Bravo Brio Restaurant Group, Inc. (Form: 10-Q, Received: 08/02/2013 16:05:58)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

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 June 30, 2013

¨	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, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company,” in Rule 12b-2 of the Exchange 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 August 1, 2013, the latest practicable date, 19,606,058 of the registrant’s common shares, no par value per share, were outstanding.

Table of Contents:


Part I – Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets			3
Consolidated Statements of Operations			4
Consolidated Statements of Stockholders’ 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			11
Item 3. Quantitative and Qualitative Disclosures About Market Risk			20
Item 4. Controls and Procedures			20
Part II – Other Information			21
Item 1. Legal Proceedings			21
Item 1A. Risk Factors			21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			21
Item 3. Defaults Upon Senior Securities			21
Item 4. Mine Safety Disclosures			21
Item 5. Other Information			21
Item 6. Exhibits			21
Signatures			23

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PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

BRAVO BRIO RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2013 AND DECEMBER 30, 2012

(Dollars in thousands)


	June 30, 2013			December 30, 2012
	(Unaudited)			December 30, 2012
Assets
Current assets
Cash and cash equivalents	$	5,861		$	13,717
Accounts receivable		5,878			7,728
Tenant improvement allowance receivable		834			1,638
Inventories		2,723			3,023
Deferred income taxes, net		1,898			2,304
Prepaid expenses and other current assets		4,880			2,547

Total current assets		22,074			30,957
Property and equipment — net		178,908			175,969
Deferred income taxes — net		49,807			52,068
Other assets — net		4,102			4,344

Total assets	$	254,891		$	263,338

Liabilities and stockholders’ equity
Current liabilities
Trade and construction payables	$	11,192		$	10,695
Accrued expenses		22,568			24,724
Current portion of long-term debt		2,082			2,704
Deferred lease incentives		6,187			6,430
Deferred gift card revenue		8,819			12,210

Total current liabilities		50,848			56,763

Deferred lease incentives		60,300			64,761
Long-term debt		14,132			20,382
Other long-term liabilities		21,102			21,149
Commitments and contingencies (Note 6)
Stockholders’ equity
Common shares, no par value per share—authorized, 100,000,000 shares; issued 19,895,854 at June 30, 2013 and 19,820,428 shares issued at December 30, 2012		196,802			195,512
Preferred shares, no par value, per share—authorized, 5,000,000 shares; issued and outstanding, 0 shares at June 30, 2013 and December 30, 2012		—			—
Treasury shares, 290,525 shares at June 30, 2013; and 224,172 shares at December 30, 2012		(3,952	)		(2,927	)
Retained deficit		(84,341	)		(92,302	)

Total stockholders’ equity		108,509			100,283

Total liabilities and stockholders’ equity	$	254,891		$	263,338

See condensed notes to unaudited consolidated financial statements.

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BRAVO BRIO RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THIRTEEN AND TWENTY-SIX WEEKS ENDED JUNE 30, 2013 AND JUNE 24, 2012 (UNAUDITED)

(in thousands except per share data)


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 30,		June 24,		June 30,		June 24,
	2013		2012		2013		2012
Revenues	$	105,622	$	102,807	$	208,685	$	201,184

Costs and expenses
Cost of sales		27,051		26,482		54,015		52,119
Labor		36,882		35,267		73,464		69,422
Operating		16,588		15,764		32,708		30,663
Occupancy		7,171		6,728		14,006		13,218
General and administrative expenses		5,836		5,688		11,695		11,385
Restaurant preopening costs		558		811		1,259		2,173
Depreciation and amortization		4,962		4,663		9,831		9,076

Total costs and expenses		99,048		95,403		196,978		188,056

Income from operations		6,574		7,404		11,707		13,128
Interest expense, net		284		332		601		686

Income before income taxes		6,290		7,072		11,106		12,442
Income tax expense		1,748		1,952		3,145		3,563

Net income	$	4,542	$	5,120	$	7,961	$	8,879

Net income per basic share	$	0.23	$	0.26	$	0.41	$	0.45

Net income per diluted share	$	0.22	$	0.25	$	0.39	$	0.43

Weighted average shares outstanding-basic		19,591		19,555		19,598		19,528

Weighted average shares outstanding-diluted		20,489		20,618		20,482		20,600

See condensed notes to unaudited consolidated financial statements.

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BRAVO BRIO RESTAURANT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE TWENTY-SIX WEEKS ENDED JUNE 30, 2013 (UNAUDITED)

(Dollars in thousands)


	Common Shares						Retained			Treasury Stock						Stockholders’
	Shares			Amount			Deficit			Shares			Amount			Equity
Balance — December 30, 2012		19,820,428		$	195,512		$	(92,302	)		(224,172	)	$	(2,927	)	$	100,283

Net income		—			—			7,961			—			—			7,961
Share-based compensation costs		—			1,395			—			—			—			1,395
Proceeds from the exercise of stock options		48,489			70			—			—			—			70
Issuance of shares of restricted stock		37,125			—			—			—			—			—
Excess tax deficiency from share based payments, net		—			(21	)		—			—			—			(21	)
Shares withheld from restricted stock vesting for minimum tax withholdings		(10,188	)		(154	)		—			—			—			(154	)
Purchase of treasury shares		—			—			—			(66,353	)		(1,025	)		(1,025	)

Balance — June 30, 2013		19,895,854		$	196,802		$	(84,341	)		(290,525	)	$	(3,952	)	$	108,509

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 TWENTY-SIX WEEKS ENDED JUNE 30, 2013 AND JUNE 24, 2012

(UNAUDITED)

(Dollars in thousands)


	Twenty-Six Weeks Ended
	June, 30			June 24,
	2013			2012
Cash flows from operating activities:
Net income	$	7,961		$	8,879
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,018			9,260
Loss on disposals of property and equipment		1,280			129
Amortization of deferred lease incentives		(7,288	)		(2,940	)
Share-based compensation costs		1,395			1,105
Deferred income taxes		2,667			2,062
Changes in assets and liabilities:
Accounts and tenant improvement allowance receivables		2,654			53
Inventories		300			138
Prepaid expenses and other current assets		(2,333	)		57
Trade and construction payables		611			(1,980	)
Deferred lease incentives		2,584			4,508
Deferred gift card revenue		(3,391	)		(3,267	)
Other accrued expenses		(2,223	)		1,583
Other — net		(7	)		876

Net cash provided by operating activities		14,228			20,463

Cash flows from investing activities:
Purchase of property and equipment		(14,171	)		(18,493	)
Proceeds from the sale of assets		22			—

Net cash used in investing activities		(14,149	)		(18,493	)

Cash flows from financing activities:
Payments on long-term debt		(6,872	)		(8,809	)
Proceeds from the exercise of stock options		70			131
Excess tax benefit related to share based payments		46			189
Shares withheld from restricted stock vesting for minimum tax withholdings		(154	)		—
Repurchase of treasury shares		(1,025	)		—

Net cash used in financing activities		(7,935	)		(8,489	)

Net decrease in cash and cash equivalents		(7,856	)		(6,519	)
Cash and cash equivalents — beginning of period		13,717			10,093

Cash and cash equivalents — end of period	$	5,861		$	3,574

Supplemental disclosures of cash flow information:
Interest paid		514			545
Income taxes paid		958			831
Property financed by trade and construction payables		1,610			1,615

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 June 30, 2013, Bravo Brio Restaurant Group, Inc. (the “Company”) operated 103 restaurants under the trade names “Bravo! Cucina Italiana ^® ,” “Brio Tuscan Grille ^TM ,” and “Bon Vie ^® .” Of the 103 restaurants the Company operates, there are 46 Bravo! Cucina Italiana ^® restaurants, 56 Brio Tuscan Grille ^TM restaurants and one Bon Vie ^® restaurant in operation in 31 states throughout the United States of America. The Company owns all of its restaurants with the exception of one BRIO restaurant, which it operates under a management agreement and for which operation it receives a management fee.

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. Operating results for the thirteen weeks ended June 30, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2013.

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 30, 2012 filed with the Securities and Exchange Commission (the “SEC”) on March 5, 2013 (the “2012 Annual Report on Form 10-K”).

