Both Brands Generated Positive Adjusted EBITDA
during Quarter
Company Generated Net Cash Provided by
Operations of $24.5 Million during Quarter
Sequential Improvement in Comparable Restaurant
Sales Trend Extended through July
Fiesta Restaurant Group, Inc. ("Fiesta" or the "Company")
(NASDAQ:FRGI), parent company of the Pollo Tropical® and Taco
Cabana® restaurant brands, today reported results for the 13-week
second quarter 2020, which ended on June 28, 2020 and provided a
business update related to current operations.
Fiesta President and Chief Executive Officer Richard Stockinger
said, "We are pleased with our sequential improvement in comparable
restaurant sales at both brands, which continued into July. Comp
sales run rates at both brands improved from June to July by 350
basis points or more. These encouraging trends have been achieved
despite the fact that we operate in Florida and Texas, two of the
more challenged states in terms of COVID outbreaks, which drove our
decision to again close our dining rooms as of July 12, 2020. As we
continue to prioritize the well-being of our team members and
guests during this pandemic, we believe we are also evolving to a
better business model that is easier and safer for our consumers
including expanded delivery options, new curbside and pick-up
capabilities, and a much-enhanced online ordering experience. Our
new app, developed by BottleRocket, went live for Pollo Tropical in
late July and will go live for Taco Cabana in September."
"We also continued to make progress on improving our financial
position and liquidity during the quarter. In addition to securing
an amendment to our senior credit facility that we believe provides
us adequate covenant cushion and liquidity, we generated positive
Adjusted EBITDA at both brands for the quarter and also generated
net cash provided by operating activities of $24.5 million through
better working capital management and positive Adjusted EBITDA from
both brands. Since the beginning of the COVID crisis, we have
significantly reduced our revolving credit facility(1) and net
revolver debt balances(2). At current sales trends, we believe we
will continue to improve liquidity."
Mr. Stockinger concluded, "We are proud of our operations team
that has continued to keep our restaurants operating safely during
this crisis while improving operations efficiency. In the second
half of the year, we expect to see the accelerating effects of our
off-premise initiatives as they gain traction, including curbside
capabilities and our new apps at both brands. We are optimistic
about our future and our ability to continue evolving our business
model to meet changing market conditions and consumer needs in
order to allow our customers to enjoy our brands safely and
conveniently across all channels—however the guest chooses."
________
(1)
Outstanding revolving credit
facility balance plus outstanding letters of credit.
(2)
We define net revolver debt as
outstanding revolving credit facility borrowings plus outstanding
letters of credit less unrestricted cash. Net revolver debt is a
non-GAAP measure which we believe assists investors in
understanding of our management of our overall liquidity and
financial flexibility.
Second Quarter 2020 Financial Summary
- Total revenues decreased 28.9% to $121.9 million in the second
quarter of 2020 from $171.4 million in the second quarter of
2019;
- Comparable restaurant sales at Pollo Tropical decreased
31.6%;
- Comparable restaurant sales at Taco Cabana decreased
19.2%;
- Net loss of $8.3 million, or $0.33 per diluted share, in the
second quarter of 2020 compared to net loss of $43.4 million, or
$1.62 per diluted share, in the second quarter of 2019, which
included the unfavorable impact of $46.5 million, or $1.73 per
diluted share, related to a non-cash impairment of goodwill;
- Adjusted net loss (a non-GAAP financial measure) of $2.9
million, or $0.11 per diluted share, in the second quarter of 2020,
compared to adjusted net income of $5.7 million, or $0.21 per
diluted share, in the second quarter of 2019 (see non-GAAP
reconciliation table below);
- Adjusted EBITDA for Pollo Tropical of $5.0 million in the
second quarter of 2020 compared to $14.6 million in the second
quarter of 2019;
- Restaurant-level Adjusted EBITDA (a non-GAAP financial measure)
for Pollo Tropical of $10.3 million, or 16.3% of Pollo Tropical
restaurant sales, in the second quarter of 2020 compared to $21.4
million, or 23.1% of Pollo Tropical restaurant sales, in the second
quarter of 2019 (see non-GAAP reconciliation table below);
- Adjusted EBITDA for Taco Cabana of $2.7 million in the second
quarter of 2020 compared to $4.1 million in the second quarter of
2019;
- Restaurant-level Adjusted EBITDA (a non-GAAP financial measure)
for Taco Cabana of $7.3 million, or 12.6% of Taco Cabana restaurant
sales, in the second quarter of 2020 compared to $9.5 million, or
12.1% of Taco Cabana restaurant sales, in the second quarter of
2019 (see non-GAAP reconciliation table below); and
- Consolidated Adjusted EBITDA (a non-GAAP financial measure) of
$7.7 million in the second quarter of 2020 compared to Consolidated
Adjusted EBITDA of $18.8 million in the second quarter of 2019 (see
non-GAAP reconciliation table below).
