Fiesta Restaurant Group, Inc. Reports First Quarter 2015 Results

ADDISON, Texas - April 30, 2015 - (BUSINESS WIRE) - Fiesta Restaurant Group, Inc. (“Fiesta” or the “Company”) (NASDAQ:FRGI), parent company of the Pollo Tropical® and Taco Cabana® fast-casual restaurant brands, today reported results for the first quarter 2015, which ended on March 29, 2015.

Highlights of the first quarter 2015 results as compared to the first quarter 2014 include:

  • Total revenues increased 12.7% to $163.9 million;
  • Comparable restaurant sales increased 6.4% and comparable guest traffic increased 0.9% at Pollo Tropical;
  • Comparable restaurant sales increased 3.8% and comparable guest traffic increased 0.7% at Taco Cabana;
  • Net income increased 20.4% to $10.5 million;
  • Earnings per diluted share increased 18.2% to $0.39; and
  • Six Company-owned and operated Pollo Tropical restaurants were opened and three Company-owned Taco Cabana restaurants were closed.

Fiesta President and Chief Executive Officer Tim Taft commented, “By generating increases of 12.7% in revenues and 18.2% in diluted EPS during the first quarter, our team has once again done a great job delivering strong financial results for shareholders. The Pollo Tropical brand continues to build upon its strong track record by growing comparable transactions and opening successful restaurants in both new and existing markets, while the Taco Cabana brand continues to demonstrate the positive impact of improved operational execution, remodels and value-oriented promotions.”

First Quarter 2015 Financial Review

Consolidated Results

Total revenues increased 12.7% to $163.9 million from $145.4 million compared to the prior year period due primarily to 23 net Company-owned restaurant openings as well as comparable restaurant sales growth of 6.4% at Pollo Tropical and 3.8% at Taco Cabana. Pollo Tropical has generated comparable restaurant sales growth for the 22nd consecutive quarter while Taco has generated comparable restaurant sales growth for 18 out of the past 19 quarters and for the fifth consecutive quarter.

Cost of sales as a percentage of restaurant sales was approximately the same as the prior year period as price increases, favorable sales mix related to the implementation of new menu boards at Taco Cabana in the first quarter 2015, and supply chain management initiatives offset commodity cost increases.

Restaurant wages and related expenses as a percentage of restaurant sales improved 30 basis points compared to the prior year period due to the positive impact of sales increases, partially offset by labor costs at new Company-owned restaurants.

General and administrative expenses increased $1.6 million to $13.8 million compared to the prior year period due primarily to investments in human capital and training to support the ongoing Pollo Tropical expansion effort in new markets. As a percentage of revenues, general and administrative expenses held steady compared to the prior year period.

Impairment and other lease charges of $0.1 million consisted primarily of asset impairment charges of non-transferable assets at restaurants to be closed in 2015.

Other income of $0.4 million included the impact of a previously deferred gain from a sale-leaseback transaction that was recognized upon termination of a lease as a result of an eminent domain proceeding.

Interest expense decreased $0.2 million to $0.4 million compared to the prior year period due primarily to lower borrowing rates as well as higher capitalized interest in 2015.

The effective tax rate of 38.3% held steady compared to the prior year period.

Net income increased to $10.5 million, or $0.39 per diluted share (on a base of 26.4 million diluted shares), compared to a net income of $8.7 million, or $0.33 per diluted share (on a base of 26.2 million diluted shares) in the prior year period.

Brand Results

Pollo Tropical restaurant sales increased 21.8% to $86.9 million compared to the prior year period due to 24 net Company-owned restaurant openings and a comparable restaurant sales increase of 6.4%. The growth in comparable restaurant sales resulted from a 5.5% increase in average check along with a 0.9% increase in comparable guest traffic. Average check was primarily driven by menu price increases that positively impacted restaurant sales by 5.4%. This is the 22nd consecutive quarter the brand has delivered comparable restaurant sales growth and, on a two-year basis, quarterly comparable restaurant sales grew 12.7%. Adjusted EBITDA for Pollo Tropical, a non-GAAP financial measure, increased 17.1% to $16.0 million compared to the prior year period (see non-GAAP reconciliation table below).

Taco Cabana restaurant sales increased 3.7% to $76.2 million compared to the prior year period due to a 3.8% increase in comparable restaurant sales, net of restaurant closures. The increase in comparable restaurant sales resulted from a 3.1% increase in average check along with a 0.7% increase in comparable guest traffic. Average check was driven by menu price increases that positively impacted restaurant sales by 1.9% and a positive change in sales mix due to the implementation of new menu boards in the first quarter of 2015. This is the fifth consecutive quarter and 18 out of the past 19 quarters the brand has delivered comparable restaurant sales growth. On a two-year basis, quarterly comparable restaurant sales grew 4.6%. Adjusted EBITDA for Taco Cabana, a non-GAAP financial measure, increased 26.1% to $9.0 million compared to the prior year period (see non-GAAP reconciliation table below).

Restaurant Development

During the first quarter 2015, Fiesta opened six Company-owned and operated Pollo Tropical restaurants in Florida, Georgia and Texas, and closed three Company-owned and operated Taco Cabana restaurants in Texas.

