Del Taco Restaurants, Inc. Announces Fiscal Second Quarter 2015 Financial Results For Del Taco Holdings, Inc.

Del Taco Holdings, Inc. is a wholly-owned subsidiary of Del Taco Restaurants, Inc.; Conference Call and Webcast will be held at 5:00 PM EDT Today

LAKE FOREST, Calif. - July 28, 2015 - (BUSINESS WIRE) - Del Taco Restaurants, Inc. (NASDAQ: TACO, TACOW), today announced fiscal second quarter financial results for its wholly-owned subsidiary Del Taco Holdings, Inc. (“Del Taco” or the “Company”), the second largest Mexican-American QSR chain by units in the United States, operating restaurants under the name Del Taco.

Fiscal second quarter 2015 financial results for Del Taco reflect the twelve weeks ended June 16, 2015, prior to the closing of the recent business combination (the “Business Combination”) between Del Taco and Levy Acquisition Corp. which occurred on June 30, 2015. In connection with the closing of the Business Combination, Levy Acquisition Corp. changed its name to Del Taco Restaurants, Inc. and Del Taco Holdings, Inc. became a wholly-owned subsidiary of Del Taco Restaurants, Inc.

Fiscal Second Quarter 2015 Highlights

  • Total revenue of $97.6 million, representing 7.0% growth from the fiscal second quarter of 2014;
  • System-wide comparable restaurant sales growth of 6.0% and company-owned comparable restaurant sales growth of 5.9%, marking the seventh and twelfth consecutive quarter of gains, respectively;
  • Income from operations of $11.3 million, representing 30.2% growth from the same fiscal quarter last year;
  • Restaurant contribution margin of 19.8%, an improvement of approximately 150 basis points from the prior year’s fiscal second quarter;
  • Adjusted EBITDA, a non-GAAP financial measure, of $15.3 million, representing 12.2% growth from the previous year’s fiscal second quarter; and
  • The opening of two new company-operated restaurants.

Paul J.B. Murphy, III, President and Chief Executive Officer of Del Taco, commented, “We are delighted with our second quarter financial results which demonstrate continued strong and accelerating brand momentum. Our successful execution of our Combined Solutions strategy is gaining further traction and enabling us to deliver an elevated brand experience and improve our freshness perceptions. These efforts are in turn driving meaningful improvements in our key performance indicators and solidifying our QSR+ positioning.”

Murphy continued, “The closing of the merger with Levy Acquisition Corp. on June 30th marked the end of one chapter for Del Taco and the beginning of an exciting new one in our company’s history. The invaluable guidance from our talented Board, along with our newly strengthened balance sheet, positions us well to embark on this next phase of our growth. We look forward to showcasing delicious, fresh, made-to-order Mexican and American classics at a great value to guests across the country.”

Review of Fiscal Second Quarter 2015 Financial Results

Total revenue was $97.6 million, an increase of 7.0% compared to $91.2 million in the fiscal second quarter of 2014. The growth in revenue was driven by a 7.1% increase in company restaurant sales and a 4.4% increase in franchise revenue.

Comparable restaurant sales increased 6.0% system-wide for the fiscal quarter ended June 16, 2015 compared to the 4.8% gain in the prior year fiscal second quarter, for a two-year growth rate of 10.8%. The Del Taco system has now generated comparable restaurant sales growth for seven consecutive quarters. Company-owned comparable restaurant sales increased 5.9% and included a 2.0% gain in traffic, marking the twelfth consecutive quarter of comparable restaurant sales growth. Franchise comparable restaurant sales increased 6.2%.

Restaurant contribution increased 15.9% year-over-year to $18.6 million. As a percentage of company restaurant sales, restaurant contribution increased approximately 150 basis points year-over-year to 19.8%. The increase was driven by an approximate 90 basis point improvement in food and paper costs, and approximately 30 basis point improvements in both labor and related expenses and occupancy and other operating expenses.