Second Quarter 2020 and Fiscal July Comparable Restaurant
Sales Summary
Fiscal April
Fiscal May
Fiscal June
Second Quarter 2020
Fiscal July
Pollo Tropical
-49.2%
-27.9%
-17.8%
-31.6%
-13.8%
Taco Cabana
-26.2%
-14.5%
-18.0%
-19.2%
-14.4%
- Due to ongoing uncertainty and volatility surrounding the
COVID-19 pandemic and guidelines, effective July 12, 2020, we
closed all of our dining rooms until further notice to ensure team
member and guest safety. We continue to operate our restaurants for
drive-thru, delivery and pick up, and we are accelerating efforts
to better enable our customers to enjoy our brands safely and
conveniently across all channels—wherever and whenever they
choose.
Cash and Liquidity
- At the end of the second quarter of 2020, we had $101.4 million
in cash and $148.5 million in debt, which includes $146.5 million
outstanding under our amended senior credit facility and $2.0
million in capital lease obligations.
- As previously announced, we completed the amendment to our
senior credit facility on July 10, 2020. Under this amendment, our
available revolving credit borrowings under the amended senior
credit facility will be reduced from $150 million to $95 million in
a phased reduction beginning with a $30 million permanent reduction
at the closing of the amendment on July 10, 2020, a $15 million
reduction in the fourth quarter of 2020, and a $10 million
reduction in the first quarter of 2021. We repaid borrowings under
our amended senior credit facility as follows: $30.0 million on
July 10, 2020, pursuant to the terms of the amended senior credit
facility, and an additional $62.5 million through July 31, 2020. On
July 31, 2020, there were $54.0 million in outstanding revolving
credit borrowings under our amended senior credit facility. In
addition, as of July 31, 2020, we were current on all lease
obligations.
- We have aggressively cut our capital expenditure budget for
2020. Capital expenditures in the first half of 2020 totaled $8.7
million compared to $21.7 million in the first half of 2019. 2020
full year capital expenditures will not exceed $22.0 million.
- From the beginning of the COVID-19 pandemic in mid-March
through late July, we significantly reduced our total debt,
revolving credit facility and net revolver debt(3) balances. On
March 18, 2020, we had a total debt balance of $148.4 million, an
outstanding revolving credit facility balance (including letters of
credit) of $149.9 million and net revolver debt(3) of $74.4
million. As of July 31, 2020, our total debt balance was $56.0
million, our outstanding revolving credit facility balance
(including letters of credit) was $57.5 million and our net
revolver debt (3) was $48.4 million.
- Working capital efficiency has been significantly improved as a
result of vendor payment term extensions and pricing
renegotiations, which contributed to cash flows from operations of
$24.5 million during the second quarter of 2020. We believe that a
significant portion of the improvement in working capital
efficiency represent sustainable improvements in cash flow. We are
also marketing 16 owned properties for sale or sale-leaseback,
which are expected to result in cash flow increases, although there
can be no assurance that any such sales or sale-leaseback
transactions will be consummated.
Second Quarter 2020 Brand Results
Total Pollo Tropical restaurant sales decreased 31.7% to $63.3
million in the second quarter of 2020 compared to $92.6 million in
the second quarter of 2019 primarily due to a comparable restaurant
sales decrease of 31.6%. Comparable restaurant sales for Pollo
Tropical accelerated significantly through the second quarter, from
a decrease of 49.2% in April to a decrease of 17.8% in June. Off
premise sales consisting of online, catering, and delivery orders
comprised 11.5% of total restaurant sales in the second quarter of
2020 compared to 4.0% of total restaurant sales in the second
quarter of 2019.
Sales cannibalization from new restaurants on existing
restaurants negatively impacted comparable restaurant sales by
approximately 20 basis points. The decrease in comparable
restaurant sales resulted from a 38.2% decrease in comparable
restaurant transactions and a 6.6% increase in the net impact of
pricing and product/channel mix. The increase in pricing and
product/channel mix was driven primarily by increases in delivery
and drive-thru average check and sales channel penetration, and
menu price increases of 0.2%.
Adjusted EBITDA for Pollo Tropical decreased to $5.0 million in
the second quarter of 2020 from $14.6 million in the second quarter
of 2019. The decrease was primarily due to the impact of lower
comparable restaurant sales. Cost of sales, restaurant wages, rent
expense, and other restaurant operating expenses increased as a
percentage of restaurant sales—driven in large part by the impact
of lower comparable restaurant sales. This was partially offset by
lower advertising expense. Pollo Tropical incurred incremental
costs related to COVID-19 of $1.6 million for the quarter including
special incentive pay, quarantine pay, and costs related to masks
and sanitizer. In order to support the community, Pollo Tropical
also offered additional discounts to first responders and
healthcare workers and free kids meals due to school cancellations
during the second quarter. Restaurant wages and related expenses
increased as a percentage of restaurant sales as a result of
COVID-19 incentives and quarantine pay. Driven by efficiency
initiatives, management and hourly wage costs as a percentage of
sales improved compared to last year by 0.9% (excluding COVID-19
incentives and quarantine pay).
