Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549 

FORM 10-Q

ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20182019
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-35373 

FIESTA RESTAURANT GROUP, INC.
(Exact name of Registrant as specified in its charter)

DelawareDE90-0712224
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
14800 Landmark Boulevard, Suite 500
Dallas, Texas
75254
DallasTX(Zip Code)
(Address of principal executive office)(Zip Code)
Registrant’sRegistrant's telephone number, including area code: (972) (972) 702-9300

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareFRGINASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý☒  No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on their Corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý☒    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated filerAccelerated Filerý☒Accelerated filerFiler¨☐
    
Non-accelerated filerFiler¨☐Smaller reporting companyReporting Company¨☐
   
  Emerging growth companyGrowth Company¨☐


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

As of October 31, 2018,August 2, 2019, Fiesta Restaurant Group, Inc. had 27,256,84227,477,476 shares of its common stock, $0.01 par value, outstanding.

FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBERJUNE 30, 20182019
 
  Page
PART I   FINANCIAL INFORMATION 
   
Item 1
Interim Condensed Consolidated Financial Statements (Unaudited) - Fiesta Restaurant Group, Inc.:
 
   
 
Condensed Consolidated Balance Sheets as of SeptemberJune 30, 20182019 and December 31, 201730, 2018
4
   
 
Condensed Consolidated Statements of Operations for the Three and NineSix Months Ended SeptemberJune 30, 20182019 and OctoberJuly 1, 20172018
5
   
 
Condensed Consolidated Statements of Changes in Stockholders' Equity for the NineThree and Six Months Ended SeptemberJune 30, 20182019 and OctoberJuly 1, 20172018
6
   
 
Condensed Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20182019 and OctoberJuly 1, 20172018
7
   
 
Notes to Unaudited Condensed Consolidated Financial Statements
8
   
Item 2
Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations
2123
   
Item 3
Quantitative and Qualitative Disclosures About Market Risk
4042
   
Item 4
Controls and Procedures
4042
  
PART II   OTHER INFORMATION
 
   
Item 1
Legal Proceedings
4042
   
Item 1A
Risk Factors
4042
   
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
4142
   
Item 3
Defaults Upon Senior Securities
4143
   
Item 4
Mine Safety Disclosures
4143
   
Item 5
Other Information
4143
   
Item 6
Exhibits
4244

PART I—I. FINANCIAL INFORMATION

ITEM 1—1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
 September 30, 2018 December 31, 2017
ASSETS   
Current assets:   
Cash$5,743
 $3,599
Accounts receivable9,462
 9,830
Inventories2,761
 2,880
Prepaid rent3,360
 3,300
Income tax receivable16,059
 11,334
Prepaid expenses and other current assets6,970
 10,105
Total current assets44,355
 41,048
Property and equipment, net235,609
 234,561
Goodwill123,484
 123,484
Deferred income taxes9,376
 17,232
Other assets7,074
 6,988
Total assets$419,898
 $423,313
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:   
Current portion of long-term debt$106
 $98
Accounts payable16,042
 20,293
Accrued payroll, related taxes and benefits11,813
 11,776
Accrued real estate taxes6,525
 5,860
Other current liabilities15,052
 21,817
Total current liabilities49,538
 59,844
Long-term debt, net of current portion71,664
 76,425
Deferred income—sale-leaseback of real estate20,765
 23,466
Other non-current liabilities30,474
 32,062
Total liabilities172,441
 191,797
Commitments and contingencies

 

Stockholders' equity:   
Common stock, $0.01 par value; 100,000,000 shares authorized, 27,258,395 and 27,086,958 shares issued, respectively, and 26,865,639 and 26,847,458 shares outstanding, respectively270
 268
Additional paid-in capital169,465
 166,823
Retained earnings80,206
 64,425
Treasury stock, at cost; 97,358 shares(2,484) —
Total stockholders' equity247,457
 231,516
Total liabilities and stockholders' equity$419,898
 $423,313

 June 30, 2019 December 30, 2018
ASSETS   
Current assets:   
Cash$5,646
 $5,258
Accounts receivable10,070
 8,505
Inventories2,997
 2,842
Prepaid rent117
 3,375
Income tax receivable508
 17,857
Prepaid expenses and other current assets12,199
 6,562
Total current assets31,537
 44,399
Property and equipment, net225,030
 231,328
Operating lease right-of-use assets261,395
 —
Goodwill76,999
 123,484
Deferred income taxes6,131
 10,383
Other assets8,617
 9,065
Total assets$609,709
 $418,659
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:   
Current portion of long-term debt$157
 $108
Accounts payable15,818
 16,410
Accrued payroll, related taxes and benefits10,012
 10,086
Accrued real estate taxes5,085
 5,871
Other current liabilities29,361
 14,086
Total current liabilities60,433
 46,561
Long-term debt, net of current portion62,793
 79,636
Deferred income—sale-leaseback of real estate—
 19,899
Operating lease liabilities265,816
 —
Other non-current liabilities8,430
 32,504
Total liabilities397,472
 178,600
Commitments and contingencies

 

Stockholders' equity:   
Preferred stock, $0.01 par value; 20,000,000 shares authorized, no shares issued—
 —
Common stock, $0.01 par value; 100,000,000 shares authorized, 27,485,603 and 27,259,212 shares issued, respectively, and 26,826,552 and 26,858,988 shares outstanding, respectively271
 270
Additional paid-in capital171,815
 170,290
Retained earnings45,119
 72,268
Treasury stock, at cost; 270,627 and 112,358 shares, respectively(4,968) (2,769)
Total stockholders' equity212,237
 240,059
Total liabilities and stockholders' equity$609,709
 $418,659

FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20182019 AND OCTOBERJULY 1, 20172018
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
September 30, 2018 October 1, 2017 September 30, 2018 October 1, 2017June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Revenues:              
Restaurant sales$173,966
 $158,100
 $518,951
 $505,082
$170,713
 $176,152
 $335,894
 $344,985
Franchise royalty revenues and fees682
 591
 2,008
 1,840
668
 675
 1,339
 1,326
Total revenues174,648
 158,691
 520,959
 506,922
171,381
 176,827
 337,233
 346,311
Costs and expenses:              
Cost of sales56,021
 49,151
 166,275
 150,827
53,758
 56,689
 104,268
 110,254
Restaurant wages and related expenses (including stock-based compensation expense of $6, $9, $56 and $44, respectively)47,943
 44,649
 142,103
 139,050
Restaurant wages and related expenses (including stock-based compensation expense of $16, $33, $43, and $50, respectively)45,766
 47,677
 90,802
 94,160
Restaurant rent expense9,129
 9,104
 26,861
 27,881
11,898
 8,840
 23,643
 17,732
Other restaurant operating expenses27,294
 24,856
 75,398
 73,560
22,513
 24,654
 44,276
 48,104
Advertising expense6,472
 5,885
 18,046
 17,716
5,883
 5,361
 11,404
 11,574
General and administrative (including stock-based compensation expense of $732, $938, $2,588 and $2,723, respectively)13,284
 12,057
 41,023
 46,751
General and administrative (including stock-based compensation expense of $719, $984, $1,484 and $1,856, respectively)13,496
 12,820
 28,567
 27,739
Depreciation and amortization9,739
 8,483
 27,908
 26,265
9,807
 9,170
 19,355
 18,169
Pre-opening costs223
 544
 1,481
 1,878
385
 877
 786
 1,258
Impairment and other lease charges6,417
 15,905
 6,539
 59,081
1,751
 784
 1,413
 122
Goodwill impairment46,485
 —
 46,485
 —
Closed restaurant rent expense, net of sublease income1,335
 —
 2,759
 —
Other expense (income), net47
 469
 (3,132) 1,721
154
 (3,545) 856
 (3,179)
Total operating expenses176,569
 171,103
 502,502
 544,730
213,231
 163,327
 374,614
 325,933
Income (loss) from operations(1,921) (12,412) 18,457
 (37,808)(41,850) 13,500
 (37,381) 20,378
Interest expense924
 672
 2,979
 1,910
967
 986
 2,201
 2,055
Income (loss) before income taxes(2,845) (13,084) 15,478
 (39,718)(42,817) 12,514
 (39,582) 18,323
Benefit from income taxes(4,892) (4,827) (246) (14,241)
Provision for income taxes623
 3,021
 1,569
 4,646
Net income (loss)$2,047
 $(8,257) $15,724
 $(25,477)$(43,440) $9,493
 $(41,151) $13,677
Earnings per common share:       
Earnings (loss) per common share:       
Basic$0.08
 $(0.31) $0.58
 $(0.95)$(1.62) $0.35
 $(1.53) $0.50
Diluted0.08
 (0.31) 0.58
 (0.95)(1.62) 0.35
 (1.53) 0.50
Weighted average common shares outstanding:              
Basic26,954,285
 26,845,568
 26,900,716
 26,811,610
26,807,068
 26,916,295
 26,825,286
 26,895,302
Diluted26,958,874
 26,845,568
 26,905,391
 26,811,610
26,807,068
 26,919,914
 26,825,286
 26,901,829


FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINETHREE AND SIX MONTHS ENDED SEPTEMBERJUNE 30, 20182019 AND OCTOBERJULY 1, 20172018
(In thousands, except share data) 
(Unaudited)

Common Stock Additional
Paid-In
Capital		 Retained
Earnings		 Treasury
Stock		 Total
Stockholders'
Equity		Common Stock Additional
Paid-In
Capital		 Retained
Earnings		 Treasury
Stock		 Total
Stockholders'
Equity
Shares Amount Shares Amount 
Balance at January 1, 201726,755,640
 $267
 $163,204
 $100,704
 $—
 $264,175
Balance at December 31, 201726,847,458
 $268
 $166,823
 $64,425
 $—
 $231,516
Stock-based compensation—
 —
 2,767
 —
 —
 2,767
—
 —
 889
 —
 —
 889
Vesting of restricted shares91,169
 1
 —
 —
 —
 1
76,578
 1
 (1) —
 —
 —
Cumulative effect of adopting a new accounting standard—
 —
 73
 (47) —
 26
—
 —
 —
 57
 —
 57
Net loss—
 —
 —
 (25,477) —
 (25,477)
Balance at October 1, 201726,846,809
 $268
 $166,044
 $75,180
 $—
 $241,492
Purchase of treasury stock(18,406) —
 —
 —
 (349) (349)
Net income—
 —
 —
 4,184
 —
 4,184
Balance at April 1, 201826,905,630
 $269
 $167,711
 $68,666
 $(349) $236,297
Stock-based compensation—
 —
 1,017
 —
 —
 1,017
Vesting of restricted shares38,348
 1
 (1) —
 —
 —
Purchase of treasury stock(24,499) —
 —
 —
 (603) (603)
Net income—
 —
 —
 9,493
 —
 9,493
Balance at July 1, 201826,919,479
 $270
 $168,727
 $78,159
 $(952) $246,204
                      
Balance at December 31, 201726,847,458
 $268
 $166,823
 $64,425
 $—
 $231,516
Balance at December 30, 201826,858,988
 $270
 $170,290
 $72,268
 $(2,769) $240,059
Stock-based compensation—
 —
 2,644
 —
 —
 2,644
—
 —
 792
 —
 —
 792
Vesting of restricted shares115,539
 2
 (2) —
 —
 —
68,286
 —
 (1) —
 —
 (1)
Cumulative effect of adopting a new accounting standard (Note 1)—
 —
 —
 57
 —
 57
—
 —
 —
 14,002
 —
 14,002
Purchase of treasury stock(97,358) —
 —
 —
 (2,484) (2,484)(158,269) —
 —
 —
 (2,199) (2,199)
Net income—
 —
 —
 15,724
 —
 15,724
—
 —
 —
 2,289
 —
 2,289
Balance at September 30, 201826,865,639
 $270
 $169,465
 $80,206
 $(2,484) $247,457
Balance at March 31, 201926,769,005
 $270
 $171,081
 $88,559
 $(4,968) $254,942
Stock-based compensation—
 —
 735
 —
 —
 735
Vesting of restricted shares57,547
 1
 (1) —
 —
 —
Net loss—
 —
 —
 (43,440) —
 (43,440)
Balance at June 30, 201926,826,552
 $271
 $171,815
 $45,119
 $(4,968) $212,237




FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20182019 AND OCTOBERJULY 1, 20172018
(In thousands)
(Unaudited)
Nine Months EndedSix Months Ended
September 30, 2018 October 1, 2017June 30, 2019 July 1, 2018
Operating activities:      
Net income (loss)$15,724
 $(25,477)$(41,151) $13,677
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
(Gain) loss on disposals of property and equipment(1,167) 1,020
Loss (gain) on disposals of property and equipment8
 (930)
Stock-based compensation2,644
 2,767
1,527
 1,906
Impairment and other lease charges6,539
 59,081
1,413
 122
Goodwill impairment46,485
 —
Depreciation and amortization27,908
 26,265
19,355
 18,169
Amortization of deferred financing costs203
 231
135
 135
Amortization of deferred gains from sale-leaseback transactions(2,698) (2,703)—
 (1,799)
Deferred income taxes7,856
 (16,886)—
 2,141
Changes in other operating assets and liabilities(12,721) 3,355
11,771
 (7,088)
Net cash provided by operating activities44,288
 47,653
39,543
 26,333
Investing activities:      
Capital expenditures:      
New restaurant development(17,897) (23,994)(7,835) (12,051)
Restaurant remodeling(234) (2,280)(268) (299)
Other restaurant capital expenditures(15,536) (7,650)(9,936) (10,026)
Corporate and restaurant information systems(6,256) (4,615)(3,632) (4,912)
Total capital expenditures(39,923) (38,539)(21,671) (27,288)
Proceeds from disposals of properties4,676
 —
1,774
 4,676
Proceeds from insurance recoveries813
 —
—
 531
Net cash used in investing activities(34,434) (38,539)(19,897) (22,081)
Financing activities:      
Borrowings on revolving credit facility18,000
 7,000
11,000
 15,000
Repayments on revolving credit facility(23,000) (16,000)(28,000) (17,000)
Principal payments on capital leases(76) (66)
Principal payments on finance/capital leases(59) (51)
Financing costs associated with issuance of debt(150) —
—
 (150)
Payments to purchase treasury stock(2,484) —
(2,199) (952)
Net cash used in financing activities(7,710) (9,066)(19,258) (3,153)
Net change in cash2,144
 48
388
 1,099
Cash, beginning of period3,599
 4,196
5,258
 3,599
Cash, end of period$5,743
 $4,244
$5,646
 $4,698
Supplemental disclosures:      
Interest paid on long-term debt$2,505
 $1,756
$2,729
 $1,515
Interest paid on lease financing obligations—
 83
Accruals for capital expenditures5,338
 7,950
6,073
 6,437
Income tax payments (refunds), net(3,360) 3,003
(15,779) (4,150)
Capital lease obligations incurred322
 —
Non-cash reduction of lease financing obligations—
 1,664
Non-cash reduction of assets under lease financing obligations—
 1,193
Finance/capital lease obligations incurred304
 322

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FIESTA RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)



1. Basis of Presentation
Business Description. Fiesta Restaurant Group, Inc. ("Fiesta Restaurant Group" or "Fiesta") owns, operates and franchises two restaurant brands through its wholly-owned subsidiaries Pollo Operations, Inc. and its subsidiaries, Pollo Franchise, Inc. (collectively "Pollo Tropical"), and Taco Cabana, Inc. and its subsidiaries (collectively "Taco Cabana"). Unless the context otherwise requires, Fiesta and its subsidiaries, Pollo Tropical and Taco Cabana, are collectively referred to as the "Company." At SeptemberJune 30, 2018,2019, the Company owned and operated 150140 Pollo Tropical® restaurants and 171165 Taco Cabana® restaurants. TheAll of the Pollo Tropical restaurants included 141are located in Florida and 9 located in Georgia. Allall of the Taco Cabana restaurants are located in Texas. At SeptemberJune 30, 2018,2019, the Company franchised a total of 3031 Pollo Tropical restaurants and eight Taco Cabana restaurants. The franchised Pollo Tropical restaurants included 17 in Puerto Rico, four in Panama, two in Guyana, one in the Bahamas, fivesix on college campuses and one at a hospital in Florida. The franchised Taco Cabana restaurants included six in New Mexico and two on college campuses in Texas.
Basis of Consolidation. The unaudited condensed consolidated financial statements presented herein reflect the consolidated financial position, results of operations and cash flows of Fiesta and its wholly-owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
Fiscal Year. The Company uses a 52–53 week fiscal year ending on the Sunday closest to December 31. The fiscal year ended December 31, 201730, 2018 contained 52 weeks. The three and ninesix months ended SeptemberJune 30, 20182019 and OctoberJuly 1, 20172018 each contained thirteen and thirty-ninetwenty-six weeks, respectively. The fiscal year ending December 30, 201829, 2019 will contain 52 weeks.
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements for the three and ninesix months ended SeptemberJune 30, 20182019 and OctoberJuly 1, 20172018 have been prepared without an audit pursuant to the rules and regulations of the Securities and Exchange Commission and do not include certain information and footnotes required by U.S. Generally Accepted Accounting Principles ("GAAP") for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of such financial statements have been included. The results of operations for the three and ninesix months ended SeptemberJune 30, 20182019 and OctoberJuly 1, 20172018 are not necessarily indicative of the results to be expected for the full year.
These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 201730, 2018 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017.30, 2018. The December 31, 201730, 2018 balance sheet data is derived from those audited financial statements.
Reclassification. Write-offs of site development costs were reclassified from general and administrative expense to other expense (income), net in the condensed consolidated statement of operations to conform with the current year presentation.
Guidance Adopted in 2018.2019. In May 2014,February 2016, and in subsequent updates, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09,2016-02, Revenue from Contracts with CustomersLeases (Topic 842) (Topic 606)("ASC 842"), which supersedesrequires lessee recognition of lease assets and lease liabilities on the guidance in former Topic 605, Revenue Recognition,balance sheet and requires entities to recognize revenue when controldisclosure of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.key information about leasing arrangements. The Company adopted this new accounting standard and all the related amendments as of January 1,December 31, 2018 using the modified retrospective method, with certain optional practical expedients including the transition practical expedient package, which among other things does not require reassessment of lease classification. The Company elected the transition method that allows it to initially apply the new standard at the adoption date and recognizedrecognize a total cumulative effectcumulative-effect adjustment to increasethe opening balance of retained earnings by less than $0.1 million, which consistedin the period of a $0.3 million increase related to gift card breakage and a $0.3 million decrease related to initial franchise and area development fees, as a result of adopting the standard. The new standard did not impact the Company’s recognition of revenue from Company-owned and operated restaurants or its recognition of sale-based royalties from restaurants operated by franchisees.adoption. The comparative period information has not been restated and continues to be reported under the accounting standard in effect for those periods. When comparedthat period.
The Company has recognized lease liabilities and corresponding right-of-use ("ROU") lease assets for substantially all of the leases it previously accounted for as operating leases, including leases related to closed restaurant properties. The initial ROU assets were calculated as the present value of the remaining operating lease payments using the Company's incremental borrowing rate as of December 31, 2018, reduced by accrued occupancy costs such as certain closed-restaurant lease reserves, accrued rent (including accruals to expense operating lease payments on a straight-line basis), unamortized lease incentives and any unamortized sale-leaseback gains that resulted from off-market terms and increased by unamortized lease acquisition costs. Upon the adoption of ASC 842, the Company no longer records closed restaurant lease reserves, and ROU lease assets are reviewed for impairment with the Company's long-lived assets.
The Company elected the practical expedient to combine lease and non-lease components of real estate contracts, which resulted in classification of certain occupancy related expenses that are included in other restaurant operating expenses for periods prior to the previous accounting policies,adoption of ASC 842 as restaurant rent expenses in the impactconsolidated statement of adoptingoperations for periods subsequent to the new standard was immaterialadoption of ASC 842. The Company separately presents rent expense related to currentits closed restaurant locations and non-current other liabilities andany sublease income related to these closed restaurant locations within closed restaurant rent expense, net of sublease income in the consolidated statement of operations for periods subsequent to the adoption of ASC 842.

