Fiesta Restaurant Group, Inc. Reports Second Quarter 2015 Results

ADDISON, Texas - July 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 second quarter 2015, which ended on June 28, 2015.

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

  • Total revenues increased 11.5% to $171.9 million;
  • Comparable restaurant sales increased 4.3% and comparable guest traffic decreased 0.2% at Pollo Tropical;
  • Comparable restaurant sales increased 5.6% and comparable guest traffic increased 1.0% at Taco Cabana;
  • Net income increased 20.8% to $11.2 million;
  • Earnings per diluted share increased 20.0% to $0.42; and
  • Seven Company-owned and -operated restaurants were opened, including one Taco Cabana and six Pollo Tropical restaurants. Two Company-owned Taco Cabana restaurants were closed.

Fiesta President and Chief Executive Officer Tim Taft commented, “We extended our track record of generating stronger year-over-year results in each successive quarter since the May 2012 spin-off, with continued, strong performance during the recent three-month period. Double-digit top-line growth and robust improvement in restaurant-level profitability resulted in a 20% increase in diluted EPS on top of a 67% gain in the same period last year that we believe demonstrates Fiesta’s ongoing ability to deliver exceptional operational and financial results.”

Taft added, “As we expected, sales at Pollo Tropical accelerated in July with comparable restaurant sales growth of 6.4%, as we believe the impact of healthcare enrollment and related premiums in south Florida dissipated. The improved results at Taco Cabana are also gratifying.”

Second Quarter 2015 Financial Review

Consolidated Results

Total revenues increased 11.5% to $171.9 million from $154.2 million compared to the prior year period, due primarily to 21 net Company-owned restaurant openings as well as comparable restaurant sales growth of 4.3% at Pollo Tropical and 5.6% at Taco Cabana. Pollo Tropical has generated comparable restaurant sales growth for 23 consecutive quarters while Taco Cabana has generated comparable restaurant sales growth for 19 of the past 20 quarters and for six consecutive quarters.

Cost of sales as a percentage of restaurant sales improved 20 basis points compared to the prior year period as price increases, supply chain management initiatives and favorable sales mix related to the implementation of new menu boards at Taco Cabana earlier this year were partially offset by commodity cost increases.

Restaurant wages and related expenses as a percentage of restaurant sales improved 80 basis points compared to the prior year period, due primarily to the favorable impact of sales increases on fixed costs, partially offset by higher labor costs at new Company-owned restaurants.

General and administrative expenses increased $1.5 million to $13.6 million compared to the prior year period due primarily to continued 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 were consistent with the prior year period.

Other income of $142,000 reflected expected business interruption insurance proceeds for a Pollo Tropical restaurant location that was temporarily closed due to a fire.

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 estimated annual effective tax rate of 38.3% is consistent with the prior year period.

Net income increased to $11.2 million, or $0.42 per diluted share, compared to a net income of $9.3 million, or $0.35 per diluted share in the prior year period.

Brand Results

Pollo Tropical restaurant sales increased 19.0% to $89.6 million compared to the prior year period due to 24 net Company-owned restaurant openings and a comparable restaurant sales increase of 4.3%. The growth in comparable restaurant sales resulted from a 4.5% increase in average check, slightly offset by a 0.2% decrease in comparable guest traffic, and is inclusive of more than 1% in estimated comparable restaurant sales cannibalization, primarily due to new restaurant development in the brand’s highest volume South Florida markets. Average check was primarily driven by menu price increases that positively impacted restaurant sales by 5.4%. This is the 23rd consecutive quarter the brand has delivered comparable restaurant sales growth. On a two-year basis, quarterly comparable restaurant sales grew 11.0%. Adjusted EBITDA for Pollo Tropical, a non-GAAP financial measure, increased 18.2% to $15.9 million compared to the prior year period (see non-GAAP reconciliation table below).

Taco Cabana restaurant sales increased 4.4% to $81.7 million compared to the prior year period due to a 5.6% increase in comparable restaurant sales, net of restaurant closures. The increase in comparable restaurant sales resulted from a 4.6% increase in average check along with a 1.0% increase in comparable guest traffic. Average check was driven by menu price increases that positively impacted restaurant sales by 2.9% and a favorable shift in sales mix due to the new menu board implementation earlier this year. This is the sixth consecutive quarter and 19 out of the past 20 quarters the brand has delivered comparable restaurant sales growth. On a two-year basis, quarterly comparable restaurant sales grew 8.4%. Adjusted EBITDA for Taco Cabana, a non-GAAP financial measure, increased 24.8% to $11.1 million compared to the prior year period (see non-GAAP reconciliation table below).

