Notes to Consolidated Financial Statements
December 29, 2019, December 30, 2018 and December 31, 2017
(Dollars in thousands except shares and per share amounts)
Note 1 – Organization and Business
J. Alexander’s Holdings, Inc. (the “Company”) was incorporated on August 15, 2014 in the state of Tennessee and is a holding company which is the sole managing member of and owns all of the outstanding Class A Units of J. Alexander’s Holdings, LLC, the parent company of all of the Company’s operating subsidiaries. The Company became a publicly-traded company, with its stock listed on the New York Stock Exchange under the symbol “JAX”, effective in September of 2015 as a result of the “Spin-off” distribution (the “Spin-off”) by the Company’s former parent, Fidelity National Financial, Inc. (“FNF”) of all shares of the Company’s common stock owned by FNF to holders of shares of FNF’s Fidelity National Financial Ventures, LLC (“FNFV”) Group common stock, as it was known at the time of the Spin-off. FNFV is now conducting business independently as Cannae Holdings, Inc.
The Company, through J. Alexander’s Holdings, LLC and its subsidiaries, owns and operates full service, upscale restaurants including J. Alexander’s, Redlands Grill, Lyndhurst Grill, Overland Park Grill, Merus Grill and Stoney River Steakhouse and Grill (“Stoney River”). At December 29, 2019 and December 30, 2018, the Company operated 47 and 46 restaurants, respectively, in 16 states. The Company’s restaurants are concentrated primarily in the East, Southeast, and Midwest regions of the United States. The Company does not have any restaurants operating under franchise agreements.
Note 2 – Summary of Significant Accounting Policies
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a)
|
Principles of Consolidation and Basis of Presentation
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The Consolidated Financial Statements are prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”), and include the accounts of the Company as well as the accounts of its majority-owned subsidiaries. All intercompany profits, transactions, and balances between the Company and its subsidiaries have been eliminated. It is the Company’s policy to reclassify prior year amounts to conform to the current year’s presentation for comparative purposes, if such a reclassification is warranted.
The Company is a holding company with no direct operations. It holds as its sole asset an equity interest in J. Alexander’s Holdings, LLC, and relies on J. Alexander’s Holdings, LLC to provide it with funds necessary to meet any financial obligations.
The Company utilizes a 52- or 53-week accounting period which ends on the Sunday closest to December 31, and each quarter typically consists of 13 weeks. Fiscal years 2019, 2018 and 2017 each included 52 weeks of operations. Our next 53-week fiscal year will occur in 2020.
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c)
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Discontinued Operations and Restaurant Closures
|
The Company remains party to a lease agreement for a location that was closed in 2013 and is accounted for as a discontinued operation. The $236, $459 and $439 losses from discontinued operations in fiscal years 2019, 2018 and 2017, respectively, consist solely of exit and disposal costs for this location.
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d)
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Cash and Cash Equivalents
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Cash and cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased. Cash also consists of payments due from third‑party credit card issuers for purchases made by guests using the issuers’ credit cards. The issuers typically remit payment within three to four days of a credit card transaction.
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e)
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Accounts and Other Receivables
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Accounts receivable are primarily related to amounts due from various taxing jurisdictions, third-party online gift card sellers and expected workers’ compensation rebates and vendor rebates which have been earned but not yet received.
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Inventories are stated at the lower of cost or net realizable value, with cost being determined on a first‑in, first‑out basis.
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g)
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Property and Equipment, Net
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The Company states property and equipment at cost less accumulated depreciation and amortization. Depreciation and amortization expense is calculated using the straight‑line method. The useful lives of assets are typically 30–40 years for buildings and land improvements and two–10 years for furniture, fixtures, and equipment. Leasehold improvements are amortized over the lesser of the useful life or the remaining lease term, generally inclusive of renewal periods. Gains or losses are recognized upon the disposal of property and equipment, and the asset and related accumulated depreciation and amortization are removed from the accounts. Maintenance, repairs and betterments that do not enhance the value of or increase the life of the assets are expensed as incurred. The Company capitalizes all direct external costs associated with obtaining the land, building, and equipment for each new restaurant, as well as construction period interest. All direct external costs associated with obtaining the dining room and kitchen equipment, signage, and other assets and equipment are also capitalized.
Certain direct and indirect costs are capitalized as building and leasehold improvement costs in conjunction with capital improvement projects at existing restaurants and acquiring and developing new restaurant sites. Such costs are amortized over the life of the related assets.
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h)
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Goodwill and Other Intangible Assets
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Goodwill represents the excess of cost over fair value of net assets acquired in a previous acquisition of the Company’s predecessor by FNF in 2012. Intangible assets include trade names, deferred loan costs, purchased trademarks and liquor licenses at certain restaurants. Goodwill, trade names, trademarks and liquor licenses are not subject to amortization, but are tested for impairment annually as of the fiscal year‑end date, or more frequently, if events or changes in circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount of the goodwill or indefinite‑lived intangible asset exceeds its fair value.
The Company performed the fiscal year 2019 annual review of goodwill in accordance with Accounting Standards Update (“ASU”) No. 2011‑08, Testing Goodwill for Impairment, which allows for the performance of a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount prior to performing the two‑step goodwill impairment test. The qualitative assessment includes an analysis of macroeconomic factors, industry and market conditions, internal cost factors, overall financial performance and entity‑specific events. ASU No. 2012‑02, Testing Indefinite‑lived Intangible Assets for Impairment, also provides an entity the option to perform a qualitative assessment with regard to the testing of its indefinite‑lived intangible assets. The Company performed the fiscal year 2019 annual review of impairment for its indefinite‑lived intangibles in accordance with this guidance. It was determined that no impairment of goodwill or indefinite‑lived intangible assets existed as of December 29, 2019, December 30, 2018 or December 31, 2017 and, accordingly, no impairment losses were recorded.
Deferred loan costs are subject to amortization and are classified in the “Long-term debt, net of portion classified as current and deferred loan costs” line item on the Consolidated Balance Sheets. Deferred loan costs are amortized over the life of the related debt.
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i)
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Impairment of Long‑Lived Assets
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In accordance with Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment, long‑lived assets, such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, an impairment charge may be recognized for the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group based upon the future highest and best use of the impaired asset or asset group. Fair value is determined by projected future discounted cash flows for each location or the estimated market value of the assets. The asset impairment charges are generally recorded in the Consolidated Statements of Income and Comprehensive Income in the financial statement line item “Asset impairment charges and restaurant closing costs,” but are also recorded in the line item “Loss from discontinued operations, net” when applicable. Assets to be disposed of are separately presented in the Consolidated Balance Sheets and reported at the lower of carrying amount or fair value less costs to sell, and are no longer depreciated.
59
No impairment charges were recorded for the years ended December 29, 2019, December 30, 2018 or December 31, 2017.
The Company through its subsidiaries has land only, building only, and land and building leases for a number of its restaurants and its corporate office that are recorded as operating leases. The Company determines if an arrangement meets the definition of a lease at inception, at which time it also performs an analysis to determine whether the lease qualifies as operating or financing. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease current and long-term liabilities on the Company’s Consolidated Balance Sheets. Lease expense for operating leases is generally recognized on a straight-line basis over the lease term, and is included in other operating expenses (for restaurant properties) or general and administrative expense (for corporate office space) on the Company’s Consolidated Statements of Income and Comprehensive Income. The Company presents both the change in ROU assets and lease liabilities as a single line item in the Company’s Consolidated Statement of Cash Flows as the change in “Lease right-of-use assets and liabilities.” The Company does not currently have any arrangements that are classified as financing leases.
Most of the Company’s leases have rent escalation clauses and some have rent holiday and contingent rent provisions. Terms for these leases are generally for 15 to 20 years and, in many cases, the leases provide for one or more five‑year renewal options. As stated, the rent expense under these leases is recognized on a straight‑line basis over an expected lease term, including cancelable option periods when it is reasonably assured that such option periods will be exercised because failure to do so would result in a significant economic penalty, and these periods are recognized as a part of the ROU asset and related lease liability. The Company begins recognizing rent expense on the date that it or its subsidiaries become legally obligated under the lease and take possession of or are given control of the leased property. Rent expense incurred during the construction period for a leased restaurant location is included in pre‑opening expense. Contingent rent expense is generally based upon sales levels and is typically accrued when it is deemed probable that it will be payable. These costs are disclosed as variable lease costs. Any tenant improvement allowances received from landlords under operating leases are recorded as a reduction to the related ROU asset and lease liability. The same lease term that is used to calculate the lease liabilities is also used for assessing leases for finance or operating lease accounting. Many of the Company’s leases require payments for property taxes, insurance, maintenance and certain other costs. The variable portion of these payments is not included as a component of the Company’s ROU assets and lease liabilities. Rather, variable payments, other than those dependent on an index or rate, are expensed as incurred and are disclosed as variable lease costs.
Certain of the Company’s leases include both lease (i.e. fixed payments including rent) and non-lease components (e.g., common-area maintenance, marketing, and other miscellaneous fixed costs) which are accounted for as a single lease component as the Company has elected the practical expedient to combine lease and non-lease components for real estate leases. The Company is also a party to leases which have a non-cancelable lease term of less than one year with no option to purchase the underlying asset and, therefore, it has elected to exclude these short-term leases from its ROU assets and lease liabilities.
For our existing operating leases that commenced prior to the adoption of ASC Topic 842, Leases, we made an accounting policy election to use the incremental borrowing rate for our leases considering the remaining lease term and remaining minimum rental payments during transition in establishing our lease liabilities. For new leases entered into after the adoption of ASC Topic 842, we will use an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The right-of-use asset also includes any lease payments made on or before the commencement date of the lease, less any lease incentives received. As the rate implicit in the lease is not readily determinable in the Company’s leases, it uses an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The incremental borrowing rates used are estimated based on what the Company would be required to pay for a collateralized loan over a similar term. Additionally, based on the applicable lease terms and the current economic environment, the Company applies a portfolio approach for determining the incremental borrowing rate for its real estate leases.
Restaurant sales are recognized at a point in time when food and service are provided to guests at one of the Company’s restaurants. Taxes assessed by a governmental authority that are imposed on the Company’s sales of its food and service, and collected by the Company from the guest for remittance to such authorities, are excluded from net sales. Further, the Company excludes any discounts, such as management meals and employee meals, associated with each sale.
Unearned revenue, as separately stated on the Company’s Consolidated Balance Sheets, represents the contract liability for gift cards, which have been sold but not redeemed. Upon redemption, when the guest presents a gift card as a form of payment for food and service provided at the restaurant, net sales are recorded and the contract liability is reduced by the amount of card value redeemed. The Company considers its performance obligations associated with gift cards sold to guests
60
to be met when food and service have been provided to its guests, and a gift card is presented as a form of payment. The amount of gift card revenue that was previously deferred is recognized based on the selling price of the menu items at each restaurant.
