Sequential Improvement in Comparable Restaurant
Sales Trend Compared to Second Quarter
Pollo Tropical Q3 Adjusted EBITDA as % of
Restaurant Sales Increased from 12.4% in 2019 to 13.6% in 2020
Taco Cabana Q3 Adjusted EBITDA as % of
Restaurant Sales Increased from 1.6% in 2019 to 7.0% in 2020
Company Generated Net Cash Provided by
Operations of $18 Million during Quarter
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
third quarter 2020, which ended on September 27, 2020 and provided
a business update related to current operations.
Fiesta President and Chief Executive Officer Richard Stockinger
said, "While prioritizing the well-being of our team members and
guests during these challenging times, we are very encouraged that
our business trajectory continues to strengthen. Pollo Tropical’s
comparable sales trend improved from -31.6% in the second quarter
of 2020 to -11.1% in the third quarter. Taco Cabana’s comparable
sales trend accelerated by 500 basis points compared to the second
quarter of 2020. Notably, our progress was achieved despite
reclosing our dining rooms in mid July in response to COVID
outbreaks in Florida and Texas, the two states where we operate.
Our evolving operating model is making it easier and safer for
consumers to order the freshly prepared food that they love through
an improved drive-thru experience, expanded delivery options, new
curbside and pickup capabilities, and a much-enhanced online and
mobile ordering experience at both brands. These off-premise
initiatives and investments are addressing real consumer needs for
convenience and we believe will be key revenue growth drivers going
forward."
Stockinger added, “Our operating model optimization and cost
management efforts have significantly increased profit margins at
both brands at a sustainable level. Third quarter Pollo Tropical
Adjusted EBITDA margin improved 120 basis points and Taco Cabana
Adjusted EBITDA margin expanded by 540 basis points. Net income was
$4.6 million, which includes benefits from deferred tax valuation
allowance adjustments and benefits from the CARES Act, and pre-tax
income was $0.4 million for the quarter. Consolidated Adjusted
EBITDA, a non-GAAP measure(1), increased 22% vs. last year to $14.8
million, driven by significant improvement in Restaurant-level
Adjusted EBITDA margins at both brands. Restaurant-level Adjusted
EBITDA margins, a non-GAAP measure(1), improved in the third
quarter of 2020 to 21.2% for Pollo Tropical and 14.9% for Taco
Cabana. In this evolving environment, our primary focus remains on
driving profitable sales growth. We will continue focusing on
increasing ease of use and capacity for the most desired channels
by consumers including online, drive-thru, pickup and delivery, and
selectively opening dining rooms in situations in which we can
achieve profitable sales.”
Stockinger concluded, “We have bolstered our liquidity through
better working capital management, generation of cash flow from
operations, and by significantly reducing our revolving credit
facility(2) and net revolver debt balances(3). As of November 2,
total debt was $21.4 million and net revolver debt was $9.0
million(3). At the beginning of the COVID crisis, on March 18, our
total debt was $148.4 million and our net revolver debt was $74.4
million(3). We continue to improve our financial position and
believe we will exit this challenging period with a stronger
financial position that will support continued growth.”
________
(1)
See non-GAAP reconciliation table
below.
(2)
Outstanding revolving credit
facility balance plus outstanding letters of credit.
(3)
We define net revolver debt as
outstanding revolving credit facility borrowings plus outstanding
letters of credit less unrestricted cash balance as defined in our
credit agreement (generally cash in bank less outstanding
payments), which were $19.5 million, $3.5 million and $14.0
million, respectively, as of November 2, 2020 and $146.4 million,
$3.5 million and $75.5 million, respectively, as of March 18, 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.
