The restatement does not impact the Company’s revenues, comparable restaurant sales or free cash flows for any period. In addition, the impact on other key non-GAAP measures, including Adjusted EBITDA and restaurant-level profit is minimal. The restatement adjustments reduce Adjusted EBITDA for fiscal year 2011 and first quarter 2012 by $835,000 (or 1.9%) and $189,000 (or 1.7%), respectively. The impact on restaurant-level profit for fiscal year 2011 and first quarter 2012 was a reduction of $600,000 (or 0.9%) and $362,000 (or 2.2%), respectively. The cumulative impact of the restatement adjustments on the Company’s Adjusted EBITDA and restaurant-level profit for all periods since its inception is detailed in the table below (amounts in thousands):
|Fiscal Year Ended||Twelve Weeks Ended||Fiscal Years 2006 - 2011 Through|
|Fiscal Years 2006 - 2008||December 28, 2009||January 3, 2011||January 2, 2012||March 26, 2012||First Quarter 2012|
|Repairs and maintenance expense||(1,936||)||(489||)||(426||)||(634||)||(89||)||(3,574||)|
|Non-development demolition costs||(436||)||(1||)||(132||)||(26||)||—||(595||)|
|Net adjustment to Adjusted EBITDA||(2,372||)||(490||)||(558||)||(835||)||(189||)||(4,444||)|
|Repairs and maintenance expense||(1,755||)||(466||)||(419||)||(600||)||(87||)||(3,327||)|
|Net adjustment to restaurant-levelprofit||(1,755||)||(466||)||(419||)||(600||)||(362||)||(3,602||)|
Disclosure and Internal Controls
In connection with the restatement, management identified material weaknesses in its internal control over financial reporting related to lack of sufficient qualified accounting and tax personnel, lack of adequate supervision and monitoring of accounting operations, inadequate lease accounting controls, and lack of effective controls related to the existence, completeness and accuracy of fixed assets and related depreciation and amortization expense. To address the underlying causes of control deficiencies, the Company has begun remediation efforts to strengthen its accounting and finance department through the addition of key professional staff, the establishment of an internal audit function and the enhancement of its lease accounting and fixed asset controls, processes and supporting systems. The Company will continue to review its internal control over financial reporting in the areas identified above and other areas, update its accounting policies and procedures and make any additional investments needed to fully remediate the issues that contributed to the restatement.
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