ADDISON, Texas - August 05, 2014 - (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 second quarter 2014, which ended on June 29, 2014.
Highlights of the second quarter of 2014 include:
Fiesta President and Chief Executive Officer Tim Taft commented, “We believe our financial results are demonstrative of the strength of our business model and our ability to perform despite a challenging consumer spending environment. In the second quarter, we increased total revenues, grew comparable restaurant sales, expanded operating margins, and delivered diluted EPS growth of almost 67%. We are very pleased with what we have accomplished so far this year and look forward to continuing to execute our strategy and enhance shareholder value.”
Total revenues increased 9.4% to $154.2 million from $140.9 million compared to the prior year period due to 18 net Company-owned restaurant openings and comparable restaurant sales growth of 6.7% and 2.8% at Pollo Tropical and Taco Cabana, respectively.
Cost of sales as a percentage of restaurant sales improved 40 basis points compared to the prior year period as modest price increases, a favorable sales mix, and supply chain management initiatives more than offset commodity cost increases.
Restaurant wages and related expenses as a percentage of restaurant sales held steady compared to the prior year period as the positive impact of sales increases on fixed costs were offset by higher medical expenses.
Other restaurant operating expenses as a percentage of restaurant sales increased 30 basis points compared to the prior year period as timing and higher repair and maintenance expenses including costs associated with the conversion to Coca-Cola products at Pollo Tropical restaurants and higher insurance expenses were partially offset by lower utility expenses.
Pre-opening costs increased $0.2 million to $1.2 million compared to the prior year period due to the timing of expenses for future Company-owned restaurant openings.
Rent expense as a percentage of restaurant sales increased 20 basis points compared to the prior year period as a consequence of new sale-leaseback transactions and Company-owned restaurant openings, which generally have higher rent.
Advertising expense as a percentage of restaurant sales decreased 20 basis points compared to the prior year period due primarily to the favorable impact of sales increases and the timing of promotions.
General and administrative expenses increased slightly to $12.1 million compared to the prior year period but improved as a percentage of revenues by 60 basis points due to the favorable impact of higher sales on relatively flat overhead expenses.
Depreciation and amortization increased $0.4 million to $5.6 million compared to the prior year period due to new Company-owned restaurant development, partially offset by the impact of sale-leaseback transactions.
Interest expense decreased $4.4 million to $0.6 million compared to the prior year period due to the reduction in Fiesta’s outstanding debt and a lower interest rate on borrowings under the new senior credit facility.
The provision for income taxes was derived using an estimated annual effective income tax rate for 2014 of 38.3%, while the provision for income taxes for the prior year period was derived using an estimated effective annual income tax rate for 2013 of 36.5%, excluding discrete items. The estimated effective annual income tax rate for 2014 is higher than 2013, primarily due to the expiration of the Work Opportunity Tax Credit on December 31, 2013.
Net income increased 87.4% to $9.3 million compared to net income of $5.0 million in the prior year period.
Diluted earnings per share increased 66.7% to $0.35 (on a base of 26.3 million shares) compared to diluted earnings per share of $0.21 (on a base of 22.9 million shares) in the prior year period.
Pollo Tropical restaurant sales increased 16.7% to $75.3 million compared to the prior year period due to a comparable restaurant sales increase of 6.7% along with a net increase of 16 Company-owned restaurants. The growth in comparable restaurant sales resulted from a 5.6% increase in comparable restaurant guest traffic along with a 1.1% increase in average check. Average check was driven by menu price increases that positively impacted restaurant sales by 1.6% partially offset by sales mix. This is the 19th consecutive quarter the brand has delivered comparable restaurant sales growth and, on a two-year basis, second quarter comparable restaurant sales grew 13.1%. Adjusted EBITDA for Pollo Tropical, a non-GAAP financial measure, increased 12.1% to $13.4 million compared to the prior year period.
Taco Cabana restaurant sales increased 3.3% to $78.3 million compared to the prior year period due to a 2.8% increase in comparable restaurant sales along with a net increase of two Company-owned restaurants. The increase in comparable restaurant sales resulted from a decrease of 0.2% in comparable restaurant guest traffic which was more than offset by a 3.0% increase in average check. Average check was driven by menu price increases that positively impacted restaurant sales by 1.3% and a positive change in sales mix due to the implementation of new menu boards. On a two-year basis, second quarter comparable restaurant sales grew 3.9%. Adjusted EBITDA for Taco Cabana, a non-GAAP financial measure, increased 23.9% to $8.9 million compared to the prior year period.
During the quarter, Fiesta opened six new Pollo Tropical restaurants in Florida and its first restaurant under the elevated, non-24 hour Taco Cabana format, Cabana Grill, outside of Atlanta, all of which are Company-owned.
As of June 29, 2014, the Company owned and operated 112 Pollo Tropical restaurants and 166 Taco Cabana restaurants and franchised 35 Pollo Tropical restaurants in the U.S., Puerto Rico, the Bahamas, Costa Rica, Ecuador, Guatemala, Honduras, Panama, Trinidad & Tobago, Venezuela and the Dominican Republic, and seven Taco Cabana restaurants in the U.S.
Fiesta will host a conference call to review second quarter 2014 results today at 4:30 PM ET. Hosting the call will be President and Chief Executive Officer Tim Taft and Vice President and Chief Financial Officer Lynn Schweinfurth.
The conference call can be accessed live over the phone by dialing 877-407-0789 or for international callers by dialing 201-689-8562. 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 13586402. The replay will be available until Tuesday, August 12, 2014.
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. The brands specialize in the operation of fast-casual, ethnic restaurants that offer distinct and unique Caribbean and Mexican inspired flavors with broad appeal at a compelling value. The brands feature made-from-scratch cooking, fresh salsa bars, and drive-thru service and catering. For more information about Fiesta Restaurant Group, Inc., visit the 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.
Supplemental Non-GAAP Information
The following table sets forth certain unaudited supplemental financial data for the periods indicated
(In thousands):
Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP financial measures. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense and other income and expense. Adjusted EBITDA for each of our segments includes an allocation of general and administrative expenses associated with administrative support for executive management, information systems and certain accounting, legal and other administrative functions. Restaurant-Level Adjusted EBITDA is defined as Adjusted EBITDA excluding franchise royalty revenues and fees and general and administrative expenses (including corporate-level general and administrative expenses). Adjusted EBITDA for each of our segments is a measure of segment profitability reported to our chief operating decision maker for purposes of allocating resources to the segments and assessing each segment's performance. In addition, management believes that Adjusted EBITDA and Restaurant-Level Adjusted EBITDA, when viewed with our results of operations calculated in accordance with GAAP and our reconciliation of Restaurant-Level Adjusted EBITDA and Adjusted EBITDA to net income (i) provides useful information (including at the restaurant level) about our operating performance and period-over-period growth, (ii) provides additional information that is useful for evaluating the operating performance of our business, and (iii) permits investors to gain an understanding of the factors and trends affecting our ongoing earnings, from which capital investments are made and debt is serviced. However, such measures are not a measure of financial performance or liquidity under GAAP and, accordingly, should not be considered as an alternative to net income or net income per share as indicators of operating performance or liquidity. Also these measures may not be comparable to similarly titled captions of other companies.
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Raphael Gross
Investor Relations
203-682-8253
investors@frgi.com
Fiesta Restaurant Group, Inc. owns, operates and franchises the Pollo Tropical® and Taco Cabana® restaurant brands