Del Taco Restaurants, Inc. Announces Fiscal Fourth Quarter and Fiscal Year 2015 Financial Results

  • Adjusted EBITDA of $21.2 million, ahead of previous quarterly guidance range
  • Announces $25 million share repurchase program
  • Conference call and webcast will be held at 8:00 a.m. ET today

LAKE FOREST, Calif. - March 07, 2016 - (BUSINESS WIRE) - Del Taco Restaurants, Inc. (“Del Taco” or the “Company”), (NASDAQ: TACO, TACOW), the second largest Mexican-American QSR chain by units in the United States, operating restaurants under the name Del Taco, today announced fiscal fourth quarter and fiscal year 2015 financial results. Del Taco also announced that its Board of Directors has authorized a share repurchase program under which the Company may repurchase up to $25 million of its outstanding common stock and warrants.

Del Taco became a public company when it completed a business combination with Levy Acquisition Corp. on June 30, 2015. This resulted in a fiscal fourth quarter financial statement presentation that includes a predecessor period for the sixteen-weeks ended December 30, 2014 compared to a successor period for the sixteen-weeks ended December 29, 2015. Consequently, the fiscal year 2015 financial statement presentation includes a predecessor period for the twenty-six weeks ended June 30, 2015 followed by a successor period for the twenty-six weeks ended December 29, 2015. The financial results referenced for fiscal year 2015 have been aggregated to reflect, on a pro forma basis, the combined successor and predecessor periods for the fifty-two weeks ended December 29, 2015 compared to the comparable fifty-two weeks during fiscal year 2014.

Fiscal Fourth Quarter 2015 Highlights

  • System-wide comparable restaurant sales growth of 5.8% and company-owned comparable restaurant sales growth of 5.9%, marking the ninth and fourteenth consecutive quarter of gains, respectively;
    • Company-owned comparable restaurant sales growth comprised check growth of 6.0%, including over 2% of menu mix growth, and approximately flat transactions at (0.1%);
  • Total revenue of $133.4 million, representing 6.1% growth from the fiscal fourth quarter of 2014;
  • Restaurant sales of $128.1 million, representing 6.0% growth from the fiscal fourth quarter of 2014;
  • Restaurant contribution margin, a non-GAAP financial measure, of 21.2%, an improvement of approximately 90 basis points from the fiscal fourth quarter of 2014;
  • Net income increased to $4.8 million from a net loss of $8.1 million in the fiscal fourth quarter of 2014, representing diluted earnings (loss) per share of $0.12 and ($2.08) in the fiscal fourth quarter of 2015 and 2014, respectively;
  • Adjusted EBITDA, a non-GAAP financial measure, of $21.2 million, representing 8.4% growth from the fiscal fourth quarter of 2014; and
  • The opening of nine restaurants system wide, including three company-owned and six franchised restaurants.

Fiscal Year 2015 Highlights

  • System-wide comparable restaurant sales growth of 6.3% and company-owned comparable restaurant sales growth of 6.4%;
    • Company-owned comparable restaurant sales growth comprises check growth of 4.8% and transaction growth of 1.6%;
  • Total revenue of $424.0 million, representing 7.1% growth from the prior fiscal year;
  • Restaurant sales of $407.6 million, representing 7.0% growth from the prior fiscal year;
  • Restaurant contribution margin, a non-GAAP financial measure, of 20.0%, an improvement of approximately 130 basis points from the prior fiscal year;
  • Adjusted EBITDA, a non-GAAP financial measure, of $65.0 million, representing 10.4% growth from the prior fiscal year; and
  • The opening of 12 restaurants system wide, including 6 company-owned and 6 franchised restaurants.

Paul J.B. Murphy, III, President and Chief Executive Officer of Del Taco, commented, “2015 was an incredibly successful year at Del Taco as we solidified our QSR+ positioning by elevating brand perceptions and guest experiences. Strong execution of our initiatives is reflected in the progress we made in increasing operating margins and towards reaching our average unit volume goal of $1.5 million by 2018. This past year also marked Del Taco’s entry into the public markets, laying the foundation for our next growth phase. I thank all of our team members for their hard work without which these achievements would not have been possible.”