Prior to the adoption of ASC Topic 606, Revenue from Contracts with Customers, the Company recorded gift card breakage when such cards were considered to be only remotely likely to be redeemed, and for which there was no legal obligation to remit balances under unclaimed property laws of the relevant jurisdictions. Management considered the probability of redemption of a gift card to be remote when it had been outstanding for 24 months. With the adoption of ASC Topic 606 as of January 1, 2018, the Company began analyzing gift card breakage based upon Company-specific historical redemption patterns, and gift card breakage is now recognized as revenue in proportion to guest redemptions. The Company’s gift cards continue to have no expiration date, and it does not deduct non-usage fees from outstanding gift card balances. In applying the guidance under this topic, management estimates the percentage of the value of gift cards sold that will go unused by the purchaser of such card, and for which there is no legal obligation to remit balances under unclaimed property laws of the relevant jurisdictions, which is a matter of judgement, and, as noted above, recognizes revenue in proportion to actual gift card redemptions during the reporting period, at which time management believes the underlying performance obligations have been satisfied by the Company. Gift card breakage is recorded on a quarterly basis in conjunction with the Company’s preparation of its financial statements and related disclosures, and is presented as a component of “Net sales” within the Consolidated Statements of Income and Comprehensive Income. Breakage of $443, $378 and $311 related to gift cards was recorded in fiscal years 2019, 2018 and 2017, respectively.
The Company’s net sales and net income have historically been subject to seasonal fluctuations. Net sales and operating income typically reach their highest levels during the fourth quarter of the fiscal year due to holiday business and the first quarter of the fiscal year due in part to the redemption of gift cards sold during the holiday season. The contract liability relative to gift cards and the recognition of revenue associated with such form of payment is impacted accordingly. The Company’s unearned revenue balance has historically decreased throughout the course of the fiscal year until the fourth quarter when an increase in the balance is typically experienced given the seasonality of gift card sales.
Vendor rebates are received from various nonalcoholic beverage suppliers and suppliers of food products and supplies. Rebates are recognized as a reduction to cost of sales in the period in which they are earned.
Costs of advertising are charged to expense at the time the costs are incurred. Advertising expense totaled $156, $154 and $124, during fiscal years 2019, 2018 and 2017, respectively.
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n)
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Transaction, Contested Proxy and Other Related Expenses
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Transaction, contested proxy and other related expenses consist primarily of legal and consulting costs, accounting fees, and to a lesser extent other professional fees and miscellaneous costs. During fiscal year 2017, the Company incurred transaction expenses associated with the proposed acquisition of the Ninety Nine Restaurant and Pub concept (“99 Restaurants”) totaling $3,529. Such costs consisted primarily of fairness opinion fees, legal, accounting, and consulting fees as well as other miscellaneous expenses. During fiscal year 2018, the Company announced that it did not receive the required number of disinterested shareholder votes to approve the proposed acquisition, and the merger agreement was thereafter terminated.
In fiscal year 2018, the Company incurred transaction expenses totaling $5,648, a portion of which related to the abovementioned terminated merger agreement with 99 Restaurants. Additionally, the Company incurred transaction costs associated with the termination agreement (the “Termination Agreement”) between J. Alexander’s Holdings, LLC and Black Knight Advisory Services, LLC (“Black Knight”) effective November 30, 2018 which resulted in the termination of the management consulting agreement. Pursuant to the Termination Agreement, the termination payment of $4,560, along with other legal and professional fees, is included in transaction expenses for fiscal year 2018.
For fiscal year 2019, transaction, contested proxy and other related expenses totaled $1,178 and included legal, proxy solicitor, and other professional and consulting fees along with printing and postage costs and other miscellaneous costs associated with both soliciting shareholder proxies for the Company’s 2019 annual meeting of shareholders and the ongoing evaluation of strategic alternatives.
61
Income taxes are accounted for using the asset and liability method, whereby deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and for operating loss and tax credit carryforwards. The deferred taxes generated within the J. Alexander’s Holdings, LLC partnership are accounted for using the “outside basis” approach, and the deferred taxes outside of the partnership are accounted for using the “inside basis” approach. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized.
The benefits of uncertain tax positions are recognized in the Consolidated Financial Statements only after determining a more likely than not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances change, these probabilities are reassessed and any appropriate changes are recorded in the Consolidated Financial Statements. Uncertain tax positions are accounted for by determining the minimum recognition threshold that a tax position is required to meet before being recognized in the Consolidated Financial Statements. This determination requires the use of judgment in assessing the timing and amounts of deductible and taxable items. Tax positions that meet the more likely than not recognition threshold are recognized and measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. Interest and penalties accrued related to unrecognized tax benefits or income tax settlements are recognized as components of income tax expense.
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p)
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Concentration of Credit Risk
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Financial instruments that are potentially exposed to a concentration of credit risk are cash and cash equivalents and accounts receivable. Operating cash balances are maintained in noninterest‑bearing transaction accounts, which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250. Further, a certain portion of the assets held in a rabbi trust (the “Trust”) consists of cash and cash equivalents. The Company places cash with high‑credit‑quality financial institutions, and at times, such cash may be in excess of the federally insured limit. However, there have been no losses experienced related to these balances, and the credit risk is believed to be minimal. Also, the Company believes that its risk related to cash equivalents from third‑party credit card issuers for purchases made by guests using the issuers’ credit cards is not significant due to the number of banks involved and the fact that payment is typically received within three to four days of a credit card transaction. Therefore, the Company does not believe it has significant risk related to its cash and cash equivalents accounts. Another portion of the assets held in the Trust consists of U.S. Treasury bonds as well as a small number of corporate bonds with ratings no lower than BBB. The Company believes the credit risk associated with such bonds to be minimal given the historical stability of the U.S. government and the investment grade bond ratings relative to the corporate issuers. Concentrations of credit risk with respect to accounts receivable are related principally to receivables from governmental agencies related to refunds of franchise and income taxes. The Company does not believe it has significant risk related to accounts receivable due to the nature of the entities involved.
Management has made certain estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the periods presented to prepare these Consolidated Financial Statements in conformity with GAAP. Significant items subject to such estimates and assumptions include those related to the accounting for gift card breakage, determination of uncertain tax positions and the valuation allowance relative to deferred tax assets, if any, estimates of useful lives of property and equipment and leasehold improvements, the carrying amount of intangible assets, fair market valuations, determination of lease terms, and accounting for impairment losses, contingencies, and litigation. Actual results could differ from these estimates.
As mentioned in Note 2 (k), Revenues are presented net of sales taxes. The obligation for sales taxes is included in accrued expenses and other current liabilities until the taxes are remitted to the appropriate taxing authorities.
Pre‑opening expenses are accounted for by expensing such costs as they are incurred.
62
Total comprehensive income or loss is comprised solely of net income or net loss for all periods presented. Therefore, a separate statement of comprehensive income is not included in the accompanying Consolidated Financial Statements.
The Company through its subsidiaries owns and operates full‑service, upscale restaurants under various concepts exclusively in the United States that have similar economic characteristics, products and services, class of customer and distribution methods. The Company believes it meets the criteria for aggregating its operating segments into a single reportable segment.
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v)
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Non-controlling Interests
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Non-controlling interests on the Consolidated Balance Sheets represents the portion of the Company’s net assets attributable to the non-controlling J. Alexander’s Holdings, LLC Class B Unit holders. As of December 29, 2019 and December 30, 2018, the non-controlling interest presented on the Consolidated Balance Sheets is $1,558 and $7,844, respectively. On February 28, 2019, in conjunction with the Termination Agreement with Black Knight, the 1,500,024 Class B Units held by Black Knight were cancelled and forfeited for no consideration. Therefore, the share-based compensation expense associated with the Black Knight grant has been reclassified to additional paid-in capital in fiscal year 2019, and as of December 29, 2019, non-controlling interests consist solely of the non-cash compensation expense relative to the Class B Units held by management. Non-controlling interests reported as of December 30, 2018 consisted of non-cash compensation expense associated with Class B Units held by both management and Black Knight. The Hypothetical Liquidation of Book Value method was used as of December 29, 2019, December 30, 2018 and December 31, 2017 to determine allocations of non-controlling interests consistent with the terms of the Second Amended and Restated LLC Agreement of J. Alexander’s Holdings, LLC, and pursuant to that calculation, no allocation of net income was made to non-controlling interests for fiscal years 2019, 2018 or 2017, respectively.
Basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares outstanding for the reporting period. Diluted earnings per share of common stock is computed similarly to basic earnings per share except the weighted average shares outstanding are increased to include potential shares outstanding resulting from share-based compensation awards and additional shares from the assumed exercise of any common stock equivalents, if dilutive. J. Alexander’s Holdings, LLC Class B Units are considered common stock equivalents for this purpose. The number of additional shares of common stock related to these common stock equivalents is calculated using the if-converted method, if dilutive. The number of additional shares of common stock related to stock option awards and unvested restricted share awards subject to only a service condition is calculated using the treasury stock method, if dilutive. Unvested restricted share awards that are subject to a performance condition are regarded as contingently issuable common shares and are included in the denominator of the diluted earnings per share calculation using the treasury stock method as of the beginning of the period in which the performance condition has been satisfied, if dilutive. Refer to Note 3 – Earnings per Share for the basic and diluted earnings per share calculations and additional discussion.
x)Share Repurchase Program
On November 1, 2018, the Company’s Board of Directors authorized a share repurchase program which replaced the previous share repurchase program that expired on October 29, 2018, and allows for the repurchase of shares up to an aggregate purchase price of $15,000 over the three-year period ending November 1, 2021. Any share repurchases under the program are expected to be made solely from cash on hand and available operating cash flow. Repurchases will be made in accordance with applicable securities laws and may be made from time to time in the open market. The timing, prices and amount of repurchases will depend upon prevailing market prices, general economic and market conditions and other considerations. The repurchase program does not obligate the Company to acquire any particular amount of stock. There was no common stock repurchase activity under the program during fiscal year 2019.
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y)
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Recently Issued Accounting Standards
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In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”). ASU No. 2016-13 was issued to update the methodology used to measure current expected credit losses (“CECL”). The update applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet credit exposures, such as loan commitments. This ASU replaces
63
the current incurred loss impairment methodology with a methodology to reflect CECL and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. ASU No. 2016-13 must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings in the period of adoption. The effective date relative to smaller reporting companies is for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU No. 2016-13 to have a material impact on its Consolidated Financial Statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU No. 2017-04”). This update simplifies the subsequent measurement of goodwill by eliminating the second step of the two-step quantitative goodwill impairment test. An entity will no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured at the amount by which the carrying value exceeds the fair value of a reporting unit, not to exceed the carrying value of the reporting unit goodwill. The option remains for an entity to perform a qualitative assessment of a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 requires prospective adoption and is effective commencing in fiscal years beginning after December 15, 2022, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its Consolidated Financial Statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU No. 2018-13”). This update eliminates, modifies and adds a number of disclosure requirements related to fair value measurements in connection with the FASB’s disclosure framework project, the objective of which is to improve the effectiveness of disclosures in the notes to financial statements. ASU No. 2018-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption permitted. While the Company continues to assess the potential impact of ASU No. 2018-13, it does not expect the adoption of this standard to have a significant impact on the notes to its Consolidated Financial Statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”). ASU No. 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This standard is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods, with early adoption permitted. The Company is currently assessing the potential impact of ASU No. 2019-12 on its Consolidated Financial Statements and related disclosures.
