Chuy's Holding
CHUY'S HOLDINGS, INC. (Form: 10-Q, Received: 05/09/2014 16:56:34)
Table of Contents     

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________ 
FORM 10-Q
__________________________________ 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 2014
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 001-35603
__________________________________  
CHUY’S HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
 __________________________________ 
DELAWARE
 
20-5717694
(State of Incorporation
or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
1623 TOOMEY ROAD
AUSTIN, TEXAS
 
78704
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (512) 473-2783
 __________________________________ 
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   þ     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   þ     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):
Large accelerated filer
 
¨
  
Accelerated filer
 
þ
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ¨     No   þ
The number of shares of the registrant’s common stock outstanding at May 2, 2014 was 16,435,687 .


Table of Contents     

Table of Contents
 
 
 


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Table of Contents     

Part I—Financial Information
Item 1.    Financial Statements
Chuy’s Holdings, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
 
 
March 30,
2014
 
December 29,
2013
ASSETS
 
 
 
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
4,806

 
$
5,323

Accounts receivable
624

 
636

Lease incentives receivable
1,000

 
1,933

Inventories
744

 
705

Prepaid expenses and other current assets
2,067

 
1,826

Total current assets
9,241

 
10,423

Property and equipment, net
98,924

 
93,520

Other assets and intangible assets, net
1,308

 
1,250

Tradename
21,900

 
21,900

Goodwill
24,069

 
24,069

Total assets
$
155,442

 
$
151,162

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
CURRENT LIABILITIES
 
 
 
Accounts payable
$
4,290

 
$
4,620

Accrued liabilities
8,469

 
9,903

Deferred lease incentives
1,335

 
1,335

Current deferred tax liability
89

 
89

Total current liabilities
14,183

 
15,947

Deferred tax liability
4,421

 
4,058

Accrued deferred rent
3,842

 
3,502

Deferred lease incentives, less current portion
16,835

 
17,167

Long-term debt
8,000

 
6,000

Total liabilities
47,281

 
46,674

Commitments and contingencies

 

Stockholders’ equity
 
 
 
Common stock, $0.01 par value; 60,000,000 shares authorized; 16,435,687 shares issued and outstanding at March 30, 2014 and 16,385,683 shares issued and outstanding at December 29, 2013
164

 
164

Preferred stock, $0.01 par value; 15,000,000 shares authorized and no shares issued or outstanding at March 30, 2014 and December 29, 2013

 

Paid-in capital
87,299

 
86,258

Retained earnings
20,698

 
18,066

Total stockholders’ equity
108,161

 
104,488

Total liabilities and stockholders’ equity
$
155,442

 
$
151,162





See notes to the Unaudited Condensed Consolidated Financial Statements

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Table of Contents     

Unaudited Condensed Consolidated Income Statements
(In thousands, except share and per share data)
 
 
Thirteen Weeks Ended
 
March 30,
2014
 
March 31,
2013
Revenue
$
55,951

 
$
46,698

Costs and expenses:
 
 
 
Cost of sales
15,528

 
12,557

Labor
18,710

 
14,975

Operating
7,561

 
6,547

Occupancy
3,554

 
2,891

General and administrative
2,923

 
2,795

Secondary offering costs

 
417

Marketing
422

 
352

Restaurant pre-opening
1,155

 
971

Depreciation and amortization
2,316

 
1,968

Total costs and expenses
52,169

 
43,473

Income from operations
3,782

 
3,225

Interest expense
22

 
33

Income before income taxes
3,760

 
3,192

Income tax expense
1,128

 
551

Net income
$
2,632

 
$
2,641

Net income per common share:
 
 
 
Basic
$
0.16

 
$
0.16

Diluted
$
0.16

 
$
0.16

Weighted-average shares outstanding:
 
 
 
Basic
16,397,629

 
16,111,286

Diluted
16,712,418

 
16,577,053

























See notes to the Unaudited Condensed Consolidated Financial Statements

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Table of Contents     

Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
 
Thirteen Weeks Ended
 
March 30,
2014
 
March 31,
2013
Cash flows from operating activities:
 
 
 
Net income
$
2,632

 
$
2,641

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
2,316

 
1,968

Amortization of loan origination costs
11

 
11

Stock-based compensation
202

 
98

Excess tax benefit from stock-based compensation
(537
)
 

(Gain) loss on disposal of property and equipment
(1
)
 
4

Amortization of deferred lease incentives
(332
)
 
(266
)
Deferred income taxes
900

 
(241
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
12

 
(144
)
Inventories
(39
)
 
(21
)
Prepaid expenses and other current assets
(241
)
 
(190
)
Accounts payable
(1,785
)
 
(319
)
Accrued liabilities and deferred rent
(1,094
)
 
(1,502
)
Deferred lease incentives
933

 
463

Net cash provided by operating activities
2,977

 
2,502

Cash flows from investing activities:
 
 
 
Purchase of property and equipment
(6,247
)
 
(6,136
)
Purchase of other assets
(86
)
 
(38
)
Net cash used in investing activities
(6,333
)
 
(6,174
)
Cash flows from financing activities:
 
 
 
Borrowings under revolving line of credit
2,000

 

Excess tax benefit from stock-based compensation
537

 

Proceeds from the exercise of stock options
302

 
913

Net cash provided by financing activities
2,839

 
913

Net decrease in cash and cash equivalents
(517
)
 
(2,759
)
Cash and cash equivalents, beginning of period
5,323

 
5,855

Cash and cash equivalents, end of period
$
4,806

 
$
3,096

 
 
 
 
Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Property and equipment and other assets acquired by accounts payable
$
1,455

 
$

 
 
 
 
Supplemental cash flow disclosures:
 
 
 
