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 13-week fourth quarter and 52-week full year 2016, which ended
on January 1, 2017.
Select fourth quarter 2016 results (13 weeks) as compared to
fourth quarter 2015 results (14 weeks) include:
- Total revenues decreased 4.6% to $171.3
million. Excluding the extra week in 2015, total revenues increased
2.1%;
- Comparable restaurant sales at Pollo
Tropical decreased 4.0% and comparable restaurant transactions
decreased 7.3%, partially attributable to Hurricane Matthew which
negatively impacted comparable restaurant transactions by
approximately 1.3% and sales cannibalization that negatively
impacted comparable restaurant transactions by approximately
1.1%;
- Comparable restaurant sales at Taco
Cabana decreased 3.5% and comparable restaurant transactions
decreased 4.5%;
- Six Company-owned Pollo Tropical and
two Company-owned Taco Cabana restaurants were opened;
- Net income of $2.4 million, or $0.09
per diluted share, compared to net income in the prior year period
of $8.8 million, or $0.33 per diluted share; and
- Adjusted net income of $7.3 million, or
$0.27 per diluted share, compared to adjusted net income in the
prior year period of $10.5 million, or $0.39 per diluted share (see
non-GAAP reconciliation table below).
Select full year 2016 results (52 weeks) as compared to full
year 2015 results (53 weeks) include:
- Total revenues increased 3.5% to $711.8
million. Excluding the extra week in 2015, total revenues increased
5.4%;
- Comparable restaurant sales at Pollo
Tropical decreased 1.6% and comparable restaurant transactions
decreased 3.1%, partially due to sales cannibalization that
negatively impacted comparable restaurant transactions by
approximately 1.5%;
- Comparable restaurant sales at Taco
Cabana decreased 2.5% and comparable restaurant transactions
decreased 3.6%;
- 32 Company-owned Pollo Tropical and
four Company-owned Taco Cabana restaurants were opened;
- Net income of $16.7 million, or $0.62
per diluted share, compared to net income in the prior year of
$38.5 million, or $1.44 per diluted share; and
- Adjusted net income of $34.8 million,
or $1.29 per diluted share, compared to adjusted net income in the
prior year of $41.0 million, or $1.53 per diluted share (see
non-GAAP reconciliation table below).
Fourth Quarter 2016 Financial Review
Consolidated Results
Total revenues decreased 4.6% to $171.3 million from $179.5
million compared to the prior year period as sales contributions
from 26 net Company-owned restaurant openings were offset by
declines in comparable restaurant sales amid continued
industry-wide softness, and the effect of an extra week in 2015.
Comparable restaurant sales decreased 4.0% at Pollo Tropical
compared to a 0.4% gain in the prior year period and decreased 3.5%
at Taco Cabana compared to a 3.3% gain in the prior year period.
The extra week in 2015 contributed approximately $11.8 million to
total revenues.
Cost of sales as a percentage of restaurant sales improved 160
basis points compared to the prior year period due primarily to
favorable chicken and other commodity costs and menu price
increases.
Restaurant wages and related expenses as a percentage of
restaurant sales increased 50 basis points compared to the prior
year period due primarily to higher labor costs, including the
impact of new Company-owned restaurants and sales deleverage,
partially offset by lower workers compensation, incentive based
compensation and medical expenses.
Other restaurant operating expenses as a percentage of
restaurant sales increased 90 basis points compared to the prior
year period due primarily to higher repair and maintenance and
insurance costs, and sales deleverage.
Restaurant rent expense as a percentage of restaurant sales
increased 100 basis points compared to the prior year period due
primarily to new Company-owned restaurants, which generally have
higher rent, and sales deleverage.
General and administrative expenses increased $0.6 million to
$13.5 million compared to the prior year period due primarily to
higher labor costs and infrastructure investment expenses
associated with current and future growth and financial and legal
advisory fees associated with the Company’s review of strategic
alternatives, partially offset by performance-based compensation
expense. As a percentage of revenues, general and administrative
expenses increased 70 basis points compared to the prior year
period.
The Company recognized impairment and other lease charges of
$7.0 million in the fourth quarter of 2016 that included $4.5
million related to the 16 Pollo Tropical restaurants that were
previously impaired in the third quarter, $1.5 million related to
one additional Pollo Tropical restaurant and $1.0 million primarily
related to six Taco Cabana restaurants with declining sales.