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z)
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Recently Adopted Accounting Standards
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In February 2016, the FASB established ASC Topic 842, Leases, by issuing ASU No. 2016-02, Leases (“Topic 842”), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a ROU model that requires a lessee to recognize a lease liability and ROU asset on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of income. The new standard was effective for the Company on the first day of fiscal year 2019, December 31, 2018, and it elected the optional transition method to apply the standard as of the effective date. Consequently, prior year financial information has not been updated and the disclosures required under the new standard have not been provided for dates and periods before December 31, 2018. See Note 13 – Leases for additional discussion surrounding the adoption of Topic 842 as well as related disclosures.
In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) (“ASU No. 2018-07”), in an effort to simplify the accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718, to include share-based payment transactions for acquiring goods and services from nonemployees. Under ASU No. 2018-07, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. The Company adopted this guidance at the beginning of fiscal year 2019, and it did not have a significant impact on the Company’s Consolidated Financial Statements and related disclosures.
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Note 3 – Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share:
|
|
Year Ended
|
|
(Dollars and shares in thousands, except per share amounts)
|
|
December 29,
|
|
|
December 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
$
|
9,053
|
|
|
$
|
4,458
|
|
|
$
|
7,773
|
|
Loss from discontinued operations, net
|
|
|
(236
|
)
|
|
|
(459
|
)
|
|
|
(439
|
)
|
Net income
|
|
$
|
8,817
|
|
|
$
|
3,999
|
|
|
$
|
7,334
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares (denominator for basic earnings per share)
|
|
|
14,695
|
|
|
|
14,695
|
|
|
|
14,695
|
|
Effect of dilutive securities
|
|
|
46
|
|
|
|
168
|
|
|
|
73
|
|
Adjusted weighted average shares and assumed conversions
(denominator for diluted earnings per share)
|
|
|
14,741
|
|
|
|
14,863
|
|
|
|
14,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
$
|
0.62
|
|
|
$
|
0.30
|
|
|
$
|
0.53
|
|
Loss from discontinued operations, net
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
Basic earnings per share
|
|
$
|
0.60
|
|
|
$
|
0.27
|
|
|
$
|
0.50
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
$
|
0.61
|
|
|
$
|
0.30
|
|
|
$
|
0.53
|
|
Loss from discontinued operations, net
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
Diluted earnings per share
|
|
$
|
0.60
|
|
|
$
|
0.27
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Per share amounts may not sum due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares outstanding for the reporting period. Diluted earnings per share of common stock gives effect during the reporting period to all dilutive potential shares outstanding resulting from share-based compensation awards and additional shares from the assumed exercise of any common stock equivalents, if dilutive.
The J. Alexander’s Holdings, LLC Class B Units are considered common stock equivalents, and the number of additional shares of common stock related to these Class B Units is calculated using the if-converted method. The 833,346 Class B Units associated with management’s profits interest awards were considered to be dilutive for one quarter within fiscal year 2018, and the impact on the diluted earnings per share calculation was additional shares of 3,719 for the year ended December 30, 2018. Conversely, these Class B Units were considered to be anti-dilutive for the years ended December 29, 2019 and December 31, 2017, and, therefore, are excluded from the diluted earnings per share calculation in these years.
The previously outstanding Black Knight profits interest Class B Units were considered to be dilutive for certain quarterly periods within fiscal years 2018 and 2017, and the impact on the diluted earnings per share calculation was additional shares of 130,113 and 72,579 for the years ended December 30, 2018 and December 31, 2017, respectively. See Note 19 – Related Party Transactions for discussion pertaining to the forfeiture and cancellation of these Class B Units during fiscal year 2019.
The number of additional shares of common stock related to stock option awards is calculated using the treasury method, if dilutive. There were 1,495,750 stock option awards outstanding as of both December 29, 2019 and December 30, 2018, and 985,750 stock option awards outstanding as of December 31, 2017. The dilutive impact of these option awards on the number of weighted average shares in the diluted earnings per share calculation was additional shares of 42,948 and 33,811 for the years ended December 29, 2019 and December 30, 2018, respectively. However, the stock option awards outstanding were considered anti-dilutive for all quarterly periods of fiscal year 2017 and, therefore, are excluded from the diluted earnings per share calculation for the year ended December 31, 2017.
On August 9, 2019, the Company granted 264,000 restricted share awards to members of its board of directors as well as certain employees of the Company and 52,500 performance share awards to certain employees of the Company under its Amended and Restated 2015 Equity Incentive Plan. The shares were registered under the Company’s Registration Statement on Form S-8, filed with the SEC on August 9, 2019. Restricted share awards subject to only a service condition are not regarded as outstanding for basic
65
earnings per share calculation purposes until they are vested, and any potential dilutive impact of unvested restricted share awards is calculated using the treasury stock method. Performance share awards are regarded as contingently issuable common shares and are included in the weighted average shares outstanding for basic earnings per share calculation purposes as of the beginning of the period in which the performance condition has been satisfied and the awards have vested. For diluted earnings per share calculation purposes under the treasury stock method, such performance share awards are included in the number of weighted average shares outstanding as of the beginning of the period in which the performance condition has been satisfied, if dilutive. The performance condition associated with the performance share awards had not been met as of December 29, 2019, and, therefore, any dilutive impact on the earnings per share calculation of performance share awards was not considered. However, the unvested restricted share awards subject to only a service condition were considered dilutive for the year ended December 29, 2019, and the impact on the number of weighted average shares in the diluted earnings per share calculation was 3,427.
Note 4 – Fair Value Measurements
The Company utilizes the following fair value hierarchy, which prioritizes the inputs into valuation techniques used to measure fair value. Accordingly, the Company uses valuation techniques which maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value. The three levels of the hierarchy are as follows:
Level 1
|
Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities.
|
Level 2
|
Defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
Level 3
|
Defined as unobservable inputs for which little or no market data exists, therefore, requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk.
|
The following tables present our financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated:
|
|
December 29, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Cash and cash equivalents *
|
|
$
|
71
|
|
|
$
|
-
|
|
|
$
|
-
|
|
U.S. government obligations *
|
|
|
300
|
|
|
|
-
|
|
|
|
-
|
|
Corporate bonds *
|
|
|
2,195
|
|
|
|
-
|
|
|
|
-
|
|
Mutual and money market funds
|
|
|
833
|
|
|
|
-
|
|
|
|
-
|
|
Cash surrender value - life insurance *
|
|
|
-
|
|
|
|
2,253
|
|
|
|
-
|
|
Total
|
|
$
|
3,399
|
|
|
$
|
2,253
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30, 2018
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Cash and cash equivalents *
|
|
$
|
86
|
|
|
$
|
-
|
|
|
$
|
-
|
|
U.S. government obligations *
|
|
|
296
|
|
|
|
-
|
|
|
|
-
|
|
Corporate bonds *
|
|
|
2,083
|
|
|
|
-
|
|
|
|
-
|
|
Mutual and money market funds
|
|
|
705
|
|
|
|
-
|
|
|
|
-
|
|
Cash surrender value - life insurance *
|
|
|
-
|
|
|
|
2,193
|
|
|
|
-
|
|
Total
|
|
$
|
3,170
|
|
|
$
|
2,193
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* - As held in the Trust as defined below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents are classified as Level 1 of the fair value hierarchy as they represent cash held in a rabbi trust established under retirement benefit arrangements with certain of our current and former officers (the “Trust”). Cash held in the Trust is invested through an overnight repurchase agreement. The assets of the Trust may include investments in U.S. Government securities or investment-grade debt of U.S.-based companies. Such investments are valued using quoted market prices in active markets.
U.S. government obligations held in the Trust include U.S. Treasury Bonds. These bonds as well as the corporate bonds included in the Trust are classified as Level 1 of the fair value hierarchy given their readily available quoted prices in active markets.
66
At December 29, 2019 and December 30, 2018, the Company held investments in mutual and money market funds classified as trading securities to support its future obligations to participants of its nonqualified deferred compensation plan (discussed in greater detail in Note 16 – Other Employee Benefits), which are carried at fair value based on quoted market prices in active markets for identical assets (Level 1).
Cash surrender value - life insurance is classified as Level 2 in the fair value hierarchy. The value of each policy was determined by MassMutual Financial Group, an A-rated insurance company, which provides the value of these policies to the Company on a regular basis.
There were no transfers between the levels listed above during either of the reporting periods. Unrealized gains or losses on investments held in the Trust as well as other investments noted above are presented as a component of “Other, net” on the Consolidated Statements of Income and Comprehensive Income.
As of December 29, 2019 and December 30, 2018, the fair value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities approximated their carrying value due to their short-term nature. The carrying amounts of the long-term debt approximate fair value (Level 2) as interest rates and negotiated terms and conditions are consistent with current market rates because of the close proximity of recent refinancing transactions and the quotes obtained for potential financings to the dates of these Consolidated Financial Statements.
There were no assets and liabilities measured at fair value on a nonrecurring basis during the years ended December 29, 2019 and December 30, 2018.
Note 5 – Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
|
|
December 29,
|
|
|
December 30,
|
|
|
|
2019
|
|
|
2018
|
|
Prepaid insurance
|
|
$
|
1,422
|
|
|
$
|
1,170
|
|
Prepaid rent
|
|
|
1,081
|
|
|
|
1,022
|
|
Payroll taxes
|
|
|
1,183
|
|
|
|
1,328
|
|
Other
|
|
|
473
|
|
|
|
279
|
|
Prepaid expenses and other current assets
|
|
$
|
4,159
|
|
|
$
|
3,799
|
|
Note 6 – Other Assets
Other assets consisted of the following:
|
|
December 29,
|
|
|
December 30,
|
|
|
|
2019
|
|
|
2018
|
|
Favorable operating leases, net
|
|
$
|
-
|
|
|
$
|
148
|
|
Cash, cash equivalents and securities held in the Trust
|
|
|
2,566
|
|
|
|
2,465
|
|
Cash surrender value of life insurance
|
|
|
2,253
|
|
|
|
2,193
|
|
Investments in trading securities
|
|
|
833
|
|
|
|
705
|
|
Other
|
|
|
46
|
|
|
|
46
|
|
Other assets
|
|
$
|
5,698
|
|
|
$
|
5,557
|
|
67
Note 7 – Property and Equipment
Property and equipment, at cost, less accumulated depreciation and amortization, consisted of the following:
|
|
December 29,
|
|
|
December 30,
|
|
|
|
2019
|
|
|
2018
|
|
Land
|
|
$
|
20,204
|
|
|
$
|
20,204
|
|
Buildings
|
|
|
32,785
|
|
|
|
32,104
|
|
Leasehold improvements
|
|
|
78,047
|
|
|
|
72,213
|
|
Restaurant and other equipment
|
|
|
41,504
|
|
|
|
37,750
|
|
Construction in progress
|
|
|
1,730
|
|
|
|
882
|
|
|
|
|
174,270
|
|
|
|
163,153
|
|
Less accumulated depreciation and amortization
|
|
|
(64,967
|
)
|
|
|
(53,821
|
)
|
Property and equipment, net
|
|
$
|
109,303
|
|
|
$
|
109,332
|
|
For fiscal years 2019, 2018 and 2017, depreciation expense from continuing operations related to restaurant and corporate office property and equipment was $12,123, $11,157 and $10,287, respectively. The loss on disposition of assets from continuing operations included in the “Other operating expenses” line item of the Statements of Income and Comprehensive Income, primarily related to the refreshing of assets through store remodels, was $135, $202 and $147 for fiscal years 2019, 2018 and 2017, respectively.