2.	NET 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. At June 30, 2013 and June 24, 2012, all outstanding stock options and restricted stock were included in the dilutive calculation.

(in thousands, except per share data)


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 30,		June 24,		June 30,		June 24,
	2013		2012		2013		2012
Net income	$	4,542	$	5,120	$	7,961	$	8,879

Weighted average common shares outstanding		19,591		19,555		19,598		19,528
Effect of dilutive securities:
Stock options		824		998		847		1,018
Restricted stock		74		65		37		54

Weighted average common and potentially issuable common shares outstanding—diluted		20,489		20,618		20,482		20,600

Basic net income per common share	$	0.23	$	0.26	$	0.41	$	0.45

Diluted net income per common share	$	0.22	$	0.25	$	0.39	$	0.43

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BRAVO BRIO RESTAURANT GROUP, INC. AND SUBSIDIARIES

Condensed Notes to Unaudited Consolidated Financial Statements – (Continued)

3.	LONG-TERM DEBT

Long-term debt at June 30, 2013 and December 30, 2012 consisted of the following (in thousands):


	June 30, 2013			December 30, 2012
Total term loan	$	16,214		$	23,086
Less current maturities		(2,082	)		(2,704	)

Long-term debt	$	14,132		$	20,382

On October 26, 2010, the Company, in connection with its Initial Public Offering (“IPO”), entered into a credit agreement with a syndicate of financial institutions with respect to its senior credit facilities. The senior credit facilities provide for (i) a $45.0 million term loan facility, maturing in 2015, and (ii) a revolving credit facility under which the Company may borrow up to $40.0 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 2015.

Under the credit agreement, the Company is allowed to incur additional incremental term loans and/or increases in the revolving credit facility of up to $20.0 million if no event of default exists and certain other requirements are satisfied. Borrowings under the senior credit facilities bear interest at the Company’s option of either (i) the Alternate Base Rate (as such term is defined in the credit agreement) plus the applicable margin of 1.75% to 2.25% 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 2.75% to 3.25%. In addition to paying any outstanding principal amount under the Company’s senior credit facilities, the Company is required to pay an unused facility fee to the lenders equal to 0.50% to 0.75% per annum on the aggregate amount of the unused revolving credit facility, excluding swing-line loans, commencing on October 26, 2010, payable quarterly in arrears. Borrowings under the Company’s senior credit facilities are collateralized by a first priority interest in substantially all assets of the Company and its subsidiaries.

On October 9, 2012, the Company entered into an amendment to its credit agreement. The amendment eliminated dollar restrictions in paying dividends, distributions to shareholders, or repurchasing the Company’s common shares subject to the defined leverage ratio.

The credit agreement provides for a bank guarantee 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 June 30, 2013, the maximum exposure under these standby letters of credit was $2.6 million.

Pursuant to the credit agreement, the Company is required to meet certain financial covenants including leverage ratios, fixed charge ratios, capital expenditures as well as other customary affirmative and negative covenants. At June 30, 2013, the Company was in compliance with its applicable financial covenants.

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 IPO, 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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2006 Plan

Stock option activity for the twenty-six weeks ended June 30, 2013 is summarized as follows:


	Number of Shares			Weighted Average Exercise Price
Outstanding at December 30, 2012		992,192		$	1.45
Exercised		(48,489	)	$	1.45
Granted		—			—
Forfeited		—			—

Outstanding at June 30, 2013		943,703		$	1.45

Exercisable at June 30, 2013		943,703		$	1.45

At June 30, 2013, the weighted-average remaining contractual term of options outstanding was approximately 3.4 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 June 30, 2013 was $15.4 million.

Stock Incentive Plan

Restricted stock activity for the twenty-six weeks ended June 30, 2013 is summarized as follows:


				Weighted-
	Number of Shares			Average Grant Date Fair Value
Outstanding at December 30, 2012		345,312		$	18.19
Granted		141,400		$	14.71
Vested		(37,125	)	$	19.76
Forfeited		(7,599	)	$	17.39

Outstanding at June 30, 2013		441,988		$	16.96

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. On February 28, 2013, 141,400 shares of restricted stock were granted to employees and directors of the Company pursuant to the Stock Incentive Plan. The average of the high and low price of the Company’s shares on February 27, 2013, the date immediately preceding the date of grant in which stock markets were open, was $14.71. In the first two quarters of 2013, stock compensation costs related to shares of restricted stock were approximately $1.4 million. As of June 30, 2013, total unrecognized stock-based compensation expense related to non-vested shares of restricted stock was approximately $6.0 million, which is expected to be recognized over a weighted average period of approximately 2.4 years taking into account potential forfeitures. These shares of restricted stock will vest, subject to certain exceptions, annually over a four-year period.

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5.	INCOME TAXES

The Company’s consolidated balance sheets at June 30, 2013 and December 30, 2012 include a net deferred tax asset of $51.7 million and $54.4 million, respectively. The Company performs analyses to evaluate whether the deferred tax assets will be realized. Such analyses assumes that the Company will continue to be a going concern and that it is more likely than not that the deferred tax assets will be realized through the generation of future taxable income.

The Company is currently under examination by the Internal Revenue Service for the fiscal year ended December 26, 2010. The Company does not believe that any adjustment as a result of the examination would be material to the financial statements.

6.	COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims, possible legal actions, and other matters arising out of the normal course of business. While it is not possible to predict the outcome of these issues, management is of the opinion that adequate provision for potential losses has been made in the accompanying consolidated financial statements and that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

On May 24, 2012, the Company was named as a defendant in a class action lawsuit alleging certain violations of the Fair Labor Standards Act as well as certain Iowa wage and hours laws. Since that time the Company has answered the complaint and worked with the plaintiff to address the potential violations. While the Company believes that it has meritorious defenses to these allegations, the Company determined that working towards a settlement in this particular case was in its best interest. On May 31, 2013, the parties signed a negotiated settlement agreement, subject to final approval by the court. Based on the current status of the case, the Company does not believe that there will be a material impact to the financial statements as a result of any potential future payments.

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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. 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 2012 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 2012 Annual Report on Form 10-K and the unaudited consolidated financial statements and the related condensed notes thereto included herein.

Overview

We are a leading 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 business is highly sensitive to changes in guest traffic. 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 to this decrease in guest spending, 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. Additionally, 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.

Results of Operations

Thirteen Weeks Ended June 30, 2013 Compared to the Thirteen Weeks Ended June 24, 2012

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

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	Thirteen Weeks Ended
	June 30, 2013		% of Revenues			June 24, 2012		% of Revenues			Change			% Change
	(dollars in thousands)
Revenues	$	105,622		100	%	$	102,807		100	%	$	2,815			2.7	%
Cost and expenses:
Cost of sales		27,051		25.6	%		26,482		25.8	%		569			2.1	%
Labor		36,882		34.9	%		35,267		34.3	%		1,615			4.6	%
Operating		16,588		15.7	%		15,764		15.3	%		824			5.2	%
Occupancy		7,171		6.8	%		6,728		6.5	%		443			6.6	%
General and administrative expenses		5,836		5.5	%		5,688		5.5	%		148			2.6	%
Restaurant preopening costs		558		0.5	%		811		0.8	%		(253	)		(31.2	)%
Depreciation and amortization		4,962		4.7	%		4,663		4.5	%		299			6.4	%

Total costs and expenses		99,048		93.8	%		95,403		92.8	%		3,645			3.8	%

Income from operations		6,574		6.2	%		7,404		7.2	%		(830	)		(11.2	)%
Net interest expense		284		0.3	%		332		0.3	%		(48	)		(14.5	)%

Income before income taxes		6,290		6.0	%		7,072		6.9	%		(782	)		(11.1	)%
Income tax expense		1,748		1.7	%		1,952		1.9	%		(204	)		(10.5	)%

Net income	$	4,542		4.3	%	$	5,120		5.0	%	$	(578	)		(11.3	)%

Certain percentage amounts may not sum due to rounding.