Cash paid for interest
$
38

 
$
54

Cash paid for income taxes
$
59

 
$
182










See notes to the Unaudited Condensed Consolidated Financial Statements

5

Table of Contents     

Notes to Unaudited Condensed Consolidated Financial Statements
(Tabular dollar amounts in thousands, except share and per share data)
1 . BASIS OF PRESENTATION
Chuy’s Holdings, Inc. (the “Company” or “Chuy’s”) is in the business of developing and operating Chuy’s restaurants throughout the United States. Chuy’s is a fast-growing, full-service restaurant concept offering a distinct menu of authentic, freshly-prepared Mexican and Tex Mex inspired food. As of March 30, 2014 , the Company operated 51 restaurants in fourteen states.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements and the related notes reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods presented. The financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), except that certain information and notes have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission (the “SEC”). Results for interim periods are not necessarily indicative of the results that may be expected for the full fiscal year. The unaudited condensed consolidated financial statements should be read in conjunction with consolidated financial statements and notes included in the Company’s annual report on Form 10-K for the fiscal year ended December 29, 2013 . The accompanying consolidated balance sheet as of December 29, 2013 , has been derived from our audited consolidated financial statements.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the period. Actual results could differ from those estimates.
Certain prior period amounts were reclassified to conform to the 2014 presentation. These reclassifications had no impact on net income or total stockholders' equity.
The Company operates on a 52- or 53- week fiscal year that ends on the last Sunday of the calendar year. Each quarterly period has 13 weeks, except for a 53-week year when the fourth quarter has 14 weeks. Our 2014 fiscal year will consist of 52 weeks and our 2013 fiscal year consisted of 52 weeks.
On January 30, 2013, a secondary offering of the Company’s common stock was completed by certain of the Company’s existing stockholders. The selling stockholders sold 5,175,000 previously outstanding shares, including 675,000 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares.
On April 17, 2013, a secondary offering of the Company's common stock was completed by certain of the Company's existing stockholders. The selling stockholders sold 3,000,000 previously outstanding shares. In addition, the underwriters exercised their option to purchase an additional 257,113 shares of common stock from the selling stockholders.
The Company did not receive any proceeds from these two offerings. The selling stockholders paid all of the underwriting discounts and commissions associated with the sale of the shares; however, the Company incurred approximately $1.2 million in costs and registration expenses related to the offerings, of which $417,000 was incurred during the thirteen weeks ended March 31, 2013 .
2 . RECENT ACCOUNTING PRONOUNCEMENTS
We reviewed all significant newly-issued accounting pronouncements and concluded that they either are not applicable to our operations or that no material effect is expected on our consolidated financial statements as a result of future adoption.
3 . NET INCOME PER SHARE
The number of shares and net income per share data for all periods presented are based on the historical weighted-average shares of common stock outstanding.
Basic net income per share of the Company's common stock is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period.
Diluted net income per share of the Company's common stock is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential shares of common stock equivalents outstanding during the period using the treasury stock method for dilutive options and deferred shares (such deferred shares granted under the Chuy's Holdings, Inc. 2012 Omnibus Equity Incentive Plan, the "restricted stock units").

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The computation of basic and diluted earnings per share is as follows:
 
Thirteen Weeks Ended
 
March 30,
2014
 
March 31,
2013
BASIC
 
 
 
NUMERATOR:
 
 
 
Net income
$
2,632

 
$
2,641

DENOMINATOR:
 
 
 
Weighted-average common shares outstanding
16,397,629

 
16,111,286

Basic net income per common share
$
0.16

 
$
0.16

DILUTED
 
 
 
NUMERATOR:
 
 
 
Net income
$
2,632

 
$
2,641

DENOMINATOR:
 
 
 
Weighted-average common shares outstanding
16,397,629

 
16,111,286

Dilutive effect of stock options and restricted stock units
314,789

 
465,767

Weighted-average of diluted shares
16,712,418

 
16,577,053

Diluted net income per common share
$
0.16

 
$
0.16

 
4 . STOCK-BASED COMPENSATION
The Company has outstanding awards under the 2006 Plan. The outstanding options vest 20% on each of the first five anniversaries of the date of grant and have a maximum term of 10 years. In connection with the IPO, the Company terminated the 2006 Plan, and no further awards will be granted under the 2006 Plan. The termination of the 2006 Plan did not affect awards outstanding under the 2006 Plan at the time of its termination and the terms of the 2006 Plan continue to govern those outstanding awards.
In connection with the IPO, the Company adopted the Chuy's Holdings, Inc. 2012 Omnibus Equity Incentive Plan (the “2012 Plan”) which allows the Company’s Board of Directors to grant stock options, restricted stock, restricted stock units and other equity-based awards to directors, officers, and key employees of the Company. The 2012 Plan provides for granting of options to purchase shares of common stock at an exercise price not less than the fair value of the stock on the date of grant. The outstanding options vest 20% on each of the first five anniversaries of the date of grant and have a maximum term of 10 years. The outstanding restricted stock units vest 25% on each of the first four anniversaries of the date of grant. As of March 30, 2014 , a total of 989,691 shares of common stock are reserved and remain available for issuance under the 2012 Plan.
Stock-based compensation cost recognized in the accompanying consolidated income statements was $202,000 and $98,000 for the thirteen weeks ended March 30, 2014 and March 31, 2013 , respectively.
Stock Options
A summary of stock-based compensation activity related to stock options for the thirteen weeks ended March 30, 2014 are as follows:
 
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
(Years)
 
Aggregate
Intrinsic
Value
Outstanding and expected to vest at December 29, 2013
729,874

 
$
11.45

 
 
 
 
Granted
4,944

 
40.68

 
 
 
 
Exercised
(50,004
)
 
6.05

 
 
 
 
Forfeited
(653
)
 
13.54

 
 
 
 
