Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 28, 2016 | May. 04, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | COSI INC | |
Entity Central Index Key | 1,171,014 | |
Current Fiscal Year End Date | --12-27 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 47,988,400 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 28, 2016 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 28, 2016 | Dec. 28, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 3,200 | $ 5,152 |
Credit card receivables | 547 | 343 |
Accounts receivable, net of allowances of $41 and $223, respectively | 1,102 | 899 |
Inventories | 950 | 1,051 |
Prepaid expenses and other current assets | 1,362 | 1,335 |
Total current assets | 7,161 | 8,780 |
Furniture and fixtures, equipment and leasehold improvements, net | 10,942 | 11,892 |
Notes receivable, net of allowances $1,001, respectively | 0 | 0 |
Intangible assets, net | 2,337 | 2,642 |
Goodwill | 11,632 | 11,632 |
Restricted cash | 0 | 5,002 |
Other assets | 1,134 | 1,313 |
Total assets | 33,206 | 41,261 |
Current liabilities: | ||
Accounts payable | 1,950 | 1,564 |
Accrued expenses | 5,945 | 6,920 |
Current portion of other long-term liabilities | 164 | 105 |
Current portion of long-term debt | 0 | 473 |
Total current liabilities | 8,059 | 9,062 |
Deferred franchise revenue | 1,754 | 1,726 |
Other long-term liabilities, net of current portion | 1,653 | 1,625 |
Long-term debt, net | 6,939 | 10,669 |
Deferred income tax | 412 | 327 |
Total liabilities | $ 18,817 | $ 23,409 |
Commitments and Contingencies | ||
Stockholders' equity: | ||
Common stock - $.01 par value; 100,000,000 shares authorized, 47,803,961 and 47,972,150 shares issued, respectively | $ 478 | $ 479 |
Additional paid-in capital | 344,376 | 344,296 |
Treasury stock, 59,886 shares at cost | (1,198) | (1,198) |
Accumulated deficit | (329,267) | (325,725) |
Total stockholders' equity | 14,389 | 17,852 |
Total liabilities and stockholders' equity | $ 33,206 | $ 41,261 |
Consolidated Balance Sheets (U3
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Mar. 28, 2016 | Dec. 28, 2015 |
Current assets: | ||
Accounts receivable, allowances | $ 41 | $ 223 |
Notes receivable, allowances | $ 1,001 | $ 1,001 |
Stockholders' equity: | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 47,803,961 | 47,972,150 |
Treasury stock, shares (in shares) | 59,886 | 59,886 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2016 | Mar. 30, 2015 | |
Revenues: | ||
Restaurant net sales | $ 21,221 | $ 17,207 |
Franchise fees and royalties | 460 | 701 |
Total revenues | 21,681 | 17,908 |
Costs and expenses: | ||
Cost of food and beverage | 5,655 | 4,844 |
Restaurant labor and related benefits | 8,004 | 7,097 |
Occupancy and other restaurant operating expenses | 7,487 | 6,637 |
Operating costs and expenses | 21,146 | 18,578 |
General and administrative expenses | 2,290 | 2,617 |
Depreciation and amortization | 984 | 580 |
Provision for losses on asset impairments and disposals | 43 | 0 |
Closed store costs expense (income) | 103 | (39) |
Lease termination costs | 180 | 51 |
Loss on sale of assets | 197 | 18 |
Total costs and expenses | 24,943 | 21,805 |
Operating loss | (3,262) | (3,897) |
Other income (expense): | ||
Interest expense | (169) | (256) |
Debt issuance and debt discount amortization | (165) | (165) |
Other income | 139 | 3 |
Total other income (expense) | (195) | (418) |
Net loss before income taxes | (3,457) | (4,315) |
Provision for income tax expense | (85) | 0 |
Net loss | $ (3,542) | $ (4,315) |
Per Share Data: | ||
Loss per share, basic and diluted (in dollars per share) | $ (0.08) | $ (0.12) |
Weighted average common shares outstanding, basic and diluted (in shares) | 46,713,329 | 37,199,402 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Equity (Unaudited) - 3 months ended Mar. 28, 2016 - USD ($) $ in Thousands | Common Stock [Member] | Additional Paid In Capital [Member] | Treasury Stock [Member] | Accumulated Deficit [Member] | Total |
Balance, beginning of period at Dec. 28, 2015 | $ 479 | $ 344,296 | $ (1,198) | $ (325,725) | $ 17,852 |
Balance, beginning of period (in shares) at Dec. 28, 2015 | 47,972,150 | 59,886 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of restricted stock, net of forfeitures | $ 0 | 0 | 0 | ||
Issuance of restricted stock, net of forfeitures (in shares) | 23,750 | 0 | |||
Forfeiture of common stock in connection with the Holdback Settlement | $ (1) | (123) | $ 0 | 0 | (124) |
Forfeiture of common stock in connection with the Holdback Settlement (in shares) | (191,939) | 0 | |||
Stock-based compensation expense | $ 0 | 203 | $ 0 | 0 | 203 |
Net loss | 0 | 0 | 0 | (3,542) | (3,542) |
Balance, end of period at Mar. 28, 2016 | $ 478 | $ 344,376 | $ (1,198) | $ (329,267) | $ 14,389 |
Balance, end of period (in shares) at Mar. 28, 2016 | 47,803,961 | 59,886 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2016 | Mar. 30, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (3,542) | $ (4,315) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Depreciation and amortization | 984 | 580 |
Amortization of debt issuance and debt discount costs | 165 | 165 |
Loss on sale of assets | 197 | 18 |
Deferred income tax | 85 | 0 |
Non-cash portion of asset impairments and disposals | 43 | 0 |
Provision for bad debts | 3 | 76 |
Provision for lease terminations reserves | 180 | 51 |
Non-cash gain on settlement of Holdback Agreement | (124) | 0 |
Stock-based compensation expense | 203 | 108 |
Interest expense paid in kind | 0 | 256 |
Changes in operating assets and liabilities, net of effect of acquisitions | ||
Credit card receivables | (204) | (917) |
Accounts receivable | (206) | (287) |
Inventories | 101 | 92 |
Prepaid expenses and other current assets | (27) | 250 |