Revenues. Revenues increased $2.8 million, or 2.7%, to $105.6 million for the thirteen weeks ended June 30, 2013, as compared to $102.8 million for the thirteen weeks ended June 24, 2012. The increase of $2.8 million was primarily due to a net additional 71 operating weeks provided by six company owned restaurants opened in the last thirty-nine weeks of 2012, and three new restaurants opened in the first two quarters of 2013, less the operating weeks of three restaurant closures in 2013, two in the first quarter and one in the second quarter. Partially offsetting the effect of the net increase in operating weeks was a decrease in comparable restaurant revenues of 3.0% or $2.8 million, which was driven by a 2.1% decrease in guest counts that decreased comparable revenues by $1.9 million, and a decrease of 0.9% in average check. We consider a restaurant to be part of the comparable revenue base in the first full quarter following the eighteenth month of operations. Additionally, during the second quarter of 2012, we opened one BRIO that we do not own but which we operate pursuant to a management agreement under which we receive a management fee. Other than our receipt of this management fee, the operation of this restaurant has no impact on our financial statements.

For our BRAVO! brand, restaurant revenues decreased $0.5 million, or 1.2%, to $41.1 million for the thirteen weeks ended June 30, 2013 as compared to $41.6 million for the thirteen weeks ended June 24, 2012. Comparable revenues for the BRAVO! brand restaurants decreased 1.6%, or $0.7 million, to $38.9 million for the thirteen weeks ended June 30, 2013 as compared to $39.6 million for the thirteen weeks ended June 24, 2012. This decrease was 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 revenue base increased $0.2 million to $2.2 million for the thirteen weeks ended June 30, 2013. At June 30, 2013, there were 44 BRAVO! restaurants included in the comparable revenue base and two BRAVO! restaurants not included in the comparable revenue base.

For our BRIO brand, restaurant revenues increased $3.2 million, or 5.3%, to $64.4 million for the thirteen weeks ended June 30, 2013 as compared to $61.2 million for the thirteen weeks ended June 24, 2012. Comparable revenues for the BRIO brand restaurants decreased 4.0%, or $2.1 million, to $51.4 million for the thirteen weeks ended June 30, 2013 as compared to $53.5 million for the thirteen weeks ended June 24, 2012. This decrease was due to a decrease in guest counts as well as in average check. Revenues for BRIO brand restaurants not included in the comparable revenue base increased $5.3 million to $13.0 million for the thirteen weeks ended June 30, 2013. At June 30, 2013, there were 42 BRIO restaurants included in the comparable revenue base and 14 BRIO restaurants not included in the comparable revenue base.

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Cost of Sales. Cost of sales increased approximately $0.6 million, or 2.1%, to $27.1 million for the thirteen weeks ended June 30, 2013, as compared to $26.5 million for the thirteen weeks ended June 24, 2012. As a percentage of revenues, cost of sales decreased to 25.6% for the thirteen weeks ended June 30, 2013, from 25.8% for the thirteen weeks ended June 24, 2012. The decrease in cost of sales, as a percentage of revenues, was primarily the result of a favorable change in our menu mix as well as a menu price increase, which was partially offset by higher commodity costs for our poultry, seafood and grocery products in 2013 as compared to 2012. As a percentage of revenues, food costs decreased 0.1% to 21.0% but increased in total dollars by $0.5 million. Beverage costs decreased 0.1% as a percentage of revenues to 4.6% but increased in total dollars by $0.1 million. The increase in these costs in total dollars was related to the growth in restaurants in 2013 due to six company owned restaurants opened in the last three quarters of 2012 and three restaurants opened in 2013.

Labor Costs. Labor costs increased $1.6 million, or 4.6%, to $36.9 million for the thirteen weeks ended June 30, 2013, as compared to $35.3 million for the thirteen weeks ended June 24, 2012. As a percentage of revenues, labor costs increased to 34.9% for the thirteen weeks ended June 30, 2013, from 34.3% for the thirteen weeks ended June 24, 2012. These increases were primarily due to the deleveraging resulting from the decrease in our comparable revenues as well as labor inefficiencies associated with the six company owned restaurants opened in the last three quarters of 2012 and three restaurants opened in 2013.

Operating Costs. Operating costs increased $0.8 million, or 5.2%, to $16.6 million for the thirteen weeks ended June 30, 2013, as compared to $15.8 million for the thirteen weeks ended June 24, 2012. This increase was primarily due to a net additional 71 operating weeks in 2013 as compared to 2012 resulting from the six company owned restaurants opened in the last three quarters of 2012 and three restaurants opened in 2013, less the operating weeks of three restaurant closures in 2013, two in the first quarter and one in the second quarter. As a percentage of revenues, operating costs increased to 15.7% for the thirteen weeks ended June 30, 2013, compared to 15.3% for the thirteen weeks ended June 24, 2012. The increase as a percentage of revenues was primarily related to higher advertising costs, repair and maintenance costs and janitorial services as well as the deleveraging resulting from the decrease in comparable sales in the second quarter of 2013 as compared to the same period in the prior year.

Occupancy Costs. Occupancy costs increased approximately $0.5 million, or 6.6%, to $7.2 million for the thirteen weeks ended June 30, 2013, as compared to $6.7 million for the thirteen weeks ended June 24, 2012. The increase was due to the six company owned restaurants opened in the last three quarters of 2012 and three restaurants opened in 2013. As a percentage of revenues, occupancy costs increased to 6.8% for the thirteen weeks ended June 30, 2013 compared to 6.5% for the thirteen weeks ended June 24, 2012 due to the deleveraging resulting from the decrease in comparable sales in the second quarter of 2013 as compared to the same period in the prior year.

General and Administrative. General and administrative expenses increased by $0.1 million, or 2.6%, to $5.8 million for the thirteen weeks ended June 30, 2013, as compared to $5.7 million for the thirteen weeks ended June 24, 2012. The increase in expenses was attributable to higher stock compensation costs due to a stock grant in 2013 as well as a slight increase in professional fees. As a percentage of revenues, general and administrative expenses remained flat at 5.5% for the thirteen weeks ended June 30, 2013 and June 24, 2012.

Restaurant Pre-opening Costs. Pre-opening costs decreased by approximately $0.2 million, to $0.6 million for the thirteen weeks ended June 30, 2013, as compared to $0.8 million for the thirteen weeks ended June 24, 2012. 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 June 30, 2013, we opened one restaurant and had five additional restaurants under construction. During the thirteen weeks ended June 24, 2012, we opened one restaurant and had four additional restaurants under construction.

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Depreciation and Amortization. Depreciation and amortization expenses increased $0.3 million, to $5.0 million for the thirteen weeks ended June 30, 2013 compared to $4.7 million for the thirteen weeks ended June 24, 2012. As a percentage of revenues, depreciation and amortization expenses increased to 4.7% for the thirteen weeks ended June 30, 2013 as compared to 4.5% for the thirteen weeks ended June 24, 2012. The increase, as a percentage of revenues, was due to the deleveraging resulting from the decrease in comparable sales during the quarter, while the increase in dollars was due to the growth in the number of our restaurants.

Net Interest Expense. Net interest expense slightly decreased to $0.3 million for the thirteen weeks ended June 30, 2013. This decrease was due to lower average outstanding debt during the thirteen weeks ended June 30, 2013 compared to the same period in the prior year.

Income Taxes. Income tax expense was $1.7 million, or 27.8% of income before income taxes, for the thirteen weeks ended June 30, 2013 as compared to $2.0 million, or 27.6% of income before income taxes, for the thirteen weeks ended June 24, 2012. The decrease in the tax expense as a percentage of income before income taxes was due to increased general business credits.

