Fiesta Restaurant Group, Inc. Reports First Quarter 2014 Results

2014-05-06
  • Send
  • PDF
  • Print
  • Bookmark
  • Text Size:
  •  Repost This Article
  • Total revenues increased 8.8% to $145.4 million; Comparable restaurant sales increased 6.3% and comparable restaurant guest traffic increased 4.6% at Pollo Tropical

    Fiesta Restaurant Group, Inc. (NASDAQ:FRGI), the owner, operator, and franchisor of the Pollo Tropical® and Taco Cabana® fast-casual restaurant brands, today reported results for the first quarter 2014, which ended on March 30, 2014.

    Highlights of first quarter 2014 results include:

    • Total revenues increased 8.8% to $145.4 million;
    • Comparable restaurant sales increased 6.3% and comparable restaurant guest traffic increased 4.6% at Pollo Tropical;
    • Comparable restaurant sales increased 0.8% and comparable restaurant guest traffic decreased 2.0% at Taco Cabana, negatively impacted by unfavorable weather and fewer newly remodeled restaurants;
    • Four Company-owned Pollo Tropical restaurants were opened, including the first restaurant in Texas;
    • Net income increased $3.9 million to $8.7 million, or $0.33 per diluted share, compared to net income of $4.8 million, or $0.20 per diluted share.

    Fiesta President and Chief Executive Officer Tim Taft commented, “With a successful start to 2014, we increased revenues by almost nine percent, expanded operating margins and grew EPS over 60%. We also opened our newest Pollo Tropical restaurant prototype in Addison, Texas. This is the first of approximately 10 slated to open in three key Texas markets in 2014.”

    Taft continued, “In April, we opened our first Cabana Grill restaurant in the greater Atlanta market. In addition to the westward expansion of Pollo Tropical and testing Cabana Grill in the east, we continue to focus our development efforts on building Pollo Tropical restaurants in markets where we already have presence, driving profitable growth.”

    First Quarter 2014 Financial Review

    Consolidated Results

    Total revenues increased 8.8% in the first quarter of 2014 to $145.4 million from $133.6 million in the first quarter of 2013. Restaurant sales in the first quarter of 2014 increased 8.8% to $144.8 million from $133.1 million in the first quarter of 2013 due to the opening of new Company-owned restaurants and comparable restaurant sales growth.

    Cost of sales decreased as a percentage of restaurant sales in the first quarter of 2014 compared to the prior year period as modest price increases and supply chain management initiatives more than offset commodity cost increases.

    Restaurant wages and related expenses improved as a percentage of restaurant sales in the first quarter of 2014 compared to the prior year period due primarily to lower workers’ compensation claim costs along with the favorable impact of sales increases on fixed costs.

    Other restaurant operating expenses increased slightly as a percentage of restaurant sales in the first quarter of 2014 compared to the prior year period. Pre-opening costs were $0.7 million compared to $0.8 million in the prior year period due to the timing of expenses for future openings. Rent expense increased slightly as a percentage of restaurant sales compared to the prior year period as a consequence of new Company-owned restaurant openings and sale-leaseback transactions completed over the course of a year.

    Advertising expense increased as a percentage of restaurant sales in the first quarter of 2014 compared to the prior year period due primarily to an increase in expenditures and the timing of promotions.

    General and administrative expenses were $12.2 million in both the first quarters of 2014 and 2013 and decreased as a percentage of restaurant sales in the first quarter of 2014 due to the favorable impact of higher sales on fixed costs.

    Depreciation and amortization increased to $5.3 million in the first quarter of 2014 compared to $4.8 million in the prior year period. This increase was due to new Company-owned restaurant development, partially offset by the impact of sale-leaseback transactions.

    Interest expense decreased $4.4 million to $0.6 million in the first quarter of 2014 from $5.0 million in the first quarter 2013 due to the reduction in Fiesta’s outstanding debt and a lower interest rate on borrowings under the new senior credit facility.

