ADDISON, Texas - November 12, 2012 - (BUSINESS WIRE) - Fiesta Restaurant Group, Inc. (“Fiesta” or the “Company”) (NASDAQ: FRGI), the owner, operator, and franchisor of the Pollo Tropical® and Taco Cabana® fast-casual restaurant brands, today reported results for the third quarter of 2012 which ended on September 30, 2012. Fiesta also provided certain initial operating targets for 2013.
Tim Taft, President and Chief Executive Officer of Fiesta Restaurant Group, Inc., commented, “Fiesta delivered outstanding results in the third quarter characterized by healthy revenue gains, positive guest traffic, expanding operating margins and profitability growth. Pollo Tropical continues to post strong comparable restaurant sales. Taco Cabana continues to post positive comparable restaurant sales with transaction growth, while being affected by lapping significant price increases taken last year. In October, both brands produced strong sales performance driven by transaction growth, with comparable restaurant sales increases of 7.5% at Pollo Tropical and 6.4% at Taco Cabana.”
Taft continued, “We are committed to building restaurants in target markets where we can achieve a compelling return on investment. In addition to the 10 new Company-owned restaurants that we have and will develop in 2012, we are planning to open an additional 14 to 17 new Company-owned restaurants in 2013, including further Pollo Tropical expansion in Atlanta, Georgia and our initial entry into Nashville, Tennessee. We continue to pursue international franchise expansion, with more than 10 Pollo Tropical franchised restaurant openings planned in 2013, including our first new restaurant in India.”
Taft concluded, “With the spin-off now behind us, we are continuing to build out our capabilities within various functional areas, and to that end, have established our corporate headquarters in the city of Addison, Texas, within Dallas County. We hope to complete our infrastructure and administrative transition from Carrols Restaurant Group by the end of 2013, well ahead of the full three-year term of our transition services agreement.”
Total revenues increased 5.8% in the third quarter of 2012 to $128.2 million from $121.2 million in the third quarter of 2011. Restaurant sales in the third quarter of 2012 increased 5.7% to $127.6 million from $120.8 million in the third quarter of 2011, due primarily to comparable restaurant sales growth at both Pollo Tropical and Taco Cabana. Franchise revenues in the third quarter of 2012 increased to $0.5 million from $0.4 million in the prior year period.
Cost of sales, restaurant wages and related expenses, and other restaurant operating expenses each decreased as a percentage of restaurant sales in the third quarter of 2012 compared to the third quarter of 2011, due to the positive impact of a sales increase on fixed costs and lower utility rates. Advertising expense declined as a percentage of restaurant sales due primarily to the timing of advertising.
Rent expense increased $2.1 million to $6.3 million compared to $4.2 million in the prior year period. Rent expense was $1.6 million higher in the third quarter of 2012 compared to the third quarter of 2011 as a result of the qualification for sale treatment of certain sale-leaseback transactions upon completion of the spin-off on May 7, 2012, as previously disclosed.
General and administrative expenses increased $2.1 million to $11.2 million in the third quarter of 2012 from $9.1 million in the third quarter of 2011, due primarily to Fiesta employee additions and a $0.6 million expense associated with retirement agreements that were entered into during the quarter.
Depreciation and amortization decreased $0.4 million to $4.5 million in the third quarter of 2012 from $4.8 million in the third quarter of 2011, primarily due to the elimination of depreciation expense of $0.5 million as a result of the qualification for sale treatment of certain sale-leaseback transactions upon completion of the spin-off.
Interest expense decreased $1.6 million to $5.0 million in the third quarter of 2012 from $6.7 million in the third quarter 2011, primarily because of the elimination of $2.7 million in interest expense as a result of the qualification for sale treatment of certain sale-leaseback transactions, partially offset by interest expense associated with the issuance of $200 million of 8.875% Senior Secured Second Lien Notes in the third quarter of 2011.
The provision for income taxes in the third quarter of 2012 was derived using an estimated effective annual income tax rate of 39.3%. During the third quarter, Fiesta was able to lower its estimated effective annual income tax rate primarily as a result of adopting a consolidated tax filing position in the state of Florida. However, the estimated effective annual rate does not include any impact from a reenactment of the Work Opportunity Tax Credit. If reenacted, the related benefit would be recognized in the period of reenactment.
Net Income increased $1.2 million to $3.6 million in the third quarter of 2012, or $0.16 per diluted share, compared to net income of $2.4 million, or $0.10 per diluted share, in the third quarter of 2011.