Outstanding and expected to vest at March 30, 2014
684,161

 
$
12.05

 
5.56
 
$
19,843

Exercisable at March 30, 2014
463,252

 
$
7.00

 
4.30
 
$
15,807

The aggregate intrinsic value in the table above is obtained by subtracting the weighted average exercise price from the estimated fair value of the underlying common stock as of March 30, 2014 and multiplying this result by the related number of options outstanding and exercisable at March 30, 2014 . The estimated fair value of the common stock as of March 30, 2014 used in the

7


above calculation was $41.06 per share, the closing price of the Company’s common stock on March 28, 2014, the last trading day of the first quarter. The total intrinsic value of options exercised during the thirteen weeks ended March 30, 2014  was  $1.7 million .
The weighted-average grant date fair value of options granted during the thirteen weeks ended March 30, 2014 was $14.19  per share, as estimated at the date of grant using the Black-Scholes pricing model with the following weighted-average assumptions:  
 
 
Dividend yield
0
%
Expected volatility
37
%
Risk-free rate of return
1.53
%
Expected life (in years)
5

The assumptions above represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. The expected term of options granted is based on a representative peer group with similar employee groups and expected behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury constant maturities rate in effect at the time of grant. The Company utilized a weighted rate for expected volatility based on a representative peer group within the industry.
There was approximately $1.8 million of total unrecognized compensation costs related to options granted under the 2006 Plan and the 2012 Plan as of March 30, 2014 . These costs will be recognized ratably through the year 2019 . In the event of a change of control, approximately $320,000 of the Company’s unrecognized compensation costs would be immediately recognized.
Restricted Stock Units
A summary of stock-based compensation activity related to restricted stock units for the thirteen weeks ended March 30, 2014 are as follows:
 
Shares
 
Weighted
Average
Fair Value
Outstanding and expected to vest at December 29, 2013

 
$

Granted
84,421

 
40.68

Outstanding and expected to vest at March 30, 2014
84,421

 
$
40.68

The fair value of the restricted stock units is the quoted market value of our common stock on the date of grant. As of March 30, 2014 , total unrecognized stock-based compensation expense related to non-vested restricted stock units was approximately $3.4 million , which is expected to be recognized ratably over the next four years.
5 . LONG-TERM DEBT
Revolving Credit Facility
On November 30, 2012, the Company entered into a secured $25 million revolving credit facility (the “Revolving Credit Facility”) with Wells Fargo Bank, National Association, which replaced the Company's previous credit facility. As of March 30, 2014 , the interest rate on our Revolving Credit Facility was 1.91% . The Revolving Credit Facility requires the Company to comply with a fixed charge coverage ratio, a lease adjusted leverage ratio and certain non-financial covenants.
The obligations under the Company’s long-term debt are secured by a first priority lien on substantially all of the Company’s assets.

8


6 . ACCRUED LIABILITIES
The major classes of accrued liabilities at March 30, 2014 and  December 29, 2013 are summarized as follows:
 
March 30,
2014
 
December 29,
2013
Accrued compensation and related benefits
$
3,348

 
$
4,122

Other accruals
1,813

 
2,184

Sales and use tax
1,955

 
1,493

Deferred gift card revenue
778

 
1,095

Property tax
575

 
1,009

Total accrued liabilities
$
8,469

 
$
9,903

7 . INCOME TAXES
The effective income tax rate for the thirteen weeks ended March 30, 2014 was 30.0% compared to an effective income tax rate of 17.3% for the thirteen weeks ended March 31, 2013 . The increase in the effective income tax rate from the prior year was primarily attributable to the favorable impact of a one time adjustment made for incremental employment tax credits for the prior year as well as the previous open tax years, which resulted in a $556,000 net favorable impact in net income during the thirteen weeks ended March 31, 2013 . The decrease in the effective income tax rate for the thirteen week period ended March 31, 2013 related to this adjustment was partially offset by the unfavorable impact of the non-tax deductible secondary offering costs incurred during the thirteen week period ended March 31, 2013 . The impact on the effective income tax rate for these items were treated discretely in the thirteen week period ended March 31, 2013 as required by the FASB's Accounting Standards Codification.
Since the Company has net operating loss carry forwards, the net favorable tax benefit mentioned above primarily increased the general business credits deferred tax asset.
8 . SUBSEQUENT EVENTS
Subsequent to March 30, 2014 , the Company opened one new restaurant, in Indiana, for a total of 52 restaurants, in fourteen states.