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



The Company recorded an initial adjustment to the opening balance of retained earnings at January 1, 2018of $14.0 million associated with previously deferred gains on sale-leaseback transactions and to net income for the three and nine months ended September 30, 2018. The adoptionimpairment of operating lease right-of-use assets as of the date of adoption. This adjustment consisted of $18.6 million in deferred gains on sale-leaseback transactions, net of a related deferred tax asset of $4.3 million and $0.2 million in impairment charges, net of tax. For any future sale-leaseback transactions, the gain (adjusted for any off-market terms) will be recognized immediately.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which eliminates the requirement to calculate the implied fair value of goodwill if the fair value of a reporting unit is less than the carrying amount of the reporting unit. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company early adopted this new accounting standard had no impact onand performed its interim impairment test in accordance with ASU 2017-04. The Company recognized a $46.5 million impairment of its Taco Cabana reporting unit goodwill, which represents the Company's consolidated statementsexcess of cash flows.the reporting unit's carrying value over its fair value, in the second quarter of 2019. See Note 4—Goodwill.
Revenue Recognition. Revenue is recognized upon transfer of promised products or services to customers in an amount that reflects the consideration the Company received in exchange for those products or services. Revenues from the Company's owned and operated restaurants are recognized when payment is tendered at the time of sale. Franchise royalty revenues are based on a percent of gross sales and are recorded as income when earned. Initial franchise fees and area development fees associated with new franchise agreements are not distinct from the continuing rights and services offered by the Company during the term of the

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



related franchise agreements and are recognized as income over the term of the related franchise agreements. A portion of the initial franchise fee is allocated to training services and is recognized as revenue when the Company completes the training services. Prior to adopting Topic 606, the Company recognized initial franchise fees as revenue in the period that a franchised location opened for business. See Note 6—Business Segment Information.
Gift cards. The Company sells gift cards to its customers in its restaurants and through select third parties. The Company recognizes revenue from gift cards upon redemption by the customer. For unredeemed gift cards that the Company expects to be entitled to breakage, the Company recognizes expected breakage as revenue in proportion to the pattern of redemption by the customers. The gift cards have no stated expiration dates. Revenues from unredeemed gift cards and gift card liabilities, which are recorded in other current liabilities, are not material to the Company's financial statements. Prior to adopting Topic 606, the Company did not recognize breakage on its gift cards.
Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. In determining fair value, the accounting standards establish a three levelthree-level hierarchy for inputs used in measuring fair value as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities; and Level 3 inputs are unobservable and reflect management's own assumptions. The following methods were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the fair value:
•
Current Assets and Liabilities. The carrying values reported on the balance sheet of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of those financial instruments.
•
Revolving Credit Borrowings. The fair value of outstanding revolving credit borrowings under the Company's senior credit facility, which is considered Level 2, is based on current LIBOR rates. The fair value of the Company's senior credit facility was approximately $69.9$61.0 million at SeptemberJune 30, 2018,2019, and $75.0$78.0 million at December 31, 2017.30, 2018. The carrying value of the Company's senior credit facility was $70.0$61.0 million at SeptemberJune 30, 20182019 and $75.0$78.0 million at December 31, 2017.30, 2018.
Long-Lived Assets. The Company assesses the recoverability of property and equipment and definite-lived intangible assets including right-of-use lease assets by determining whether the carrying value of these assets can be recovered over their respective remaining lives through undiscounted future operating cash flows. Impairment is reviewed when events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. See Note 3—Impairment of Long-Lived Assets.
Leases. The Company assesses whether an agreement contains a lease at inception. Operating leases are included within operating lease right-of-use assets, other current liabilities, and operating lease liabilities in the consolidated balance sheets. Finance leases are included within property and equipment, net, current portion of long-term debt, and long-term debt, net of current portion in the consolidated balance sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made in advance and is reduced by lease incentives received. As most leases do not provide an implicit rate, the Company uses its incremental borrowing rate at commencement date in determining the present value of lease payments. Lease terms include options to extend the lease when it is reasonably certain that the Company will exercise that option. The Company assumes options are reasonably certain to be exercised when such options are required to achieve a minimum 20-year lease term for new restaurant properties, and subsequent to the adoption of ASC 842, when it incurs significant leasehold improvement costs near the end of a lease term. The Company uses judgment and available data to allocate consideration in a contract when it leases land and a building. The Company also uses judgment in determining its incremental borrowing rate, which includes selecting a

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



yield curve based on a synthetic credit rating determined using a valuation model. Lease expense for lease payments is recognized on a straight-line basis over the lease term unless the related ROU asset has been adjusted for an impairment charge. The Company has real estate lease agreements with lease and non-lease components, which are accounted for as a single lease component. See Note 6—Leases.
Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements. Estimates also affect the reported amounts of expenses during the reporting periods. Significant items subject to such estimates and assumptions include: accrued occupancy costs, insurance liabilities, evaluation for impairment of goodwill and long-lived assets and lease accounting matters. Actual results could differ from those estimates.
2. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets, consist of the following:
September 30, 2018 December 31, 2017June 30, 2019 December 30, 2018
Prepaid contract expenses$3,670
 $3,681
$4,531
 $4,232
Assets held for sale(1)
—
 2,705
4,336
 —
Other3,300
 3,719
3,332
 2,330
$6,970
 $10,105
$12,199
 $6,562

(1) TwoOne closed Pollo Tropical restaurant and two Taco Cabana restaurant properties owned by the Company that were classified as held for sale as of December 31, 2017 were sold in 2018 for a total of $3.3 million.June 30, 2019.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



3. Impairment of Long-Lived Assets and Other Lease Charges
The Company reviews its long-lived assets, principally property and equipment and lease ROU assets, for impairment at the restaurant level. In addition to considering management’smanagement's plans, known regulatory or governmental actions and damage due to acts of God (hurricanes, tornadoes, etc.), the Company considers a triggering event to have occurred related to a specific restaurant if the restaurant’srestaurant's cash flows for the last twelve months are less than a minimum threshold or if consistent levels of cash flows for the remaining lease period are less than the carrying value of the restaurant’srestaurant's assets. If an indicator of impairment exists for any of its assets, an estimate of undiscounted future cash flows over the life of the primary asset for each restaurant is compared to that long-lived asset’sasset's carrying value. If the carrying value is greater than the undiscounted cash flow, the Company then determines the fair value of the asset and if an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. There is uncertainty in the projected undiscounted future cash flows used in the Company's impairment review analysis. If actual performance does not achieve the projections, the Company may recognize impairment charges in future periods, and such charges could be material. For closed restaurant locations, the Company reviews the future minimum lease payments and related ancillary costs from the date of the restaurant closure to the end of the remaining lease term and records a lease charge for the lease liabilities to be incurred, net of any estimated sublease recoveries. There is uncertainty in the estimates of future lease costs and sublease recoveries. Actual costs and sublease recoveries could vary significantly from the estimated amounts and result in additional lease charges or recoveries, and such amounts could be material.

A summary of impairment onof long-lived assets and other lease charges (recoveries) recorded by segment is as follows:
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
September 30, 2018 October 1, 2017 September 30, 2018 October 1, 2017June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Pollo Tropical$3,295
 $13,729
 $3,439
 $56,336
$52
 $685
 $(327) $144
Taco Cabana3,122
 2,176
 3,100
 2,745
1,699
 99
 1,740
 (22)
$6,417
 $15,905
 $6,539
 $59,081
$1,751
 $784
 $1,413
 $122


The Company recognized impairment charges totaling $5.7 million in the three months ended September 30, 2018 related to management's ongoing assessment of the Company's restaurant portfolio in light of continued sales declines at certain underperforming restaurants. Impairment and other lease charges for the three and ninesix months ended SeptemberJune 30, 20182019 for Pollo Tropical include impairment charges of $3.4$0.1 million and $3.6$0.4 million, respectively, related primarily to additional impairment of three underperformingequipment from previously impaired restaurants that the Company continues to operate and a benefit of $(0.1) million in net lease charge recoveries benefit related to previously closed restaurant lease terminations of $(0.7) million for the six months ended June 30, 2019. Impairment and other lease charges for the three and six months ended June 30, 2019 for Taco Cabana include impairment charges of $1.7 million related primarily to impairment of assets for three underperforming Taco Cabana restaurants for which continued sales declines resulted in a decrease in the estimated future cash flows and equipment from previously impaired restaurants.
Impairment and other lease charges for the three and six months ended July 1, 2018 primarily include lease charges, net of recoveries, of $0.5 million related to certain previously closed restaurants due to adjustments to estimates of future lease costs. Impairmentcosts and other lease charges for the three and nine months ended September 30, 2018 for Taco Cabana include impairment charges of $2.4 million and $2.6 million, respectively, related primarily to impairment of five underperforming restaurants that the Company continues to operate and other lease charges, net of recoveries, of $0.7 million and $0.5 million, respectively, due primarily to lease charges related to an office relocation in the third quarter of 2018 and other lease charges, net of recoveries, related to certain previously closed restaurants due to adjustments to estimates of future lease costs.
In conjunction with the Strategic Renewal Plan to drive long-term shareholder value creation, Pollo Tropical recognized impairment charges of $15.6 million and $51.3 million for the three and nine months ended October 1, 2017, respectively. In addition, Pollo Tropical recognized a $(1.9) million net benefit related to lease charge recoveries and $5.0 million of lease charges, net of recoveries, for the three and nine months ended October 1, 2017, respectively. These charges were due primarily to impairment and closures of underperforming Pollo Tropical restaurants in 2017 and the net benefit related to lease charge recoveries during the third quarter of 2017 was due to closed restaurant lease terminations, assignments and other adjustments to estimates of future lease costs. Impairment and other lease charges for Taco Cabana consisted of impairment charges of $0.9 million and $1.4 million for the three and nine months ended October 1, 2017, respectively, and other lease charges of $1.3 million for the three and nine months ended October 1, 2017. These charges were due primarily to impairment and closures of underperforming Taco Cabana restaurants in 2017.

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



impairment charges of $0.3 million related to previously closed restaurants as well as one underperforming Taco Cabana restaurant with a short remaining lease term. Impairment and other lease charges for the six months ended July 1, 2018 also include a net benefit of $(0.7) million in lease charge recoveries due primarily to a lease termination, a lease assignment, sublease and other adjustments to estimates of future lease costs in the first quarter of 2018.
The Company determined the fair value of restaurant equipment, for those restaurants reviewed for impairment, based on current economic conditions, the Company’sCompany's history of using these assets in the operation of its business and the Company's expectation of how a market participant would value the assets. In addition, for those restaurants reviewed for impairment where the Company owns the land and building, the Company utilized third-party information such as a broker quoted value to determine the fair value of the property. These fair value asset measurements rely on significant unobservable inputs and are considered Level 3 in the fair value hierarchy. The Company also utilized discounted future cash flows to determine the fair value of assets for certain leased restaurants. The Level 3 assets measured at fair value associated with impairment charges recorded during the ninesix months ended SeptemberJune 30, 2018 and October 1, 20172019 totaled $1.2 million and $13.5 million, respectively, which primarily consisted of equipment for the nine months ended September 30, 2018 and leasehold improvements related to Pollo Tropical restaurants that were or will be rebranded as Taco Cabana restaurants and the estimated fair value of owned properties for the nine months ended October 1, 2017.$0.7 million.
4. Other LiabilitiesGoodwill
Other current liabilities consistThe Company is required to review goodwill for impairment annually or more frequently when events and circumstances indicate that the carrying amount may be impaired. If the determined fair value of goodwill is less than the related carrying amount, an impairment loss is recognized. The Company performs its annual impairment assessment as of the following:
 September 30, 2018 December 31, 2017
Accrued workers' compensation and general liability claims$5,401
 $5,083
Sales and property taxes2,299
 2,279
Accrued occupancy costs4,959
 7,813
Other2,393
 6,642
 $15,052
 $21,817

Other non-current liabilities consistlast day of the following:fiscal year and has determined its reporting units to be its operating segments, Pollo Tropical and Taco Cabana.
 September 30, 2018 December 31, 2017
Accrued occupancy costs$20,007
 $20,985
Deferred compensation826
 1,029
Accrued workers’ compensation and general liability claims6,099
 6,102
Other3,542
 3,946
 $30,474
 $32,062

In performing its goodwill impairment test as of December 30, 2018, the Company compared the net book values of its reporting units to their estimated fair values, the latter determined by employing an income-based discounted cash flow analysis approach and a market-based approach, which was corroborated with other value indicators where available, such as comparable company earnings multiples.
Accrued occupancy costs include obligations pertainingAs of June 30, 2019, the Company determined that a triggering event had occurred due to closed restaurant locationsa sustained decrease in the market price of the Company's common stock. In response to the triggering event, the Company performed a quantitative impairment test for both the Pollo Tropical and accruals to expense operating lease rental paymentsTaco Cabana reporting units. Fair value for each reporting unit was determined using a combination of the income-based approach and two market-based approaches. Based on the impairment test analysis, the fair value of the Pollo Tropical reporting unit substantially exceeded its carrying amount, while the carrying amount for the Taco Cabana reporting unit exceeded its estimated fair value, which indicated an impairment of the Taco Cabana reporting unit. Lower than expected profitability and a straight-line basis overlower profitability and growth outlook for the lease term.Taco Cabana reporting unit reduced its income-based and market-based approach fair value.

The following table presentsCompany early adopted ASU 2017-04, which eliminates Step 2 from the activitygoodwill impairment test, and requires recognition of an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, limited to the carrying value of the reporting unit's goodwill. The Company recorded an impairment charge on the goodwill of its Taco Cabana segment of $46.5 million during the three months ended June 30, 2019, which is not deductible for income tax purposes.
A summary of changes in goodwill during the closed-restaurant reserve, of which $3.3 million and $5.3 million are included in non-current accrued occupancy costs at Septembersix months ended June 30, 2018 and December 31, 2017, respectively, with the remainder in current accrued occupancy costs.2019 is as follows:
 Nine Months Ended September 30, 2018 Year Ended December 31, 2017
Balance, beginning of period$12,994
 $4,912
Provisions for restaurant closures—
 8,767
Additional lease charges (recoveries), net413
 (1,301)
Payments, net(5,741) (5,528)
Other adjustments(1)
388
 6,144
Balance, end of period$8,054
 $12,994

 Pollo
Tropical		 Taco
Cabana		 Total
Balance, December 30, 2018$56,307
 $67,177
 $123,484
Impairment charges(1)
—
 (46,485) (46,485)
Balance, June 30, 2019$56,307
 $20,692
 $76,999
(1)(1) For the year ended Accumulated impairment losses at June 30, 2019 were $46.5 million. There were no accumulated impairment losses at December 31, 2017, includes the transfer of accruals to expense operating lease payments on a straight-line basis.30, 2018.


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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



5. Other Liabilities
Other current liabilities consist of the following:
 June 30, 2019 December 30, 2018
Accrued workers' compensation and general liability claims$4,546
 $4,886
Sales and property taxes1,735
 1,958
Accrued occupancy costs1,616
 4,554
Operating lease liabilities19,355
 —
Other2,109
 2,688
 $29,361
 $14,086

Other non-current liabilities consist of the following:
 June 30, 2019 December 30, 2018
Accrued occupancy costs$78
 $21,534
Deferred compensation920
 867
Accrued workers' compensation and general liability claims6,807
 6,808
Other625
 3,295
 $8,430
 $32,504

At December 30, 2018, accrued occupancy costs included obligations pertaining to closed restaurant locations and accruals to expense operating lease rental payments on a straight-line basis over the lease term. As a result of adopting ASC 842 on December 31, 2018, at June 30, 2019, accrued occupancy costs primarily consisted of obligations pertaining to closed restaurant locations.
The following table presents the activity in the closed-restaurant reserve, of which $0.1 million and $4.4 million are included in non-current accrued occupancy costs at June 30, 2019 and December 30, 2018, respectively, with the remainder in current accrued occupancy costs.
 Six Months Ended June 30, 2019 Year Ended December 30, 2018
Balance, beginning of period$8,819
 $12,994
Provisions for restaurant closures—
 2,228
Additional lease charges (recoveries), net(781) (152)
Payments, net(801) (6,778)
Other adjustments(1)
(5,708) 527
Balance, end of period$1,529
 $8,819

(1) As a result of adopting ASC 842 on December 31, 2018, the portion of the closed restaurant reserve related to operating lease rental payments was reclassified and included as a component of the related ROU assets during the six months ended June 30, 2019. The portion of the closed restaurant reserve related to variable ancillary lease costs was not reclassified and was not included as a reduction to ROU assets.
6. Leases
The Company utilizes land and buildings in its operations under various operating and finance lease agreements. The Company does not consider any one of these individual leases material to the Company's operations. Initial lease terms are generally for 20 years and, in many cases, provide for renewal options and in most cases rent escalations. As of June 30, 2019, the Company's leases have remaining lease terms of 0.3 years to 22.3 years. Some of the Company's leases include options to extend the lease for up to 40 years. Certain leases require contingent rent, determined as a percentage of sales as defined by the terms of the applicable lease agreement. For most locations, the Company is obligated for occupancy related costs including payment of property taxes, insurance and utilities. Variable lease payments included in rent expense consist of such contingent rent, certain rent payments based on changes in an index and certain occupancy related costs, such as variable common area maintenance expense and property taxes. The Company is not subject to residual value guarantees under any of the lease agreements. Many of the Company's real estate leases contain usage restrictions, but do not contain financial covenants and restrictions.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



Lease expense consisted of the following:
 Three Months Ended Six Months Ended
 June 30, 2019 June 30, 2019
Operating lease cost$11,346
 $22,701
    
Finance lease costs:   
Amortization of right-of-use assets$42
 $77
Interest on lease liabilities55
 110
Total finance lease costs$97
 $187
    
Variable lease costs$3,104
 6,090
Sublease income(881) (1,629)
Total lease costs$13,666
 $27,349

Supplemental balance sheet information related to leases is as follows:
 June 30, 2019
Operating Leases 
Operating lease right-of-use assets$261,395
  
Other current liabilities$19,355
Operating lease liabilities265,816
Total operating lease liabilities$285,171
  
Finance Leases 
Property and equipment, gross$2,677
Accumulated amortization(1,197)
Property and equipment, net$1,480
  
Current portion of long-term debt$157
Long-term debt, net of current portion1,793
Total finance lease liabilities$1,950
Weighted Average Remaining Lease Term (in Years)
Operating leases12.3
Finance leases8.7
Weighted Average Discount Rate
Operating leases7.70%
Finance leases13.05%


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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



Supplemental cash flow information related to leases is as follows:
 Six Months Ended
 June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities: 
Operating cash flows for operating leases$21,820
Operating cash flows for finance leases110
Financing cash flows for finance leases59
  
Right-of-use assets obtained in exchange for lease liabilities: 
Operating lease ROU assets8,009
Finance lease ROU assets304
  
Right-of-use assets and lease liabilities reduced for terminated leases: 
Operating lease ROU assets2,547
Operating lease liabilities3,196
  
Operating lease right-of-use assets obtained and liabilities incurred as a result of adoption of ASC 842: 
Operating lease ROU assets267,743
Operating lease liabilities291,373

Maturities of lease liabilities were as follows:
 Operating Leases Finance Leases
Remaining 2019$18,411
 $176
202043,609
 410
202140,169
 424
202238,752
 424
202335,372
 390
202431,813
 350
Thereafter249,969
 1,278
Total lease payments458,095
 3,452
Less amount representing interest(172,924) (1,502)
Total discounted lease liabilities285,171
 1,950
Less current portion(19,355) (157)
Long-term portion of leases liabilities$265,816
 $1,793

As of June 30, 2019, the Company had five additional operating leases for restaurant properties. These operating leases will commence in fiscal year 2020 with each lease having an initial lease term of 15 years.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



Minimum rent commitments due under capital and non-cancelable operating leases at December 30, 2018 were as follows:
 Operating Capital
2019$44,427
 $323
202044,144
 327
202141,396
 342
202240,215
 342
202336,587
 349
Thereafter264,704
 1,646
Total minimum lease payments(1)
$471,473
 3,329
Less amount representing interest  (1,585)
Total obligations under capital leases  1,744
Less current portion  (108)
Long-term debt under capital leases  $1,636
(1)Minimum operating lease payments include contractual rent payments for closed restaurants for which the Company is still obligated under the lease agreements and have not been reduced by minimum sublease rent of $41.4 million due in the future under non-cancelable subleases. See Note 5—Other Liabilities.
The Company subleases land and buildings related to closed restaurant locations and a closed office location under various operating sublease agreements. Initial sublease terms are generally for the period of time remaining on the head lease term and, in some cases, subleases provide for renewal options and in most cases rent escalations. As of June 30, 2019, the Company's subleases have remaining sublease terms of 2.8 years to 19.9 years. Some of the Company's subleases include options to extend the lease for up to 25 years. Variable lease payments included in sublease income consist of certain occupancy related costs, such as variable common area maintenance expense and property taxes where the Company makes the real estate payment and is reimbursed by the lessee. The sublease agreements do not include residual value guarantees. Consistent with the Company's real estate leases, many of the subleases contain usage restrictions, but do not contain financial covenants and restrictions.
The undiscounted cash flows to be received under operating subleases were as follows:
 Operating Leases
Remaining 2019$1,779
20203,994
20214,152
20224,077
20234,065
20244,119
Thereafter37,268
Total$59,454