No impairment charges were recorded during fiscal years 2019, 2018 or 2017.
Note 8 – Goodwill and Indefinite‑Lived Intangible Assets
Goodwill and indefinite-lived intangible assets consisted of the following:
|
|
December 29,
|
|
|
December 30,
|
|
|
|
2019
|
|
|
2018
|
|
Goodwill
|
|
$
|
15,737
|
|
|
$
|
15,737
|
|
Tradename
|
|
|
25,069
|
|
|
|
25,069
|
|
Liquor licenses
|
|
|
579
|
|
|
|
578
|
|
Goodwill and intangible assets
|
|
$
|
41,385
|
|
|
$
|
41,384
|
|
Note 9 – Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
|
|
December 29,
|
|
|
December 30,
|
|
|
|
2019
|
|
|
2018
|
|
Taxes, other than income taxes
|
|
$
|
4,447
|
|
|
$
|
4,428
|
|
Salaries, wages, vacation, and incentive compensation
|
|
|
3,009
|
|
|
|
3,096
|
|
Transaction, contested proxy and other related expenses
|
|
|
412
|
|
|
|
4,635
|
|
Other
|
|
|
1,521
|
|
|
|
2,538
|
|
Accrued expenses and other current liabilities
|
|
$
|
9,389
|
|
|
$
|
14,697
|
|
68
Note 10 – Debt
Debt consisted of the following:
|
|
December 29,
|
|
|
December 29,
|
|
|
December 30,
|
|
|
December 30,
|
|
|
|
2019
|
|
|
2019
|
|
|
2018
|
|
|
2018
|
|
|
|
Current
|
|
|
Long-term
|
|
|
Current
|
|
|
Long-term
|
|
Mortgage Loan
|
|
$
|
1,667
|
|
|
$
|
2,917
|
|
|
$
|
1,667
|
|
|
$
|
4,583
|
|
Term Loan
|
|
|
1,389
|
|
|
|
-
|
|
|
|
3,333
|
|
|
|
1,389
|
|
Development Line of Credit
|
|
|
4,000
|
|
|
|
-
|
|
|
|
4,000
|
|
|
|
-
|
|
Less: Net deferred loan costs
|
|
|
-
|
|
|
|
(72
|
)
|
|
|
-
|
|
|
|
(106
|
)
|
Total debt
|
|
$
|
7,056
|
|
|
$
|
2,845
|
|
|
$
|
9,000
|
|
|
$
|
5,866
|
|
The Company currently has four separate notes under its Second Amended and Restated Loan Agreement (“Loan Agreement”) with Pinnacle Bank. The borrower under the Loan Agreement is J. Alexander’s, LLC, and it is guaranteed by J. Alexander’s Holdings, LLC and all of its significant subsidiaries. The indebtedness outstanding under this Loan Agreement is secured by liens on certain personal property of the Company and its subsidiaries, subsidiary guarantees, and a mortgage lien on certain real property. The Loan Agreement, among other things, permits payments of tax dividends to members, limits capital expenditures, assets sales and liens and encumbrances, prohibits dividends, and contains certain other provisions customarily included in such agreements. The Loan Agreement consists of the following:
|
•
|
A $1,000 revolving line of credit (“Revolving Line of Credit”) that matures on September 3, 2021, and which may be used for general corporate purposes. The outstanding balance was $0 at both December 29, 2019 and December 30, 2018;
|
|
•
|
A $5,000 term loan (“Mortgage Loan”) that matures on September 3, 2021;
|
|
•
|
A $20,000 development line of credit (“Development Line of Credit”) that matures on September 3, 2021; and
|
|
•
|
A $10,000 term loan (“Term Loan”) entered into in 2015 with a term of five years ending on May 3, 2020.
|
The current balance of these credit facilities is set forth below.
Prior to the modification agreements discussed below, at December 30, 2018, any amount borrowed under the Revolving Line of Credit bore interest at an annual rate of 30-day LIBOR plus a margin equal to 2.50%, with a minimum interest rate of 3.25% per annum. At December 30, 2018, the Mortgage Loan bore interest at an annual rate of 30-day LIBOR plus a margin equal to 2.50%, with a minimum and maximum interest rate of 3.25% and 6.25% per annum, respectively. At December 30, 2018, both the Development Line of Credit and the Term Loan bore interest at 30-day LIBOR plus 2.20% per annum. The interest rates for the Mortgage Loan, the Development Line of Credit and Term Loan as of December 30, 2018 were 4.90%, 4.60% and 4.60%, respectively.
In 2019, J. Alexander’s, LLC entered into two separate modification agreements with respect to the Loan Agreement. The first modification agreement (the “First Modification Agreement”) became effective on January 2, 2019, while the second modification agreement (the “Second Modification Agreement”) became effective on September 3, 2019. Under the terms of the First Modification Agreement, effective January 2, 2019, all of the notes under the Loan Agreement bear interest at 30-day LIBOR plus a sliding interest rate scale determined by the maximum adjusted debt to EBITDAR ratio. For the year ended December 29, 2019, the interest rate was set at 3.57% for the Loan Agreement, which is 30-day LIBOR plus 1.85%. Additionally, the non-use fee payable quarterly on the Development Line of Credit and Revolving Line of Credit decreased as a result of the First Modification Agreement from 0.25% to a sliding rate based on the maximum adjusted debt to EBITDAR ratio. The interest rate and non-use fee rate scale is set forth as follows:
Maximum adjusted debt to EBITDAR ratio
|
|
Margin
|
|
|
Non-Use Fee Rate
|
|
Less than 1.25X
|
|
1.60%
|
|
|
0.15%
|
|
Less than 2.25X
|
|
1.85%
|
|
|
0.20%
|
|
Less than 3.25X
|
|
2.10%
|
|
|
0.25%
|
|
Greater than 3.25X
|
|
2.35%
|
|
|
0.30%
|
|
The Second Modification Agreement extended the maturity dates with respect to the Development Line of Credit, the Revolving Line of Credit and the Mortgage Loan to September 3, 2021. Prior to the Second Modification Agreement, the Revolving Line of Credit,
69
the Development Line of Credit, and the Mortgage Loan were set to mature on September 3, 2019, May 3, 2020 and September 3, 2020, respectively. No further changes to the Loan Agreement were made as a result of the modification agreements discussed above.
The Loan Agreement also includes certain financial covenants and the First Modification Agreement states that the calculation of such covenants shall not be impacted by the Company’s adoption of ASC 842, Leases. A fixed charge coverage ratio of at least 1.25 to 1 as of the end of any fiscal quarter based on the four quarters then ending must be maintained. The fixed charge coverage ratio is defined in the Loan Agreement as the ratio of (a) the sum of net income for the applicable period (excluding the effect on such period of any extraordinary or nonrecurring gains or losses, including any asset impairment charges, restaurant closing expenses (including lease buy‑out expenses), changes in valuation allowance for deferred tax assets, and non-cash deferred income tax benefits and expenses and up to $1,000 (in the aggregate for the term of the loans) in uninsured losses) plus depreciation and amortization plus interest expense plus rent payments plus non-cash share-based compensation expense plus any other non-cash expenses or charges minus the greater of either actual total store maintenance capital expenditures (excluding major remodeling or image enhancements) or the total number of stores in operation for at least 18 months multiplied by $40, to (b) the sum of interest expense during such period plus rent payments made during such period plus payments of long‑term debt and capital lease obligations made during such period, all determined in accordance with GAAP.
In addition, the maximum adjusted debt to EBITDAR ratio must not exceed 4.0 to 1 at the end of any fiscal quarter. Under the Loan Agreement, EBITDAR is measured based on the then‑ending four fiscal quarters and is defined as the sum of net income for the applicable period (excluding the effect on such period of any extraordinary or nonrecurring gains or losses, including any asset impairment charges, restaurant closing expenses (including lease buy‑out expenses), changes in valuation allowance for deferred tax assets and non-cash deferred income tax benefits and expenses and up to $1,000 (in the aggregate for the term of the loans) in uninsured losses) plus an amount that in the determination of net income for the applicable period has been deducted for (i) interest expense; (ii) total federal, state, foreign, or other income taxes; (iii) all depreciation and amortization; (iv) rent payments; and (v) non-cash share-based compensation expenses, plus any other non-cash expenses or charges, all as determined in accordance with GAAP. Adjusted debt is (i) funded debt obligations net of any short‑term investments, cash and cash equivalents plus (ii) rent payments multiplied by seven.
If an event of default shall occur and be continuing under the Loan Agreement, the commitment under the Loan Agreement may be terminated and any principal amount outstanding, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable. J. Alexander’s, LLC was in compliance with these financial covenants as of December 29, 2019 and for all reporting periods during the year then ended.
At December 29, 2019, the amounts outstanding under the Development Line of Credit and Revolving Line of Credit were $4,000 and $0, respectively, and a total of $17,000 was available to us for borrowing under these lines of credit on this date. At December 29, 2019, $4,584 was outstanding under the Mortgage Loan and an additional $1,389 was outstanding under the Term Loan. The Loan Agreement in place at December 29, 2019 is secured by the real estate, equipment and other personal property of 12 restaurant locations with an aggregate net book value of $30,606 at December 29, 2019.
Deferred loan costs are $508 and $465, net of accumulated amortization expense of $436 and $359 at December 29, 2019 and December 30, 2018, respectively. Deferred loan costs are being amortized to interest expense over the life of the related debt. For the next five fiscal years, scheduled amortization of deferred loan costs is as follows: 2020 – $44; 2021 - $28; and 2022 and thereafter – $0.
The carrying value of the debt balance under both the Mortgage Loan and Term Loan as of December 29, 2019 and December 30, 2018 are considered to approximate their fair value (Level 2) because of the proximity of the debt refinancing discussed above to the 2019 and 2018 fiscal year-ends.
The aggregate maturities of long‑term debt for the five fiscal years succeeding December 29, 2019 are as follows: 2020 – $7,056; 2021 – $2,917; 2022 and thereafter – $0.
70
Note 11 - Other Long‑Term Liabilities
Other long‑term liabilities consisted of the following:
|
|
December 29,
|
|
|
December 30,
|
|
|
|
2019
|
|
|
2018
|
|
Deferred rent
|
|
$
|
-
|
|
|
$
|
6,801
|
|
Unfavorable lease liabilities, net
|
|
|
-
|
|
|
|
187
|
|
Uncertain tax positions
|
|
|
9
|
|
|
|
7
|
|
Other
|
|
|
129
|
|
|
|
-
|
|
Other long-term liabilities
|
|
$
|
138
|
|
|
$
|
6,995
|
|
Note 12 – Revenue
On January 1, 2018, the Company adopted ASC Topic 606 using the cumulative effect method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC Topic 606, while prior period amounts are not adjusted, and continue to be reported in accordance with the Company’s historic accounting policy under ASC Topic 605. The Company’s accounting policies with respect to revenue are discussed in further in Note 2 (k) above, including policies implemented prior to and with the adoption of ASC Topic 606.
