SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~April 241, ~~2017~~2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-34920

BRAVO BRIO RESTAURANT GROUP, INC.

(Exact name of registrant as specified in its charter)



Ohio		34-1566328
(State or other jurisdiction incorporation or organization)		(I.R.S. Employer Identification No.)



777 Goodale Boulevard, Suite 100, Columbus, Ohio		43212
(Address of principal executive office)		(Zip Code)

Registrant’s telephone number, including area code (614) 326-7944

Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company,” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	x	Smaller reporting company	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)			Emerging Growth Company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.					¨

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Act. Yes ¨ No x

As of ~~November~~May 13, ~~2017~~2018, the latest practicable date, 15,~~204~~295,~~654~~015 of the registrant’s common shares, no par value per share, were outstanding.

Table of Contents

Table of Contents:

Part I – Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets	3
Consolidated Statements of Operations	4
Consolidated Statement of Shareholders’ Equity	5
Consolidated Statements of Cash Flows	6
Condensed Notes to Unaudited Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1214
Item 3. Quantitative and Qualitative Disclosures About Market Risk	22
Item 4. Controls and Procedures	2223
Part II – Other Information	24
Item 1. Legal Proceedings	24
Item 1A. Risk Factors	24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3. Defaults Upon Senior Securities	24
Item 4. Mine Safety Disclosures	24
Item 5. Other Information	24
Item 6. Exhibits	25
Signatures	26

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

BRAVO BRIO RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF ~~SEPTEMBER~~APRIL 241, ~~2017~~2018 AND DECEMBER 2531, ~~2016~~2017

(Dollars in thousands)

	September 24, 2017			December 25, 2016
	April 1, 2018			December 31, 2017
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	~~387~~1,737		$	~~444~~393
Accounts receivable	56,~~780~~527			910,~~587~~397
Tenant improvement allowance receivable	116			~~799~~116
Inventories	2,~~636~~909			3,~~114~~077
Prepaid expenses and other current assets	14,~~903~~464			32,~~339~~060
Total current assets	1015,~~822~~753			1716,~~283~~043
Property and equipment — net	~~137~~113,~~178~~022			~~145~~121,~~120~~251
Other assets — net	45,~~147~~101			4,~~359~~873
Total assets	$	~~152~~133,~~147~~876		$	~~166~~142,~~762~~167
Liabilities and shareholders' deficiency in assets
Current liabilities
Trade and construction payables	$	169,~~770~~630		$	1512,~~514~~614
Accrued expenses	2326,~~600~~173			2726,~~351~~057
Current portion of long-term debt	842,~~500~~000			438,~~000~~500
Deferred lease incentives	7,~~270~~460			7,~~334~~174
Deferred gift card revenue	1115,~~270~~505			1819,~~618~~859
Total current liabilities	67100,~~410~~768			72104,~~817~~204
Deferred lease incentives	4843,~~252~~943			5446,~~459~~493
Long-term debt	34,900			37,500
Other long-term liabilities	21,438			21,799
Other long-term liabilities	22,367			23,516
Commitments and contingencies (Note 6)
Shareholders’ deficiency in assets
Common shares, no par value per share— authorized 100,000,000 shares; 21,178,105 shares issued at September 24, 2017 and 21,069,454 shares issued at December 25, 2016	203,285			202,561
Common shares, no par value per share— authorized 100,000,000 shares; 21,272,875 shares issued at April 1, 2018 and 21,183,764 shares issued at December 31, 2017	203,726			203,531
Preferred shares, no par value per share— authorized 5,000,000 shares; issued and outstanding, 0 shares at September 24, 2017 and December 25, 2016	—			—
Preferred shares, no par value per share— authorized 5,000,000 shares; issued and outstanding, 0 shares at April 1, 2018 and December 31, 2017	—			—
Treasury shares, 5,977,860 shares at September 24, 2017 and December 25, 2016	(81,019		)	(81,019		)
Treasury shares, 5,977,860 shares at April 1, 2018 and December 31, 2017	(81,019		)	(81,019		)
Retained deficit	(~~143~~154,~~048~~980		)	(~~143~~152,~~072~~841		)
Total shareholders’ deficiency in assets	(2032,~~782~~273		)	(2130,~~530~~329		)
Total liabilities and shareholders’ deficiency in assets	$	~~152~~133,~~147~~876		$	~~166~~142,~~762~~167

See condensed notes to unaudited consolidated financial statements.

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BRAVO BRIO RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

~~THIRTY-NINE~~THIRTEEN WEEKS ENDED ~~SEPTEMBER~~APRIL 241, ~~2017~~2018 AND ~~SEPTEMBER~~MARCH 2526, ~~2016~~2017 (UNAUDITED)

(in thousands except per share data)

Thirteen Weeks Ended

~~Thirty-Nine Weeks Ended~~

September 24, 2017

September 25, 2016

September 24, 2017

September 25, 2016

April 1, 2018

March 26, 2017

Revenues

8897,~~731~~359

94106,~~588~~719

~~298,491~~

~~308,601~~

Costs and expenses

Cost of sales

2224,~~713~~853

2528,~~265~~211

~~77,201~~

~~80,507~~

Labor

3436,~~339~~683

3639,~~938~~070

~~111,876~~

~~115,954~~

Operating

1516,~~699~~951

1617,~~432~~085

~~49,484~~

~~51,626~~

Occupancy

78,~~132~~022

8,~~036~~449

~~22,888~~

~~23,622~~

General and administrative expenses

56,~~267~~367

67,~~896~~671

~~19,313~~

~~20,141~~

Restaurant preopening costs

~~270~~—

~~107~~29

~~420~~

~~621~~

Impairment

—3,915

—

~~1,249~~

Depreciation and amortization

54,~~148~~922

5,~~600~~114

~~15,405~~

~~16,680~~

Total costs and expenses

90101,~~568~~713

99105,~~274~~629

~~296,587~~

~~310,400~~

(Loss) income from operations

(14,~~837~~354

)

(41,~~686~~090

)

~~1,904~~

~~(1,799~~

)

Interest expense, net

~~677~~693

~~406~~511

~~1,717~~

~~1,098~~

(Loss) income before income taxes

(2,514

)

(5,092

)

187

(2,897

)

Loss (income) before income taxes

(5,047

)

579

Income tax (benefit) expense

(42

)

(2,107

)

163

(1,506

)

Income tax expense

Net (loss) income

(25,~~472~~072

)

~~(2,985~~550

)

~~(1,391~~

)

Net (loss) income per basic share

(0.1633

)

(0.2004

)

~~0.00~~

~~(0.09~~

)

Net (loss) income per diluted share

(0.1633

)

(0.2004

)

~~0.00~~

~~(0.09~~

)

Weighted average shares outstanding-basic

15,~~197~~236

1415,~~582~~113

~~15,162~~

~~14,648~~

Weighted average shares outstanding-diluted

15,~~197~~236

1415,~~582~~138

~~15,190~~

~~14,648~~

See condensed notes to unaudited consolidated financial statements.

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BRAVO BRIO RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ DEFICIENCY IN ASSETS

FOR THE ~~THIRTY-NINE~~THIRTEEN WEEKS ENDED ~~SEPTEMBER~~APRIL 241, ~~2017~~2018 (UNAUDITED)

(Dollars in thousands)

	Common Shares					Retained			Treasury Stock					Shareholders’
	Shares		Amount			Deficit			Shares		Amount			Deficiency in Assets
Balance — December 25, 2016	21,069,454		$	202,561		$	(143,072	)	(5,977,860	)	$	(81,019	)	$	(21,530	)
Balance — December 31, 2017	21,183,764		$	203,531		$	(152,841	)	(5,977,860	)	$	(81,019	)	$	(30,329	)
Net income	—		—			24			—		—			24
Cumulative effect of accounting change						2,933								2,933
Share-based compensation costs	—		748			—			—		—			748
Net (loss) income	—		—			(5,072		)	—		—			(5,072		)
Proceeds from the exercise of stock options	13,228		19			—								19
Share-based compensation costs	—		195			—			—		—			195
Issuance of shares of restricted stock	104,873		—			—			—		—			—
Proceeds from the exercise of stock options						—								—
Shares withheld for employee taxes	(9,450	)	(43		)	—			—		—			(43		)
Issuance of shares of restricted stock	89,111		—			—			—		—			—
Balance — September 24, 2017	21,178,105		$	203,285		$	(143,048	)	(5,977,860	)	$	(81,019	)	$	(20,782	)
Shares withheld for employee taxes						—			—		—			—
Balance — April 1, 2018	21,272,875		$	203,726		$	(154,980	)	(5,977,860	)	$	(81,019	)	$	(32,273	)

See condensed notes to unaudited consolidated financial statements.

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BRAVO BRIO RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~THIRTY-NINE~~THIRTEEN WEEKS ENDED ~~SEPTEMBER~~APRIL 241, ~~2017~~2018 AND ~~SEPTEMBER~~MARCH 2526, ~~2016~~2017

(UNAUDITED)

(Dollars in thousands)

	Thirty-Nine Weeks Ended
	Thirteen Weeks Ended
	September 24, 2017			September 25, 2016
	April 1, 2018			March 26, 2017
Cash flows from operating activities:
Net income (loss)	$	24		$	(1,391	)
Net (loss) income	$	(5,072	)	$	550
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	155,~~581~~096			165,~~744~~154
Loss on disposals of property and equipment	~~445~~173			~~695~~133
Write-off of unamortized loan origination fees	69			—
Impairment of assets	3,915			—
Impairment of assets	—			1,249
Amortization of deferred lease incentives	(2,264		)	(1,957		)
Amortization of deferred lease incentives	(5,942		)	(6,026		)
Share-based compensation costs	195			270
Share-based compensation costs	748			864
Deferred income taxes	—			(1,506		)
Changes in assets and liabilities:
Accounts and tenant improvement allowance receivables	4,~~490~~095			23,~~521~~744
Inventories	~~478~~168			~~451~~343
Prepaid expenses and other current assets	~~1,596~~303			~~806~~842
Trade and construction payables	1(2,~~257~~893		)	(1,~~994~~619		)
Deferred lease incentives	(329		)	2,054
Deferred gift card revenue	(4,354		)	(4,228		)
Deferred gift card revenue	(7,348		)	(3,581		)
Other accrued expenses	116			(275		)
Other accrued expenses	(3,751		)	(3,668		)
Other — net	(357		)	(316		)
Other — net	(1,100		)	(147		)
Net cash (used in) provided by operating activities	(879		)	2,641
Net cash provided by operating activities	6,218			7,071
Cash flows from investing activities:
Purchase of property and equipment	(~~7,887~~864		)	(111,~~629~~891		)
Net cash used in investing activities	(~~7,887~~864		)	(111,~~629~~891		)
Cash flows from financing activities:
Proceeds from long-term debt	~~463~~105,~~900~~500			~~489~~185,~~100~~700
Payments on long-term debt	(~~462~~102,000		)	(~~481~~186,~~400~~500		)
Proceeds from the exercise of stock options	19—			~~445~~3
Shares withheld for employee taxes	~~(43~~—		)	(~~185~~20		)
Repurchase of treasury shares	—			(3,461		)
Loan financing costs	(413		)	—
Loan origination fees related to credit facility amendment	(264		)	—
Net cash provided by (used in) financing activities	3,087			(817		)
Net cash provided by financing activities	1,612			4,499
Net increase (decrease) in cash and cash equivalents	1,344			(67		)
Net decrease in cash and cash equivalents	(57		)	(59		)
Cash and cash equivalents — beginning of period	393			444
Cash and cash equivalents — beginning of period	444			447
Cash and cash equivalents — end of period	$	1,737		$	377
Cash and cash equivalents — end of period	$	387		$	388
Supplemental disclosures of cash flow information:
Interest paid	~~1,515~~497			~~925~~541
Income taxes (received) paid	(1,128		)	458
Income taxes (refund), net	(91		)	(517		)
Property financed by trade and construction payables	~~616~~399			~~880~~519

See condensed notes to unaudited consolidated financial statements.

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BRAVO BRIO RESTAURANT GROUP, INC. AND SUBSIDIARIES

Condensed Notes to Unaudited Consolidated Financial Statements


1.	BASIS OF PRESENTATION

Description of Business — As of ~~September~~April 241, ~~2017~~2018, Bravo Brio Restaurant Group, Inc. (the “Company”) operated ~~113~~111 restaurants under the trade names “Bravo! Cucina Italiana®,” “Brio Tuscan Grille™,” and “Bon Vie®.” Of the ~~113~~111 restaurants the Company operates, there are 4947 Bravo! Cucina Italiana® restaurants, 63 Brio Tuscan Grille™ restaurants and one Bon Vie® restaurant in operation in 32 states throughout the United States of America. The Company owns all of its restaurants with the exception of one Brio Tuscan Grille™ restaurant, which it operates under a management agreement and for which operation it receives a management fee. Additionally, one Brio Tuscan Grille™ restaurant is operated under a franchise agreement.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements. The operating results included herein are not necessarily indicative of results for any other interim period or for the full fiscal year.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances at the time. Actual amounts may differ from those estimates.

Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. These unaudited consolidated financial statements and related condensed notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 2531, ~~2016~~2017 filed with the SEC on March 614, ~~2017~~2018 (the “~~2016~~2017 Annual Report on Form 10-K”).

~~Recent~~Going ~~Accounting~~Concern ~~Pronouncements~~— Outstanding debt under the Company's 2014 Credit Agreement is classified as a current liability as of April 1, 2018 on the Company's consolidated balance sheets as the outstanding debt matures on December 1, 2018. The Company's lack of sufficient cash flow to meet its obligation under the existing Credit Agreement at maturity creates substantial doubt about the Company's ability to continue as a going concern. As a result, the Company pursued strategic alternatives, including seeking a refinancing of its outstanding debt, and ultimately entered into an Agreement and Plan of Merger on March 7, 2018 as described below in "Merger Agreement among Bravo Brio Restaurant Group, Inc. and affiliates of Spice Private Equity Ltd." The consummation of the transactions contemplated by the Agreement and Plan of Merger will result in the repayment in full of the Company’s obligations under its senior secured credit facility prior to maturity as the transactions are anticipated to be consummated in the second quarter of fiscal 2018.