Murphy continued, “As we look to 2016, we are striving to improve the guest experience with a great line up of new products including continued innovation within our Buck & Under value platform. We are also investing in our operations to drive speed of service and expand our QSR+ capabilities, and we are focused on embedding and enhancing our positioning by taking a fresh approach to everything we do.”

Murphy concluded, “Today’s announcement of a share repurchase plan reflects the marked improvement in our financial condition over the past year, as represented by our strong free cash flow profile and increased borrowing capacity, as well as our confidence in Del Taco’s growth strategy. We are committed to generating long-term returns for our shareholders through all the means at our disposal, including opportunistic repurchases of our common stock and warrants.”

Review of Fiscal Fourth Quarter 2015 Financial Results

Total revenue was $133.4 million, an increase of 6.1% compared to $125.7 million in the fiscal fourth quarter of 2014. The growth in revenue was driven by a 6.0% increase in Company restaurant sales and an 11.5% increase in franchise revenue.

Comparable restaurant sales increased 5.8% system-wide for the fiscal fourth quarter ended December 29, 2015 compared to the 5.8% gain in the prior year fiscal fourth quarter, for a two-year growth rate of 11.6%. The Del Taco system has now generated comparable restaurant sales growth for nine consecutive quarters.

Company-owned comparable restaurant sales increased 5.9%, marking the fourteenth consecutive quarter of comparable restaurant sales growth. Average check growth contributed meaningfully to the comparable restaurant sales increase as guests continued to respond favorably to the introduction of new premium products that embed Del Taco’s QSR+ positioning. Franchise comparable restaurant sales increased 5.7%.

Restaurant contribution, a non-GAAP financial measure, increased 10.3% year-over-year to $27.1 million. As a percentage of Company restaurant sales, restaurant contribution increased approximately 90 basis points year-over-year to 21.2%. The increase was driven by an approximate 90 basis point improvement in labor and related expenses and 10 basis point improvement in occupancy and other operating expenses, partially offset by a 10 basis point increase in food and paper costs. A reconciliation between restaurant contribution and the nearest GAAP financial measure is included in the accompanying financial data.

Adjusted EBITDA, a non-GAAP financial measure, was $21.2 million, an increase of 8.4% from $19.6 million in the previous year’s fiscal fourth quarter. A reconciliation between adjusted EBITDA and the nearest GAAP financial measure is included in the accompanying financial data.

Net income was $4.8 million, compared to net loss of $8.1 million in the fiscal fourth quarter of 2014. Earnings per diluted share were $0.12, compared to a loss of $2.08 per diluted share in the fourth quarter of 2014.

Restaurant Development

Del Taco opened three company-owned and six franchise restaurants during the fiscal fourth quarter, resulting in twelve system-wide openings during fiscal year 2015. One company-owned restaurant previously expected to open last year was delayed due to significant rains in Georgia and opened on January 6, 2016. Additionally, Del Taco closed twelve previously discussed underperforming company-owned restaurants late in the fiscal fourth quarter.

Fiscal Year 2016 Guidance

The Company is providing the following guidance for fiscal year 2016, the 53-week period ending January 3, 2017 and currently expects the following for fiscal year 2016:

  • System-wide same store sales growth of approximately 2.5% to 4.5%;
  • Total revenue between $439 million and $449 million;
  • Total company-owned restaurant sales between $422 million and $432 million;
  • Restaurant contribution margin between 19.8% and 20.3%;
  • New California minimum wage impact estimated to increase labor and related expenses by approximately $7.2 million, including preservation of appropriate wage differentials and incremental payroll taxes;
  • General and administrative expenses of between approximately 7.9% and 8.3% of total revenue, including incremental public company costs and non-cash stock-based compensation;
  • Adjusted EBITDA between $67.5 million and $70.0 million;
  • Effective tax rate of approximately 40%;
  • Diluted earnings per share of approximately $0.53 and $0.56;
  • Fifteen to eighteen new system-wide restaurant openings, including the company-owned restaurant that opened in early January 2016; and
  • Net capital expenditures totaling approximately $36.0 to $41.0 million including approximately $10.0 to $12.5 million for new unit construction, approximately $10.0 to $11.0 million for capitalized maintenance, approximately $10.0 to $11.5 million for discretionary investment in equipment and technology, and approximately $6.0 million for land acquisition for development after 2016.

