Fiesta Restaurant Group Inc : Fiesta Restaurant Group, Inc. Reports Second Quarter 2012 Results
08/08/2012| 07:05am US/Eastern
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Fiesta Restaurant Group, Inc. ("Fiesta" or the "Company") (NASDAQ:
FRGI), the owner, operator, and franchisor of the Pollo Tropical® and
Taco Cabana® fast-casual restaurant brands, today reported results for
the second quarter of 2012 which ended on July 1, 2012.
Highlights of Second Quarter 2012 Results Include:
Completion of the tax-free spin-off of Fiesta from Carrols Restaurant
Group, Inc. ("Carrols") on May 7, 2012;
Total revenues increased 6.3% to $128.8 million compared to $121.2
million in the prior year period;
Comparable restaurant sales increased 7.8% at Pollo Tropical and 4.5%
at Taco Cabana;
Comparable restaurant guest traffic increased 6.9% at Pollo Tropical
and 0.6% at Taco Cabana;
Four company-owned restaurants opened including three Pollo Tropical
restaurants and one Taco Cabana restaurant;
Income from operations increased 25.6% to $12.9 million compared to
$10.2 million in the prior year period; and
Net income increased $0.3 million to $3.9 million, or $0.17 per
diluted share, compared to $3.6 million, or $0.16 per diluted share,
in the prior year period.
Tim Taft, President and Chief Executive Officer of Fiesta Restaurant
Group, Inc., commented, "Our second quarter marked strong top-line
performance from both of our brands against strong prior year sales
comparisons, coupled with effective cost management that positively
impacted our restaurant-level profitability. Despite the sluggish
economy and general softness in discretionary spending, our guests are
responding favorably to our quality menu offerings and value proposition
complemented by our enhanced service model and facilities. We view our
brands as well-positioned and differentiated in the competitive
landscape and believe that through continued execution of our
strategies, we can continue to build long-term value for our
shareholders."
Taft concluded, "Our development plans are on track and we are
encouraged by the preliminary results from our recent restaurant
openings in expansion markets along with the quality of sites in our
pipeline that will open in the second half of the year and beyond. We
are also pleased to be expanding our international presence by signing
new agreements with franchisees to develop restaurants in Panama and
Guatemala as well as the recently announced development agreement with
our new franchisee in India."
Second Quarter Financial Review
Revenues
Total revenues increased 6.3% in the second quarter of 2012 to $128.8
million from $121.2 million in the second quarter of 2011. Restaurant
sales in the second quarter of 2012 increased 6.2% to $128.2 million
from $120.7 million in the second quarter of 2011, primarily due to
comparable restaurant sales growth at both Pollo Tropical and Taco
Cabana. Franchise revenues in the second quarter of 2012 increased to
$0.6 million from $0.5 million in the second quarter of 2011.
Costs and Expenses
Restaurant operating margins, as a percentage of restaurant sales,
improved in the second quarter of 2012 compared to the second quarter of
2011, and were favorably impacted by lower cost of sales, restaurant
wages, and utility expenses.
Cost of sales, as a percentage of restaurant sales, improved to 32.2%
from 32.9% due to menu price increases and effective supply chain
management that mitigated commodity inflation.
Restaurant wages and related expenses, as a percentage of restaurant
sales, improved to 26.6% from 27.1% due to the effect of higher sales
volumes on fixed labor costs and lower medical claim costs.
Rent expense increased $1.2 million to $5.4 million. As of the date of
completion of the spin-off, sale-leaseback transactions previously
classified as lease financing obligations qualified for sale
treatment, and the related leases qualified as operating leases. Prior
to the spin-off, payments related to lease financing obligations were
classified as interest expense. Subsequent to the spin-off, payments
under such leases are now classified as rent expense. Rent expense is
$1.1 million higher in the second quarter of 2012 compared to the
second quarter of 2011 as a result of the qualification for sale
treatment of these sale-leaseback transactions.
Other restaurant operating expenses, as a percentage of restaurant
sales, improved to 12.7% from 13.0%, due to the effect of higher sales
volumes on fixed operating costs and lower utility expenses, partially
offset by higher pre-opening expenses associated with new restaurant
openings as well as the remodeling initiative at Taco Cabana.