Adjusted EBITDA, a non-GAAP financial measure, was $15.3 million, an increase of 12.2% from $13.6 million in the previous year’s fiscal second quarter. A reconciliation between adjusted EBITDA and the nearest GAAP financial measure is included in the accompanying financial data.

Income from operations increased 30.2% to $11.3 million compared to $8.6 million in the prior year fiscal second quarter.

Net income was $4.6 million compared to net loss of $0.1 million in the fiscal second quarter of 2014, and included $0.9 million of transaction-related costs that consist of direct costs incurred in connection with our two-step transaction.

Key Financial Definitions

Comparable restaurant sales growth reflects the change in year-over-year sales for the comparable company, franchise and total system restaurant base. Restaurants are included in the comparable store base in the accounting period following its 18th full month of operations.

Restaurant contribution is defined as company restaurant sales less restaurant operating expenses, which are food and paper costs, labor and related expenses and occupancy and other operating expenses. Restaurant contribution margin is defined as restaurant contribution as a percentage of company restaurant sales. Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP.

Adjusted EBITDA is defined as net income/loss prior to interest expense, income taxes, and depreciation and amortization, as adjusted to add back certain charges, such as stock-based compensation expense and transaction-related costs, as these expenses are not considered an indicator of ongoing company performance. Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income/loss as a measure of operating performance or cash flows or as measures of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior to GAAP results. Adjusted EBITDA is a financial measure that was not calculated in accordance with GAAP. A reconciliation between adjusted EBITDA and the nearest GAAP financial measure is included in the accompanying financial data.

Conference Call and Webcast

Del Taco will host a conference call and webcast to discuss financial results for the fiscal second quarter 2015 today at 5:00 PM EDT.

Hosting the conference call and webcast will be Larry Levy, Chairman of the Board; Paul J.B. Murphy, III, President and Chief Executive Officer; John D. Cappasola, Jr., Executive Vice President and Chief Brand Officer; and Steven L. Brake, Executive Vice President and Chief Financial Officer.

Interested parties may listen to the conference call via telephone by dialing 1-877-407-0789, or for international callers, 1-201-689-8562. A telephone replay will be available shortly after the call has concluded and can be accessed by dialing 1-877-870-5176, or for international callers, 1-858-384-5517. The passcode is 13613715.

The webcast will be available at www.deltaco.com under the investors section and will be archived on the site shortly after the call has concluded.

About Del Taco Restaurants, Inc.

At Del Taco (NASDAQ: TACO) all menu items taste better because they are made to order with fresh ingredients including cheddar cheese grated from 40-pound blocks, handmade pico de gallo salsa, lard-free beans slow-cooked from scratch, fresh sliced avocado and marinated chicken grilled in the restaurant. The menu, which includes a full line of breakfast, includes classic Mexican dishes such as tacos, burritos, quesadillas and nachos as well as American favorites including hamburgers, crinkle-cut fries and shakes. Del Taco’s UnFreshing Believable campaign communicates the lengths the company goes to in order to deliver quality, made-to-order menu items created with freshly-prepared ingredients at unbelievable prices. With nearly 550 restaurants in 16 states, Del Taco serves more than three million guests each week. In June 2015, Del Taco changed its name to Del Taco Restaurants, Inc. following the completion of its transition to a public company.

For more information, please visit www.deltaco.com.

Forward-Looking Statements

In addition to historical information, this release may contain a number of “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, information concerning Del Taco’s possible or assumed future results of operations, business strategies, competitive position, industry environment, potential growth opportunities and the effects of regulation. These statements are based Del Taco’s management’s current expectations and beliefs, as well as a number of assumptions concerning future events. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Del Taco’s management’s control that could cause actual results to differ materially from the results discussed in the forward-looking statements. These risks included, without limitation, consumer demand, our inability to successfully open company-operated or franchised restaurants or establish new markets, competition in our markets, our inability to grow and manage growth profitably, adverse changes in food and supply costs, our inability to access additional capital, changes in applicable laws or regulations, food safety and foodborne illness concerns, our inability to manage existing and to obtain additional franchisees, our inability to attract and retain qualified personnel, our inability to profitably expand into new markets, and the possibility that we may be adversely affected by other economic, business, and/or competitive factors. Additional risks and uncertainties are identified and discussed in Del Taco’s reports filed with the SEC and available at the SEC’s website at www.sec.gov and the Company’s website at www.deltaco.com.