InThe ~~May~~financial ~~2014,~~statements ~~the~~have ~~Financial~~been ~~Accounting~~prepared ~~Standards~~assuming ~~Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU provides a comprehensive new revenue recognition model~~ that ~~requires a company to recognize revenue to depict~~ the ~~transfer~~Company ofwill ~~goods~~continue oras ~~services to~~ a ~~customer~~going atconcern anfor ~~amount that reflects~~ the ~~consideration~~next ittwelve ~~expects to receive in exchange for those goods or services~~months. ~~Additionally~~ Accordingly, ~~this~~the ~~guidance~~unaudited ~~expands~~condensed ~~related~~consolidated ~~disclosure~~financial ~~requirements.~~statements ~~The~~do ~~FASB~~not ~~later~~include ~~issued~~any ~~ASU~~adjustments ~~No.~~to ~~2016-08,~~reflect ~~Revenue~~the ~~from~~possible ~~Contracts~~future ~~with~~effects ~~Customers~~on ~~(Topic~~the ~~606)~~recoverability ~~- Principal versus Agent Considerations, in March 2016, ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations~~ and ~~Licensing,~~classification in April 2016, ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients, in May 2016, and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, in December 2016, all of ~~which~~assets ~~further~~or ~~clarified aspects of Topic 606. The pronouncement is effective for annual and interim reporting periods beginning after December 15, 2017 and~~ the ~~amendments~~amounts ~~have the same effective date~~ and ~~transition~~classification ~~requirements as the revenue standard. Early adoption is permitted only as~~ of ~~annual~~liabilities ~~reporting periods beginning after December 15, 2016, including interim reporting periods within~~ that ~~reporting~~may ~~period.~~result ~~This~~from ~~ASU permits~~ the ~~use~~possible ofinability either the retrospective or cumulative effect transition method. The Company is currently evaluating the overall impact this ASU will have on its consolidated financial statements. While the Company continues to assess all potential impacts of ~~this ASU, it currently believes~~ the ~~most significant impact relates to accounting for unredeemed gift cards (breakage). Under this ASU, the~~ Company ~~expects~~ to ~~recognize~~continue ~~breakage~~as ~~proportional to actual gift card redemptions. The Company plans to adopt this ASU in fiscal 2018, using the modified retrospective method. Under this method, the Company expects to record~~ a ~~cumulative~~going ~~adjustment to retained earnings related to the impacts of applying the new ASU~~concern. ~~Additionally, this ASU requires enhanced disclosures, including significant judgments in measurement and recognition. The Company is continuing its assessment, which may identify other impacts.~~

InMerger ~~July~~Agreement ~~2015~~among Bravo Brio Restaurant Group, ~~the~~Inc. ~~FASB~~and ~~issued~~affiliates ~~ASU~~of ~~2015-11~~Spice Private Equity Ltd. — As previously announced, ~~Inventory:~~on ~~Simplifying~~March 7, 2018, the ~~Measurement~~Company entered into an Agreement and Plan of ~~Inventory~~Merger (~~Topic~~the "Merger ~~330~~Agreement") with Bugatti Parent, Inc., ~~This~~a ~~ASU~~Delaware ~~provides~~corporation ~~guidance~~(“Parent”), onand ~~the~~Bugatti ~~subsequent~~Merger ~~measurement~~Sub, Inc., an Ohio corporation and a wholly-owned subsidiary of ~~inventory,~~Parent ~~which~~(“Merger ~~changes~~Sub”). Parent ~~the~~and ~~measurement~~Merger ~~from~~Sub ~~lower~~are investment affiliates of ~~cost~~Spice orPrivate ~~market~~Equity Ltd. (“Spice”). Pursuant to ~~lower~~the Merger Agreement, upon the closing of ~~cost~~the transactions contemplated by the Merger Agreement (i) Merger Sub shall be merged with and ~~net~~into ~~realizable~~the ~~value. This~~Company ~~ASU~~and ~~defines~~the ~~net~~Company ~~realizable~~will ~~value~~survive as a wholly-owned subsidiary of Parent and (ii) each common share, no par value per share (the ~~estimated~~“Company ~~selling~~Common ~~prices~~Shares”) in(other than treasury stock and any Company Common Stock owned by the ~~ordinary~~Company, ~~course~~Parent, Merger Sub, any of ~~business~~their wholly owned subsidiaries, ~~less~~or ~~reasonably~~any ~~predictable~~person ~~costs~~who properly demands statutory appraisal of ~~completion,~~their ~~disposal,~~shares) ~~and~~of ~~transportation~~the ~~and~~Company iswill ~~effective~~be ~~for~~converted ~~annual~~into ~~and~~the ~~interim~~right ~~periods~~to ~~beginning~~receive ~~after~~an ~~December~~amount ~~15,~~in ~~2016.~~cash ~~The~~equal ~~Company~~to ~~adopted~~$4.05 ~~this~~per ~~ASU~~share, without interest.

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~~during~~Significant ~~the~~Accounting ~~thirteen weeks ended March 26, 2017. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.~~Policies

InThere ~~February~~have ~~2016,~~been ~~the~~no ~~FASB~~significant ~~issued~~changes ~~ASU 2016-02, Leases (Topic 842). This ASU requires organizations~~ to ~~recognize~~our ~~lease~~significant ~~assets~~accounting ~~and~~policies ~~lease~~during ~~liabilities on~~ the quarter ~~balance~~ended ~~sheet~~April ~~and also disclose key information about leasing arrangements. This ASU is effective for annual reporting periods beginning on or after December 15~~1, 2018, as ~~and~~compared ~~interim~~to ~~periods within~~ those ~~annual~~disclosed ~~periods.~~in ~~Earlier application is permitted for all entities as of the beginning of an interim or annual period. As of September~~our ~~24,~~ 2017 Form 10-K, ~~the~~other ~~Company~~than ~~has not adopted this ASU. The Company has not completed~~ the ~~process~~changes ofdescribed evaluating the impact that will result from adopting this ASU and is therefore unable to disclose the impact that adopting this ASU will have on its financial position, results of operations, and cash flowsbelow.

Revenue Recognition — In ~~March~~May ~~2016~~2014, the FASB issued ASU ~~2016~~2014-09, ~~Compensation~~Revenue -from ~~Stock~~Contracts ~~Compensation~~with Customers (Topic ~~718~~606), or ASC 606 and has since issued various amendments which provide further clarification and implementation guidance on ASC 606. This ASU isprovides ~~intended~~a comprehensive new revenue recognition model that requires a company to ~~simplify~~recognize ~~several~~revenue ~~aspects~~to ofdepict the ~~accounting~~transfer ~~for~~of ~~share-based~~goods ~~payment~~or ~~transactions,~~services ~~including~~to ~~the~~a ~~income~~customer ~~tax~~at ~~consequences,~~an ~~classification~~amount ofthat ~~awards~~reflects asthe ~~either~~consideration ~~equity~~it orexpects ~~liabilities,~~to ~~and~~receive ~~classification~~in onexchange ~~the~~for ~~statement~~those ofgoods ~~cash~~or ~~flows~~services. ~~This~~The ~~ASU~~pronouncement is effective for annual and interim reporting periods beginning ~~on or~~ after December 15, ~~2016,~~2017. ~~and~~This ~~interim~~ASU ~~periods~~permits ~~within~~the ~~those~~use ~~annual~~of ~~periods~~either the retrospective or modified retrospective transition method. The Company adopted ~~this~~ASC ~~ASU~~606 ~~during~~prospectively using the ~~thirteen~~modified ~~weeks~~retrospective ~~ended~~method ~~March~~on 26January 1, ~~2017~~2018. The ~~adoption~~transition ofto ~~this~~ASC ~~ASU~~606 ~~did~~represents ~~not have~~ a ~~material~~change ~~impact~~in onaccounting ~~the Company's consolidated financial statements~~principle.

InRevenue ~~May~~from ~~2017,~~restaurant ~~the~~operations ~~FASB~~is ~~issued~~recognized ~~ASU~~upon ~~2017-09,~~payment ~~Compensation~~by -the ~~Stock~~customer ~~Compensation:~~at ~~Scope~~the time of ~~Modification Accounting~~sale. ~~This~~Revenues ~~ASU~~are ~~provides~~reflected ~~clarity~~net ~~and reduces complexity when an entity has changes to the terms or conditions~~ of asales ~~share-based~~tax ~~payment award,~~ and ~~when~~certain andiscounts ~~entity~~and ~~should apply modification accounting~~allowances. ~~This~~The ~~ASU~~timing isof ~~effective~~revenue recognition for ~~annual~~restaurant ~~reporting~~operations ~~periods~~did ~~beginning~~not onchange orupon ~~after December 15, 2017, and interim periods within those annual periods. Early~~ adoption isof ~~permitted~~ASC ~~for interim and annual periods~~606. The ~~Company~~most ~~has~~significant ~~not~~impact ~~yet~~of ~~adopted~~the ~~this~~Company's ~~guidance.~~ASC ~~The~~606 adoption ofrelates ~~this~~to ~~ASU~~accounting isfor ~~not~~unredeemed ~~expected~~gift tocards ~~have~~(breakage) aand ~~material~~marketing ~~impact~~expenses onrelated to the ~~Company's~~sale ~~consolidated~~of ~~financial~~its ~~statements~~gift cards.

2The Company has historically recognized breakage, based upon historical redemption patterns, when the Company determines the likelihood of redemption of the gift card by the customer is remote and there is no legal obligation to remit the value of unredeemed gift cards to the relevant jurisdiction. ~~NET~~In ~~INCOME~~contrast, ~~PER~~under ~~SHARE~~ASC 606 the Company recognizes an estimate for potential breakage as gift cards are redeemed based on historical redemption patterns. Recognition of gift card breakage under ASC 606 will not materially change on an annual basis.

The Company has historically recognized marketing costs related to the placement of its gift cards at retailers upon the initial sale of the gift card. Additionally, the Company historically recorded a liability upon each sale of such gift cards at full value and recognized revenue upon redemption by the customer. In contrast, under ASC 606 the Company initially records a liability upon the sale of these gift cards and an asset for the related marketing costs, which are considered incremental costs of gift card placement. Gift card revenue is recognized upon redemption by the customer and marketing costs are recognized in proportion to the related gift card redemption. Marketing expense recognition under ASC 606 will not materially change on an annual basis but will be recognized proportionally as gift card redemptions occur. During the thirteen weeks ended April 1, 2018, the Company recorded $0.7 million of marketing costs related to gift card redemptions and had $2.1 million capitalized related to marketing costs, included in prepaid expenses and other current assets. As of April 1, 2018, the Company had a liability related to deferred gift card revenue of $15.5 million.

Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. The Company recognized an adjustment of approximately $2.9 million to the January 1, 2018 opening balance of retained earnings, reducing the retained deficit from $152.8 million to $149.9 million. The $2.9 million adjustment represents the cumulative effect of initially applying the new standard and is primarily comprised of $2.7 million related to the capitalization of previously expensed marketing costs.

The adoption of ASC 606 had an immaterial impact on revenue during the three months ended April 1, 2018 as compared to our historic accounting under ASC 605.The following table presents the Company's revenues disaggregated by revenue source (in thousands):



	Thirteen Weeks Ended
	April 1, 2018		March 26, 2017⁽¹⁾
Restaurant Sales, net	$	96,662	$	106,657
Other Revenue⁽²⁾	697		62
Total	$	97,359	$	106,719

⁽¹⁾As noted above, prior period amounts have not been adjusted under the modified retrospective transition method.

⁽²⁾ Comprised of revenue from gift card breakage and management fees.

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Table of Contents

Recently Adopted Accounting Standards

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting. This ASU provides clarity and reduces complexity when an entity has changes to the terms or conditions of a share-based payment award, and when an entity should apply modification accounting. This ASU is effective for annual reporting periods beginning on or after December 15, 2017, and interim periods within those annual periods. The Company adopted this guidance during the thirteen weeks ended April 1, 2018. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements and was adopted prospectively.

Impact of New Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires organizations to recognize lease assets and lease liabilities on the balance sheet and also disclose key information about leasing arrangements. This ASU is effective for annual reporting periods beginning on or after December 15, 2018, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual period. As of April 1, 2018, the Company has not adopted this ASU. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements. The ASU will be adopted using the modified retrospective transition method. In preparation for the adoption of the ASU, the Company is in the process of implementing controls and key system changes to enable the preparation of financial information under the new guidance.

2. NET (LOSS) INCOME PER SHARE

Basic earnings per share (EPS) data is computed based on weighted average common shares outstanding during the period. Diluted EPS data is computed based on weighted average common shares outstanding, including all potentially issuable common shares.

(in thousands, except per share data)

	~~Thirteen Weeks Ended~~	Thirteen Weeks Ended						~~Thirty-Nine Weeks Ended~~
	September 24, 2017				September 25, 2016			September 24, 2017		September 25, 2016
		April 1, 2018				March 26, 2017
Net (loss) income	$	~~(2,472~~$	)(5,072	)	$	~~(2,985~~$	)550	$	24	$	~~(1,391~~	)
Weighted average common shares outstanding	~~15,197~~	15,236			~~14,582~~	15,113		~~15,162~~		~~14,648~~
Effect of dilutive securities:
Stock options	—	—			—	24		17		—
Restricted stock	—	—			—	1		11		—
Weighted average common and potentially issuable common shares outstanding—diluted	~~15,197~~	15,236			~~14,582~~	15,138		~~15,190~~		~~14,648~~
Basic net (loss) income per common share	$	~~(0.16~~$	)(0.33	)	$	~~(0.20~~$	)0.04	$	~~0.00~~	$	~~(0.09~~	)
Diluted net (loss) income per common share	$	~~(0.16~~$	)(0.33	)	$	~~(0.20~~$	)0.04	$	~~0.00~~	$	~~(0.09~~	)

~~Shares~~Common ofshare ~~common stock~~ equivalents of ~~422~~ 28,~~790~~ 762 were excluded from the diluted calculation for the ~~thirteen~~quarter ~~weeks~~ ended ~~September~~ 24April 1, ~~2017~~2018 due to a net loss during the period. ~~Shares~~Common ofshare ~~common stock~~ equivalents of ~~389~~258,~~836~~125 and 460,972 were excluded from the diluted calculation due to their anti-dilutive effect for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017.~~2018 ~~Shares of common stock equivalents of 806,286 were excluded from the diluted calculation for the thirteen~~ and ~~thirty-nine weeks ended September~~March 2526, ~~2016~~2017, ~~due to a net loss during each respective period~~respectively.

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3. LONG-TERM DEBT

Long-term debt at September 24, 2017 and December 25, 2016 consisted of the following (in thousands):

	September 24, 2017		December 25, 2016
Term loan	$	31,000	$	34,000
Revolving credit facility	12,400		7,500
Total	43,400		41,500
Less current maturities	8,500		4,000
Long-term debt	$	34,900	$	37,500

On November 5, 2014, the Company entered into a credit agreement (the "2014 Credit Agreement") with a syndicate of financial institutions with respect to its senior credit facilities. On October 31, 2016, the Company entered into an amendment to the 2014 Credit Agreement (the "Amendment"). The Amendment redefined the Company's senior credit facilities and provides for (i) a $35.0 million term loan facility, maturing in 2019, and (ii) a revolving credit facility under which the Company may borrow up to $30.0 million (including a sublimit cap of up to $10.0 million for letters of credit and up to $10.0 million for swing-line loans), maturing in 2019. On August 1, 2017, the Company entered into a second amendment to the 2014 Credit Agreement (the "Second Amendment"). The Second Amendment provides for (a) the amendment of the maturity date of the senior credit facilities from November 5, 2019 to December 1, 2018, (b) a reduction of the amount the Company may borrow pursuant to its revolving credit facility from $30.0 million (including a sublimit cap of up to $10.0 million for letters of credit and up to $10.0 million for swing-line loans) to (i) $20.0 million (including a sublimit cap of up to $4.0 million for letters of credit and up to $10.0 million for swing-line loans) on August 1, 2017, (ii) $15.0 million (including a sublimit cap of up to $4.0 million for letters of credit and up to $10.0 million for swing-line loans) on December 31, 2017, (iii) $15.0 million (including a sublimit cap of up to $3.0 million for letters of credit and up to $10.0 million for swing-line loans) on March 31, 2018 and (iv) $10.0 million (including a sublimit cap of up to $3.0 million for letters of credit and up to $10.0 million for swing-line loans) on June 30, 2018; and (c) an increase to the fixed quarterly principal payments from $1.0 million per quarter to $2.5 million per quarter beginning on March 31, 2018.

Borrowings under the senior credit facilities bear interest at (i) the Base Rate (as such term is defined in the Amendment) plus the applicable margin of 1.50% to 2.00% or (ii) at a fixed rate for a period of one, two, three or six months equal to the London interbank offered rate, LIBOR, plus the applicable margin of 2.50% to 3.00%. In addition to making fixed quarterly principal payments under the Company’s senior credit facilities, the Company is required to pay an unused facility fee to the lenders equal to 0.30% to 0.50% per annum on the aggregate amount of the unused revolving credit facility, excluding swing-line loans, payable quarterly in arrears. Borrowings under the Company’s senior credit facilities are collateralized by a first priority interest in substantially all tangible and intangible personal property of the Company and its subsidiaries.

The 2014 Credit Agreement provides for bank guarantees under standby letter of credit arrangements in the normal course of business operations. The standby letters of credit are cancellable only at the option of the beneficiary who is authorized to draw drafts on the issuing bank up to the face amount of the standby letters of credit in accordance with its credit. As of September 24, 2017, the maximum exposure under these standby letters of credit was $2.9 million.

Pursuant to the Second Amendment, the Company is required to meet certain financial covenants including a minimum consolidated fixed charge coverage ratio, a maximum consolidated lease-adjusted leverage ratio and a minimum earnings before interest, taxes, depreciation and amortization. In addition to these financial tests, the Amendment places limitations on new restaurant leases until the lease-adjusted leverage ratio meets certain thresholds.