Many new Pollo Tropical restaurants in its emerging markets have
opened at lower sales volumes than expected and have not yet
achieved the sales volumes required to generate positive cash
flows. Pollo Tropical’s emerging markets include Atlanta, Nashville
and Texas. Generally, restaurants in Atlanta have performed
better than restaurants in Nashville and Texas due primarily to
higher average sales volumes and lower average wage rates, rent
expense and real estate taxes. Combined carrying values of the
restaurants in Atlanta, Nashville and Texas are $26.7 million, $3.2
million and $48.3 million respectively.
Pollo Tropical has initiated operational and transactional
growth plans to drive improved performance in the emerging markets
with strategies focused on enhancing guest experience and brand
recognition and will continue to evaluate the long-term viability
of these markets. The Company’s estimates of future cash flows for
restaurants that were not impaired assume these plans will succeed
and sales will reach the levels required to generate cash flows
that exceed the carrying value of the restaurants. Our cash flow
projections include, among other things, significant sales growth
as the result of the introduction of broadcast media, dedicated
sales positions to build the brand’s catering business, increased
frequency with the launch of a loyalty program, third party
delivery and local store marketing. If these assumptions
change in the future or the performance of the restaurants does not
improve as projected, an impairment charge could be recognized in
future periods, and such charge could be material.
Thirteen Pollo Tropical restaurants open more than twelve months
in markets outside of Florida with a combined carrying value of
$22.0 million have projected cash flows that exceed the
restaurant's carrying value by a small margin. The thirteen
restaurants contributed approximately $6.1 million in operating
losses to income from operations, including $2.7 million in
depreciation expense, for the twelve months ended January 1,
2017. In addition, 16 Pollo Tropical restaurants opened during 2016
in markets outside of Florida with a combined carrying value of
$30.2 million have initial sales volumes lower than expected, but
do not have significant operating history to form a good basis for
future projections. The 16 restaurants contributed approximately
$6.0 million in operating losses to income from operations,
including $1.5 million in depreciation expense and $2.9 million in
pre-opening costs, for the twelve months ended January 1,
2017. If expected performance improvements are not realized, an
impairment charge may be recognized in future periods, and such
charge could be material.
In addition, three Taco Cabana restaurants with a combined
carrying value of $2.5 million have projected cash flows that
exceed the restaurants carrying value by a small margin. These
restaurants contributed approximately $0.4 million in operating
losses to income from operations, including $0.3 million in
depreciation expense, for the twelve months ended January 1,
2017.
The effective tax rate for 2016 of 33.3% decreased as compared
to an effective tax rate for 2015 of 36.4%, due primarily to the
impact of tax credits on lower income before taxes and various
other changes in permanent items.
Net income was $2.4 million, or $0.09 per diluted share,
compared to net income of $8.8 million, or $0.33 per diluted share,
in the prior year period.
Adjusted net income, a non-GAAP financial measure, was $7.3
million, or $0.27 per diluted share, compared to adjusted net
income of $10.5 million, or $0.39 per diluted share, in the prior
year period (see non-GAAP reconciliation table below).
Brand Results
Pollo Tropical restaurant sales decreased 1.1% to $95.6 million
in the quarter compared to the prior year period due primarily to a
comparable restaurant sales decrease of 4.0% and the effect of an
extra week in 2015 of approximately $6.5 million, offset by sales
contributions from 22 net Company-owned restaurant openings. The
decrease in comparable restaurant sales resulted from a 7.3%
decrease in comparable restaurant transactions, partially offset by
a 3.3% increase in average check. Hurricane Matthew negatively
impacted comparable restaurant transactions by approximately 1.3%
and sales cannibalization from new restaurants on existing
restaurants negatively impacted comparable restaurant transactions
by approximately 1.1%. Average check was primarily driven by menu
price increases that positively impacted restaurant sales by 1.8%.
Adjusted EBITDA for Pollo Tropical, a non-GAAP financial measure,
decreased 10.7% to $13.7 million compared to the prior year period
(see non-GAAP reconciliation table below).
Taco Cabana restaurant sales decreased 8.7% to $75.0 million in
the quarter compared to the prior year period due primarily to a
comparable restaurant sales decrease of 3.5% and the effect of an
extra week in 2015 of approximately $5.3 million, offset by sales
contributions from four Company-owned restaurant openings. The
decrease in comparable restaurant sales resulted from a 4.5%
decrease in comparable restaurant transactions and an increase in
average check of 1.0%. Average check was driven by menu price
increases that positively impacted restaurant sales by 2.5%.