    The provision for income taxes for the first quarter of 2014 was derived using an estimated annual effective income tax rate for 2014 of 38.3%, while the provision for income taxes for the first quarter of 2013 was derived using an estimated effective annual income tax rate for 2013 of 35.8%, excluding discrete items. The estimated effective annual income tax rate for 2014 is higher than the estimated effective annual income tax rate for the first quarter of 2013, primarily due to the expiration of the Work Opportunity Tax Credit on December 31, 2013.

    Net income was $8.7 million, or $0.33 per diluted share (on a base of 26.2 million shares), compared to net income of $4.8 million, or $0.20 per diluted share (on a base of 22.9 million shares), in the first quarter of 2013.

    Brand Results

    Pollo Tropical restaurant sales increased 15.3% to $71.4 million in the first quarter of 2014 from $61.9 million in the first quarter of 2013 due to a comparable restaurant sales increase of 6.3% along with a net increase of 13 Company-owned restaurants. This is the eighteenth consecutive quarter the brand has delivered comparable restaurant sales growth and, on a two year basis, first quarter comparable restaurant sales grew 10.1%. The growth in comparable restaurant sales resulted from a 4.6% increase in comparable restaurant guest traffic along with a 1.7% increase in average check. Adjusted EBITDA for Pollo Tropical, a non-GAAP financial measure, increased to $13.7 million in the first quarter of 2014 from $9.8 million in the first quarter of 2013.

    Taco Cabana restaurant sales increased 3.2% to $73.5 million in the first quarter of 2014 from $71.2 million in the first quarter of 2013 due to a 0.8% increase in comparable restaurant sales along with a net increase of three Company-owned restaurants. On a two year basis, first quarter comparable restaurant sales grew 2.8%. The increase in comparable restaurant sales resulted from a decrease of 2.0% in comparable restaurant guest traffic negatively impacted by unfavorable weather conditions in Texas and fewer newly remodeled restaurants, partially offset by a 2.8% increase in average check. Menu price increases drove an increase in restaurant sales of 1.3% while the remaining increase in average check is primarily driven by a positive change in sales mix due to the implementation of new menu boards. Adjusted EBITDA for Taco Cabana, a non-GAAP financial measure, increased to $7.1 million in the first quarter of 2014 from $6.5 million in the first quarter of 2013.

    Restaurant Development

    During the first quarter of 2014, Fiesta opened four new Company-owned Pollo Tropical restaurants, one in Texas and three in Florida. Subsequent to the end of the first quarter of 2014, the Company opened its first Cabana Grill restaurant in Snellville, Georgia, outside of Atlanta.

    As of March 30, 2014, the Company owned and operated 106 Pollo Tropical restaurants and 165 Taco Cabana restaurants and franchised 39 Pollo Tropical restaurants in the U.S., Puerto Rico, the Bahamas, Costa Rica, Ecuador, Guatemala, Honduras, India, Panama, Trinidad & Tobago, Venezuela and the Dominican Republic, and seven Taco Cabana restaurants in the U.S.

    About Fiesta Restaurant Group, Inc.

    Fiesta Restaurant Group, Inc. owns, operates and franchises the Pollo Tropical® and Taco Cabana® restaurant brands. The brands specialize in the operation of fast-casual, ethnic restaurants that offer distinct and unique flavors with broad appeal at a compelling value. The brands feature made-from-scratch cooking, fresh salsa bars, and drive-thru service and catering.

    FIESTA RESTAURANT GROUP, INC.

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    THREE MONTHS ENDED MARCH 30, 2014 AND MARCH 31, 2013

    (In thousands of dollars, except share and per share amounts)

    (Unaudited)

     
      Three months ended (a)
    March 30, 2014   March 31, 2013
     
    Revenues:
    Restaurant sales $ 144,825 $ 133,090
    Franchise royalty revenues and fees 611   534  
    Total revenues 145,436 133,624
    Costs and expenses:
    Cost of sales 45,529 42,411
    Restaurant wages and related expenses (b) 36,506 35,116
    Restaurant rent expense 7,204 6,435
    Other restaurant operating expenses 17,885 16,164
    Advertising expense 5,419 4,549
    General and administrative expenses (b)(c) 12,151 12,211
    Depreciation and amortization 5,345 4,810
    Pre-opening costs 683 831
    Impairment and other lease charges (15 ) 95
    Other income (6 ) (497 )
    Total costs and expenses 130,701   122,125  
    Income from operations 14,735 11,499
    Interest expense (d) 603   5,007  
    Income before income taxes 14,132 6,492
    Provision for income taxes 5,413   1,693  
    Net income $ 8,719   $ 4,799  
    Basic net income per share (e) $ 0.33   $ 0.20  
    Diluted net income per share (e) $ 0.33   $ 0.20  
    Basic weighted average common shares outstanding 26,201,747   22,868,894  
    Diluted weighted average common shares outstanding 26,202,309   22,868,894  