4. STOCK BASED COMPENSATION

In June 2006, the Company adopted the Bravo Development, Inc. Option Plan (the “2006 Plan”) in order to provide an incentive to employees. In conjunction with the Company’s initial public offering, all of the then outstanding options under the 2006 Plan became exercisable and the 2006 Plan was terminated. No further compensation costs will be recorded under the 2006 Plan. The 2006 Plan was replaced with the Bravo Brio Restaurant Group, Inc. Stock Incentive Plan (the “Stock Incentive Plan”), which was adopted in October 2010.

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3.	DEBT

Debt at April 1, 2018 and December 31, 2017 consisted of the following (in thousands):



	April 1, 2018		December 31, 2017
Term loan	$	30,000	$	30,000
Revolving credit facility	12,000		8,500
Total	42,000		38,500
Less current maturities	42,000		38,500
Long-term debt	$	—	$	—

On November 5, 2014, the Company entered into a credit agreement (the "2014 Credit Agreement") with a syndicate of financial institutions with respect to its senior secured credit facility. On October 31, 2016, the Company entered into a First Amendment to the 2014 Credit Agreement. The First Amendment redefined the Company's senior secured credit facility and provided for (i) a $35.0 million term loan facility, maturing in 2019, and (ii) a revolving credit facility under which the Company may borrow up to $30.0 million (including a sublimit cap of up to $10.0 million for letters of credit and up to $10.0 million for swing-line loans), maturing in 2019. On August 1, 2017, the Company entered into a Second Amendment to the 2014 Credit Agreement. The Second Amendment provided for (a) the amendment of the maturity date of the senior secured credit facility from November 5, 2019 to December 1, 2018, (b) a reduction of the amount the Company may borrow pursuant to its revolving credit facility from $30.0 million (including a sublimit cap of up to $10.0 million for letters of credit and up to $10.0 million for swing-line loans) to (i) $20.0 million (including a sublimit cap of up to $4.0 million for letters of credit and up to $10.0 million for swing-line loans) on August 1, 2017, (ii) $15.0 million (including a sublimit cap of up to $4.0 million for letters of credit and up to $10.0 million for swing-line loans) on January 1, 2018, (iii) $15.0 million (including a sublimit cap of up to $3.0 million for letters of credit and up to $10.0 million for swing-line loans) on March 31, 2018 and (iv) $10.0 million (including a sublimit cap of up to $3.0 million for letters of credit and up to $10.0 million for swing-line loans) on July 2, 2018; and (c) an increase to the fixed quarterly principal payments from $1.0 million per quarter to $2.5 million per quarter beginning on March 30, 2018. Pursuant to the Second Amendment, the Company became required to meet certain financial covenants including a minimum consolidated fixed charge coverage ratio, a maximum consolidated lease-adjusted leverage ratio and a minimum earnings before interest, taxes, depreciation and amortization. In addition to these financial tests, the Second Amendment placed limitations on new restaurant leases until the lease-adjusted leverage ratio meets certain thresholds.

Borrowings under the senior secured credit facility bear interest at (i) the Base Rate (as such term is defined in the Amendment) plus the applicable margin of 1.50% to 2.00% or (ii) at a fixed rate for a period of one, two, three or six months equal to the London interbank offered rate, LIBOR, plus the applicable margin of 2.50% to 3.00%. In addition to making fixed quarterly principal payments under the Company’s senior secured credit facility, the Company is required to pay an unused facility fee to the lenders equal to 0.30% to 0.50% per annum on the aggregate amount of the unused revolving credit facility, excluding swing-line loans, commencing on October 31, 2016, payable quarterly in arrears. Borrowings under the Company’s senior secured credit facility are collateralized by a first priority interest in substantially all tangible and intangible personal property of the Company and its subsidiaries.

The 2014 Credit Agreement, as amended, provides for bank guarantees under standby letter of credit arrangements in the normal course of business operations. The standby letters of credit are cancellable only at the option of the beneficiary who is authorized to draw drafts on the issuing bank up to the face amount of the standby letters of credit in accordance with its credit. As of April 1, 2018, the maximum exposure under these standby letters of credit was $2.9 million.

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On February 9, 2018, the Company entered into a Third Amendment to the senior secured credit facility. The Third Amendment provided for (a) the definition of “Consolidated EBITDA” to exclude certain litigation settlement payments in an amount not to exceed $1.4 million in the aggregate in the fiscal year ended on or about December 31, 2018 and legal fees and expenses not constituting Transaction Costs (as defined in the Third Amendment) in an amount not to exceed $3.5 million in the aggregate in the fiscal year ended on or about December 31, 2017, (b) prepayments of principal and interest, in increments of $0.5 million, on amounts outstanding under the credit facility: first to outstanding swingline loans, next to outstanding revolving loans, next to letter of credit obligations, and finally to the term loan, if the Company has excess cash or cash equivalents in an amount greater than $3.0 million on an aggregate book basis for three consecutive business days, (c) the Company to reconfirm certain of its reporting obligations to the lenders, (d) an adjustment to the Minimum Consolidated EBITDA (as defined in the Third Amendment) for the period January 1, 2018 through July 1, 2018 to $16.0 million, and for the period July 2, 2018 and thereafter to $19.0 million, and (e) deletion of the requirement that the Company maintain at least $2.0 million in minimum Liquidity (as defined in the Third Amendment) as of the end of each week.

On March 14, 2018, the Company entered into a Fourth Amendment to the senior secured credit facility. The Fourth Amendment provided for (a) revision of the maximum consolidated lease-adjusted leverage ratio (as defined in the Credit Agreement) to a maximum of 6.25 (b) deletion of the requirement that the Company make principal payments in the first and second quarters of fiscal 2018 and movement of the third quarter of fiscal 2018 principal payment to October 1, 2018 and (c) an adjustment to the Minimum Consolidated EBITDA (as defined in the Fourth Amendment) for the period January 1, 2018 and thereafter to $15.0 million.

Outstanding debt under the Credit Agreement is classified as a current liability as of April 1, 2018 on the Company's consolidated balance sheets as the outstanding debt matures on December 1, 2018. In light of the maturity date, the Company pursued strategic alternatives, including seeking a refinancing of its outstanding debt, and ultimately entered into an Agreement and Plan of Merger on March 7, 2018, as described in Note 1 to our unaudited financial statements. The consummation of the transactions contemplated by the Agreement and Plan of Merger will result in the repayment in full of the Company’s obligations under its senior secured credit facility prior to maturity as the transactions are anticipated to be consummated in the second quarter of fiscal 2018.


4.	STOCK BASED COMPENSATION

At April 1, 2018, the remaining contractual term of options outstanding was approximately 1.4 years and all of the options were exercisable. Aggregate intrinsic value is calculated as the difference between the Company’s closing price at the end of the fiscal quarter and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders had they all exercised such options on the fiscal quarter end date. The aggregate intrinsic value for outstanding and exercisable options at April 1, 2018 was $40 thousand.

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Table of Contents

2006 Plan

Stock option activity for the thirty-nine weeks ended September 24, 2017 is summarized as follows:

	Numberof Shares		Weighted AverageExercise Price
Outstanding at December 25, 2016	56,691		$	1.45
Exercised	(13,228	)	$	1.45
Granted	—		$	—
Forfeited	(23,509	)	$	1.45
Outstanding at September 24, 2017	19,954		$	1.45
Exercisable at September 24, 2017	19,954		$	1.45

At September 24, 2017, the weighted-average remaining contractual term of options outstanding was approximately 2.0 years and all of the options were exercisable. Aggregate intrinsic value is calculated as the difference between the Company’s closing price at the end of the fiscal quarter and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders had they all exercised such options on the fiscal quarter end date. The aggregate intrinsic value for outstanding and exercisable options at September 24, 2017 was $19.0 thousand.

Stock Incentive Plan

Restricted stock activity for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018 is summarized as follows:

	Number ofShares		Weighted-Average GrantDate Fair Value
Outstanding at December 25, 2016	320,570		$	9.20
Outstanding at December 31, 2017	415,361		$	5.90
Granted	~~236,500~~—		$	~~4.69~~—
Vested	(~~104~~89,~~873~~111	)	$	107.8468
Forfeited	(496,~~361~~375	)	$	7.2774
Outstanding at September 24, 2017	402,836		$	6.36
Outstanding at April 1, 2018	319,875		$	5.37

Fair value of the outstanding shares of restricted stock is based on the average of the high and low price of the Company’s shares on the date immediately preceding the date of grant. Stock compensation costs related to shares of restricted stock were approximately $0.72 million and $0.93 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018 and ~~September~~March 2526, ~~2016~~2017, respectively. As of ~~September~~April 241, ~~2017~~2018, total unrecognized stock-based compensation expense related to non-vested shares of restricted stock was approximately $1.94 million taking into account potential forfeitures, which is expected to be recognized over a weighted average period of approximately 2.97 years. These shares of restricted stock will vest, subject to certain exceptions, annually over a four-year period. The Company's restricted stock award agreements allow employees to surrender to the Company shares of stock upon vesting in lieu of their payment of the required personal employment-related taxes. Employees surrendered to the Company 94,~~450~~732 ~~and 22,792 shares~~ of restricted stock towards the minimum statutory tax withholdings, which the Company recorded as a reduction in common shares in the amount of approximately $4320.0 thousand ~~and $170.0 thousand,~~ for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2426, 2017. ~~and~~No ~~September~~such transactions were recorded during the thirteen weeks ended April 251, ~~2016, respectively~~2018.


5.	INCOME TAXES

Deferred tax assets are reduced by a valuation allowance if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Both positive and negative evidence are considered in forming management’s judgment as to whether a valuation allowance is appropriate, and more weight is given to evidence that can be objectively verified. Due to the impairment charges recorded during 2017, 2016 and 2015, the Company is in a three-year cumulative loss position. According to ASC Topic No. 740, Income Taxes ("ASU 740"), cumulative losses in recent years represent significant negative evidence in considering whether deferred tax assets are realizable. Based on the required weight of that evidence under ASC 740, the Company has determined that a valuation allowance was needed for all of its net deferred income tax assets. The Company recorded valuation allowances of $60.6 million and $60.3 million as of April 1, 2018 and December 31, 2017, respectively. The tax benefits relating to any reversal of the valuation allowance on the net deferred tax assets will be recognized as a reduction of future income tax expense.

~~- 10~~6. IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews long-lived assets, such as property, equipment and intangibles subject to amortization, for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable. The Company regularly reviews any restaurants generating negative or low cash flow for the previous four quarters to determine if impairment testing is warranted. As part of the review, the Company also takes into account that its business is sensitive to seasonal fluctuations, such as the holiday season at the end of the fourth quarter, as it significantly impacts short and long term projections for each location. Other factors considered that may impact expectations of future performance include changes in the economic environment, changes in the manner in which assets are used, unfavorable changes in legal factors or business climate, incurring excess costs in construction of the asset, and overall restaurant operating performance. Based on this analysis, the Company determines whether an indicator of impairment exists.

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Table of Contents

~~allowances~~If ofan ~~$67.0~~impairment ~~million~~indicator is identified, the Company prepares future undiscounted cash flow projections, which take into consideration qualitative factors and ~~$64~~future operating plans.7 ~~million~~The asCompany offorecasts ~~September 24~~future cash flows by considering recent restaurant level performance, ~~2017~~restaurant ~~and~~level ~~December 25~~operating plans, ~~2016~~sales trends, ~~respectively~~and cost trends for cost of sales, labor and operating expenses. The ~~tax~~Company ~~benefits~~compares ~~relating~~the undiscounted cash flow forecast to ~~any~~the ~~reversal~~assets' carrying value at the restaurant. If the carrying amount of the ~~valuation~~assets ~~allowance~~are onnot recoverable, an impairment charge is recognized based upon the ~~net~~amount ~~deferred~~by ~~tax~~which the assets' ~~will~~carrying bevalue ~~recognized~~exceeds asfair value. Fair value is estimated using a ~~reduction~~discounted cash flow approach. The impairment assessment process requires a significant degree of management’s judgment. At any given time, the Company may be monitoring a number of locations, and future ~~income~~impairment ~~tax~~charges ~~expense~~could be required if individual restaurant performance does not improve.

6As a result of the above mentioned review process, the Company incurred a non-cash impairment charge of $3. ~~COMMITMENTS~~9 ~~AND~~million during ~~CONTINGENCIES~~the thirteen weeks ended April 1, 2018 related to two restaurants. The Company did not recognize an impairment charge during the thirteen weeks ended March 26, 2017.

The Company's isimpairment ~~subject~~assessment toprocess ~~various~~requires ~~claims,~~the ~~possible~~use ~~legal~~of ~~actions,~~estimates and ~~other~~assumptions ~~matters~~regarding ~~arising~~future ~~out~~undiscounted ofcash ~~the~~flows ~~normal~~and ~~course~~operating outcomes, which are based upon a significant degree of ~~business~~management’s judgment. ~~While~~The itestimates isused ~~not~~in ~~possible~~the impairment analysis represent a Level 3 fair value measurement. The Company continues to ~~predict~~assess the ~~outcome~~performance of ~~these~~restaurants ~~issues,~~and ~~management~~monitors isthe ofneed for future impairment. Changes in the ~~opinion~~economic ~~that~~environment, ~~adequate~~real ~~provision~~estate ~~for~~markets, ~~potential~~capital ~~losses~~spending, ~~has~~and ~~been~~overall ~~made~~operating performance could impact these estimates and result in ~~the~~future ~~accompanying~~impairment ~~consolidated~~charges. ~~financial~~There ~~statements~~can be no assurance that future impairment tests will not result in additional charges to earnings.

~~As of September 24, 2017, the Company has assigned the lease relating to one property; however, the Company remains secondarily liable for the associated lease payments~~7. SUBSEQUENT ~~The~~EVENTS Company has recorded a liability for this continuing obligation which is based on the Company’s estimate of fair value. If the assignee ceases making lease payments or otherwise fails to perform its contractual obligations, the Company may incur additional expense and increase the liability associated with this continuing obligation.

InOn ~~May~~April ~~2016~~18, 2018, the Company filed a ~~former~~Definitive ~~restaurant~~14A ~~hourly~~Proxy ~~employee~~Statement ~~filed~~with athe ~~putative~~SEC. ~~class~~The ~~and~~proxy ~~collective~~statement ~~action~~includes ~~lawsuit~~a inproposal for the ~~United~~Company’s ~~States~~shareholders ~~District~~to ~~Court~~consider ~~for~~and vote upon a proposal to approve and adopt the ~~Southern~~Merger ~~District~~Agreement, dated as of ~~Missouri~~March 7, ~~Mamdooh~~2018. ~~Hussein~~The v.consummation ~~Bravo~~of ~~Brio~~the ~~Restaurant~~transactions ~~Group~~contemplated by the Merger Agreement are subject to customary closing conditions, ~~Inc.~~including, ~~alleging~~among ~~that~~others, (1) the approval of the merger by holders of a majority of the outstanding Company ~~violated~~Common ~~Missouri~~Shares, ~~wage~~(2) the ~~and~~absence ~~hour~~of any law ~~and~~prohibiting, ~~the~~or ~~Fair~~any ~~Labor~~order, ~~Standards~~injunction ~~Act~~or certain other legal impediments restraining, asenjoining ~~interpreted~~or byotherwise prohibiting, the ~~Department~~consummation of ~~Labor~~the merger, by(3) ~~not~~subject ~~paying~~to ~~regular~~certain ~~minimum~~materiality ~~wage~~and ~~for~~other ~~time~~qualifications, ~~spent~~the ~~performing~~accuracy ~~non-tipped~~of ~~duties.~~representations Inand ~~March~~warranties ~~2017,~~made by the Company, ~~and~~on the ~~plaintiffs~~one inhand, ~~this~~and ~~litigation~~Parent ~~agreed~~and inMerger ~~principle~~Sub, toon ~~settle~~the other hand, (4) the ~~litigation.~~performance ~~Based~~in ~~upon~~all ~~the~~material ~~conditions~~respects ofby ~~this~~each ~~settlement,~~of the Company ~~has~~and ~~recorded~~Parent aand ~~total~~Merger ~~expense~~Sub, respectively, of ~~$2.1~~its ~~million~~obligations inunder ~~potential~~the ~~settlement~~Merger Agreement, and ~~legal~~(5) in ~~costs~~the ~~during~~case ~~the~~of ~~thirty-nine~~Parent’s ~~weeks~~obligations ~~ended~~to ~~September 24,~~complete ~~2017~~the merger, ~~but~~ the ~~proposed~~absence ~~settlement~~of ~~may~~any ~~result~~Company Material Adverse Effect (as defined in athe ~~loss~~Merger Agreement) since the date of $1the Merger Agreement.8 ~~million~~The intransactions ~~excess~~contemplated by the Merger Agreement are expected to be completed by the end of the ~~amount~~second ~~recorded~~quarter of fiscal 2018. InThe ~~2016~~Company cannot predict with certainty when, ~~the~~or ~~Company~~if, ~~recorded~~such ~~$0.5~~transactions ~~million~~will inbe ~~potential~~completed ~~settlement~~because ~~and~~the ~~legal~~completion ~~costs~~of ~~related~~such transactions are subject to ~~this~~conditions ~~matter~~beyond the control of the Company.