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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes. Unless otherwise specified, or the context otherwise requires, the references in this report to “our Company”, “the Company”, “us”, “we” and “our” refer to Chuy’s Holdings, Inc. together with its subsidiaries.
The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 29, 2013 (our "Annual Report").
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, except as may be required by law.
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 Annual Report and the unaudited condensed consolidated financial statements and the accompanying notes thereto included herein.
Overview
We are a fast-growing, full-service restaurant concept offering a distinct menu of authentic, freshly-prepared Mexican and Tex Mex inspired food. We were founded in Austin, Texas in 1982 by Mike Young and John Zapp, and as of March 30, 2014 , we operated 51 Chuy’s restaurants across fourteen states.
We are committed to providing value to our customers through offering generous portions of made-from-scratch, flavorful Mexican and Tex Mex inspired dishes. We also offer a full-service bar in all of our restaurants providing our customers a wide variety of beverage offerings. We believe the Chuy’s culture is one of our most valuable assets, and we are committed to preserving and continually investing in our culture and our customers’ restaurant experience.
Our restaurants have a common décor, but we believe each location is unique in format, offering an “unchained” look and feel, as expressed by our motto “If you’ve seen one Chuy’s, you’ve seen one Chuy’s!” We believe our restaurants have an upbeat, funky, eclectic, somewhat irreverent atmosphere while still maintaining a family-friendly environment.
Our Growth Strategies and Outlook
Our growth is based primarily on the following strategies:
Pursue new restaurant development;
Deliver consistent same store sales through providing high-quality food and service; and
Leverage our infrastructure.
As of March 30, 2014 , we opened three restaurants year-to-date and opened one additional restaurant subsequent to March 30, 2014 . We have an established presence in Texas, the Southeast and the Midwest, with restaurants in multiple large markets in these regions. Our growth plan over the next five years focuses on developing additional locations in our existing core markets, new core markets and in smaller markets surrounding each of those core markets.
Performance Indicators
We use the following performance indicators in evaluating our performance:
Number of Restaurant Openings . Number of restaurant openings reflects the number of restaurants opened during a particular fiscal period. For restaurant openings we incur pre-opening costs, which are defined below, before the restaurant opens. Typically new restaurants open with an initial start-up period of higher than normalized sales volumes, which decrease to a steady level approximately six to twelve months after opening. However, operating costs during this initial six to twelve month period are also higher than normal, resulting in restaurant operating margins that are generally lower during the start-up period of operation and increase to a steady level approximately nine to twelve months after opening.
Comparable Restaurant Sales . We consider a restaurant to be comparable in the first full quarter following the 18th month of operations. Changes in comparable restaurant sales reflect changes in sales for the comparable group of restaurants over a specified period of time. Changes in comparable sales reflect changes in customer count trends as well as changes in average check. Our comparable restaurant base consisted of 35 and 27 restaurants at March 30, 2014 and March 31, 2013 , respectively.

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Table of Contents     

Average Check . Average check is calculated by dividing revenue by total entrées sold for a given time period. Average check reflects menu price increases as well as changes in menu mix. Our management team uses this indicator to analyze trends in customers’ preferences, effectiveness of menu changes and price increases and per customer expenditures.
Average Weekly Customers . Average weekly customers is measured by the number of entrées sold per week. Our management team uses this metric to measure changes in customer traffic.
Average Unit Volume . Average unit volume consists of the average sales of our comparable restaurants over a certain period of time. This measure is calculated by dividing total comparable restaurant sales within a period of time by the total number of comparable restaurants within the relevant period. This indicator assists management in measuring changes in customer traffic, pricing and development of our brand.
Operating Margin . Operating margin represents income from operations as a percentage of our revenue. By monitoring and controlling our operating margins, we can gauge the overall profitability of our company.
The following table presents operating data for the periods indicated:
 
Thirteen Weeks Ended
 
March 30,
2014
 
March 31,
2013
Total restaurants (at end of period)
51

 
41

Total comparable restaurants (at end of period)
35

 
27

Average sales per comparable restaurant (in thousands)
$
1,210

 
$
1,207

Change in comparable restaurant sales
4.2
%
 
2.3
%
Average check
$
13.62

 
$
13.34

Our Fiscal Year
We operate on a 52- or 53-week fiscal year that ends on the last Sunday of the calendar year. Each quarterly period has 13 weeks, except for a 53-week year when the fourth quarter has 14 weeks. Our 2013 fiscal year consisted of 52 weeks and our 2014 fiscal year will consist of 52 weeks.
Key Financial Definitions
Revenue . Revenue primarily consists of food and beverage sales and also includes sales of our t-shirts, sweatshirts and hats. Revenue is presented net of discounts associated with each sale. Revenue in a given period is directly influenced by the number of operating weeks in such period, the number of restaurants we operate and comparable restaurant sales growth.
Cost of Sales . Cost of sales consists primarily of food, beverage and merchandise related costs. The components of cost of sales are variable in nature, change with sales volume and are subject to increases or decreases based on fluctuations in commodity costs.
Labor Costs . Labor costs include restaurant management salaries, front- and back-of-house hourly wages and restaurant-level manager bonus expense, employee benefits and payroll taxes.
Operating Costs . Operating costs consist primarily of restaurant-related operating expenses, such as supplies, utilities, repairs and maintenance, travel cost, insurance, credit card fees, recruiting, delivery service and security. These costs generally increase with sales volume but decline as a percentage of revenue.
Occupancy Costs . Occupancy costs include rent charges, both fixed and variable, as well as common area maintenance costs, property insurance and taxes, the amortization of tenant allowances and the adjustment to straight-line rent. These costs are generally fixed but a portion may vary with an increase in sales when the lease contains percentage rent.
General and Administrative Expenses . General and administrative expenses include costs associated with corporate and administrative functions that support our operations, including senior and supervisory management and staff compensation (including stock-based compensation) and benefits, travel, legal and professional fees, information systems, corporate office rent and other related corporate costs.
Marketing . Marketing costs include costs associated with our local restaurant marketing programs, community service and sponsorship activities, our menus and other promotional activities.
Restaurant Pre-opening Costs . Restaurant pre-opening costs consist of costs incurred before opening a restaurant, including manager salaries, relocation costs, supplies, recruiting expenses, initial new market public relations costs, pre-opening activities, employee payroll and related training costs for new employees. Restaurant pre-opening costs also include rent recorded during the period between date of possession and the restaurant opening date.