Share Repurchase Program

The Del Taco Board of Directors has approved a share repurchase program under which the Company may purchase up to $25 million of its outstanding common stock and warrants. The authorization is effective immediately, and will expire upon completion of the repurchase program, unless terminated earlier by the Board of Directors. Purchases under the program may be made in open market or privately negotiated transactions (including, without limitation, the use of Rule 10b5-1 plans) in compliance with applicable federal securities laws, including the Securities and Exchange Commission Rule 10b-18. The Company has no obligation to repurchase shares under this authorization, and the timing, actual number and value of shares purchased will depend on the Company’s stock price, market conditions, and other factors.

Conference Call

A conference call and webcast to discuss Del Taco’s financial results is scheduled for 8:00 a.m. ET today. 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 13629964.

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.

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 and excludes restaurant closures.

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. A reconciliation between restaurant contribution and the nearest GAAP financial measure is included in the accompanying financial data.

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. A reconciliation between adjusted EBITDA and the nearest GAAP financial measure is included in the accompanying financial data.

About Del Taco Restaurants, Inc.

At Del Taco (NASDAQ: TACO, TACOW) 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 and carne asada 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. Stay up to date by following Del Taco on Twitter, Facebook and Instagram or visit www.deltaco.com for more information.

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,” “target,” “may,” “will,” “should,” “future,” “propose,” “preliminary,” “guidance” 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-owned 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, changes in, or the discontinuation of, the Company’s stock repurchase program, 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 Restaurants, Inc.

Consolidated Balance Sheet

(In thousands, except share and per share data)

               
      Successor       Predecessor
     

   December 29,   

     

   December 30,   

      2015       2014
               
Assets              
Current assets:              
Cash and cash equivalents     $ 10,194         $ 8,553  
Accounts and other receivables, net       3,220           3,383  
Inventories       2,806           2,687  
Prepaid expenses and other current assets       3,545           3,816  
Total current assets       19,765           18,439  
               
Property and equipment, net       114,030           85,164  
Goodwill       318,275           281,200  
Trademarks       220,300           144,000  
Intangible assets, net       28,373           17,683  
Other assets, net       2,829           2,833  
Total assets     $ 703,572         $ 549,319  
               
Liabilities and shareholders' equity              
Current liabilities:              
Accounts payable     $ 16,831           14,645  
Other accrued liabilities       32,897           31,906  

Current portion of long-term debt, capital lease obligations
   and deemed landlord financing liabilities

      1,725           1,634  
Total current liabilities       51,453           48,185  
               

 

             

Long-term debt, capital lease obligations and deemed landlord
   financing liabilities, excluding current portion, net

      167,968           321,049  
               
Deferred income taxes       79,523           64,918  
Warrant liability                 8,309  
Other non-current liabilities       36,251           25,454  
Total liabilities       335,195           467,915  
               
Commitments and contingencies              
               
Shareholders' equity:              
Del Taco Holdings, Inc. (Predecessor) preferred stock, $0.01 par value; 200,000              
shares authorized; no shares issued and outstanding       -           -  
Del Taco Restaurants, Inc. (Successor) preferred stock, $0.0001 par value;              
1,000,000 shares authorized; no shares issued and outstanding       -           -  
Del Taco Holdings, Inc. (Predecessor) common stock, $0.01 par value;              
5,800,000 shares authorized; 3,907,835 shares issued and outstanding at              
December 30, 2014       -           39  
Del Taco Restaurants, Inc. (Successor) common stock, $0.0001 par value;              
400,000,000 shares authorized; 38,802,425 shares issued and outstanding at              
December 29, 2015       4           -  
Additional paid-in capital       372,260           110,941  
Accumulated other comprehensive loss       -           (409 )
Accumulated deficit       (3,887 )         (29,167 )
Total shareholders' equity       368,377           81,404  
Total liabilities and shareholders' equity     $ 703,572         $ 549,319  

 

                 
                 

Del Taco Restaurants, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands, except share and per share data)

 
                 