Twenty-Six Weeks Ended June 30, 2013 Compared to the Twenty-Six Weeks Ended June 24, 2012

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


	Twenty-Six Weeks Ended
	June 30, 2013		% of Revenues			June 24, 2012		% of Revenues			Change			% Change
	(dollars in thousands)
Revenues	$	208,685		100	%	$	201,184		100	%	$	7,501			3.7	%
Cost and expenses:
Cost of sales		54,015		25.9	%		52,119		25.9	%		1,896			3.6	%
Labor		73,464		35.2	%		69,422		34.5	%		4,042			5.8	%
Operating		32,708		15.7	%		30,663		15.2	%		2,045			6.7	%
Occupancy		14,006		6.7	%		13,218		6.6	%		788			6.0	%
General and administrative expenses		11,695		5.6	%		11,385		5.7	%		310			2.7	%
Restaurant preopening costs		1,259		0.6	%		2,173		1.1	%		(914	)		(42.1	)%
Depreciation and amortization		9,831		4.7	%		9,076		4.5	%		755			8.3	%

Total costs and expenses		196,978		94.4	%		188,056		93.5	%		8,922			4.7	%

Income from operations		11,707		5.6	%		13,128		6.5	%		(1,421	)		(10.8	)%
Net interest expense		601		0.3	%		686		0.3	%		(85	)		(12.4	)%

Income before income taxes		11,106		5.3	%		12,442		6.2	%		(1,336	)		(10.7	)%
Income tax expense		3,145		1.5	%		3,563		1.8	%		(418	)		(11.7	)%

Net income	$	7,961		3.8	%	$	8,879		4.4	%	$	(918	)		(10.3	)%

Certain percentage amounts may not sum due to rounding.

Revenues. Revenues increased $7.5 million, or 3.7%, to $208.7 million for the twenty-six weeks ended June 30, 2013, as compared to $201.2 million for the twenty-six weeks ended June 24, 2012. The increase of $7.5 million was primarily due to a net additional 183 operating weeks provided by nine company owned restaurants opened in 2012 and three restaurants opened in 2013, less the operating weeks of three restaurant closures in 2013, two in the first quarter and one in the second quarter. Partially offsetting the effect of the net increase in operating weeks was a decrease in comparable restaurant revenues of 2.7% that decreased revenues by $5.0 million, which was driven by a 2.7% decrease in guest counts. Average check for the first twenty-six weeks of 2013 was flat as compared to the same period in the prior year. Our comparable restaurant revenues for 2013 were negatively impacted due to the shift in our operating calendar as a result of the fifty-third week in fiscal 2012. We consider a restaurant to be part of the comparable revenue base in the first full quarter following the eighteenth month of operations. Additionally, during the second quarter of 2012, we opened one BRIO that we do not own but which we operate pursuant to a management agreement under which we receive a management fee. Other than our receipt of this management fee, the operation of this restaurant has no impact on our financial statements.

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For our BRAVO! brand, restaurant revenues decreased $0.6 million, or 0.7%, to $81.3 million for the twenty-six weeks ended June 30, 2013 as compared to $81.9 million for the twenty-six weeks ended June 24, 2012. Comparable revenues for the BRAVO! brand restaurants decreased 1.6%, or $1.2 million, to $77.2 million for the twenty-six weeks ended June 30, 2013 as compared to $78.4 million for the twenty-six weeks ended June 24, 2012. This decrease was 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 revenue base increased $0.6 million to $4.1 million for the twenty-six weeks ended June 30, 2013. At June 30, 2013, there were 44 BRAVO! restaurants included in the comparable revenue base and two BRAVO! restaurants not included in the comparable revenue base.

For our BRIO brand, restaurant revenues increased $8.0 million, or 6.7%, to $127.2 million for the twenty-six weeks ended June 30, 2013 as compared to $119.2 million for the twenty-six weeks ended June 24, 2012. Comparable revenues for the BRIO brand restaurants decreased 3.6%, or $3.7 million, to $101.7 million for the twenty-six weeks ended June 30, 2013 as compared to $105.4 million for the twenty-six weeks ended June 24, 2012. This decrease was due to a decrease in both guest counts and average check during the first twenty-six weeks of 2013. Revenues for BRIO brand restaurants not included in the comparable revenue base increased $11.7 million to $25.5 million for the twenty-six weeks ended June 30, 2013. At June 30, 2013, there were 42 BRIO restaurants included in the comparable revenue base and 14 BRIO restaurants not included in the comparable revenue base.

Cost of Sales. Cost of sales increased approximately $1.9 million, or 3.6%, to $54.0 million for the twenty-six weeks ended June 30, 2013, as compared to $52.1 million for the twenty-six weeks ended June 24, 2012. As a percentage of revenues, cost of sales remained flat at 25.9% for the twenty-six weeks ended June 30, 2013 and June 24, 2012. The increase in commodity costs in 2013 over 2012 was offset by a price increase over the same period. As a percentage of revenues, food costs remained flat at 21.2% but increased in total dollars by $1.6 million. Beverage costs remained flat as a percentage of revenues at 4.7% but increased in total dollars by $0.3 million. The increase in these costs in total dollars was related to growth in the number of our restaurants in 2013 due to the nine company owned restaurants opened in 2012 and the three restaurants opened in the twenty-six weeks ended June 30, 2013.

Labor Costs. Labor costs increased approximately $4.1 million, or 5.8%, to $73.5 million for the twenty-six weeks ended June 30, 2013, as compared to $69.4 million for the twenty-six weeks ended June 24, 2012. As a percentage of revenues, labor costs increased to 35.2% for the twenty-six weeks ended June 30, 2013, from 34.5% for the twenty-six weeks ended June 24, 2012. These increases were primarily due to the deleveraging resulting from the decrease in our comparable revenues as well as labor inefficiencies associated with the nine company owned restaurants opened in 2012 and three new restaurants opened in 2013.

Operating Costs. Operating costs increased $2.0 million, or 6.7%, to $32.7 million for the twenty-six weeks ended June 30, 2013, as compared to $30.7 million for the twenty-six weeks ended June 24, 2012. This increase was mainly due to a net additional 183 operating weeks in 2013 as compared to 2012 resulting from the nine company owned restaurants opened in 2012 and three restaurants opened in the first twenty-six weeks of 2013, less the operating weeks of three restaurant closures in 2013, two in the first quarter and one in the second quarter. As a percentage of revenues, operating costs increased to 15.7% for the twenty-six weeks ended June 30, 2013, compared to 15.2% for the twenty-six weeks ended June 24, 2012. The increase as a percentage of revenues was primarily related to higher repairs and maintenance, advertising costs and janitorial services, as well as the deleveraging from the decrease in comparable sales in the first twenty-six weeks of 2013 as compared to the same period in the prior year.

Occupancy Costs. Occupancy costs increased $0.8 million, or 6.0%, to $14.0 million for the twenty-six weeks ended June 30, 2013, as compared to $13.2 million for the twenty-six weeks ended June 24, 2012. The increase was due to nine company owned restaurants opened in 2012 and three new restaurants opened in the first twenty-six weeks of 2013. As a percentage of revenues, occupancy costs increased to 6.7% for the twenty-six weeks ended June 30, 2013 as compared to 6.6% for the twenty-six weeks ended June 24, 2012.

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General and Administrative. General and administrative expenses increased by $0.3 million, or 2.7%, to $11.7 million for the twenty-six weeks ended June 30, 2013, as compared to $11.4 million for the twenty-six weeks ended June 24, 2012. The increase in expenses was attributable to higher stock compensation costs due to stock grants in 2012 and 2013 as compared to the prior period. As a percentage of revenues, general and administrative expenses decreased to 5.6% for the twenty-six weeks ended June 30, 2013, from 5.7% for the twenty-six weeks ended June 24, 2012.

Restaurant Pre-opening Costs. Pre-opening costs decreased by approximately $0.9 million, to $1.3 million for the twenty-six weeks ended June 30, 2013, as compared to $2.2 million for the twenty-six weeks ended June 24, 2012. 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 twenty-six weeks of 2013, we opened three restaurants and had five additional restaurants under construction. In the first twenty-six weeks of 2012, we opened four restaurants and had four additional restaurants under construction.

Depreciation and Amortization. Depreciation and amortization expenses increased $0.7 million, to $9.8 million for the twenty-six weeks ended June 30, 2013 compared to $9.1 million for the twenty-six weeks ended June 24, 2012. As a percentage of revenues, depreciation and amortization expenses increased to 4.7% for the twenty-six weeks ended June 30, 2013 as compared to 4.5% for the twenty-six weeks ended June 24, 2012. The increase, as a percentage of revenues, was due to the deleveraging resulting from the decrease in comparable sales during the first two quarter of 2013, while the increase in dollars was due to the growth in the number of our restaurants.

Net Interest Expense. Net interest expense decreased $0.1 million to $0.6 million for the twenty-six weeks ended June 30, 2013 as compared to $0.7 million for the twenty-six weeks ended June 24, 2012. This decrease was due to lower average outstanding debt during the first twenty-six weeks of 2013 compared to the same period in the prior year.