Third Quarter 2020 Financial Summary
- Total revenues decreased 16.4% to $137.3 million in the third
quarter of 2020 from $164.2 million in the third quarter of
2019;
- Comparable restaurant sales at Pollo Tropical decreased
11.1%;
- Comparable restaurant sales at Taco Cabana decreased
14.2%;
- Net income of $4.6 million, or $0.18 per diluted share, in the
third quarter of 2020, which included a benefit from income taxes
of $4.2 million, compared to net loss of $22.2 million, or ($0.84)
per diluted share, in the third quarter of 2019, which included the
unfavorable net impact of $19.3 million, or $0.73 per diluted
share, related to a non-cash impairment of goodwill;
- Adjusted net income (a non-GAAP financial measure) of $2.1
million, or $0.08 per diluted share, in the third quarter of 2020,
compared to adjusted net income of $0.2 million, or $0.01 per
diluted share, in the third quarter of 2019 (see non-GAAP
reconciliation table below);
- Adjusted EBITDA for Pollo Tropical of $10.6 million in the
third quarter of 2020 compared to $11.0 million in the third
quarter of 2019;
- Restaurant-level Adjusted EBITDA (a non-GAAP financial measure)
for Pollo Tropical of $16.4 million, or 21.2% of Pollo Tropical
restaurant sales, in the third quarter of 2020 compared to $17.8
million, or 20.1% of Pollo Tropical restaurant sales, in the third
quarter of 2019 (see non-GAAP reconciliation table below);
- Adjusted EBITDA for Taco Cabana of $4.2 million in the third
quarter of 2020 compared to $1.2 million in the third quarter of
2019;
- Restaurant-level Adjusted EBITDA (a non-GAAP financial measure)
for Taco Cabana of $8.8 million, or 14.9% of Taco Cabana restaurant
sales, in the third quarter of 2020 compared to $6.9 million, or
9.2% of Taco Cabana restaurant sales, in the third quarter of 2019
(see non-GAAP reconciliation table below); and
- Consolidated Adjusted EBITDA (a non-GAAP financial measure) of
$14.8 million in the third quarter of 2020 compared to Consolidated
Adjusted EBITDA of $12.2 million in the third quarter of 2019 (see
non-GAAP reconciliation table below).
Third Quarter 2020 Comparable Restaurant Sales
Summary
Fiscal July
Fiscal August
Fiscal September
Third Quarter 2020
Pollo Tropical
-13.8%
-10.8%
-8.7%
-11.1%
Taco Cabana
-14.4%
-14.1%
-14.2%
-14.2%
- Due to ongoing uncertainty and volatility surrounding the
COVID-19 pandemic and guidelines, effective July 12, 2020, we
closed all of our dining rooms and began re-opening certain dining
rooms and patios with limited capacity and hours at both brands in
late September at locations in which we believe we can generate
profitable dining room sales while maintaining health safety. We
continue to operate our restaurants for drive-thru, delivery and
pickup, and we have accelerated efforts to better enable our
customers to enjoy our brands safely and conveniently across all
channels—wherever and whenever they choose.
- Third quarter comparable restaurant sales at Pollo Tropical
benefited from the negative impact of Hurricane Dorian in 2019.
After adjusting for the impact of that named storm, 2020 third
quarter comparable sales would have been approximately 140 basis
points lower.
Cash and Liquidity
- At the end of the third quarter of 2020, we had $18.0 million
in cash and $41.8 million in debt, which includes $39.9 million
outstanding under our amended senior credit facility and $1.9
million in finance lease obligations.
- The reduction in our net revolver debt to $9.0 million(3) as of
November 2, 2020 was funded by cash flow from operations and the
sale or sale-leaseback of nine Company-owned properties. We
currently have offers or contracts in place for the sale or
sale-leaseback of our seven remaining Company-owned properties
being marketed, with additional transactions expected to close in
the fourth quarter to enable further debt pay down. However, there
can be no assurance that such transactions will be completed during
the fourth quarter or at all. We are also exploring the potential
refinancing of our current credit agreement, although we cannot
make any assurance of the timing or certainty of completing any
refinancing transactions at this time.
- 2020 full year capital expenditures will not exceed $22.0
million.
Third Quarter 2020 Brand Results
Total Pollo Tropical restaurant sales decreased 12.1% to $77.6
million in the third quarter of 2020 compared to $88.3 million in
the third quarter of 2019 primarily due to a comparable restaurant
sales decrease of 11.1%. Comparable restaurant sales for Pollo
Tropical improved through the third quarter, from a decrease of
13.8% in fiscal July to a decrease of 8.7% in fiscal September.
Off-premise sales consisting of online, catering, and delivery
orders comprised 12.1% of total restaurant sales in the third
quarter of 2020 compared to 4.4% of total restaurant sales in the
third quarter of 2019.
The decrease in comparable restaurant sales resulted from a
22.1% decrease in comparable restaurant transactions and an 11.0%
increase in the net impact of product/channel mix and pricing. The
increase in product/channel mix and pricing was driven primarily by
increases in delivery and drive-thru average check and sales
channel penetration, and menu price increases of 0.2%. Sales
cannibalization from new restaurants on existing restaurants
negatively impacted comparable restaurant sales by approximately 10
basis points. As noted above, comparable restaurant sales for Pollo
Tropical in the third quarter of 2020 benefited from the negative
impact of Hurricane Dorian in 2019. After adjusting for the impact
of that named storm, 2020 third quarter comparable restaurant sales
would have been approximately 140 basis points lower.
