| Dispositions | DispositionsOn June 30, 2021, the Company's Board of Directors approved a stock purchase agreement, which was subsequently entered into by the Company on July 1, 2021, for the sale of all of the outstanding capital stock of Taco Cabana, Inc., including nearly all related assets and liabilities, for a cash purchase price of $85.0 million subject to reduction for (i) closing adjustments of approximately $4.6 million and (ii) certain other working capital adjustments as set forth in the stock purchase agreement. The transaction was completed August 16, 2021. The Company filed an insurance claim for winter storm damages in Texas that occurred in the first quarter of 2021 and retained the right to receive the insurance claim proceeds. The Company recognized $0.4 million of insurance proceeds within income (loss) from discontinued operations, net of tax, in the nine months ended October 2, 2022 and $0.9 million of insurance proceeds in the fourth quarter of 2021, and expects to recognize any additional proceeds when the claim is ultimately resolved. All revenues, costs and expenses and income taxes attributable to Taco Cabana, together with certain costs related to the transaction, have been aggregated within income (loss) from discontinued operations, net of tax, in the condensed consolidated statements of operations for all periods presented. No amounts for shared general and administrative operating support expense were allocated to discontinued operations. Depreciation and amortization related to Taco Cabana property and equipment and lease ROU assets was not recorded after June 30, 2021 when Taco Cabana was classified as held for sale. As required by the terms of the senior credit facility, the net proceeds from the sale were used to fully repay Fiesta's outstanding term loan borrowings on August 16, 2021. The early repayment was subject to a 103% loan prepayment premium. Interest expense and amortization of discount and debt issuance costs related to the term loan portion of the senior credit facility are included within income (loss) from discontinued operations, net of tax. Upon completion of the sale of Taco Cabana, the Company provided certain services to Taco Cabana subject to a transition services agreement which expired on December 13, 2021. The Company retained certain closed Taco Cabana restaurant leases, including the associated operating lease right-of-use assets and operating lease liabilities. The Company also retained liability for Taco Cabana's accrued worker's compensation and general liability claims for periods prior to the sale. These liabilities are recognized in other current liabilities and other non-current liabilities in the condensed consolidated balance sheets. As there are estimates and assumptions inherent in recording these insurance liabilities, including the ability to estimate the future development of incurred claims based on historical trends or the severity of the claims, differences between actual future events and prior estimates and assumptions could result in adjustments to these liabilities. During the nine months ended October 2, 2022, the Company recognized $0.2 million of income primarily related to insurance proceeds and a reduction of stock-based compensation of $(0.1) million, slightly offset by expenses related to workers' compensation claims within income (loss) from discontinued operations, net of tax, in the condensed consolidated statement of operations. A summary of the results of the discontinued operations for the three and nine months ended October 3, 2021 is as follows: Three Months Ended Nine Months Ended October 3, 2021 October 3, 2021 Major classes of line items constituting pretax loss of discontinued operations: Revenues: Total revenues $ 29,463 $ 152,339 Costs and expenses: Cost of sales 8,872 43,480 Restaurant wages and related expenses (including stock-based compensation expense of $122 and $172, respectively) 10,054 48,399 Restaurant rent expense 1,582 12,995 Other restaurant operating expenses 5,364 24,814 General and administrative (including stock-based compensation expense of $1,405 and $1,688, respectively) 3,451 11,442 Depreciation and amortization — 7,799 Other income and expense items that are not major 490 4,871 Total operating expenses 29,813 153,800 Loss from operations (350) (1,461) Interest expense 810 4,678 Gain on sale of Taco Cabana (24,066) (24,066) Loss on extinguishment of debt 5,307 5,307 Income from discontinued operations before income taxes 17,599 12,620 Benefit from income taxes (2,894) (3,716) Income from discontinued operations, net of tax $ 20,493 $ 16,336 A summary of significant investing activity and non-cash operating, investing, and financing activity of the discontinued operations for the nine months ended October 3, 2021 is as follows: Nine Months Ended October 3, 2021 Non-cash operating activities: Gain on disposals of property and equipment, net $ (217) Stock-based compensation 1,860 Impairment and other lease charges 132 Loss on extinguishment of debt 5,307 Gain on sale of Taco Cabana (24,066) Depreciation and amortization 7,799 Investing activities: Capital expenditures: New restaurant development $ — Restaurant remodeling (1,283) Other restaurant capital expenditures (5,050) Corporate and restaurant information systems (169) Total capital expenditures (6,502) Proceeds from sale of Taco Cabana 74,910 Proceeds from disposals of properties 1,307 Proceeds from sale-leaseback transactions 3,083 Net cash provided by investing activities – discontinued operations $ 72,798 Supplemental cash flow disclosures: Interest paid on long-term debt $ 4,338 Supplemental cash flow disclosures of non-cash investing and financing activities: Accruals for capital expenditures $ 410 Right-of-use assets obtained in exchange for lease liabilities: Operating lease ROU assets 5,156 Right-of-use assets and lease liabilities reduced for terminated leases: Operating lease ROU assets 2,695 Operating lease liabilities 3,443 |