7. Stockholders' Equity

Purchase of Treasury Stock

On February 26, 2018, the Company announced that its board of directors approved a share repurchase program for up to 1,500,000 shares of the Company's common stock. Under the share repurchase program, shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The share repurchase program has no time limit and may be modified, suspended, superseded or terminated at any time by the Company's board of directors. The Company repurchased 97,358158,269 shares of its common stock under the program in open market transactions during the ninesix months ended SeptemberJune 30, 20182019 for $2.5$2.2 million. The repurchased shares are held as treasury stock at cost.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



Stock-Based Compensation

During the ninesix months ended SeptemberJune 30, 2018,2019, the Company granted certain employees, non-employee directors and a non-employee food and beverage consultant a total of 187,747267,002 non-vested restricted shares under the Fiesta Restaurant Group, Inc. 2012 Stock Incentive Plan (the "Fiesta Plan"). The shares granted to employees generally vest and become non-forfeitable over a four-year vesting period. The shares granted to non-employee directors and the non-employee food and beverage consultant and a new non-employee director vest and become non-forfeitable over a one-, three- and five-yearfour-year vesting period, respectively. The weighted average fair value at grant date for non-vested shares issued during the ninesix months ended SeptemberJune 30, 2018 and October 1, 20172019 was $19.02 and $20.84$13.32 per share, respectively.share.
During the ninesix months ended SeptemberJune 30, 2018,2019, the Company granted a certain executivesexecutive a total of 112,16915,348 restricted stock units under the Fiesta Plan, which vest in threetwo tranches over a three-yeartwo-year vesting period. The restricted stock units granted to executivesthe executive are subject to continued service and attainment of specified share prices of the Company's common stock for a specified period of time within each vesting period. Each tranche vests by the end of a one-year period if the specified target stock price condition for that year is met. If the specified target stock price condition for anythe first tranche is not met for the year, the cumulative unearned restricted stock units will be rolled over to the subsequent tranches on a pro rata basis.tranche. For the restricted stock units granted to executives in the ninesix months ended SeptemberJune 30, 2018,2019, the number of shares into which these restricted stock units convert ranges from no shares, if the service and market performance conditions are not met, to 112,16915,348 shares, if the service and market performance conditions are met in the last vesting period. The weighted average fair value at grant date for the restricted stock units granted to executives in the ninesix months ended SeptemberJune 30, 2018 and October 1, 20172019 was $6.96 and $12.13 per share, respectively.
During the nine months ended October 1, 2017, the Company granted certain employees restricted stock units under the Fiesta Plan. The restricted stock units granted during the nine months ended October 1, 2017 vest and become non-forfeitable at the end of a four-year vesting period. The weighted average fair value at grant date for these restricted stock units issued to employees during the nine months ended October 1, 2017 was $20.75$1.76 per share.
Stock-based compensation expense for the three and ninesix months ended SeptemberJune 30, 20182019 was $0.7 million and $2.6$1.5 million, respectively, and for the three and ninesix months ended OctoberJuly 1, 20172018 was $0.9$1.0 million and $2.8$1.9 million, respectively. At SeptemberJune 30, 2018,2019, the total unrecognized stock-based compensation expense related to non-vested restricted shares and restricted stock units was approximately $5.8$5.7 million. At SeptemberJune 30, 2018,2019, the remaining weighted average vesting period for non-vested restricted shares was 2.72.9 years and restricted stock units was 1.31.2 years.
A summary of all non-vested restricted shares and restricted stock units activity for the six months ended June 30, 2019 is as follows:
 Non-Vested Shares Restricted Stock Units
 Shares Weighted
Average
Grant Date
Fair Value		 Units Weighted
Average
Grant Date
Fair Value
Outstanding at December 30, 2018287,866
 $20.70
 231,112
 $12.44
Granted267,002
 13.32
 15,348
 1.76
Vested and released(122,549) 20.51
 (3,124) 62.05
Forfeited(43,780) 18.66
 (94,833) 12.95
Outstanding at June 30, 2019388,539
 $15.85
 148,503
 $9.96

The fair value of the non-vested restricted shares and all other restricted stock units is based on the closing price on the date of grant. The fair value of the restricted stock units subject to market conditions was estimated using the Monte Carlo simulation method. The assumptions used to value grant restricted stock units subject to market conditions are detailed below:
  2019 2018
Grant date stock price $14.66
 $18.70
Fair value at grant date $1.76
 $6.96
Risk free interest rate 2.53% 2.40%
Expected term (in years) 2
 3
Dividend yield —% —%
Expected volatility 43.18% 41.49%


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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



A summary of all non-vested restricted shares and restricted stock units activity for the nine months ended September 30, 2018 is as follows:
 Non-Vested Shares Restricted Stock Units
 Shares Weighted
Average
Grant Date
Fair Value		 Units Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2017239,500
 $24.81
 143,946
 $23.11
Granted187,747
 19.02
 112,169
 6.96
Vested and released(105,240) 25.62
 (10,344) 45.76
Forfeited(26,609) 22.56
 (13,851) 52.93
Outstanding at September 30, 2018295,398
 $20.66
 231,920
 $12.51

The fair value of the restricted stock units subject to market performance conditions was estimated using the Monte Carlo simulation method. The fair value of the non-vested restricted shares and all other restricted stock units is based on the closing price on the date of grant.
6.8. Business Segment Information
The Company owns, operates and franchises two restaurant brands, Pollo Tropical® and Taco Cabana®, each of which is an operating segment. Pollo Tropical restaurants feature 24-hourfire-grilled and crispy citrus marinated chicken and other freshly prepared tropical inspired menu items, while Taco Cabana restaurants specialize in Mexican inspired food.
Each segment's accounting policies are described in the summary of significant accounting policies in Note 1 to the Company's audited financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017.30, 2018. The primary measure of segment profit or loss used by the chief operating decision maker to assess performance and allocate resources is Adjusted EBITDA, which is defined as earnings attributable to the applicable operating segments before interest expense, income taxes, depreciation and amortization, impairment and other lease charges, stock-compensationgoodwill impairment, closed restaurant rent expense, net of sublease income, stock-based compensation expense, other expense (income), net, and certain significant items for each segment that management believes are related to strategic changes and/or are not related to the ongoing operation of the Company's restaurants as set forth in the reconciliation table below.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



The "Other" column includes corporate-related items not allocated to reportable segments and consists primarily of corporate-owned property and equipment, miscellaneous prepaid costs, capitalized costs associated with the issuance of indebtedness, corporate cash accounts and a current income tax receivable.
Three Months Ended Pollo Tropical Taco Cabana Other Consolidated Pollo Tropical Taco Cabana Other Consolidated
September 30, 2018:        
June 30, 2019:        
Restaurant sales $93,592
 $80,374
 $—
 $173,966
 $92,620
 $78,093
 $—
 $170,713
Franchise revenue 453
 229
 —
 682
 438
 230
 —
 668
Cost of sales 31,219
 24,802
 —
 56,021
 29,318
 24,440
 —
 53,758
Restaurant wages and related expenses(1)
 21,947
 25,996
 —
 47,943
 21,290
 24,476
 —
 45,766
Restaurant rent expense 4,392
 4,737
 —
 9,129
 5,495
 6,403
 —
 11,898
Other restaurant operating expenses 13,521
 13,773
 —
 27,294
 11,900
 10,613
 —
 22,513
Advertising expense 3,413
 3,059
 —
 6,472
 3,189
 2,694
 —
 5,883
General and administrative expense(2)
 7,291
 5,993
 —
 13,284
 7,700
 5,796
 —
 13,496
Adjusted EBITDA 12,544
 2,493
 —
 15,037
 14,646
 4,120
 —
 18,766
Depreciation and amortization 5,438
 4,301
 —
 9,739
 5,376
 4,431
 —
 9,807
Capital expenditures 4,621
 7,489
 525
 12,635
 4,648
 5,930
 (444) 10,134
October 1, 2017:        
July 1, 2018:        
Restaurant sales $87,888
 $70,212
 $—
 $158,100
 $95,377
 $80,775
 $—
 $176,152
Franchise revenue 396
 195
 —
 591
 459
 216
 —
 675
Cost of sales 28,527
 20,624
 —
 49,151
 31,482
 25,207
 —
 56,689
Restaurant wages and related expenses(1)
 21,208
 23,441
 —
 44,649
 21,549
 26,128
 —
 47,677
Restaurant rent expense 4,655
 4,449
 —
 9,104
 4,335
 4,505
 —
 8,840
Other restaurant operating expenses 13,034
 11,822
 —
 24,856
 12,634
 12,020
 —
 24,654
Advertising expense 4,980
 905
 —
 5,885
 3,130
 2,231
 —
 5,361
General and administrative expense(2)
 6,647
 5,410
 —
 12,057
 6,923
 5,897
 —
 12,820
Adjusted EBITDA 9,396
 3,776
 —
 13,172
 15,529
 4,648
 —
 20,177
Depreciation and amortization 5,187
 3,296
 —
 8,483
 5,363
 3,807
 —
 9,170
Capital expenditures 6,302
 5,471
 613
 12,386
 4,862
 7,000
 258
 12,120

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)




 
Nine Months Ended Pollo Tropical Taco Cabana Other Consolidated
September 30, 2018:        
Six Months Ended Pollo Tropical Taco Cabana Other Consolidated
June 30, 2019:        
Restaurant sales $283,447
 $235,504
 $—
 $518,951
 $183,646
 $152,248
 $—
 $335,894
Franchise revenue 1,376
 632
 —
 2,008
 893
 446
 —
 1,339
Cost of sales 93,716
 72,559
 —
 166,275
 57,616
 46,652
 —
 104,268
Restaurant wages and related expenses(1)
 65,652
 76,451
 —
 142,103
 42,443
 48,359
 —
 90,802
Restaurant rent expense 13,024
 13,837
 —
 26,861
 10,916
 12,727
 —
 23,643
Other restaurant operating expenses 38,270
 37,128
 —
 75,398
 23,858
 20,418
 —
 44,276
Advertising expense 9,859
 8,187
 —
 18,046
 6,221
 5,183
 —
 11,404
General and administrative expense(2)
 22,256
 18,767
 —
 41,023
 16,047
 12,520
 —
 28,567
Adjusted EBITDA 42,520
 9,652
 —
 52,172
 28,963
 7,015
 —
 35,978
Depreciation and amortization 16,117
 11,791
 —
 27,908
 10,589
 8,766
 —
 19,355
Capital expenditures 17,656
 21,400
 867
 39,923
 11,793
 9,967
 (89) 21,671
October 1, 2017:        
July 1, 2018:        
Restaurant sales $281,572
 $223,510
 $—
 $505,082
 $189,855
 $155,130
 $—
 $344,985
Franchise revenue 1,272
 568
 —
 1,840
 923
 403
 —
 1,326
Cost of sales 87,430
 63,397
 —
 150,827
 62,497
 47,757
 —
 110,254
Restaurant wages and related expenses(1)
 66,945
 72,105
 —
 139,050
 43,705
 50,455
 —
 94,160
Restaurant rent expense 14,502
 13,379
 —
 27,881
 8,632
 9,100
 —
 17,732
Other restaurant operating expenses 39,353
 34,207
 —
 73,560
 24,749
 23,355
 —
 48,104
Advertising expense 11,316
 6,400
 —
 17,716
 6,446
 5,128
 —
 11,574
General and administrative expense(2)
 26,161
 20,590
 —
 46,751
 14,965
 12,774
 —
 27,739
Adjusted EBITDA 41,257
 17,252
 —
 58,509
 29,976
 7,159
 —
 37,135
Depreciation and amortization 16,705
 9,560
 —
 26,265
 10,679
 7,490
 —
 18,169
Capital expenditures 23,208
 13,487
 1,844
 38,539
 13,035
 13,911
 342
 27,288
Identifiable Assets:                
September 30, 2018 $212,704
 $174,575
 $32,619
 $419,898
December 31, 2017 227,194
 167,237
 28,882
 423,313
June 30, 2019 $351,472
 $237,135
 $21,102
 $609,709
December 30, 2018 207,435
 174,681
 36,543
 418,659

(1) Includes stock-based compensation expense of $6$16 and $56$43 for the three and ninesix months ended SeptemberJune 30, 2018, 2019, respectively, and $9$33 and $44$50 for the three and ninesix months ended OctoberJuly 1, 2017,2018, respectively.
(2) Includes stock-based compensation expense of $732$719 and $2,588$1,484 for the three and ninesix months ended SeptemberJune 30, 2018,2019, respectively, and $938$984 and $2,723$1,856 for the three and ninesix months ended OctoberJuly 1, 2017,2018, respectively.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



A reconciliation of consolidated net income (loss) to Adjusted EBITDA follows:
Three Months Ended Pollo Tropical Taco Cabana Consolidated Pollo Tropical Taco Cabana Other Consolidated
September 30, 2018:      
Net income     $2,047
Benefit from income taxes     (4,892)
June 30, 2019:        
Net loss       $(43,440)
Provision for income taxes       623
Income (loss) before taxes $2,976
 $(5,821) $(2,845) $6,918
 $(49,735) $—
 $(42,817)
Add:              
Non-general and administrative expense adjustments:              
Depreciation and amortization 5,438
 4,301
 9,739
 5,376
 4,431
 —
 9,807
Impairment and other lease charges 3,295
 3,122
 6,417
 52
 1,699
 —
 1,751
Goodwill impairment —
 46,485
 —
 46,485
Interest expense 448
 476
 924
 480
 487
 —
 967
Closed restaurant rent expense, net of sublease income 1,039
 296
 —
 1,335
Other expense (income), net (29) 76
 47
 148
 6
 —
 154
Stock-based compensation expense in restaurant wages 4
 2
 6
 4
 12
 —
 16
Total non-general and administrative expense adjustments 9,156
 7,977
 17,133
 7,099
 53,416
 —
 60,515
General and administrative expense adjustments:              
Stock-based compensation expense 407
 325
 732
 351
 368
 —
 719
Strategic Renewal Plan restructuring costs and retention bonuses 5
 12
 17
Restructuring costs and retention bonuses 278
 71
 —
 349
Total general and administrative expense adjustments 412
 337
 749
 629
 439
 —
 1,068
Adjusted EBITDA $12,544
 $2,493
 $15,037
 $14,646
 $4,120
 $—
 $18,766
              
October 1, 2017:      
Net loss     $(8,257)
Benefit from income taxes     (4,827)
Loss before taxes $(10,816) $(2,268) $(13,084)
July 1, 2018:        
Net income       $9,493
Provision for income taxes       3,021
Income before taxes $10,797
 $1,717
 $—
 $12,514
Add:              
Non-general and administrative expense adjustments:              
Depreciation and amortization 5,187
 3,296
 8,483
 5,363
 3,807
 —
 9,170
Impairment and other lease charges 13,729
 2,176
 15,905
 685
 99
 —
 784
Interest expense 329
 343
 672
 491
 495
 —
 986
Other expense (income), net 574
 (105) 469
 (1,894) (1,651) —
 (3,545)
Stock-based compensation expense in restaurant wages (4) 13
 9
 14
 19
 —
 33
Total non-general and administrative expense adjustments 19,815
 5,723
 25,538
 4,659
 2,769
 —
 7,428
General and administrative expense adjustments:              
Stock-based compensation expense 587
 351
 938
 584
 400
 —
 984
Board and shareholder matter costs (89) (66) (155) (328) (269) —
 (597)
Strategic Renewal Plan restructuring costs and retention bonuses 51
 36
 87
Office restructuring and relocation costs (152) —
 (152)
Restructuring costs and retention bonuses (16) 31
 —
 15
Legal settlements and related costs (167) —
 —
 (167)
Total general and administrative expense adjustments 397
 321
 718
 73
 162
 —
 235
Adjusted EBITDA $9,396
 $3,776
 $13,172
 $15,529
 $4,648
 $—
 $20,177
              
        
        


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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



Nine Months Ended Pollo Tropical Taco Cabana Consolidated
September 30, 2018:      
Six Months Ended Pollo Tropical Taco Cabana Other Consolidated
June 30, 2019:        
Net loss       $(41,151)
Provision for income taxes       1,569
Income (loss) before taxes $12,874
 $(52,456) $—
 $(39,582)
Add:        
Non-general and administrative expense adjustments:        
Depreciation and amortization 10,589
 8,766
 —
 19,355
Impairment and other lease charges (327) 1,740
 —
 1,413
Goodwill impairment —
 46,485
 —
 46,485
Interest expense 1,136
 1,065
 —
 2,201
Closed restaurant rent expense, net of sublease income 2,183
 576
 —
 2,759
Other expense (income), net 744
 112
 —
 856
Stock-based compensation expense in restaurant wages 9
 34
 —
 43
Total non-general and administrative expense adjustments 14,334
 58,778
 —
 73,112
General and administrative expense adjustments:        
Stock-based compensation expense 928
 556
 —
 1,484
Restructuring costs and retention bonuses 827
 137
 —
 964
Total general and administrative expense adjustments 1,755
 693
 —
 2,448
Adjusted EBITDA $28,963
 $7,015
 $—
 $35,978
        
July 1, 2018:        
Net income     $15,724
       $13,677
Benefit from income taxes     (246)
Provision for income taxes       4,646
Income (loss) before taxes $21,901
 $(6,423) $15,478
 $18,925
 $(602) $—
 $18,323
Add:              
Non-general and administrative expense adjustments:              
Depreciation and amortization 16,117
 11,791
 27,908
 10,679
 7,490
 —
 18,169
Impairment and other lease charges 3,439
 3,100
 6,539
 144
 (22) —
 122
Interest expense 1,467
 1,512
 2,979
 1,019
 1,036
 —
 2,055
Other expense (income), net (1,577) (1,555) (3,132) (1,548) (1,631) —
 (3,179)
Stock-based compensation expense in restaurant wages 23
 33
 56
 19
 31
 —
 50
Total non-general and administrative expense adjustments 19,469
 14,881
 34,350
 10,313
 6,904
 —
 17,217
General and administrative expense adjustments:              
Stock-based compensation expense 1,458
 1,130
 2,588
 1,051
 805
 —
 1,856
Board and shareholder matter costs (328) (269) (597) (328) (269) —
 (597)
Strategic Renewal Plan restructuring costs and retention bonuses 187
 333
 520
Restructuring costs and retention bonuses 182
 321
 —
 503
Legal settlements and related costs (167) —
 (167) (167) —
 —
 (167)
Total general and administrative expense adjustments 1,150
 1,194
 2,344
 738
 857
 —
 1,595
Adjusted EBITDA $42,520
 $9,652
 $52,172
 $29,976
 $7,159
 $—
 $37,135
      
October 1, 2017:      
Net loss     $(25,477)
Benefit from income taxes     (14,241)
Loss before taxes $(39,414) $(304) $(39,718)
Add:      
Non-general and administrative expense adjustments:      
Depreciation and amortization 16,705
 9,560
 26,265
Impairment and other lease charges 56,336
 2,745
 59,081
Interest expense 873
 1,037
 1,910
Other expense (income), net 1,624
 97
 1,721
Stock-based compensation expense in restaurant wages (4) 48
 44
Unused pre-production costs in advertising expense 322
 88
 410
Total non-general and administrative expense adjustments 75,856
 13,575
 89,431
General and administrative expense adjustments:      
Stock-based compensation expense 1,542
 1,181
 2,723
Terminated capital project 484
 365
 849
Board and shareholder matter costs 2,136
 1,612
 3,748
Strategic Renewal Plan restructuring costs and retention bonuses 1,278
 823
 2,101
Office restructuring and relocation costs (152) —
 (152)
Legal settlements and related costs (473) —
 (473)
Total general and administrative expense adjustments 4,815
 3,981
 8,796
Adjusted EBITDA $41,257
 $17,252
 $58,509


