April Comparable Restaurant Sales Increased 2.8% at Pollo Tropical and 0.9% at Taco Cabana
Restaurant Margins Improved at Pollo Tropical
DALLAS - (BUSINESS WIRE) - May 07, 2018 - Fiesta Restaurant Group, Inc. (“Fiesta” or the “Company”) (NASDAQ:FRGI), parent company of the Pollo Tropical® and Taco Cabana® restaurant brands, today reported results for the 13-week first quarter of 2018, which ended on April 1, 2018.
Fiesta President and Chief Executive Officer Richard Stockinger said, “Last year, we developed and began implementing our Strategic Renewal Plan (the “Plan”) in earnest, starting with Pollo Tropical and following a few months later with Taco Cabana. We believe our Plan is driving intended operational and financial performance improvements.”
Mr. Stockinger continued, “For the past five consecutive months, comparable restaurant sales at Pollo Tropical increased, including comparable restaurant sales growth of 2.8% in April. As part of the Plan, we conducted consumer research in multiple markets to develop and validate our strategic positioning, service standards and menu innovation. We initially prioritized much of our Plan implementation in Pollo Tropical’s core markets where we generated system-leading comparable restaurant sales growth in the first quarter. An important new product platform for Pollo Tropical, hand-battered crispy citrus-marinated chicken, has been extremely successful, with broad appeal across all markets. More work needs to be done, but we believe we are establishing a promising foundation for future expansion.”
Mr. Stockinger added, “The early indicators of Taco Cabana’s revitalization are mirroring what we experienced at Pollo Tropical, including improving guest and social media scores, fewer guest complaints and growing guest compliments. While still early, we are encouraged by April comparable restaurant sales growth of 0.9%. Similar to Pollo Tropical, Taco Cabana’s consumer research has helped us to develop our brand positioning and related initiatives, including a focus on tacos with improved proteins, flavorful toppings and the successful reintroduction of Texas brisket. Leading up to our Taco Cabana brand re-launch this summer, we are implementing additional brand enhancements which we believe will continue to build our business momentum and improve restaurant margins.”
First Quarter 2018 Financial Summary
First Quarter 2018 Brand Results
Pollo Tropical restaurant sales decreased 4.9% to $94.5 million in the first quarter of 2018 compared to the prior year period due primarily to 34 fewer Company-owned restaurants in operation compared to the prior year period as a result of closing unprofitable restaurants, partially offset by a comparable restaurant sales increase of 1.1%. The increase in comparable restaurant sales resulted from a 3.4% increase in average check, partially offset by a 2.3% decrease in comparable restaurant transactions. Comparable restaurant sales and transactions were negatively impacted by the fiscal calendar shift of New Year’s Day and Easter. The increase in average check was primarily driven by menu price increases that positively impacted restaurant sales, higher priced promotions and add-on sales.
Adjusted EBITDA for Pollo Tropical decreased to $14.4 million in the first quarter of 2018 from $14.7 million in the first quarter of 2017 due primarily to the impact of an increase in cost of sales as a percentage of sales and higher repairs and maintenance costs primarily driven by the initiatives under the Plan, partially offset by higher comparable restaurant sales, lower advertising costs and the impact of closing unprofitable restaurants in 2017.
Taco Cabana restaurant sales decreased 1.7% to $74.4 million in the first quarter of 2018 compared to the prior year period due to a comparable restaurant sales decrease of 1.7%. The decrease in comparable restaurant sales resulted from an 11.3% decrease in comparable restaurant transactions, partially offset by a 9.6% increase in average check. Comparable restaurant transactions were negatively impacted primarily by the elimination of deep discounting related to the repositioning of the brand, the reduction in overnight operating hours and the fiscal calendar shift of New Years’ Day and Easter. The increase in average check was primarily driven by positive sales mix associated with higher priced promotions and new menu items related to the repositioning of the brand, and menu price increases.
Adjusted EBITDA for Taco Cabana decreased to $2.5 million in the first quarter of 2018 from $6.5 million in the first quarter of 2017 due primarily to the impact of lower comparable restaurant sales, higher cost of sales as a percentage of sales and higher repairs and maintenance costs primarily driven by the initiatives under the Plan, and higher restaurant wages and related expenses, partially offset by lower advertising costs.