The Company recorded a net increase to opening retained earnings of $34 as of January 1, 2018 due to the cumulative impact of adopting ASC Topic 606, with the impact wholly related to the Company’s accounting for gift card breakage.
The following table presents the Company’s revenues disaggregated by revenue source for the periods presented:
|
Year Ended
|
|
|
December 29,
|
|
|
December 30,
|
|
|
December 31,
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Restaurant
|
$
|
246,826
|
|
|
$
|
241,886
|
|
|
$
|
232,944
|
|
Gift card breakage
|
|
443
|
|
|
|
378
|
|
|
|
311
|
|
Net sales
|
$
|
247,269
|
|
|
$
|
242,264
|
|
|
$
|
233,255
|
|
The Company recognized revenue associated with gift cards redeemed by guests during fiscal years 2019, 2018 and 2017 of $4,115, $4,011 and $3,876, respectively. Further, of the amounts that were redeemed during fiscal years 2019 and 2018, $2,464 and $2,396 were recorded within unearned revenue at the beginning of each respective fiscal year. Unearned revenue increased by $4,723 and $4,675 as a result of gift cards sold during the fiscal years 2019 and 2018, respectively.
Note 13 - Leases
Adoption of ASC Topic 842, Leases
As discussed in Notes 2(j) and 2(z), the Company adopted ASC Topic 842, Leases, as of the first day of fiscal year 2019, December 31, 2018, electing the optional transition method to apply the standard as of the effective date. Accordingly, financial information for periods prior to the first day of fiscal year 2019 has not been adjusted to reflect the effects of ASC Topic 842, and the Company recorded a cumulative-effect adjustment to opening retained earnings for the impairment of an abandoned ROU asset at the effective date for a restaurant that was previously impaired and the remaining lease payments were accounted for under ASC Topic 420, Exit or Disposal Obligations. Additionally, the adoption of ASC Topic 842 had a material impact on the Company’s assets and liabilities as a result of the recognition of operating lease ROU assets and lease liabilities on its Consolidated Balance Sheet. The adoption of ASC Topic 842 did not have a material effect on the Company’s Consolidated Statements of Income and Comprehensive Income and Consolidated Statements of Cash Flows.
ASC Topic 842 provided a number of optional practical expedients in transition. The Company elected the package of practical expedients which permits the Company to not reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the practical expedient that permits the Company to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC Topic 840 are now considered leases under ASC Topic 842. The Company also elected the practical expedient to account for lease and non-lease components as a
71
single component for certain classes of underlying assets, specifically real property. Additionally, the Company elected a short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less). The Company did not elect the use-of-hindsight practical expedient which would have permitted a reassessment of lease terms for existing leases.
As of the date of adoption, the Company was party to 30 separate operating leases for real estate on which it operates its restaurants and has its corporate office space. During fiscal year 2019, the Company entered into two additional leases for new restaurant locations, and the associated commencement date for one of these leases was also during 2019. The remaining restaurant lease will commence when the Company takes possession of the property in fiscal year 2020, and it includes a lease term of 30 years. The Company also entered into one equipment lease during fiscal year 2019.
The effects of the changes made to the Company’s Consolidated Balance Sheet as of December 31, 2018 for the adoption of ASC Topic 842 were as follows:
|
|
December 30,
|
|
|
Adjustments Due to
|
|
|
December 31,
|
|
|
|
2018
|
|
|
the Adoption of ASC Topic 842
|
|
|
2018
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
$
|
5,557
|
|
|
$
|
(149
|
)
|
|
$
|
5,408
|
|
Right-of-use lease assets
|
|
|
-
|
|
|
|
70,666
|
|
|
|
70,666
|
|
Deferred income taxes
|
|
|
539
|
|
|
|
434
|
|
|
|
973
|
|
Liabilities and stockholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of lease liabilities
|
|
|
-
|
|
|
|
3,707
|
|
|
|
3,707
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term lease liabilities
|
|
|
-
|
|
|
|
75,489
|
|
|
|
75,489
|
|
Other long-term liabilities (1)
|
|
|
6,995
|
|
|
|
(6,988
|
)
|
|
|
7
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
17,528
|
|
|
|
(1,257
|
)
|
|
|
16,271
|
|
(1) - The other long-term liabilities balance as of December 30, 2018 consisted of, in part, the Company’s deferred rent balance.
Components of lease cost are as follows:
|
|
Year Ended
|
|
|
|
December 29,
|
|
|
|
2019
|
|
Operating lease cost
|
|
$
|
8,930
|
|
Variable lease cost
|
|
|
2,438
|
|
Short-term lease cost
|
|
|
167
|
|
Total lease cost
|
|
$
|
11,535
|
|
Supplemental cash flow information and non-cash activity related to the Company’s operating leases are as follows:
|
|
Year Ended
|
|
|
|
December 29,
|
|
|
|
2019
|
|
Operating cash flow information:
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
$
|
8,330
|
|
Non-cash activity:
|
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations
|
|
|
3,752
|
|
Weighted-average remaining lease term and discount rate for the Company’s operating leases are as follows as of the period indicated:
72
|
|
December 29,
|
|
|
|
2019
|
|
Weighted-average remaining lease term
|
|
15.7 years
|
|
Weighted-average discount rate
|
|
|
6.01
|
%
|
Maturities of lease liabilities by fiscal year for the Company’s operating leases are as follows:
|
|
December 29,
|
|
|
|
2019
|
|
2020
|
|
$
|
8,936
|
|
2021
|
|
|
9,142
|
|
2022
|
|
|
9,302
|
|
2023
|
|
|
9,327
|
|
2024
|
|
|
9,002
|
|
2025 and thereafter
|
|
|
84,637
|
|
Total minimum lease payments
|
|
|
130,346
|
|
Less: Imputed interest (1)
|
|
|
50,146
|
|
Present value of lease liabilities
|
|
$
|
80,200
|
|
(1) Amount necessary to reduce net minimum lease payments to present value calculated using our incremental borrowing rates, which are consistent with the lease terms at adoption date (for those leases in existence as of the adoption date of ASC Topic 842) or lease inception (for those leases entered into after the adoption date).
|
|
As previously disclosed in the 2018 Annual Report and under the previous lease accounting standard, minimum lease payments under non-cancelable operating leases (including renewal options and those restaurants reported as discontinued operations) were expected to be as follows:
|
|
December 30,
|
|
|
|
2018
|
|
2019
|
|
$
|
7,800
|
|
2020
|
|
|
8,084
|
|
2021
|
|
|
7,832
|
|
2022
|
|
|
7,974
|
|
2023
|
|
|
8,006
|
|
2024 and thereafter
|
|
|
78,302
|
|
Total minimum lease payments
|
|
$
|
117,998
|
|
Note 14 – Income Taxes
Significant components of the Company’s income tax benefit for the periods indicated below are as follows:
|
|
Year Ended
|
|
|
|
December 29,
|
|
|
December 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Current income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
697
|
|
|
$
|
(152
|
)
|
|
$
|
264
|
|
State and local
|
|
|
678
|
|
|
|
565
|
|
|
|
743
|
|
Total current income taxes
|
|
|
1,375
|
|
|
|
413
|
|
|
|
1,007
|
|
Deferred income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(1,838
|
)
|
|
|
(2,041
|
)
|
|
|
(1,881
|
)
|
State and local
|
|
|
(105
|
)
|
|
|
32
|
|
|
|
(473
|
)
|
Total deferred income taxes
|
|
|
(1,943
|
)
|
|
|
(2,009
|
)
|
|
|
(2,354
|
)
|
Income tax benefit
|
|
$
|
(568
|
)
|
|
$
|
(1,596
|
)
|
|
$
|
(1,347
|
)
|
73
The Company’s effective tax rate differs from the federal statutory rate as set forth in the following table for the periods indicated:
|
|
Year Ended
|
|
|
|
December 29,
|
|
|
December 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Federal income tax
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
|
|
35.0
|
%
|
Federal tax reform
|
|
|
-
|
|
|
|
3.3
|
|
|
|
(22.4
|
)
|
State income tax
|
|
|
6.0
|
|
|
|
14.3
|
|
|
|
6.4
|
|
Wage credits
|
|
|
(32.3
|
)
|
|
|
(107.5
|
)
|
|
|
(33.3
|
)
|
Uncertain tax positions
|
|
|
-
|
|
|
|
(0.3
|
)
|
|
|
(3.9
|
)
|
Return to provision
|
|
|
(0.6
|
)
|
|
|
(3.1
|
)
|
|
|
(4.5
|
)
|
Rate differential between current and deferred taxes
|
|
|
-
|
|
|
|
(1.3
|
)
|
|
|
(1.7
|
)
|
Incentive Stock Options
|
|
|
1.3
|
|
|
|
4.4
|
|
|
|
2.0
|
|
Other
|
|
|
(2.3
|
)
|
|
|
2.8
|
|
|
|
(0.1
|
)
|
Effective tax rate
|
|
|
(6.9
|
)%
|
|
|
(66.4)
|
%
|
|
|
(22.5
|
)%
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 29, 2019, and December 30, 2018, are as follows:
|
|
December 29,
|
|
|
December 30,
|
|
|
|
2019
|
|
|
2018
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
207
|
|
|
$
|
133
|
|
Accrued bonuses
|
|
|
47
|
|
|
|
91
|
|
Share-based compensation awards
|
|
|
546
|
|
|
|
309
|
|
State bonus depreciation
|
|
|
115
|
|
|
|
178
|
|
General business credit carryforward
|
|
|
3,304
|
|
|
|
2,676
|
|
Other
|
|
|
77
|
|
|
|
-
|
|
Total deferred tax assets
|
|
|
4,296
|
|
|
|
3,387
|
|
Less: deferred tax assets valuation allowance
|
|
|
(168
|
)
|
|
|
(128
|
)
|
Total net deferred tax assets
|
|
|
4,128
|
|
|
|
3,259
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Partnership differences
|
|
|
(1,210
|
)
|
|
|
(2,580
|
)
|
Other
|
|
|
-
|
|
|
|
(140
|
)
|
Total deferred tax liabilities
|
|
|
(1,210
|
)
|
|
|
(2,720
|
)
|
Net deferred tax asset
|
|
$
|
2,918
|
|
|
$
|
539
|
|
ASC Topic 740, Income Taxes, establishes procedures to measure deferred tax assets and liabilities and assess whether a valuation allowance relative to existing deferred tax assets is necessary. Management assesses the likelihood of realization of the Company’s deferred tax assets and the need for a valuation allowance with respect to those assets based on the weight of available positive and negative evidence. As of December 29, 2019, management determined that a valuation allowance of $168 was necessary relative to certain state net operating loss and capital loss carryforwards which are not expected to be realized. Management also determined at December 29, 2019 that it is more likely than not that the results of future operations and reversal of deferred tax liabilities will generate sufficient taxable income to realize the remaining deferred tax assets not covered by this valuation allowance.