Taco Cabana restaurant sales decreased 25.4% to $58.3 million in
the second quarter of 2020 from $78.1 million in the second quarter
of 2019 due primarily to a comparable restaurant sales decrease of
19.2% along with a decrease in sales related to closed restaurants.
Comparable restaurant sales for Taco Cabana improved through the
second quarter, from a decrease of 26.2% in April to a decrease of
18.0% in June. Off premise sales consisting of online, catering,
and delivery orders comprised 8.0% of total restaurant sales in the
second quarter of 2020 compared to 3.7% of total restaurant sales
in the second quarter of 2019. The decrease in comparable
restaurant sales resulted from a 29.0% decrease in comparable
restaurant transactions and a 9.8% increase in the net impact of
product/channel mix. The increase in product/channel mix was driven
primarily by increases in drive-thru and delivery sales channel
penetration and growth in average check for drive-thru versus last
year due in part to an increase in transactions that include
alcohol.
Adjusted EBITDA for Taco Cabana decreased to $2.7 million from
$4.1 million in the second quarter of 2019. The decrease was
primarily due to the impact of lower comparable restaurant sales.
Restaurant wages, rent expense and other operating expenses
increased as a percentage of Taco Cabana restaurant sales—driven in
large part by the impact of lower comparable restaurant sales. This
was partially offset by lower cost of sales as a percentage of
restaurant sales and advertising expense. Taco Cabana incurred
incremental costs related to COVID-19 of $1.8 million for the
quarter including special incentive pay, quarantine pay, and costs
related to masks and sanitizer. In order to support the community,
Taco Cabana also offered additional discounts to first responders
and healthcare workers and free kids meals due to school
cancellations during the second quarter. Restaurant wages and
related expenses increased as a percentage of restaurant sales as a
result of COVID-19 incentives and quarantine pay. Driven by
efficiency initiatives, management and hourly wage costs as a
percentage of sales improved compared to last year by 2.1%
(excluding COVID-19 incentives and quarantine pay).
________
(3)
Total debt is comprised of capital lease obligations of $2.0
million as of March 18, 2020 and July 31, 2020 and outstanding
revolving credit facility borrowings. We define net revolver debt
as outstanding revolving credit facility borrowings plus
outstanding letters of credit less unrestricted cash balance, which
were $146.4 million, $3.5 million and $75.5 million, respectively,
as of March 18, 2020 and $54.0 million, $3.5 million and $9.1
million, respectively, as of July 31, 2020. Net revolver debt is a
non-GAAP measure which we believe assists investors in
understanding of our management of our overall liquidity and
financial flexibility.
Restaurant Portfolio
As of June 28, 2020, there were 141 Company-owned Pollo Tropical
restaurants, 146 Company-owned Taco Cabana restaurants, 33
franchised Pollo Tropical restaurants in the U.S., Puerto Rico,
Panama, Guyana, Ecuador and the Bahamas, and seven franchised Taco
Cabana restaurants in the U.S.
Investor Conference Call Today
We will host a conference call at 4:30 p.m. ET today. The
conference call can be accessed live over the phone by dialing
631-891-4304. A replay will be available after the call until
Wednesday, August 12, 2020 and can be accessed by dialing
412-317-6671. The passcode is 10010440. 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., owns, operates and franchises the
Pollo Tropical® and Taco Cabana® restaurant brands. The brands
specialize in the operation of fast casual/quick service
restaurants that offer distinct and unique flavors with broad
appeal at a compelling value. The brands feature fresh-made
cooking, drive-thru service and catering. For more information
about Fiesta Restaurant Group, Inc., visit the corporate website at
www.frgi.com.