Other assets | 145 | (1) |
Accounts payable and accrued expenses | (591) | (1,762) |
Deferred franchise revenue | 28 | (17) |
Other liabilities | (93) | (247) |
Net cash used in operating activities | (2,653) | (5,950) |
Cash flows from investing activities: | ||
Capital expenditures | (219) | (1,225) |
Proceeds from sale of assets | 251 | 0 |
Net cash provided by (used in) investing activities | 32 | (1,225) |
Cash flows from financing activities: | ||
Principal payments on long-term debt | (4,333) | 0 |
Return of excess restricted cash held in escrow account | 5,002 | 0 |
Net cash provided by financing activities | 669 | 0 |
Net decrease in cash and cash equivalents | (1,952) | (7,175) |
Cash and cash equivalents, beginning of year | 5,152 | 21,053 |
Cash and cash equivalents, end of period | 3,200 | 13,878 |
Cash paid for: | ||
Interest | 0 | 0 |
Corporate franchise and income taxes | $ 34 | $ 32 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 28, 2016 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | Note 1 - Basis of Presentation We have prepared the accompanying unaudited consolidated financial statements in accordance with the requirements of Form 10-Q and, therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In our opinion, the financial statements reflect all adjustments that are necessary for a fair presentation of the results of operations for the periods shown. All such adjustments are of a normal recurring nature. In preparing financial statements in conformity with U.S. GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. As used in this quarterly report on Form 10-Q, unless the context requires otherwise, the terms “we,” “our,” “Company” or “Cosi” refer to Cosi, Inc. and its consolidated subsidiaries. The balance sheet at December 28, 2015 has been derived from audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The results for the three-month periods ended March 28, 2016 and March 30, 2015 are not indicative of the results for the full fiscal year. This Report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 28, 2015, as filed with the Securities and Exchange Commission (“SEC”). There have been no material changes to our significant accounting policies and estimates from the information provided in Note 1 of our consolidated financial statements included in our Form 10-K for the fiscal year ended December 28, 2015. We believe that our current cash and cash equivalents, expected cash flows from Company-owned restaurant operations, expected franchise fees and royalties, and additional opportunities potentially available for further overhead costs reductions not yet reflected as of March 28, 2016, will be sufficient to fund our cash requirements for working capital needs, the maintenance of our restaurants, and debt payments for the next twelve months. We do not anticipate new construction of Company-owned restaurants, material technology implementations, or additional large-scale remodels in 2016. Our conclusion is based on the Company’s projected sources of cash from operating results derived from a sensitivity analysis that projects varying levels of consumer demand, sources of cash, and uses of cash analyzed through multiple risk-adjusted scenarios and the associated contingencies related to each. If our Company-owned restaurants do not generate the cash flow levels that we expect, if new franchise restaurants do not open according to expectations, if we do not generate the franchise fees and royalties that we currently expect, or if we experience other unforeseen circumstances, we may have to effect further reductions in general and administrative expenses, seek to sell certain Company-owned locations to franchisees and/or other third parties, or take other actions necessitated by the impact of such unanticipated circumstances. |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 28, 2016 | |
Acquisitions [Abstract] | |
Acquisitions | Note 2 - Acquisitions Hearthstone Merger On April 1, 2015, Cosi, Inc. (the “Company”) completed the merger of Hearthstone Associates, LLC (“Associates”) with and into a wholly-owned subsidiary of the Company, with Associates continuing as the surviving entity (the “Merger”). Upon completion of the Merger, Associates became a wholly-owned subsidiary of the Company, and Hearthstone Partners, LLC (“Partners”), a wholly-owned subsidiary of Associates, became an indirect wholly-owned subsidiary of the Company. As a result of this acquisition, the Company acquired 13 franchise restaurants from Associates and Partners (“Hearthstone”). The operations of Hearthstone have been included in the Company’s consolidated financial statements from the date of acquisition. As consideration for the Merger, an aggregate of 1,790,993 shares (fair value of approximately $4.7 million at closing) of the Company’s common stock, $.01 par value, were distributed to the owners of Associates. The shares were fully vested upon issuance and were not restricted. The shares were unregistered when issued and subsequently registered under a registration statement effective June 2, 2015. In connection with the Merger, and as a condition of obtaining the consent of Partners’ lender, the Company agreed to guaranty the obligations of Partners under certain loan documents previously entered into by Partners with First Franchise Capital Corporation (“Lender” or “FFCC”). The Company placed $5.0 million in a control account as cash collateral to secure the Company’s obligations under the Guaranty, which has been classified as restricted cash on the fiscal 2015 consolidated balance sheet. On December 31, 2015, the Company paid off the balance of the FFCC Notes, in the amount of approximately $4.3 million using the funds in the control