Adjusted EBITDA for Pollo Tropical decreased to $10.6 million in
the third quarter of 2020 from $11.0 million in the third quarter
of 2019. The decrease was primarily due to the impact of lower
comparable restaurant sales. 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 as well as higher delivery fee expense in
operating expenses. This was partially offset by lower cost of
sales, restaurant wages, and advertising expense. Pollo Tropical
incurred incremental costs related to COVID-19 of $0.2 million for
the quarter including quarantine pay, and costs related to COVID
testing, masks and sanitizer. Restaurant wages and related expenses
decreased as a percentage of restaurant sales, primarily driven by
efficiency initiatives. Driven by operating model optimization and
cost management efforts, third quarter Adjusted EBITDA as a
percentage of revenues increased from 12.4% in 2019 to 13.6% in
2020 and Restaurant-level Adjusted EBITDA as a percentage of
restaurant sales increased from 20.1% in 2019 to 21.2% in 2020.
Taco Cabana restaurant sales decreased 21.3% to $59.2 million in
the third quarter of 2020 from $75.3 million in the third quarter
of 2019 due primarily to a comparable restaurant sales decrease of
14.2% along with a decrease in sales related to closed restaurants.
Off-premise sales consisting of online, catering, and delivery
orders comprised 7.9% of total restaurant sales in the third
quarter of 2020 compared to 3.6% of total restaurant sales in the
third quarter of 2019. The decrease in comparable restaurant sales
resulted from a 23.8% decrease in comparable restaurant
transactions and a 9.6% increase in the net impact of
product/channel mix and pricing. The increase in product/channel
mix and pricing was driven primarily by increases in drive-thru and
delivery sales channel penetration, growth in average check for
drive-thru versus last year due in part to an increase in
transactions that include alcohol, and menu price increases of
1.6%.
Adjusted EBITDA for Taco Cabana increased to $4.2 million from
$1.2 million in the third quarter of 2019. The increase was
primarily due to lower cost of sales, restaurant wages, and
advertising expense as a percentage of Taco Cabana restaurant
sales. This was partially offset by higher rent expense as a
percentage of restaurant sales and the impact of lower comparable
restaurant sales. Higher delivery fee expense was offset by lower
operating supplies, repair and maintenance and other costs within
other operating expenses as a percentage of restaurant sales. Taco
Cabana incurred incremental costs related to COVID-19 of $0.2
million for the quarter including quarantine pay, and costs related
to COVID testing, masks and sanitizer. Restaurant wages and related
expenses decreased as a percentage of restaurant sales, primarily
driven by efficiency initiatives. Driven by operating model
optimization and cost management efforts, third quarter Adjusted
EBITDA as a percentage of revenues increased from 1.6% in 2019 to
7.0% in 2020 and Restaurant-level Adjusted EBITDA as a percentage
of restaurant sales increased from 9.2% in 2019 to 14.9% in
2020.
Restaurant Portfolio
As of September 27, 2020, there were 138 Company-owned Pollo
Tropical restaurants, 145 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
1-631-891-4304. A replay will be available after the call until
Wednesday, November 11, 2020 and can be accessed by dialing
1-412-317-6671. The passcode is 10011317. 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 NINE MONTHS ENDED
SEPTEMBER 27, 2020 AND SEPTEMBER 29, 2019
(In thousands, except share
and per share data)
(Unaudited)
Three Months Ended (a)
Nine Months Ended (a)
September 27, 2020
September 29, 2019
September 27, 2020
September 29, 2019
Revenues:
Restaurant sales
$
136,819
$
163,589
$
404,452
$
499,483
Franchise royalty revenues and fees
513
659
1,447
1,998
Total revenues
137,332
164,248
405,899
501,481
Costs and expenses:
Cost of sales
41,752
52,056
125,835
156,324
Restaurant wages and related expenses
(b)
35,545
44,459
109,787
135,261
Restaurant rent expense
11,174
11,970
33,792
35,613
Other restaurant operating expenses
21,138
24,153
61,638
68,429
Advertising expense
2,033
6,385
9,959
17,789
General and administrative expenses
(b)(c)
11,855
13,820
38,527
42,387
Depreciation and amortization
9,432
10,165
28,427
29,520
Pre-opening costs
—
77
69
863
Impairment and other lease charges (d)
2,404
3,254
8,922
4,667
Goodwill impairment (e)
—
21,424
—
67,909
Closed restaurant rent, net of sublease
income (f)
1,481
726
4,943
3,485
Other expense (income), net (g)
(1,304
)
64
388
920
Total operating expenses
135,510
188,553
422,287
563,167
Income (loss) from operations
1,822
(24,305
)
(16,388
)
(61,686
)
Interest expense
1,172
823
3,370
3,024
Loss on extinguishment of debt (i)
212
—
212
—
Income (loss) before income taxes
438
(25,128
)
(19,970
)
(64,710
)
Benefit from income taxes (h)
(4,155
)
(2,946
)
(8,903
)
(1,377
)
Net income (loss)
$
4,593
$
(22,182
)
$
(11,067
)
$
(63,333
)
Earnings (loss) per common share:
Basic
$
0.18
$
(0.84
)
$
(0.44
)
$
(2.37
)
Diluted
0.18
(0.84
)
(0.44
)
(2.37
)
Weighted average common shares
outstanding:
Basic
25,290,357
26,548,116
25,359,004
26,734,822
Diluted
25,291,719
26,548,116
25,359,004
26,734,822
(a)
The Company uses a 52- or 53-week
fiscal year that ends on the Sunday closest to December 31. The
three- and nine-month periods ended September 27, 2020 and
September 29, 2019 each included 13 and 39 weeks, respectively.