Forward Looking Statements
Certain statements contained in this news release and in our
public disclosures, whether written, oral or otherwise made,
relating to future events or future performance, including any
discussion, express or implied regarding our anticipated growth,
plans, objectives and the impact of our initiatives designed to
strengthen our liquidity and cash position, including those related
to working capital efficiency initiatives and sales of real
property, our investments in strategic and sales building
initiatives, including those relating to advertising and marketing,
operations improvements, menu development and simplification,
digital ordering and online sales, catering and third-party
delivery and the impact of the recent COVID-19 outbreak and our
initiatives designed to respond to the COVID-19 outbreak on future
sales, margins, earnings and liquidity, contain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These statements are often identified by the
words "may," "might," "believes," "thinks," "anticipates," "plans,"
"positioned," "target," "continue," "expects," "look to," "intends"
and other similar expressions, whether in the negative or the
affirmative, that are not statements of historical fact. These
forward-looking statements are not guarantees of future performance
and involve certain risks, uncertainties, and assumptions that are
difficult to predict, and you should not place undue reliance on
our forward-looking statements. Our actual results and timing of
certain events could differ materially from those anticipated in
these forward-looking statements as a result of certain factors,
including, but not limited to, those discussed from time to time in
our reports filed with the Securities and Exchange Commission,
including our Annual Report on Form 10-K for the fiscal year ended
December 29, 2019 and our quarterly reports on Form 10-Q. All
forward-looking statements and the internal projections and beliefs
upon which we base our expectations included in this release are
made only as of the date of this release and may change. While we
may elect to update forward-looking statements at some point in the
future, we expressly disclaim any obligation to update any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
FIESTA RESTAURANT GROUP,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED
JUNE 28, 2020 AND JUNE 30, 2019
(In thousands, except share
and per share data)
(Unaudited)
Three Months Ended (a)
Six Months Ended (a)
June 28, 2020
June 30, 2019
June 28, 2020
June 30, 2019
Revenues:
Restaurant sales
$
121,547
$
170,713
$
267,633
$
335,894
Franchise royalty revenues and fees
321
668
934
1,339
Total revenues
121,868
171,381
268,567
337,233
Costs and expenses:
Cost of sales
37,807
53,758
84,083
104,268
Restaurant wages and related expenses
(b)
33,747
45,766
74,242
90,802
Restaurant rent expense
11,279
11,898
22,618
23,643
Other restaurant operating expenses
18,989
22,513
40,500
44,276
Advertising expense
2,143
5,883
7,926
11,404
General and administrative expenses
(b)(c)
12,288
13,496
26,672
28,567
Depreciation and amortization
9,565
9,807
18,995
19,355
Pre-opening costs
—
385
69
786
Impairment and other lease charges (d)
2,285
1,751
6,518
1,413
Goodwill impairment (e)
—
46,485
—
46,485
Closed restaurant rent, net of sublease
income (f)
1,830
1,335
3,462
2,759
Other expense (income), net (g)
784
154
1,692
856
Total operating expenses
130,717
213,231
286,777
374,614
Loss from operations
(8,849
)
(41,850
)
(18,210
)
(37,381
)
Interest expense
1,237
967
2,198
2,201
Loss before income taxes
(10,086
)
(42,817
)
(20,408
)
(39,582
)
Provision for (benefit from) income taxes
(h)
(1,743
)
623
(4,748
)
1,569
Net loss
$
(8,343
)
$
(43,440
)
$
(15,660
)
$
(41,151
)
Earnings (loss) per common share:
Basic
$
(0.33
)
$
(1.62
)
$
(0.62
)
$
(1.53
)
Diluted
(0.33
)
(1.62
)
(0.62
)
(1.53
)
Weighted average common shares
outstanding:
Basic
25,267,404
26,807,068
25,393,325
26,825,286
Diluted
25,267,404
26,807,068
25,393,325
26,825,286
(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, 2020 and June 30, 2019 each
included 13 and 26 weeks, respectively.
(b)
Restaurant wages and related expenses
include stock-based compensation of $69 and $16 for the three
months ended June 28, 2020 and June 30, 2019, respectively, and
$105 and $43 for the six months ended June 28, 2020 and June 30,
2019, respectively. General and administrative expenses include
stock-based compensation expense of $959 and $719 for the three
months ended June 28, 2020 and June 30, 2019, respectively, and
$1,735 and $1,484 for the six months ended June 28, 2020 and June
30, 2019, respectively.
(c)
See notes (g) and (h) to the
reconciliation of net income (loss) to adjusted net income (loss)
in the tables titled "Supplemental Non-GAAP Information."
(d)
See note (c) to the reconciliation of net
income (loss) to adjusted net income (loss) in the tables titled
"Supplemental Non-GAAP Information."
(e)
See note (d) to the reconciliation of net
income (loss) to adjusted net income (loss) in the tables titled
"Supplemental Non-GAAP Information."
(f)
See note (e) to the reconciliation of net
income (loss) to adjusted net income (loss) in the tables titled
"Supplemental Non-GAAP Information."
(g)
See note (f) to the reconciliation of net
income (loss) to adjusted net income (loss) in the tables titled
"Supplemental Non-GAAP Information."
(h)
See notes (a) and (b) to the
reconciliation of net income (loss) to adjusted net income (loss)
in the tables titled "Supplemental Non-GAAP Information."