account. The excess funds in the control account, in the amount of approximately $0.7 million, were returned to the Company, net of $40,000 in prepayment fees. The Company accounted for this transaction in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations Accounts receivable $ 348 Inventory 134 Prepaid expenses and other current assets 226 Property and equipment 3,857 Intangible assets 3,100 Goodwill 11,435 Other long term assets 154 Total assets 19,254 Accounts payable 1,156 Accrued expenses 777 Long-term debt 10,821 Deferred tax liability 1,835 Total liabilities 14,589 Purchase price $ 4,665 The Company has allocated the cost to its identifiable tangible and intangible assets and liabilities, with the remaining amount classified as goodwill. Fair value of intangible assets was determined using a combination of the income approach and the cost approach. The resulting goodwill is derived from the expected value of the acquired franchise locations and management know-how. The total amount of goodwill that is expected to be deductible for tax purposes is $3.2 million. The Company incurred indirect transaction costs related to the acquisition of approximately $0.2 million through April 1, 2015, and these costs are included in general and administrative expenses in the consolidated statement of operations and comprehensive loss. Management is responsible for the valuation of net assets acquired and considered a number of factors, including valuations and appraisals, when estimating the fair values and estimated useful lives of acquired assets and liabilities assumed. As part of the Merger, the Company entered into an Indemnification and Holdback Agreement with our Chief Executive Officer (“CEO”), who was also the principal owner of Associates. Pursuant to this agreement, the CEO agreed to indemnify the Company for certain liabilities, including accounts payable and other obligations (the “A/P Amounts”) owed to third parties for goods and services received by Associates or its subsidiaries, which were past due as of the closing of the Merger or were otherwise not in compliance with the provisions of the previously disclosed Election to Cause Merger Agreement, dated as of March 18, 2014 (as amended April 1, 2015) between the Company and the owners of Associates. Pursuant to the Holdback Agreement, the parties agreed that, until resolution of the retained liabilities, the Company would hold in escrow a portion of the shares (“Holdback Shares”) that would otherwise have been distributed to Mr. Dourney upon consummation of the Merger. For the A/P Amounts, the Company held back 191,939 shares of the Company’s common stock (the “A/P Holdback Shares”). On February 26, 2016, the Company and Mr. Dourney entered into an Agreement (the “Agreement”) to resolve the A/P Amounts. Pursuant to the Agreement, Mr. Dourney forfeited, and the Company agreed to accept, the A/P Holdback Shares in final settlement of the A/P Amounts, and the The Company recorded a gain on settlement of Holdback Agreement of $0.1 million in other income on the Consolidated Statements of Operations. Other intangible assets, net, excluding goodwill, are being amortized on a straight-line basis over their estimated lives, and were comprised of the following at April 1, 2015 (in thousands): Identified Intangible Asset Estimated Lives Useful Life (Years) Gross Carrying Amount Net favorable leases 2 to 5 years $ 500 Reacquired franchise rights (old locations) 4 years 1,500 Reacquired franchise rights (new locations) 10 years 1,100 $ 3,100 The unaudited pro forma restaurant net sales for Cosi, as if the Hearthstone Merger occurred on December 29, 2014, were $21.0 million for the three-months ended March 30, 2015. The Company has not disclosed the net loss or net loss per share due to the impractical nature of obtaining that information. For the three months-ended March 28, 2016, approximately $4.2 million of restaurant net sales from the franchise restaurants acquired in the Merger, is included in the Company’s consolidated statement of operations. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 28, 2016 | |
Long-Term Debt [Abstract] | |
Long-Term Debt | Note 3 - Long-Term Debt FFCC Notes On April 1, 2015, the Company completed the merger of Hearthstone Associates, LLC (“Associates”) with and into a wholly-owned subsidiary of the Company, with Associates continuing as the surviving entity (the “Merger”). Upon completion of the Merger, Associates became a wholly-owned subsidiary of the Company, and Hearthstone Partners, LLC (“Partners”), a wholly-owned subsidiary of Associates, became an indirect wholly-owned subsidiary of the Company. As a result of this acquisition, the Company acquired 13 franchise restaurants from Associates and Partners (“Hearthstone”). Refer to our Annual Report on Form 10-K for the year ended December 28, 2015 for more information on the Merger. In connection with the Merger of Hearthstone, the Company acquired certain debt obligations of Partners known as the FFCC Notes. The “FFCC Notes” collectively refers to the Secured Promissory Notes dated on or about May 9, 2013, made by Partners, as borrower, in favor of First Franchise Capital Corporation (“FFCC”), as lender, in the original aggregate principal amount of $5.4 million. The FFCC Notes originally had a term of 60 months, commencing on June 10, 2013, and accrued interest on the outstanding balance at the rate of 5.93%. Payments of principal and interest of $60,000 were due monthly with one balloon payment of $3.2 million originally due June 10, 2018. Under each of the FFCC Notes, a late fee equal to 10.0% of the amount past due was assessed on any late payments, reduced to 5.0% on any amount paid after the maturity date. The FFCC Notes were