Pollo Tropical restaurant sales increased 9.8% to $57.4 million in the third quarter of 2012 from $52.4 million in the third quarter of 2011, primarily due to a comparable restaurant sales increase of 7.0%. The growth in comparable restaurant sales resulted from a 5.9% increase in guest traffic along with a 1.1% increase in average check. Pollo Tropical franchise revenues increased to $0.4 million in the third quarter of 2012 from $0.3 million in the third quarter of 2011. Adjusted Segment EBITDA for Pollo Tropical increased to $9.1 million in the third quarter of 2012 from $8.5 million in the third quarter of 2011. Adjusted Segment EBITDA was negatively impacted by a $0.3 million expense associated with a retirement agreement that was entered into during the quarter and an increase in rent expense of $0.6 million in the third quarter of 2012 compared to the third quarter of 2011 due to the qualification for sale treatment of sale-leaseback transactions, as discussed above.
Taco Cabana restaurant sales increased 2.8% to $70.3 million in the third quarter of 2012 from $68.4 million in the third quarter of 2011, primarily due to a comparable restaurant sales increase of 1.8%. The growth in comparable restaurant sales resulted from a 0.6% increase in guest traffic along with a 1.2% increase in average check. Taco Cabana franchise revenues of $0.1 million in the third quarter of 2012 were consistent with the third quarter of 2011. Adjusted Segment EBITDA for Taco Cabana decreased to $6.7 million in the third quarter of 2012 from $7.3 million in the third quarter of 2011. Adjusted Segment EBITDA was negatively impacted by a $0.3 million expense associated with a retirement agreement that was entered into during the quarter and an increase in rent expense of $1.0 million in the third quarter 2012 compared to the third quarter of 2011 due to the qualification for sale treatment of sale-leaseback transactions, as discussed above.
Fiesta opened three company-owned restaurants during the third quarter of 2012 including one Pollo Tropical restaurant in Miami and two Taco Cabana restaurants, one each in the Houston and Dallas markets. During the third quarter of 2012, the Company entered into a development agreement with a new franchisee in India that has committed to opening 10 Pollo Tropical franchised restaurants in India over the next five years.
As of September 30, 2012, the Company owned 90 Pollo Tropical restaurants and 160 Taco Cabana restaurants and franchised 35 Pollo Tropical restaurants in the U.S., Puerto Rico, the Bahamas, Costa Rica, Ecuador, Honduras, Panama, Trinidad & Tobago, and Venezuela, and five Taco Cabana restaurants in the U.S.
Fiesta will host a conference call and webcast to review third quarter 2012 results today at 8:30 AM ET. Hosting the call will be Tim Taft, President and Chief Executive Officer, and Lynn Schweinfurth, Vice President and Chief Financial Officer.
The conference call can be accessed live over the phone by dialing 888-401-4674 or for international callers by dialing 719-325-4756. A replay will be available after the call and can be accessed by dialing 877-870-5176 or for international callers by dialing 858-384-5517; the passcode is 7664129. The replay will be available until Tuesday, November 20, 2012.
The conference call will also be webcast live from the corporate website at www.FRGI.com, under the investor relations section. A replay of the webcast will be available through the corporate website shortly after the call has concluded.
Fiesta Restaurant Group, Inc. owns, operates, and franchises the Pollo Tropical® and Taco Cabana® restaurant brands with 250 company-owned and operated restaurants and 40 franchised restaurants in the U.S., Puerto Rico, the Bahamas, Costa Rica, Ecuador, Honduras, Panama, Trinidad & Tobago, and Venezuela as of September 30, 2012. The brands specialize in the operation of fast-casual, ethnic restaurants that offer distinct and unique flavors with a broad appeal at a compelling value. Both brands feature made-from-scratch cooking, fresh salsa bars, and drive-thru service and catering. For more information about Fiesta Restaurant Group, Inc. visit our corporate website at www.FRGI.com.
Except for the historical information contained in this news release, the matters addressed are forward-looking statements. Forward-looking statements, written, oral or otherwise made, represent Fiesta’s expectation or belief concerning future events. Without limiting the foregoing, these statements are often identified by the words “may,” “might,” “believes,” “thinks,” “anticipates,” “plans,” “expects”, “intends” or similar expressions. In addition, expressions of Fiesta’s strategies, intentions or plans, are also forward-looking statements. Such statements reflect management’s current views with respect to future events and are subject to risks and uncertainties, both known and unknown. You are cautioned not to place undue reliance on these forward-looking statements as there are important factors that could cause actual results to differ materially from those in forward-looking statements, many of which are beyond Fiesta’s control. Investors are referred to the full discussion of risks and uncertainties as included in Fiesta’s filings with the Securities and Exchange Commission.
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Fiesta Restaurant Group, Inc.
Investor Relations
Raphael Gross
203-682-8253
investors@frgi.com
Fiesta Restaurant Group, Inc. owns, operates and franchises the Pollo Tropical® and Taco Cabana® restaurant brands