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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



7.9. Earnings (Loss) Per Share
Basic earnings (loss) per share ("EPS") is computed by dividing net income (loss) applicable to common shares by the weighted average number of common shares outstanding during each period. Non-vested restricted shares contain a non-forfeitable right to receive dividends on a one-to-one per share ratio to common shares and are thus considered participating securities. The impact of the participating securities is included in the computation of basic EPS pursuant to the two-class method. The two-class method of computing EPS is an earnings allocation formula that determines earnings attributable to common shares and participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. EPS is computed by dividing undistributed earnings allocated to common stockholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and non-vested restricted shares based on the weighted average shares outstanding during the period.
Diluted EPS reflects the potential dilution that could occur if the restricted stock units were to be converted into common shares. Restricted stock units with performance conditions are only included in the diluted EPS calculation to the extent that performance conditions have been met at the measurement date. Diluted EPS is computed by adjusting the basic weighted average number of common shares by the dilutive effect of the restricted stock units, determined using the treasury stock method.
Weighted averageFor the three and six months ended June 30, 2019, all shares of outstanding restricted stock units totaling 568 and 746 shares were not included in the computation of diluted EPS for the three and nine months ended September 30, 2018, respectively, because including them would have been antidilutive. For the three and nine months ended October 1, 2017, all restricted stock units outstanding were excluded from the computation of diluted EPS because including themsuch restricted stock units would have been antidilutive as a result of the net loss in these periods.the three and six months ended June 30, 2019. Weighted average outstanding restricted stock units totaling 611 and 836 shares were excluded from the computation of diluted EPS for the three and six months ended July 1, 2018 because including such restricted stock units would have been antidilutive.
The computation of basic and diluted EPS is as follows:
Three Months Ended Nine Months EndedThree Months Ended Six Months Ended
September 30, 2018 October 1, 2017 September 30, 2018 October 1, 2017June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Basic and diluted EPS:              
Net income (loss)$2,047
 $(8,257) $15,724
 $(25,477)$(43,440) $9,493
 $(41,151) $13,677
Less: income allocated to participating securities23
 —
 171
 —
—
 113
 —
 148
Net income (loss) available to common shareholders$2,024
 $(8,257) $15,553
 $(25,477)$(43,440) $9,380
 $(41,151) $13,529
Weighted average common shares—basic26,954,285
 26,845,568
 26,900,716
 26,811,610
26,807,068
 26,916,295
 26,825,286
 26,895,302
Restricted stock units4,589
 —
 4,675
 —
—
 3,619
 —
 6,527
Weighted average common shares—diluted26,958,874
 26,845,568
 26,905,391
 26,811,610
26,807,068
 26,919,914
 26,825,286
 26,901,829
              
Earnings per common share—basic$0.08
 $(0.31) $0.58
 $(0.95)
Earnings per common share—diluted0.08
 (0.31) 0.58
 (0.95)
Earnings (loss) per common share—basic$(1.62) $0.35
 $(1.53) $0.50
Earnings (loss) per common share—diluted(1.62) 0.35
 (1.53) 0.50

8.10. Commitments and Contingencies

Lease Assignments. Taco Cabana has assigned three leases to various parties on properties where it no longer operates restaurants with lease terms expiring on various dates through 2029. The assignees are responsible for making the payments required by the leases. The Company is a guarantor under one of the leases, and it remains secondarily liable as a surety with respect to two of the leases. Pollo Tropical assigned one lease to a third party on a property where it no longer operates with a lease term expiring in 2033. The assignee is responsible for making the payments required by the lease. The Company is a guarantor under the lease.

The maximum potential liability for future rental payments that the Company could be required to make under these leases at SeptemberJune 30, 20182019 was $3.7$3.4 million. The Company could also be obligated to pay property taxes and other lease relatedlease-related costs. The obligations under these leases will generally continue to decrease over time as the operating leases expire. The Company does not believe it is probable that it will be ultimately responsible for the obligations under these leases.

Legal Matters. On November 24, 2015, Pollo Tropical receivedThe Company is a legal demand letter alleging that assistant managers were misclassified as exempt from overtime wages under the Fair Labor Standards Act. On September 30, 2016, priorparty to any suit being filed, Pollo Tropical reached a settlement with seven named individuals and a proposed collective action class that allowed current and former assistant managers to receive notice and opt-invarious litigation matters incidental to the settlement. Pollo Tropical deniesconduct of business. The Company does not believe that the outcome of any liability or unlawful conduct.of these matters will have a material effect on its consolidated financial statements.


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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



The settlement was approved by a Florida state judge on December 27, 2017 which resulted in dismissal with prejudice for the named individuals and all individuals that opted-in to the settlement. The Company reserved $0.8 million in 2016 to cover the estimated costs related to the settlement. During the second quarter of 2018, the Company paid all settlement claims costs and recognized a reduction in legal settlement costs of $0.2 million.

The Company is also a party to various other litigation matters incidental to the conduct of business. The Company does not believe that the outcome of any of these matters will have a material effect on its consolidated financial statements.
Contingency Related to Insurance Recoveries. During the third quarter of 2017, Texas and Florida were struck by Hurricanes Harvey and Irma (the "Hurricanes"). Forty-three Taco Cabana restaurants in the Houston metropolitan area and all Pollo Tropical restaurants in Florida and the Atlanta metropolitan area were temporarily closed and affected by the Hurricanes to varying degrees (e.g. property preparation and damages, inventory losses, payments to hourly employees while restaurants were closed and lost business related to temporary closures). In 2017, the Company recorded certain expected insurance proceeds in accounts receivable of $0.7 million and $0.4 million for Pollo Tropical and Taco Cabana, respectively. In the nine months ended September 30, 2018, the Company received business interruption and property damage insurance settlement proceeds of $2.8 million and $1.4 million for Pollo Tropical and Taco Cabana, respectively, and recognized other income of $2.1 million and $1.0 million for Pollo Tropical and Taco Cabana, respectively, related to the Hurricanes. The Company has received a final settlement related to Hurricane Irma as of September 30, 2018 and expects to record additional insurance proceeds related to Hurricane Harvey at the time of final settlement.
9. Income Taxes
Tax Law Changes. On December 22, 2017, the Tax Cuts and Jobs Act (the "Act"), which includes a provision that reduced the federal corporate income tax rate from 35.0% to 21.0% effective January 1, 2018, was signed into law. In accordance with generally accepted accounting principles, the enactment of this new tax legislation required the Company to revalue its net deferred income tax assets at the new corporate statutory rate of 21.0% as of the enactment date, which resulted in an adjustment to its deferred income taxes of $9.0 million with a corresponding increase to the provision for income taxes as a discrete item during the fourth quarter of 2017. In 2018, in conjunction with a cost segregation study conducted prior to filing its 2017 federal income tax return, the Company changed the depreciation method for certain assets for federal income tax purposes to accelerate tax deductions. Changes in the Company's 2017 federal income tax return from the amounts recorded as of December 31, 2017 were primarily the result of changing the depreciable lives of assets for federal income tax purposes. These changes allowed the Company to record an incremental benefit of $3.9 million during the third quarter of 2018.
On December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for the impact of the Act, that, in effect, allows entities to use a methodology similar to the measurement period in a business combination. Pursuant to the disclosure provisions of SAB 118, the Company continues to evaluate the impact of the Act on various matters. The actual impact of the Act on the Company may differ from the provisional amounts recognized based on its reasonable estimates due to, among other things, changes in assumptions made in the Company's interpretation of the Act, guidance related to application of the Act that may be issued in the future, and actions that the Company may take as a result of the expected impact of the Act. The Company will adjust the amounts recognized related to the Act if more information becomes available. The Company did not make any measurement period adjustments related to the Act in the nine months ended September 30, 2018.

10.11. Recent Accounting Pronouncements
In February 2016, and in subsequent updates, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessee recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. For the Company, the new standard is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. A modified retrospective approach is required with an option to use certain practical expedients. The Company intends to elect the transition method that allows it to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The comparative period information will not be restated and will continue to be reported under the accounting standard in effect for those periods. The Company is currently evaluating the impact of the new standard on its financial statements. Although the impact is not currently estimable, the Company expects to recognize right-of-use lease assets and lease liabilities for most of the leases it currently accounts for as operating leases. The right-of-use lease assets to be recognized will be adjusted by certain closed-restaurant lease reserves, accrued rent (including accruals to expense operating lease payments on a straight-line basis) and unamortized lease incentives upon the adoption of Topic 842. The Company intends to elect the transition practical expedient package as well as the practical expedient to combine lease

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in thousands, except per share data)



and non-lease components of the contracts, which may result in reclassification of certain occupancy related expenses to restaurant rent expenses in the consolidated statement of operations. In addition, the Company will be required to record an initial adjustment to retained earnings associated with previously deferred gains on sale-leaseback transactions and will no longer receive the benefit to rent expense from amortizing such previously deferred gains on sale-leaseback transactions beginning in 2019. For any future sale-leaseback transactions, the gain (adjusted for any off-market terms) will be recognized immediately. Currently the Company amortizes sale-leaseback gains over the lease term. The Company has not assessed the potential impact of Topic 842 on its covenant financial ratios as the Company's senior credit facility does not give effect to any change in GAAP arising out of Topic 842. The Company is continuing its assessment of the impact of Topic 842 and may identify other impacts.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill if the fair value of a reporting unit is less than the carrying amount of the reporting unit. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The guidance will be effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted for any goodwill impairment tests after January 1, 2017. This standard may have an impact on the Company's financial statements if goodwill impairment is recognized in future periods.
In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The guidance will be effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted and may be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company does not expect the standard to have a material effect on its financial statements.

ITEM 2—2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of financial condition and results of operations ("MD&A") is written to help the reader understand our company. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the accompanying financial statement notes. Any reference to restaurants refers to company-owned restaurants unless otherwise indicated. Throughout this MD&A, we refer to Fiesta Restaurant Group, Inc., together with its consolidated subsidiaries, as "Fiesta," "we," "our" and "us."
We use a 52–53 week fiscal year ending on the Sunday closest to December 31. The fiscal year ended December 31, 201730, 2018 contained 52 weeks. The three and ninesix months ended SeptemberJune 30, 20182019 and OctoberJuly 1, 20172018 each contained thirteen and thirty-ninetwenty-six weeks, respectively. The fiscal year ending December 30, 201829, 2019 will contain 52 weeks.
Company Overview

We own, operate and franchise two restaurant brands, Pollo Tropical® and Taco Cabana®, which have approximatelyrecently celebrated 30th and 40 years,th anniversaries, respectively, of operating history and loyal customer bases. Our Pollo Tropical restaurants feature 24-hourfire-grilled and crispy citrus marinated chicken offered bone-in or boneless, grilled or lightly battered and fried, and other freshly prepared tropical inspired menu items, while our Taco Cabana restaurants specialize in Mexican inspired food.food made fresh by hand. We believe that both brands offer distinct and unique flavors with broad appeal at a compelling value, which differentiates them in the competitive fast-casual and quick-service restaurant segments. Nearly all of our restaurants offer the convenience of drive-thru windows. As of SeptemberJune 30, 2018,2019, we owned and operated 150140 Pollo Tropical restaurants and 171165 Taco Cabana restaurants.
We franchise our Pollo Tropical restaurants primarily internationally and as of SeptemberJune 30, 2018,2019, we had 24 franchised Pollo Tropical restaurants located in Puerto Rico, the Bahamas, Panama and Guyana, and fivesix licensed locations on college campuses and one at a hospital in Florida. We have agreements for the continued development of franchised Pollo Tropical restaurants in certain of our existing franchised markets.
As of SeptemberJune 30, 2018,2019, we had six franchised Taco Cabana restaurants located in New Mexico and two non-traditional Taco Cabana licensed locations on college campuses in Texas.
Recent Events Affecting our Results of Operations
Strategic Renewal PlanNew Lease Accounting Standard
On February 27, 2017,December 31, 2018, we announcedadopted Financial Accounting Standard Board ("FASB") Accounting Standard Update ("ASU") 2016-02, Leases (Topic 842) ("ASC 842"), which requires lessee recognition of lease assets and lease liabilities on the appointmentbalance sheet and disclosure of Richard C. Stockingerkey information about leasing arrangements. The new lease accounting standard, ASC 842, had a significant impact on our results of operations because we had $18.6 million in sale leaseback gains that we no longer receive a benefit to rent expense from and we have a significant number of closed restaurants for which we had previous closed restaurant rent reserves and would not have recognized current period expense under the previous accounting standard.
As a result of adopting this standard, substantially all previously deferred gains on sale-leaseback transactions were recognized as Chief Executive Officeran adjustment to retained earnings and Presidentwe will no longer receive the benefit to rent expense from amortizing these gains resulting in higher rent expense being recognized each period over the life of the Company, effective February 28, 2017. Shortly thereafter,respective leases. Additionally, prior to the adoption of ASC 842, we developedrecorded closed restaurant reserves representing future minimum lease payments and began implementingancillary costs from the Strategic Renewal Plan designed to significantly improve our core business model and drive long-term shareholder value creation, consistingdate of the following: 1) revitalizing restaurant performance in core markets; 2) managing capital and financial discipline; 3) establishing platforms for long-term growth; and 4) optimizing each brands' restaurant portfolio. We believeclosure to the continued implementationend of the Strategic Renewal Plan in 2018, built onremaining lease term net of estimated sublease recoveries when a number of foundational accomplishments in 2017, is positively impacting the operational and financial trajectoryrestaurant closed, recorded expense related to accretion of the Company.
Hurricanes
During the third quarter of 2017, Texasreserve each period, and Florida were struck by Hurricanes Harvey and Irma (the "Hurricanes"). Forty-three Taco Cabana and two Pollo Tropical Company-owned restaurantsrecorded subsequent changes in the Houston metropolitan area and all 149 Pollo Tropical Company-owned restaurants in Florida and the Atlanta metropolitan area were closed and affected by the Hurricanes to varying degrees (e.g. property preparation and damage, inventory losses, payment of hourly restaurant employees while restaurants were closed, lost businessassumptions related to temporary closures, limited menuthe sublease income to expense in the period in which the assumption changed. The subsequent closed restaurant rent payments were recorded as a reduction to the closed restaurant reserves, with no rent related expense being recorded in the period. As a result of adopting ASC 842, accrued rent included in these closed restaurant reserves was recorded as a reduction to operating lease right-of-use assets, and modified hoursrent expense (the straight-line amortization of operations). Other Texas markets where we operate Company-ownedthe right-of-use assets and accretion of the lease liability) related to closed restaurants including San Antonio were also affected by Hurricane Harvey, butis now included within closed restaurant rent expense, net of sublease income in the condensed consolidated statement of operations each period. The comparative period information has not been restated and continues to a lesser degree.be reported under the accounting standard in effect for that period.

For the three and six months ended June 30, 2019, the adoption of ASC 842 had the following impact:
We estimate that the Hurricanes negatively impactedReduced both Adjusted EBITDA and Restaurant-level Adjusted EBITDA (a non-GAAP financial measure) for Pollo Tropical by $0.4 million and $0.7 million, respectively; and

Reduced both Adjusted EBITDA and Restaurant-level Adjusted EBITDA (a non-GAAP financial measure) for Taco Cabana by $0.5 million and $0.9 million, respectively.
Resulted in the recognition of additional rent related expense for closed restaurant locations of approximately $0.2 million and $1.0 million for Pollo Tropical, respectively.
Resulted in the recognition of additional rent related expense for closed restaurant locations of approximately $0.2 million and $0.4 million for Taco Cabana, respectively.
We recognized closed restaurant rent expense, net of sublease income, (loss) from operations byfor the three and six months ended June 30, 2019 of approximately $3.0$1.0 million to $4.0and $2.2 million, respectively, for Pollo Tropical and approximately $1.0$0.3 million to $1.5and $0.6 million, respectively, for Taco Cabana and negatively impacted comparable restaurant sales and transactions by approximately 5.5%Cabana. However, we did not recognize lease charges for subsequent changes in assumptions related to 6.5% for Pollo Tropical, and approximately 2.0% to 3.0% for the timing of future sublease income.
Taco Cabana Goodwill Impairment
As of June 30, 2019, the sustained decrease in the market price of Fiesta's common stock was determined to be a triggering event requiring an interim impairment test of goodwill. Based on this interim impairment test, we recorded a non-cash impairment charge to write down the value of goodwill for the third quarterTaco Cabana reporting unit in the amount of 2017.

Tax Changes
On December 22, 2017, the Tax Cuts and Jobs Act (the "Act"),$46.5 million, which includes a provision that reduced the federal corporate incomeis not tax rate from 35.0% to 21.0% effective January 1, 2018, was signed into law. In accordance with generally accepted accounting principles, the enactment of this new tax legislation required us to revalue our net deferred income tax assets at the new corporate statutory rate of 21.0% as of the enactment date in 2017. In 2018, in conjunction with a cost segregation study conducted prior to filing our 2017 federal income tax return, we changed the depreciation method for certain assets for federal income tax purposes to accelerate tax deductions. Changes in our 2017 federal income tax return from the amounts recorded as of December 31, 2017 were primarily the result of changing the depreciable lives of assets for federal income tax purposes. These changes allowed us to record an incremental benefit of $3.9 million for the third quarter of 2018.deductible.
Executive Summary—Consolidated Operating Performance for the Three Months Ended SeptemberJune 30, 20182019
Our thirdsecond quarter 20182019 results and highlights include the following:
We recognized net income of $2.0 million in the third quarter of 2018, or $0.08 per diluted share, compared to a net loss of $(8.3)$(43.4) million, or $(0.31)$(1.62) per diluted share, in the thirdsecond quarter of 2017,2019 compared to net income of $9.5 million, or $0.35 per diluted share in the second quarter of 2018, due primarily to a decrease in$46.5 million goodwill impairment charge for the Taco Cabana reporting unit, the adoption of ASC 842 discussed above and other leasehigher restaurant impairment charges, from $15.9 milliondepreciation and amortization, general and administrative expenses and advertising expense, partially offset by lower cost of sales and restaurant wages and related expenses as a percentage of restaurant sales in the thirdsecond quarter of 2017 to $6.4 million in the third quarter of 2018, the impact of the Hurricanes in 2017, the effect of changing the depreciation method for certain assets for federal income tax purposes and lower advertising expenses for Pollo Tropical.2019. In addition, growthdeclines in comparable restaurant sales at both brands positively contributed to the increasedecrease in net income in the thirdsecond quarter of 2018. The positive impact was offset by higher cost2019. Net income in the second quarter of 2018 included the benefit of $2.8 million in insurance recoveries related to Hurricanes Harvey and Irma (the "Hurricanes"), total gains of $1.1 million on the sales at both brands in part attributableof two restaurant properties and fee reductions and final insurance recoveries totaling $0.6 million related to the initiatives under the Strategic Renewal Plan to improve the guest experience, higher general and administrative expenses and higher advertising expenses for Taco Cabana as a result of the reduction of advertising in 2017 during the early stages of the Strategic Renewal Plan.shareholder activism costs.
Total revenues increased 10.1%decreased 3.1% in the thirdsecond quarter of 2019 to $171.4 million compared to $176.8 million in the second quarter of 2018, to $174.6 million compared to $158.7 million in the third quarter of 2017, driven by an increasea decrease in comparable restaurant sales at both brands, and the net impact of opening new restaurants and closing 14 underperforming Pollo Tropical restaurants and 11 underperforming Taco Cabana restaurants in 2017.2018. Comparable restaurant sales increased 6.5%decreased 1.3% for our Pollo Tropical restaurants resulting from a decrease in comparable restaurant transactions of 1.8% partially offset by an increase in average check of 5.2% and an increase in comparable restaurant transactions of 1.3%0.5%. Comparable restaurant sales increased 12.2%decreased 3.0% for our Taco Cabana restaurants resulting from a decrease in comparable restaurant transactions of 6.1% partially offset by an increase in average check of 12.1% and an increase in comparable restaurant transactions of 0.1%3.1%.
Consolidated Adjusted EBITDA increased $1.9decreased $1.4 million (which includes the negative impact of a $0.8 million increase in rent expense as a result of adopting ASC 842) in the second quarter of 2019 to $18.8 million compared to $20.2 million in the thirdsecond quarter of 2018, to $15.0 million compared to $13.2 million in the third quarter of 2017, driven primarily by the impact of the Hurricanes in 2017, higher comparablelower restaurant sales, at both brandshigher rent expense as a result of adopting ASC 842 and lowerhigher advertising expenses at Pollo Tropical,expense, partially offset by higher costs associated with the Strategic Renewal Planimproved restaurant operating margins related to improve the guest experience, higher generallower cost of sales and administrative expenses and higher advertising expenses at Taco Cabana.restaurant wages as a percent of sales. Consolidated Adjusted EBITDA is a non-GAAP financial measure of performance. For a discussion of our use of Consolidated Adjusted EBITDA and a reconciliation from net income (loss) to Consolidated Adjusted EBITDA, see "Management's Use of Non-GAAP Financial Measures."
During the thirdsecond quarter of 2018,2019, we opened one Pollo Tropical restaurant in Florida and one Taco Cabana restaurant in Texas, which was converted from a closed Pollo Tropical location. During the third quarter of 2017, we opened two Pollo Tropical restaurants and three Taco Cabana restaurants and closed six Pollo Tropical restaurants and four Taco Cabana restaurants.