As of December 29, 2019, the Company has state gross operating loss carryforwards gross of the valuation allowance and uncertain tax positions discussed above of approximately $4,442 expiring in years 2021 through 2039 as well as an additional $7 that will never expire, and federal general business credit carryforwards of $3,304 expiring in 2038 through 2039.
Additionally, the Company has recorded a liability (including interest) in connection with uncertain tax positions related to state tax issues totaling $66 and $71 as of December 29, 2019 and December 30, 2018, respectively. The Company elected to accrue interest and penalties related to unrecognized tax benefits in its provision for income taxes. The Company has accrued interest related to unrecognized tax benefits of approximately $1 as of both December 29, 2019 and December 30, 2018, respectively.
74
A reconciliation of the beginning and ending unrecognized tax benefit associated with these positions (excluding federal benefit and the aforementioned accrued interest) is as follows:
|
|
December 29,
|
|
|
December 30,
|
|
|
|
2019
|
|
|
2018
|
|
Balance at the beginning of the year
|
|
$
|
88
|
|
|
$
|
80
|
|
Changes based on tax positions taken during the current year
|
|
|
-
|
|
|
|
23
|
|
Changes based on tax positions taken during prior years
|
|
|
-
|
|
|
|
-
|
|
Reductions related to settlements with taxing authorities and
|
|
|
|
|
|
|
|
|
lapses of statutes of limitations
|
|
|
(5
|
)
|
|
|
(15
|
)
|
Balance at the end of the year
|
|
$
|
83
|
|
|
$
|
88
|
|
As of December 29, 2019, the total amount of gross unrecognized tax benefit that, if recognized, would impact the effective tax rate was $23. The Company does not expect that gross unrecognized benefits will decrease due to statute expirations within the next twelve months.
The Company and its subsidiaries file a partnership federal income tax return, consolidated corporate federal income tax return, and a separate corporate federal income tax return as well as various state and local income tax returns. The earliest year open to examination in the Company’s major jurisdictions is 2016 for federal and 2015 for state income tax returns.
Note 15 – Share-based Compensation
For the years ended December 29, 2019, December 30, 2018 and December 31, 2017, the Company recorded total share-based compensation expense of $1,498, $3,765 and $2,207, respectively, the components of which are discussed in further detail below.
J. Alexander’s Holdings, Inc. Amended and Restated 2015 Equity Incentive Plan
Under the J. Alexander’s Holdings, Inc. Amended and Restated 2015 Equity Incentive Plan (the “Plan”), directors, officers and key employees of the Company may be granted equity incentive awards, such as stock options, restricted stock and stock appreciation rights in an effort to retain qualified management and personnel. The Company’s Board of Directors approved the amended and restated plan in May 2019, and it was subsequently approved by shareholders of the Company in June 2019 at the annual meeting of shareholders. The amended and restated plan authorizes a maximum of 2,850,000 shares of the Company’s common stock to be issued to holders of these equity awards. At December 29, 2019, December 30, 2018 and December 31, 2017, total shares available to be granted pursuant to the Plan (or the predecessor plan) were 721,250; 4,250; and 514,250, respectively.
Stock Option Awards
Under the 2015 Equity Incentive Plan previously in place, during fiscal years 2018, 2016 and 2015, the Compensation Committee and the Board of the Company awarded stock option grants totaling 510,000, 553,750 and 467,000 options, respectively, to certain members of management and the members of the Board, and the contractual term for each grant is seven years. The requisite service period for each grant is four years with each vesting in four equal installments on the first four anniversaries of their respective grant dates. No stock option awards were made by the Company under this plan during fiscal years 2019 and 2017. A total of 35,000 options have been forfeited since the inception of the plan, none of which occurred in fiscal year 2019.
The Company uses the Black-Scholes-Merton option pricing model to estimate the fair value of stock option awards and used the following assumptions for the indicated periods during which grants were made as noted above:
|
|
Year Ended
|
|
|
|
December 30, 2018
|
|
Dividend yield
|
|
|
0.00
|
%
|
Volatility factor
|
|
|
37.00
|
%
|
Risk-free interest rate
|
|
|
2.69
|
%
|
Expected life of options (in years)
|
|
|
4.75
|
|
Weighted-average grant date fair value
|
|
$
|
3.42
|
|
The expected life of stock options granted during the period presented was calculated in accordance with the simplified method described in SEC Staff Accounting Bulletin (“SAB”) Topic 14.D.2 in accordance with SAB 110. This approach was utilized due to the lack of exercise history and the anticipated behavior of the overall group of grantees. The risk-free rate for periods within the
75
contractual life of the options is based on the 5-year U.S. Treasury bond rate in effect at the time of grant. The Company utilized a weighted rate for expected volatility based on a representative peer group within the industry. The dividend yield was set at zero as the underlying security does not pay a dividend. Additionally, management has made an accounting policy election in accordance with ASU No. 2016-09 to account for forfeitures when they occur.
A summary of stock options under the Company’s equity incentive plan is as follows:
|
|
Number of
Shares
|
|
|
Weighted Average
Exercise Price
|
|
Outstanding at January 1, 2017
|
|
|
990,750
|
|
|
$
|
9.58
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(5,000
|
)
|
|
|
8.90
|
|
Outstanding at December 31, 2017
|
|
|
985,750
|
|
|
|
9.58
|
|
Issued
|
|
|
510,000
|
|
|
|
9.55
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 30, 2018
|
|
|
1,495,750
|
|
|
|
9.57
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 29, 2019
|
|
|
1,495,750
|
|
|
$
|
9.57
|
|
At December 29, 2019, December 30, 2018 and December 31, 2017, stock options exercisable were 976,063; 602,125; and 355,687, respectively.
As these awards contain only service conditions for vesting purposes and have a graded vesting schedule, the Company has elected to recognize the expense over the requisite service period for the entire award. Stock option expense totaling $1,105, $1,121 and $747 was recognized for fiscal years 2019, 2018 and 2017, respectively, which is included in the “General and administrative expenses” line item on the Consolidated Statements of Income and Comprehensive Income. At December 29, 2019, the Company had $1,262 of unrecognized compensation cost related to these stock options which is expected to be recognized over a period of approximately 2.15 years.
The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options. This amount changes based on the fair market value of the Company’s common stock and totaled $379, $0 and $428 at December 29, 2019, December 30, 2018 and December 31, 2017, respectively, for options outstanding. The intrinsic value of options exercisable at December 29, 2019, December 30, 2018 and December 31, 2017 totaled $277, $0 and $107, respectively. No options were exercised in fiscal years 2019, 2018 or 2017.
The following table summarizes the Company’s non-vested stock option activity for the year ended December 29, 2019:
|
|
|
|
|
|
Weighted Average
|
|
|
|
Number of
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
Non-vested stock options at December 30, 2018
|
|
|
893,625
|
|
|
$
|
3.23
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
(373,938
|
)
|
|
|
3.17
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Non-vested stock options at December 29, 2019
|
|
|
519,687
|
|
|
$
|
3.26
|
|
The total fair value of stock options vested during fiscal years 2019, 2018 and 2017 was $1,187, $751 and $751, respectively.
76
The following table summarizes information about the Company’s stock options outstanding at December 29, 2019:
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of Exercise Prices
|
|
Number Outstanding at December 29, 2019
|
|
|
Weighted Average Remaining Contractual Life
|
|
Weighted Average Exercise Price
|
|
|
Number Exercisable at December 29, 2019
|
|
|
Weighted Average Remaining Contractual Life
|
|
Weighted Average Exercise Price
|
|
$8.90
|
|
|
535,000
|
|
|
3.86 years
|
|
$
|
8.90
|
|
|
|
401,250
|
|
|
3.86 years
|
|
$
|
8.90
|
|
$9.55
|
|
|
510,000
|
|
|
5.15 years
|
|
|
9.55
|
|
|
|
127,500
|
|
|
5.15 years
|
|
|
9.55
|
|
$10.24
|
|
|
13,750
|
|
|
3.33 years
|
|
|
10.24
|
|
|
|
10,313
|
|
|
3.33 years
|
|
|
10.24
|
|
$10.39
|
|
|
437,000
|
|
|
2.79 years
|
|
|
10.39
|
|
|
|
437,000
|
|
|
2.79 years
|
|
|
10.39
|
|
$8.90 - $10.39
|
|
|
1,495,750
|
|
|
3.98 years
|
|
$
|
9.57
|
|
|
|
976,063
|
|
|
3.54 years
|
|
$
|
9.67
|
|
Restricted and Performance Shares
On August 9, 2019, the Company granted 264,000 restricted share awards to members of its board of directors as well as certain employees of the Company and 52,500 performance share awards to certain employees of the Company under the Plan. The shares were registered under the Company’s Registration Statement on Form S-8, filed with the SEC on August 9, 2019. Restricted share awards are subject to only a service condition while performance share awards are regarded as contingently issuable common shares which are dependent upon achievement of certain performance targets by the Company. With respect to the restricted share awards, the restricted period for each grant is four years with the restriction expiring in four equal installments on the first four anniversaries of their respective grant dates. For the performance share awards, the performance period shall be any four consecutive fiscal quarters during the sixteen-quarter period beginning with the fiscal quarter in which the awards were granted. The performance target must be met for the performance period in order for the restriction to lapse.
The following table summarizes the Company’s non-vested restricted and performance share activity for the year ended December 29, 2019:
|
|
Restricted Shares
|
|
|
Performance Shares
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Number of
|
|
|
Grant Date
|
|
|
Number of
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
Non-vested stock options at December 30, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
264,000
|
|
|
|
10.75
|
|
|
|
52,500
|
|
|
|
10.75
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Non-vested stock options at December 29, 2019
|
|
|
264,000
|
|
|
$
|
10.75
|
|
|
|
52,500
|
|
|
$
|
10.75
|
|
Expense associated with the restricted shares is recognized using the straight-line method over the requisite service period, accounting for forfeitures as they occur. Expense associated with the performance share awards is recognized using the tranche method wherein the Company treats each vesting tranche as a separate award with compensation cost for each award recognized over its vesting period. The Company anticipates that the performance condition will be met during the performance period. The grant date fair value for each of the awards was $10.75 based on the Company’s quoted stock price on the date of grant. The Company recorded non-cash share-based compensation expense for restricted and performance shares totaling $277 and $115, respectively, during fiscal year 2019. Based on estimates at December 29, 2019, the Company had $2,560 and $449 of unrecognized compensation expense related to the restricted and performance awards, respectively, that will be recognized over a period of approximately 3.6 years.