Capital Allocation
Anticipated capital expenditures in 2018 include opening seven to eight new Company-owned Pollo Tropical restaurants in Florida and seven to eight new Company-owned Taco Cabana restaurants in Texas. Up to five of the new Taco Cabana restaurants are expected to come from converting closed Pollo Tropical restaurants. Total capital expenditures in 2018 are expected to be $60.0 million to $70.0 million, including $22.0 million to $25.0 million for the development of new restaurants.
Restaurant Portfolio
As of April 1, 2018, there were 146 Company-owned Pollo Tropical restaurants, 166 Company-owned Taco Cabana restaurants, 31 franchised Pollo Tropical restaurants in the U.S., Puerto Rico, the Bahamas, Guyana, Panama and Venezuela and seven franchised Taco Cabana restaurants in the U.S. There were no restaurant openings during the first quarter of 2018.
Investor Conference Call Today
Fiesta will host a conference call at 4:30 p.m. ET today. The conference call can be accessed live over the phone by dialing 201-689-8562. A replay will be available after the call until Monday, May 14, 2018, and can be accessed by dialing 412-317-6671. The passcode is 13678815. 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 Pollo Tropical® and Taco Cabana® restaurant brands. The brands specialize in the operation of fast casual/quick service restaurants that offer distinct and unique flavors with broad appeal at a compelling value. The brands feature fresh-made cooking, drive-thru service and catering. For more information about Fiesta Restaurant Group, Inc., visit the corporate website at www.frgi.com.
Forward-Looking Statements
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.
FIESTA RESTAURANT GROUP, INC.
Supplemental Non-GAAP Information
The following table sets forth certain unaudited supplemental financial data for the periods indicated
(In thousands):
Consolidated Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP financial measures. Adjusted EBITDA is defined as earnings attributable to the applicable operating segments before interest expense, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense, other expense (income), net, and certain significant items for each segment that are related to strategic changes and/or are not related to the ongoing operation of our restaurants as set forth in the reconciliation table below. 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 finance, legal, supply chain, human resources, construction and other administrative functions. Restaurant-Level Adjusted EBITDA is defined as Adjusted EBITDA excluding franchise royalty revenues and fees, pre-opening costs and general and administrative expenses (including corporate-level general and administrative expenses).
Adjusted EBITDA for each of our segments is the primary measure of segment profit or loss used by our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance. In addition, management believes that Consolidated Adjusted EBITDA and Restaurant-Level Adjusted EBITDA, when viewed with our results of operations calculated in accordance with GAAP and our reconciliation of net income (loss) to Consolidated Adjusted EBITDA and Restaurant-Level Adjusted EBITDA (i) provide useful information about our operating performance and period-over-period changes, (ii) provide additional information that is useful for evaluating the operating performance of our business, and (iii) permit 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 measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income or cash flow from operating activities as indicators of operating performance or liquidity. Also, these measures may not be comparable to similarly titled captions of other companies.
FIESTA RESTAURANT GROUP, INC.
Supplemental Non-GAAP Information
The following table sets forth certain unaudited supplemental financial data for the periods indicated
(In thousands of dollars, except per share amounts):
Adjusted net income and related adjusted diluted earnings per share are non-GAAP financial measures. Adjusted net income is defined as net income (loss) before impairment and other lease charges, other expense (income), net, unused pre-production costs in advertising expense, terminated capital project costs, board and shareholder matter costs, Plan restructuring costs and retention bonuses, certain legal settlements and related costs and other significant items that are related to strategic changes and/or are not related to the ongoing operation of our restaurants. Management believes that adjusted net income and related adjusted earnings per diluted share, when viewed with our results of operations calculated in accordance with GAAP (i) provide useful information about our operating performance and period-over-period growth, (ii) provide additional information that is useful for evaluating the operating performance of our business, and (iii) permit 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 measures of financial performance or liquidity under GAAP and, accordingly should not be considered as alternatives 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.
Raphael Gross
Investor Relations
Fiesta Restaurant Group, Inc.
203-682-8253
investors@frgi.com
SOURCE Fiesta Restaurant Group, Inc.
Fiesta Restaurant Group, Inc. owns, operates and franchises the Pollo Tropical® and Taco Cabana® restaurant brands