Restaurant Development

During the second quarter 2015, Fiesta opened six Company-owned and -operated Pollo Tropical restaurants in Florida and Texas, one Company-owned and -operated Taco Cabana restaurant in Texas, and closed two Company-owned and -operated Taco Cabana restaurants in Texas.

As of June 28, 2015, the Company owned and operated 136 Pollo Tropical restaurants and 163 Taco Cabana restaurants (including two Cabana Grill® restaurants) and franchised 35 Pollo Tropical restaurants in the U.S., Puerto Rico, the Bahamas, Ecuador, Guatemala, Honduras, Panama, Trinidad & Tobago and Venezuela and six Taco Cabana restaurants in the U.S.

Investor Conference Call Today

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

The conference call can be accessed live over the phone domestically at 877-407-0789 or internationally at 201-689-8562. A replay will be available after the call until Thursday, August 6, 2015, and can be accessed domestically by dialing 877-870-5176 or for internationally at 858-384-5517. The passcode is 13613707.

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, 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 AND SIX MONTHS ENDED JUNE 28, 2015 AND JUNE 29, 2014    
(In thousands of dollars, except share and per share amounts)    
(Unaudited)    
     
          Three months ended (a)       Six months ended (a)    
          June 28, 2015       June 29, 2014       June 28, 2015       June 29, 2014    
                                       
Revenues:                                      
Restaurant sales         $   171,268         $   153,515         $   334,326         $   298,340      
Franchise royalty revenues and fees         632         670         1,449         1,281      
Total revenues         171,900         154,185         335,775         299,621      
Costs and expenses:                                      
Cost of sales         54,223         48,960         105,346         94,489      
Restaurant wages and related expenses (b)         42,383         39,116         82,973         75,622      
Restaurant rent expense         8,048         7,374         16,055         14,578      
Other restaurant operating expenses         21,362         19,466         41,221         37,351      
Advertising expense         5,144         4,676         10,698         10,095      
General and administrative expenses (b)         13,624         12,132         27,388         24,283      
Depreciation and amortization         7,401         5,578         14,248         10,923      
Pre-opening costs         1,211         1,188         2,162         1,871      
Impairment and other lease charges                 32         94         17      
Other (income) expense (c)         (142 )               (514 )       (6 )    
Total operating expenses         153,254         138,522         299,671         269,223      
Income from operations         18,646         15,663         36,104         30,398      
Interest expense         414         568         852         1,171      
Income before income taxes         18,232         15,095         35,252         29,227      
Provision for income taxes         6,983         5,781         13,502         11,194      
Net income         $   11,249         $   9,314         $   21,750         $   18,033      
Basic net income per share         $   0.42         $   0.35         $   0.81         $   0.67      
Diluted net income per share         $   0.42         $   0.35         $   0.81         $   0.67      
Basic weighted average common shares outstanding         26,490,673         26,271,116         26,462,919         26,236,432      
Diluted weighted average common shares outstanding         26,497,658         26,271,116         26,470,130         26,236,713      
                                               

 

(a)  The Company uses a 52 or 53 week fiscal year that ends on the Sunday closest to December 31. The three and six month periods ended June 28, 2015 and June 29, 2014 each included 13 and 26 weeks, respectively.

 

(b)  Restaurant wages and related expenses include stock-based compensation expense of $40 and $21 for the three month periods ended June 28, 2015 and June 29, 2014, respectively, and $107 and $30 for the six month periods ended June 28, 2015 and June 29, 2014, respectively. General and administrative expenses include stock-based compensation expense of $1,055 and $1,058 for the three month periods ended June 28, 2015 and June 29, 2014, respectively, and $1,929 and $1,770 for the six month periods ended June 28, 2015 and June 29, 2014, respectively.

 

(c)  Other (income) expense for the three months ended June 28, 2015 primarily includes expected business interruption insurance proceeds related to a Pollo Tropical location that was temporarily closed due to a fire.