Adjusted EBITDA for Taco Cabana, a non-GAAP financial measure,
decreased 21.6% to $7.6 million compared to the prior year period
(see non-GAAP reconciliation table below).
Full Year 2016 Financial Summary
Total revenues increased 3.5% to $711.8 million compared to
$687.4 million in the prior year due to 26 net Company-owned
restaurant openings. Excluding the extra week in 2015, total
revenues increased 5.4%. Comparable restaurant sales decreased 1.6%
at Pollo Tropical compared to a 3.8% gain in the prior year and
decreased 2.5% at Taco Cabana compared to a 4.4% gain in the prior
year. The decrease in comparable restaurant sales at Pollo Tropical
resulted from a 3.1% decrease in comparable restaurant transactions
and an increase in average check of 1.5%. The decrease in
comparable restaurant sales at Taco Cabana resulted from a 3.6%
decrease in comparable restaurant transactions and an increase in
average check of 1.1%.
Net income decreased to $16.7 million, or $0.62 per diluted
share, compared to $38.5 million, or $1.44 per diluted share, in
the prior year, due primarily to impairment and other lease
charges, new restaurant performance, lower comparable restaurant
sales and the extra week in 2015.
Adjusted net income, a non-GAAP financial measure, was $34.8
million, or $1.29 per diluted share, compared to adjusted net
income of $41.0 million, or $1.53 per diluted share, in the prior
year (see non-GAAP reconciliation table below).
Restaurant Portfolio
During the fourth quarter 2016, Fiesta opened six Company-owned
Pollo Tropical restaurants, four in south Florida and two in San
Antonio, Texas. In addition, the Company opened two Company-owned
Taco Cabana restaurants in San Antonio, Texas.
As of January 1, 2017, Fiesta had 177 Company-owned Pollo
Tropical restaurants, 166 Company-owned Taco Cabana restaurants, 35
franchised Pollo Tropical restaurants in the U.S., Puerto Rico, the
Bahamas, Guatemala, Guyana, Panama, Trinidad & Tobago and
Venezuela and seven franchised Taco Cabana restaurants in the
U.S.
Investor Conference Call Today
Incoming President and Chief Executive Officer Richard
Stockinger, Senior Vice President and Chief Operating Officer Danny
Meisenheimer and Senior Vice President and Chief Financial Officer
Lynn Schweinfurth will host a conference call to answer questions
regarding today's press releases at 5:00 p.m. ET today.
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 Monday, March 6,
2017, and can be accessed domestically at 844-512-2921 or
internationally at 412-317-6671. The passcode is 13654070.
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 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 TWELVE MONTHS ENDED JANUARY
1, 2017 AND JANUARY 3, 2016
(In thousands of dollars, except share
and per share amounts)
(Unaudited)
Three months ended (a) Twelve months
ended (a) January 1, 2017 January 3,
2016 January 1, 2017 January 3,
2016 Revenues: Restaurant sales $ 170,590 $ 178,789 $
708,956 $ 684,584 Franchise royalty revenues and fees 715
723 2,814 2,808 Total revenues 171,305 179,512
711,770 687,392 Costs and expenses: Cost of sales 51,226 56,573
214,609 217,328 Restaurant wages and related expenses (b) 45,769
47,066 185,305 174,222 Restaurant rent expense 9,971 8,652 37,493
33,103 Other restaurant operating expenses 24,091 23,553 96,457
87,285 Advertising expense 5,293 6,088 26,800 21,617 General and
administrative expenses (b)(c) 13,463 12,874 56,084 54,521
Depreciation and amortization 10,302 8,731 36,776 30,575
Pre-opening costs 804 716 5,511 4,567 Impairment and other lease
charges (d) 7,037 1,901 25,644 2,382 Other expense (income), net
(e) 110 — (128 ) (679 ) Total operating expenses
168,066 166,154 684,551 624,921 Income
from operations 3,239 13,358 27,219 62,471 Interest expense 536
544 2,171 1,889 Income before income
taxes 2,703 12,814 25,048 60,582
Provision for income taxes 271 3,973 8,336
22,046 Net income $ 2,432 $ 8,841 $ 16,712
$ 38,536 Basic net income per share $ 0.09 $
0.33 $ 0.62 $ 1.44 Diluted net income per
share $ 0.09 $ 0.33 $ 0.62 $ 1.44 Basic
weighted average common shares outstanding 26,752,695
26,571,943 26,682,227 26,515,029 Diluted
weighted average common shares outstanding 26,761,450
26,578,553 26,689,179 26,522,196
(a) The Company uses a 52 or 53 week fiscal year that ends on
the Sunday closest to December 31. The three and twelve month
periods ended January 1, 2017 included 13 and 52 weeks,
respectively, and the three and twelve month periods ended
January 3, 2016 included 14 and 53 weeks, respectively.