FIESTA RESTAURANT GROUP,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
June 28, 2020
December 29, 2019
Assets
Cash
$
101,375
$
13,413
Other current assets
38,986
25,870
Property and equipment, net
187,928
211,944
Operating lease right-of-use assets
257,654
251,272
Goodwill
56,307
56,307
Other assets
8,134
9,835
Total assets
$
650,384
$
568,641
Liabilities and Stockholders'
Equity
Current liabilities
$
79,097
$
63,620
Long-term debt, net of current portion
148,233
76,823
Operating lease liabilities
264,157
256,798
Deferred tax liabilities
7,866
4,759
Other non-current liabilities
10,343
8,405
Total liabilities
509,696
410,405
Stockholders' equity
140,688
158,236
Total liabilities and stockholders'
equity
$
650,384
$
568,641
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, 2020
June 30, 2019
June 28, 2020
June 30, 2019
Segment revenues:
Pollo Tropical
$
63,438
$
93,058
$
149,563
$
184,539
Taco Cabana
58,430
78,323
119,004
152,694
Total revenues
$
121,868
$
171,381
$
268,567
$
337,233
Change in comparable restaurant sales
(a):
Pollo Tropical
(31.6
)%
(1.3
)%
(19.5
)%
(1.9
)%
Taco Cabana
(19.2
)%
(3.0
)%
(16.4
)%
(1.8
)%
Average sales per Company-owned
restaurant:
Pollo Tropical
Comparable restaurants (b)
$
461
$
677
$
1,076
$
1,347
New restaurants (c)
369
452
857
887
Total Company-owned (d)
458
662
1,067
1,316
Taco Cabana
Comparable restaurants (b)
$
399
$
476
$
809
$
935
New restaurants (c)
435
482
740
920
Total Company-owned (d)
399
476
806
933
Income (loss) before income taxes:
Pollo Tropical
$
(5,186
)
$
6,918
$
(7,013
)
$
12,874
Taco Cabana
(4,900
)
(49,735
)
(13,395
)
(52,456
)
Adjusted EBITDA:
Pollo Tropical
$
4,993
$
14,646
$
13,773
$
28,963
Taco Cabana
2,672
4,120
1,765
7,015
Restaurant-level Adjusted EBITDA (e):
Pollo Tropical
$
10,338
$
21,432
$
25,772
$
42,601
Taco Cabana
7,313
9,479
12,597
18,943
(a)
Restaurants are included in
comparable restaurant sales after they have been open for 18 months
or longer.
(b)
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.
(c)
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.
(d)
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.
(e)
Restaurant-level Adjusted EBITDA
is a non-GAAP financial measure. Please see the reconciliation from
net income (loss) to Restaurant-level Adjusted EBITDA in the table
titled "Supplemental Non-GAAP Information."
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, 2020
June 30, 2019
June 28, 2020
June 30, 2019
Company-owned restaurant openings:
Pollo Tropical
—
1
—
1
Taco Cabana
—
1
1
3
Total new restaurant openings
—
2
1
4
Company-owned restaurant closings:
Pollo Tropical
—
—
(1
)
—
Taco Cabana
—
—
(19
)
—
Net change in restaurants
—
2
(19
)
4
Number of Company-owned restaurants:
Pollo Tropical
141
140
141
140
Taco Cabana
146
165
146
165
Total Company-owned restaurants
287
305
287
305
Number of franchised restaurants:
Pollo Tropical
33
31
33
31
Taco Cabana
7
8
7
8
Total franchised restaurants
40
39
40
39
Total number of restaurants:
Pollo Tropical
174
171
174
171
Taco Cabana
153
173
153
173
Total restaurants
327
344
327
344
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, 2020
June 30, 2019
Pollo Tropical:
(a)
(a)
Restaurant sales
$
63,292
$
92,620
Cost of sales
20,321
32.1
%
29,318
31.7
%
Restaurant wages and related expenses
15,108
23.9
%
21,290
23.0
%
Restaurant rent expense
5,660
8.9
%
5,495
5.9
%
Other restaurant operating expenses
10,714
16.9
%
11,900
12.8
%
Advertising expense
1,178
1.9
%
3,189
3.4
%
Depreciation and amortization
5,233
8.3
%
5,376
5.8
%
Pre-opening costs
—
—
%
153
0.2
%
Impairment and other lease charges
1,932
3.1
%
52
0.1
%
Closed restaurant rent expense, net of
sublease income
671
1.1
%
1,039
1.1
%
Taco Cabana:
Restaurant sales
$
58,255
$
78,093
Cost of sales
17,486
30.0
%
24,440
31.3
%
Restaurant wages and related expenses
18,639
32.0
%
24,476
31.3
%
Restaurant rent expense
5,619
9.6
%
6,403
8.2
%
Other restaurant operating expenses
8,275
14.2
%
10,613
13.6
%
Advertising expense
965
1.7
%
2,694
3.4
%
Depreciation and amortization
4,332
7.4
%
4,431
5.7
%
Pre-opening costs
—
—
%
232
0.3
%
Impairment and other lease charges
353
0.6
%
1,699
2.2
%
Goodwill impairment
—
—
%
46,485
59.5
%
Closed restaurant rent expense, net of
sublease income
1,159
2.0
%
296
0.4
%
Six Months Ended
June 28, 2020
June 30, 2019
Pollo Tropical:
(a)
(a)
Restaurant sales
$
149,013
$
183,646
Cost of sales
48,052
32.2
%
57,616
31.4
%
Restaurant wages and related expenses
36,145
24.3
%
42,443
23.1
%
Restaurant rent expense
11,300
7.6
%
10,916
5.9
%
Other restaurant operating expenses
23,100
15.5
%
23,858
13.0
%
Advertising expense
4,682
3.1
%
6,221
3.4
%
Depreciation and amortization
10,511
7.1