Texas.

Results of Operations
The following table summarizes the changes in the number and mix of Pollo Tropical and Taco Cabana Company-owned and franchised restaurants.
Pollo Tropical Taco CabanaPollo Tropical Taco Cabana
Owned Franchised Total Owned Franchised TotalOwned Franchised Total Owned Franchised Total
December 30, 2018139
 30
 169
 162
 8
 170
New—
 1
 1
 2
 —
 2
Closed—
 —
 —
 —
 —
 —
March 31, 2019139
 31
 170
 164
 8
 172
New1
 —
 1
 1
 —
 1
Closed—
 —
 —
 —
 —
 —
June 30, 2019140
 31
 171
 165
 8
 173
                      
December 31, 2017146
 31
 177
 166
 7
 173
146
 31
 177
 166
 7
 173
New—
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
Closed—
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
April 1, 2018146
 31
 177
 166
 7
 173
146
 31
 177
 166
 7
 173
New4
 —
 4
 6
 1
 7
4
 —
 4
 6
 1
 7
Closed—
 (1) (1) (2) —
 (2)—
 (1) (1) (2) —
 (2)
July 1, 2018150
 30
 180
 170
 8
 178
150
 30
 180
 170
 8
 178
New—
 —
 —
 1
 —
 1
Closed—
 —
 —
 —
 —
 —
September 30, 2018150
 30
 180
 171
 8
 179
           
January 1, 2017177
 35
 212
 166
 7
 173
New3
 2
 5
 1
 —
 1
Closed—
 (3) (3) —
 —
 —
April 2, 2017180
 34
 214
 167
 7
 174
New3
 1
 4
 2
 —
 2
Closed(30) (3) (33) —
 —
 —
July 2, 2017153
 32
 185
 169
 7
 176
New2
 —
 2
 3
 —
 3
Closed(6) —
 (6) (4) —
 (4)
October 1, 2017149
 32
 181
 168
 7
 175
Three Months Ended SeptemberJune 30, 20182019 Compared to Three Months Ended OctoberJuly 1, 20172018
The following table sets forth, for the three months ended SeptemberJune 30, 20182019 and OctoberJuly 1, 2017,2018, selected consolidated operating results as a percentage of consolidated restaurant sales and select segment operating results as a percentage of applicable segment restaurant sales.
Three Months EndedThree Months Ended
September 30, 2018 October 1, 2017 September 30, 2018 October 1, 2017 September 30, 2018 October 1, 2017June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Pollo Tropical Taco Cabana ConsolidatedPollo Tropical Taco Cabana Consolidated
Restaurant sales:                      
Pollo Tropical        53.8% 55.6%        54.3% 54.1%
Taco Cabana        46.2% 44.4%        45.7% 45.9%
Consolidated restaurant sales        100.0% 100.0%        100.0% 100.0%
Costs and expenses:                      
Cost of sales33.4% 32.5% 30.9% 29.4% 32.2% 31.1%31.7% 33.0% 31.3% 31.2% 31.5% 32.2%
Restaurant wages and related expenses23.4% 24.1% 32.3% 33.4% 27.6% 28.2%23.0% 22.6% 31.3% 32.3% 26.8% 27.1%
Restaurant rent expense4.7% 5.3% 5.9% 6.3% 5.2% 5.8%5.9% 4.5% 8.2% 5.6% 7.0% 5.0%
Other restaurant operating expenses14.4% 14.8% 17.1% 16.8% 15.7% 15.7%12.8% 13.2% 13.6% 14.9% 13.2% 14.0%
Advertising expense3.6% 5.7% 3.8% 1.3% 3.7% 3.7%3.4% 3.3% 3.4% 2.8% 3.4% 3.0%
Pre-opening costs0.1% 0.3% 0.1% 0.4% 0.1% 0.3%0.2% 0.4% 0.3% 0.7% 0.2% 0.5%
Consolidated Revenues. Revenues include restaurant sales and franchise royalty revenues and fees. Restaurant sales consistsconsist of food and beverage sales, net of discounts, at our Company-owned restaurants. Franchise royalty revenues and fees represent ongoing royalty payments that are determined based on a percentage of franchisee sales and the amortization of initial franchise fees and area development fees associated with the opening of new franchised restaurants. Restaurant sales are influenced by new restaurant openings, closures of restaurants and changes in comparable restaurant sales.
Total revenues increased 10.1%decreased 3.1% to $174.6$171.4 million in the thirdsecond quarter of 20182019 from $158.7$176.8 million in the thirdsecond quarter of 2017.2018. Restaurant sales increased 10.0%decreased 3.1% to $174.0$170.7 million in the thirdsecond quarter of 20182019 from $158.1$176.2 million in the thirdsecond quarter of 2017.2018.

The following table presents the primary drivers of the increasesdecreases in restaurant sales for both Pollo Tropical and Taco Cabana for the thirdsecond quarter of 20182019 compared to the thirdsecond quarter of 20172018 (in millions).
Pollo Tropical: 
Increase in comparable restaurant sales$5.3
Incremental sales related to new restaurants, net of closed restaurants0.4
   Total increase$5.7
  
Taco Cabana: 
Increase in comparable restaurant sales$8.1
Incremental sales related to new restaurants, net of closed restaurants2.1
   Total increase$10.2
Pollo Tropical: 
Decrease in comparable restaurant sales$(1.1)
Decrease in sales related to closed restaurants, net of new restaurants(1.7)
   Total decrease$(2.8)
  
Taco Cabana: 
Decrease in comparable restaurant sales$(2.3)
Decrease in sales related to closed restaurants, net of new restaurants(0.4)
   Total decrease$(2.7)
Comparable restaurant sales for our Pollo Tropical restaurants increased 6.5% in the third quarter of 2018. Comparable restaurant sales for our Taco Cabana restaurants increased 12.2% in the third quarter of 2018. Restaurants are included in comparable restaurant sales after they have been open for 18 months.
Comparable restaurant sales decreased 1.3% and 3.0% for Pollo Tropical and Taco Cabana restaurants, respectively, in the second quarter of 2019. Increases or decreases in comparable restaurant sales result primarily from an increase or decrease in comparable restaurant transactions and in average check. The increase in average check is primarily driven by menu price increases.
For Pollo Tropical, average check increased 5.2% anda decrease in comparable restaurant transactions increased 1.3%of 1.8% was partially offset by an increase in average check of 0.5% in the thirdsecond quarter of 20182019 compared to the thirdsecond quarter of 2017.2018. The increase in average check was driven primarily by menu price increases of 4.9%1.5%. As a result of new restaurant openings, sales cannibalization of existing restaurants negatively impacted comparable restaurant sales for Pollo Tropical by 0.4%1.2%.
For Taco Cabana, average check increased 12.1% anda decrease in comparable restaurant transactions increased 0.1%of 6.1% was partially offset by an increase in average check of 3.1% in the thirdsecond quarter of 20182019 compared to the thirdsecond quarter of 2017.2018. The increase in average check was driven primarily by menu price increases of 7.7% as well as a change in sales mix,2.8% and the introduction of higher priced promotions and new menu items related to the repositioning of the brand. Comparable restaurant sales for Taco Cabana were negatively impacted by approximately 0.9% related to reduced overnight operating hours beginningshareables earlier in the last quarter of 2017.2019.
Franchise revenues increased by $0.1 million to $0.7 millionremained flat in the thirdsecond quarter of 2018 from $0.6 million in2019 compared to the thirdsecond quarter of 2017 due primarily to higher sales at franchised restaurants.2018.
Operating costs and expenses. Operating costs and expenses include cost of sales, restaurant wages and related expenses, other restaurant expenses and advertising expenses. Cost of sales consists of food, paper and beverage costs including packaging costs, less rebates and purchase discounts. Cost of sales is generally influenced by changes in commodity costs, the sales mix of items sold and the effectiveness of our restaurant-level controls to manage food and paper costs. Key commodities, including chicken and beef, are generally purchased under contracts for future periods of up to one year.
Restaurant wages and related expenses include all restaurant management and hourly productive labor costs, employer payroll taxes, restaurant-level bonuses and related benefits. Payroll and related taxes and benefits are subject to inflation, including minimum wage increases and increased costs for health insurance, workers' compensation insurance and state unemployment insurance.
Other restaurant operating expenses include all other restaurant-level operating costs, the major components of which are utilities, repairs and maintenance, general liability insurance, real estate taxes, sanitation, supplies and credit card fees. In addition, for periods prior to December 31, 2018, other restaurant operating expenses include real estate taxes related to our leases characterized as operating leases.
Advertising expense includes all promotional expenses including television, radio, billboards and other sponsorships and promotional activities and agency fees.

Pre-opening costs include costs incurred prior to opening a restaurant, including restaurant employee wages and related expenses, travel expenditures, recruiting, training, promotional costs associated with the restaurant opening and rent, including any non-cash rent expense recognized during the construction period. Pre-opening costs are generally incurred beginning four to six months prior to a restaurant opening.

The following tables present the primary drivers of the changes in the components of restaurant operating margins for Pollo Tropical and Taco Cabana for the thirdsecond quarter of 20182019 compared to the thirdsecond quarter of 2017.2018. All percentages are stated as a percentage of applicable segment restaurant sales:
Pollo Tropical: 
Cost of sales(1):
sales:		 
   Sales mix(2)
1.7 %
   Menu offering improvement costs offset by lower   Lower commodity costs1.3 %
   Operating efficiency(0.41.7)%
   Menu price increases(1.70.5)%
   Higher promotions and discounts0.5 %
   Operating inefficiency0.2 %
   Other0.2 %
Net increasedecrease in cost of sales as a percentage of restaurant sales0.9(1.3)%
  
Restaurant wages and related expenses: 
   Higher medical benefitlabor costs for comparable restaurants(1)
0.70.8 %
   Lower labor costs due to restaurant closures, net of new restaurants(0.3)%
   Impact of higher sales at comparable restaurants(3)(4)
(1.00.5)%
   Other(0.1)%
      Net decreaseincrease in restaurant wages and related costs as a percentage of restaurant sales(0.70.4)%
  
Other operating expenses: 
   Hurricane preparation and repair costs
   Real estate tax classification(2)
(0.30.9)%
   Lower utility costs(4)
repair and maintenance		(0.20.5)%
   Contracted cleaning services0.6 %
   Higher delivery fees0.3%
   Other0.1 %
      Net decrease in other restaurant operating expenses as a percentage of restaurant sales(0.4)%
  
Advertising expense: 
   DecreasedTiming of advertising(2.10.1)%
      Net decreaseincrease in advertising expense as a percentage of restaurant sales(2.10.1)%
  
Pre-opening costs: 
   Decrease in the number of restaurant openings(0.2)%
      Net decrease in pre-opening costs as a percentage of restaurant sales(0.2)%
(1) Includes costs related to the Strategic Renewal Plan.
(2) Includes the impact of Hurricane Irma in 2017.
(3) Includes the impact of Hurricane Irma in 2017, partially offset by higher wage rates.
(4) Includes the impact of higher sales on fixedwage rates and semi-fixed costs.overtime due to labor shortages.
(2) Due to the adoption of ASC 842, real estate taxes are included in rent expense in 2019 and in other operating expenses in 2018.



Taco Cabana: 
Cost of sales(1):
sales:		 
   Menu offering improvement and higher commodity costs3.8 %
   Operating inefficiency0.71.1 %
   Higher promotions and discounts0.4 %
   Lower rebates and discounts0.2 %
   Sales mixMenu price increases(1.10.9)%
   Menu price increasesOperating efficiency(2.50.5)%
      Net increase in cost of sales as a percentage of restaurant sales1.50.1 %
  
Restaurant wages and related expenses: 
   HigherLower incentive bonus0.3(0.6)%
   Lower labor costs(1)
(0.5)%
   Higher medical benefit costs0.50.2 %
   Impact of higher sales at comparable restaurants(2)(3)
(1.7)%
   Other(0.20.1)%
      Net decrease in restaurant wages and related costs as a percentage of restaurant sales(1.11.0)%
  
Other operating expenses: 
   Higher operating suppliesReal estate tax classification(1)(4)(2)
(1.5)%
   Lower utility costs(0.3)%
   Higher live entertainment costsdelivery fees0.20.3 %
   Higher repair and maintenance costs0.1 %
   Lower utility costs(2)
(0.4)%
   Other0.10.2 %
      Net increasedecrease in other restaurant operating expenses as a percentage of restaurant sales0.3(1.3)%
  
Advertising expense: 
   IncreasedTiming of advertising2.50.6 %
      Net increase in advertising expense as a percentage of restaurant sales2.50.6 %
  
Pre-opening costs: 
   Decrease in the number of restaurant openings(0.30.4)%
      Net decrease in pre-opening costs as a percentage of restaurant sales(0.30.4)%
(1) Includes costs related to the Strategic Renewal Plan.
(2) Includes the impact of higher sales on fixed and semi-fixed costs.
(3) Includes the impact of Hurricane Harvey in 2017,Improved labor scheduling, partially offset by higher wage rates.rates and overtime due to labor shortages.
(4) (2)Includes various small-wares, cleaning Due to the adoption of ASC 842, real estate taxes are included in rent expense in 2019 and in other supplies.operating expenses in 2018.
Consolidated Restaurant Rent Expense. RestaurantBeginning December 31, 2018, restaurant rent expense includes base rent, contingent rent and common area maintenance and property taxes related to our leases characterized as operating leases. For periods prior to the adoption of ASC 842 on December 31, 2018, restaurant rent expense included base rent and contingent rent on our leases characterized as operating leases, reduced by amortization of gains on sale-leaseback transactions. Restaurant rent expense, as a percentage of total restaurant sales, decreasedincreased to 5.2%7.0% in the thirdsecond quarter of 2019 from 5.0% in the second quarter of 2018 from 5.8% in the third quarter of 2017 due primarily to a $0.8 million increase in rent expense as a result of no longer amortizing gains on sale-leaseback transactions, the closureinclusion of underperforming restaurants, which generally had higher rentproperty taxes and lower sales,common area maintenance costs related to our leases characterized as operating leases, and the impact of higherlower comparable restaurant sales.
Consolidated General and Administrative Expenses. General and administrative expenses are comprised primarily of (1) salaries and expenses associated with the development and support of our company and brands and the management oversight of the operation of our restaurants; and (2) legal, auditing and other professional fees and stock-based compensation expense.
General and administrative expenses were $13.3$13.5 million in the thirdsecond quarter of 20182019 and $12.1$12.8 million in the thirdsecond quarter of 2017,2018, and as a percentage of total revenues, general and administrative expenses were 7.6%increased to 7.9% in the thirdsecond quarter of 2018 and2019 compared to 7.3% in the thirdsecond quarter of 2017,2018, due primarily to the impact of higherlower total revenues on higher general and administrative expenses in the thirdsecond quarter of 2018.2019. General and administrative expenses for the thirdsecond quarter of 2019 included $0.3 million related to restructuring costs due to eliminated or relocated positions. General and administrative expenses for the second quarter of 2018 included $0.4 million in costs related to discontinuing certain servicesthe benefit of fee reductions and $0.4final insurance recoveries totaling $0.6 million related to system implementation and project-oriented advisory services. General2017

shareholder activism costs. General and administrative expenses infor the thirdsecond quarter of 20172018 also included a reduction of $(0.2) million in board and shareholder matter costs, a benefit of $(0.2) millionreductions to final settlement amounts related to an adjustment related to costs associated with restructuring Pollo Tropical management in Miami, Florida and Dallas, Texas, and $0.1 million related to Strategic Renewal Plan restructuring costs and retention bonuses.a litigation matter of $0.2 million.
Adjusted EBITDA. Adjusted EBITDA is the primary measure of segment profit or loss used by our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance and is defined as earnings attributable to the applicable segment before interest expense, income taxes, depreciation and amortization, impairment and other lease charges, closed restaurant rent expense, net of sublease income, stock-based compensation expense, other expense (income), net and certain significant items that management believes are related to strategic changes and/or are not related to the ongoing operation of our restaurants.
Adjusted EBITDA may not necessarily be comparable to other similarly titled captions of other companies due to differences in methods of calculation. Adjusted EBITDA for each of our segments includes an allocation of general and administrative expenses associated with administrative support for executive management, information systems and certain finance, legal, supply chain, human resources, construction, and other administrative functions. Consolidated Adjusted EBITDA is a non-GAAP financial measure of performance. For a discussion of our use of Adjusted EBITDA and Consolidated Adjusted EBITDA and a reconciliation from net income (loss) to Consolidated Adjusted EBITDA, see the heading entitled "Management's Use of Non-GAAP Financial Measures."
Adjusted EBITDA for Pollo Tropical increaseddecreased to $12.5$14.6 million (which includes the negative impact of a $0.4 million increase in rent expense as a result of adopting ASC 842) in the second quarter of 2019 from $15.5 million in the thirdsecond quarter of 2018 from $9.4 million in the third quarter of 2017 due primarily to the impact of the Hurricaneslower restaurant sales, higher rent expense and closing unprofitable restaurants in 2017,general and administrative expenses, and higher comparablerestaurant wages and related expenses as a percentage of restaurant sales, and lower advertising expenses in 2018, partially offset by an increase inlower cost of sales as a percentage of restaurant sales and general and administrative expenses.sales. Adjusted EBITDA for Taco Cabana decreased to $2.5$4.1 million (which includes the negative impact of a $0.5 million increase in rent expense as a result of adopting ASC 842) in the second quarter of 2019 from $4.6 million in the thirdsecond quarter of 2018 from $3.8 million in the third quarter of 2017 due primarily to the impact of lower restaurant sales and higher cost of salesadvertising and rent expense, partially offset by lower labor as a percentage of restaurant sales and higher advertising, operating and general and administrative expenses, partially offset by the impact of higher comparable restaurant sales in 2018 and the impact of Hurricane Harvey in 2017.sales. Consolidated Adjusted EBITDA increaseddecreased to $15.0$18.8 million in the thirdsecond quarter of 20182019 from $13.2$20.2 million in the thirdsecond quarter of 2017.2018.
Restaurant-level Adjusted EBITDA. We also use Restaurant-level Adjusted EBITDA, a non-GAAP financial measure, as a supplemental measure to evaluate the performance and profitability of our restaurants in the aggregate, which is defined as Adjusted EBITDA excluding franchise royalty revenues and fees, pre-opening costs and general and administrative expenses (including corporate-level general and administrative expenses).
Restaurant-level Adjusted EBITDA for Pollo Tropical increaseddecreased to $19.1$21.4 million (which includes the negative impact a $0.4 million increase in rent expense as a result of adopting ASC 842) in the second quarter of 2019 from $22.3 million in the thirdsecond quarter of 2018 from $15.5 million in the third quarter of 2017 primarily due to the foregoing. Restaurant-level Adjusted EBITDA for Taco Cabana decreased to $8.0$9.5 million (which includes the negative impact of a $0.5 million increase in rent expense as a result of adopting ASC 842) in the second quarter of 2019 from $10.7 million in the thirdsecond quarter of 2018 from $9.0 million in the third quarter of 2017 primarily as a result of the foregoing. For a reconciliation from Adjusted EBITDA to Restaurant-level Adjusted EBITDA, see the heading entitled "Management's Use of Non-GAAP Financial Measures."
Depreciation and Amortization. Depreciation and amortization expense increased to $9.7$9.8 million in the thirdsecond quarter of 20182019 from $8.5$9.2 million in the thirdsecond quarter of 20172018 due primarily to increased depreciation related to new restaurant openings and ongoing reinvestment and enhancements to our restaurants, partially offset by a decrease in depreciation as a result of impairing closed restaurant assets.
Impairment and Other Lease Charges. Impairment and other lease charges decreasedincreased to $6.4$1.8 million in the thirdsecond quarter of 20182019 from $15.9$0.8 million in the thirdsecond quarter of 2017.2018.
Impairment and other lease charges for the three months ended SeptemberJune 30, 20182019 for Pollo Tropical include impairment charges of $3.4$0.1 million related primarily to additional impairment of equipment from previously impaired restaurants. Impairment and other lease charges for the three months ended June 30, 2019 for Taco Cabana include impairment charges of $1.7 million related primarily to assets for three underperforming restaurants that we continue to operate and a benefitequipment from previously impaired restaurants. Impairment and other lease charges in the second quarter of $(0.1)2018 primarily include lease charges, net of recoveries, of $0.5 million in net lease charge recoveries related to certain previously closed restaurants due to adjustments to estimates of future lease costs. Impairmentcosts and other lease charges for the three months ended September 30, 2018 for Taco Cabana include impairment charges of $2.4$0.3 million related primarily to impairment of five underperforming restaurants that we continue to operate and other lease charges, net of recoveries, of $0.7 million, due primarily to lease charges related to an office relocation in the third quarter of 2018 and other lease charges, net of recoveries, related to previously closed restaurants due to adjustments to estimates of future lease costs.
Impairment and other lease charges in the third quarter of 2017 for Pollo Tropical included impairment charges of $15.6 million with respect to ten closed Pollo Tropical restaurants and two Pollo Tropical restaurants that we continue to operate, partially offset by a net benefit of $(1.9) million in other lease charge recoveries related to previously closed Pollo Tropical restaurants as a result of lease terminations, assignments and other adjustments to estimates of future lease costs, net of lease charges related to Pollo Tropical restaurants closed in September 2017. Impairment and other lease charges in the third quarter of 2017 for Taco