11

Table of Contents     

Depreciation and Amortization . Depreciation and amortization principally include depreciation on fixed assets, including equipment and leasehold improvements, and amortization of certain intangible assets for restaurants.
Interest Expense . Interest expense consists primarily of interest on our outstanding indebtedness and the amortization of our debt issuance costs reduced by capitalized interest.
Results of Operations
Potential Fluctuations in Quarterly Results and Seasonality
Our quarterly operating results may fluctuate significantly as a result of a variety of factors, including the timing of new restaurant openings and related expenses, profitability of new restaurants, weather, increases or decreases in comparable restaurant sales, general economic conditions, consumer confidence in the economy, changes in consumer preferences, competitive factors, changes in food costs, changes in labor costs and rising gas prices. In the past, we have experienced significant variability in restaurant pre-opening costs from quarter to quarter primarily due to the timing of restaurant openings. We typically incur restaurant pre-opening costs in the five months preceding a new restaurant opening. In addition, our experience to date has been that labor and direct operating costs associated with a newly opened restaurant during the first several months of operation are often materially greater than what will be expected after that time, both in aggregate dollars and as a percentage of restaurant sales. Accordingly, the number and timing of new restaurant openings in any quarter has had, and is expected to continue to have, a significant impact on quarterly restaurant pre-opening costs, labor and direct operating costs.
Our business also is subject to fluctuations due to seasonality and adverse weather. The spring and summer months have traditionally had higher sales volume than other periods of the year. Holidays, severe winter weather, hurricanes, thunderstorms and similar conditions may impact restaurant unit volumes in some of the markets where we operate and may have a greater impact should they occur during our higher volume months. As a result of these and other factors, our financial results for any given quarter may not be indicative of the results that may be achieved for a full fiscal year.
Thirteen Weeks Ended March 30, 2014 Compared to Thirteen Weeks Ended March 31, 2013
The following table presents, for the periods indicated, the consolidated statement of operations (in thousands):
 
Thirteen Weeks Ended
 
March 30,
2014
 
% of
Revenue
 
March 31,
2013
 
% of
Revenue
 
Change
 
%
Change
Revenue
$
55,951

 
100.0
%
 
$
46,698

 
100.0
%
 
$
9,253

 
19.8
 %
Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
15,528

 
27.8
%
 
12,557

 
26.9
%
 
2,971

 
23.7
 %
Labor
18,710

 
33.4
%
 
14,975

 
32.1
%
 
3,735

 
24.9
 %
Operating
7,561

 
13.5
%
 
6,547

 
14.0
%
 
1,014

 
15.5
 %
Occupancy
3,554

 
6.4
%
 
2,891

 
6.2
%
 
663

 
22.9
 %
General and administrative
2,923

 
5.2
%
 
2,795

 
6.0
%
 
128

 
4.6
 %
Secondary offering costs

 
%
 
417

 
0.9
%
 
(417
)
 
(100.0
)%
Marketing
422

 
0.8
%
 
352

 
0.8
%
 
70

 
19.9
 %
Restaurant pre-opening
1,155

 
2.1
%
 
971

 
2.0
%
 
184

 
18.9
 %
Depreciation and amortization
2,316

 
4.1
%
 
1,968

 
4.2
%
 
348

 
17.7
 %
Total costs and expenses
52,169

 
93.3
%
 
43,473

 
93.1
%
 
8,696

 
20.0
 %
Income from operations
3,782

 
6.7
%
 
3,225

 
6.9
%
 
557

 
17.3
 %
Interest expense
22

 
%
 
33

 
0.1
%
 
(11
)
 
(33.3
)%
Income before income taxes
3,760

 
6.7
%
 
3,192

 
6.8
%
 
568

 
17.8
 %
Income tax expense
1,128

 
2.0
%
 
551

 
1.2
%
 
577

 
104.7
 %
Net income
$
2,632

 
4.7
%
 
$
2,641

 
5.6
%
 
$
(9
)
 
(0.3
)%
Revenue. Revenue increased $9.3 million , or 19.8% , to $56.0 million for the thirteen weeks ended March 30, 2014 , as compared to $46.7 million for the thirteen weeks ended March 31, 2013 . This increase was primarily driven by $8.6 million in incremental revenue from an additional 124 operating weeks provided by 12 new restaurants opened during and subsequent to the thirteen weeks ended March 31, 2013 and increased revenue at our comparable restaurants. These increases were partially offset by a decrease in revenue related to non-comparable restaurants that are not included in the incremental revenue discussed above. Our non-comparable restaurant revenue decreased from higher than normal revenue during the thirteen weeks ended March 30, 2014 as a result of the 'honeymoon' period that follows a restaurant's initial opening.