%
10,589
5.8
%
Pre-opening costs
—
—
%
239
0.1
%
Impairment and other lease charges
5,628
3.8
%
(327
)
(0.2
)%
Closed restaurant rent expense, net of
sublease income
1,273
0.9
%
2,183
1.2
%
Taco Cabana:
Restaurant sales
$
118,620
$
152,248
Cost of sales
36,031
30.4
%
46,652
30.6
%
Restaurant wages and related expenses
38,097
32.1
%
48,359
31.8
%
Restaurant rent expense
11,318
9.5
%
12,727
8.4
%
Other restaurant operating expenses
17,400
14.7
%
20,418
13.4
%
Advertising expense
3,244
2.7
%
5,183
3.4
%
Depreciation and amortization
8,484
7.2
%
8,766
5.8
%
Pre-opening costs
69
0.1
%
547
0.4
%
Impairment and other lease charges
890
0.8
%
1,740
1.1
%
Goodwill impairment
—
—
%
46,485
30.5
%
Closed restaurant rent expense, net of
sublease income
2,189
1.8
%
576
0.4
%
(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):
Consolidated Adjusted EBITDA and Restaurant-level Adjusted
EBITDA are non-GAAP financial measures. Adjusted EBITDA is defined
as earnings (loss) attributable to the applicable operating
segments before interest expense, income taxes, depreciation and
amortization, impairment and other lease charges, goodwill
impairment, closed restaurant rent expense, net of sublease income,
stock-based compensation expense, other expense (income), net, and
certain significant items for each segment that are related to
strategic changes and/or are not related to the ongoing operation
of our restaurants as set forth in the reconciliation table below.
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
finance, legal, supply chain, human resources, construction 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 the primary 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
Consolidated Adjusted EBITDA and Restaurant-level Adjusted EBITDA,
when viewed with our results of operations calculated in accordance
with GAAP and our reconciliation of net income (loss) to
Consolidated Adjusted EBITDA and Restaurant-level Adjusted EBITDA
(i) provide useful information about our operating performance and
period-over-period changes, (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.
Three Months Ended
Pollo Tropical
Taco Cabana
Consolidated
June 28, 2020:
Net loss
$
(8,343
)
Benefit from income taxes
(1,743
)
Loss before taxes
$
(5,186
)
$
(4,900
)
$
(10,086
)
Add:
Non-general and administrative expense
adjustments:
Depreciation and amortization
5,233
4,332
9,565
Impairment and other lease charges
1,932
353
2,285
Interest expense
625
612
1,237
Closed restaurant rent expense, net of
sublease income
671
1,159
1,830
Other expense (income), net
644
140
784
Stock-based compensation expense in
restaurant wages
27
42
69
Total non-general and administrative
expense adjustments
9,132
6,638
15,770
General and administrative expense
adjustments:
Stock-based compensation expense
523
436
959
Restructuring costs and retention
bonuses
452
439
891
Digital and brand repositioning costs
72
59
131
Total general and administrative expense
adjustments
1,047
934
1,981
Adjusted EBITDA
$
4,993
$
2,672
$
7,665
Restaurant-level adjustments:
Add: Other general and administrative
expense(1)
5,491
4,816
10,307
Less: Franchise royalty revenue and
fees
146
175
321
Restaurant-level Adjusted EBITDA
$
10,338
$
7,313
$
17,651
June 30, 2019:
Net loss
$
(43,440
)
Provision for income taxes
623
Income (loss) before taxes
$
6,918
$
(49,735
)
$
(42,817
)
Add:
Non-general and administrative expense
adjustments:
Depreciation and amortization
5,376
4,431
9,807
Impairment and other lease charges
52
1,699
1,751
Goodwill impairment
—
46,485
46,485
Interest expense
480
487
967
Closed restaurant rent expense, net of
sublease income
1,039
296
1,335
Other expense (income), net
148
6
154
Stock-based compensation expense in
restaurant wages
4
12
16
Total non-general and administrative
expense adjustments
7,099
53,416
60,515
General and administrative expense
adjustments:
Stock-based compensation expense
351
368
719
Restructuring costs and retention
bonuses
278
71
349
Total general and administrative expense
adjustments
629
439
1,068
Adjusted EBITDA
$
14,646
$
4,120
$
18,766
Restaurant-level adjustments:
Add: Pre-opening costs
153
232
385
Add: Other general and administrative
expense(1)
7,071
5,357
12,428
Less: Franchise royalty revenue and
fees
438
230
668
Restaurant-level Adjusted EBITDA
$
21,432
$
9,479
$
30,911
Six Months Ended
Pollo Tropical
Taco Cabana
Consolidated
June 28, 2020:
Net loss
$
(15,660
)
Benefit from income taxes
(4,748
)
Loss before taxes
$
(7,013
)
$
(13,395
)
$
(20,408
)
Add:
Non-general and administrative expense
adjustments:
Depreciation and amortization
10,511
8,484
18,995
Impairment and other lease charges
5,628
890
6,518
Interest expense