secured by all of the assets of Partners, including, without limitation, the Hearthstone restaurants it operates. The FFCC Notes could be prepaid with a prepayment fee of 1.0% of the outstanding principal balance. In connection with the Merger, the Company agreed to guarantee the obligations of Partners under the FFCC Notes and the related loan documents (the “Loan Documents”) previously entered into by Partners with FFCC. Additionally, the Company and FFCC entered into a Master Amendment to the Loan Documents modifying and amending certain terms of the Loan Documents. Accordingly, the Company entered into a Guaranty in favor of FFCC (“Guaranty”) pursuant to which the Company placed $5.0 million in a control account as cash collateral to secure the Company’s obligations under the Guaranty, which was been classified as restricted cash on the Consolidated Balance Sheet. On December 31, 2015, the Company paid off the balance of the FFCC Notes, in the amount of approximately $4.3 million using the funds in the control account. The excess funds in the control account, in the amount of approximately $0.7 million, were returned to the Company, net of $40,000 in prepayment fees. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 28, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 4 - Related Party Transactions As part of the Merger, the Company entered into an Indemnification and Holdback Agreement with our Chief Executive Officer (“CEO”), who was also the principal owner of Associates. Pursuant to this agreement, the CEO agreed to indemnify the Company for certain liabilities, including accounts payable and other obligations (the “A/P Amounts”) owed to third parties for goods and services received by Associates or Partners, which were past due as of the closing of the Merger or were otherwise not in compliance with the provisions of the previously disclosed Election to Cause Merger Agreement, dated as of March 18, 2014 (as amended April 1, 2015) between the Company and the owners of Associates. Pursuant to the Holdback Agreement, the parties agreed that, until resolution of the retained liabilities, the Company would hold in escrow a portion of the shares (“Holdback Shares”) that would otherwise have been distributed to Mr. Dourney upon consummation of the Merger. For the A/P Amounts, the Company held back 191,939 shares of the Company’s common stock (the “A/P Holdback Shares”). On February 26, 2016, the Company and Mr. Dourney entered into an Agreement (the “Holdback Agreement”) to resolve the A/P Amounts. Pursuant to the Agreement, Mr. Dourney forfeited, and the Company agreed to accept, the A/P Holdback Shares in final settlement of the A/P Amounts, and the Company agreed to waive and release Mr. Dourney from any obligation to retain, or indemnify the Company for, the A/P Amounts. The Company recorded a gain on settlement of Holdback Agreement of $0.1 million in other income on the Consolidated Statements of Operations. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 28, 2016 | |
Stock-Based Compensation [Abstract] | |
Stock-Based Compensation | Note 5 - Stock-Based Restricted Stock Awards The following table summarizes the status of the Company’s non-vested restricted stock awards, (in thousands): Market-Based Vesting: For the Three-Month Period Ending March 28, 2016 March 30, 2015 Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Non-vested at beginning of year 484 1.50 617 1.09 Granted 15 0.54 - Vested - (213 ) - Forfeited (3 ) (100 ) - Non-vested at end of quarter 496 1.32 304 1.32 Service-Based Vesting: Non-vested at beginning of year 697 1.62 624 1.09 Granted 15 0.54 - Vested (200 ) (34 ) Forfeited (3 ) Non-vested at end of quarter 509 1.62 590 1.62 Board of Directors Vesting: Granted - 6 Vested - (6 ) Total Awards: Non-vested at beginning of year 1,181 1.57 1,241 1.09 Granted 30 0.54 6 Vested (200 ) (253 ) Forfeited (6 ) (100 ) Non-vested at end of quarter 1,005 1.57 894 1.59 The fair value of restricted stock awards is based on the closing price of our common stock on the grant date. The total intrinsic value of restricted shares vested during the three months ended March 28, 2016 and March 30, 2015 was $1.0 million and $3.3 million, respectively. At March 28, 2016, unrecognized compensation expense related to restricted stock grants expected to vest totaled $1.2 million and will be recognized over a weighted average period of 2.8 years For the shares issued during the three months ended March 28, 2016 and March 30, 2015, 50% of each grant vests over time (“Service-Vested Shares”) and 50% of each grant vests upon achievement of certain stock price targets (“Market-Based Shares”), subject to the following vesting schedules: (a) The Service-Vested Shares will vest in four equal installments, with 25% vesting on each of the first, second, third and fourth anniversaries of the Date of Award, provided that the grantee remains in the continuous employ of the Company through each such vesting date. The Market-Based Shares will vest in four equal installments, provided that (a) the grantee remains in the continuous employ of the Company from and after the Date of Award and through the defined vesting dates, and (b) specified escalating price targets for the Company’s common stock are achieved for at least 30 consecutive trading days. Stock Option Activity Number of Options Weighted Average Fair Value Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in years) (in thousands) Outstanding as of December 28, 2015 6,463 3.62 1.2 - Granted - - Exercised - - Cancelled/Expired (213 ) - - Outstanding as of March 28, 2016 6,250 2.80 1.2 - Exercisable as of March 28, 2016 5,000 2.80 1.2 - There were 6,250 outstanding, out-of-the-money stock options as of March 28, 2016 with exercise prices ranging from $2.80- $27.76. No stock options were exercised during any of the fiscal years presented. As of the end of March 28, 2016, the outstanding stock options had no intrinsic value as they were all out-of-the-money. As of March 28, 2016, there was an immaterial amount of total unrecognized compensation cost related to stock option arrangements granted under the Company’s plans, which is expected to be recognized over a weighted average period of 2.0 years. Compensation Expense In accordance with ASC 718-10-25, Compensation – Stock Compensation |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 28, 2016 | |