Management Profits Interest Plan
On January 1, 2015, J. Alexander’s Holdings, LLC adopted its 2015 Management Incentive Plan and granted equity incentive awards to certain members of its management in the form of Class B Units. The Class B Units are profits interests in J. Alexander’s Holdings, LLC. Class B Units in the amount of 1,770,000 were reserved for issuance under the plan and a total of 885,000 Class B Units were granted on January 1, 2015. Each Class B Unit represents a non-voting equity interest in J. Alexander’s Holdings, LLC that entitles the holder to a percentage of the profits and appreciation in the equity value of J. Alexander’s Holdings, LLC arising after the date of grant and after such time as an applicable hurdle amount is met. The hurdle amount for the Class B Units issued to our management in January 2015 was set at $180,000, which at such time was a reasonable premium to the estimated liquidation value of the equity of
77
J. Alexander’s Holdings, LLC. The Class B Units issued to management vested with respect to 50% of the grant units on the second anniversary of the date of grant and with respect to the remaining 50% on the third anniversary of the date of grant and required a six-month holding period post vesting.
Vested Class B Units may be exchanged for, at the Company’s option, either (i) cash in an amount equal to the amount that would be distributed to the holder of those Class B Units by J. Alexander’s Holdings, LLC upon a liquidation of J. Alexander’s Holdings, LLC assuming the aggregate amount to be distributed to all members of J. Alexander’s Holdings, LLC were equal to the Company’s market capitalization on the date of exchange (net of any assets and liabilities of the Company that are not assets or liabilities of J. Alexander’s Holdings, LLC) or (ii) shares of the Company’s common stock with a fair market value equal to the cash payment under (i) above.
The Class B Units issued to the Company’s management have been classified as equity awards and share-based compensation expense is based on the grant date fair value of the awards. At December 29, 2019, the applicable hurdle rate for these Class B Units was not met.
The Company used the Black-Scholes-Merton pricing model to estimate the fair value of management profits interest awards and used the following assumptions:
|
|
Grant Date
|
|
|
|
Fair Value
|
|
Member equity price per unit
|
|
$
|
10.00
|
|
Class B hurdle price
|
|
$
|
11.30
|
|
Dividend yield
|
|
|
0
|
%
|
Volatility factor
|
|
|
35
|
%
|
Risk-free interest rate
|
|
|
1.24
|
%
|
Time to liquidity (in years)
|
|
|
3.5
|
|
Lack of marketability discount
|
|
|
23
|
%
|
Grant date fair value
|
|
$
|
1.76
|
|
The member equity price per unit was based on an enterprise valuation of J. Alexander’s Holdings, LLC divided by the number of Class A Units outstanding at the date of grant. The Class B hurdle price is based on the hurdle rate divided by the number of Class A Units outstanding at the time of grant. The expected life of management profits interest awards granted during the period presented was determined based on the vesting term of the award which also includes a six-month holding period subsequent to meeting the requisite vesting period. The risk-free rate for periods within the contractual life of the profit interest award is based on an extrapolated 4-year U.S. Treasury bond rate in effect at the time of grant given the expected time to liquidity. The Company utilized a weighted rate for expected volatility based on a representative peer group of comparable public companies. The dividend yield was set at zero as the underlying security does not pay a dividend. The protective put method was used to estimate the discount for lack of marketability inherent to the awards due to the lack of liquidity associated with the post-vesting requirement and other restrictions on the Class B Units.
As a result of the reorganization transactions on September 28, 2015 and as evidenced in the executed Second Amended and Restated LLC Agreement of J. Alexander’s Holdings, LLC, entered into in connection with the reorganization transactions, the members’ equity of J. Alexander’s Holdings, LLC was recapitalized such that the total outstanding Class B Units granted to management as discussed above was reduced on a pro rata basis from 885,000 to 833,346 which is also the number of Class B Units outstanding as of December 29, 2019, and resulted in an adjusted grant date fair value relative to these units of $1.87.
As these awards contain only service conditions for vesting purposes and have a graded vesting schedule, the Company elected to recognize the expense over the requisite service period for the entire award. Management profits interest expense totaling $0, $0 and $518 was recognized for fiscal years 2019, 2018 and 2017, respectively, which is included in the “General and administrative expense” line item on the Consolidated Statements of Income and Comprehensive Income. As of December 29, 2019, the Company had $0 of unrecognized compensation cost related to these awards as the units fully vested on January 1, 2018. The total grant date fair value of units vested during fiscal years 2019, 2018 and 2017 was $0, $779 and $0, respectively. There was no redemption value of the outstanding management profits interest awards as of December 29, 2019 as the fair value was less than the hurdle rate.
Black Knight Advisory Services Profits Interest Plan
On October 6, 2015, J. Alexander’s Holdings, LLC granted 1,500,024 Class B Units representing profits interests to Black Knight with a hurdle rate stated in the agreement of $151,052. The awards vested at a rate of one-third of the Class B Units on each of the first, second and third anniversaries of the grant date and required a six-month holding period post vesting. The Class B Units contained exchange rights which allowed for them to be converted once vested into shares of the Company’s common stock based
78
upon the value of the Class B Units at the date of the conversion election. The value was determined in reference to the market capitalization of the Company, with certain adjustments made for assets or liabilities contained at the Company’s level which are not also assets and liabilities of J. Alexander’s Holdings, LLC. These awards could not be settled with a cash payment.
On November 30, 2018, the Company entered into the Termination Agreement which terminated the consulting agreement with Black Knight (the “Management Consulting Agreement”). Under the terms of the Management Consulting Agreement, Black Knight had 90 days from November 30, 2018 to exercise its right to convert the value of the fully-vested Class B Units above the applicable hurdle rate to the Company’s common stock. As Black Knight did not exercise its conversion rights within the 90-day period, the Class B Units were cancelled and forfeited for no consideration in fiscal year 2019.
The Class B Units issued to Black Knight were classified as equity awards. The hurdle rate had not been met as of December 30, 2018 or December 31, 2017, and, therefore, the intrinsic value as of these dates was $0.
The Company used the Black-Scholes-Merton pricing model to estimate the fair value of Black Knight profits interest awards. Since the Class B Units became fully vested on October 6, 2018, the Company obtained a final valuation of the grant as of that date which included the following assumptions:
Member equity price per unit
|
|
$
|
11.47
|
|
Class B hurdle price
|
|
$
|
10.07
|
|
Dividend yield
|
|
|
0
|
%
|
Volatility factor
|
|
|
36
|
%
|
Risk-free interest rate
|
|
|
3.03
|
%
|
Time to liquidity (in years)
|
|
|
3.8
|
|
Estimated fair value
|
|
$
|
4.19
|
|
The member equity price per unit represented the share price of the Company on the valuation date. The Class B hurdle price represented the market value of J. Alexander’s Holdings, LLC on the grant date. The expected term of the Black Knight profits interest awards granted during the period presented was determined based on the mid-point between the full remaining economic term of the Management Consulting Agreement and the full vesting term of three years plus the six-month holding period. The risk-free rate was based on the U.S. Treasury bond rates in effect at the valuation date given the expected time to liquidity. A rate for expected volatility was based on a historical volatility analysis using daily stock price information for select comparable public companies based on the relative expected holding period of the Units. The dividend yield was set at zero as the underlying security does not pay a dividend.
These awards constituted nonemployee awards. Therefore, the Company remeasured the fair value of the awards at each reporting date through October 6, 2018 using the valuation model applied in previous periods. The portion of services rendered to each reporting date was applied to the current measure of fair value to determine the expense for the relevant period. Because these awards had a graded vesting schedule, the Company elected to recognize the compensation cost on a straight-line basis over the three-year requisite service period for the entire award. Black Knight profits interest expense totaling $0, $2,644 and $942 was recognized for fiscal years 2019, 2018 and 2017, respectively, which is included in the “General and administrative expense” line item on the Consolidated Statements of Income and Comprehensive Income. The total weighted average fair value of units vested during fiscal years 2018 and 2017 was $2,095 and $1,625, respectively.
Note 16 – Other Employee Benefits
A subsidiary of the Company maintains a Savings Incentive and Salary Deferral Plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”) for the benefit of its employees and their beneficiaries. Under the 401(k) Plan, qualifying employees can defer a portion of their income on a pretax basis through contributions to the 401(k) Plan, subject to an annual statutory limit. All employees with at least six months of service and who are at least 21 years of age are eligible to participate. For each dollar of participant contributions, up to 3% of each participant’s salary and bonus, the Company makes a minimum 25% matching contribution to the 401(k) Plan with a discretionary match allowable in addition and subject to the approval of the compensation committee of the board of directors on an annual basis. Matching contributions vest according to a vesting schedule defined in the plan document. Expense for matching contributions totaled $119, $122 and $130 for fiscal years 2019, 2018 and 2017, respectively.
A subsidiary of the Company also has a nonqualified deferred compensation plan under which executive officers and certain senior managers may defer receipt of their compensation, including up to 50% of applicable salaries and bonuses, and may be credited with matching contributions subject to the annual approval by the compensation committee of the board of directors. Amounts that are deferred under this plan, and any matching contributions, are increased by earnings and decreased by losses based on the performance of one or more investment measurement funds elected by the participants from a group of funds, which the plan administrator has
79
determined to make available for this purpose. Participant account balances totaled $1,050 and $787 at December 29, 2019 and December 30, 2018, respectively.
A subsidiary of the Company has Salary Continuation Agreements, which provide retirement and death benefits to certain executive officers and certain other members of management. The recorded liability associated with these agreements totaled $6,053 and $5,464 at December 29, 2019 and December 30, 2018, respectively. The expense (income) recognized under these agreements was $702, $(206) and $336 for fiscal years 2019, 2018 and 2017, respectively.
Due to the Spin-off discussed in Note 1, FNF no longer retains a beneficial ownership of at least 40% of J. Alexander’s Holdings, LLC, and as such, the Spin-off triggered the obligation of J. Alexander’s, LLC, the operating subsidiary of the Company, to establish and fund the Trust (as defined in Note 2 above) under the Amended and Restated Salary Continuation Agreements with each of the agreement holders, which includes three of the Company’s executive officers and one former executive officer. On October 19, 2015, the Trust was funded with a total of $4,304, which consisted of $2,415 in cash and $1,889 in aggregate cash surrender value of whole life insurance policies. These assets are classified as noncurrent within the Company’s Consolidated Financial Statements. J. Alexander’s, LLC made additional contributions of $75, $95 and $63 to the Trust in fiscal years 2019, 2018 and 2017, respectively, and will continue to make additional contributions to the Trust in the future in order to maintain the level of funding required by the agreements. The Trust is subject to creditor claims in the event of insolvency, but the assets held in the Trust are not available for general corporate purposes. The Trust investments consisted of cash and cash equivalents, U.S government agency obligations and corporate bonds. The aforementioned securities are designated as trading securities and carried at fair value. Refer to Note 4 – Fair Value Measurements for additional discussion regarding fair value considerations. As of December 29, 2019, the Trust balance was $4,819 consisting of $2,253 in aggregate cash surrender value of whole life insurance policies and $2,566 in Trust investments. The Company records changes in the fair value of assets held in the Trust in the “Other, net” line item on the Consolidated Statements of Income and Comprehensive Income.