1,108
1,090
2,198
Closed restaurant rent expense, net of
sublease income
1,273
2,189
3,462
Other expense (income), net
751
941
1,692
Stock-based compensation expense in
restaurant wages
38
67
105
Total non-general and administrative
expense adjustments
19,309
13,661
32,970
General and administrative expense
adjustments:
Stock-based compensation expense
833
902
1,735
Restructuring costs and retention
bonuses
452
439
891
Digital and brand repositioning costs
192
158
350
Total general and administrative expense
adjustments
1,477
1,499
2,976
Adjusted EBITDA
$
13,773
$
1,765
$
15,538
Restaurant-level adjustments:
Add: Pre-opening costs
—
69
69
Add: Other general and administrative
expense(1)
12,549
11,147
23,696
Less: Franchise royalty revenue and
fees
550
384
934
Restaurant-level Adjusted EBITDA
$
25,772
$
12,597
$
38,369
June 30, 2019:
Net loss
$
(41,151
)
Provision for income taxes
1,569
Income (loss) before taxes
$
12,874
$
(52,456
)
$
(39,582
)
Add:
Non-general and administrative expense
adjustments:
Depreciation and amortization
10,589
8,766
19,355
Impairment and other lease charges
(327
)
1,740
1,413
Goodwill impairment
—
46,485
46,485
Interest expense
1,136
1,065
2,201
Closed restaurant rent expense, net of
sublease income
2,183
576
2,759
Other expense (income), net
744
112
856
Stock-based compensation expense in
restaurant wages
9
34
43
Total non-general and administrative
expense adjustments
14,334
58,778
73,112
General and administrative expense
adjustments:
Stock-based compensation expense
928
556
1,484
Restructuring costs and retention
bonuses
827
137
964
Total general and administrative expense
adjustments
1,755
693
2,448
Adjusted EBITDA
$
28,963
$
7,015
$
35,978
Restaurant-level adjustments:
Add: Pre-opening costs
239
547
786
Add: Other general and administrative
expense(1)
14,292
11,827
26,119
Less: Franchise royalty revenue and
fees
893
446
1,339
Restaurant-level Adjusted EBITDA
$
42,601
$
18,943
$
61,544
(1) Excludes general and administrative
adjustments above.
FIESTA RESTAURANT GROUP, INC.
Supplemental Non-GAAP Information The 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 (loss) before impairment and other lease
charges, goodwill impairment, closed restaurant rent expense, net
of sublease income, other expense (income), net, board and
shareholder matter costs, restructuring costs and retention
bonuses, certain legal settlements and related costs and other
significant items that are related to strategic changes and/or are
not related to the ongoing operation of our restaurants. 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
June 28, 2020
June 30, 2019
Loss Before Income
Taxes
Benefit From Income Taxes
(a)
Net Loss
Diluted EPS
Income (Loss) Before Income
Taxes
Provision For Income Taxes
(a)
Net Income (Loss)
Diluted EPS
Reported - GAAP
$
(10,086
)
$
(1,743
)
$
(8,343
)
$
(0.33
)
$
(42,817
)
$
623
$
(43,440
)
$
(1.62
)
Adjustments:
Non-general and administrative expense
adjustments:
Deferred tax asset valuation allowance
(b)
—
(971
)
971
0.04
—
—
—
—
Impairment and other lease charges (c)
2,285
546
1,739
0.07
1,751
436
1,315
0.05
Goodwill impairment (d)
—
—
—
—
46,485
—
46,485
1.73
Closed restaurant rent expense, net of
sublease income (e)
1,830
437
1,393
0.06
1,335
333
1,002
0.04
Other expense (income), net (f)
784
187
597
0.02
154
38
116
—
Total non-general and administrative
expense
4,899
199
4,700
0.19
49,725
807
48,918
1.82
General and administrative expense
adjustments:
Restructuring costs and retention bonuses
(g)
891
213
678
0.03
349
87
262
0.01
Digital and brand repositioning costs
(h)
131
31
100
—
—
—
—
—
Total general and administrative
expense
1,022
244
778
0.03
349
87
262
0.01
Adjusted - Non-GAAP
$
(4,165
)
$
(1,300
)
$
(2,865
)
$
(0.11
)
$
7,257
$
1,517
$
5,740
$
0.21
(Unaudited)
Six Months Ended
June 28, 2020
June 30, 2019
Loss Before Income
Taxes
Benefit From Income Taxes
(a)
Net Loss
Diluted EPS
Income (Loss) Before Income
Taxes
Provision For Income Taxes
(a)
Net Income (Loss)
Diluted EPS
Reported - GAAP
$
(20,408
)
$
(4,748
)
$
(15,660
)
$
(0.62
)
$
(39,582
)
$
1,569
$
(41,151
)
$
(1.53
)
Adjustments:
Non-general and administrative expense
adjustments:
Income tax due to tax law change (a)
—
1,603
(1,603
)
(0.06
)
—
—
—
—
Deferred tax asset valuation allowance
(b)
—
(1,674
)
1,674
0.07
—
—
—
—
Impairment and other lease charges (c)
6,518
1,558
4,960
0.20
1,413
352
1,061
0.04
Goodwill impairment (d)
—
—
—
—
46,485
—
46,485
1.73
Closed restaurant rent expense, net of
sublease income (e)
3,462
827
2,635
0.10
2,759
687
2,072
0.08
Other expense (income), net (f)
1,692
404
1,288
0.05
856
213
643
0.02
Total non-general and administrative
expense
11,672