(b) Restaurant wages and related expenses include stock-based
compensation expense of $31 and $9 for the three month periods
ended January 1, 2017 and January 3, 2016, respectively,
and $142 and $156 for the twelve month periods ended
January 1, 2017 and January 3, 2016, respectively.
General and administrative expenses include stock-based
compensation expense of $618 and $1,081 for the three month periods
ended January 1, 2017 and January 3, 2016, respectively,
and $3,141 and $4,137 for the twelve month periods ended
January 1, 2017 and January 3, 2016, respectively.
(c) General and administrative expenses for the three and twelve
months ended January 1, 2017, include $381 and $1,258,
respectively, for the write-off of site costs related to locations
that we decided not to develop, $614 and $1,580, respectively, of
financial and legal advisory fees primarily related to a review of
strategic alternatives and $47 and $947, respectively, related to a
class action litigation (these amounts include legal fees and other
costs, including estimated settlement charges), partially offset by
$196 and $637, respectively, related to litigation matters and
expense of $539 in office restructuring and relocation costs for
the twelve months ended January 1, 2017. General and
administrative expenses for the three and twelve months ended
January 3, 2016, include $504 and $1,633, respectively,
related to a class action litigation (these amounts include legal
fees and other costs, including estimated settlement charges) and
$166 and $365, respectively, for the write-off of site costs
related to locations that the Company decided not to develop.
(d) Impairment and other lease charges for the three months
ended January 1, 2017, primarily include impairment charges
for one Pollo Tropical restaurant and six Taco Cabana restaurants
that the Company continues to operate plus additional impairment
charges related to previously impaired Pollo Tropical and Taco
Cabana locations as well as lease charges related to the closure of
10 Pollo Tropical restaurants in the fourth quarter of 2016, and
for the twelve months ended January 1, 2017 also include
impairment charges related to the closure of 10 Pollo Tropical
restaurants in the fourth quarter of 2016 and six additional Pollo
Tropical restaurants and one Taco Cabana restaurant that the
Company continues to operate. Impairment and other lease charges
for the three and twelve months ended January 3, 2016
primarily include charges related to a restaurant closure at the
end of fiscal 2015 and charges related to previously closed
restaurants, and for the twelve months ended January 3, 2016
also include a charge related to the closure of a Pollo Tropical
restaurant.
(e) Other expense (income), net for the three and twelve months
ended January 1, 2017, also includes costs for the removal of
signs and equipment related to the closure of 10 Pollo Tropical
restaurants in the fourth quarter of 2016, and for the twelve
months ended January 1, 2017, also includes additional proceeds
related to a location that closed in 2015 as a result of an eminent
domain proceeding. Other income for the twelve months ended
January 3, 2016, primarily includes expected business
interruption insurance proceeds related to a Pollo Tropical
location that was temporarily closed due to a fire and a previously
deferred gain from a sale-leaseback transaction that was recognized
upon termination of the lease as a result of an eminent domain
proceeding.
FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands of dollars, except share
and per share amounts)
(Unaudited)
January 1, 2017 January 3, 2016
Assets Cash $ 4,196 $ 5,281 Other current assets 22,746
25,957 Property and equipment, net 270,920 248,992 Goodwill 123,484
123,484 Deferred income taxes 14,377 8,497 Other assets 5,842
3,434 Total assets $ 441,565 $ 415,645
Liabilities and Stockholders' Equity Current liabilities $
46,769 $ 46,305 Long-term debt, net of current portion 71,423
72,612 Lease financing obligations 1,664 1,663 Deferred income
sale-leaseback of real estate 27,165 30,086 Other liabilities
30,369 20,997 Total liabilities 177,390 171,663
Stockholders' equity 264,175 243,982 Total liabilities and
stockholders' equity $ 441,565 $ 415,645
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 Twelve months ended
January 1,
2017
January 3,
2016
January 1,
2017
January 3,
2016
Segment revenues: Pollo Tropical $ 96,101 $ 97,217 $ 401,798 $
366,741 Taco Cabana 75,204 82,295 309,972
320,651 Total revenues $ 171,305 $ 179,512 $
711,770 $ 687,392 Change in comparable
restaurant sales (a): Pollo Tropical (4.0 )% 0.4 % (1.6 )% 3.8 %
Taco Cabana (3.5 )% 3.3 % (2.5 )% 4.4 % Average sales per
Company-owned restaurant (b): Pollo Tropical Comparable restaurants
(c) $ 602 $ 684 $ 2,652 $ 2,856 New restaurants (d) 357 390 1,599
1,838 Total company-owned (e) 536 595 2,354 2,585 Taco Cabana
Comparable restaurants (c) $ 455 $ 474 $ 1,891 $ 1,937 New
restaurants (d) 504 394 2,020 1,428 Total company-owned (e) 456 471
1,894 1,920 Income before income taxes: Pollo Tropical $ 404
$ 8,956 $ 4,639 $ 38,021 Taco Cabana 2,299 3,858 21,231 22,561
Adjusted EBITDA (f): Pollo Tropical $ 13,707 $ 15,342 $
55,535 $ 59,335 Taco Cabana 7,630 9,738 38,081 39,707
Restaurant-Level Adjusted EBITDA (f): Pollo Tropical $ 21,448 $
22,151 $ 90,294 $ 90,374 Taco Cabana 12,823 14,715 58,140 60,811
(a) Restaurants are included in comparable restaurant sales
after they have been open for 18 months or longer. For comparative
purposes, the calculation of the changes in comparable restaurant
sales is based on a 52-week fiscal year. Restaurant sales for the
extra week in the fiscal quarter and year ended January 3, 2016
have been excluded for purposes of calculating the change in
comparable company-owned restaurant sales.
(b) For comparative purposes, the calculation of average sales
per company-owned restaurant is based on a 13 week fiscal quarter
and a 52-week fiscal year. Restaurant sales for the extra week in
the fiscal quarter and year ended January 3, 2016 have been
excluded for purposes of calculating average annual sales per
company-owned restaurant.
(c) Comparable restaurants are restaurants that have been open
for 18 months or longer. 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) New restaurants are restaurants that have been open for less
than 18 months. Average sales for new Company-owned restaurants are
derived by dividing new restaurant sales for such period for the
applicable segment by the average number of new restaurants for the
applicable segment for such period.
(e) 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.
(f) Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are
non-GAAP financial measures. Please see the reconciliation from net
income to Adjusted EBITDA and Restaurant-Level Adjusted EBITDA 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 Twelve months
ended
January 1,
2017
January 3,
2016
January 1,
2017
January 3,
2016
Company-owned restaurant openings: Pollo Tropical 6 6
32 32 Taco Cabana 2 — 4 2 Total new
restaurant openings 8 6 36 34 Company-owned restaurant
closings: Pollo Tropical (10 ) — (10 ) (1 ) Taco Cabana — (1
) — (7 ) Net change in restaurants (2 ) 5 26 26
Number of Company-owned restaurants: Pollo Tropical 177 155 177 155
Taco Cabana 166 162 166 162 Total
Company-owned restaurants 343 317 343 317 Number of
franchised restaurants: Pollo Tropical 35 35 35 35 Taco Cabana 7
6 7 6 Total franchised restaurants 42
41 42 41 Total number of restaurants: Pollo Tropical 212 190
212 190 Taco Cabana 173 168 173 168
Total restaurants 385 358 385 358
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 January 1, 2017
January 3, 2016 (a) (a) Pollo
Tropical: Restaurant sales $ 95,598 $ 96,646 Cost of sales