(b)
Restaurant wages and related
expenses include stock-based compensation of $47 and $102 for the
three months ended September 27, 2020 and September 29, 2019,
respectively, and $152 and $145 for the nine months ended September
27, 2020 and September 29, 2019, respectively. General and
administrative expenses include stock-based compensation expense of
$597 and $509 for the three months ended September 27, 2020 and
September 29, 2019, respectively, and $2,332 and $1,993 for the
nine months ended September 27, 2020 and September 29, 2019,
respectively.
(c)
See notes (h) and (i) 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."
(i)
See note (g) 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)
September 27, 2020
December 29, 2019
Assets
Cash
$
17,997
$
13,413
Other current assets
36,261
25,870
Property and equipment, net
174,551
211,944
Operating lease right-of-use assets
258,913
251,272
Goodwill
56,307
56,307
Other assets
7,739
9,835
Total assets
$
551,768
$
568,641
Liabilities and Stockholders'
Equity
Current liabilities
$
80,944
$
63,620
Long-term debt, net of current portion
41,586
76,823
Operating lease liabilities
265,356
256,798
Deferred tax liabilities
5,311
4,759
Other non-current liabilities
12,646
8,405
Total liabilities
405,843
410,405
Stockholders' equity
145,925
158,236
Total liabilities and stockholders'
equity
$
551,768
$
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
Nine Months Ended
September 27, 2020
September 29, 2019
September 27, 2020
September 29, 2019
Segment revenues:
Pollo Tropical
$
77,940
$
88,741
$
227,503
$
273,280
Taco Cabana
59,392
75,507
178,396
228,201
Total revenues
$
137,332
$
164,248
$
405,899
$
501,481
Change in comparable restaurant sales
(a):
Pollo Tropical
(11.1
)%
(3.8
)%
(16.8
)%
(2.5
)%
Taco Cabana
(14.2
)%
(4.8
)%
(15.7
)%
(2.8
)%
Average sales per Company-owned
restaurant:
Pollo Tropical
Comparable restaurants (b)
$
568
$
639
$
1,644
$
1,986
New restaurants (c)
387
447
1,233
1,333
Total Company-owned (d)
562
626
1,628
1,943
Taco Cabana
Comparable restaurants (b)
$
406
$
457
$
1,216
$
1,392
New restaurants (c)
410
460
1,140
1,369
Total Company-owned (d)
406
456
1,212
1,389
Income (loss) before income taxes:
Pollo Tropical
$
3,035
$
3,857
$
(3,978
)
$
16,731
Taco Cabana
(2,385
)
(28,985
)
(15,780
)
(81,441
)
Adjusted EBITDA:
Pollo Tropical
$
10,621
$
10,980
$
24,394
$
39,943
Taco Cabana
4,172
1,174
5,937
8,189
Restaurant-level Adjusted EBITDA (e):
Pollo Tropical
$
16,430
$
17,751
$
42,202
$
60,352
Taco Cabana
8,794
6,917
21,391
25,860
(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
Nine Months Ended
September 27, 2020
September 29, 2019
September 27, 2020
September 29, 2019
Company-owned restaurant openings:
Pollo Tropical
—
1
—
2
Taco Cabana
—
—
1
3
Total new restaurant openings
—
1
1
5
Company-owned restaurant closings:
Pollo Tropical
(3
)
—
(4
)
—
Taco Cabana
(1
)
—
(20
)
—
Net change in restaurants
(4
)
1
(23
)
5
Number of Company-owned restaurants:
Pollo Tropical
138
141
138
141
Taco Cabana
145
165
145
165
Total Company-owned restaurants
283
306
283
306
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
171
172
171
172
Taco Cabana
152
173
152
173
Total restaurants
323
345
323
345
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
September 27, 2020
September 29, 2019
Pollo Tropical:
(a)
(a)
Restaurant sales
$
77,604
$
88,309
Cost of sales
24,614
31.7
%
28,239
32.0
%
Restaurant wages and related expenses
18,051
23.3
%
20,944
23.7
%
Restaurant rent expense
5,585
7.2
%
5,477
6.2
%
Other restaurant operating expenses
12,125
15.6
%