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Comparable restaurant sales increased 4.2% for the thirteen week period ended March 30, 2014 compared to the same period in 2013 . The increase in comparable restaurant sales was driven primarily by a 1.9% increase in average check and a 2.3% increase in average weekly customers. Our revenue mix attributed to bar sales was 18.4% during the thirteen weeks ended March 30, 2014 compared to 18.5% during the same period in 2013.
Cost of Sales. Cost of sales as a percentage of revenue increased to 27.8% during the thirteen weeks ended March 30, 2014 , from 26.9% during the same period in 2013 , primarily as a result of higher beef, dairy and produce costs.
Labor Costs. Labor costs as a percentage of revenue increased to 33.4% during the thirteen weeks ended March 30, 2014 , from 32.1% during the same period in 2013 , primarily as a result of lower volumes on fixed labor and longer learning curves related to hourly labor at some of our newer locations, as well as inefficiencies associated with the bad weather we experienced in the first quarter across the South and Southeast, partially offset by improved labor efficiency in our comparable restaurants.
Operating Costs. Operating costs as a percentage of revenue decreased to 13.5% during the thirteen weeks ended March 30, 2014 from 14.0% during the same period in 2013 . The decrease in the current period was primarily caused by lower liquor taxes as a result of opening more locations outside of Texas, which charges a higher liquor tax than other jurisdictions, and a lower liquor tax in Texas, which went into effect on January 1, 2014, partially offset by higher utility and insurance costs as a percentage of revenue.
Occupancy Costs. Occupancy costs as a percentage of revenue increased to 6.4% during the thirteen weeks ended March 30, 2014 from 6.2% during the same period in 2013 , primarily as a result of higher rent expense at certain new restaurants as we continue to move into new markets.
General and Administrative Expenses. General and administrative expenses increased $0.1 million , or 4.6% , to $2.9 million for the thirteen weeks ended March 30, 2014 , as compared to $2.8 million during the same period in 2013 . This increase was primarily driven by an increase in stock-based compensation and an increase in salary expense associated with additional employees as we continue to strengthen our infrastructure for growth, partially offset by lower performance-based bonuses during the thirteen weeks ended March 30, 2014 compared to the same period in 2013.
Secondary Offering Costs. During the thirteen week period ended March 31, 2013 we incurred $417,000 of offering expenses related to two secondary offerings of the Company's common stock that were completed in January 2013 and April 2013. All of the common stock sold in the offerings was sold by certain existing stockholders and as a result, the Company did not receive any proceeds from these offerings.
Marketing Costs. As a percentage of revenue, marketing costs remained flat at approximately 0.8% .
Restaurant Pre-opening Costs . Restaurant pre-opening costs increased by $184,000 , or 18.9% , to $1.2 million for the thirteen weeks ended March 30, 2014 , as compared to $1.0 million for the thirteen weeks ended March 31, 2013 . This increase is primarily due to opening three restaurants during the thirteen week period ended March 30, 2014 as compared to two restaurants during the same period in 2013, and due to the timing of the opening dates and stage of development for the restaurants in development during the periods.
Depreciation and Amortization. Depreciation and amortization costs increased $0.3 million to $2.3 million during the thirteen weeks ended March 30, 2014 from $2.0 million during the same period in 2013 , primarily as the result of an increase in equipment and leasehold improvement costs associated with our new restaurants. This increase was partially offset by a change in the estimated economic life of our signage and certain equipment items in order to better reflect the estimated period such assets will remain in service.
Interest Expense. Interest expense as a percentage of revenue remained flat at approximately 0.1%. Our average interest rate on outstanding borrowings during the thirteen weeks ended March 30, 2014 was 1.91% compared to 1.96% during the thirteen weeks ended March 31, 2013 .
Income Tax Expense. For the thirteen weeks ended March 30, 2014 our effective tax rate increased to 30.0% from 17.3% during the same period in 2013. The increase in the effective income tax rate as compared to the same period in 2013 was primarily attributable to the favorable impact of a one time adjustment made for incremental employment tax credits for the prior year as well as the previous open tax years, which resulted in a $556,000 net favorable impact in net income during the thirteen weeks ended March 31, 2013. The decrease in the effective income tax rate for 2013 was partially offset by the unfavorable impact of the non-tax deductible secondary offering costs incurred during the thirteen weeks ended March 31, 2013. The impact on the effective income tax rate for these items were treated discretely in the thirteen week period ended March 31, 2013 as required by the Financial Accounting Standards Board's Accounting Standards Codification. Additionally, due to the Company's net operating loss carry forwards the net favorable tax benefit related to employment tax credits was added to the general business credits deferred tax asset and will not be utilized to reduce taxes until the net operating loss carry forwards are completely utilized.
Net Income. As a result of the foregoing, net income remained constant at $2.6 million for the thirteen weeks ended March 30, 2014 compared to the same period in 2013 .

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Liquidity
Our principal sources of cash are net cash provided by operating activities, which includes tenant improvement allowances from our landlords, and borrowings under our $25 million credit facility (the "Revolving Credit Facility"), which we entered into on November 30, 2012. Our need for capital resources is driven by our restaurant expansion plans, ongoing maintenance of our restaurants, investment in our corporate and information technology infrastructure, obligations under our operating leases and interest payments on our debt. Based on our current growth plans, we believe our expected cash flows from operations, expected tenant improvement allowances and available borrowings under our Revolving Credit Facility will be sufficient to finance our planned capital expenditures and other operating activities for the next twelve months.
Consistent with many other restaurant and retail chain store operations, we use operating lease arrangements for our restaurants. We believe that these operating lease arrangements provide appropriate leverage of our capital structure in a financially efficient manner. We have entered into operating leases with certain related parties with respect to six of our restaurants and our corporate headquarters as described on Amendment No. 2 to our Annual Report under the heading “Certain Relationships and Related Transactions, and Director Independence”, which was filed on form 10-K/A with the Securities and Exchange Commission on April 28, 2014.
Our liquidity may be adversely affected by a number of factors, including a decrease in customer traffic or average check per customer due to changes in economic conditions.
Cash Flows for Thirteen Weeks Ended March 30, 2014 and March 31, 2013
The following table summarizes the statement of cash flows for the thirteen weeks ended March 30, 2014 and March 31, 2013 (in thousands):  
 
Thirteen Weeks Ended
 
March 30,
2014
 
March 31,
2013
Net cash provided by operating activities
$
2,977

 
$
2,502

Net cash used in investing activities
(6,333
)
 
(6,174
)
Net cash provided by financing activities
2,839

 
913

Net increase (decrease) in cash and cash equivalents
(517
)
 
