operations		$	31,073			$	29,432

 

Operating Activities

 

Net cash provided by operating activities – continuing operations was $29.8 million for the thirty-nine weeks ended September 28, 2015 and $26.2 million for the thirty-nine weeks ended September 29, 2014. The $3.6 million increase from the prior year period is primarily due to lower general and administrative expenses and changes in working capital, partially offset by lower sales and higher interest payments.

 

Net cash provided by operating activities – discontinued operations increased to $3.9 million in the current year versus $268 thousand in the prior year. The increase year over year was primarily due to a decrease in marketing expenses and costs related to restaurant closures.

 

Investing Activities

 

Net cash used in investing activities – continuing operations decreased by $8.6 million to $10.6 million for the thirty-nine weeks ended September 28, 2015 compared to $19.2 million for the thirty-nine weeks ended September 29, 2014 mainly due to the decrease in capital expenditures from prior year and $1.6 million in net proceeds from the sale of a Joe’s restaurant in the third quarter of 2015. Capital expenditures decreased to $12.2 million in the current year compared to $19.1 million in the prior year primarily due to the timing of new restaurant openings.

 

Net cash from investing activities – discontinued operations increased to $11.6 million net cash provided in the current year compared to $1.0 million net cash used in the prior year. The increase is primarily due to the $7.1 million net proceeds from sale of the Macaroni Grill business and $4.3 million from the sale of certain Macaroni Grill assets prior to the sale of the entire business in the current year.

 

We estimate that total capital expenditures for fiscal year 2015 will be approximately $15.0 million to $20.0 million.

 

Financing Activities

 

Net cash used in financing activities was $1.4 million for the thirty-nine weeks ended September 28, 2015 compared to $25.6 million net cash provided by financing activities for the thirty-nine weeks ended September 29, 2014, primarily due to net payments on our term loan in the current year compared to prior year activity which included net payments of $85.2 million on our Revolving Credit Facility, proceeds from our term loan of $162.5 million, $46.8 million repayment of our old term loan and payment of $4.8 million of debt issuance costs related to our August 2014 debt refinancing.

 

 

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. At closing, we repaid the balance of our previously amended 2013 Credit Facility using the proceeds from the 2014 Term Loan.

 

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 September 28, 2015. 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 September 28, 2015.

 

We wrote off $2.2 million of debt issuance costs related to the 2013 Credit Facility, and at closing paid $4.8 million in additional debt issuance costs. The debt issuance costs paid at closing and the remaining unamortized debt issuance costs from the 2013 Credit Facility are recorded in other assets and are amortized over the term of the 2014 Credit Agreement. The debt discount is included as a reduction to the carrying value of the debt obligations and is amortized over the term of the 2014 Term Loan using the effective interest rate method.

 

The weighted average interest rate on the 2014 Credit Agreement at September 28, 2015 was 8.0%. As of September 28, 2015, 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 income from continuing operations and adjusted income from continuing operations per share

 

We calculate adjusted income from continuing operations by eliminating from income (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 income from continuing operations represents income (loss) from continuing operations less items such as (a) transaction costs, (b) costs related to conversions, remodels and closures, (c) write-off of debt issuance costs, (d) asset impairment, (e) loss (gain) on insurance settlements, (f) the income tax effect of the above described adjustment, and (g) 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 income (loss) from continuing operations to adjusted income from continuing operations is as follows (in thousands):

 

		Thirteen Weeks Ended September 28, 2015				Thirteen Weeks Ended September 29, 2014				Thirty-Nine Weeks Ended September 28, 2015				Thirty-Nine Weeks Ended September 29, 2014
		(in thousands)
Income (loss) from continuing operations		$	(4,288	)		$	(2,374	)		$	(5,753	)		$	105
Adjustments - continuing operations:
Transaction costs			-				421				-				510
Costs related to conversions, remodels and closures			1,559				127				1,622				127
Write-off of debt issuance costs			-				2,241				-				2,241
Asset impairment			3,881				1,770				3,881				1,770
Loss (gain) on insurance settlements			428				(89	)			428				(89	)
Income tax effect of adjustments above			(2,324	)			(1,761	)			(2,349	)			(1,796	)
Deferred tax asset valuation allowance			2,624				-				5,357				-
Adjusted income from continuing operations		$	1,880			$	335			$	3,186			$	2,868
Weighted average shares outstanding
Basic			25,761				25,672				25,719				25,654
Diluted			25,792				25,674				25,738				25,701
Income (loss) from continuing operations per share
Basic and diluted		$	(0.17	)		$	(0.09	)		$	(0.22	)		$	0.00
Adjusted income from continuing operations per share
Basic and diluted		$	0.07			$	0.01			$	0.12			$	0.11

 

 

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 and thirty-nine weeks ended September 28, 2015, 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 29, 2014 filed with the SEC on March 13, 2015.

 

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. Examples of forward-looking statements in this quarterly report include expectations about new restaurant openings and conversions, and our fiscal year 2015 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 13, 2015 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 thirty-nine weeks ended September 28, 2015, crab, lobster and shrimp accounted for approximately 40% of total food purchases, excluding Macaroni Grill. 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 3% to 11% of our food purchases, excluding Macaroni Grill. 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 September 28, 2015, we had $163.8 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 new senior secured credit facility, a 1% increase in the interest rate on the outstanding balance of our variable rate debt would result in a $0.5 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 September 28, 2015, 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 September 28, 2015.

 

 

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 September 28, 2015 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 9 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 29, 2014.

 

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 No.		Description
3.1		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		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		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.

 

	IGNITE RESTAURANT GROUP, INC.
November 5, 2015	By:	/s/ Brad A. Leist
		Name:	Brad A. Leist
		Title:	Senior Vice President and Chief Financial Officer
			(On behalf of the Registrant and as Principal Financial Officer)

 

 

33