12,807
14.5
%
Advertising expense
815
1.1
%
3,130
3.5
%
Depreciation and amortization
5,171
6.7
%
5,529
6.3
%
Pre-opening costs
—
—
%
68
0.1
%
Impairment and other lease charges
2,395
3.1
%
165
0.2
%
Closed restaurant rent expense, net of
sublease income
356
0.5
%
601
0.7
%
Taco Cabana:
Restaurant sales
$
59,215
$
75,280
Cost of sales
17,138
28.9
%
23,817
31.6
%
Restaurant wages and related expenses
17,494
29.5
%
23,515
31.2
%
Restaurant rent expense
5,589
9.4
%
6,493
8.6
%
Other restaurant operating expenses
9,013
15.2
%
11,346
15.1
%
Advertising expense
1,218
2.1
%
3,255
4.3
%
Depreciation and amortization
4,261
7.2
%
4,636
6.2
%
Pre-opening costs
—
—
%
9
—
%
Impairment and other lease charges
9
—
%
3,089
4.1
%
Goodwill impairment
—
—
%
21,424
28.5
%
Closed restaurant rent expense, net of
sublease income
1,125
1.9
%
125
0.2
%
Nine Months Ended
September 27, 2020
September 29, 2019
Pollo Tropical:
(a)
(a)
Restaurant sales
$
226,617
$
271,955
Cost of sales
72,666
32.1
%
85,855
31.6
%
Restaurant wages and related expenses
54,196
23.9
%
63,387
23.3
%
Restaurant rent expense
16,885
7.5
%
16,393
6.0
%
Other restaurant operating expenses
35,225
15.5
%
36,665
13.5
%
Advertising expense
5,497
2.4
%
9,351
3.4
%
Depreciation and amortization
15,682
6.9
%
16,118
5.9
%
Pre-opening costs
—
—
%
307
0.1
%
Impairment and other lease charges
8,023
3.5
%
(162
)
(0.1
)%
Closed restaurant rent expense, net of
sublease income
1,629
0.7
%
2,784
1.0
%
Taco Cabana:
Restaurant sales
$
177,835
$
227,528
Cost of sales
53,169
29.9
%
70,469
31.0
%
Restaurant wages and related expenses
55,591
31.3
%
71,874
31.6
%
Restaurant rent expense
16,907
9.5
%
19,220
8.4
%
Other restaurant operating expenses
26,413
14.9
%
31,764
14.0
%
Advertising expense
4,462
2.5
%
8,438
3.7
%
Depreciation and amortization
12,745
7.2
%
13,402
5.9
%
Pre-opening costs
69
—
%
556
0.2
%
Impairment and other lease charges
899
0.5
%
4,829
2.1
%
Goodwill impairment
—
—
%
67,909
29.8
%
Closed restaurant rent expense, net of
sublease income
3,314
1.9
%
701
0.3
%
(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
Other
Consolidated
September 27, 2020:
Net income
$
4,593
Benefit from income taxes
(4,155
)
Income (loss) before taxes
$
3,035
$
(2,385
)
$
(212
)
$
438
Add:
Non-general and administrative expense
adjustments:
Depreciation and amortization
5,171
4,261
—
9,432
Impairment and other lease charges
2,395
9
—
2,404
Interest expense
593
579
—
1,172
Closed restaurant rent expense, net of
sublease income
356
1,125
—
1,481
Loss on extinguishment of debt
—
—
212
212
Other expense (income), net
(1,404
)
100
—
(1,304
)
Stock-based compensation expense in
restaurant wages
15
32
—
47
Total non-general and administrative
expense adjustments
7,126
6,106
212
13,444
General and administrative expense
adjustments:
Stock-based compensation expense
307
290
—
597
Restructuring costs and retention
bonuses
99
117
—
216
Digital and brand repositioning costs
54
44
—
98
Total general and administrative expense
adjustments
460
451
—
911
Adjusted EBITDA
$
10,621
$
4,172
$
—
$
14,793
Adjusted EBITDA as a percentage of total
revenues
13.6
%
7.0
%
10.8
%
Restaurant-level adjustments:
Add: Other general and administrative
expense(1)
6,145
4,799
—
10,944
Less: Franchise royalty revenue and
fees
336
177
—
513
Restaurant-level Adjusted EBITDA
$
16,430
$
8,794
$
—
$
25,224
Restaurant-level Adjusted EBITDA as a
percentage of restaurant sales
21.2
%
14.9
%
18.4
%
September 29, 2019:
Net loss
$
(22,182
)
Benefit from income taxes
(2,946
)
Income (loss) before taxes
$
3,857
$
(28,985
)
$
—
$
(25,128
)