30,104 31.5 % 32,002 33.1 % Restaurant wages and related expenses
22,699 23.7 % 22,658 23.4 % Restaurant rent expense 5,470 5.7 %
4,376 4.5 % Other restaurant operating expenses 13,544 14.2 %
12,653 13.1 % Advertising expense 2,346 2.5 % 2,817 2.9 %
Depreciation and amortization 6,544 6.8 % 5,417 5.6 % Pre-opening
costs 472 0.5 % 699 0.7 % Impairment and other lease charges 6,029
6.3 % 123 0.1 %
Taco Cabana: Restaurant sales $
74,992 $ 82,143 Cost of sales 21,122 28.2 % 24,571 29.9 %
Restaurant wages and related expenses 23,070 30.8 % 24,408 29.7 %
Restaurant rent expense 4,501 6.0 % 4,276 5.2 % Other restaurant
operating expenses 10,547 14.1 % 10,900 13.3 % Advertising expense
2,947 3.9 % 3,271 4.0 % Depreciation and amortization 3,758 5.0 %
3,314 4.0 % Pre-opening costs 332 0.4 % 17 — % Impairment and other
lease charges 1,008 1.3 % 1,778 2.2 %
Twelve months
ended January 1, 2017 January 3, 2016 (a)
(a) Pollo Tropical: Restaurant sales $ 399,736 $
364,544 Cost of sales 126,539 31.7 % 121,689 33.4 % Restaurant
wages and related expenses 93,958 23.5 % 81,647 22.4 % Restaurant
rent expense 19,998 5.0 % 16,003 4.4 % Other restaurant operating
expenses 54,198 13.6 % 45,376 12.4 % Advertising expense 14,819 3.7
% 9,527 2.6 % Depreciation and amortization 23,587 5.9 % 18,000 4.9
% Pre-opening costs 4,837 1.2 % 4,310 1.2 % Impairment and other
lease charges 24,419 6.1 % 510 0.1 %
Taco Cabana:
Restaurant sales $ 309,220 $ 320,040 Cost of sales 88,070 28.5 %
95,639 29.9 % Restaurant wages and related expenses 91,347 29.5 %
92,575 28.9 % Restaurant rent expense 17,495 5.7 % 17,100 5.3 %
Other restaurant operating expenses 42,259 13.7 % 41,909 13.1 %
Advertising expense 11,981 3.9 % 12,090 3.8 % Depreciation and
amortization 13,189 4.3 % 12,575 3.9 % Pre-opening costs 674 0.2 %
257 0.1 % Impairment and other lease charges 1,225 0.4 % 1,872 0.6
%
(a) Percent of restaurant sales for the applicable segment.
FIESTA RESTAURANT GROUP,
INC.Supplemental Non-GAAP InformationThe 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, human resources, 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 Twelve months ended
January 1,
2017
January 3,
2016
January 1,
2017
January 3,
2016
Net income $ 2,432 $ 8,841 $ 16,712 $ 38,536 Add:
Depreciation and amortization 10,302 8,731 36,776 30,575 Impairment
and other lease charges 7,037 1,901 25,644 2,382 Interest expense
536 544 2,171 1,889 Provision for income taxes 271 3,973 8,336
22,046 Stock-based compensation expense 649 1,090 3,283 4,293 Other
expense (income), net 110 — (128 ) (679 ) Adjusted EBITDA:
Pollo Tropical $ 13,707 $ 15,342 $ 55,535 $ 59,335 Taco Cabana
7,630 9,738 38,081 39,707 Fiesta — — (822 ) —
Consolidated $ 21,337 $ 25,080 $ 92,794 $ 99,042 Add:
Pre-opening costs 804 716 5,511 4,567
General and administrative (excluding
stock-based
compensation expense of $618, $1,081,
$3,141, and $4,137,
respectively)
12,845 11,793 52,943 50,384 Less: Franchise royalty revenue
and fees 715 723 2,814 2,808 Restaurant-Level Adjusted
EBITDA: Pollo Tropical $ 21,448 $ 22,151 $ 90,294 $ 90,374 Taco
Cabana 12,823 14,715 58,140 60,811
Consolidated $ 34,271 $ 36,866 $ 148,434 $ 151,185
FIESTA RESTAURANT GROUP,
INC.Supplemental Non-GAAP InformationThe following
table sets forth certain unaudited supplemental financial data for
the periods indicated(In thousands of dollars, except per
share amounts):
Adjusted net income and related adjusted diluted earnings per
share are non-GAAP financial measures. Adjusted net income is
defined as net income before impairment and other lease charges,
gain on condemnation, office restructuring and relocation costs,
legal settlements and related costs, financial and legal advisory
fees and site development costs write-offs. Management believes
that adjusted net income and related adjusted earnings per diluted
share, when viewed with our results of operations calculated in
accordance with GAAP (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 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 January 1,
2017 January 3, 2016
Income
Before
Income
Taxes
Provision For
Income
Taxes (g)
Net Income Diluted EPS
Income
Before
Income
Taxes
Provision For
Income
Taxes (g)
Net Income Diluted EPS Reported - GAAP
$ 2,703 $ 271 $ 2,432 $ 0.09 $ 12,814 $ 3,973 $ 8,841 $ 0.33
Adjustments: Expense (Income)