Income Taxes [Abstract] | |
Income Taxes | Note 6 – Income Taxes Provision for income tax expense was $85.0 thousand and $0.0 for the three months ending March 28, 2016 and March 30, 2015 respectively. We project to record a tax provision of $150.0 thousand for the year ending January 2, 2017 related to the amortization of tax deductible goodwill, which generates a deferred tax liability that cannot be offset by net operating losses or other deferred tax assets since its reversal is considered indefinite in nature. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 28, 2016 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 7 -Commitments and Contingencies Commitments As of March 28, 2016, we are committed under lease agreements expiring through 2027 for occupancy of our retail restaurants and for office space at the following minimum annual rentals (in thousands): Fiscal Year Amount 2016 $ 8,715 2017 8,997 2018 6,840 2019 5,755 2020 and Thereafter 16,414 $ 46,721 Amounts shown are net of approximately $0.1 million of sublease rental income under non‑cancelable subleases. Rental expense for the three months-ended March 28, 2016 and March 30, 2015 totaled $3.3 million and $2.8 million, respectively. Certain lease agreements have renewal options ranging from three years to five years. In addition, certain leases obligate us to pay additional rent if restaurant sales reach certain minimum levels (percentage rent). Amounts incurred under these additional rent provisions and agreements were immaterial for the three months ended March 28, 2016 and March 30, 2015. Certain of our lease agreements provide for scheduled rent increases during the lease term or for rental payments to commence at a date other than the date of initial occupancy. Rent expense is recognized on a straight ‑ Certain of our leases also provide for landlord contributions to offset a portion of the cost of our leasehold improvements. These allowances are recorded as deferred liabilities and amortized on a straight-line basis as a reduction to rent expense over the term of the related leases. Included in other liabilities in the accompanying consolidated balance sheets for the three months ended March 28, 2016 and March 30, 2015 are immaterial landlord allowances. As of March 28, 2016, the Company had approximately $0.2 million in standby letters of credit, which were provided as security deposits for certain of our lease obligations. The letters of credit are fully secured by cash deposits or marketable securities held in accounts at the issuing banks and are not available for withdrawal by the Company. These amounts are included as a component of "Other Assets" in the accompanying consolidated balance sheets. Purchase Commitments We have agreements with some of the nation’s largest food, paper, and beverage manufacturers in the industry. This enables us to provide our restaurants with high quality proprietary food products and non-food items at competitive prices. We source and negotiate prices directly with these suppliers and distribute these products to our restaurants primarily through a national network that consists of some of the nation’s largest independent distributors. These primary suppliers and independent distributors have parallel facilities and systems to minimize the risk of any disruption of our supply chain. We do not utilize a commissary system. Our inventory control system allows each restaurant to place orders electronically with our master distributor and then transmits the invoices electronically to our accounts payable system. We have an agreement with Distribution Market Advantage, Inc. that provides us access to a national network of independent distributors. Under this agreement, the independent distributors supply us with approximately 80.0% of our food and paper products, primarily pursuant to pricing agreements that we negotiate directly with the suppliers. This agreement expires in December of 2020. We have a long-term beverage marketing agreement with the Coca ‑ In April 2015, we entered into an agreement to purchase all contracted coffee products through a single supplier, Coffee Bean International (a division of Farmer Brothers). This is a three year agreement, expiring in 2018. Self‑Insurance We have a self-insured group health insurance plan. We are responsible for all covered claims to a maximum limit of $100,000 per participant and an additional aggregating maximum limit of $50,000 for the plan year. Benefits paid in excess of these limits are reimbursed to the plan under our stop-loss policy. In addition, we have an aggregate stop-loss policy whereby our liability for total claims submitted cannot exceed a pre-determined dollar factor based upon, among other things, past years’ claims experience, actual claims paid, the number of plan participants and monthly accumulated aggregate deductibles. We did not exceed this pre-determined maximum during fiscal 2015. For our 2016 plan year, this pre-determined dollar amount is $1.1 million. The balance in the self-insurance reserve account as of March 28, 2016 was approximately $0.2 million. Litigation From time to time, we are a defendant in litigation arising in the ordinary course of our business. As of the date of this report, there are no legal proceedings that require accrual or disclosure. |