Add:
Non-general and administrative expense
adjustments:
Depreciation and amortization
5,529
4,636
—
10,165
Impairment and other lease charges
165
3,089
—
3,254
Goodwill impairment
—
21,424
—
21,424
Interest expense
398
425
—
823
Closed restaurant rent expense, net of
sublease income
601
125
—
726
Other expense (income), net
5
59
—
64
Stock-based compensation expense in
restaurant wages
39
63
—
102
Total non-general and administrative
expense adjustments
6,737
29,821
—
36,558
General and administrative expense
adjustments:
Stock-based compensation expense
268
241
—
509
Digital and brand repositioning costs
118
97
—
215
Total general and administrative expense
adjustments
386
338
—
724
Adjusted EBITDA
$
10,980
$
1,174
$
—
$
12,154
Adjusted EBITDA as a percentage of total
revenues
12.4
%
1.6
%
7.4
%
Restaurant-level adjustments:
Add: Pre-opening costs
68
9
—
77
Add: Other general and administrative
expense(1)
7,135
5,961
—
13,096
Less: Franchise royalty revenue and
fees
432
227
—
659
Restaurant-level Adjusted EBITDA
$
17,751
$
6,917
$
—
$
24,668
Restaurant-level Adjusted EBITDA as a
percentage of restaurant sales
20.1
%
9.2
%
15.1
%
Nine Months Ended
Pollo Tropical
Taco Cabana
Other
Consolidated
September 27, 2020:
Net loss
$
(11,067
)
Benefit from income taxes
(8,903
)
Loss before taxes
$
(3,978
)
$
(15,780
)
$
(212
)
$
(19,970
)
Add:
Non-general and administrative expense
adjustments:
Depreciation and amortization
15,682
12,745
—
28,427
Impairment and other lease charges
8,023
899
—
8,922
Interest expense
1,701
1,669
—
3,370
Closed restaurant rent expense, net of
sublease income
1,629
3,314
—
4,943
Loss on extinguishment of debt
—
—
212
212
Other expense (income), net
(653
)
1,041
—
388
Stock-based compensation expense in
restaurant wages
53
99
—
152
Total non-general and administrative
expense adjustments
26,435
19,767
212
46,414
General and administrative expense
adjustments:
Stock-based compensation expense
1,140
1,192
—
2,332
Restructuring costs and retention
bonuses
551
556
—
1,107
Digital and brand repositioning costs
246
202
—
448
Total general and administrative expense
adjustments
1,937
1,950
—
3,887
Adjusted EBITDA
$
24,394
$
5,937
$
—
$
30,331
Adjusted EBITDA as a percentage of total
revenues
10.7
%
3.3
%
7.5
%
Restaurant-level adjustments:
Add: Pre-opening costs
—
69
—
69
Add: Other general and administrative
expense(1)
18,694
15,946
—
34,640
Less: Franchise royalty revenue and
fees
886
561
—
1,447
Restaurant-level Adjusted EBITDA
$
42,202
$
21,391
$
—
$
63,593
Restaurant-level Adjusted EBITDA as a
percentage of restaurant sales
18.6
%
12.0
%
15.7
%
September 29, 2019:
Net loss
$
(63,333
)
Benefit from income taxes
(1,377
)
Income (loss) before taxes
$
16,731
$
(81,441
)
$
—
$
(64,710
)
Add:
Non-general and administrative expense
adjustments:
Depreciation and amortization
16,118
13,402
—
29,520
Impairment and other lease charges
(162
)
4,829
—
4,667
Goodwill impairment
—
67,909
—
67,909
Interest expense
1,534
1,490
—
3,024
Closed restaurant rent expense, net of
sublease income
2,784
701
—
3,485
Other expense (income), net
749
171
—
920
Stock-based compensation expense in
restaurant wages
48
97
—
145
Total non-general and administrative
expense adjustments
21,071
88,599
—
109,670
General and administrative expense
adjustments:
Stock-based compensation expense
1,196
797
—
1,993
Restructuring costs and retention
bonuses
827
137
—
964
Digital and brand repositioning costs
118
97
—
215
Total general and administrative expense
adjustments
2,141
1,031
—
3,172
Adjusted EBITDA
$
39,943
$
8,189
$
—
$
48,132