Cabana included impairment charges of $0.9 million for twowell as one underperforming Taco Cabana restaurants that we continue to operate and $1.3 million in otherrestaurant with a short remaining lease charges related to the closure of four Taco Cabana restaurants in July 2017.term.
Each quarter we assess the potential impairment of any long-lived assets that have experienced a triggering event, including restaurants for which the related trailing twelve month cash flows are below a certain threshold. We determine if there is impairment at the restaurant level by comparing undiscounted future cash flows from the related long-lived assets to their respective carrying

values. In determining future cash flows, significant estimates are made by us with respect to future operating results of each restaurant over its remaining lease term, including sales trends, labor rates, commodity costs and other operating cost assumptions. If assets are determined to be impaired, the impairment charge is measured by calculating the amount by which the asset carrying amount exceeds its fair value. This process of assessing fair values requires the use of estimates and assumptions, including our ability to sell or reuse the related assets and market conditions, which are subject to a high degree of judgment. If these assumptions change in the future, we may be required to record impairment charges for these assets and these charges could be material.
For fourone Pollo Tropical restaurantsrestaurant and seven Taco Cabana restaurants with combined carrying values (excluding right-of-use lease assets) of $4.5$0.4 million and $4.2$3.7 million, respectively, projected cash flows are not substantially in excess of their carrying values. In addition, twoone Pollo Tropical restaurantsrestaurant with a combined carrying value (excluding right-of-use lease assets) of $3.1$1.9 million and two Taco Cabana restaurants with a combined carrying value of $3.1$3.5 million have initial sales volumes lower than expected, but do not have significant operating history to form a good basis for future projections. If the performance of these restaurants does not improve as projected, an impairment charge could be recognized in future periods, and such charge could be material.
We continueGoodwill Impairment. Goodwill impairment was $46.5 million for the second quarter of 2019 and consisted of a non-cash impairment charge to ownwrite down the value of goodwill for the Taco Cabana reporting unit.
Closed Restaurant Rent Expense, Net of Sublease Income. Closed restaurant rent expense, net of sublease income for the second quarter of 2019 consisted of closed restaurant rent and operate 141 Pollo Tropical restaurants in Floridaancillary lease costs of $1.8 million and nine Pollo Tropical restaurants in Georgia, three$0.4 million net of which were impaired in 2018sublease income of $0.8 million and 2017, and continue to focus on revitalizing our core markets and brand repositioning outside of our core markets in Florida. Our long-term strategy is focused on profitably building our base business, growing new distribution channels, including delivery, catering, licensed and franchised locations, and new restaurants. We believe opportunities at both brands are being addressed as part of the Strategic Renewal Plan. Although we expect and have projected higher sales growth driven by the Strategic Renewal Plan$0.1 million for Pollo Tropical restaurantsand Taco Cabana, respectively. Prior to the adoption of ASC 842, we recorded closed restaurant reserves representing future minimum lease payments and ancillary costs from the date of the restaurant closure to the end of the remaining lease term net of estimated sublease recoveries when a restaurant closed and recorded subsequent changes in Georgia comparedthe assumptions related to more mature markets, we may record an impairment chargethe sublease income to expense in future periods for somethe period in which the assumptions changed. The subsequent rent payments were recorded as a reduction to the closed restaurant reserves, with no rent expense being recorded in the period. See "New Lease Accounting Standard" under "Recent Events Affecting our Results of these restaurants, which have a combined carrying value of $9.1 million, if their performance does not improve as projected.Operations."
Other Expense (Income), Net. Other expense, net was less than $0.1$0.2 million in the thirdsecond quarter of 2019 and primarily consisted of $0.2 million in costs for the removal, transfer and storage of equipment from closed restaurants. Other income, net was $3.5 million in the second quarter of 2018 and primarily consisted of $0.3$2.8 million in insurance recoveries related to Hurricane Irmathe Hurricanes and total gains of $1.1 million on the sales of two restaurant properties, partially offset by the write-off of site development costs of $0.1$0.2 million and costs for the removal, transfer and storage of equipment from closed restaurants of $0.2 million. Other expense, net of $0.5 million in the third quarter of 2017 primarily consisted of costs for the removal of signs and equipment and equipment transfers and storage for closed Pollo Tropical restaurants, and the write-off of site costs related to locations that we decided not to develop, partially offset by estimated insurance recoveries related to a Taco Cabana restaurant that was closed due to Hurricane Harvey damages.
Interest Expense. Interest expense increased to $0.9 millionremained flat in the thirdsecond quarter of 2018 from $0.7 million in2019 compared to the thirdsecond quarter of 2017 due primarily to higher interest rates and a higher borrowing level under our senior credit facility.2018.
Benefit fromProvision for Income Taxes. The effective tax rate was 172.0%(1.5)% and 36.9%24.1% for the thirdsecond quarter of 2019 and 2018, and 2017, respectively. In accordance with generally accepted accounting principles, we revalued our net deferred income tax assets at the new corporate statutory rate of 21.0% in 2017 as a result of the Act. In 2018, in conjunction with a cost segregation study conducted prior to filing our 2017 federal income tax return, we changed the depreciation methodThe provision for certain assets for federal income tax purposes to accelerate tax deductions. Changes in our 2017 federal income tax return from the amounts recorded as of December 31, 2017 were primarily the result of changing the depreciable lives of assets for federal income tax purposes. These changes allowed us to record an incremental benefit of $3.9 million for the third quarter of 2018. The benefit from income taxes for the thirdsecond quarter of 20182019 was derived using an estimated annual effective tax rate of 23.4%24.6%, which excludes the discrete impact of a tax deficiency from the vesting of restricted shares of $0.2 million and an adjustment resultinga tax benefit from changes in our 2017 federalinterest on an income tax return fromrefund of $(0.4) million. We did not recognize a tax benefit for the amounts recorded as of December 31, 2017 of $4.1 million, which includesgoodwill impairment charge because the $3.9 million impact of revaluing changes in our deferred tax assets.
related goodwill was not deductible. The benefit fromprovision for income taxes for the thirdsecond quarter of 20172018 was derived using an estimated effective annual incomeeffective tax rate of 36.8%24.3%, which excluded the discrete impact of a tax deficiency from the vesting of restricted shares and the tax benefit resulting from impairment and other lease charges of $0.2 million and $21.6 million, respectively.million.
Net Income (Loss). As a result of the foregoing, we had net income of $2.0 million in the third quarter of 2018 compared to a net loss of $8.3$43.4 million in the thirdsecond quarter of 2017.2019 compared to net income of $9.5 million in the second quarter of 2018.


NineSix Months Ended SeptemberJune 30, 20182019 Compared to NineSix Months Ended OctoberJuly 1, 20172018
The following table sets forth, for the ninesix months ended SeptemberJune 30, 20182019 and OctoberJuly 1, 2017,2018, selected consolidated operating results as a percentage of consolidated restaurant sales and select segment operating results as a percentage of applicable segment restaurant sales:
Nine Months EndedSix Months Ended
September 30, 2018 October 1, 2017 September 30, 2018 October 1, 2017 September 30, 2018 October 1, 2017June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Pollo Tropical Taco Cabana ConsolidatedPollo Tropical Taco Cabana Consolidated
Restaurant sales:                      
Pollo Tropical        54.6% 55.7%        54.7% 55.0%
Taco Cabana        45.4% 44.3%        45.3% 45.0%
Consolidated restaurant sales        100.0% 100.0%        100.0% 100.0%
Costs and expenses:                      
Cost of sales33.1% 31.1% 30.8% 28.4% 32.0% 29.9%31.4% 32.9% 30.6% 30.8% 31.0% 32.0%
Restaurant wages and related expenses23.2% 23.8% 32.5% 32.3% 27.4% 27.5%23.1% 23.0% 31.8% 32.5% 27.0% 27.3%
Restaurant rent expense4.6% 5.2% 5.9% 6.0% 5.2% 5.5%5.9% 4.5% 8.4% 5.9% 7.0% 5.1%
Other restaurant operating expenses13.5% 14.0% 15.8% 15.3% 14.5% 14.6%13.0% 13.0% 13.4% 15.1% 13.2% 13.9%
Advertising expense3.5% 4.0% 3.5% 2.9% 3.5% 3.5%3.4% 3.4% 3.4% 3.3% 3.4% 3.4%
Pre-opening costs0.2% 0.4% 0.3% 0.4% 0.3% 0.4%0.1% 0.3% 0.4% 0.4% 0.2% 0.4%
Total revenues increased 2.8%decreased 2.6% to $521.0$337.2 million in the ninesix months ended SeptemberJune 30, 20182019 from $506.9$346.3 million in the ninesix months ended OctoberJuly 1, 2017.2018. Restaurant sales increased 2.7%decreased 2.6% to $519.0$335.9 million in the ninesix months ended SeptemberJune 30, 20182019 from $505.1$345.0 million in the ninesix months ended OctoberJuly 1, 2017.2018.
The following table presents the primary drivers of the increase or decreasedecreases in restaurant sales for both Pollo Tropical and Taco Cabana for the ninesix months ended SeptemberJune 30, 20182019 compared to the ninesix months ended OctoberJuly 1, 20172018 (in millions):
Pollo Tropical: 
Increase in comparable restaurant sales$9.2
Decrease in sales related to closed restaurants, net of new restaurants(7.3)
   Total increase$1.9
  
Taco Cabana: 
Increase in comparable restaurant sales$9.2
Incremental sales related to new restaurants, net of closed restaurants2.8
   Total increase$12.0
Pollo Tropical: 
Decrease in comparable restaurant sales$(3.4)
Decrease in sales related to closed restaurants, net of new restaurants(2.8)
   Total decrease$(6.2)
  
Taco Cabana: 
Decrease in comparable restaurant sales$(2.6)
Decrease in sales related to closed restaurants, net of new restaurants(0.3)
   Total decrease$(2.9)
Comparable restaurant sales for Pollo Tropical restaurants increased 3.6%decreased 1.9% in the ninesix months ended SeptemberJune 30, 2018.2019. Comparable restaurant sales for Taco Cabana restaurants increased 4.3%decreased 1.8% in the ninesix months ended SeptemberJune 30, 2018.2019.
For Pollo Tropical, average check increased 4.3%, partially offset by a decrease in comparable restaurant transactions of 0.7%3.6% was partially offset by an increase in average check of 1.7% in the ninesix months ended SeptemberJune 30, 20182019 compared to the ninesix months ended OctoberJuly 1, 2017.2018. The increase in average check was driven primarily by menu price increases of 4.1%2.5%. As a result of new restaurant openings, sales cannibalization of existing restaurants negatively impacted comparable restaurant sales for Pollo Tropical by 0.3%1.1% in the ninesix months ended SeptemberJune 30, 20182019 compared to the ninesix months ended OctoberJuly 1, 2017.2018.
For Taco Cabana, average check increased 10.6%, partially offset by a decrease in comparable restaurant transactions of 6.3%5.2% was partially offset by an increase in average check of 3.4% in the ninesix months ended SeptemberJune 30, 20182019 compared to the ninesix months ended OctoberJuly 1, 2017. We eliminated deep discounting in connection with the repositioning of the brand as part of the Strategic Renewal Plan, which negatively impacted comparable restaurant transactions.2018. The increase in average check was driven primarily by menu price increases of 6.9% as well as a change in sales mix,2.9% and the introduction of higher priced promotions and new menu items related to the repositioning of the brand. Comparable restaurant sales for Taco Cabanashareables in the nine months ended September 30, 2018 were negatively impacted by approximately 1.4% related to reduced overnight operating hours beginning in the last quarter of 2017.

2019.
Franchise revenues increased to $2.0 millionremained flat in the ninesix months ended SeptemberJune 30, 2018 from $1.8 million in2019 compared to the ninesix months ended OctoberJuly 1, 2017 due primarily to higher sales at franchised restaurants.2018.

The following tables present the primary drivers of the changes in the components of restaurant operating margins for Pollo Tropical and Taco Cabana for the ninesix months ended SeptemberJune 30, 20182019 compared to the ninesix months ended OctoberJuly 1, 2017.2018. All percentages are stated as a percentage of applicable segment restaurant sales.

Pollo Tropical: 
Cost of sales(1):
sales:		 
   Menu offering improvement costs offset by lowerLower commodity costs2.5(1.7)%
   Menu price increases(0.8)%
   Sales mix0.60.4 %
   Higher promotions and discounts0.4 %
   Operating inefficiency0.30.2 %
      Menu price increases(1.4)%
Net increasedecrease in cost of sales as a percentage of restaurant sales2.0(1.5)%
  
Restaurant wages and related expenses: 
   Higher labor costs for comparable restaurants(1)(2)
0.5 %
   Lower workers compensation costs(0.1)%
   Lower labor costs due to restaurant closures, net of new restaurants(1.10.4)%
      Other0.1 %
Net decreaseincrease in restaurant wages and related costs as a percentage of restaurant sales(0.60.1)%
  
Other operating expenses: 
   Higher repairs and maintenance costsReal estate tax classification(1)(2)
(0.9)%
   Contracted cleaning services0.6 %
   Higher delivery fees0.3 %
      Lower insurance costs(0.1)%
   Lower utilities costs(3)
(0.2)%
   Lower real estate taxes(3)
(0.3)%
   Other(0.2)%
Net decreasechange in other restaurant operating expenses as a percentage of restaurant sales(0.5—)%
  
Advertising expense: 
   Decreased advertising(4)
(0.5)%
      Net decreasechange in advertising expense as a percentage of restaurant sales(0.5—)%
  
Pre-opening costs: 
   Decrease in the number of restaurant openings(0.2)%
      Net decrease in pre-opening costs as a percentage of restaurant sales(0.2)%
(1) Includes costs relatedthe impact of higher wage rates and overtime due to the Strategic Renewal Plan.labor shortages.
(2) IncludesDue to the impactadoption of higher wage rates.
(3) Includes the impact of restaurant closuresASC 842, real estate taxes are included in 2017.
(4) Advertisingrent expense in 2019 and in other operating expenses in 2017 included the impact of a one-time write-off of unused pre-production costs.2018.




Taco Cabana: 
Cost of sales(1):
sales:		 
   Menu price increases(0.9)%
   Operating efficiency(0.3)%
   Menu offering improvement and higher commodity costs4.40.8 %
   Lower rebatesHigher promotions and discounts0.20.4 %
   Operating inefficiency1.0 %
   Lower promotions and discountsOther(0.4)%
   Sales mix(0.6)%
   Menu price increases(2.20.2)%
      Net increasedecrease in cost of sales as a percentage of restaurant sales2.4(0.2)%
  
Restaurant wages and related expenses: 
   Higher medical benefit
   Lower labor costs(1)
0.5(0.3)%
   HigherLower incentive bonus0.2 %
   Impact of higher sales at comparable restaurants(2)(3)
(0.40.3)%
   Other(0.1)%
      Net increasedecrease in restaurant wages and related costs as a percentage of restaurant sales0.2(0.7)%
  
Other operating expenses: 
   Higher repairs and maintenance costsReal estate tax classification(1)(2)
0.3(1.6)%
   Lower utility costs
(0.3)%
   Higher operating supplies(1)delivery fees0.2 %
      Lower insurance costs(0.1)%
   Other0.1 %
Net increasedecrease in other restaurant operating expenses as a percentage of restaurant sales0.5(1.7)%
  
Advertising expense: 
   Increased advertising0.60.1 %
      Net increase in advertising expense as a percentage of restaurant sales0.60.1 %
  