InOn ~~August~~April ~~2016~~23, a2018, ~~former~~Mr. ~~restaurant~~Jon ~~hourly~~Dagenbach ~~employee~~ filed a ~~putative~~purported shareholder class action against the Company and ~~collective~~the ~~action~~individual ~~lawsuit~~members of the Company’s Board of Directors (collectively, the “Company Board”) in the United States District Court for the ~~Western~~Southern District of ~~New~~Ohio. The ~~York,~~case ~~Robert~~is ~~Andreescu~~captioned Jon Dagenbach v. Bravo Brio Restaurant Group, Inc. et al., ~~alleging~~No. 2:18-cv-00375-ALM. Mr. Dagenbach’s lawsuit alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 in connection with the proposed merger contemplated by the Merger Agreement. Mr. Dagenbach alleges that the Company’s ~~violated~~proxy ~~New~~statement ~~York~~filed ~~wage~~with the Securities and ~~hour~~Exchange ~~law~~Commission on April 18, 2018 contains certain material omissions and ~~the~~misstatements ~~Fair~~and ~~Labor~~is ~~Standards~~seeking ~~Act,~~to asenjoin ~~interpreted~~or rescind the transactions contemplated by the ~~Department~~Merger ofAgreement ~~Labor,~~and byrequests ~~not~~attorneys’ ~~paying~~fees ~~regular~~and ~~minimum~~damages ~~wage~~in ~~for~~an ~~time~~unspecified ~~spent~~amount. On ~~performing~~April ~~non-tipped~~24, ~~duties~~2018, Mr. ~~The~~Dagenbach ~~lawsuit~~filed ~~seeks~~a ~~unspecified~~motion ~~penalties~~for ina ~~addition~~preliminary injunction to ~~other~~prevent ~~monetary~~the ~~payments. The~~consummation ~~Company~~of ~~intends~~the totransactions ~~defend~~contemplated ~~this~~by ~~case~~the ~~vigorously~~Merger Agreement and on April 25, ~~but~~2018, itMr. isDagenbach ~~not~~filed ~~possible~~a atmotion ~~this~~to ~~time~~expedite proceedings relating to ~~reasonably~~its ~~estimate~~motion ~~the~~for ~~outcome~~a ofpreliminary orinjunction. ~~any~~The ~~potential~~defendants ~~liability~~believe ~~from~~these ~~this~~claims ~~case~~are without merit and intend to vigorously defend against these claims.

~~During~~In August 2016, a former restaurant hourly employee filed a putative class and collective action lawsuit in the ~~thirty-nine~~United ~~weeks~~States ~~ended~~District ~~September 24~~Court for the Western District of New York, ~~2017~~Robert Andreescu v. Bravo Brio Restaurant Group, Inc., alleging that the Company ~~settled~~violated aNew ~~loss~~York ~~claim~~wage ~~asserted~~and byhour law and the ~~Company~~Fair ~~which~~Labor ~~previously~~Standards ~~arose~~Act, ~~and~~as ~~recognized~~interpreted aby ~~gain~~the Department of ~~$0.5~~Labor, ~~million~~by tonot ~~general~~paying ~~and~~regular ~~administrative~~minimum ~~expenses~~wage for time spent performing non-tipped duties. ~~The~~In ~~majority~~December of2017, the ~~gain~~Company ~~pertained~~and the plaintiffs in this litigation agreed in principle to ~~compensation~~settle the litigation for $1.6 million. Based upon the conditions of this settlement, the Company’s ~~lost~~recorded ~~operating~~a ~~income~~total ~~awarded~~expense byof ~~the~~$1.0 ~~claims~~million ~~administrator~~in ~~pursuant~~settlement toand ~~the~~legal costs during fiscal 2017. The settlement ~~agreement~~received ~~reached~~final inapproval ~~litigation~~from the Court on April 23, 2018. No additional expenses related to the ~~2010~~case ~~Deepwater~~were ~~Horizon~~recorded ~~oil~~in ~~spill~~the infirst quarter and no further expenses are anticipated for the ~~Gulf~~remainder of ~~Mexico~~fiscal 2018.

~~7. IMPAIRMENT OF LONG~~-~~LIVED~~ 13 ~~ASSETS~~-

The Company reviews long-lived assets, such as property, equipment and intangibles subject to amortization, for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable. The Company has determined that its asset group for impairment testing is comprised of the assets and liabilities of each of its individual restaurants, as this is the lowest level of identifiable cash flows and primarily includes an assessment of historical cash flows and other relevant factors and circumstances. As part of the review, the Company also takes into account that its business is highly sensitive to seasonal fluctuations such as the holiday season at the end of the fourth quarter as it significantly impacts its short and long term projections for each location. The other factors and circumstances include changes in the economic environment, changes in the manner in which assets are used, unfavorable changes in legal factors or business climate, incurring excess costs in construction of the asset, overall restaurant operating performance and projections for future performance. These estimates result in a wide range of variability on a year to year basis due to the nature of the criteria.

The Company evaluates future undiscounted cash flow projections in conjunction with qualitative factors and future operating plans. The impairment assessment process requires the use of estimates and assumptions regarding future undiscounted cash flows and operating outcomes, which are based upon a significant degree of management’s judgment. The estimates used in the impairment analysis represent a Level 3 fair value measurement. At any given time, the Company may be monitoring a number of locations, and future impairment charges could be required if individual restaurant performance does not improve. The Company forecasts future cash flows by considering recent restaurant level performance, restaurant level operating plans, sales trends, and cost trends for cost of sales, labor and

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operating expenses. The Company compares this cash flow forecast to the asset's carrying value at the restaurant. Based on this analysis, if the Company determines that the carrying amount of the assets are not recoverable, an impairment charge is recognized based upon the amount by which the asset's carrying value exceeds fair value. The Company incurred a non-cash impairment charge of $1.2 million during the thirty-nine weeks ended September 25, 2016 related to one restaurant. The Company did not recognize an impairment charge during the thirty-nine weeks ended September 24, 2017.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read this discussion together with our unaudited consolidated financial statements and accompanying condensed notes included herein. Unless indicated otherwise, any reference in this report to the “Company,” “we,” “us,” and “our” refer to Bravo Brio Restaurant Group, Inc. together with its subsidiaries.

This discussion contains forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors, including those discussed under the heading “Risk Factors” in our ~~2016~~2017 Annual Report on Form 10-K.

Although we believe that the expectations reflected in the forward-looking statements are reasonable based on our current knowledge of our business and operations, we cannot guarantee future results, levels of activity, performance or achievements. We assume no obligation to provide revisions to any forward-looking statements should circumstances change.

The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our ~~2016~~2017 Annual Report on Form 10-K and the unaudited consolidated financial statements and the related condensed notes thereto included herein.

Overview

We are an owner and operator of two distinct Italian restaurant brands, BRAVO! Cucina Italiana (“BRAVO!”) and BRIO Tuscan Grille (“BRIO”), which for purposes of the following discussion includes our one Bon Vie restaurant. We have positioned our brands as multifaceted culinary destinations that deliver the ambiance, design elements and food quality reminiscent of fine dining restaurants at a value typically offered by casual dining establishments, a combination known as the upscale affordable dining segment. Each of our brands provides its guests with a fine dining experience and value by serving affordable cuisine prepared using fresh flavorful ingredients and authentic Italian cooking methods, combined with attentive service in an attractive, lively atmosphere. We strive to be the best Italian restaurant company in America and are focused on providing our guests an excellent dining experience through consistency of execution.

Our approach to operations continues to focus on core ways to drive and grow our business. We look for new and different ways to increase our comparable sales through various initiatives. We are constantly identifying new potential sites to expand both of our brands by opening new restaurants in the best possible locations within a development and throughout the country. We will continue to evaluate our existing restaurant base to ensure each location is meeting our standards from both an operational and profitability standpoint. Finally, we explore all of our options for deploying our capital in a way that is best for our shareholders and our business.

Our business is sensitive to seasonal fluctuations as, historically, the percentage of operating income earned during the first and fourth quarters has been higher than the other quarters due in part to higher restaurant sales during the winter months in our restaurants located in the southern region of the United States and the year-end holiday season. Our business is also highly sensitive to changes in guest traffic and the operating environment continues to be difficult with negative comparable store sales, driven by negative guest traffic, in ~~each quarter of 2016 and~~ the first ~~three~~ quarters of 2018 and 2017. Increases and decreases in guest traffic can have a significant impact on our financial results. In recent years, we have faced and we continue to face uncertain economic conditions, which have resulted in changes to our guests’ discretionary spending. To adjust for this decrease in guest traffic, we have focused on controlling product margins and costs while maintaining our high standards for food quality and service and enhancing our guests’ dining experience. We have worked with our distributors and suppliers to control commodity costs, become more efficient with the use of our employee base and found new ways to improve efficiencies across our company. We have increased our electronic advertising, social media communication and public relations activities in order to bring new guests to our restaurants and keep loyal guests coming back to grow our revenues. We have focused resources on highlighting our menu items and promoting our non-entrée selections such as appetizers, desserts and beverages as part of our efforts to drive higher sales volumes at our restaurants.

~~Recent guest traffic trends and their effect on sales may result in individual restaurants being cash flow negative.~~- ~~For~~14 ~~these restaurants, the Company reviews the associated long~~-~~lived assets, such as property, equipment and intangibles subject to~~

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Recent guest traffic trends and their effect on sales may result in individual restaurants being cash flow negative. For these restaurants, the Company reviews the associated long-lived assets, such as property, equipment and intangibles subject to amortization, for impairment. We are currently monitoring the performance of certain restaurants with negative cash flows. Based on our current projections, no ~~additional~~ impairment, beyond that already recorded has been identified. However, depending upon the performance trends of these ~~monitored~~ restaurants, an impairment charge may be necessary ~~in the fourth quarter of 2017~~. See the Company’s significant accounting policies presented in Note 1 to the Company’s consolidated financial statements for the fiscal year ended December 2531, ~~2016~~2017, which are contained in our ~~2016~~2017 Annual Report on Form 10-K, for further information regarding the Company's accounting policy for impairment of long-lived assets and intangible assets.

Results of Operations

Thirteen Weeks Ended ~~September~~April 241, ~~2017~~2018 Compared to the Thirteen Weeks Ended ~~September~~March 2526, ~~2016~~2017

The following table sets forth, for the periods indicated, our consolidated statements of operations both on an actual basis and expressed as a percentage of revenues.

	Thirteen Weeks Ended
	September 24, 2017			% ofRevenues		September 25, 2016			% ofRevenues		Change			% Change
	April 1, 2018			% ofRevenues		March 26, 2017			% ofRevenues		Change			% Change
	(dollars in thousands)
Revenues	$	8897,~~731~~359		100.0	%	$	94106,~~588~~719		100	%	$	(59,~~857~~360	)	(68.28	)%
Costs and expenses
Cost of sales	2224,~~713~~853			25.65	%	2528,~~265~~211			26.74	%	(23,~~552~~358		)	(1011.19	)%
Labor	3436,~~339~~683			3837.7	%	3639,~~938~~070			3936.16	%	(2,~~599~~387		)	(76.01	)%
Operating	1516,~~699~~951			17.74	%	1617,~~432~~085			1716.40	%	(~~733~~134		)	(40.58	)%
Occupancy	78,~~132~~022			8.02	%	8,~~036~~449			87.59	%	(~~904~~427		)	(115.21	)%
General and administrative expenses	56,~~267~~367			56.95	%	67,~~896~~671			7.32	%	(1,~~629~~304		)	(2317.60	)%
Restaurant preopening costs	~~270~~—			~~0.3~~—	%	~~107~~29			~~0.1~~—	%	~~163~~(29		)	-
Depreciation and amortization	5,148			5.8	%	5,600			5.9	%	(452		)	(8.1	)%
Impairment	3,915			4.0	%	—			—	%	3,915			-
Total costs and expenses	90,568			102.1	%	99,274			105.0	%	(8,706		)	(8.8	)%
Depreciation and amortization	4,922			5.1	%	5,114			4.8	%	(192		)	(3.8	)%
(Loss) income from operations	(1,837		)	(2.1	)%	(4,686		)	(5.0	)%	2,849			(60.8	)%
Total costs and expenses	101,713			104.5	%	105,629			99.0	%	(3,916		)	(3.7	)%
Interest expense, net	677			0.8	%	406			0.4	%	271			66.7	%
(Loss) income from operations	(4,354		)	(4.5	)%	1,090			1.0	%	(5,444		)	-
(Loss) income before income taxes	(2,514		)	(2.8	)%	(5,092		)	(5.4	)%	2,578			(50.6	)%
Interest expense, net	693			0.7	%	511			0.5	%	182			35.6	%
Income tax (benefit) expense	(42		)	0.0	%	(2,107		)	(2.2	)%	2,065			(98.0	)%
Loss (income) before income taxes	(5,047		)	(5.2	)%	579			0.5	%	(5,626		)	-
Net (loss) income	$	(2,472	)	(2.8	)%	$	(2,985	)	(3.2	)%	$	513		(17.2	)%
Income tax expense	25			—	%	29			—	%	(4		)	(13.8	)%
Net (loss) income	$	(5,072	)	(5.2	)%	$	550		0.5	%	$	(5,622	)	-
Certain percentage amounts may not sum due to rounding. Percentages over 100% are not shown.

Revenues. Revenues decreased $5.9.3 million, or 68.28%, to $8897.74 million for the thirteen weeks ended ~~September~~April 241, ~~2017~~2018, as compared to $94106.67 million for the thirteen weeks ended ~~September~~March 2526, ~~2016~~2017. The decrease of $5.9.3 million was primarily due to ~~the cumulative impact of the closure of five Company restaurants in 2017 and~~ a decrease of 56.7%, or $56.17 million, in comparable restaurant sales, which was the result of a 57.85% decrease in guest counts, ~~and~~offset aby an 0.18% increase in average check, for the thirteen weeks ended ~~September~~April 241, 2018 as compared to the thirteen weeks ended March 26, 2017. The decrease in comparable sales was due primarily to weather related restaurant closings and the result of New Year's Eve ("NYE") falling in the fifty-third week of fiscal 2017 versus in the first quarter of 2018 as compared to the prior year first quarter. Adjusting for the NYE shift, comparable restaurant sales for the thirteen weeks ended ~~September~~April 251, ~~2016~~2018 declined 4.0% compared to the thirteen weeks ended March 26, 2017. In addition, there were five restaurant closures after the first quarter of fiscal 2017 and two restaurant closures in the first weeks of fiscal 2018 resulting in a revenue loss of $3.8 million. We consider a restaurant to be part of the comparable restaurant base in the first full quarter following the eighteenth month of operations.

For our BRAVO! brand, restaurant revenues decreased $2.3 million, or 6.6%, to $32.6 million for the thirteen weeks ended September 24, 2017 as compared to $34.9 million for the thirteen weeks ended September 25, 2016. Comparable restaurant sales for the BRAVO! brand restaurants decreased 2.7%, or $0.9 million, to $31.6 million for the thirteen weeks ended September 24, 2017 as compared to $32.5 million for the thirteen weeks ended September 25, 2016 due to a decrease in guest counts, partially offset by an increase in average check. Revenues for BRAVO! brand restaurants not included in the comparable restaurant base decreased $1.4 million to $1.0 million for the thirteen weeks ended September 24, 2017 as compared to $2.4 million for the thirteen weeks ended September 25, 2016. The decrease of $1.4 million was primarily due to the closure of one BRAVO! restaurant in the second quarter of 2017. At September 24, 2017, there were 47 BRAVO! restaurants included in the comparable restaurant base and two BRAVO! restaurants not included in the comparable restaurant base.