2,718
8,954
0.35
51,513
1,252
50,261
1.87
General and administrative expense
adjustments:
Restructuring costs and retention bonuses
(g)
891
213
678
0.03
964
240
724
0.03
Digital and brand repositioning costs
(h)
350
84
266
0.01
—
—
—
—
Total general and administrative
expense
1,241
297
944
0.04
964
240
724
0.03
Adjusted - Non-GAAP
$
(7,495
)
$
(1,733
)
$
(5,762
)
$
(0.23
)
$
12,895
$
3,061
$
9,834
$
0.37
(a)
The provision for (benefit from) income
taxes related to the adjustments was calculated using the Company's
combined federal statutory and estimated state rate of 23.9% and
24.9% for the periods ending June 28, 2020, and June 30, 2019,
respectively. For fiscal years beginning January 1, 2018, our
federal statutory tax rate is 21% as a result of the enactment of
the Tax Cuts and Jobs Act (the "Act") in December 2017. For the six
months ended June 28, 2020, we recorded a $1.8 million tax benefit
related to prior year net operating losses as a result of a
provision in the CARES Act that allows net operating losses from
2018–2020 to be carried back for five years.
(b)
We recorded an additional valuation
allowance of $1.0 million and $1.7 million for the three and six
months ended June 28, 2020, respectively, against deferred income
tax assets where it was determined to be more likely than not that
the deferred income tax assets will not be realized through the
reversal of existing deferred tax liabilities.
(c)
Impairment and other lease charges for the
three and six months ended June 28, 2020, consist of impairment
charges of $1.6 million and $5.9 million, respectively, and other
lease charges of $0.6 million. The impairment charges primarily
relate to the write-down of assets held for sale to their fair
value for the three and six months ended June 28, 2020 and two
underperforming Taco Cabana restaurants and three underperforming
Pollo Tropical restaurants that we continue to operate for the six
months ended June 28, 2020. The other lease charges primarily
relate to lease termination charges of $0.9 million for restaurant
locations we decided not to develop, net of a gain from a lease
termination of $(0.2) million.
Impairment and other lease charges for the
three and six months ended June 30, 2019, primarily consist of
impairment charges of $1.8 million and $2.2 million, respectively,
and a lease charge recoveries benefit related to closed restaurant
lease terminations of $(0.7) million for the six months ended June
30, 2019. The impairment charges primarily related to assets for
three underperforming Taco Cabana restaurants that we continue to
operate and equipment from previously impaired restaurants.
(d)
Goodwill impairment for the three and six
months ended June 30, 2019 consists of a non-cash impairment charge
to write down the value of goodwill for the Taco Cabana reporting
unit.
(e)
Closed restaurant rent expense, net of
sublease income for the three and six months ended June 28, 2020,
primarily consists of closed restaurant lease costs of $3.0 million
and $5.9 million, respectively, partially offset by sublease income
of $(1.2) million and $(2.4) million, respectively. Closed
restaurant rent expense, net of sublease income for the three and
six months ended June 30, 2019, primarily consists of closed
restaurant lease costs of $2.2 million and $4.4 million,
respectively, partially offset by sublease income of $(0.9) million
and $(1.6) million, respectively.
(f)
Other expense (income), net for the three
and six months ended June 28, 2020, primarily consists of the
write-off of site development costs of $0.6 million and costs for
the removal, transfer, and storage of equipment from closed
restaurants and other closure related costs of $0.2 million and
$1.1 million, respectively. Other expense (income), net for the
three and six months ended June 30, 2019, primarily consists of
costs for the removal, transfer, and storage of equipment from
closed restaurants of $0.2 million and $0.6 million,
respectively.
(g)
Restructuring costs and retention bonuses
for the three and six months ended June 28, 2020, include severance
costs related to terminations in response to the COVID-19 pandemic.
Restructuring costs and retention bonuses for the three and six
months ended June 30, 2019, include severance costs related to
eliminated positions.
(h)
Digital and brand repositioning costs for
the three and six months ended June 28, 2020, include consulting
costs related to repositioning the digital experience for our
customers.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200805005933/en/
Investor Relations: Raphael Gross 203-682-8253
investors@frgi.com
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