As of March 29, 2015, the Company owned and operated 130 Pollo Tropical restaurants and 164 Taco Cabana restaurants (including two Cabana Grill restaurants) and franchised 37 Pollo Tropical restaurants in the U.S., Puerto Rico, the Bahamas, Ecuador, Guatemala, Honduras, Panama, Trinidad & Tobago, Venezuela and the Dominican Republic, and seven Taco Cabana restaurants in the U.S.

Investor Conference Call Today

Fiesta will host a conference call to review first quarter 2015 results today at 4:30 PM ET. Hosting the call will be Tim Taft, President and Chief Executive Officer, and Lynn Schweinfurth, Senior Vice President and Chief Financial Officer.

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 13606348. The replay will be available until Thursday, May 7, 2015.

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.

About Fiesta Restaurant Group, Inc.

Fiesta Restaurant Group, Inc. is the parent company of 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.

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.    
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS    
THREE MONTHS ENDED MARCH 29, 2015 AND MARCH 30, 2014    
(In thousands of dollars, except share and per share amounts)    
(Unaudited)    
     
          Three months ended (a)    
          March 29, 2015       March 30, 2014    
                       
Revenues:                      
Restaurant sales         $     163,058         $     144,825      
Franchise royalty revenues and fees         817         611      
Total revenues         163,875         145,436      
Costs and expenses:                      
Cost of sales         51,123         45,529      
Restaurant wages and related expenses (b)         40,590         36,506      
Restaurant rent expense         8,007         7,204      
Other restaurant operating expenses         19,859         17,885      
Advertising expense         5,554         5,419      
General and administrative expenses (b)         13,764         12,151      
Depreciation and amortization         6,847         5,345      
Pre-opening costs         951         683      
Impairment and other lease charges         94         (15 )    
Other (income) expense         (372 )       (6 )    
Total costs and expenses         146,417         130,701      
Income from operations         17,458         14,735      
Interest expense         438         603      
Income before income taxes         17,020         14,132      
Provision for income taxes         6,519         5,413      
Net income         $     10,501         $     8,719      
Basic net income per share         $     0.39         $     0.33      
Diluted net income per share         $     0.39         $     0.33      
Basic weighted average common shares outstanding         26,435,166         26,201,747      
Diluted weighted average common shares outstanding         26,442,602         26,202,309      
                           

 

(a) The Company uses a 52 or 53 week fiscal year that ends on the Sunday closest to December 31. The three month periods ended March 29, 2015 and March 30, 2014 included 13 weeks.

 
(b) Restaurant wages and related expenses include stock-based compensation expense of $67 and $9 for the three month periods ended March 29, 2015 and March 30, 2014, respectively. General and administrative expenses include stock-based compensation expense of $874 and $712 for the three month periods ended March 29, 2015 and March 30, 2014, respectively.
 

 

     
FIESTA RESTAURANT GROUP, INC.    
CONDENSED CONSOLIDATED BALANCE SHEETS    
(In thousands of dollars, except share and per share amounts)    
(unaudited)    
     
          March 29, 2015       December 28, 2014    
                       
Assets                      
Cash         $       3,523         $   5,087    
Other current assets         22,388         23,018    
Property and equipment, net         204,882         191,371    
Goodwill         123,484         123,484    
Deferred income taxes         11,055         11,055    
Deferred financing costs, net         1,156         1,233    
Other assets         3,430         2,708    
Total assets         $       369,918         $   357,956    
                       
Liabilities and Stockholders' Equity                      
Current liabilities         $       35,625         $   39,423    
Long-term debt, net of current portion         71,266         67,264    
Lease financing obligations         1,661         1,660    
Deferred income—sale-leaseback of real estate         32,808         34,079    
Other liabilities         16,641         15,943    
Total liabilities         158,001         158,369    
Stockholders' equity         211,917         199,587    
Total liabilities and stockholders' equity         $       369,918         $   357,956    
                                     

 

     
FIESTA RESTAURANT GROUP, INC.    
Supplemental Information    

The following table sets forth certain unaudited supplemental financial and other data for the periods indicated

   
(in thousands, except percentages):    
     
          (unaudited)    
          Three months ended    
          March 29, 2015       March 30, 2014    
Segment revenues:                      
Pollo Tropical         $ 87,570         $ 71,844      
Taco Cabana         76,305         73,592      
Total revenues         $ 163,875         $ 145,436      
                       
Change in comparable restaurant sales (a):                      
Pollo Tropical         6.4 %       6.3 %    
Taco Cabana         3.8 %       0.8 %    
                       
Average sales per Company-owned restaurant (b):                      
Pollo Tropical                      
Comparable restaurants (c)         $ 737         $ 715      
New restaurants         509         494      
Total company-owned         686         682      
Taco Cabana                      
Comparable restaurants (c)         $ 463         $ 449      
New restaurants         339         392      
Total company-owned         459         445      
                       
Income before income taxes:                      
Pollo Tropical         $ 11,590         $ 10,496      
Taco Cabana         5,430         3,636      
                       
Adjusted EBITDA (d):                      
Pollo Tropical         $ 16,011         $ 13,677      
Taco Cabana         8,957         7,103      
                       
Restaurant-Level Adjusted EBITDA (d):                      
Pollo Tropical         $ 23,528         $ 19,610      
Taco Cabana         14,464         12,681      
                           

 

(a) Restaurants are included in comparable restaurant sales after they have been open for 18 months.
 