 

 

     
FIESTA RESTAURANT GROUP, INC.    
CONDENSED CONSOLIDATED BALANCE SHEETS    
(In thousands of dollars, except share and per share amounts)    
(Unaudited)    
     
          June 28, 2015       December 28, 2014    
                       
Assets                      
Cash         $         5,519         $ 5,087    
Other current assets         23,778         23,018    
Property and equipment, net         218,589         191,371    
Goodwill         123,484         123,484    
Deferred income taxes         11,055         11,055    
Deferred financing costs, net         1,079         1,233    
Other assets         2,696         2,708    
Total assets         $         386,200         $ 357,956    
                       
Liabilities and Stockholders' Equity                      
Current liabilities         $         38,696         $ 39,423    
Long-term debt, net of current portion         72,264         67,264    
Lease financing obligations         1,662         1,660    
Deferred income sale-leaseback of real estate         31,899         34,079    
Other liabilities         17,290         15,943    
Total liabilities         161,811         158,369    
Stockholders' equity         224,389         199,587    
Total liabilities and stockholders' equity         $         386,200         $ 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)       (unaudited)    
          Three months ended       Six months ended    
          June 28, 2015       June 29, 2014       June 28, 2015       June 29, 2014    
Segment revenues:                                      
Pollo Tropical         $     90,046         $     75,795         $     177,616         $     147,639      
Taco Cabana         81,854         78,390         158,159         151,982      
Total revenues         $     171,900         $     154,185         $     335,775         $     299,621      
                                       
Change in comparable restaurant sales (a):                                      
Pollo Tropical         4.3 %       6.7 %       5.4 %       6.5 %    
Taco Cabana         5.6 %       2.8 %       4.7 %       1.8 %    
                                       
Average sales per Company-owned restaurant (b):                                      
Pollo Tropical                                      
Comparable restaurants (c)         $     729         $     734         $     1,466         $     1,449      
New restaurants         498         523         1,006         1,020      
Total company-owned         672         697         1,358         1,379      
Taco Cabana                                      
Comparable restaurants (c)         $     504         $     474         $     966         $     923      
New restaurants         355         423         695         822      
Total company-owned         499         472         957         917      
                                       
Income before income taxes:                                      
Pollo Tropical         $     10,908         $     9,888         $     22,498         $     20,384      
Taco Cabana         7,324         5,207         12,754         8,843      
                                       
Adjusted EBITDA (d):                                      
Pollo Tropical         $     15,862         $     13,425         $     31,873         $     27,102      
Taco Cabana         11,138         8,927         20,095         16,030      
                                       
Restaurant-Level Adjusted EBITDA (d):                                      
Pollo Tropical         $     23,623         $     19,724         $     47,151         $     39,334      
Taco Cabana         16,525         14,220         30,989         26,901      
                                               

 

(a)  Restaurants are included in comparable restaurant sales after they have been open for 18 months.

 

(b)  Average sales for total 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 titled "Supplemental Non-GAAP Information" on the last page of this release.

 

 

     
FIESTA RESTAURANT GROUP, INC.    
Supplemental Information    
The following table sets forth certain unaudited supplemental data for the periods indicated:    
     
          Three months ended       Six months ended    
          June 28, 2015       June 29, 2014       June 28, 2015       June 29, 2014    
                                       
Company-owned restaurant openings:                                      
Pollo Tropical         6         6         12         10      
Taco Cabana         1         1         1         1      
Total new restaurant openings         7         7         13         11      
                                       
Company-owned restaurant closings:                                      
Pollo Tropical                                      
Taco Cabana         (2 )               (5 )            
Net change in restaurants         5         7         8         11      
                                       
Number of Company-owned restaurants:                                      
Pollo Tropical         136         112         136         112      
Taco Cabana         163         166         163         166      
Total Company-owned restaurants         299         278         299         278      
                                       
Number of franchised restaurants:                                      
Pollo Tropical         35         35         35        

35

 

   
Taco Cabana         6         7         6         7      
Total franchised restaurants         41         42         41         42      
                                       
Total number of restaurants:                                      
Pollo Tropical         171         147         171         147      
Taco Cabana         169         173         169         173      
Total restaurants         340         320         340         320      
                                             

 