Other
Other | 3 Months Ended |
Mar. 28, 2016 | |
Other [Abstract] | |
Other | Note 8 - Other On November 24, 2015, we received notice from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, for the last 30 consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share required for continued inclusion on the Nasdaq Global Market under Nasdaq Listing Rule 5550(a)(2). The notification letter stated that we would be afforded 180 calendar days, or until May 16, 2016, to regain compliance with the minimum bid price requirement. In order to regain compliance, shares of the Company’s common stock must maintain a minimum bid closing price of at least $1.00 per share for a minimum of ten consecutive business days. The Company intends to actively monitor the bid price for its common stock between now and May 16, 2016, and will consider all available options to resolve the deficiency and regain compliance with the Nasdaq minimum bid price requirement. |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Mar. 28, 2016 | |
Business Acquisition [Line Items] | |
Schedule of identified intangible asset | Other intangible assets, net, excluding goodwill, are being amortized on a straight-line basis over their estimated lives, and were comprised of the following at April 1, 2015 (in thousands): Identified Intangible Asset Estimated Lives Useful Life (Years) Gross Carrying Amount Net favorable leases 2 to 5 years $ 500 Reacquired franchise rights (old locations) 4 years 1,500 Reacquired franchise rights (new locations) 10 years 1,100 $ 3,100 |
Hearthstone Associates, LLC [Member] | |
Business Acquisition [Line Items] | |
Schedule of recognized identified assets acquired and liabilities assumed | The Company accounted for this transaction in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations Accounts receivable $ 348 Inventory 134 Prepaid expenses and other current assets 226 Property and equipment 3,857 Intangible assets 3,100 Goodwill 11,435 Other long term assets 154 Total assets 19,254 Accounts payable 1,156 Accrued expenses 777 Long-term debt 10,821 Deferred tax liability 1,835 Total liabilities 14,589 Purchase price $ 4,665 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 28, 2016 | |
Stock-Based Compensation [Abstract] | |
Summary of restricted stock awards | The following table summarizes the status of the Company’s non-vested restricted stock awards, (in thousands): Market-Based Vesting: For the Three-Month Period Ending March 28, 2016 March 30, 2015 Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Non-vested at beginning of year 484 1.50 617 1.09 Granted 15 0.54 - Vested - (213 ) - Forfeited (3 ) (100 ) - Non-vested at end of quarter 496 1.32 304 1.32 Service-Based Vesting: Non-vested at beginning of year 697 1.62 624 1.09 Granted 15 0.54 - Vested (200 ) (34 ) Forfeited (3 ) Non-vested at end of quarter 509 1.62 590 1.62 Board of Directors Vesting: Granted - 6 Vested - (6 ) Total Awards: Non-vested at beginning of year 1,181 1.57 1,241 1.09 Granted 30 0.54 6 Vested (200 ) (253 ) Forfeited (6 ) (100 ) Non-vested at end of quarter 1,005 1.57 894 1.59 |
Summary of option activity | Stock Option Activity Number of Options Weighted Average Fair Value Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in years) (in thousands) Outstanding as of December 28, 2015 6,463 3.62 1.2 - Granted - - Exercised - - Cancelled/Expired (213 ) - - Outstanding as of March 28, 2016 6,250 2.80 1.2 - Exercisable as of March 28, 2016 5,000 2.80 1.2 - |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 28, 2016 | |
Commitments and Contingencies [Abstract] | |
Schedule of minimum annual rentals | As of March 28, 2016, we are committed under lease agreements expiring through 2027 for occupancy of our retail restaurants and for office space at the following minimum annual rentals (in thousands): Fiscal Year Amount 2016 $ 8,715 2017 8,997 2018 6,840 2019 5,755 2020 and Thereafter 16,414 $ 46,721 |
Acquisitions (Details)
Acquisitions (Details) | Feb. 26, 2016USD ($) | Dec. 31, 2015USD ($) | Apr. 01, 2015USD ($)Restaurant$ / sharesshares | Mar. 28, 2016USD ($)$ / shares | Mar. 30, 2015USD ($) | Dec. 28, 2015USD ($)$ / shares |
Business Acquisition [Line Item] | ||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | ||||
Fair Value of Assets Acquired and Liabilities Assumed [Abstract] | ||||||
Goodwill | $ 11,632,000 | $ 11,632,000 | ||||
Mr. Dourney (CEO) [Member] | ||||||
Fair Value of Assets Acquired and Liabilities Assumed [Abstract] | ||||||
Gain on settlement | $ 100,000 | |||||
Hearthstone Associates, LLC [Member] | ||||||
Business Acquisition [Line Item] | ||||||
Number of restaurants | Restaurant | 13 | |||||
Common shares issued in Hearthstone merger agreement (in shares) | shares | 1,790,993 | |||||
Fair value of stock issued in Hearthstone merger agreement | $ 4,700,000 | |||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | |||||
Fair Value of Assets Acquired and Liabilities Assumed [Abstract] | ||||||
Accounts receivable | $ 348,000 | |||||
Inventory | 134,000 | |||||
Prepaid expenses and other current assets | 226,000 | |||||
Property and equipment | 3,857,000 | |||||
Intangible assets | 3,100,000 | |||||
Goodwill | 11,435,000 | |||||
Other long term assets | 154,000 | |||||
Total assets | 19,254,000 | |||||
Accounts payable | 1,156,000 | |||||
Accrued expenses | 777,000 | |||||
Long-term debt | 10,821,000 | |||||
Deferred tax liability | 1,835,000 | |||||
Total liabilities | 14,589,000 | |||||
Purchase price | 4,665,000 | |||||
Amount of goodwill deductible for tax purposes | 3,200,000 | |||||