Pre-opening costs: 
      Timing of restaurant openings(0.1)%
Net decreasechange in pre-opening costs as a percentage of restaurant sales(0.1—)%
(1) Includes costs related to the Strategic Renewal Plan.
(2) Includes the impact ofImproved labor scheduling, partially offset by higher wage rates and an increase in overtime hours.due to labor shortages.
(3) (2)Includes Due to the impactadoption of higher sales on fixedASC 842, real estate taxes are included in rent expense in 2019 and semi-fixed costs.in other operating expenses in 2018.
Consolidated Restaurant Rent Expense. Beginning December 31, 2018, restaurant rent expense includes base rent, contingent rent and common area maintenance and property taxes related to our leases characterized as operating leases. For periods prior to the adoption of ASC 842 on December 31, 2018, restaurant rent expense included base rent and contingent rent on our leases characterized as operating leases, reduced by amortization of gains on sale-leaseback transactions. Restaurant rent expense, as a percentage of total restaurant sales, decreasedincreased to 5.2%7.0% in the ninesix months ended SeptemberJune 30, 20182019 from 5.5%5.1% in the ninesix months ended OctoberJuly 1, 20172018 due primarily due to a $1.7 million increase in rent expense as a result of no longer amortizing gains on sale-leaseback transactions, the closureinclusion of underperforming restaurants in 2017, which generally had higher rentproperty taxes and lower salescommon area maintenance costs related to our leases characterized as operating leases, and the impact of higherlower comparable restaurant sales.
Consolidated General and Administrative Expenses.General and administrative expenses were $41.0$28.6 million in the ninesix months ended SeptemberJune 30, 20182019 and $46.8$27.7 million in the ninesix months ended OctoberJuly 1, 20172018 and, as a percentage of total revenues, general and administrative expenses decreasedincreased to 7.9%8.5% in the ninesix months ended SeptemberJune 30, 20182019 compared to 9.2%8.0% in the ninesix months ended OctoberJuly 1, 20172018 due primarily to the impact of lower boardtotal revenues on higher general and shareholder matter costs and Strategic Renewal Plan restructuring costs and retention bonuses.administrative expenses in the six months ended June 30, 2019. General and administrative expense for the ninesix months ended SeptemberJune 30, 2019 included $1.0 million related to restructuring costs due to eliminated or relocated positions. General and administrative expenses in the six months ended July 1, 2018 included the benefit of fee reductions and final insurance recoveries totaling $0.6 million related to 2017 shareholder activism costs and reductions to final settlement amounts related to a litigation matter of $0.2 million, partially offset by $0.5 million in Strategic Renewal Plan restructuring costs and retention bonuses, $0.4 million in costs related to discontinuing certain services and $0.8 million related to system implementation and project-oriented advisory services. General and administrative expenses in the nine months ended October 1, 2017 included $3.7 million in board and shareholder matter costs related to shareholder activism matters and Chief Executive Officer and board member searches, $2.1 million related to Strategic Renewal Plan restructuring costs and retention bonuses and $0.8 million in charges for

terminated capital projects, partially offset by a benefit of $(0.5) million related to litigation matters and a benefit of $(0.2) million adjustment related to costs associated with restructuring Pollo Tropical management in Miami, Florida and Dallas, Texas.bonuses.
Adjusted EBITDA. Adjusted EBITDA for Pollo Tropical increaseddecreased to $42.5$29.0 million (which includes the negative impact of a $0.7 million increase in rent expense as a result of adopting ASC 842) in the six months ended June 30, 2019 from $30.0 million in the ninesix months ended September 30,July 1, 2018 from $41.3 million in the nine months ended October 1, 2017 due primarily to the impact of the Hurricanes and closing unprofitable restaurants in 2017, higher comparablelower restaurant sales and lower advertisinghigher rent expense and other operating expenses, partially offset by an increase inlower cost of sales as a percentage of restaurant sales and higher repair and maintenance costs primarily driven by the initiatives under the Strategic Renewal Plan to improve the guest experience.sales. Adjusted EBITDA for Taco Cabana

decreased to $9.7$7.0 million (which includes the negative impact of a $0.9 million increase in rent expense as a result of adopting ASC 842) in the six months ended June 30, 2019 from $7.2 million in the ninesix months ended September 30,July 1, 2018 from $17.3 million in the nine months ended October 1, 2017 due primarily to the impact of lower restaurant sales and higher cost of salesrent expense, partially offset by lower labor as a percentage of restaurant sales and higher advertising expenses, repairs and maintenance costs primarily driven by the initiatives under the Strategic Renewal Plan, restaurant wages and related expenses and general and administrative expenses, partially offset by higher comparable restaurant sales. Consolidated Adjusted EBITDA decreased to $52.2$36.0 million in the ninesix months ended SeptemberJune 30, 20182019 from $58.5$37.1 million in the ninesix months ended OctoberJuly 1, 2017.2018.
Restaurant-level Adjusted EBITDA. Restaurant-level Adjusted EBITDA for Pollo Tropical increaseddecreased to $62.9$42.6 million (which includes the negative impact of a $0.7 million increase in rent expense as a result of adopting ASC 842) in the six months ended June 30, 2019 from $43.8 million in the ninesix months ended September 30,July 1, 2018 from $62.3 million in the nine months ended October 1, 2017 due primarily to the foregoing. Restaurant-level Adjusted EBITDA for Taco Cabana decreased to $27.4$18.9 million (which includes the negative impact of a $0.9 million increase in rent expense as a result of adopting ASC 842) in the six months ended June 30, 2019 from $19.4 million in the ninesix months ended September 30,July 1, 2018 from $34.2 million in the nine months ended October 1, 2017 as a result of the foregoing. For a reconciliation from Adjusted EBITDA to Restaurant-level Adjusted EBITDA, see the heading entitled "Management's Use of Non-GAAP Financial Measures."
Depreciation and Amortization. Depreciation and amortization expense increased to $27.9$19.4 million in the ninesix months ended SeptemberJune 30, 20182019 from $26.3$18.2 million in the ninesix months ended OctoberJuly 1, 20172018 due primarily to increased depreciation related to new restaurant openings and ongoing reinvestment and enhancements to our restaurants, partially offset by a decrease in depreciation as a result of impairing closed restaurant assets.
Impairment and Other Lease Charges. Impairment and other lease charges decreasedincreased to $6.5$1.4 million in the ninesix months ended SeptemberJune 30, 20182019 from $59.1$0.1 million in the ninesix months ended OctoberJuly 1, 2017.2018.
Impairment and other lease charges infor the ninesix months ended SeptemberJune 30, 20182019 for Pollo Tropical include impairment charges of $3.6$0.4 million related primarily to additional impairment of equipment from previously impaired restaurants and a lease charge recoveries benefit related to previously closed restaurant lease terminations of $(0.7) million. Impairment and other lease charges for the six months ended June 30, 2019 for Taco Cabana include impairment charges of $1.7 million related primarily to impairment of assets for three underperforming restaurants that we continue to operate and a benefitequipment from previously impaired restaurants.
Impairment and other lease charges in the six months ended July 1, 2018 primarily consisted of $(0.1)$0.4 million in net lease charge recoveriesimpairment charges related primarily to certain previously closed restaurants as well as one underperforming Taco Cabana restaurant with a short remaining lease term, partially offset by a net benefit of $(0.3) million in other lease charges, net of recoveries, due primarily to lease terminations, a lease assignment, subleases, and other adjustments to estimates of future lease costs.    Impairment and other lease charges
Goodwill Impairment. Goodwill impairment was $46.5 million for the ninesix months ended SeptemberJune 30, 20182019 and consisted of a non-cash impairment charge to write down the value of goodwill for the Taco Cabana include impairment chargesreporting unit.
Closed Restaurant Rent Expense, Net of $2.6 million related primarily to impairment of five underperforming restaurants that we continue to operate, and other lease charges,Sublease Income. Closed restaurant rent expense, net of recoveries,sublease income for the six months ended June 30, 2019 consisted of $0.5closed restaurant rent and ancillary lease costs of $3.6 million due primarily to lease charges related to an office relocation in the third quarter of 2018 and other lease charges,$0.8 million net of recoveries, related to previously closed restaurants due to adjustments to estimates of future lease costs.
Impairment and other lease charges for the nine months ended October 1, 2017 for Pollo Tropical consisted of impairment charges of $51.3 million and other lease charges, net of recoveries, of $5.0 million. Impairment charges are related to 40 restaurants closed in 2017, seven of which were impaired in 2016, and two restaurants that we continue to operate, as well as an additional impairment charge related to a restaurant closed in 2016 as a result of the decision not to convert the location to a Taco Cabana restaurant. Other lease charges, net of recoveries, are related to restaurants closed in 2017 as well as previously closed restaurants. Impairment and other lease charges for the nine months ended October 1, 2017 for Taco Cabana consisted of impairment chargessublease income of $1.4 million and other$0.2 million for Pollo Tropical and Taco Cabana, respectively. Prior to the adoption of ASC 842, we recorded closed restaurant reserves representing future minimum lease charges,payments and ancillary costs from the date of the restaurant closure to the end of the remaining lease term net of estimated sublease recoveries of $1.3 million. Impairment charges arewhen a restaurant closed and recorded subsequent changes in the assumptions related to four Taco Cabana restaurants thatthe sublease income to expense in the period in which the assumptions changed. The subsequent rent payments were recorded as a reduction to the closed restaurant reserves, with no rent expense being recorded in 2017 and three Taco Cabana restaurants that we continue to operate. Other lease charges, netthe period. See "New Lease Accounting Standard" under "Recent Events Affecting our Results of recoveries, are related to restaurants closed in 2017 as well as previously closed restaurants.Operations."
Other Expense (Income), Net. Other income,expense, net was $3.1$0.9 million in the ninesix months ended SeptemberJune 30, 20182019 and primarily consisted of $3.1$0.6 million in costs for the removal, transfer and storage of equipment from closed restaurants. Other income, net of $3.2 million in the six months ended July 1, 2018 primarily consisted of $2.8 million in insurance recoveries related to the Hurricanes and total gains of $1.2 million on the sales of three restaurant properties, partially offset by the write-off of site development costs of $0.5$0.3 million and costs for the removal, transfer and storage of equipment from closed restaurants of $0.7$0.5 million. Other expense, net of $1.7 million in the nine months ended October 1, 2017 primarily consisted of costs related to the removal of signs and equipment for closed Pollo Tropical restaurants, severance for restaurant employees and the write-off of site costs related to locations that we decided not to develop, partially offset by estimated insurance recoveries related to a Taco Cabana restaurant that was closed due to Hurricane Harvey damages and expected business interruption insurance proceeds related to a Taco Cabana restaurant that was temporarily closed due to a fire.
Interest Expense. Interest expense increased to $3.0$2.2 million in the ninesix months ended SeptemberJune 30, 20182019 from $1.9$2.1 million in the ninesix months ended OctoberJuly 1, 20172018 due to higher interest rates and a higher borrowing level under our senior credit facility.facility through May 2019.

Benefit fromProvision for Income Taxes. The effective tax rate was (1.6)(4.0)% for the ninesix months ended SeptemberJune 30, 20182019 and 35.9%25.4% for the ninesix months ended OctoberJuly 1, 2017. In accordance with generally accepted accounting principles, we revalued our net deferred income tax assets at the new corporate statutory rate of 21.0% in 2017 as a result of the Act. In 2018, in conjunction with a cost segregation study conducted prior to filing our 2017 federal income tax return, we changed the depreciation method for certain assets for federal income tax purposes to accelerate tax deductions. Changes in our 2017 federal income tax return from the amounts recorded as of December 31, 2017 were primarily the result of changing the depreciable lives of assets for federal income tax purposes. These changes allowed us to record an incremental benefit of $3.9 million for the third quarter of 2018. The benefit fromprovision for income taxes for the ninesix months ended SeptemberJune 30, 20182019 was derived using an estimated annual effective tax rate of 23.4%24.6%, which excludes the discrete impact of a tax deficiency from the vesting of restricted shares of $0.2 million and an adjustment resultinga tax benefit from changes in our 2017 federalinterest on an income tax return fromrefund of $(0.4) million. We did not recognize a tax benefit for the amounts recorded as of December 31, 2017 of $4.1 million, which includesgoodwill impairment charge because the $3.9 million impact of revaluing changes in our deferred tax assets.related goodwill was not deductible. The benefit fromprovision for income taxes for the ninesix months

ended OctoberJuly 1, 20172018 was derived using an estimated effective annual income tax rate of 36.8%24.3%, excludingwhich excludes the discrete impact of a tax deficiency from the vesting of restricted shares and the tax benefit resulting from impairment and other lease charges of $0.2 million and $21.6 million, respectively.million.
Net Income (Loss). As a result of the foregoing, we had net income of $15.7 million in the nine months ended September 30, 2018 compared to a net loss of $(25.5)$41.2 million in the ninesix months ended OctoberJune 30, 2019 compared to net income of $13.7 million in the six months ended July 1, 2017.2018.
Liquidity and Capital Resources
We do not have significant receivables or inventory and receive trade credit based upon negotiated terms in purchasing food products and other supplies. We are able to operate with a substantial working capital deficit because:
restaurant operations are primarily conducted on a cash basis;
rapid turnover results in a limited investment in inventories; and
cash from sales is usually received before related liabilities for food, supplies and payroll become due.
Capital expenditures and payments related to our lease obligations represent significant liquidity requirements for us. We believe cash generated from our operations and availability of borrowings under our senior credit facility will provide sufficient cash availability to cover our anticipated working capital needs, capital expenditures and debt service requirements for the next twelve months.
Operating Activities. Net cash provided by operating activities in the first ninesix months of 2019 and 2018 and 2017 was $44.3$39.5 million and $47.7$26.3 million, respectively. The decreaseincrease in net cash provided by operating activities in the ninesix months ended SeptemberJune 30, 20182019 was primarily driven by the receipt of a tax refund, partially offset by a decrease in Adjusted EBITDAnet income and the timing of payments.
Investing Activities. Net cash used in investing activities in the first ninesix months of 2019 and 2018 and 2017 was $34.4$19.9 million and $38.5$22.1 million, respectively. Capital expenditures are the largest component of our investing activities and include: (1) new restaurant development, which may include the purchase of real estate; (2) restaurant remodeling/reimaging, which includes the renovation or rebuilding of the interior and exterior of our existing restaurants; (3) other restaurant capital expenditures, which include capital maintenance expenditures for the ongoing repair, reinvestment and enhancement of our restaurants; and (4) corporate and restaurant information systems.

The following table sets forth our capital expenditures for the periods presented (dollars in thousands).
Pollo
Tropical
 
Taco
Cabana
 Other Consolidated
Pollo
Tropical
 
Taco
Cabana
 Other Consolidated
Nine Months Ended September 30, 2018:       
Six Months Ended June 30, 2019:       
New restaurant development$9,439
 $8,458
 $—
 $17,897
$4,546
 $3,289
 $—
 $7,835
Restaurant remodeling18
 216
 —
 234
268
 —
 —
 268
Other restaurant capital expenditures(1)
6,029
 9,507
 —
 15,536
5,444
 4,492
 —
 9,936
Corporate and restaurant information systems2,170
 3,219
 867
 6,256
1,535
 2,186
 (89) 3,632
Total capital expenditures$17,656
 $21,400
 $867
 $39,923
$11,793
 $9,967
 $(89) $21,671
Number of new restaurant openings4
 7
 —
 11
1
 3
   4
Nine Months Ended October 1, 2017:       
Six Months Ended July 1, 2018:       
New restaurant development$15,863
 $8,131
 $—
 $23,994
$6,378
 $5,673
 $—
 $12,051
Restaurant remodeling2,243
 37
 —
 2,280
105
 194
 —
 299
Other restaurant capital expenditures(1)
4,033
 3,617
 —
 7,650
4,726
 5,300
 —
 10,026
Corporate and restaurant information systems1,069
 1,702
 1,844
 4,615
1,826
 2,744
 342
 4,912
Total capital expenditures$23,208
 $13,487
 $1,844
 $38,539
$13,035
 $13,911
 $342
 $27,288
Number of new restaurant openings8
 6
 
 14
4
 6
 
 10
(1)Excludes restaurant repair and maintenance expenses included in other restaurant operating expenses in our consolidated financial statements. For the ninesix months ended SeptemberJune 30, 20182019 and OctoberJuly 1, 2017,2018, total restaurant repair and maintenance expenses were approximately $17.7$10.8 million and $15.6$11.0 million, respectively.
Cash used in investing activities in the first ninesix months of 2019 included net proceeds from the sale of one restaurant property of $1.8 million. Cash used in investing activities in the first six months of 2018 included net proceeds from the sales of three restaurant properties of $4.7 million. In addition, in the first six months of 2018, we received property damage insurance proceeds totaling $0.8$0.5 million related to a closed Taco Cabana restaurant that suffered flood damages due to Hurricane Harvey and a Taco Cabana restaurant that was temporarily closed due to a fire.
In 2018, we expect to open seven new Company-owned Pollo Tropical restaurants in Florida and seven new Company-owned Taco Cabana restaurants in Texas, including five conversions from closed Pollo Tropical restaurants to Taco Cabana restaurants, one of which was completed in the third quarter of 2018.
Total capital expenditures in 20182019 are expected to be at the high-end of $60.0$45.0 million to $70.0$55.0 million including $22.0$12.0 million to $25.0$15.0 million for the development of new restaurants.
Financing Activities. Net cash used in financing activities in the first ninesix months of 20182019 was $7.7$19.3 million and included net revolving credit borrowing repayments under our senior credit facility of $5.0$17.0 million combined with $2.5$2.2 million in payments to repurchase our common stock. Net cash used in financing activities in the first ninesix months of 20172018 included net revolving credit borrowing repayments under our senior credit facility of $9.0 million.$2.0 million combined with $1.0 million in payments to repurchase our common stock.
Senior Credit Facility. Our senior credit facility provides for aggregate revolving credit borrowings of up to $150.0 million (including up to $15.0 million available for letters of credit) and matures on November 30, 2022. The senior credit facility also provides for potential incremental increases of up to $50.0 million to the revolving credit borrowings available under the senior credit facility. On SeptemberJune 30, 2018,2019, there were $70.0$61.0 million in outstanding revolving credit borrowings under our senior credit facility.
Borrowings under the senior credit facility bear interest at a per annum rate, at our option, equal to either (all terms as defined in the senior credit facility):
1) the Alternate Base Rate plus the applicable margin of 0.75% to 1.50% based on our Adjusted Leverage Ratio
(with a margin of 1.25% as of September 30, 2018), or
2) the LIBOR Rate plus the applicable margin of 1.75% to 2.50% based on our Adjusted Leverage Ratio (with a
margin of 2.25% as of September 30, 2018).
1)the Alternate Base Rate plus the applicable margin of 0.75% to 1.50% based on our Adjusted Leverage Ratio (with a margin of 1.00% as of June 30, 2019), or
2)the LIBOR Rate plus the applicable margin of 1.75% to 2.50% based on our Adjusted Leverage Ratio (with a margin of 2.00% as of June 30, 2019).
In addition, the senior credit facility requires us to pay (i) a commitment fee based on the applicable Commitment Fee marginrate of 0.25% to 0.35%, based on our Adjusted Leverage Ratio, (with a marginrate of 0.30% as of SeptemberJune 30, 2018)2019) and the unused portion of the facility and (ii) a letter of credit fee based on the applicable LIBOR margin and the dollar amount of outstanding letters of credit.

All obligations under the senior credit facility are guaranteed by all of our material domestic subsidiaries. In general, our obligations under our senior credit facility and our subsidiaries’subsidiaries' obligations under the guarantees are secured by a first priority lien and security interest on substantially all of our assets and the assets of our material subsidiaries (including a pledge of all of the capital stock and equity interests of our material subsidiaries), other than certain specified assets, including real property owned by us or our subsidiaries.
The outstanding borrowings under the senior credit facility are prepayable subject to breakage costs as defined in the senior credit facility agreement. The senior credit facility requires us to comply with customary affirmative, negative and financial covenants, including, without limitation, those limiting our and our subsidiaries’ ability to (i) incur indebtedness, (ii) incur liens, (iii) loan, advance, or make acquisitions and other investments or other commitments to construct, acquire or develop new restaurants (subject to certain exceptions), (iv) pay dividends, (v) redeem and repurchase equity interests (subject to certain exceptions), (vi) conduct asset and restaurant sales and other dispositions (subject to certain exceptions), (vii) conduct transactions with affiliates and (viii) change our business. In addition, the senior credit facility will require us to maintain certain financial ratios, including minimum Fixed Charge Coverage and maximum Adjusted Leverage Ratios (all as defined under the senior credit facility).
Our senior credit facility contains customary default provisions, including without limitation, a cross default provision pursuant to which it is an event of default under this facility if there is a default under any of our indebtedness having an outstanding principal amount of $5.0 million or more which results in the acceleration of such indebtedness prior to its stated maturity or is caused by a failure to pay principal when due.
As of SeptemberJune 30, 2018,2019, we were in compliance with the covenants under our senior credit facility. After reserving $4.0$3.7 million for letters of credit issued under the senior credit facility, $76.0$85.3 million was available for borrowing under the senior credit facility at SeptemberJune 30, 2018.2019.
Share Repurchase Plan Modification
On August 7, 2019, we announced that our board of directors has approved an increase to our share repurchase program of an additional 0.5 million shares of common stock from the previously announced 1.5 million shares of our common stock. As of August 7, 2019, we have purchased a total of 270,627 shares of common stock and, following this increase, 1,729,373 shares of common stock remain available for purchase.