Adjusted EBITDA as a percentage of total
revenues
14.6
%
3.6
%
9.6
%
Restaurant-level adjustments:
Add: Pre-opening costs
307
556
—
863
Add: Other general and administrative
expense(1)
21,427
17,788
—
39,215
Less: Franchise royalty revenue and
fees
1,325
673
—
1,998
Restaurant-level Adjusted EBITDA
$
60,352
$
25,860
$
—
$
86,212
Restaurant-level Adjusted EBITDA as a
percentage of restaurant sales
22.2
%
11.4
%
17.3
%
(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
September 27, 2020
September 29, 2019
Income Before Income
Taxes
Benefit From Income Taxes
(a)
Net Income
Diluted EPS
Income (Loss) Before Income
Taxes
Provision For (Benefit From)
Income Taxes (a)
Net Income (Loss)
Diluted EPS
Reported - GAAP
$
438
$
(4,155
)
$
4,593
$
0.18
$
(25,128
)
$
(2,946
)
$
(22,182
)
$
(0.84
)
Adjustments:
Non-general and administrative expense
adjustments:
Income tax due to tax law change (a)
—
1,919
(1,919
)
(0.07
)
—
—
—
—
Deferred tax asset valuation allowance
(b)
—
2,968
(2,968
)
(0.11
)
—
—
—
—
Impairment and other lease charges (c)
2,404
575
1,829
0.07
3,254
903
2,351
0.09
Goodwill impairment (d)
—
—
—
—
21,424
2,111
19,313
0.73
Closed restaurant rent expense, net of
sublease income (e)
1,481
354
1,127
0.04
726
201
525
0.02
Other expense (income), net (f)
(1,304
)
(312
)
(992
)
(0.04
)
64
18
46
—
Loss on extinguishment of debt (g)
212
51
161
0.01
—
—
—
—
Total non-general and administrative
expense
2,793
5,555
(2,762
)
(0.11
)
25,468
3,233
22,235
0.84
General and administrative expense
adjustments:
Restructuring costs and retention bonuses
(h)
216
52
164
0.01
—
—
—
—
Digital and brand repositioning costs
(i)
98
23
75
—
215
60
155
0.01
Total general and administrative
expense
314
75
239
0.01
215
60
155
0.01
Adjusted - Non-GAAP
$
3,545
$
1,475
$
2,070
$
0.08
$
555
$
347
$
208
$
0.01
(Unaudited)
Nine Months Ended
September 27, 2020
September 29, 2019
Loss Before Income
Taxes
Benefit From Income Taxes
(a)
Net Income (Loss)
Diluted EPS
Income (Loss) Before Income
Taxes
Provision For (Benefit From)
Income Taxes (a)
Net Income (Loss)
Diluted EPS
Reported - GAAP
$
(19,970
)
$
(8,903
)
$
(11,067
)
$
(0.44
)
$
(64,710
)
$
(1,377
)
$
(63,333
)
$
(2.37
)
Adjustments:
Non-general and administrative expense
adjustments:
Income tax due to tax law change (a)
—
3,522
(3,522
)
(0.14
)
—
—
—
—
Deferred tax asset valuation allowance
(b)
—
1,294
(1,294
)
(0.05
)
—
—
—
—
Impairment and other lease charges (c)
8,922
2,132
6,790
0.27
4,667
1,295
3,372
0.13
Goodwill impairment (d)
—
—
—
—
67,909
2,111
65,798
2.46
Closed restaurant rent expense, net of
sublease income (e)
4,943
1,181
3,762
0.15
3,485
967
2,518
0.09
Other expense (income), net (f)
388
93
295
0.01
920
255
665
0.02
Loss on extinguishment of debt (g)
212
51
161
0.01
—
—
—
—
Total non-general and administrative
expense
14,465
8,273
6,192
0.24
76,981
4,628
72,353
2.71
General and administrative expense
adjustments:
Restructuring costs and retention bonuses
(h)
1,107
265
842
0.03
964
268
696
0.03
Digital and brand repositioning costs
(i)
448
107
341
0.01
215
60
155
0.01
Total general and administrative
expense
1,555
372
1,183
0.05
1,179
328
851
0.03
Adjusted - Non-GAAP
$
(3,950
)
$
(258
)
$
(3,692
)
$
(0.15
)
$
13,450
$
3,579
$
9,871
$
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 27.7% for the periods ending September 27, 2020 and
September 29, 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 three and nine months ended September 27,
2020, we recorded a $0.1 million and $1.9 million tax benefit,
respectively, 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.