(2,759
)
Cash and cash equivalents at beginning of year
5,323

 
5,855

Cash and cash equivalents at end of period
$
4,806

 
$
3,096

Operating Activities. Net cash provided by operating activities increased $0.5 million to $3.0 million for the thirteen weeks ended March 30, 2014 , from $2.5 million during the same period in 2013 . Our business is almost exclusively a cash business. Almost all of our receipts come in the form of cash and cash equivalents and a large majority of our expenditures are paid within a 30 day period. The increase in net cash provided by operating activities during the thirteen weeks ended March 30, 2014 compared to the same period in 2013 was primarily due to an increase in deferred lease incentives received during the current quarter as a result of timing differences in our construction schedule and an increase in deferred income taxes. These increases were partially offset by the excess tax benefit from stock-based compensation in 2014 and a decrease in accounts payable due to timing of payments.
Investing Activities. Net cash used in investing activities increased $0.1 million to $6.3 million for the thirteen weeks ended March 30, 2014 , from $6.2 million for the thirteen weeks ended 2013 . This increase was minimal and was the the result of the timing of our construction schedule and the related construction payments associated with the construction of our three new restaurants that opened during the thirteen weeks ended March 30, 2014 , as well as expenditures related to four additional unopened restaurants currently under construction as compared to two new restaurants opened and four additional restaurants under construction during the same period in 2013.
Financing Activities. Net cash provided by financing activities increased $1.9 million to $2.8 million for the thirteen weeks ended March 30, 2014 from $0.9 million during the same period in 2013 . This increase was primarily the result of $2.0 million in additional borrowing under our Revolving Credit facility during the thirteen weeks ended March 30, 2014 , compared to no additional borrowings during the same period in 2013 and $537,000 in excess tax benefits from stock based compensation in the current quarter. In addition, our proceeds from the exercise of stock options decreased by $611,000 to $302,000 during the thirteen weeks ended March 30, 2014 from $913,000 during the same period in 2013 .
As of March 30, 2014 , we had no financing transactions, arrangements or other relationships with any unconsolidated affiliates or related parties. Additionally, we had no financing arrangements involving synthetic leases or trading activities involving commodity contracts.

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Table of Contents     

Capital Resources
Long-Term Capital Requirements
Our capital requirements are primarily dependent upon the pace of our growth plan and resulting new restaurants. Our growth plan is dependent upon many factors, including economic conditions, real estate markets, restaurant locations and the nature of our lease agreements. Our capital expenditure outlays are also dependent on costs for maintenance and capacity additions in our existing restaurants as well as information technology and other general corporate capital expenditures.
The capital resources required for a new restaurant depend on whether the restaurant is a ground-up construction or a conversion. We estimate that each ground-up restaurant will require a total cash investment of $1.7 million to $2.5 million (net of estimated tenant improvement allowances of between zero and $0.8 million). We estimate that each conversion will require a total cash investment of $2.0 million to $2.2 million. In addition to the cost of the conversion or ground-up buildout, we expect to spend approximately $350,000 to $400,000 per restaurant for restaurant pre-opening costs. We target a cash-on-cash return beginning in the third operating year of 40.0%, and a sales to investment ratio of 2:1 for our new restaurants.
For 2014 , we currently estimate capital expenditure outlays will range between $27.5 million and $30.0 million, net of agreed upon tenant improvement allowances and excluding approximately $3.8 million to $4.3 million of restaurant pre-opening costs for new restaurants that are not capitalized. Of the restaurant pre-opening costs that are not capitalized, we spent $1.2 million during the thirteen weeks ended March 30, 2014 . These capital expenditure estimates are based on average new restaurant capital expenditures of $2.4 million in 2014 (net of estimated tenant improvement allowances) each for the opening of 10 to 11 new restaurants as well as $3.0 million to maintain and remodel our existing restaurants and for general corporate purposes.
Based on our growth plans, we believe our combined expected cash flows from operations, available borrowings under our Revolving Credit Facility and expected tenant improvement allowances will be sufficient to finance our planned capital expenditures and other operating activities in fiscal 2014 .
Short-Term Capital Requirements
Our operations have not required significant working capital and, like many restaurant companies, we 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, beverages and supplies, therefore reducing the need for incremental working capital to support growth. We had a net working capital deficit of $4.9 million at March 30, 2014 , compared to a net working capital deficit of $5.5 million at December 29, 2013 .
Revolving Credit Facility
On November 30, 2012, the Company entered into a $25.0 million Revolving Credit Facility with Wells Fargo Bank, National Association, which replaced the company's previous credit facility. As of March 30, 2014 , we had borrowings under our Revolving Credit Facility of $8.0 million , and the amount available for future borrowings was $17.0 million . The Revolving Credit Facility (a) will mature on November 30, 2017, unless the Company exercises its option to voluntarily reduce all of the commitment before the maturity date, (b) accrues commitment fees on the daily unused balance of the facility at an applicable margin, which varies based on the Company's consolidated total lease adjusted leverage ratio and (c) provides for letters of credit in amounts totaling the lesser of $5 million or the available borrowings under our Revolving Credit Facility.
Borrowings under the Revolving Credit Facility bear interest at a variable rate based upon the Company’s election, of (i) the base rate (which is the highest of the prime rate, federal funds rate plus 0.50% or one month LIBOR) plus 1%, or (ii) LIBOR, plus, in either case, an applicable margin based on the Company’s consolidated total lease adjusted leverage ratio. Interest is due at the end of each quarter if the Company selects to pay interest based on the base rate and at the end of each LIBOR period if it selects to pay interest based on LIBOR. The Company has elected a variable rate of interest based on LIBOR. As of March 30, 2014 , this interest rate was 1.91% . The Revolving Credit Facility requires the Company to comply with a fixed charge coverage ratio, a lease adjusted leverage ratio and certain non-financial covenants. As of March 30, 2014 , the Company was in compliance with all covenants under the Revolving Credit Facility. Based on our capital expenditure plans, contractual commitments and cash flow from operations, we expect to be able to comply with these covenants in the near and long term.
As a result of entering into the Revolving Credit Facility, the Company paid loan origination costs of approximately $225,000 related to the Revolving Credit Facility, and will amortize these loan origination costs over the term of the credit agreement.
The obligations under the Company’s long-term debt are secured by a first priority lien on substantially all of the Company’s assets.
Contractual Obligations
There have been no material changes to our contractual obligations from what was previously reported in our Annual Report.