Note 17 – Stockholders’ Equity
As a result of the Spin-off discussed in Note 1, the Company is an independent public company, and its common stock is listed under the symbol “JAX” on The NYSE, effective September 29, 2015. The Company also now owns, directly or indirectly, all of the outstanding Class A Units and is the sole managing member of J. Alexander’s Holdings, LLC. The Company is authorized to issue 40,000,000 shares of capital stock, consisting of 30,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. As of December 29, 2019 and December 30, 2018, a total of 15,011,676 and 14,695,176 shares of the Company’s common stock were outstanding, respectively. No shares of preferred stock were outstanding during either of the periods presented.
The pertinent rights and privileges of the Company’s outstanding common stock or restricted and performance share awards are as follows:
Voting rights. The holders of common stock as well as restricted and performance share awards are entitled to one vote per share on all matters to be voted upon by the shareholders.
Dividend rights. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor. Holders of restricted and performance share awards are entitled to dividend rights once such shares have vested. Prior to vesting, dividends may be accumulated for eventual payment once relevant restrictions have expired or performance targets are met by the Company, as applicable.
Rights upon liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of affairs, the holders of common stock are entitled to share ratably in all assets remaining after payment of debts and other liabilities, subject to prior distribution rights of preferred stock then outstanding, if any. Such rights are conferred upon holders of restricted or performance share awards upon vesting.
Other rights. The holders of common stock as well as restricted and performance share awards have no preemptive or conversion rights or other subscription rights. Further, there are no redemption or sinking fund provisions applicable to the common stock or the aforementioned awards. The rights, preferences and privileges of holders of common stock and vested restricted and performance share awards will be subject to those of the holders of any shares of preferred stock the Company may issue in the future.
80
Note 18 - Commitments and Contingencies
As a result of the disposition of the Company’s predecessor’s Wendy’s operations in 1996, subsidiaries of the Company may remain secondarily liable for certain real property leases with remaining terms of one to five years. The total estimated amount of lease payments remaining on these five leases at December 29, 2019 was approximately $690. In connection with the sale of the Company’s predecessor’s Mrs. Winner’s Chicken & Biscuit restaurant operations in 1989 and certain previous dispositions, subsidiaries of the Company also may remain secondarily liable for a certain real property lease. The total estimated amount of lease payments remaining on this lease at December 29, 2019 was approximately $348. Additionally, in connection with the previous disposition of certain other Wendy’s restaurant operations, primarily the southern California restaurants in 1982, subsidiaries of the Company may remain secondarily liable for a certain real property lease with a remaining term of one year. The total estimated amount of lease payments remaining on this one lease as of December 29, 2019 was approximately $10. There have been no payments by subsidiaries of the Company of such contingent liabilities in the history of the Company or its predecessor. Management believes any significant loss is remote.
The Company is subject to real property, personal property, business, franchise and income, and sales and use taxes in various jurisdictions within the United States and is regularly under audit by tax authorities. This is believed to be common for the restaurant industry. Management believes the ultimate disposition of these matters will not have a material adverse effect on the consolidated financial position or results of operations for the Company.
(c)
|
Litigation Contingencies
|
The Company and its subsidiaries are defendants from time to time in various claims or legal proceedings arising in the ordinary course of business, including claims relating to workers’ compensation matters, labor-related claims, discrimination and similar matters, claims resulting from guest accidents while visiting a restaurant, claims relating to lease and contractual obligations, federal and state tax matters, and claims from guests or employees alleging illness, injury or other food quality, health or operational concerns, and injury or wrongful death under “dram shop” laws that allow a person to sue the Company based on any injury caused by an intoxicated person who was wrongfully served alcoholic beverages at one of its restaurants.
Management does not believe that any of the legal proceedings pending against it as of the date of this report will have a material adverse effect on its liquidity, results of operations or financial condition. The Company may incur liabilities, receive benefits, settle disputes, sustain judgments, or accrue expenses relating to legal proceedings in a particular fiscal year, which may adversely affect its results of operations, or on occasion, receive settlements that favorably affect its results of operations.
Note 19 – Related-Party Transactions
On September 28, 2015, immediately prior to the Spin-off, J. Alexander’s Holdings, LLC entered into the Management Consulting Agreement with Black Knight, pursuant to which Black Knight provided corporate and strategic advisory services to J. Alexander’s Holdings, LLC. On November 30, 2018, the Company terminated the Management Consulting Agreement by entering into the Termination Agreement. The details pertaining to the termination of this agreement are discussed below.
Under the Management Consulting Agreement, J. Alexander’s Holdings, LLC issued Black Knight non-voting Class B Units and was required to pay Black Knight an annual fee equal to 3% of the Company’s Adjusted EBITDA for each fiscal year during the term of the Management Consulting Agreement. J. Alexander’s Holdings, LLC also reimbursed Black Knight for its direct out-of-pocket costs incurred for management services provided to J. Alexander’s Holdings, LLC. Under the Management Consulting Agreement, “Adjusted EBITDA” meant the Company’s net income (loss) before interest expense, income tax (expense) benefit, depreciation and amortization, and adding asset impairment charges and restaurant closing costs, loss on disposals of fixed assets, transaction and integration costs, non-cash compensation, loss from discontinued operations, gain on debt extinguishment, pre-opening costs and certain unusual items. As a result of the Termination Agreement, in the first quarter of 2019, the Company paid approximately $705 to Black Knight which represented the pro-rata portion of its consulting fees earned during 2018 through the Termination Date. Additionally, the early termination of the Management Consulting Agreement required the cash payment of $4,560 to Black Knight as a termination fee which the Company paid on January 31, 2019 using cash on hand.
During fiscal years 2018 and 2017, management fees and reimbursable out-of-pocket costs of $703 and $809, respectively, were incurred relative to the Black Knight Management Consulting Agreement. Such costs are presented as a component of “General and administrative expenses” on the Consolidated Statements of Income and Comprehensive Income.
81
The Class B Units granted to Black Knight vested in equal installments on the first, second, and third anniversaries of the October 6, 2015 grant date and were measured at fair value at each reporting date through the date of vesting. Under the terms of the Termination Agreement, Black Knight had 90 days from November 30, 2018 to exchange its Class B Units to exercise its right to convert the value of such units above the applicable hurdle rate to the Company’s common stock. Since Black Knight did not exercise its conversion rights within the 90-day period, the Class B Units were cancelled and forfeited for no consideration on February 28, 2019.
Note 20 –Non-controlling Interest
As discussed in Note 15, on January 1, 2015, J. Alexander’s Holdings, LLC adopted the 2015 Management Incentive Plan and granted equity incentive awards to certain members of management in the form of Class B Units. The Class B Units are profits interests in J. Alexander’s Holdings, LLC. Additionally, on October 6, 2015, J. Alexander’s Holdings, LLC granted Class B Units representing profits interests to Black Knight. However, on February 28, 2019, in conjunction with the Termination Agreement with Black Knight, the 1,500,024 Class B Units held by Black Knight were cancelled and forfeited for no consideration. The Class B Units allow for the distribution of earnings in J. Alexander’s Holdings, LLC in the event that the hurdle amounts and vesting requirements are met and, as such, represent non-controlling interests in J. Alexander’s Holdings, LLC during the periods that they remain outstanding. The Hypothetical Liquidation of Book Value method was used as of December 29, 2019, December 30, 2018 and December 31, 2017 to determine allocations of non-controlling interests consistent with the terms of the Second Amended and Restated LLC Agreement of J. Alexander’s Holdings, LLC, and pursuant to that calculation, no allocation of net income was made to non-controlling interests for fiscal years 2019, 2018 or 2017, respectively. A non-controlling interest balance has been presented on the Consolidated Balance Sheets and Statements of Stockholders’ Equity in the amount of $1,558 and $7,844 as of December 29, 2019 and December 30, 2018, respectively, which represents profits interest compensation expense recorded by the Company. The share-based compensation expense associated with the Black Knight grant has been reclassified to additional paid-in capital in fiscal year 2019 as a result of their forfeiture and cancellation. As such, non-controlling interests consist solely of the non-cash compensation expense relative to the Class B Units held by management as of December 29, 2019, while non-controlling interests reported as of December 30, 2018 consisted of non-cash compensation expense associated with Class B Units held by both management and Black Knight. Such compensation costs have been reflected in the “General and administrative expenses” line item of the Consolidated Statements of Income and Comprehensive Income for fiscal years 2018 and 2017. No such compensation expense was recognized in 2019 as the Class B Units held by management vested in fiscal year 2018.
82
Note 21 – Quarterly Results of Operations (Unaudited)
The following is a summary of the quarterly results of operations for the years ended December 29, 2019 and December 30, 2018 (in thousands, except per share amounts):
|
|
2019 Quarter ended
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 29
|
|
|
December 29
|
|
Net sales
|
|
$
|
64,734
|
|
|
$
|
62,229
|
|
|
$
|
56,867
|
|
|
$
|
63,439
|
|
Operating income
|
|
|
4,266
|
|
|
|
2,343
|
|
|
|
422
|
|
|
|
1,883
|
|
Income from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before income taxes
|
|
|
4,146
|
|
|
|
2,244
|
|
|
|
342
|
|
|
|
1,753
|
|
Net income
|
|
|
3,848
|
|
|
|
2,168
|
|
|
|
771
|
|
|
|
2,030
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of tax
|
|
$
|
0.27
|
|
|
$
|
0.15
|
|
|
$
|
0.06
|
|
|
$
|
0.14
|
|
Loss from discontinued operations, net
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
Basic earnings per share
|
|
$
|
0.26
|
|
|
$
|
0.15
|
|
|
$
|
0.05
|
|
|
$
|
0.14
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of tax
|
|
$
|
0.27
|
|
|
$
|
0.15
|
|
|
$
|
0.06
|
|
|
$
|
0.14
|
|
Loss from discontinued operations, net
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
Diluted earnings per share
|
|
$
|
0.26
|
|
|
$
|
0.15
|
|
|
$
|
0.05
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Quarter ended
|
|
|
|
April 1
|
|
|
July 1
|
|
|
September 30
|
|
|
December 30
|
|
Net sales
|
|
$
|
61,909
|
|
|
$
|
60,420
|
|
|
$
|
56,730
|
|
|
$
|
63,205
|
|
Operating income (loss)
|
|
|
2,058
|
|
|
|
2,334
|
|
|
|
(542
|
)
|
|
|
(361
|
)
|
Income (loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before income taxes
|
|
|
1,842
|
|
|
|
2,203
|
|
|
|
(713
|
)
|
|
|
(470
|
)
|
Net income (loss)
|
|
|
1,593
|
|
|
|
2,105
|
|
|
|
(633
|
)
|
|
|
934
|
|
Basic earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of tax
|
|
$
|
0.12
|
|
|
$
|
0.15
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.07
|
|
Loss from discontinued operations, net
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
Basic earnings (loss) per share
|
|
$
|
0.11
|
|
|
$
|
0.14
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.06
|
|
Diluted earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of tax
|
|
$
|
0.11
|
|
|
$
|
0.15
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.07
|
|
Loss from discontinued operations, net
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
Diluted earnings (loss) per share
|
|
$
|
0.11
|
|
|
$
|
0.14
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.06
|
|
Per share amounts may not sum due to rounding.
83