DALLAS - (BUSINESS WIRE) - May 07, 2020 - 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 2020, which ended on March 29, 2020 and provided a business update related to current operations.
Fiesta President and Chief Executive Officer Richard Stockinger said, "Our priorities in this time of crisis have been and will continue to be as follows: Taking steps to ensure the safety and well-being of our team members and customers, protecting the reputation of our brands and the Company, doing right by our employees, shareholders, vendor partners, service providers and landlords, and continuing to be a leader in our communities. I am proud of our team for their focus on those priorities, while developing new and better ways to drive sales and maximize results."
Mr. Stockinger continued, "Post COVID-19 comp sales declines stabilized in late March and early April at both brands, and we have realized sequential sales improvement weekly at both brands since that time. Aided by strong drive thru and carry out sales, recent weekly Taco Cabana comparable restaurant sales for the two weeks ended May 3, 2020 have improved to down 18.6% compared to the same weeks last year. Pollo Tropical comparable restaurant sales trends have improved to down 37.8% compared to the same weeks last year, supported by increased drive thru and delivery sales. At those sales trends we estimate that we generate break-even profitability, which we believe should be sustainable and provide us a base from which to rebuild the bottom line as the economy re-accelerates."
Mr. Stockinger added, "We are seizing the opportunity created by changes in response to COVID-19 to create a better business model designed to enable our customers to enjoy our brands safely wherever and however they choose. We have expanded and will continue to expand delivery options, we are creating more in-home dining options including Pollo Pantry and TC Pantry and we are rapidly improving our curbside and pick up capabilities to be faster and safer for our customers. Additionally, we have completed our re-opening plans in compliance with applicable state and local guidelines for the return of safe dine-in activity in Texas and Florida in markets that are allowing dine-in activity."
Mr. Stockinger concluded, "We have been working to maximize efficiency and operating flexibility since this crisis began. Early in the second quarter of 2020 we drew down all revolver capacity under our senior credit facility and had a total cash balance of approximately $91.6 million as of May 6. We have been successfully working with our vendor partners, service providers and landlords regarding more flexible payment terms and cost reductions. We cut our 2020 capex plans in half and are focusing only on necessary capital projects. We were in full compliance with our loan financial covenants under our senior credit facility at the end of the first quarter of 2020, and we are proactively working with our lenders to amend our financial covenants under our senior credit facility to avoid any potential issues in the future given the economic uncertainty related to the pandemic. In conclusion, we are confident that we will ultimately exit this crisis as a company better positioned for future sales and profit growth."
First Quarter 2020 Financial Summary
Recent Results
COVID-19 Business Update
On March 16, 2020, we announced in an SEC filing on Form 8-K that we had closed all of our dining room seating areas in all Pollo Tropical and Taco Cabana restaurants in Florida and Texas, respectively, due to the COVID-19 pandemic. Since that time, we have continued to make proactive changes designed to ensure our top priority of the safety of our guests, team members and franchisees.
We have taken the following health safety preventive measures in response to the COVID-19 pandemic:
As government authorities move toward reducing COVID-19 restrictions, we are in the process of implementing the following additional measures:
Since the efforts to respond to the COVID-19 crisis are constantly changing, we will continue to monitor the situation closely and implement additional measures as needed to ensure the safety of our team members and guests.
We also implemented a number of operational changes to maximize sales, maintain service, improve liquidity and help our communities in response to the COVID-19 crisis:
The COVID-19 pandemic has not had a significant negative disruptive impact on our supply chain or access to labor, although there can be no assurance that there will not be a significant impact on our supply chain or access to labor in the future. We are actively monitoring our food suppliers to determine how they are managing their operations to mitigate supply flow and food safety risks. To ensure we mitigate potential supply availability risk, we are building additional inventory backstock levels when appropriate and we have also identified alternative supply sources in key product categories including but not limited to proteins and sanitation and safety supplies.
First Quarter 2020 Brand Results
Total Pollo Tropical restaurant sales decreased 5.8% to $85.7 million in the first quarter of 2020 compared to $91.0 million in the first quarter of 2019 primarily due to a comparable restaurant sales decrease of 7.3% that was partially offset by incremental sales related to new restaurants, net of closed restaurants. Comparable restaurant sales for Pollo Tropical increased 0.6% during the first ten weeks of the first quarter of 2020 prior to the impact of COVID-19 and decreased 32.0% during the last three weeks of the first quarter of 2020. Off premise sales consisting of online, catering, and delivery orders comprised 7.1% of total restaurant sales in the first quarter of 2020 compared to 2.6% of total restaurant sales in the first quarter of 2019.
Sales cannibalization from new restaurants on existing restaurants negatively impacted comparable restaurant sales by approximately 40 basis points. The decrease in comparable restaurant sales resulted from an 8.3% decrease in comparable restaurant transactions and a 1.0% increase in average check. The increase in average check was driven primarily by menu price increases of 0.2%, an increase in delivery orders and higher priced promotions.