Income Taxes. Income tax expense was $3.1 million, or 28.3% of income before income taxes, for the twenty-six weeks ended June 30, 2013 as compared to $3.6 million, or 28.6% of income before income taxes, for the twenty-six weeks ended June 24, 2012. The decrease in the tax expense as a percentage of income before income taxes was due to increased general business credits.

Liquidity

Our principal sources of cash have been net cash provided by operating activities and borrowings under our senior credit facilities. As of June 30, 2013, we had approximately $5.9 million in cash and cash equivalents and approximately $37.4 million of availability under our senior credit facilities (after giving effect to $2.6 million of outstanding letters of credit at June 30, 2013). Our need for capital resources is driven by our restaurant expansion plans, on-going maintenance of our restaurants, investment in our corporate infrastructure and information technology infrastructures. Based on our current real estate development plans, we believe our combined expected cash flows from operations, available borrowings under our senior credit facilities and expected landlord lease incentives will be sufficient to finance our planned capital expenditures and other operating activities in fiscal 2013.

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 will impact our capacity to borrow money under our senior credit facilities. However, restaurant real estate operating leases are expressly excluded from the restrictions under our senior credit facilities 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 2012 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 twenty-six weeks ended June 30, 2013 and June 24, 2012 (in thousands):


	Twenty-Six Weeks Ended,
	June 30,			June 24,
	2013			2012
Net cash provided by operating activities	$	14,228		$	20,463
Net cash used in investing activities		(14,149	)		(18,493	)
Net cash used in financing activities		(7,935	)		(8,489	)

Net decrease in cash and cash equivalents		(7,856	)		(6,519	)
Cash and cash equivalents at beginning of period		13,717			10,093

Cash and cash equivalents at end of period	$	5,861		$	3,574

Operating Activities. Net cash provided by operating activities was $14.2 million for the twenty-six weeks ended June 30, 2013, compared to net cash provided by operations of $20.5 million for the twenty-six weeks ended June 24, 2012. The decrease in net cash provided by operating activities in the first twenty-six weeks of 2013 compared to the same period in 2012 was due to an increase in cash expenditures in excess of the increase in cash receipts. This was primarily due to the timing of rent payments at quarter end in 2013 as compared to 2012 and the repayment of tenant allowances. Cash receipts from operations for the first twenty-six weeks of 2013 and 2012, were $205.5 million and $197.9 million, respectively. Cash expenditures from operations during the first twenty-six weeks of 2013 and 2012 were $194.2 million and $180.4 million, respectively.

Investing Activities. Net cash used in investing activities was $14.1 million for the twenty-six weeks ended June 30, 2013, compared to $18.5 million for the twenty-six weeks ended June 24, 2012. We invest cash to purchase property and equipment related to our restaurant expansion plans. The decrease in spending was related to the timing of restaurant openings, the timing of spending related to our new restaurants as well as the number of restaurants that were opened and under construction during 2013 versus 2012. During the first twenty-six weeks of 2013, we opened three restaurants and had five additional restaurants under construction. In the first twenty-six weeks of 2012, we opened four restaurants and had four additional restaurants under construction.

Financing Activities. Net cash used in financing activities was $7.9 million for the twenty-six weeks ended June 30, 2013, compared to cash used in financing activities of $8.5 million for the twenty-six weeks ended June 24, 2012. For the twenty-six weeks ended June 30, 2013, $6.9 million was used to pay down the Company’s term debt and $1.0 million was used to repurchase Company shares as part of the Company’s buyback program. For the twenty-six weeks ended June 24, 2012, $8.8 million was used to pay down the Company’s term debt, partially offset by $0.3 million in cash and tax benefits related to stock option exercises that was received during the first twenty-six weeks of the 2012.

As of June 30, 2013, we had no financing transactions, arrangements or other relationships with any unconsolidated entities or 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 resulting new restaurants. Our real estate development program is dependent upon many factors, including economic conditions, real estate markets, site locations and nature of 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.

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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.

We currently estimate capital expenditures, net of estimated lease incentives, for the remainder of 2013 to be in the range of approximately $12.0 million to $14.0 million, for a total of $23.0 million to $25.0 million for the year. This is primarily related to the opening of five additional restaurants in the last two quarters of 2013, the start of construction of restaurants to be opened in early 2014, as well as normal maintenance related capital expenditures relating to our existing restaurants. In conjunction with these restaurant openings, the Company anticipates expensing approximately $2.7 million in preopening costs for the remainder of 2013 for a total of approximately $4.0 million for all of 2013.

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 $28.8 million at June 30, 2013, compared to a net working capital deficit of $25.8 million at December 30, 2012.

In connection with our initial public offering, we entered into a credit agreement with a syndicate of financial institutions with respect to our senior credit facilities. Our senior credit facilities provide for (i) a $45.0 million term loan facility, maturing in 2015, and (ii) a revolving credit facility under which we may borrow up to $40.0 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 2015. Under the credit agreement, we are also entitled to incur additional incremental term loans and/or increases in the revolving credit facility of up to $20.0 million if no event of default exists and certain other requirements are satisfied. Our revolving credit facility 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, (iii) secured by a first priority security interest on all owned real property and (iv) secured by a pledge of all of the capital stock of our subsidiaries. Our credit agreement also requires us to meet financial tests, including a maximum consolidated total leverage ratio, a minimum consolidated fixed charge coverage ratio and a maximum consolidated capital expenditures limitation. At June 30, 2013, the Company was in compliance with its applicable financial covenants. Additionally, our credit agreement 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 October 9, 2012, we entered into an amendment to our credit agreement. The amendment eliminated dollar restrictions in paying dividends, distributions to shareholders, or repurchasing of our common share subject to the defined leverage ratio.

Borrowings under our senior credit facilities bear interest at our option of either (i) the Alternate Base Rate (as such term is defined in the credit agreement) plus the applicable margin of 1.75% to 2.25% or (ii) at a fixed rate for a period of one, two, three or six months equal to LIBOR plus the applicable margin of 2.75% to 3.25%. The applicable margins with respect to our senior credit facilities vary from time to time in accordance with agreed upon pricing grids based on our consolidated total leverage ratio. Swing-line loans under our senior credit facilities bear interest only at the Alternate Base Rate plus the applicable margin. Interest on loans based upon the Alternate Base Rate are payable on the last day of each calendar quarter in which such loan is outstanding. Interest on loans based on LIBOR are 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 shall be payable quarterly. In addition to paying any outstanding principal amount under our senior credit facilities, we are required to pay an unused facility fee to the lenders equal to 0.50% to 0.75% per annum on the aggregate amount of the unused revolving credit facility, excluding swing-line loans, commencing on October 26, 2010, payable quarterly in arrears. As of June 30, 2013, we had an outstanding principal balance of approximately $16.2 million on our term loan facility and no outstanding balance on our revolving credit facility.

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Based on the Company’s forecasts, management believes that the Company will be able to maintain compliance with its applicable financial covenants for the next twelve months. Management believes that the cash flow from operating activities as well as available borrowings under its revolving credit facility will be sufficient to meet the Company’s liquidity needs over the same period.

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 June 30, 2013, we are not involved in any VIE transactions and do not otherwise have any off-balance sheet arrangements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates — 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.

There have been no material changes to the significant accounting policies from what was previously reported in our 2012 Annual Report on Form 10-K.

Recent Accounting Pronouncements — We reviewed all newly issued accounting pronouncements and concluded that they either are not applicable to our operations or that no material effect is expected on our financial statements as a result of future adoption.

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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 are payable at variable rates.

At June 30, 2013, we had $16.2 million in debt outstanding under our term loan facility. Each eighth point change in interest rates on the variable rate portion of debt under our senior credit facilities would result in a $20,000 annual change in our interest expense.

Commodity Price Risk

We are exposed to market price fluctuation 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 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.

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 Securities Exchange Act of 1934) 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 6 to our consolidated financial statement 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 2012 Annual Report on Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information with respect to purchases of common shares made during the quarter ended June 30, 2013 by or on behalf of the Company or any “affiliated purchaser” as defined by Rule 10b5-1 of the Exchange Act.