For our BRIO brand, restaurant revenues decreased $3.8 million, or 6.5%, to $55.0 million for the thirteen weeks ended September 24, 2017 as compared to $58.8 million for the thirteen weeks ended September 25, 2016. Comparable restaurant sales for the BRIO brand restaurants decreased 7.4%, or $4.2 million, to $52.5 million for the thirteen weeks ended

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September 24, 2017 as compared to $56.7 million for the thirteen weeks ended September 25, 2016 due to a decrease in guest counts, partially offset by an increase in average check. Revenues for BRIO brand restaurants not included in the comparable restaurant base increased $0.4 million to $2.5 million for the thirteen weeks ended September 24, 2017 as compared to $2.1 million for the thirteen weeks ended September 25, 2016. The increase of $0.4 million was due to the opening of one BRIO restaurant in the fourth quarter of 2016 and one restaurant during the thirteen weeks ended September 24, 2017 as well as the closure of two BRIO restaurants in the second quarter of 2017 and two restaurants during the thirteen weeks ended September 24, 2017. At September 24, 2017, there were 60 BRIO restaurants included in the comparable restaurant base and three BRIO restaurants not included in the comparable restaurant base.

Cost of Sales. Cost of sales decreased $2.6 million, or 10.1%, to $22.7 million for the thirteen weeks ended September 24, 2017 as compared to $25.3 million for the thirteen weeks ended September 25, 2016. The decrease in the current period was primarily due to the decrease in comparable restaurant sales as well as the absence of additional costs associated with the initial testing and implementation of a new menu at both brands during the prior period. As a percentage of revenues, cost of sales decreased to 25.6% for the thirteen weeks ended September 24, 2017 as compared to 26.7% for the thirteen weeks ended September 25, 2016. The decrease in the current period was primarily due to increases in average check at both brands during the third quarter of 2017 as well as the absence of additional costs associated with the implementation of a new menu at both brands during the prior period. As a percentage of revenues, food costs decreased 1.0% to 21.3% for the thirteen weeks ended September 24, 2017 as compared to 22.3% for the thirteen weeks ended September 25, 2016. Beverage costs decreased 0.1% to 4.3% for the thirteen weeks ended September 24, 2017 as compared to 4.4% for the the thirteen weeks ended September 25, 2016.

Labor Costs. Labor costs decreased $2.6 million, or 7.0%, to $34.3 million for the thirteen weeks ended September 24, 2017 as compared to $36.9 million for the thirteen weeks ended September 25, 2016. This decrease was primarily due to the decrease in comparable restaurant sales as well as the absence of additional training costs associated with the initial testing and implementation of a new menu at both brands during the prior period. As a percentage of revenues, labor costs decreased to 38.7% for the thirteen weeks ended September 24, 2017, from 39.1% for the thirteen weeks ended September 25, 2016, primarily due to the absence additional training costs associated with the initial testing and implementation of a new menu at both brands during the prior period.

Operating Costs. Operating costs decreased $0.7 million, or 4.5%, to $15.7 million for the thirteen weeks ended September 24, 2017 as compared to $16.4 million for the thirteen weeks ended September 25, 2016. This decrease was primarily due to a decrease in supplies costs during the thirteen weeks ended September 24, 2017. As a percentage of revenues, operating costs increased to 17.7% for the thirteen weeks ended September 24, 2017, from 17.4% for the thirteen weeks ended September 25, 2016, primarily due to the deleveraging resulting from the decrease in comparable restaurant sales during the quarter.

Occupancy Costs. Occupancy costs decreased $0.9 million, or 11.2%, to $7.1 million for the thirteen weeks ended September 24, 2017 as compared to $8.0 million for the thirteen weeks ended September 25, 2016. This decrease was primarily due to the impact of a net reduction of 39 operating weeks in 2017 as compared to 2016. As a percentage of revenues, occupancy costs decreased to 8.0% for the thirteen weeks ended September 24, 2017, from 8.5% for the thirteen weeks ended September 25, 2016.

General and Administrative. General and administrative expenses decreased by $1.6 million, or 23.6%, to $5.3 million for the thirteen weeks ended September 24, 2017, as compared to $6.9 million for the thirteen weeks ended September 25, 2016. This decrease was primarily due to lower corporate compensation expense during the current period. As a percentage of revenues, general and administrative expenses decreased to 5.9% for the thirteen weeks ended September 24, 2017, from 7.3% for the thirteen weeks ended September 25, 2016, primarily due to lower corporate compensation expenses.

Restaurant Pre-opening Costs. Pre-opening costs increased by $163 thousand to $270 thousand for the thirteen weeks ended September 24, 2017, as compared to $107 thousand for the thirteen weeks ended September 25, 2016. Year over year changes in pre-opening costs are driven by the timing and number of restaurant openings in a given period. During the thirteen weeks ended September 24, 2017, we opened one restaurant and did not have any restaurants under construction. During the thirteen weeks ended September 25, 2016, we did not open any restaurants and had one restaurant under construction.

Depreciation and Amortization. Depreciation and amortization expenses decreased by $0.5 million to $5.1 million for the thirteen weeks ended September 24, 2017, as compared to $5.6 million for the thirteen weeks ended September 25, 2016. This decrease was primarily due to asset impairment charges incurred in 2016. As a percentage of revenues, depreciation and amortization expenses decreased to 5.8% for the thirteen weeks ended September 24, 2017 as compared to 5.9% for the thirteen weeks ended September 25, 2016. The decrease, as a percentage of revenues, was due to asset impairment charges incurred in 2016, partially offset by the deleveraging resulting from the decrease in comparable restaurant sales during the quarter.

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Net Interest Expense. Net interest expense increased by $0.3 million to $0.7 million for the thirteen weeks ended September 24, 2017, as compared to $0.4 million for the thirteen weeks ended September 25, 2016. This increase was primarily due to higher borrowing rates for the thirteen weeks ended September 24, 2017 after giving effect to the Amendment, as compared to the borrowing rates for the thirteen weeks ended September 25, 2016.

Income Taxes. Income tax benefit decreased $2.1 million to $42 thousand for the thirteen weeks ended September 24, 2017, as compared to $2.1 million for the thirteen weeks ended September 25, 2016. The decrease in income tax benefit was primarily due to the difference in the estimated annual effective tax rate of approximately 5% for the thirteen weeks ended September 24, 2017 as compared to approximately 90%, as well as a loss before taxes for the thirteen weeks ended September 25, 2016.

Non-GAAP Measures. Adjusted net income and Adjusted net income per share are supplemental measures of our performance that are not required or presented in accordance with generally accepted accounting principles, or GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered by themselves or as a substitute for measures of performance prepared in accordance with GAAP.

We calculate these non-GAAP measures by adjusting net income and net income per share for the impact of certain non-comparable items that are reflected in our GAAP results. We believe these adjusted measures provide investors with additional information to facilitate the comparison of our past and present financial results and assist users of the financial statements to better understand our results. We utilize results that both include and exclude the identified items in evaluating our business performance. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will not be affected by certain unusual or non-comparable items.

The following is a reconciliation from net income and net income per share to the corresponding adjusted measures (dollars in thousands, except per share data):

	Thirteen Weeks Ended
	September 24, 2017			September 25, 2016
Net loss	$	(2,472	)	$	(2,985	)
Impact from:
Write-off of unamortized loan origination fees (1)	69			—
Tax expense from excess tax deficiency for option exercises (2)	—			624
Income tax expense (3)	(3		)	—
Adjusted net loss	$	(2,406	)	$	(2,361	)

	Basic						Diluted
	September 24, 2017			September 25, 2016			September 24, 2017			September 25, 2016
Net loss per share	$	(0.16	)	$	(0.20	)	$	(0.16	)	$	(0.20	)
Impact from:
Write-off of unamortized loan origination fees (1)	—			—			—			—
Tax expense from excess tax deficiency for option exercises (2)	—			0.04			—			0.04
Income tax expense (3)	—			—			—			—
Adjusted net loss per share	$	(0.16	)	$	(0.16	)	$	(0.16	)	$	(0.16	)
Weighted average shares outstanding (4)	15,197			14,582			15,197			14,582

_________________________

1) Reflects non-cash write-off of unamortized loan origination fees related to the second amendment to the Company's senior credit facilities on August 1, 2017.

2) Reflects the excess tax deficiency associated with the exercise of stock options during the period.

3) Reflects the adjustments for income taxes, at our estimated annual effective tax rate, related to the write-off of unamortized loan origination fees.

4) Diluted weighted average shares outstanding includes all potentially issuable common shares, except in a loss position, in which case diluted weighted average shares outstanding is equal to basic weighted average shares outstanding.

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~~Thirty-Nine~~For ~~Weeks~~our ~~Ended~~BRAVO! ~~September~~brand, restaurant revenues decreased $3.9 million, or 10.3%, to $34.3 million for the thirteen weeks ended April 241, 2018 as compared to $38.2 million for the thirteen weeks ended March 26, 2017. Comparable ~~Compared~~restaurant sales for the BRAVO! brand restaurants decreased 5.2%, or $1.9 million, to $34.1 million for the ~~Thirty-Nine~~thirteen ~~Weeks~~weeks ~~Ended~~ended ~~September~~April 251, ~~2016~~2018 as compared to $36.0 million for the thirteen weeks ended March 26, 2017 due to a decrease in guest counts. Revenues for BRAVO! brand restaurants not included in the comparable restaurant base decreased $2.0 million to $0.2 million for the thirteen weeks ended April 1, 2018 as compared to $2.2 million for the thirteen weeks ended March 26, 2017. The decrease of $2.0 million was primarily due to one fiscal 2017 store closure and two fiscal 2018 store closures. At April 1, 2018, all 47 BRAVO! restaurants were included in the comparable restaurant base.

~~The~~For ~~following~~our ~~table~~BRIO ~~sets~~brand, ~~forth~~restaurant revenues decreased $6.1 million, or 8.9%, to $62.4 million for the ~~periods~~thirteen ~~indicated~~weeks ended April 1, ~~our~~2018 ~~consolidated~~as ~~statements~~compared ofto ~~operations~~$68.5 ~~both~~million onfor anthe ~~actual~~thirteen ~~basis~~weeks ~~and~~ended ~~expressed~~March 26, 2017. Comparable restaurant sales for the BRIO brand restaurants decreased 7.5%, or $4.9 million, to $60.1 million for the thirteen weeks ended April 1, 2018 as compared to $65.0 million for the thirteen weeks ended March 26, 2017 due to a ~~percentage~~decrease in guest counts, partially offset by an increase in average check. Revenues for BRIO brand restaurants not included in the comparable restaurant base decreased $1.3 million to $2.2 million for the thirteen weeks ended April 1, 2018 as compared to $3.5 million for the thirteen weeks ended March 26, 2017. The decrease of ~~revenues~~$1.3 million was primarily due to the closing of four BRIO restaurant locations in fiscal 2017 that contributed to non comparable revenue in the first quarter of 2017 offset by the opening of one BRIO restaurant location in third quarter of fiscal 2017. At April 1, 2018, there were 60 BRIO restaurants included in the comparable restaurant base and three BRIO restaurants not included in the comparable restaurant base.

	Thirty-Nine Weeks Ended
	September 24, 2017		% ofRevenues		September 25, 2016			% ofRevenues		Change			% Change
	(dollars in thousands)
Revenues	$	298,491	100	%	$	308,601		100	%	$	(10,110	)	(3.3	)%
Costs and expenses
Cost of sales	77,201		25.9	%	80,507			26.1	%	(3,306		)	(4.1	)%
Labor	111,876		37.5	%	115,954			37.6	%	(4,078		)	(3.5	)%
Operating	49,484		16.6	%	51,626			16.7	%	(2,142		)	(4.1	)%
Occupancy	22,888		7.7	%	23,622			7.7	%	(734		)	(3.1	)%
General and administrative expenses	19,313		6.5	%	20,141			6.5	%	(828		)	(4.1	)%
Restaurant preopening costs	420		0.1	%	621			0.2	%	(201		)	(32.4	)%
Impairment	—		—	%	1,249			0.4	%	(1,249		)	-
Depreciation and amortization	15,405		5.2	%	16,680			5.4	%	(1,275		)	(7.6	)%
Total costs and expenses	296,587		99.4	%	310,400			100.6	%	(13,813		)	(4.5	)%
Income (loss) from operations	1,904		0.6	%	(1,799		)	(0.6	)%	3,703			-
Interest expense, net	1,717		0.6	%	1,098			0.4	%	619			56.4	%
Income (loss) before income taxes	187		0.1	%	(2,897		)	(0.9	)%	3,084			-
Income tax expense	163		0.1	%	(1,506		)	(0.5	)%	1,669			-
Net income (loss)	$	24	0.0	%	$	(1,391	)	(0.5	)%	$	1,415		-
Certain percentage amounts may not sum due to rounding. Percentages over 100% are not shown.

Cost of Sales. Cost of sales decreased $3.3 million, or 11.9%, to $24.9 million for the thirteen weeks ended April 1, 2018 as compared to $28.2 million for the thirteen weeks ended March 26, 2017. This decrease corresponds with an 8.8% decrease in revenue. As a percentage of revenues, cost of sales decreased to 25.5% for the thirteen weeks ended April 1, 2018 as compared to 26.4% for the thirteen weeks ended March 26, 2017. As a percentage of revenues, food costs decreased 0.9% to 21.0% for the thirteen weeks ended April 1, 2018 as compared to 21.9% for the thirteen weeks ended March 26, 2017 as a result of continued efficiencies gained after menu changes implemented in the first half fiscal 2017. Beverage costs remained flat at 4.5% for the thirteen weeks ended April 1, 2018 and March 26, 2017.

~~Revenues~~Labor Costs. ~~Revenues~~Labor costs decreased $102.14 million, or 36.31%, to $~~298~~36.57 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017,~~2018 as compared to $~~308~~39.61 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016~~2017. ~~The~~As ~~decrease~~a percentage of ~~$10.1~~revenues, ~~million~~labor ~~was~~costs ~~primarily~~increased ~~due~~ to ~~the~~37.7% ~~cumulative~~for ~~impact of~~ the ~~closure~~thirteen ofweeks ~~five~~ended ~~restaurants~~April 1, in2018, ~~2017~~from ~~and~~36.6% afor ~~decrease~~the inthirteen ~~comparable~~weeks ~~restaurant~~ended ~~sales of 2.9%~~March 26, ~~or $8.4 million~~2017, ~~which~~primarily ~~was~~due to the ~~result~~deleveraging ofresulting afrom ~~4.3%~~the decrease in ~~guest counts and a 1.4% increase in average check. We consider a restaurant to be part of the~~ comparable restaurant ~~base~~sales induring the ~~first full~~ quarter ~~following the eighteenth month of operations~~.