(b) Average sales for Company-owned restaurants are derived by dividing restaurant sales for such period for the applicable segment by the average number of open restaurants for the applicable segment for such period.
 
(c) Average sales for comparable Company-owned restaurants are derived by dividing comparable restaurant sales for such period for the applicable segment by the average number of comparable restaurants for the applicable segment for such period.
 
(d) Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP financial measures. Please see the reconciliation of Restaurant-Level Adjusted EBITDA and Adjusted EBITDA to net income in the table on the following page of this release.
 

 

       
FIESTA RESTAURANT GROUP, INC.    
Supplemental Information    
The following table sets forth certain unaudited supplemental data for the periods indicated:    
       
          (unaudited)    
          Three months ended    
          March 29, 2015         March 30, 2014    
                         
Company-owned restaurant openings:                        
Pollo Tropical         6         4    
Taco Cabana                    
Total new restaurant openings         6         4    
                         
Company-owned restaurant closings:                        
Pollo Tropical                    
Taco Cabana         (3 )          
Net change in restaurants         3         4    
                         
Number of Company-owned restaurants:                        
Pollo Tropical         130         106    
Taco Cabana         164         165    
Total Company-owned restaurants         294         271    
                         
Number of franchised restaurants:                        
Pollo Tropical         37         39    
Taco Cabana         7         7    
Total franchised restaurants         44         46    
                         
Total number of restaurants:                        
Pollo Tropical         167         145    
Taco Cabana         171         172    
Total restaurants         338         317    
                         

 

     
FIESTA RESTAURANT GROUP, INC.    
Supplemental Information    
The following table sets forth certain unaudited supplemental financial and other data for the periods indicated    
(in thousands, except percentages):    
     
          Three months ended    
          March 29, 2015         March 30, 2014    
                (a)               (a)    
Pollo Tropical:                                    
Restaurant sales         $     86,889                 $     71,356            
Cost of sales         28,539       32.8 %         23,229       32.6

 

%

 
Restaurant wages and related expenses         18,754       21.6 %         15,265       21.4

 

%

 
Restaurant rent expense         3,649       4.2 %         2,917       4.1

 

%

 
Other restaurant operating expenses         10,089       11.6 %         8,377       11.7

 

%

 
Advertising expense         2,358       2.7 %         1,962       2.7

 

%

 
Depreciation and amortization         3,739       4.3 %         2,577       3.6

 

%

 
Pre-opening costs         870       1.0 %         533       0.7

 

%

 
Impairment and other lease charges               %         (39 )     (0.1

)

%

 
                                     
Taco Cabana:                                    
Restaurant sales         $     76,169                 $     73,469            
Cost of sales         22,584       29.6 %         22,300       30.4

 

%

 
Restaurant wages and related expenses         21,836       28.7 %         21,241       28.9

 

%

 
Restaurant rent expense         4,358       5.7 %         4,287       5.8

 

%

 
Other restaurant operating expenses         9,770       12.8 %         9,508       12.9

 

%

 
Advertising expense         3,196       4.2 %         3,457       4.7

 

%

 
Depreciation and amortization         3,108       4.1 %         2,768       3.8

 

%

 
Pre-opening costs         81       0.1 %         150       0.2

 

%

 
Impairment and other lease charges         94       0.1 %         24      

 

%

 
                                             

 

(a) Percent of restaurant sales for the applicable segment.
 

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, supply chain, development 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 a 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 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) 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 a measure 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.

          (unaudited)    
          Three months ended    
          March 29, 2015       March 30, 2014    
                       
Restaurant-Level Adjusted EBITDA:                      
Pollo Tropical         $   23,528         $   19,610      
Taco Cabana         14,464         12,681      
Consolidated         37,992         32,291      
Add:                      
Franchise royalty revenue and fees         817         611      
Less:                      
Pre-opening costs         951         683      

General and administrative (excluding stock-based compensation expense

                         

of $874 and $712, respectively)

        12,890         11,439      
Adjusted EBITDA:                      
Pollo Tropical         16,011         13,677      
Taco Cabana         8,957         7,103      
Consolidated         24,968         20,780      
Less:                      
Depreciation and amortization         6,847         5,345      
Impairment and other lease charges         94         (15 )    
Interest expense         438         603      
Provision for income taxes         6,519         5,413      
Stock-based compensation expense         941         721      
Other (income) expense         (372 )       (6 )    
Net income         $   10,501         $   8,719      
                                   
                                   

SOURCE Fiesta Restaurant Group, Inc.

Contact:

Raphael Gross
Investor Relations:
Fiesta Restaurant Group, Inc.
203-682-8253
investors@frgi.com

###

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