Bravo Brio Restaurant Group Accounting Periods	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of the Publicly Announced Plans		Increase in Dollars for Share Repurchase Authorization		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
4/1/13-4/28/13		—	$	—		—	$	—	$	16,047,947
4/29/13-5/26/13		554	$	16.95		—	$	—	$	16,047,947
5/27/13-6/30/13		—	$	—		—	$	—	$	16,047,947

Total for the Quarter		554	$	16.95		—

(1)	Includes 554 shares withheld, on May 1, 2013, to cover tax withholding obligations at $16.95 per share relating to the vesting of restricted stock issued to employees pursuant to the Company’s Stock Incentive Plan and available to be granted in future periods.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

None.

Item 6.

Exhibits

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

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EXHIBIT INDEX


Exhibit Number		Description

10.1*		Employment Agreement dated August 1, 2013, between the Company and Brian T. O’Malley, employed as the Chief Operating Officer.

11		Computation of Per Share Earnings (included in the notes to the Condensed Notes to Unaudited Consolidated Financial Statement 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: August 2, 2013


Bravo Brio Restaurant Group, Inc.

By:		/s/ Saed Mohseni
		Saed Mohseni
		President, Chief Executive Officer and Director
		(Principal Executive Officer)

By:		/s/ James J. O’Connor
		James J. O’Connor
		Chief Financial Officer, Treasurer and Secretary
		(Principal Financial Officer)

- 23 -

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of August 1, 2013 (the “ Effective Date ”), is made by and between Bravo Brio Restaurant Group, Inc., an Ohio corporation (the “ Employer ”) and Brian T. O’Malley (“ Executive ”).

RECITALS

WHEREAS, Executive is currently employed by the Employer as its Chief Operating Officer and desires to continue such employment on the terms and conditions set forth in this Agreement; and

WHEREAS, the Employer desires to continue Executive’s employment with the Employer as its Chief Operating Officer on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement, intending to be legally bound, hereby agree as follows.

AGREEMENTS

1. Employment . Executive’s employment hereunder shall commence on the Effective Date and shall continue until terminated in accordance with Section 1(c) hereof (the “ Employment Period ”).

(a) Position and Duties .

(i) During the Employment Period, Executive shall serve as the Chief Operating Officer of the Employer and shall have the normal duties, responsibilities and authority implied by such position and such other duties and responsibilities as are assigned by the Chief Executive Officer and/or his or her designee.

(ii) During the Employment Period, Executive shall report to the Chief Executive Officer and/or his or her designee, and Executive shall devote Executive’s best efforts and Executive’s full business time and attention to the business and affairs of the Employer and its Affiliates. Executive shall not engage, directly or indirectly, in any other business, investment or activity that (a) interferes with the performance of Executive’s duties under this Agreement (which shall include the preceding sentence), (b) is contrary to the interests of the Employer or any of its Affiliates or (c) requires any portion of Executive’s business time; provided, however, that, to the extent that the following does not impair Executive’s ability to perform Executive’s duties pursuant to this Agreement (which shall include the preceding sentence), Executive, with the Board’s

prior written approval (which approval may be withheld in the sole discretion of the Board), may serve on the board or committee of any charitable, religious, or educational institution.

(b) Salary, Bonus, Benefits and Expenses .

(i) Salary . During the Employment Period, the Employer will pay Executive a base salary of $218,000 per annum (the “ Base Salary ”). The Board may review the Base Salary of Executive and may adjust the Base Salary by such amount as the Board, in its sole discretion, shall deem appropriate. The term “ Base Salary ” as used in this Agreement shall refer to the Base Salary as it may be so adjusted.

(ii) Annual Bonus . During the Employment Period, Executive shall be eligible to earn an annual bonus (the “ Annual Bonus ”) based upon the achievement of corporate and/or individual performance goals established by the Board in its sole and absolute discretion. Any Annual Bonus earned by Executive shall be paid to Executive no later than March 15 ^th of the year following the year to which such Annual Bonus relates; provided, that no Annual Bonus will be paid to Executive unless Executive has been continuously employed by the Employer through the end of the fiscal year for which the Annual Bonus was earned.

(iii) Benefits . During the Employment Period, Executive shall be eligible to participate in and be covered on the same basis as other senior management of the Employer under all employee benefit plans and programs of the Employer (subject to the terms and conditions of the applicable plan or program) and be entitled to receive four (4) weeks of paid vacation per calendar year (pro-rated for any partial calendar year worked).

(iv) Expenses . Employer shall pay or reimburse Executive for reasonable and necessary expenses directly incurred by Executive in the course of Executive’s employment by Employer in accordance with Employer’s standard policies and practices as in effect from time to time. All reimbursements under this Section 1(b)(iv) shall be made as soon as practicable following submission of a reimbursement request, but no later than the end of the year following the year during which the underlying expense was incurred.

(c) Separation . The Employment Period will terminate immediately upon Executive’s death. In addition, the Employer may, at any time, terminate the Employment Period with or without Cause, or due to Executive’s Disability, in each case, upon written notice to Executive of such termination, and Executive may terminate the Employment Period without Good Reason upon thirty (30) days advance written notice to the Employer. Executive may terminate the Employment Period for Good Reason; provided, that, Good Reason shall not be deemed to exist unless Executive notifies the Employer within fifteen (15) days after the occurrence of the event which Executive believes constitutes the basis for Good Reason, specifying the particular act or failure to act which Executive believes constitutes the basis for Good Reason, the Employer does not cure such act or failure to act within thirty (30) days after receipt of such notice, and Executive actually has a Separation within thirty (30) days after the expiration of the Employer’s thirty (30) day cure period. Effective immediately upon any Separation, Executive shall resign, and shall be deemed to have resigned, from all other officer, employee and director positions held by Executive with the Employer or any of its Affiliates.

(d) Severance .

(i) Termination Without Cause or For Good Reason . If Executive’s employment with the Employer and its Affiliates is terminated during the Employment Period by the Employer without Cause or by Executive for Good Reason, the Employer shall provide Executive with the following payments and benefits:

(1)

contingent upon the effectiveness of a general release of claims in form and substance satisfactory to the Employer which is executed within forty-five (45) days of the date of such Separation, Base Salary continuation during the period commencing on the sixtieth (60 ^th ) date following such Separation and ending on the date that is two (2) years thereafter;

(2)

any accrued but unpaid Base Salary; and

(3)

any accrued and vested benefits under any employee benefit plan of the Employer or its Affiliates in which Executive was participating immediately prior to Separation, such benefits to be provided in accordance with the terms of the applicable employee benefit plan; provided that in no event shall Executive be entitled to receive any payment for accrued but unused vacation time.

Notwithstanding the foregoing, if Executive breaches any of the provisions of Section 2, Section 3 or Section 4 hereof, any and all remaining Base Salary continuation payments payable pursuant to Section 1(d)(i)(1) shall be immediately forfeited.

Notwithstanding anything herein to the contrary, if Executive is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the regulations issued thereunder, and a payment or benefit provided for in this Section 1(d) would be subject to additional tax under Code Section 409A if the payment or benefit is paid within six months of Executive’s Separation, then such payment or benefit required under this Agreement shall not be paid (or commence) until the first day which is six (6) months after Executive’s Separation. In such case, any payments that would otherwise have been made during such period shall be made to Executive in a lump sum (without interest) as soon as administratively feasible subsequent to the date that is six (6) months after Executive’s Separation.

(ii) Other Terminations . If Executive’s employment with the Employer and its Affiliates is terminated during the Employment Period due to Executive’s death or Disability, by the Employer for Cause or by Executive without Good Reason, the sole obligation of the Employer and its Affiliates to Executive shall be to pay to Executive (or his estate or beneficiaries, as the case may be) (x) any accrued but unpaid Base Salary and (y) any accrued and vested benefits under any employee benefit plan of the Employer

or its Affiliates in which Executive was participating immediately prior to Separation, such benefits to be provided in accordance with the terms of the applicable employee benefit plan.