        Successor     Predecessor  
        16 Weeks     16 Weeks  
        Ended     Ended  
        December 29, 2015     December 30, 2014  
Revenue:                
Company restaurant sales       $ 128,065       $ 120,852    
Franchise revenue         4,634         4,156    
Franchise sublease income         716         709    
Total revenue         133,415         125,717    
                 
Operating expenses:                
Restaurant operating expenses:                
Food and paper costs         36,696         34,537    
Labor and related expenses         37,936         36,855    
Occupancy and other operating expenses         26,310         24,869    
General and administrative         11,677         9,832    
Depreciation and amortization         6,986         5,452    
Occupancy and other - franchise subleases         703         675    
Pre-opening costs         325         91    
Impairment of long-lived assets                 9,617    
Restaurant closure charges, net         1,996         253    
Loss on disposal of assets         2         78    
Total operating expenses         122,631         122,259    
                 
Income from operations         10,784         3,458    
                 
Other expense (income), net:                
Interest expense         1,927         8,927    
Other income         (220 )          
Transaction-related costs         994         1,695    
Change in fair value of warrant liability                 1,114    
Total other expense (income), net         2,701         11,736    
                 

Income (loss) from operations before provision (benefit)
  for income taxes

        8,083         (8,278 )  
                 
Provision (benefit) for income taxes         3,244         (161 )  
Net income (loss)         4,839         (8,117 )  
                 
Other comprehensive income (loss):                
Change in fair value of interest rate cap                 (22 )  
Reclassification of interest rate cap amortization                
included in net (loss) income                 12    
Total other comprehensive (loss) income, net                 (10 )  
Comprehensive (loss) income       $ 4,839       $ (8,127 )  
                 
Earnings (loss) per share:                
Basic       $ 0.12       $ (2.08 )  
Diluted       $ 0.12       $ (2.08 )  
                 
Weighted-average shares outstanding                
Basic         38,802,425         3,907,835    
Diluted         39,513,814         3,907,835    

 

                   
                   

Del Taco Restaurants, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except share and per share data)

 
                   
      Successor     Predecessor  
      26 Weeks     26 Weeks   52 Weeks  
      Ended     Ended   Ended  
      December 29, 2015     June 30, 2015   December 30, 2014  
Revenue:                  
Company restaurant sales     $ 206,939       $ 200,676     $ 380,800    
Franchise revenue       7,328         6,693       12,973    
Franchise sublease income       1,183         1,183       2,251    
Total revenue       215,450         208,552       396,024    
                   
Operating expenses:                  
Restaurant operating expenses:                  
Food and paper costs       59,263         57,447       110,708    
Labor and related expenses       61,448         61,120       116,920    
Occupancy and other operating expenses       43,191         43,611       82,021    
General and administrative       17,501         14,850       28,136    
Depreciation and amortization       11,276         8,252       18,752    
Occupancy and other - franchise subleases       1,140         1,109       2,145    
Pre-opening costs       366         276       462    
Impairment of long-lived assets                     9,617    
Restaurant closure charges, net       2,015         94       82    
Loss (gain) on disposal of assets       3         99       (151 )  
Total operating expenses       196,203         186,858       368,692    
                   
Income from operations       19,247         21,694       27,332    
                   
Other expense (income), net:                  
Interest expense       3,652         11,491       30,895    
Other income       (220 )                
Transaction-related costs       12,972         7,255       1,936    
Debt modification costs       78         139       1,241    
Change in fair value of warrant liability               (35 )     1,417    
Total other expense (income), net       16,482         18,850       35,489    
                   

Income (loss) from operations before provision for income taxes

      2,765         2,844       (8,157 )  
                   
Provision for income taxes       112         740       1,098    
Net income (loss)       2,653         2,104       (9,255 )  
                   
Other comprehensive income (loss):                  
Change in fair value of interest rate cap               (24 )     (125 )  

Reclassification of interest rate cap amortization
  included in net (loss) income

              58       19    
Total other comprehensive income (loss), net               34       (106 )  
Comprehensive income (loss)     $ 2,653       $ 2,138     $ (9,361 )  
                   
Earnings (loss) per share:                  
Basic     $ 0.07       $ 0.38     $ (2.37 )  
Diluted     $ 0.07       $ 0.37     $ (2.37 )  
                   
Weighted-average shares outstanding:                  
Basic       38,802,425         5,492,417       3,907,835    
Diluted       40,249,993         5,610,859       3,907,835    

 

   
   

Del Taco Restaurants, Inc.