Indirect transaction cost related to acquisition | $ 200,000 | |||||
Number of shares held back (in shares) | shares | 191,939 | |||||
Acquired Finite Lived Intangible Assets [Abstract] | ||||||
Gross Carrying Amount | $ 3,100,000 | |||||
Proforma revenue | $ 21,000,000 | |||||
Revenue from the franchise restaurants acquired | $ 4,200,000 | |||||
Hearthstone Associates, LLC [Member] | FFCC Notes [Member] | ||||||
Business Acquisition [Line Item] | ||||||
Repayments of debt | $ 4,300,000 | |||||
Excess funds in control account | 700,000 | |||||
Debt instrument, prepayment fees | $ 40,000 | |||||
Cash collateral pledged | 5,000,000 | |||||
Hearthstone Associates, LLC [Member] | Net Favorable Leases [Member] | ||||||
Acquired Finite Lived Intangible Assets [Abstract] | ||||||
Gross Carrying Amount | $ 500,000 | |||||
Hearthstone Associates, LLC [Member] | Net Favorable Leases [Member] | Minimum [Member] | ||||||
Acquired Finite Lived Intangible Assets [Abstract] | ||||||
Estimated Lives Useful life | 2 years | |||||
Hearthstone Associates, LLC [Member] | Net Favorable Leases [Member] | Maximum [Member] | ||||||
Acquired Finite Lived Intangible Assets [Abstract] | ||||||
Estimated Lives Useful life | 5 years | |||||
Hearthstone Associates, LLC [Member] | Reacquired Franchise Rights (Old Locations) [Member] | ||||||
Acquired Finite Lived Intangible Assets [Abstract] | ||||||
Estimated Lives Useful life | 4 years | |||||
Gross Carrying Amount | $ 1,500,000 | |||||
Hearthstone Associates, LLC [Member] | Reacquired Franchise Rights (New Locations) [Member] | ||||||
Acquired Finite Lived Intangible Assets [Abstract] | ||||||
Estimated Lives Useful life | 10 years | |||||
Gross Carrying Amount | $ 1,100,000 |
Long-Term Debt (Details)
Long-Term Debt (Details) - Hearthstone Associates, LLC [Member] | Dec. 31, 2015USD ($) | May. 09, 2013USD ($) | Apr. 01, 2015USD ($)Restaurant |
Debt Instrument [Line Items] | |||
Number of franchise restaurants acquired | Restaurant | 13 | ||
FFCC Notes [Member] | |||
Debt Instrument [Line Items] | |||
Face amount | $ 5,400,000 | ||
Maturity term | 60 months | ||
Interest rate | 5.93% | ||
Payment of principal and interest | $ 60,000 | ||
Balloon payment | $ 3,200,000 | ||
Late fee percentage on past due | 10.00% | ||
Late fee percentage on past due after maturity date | 5.00% | ||
Prepayment fee percentage on outstanding principal balance | 1.00% | ||
Cash collateral pledged | $ 5,000,000 | ||
Repayments of debt | $ 4,300,000 | ||
Excess funds in control account | 700,000 | ||
Debt instrument, prepayment fees | $ 40,000 |
Related Party Transactions (Det
Related Party Transactions (Details) - Mr. Dourney (CEO) [Member] - USD ($) $ in Millions | Feb. 26, 2016 | Apr. 01, 2015 |
Related Party Transaction [Line Items] | ||
Number of shares held back (in shares) | 191,939 | |
Gain on settlement | $ 0.1 |
Stock-Based Compensation, Summa
Stock-Based Compensation, Summary of Restricted Stock Awards (Details) $ / shares in Units, $ in Thousands | Nov. 24, 2015 | Mar. 28, 2016USD ($)Installment$ / sharesshares | Mar. 30, 2015USD ($)$ / sharesshares | Dec. 28, 2015$ / sharesshares |
Weighted Average Grant-Date Fair Value [Roll Forward] | ||||
Consecutive trading days | 30 days | |||
Restricted Stock [Member] | ||||
Number of Shares [Roll Forward] | ||||
Non-vested at the beginning of period (in shares) | 1,181 | 1,241 | 1,241 | |
Granted (in shares) | 30 | 6 | ||
Vested (in shares) | (200) | (253) | ||
Forfeited (in shares) | (6) | (100) | ||
Non-vested at the end of period (in shares) | 1,005 | 894 | 1,181 | |
Weighted Average Grant-Date Fair Value [Roll Forward] | ||||
Non-vested at the beginning of the period (in dollars per share) | $ / shares | $ 1.57 | $ 1.09 | $ 1.09 | |
Granted (in dollars per share) | $ / shares | 0.54 | |||
Non-vested at the end of the period (in dollars per share) | $ / shares | $ 1.57 | $ 1.59 | $ 1.57 | |
Total intrinsic value | $ | $ 1,000 | $ 3,300 | ||
Unrecognized compensation expense related to stock options | $ | $ 1,200 | |||
Weighted average vesting period | 2 years 9 months 18 days | |||
Restricted Stock [Member] | Key Employees [Member] | ||||
Weighted Average Grant-Date Fair Value [Roll Forward] | ||||
Consecutive trading days | 30 days | |||
Value of the forfeited shares | $ | $ 100 | |||
Restricted Stock [Member] | Board of Directors Vesting [Member] | ||||
Number of Shares [Roll Forward] | ||||
Granted (in shares) | 0 | 6 | ||
Vested (in shares) | 0 | (6) | ||
Stock Options [Member] | ||||
Weighted Average Grant-Date Fair Value [Roll Forward] | ||||
Total intrinsic value | $ | $ 0 | |||
Weighted average vesting period | 1 year 2 months 12 days | 1 year 2 months 12 days | ||
Market Based Vesting [Member] | ||||
Number of Shares [Roll Forward] | ||||
Non-vested at the beginning of period (in shares) | 484 | 617 | 617 | |
Granted (in shares) | 15 | 0 | ||
Vested (in shares) | 0 | (213) | ||
Forfeited (in shares) | (3) | (100) | ||
Non-vested at the end of period (in shares) | 496 | 304 | 484 | |
Weighted Average Grant-Date Fair Value [Roll Forward] | ||||
Non-vested at the beginning of the period (in dollars per share) | $ / shares | $ 1.50 | $ 1.09 | $ 1.09 | |
Granted (in dollars per share) | $ / shares | 0.54 | 0 | ||
Forfeited (in dollars per share) | $ / shares | 0 | |||
Non-vested at the end of the period (in dollars per share) | $ / shares | $ 1.32 | $ 1.32 | $ 1.50 | |
Market Based Vesting [Member] | Key Employees [Member] | ||||
Weighted Average Grant-Date Fair Value [Roll Forward] | ||||
Vesting rights percentage | 50.00% | 50.00% | ||
Number of installments in which restricted common stock vest | Installment | 4 | |||
Service Based Vesting [Member] | ||||
Number of Shares [Roll Forward] | ||||