15

Table of Contents     

Off-Balance Sheet Arrangements
As of March 30, 2014 , we had no off balance sheet arrangements or transactions.
Significant Accounting Policies
There have been no material changes to the significant accounting policies from what was previously reported in our Annual Report.
Recent Accounting Pronouncements
We reviewed all significant newly-issued accounting pronouncements and concluded that they either are not applicable to our operations or that no material effect is expected on our consolidated financial statements as a result of future adoption.
Cautionary Statement Concerning Forward-Looking Statements
Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the following:
the success of our existing and new restaurants;
our ability to identify appropriate sites and develop and expand our operations;
changes in economic conditions;
damage to our reputation or lack of acceptance of our brand in existing or new markets;
economic and other trends and developments, including adverse weather conditions, in the local or regional areas in which our restaurants are located;
the impact of negative economic factors, including the availability of credit, on our landlords and surrounding tenants;
changes in food availability and costs;
labor shortages and increases in our labor costs, including as a result of changes in government regulation such as the adoption of the new federal healthcare legislation;
increased competition in the restaurant industry and the segments in which we compete;
the impact of legislation and regulations regarding nutritional information, and new information or attitudes regarding diet and health or adverse opinions about the health of consuming our menu offerings;
the impact of federal, state and local beer, liquor and food service regulations;
the impact of litigation;
the success of our marketing programs;
the impact of new restaurant openings, including on the effect on our existing restaurants of opening new restaurants in the same markets;
the loss of key members of our management team and the transition to new officers;
strain on our infrastructure and resources caused by our growth;
the inadequacy of our insurance coverage and fluctuating insurance requirements and costs;
the impact of our indebtedness on our ability to invest in the ongoing needs of our business;
our ability to obtain debt or other financing on favorable terms or at all;
the impact of a potential requirement to record asset impairment charges in the future;
the impact of security breaches of confidential customer information in connection with our electronic processing of credit and debit card transactions;
inadequate protection of our intellectual property;
the failure of our information technology system or the breach of our network security;
a major natural or man-made disaster;
our increased costs and obligations as a result of being a public company;

16

Table of Contents     

the impact of our election to take advantage of certain exemptions applicable to emerging growth companies;
the failure of our internal control over financial reporting;
the impact of federal, state and local tax rules;
our founders may continue to exert significant influence over us and may have interests that conflict with our stockholders;
volatility in the price of our common stock;
the impact of future sales of our common stock in the public market, and the exercise of stock options and any additional capital raised by us through the sale of our common stock;
the impact of a downgrade of our shares by securities analysts or industry analysts, the publication of negative research or reports, or lack of publication of reports about our business;
the effect of anti-takeover provisions in our charter documents and under Delaware law;
the effect of our decision to not pay dividends for the foreseeable future;
the effect of changes in accounting principles applicable to us; and
our ability to raise capital in the future.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report and in our Annual Report. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Any forward-looking statements you read in this report reflect our views as of the date of this report with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to provide revisions to any forward looking statements should circumstances change, except as may be required by law.
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 indebtedness. Our principal interest rate exposure relates to loans outstanding under our Revolving Credit Facility. All outstanding indebtedness under our Revolving Credit Facility bears interest at a variable rate based on LIBOR. Each quarter point change in interest rates on the variable portion of indebtedness under our Revolving Credit Facility would result in a change of $20,000 to our interest expense on an annual basis.
Commodity Price Risk
We are exposed to market price fluctuation in food product prices. Given the historical volatility of certain of our food product prices, including produce, chicken, beef and cheese, these fluctuations can materially impact our food and beverage costs. While we have taken steps to enter into long term 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.
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 customers 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 in our food product prices at this time.
Item 4.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
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 Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
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

17

Table of Contents     

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.
Changes in Internal Control over Financial Reporting
There have been no changes in our 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 our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

18

Table of Contents     

Part II—Other Information
Item 1.    Legal Proceedings
Occasionally, we are a party to various legal actions arising in the ordinary course of our business including claims resulting from “slip and fall” accidents, employment related claims and claims from customers or employees alleging illness, injury or other food quality, health or operational concerns. None of these types of litigation, most of which are covered by insurance, has had a material effect on us in the past. As of the date of this report, we are not a party to any material pending legal proceedings and are not aware of any claims that could have a materially adverse effect on our financial position, results of operations or cash flows.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in our Annual Report and our other recent filings with the Securities and Exchange Commission.
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.    Defaults Upon Senior Securities
None.
Item 4.    Mine Safety Disclosures
None.
Item 5.    Other Information
None.
Item 6.    Exhibits
See Exhibit Index following the signature page of this report.


19

Table of Contents     

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: May 9, 2014
CHUY’S HOLDINGS, INC.
 
 
By:
/s/ Steven J. Hislop
 
Name:
Steven J. Hislop
 
Title:
President and Chief Executive Officer
 
 
(Principal Executive Officer)
 
 
 
 
By:
/s/ Jon W. Howie
 
Name:
Jon W. Howie
 
Title:
Vice President and Chief Financial Officer
 
 
(Principal Financial Officer)

20

Table of Contents     

Exhibit Index
 
Exhibit No.
Description of Exhibit
 
 
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
 
 
101.INS
XBRL Instance Document
 
 
101.SCH
XBRL Taxonomy Extension Schema
 
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
 
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
 
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document




21
Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Steven J. Hislop, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Chuy’s Holdings, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2014
 
/s/ Steven J. Hislop
Steven J. Hislop
President and Chief Executive Officer
(Principal Executive Officer)



Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Jon W. Howie, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Chuy’s Holdings, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2014
 
/s/ Jon W. Howie
Jon W. Howie
Vice President and Chief Financial Officer
(Principal Financial Officer)



Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Chuy’s Holdings, Inc., a Delaware Corporation (the “Company”), for the period ending March 30, 2014 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Steven J. Hislop, President and Chief Executive Officer of the Company, and Jon W. Howie, Vice President and Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods indicated.



Date: May 9, 2014
/s/ Steven J. Hislop
Steven J. Hislop
President and Chief Executive Officer
(Principal Executive Officer)

/s/ Jon W. Howie
Jon W. Howie
Vice President and Chief Financial Officer
(Principal Financial Officer)