     
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    
          June 28, 2015       June 29, 2014    
                  (a)               (a)    
Pollo Tropical:                                      
Restaurant sales         $     89,569                 $     75,253              
Cost of sales         30,094         33.6 %       24,983         33.2 %    
Restaurant wages and related expenses         19,251         21.5 %       16,423         21.8 %    
Restaurant rent expense         3,820         4.3 %       3,071         4.1 %    
Other restaurant operating expenses         10,893         12.2 %       9,422         12.5 %    
Advertising expense         1,904         2.1 %       1,639         2.2 %    
Depreciation and amortization         4,340         4.8 %       2,750         3.7 %    
Pre-opening costs         1,144         1.3 %       968         1.3 %    
Impairment and other lease charges                 %       (31 )       %    
                                       
Taco Cabana:                                      
Restaurant sales         $     81,699                 $     78,262              
Cost of sales         24,129         29.5 %       23,977         30.6 %    
Restaurant wages and related expenses         23,132         28.3 %       22,693         29.0 %    
Restaurant rent expense         4,228         5.2 %       4,303         5.5 %    
Other restaurant operating expenses         10,469         12.8 %       10,044         12.8 %    
Advertising expense         3,240         4.0 %       3,037         3.9 %    
Depreciation and amortization         3,061         3.7 %       2,828         3.6 %    
Pre-opening costs         67         0.1 %       220         0.3 %    
Impairment and other lease charges                 %       63         0.1 %    
                                       
          Six months ended    
          June 28, 2015       June 29, 2014    
                  (a)               (a)    
Pollo Tropical:                                      
Restaurant sales         $     176,458                 $     146,609              
Cost of sales         58,633         33.2 %       48,212         32.9 %    
Restaurant wages and related expenses         38,005         21.5 %       31,688         21.6 %    
Restaurant rent expense         7,469         4.2 %       5,988         4.1 %    
Other restaurant operating expenses         20,982         11.9 %       17,799         12.1 %    
Advertising expense         4,262         2.4 %       3,601         2.5 %    
Depreciation and amortization         8,079         4.6 %       5,327         3.6 %    
Pre-opening costs         2,014         1.1 %       1,501         1.0 %    
Impairment and other lease charges                 %       (70 )       %    
                                       
Taco Cabana:                                      
Restaurant sales         $     157,868                 $     151,731              
Cost of sales         46,713         29.6 %       46,277         30.5 %    
Restaurant wages and related expenses         44,968         28.5 %       43,934         29.0 %    
Restaurant rent expense         8,586         5.4 %       8,590         5.7 %    
Other restaurant operating expenses         20,239         12.8 %       19,552         12.9 %    
Advertising expense         6,436         4.1 %       6,494         4.3 %    
Depreciation and amortization         6,169         3.9 %       5,596         3.7 %    
Pre-opening costs         148         0.1 %       370         0.2 %    
Impairment and other lease charges         94         0.1 %       87         0.1 %    

 

(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 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.

                       
          (unaudited)       (unaudited)    
          Three months ended       Six months ended    
          June 28, 2015       June 29, 2014       June 28, 2015       June 29, 2014    
                                       
Restaurant-Level Adjusted EBITDA:                                      
Pollo Tropical         $     23,623         $     19,724         $     47,151         $     39,334      
Taco Cabana         16,525         14,220         30,989         26,901      
Consolidated         40,148         33,944         78,140         66,235      
Add:                                      
Franchise royalty revenue and fees         632         670         1,449         1,281      
Less:                                      
Pre-opening costs         1,211         1,188         2,162         1,871      

General and administrative (excluding stock-based compensation

                                             

expense of $1,055, $1,058, $1,929 and $1,770, respectively)

        12,569         11,074         25,459         22,513      
Adjusted EBITDA:                                      
Pollo Tropical         15,862         13,425         31,873         27,102      
Taco Cabana         11,138         8,927         20,095         16,030      
Consolidated         27,000         22,352         51,968         43,132      
Less:                                      
Depreciation and amortization         7,401         5,578         14,248         10,923      
Impairment and other lease charges                 32         94         17      
Interest expense         414         568         852         1,171      
Provision for income taxes         6,983         5,781         13,502         11,194      
Stock-based compensation expense         1,095         1,079         2,036         1,800      
Other (income) expense         (142 )               (514 )       (6 )    
Net income         $     11,249         $     9,314         $     21,750         $     18,033      
                                                                       
                                                                       

SOURCE Fiesta Restaurant Group, Inc.

Investor Contact:

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

###

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