~~For~~Operating ~~our~~Costs. Operating ~~BRAVO!~~costs ~~brand, restaurant revenues~~ decreased $50.91 million, or 50.28%, to $~~108~~17.50 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018 as compared to $~~114~~17.41 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016. Comparable restaurant sales for the BRAVO! brand restaurants decreased 2.2%, or $2.4 million, to $105.0 million for the thirty-nine weeks ended September 24,~~ 2017 ~~as compared to $107~~.4 ~~million for the thirty-nine weeks ended September 25, 2016.~~ This decrease was primarily due to a decrease in ~~guest~~supplies ~~counts,~~expense ~~partially offset by an increase in average check~~ during the ~~first~~thirteen ~~thirty-nine~~ weeks ofended ~~2017~~April 1, 2018. As ~~Revenues~~a ~~for~~percentage ~~BRAVO!~~of ~~brand~~revenues, ~~restaurants~~operating ~~not~~costs ~~included~~increased ~~in the comparable restaurant base decreased $3.5 million~~ to $317.54% ~~million~~ for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018, asfrom ~~compared to $7~~16.0% ~~million~~ for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016.~~2017, ~~The decrease of $3.5 million was~~ primarily due to ~~the~~an ~~impact~~increase ~~of two restaurant closures~~ in ~~the~~ third-party ~~quarter~~delivery offees ~~2016~~ and ~~one restaurant closure in the second quarter of 2017~~utilities. ~~At September 24, 2017, there were 47 BRAVO! restaurants included in the comparable restaurant base and two BRAVO! restaurants not included in the comparable restaurant base.~~

~~For~~Occupancy ~~our~~Costs. Occupancy ~~BRIO~~costs ~~brand, restaurant revenues~~ decreased $40.54 million, or 25.31%, to $~~188~~8.70 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018 as compared to $~~193~~8.24 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016~~2017. ~~Comparable~~ This ~~restaurant~~decrease ~~sales~~was ~~for~~primarily ~~the~~due ~~BRIO~~to ~~brand~~a ~~restaurants~~decrease ~~decreased~~in ~~3.2%,~~rent orexpense ~~$6.0~~during ~~million, to $181.1 million for~~ the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018 as ~~compared~~a toresult ~~$187.1~~of ~~million~~five ~~for~~restaurant ~~the~~closures ~~thirty-nine weeks ended September 25, 2016. This decrease was due to a decrease~~ in ~~guest~~2017 ~~counts,~~and ~~partially~~two ~~offset~~restaurant byclosures ~~an increase~~ in ~~average check during~~ the first ~~thirty-nine~~quarter ~~weeks~~ of ~~2017~~2018. ~~Revenues~~As ~~for~~a ~~BRIO~~percentage ~~brand~~of ~~restaurants~~revenues, ~~not~~occupancy ~~included~~costs ~~in the comparable restaurant base~~ increased ~~$1.5 million~~ to $78.62% ~~million~~ for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018, asfrom ~~compared to $6~~7.19% ~~million~~ for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016.~~2017, ~~The increase of $1.5 million was~~ primarily due to the ~~opening~~deleveraging ofresulting ~~one~~from ~~BRIO~~the ~~restaurant~~decrease in ~~the~~comparable ~~fourth~~restaurant ~~quarter~~sales ofduring ~~2016~~the ~~and~~ quarter.

General and Administrative. General and administrative expenses decreased by $1.3 million, or 17.0%, to $6.4 million for the thirteen weeks ended April 1, 2018, as compared to $7.7 million for the thirteen weeks ended March 26, 2017 due to $1.6 million in legal expenses for the thirteen weeks ended March 26, 2017. As a percentage of revenues, general and administrative expenses decreased to 6.5% for the thirteen weeks ended April 1, 2018 as compared to 7.2% for the thirteen weeks ended March 26, 2017.

Restaurant Pre-opening Costs. There were no pre-opening costs during the thirteen weeks ended April 1, 2018 as compared to $29 thousand in pre-opening costs for the thirteen weeks ended March 26, 2017. Year over year changes in pre-opening costs are driven by the timing and number of restaurant openings in a given period. There were no restaurant openings during the thirteen weeks ended April 1, 2018 and March 26, 2017.

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~~one~~Impairment. We ~~restaurant~~review ~~during~~long-lived ~~the~~assets, ~~thirty-nine~~such ~~weeks~~as ~~ended~~property ~~September 24~~and equipment and intangibles subject to amortization, ~~2017~~for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable. AtFactors ~~September 24~~considered include, ~~2017~~but are not limited to, ~~there~~significant ~~were~~underperformance 60relative ~~BRIO~~to ~~restaurants~~expected ~~included~~historical or projected future operating results, significant changes in the ~~comparable~~use ~~restaurant~~of ~~base~~assets, changes in our overall business strategy and ~~three~~significant ~~BRIO~~negative industry or economic trends. Based upon our analysis, we incurred a non-cash impairment charge of $3.9 million during the thirteen weeks ended April 1, 2018 related to two restaurants. We did not ~~included~~incur ina non-cash impairment charge during the ~~comparable~~thirteen ~~restaurant~~weeks ~~base~~ended March 26, 2017.

~~Cost~~Depreciation ofand ~~Sales~~Amortization. ~~Cost~~Depreciation ofand ~~sales~~amortization expenses decreased ~~approximately~~by $30.32 million, ~~or 4.1%,~~ to $774.29 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018, as compared to $~~80.~~5.1 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016~~2017. ~~The~~ This decrease ~~in the current period~~ was primarily due to ~~the~~asset ~~decrease~~impairment incharges ~~comparable~~incurred ~~restaurant~~in ~~sales as well as the absence of additional costs associated with the initial testing and implementation of a new menu at both brands during the prior period~~2017. As a percentage of revenues, ~~cost~~depreciation ofand ~~sales~~amortization ~~decreased~~expenses toincreased ~~25.9% for the thirty-nine weeks ended September 24, 2017 as compared~~ to 265.1% for the ~~thirty-nine~~thirteen weeks ended ~~September~~April ~~25, 2016. As a percentage of revenues, food costs decreased 0.~~1~~% to 21.5% for the thirty-nine weeks ended September 24~~, ~~2017~~2018 as compared to 214.68% for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016~~2017. ~~Beverage~~The ~~costs~~increase, as a percentage of revenues, ~~decreased~~was ~~0.1%~~due to ~~4.4%~~asset ~~for~~impairment ~~the~~charges ~~thirty-nine~~incurred ~~weeks~~in ~~ended September 24,~~ 2017 asoffset ~~compared~~by tothe ~~4.5%~~deleveraging ~~for~~resulting from the ~~thirty-nine~~decrease ~~weeks~~in ~~ended~~comparable ~~September 25,~~restaurant ~~2016.~~sales during the current quarter.

~~Labor~~Net ~~Costs~~Interest Expense. ~~Labor~~Net ~~costs~~interest ~~decreased~~expense increased by $40.12 million, ~~or 3.5%,~~ to $~~111~~0.97 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018, as compared to $~~116.~~0.5 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016~~2017. This ~~decrease~~increase ~~in the current period~~ was primarily due to ~~the~~increased ~~decrease~~loan infee ~~comparable~~amortization restaurant sales as well as the absence of additional training costs associated with the initial testing and implementation of a new menu at both brands during the prior period. As a percentage of revenues, labor costs decreased to 37.5% for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018 as compared to ~~37.6% for~~ the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016. The~~2017 ~~decrease in the current period was primarily~~ due to the ~~absence~~fees ~~of additional training costs~~ associated with the ~~initial~~two ~~testing~~amendments ~~and implementation~~ of aour ~~new~~senior ~~menu~~secured atcredit both brands during the prior period, partially offset by the deleveraging resulting from the decrease in comparable restaurant sales in the first thirty-nine weeks of 2017 as compared to the same period in the prior yearfacility.

~~Operating~~Income ~~Costs~~Taxes. ~~Operating~~Income ~~costs~~tax expense decreased $~~2.1 million, or~~ 4~~.1%,~~ thousand to $~~49.5~~25 ~~million~~thousand for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017,~~2018 as compared to $~~51.6~~29 ~~million~~thousand for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016. This decrease was primarily due to a decrease in supplies and insurance costs during the thirty-nine weeks ended September 24,~~ 2017. As a percentage of revenues, operating costs decreased to 16.6% for the thirty-nine weeks ended September 24, 2017 as compared to 16.7% for the thirty-nine weeks ended September 25, 2016. This decrease was primarily due to alower ~~decrease~~net in(loss) ~~supplies~~income ~~and~~before ~~insurance costs, partially offset by the deleveraging resulting from the decrease in comparable restaurant sales in the first thirty-nine weeks of 2017 as compared to the same period in the prior year~~taxes.

~~Occupancy~~Non-GAAP ~~Costs~~Measures. ~~Occupancy~~ ~~costs~~Adjusted ~~decreased~~net ~~$0.7~~income ~~million,~~and orAdjusted ~~3.1%,~~net toincome ~~$22.9~~per ~~million~~share ~~for~~are ~~the~~supplemental ~~thirty-nine~~measures ~~weeks~~of ~~ended~~our ~~September 24,~~performance ~~2017,~~that asare ~~compared~~not torequired ~~$23.6~~or ~~million~~presented ~~for~~in ~~the~~accordance ~~thirty-nine~~with ~~weeks~~generally ~~ended~~accepted ~~September 25~~accounting principles, ~~2016~~or GAAP. ~~This~~These ~~decrease~~non-GAAP ~~was~~measures ~~primarily~~may ~~due~~not tobe ~~the~~comparable ~~impact~~to ofsimilarly atitled ~~net~~measures ~~reduction~~used ofby 79other ~~operating~~companies ~~weeks~~and inshould ~~2017~~not asbe ~~compared~~considered toby ~~2016.~~themselves Asor as a ~~percentage~~substitute ~~of revenues, occupancy costs remained flat at 7.7%~~ for ~~each~~measures of ~~the~~performance ~~thirty-nine~~prepared ~~weeks~~in ~~ended~~accordance ~~September 24,~~with ~~2017 and September 25, 2016~~GAAP.

~~General~~We ~~and~~calculate ~~Administrative. General~~these ~~and~~non-GAAP ~~administrative~~measures ~~expenses decreased~~ by ~~$0.8~~adjusting ~~million,~~net orincome ~~4.1%,~~and tonet ~~$19.3~~income ~~million~~per share for the ~~thirty~~impact of certain non-~~nine~~comparable ~~weeks~~items ~~ended~~that ~~September 24,~~are ~~2017,~~reflected asin ~~compared~~our toGAAP ~~$20~~results.1 ~~million~~We ~~for~~believe ~~the~~these ~~thirty-nine~~adjusted ~~weeks~~measures ~~ended~~provide ~~September 25,~~investors ~~2016. This~~with ~~decrease~~supplemental ~~was~~information ~~primarily~~to ~~due~~facilitate tothe ~~lower~~comparison ~~corporate~~of ~~compensation~~our ~~expense,~~past ~~partially~~and ~~offset~~present byfinancial anresults. ~~increase~~We inutilize ~~litigation~~results ~~costs~~that ~~during~~both include and exclude the ~~thirty-nine~~identified ~~weeks~~items ~~ended~~in ~~September 24,~~evaluating ~~2017~~our business performance. AsHowever, aour ~~percentage~~inclusion of ~~revenues,~~these ~~general~~adjusted ~~and~~measures ~~administrative~~should ~~expenses~~not ~~remained~~be ~~flat~~construed atas ~~6.5%~~an ~~for~~indication ~~each~~that ofour ~~the~~future ~~thirty-nine~~results ~~weeks~~will ~~ended~~not ~~September 24,~~be ~~2017~~affected ~~and~~by ~~September 25,~~certain ~~2016~~unusual or non-comparable items.

Restaurant Pre-opening Costs. Pre-opening costs decreased by $0.2 million to $0.4 million for the thirty-nine weeks ended September 24, 2017 as compared to $0.6 million for the thirty-nine weeks ended September 25, 2016. Year over year changes in pre-opening costs are driven by the timing and number of restaurant openings in a given period. During the first thirty-nine weeks of 2017, we opened one restaurant and did not have any restaurants under construction. In the first thirty-nine weeks of 2016, we opened two restaurants and had one restaurant under construction.

Impairment. We review long-lived assets, such as property and equipment and intangibles subject to amortization, for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable. Factors considered include, but are not limited to, significant underperformance relative to expected historical or projected future operating results, significant changes in the use of assets, changes in our overall business strategy and significant negative industry or economic trends. Our impairment charges have been incurred as a result of locations that have had lower than anticipated traffic near the restaurant and locations that have opened in areas with lower than normal retail co-tenancy. Based upon our analysis, we did not incur a non-cash impairment charge during the thirty-nine weeks ended September 24, 2017. We incurred a non-cash impairment charge of $1.2 million during the thirty-nine weeks ended September 25, 2016 related to one restaurant.

Depreciation and Amortization. Depreciation and amortization expenses decreased $1.3 million to $15.4 million for the thirty-nine weeks ended September 24, 2017 as compared to $16.7 million for the thirty-nine weeks ended September 25, 2016. This decrease in the current period was primarily due to asset impairment charges incurred in 2016. As a percentage of revenues, depreciation and amortization expenses decreased to 5.2% for the thirty-nine weeks ended September 24, 2017 as compared to

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5.4% for the thirty-nine weeks ended September 25, 2016. The decrease, as a percentage of revenues, was due to asset impairment charges incurred in 2016, partially offset by the deleveraging resulting from the decrease in comparable restaurant sales in the first thirty-nine weeks of 2017 as compared to the same period in the prior year.

Net Interest Expense. Net interest expense increased by $0.6 million to $1.7 million for the thirty-nine weeks ended September 24, 2017 as compared to $1.1 million and the thirty-nine weeks ended September 25, 2016. This increase was primarily due to higher borrowing rates for the thirty-nine weeks ended September 24, 2017 after giving effect to the Amendment, as compared to the borrowing rates for the thirty-nine weeks ended September 25, 2016.

Income Taxes. Income tax expense increased $1.7 million to $0.2 million for the thirty-nine weeks ended September 24, 2017 as compared to an income tax benefit of $1.5 million for the thirty-nine weeks ended September 25, 2016. The increase in income tax expense was due to the difference in the estimated annual effective tax rate of approximately 5% on income before taxes for the thirty-nine weeks ended September 24, 2017 as compared to an estimated annual effective tax rate of approximately 90% on a loss before taxes for the thirty-nine weeks ended September 25, 2016.

The following is a reconciliation from net income and net income per share to the corresponding adjusted measures (dollars in thousands, except per share data):

	Thirty-Nine Weeks Ended
	Thirteen Weeks Ended
	September 24, 2017			September 25, 2016
	April 1, 2018			March 26, 2017
Net income (loss)	$	24		$	(1,391	)
Net (loss) income	$	(5,072	)	$	550
Impact from:
Litigation settlements and expenses, net (1)	~~1,560~~			—1,560
Asset impairment charges (2)	—3,915			~~1,249~~—
Write-off of unamortized loan origination fees (3)	69			—
Income tax expense (3)				(78		)
Tax expense related to an Internal Revenue Service audit settlement (4)	—			265
Adjusted net (loss) income	$	(1,157	)	$	2,032
Tax expense from excess tax deficiency for option exercises (5)	—			758
Income tax expense (6)	(81		)	(125		)
Adjusted net income	$	1,572		$	756



	Basic						Diluted
	April 1, 2018			March 26, 2017			April 1, 2018			March 26, 2017
Net (loss) income per share	$	(0.33	)	$	0.04		$	(0.33	)	$	0.04
Impact from:
Litigation settlements and expenses, net (1)	—			0.10			—			0.10
Asset impairment charges (2)	0.26			—			0.26			—
Income tax expense (3)	—			(0.01		)	—			(0.01		)
Adjusted net income per share	$	(0.07	)	$	0.13		$	(0.07	)	$	0.13
Weighted average shares outstanding	15,236			15,113			15,236			15,138

_________________________


1)	See Note 6 to our unaudited consolidated financial statements in Part 1, Item 1 of the prior year report on form 10-Q for information regarding litigation settlements and expenses recorded during the thirteen weeks ended March 26, 2017. There were no such expenses related to litigation settlements recorded during the thirteen weeks ended April 1, 2018.


2)	Reflects non-cash asset impairment charges for the thirteen weeks ended April 1, 2018 for two restaurants. This charge has not been tax affected as the Company is in a full valuation allowance as summarized in Note 5.


3)	Reflects the adjustments for income taxes related to the accrued liability for litigation recorded during the thirteen weeks ended March 26, 2017.