Forward-looking statements included in this release speak only as of the date of this release. Del Taco undertakes no obligation to update its forward-looking statements to reflect events or circumstances after the date of this release or otherwise.


Del Taco Holdings Inc.
 
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
                 
          June 16,     December 30,
          2015     2014
          (Unaudited)      
Assets                
Current assets:                
Cash and cash equivalents         $ 7,509       $ 8,553  
Accounts and other receivables, net           2,422         3,383  
Inventories           2,594         2,687  
Prepaid expenses and other current assets           3,240         3,816  
Total current assets           15,765         18,439  
                 
Property and equipment, net           91,894         85,164  
Goodwill           281,200         281,200  
Trademarks           144,000         144,000  
Intangible assets, net           16,687         17,683  
Other assets, net           3,564         3,548  
Total assets         $ 553,110       $ 550,034  
                 
Liabilities and shareholders' equity                
Current liabilities:                
Accounts payable         $ 17,003       $ 14,645  
Other accrued liabilities           31,539         32,088  
Current portion of long-term debt, capital lease obligations                
and deemed landlord financing liabilities           1,588         1,634  
Total current liabilities           50,130         48,367  
                 
Long-term debt, capital lease obligations and deemed landlord                
financing liabilities, excluding current portion, net           241,301         321,764  
                 
Deferred income taxes           64,736         64,736  
Warrant liability                   8,309  
Other non-current liabilities           23,307         25,454  
Total liabilities           379,474         468,630  
                 
Commitments and contingencies                
                 
Shareholders' equity:                
Preferred stock $0.01 par value; 200,000 shares authorized;                
none issued                    
Common stock $0.01 par value; authorized 7,800,000 shares;                
6,707,776 and 3,907,835 shares issued and outstanding at                
June 16, 2015 and December 30, 2014, respectively           67         39  
Additional paid-in capital           203,422         110,941  
Accumulated other comprehensive loss           (374 )       (409 )
Accumulated deficit           (29,479 )       (29,167 )
Total shareholders' equity           173,636         81,404  
Total liabilities and shareholders' equity         $ 553,110       $ 550,034  
 

 

 
Del Taco Holdings Inc.
 
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands)
 
          12 Weeks Ended     12 Weeks Ended
          June 16,     June 17,
          2015     2014
Revenues:                
Company restaurant sales         $ 93,902       $ 87,714  
Franchise revenue           3,147         3,015  
Franchise sublease income           554         515  
Total revenue           97,603         91,244  
                 
Operating expenses:                
Restaurant operating expenses:                
Food and paper costs           26,859         25,889  
Labor and related expenses           28,486         26,867  
Occupancy and other operating expenses           19,924         18,886  
General and administrative           6,550         6,280  
Depreciation and amortization           3,796         4,327  
Occupancy and other - franchise subleases           517         489  
Pre-opening costs           129         85  
Restaurant closure charges, net           72         (219 )
Loss (gain) on disposal of assets           14         (6 )
Total operating expenses           86,347         82,598  
                 
Income from operations           11,256         8,646  
                 
Other expenses:                
Interest expense           4,018         7,189  
Transaction-related costs           877          
Debt modification costs           2         1,241  
Total other expenses           4,897         8,430  
                 
Income from operations before provision for                
income taxes           6,359         216  
                 
Provision for income taxes           1,731         356  
Net income (loss)           4,628         (140 )
                 
Other comprehensive (loss) income:                
Change in fair value of interest rate cap           (2 )       (61 )
Reclassification of interest rate cap amortization                
included in net income (loss)           36         2  
Total other comprehensive income (loss), net           34         (59 )
Comprehensive income (loss)         $ 4,662       $ (199 )
 

 

 
Del Taco Holdings Inc.
 