2. Confidential Information .

(a) Obligation to Maintain Confidentiality . Executive shall not, during or after the Employment Period, without the prior express written consent of the Board, directly or indirectly use or divulge, disclose or make available or accessible any Confidential Information to any Person (other than when required to do so in good faith to perform Executive’s duties and responsibilities under this Agreement or when required to do so by a lawful order of a court of competent jurisdiction, any governmental authority or agency, or any recognized subpoena power). In the event that Executive becomes legally compelled (by oral questions, interrogatories, request for information or documents, subpoena, criminal or civil investigative demand or similar process) to disclose any of the Confidential Information, then prior to such disclosure, Executive will provide the Board with prompt written notice so that the Board may seek (with Executive’s cooperation) a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. In the event that such protective order or other remedy is not obtained, then Executive will furnish only that portion of the Confidential Information which he is advised by counsel is legally required, and will cooperate with the Board in the Board’s efforts to obtain reliable assurance that confidential treatment will be accorded to the Confidential Information. Executive shall also proffer to the Employer, no later than the date of Separation for any reason, and without retaining any copies, notes or excerpts thereof, all memoranda, computer disks or other media, computer programs, diaries, notes, records, data, customer or client lists, marketing plans and strategies, and any other documents consisting of or containing Confidential Information that are in Executive’s actual or constructive possession or which are subject to Executive’s control at such time.

(b) Ownership of Property . Executive acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, recipes, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to the Employer’s or any Affiliate of the Employer’s actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Executive (either solely or jointly with others) while employed by the Employer (including any of the foregoing that constitutes any proprietary information or records) (“ Work Product ”) belong to the Employer or any Affiliate of the Employer designated by the Employer, and Executive hereby assigns, and agrees to assign, all of the above Work Product to the Employer or such Affiliate of the Employer. Any copyrightable work prepared in whole or in part by Executive in the course of Executive’s work for any of the foregoing entities shall be deemed a “work made for hire” under the copyright laws, and the Employer or such Affiliate of the Employer shall own all rights therein. To the extent that any such copyrightable work is not a “work made for hire,” Executive hereby assigns and agrees to assign to the Employer or such Affiliate of the Employer all right, title, and interest, including without limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such Work Product and

copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm the ownership of the Employer or such Affiliate of the Employer (including, without limitation, assignments, consents, powers of attorney and other instruments).

(c) Third Party Information . Executive understands that the Employer and its Affiliates will receive from third parties confidential or proprietary information (“ Third Party Information ”) subject to a duty on the Employer’s and its Affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the Employment Period and thereafter, and without in any way limiting the provisions of Section 2(a) above, Executive will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of the Employer or its Affiliates who need to know such information in connection with their work for the Employer or any of its Affiliates) or use, except in connection with his work for the Employer or any of its Affiliates, Third Party Information unless expressly authorized by the Board in writing.

3. Non-Disparagement . Except as required by applicable law, rule or regulation or any recognized subpoena power, Executive agrees that, during and after the Employment Period, he shall not at any time make any statement or representation, written or oral, which Executive knows or should know will, or which he knows or should know is reasonably likely to, impair or adversely affect in any way the reputation, goodwill, business, customer or supplier relationships, or public relations of the Employer and/or any of its Affiliates, and/or any of their respective partners, directors, employees or officers. In the event that Executive becomes legally compelled (by oral questions, interrogatories, request for information or documents, subpoena, criminal or civil investigative demand or similar process) to make any such statements or representations, then prior thereto, Executive will provide the Board with prompt written notice so that the Board may seek (with Executive’s cooperation) a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. In the event that such protective order or other remedy is not obtained, then Executive will only make such statements or representations which he is advised by counsel are legally required, and will cooperate with the Board in the Board’s efforts to obtain reliable assurance that confidential treatment will be accorded to any such statements or representations.

4. Non-Competition and Non-Solicitation . Executive acknowledges that in the course of Executive’s employment with the Employer, Executive has or will become familiar with the Employer’s and its Affiliates’ trade secrets and with other Confidential Information concerning the Employer and/or its Affiliates and that Executive’s services have been and will be of special, unique and extraordinary value to the Employer and its Affiliates. In consideration of the foregoing and for other good and valuable consideration and as a material inducement to the Employer to enter into this Agreement, Executive agrees that:

(a) Non-Competition . Executive shall not, while Executive is employed by the Employer and for two (2) years after the date of any Separation (the “ Restricted Period ”), directly or indirectly, engage, without the prior express written consent of the Board, in any business or activity, whether as an employee, consultant, partner, principal, agent, representative, director, stockholder or in any other individual, corporate or representative capacity, or render any services or provide any advice to any business, activity, service or Person, if such business,

activity, service or Person competes with the Business or could reasonably be assumed to subsequently provide products or services which would compete with the Business. In addition, Executive shall not, during the Restricted Period, assist, help or otherwise support, without the prior express written consent of the Employer, any Person, business or other activity, whether as an employee, consultant, partner, principal, agent, representative, director, stockholder or in any other individual, corporate or representative capacity, to create, commence or otherwise initiate, or to develop, enhance or otherwise further, any business or activity if such business or activity competes (or is reasonably likely to compete (as determined by the Board in its sole discretion)) with the Business. Notwithstanding the foregoing, Executive shall not be prohibited during the Restricted Period from being a passive investor where Executive owns not more than five percent (5%) of the outstanding capital stock of any publicly-held company.

(b) Non-Solicitation . Executive shall not during the Restricted Period, (a) take any action to solicit or divert any business or clients or customers away from the Employer or any of its Affiliates, (b) induce customers, clients, business partners, suppliers, agents, lessors, licensors, licensees, or other Persons under contract or otherwise associated or doing business with the Employer or any of its Affiliates to terminate, reduce or alter any such association or business with or from the Employer or such Affiliate or (c) contact, solicit, approach or hire any person employed by the Employer or any of its Affiliates or who was an employee of the Employer or any of its Affiliates during the one (1) year period prior to such contact, solicitation, approach or hiring.

(c) Injunctive Relief . The provisions of Section 2, Section 3 and Section 4 hereof are material inducements to the Employer entering into and performing this Agreement. Executive acknowledges and agrees that the Employer will have no adequate remedy at law, and would be irreparably harmed, if Executive breaches or threatens to breach any of the provisions of Section 2, Section 3 or Section 4 of this Agreement. Executive agrees that the Employer shall be entitled to equitable and/or injunctive relief to prevent any breach or threatened breach of Section 2, Section 3 and/or Section 4 of this Agreement, and to specific performance of each of the terms of such Sections in addition to any other legal or equitable remedies that the Employer may have. Executive further agrees that he shall not, in any equity proceeding relating to the enforcement of the terms of Section 2, Section 3 and/or Section 4 of this Agreement, raise the defense that the Employer has an adequate remedy at law.

(d) Special Severability . The terms and provisions of Section 2, Section 3 and Section 4 of this Agreement are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of this Agreement shall thereby be affected. It is the intention of the parties to this Agreement that the potential restrictions on Executive’s future employment imposed by such Sections be reasonable in both duration and geographic scope and in all other respects. If for any reason any court of competent jurisdiction shall find any provisions of Section 2, Section 3 and/or Section 4 of this Agreement unreasonable in duration or geographic scope or otherwise, Executive and the Employer agree that the restrictions and prohibitions contained herein shall be effective to the fullest extent allowed under applicable law in such jurisdiction.

(e) Extension of Restricted Period . If Executive breaches any of the covenants contained in Section 4(a) or Section 4(b), then the Restricted Period shall be extended for a period of time equal to the period of time during which Executive is in breach of such restrictive covenant.

(f) Additional Acknowledgments . Executive acknowledges that the provisions of this Section 4 are in consideration of employment with the Employer and additional good and valuable consideration. In addition, Executive agrees and acknowledges that the restrictions contained in Section 2, Section 3 and Section 4 hereof do not preclude Executive from earning a living, nor do they unreasonably impose limitations on Executive’s ability to earn a living.

5. Definitions .

“ Affiliate ” means, with respect to any Person, any Person that controls, is controlled by or is under common control with such Person or an Affiliate of such Person.

“ Board ” means the Employer’s board of directors.

“ Business ” means operating casual and fast casual Italian restaurants within North America.