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	Basic					Diluted
	September 24, 2017		September 25, 2016			September 24, 2017		September 25, 2016
Net income (loss) per share	$	0.00	$	(0.09	)	$	0.00	$	(0.09	)
Impact from:
Litigation settlements and expenses, net (1)	0.10		—			0.10		—
Asset impairment charges (2)	—		0.08			—		0.08
Write-off of unamortized loan origination fees (3)	—		—			—		—
Tax expense related to an Internal Revenue Service audit settlement (4)	—		0.02			—		0.02
Tax expense from excess tax deficiency for option exercises (5)	—		0.05			—		0.05
Income tax expense (6)	$	—	$	(0.01	)	$	—	$	(0.01	)
Adjusted net income per share	$	0.10	$	0.05		$	0.10	$	0.05
Weighted average shares outstanding (7)	15,162		14,648			15,190		15,372

______________________

1) See Note 6 to our unaudited consolidated financial statements in Part 1, Item 1 of this report for information regarding litigation settlements and expenses recorded during the thirty-nine weeks ended September 25, 2016.

2) Reflects non-cash asset impairment charges for the thirty-nine weeks ended September 25, 2016 for one restaurant.

3) Reflects non-cash write-off of unamortized loan origination fees related to the second amendment to the Company's senior credit facilities on August 1, 2017.

4) Reflects the tax expense associated with the settlement of an Internal Revenue Service audit during the period.

5) Reflects the excess tax deficiency associated with the exercise of stock options during the period.

6) Reflects the adjustments for income taxes, at our estimated annual effective tax rate, related to accrued liability for current litigation, impairment charges and the write-off of unamortized loan origination fees.

7) Diluted weighted average shares outstanding includes potentially issuable common shares. Common share equivalents of 389,836 and 90,520 were excluded from the diluted calculation due to their anti-dilutive effect for the thirty-nine weeks ended September 24, 2017 and September 25, 2016, respectively.

Liquidity

Our principal sources of cash have been net cash provided by operating activities and borrowings under our revolving credit facility. ~~As of September 24, 2017, we had approximately $0.4 million in cash and cash equivalents.~~ On August 1, 2017, ~~the~~we ~~Company~~ entered into ~~the~~a Second Amendment to ~~its~~our senior secured credit ~~facilities~~facility. The Second Amendment ~~reduces~~reduced the amount we may borrow pursuant to our revolving credit facility from $30.0 million (including a sublimit cap of up to $10.0 million for letters of credit and up to $10.0 million for swing-line loans) to (i) $20.0 million (including a sublimit cap of up to $4.0 million for letters of credit and up to $10.0 million for swing-line loans) on August 1, 2017, (ii) $15.0 million (including a sublimit cap of up to $4.0 million for letters of credit and up to $10.0 million for swing-line loans) on ~~December~~January 311, ~~2017~~2018, (iii) $15.0 million (including a sublimit cap of up to $3.0 million for letters of credit and up to $10.0 million for swing-line loans) on March 31, 2018 and (iv) $10.0 million (including a sublimit cap of up to $3.0 million for letters of credit and up to $10.0 million for swing-line loans) on ~~June~~July 302, 2018. AsIn ~~of September 24~~addition, ~~2017,~~the wesenior ~~had~~secured ~~approximately $4.7 million of availability under our revolving~~ credit facility ~~(after~~matures ~~giving~~on ~~effect~~December to1, $22018.~~9 million of outstanding letters of credit and $12.4 million in outstanding debt under our revolving credit facility).~~

~~Our~~On ~~need~~February ~~for~~9, ~~capital~~2018, ~~resources~~we isentered ~~driven~~into bya Third Amendment to our ~~restaurant~~senior ~~expansion~~secured ~~plans,~~credit ~~on-going~~facility. The ~~maintenance~~Third Amendment provides for (a) the definition of ~~our~~“Consolidated ~~restaurants~~EBITDA” to exclude certain litigation settlement payments in an amount not to exceed $1.4 million in the aggregate in the fiscal year ended on or about December 31, ~~existing~~2018 ~~site~~and ~~remodels~~legal fees and ~~investment~~expenses not constituting Transaction Costs (as defined in ~~our~~the ~~corporate~~Third ~~and~~Amendment) ~~information~~in ~~technology~~an ~~infrastructures~~amount not to exceed $3.5 ~~Based~~million onin ~~our~~the ~~current~~aggregate ~~real~~in ~~estate~~the ~~development~~fiscal ~~plans~~year ended on or about December 31, we2017, ~~believe~~(b) ~~our~~prepayments ~~combined~~of ~~expected~~principal ~~cash~~and ~~flows~~interest, ~~from~~in ~~operations~~increments of $0.5 million, ~~available~~on ~~borrowings~~amounts outstanding under ~~our~~the ~~revolving~~senior secured credit facility: first to outstanding swingline loans, next to outstanding revolving loans, next to letter of credit obligations, and ~~expected~~finally ~~landlord~~to ~~lease~~the ~~incentives~~term ~~will~~loan, beif ~~sufficient~~we have excess cash or cash equivalents in an amount greater than $3.0 million on an aggregate book basis for three consecutive business days, (c) we are required to ~~finance~~reconfirm ~~our~~certain ~~planned~~of ~~capital~~its ~~expenditures~~reporting obligations to the lenders, (d) an adjustment to the Minimum Consolidated EBITDA (as defined in the Third Amendment) for the period January 1, 2018 through July 1, 2018 to $16.0 million, and ~~other~~for ~~operating~~the ~~activities~~period ~~over~~July 2, 2018 and thereafter to $19.0 million, and (e) deletion of the ~~next~~requirement ~~twelve~~that ~~months~~we maintain at least $2.0 million in minimum Liquidity (as defined in the Third Amendment) as of the end of each week.

~~Consistent~~On ~~with~~March ~~many~~14, ~~other~~2018, ~~restaurant~~the ~~and~~Company ~~retail~~entered ~~chain~~into ~~store~~a ~~operations,~~Fourth weAmendment ~~use~~to ~~operating~~the ~~lease~~senior ~~arrangements~~secured ~~for~~credit ~~the~~facility. ~~majority~~The ofFourth ~~our~~Amendment ~~restaurant~~provides ~~locations.~~for We(a) ~~believe~~revision ~~that~~of ~~these~~the ~~operating~~maximum consolidated lease-adjusted ~~arrangements~~leverage ~~provide~~ratio ~~appropriate~~(as ~~leverage~~defined ofin ~~our~~the ~~capital~~Credit ~~structure~~Agreement) into a ~~financially~~maximum ~~efficient~~of ~~manner~~6.25 ~~Currently,~~(b) ~~operating~~deletion ~~lease~~of ~~obligations~~the ~~are~~requirement ~~not~~that ~~reflected~~the asCompany ~~indebtedness~~make onprincipal ~~our~~payments ~~consolidated~~in ~~balance~~the ~~sheet.~~first ~~The~~and ~~use~~second quarters of ~~operating~~fiscal ~~lease~~2018 ~~arrangements~~and ~~may~~movement ~~impact~~of ~~our~~the ~~capacity~~third toquarter ~~borrow~~of ~~money~~fiscal ~~under~~2018 ~~our~~principal ~~revolving~~payment ~~credit~~to ~~facility.~~October ~~However~~1, ~~restaurant~~2018 ~~real~~and ~~estate~~(c) ~~operating~~an ~~leases~~adjustment ~~are~~to ~~expressly~~the ~~excluded~~Minimum ~~from~~Consolidated EBITDA (as defined in the ~~restrictions~~Fourth ~~under~~Amendment) ~~our~~for ~~revolving~~the ~~credit~~period ~~facility~~January ~~related~~1, to2018 ~~the~~and ~~incurrence~~thereafter ofto ~~funded~~$15.0 ~~indebtedness~~million.

As of April 1, 2018, we had approximately $1.7 million in cash and cash equivalents and approximately $0.1 million of availability under our revolving credit facility (after giving effect to $2.9 million of outstanding letters of credit and $12.0 million in outstanding debt under our revolving credit facility as of April 1, 2018). Our ~~liquidity~~need ~~may~~for becapital ~~adversely~~resources ~~affected~~is driven by aour ~~number~~restaurant expansion and reimaging plans, on-going maintenance of ~~factors~~our restaurants and investment in our corporate and information technology infrastructures. Based on our current real estate development plans, our combined expected cash flows from operations, our available borrowings under the revolving credit facility and expected landlord lease incentives were not projected to be sufficient to finance our planned capital expenditures and other operating activities for the next twelve months. In light of the maturity date of the 2014 Credit Agreement at December 1, 2018, the Company pursued strategic alternatives, including seeking a ~~decrease~~refinancing inof ~~guest~~its ~~traffic~~outstanding ordebt, ~~average~~and ~~check~~ultimately ~~per~~entered ~~guest~~into ~~due~~an toAgreement ~~changes~~and inPlan ~~economic~~of ~~conditions~~Merger on March 7, 2018, as described in Note 1 to our ~~2016~~unaudited ~~Annual~~financial ~~Report~~statements. onThe ~~Form~~transactions ~~10-K~~contemplated ~~under~~by the ~~heading~~Agreement ~~“Risk~~and ~~Factors~~Plan of Merger will result in the repayment in full of the Company’s outstanding debt.” The Company is projecting that it will be able to continue to comply with the contractual covenants contained in the senior secured credit facility, as further amended by the Fourth Amendment, until the transactions contemplated by the Agreement and Plan of Merger are consummated.

Consistent with many other restaurant and retail chain store operations, we use operating lease arrangements for the majority of our restaurant locations. We believe that these operating lease arrangements provide appropriate leverage of our capital structure in a financially efficient manner. Currently, operating lease obligations are not reflected as indebtedness on our consolidated balance sheet. The use of operating lease arrangements could impact our capacity to borrow money under our revolving credit facility. However, restaurant real estate operating leases are expressly excluded from the restrictions under our revolving credit facility related to the incurrence of funded indebtedness.

Our liquidity may be adversely affected by a number of factors, including a decrease in guest traffic or average check per guest due to changes in economic conditions, as described in our 2017 Annual Report on Form 10-K under the heading “Risk Factors.”

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The following table presents a summary of our cash flows for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018 and ~~September~~March 2526, ~~2016~~2017 (dollars in thousands):

	Thirty-Nine Weeks Ended
	Thirteen Weeks Ended
	September 24, 2017			September 25, 2016
	April 1, 2018			March 26, 2017
Net cash provided by operating activities	$	6,218		$	7,071
Net cash (used in) provided by operating activities	$	(879	)	$	2,641
Net cash used in investing activities	(~~7,887~~864		)	(111,~~629~~891		)
Net cash provided by financing activities	1,612			4,499
Net cash provided by (used in) financing activities	3,087			(817		)
Net decrease in cash and cash equivalents	(57		)	(59		)
Net increase (decrease) in cash and cash equivalents	1,344			(67		)
Cash and cash equivalents at beginning of period	~~444~~393			~~447~~444
Cash and cash equivalents at end of period	$	~~387~~1,737		$	~~388~~377

Operating Activities. Net cash ~~provided~~used byin operating activities was $60.29 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018, compared to $72.16 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016~~2017. Cash receipts from operations, ~~including~~for the ~~net~~first ~~redemption~~thirteen weeks of ~~gift~~2018 ~~cards~~and 2017 were, ~~for~~including the ~~first~~net ~~thirty-nine~~redemption ~~weeks~~ of ~~2017~~gift ~~and~~cards, ~~2016 were~~ $~~291~~93.30 million and $~~306~~102.16 million, respectively. Cash expenditures for operations during the first ~~thirty-nine~~thirteen weeks of ~~2017~~2018 and ~~2016~~2017 were $~~285~~93.7 million and $~~299~~100.21 million, respectively.

Investing Activities. Net cash used in investing activities was $70.9 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018, compared to $111.69 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016~~2017. We invest cash toon ~~purchase~~reimaging ~~property~~activities ~~and equipment related to our restaurant expansion plans, which is related to the timing of spending for our new restaurants~~ as well as ~~the~~on ~~number~~normal ofcapital ~~restaurants~~expenditure ~~that were opened and under construction during 2017 versus 2016~~replacements. During the first ~~thirty-nine~~thirteen weeks of 2017, we ~~opened~~did ~~one~~not ~~restaurant~~open ~~and~~a ~~did~~restaurant ~~not~~but ~~have~~had ~~any~~one ~~restaurants~~restaurant under construction. During the first ~~thirty-nine~~thirteen weeks of ~~2016,~~2018 we ~~opened~~did ~~two~~not ~~restaurants~~open ~~and~~a ~~had~~restaurant ~~one~~nor ~~restaurant~~did we have any restaurants under construction.

Financing Activities. Net cash provided by financing activities was $13.61 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018, compared to net cash ~~provided~~used byin financing activities of $40.58 million for the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016~~2017. For the ~~thirty-nine~~thirteen weeks ended ~~September~~April 241, ~~2017~~2018, wethe Company had net borrowings of $13.95 million ~~on our senior credit facilities~~. For the ~~thirty-nine~~thirteen weeks ended ~~September~~March 2526, ~~2016~~2017, wethe Company had net ~~borrowings~~repayments of $70.78 million ~~on our revolving credit facility and repurchased $3~~.5 ~~million in treasury stock.~~

As of ~~September~~April 241, ~~2017~~2018, we had no financing transactions, arrangements or other relationships with any related parties. Additionally, we had no financing arrangements involving synthetic leases or trading activities involving commodity contracts.

Capital Resources

Future Capital Requirements. Our capital requirements are primarily dependent upon the pace of our real estate development program and ~~existing~~resulting ~~site~~new ~~remodeling plans~~restaurants. Our real estate development program ~~and~~is ~~existing site remodeling plans are~~ dependent upon many factors, including economic conditions, real estate markets, site locations and ~~the~~ nature of lease agreements as well as maintaining compliance with applicable financial covenants contained in our senior secured credit facility. Our capital ~~expenditure~~expenditures ~~outlays are~~ also ~~dependent~~include on costs for maintenance and capacity additions in our existing restaurants as well as information technology and other general corporate capital expenditures.

We anticipate that each new restaurant on average will require a total cash investment of $1.5 million to $2.5 million (net of estimated lease incentives). We expect to spend approximately $0.4 million to $0.5 million per restaurant for cash pre-opening costs. The projected cash investment per restaurant is based on historical averages. No pre-opening costs were recorded during the first quarter of 2018 and we do not anticipate recording material pre-opening costs during the remainder of fiscal 2018.

We currently estimate capital expenditures, net of estimated lease incentives, for the remainder of ~~2017~~2018 to be in the range of approximately $26.01 million to $38.01 million, for a total of $87.0 million to $9.0 million for the year ~~2017~~2018. This is primarily related to ~~the opening of one restaurant prior to the end of 2017 as well as~~ normal maintenance related capital expenditures relating to our existing restaurants. In conjunction with this restaurant opening, we anticipate expensing approximately $0.1 million in pre-opening costs for the remainder of 2017 for a total of approximately $0.5 million for the year 2017.

Current Resources. Our operations have not required significant working capital and, like many restaurant companies, we have been able to operate with negative working capital. Restaurant sales are primarily paid for in cash or by credit card, and restaurant operations do not require significant inventories or receivables. In addition, we receive trade credit for the purchase of food, beverage and supplies, therefore reducing the need for incremental working capital to support growth. We had a net working capital deficit of $85.0 million at April 1, 2018, compared to a net working capital deficit of $88.2 million at December 31, 2017.

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~~working~~On ~~capital~~November 5, ~~deficit~~2014, we entered into the 2014 Credit Agreement with a syndicate of financial institutions and on October 31, 2016, we entered into a First Amendment to the 2014 Credit Agreement. The First Amendment redefined our senior secured credit facility and provided for (i) a $5635.60 million atterm ~~September~~loan facility, maturing in 2019, and (ii) 24a revolving credit facility under which we may borrow up to $30.0 million (including a sublimit cap of up to $10.0 million for letters of credit and up to $10.0 million for swing-line loans), ~~2017~~maturing in 2019. Additionally, ~~compared~~the First Amendment contains negative covenants limiting, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matters customarily restricted in such agreements and customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, defaults under other material debt, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the senior secured credit facility to be in full force and effect, and a ~~net~~change ~~working~~of ~~capital~~control ~~deficit~~of our business. The First Amendment requires us to make fixed quarterly principal payments of $551.50 million atunder ~~December~~the senior secured credit facility. In addition to making fixed quarterly principal payments under our senior secured credit facility, we are required to pay an unused facility fee to the lenders equal to 0.30% to 0.50% 25per annum on the aggregate amount of the unused revolving credit facility, excluding swing-line loans, commencing on October 31, 2016, payable quarterly in arrears.