Additionally, the three and nine months ended September 27, 2020
includes an incremental benefit of $1.9 million related to
reclassifying certain assets as qualified improvement property as
permitted by the CARES Act and other changes to depreciation
methods for certain assets made in conjunction with a cost
segregation study conducted prior to filing the Company’s 2019
federal income tax return.
(b)
For the three and nine months
ended September 27, 2020, we recorded a reduction of $3.0 million
and $1.3 million, respectively, to our valuation allowance against
deferred income tax assets primarily related to reclassifying
certain assets as qualified improvement property and filing our
2019 federal income tax returns as well as other changes in our
deferred income tax assets where it was determined to be more
likely than not that the deferred tax assets will not be realized
through the reversal of existing deferred tax liabilities.
(c)
Impairment and other lease
charges for the three and nine months ended September 27, 2020
consist of impairment charges of $2.6 million and $8.4 million,
respectively, and other lease charges (gains) of $(0.2) million and
$0.5 million, respectively. For the three months ended September
27, 2020, impairment charges primarily relate to the write-down of
saucing islands and self-service soda machines that are being
removed from dining rooms as a result of COVID-19. For the nine
months ended September 27, 2020, impairment charges also include
the impairment of assets from three underperforming Pollo Tropical
restaurants, two of which were closed in the third quarter of 2020,
and two underperforming Taco Cabana restaurants, as well as the
write-down of assets held for sale to their fair value. For the
three months ended September 27, 2020, other lease gains primarily
relate to a gain from a lease termination of $(0.2) million. For
the nine months ended September 27, 2020, other lease charges also
include 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 nine months ended September 29, 2019
primarily consist of impairment charges of $3.3 million and $5.5
million, respectively, and a lease charge recoveries benefit
related to closed restaurant lease terminations of $(0.9) million
for the nine months ended September 29, 2019. The impairment
charges primarily related to assets for eight underperforming Taco
Cabana restaurants that we continued to operate and equipment from
previously impaired restaurants.
(d)
Goodwill impairment for the three
and nine months ended September 29, 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 nine months ended
September 27, 2020 primarily consists of closed restaurant lease
costs of $3.0 million and $8.9 million, respectively, partially
offset by sublease income of $(1.5) million and $(3.9) million,
respectively. Closed restaurant rent expense, net of sublease
income for the three and nine months ended September 29, 2019
primarily consists of closed restaurant lease costs of $1.9 million
and $6.2 million, respectively, partially offset by sublease income
of $(1.1) million and $(2.8) million, respectively.
(f)
Other expense (income), net for
the three and nine months ended September 27, 2020 primarily
consists of total gains of $(1.6) million on the sale-leaseback of
two restaurant properties and the sale of two restaurant
properties, partially offset by costs for the removal, transfer,
and storage of equipment from closed restaurants and other closed
restaurant related costs of $0.3 million and $1.4 million,
respectively. Other expense (income), net for the nine months ended
September 27, 2020 also includes the write-off of site development
costs of $0.6 million. Other expense (income), net for the three
and nine months ended September 29, 2019 consists of the write-off
of site development costs of $0.1 million. Other expense (income),
net for the nine months ended September 29, 2019 also includes
costs for the removal, transfer, and storage of equipment from
closed restaurants of $0.7 million.
(g)
Loss on extinguishment of debt
for the three and nine months ended September 27, 2020 consists of
the write-off of unamortized deferred financing fees related to
extinguished debt.
(h)
Restructuring costs and retention
bonuses for the three and nine months ended September 27, 2020
include severance costs related to terminations in response to the
COVID-19 pandemic. Restructuring costs and retention bonuses for
the nine months ended September 29, 2019 include severance costs
related to eliminated positions.
(i)
Digital and brand repositioning
costs for the three and nine months ended September 27, 2020 and
September 29, 2019 include consulting costs related to
repositioning the digital experience for our customers.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201104005677/en/
Investor Relations: Raphael Gross 203-682-8253
investors@frgi.com
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