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

(Unaudited)

(In thousands)

 
                   
        Successor       Predecessor  
        16 Weeks

Ended

December 29, 2015

      16 Weeks

Ended

December 30, 2014

 
                   
Net income (loss)       $ 4,839         $ (8,117 )  
Non-GAAP adjustments:                  
Provision for income taxes         3,244           (161 )  
Interest expense         1,927           8,927    
Depreciation and amortization         6,986           5,408    
EBITDA         16,996           6,057    
Stock-based compensation expense         1,352           243    
Loss on disposal of assets         2           78    
Impairment of long-lived assets         -           9,617    
Restaurant closure charges, net         1,996           253    

Amortization of favorable and unfavorable lease assets and liabilities, net

        (221 )         44    
Transaction-related costs         994           1,695    
Change in fair value of warrant liability         -           1,114    
Pre-opening costs         325           91    
Insurance reserves adjustment         -           389    
Other income         (220 )         -    
Adjusted EBITDA       $ 21,224         $ 19,581    

 

   
   

Del Taco Restaurants, Inc.

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

(Unaudited)

(In thousands)

 
               
      Successor     Predecessor  
      26 Weeks

Ended

December 29, 2015

    26 Weeks

Ended

June 30, 2015

  52 Weeks

Ended

December 30, 2014

 
                   
Net income (loss)     $ 2,653       $ 2,104     $ (9,255 )  
Non-GAAP adjustments:                  
Provision for income taxes       112         740       1,098    
Interest expense       3,652         11,491       30,895    
Depreciation and amortization       11,276         8,249       18,608    
EBITDA       17,693         22,584       41,346    
Stock-based compensation expense       1,498         532       954    
Loss (gain) on disposal of assets       3         99       (151 )  
Impairment of long-lived assets       -         -       9,617    
Restaurant closure charges, net       2,015         94       82    

Amortization of favorable and unfavorable lease
  assets and liabilities, net

      (364 )       3       144    
Debt modification costs       78         139       1,241    
Transaction-related costs       12,972         7,255       1,936    
Change in fair value of warrant liability       -         (35 )     1,417    
Pre-opening costs       366         276       462    
Insurance reserves adjustment       -         -       1,800    
Other income       (220 )       -       -    
Adjusted EBITDA     $ 34,041       $ 30,947     $ 58,848    

 

 
 

Del Taco Restaurants, Inc.

Reconciliation of Company Restaurant Sales to Restaurant Contribution

(Unaudited)

(In thousands)

               
        Successor     Predecessor
        16 Weeks

Ended

December 29, 2015

    16 Weeks

Ended

December 30, 2014

               
Company restaurant sales       $ 128,065     $ 120,852
Restaurant operating expenses         100,942       96,261
Restaurant contribution       $ 27,123     $ 24,591

 

   
   

Del Taco Restaurants, Inc.

Reconciliation of Company Restaurant Sales to Restaurant Contribution

(Unaudited)

(In thousands)

 
                 
        Successor     Predecessor  
        26 Weeks

Ended

December 29, 2015

    26 Weeks

Ended

June 30, 2015

  52 Weeks

Ended

December 30, 2014

 
                     
Company restaurant sales       $ 206,939     $ 200,676   $ 380,800  
Restaurant operating expenses         163,902       162,178     309,649  
Restaurant contribution       $ 43,037     $ 38,498   $ 71,151  
                       

SOURCE Del Taco

Contacts: 

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

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

###

Share this Story:

Comments:

comments powered by Disqus

Franchise News Room »


News By Industry »


Subscribe to Franchising.com Express

A Franchise Update Media Production
Franchise Update Media | P.O. Box 20547 // San Jose, CA 95160 // PH. (408) 402-5681
Copyright © 2001 - 2017. All Rights Reserved.

In Loving Memory Of Timothy Gardner (1987-2014)