On ~~November 5~~August 1, ~~2014~~2017, ~~the~~we ~~Company~~ entered into ~~the 2014 Credit Agreement with~~ a ~~syndicate~~Second ~~of financial institutions and on October 31, 2016, the Company entered into the~~ Amendment. The Amendment redefines the Company's senior credit facilities and provides for (i) a $35.0 million term loan facility, maturing in 2019, and (ii) a revolving credit facility under which the Company may borrow up to ~~$30.0 million (including a sublimit cap of up to $10.0 million for letters of credit and up to $10.0 million for swing-line loans), maturing in 2019. On August 1, 2017,~~ the ~~Company~~2014 ~~entered~~Credit ~~into the Second Amendment~~Agreement. The Second Amendment ~~provides~~provided for ~~(a)~~ the amendment of the maturity date of the senior secured credit ~~facilities~~facility from November 5, 2019 to December 1, 2018, ~~(b)~~and a reduction of the amount ~~the~~we ~~Company~~ may borrow pursuant to ~~its~~our revolving credit facility from $30.0 million (including a sublimit cap of up to $10.0 million for letters of credit and up to $10.0 million for swing-line loans) to (i) $20.0 million (including a sublimit cap of up to $4.0 million for letters of credit and up to $10.0 million for swing-line loans) on August 1, 2017, (ii) $15.0 million (including a sublimit cap of up to $4.0 million for letters of credit and up to $10.0 million for swing-line loans) on ~~December~~January 311, ~~2017~~2018, (iii) $15.0 million (including a sublimit cap of up to $3.0 million for letters of credit and up to $10.0 million for swing-line loans) on March 31, 2018 and (iv) $10.0 million (including a sublimit cap of up to $3.0 million for letters of credit and up to $10.0 million for swing-line loans) on ~~June~~July 302, 2018; and ~~(c)~~ an increase to the fixed quarterly principal payments from $1.0 million per quarter to $2.5 million per quarter beginning on on March 3130, 2018. The Second Amendment also modifies the financial tests that the Company is required to meet by lowering the minimum consolidated fixed charge coverage ratio, raising the maximum consolidated lease-adjusted leverage ratio, and lowering the minimum earnings before interest, taxes, depreciation and amortization (as defined in the Amendment). In addition to these financial tests, the Second Amendment places limitations on new restaurant leases until the lease-adjusted leverage ratio meets certain thresholds. Our senior credit ~~facilities~~facility ~~are~~is (i) jointly and severally guaranteed by each of our existing or subsequently acquired or formed subsidiaries, (ii) secured by a first priority lien on substantially all of our subsidiaries’ tangible and intangible personal property and (iii) secured by a pledge of all of the capital stock of our subsidiaries. At September 24, 2017, the Company was in compliance with its applicable financial covenants. Additionally, the Amendment contains negative covenants limiting, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matters customarily restricted in such agreements and customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, defaults under other material debt, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the senior credit facilities to be in full force and effect, and a change of control of our business.

On ~~Borrowings~~February ~~under~~9, ~~the~~2018, ~~senior~~we ~~credit~~entered ~~facilities~~into ~~bear~~a ~~interest~~Third atAmendment ~~the~~to ~~Company’s option of either (i)~~ the ~~Base~~2014 ~~Rate~~Credit ~~(as~~Agreement. ~~such~~The ~~term~~Third isAmendment ~~defined~~provided infor ~~the Amendment~~(a) ~~plus~~ the ~~applicable~~definition ~~margin~~ of ~~1.50%~~“Consolidated EBITDA” to ~~2.00%~~exclude orcertain ~~(ii) at~~litigation asettlement ~~fixed~~payments ~~rate~~in ~~for~~an aamount ~~period~~not ofto ~~one,~~exceed ~~two,~~$1.4 ~~three~~million orin ~~six months equal to~~ the ~~London~~aggregate ~~interbank~~in ~~offered rate, LIBOR, plus~~ the ~~applicable~~fiscal ~~margin~~year ofended ~~2.50%~~on toor ~~3.00%.~~about ~~The~~December ~~applicable~~31, ~~margins~~2018 ~~with~~and ~~respect~~legal tofees ~~our~~and ~~revolving~~expenses ~~credit~~not ~~facility~~constituting ~~vary~~Transaction ~~from~~Costs ~~time~~(as todefined ~~time~~ in ~~accordance~~the ~~with~~Third ~~agreed~~Amendment) ~~upon~~in ~~pricing~~an ~~grids~~amount ~~based~~not onto ~~our~~exceed ~~consolidated total leverage ratio~~$3.5 ~~Swing-line~~million ~~loans~~in ~~under our revolving credit facility bear interest only at~~ the ~~Base~~aggregate ~~Rate~~in ~~plus~~ the ~~applicable~~fiscal ~~margin.~~year ~~Interest~~ended on ~~loans~~or ~~based~~about ~~upon~~December ~~the~~31, ~~Base~~2017, ~~Rate~~(b) ~~are~~prepayments ~~payable on the last day~~ of ~~each~~principal ~~calendar~~and ~~quarter~~interest, in ~~which~~increments ~~such~~of ~~loan is outstanding~~$0.5 ~~Interest~~million, on ~~loans~~amounts ~~based~~outstanding onunder ~~LIBOR~~the iscredit ~~payable~~facility: onfirst ~~the~~to ~~last~~outstanding ~~day~~swingline ofloans, ~~the~~next ~~applicable~~to ~~LIBOR~~outstanding ~~period~~revolving ~~and~~loans, innext ~~the~~to ~~case~~letter of ~~any~~credit ~~LIBOR~~obligations, ~~period~~and ~~greater~~finally ~~than~~to ~~three~~the ~~months~~term ~~in duration~~loan, ~~interest~~if iswe ~~payable~~have ~~quarterly. The~~excess ~~Amendment~~cash ~~requires~~or ~~the~~cash ~~Company~~equivalents toin ~~make~~an ~~fixed~~amount ~~quarterly~~greater ~~principal~~than ~~payments of~~ $13.0 million ~~under~~on ~~the~~an ~~senior~~aggregate ~~credit~~book ~~facilities.~~basis Infor ~~addition~~three toconsecutive ~~making~~business ~~fixed~~days, ~~quarterly~~(c) ~~principal~~we ~~payments~~are ~~under~~required ~~the~~to ~~Company’s~~reconfirm ~~senior~~certain ~~credit~~of ~~facilities,~~our ~~the~~reporting ~~Company~~obligations isto ~~required~~the tolenders, ~~pay~~(d) an ~~unused~~adjustment ~~facility fee~~ to the ~~lenders~~Minimum ~~equal~~Consolidated toEBITDA ~~0.30%~~(as todefined ~~0.50% per~~in ~~annum on~~ the ~~aggregate~~Third ~~amount~~Amendment) offor the ~~unused~~period ~~revolving~~January ~~credit facility~~1, ~~excluding~~2018 ~~swing-line~~through ~~loans~~July 1, ~~commencing~~2018 onto ~~October 31~~$16.0 million, ~~2016~~and for the period July 2, ~~payable~~2018 ~~quarterly~~and inthereafter ~~arrears~~to $19.0 Asmillion, ofand ~~September 24,~~(e) ~~2017,~~deletion weof ~~had~~the anrequirement ~~outstanding~~that ~~principal~~we ~~balance~~maintain ofat ~~approximately~~least $312.0 million onin ~~our~~minimum ~~term~~Liquidity ~~loan~~(as ~~facility~~defined ~~and~~in ~~$12.4~~the ~~million~~Third onAmendment) ~~our~~as ~~revolving~~of ~~credit~~the ~~facility~~end of each week.

WeOn ~~continue~~March to14, ~~operate~~2018, inthe aCompany ~~challenging~~entered ~~environment,~~into ~~and~~a ~~our~~Fourth ~~ability~~Amendment to ~~comply~~the ~~with~~senior ~~our~~secured ~~applicable~~credit ~~financial~~facility. ~~covenants~~The ~~may~~Fourth beAmendment ~~affected~~provided infor ~~the~~(a) ~~future~~revision byof ~~economic,~~the ~~industry~~maximum orconsolidated ~~business~~lease-adjusted ~~conditions~~leverage ~~beyond~~ratio ~~our~~(as ~~control.~~defined ~~Based~~in on the ~~Company’s~~Credit ~~forecasts,~~Agreement) ~~management believes the Company will be able~~ to ~~maintain~~a ~~compliance~~maximum ~~with~~of ~~its~~6.25 ~~applicable~~(b) ~~financial~~deletion ~~covenants~~of ~~for at least~~ the ~~next~~requirement ~~twelve months. However, no assurances can be given~~ that wethe ~~will~~Company ~~achieve~~make ~~these~~principal ~~forecasts.~~payments Wein ~~base~~the ~~our~~first ~~forecasts on historical experience, industry conditions~~ and ~~various~~second ~~other~~quarters ~~assumptions~~of ~~related~~fiscal to2018 ~~comparable restaurant sales, average check, guest counts,~~ and ~~cost~~movement ~~management~~of ~~that~~the wethird ~~believe~~quarter ~~are~~of ~~reasonable.~~fiscal If2018 ~~actual~~principal ~~results~~payment ~~are~~to ~~below~~October ~~our current forecast by a substantial margin~~1, we2018 ~~may~~and ~~not~~(c) bean ~~able~~adjustment to ~~maintain~~the ~~compliance~~Minimum ~~with~~Consolidated ~~our~~EBITDA ~~financial~~(as ~~covenants. If~~defined wein ~~are unable to comply with~~ the ~~required~~Fourth ~~covenants~~Amendment) ~~and~~for ~~are unable to obtain necessary waivers of non-compliance or additional amendments to~~ the ~~2014~~period ~~Credit~~January ~~Agreement~~1, it2018 ~~would~~and ~~have~~thereafter ato ~~material~~$15.0 ~~adverse effect on our business, financial condition and liquidity~~million.

Management believes expected future cash flow from operations as well as available borrowings under our senior credit facilities will be sufficient to meet liquidity needs for at least the next twelve months; however, no assurances can be given that expected future cash flow levels will be generated and all liquidity needs will be met.

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Borrowings under the senior secured credit facility bear interest at the Company’s option of either (i) the Base Rate (as such term is defined in the First Amendment) plus the applicable margin of 1.50% to 2.00% or (ii) at a fixed rate for a period of one, two, three or six months equal to LIBOR, plus the applicable margin of 2.50% to 3.00%. The applicable margins with respect to our revolving credit facility vary from time to time in accordance with agreed upon pricing grids based on our consolidated lease-adjusted leverage ratio. Swing-line loans under our revolving credit facility bear interest only at the Base Rate plus the applicable margin. Interest on loans based upon the Base Rate are payable on the last day of each calendar quarter in which such loan is outstanding. Interest on loans based on LIBOR is payable on the last day of the applicable LIBOR period and, in the case of any LIBOR period greater than three months in duration, interest is payable quarterly.

As of April 1, 2018, we had an outstanding principal balance of approximately $30.0 million on our term loan facility and $12.0 million on our revolving credit facility. At April 1, 2018, the Company was in compliance with its applicable financial covenants.

We continue to operate in a challenging environment, and our ability to comply with our applicable financial covenants may be affected in the future by economic, industry or business conditions beyond our control. Management projected that the expected future cash flow from operations, as well as available borrowings under our senior secured credit facility, were not sufficient to meet liquidity needs for the next twelve months.

In response to these projections, and in light of the maturity date of the the Company’s indebtedness under its senior secured credit facility at December 1, 2018, the Company pursued strategic alternatives, including seeking a refinancing of its outstanding debt, and ultimately entered into an Agreement and Plan of Merger on March 7, 2018, as described in Note 1 to our unaudited financial statements. The consummation of the transactions contemplated by the Agreement and Plan of Merger will result in the repayment in full of the Company’s obligations under its senior secured credit facility prior to maturity as the transactions are anticipated to be consummated in the second quarter of fiscal 2018. The Company is projecting that it will be able to continue to comply with the contractual covenants contained in the senior secured credit facility, as further amended by the Fourth Amendment, until the transactions contemplated by the Agreement and Plan of Merger are consummated.

OFF-BALANCE SHEET ARRANGEMENTS

As part of our on-going business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities referred to as structured finance or variable interest entities (“VIEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of ~~September~~April 241, ~~2017~~2018, we were not involved in any VIE transactions and did not otherwise have any off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES

There have been no material changes to our critical accounting policies from what was previously reported in our ~~2016~~2017 Annual Report on Form 10-K except for adoption of ASC 606 during the first quarter of fiscal 2018 as described in Note 1 to our unaudited financial statements.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are subject to interest rate risk in connection with our long term debt. Our principal interest rate exposure relates to the loans outstanding under our senior credit facilities, which is payable at variable rates.

At ~~September~~April 241, ~~2017~~2018, we had $4342.40 million outstanding under our senior credit facilities. Each one-eighth point change in interest rates on the variable rate portion of debt under our senior credit facilities would result in an approximately $5453,000 annual change in our interest expense.

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Commodity Price Risk

We are exposed to market price fluctuations in some of our food product prices. Given the historical volatility of our food product prices, these fluctuations can materially impact our food and beverage costs. While we have taken steps to qualify multiple suppliers and enter into agreements for some of the commodities used in our restaurant operations, there can be no assurance that future supplies and costs for such commodities will not fluctuate due to weather and other market conditions outside of our control. We currently do not contract for any of our fresh seafood and we are unable to contract for some of our commodities such as certain produce items for periods longer than one week. Consequently, such commodities can be subject to unforeseen supply and cost fluctuations. Dairy costs can also fluctuate due to government regulation. Because we typically set our menu prices in advance of our food product prices, we cannot immediately take into account changing costs of food items. To the extent that we are unable to pass the increased costs on to our guests through price increases, our results of operations would be adversely affected. We do not use financial instruments to hedge our risk to market price fluctuations related to any of our food product prices at this time.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedure

We carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered in this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures, including the accumulation and communication of disclosure to our principal executive officer and principal financial officer as appropriate to allow timely decisions regarding disclosure, are effective to provide reasonable assurance that material information required to be included in our periodic SEC reports is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms.

The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not deteriorate. Because of its inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

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Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – Other Information


Item 1.	Legal Proceedings

See Note 67 to our unaudited consolidated financial statements in Part 1, Item 1 of this report.


Item 1A.	Risk Factors

There have been no material changes from our risk factors as previously reported in our ~~2016~~2017 Annual Report on Form 10-K.


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

None.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Mine Safety Disclosures

Not applicable.


Item 5.	Other Information

None.

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Item 6.	Exhibits

The following exhibits are filed or furnished with this Quarterly Report:

EXHIBIT INDEX

ExhibitNumber		Description
2.1		Agreement and Plan of Merger by and among Bugatti Parent, Inc., Bugatti Merger Sub, Inc. and Bravo Brio Restaurant Group, Inc. Dated as of March 7, 2017 (incorporated by reference from Exhibit 2.1 on Form 8-K filed with the Securities and Exchange Commission on March 8, 2018).
10.1		Third Amendment to the Credit Agreement, dated as of February 9, 2018, by and among Bravo Brio Restaurant Group, Inc., as borrower, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent to the lenders (incorporated by reference from Exhibit 10.1 on Form 8-K filed with the Securities and Exchange Commission on February 12, 2018).
10.2		Fourth Amendment to the Credit Agreement, dated as of March 14, 2018, by and among Bravo Brio Restaurant Group, Inc., as borrower, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent to the lenders (incorporated by reference from Exhibit 10.18 on Form 10-K filed with the Securities and Exchange Commission on March 15, 2018).
11		Computation of Per Share Earnings (included in the Condensed Notes to Unaudited Consolidated Financial Statements contained in this Report).
31(a)*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32(a)*		Certification of Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



*	Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~November~~May 14, ~~2017~~2018

Bravo Brio Restaurant Group, Inc. By: /s/ Brian T. O'Malley Brian T. O'Malley President, Chief Executive Officer and Director (Principal Executive Officer) By: /s/ Diane D. Reed Diane D. Reed Executive Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer)

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