Off-Balance Sheet Arrangements and Contractual Obligations
We have no off-balance sheet arrangements. Prior to the adoption of ASC 842, off-balance sheet arrangements other thanconsisted of our operating leases, which are primarily for our restaurant properties.properties, and are now included in other current liabilities and operating lease liabilities on the condensed consolidated balance sheet as of June 30. 2019.
There have been no significant changes outside the ordinary course of business to our contractual obligations since December 31, 2017.30, 2018. Information regarding our contractual obligations is included under "Contractual Obligations" in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.30, 2018.
Inflation
The inflationary factors that have historically affected our results of operations include increases in food and paper costs, labor and other operating expenses and energy costs. Labor costs in our restaurants are impacted by changes in the federal and state hourly minimum wage rates as well as changes in payroll related taxes, including federal and state unemployment taxes. We typically attempt to offset the effect of inflation, at least in part, through periodic menu price increases and various cost reduction programs. However, no assurance can be given that we will be able to fully offset such inflationary cost increases in the future.
Application of Critical Accounting Policies
Our unaudited interim condensed consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. Preparing consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by the application of our accounting policies. Our significant accounting policies are described in the "Basis of Presentation" footnote in the notes to our consolidated financial statements for the year ended December 31, 201730, 2018 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.30, 2018. Critical accounting estimates are those that require application of management's most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. There have been no material changes affecting our critical accounting policies for the ninesix months ended SeptemberJune 30, 2018.2019 other than the lease accounting and evaluation of goodwill policies included below.
Lease Accounting. As discussed in Note 6 to our unaudited condensed consolidated financial statements, we adopted ASU 2016-02: Leases (ASC 842), the new lease accounting standard, as of as of December 31, 2018 using the modified retrospective method, with certain optional practical expedients including the transition practical expedient package, which among other things does not require reassessment of lease classification. Judgments made by management for our lease obligations include the determination of our incremental borrowing rate, the determination of stand alone selling prices used to allocate the consideration in the contract, and the length of the lease term, which includes the determination of renewal options that are reasonably assured. The lease term can affect the classification of a lease as finance or operating for accounting purposes, the amount of the lease liability and corresponding right-of-use lease asset recognized, the term over which related leasehold improvements for each restaurant are amortized and any rent holidays and/or changes in rental amounts for recognizing rent expense over the term of the lease. These judgments may produce materially different amounts of depreciation, amortization and rent expense than would be reported if different assumed lease terms were used.
We use our estimated incremental borrowing rate in determining the present value of lease payments for purposes of determining lease classification and recording lease liabilities and lease assets on our consolidated balance sheet. Our incremental borrowing rate is determined based on a synthetic credit rating, determined using a valuation model, adjusted to reflect a secured credit rating and a developed spread curve applied to a risk-free rate yield curve. Changes in the determination of our incremental borrowing rate could also have an impact on the depreciation and interest expense recognized for finance leases.
Evaluation of Goodwill. We must evaluate our recorded goodwill for impairment annually or more frequently when events and circumstances indicate that the carrying amount may be impaired. We have elected to conduct our annual impairment review of goodwill assets as of the last day of our fiscal year. As of June 30, 2019, we determined that a triggering even had occurred due to a sustained decrease in the market price of our common stock and performed an interim impairment test. As discussed in Note 1 to our unaudited condensed consolidated financial statements, we adopted ASU No. 2017-04, Simplifying the Test for Goodwill Impairment in the second quarter of 2019, which eliminates the requirement to calculate the implied fair value of goodwill if the fair value of a reporting unit is less than the carrying amount of the reporting unit. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. We early adopted this new accounting standard and performed our interim impairment test in accordance with ASU 2017-04. Our interim impairment test at June 30, 2019 indicated there was impairment as of that date.

In reviewing goodwill for impairment, we compare the net book values of our reporting units to their estimated fair values. In determining the estimated fair values of the reporting units, we employ a combination of a discounted cash flow analysis based on management's best estimates of future cash flows and one or two market-based approaches. The results of these analyses are corroborated with other value indicators where available, such as comparable company earnings multiples. This evaluation of goodwill requires us to make estimates and assumptions to determine the fair value of our reporting units including projections regarding future operating results, anticipated growth rates, the weighted average cost of capital used to discount projected cash flows, and market multiples. For our Pollo Tropical reporting unit, the fair value exceeded the carrying value of the reporting unit by a substantial amount. For our Taco Cabana reporting unit, a lower profitability and growth outlook reduced the income-based and market-based approach fair value. As a result, the carrying value exceeded the fair value of the reporting unit, and we recognized a $46.5 million impairment of our Taco Cabana reporting unit goodwill in the second quarter of 2019. See Note 4 to our unaudited condensed consolidated financial statements.
The estimates and assumptions used to determine fair value may differ from actual future events and if these estimates or related projections change in the future, we may be required to record material impairment charges for these goodwill assets. It is possible that additional goodwill impairment charges may be recognized in future periods for our Taco Cabana reporting unit due to changes in the expected performance of the reporting unit if we do not achieve our forecasted future cash flows, changes in factors or circumstances such as a deterioration in the fast-casual restaurant industry, the macroeconomic environment or the equity markets.
Management's Use of Non-GAAP Financial Measures
Consolidated Adjusted EBITDA is a non-GAAP financial measure. We use Consolidated Adjusted EBITDA in addition to net income and income from operations to assess our performance, and we believe it is important for investors to be able to evaluate us using the same measures used by management. We believe this measure is an important indicator of our operational strength and the performance of our business. Consolidated Adjusted EBITDA as calculated by us is not necessarily comparable to similarly titled measures reported by other companies, and should not be considered as an alternative to net income, earnings per share, cash flows from operating activities or other financial information determined under GAAP.
The primary measure of segment profit or loss used by the chief operating decision maker to assess performance and allocate resources is Adjusted EBITDA, which is defined as earnings attributable to the applicable operating segments before interest expense, income taxes, depreciation and amortization, impairment and other lease charges, stock-compensationgoodwill impairment, closed restaurant rent expense, net of sublease income, stock-based compensation expense, other expense (income), net, and certain significant items for each segment that management believes are related to strategic changes and/or are not related to the ongoing operation of our restaurants as set forth in the reconciliation table below. Adjusted EBITDA for each of our segments includes an allocation of general and administrative expenses associated with administrative support for executive management, information systems and certain finance, legal, supply chain, human resources, construction and other administrative functions. See Note 68 to the Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.our unaudited condensed consolidated financial statements.
We also use Restaurant-level Adjusted EBITDA as a supplemental measure to evaluate the performance and profitability of our restaurants in the aggregate, which is defined as Adjusted EBITDA for the applicable segment excluding franchise royalty revenues and fees, pre-opening costs and general and administrative expenses (including corporate-level general and administrative expenses). Restaurant-level Adjusted EBITDA is also a non-GAAP financial measure.
Management believes that Consolidated Adjusted EBITDA and Restaurant-level Adjusted EBITDA, when viewed with our results of operations calculated in accordance with GAAP and our reconciliation of net income (loss) to Consolidated Adjusted EBITDA and Restaurant-level Adjusted EBITDA (i) provide useful information about our operating performance and period-over-period changes, (ii) provide additional information that is useful for evaluating the operating performance of our business and (iii) permit investors to gain an understanding of the factors and trends affecting our ongoing earnings, from which capital investments are made and debt is serviced. However, such measures are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income or cash flow from operating activities as indicators of operating performance or liquidity. Also these measures may not be comparable to similarly titled captions of other companies.
All such financial measures have important limitations as analytical tools. These limitations include the following:
such financial information does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments to purchase capital equipment;
such financial information does not reflect interest expense or the cash requirements necessary to service payments on our debt;

although depreciation and amortization are non-cash charges, the assets that we currently depreciate and amortize will likely have to be replaced in the future, and such financial information does not reflect the cash required to fund such replacements; and
such financial information does not reflect the effect of earnings or charges resulting from matters that our management does not consider to be indicative of our ongoing operations. However, some of these charges and gains (such as impairment and other lease charges, closed restaurant rent expense, net of sublease income, other income and expense and stock-based compensation expense) have recurred and may recur.



A reconciliation from consolidated net income (loss) to Consolidated Adjusted EBITDA follows (in thousands):
 Three Months Ended Nine Months Ended Three Months Ended Six Months Ended
 September 30, 2018 October 1, 2017 September 30, 2018 October 1, 2017 June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
                
Net income (loss) $2,047
 $(8,257) $15,724
 $(25,477) $(43,440) $9,493
 $(41,151) $13,677
Benefit from income taxes (4,892) (4,827) (246) (14,241)
Provision for income taxes 623
 3,021
 1,569
 4,646
Income (loss) before taxes (2,845) (13,084) 15,478
 (39,718) (42,817) 12,514
 (39,582) 18,323
Add:                
Non-general and administrative expense adjustments:                
Depreciation and amortization 9,739
 8,483
 27,908
 26,265
 9,807
 9,170
 19,355
 18,169
Impairment and other lease charges 6,417
 15,905
 6,539
 59,081
 1,751
 784
 1,413
 122
Goodwill impairment 46,485
 —
 46,485
 —
Interest expense 924
 672
 2,979
 1,910
 967
 986
 2,201
 2,055
Closed restaurant rent expense, net of sublease income 1,335
 —
 2,759
 —
Other expense (income), net 47
 469
 (3,132) 1,721
 154
 (3,545) 856
 (3,179)
Stock-based compensation expense in restaurant wages 6
 9
 56
 44
 16
 33
 43
 50
Unused pre-production costs in advertising expense(1)
 —
 —
 —
 410
Total non-general and administrative expense adjustments 17,133
 25,538
 34,350
 89,431
 60,515
 7,428
 73,112
 17,217
General and administrative expense adjustments:                
Stock-based compensation expense 732
 938
 2,588
 2,723
 719
 984
 1,484
 1,856
Terminated capital project(2)
 —
 —
 —
 849
Board and shareholder matter costs(3)(1)
 —
 (155) (597) 3,748
 —
 (597) —
 (597)
Strategic Renewal Plan restructuring costs and retention bonuses(4)
 17
 87
 520
 2,101
Office restructuring and relocation costs —
 (152) —
 (152)
Legal settlements and related costs(5)
 —
 —
 (167) (473)
Restructuring costs and retention bonuses(2)
 349
 15
 964
 503
Legal settlements and related costs(3)
 —
 (167) —
 (167)
Total general and administrative expense adjustments 749
 718
 2,344
 8,796
 1,068
 235
 2,448
 1,595
Consolidated Adjusted EBITDA $15,037
 $13,172
 $52,172
 $58,509
 $18,766
 $20,177
 $35,978
 $37,135
(1)Unused pre-production costs for the nine months ended October 1, 2017, include costs for advertising pre-production that were not used.
(2) Terminated capital project costs for the nine months ended October 1, 2017, include costs related to the write-off of a capital project that was terminated in the first quarter of 2017.
(3) Board and shareholder matter costs for the ninethree and six months ended September 30,July 1, 2018 includeincluded fee reductions and final insurance recoveries related to 2017 shareholder activism costs. Board and shareholder matter costs for the three and nine months ended and October 1, 2017 include fees related to shareholder activism and CEO and board member searches.
(4)(2) Strategic Renewal Plan restructuringRestructuring costs and retention bonuses for the three and ninesix months ended SeptemberJune 30, 20182019 include severance related to eliminated positions. Restructuring costs and Octoberretention bonuses for the three and six months ended July 1, 2017,2018 include severance related to the Strategic Renewal Plan and reduction in force and bonuses paid to certain employees for retention purposes.
(5)(3) Legal settlements and related costs for the ninethree and six months ended September 30,July 1, 2018and nine months ended October 1, 2017, include included reductions to final settlement amounts and benefits related to litigation matters.










A reconciliation from Adjusted EBITDA to Restaurant-level Adjusted EBITDA follows (in thousands):
Three Months Ended Pollo Tropical Taco Cabana Pollo Tropical Taco Cabana
September 30, 2018:    
June 30, 2019:    
Adjusted EBITDA $12,544
 $2,493
 $14,646
 $4,120
Restaurant-level adjustments:        
Add: Pre-opening costs 134
 89
 153
 232
Add: Other general and administrative expense(1)
 6,878
 5,657
 7,071
 5,357
Less: Franchise royalty revenue and fees 453
 229
 438
 230
Restaurant-level Adjusted EBITDA $19,103
 $8,010
 $21,432
 $9,479
        
October 1, 2017:    
July 1, 2018:    
Adjusted EBITDA $9,396
 $3,776
 $15,529
 $4,648
Restaurant-level adjustments:        
Add: Pre-opening costs 230
 314
 341
 536
Add: Other general and administrative expense(1)
 6,250
 5,089
 6,850
 5,734
Less: Franchise royalty revenue and fees 396
 195
 459
 216
Restaurant-level Adjusted EBITDA $15,480
 $8,984
 $22,261
 $10,702
        
Nine Months Ended Pollo Tropical Taco Cabana
September 30, 2018:    
Six Months Ended Pollo Tropical Taco Cabana
June 30, 2019:    
Adjusted EBITDA $42,520
 $9,652
 $28,963
 $7,015
Restaurant-level adjustments:        
Add: Pre-opening costs 699
 782
 239
 547
Add: Other general and administrative expense(1)
 21,105
 17,573
 14,292
 11,827
Less: Franchise royalty revenue and fees 1,376
 632
 893
 446
Restaurant-level Adjusted EBITDA $62,948
 $27,375
 $42,601
 $18,943
        
October 1, 2017:    
July 1, 2018:    
Adjusted EBITDA $41,257
 $17,252
 $29,976
 $7,159
Restaurant-level adjustments:        
Add: Pre-opening costs 1,013
 865
 565
 693
Add: Other general and administrative expense(1)
 21,345
 16,610
 14,227
 11,916
Less: Franchise royalty revenue and fees 1,272
 568
 923
 403
Restaurant-level Adjusted EBITDA $62,343
 $34,159
 $43,845
 $19,365
(1) Excludes general and administrative adjustments included in Adjusted EBITDA.


Forward Looking Statements
This Quarterly ReportMatters discussed in this report and in our public disclosures, whether written or oral, relating to future events or our future performance, including any discussion, expressed or implied, regarding our intention to repurchase shares from time to time under the share repurchase program and the source of funding of such repurchases, our anticipated growth, operating results, future earnings per share, plans, objectives, and the impact of our investments in our Strategic Renewal Plan (the "Plan") and other business initiatives on Form 10-Q contains "forward-looking"future sales and earnings, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. "Forward-looking statements"amended, (the "Exchange Act"). These statements are any statementsoften identified by the words "believe," "positioned," "estimate," "project," "plan," "goal," "target," "assumption," "continue," "intend," "expect," "future," "anticipate," and other similar expressions, whether in the negative or the affirmative, that are not based on historical information. Statements other than statements of historical facts included herein, including, without limitation, statements regarding our future financial position and results of operations, business strategy, budgets, projected costs and plans and objectives of management for future operations, are "forward-looking statements." Forward-looking statements generally can be identified by the use offact. These forward-looking terminology such as "may," "will," "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" or "continue" or the negative of such words or variations of such words and similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions whichthat are difficult to predict. Therefore, actual outcomespredict, and results may differ materially from what is expressed or forecasted in suchyou should not place undue reliance on our forward-looking statements and we can give no assurance that such forward-looking statements will prove to be correct. Important factors that could causestatements. Our actual results toand the timing of certain events could differ materially from those expressed or implied by theanticipated in these forward-looking statements or "cautionary statements," include,as a result of certain factors, including, but are not limited to:
Increasesto, those set forth under "Risk Factors" and elsewhere in foodthis report and in our other commodity costs;
Risks associatedpublic filings with the expansion of our business, including increasing construction costs;
Risks associated with food borne illness or other food safety issues, including negative publicity through traditional
and social media;
Our ability to manage our growth and successfully implement our business strategy;
A decrease in the labor supply to us or our key suppliers due to market competition and changes in immigration policy including barriers to immigrants entering, working in, or remaining in the United States;
Labor and employment benefit costs, including the impact of increases in federal and state minimum wages, increases in exempt status salary levels and healthcare costs;
Cyber security breaches;
General economic conditions, particularly in the retail sector;
Competitive conditions;
Weather conditions including hurricanes, windstorms and flooding, and other natural disasters;
Significant disruptions in service or supply by any of our suppliers or distributors;
Increases in employee injury and general liability claims;
Changes in consumer perception of dietary health and food safety;
Regulatory factors;
Fuel prices;
The outcome of pending or future legal claims or proceedings;
Environmental conditions and regulations;
Our borrowing costs;
The availability and terms of necessary or desirable financing or refinancing and other related risks and uncertainties;
The risk of an act of terrorism or escalation of any insurrection or armed conflict involving the United States Securities and Exchange Commission ("SEC"). All forward-looking statements and the internal projections and beliefs upon which we base our expectations included in this report or other periodic reports represent our estimates as of the date made and should not be relied upon as representing our estimates as of any other nationalsubsequent date. While we may elect to update forward-looking statements at some point in the future, we expressly disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events, or international calamity; andotherwise.
Factors that affect the restaurant industry generally, including product recalls, liability if our products cause injury, ingredient disclosure and labeling laws and regulations.

ITEM 3—3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity Price Risk
We purchase certain products which are affected by commodity prices and are, therefore, subject to price volatility caused by weather, market conditions and other factors which are not considered predictable or within our control. Although many of the products purchased are subject to changes in commodity prices, certain purchasing contracts or pricing arrangements have been negotiated in advance to minimize price volatility. Where possible, we use these types of purchasing techniques to control costs as an alternative to using financial instruments to hedge commodity prices. In many cases, we believe we will be able to address commodity cost increases that are significant and appear to be long-term in nature by adjusting our menu pricing. However, long-term increases in commodity prices may result in lower restaurant-level operating margins.
There were no material changes from the information presented in Item 7A included in our Annual Report on Form 10-K for the year ended December 31, 201730, 2018 with respect to our market risk sensitive instruments.
ITEM 4—4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures. Our senior management is responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures. We have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, as well as other key members of our management. Based on this evaluation, our Chief Executive Officer and Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective as of SeptemberJune 30, 2018.2019.
Changes in Internal Control over Financial Reporting.No change occurred in our internal control over financial reporting during the thirdsecond quarter of 20182019 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—II. OTHER INFORMATION
Item 1. Legal Proceedings

On November 24, 2015, Pollo Tropical received a legal demand letter alleging that assistant managers were misclassified as exempt from overtime wages under the Fair Labor Standards Act. On September 30, 2016, prior to any suit being filed, Pollo Tropical reached a settlement with seven named individuals and a proposed collective action class that allowed current and former assistant managers to receive notice and opt-in to the settlement. Pollo Tropical denies any liability or unlawful conduct. The settlement was approved by a Florida state judge on December 27, 2017 which resulted in dismissal with prejudice for the named individuals and all individuals that opted-in to the settlement. We reserved $0.8 million in 2016 to cover the estimated costs related to the settlement. During the second quarter of 2018, we paid all settlement claims costs and recognized a reduction in legal settlement costs of $0.2 million.

We are also a party to various other litigation matters incidental to the conduct of business. We do not believe that the outcome of any of these matters will have a material adverse effect on our business, results of operations or financial condition.

Item 1A. Risk Factors
Part 1—Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 201730, 2018 describes important factors that could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Form 10-Q or presented elsewhere by management from time-to-time. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.30, 2018.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On February 26, 2018, we announced that our board of directors approved a share repurchase program for up to 1.5 million shares of our common stock. Under the share repurchase program, shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The number of shares repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, stock price, trading volume, general market and economic conditions, and other corporate considerations. The share repurchase program has no time limit and may be modified, suspended, superseded or terminated at any time by our board of directors. As of June 30, 2019, there was a remaining balance


The following table sets forth information with respect to repurchases of our common stockapproximately 1.2 million shares authorized for repurchase that had not been utilized. We did not repurchase any shares during the quarterthree months ended SeptemberJune 30, 2018:
Period 
Total Number of
Shares Purchased(1)
 Average Price
Paid
per Share		 Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs		 Maximum Number of Shares that
May Yet Be Purchased
Under the Plans or
Programs
July 2, 2018 to July 29, 2018 —
 $—
 —
 1,457,095
July 30, 2018 to September 2, 2018 1,035
 28.25
 1,035
 1,456,060
September 3, 2018 to September 30, 2018 53,418
 28.12
 53,418
 1,402,642
Total 54,453
 
 54,453
 

(1) Shares purchased in open market transactions.

2019.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information

None.

Item 6. Exhibits
(a) The following exhibits are filed as part of this report.
   
Exhibit
No.
  
   
31.1
 
Chief Executive Officer’sOfficer's Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Fiesta Restaurant Group, Inc.
  
31.2
 
Chief Financial Officer’sOfficer's Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Fiesta Restaurant Group, Inc.
  
32.1
 
Chief Executive Officer’sOfficer's Certificate Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Fiesta Restaurant Group, Inc.
  
32.2
 
Chief Financial Officer’sOfficer's Certificate Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Fiesta Restaurant Group, Inc.
  
101.INS XBRL Instance DocumentDocument—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
  
101.SCH Inline XBRL Taxonomy Extension Schema Document
  
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
  
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
  
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
  
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
   
 



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.
 
 FIESTA RESTAURANT GROUP, INC.
  
Date: November 5, 2018August 7, 2019
/S/    RICHARD C. STOCKINGER
 (Signature)
 
Richard C. Stockinger
Chief Executive Officer
  
Date: November 5, 2018
/S/    LYNN S. SCHWEINFURTH
(Signature)
Lynn S. Schweinfurth
Senior Vice President, Chief Financial Officer and Treasurer
Date: November 5, 2018August 7, 2019
/S/    CHERI L. KINDER
 (Signature)
 
Cheri L. Kinder
Interim Chief Financial Officer and Treasurer, Vice President, Corporate Controller and Chief Accounting Officer


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