“ Cause ” means (i) Executive’s fraud or material dishonesty in connection with the performance of his duties for the Employer, (ii) the failure by Executive (other than by reason of Disability) to substantially perform the duties of his position, as directed by the Chief Executive Officer and/or his or her designee, which failure is not cured, if reasonably susceptible of cure, within 10 business days after delivery of written notice thereof to Executive, or (iii) Executive’s conviction of a felony, or plea of guilty or nolo contendere to, a charge of commission of a felony, or (iv) commission of any act, or violation of any law, that in the good faith judgment of the Board could reasonably be expected to bring material disrepute to the Employer or adversely affect Executive’s ability to perform his duties for the Employer.

“ Confidential Information ” means all information respecting the business and activities of the Employer or any Affiliate of the Employer, including, without limitation, the clients, customers, suppliers, employees, consultants, computer or other files, projects, products, computer disks or other media, computer hardware or computer software programs, marketing plans, financial information, methodologies, know-how, processes, practices, approaches, projections, forecasts, formats, systems, trade secrets, data gathering methods and/or strategies of the Employer or any Affiliate of the Employer. Notwithstanding the immediately preceding sentence, Confidential Information shall not include any information that is, or becomes, generally available to the public (unless such availability occurs as a result of Executive’s breach of any portion of this Agreement).

“ Disability ” means the disability of Executive caused by any physical or mental injury, illness or incapacity as a result of which Executive is unable to effectively perform the essential functions of Executive’s duties, with or without reasonable accommodation, for a period of 180 consecutive calendar days, as determined by the Board in good faith.

“ Good Reason ” means, without the consent of Executive, (i) a material diminution in Executive’s Base Salary, (ii) a material diminution in Executive’s authority, duties, or responsibilities, (iii) any change of Executive’s principal office location to a location more than 100 miles from Columbus, Ohio, or (iv) any other action or inaction that constitutes a material breach by the Employer of this Agreement.

“ Person ” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, an investment fund, any other business entity and a governmental entity or any department, agency or political subdivision thereof.

“ Separation ” means the cessation of employment of Executive with the Employer or any successor thereto for any reason.

6. Notices . Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated and shall be effective upon receipt:


		To the Employer:				Bravo Brio Restaurant Group, Inc. 777 Goodale Boulevard, Suite 100 Columbus, OH 43212 Attention: Chief Executive Officer




		With a copy to Employer’s counsel at:				Carmen J. Romano, Esq. Dechert LLP Cira Center 2929 Arch Street Philadelphia, PA 19104





		To Executive:				at the address listed in the Employer’s personnel records

7. General Provisions .

(a) Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will (except as otherwise expressly provided herein) be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

(b) Entire Agreement . This Agreement contains the entire agreement between the parties concerning the subject matter hereof and supersedes all prior agreements, understandings,

discussions, negotiations and undertakings, whether written or oral, between the parties with respect thereto, including without limitation any term sheets addressing potential provisions of this Agreement.

(c) No Strict Construction; Headings . The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party. The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

(d) Counterparts . This Agreement may be executed and delivered in separate counterparts (including by means of facsimile), each of which is deemed to be an original and all of which taken together constitute one and the same agreement. This Agreement shall become effective only when counterparts have been executed and delivered by all parties whose names are set forth on the signature page(s) hereof.

(e) Successors and Assigns . This Agreement may be assigned by the Employer to one of its Affiliates or to any successor to the Employer, but shall not be assignable by Executive. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Employer and their respective successors and assigns.

(f) Applicable Law . This Agreement shall be governed by and construed in accordance with the laws of the state of New York, applied without reference to principles of conflict of laws.

(g) Dispute Resolution . Any dispute, controversy or claim arising out of or relating to this Agreement, the breach, termination, enforcement, interpretation, or validity thereof (including the determination of the scope or applicability of this Section 7(g)), or its subject matter shall be settled by binding arbitration before a single arbitrator in Columbus, OH, pursuant to the Employment Dispute Resolution Rules of the American Arbitration Association. The decision of the arbitrator shall be final and unappealable, and judgment on the arbitration award may be entered in any court having jurisdiction thereof. Except as may otherwise be determined by the arbitrator or required by law, all costs of arbitration shall be equally split by the parties (except that the parties will share equally in any filing fees associated with the arbitration). Notwithstanding anything to the contrary, the Employer may at any time seek injunctions or other forms of equitable relief from any court of competent jurisdiction.

(h) Cooperation . During the Employment Period and thereafter, Executive shall cooperate with the Employer and its Affiliates in any disputes with third parties, internal investigations or administrative, regulatory or judicial proceedings as reasonably requested by the Employer (including, without limitation, Executive being available to the Employer upon reasonable notice and at a reasonable location for interviews and factual investigations, appearing at the Employer’s request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Employer all pertinent information and turning over to the Employer all relevant documents which are or may come into Executive’s possession, all at times and on schedules that are reasonably consistent with Executive’s other permitted activities

and commitments). In the event the Employer requires Executive’s cooperation in accordance with this Section after Executive’s Separation, the Employer shall reimburse Executive for reasonable travel expenses (including lodging and meals, upon submission of receipts).

(i) Representations . Executive represents and warrants to the Employer that (i) his execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which Executive is a party or by which he is otherwise bound, and (ii) he is not currently subject to any covenants against competition or similar covenants or any court order that could preclude or otherwise affect the performance of his duties and obligations hereunder.

(j) Amendment and Waiver . The provisions of this Agreement may be amended and waived only with the prior written consent of the Employer and Executive.

(k) Withholding . All payments and benefits due to Executive under this Agreement or otherwise shall be subject to withholding on account of federal, state and local taxes, as determined by the Employer. Executive will be solely responsible for such federal, state and local taxes resulting from any taxable income paid to him hereunder or otherwise by the Employer and/or any Affiliate, including without limitation any taxes imposed under Section 409A of the Code or Section 4999 of the Code.

(l) Survival . This Agreement (except for the provisions of Sections 1(a) and (b)) shall survive a Separation and shall remain in full force and effect after such Separation.

(m) 409A Compliance. This Agreement is intended to comply with Code Section 409A and the parties hereto agree to interpret, apply and administer this Agreement in the least restrictive manner necessary to comply therewith and without resulting in any increase in the amounts owed hereunder by the Employer. No reimbursement or in-kind benefit shall be subject to liquidation or exchange for another benefit and the amount available for reimbursement, or in-kind benefits provided, during any calendar year shall not affect the amount available for reimbursement, or in-kind benefits to be provided, in a subsequent calendar year. Any reimbursement to which Executive is entitled hereunder shall be made no later than the last day of the calendar year following the calendar year in which such expenses were incurred. Each severance installment hereunder is intended to be a separate payment for purposes of Code Section 409A. Notwithstanding anything contained herein to the contrary, in no event shall the Employer or any Affiliate thereof be liable to Executive for any taxes or penalties incurred by Executive under Code Section 409A.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.


BRAVO BRIO RESTAURANT GROUP, INC.

By:		/s/ Saed Mohseni
Name:		Saed Mohseni
Title:		President and Chief Executive Officer

EXECUTIVE:

/s/ Brian T. O’Malley
Brian T. O’Malley

Exhibit 31(a)

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Saed Mohseni, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bravo Brio Restaurant Group, 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 we have:

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;

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

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.

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: August 2, 2013

/s/ Saed Mohseni

Saed Mohseni

President and Chief Executive Officer

(Principal Executive Officer)

Exhibit 31(b)

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, James J. O’Connor, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bravo Brio Restaurant Group, Inc.;

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

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: August 2, 2013

/s/ James J. O’Connor

James J. O’Connor

Chief Financial Officer, Treasurer and Secretary

(Principal Financial and Accounting Officer)

Exhibit 32(a)

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 of Bravo Brio Restaurant Group, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Saed Mohseni, President and Chief Executive Officer of the Company, and James J. O’Connor, Chief Financial Officer, Treasurer and Secretary 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.


Dated: August 2, 2013						/s/ Saed Mohseni
						Saed Mohseni
						President and Chief Executive Officer
						(Principal Executive Officer)

Dated: August 2, 2013						/s/ James J. O’Connor
						James J. O’Connor
						Chief Financial Officer, Treasurer and Secretary
						(Principal Financial and Accounting Officer)