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
          24 Weeks Ended     24 Weeks Ended
          June 16,     June 17,
          2015     2014
Operating activities                
Net loss         $ (312 )     $ (2,027 )
Adjustments to reconcile net loss to net cash                
provided by operating activities:                
Depreciation and amortization           7,588         8,915  
Amortization of deferred financing costs           835         610  
Subordinated note interest paid-in-kind           37         7,780  
Debt modification costs           137         1,241  
Stock-based compensation           532         522  
Change in fair value of warrant liability           (35 )        
Loss (gain) on disposal of assets           14         (205 )
Changes in operating assets and liabilities:                
Accounts receivable           961         220  
Inventories           93         107  
Prepaid expenses and other current assets           571         704  
Accounts payable           2,358         44  
Other accrued liabilities           (95 )       4,731  
Other non-current liabilities           (1,822 )       (510 )
Net cash provided by operating activities           10,862         22,132  
                 
Investing activities                
Purchases of property and equipment           (13,357 )       (8,189 )
Proceeds from disposal of property and equipment           38         194  
Purchases of other assets           (472 )       (315 )
Net cash used in investing activities           (13,791 )       (8,310 )
                 
Financing activities                
Proceeds from term loan, net of debt discount           23,654         60,388  
Proceeds from deemed landlord financing liabilities                   450  
Proceeds from issuance of common stock           91,236          
Payment of tax withholding related to option exercises and                
distribution of restricted stock units           (7,533 )        
Payments on term loans           -         (8,500 )
Payments on capital leases and deemed landlord financing           (768 )       (769 )
Payment on subordinated notes           (108,113 )       (62,000 )
Proceeds from revolving credit facility           10,000          
Payments on revolving credit facility           (6,000 )        
Payments for debt issue costs           (591 )       (392 )
Settlement of vested restricted stock units           -         (87 )
Net cash provided by (used in) financing activities           1,885         (10,910 )
                 
(Decrease) increase in cash and cash equivalents           (1,044 )       2,912  
Cash and cash equivalents at beginning of period           8,553         6,071  
Cash and cash equivalents at end of period         $ 7,509       $ 8,983  
                 
                 
Supplemental cash flow information:                
Cash paid during the period for interest         $ 8,953       $ 3,760  
Cash paid during the period for income taxes           8         7  
Supplemental schedule of non-cash activities:                
Accrued property and equipment purchases         $ 996       $ 738  
Write-offs against bad debt reserves                   23  
Amortization of interest rate cap into net loss,                
net of tax           58         2  
Change in other asset for fair value of interest rate cap recorded                
to other comprehensive loss, net           (23 )       (89 )
Warrant liability reclassified to equity upon exercise of                
warrants           8,274          
 

 

Del Taco Holdings, Inc.
 
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
(Unaudited)
(in thousands)
 
          12 Weeks Ended     12 Weeks Ended
          June 16,

2015

    June 17,

2014

Net income (loss)         $ 4,628     $ (140 )
Non-GAAP adjustments:                
Provision for income taxes           1,731       356  
Interest expense, net           4,018       7,189  
Depreciation and amortization           3,796       4,327  
                 
EBITDA           14,173       11,732  
                 
Stock based compensation expense           -       235  
Loss (gain) on disposal of assets           14       (6 )
Restaurant closure charges, net           72       (219 )
Debt modification costs           2       1,241  
Transaction-related costs           877       -  
Pre-opening costs           129       85  
Insurance reserves adjustment           -       539  
                 
Adjusted EBITDA         $ 15,267     $ 13,607  
 


View source version on businesswire.com: http://www.businesswire.com/news/home/20150727006118/en/

SOURCE Del Taco Restaurants, Inc.

Contacts:

Julia Young
Media Relations
646-277-1280
julia.young@icrinc.com

Raphael Gross
Investor Relations
203-682-8253
investor@deltaco.com

 

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