UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 28, 2016

For the transition period from              to              

Commission File Number 001-35549

IGNITE RESTAURANT GROUP, INC.

(Exact name of registrant as specified in its charter)

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.

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.

TABLE OF CONTENTS

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)

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.

The following table sets forth additional operating information for the periods indicated that we use in assessing our performance:

 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.

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.

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

Disclosure regarding legal proceedings can be found in Note 5 of our condensed consolidated financial statements (unaudited) contained in this Form 10-Q.

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.

Not applicable.

None.

Not applicable.

None.

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.

24