Impairment and other lease charges (a) 7,037 2,656 4,381 0.16 1,901
711 1,190 0.04 Legal settlements and related costs (d) (149 ) (56 )
(93 ) — 504 188 316 0.01 Financial and legal advisory fees (e) 614
232 382 0.01 — — — — Write-off of site development costs (f) 381
144 237 0.01 166 62 104
— Adjusted - Non-GAAP $ 10,586 $ 3,247
$ 7,339 $ 0.27 $ 15,385 $ 4,934 $
10,451 $ 0.39
(unaudited) Twelve
months ended January 1, 2017 January 3, 2016
Income
Before
Income
Taxes
Provision For
Income
Taxes (g)
Net Income Diluted EPS
Income
Before
Income
Taxes
Provision For
Income
Taxes (g)
Net Income Diluted EPS Reported - GAAP $ 25,048 $
8,336 $ 16,712 $ 0.62 $ 60,582 $ 22,046 $ 38,536 $ 1.44
Adjustments: Expense (Income) Impairment and other lease charges
(a) 25,644 9,681 15,963 0.59 2,382 891 1,491 0.06 Gain on
condemnation (b) (226 ) (85 ) (141 ) (0.01 ) (389 ) (145 ) (244 )
(0.01 ) Office restructuring and relocation costs (c) 539 203 336
0.01 — — — — Legal settlements and related costs (d) 310 117 193 —
1,633 611 1,022 0.04 Financial and legal advisory fees (e) 1,580
596 984 0.04 — — — — Write-off of site development costs (f) 1,258
475 783 0.03 365 137 228
0.01 Adjusted - Non-GAAP $ 54,153 $ 19,323
$ 34,830 $ 1.29 $ 64,573 $ 23,540
$ 41,033 $ 1.53
(a) Impairment and other lease charges for the three months
ended January 1, 2017, primarily include impairment charges
for one Pollo Tropical restaurant and six Taco Cabana restaurants
that the Company continues to operate plus additional impairment
charges related to previously impaired Pollo Tropical and Taco
Cabana locations as well as lease charges related to the closure of
10 Pollo Tropical restaurants in the fourth quarter of 2016, and
for the twelve months ended January 1, 2017 also include
impairment charges related to the closure of 10 Pollo Tropical
restaurants in the fourth quarter of 2016 and six additional Pollo
Tropical restaurants and one Taco Cabana restaurant that the
Company continues to operate. Impairment and other lease charges
for the three and twelve months ended January 3, 2016
primarily include charges related to a restaurant closure at the
end of fiscal 2015 and charges related to previously closed
restaurants, and for the twelve months ended January 3, 2016
also include a charge related to the closure of a Pollo Tropical
restaurant.
(b) Gain on condemnation for the twelve months ended
January 1, 2017, includes additional proceeds related to a
location that closed in 2015 as a result of an eminent domain
proceeding. Gain on condemnation for the twelve months ended
January 3, 2016, primarily includes a previously deferred gain
from a sale-leaseback transaction that was recognized upon
termination of a lease as a result of an eminent domain
proceeding.
(c) Office restructuring and relocation costs for the twelve
months ended January 1, 2017, include severance and relocation
costs associated with restructuring Pollo Tropical management in
Miami, Florida and Dallas, Texas.
(d) Legal settlements and related costs for the three and twelve
months ended January 1, 2017, include legal fees and other
costs, including estimated settlement charges, associated with a
class action litigation, partially offset by benefits related to
litigation matters. Legal settlements and related costs for the
three and twelve months ended January 3, 2016, include legal
fees and other costs, including estimated settlement charges,
associated with class action litigation.
(e) Financial and legal advisory fees for the three and twelve
months ended January 1, 2017, include financial and legal
advisory fees primarily related to a review of strategic
alternatives.
(f) Site development costs write-offs for the three and twelve
months ended January 1, 2017 and January 3, 2016, include
the write-off of site costs related to locations that we decided
not to develop.
(g) The provision for income taxes related to the adjustments
was calculated using the Company's combined federal statutory and
estimated state rate of 37.8% and 37.4% for the periods ending
January 1, 2017 and January 3, 2016, respectively.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170227006374/en/
Investor Relations:For Fiesta Restaurant Group, Inc.Raphael
Gross, 203-682-8253investors@frgi.com
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