Non-vested at the beginning of period (in shares) | 697 | 624 | 624 | |
Granted (in shares) | 15 | 0 | ||
Vested (in shares) | (200) | (34) | ||
Forfeited (in shares) | (3) | |||
Non-vested at the end of period (in shares) | 509 | 590 | 697 | |
Weighted Average Grant-Date Fair Value [Roll Forward] | ||||
Non-vested at the beginning of the period (in dollars per share) | $ / shares | $ 1.62 | $ 1.09 | $ 1.09 | |
Granted (in dollars per share) | $ / shares | 0.54 | |||
Non-vested at the end of the period (in dollars per share) | $ / shares | $ 1.62 | $ 1.62 | $ 1.62 | |
Service Based Vesting [Member] | Key Employees [Member] | ||||
Weighted Average Grant-Date Fair Value [Roll Forward] | ||||
Vesting rights percentage | 50.00% | 50.00% | ||
Additional vesting percentage on each anniversary of the grant date | 25.00% | |||
Number of installments in which restricted common stock vest | Installment | 4 |
Stock-Based Compensation, Sum22
Stock-Based Compensation, Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 28, 2016 | Dec. 28, 2015 | Mar. 30, 2015 | |
$2.80 - $27.76 [Member] | |||
Aggregate Intrinsic Value [Abstract] | |||
Number of options outstanding (in shares) | 6,250 | ||
Range of exercise prices, minimum (in dollars per share) | $ 2.80 | ||
Range of exercise prices, maximum (in dollars per share) | $ 27.76 | ||
Restricted Stock [Member] | |||
Weighted Average Remaining Contractual Term [Abstract] | |||
Outstanding at the beginning of the period | 2 years 9 months 18 days | ||
Outstanding at the end of the period | 2 years 9 months 18 days | ||
Aggregate Intrinsic Value [Abstract] | |||
Exercisable at the end of the period | $ 1,000 | $ 3,300 | |
Stock Options [Member] | |||
Number of Options [Roll Forward] | |||
Outstanding at the beginning of the period (in shares) | 6,463 | ||
Granted (in shares) | 0 | ||
Exercised (in shares) | 0 | ||
Cancelled/Expired (in shares) | (213) | ||
Outstanding at the end of the period (in shares) | 6,250 | 6,463 | |
Exercisable at the end of the period (in shares) | 5,000 | ||
Weighted Average Exercise Price [Roll Forward] | |||
Outstanding at the beginning of the period (in dollars per share) | $ 3.62 | ||
Granted (in dollars per share) | 0 | ||
Exercised (in dollars per share) | 0 | ||
Cancelled/Expired (in dollars per share) | 0 | ||
Outstanding at the end of the period (in dollars per share) | 2.80 | $ 3.62 | |
Exercisable at the end of the period (in dollars per share) | $ 2.80 | ||
Weighted Average Remaining Contractual Term [Abstract] | |||
Outstanding at the beginning of the period | 1 year 2 months 12 days | 1 year 2 months 12 days | |
Outstanding at the end of the period | 1 year 2 months 12 days | 1 year 2 months 12 days | |
Exercisable at the end of the period | 1 year 2 months 12 days | ||
Aggregate Intrinsic Value [Abstract] | |||
Outstanding at the beginning of the period | $ 0 | $ 0 | |
Cancelled/Expired | 0 | ||
Outstanding at the end of the period | 0 | $ 0 | |
Exercisable at the end of the period | $ 0 | ||
Unrecognized weighted average period | 2 years |
Stock-Based Compensation, Sum23
Stock-Based Compensation, Summary of Stock-Based Compensation (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 28, 2016 | Mar. 30, 2015 | |
Stock Options [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Recognized stock compensation expense | $ 0.2 | $ 0.1 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2016 | Mar. 30, 2015 | |
Income Taxes [Abstract] | ||
Provision for income tax expense | $ 85 | $ 0 |
Projected tax provision | $ 150 |
Commitments and Contingencies,
Commitments and Contingencies, Minimum Annual Rentals (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2016 | Mar. 30, 2015 | |
Minimum annual rentals [Abstract] | ||
2,016 | $ 8,715 | |
2,017 | 8,997 | |
2,018 | 6,840 | |
2,019 | 5,755 | |
2020 and Thereafter | 16,414 | |
Total | 46,721 | |
Sublease rental income | 100 | |
Rental expense | $ 3,300 | $ 2,800 |
Restaurant leaseholds [Member] | Minimum [Member] | ||
Operating Leased Assets [Line Items] | ||
Renewal option, period | 3 years | |
Restaurant leaseholds [Member] | Maximum [Member] | ||
Operating Leased Assets [Line Items] | ||
Renewal option, period | 5 years |
Commitments and Contingencies26
Commitments and Contingencies (Details) $ in Millions | Mar. 28, 2016USD ($) |
Standby letters of credit [Member] | |
Commitments and contingencies [Line Items] | |
Contractual obligation | $ 0.2 |
Commitments and Contingencies27
Commitments and Contingencies, Purchase Commitments and Self-Insurance (Details) - USD ($) | 1 Months Ended | 3 Months Ended |
Apr. 30, 2015 | Mar. 28, 2016 | |
Purchase Commitments [Abstract] | ||
Term period of agreement | 3 years | |
Self-Insurance [Abstract] | ||
Self-insured group health insurance plan, maximum coverage per participant | $ 100,000 | |
Self-insured group health insurance plan, maximum additional coverage per plan year | 50,000 | |
Self-insurance reserve account | 200,000 | |
Pre-determined dollar amount | $ 1,100,000 | |
Cost of goods sold [Member] | Supplier concentration [Member] | Food and paper products [Member] | ||
Purchase Commitments [Abstract] | ||
Percentage of food and paper products to be supplied by independent distributors | 80.00% |
Other (Details)
Other (Details) | Nov. 24, 2015$ / shares |
Schedule of Trading Securities and Other Trading Assets [Line Items] | |
Consecutive business days | 30 days |
Number of calendar days to regain compliance | 180 days |
Maximum [Member] | |
Schedule of Trading Securities and Other Trading Assets [Line Items] | |
Closing price (in dollars per share) | $ 1 |
Minimum [Member] | |
Schedule of Trading Securities and Other Trading Assets [Line Items] | |
Consecutive business days | 10 days |
Closing price (in dollars per share) | $ 1 |