Adjusted EBITDA for Pollo Tropical decreased to $8.8 million in the first quarter of 2020 from $14.3 million in the first quarter of 2019. The decrease was primarily due to the impact of lower comparable restaurant sales, including higher cost of sales, restaurant wages, rent expense, and other restaurant operating expenses, as a percentage of restaurant sales, and higher delivery fees and advertising expenses, partially offset by lower repair and maintenance costs and general and administrative expenses.
Taco Cabana restaurant sales decreased 18.6% to $60.4 million in the first quarter of 2020 from $74.2 million in the first quarter of 2019 due primarily to a comparable restaurant sales decrease of 13.5% along with a decrease in sales related to closed restaurants, net of new restaurants. Comparable restaurant sales for Taco Cabana decreased 8.6% during the first ten weeks of the first quarter of 2020 prior to the impact of COVID-19 compared to the prior year period and decreased 28.3% during the last three weeks of the first quarter of 2020 compared to the prior year period. Off premise sales consisting of online, catering, and delivery orders comprised 5.6% of total restaurant sales in the first quarter of 2020 compared to 2.5% of total restaurant sales in the first quarter of 2019. The decrease in comparable restaurant sales resulted from a 14.9% decrease in comparable restaurant transactions and a 1.4% increase in average check. The increase in average check was driven primarily by higher priced limited time offers compared to prior year promotions and an increase in transactions that include alcohol.
Adjusted EBITDA for Taco Cabana decreased to $(0.9) million from $2.9 million in the first quarter of 2019. The decrease was primarily due to the impact of lower comparable restaurant sales, including higher cost of sales, rent expense, advertising expense, and other operating expenses as a percent of restaurant sales and higher delivery fees, partially offset by lower medical benefit costs and general and administrative expenses.
Restaurant Portfolio
During the first quarter of 2020, there was one Company-owned Pollo Tropical restaurant closing, one Pollo Tropical franchised restaurant opening, one Company-owned Taco Cabana restaurant opening, and 19 Company-owned Taco Cabana restaurant closings. As of March 29, 2020, there were 141 Company-owned Pollo Tropical restaurants, 146 Company-owned Taco Cabana restaurants, 33 franchised Pollo Tropical restaurants in the U.S., Puerto Rico, Panama, Guyana, Ecuador and the Bahamas, and eight franchised Taco Cabana restaurants in the U.S.
Share Repurchase Activity
We repurchased 500,000 shares of common stock valued at approximately $3.7 million during the three months ended March 29, 2020. The shares repurchased in 2020 were purchased on or before March 12, 2020.
Full Year 2020 Outlook Withdrawn
On March 19, 2020 we withdrew our full year 2020 outlook for the 53-week period as communicated in our February 26, 2020 earnings release as we cannot reasonably estimate the impact of COVID-19 on our business at this time.
Investor Conference Call Today
We will host a conference call at 4:30 p.m. ET today. The conference call can be accessed live over the phone by dialing 323-794-2423. A replay will be available after the call until Thursday, May 14 and can be accessed by dialing 412-317-6671. The passcode is 9821789. The conference call will also be webcast live from the corporate website, 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/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.
Forward Looking Statements
Certain statements contained in this news release and in our public disclosures, whether written, oral or otherwise made, relating to future events or future performance, including any discussion, express or implied regarding our anticipated growth, plans, objectives and the impact of our investments in strategic and sales building initiatives, including those relating to advertising and marketing, operations improvements, menu development and simplification, digital ordering and online sales, catering and third-party delivery and the impact of the recent COVID-19 outbreak (including without limitation, any potential non-compliance with our covenants which results in a default under our senior credit facility and, in such instance, our inability to procure an amendment or waiver from our lenders or access alternative financing) on future sales, margins, earnings and liquidity, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are often identified by the words "may," "might," "believes," "thinks," "anticipates," "plans," "positioned," "target," "continue," "expects," "look to," "intends" and other similar expressions, whether in the negative or the affirmative, that are not statements of historical fact. These forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict, and you should not place undue reliance on our forward-looking statements. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those discussed from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 29, 2019 and our quarterly reports on Form 10-Q. All forward-looking statements and the internal projections and beliefs upon which we base our expectations included in this release are made only as of the date of this release and may change. While we may elect to update forward-looking statements at some point in the future, we expressly disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
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 (loss) attributable to the applicable operating segments before interest expense, income taxes, depreciation and amortization, impairment and other lease charges, goodwill impairment, closed restaurant rent expense, net of sublease income, 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, goodwill impairment, closed restaurant rent expense, net of sublease income, other expense (income), net, board and shareholder matter costs, 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.
SOURCE Fiesta Restaurant Group, Inc.
Fiesta Restaurant Group, Inc. owns, operates and franchises the Pollo Tropical® and Taco Cabana® restaurant brands