    (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 30, 2014 and March 31, 2013 included 13 weeks.

    (b) Restaurant wages and related expenses include stock-based compensation expense of $9 and $1 for the three month periods ended March 30, 2014 and March 31, 2013, respectively. General and administrative expenses include stock-based compensation expense of $712 and $425 for the three month periods ended March 30, 2014 and March 31, 2013, respectively.

    (c) General and administrative expenses for the three months ended March 31, 2013 include expenses related to the underwritten secondary public equity offering completed during March 2013 totaling $403. The Company did not receive any proceeds from the sale of shares in the offering.

    (d) Fiesta repurchased and redeemed its $200.0 million in aggregate principal amount of 8.875% Senior Secured Second Lien Notes due 2016, sold 3,078,336 shares of its common stock, and entered into a new senior secured revolving credit facility in the fourth quarter of 2013 that provides for aggregate borrowings of up to $150.0 million with variable rate interest.

    (e) As previously disclosed, Fiesta has granted shares of restricted stock to certain of its employees. Because the unvested shares participate in any dividends declared, the unvested shares are considered a second class of common stock for accounting purposes, impacting the calculation of net income per share. For further information, please see the Company's audited financial statements to be included in the Company's Annual Report on Form 10-K for the year ended December 29, 2013.

     

    FIESTA RESTAURANT GROUP, INC.

    CONDENSED CONSOLIDATED BALANCE SHEETS

    (In thousands of dollars, except share and per share amounts)

    (unaudited)

     
      March 30, 2014   December 29, 2013
     
    Assets
    Cash $ 2,406 $

    10,978

     

    Other current assets 19,971 21,947
    Property and equipment, net 149,429 144,527
    Goodwill 123,484 123,484
    Intangible assets, net 101 121
    Deferred income taxes 12,259 12,046
    Deferred financing costs, net 1,459 1,530
    Other assets 4,165   4,152  
    Total assets $ 313,274   $ 318,785  
     
    Liabilities and Stockholders' Equity
    Current liabilities $ 26,883 $ 38,087
    Long-term debt, net of current portion 65,310 72,324
    Lease financing obligations 1,658 1,657
    Deferred income sale-leaseback of real estate 36,843 35,873
    Other liabilities 13,784   12,538  
    Total liabilities 144,478 160,479
    Stockholders' equity 168,796   158,306  
    Total liabilities and stockholders' equity $ 313,274   $ 318,785  
     

    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 and number of restaurants):

     
      (unaudited)
    Three months ended
    March 30, 2014   March 31, 2013
    Segment revenues:
    Pollo Tropical $ 71,844 $ 62,282
    Taco Cabana 73,592   71,342  
    Total revenues $ 145,436   $ 133,624  
     
    Change in comparable restaurant sales (a):
    Pollo Tropical 6.3 % 3.8 %
    Taco Cabana 0.8 % 2.0 %
     
    Average sales per Company-owned restaurant (b):
    Pollo Tropical $ 682 $ 672
    Taco Cabana 445 443
     
    Income before income taxes:
    Pollo Tropical $ 10,496 $ 5,718
    Taco Cabana 3,636 774
     
    Adjusted EBITDA (c):
    Pollo Tropical $ 13,677 $ 9,805
    Taco Cabana 7,103 6,528
     
    Restaurant-Level Adjusted EBITDA (c):
    Pollo Tropical $ 19,077 $ 15,431
    Taco Cabana 12,531 12,154
     
    Number of Company-owned restaurants:
    Pollo Tropical 106 93
    Taco Cabana 165   162  
    Total Company-owned restaurants 271 255
     
    Company-owned restaurant openings:
    Pollo Tropical 4 2
    Taco Cabana   2  
    Total new restaurant openings 4 4
     
    Company-owned restaurant closings:
    Pollo Tropical
    Taco Cabana    
    Net change in restaurants 4 4
     
    Number of franchised restaurants:
    Pollo Tropical 39 36
    Taco Cabana 7   8  
    Total franchised restaurants 46 44

    (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) 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 financial and other data for the periods indicated

    (in thousands, except percentages):

     
      Three months ended
    March 30, 2014   March 31, 2013
      (a)     (a)
    Pollo Tropical:
    Restaurant sales $ 71,356 $

    61,869

     

    Cost of sales 23,229 32.6 % 20,493 33.1 %
    Restaurant wages and related expenses 15,265 21.4 % 14,317 23.1 %
    Restaurant rent expense 2,917 4.1 % 2,357 3.8 %
    Other restaurant operating expenses 8,377 11.7 % 7,203 11.6 %
    Advertising expense 1,962 2.7 % 1,574 2.5 %
    Depreciation and amortization 2,577 3.6 % 2,099 3.4 %
    Pre-opening costs 533 0.7 % 493 0.8 %
    Impairment and other lease charges (39 ) (0.1 )% 39 0.1 %
     
    Taco Cabana:
    Restaurant sales $ 73,469 $ 71,221
    Cost of sales 22,300 30.4 % 21,918 30.8 %
    Restaurant wages and related expenses 21,241 28.9 % 20,799 29.2 %
    Restaurant rent expense 4,287 5.8 % 4,078 5.7 %
    Other restaurant operating expenses 9,508 12.9 % 8,961 12.6 %
    Advertising expense 3,457 4.7 % 2,975 4.2 %
    Depreciation and amortization 2,768 3.8 % 2,711 3.8 %
    Pre-opening costs 150 0.2 % 338 0.5 %
    Impairment and other lease charges 24 0.0 % 56 0.1 %
     

    (a) Percent of restaurant sales

     

    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 and other administrative functions. Restaurant-Level Adjusted EBITDA is defined as Adjusted EBITDA excluding franchise royalty revenues and fees and general and administrative expenses (including corporate-level general and administrative expenses). Adjusted EBITDA for each of our segments is a measure of segment profitability reported to our chief operating decision maker for purposes of allocating resources to the segments and assessing each segment's 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) provides useful information (including at the restaurant level) about our operating performance and period-over-period growth, (ii) provides additional information that is useful for evaluating the operating performance of our business, and (iii) permits 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 an alternative to net income or net income per share as indicators of operating performance or liquidity. Also these measures may not be comparable to similarly titled captions of other companies.

      (unaudited)
    Three months ended
    March 30, 2014   March 31, 2013
     
    Restaurant-Level Adjusted EBITDA:
    Pollo Tropical $ 19,077 $ 15,431
    Taco Cabana 12,531   12,154  
    Consolidated 31,608 27,585
    Add:
    Franchise royalty revenue and fees 611 534
    Less:
    General and administrative (excluding stock-based compensation expense of $712 and $425, respectively) 11,439 11,786
    Adjusted EBITDA:
    Pollo Tropical 13,677 9,805
    Taco Cabana 7,103   6,528  
    Consolidated 20,780 16,333
    Less:
    Depreciation and amortization 5,345 4,810
    Impairment and other lease charges (15 ) 95
    Interest expense 603 5,007
    Provision for income taxes 5,413 1,693
    Stock-based compensation 721 426
    Other income (6 ) (497 )
    Net income $ 8,719   $ 4,799  



    Logos, product and company names mentioned are the property of their respective owners.

  • Send
  • PDF
  • Print
  • Bookmark
  • Go Back
  • Text Size:

  • comments powered by Disqus
    Ads by Nevistas

    Newsletters
    Restaurant
    Industry News
     
    Hospitality
    Newsletter
     
    Hospitality
    Trends
     
    Hospitality
    Technology
     
    Your Email Address
     
    Advertise Here