Advertising expense, as a percentage of restaurant sales, was
consistent at 3.1%.
General and administrative expenses increased $1.5 million to $10.5
million in the second quarter of 2012 from $9.1 million in the second
quarter of 2011 due to the hiring of certain Fiesta management team
members as well as legal and other costs incurred in connection with the
spin-off.
Depreciation and amortization decreased $0.6 million to $4.4 million in
the second quarter of 2012 from $4.9 million in the second quarter of
2011, primarily due to the elimination of depreciation expense of $0.3
million as a result of the qualification for sale treatment of
sale-leaseback transactions, as discussed above.
Income from operations increased $2.6 million, or 25.6%, to $12.9
million in the second quarter of 2012 from $10.2 million in the second
quarter of 2011.
Interest expense increased $1.5 million to $6.3 million in the second
quarter of 2012 from $4.8 million in the second quarter 2011, primarily
due to our refinancing activities in the third quarter of 2011 partially
offset by the elimination of interest expense of $1.6 million as a
result of the qualification for sale treatment of sale-leaseback
transactions and the prospective treatment of these payments as rent, as
discussed above.
Net Income increased $0.3 million to $3.9 million in the second quarter
of 2012, or $0.17 per diluted share, compared to net income of $3.6
million, or $0.16 per diluted share, in the second quarter of 2011.
Brand Results
Pollo Tropical restaurant sales increased 8.5% to $56.6 million in the
second quarter of 2012 from $52.2 million in the second quarter of 2011,
primarily due to a comparable restaurant sales increase of 7.8%. The
growth in comparable restaurant sales resulted from a 6.9% increase in
guest traffic along with a 0.8% increase in average check. Franchise
revenues increased to $0.6 million in the second quarter of 2012 from
$0.4 million in the second quarter of 2011. Adjusted Segment EBITDA for
Pollo Tropical increased to $10.5 million in the second quarter of 2012
from $9.5 million in the second quarter of 2011. Adjusted Segment EBITDA
was negatively impacted by an increase in rent expense of $0.4 million
in the second quarter of 2012 compared to the second quarter of 2011 due
to the qualification for sale treatment of sale-leaseback transactions,
as discussed above.
Taco Cabana restaurant sales increased 4.4% to $71.6 million in the
second quarter of 2012 from $68.5 million in the second quarter of 2011,
primarily due to a comparable restaurant sales increase of 4.5%. The
growth in comparable restaurant sales resulted from a 3.8% increase in
average check along with a 0.6% increase in guest traffic. Franchise
revenues of $0.1 million in the second quarter of 2012 were consistent
with the second quarter of 2011. Adjusted Segment EBITDA for Taco Cabana
decreased to $6.9 million in the second quarter of 2012 from $7.0
million in the second quarter of 2011. Adjusted Segment EBITDA was
negatively impacted by an increase in rent expense of $0.7 million in
the second quarter 2012 compared to the second quarter of 2011 due to
the qualification for sale treatment of sale-leaseback transactions, as
discussed above.
Restaurant Development
Fiesta opened four company-owned restaurants during the second quarter
of 2012 including three Pollo Tropical restaurants in Green Acres, FL,
Jacksonville, FL, and Atlanta, GA, respectively, and one Taco Cabana
restaurant in San Antonio, TX. There were no restaurant closures during
the quarter.
In addition, Pollo Tropical franchisees opened one restaurant in Panama
and one restaurant in Venezuela in the second quarter of 2012.
As of July 1, 2012, the Company owned 89 Pollo Tropical restaurants and
158 Taco Cabana restaurants and franchised 35 Pollo Tropical restaurants
in the U.S., Puerto Rico, the Bahamas, Costa Rica, Ecuador, Honduras,
Panama, Trinidad, and Venezuela and five Taco Cabana restaurants in the
U.S.
Investor Conference Call Today
Fiesta will host a conference call and webcast to review second quarter
2012 results today at 8:30 AM EDT. Hosting the call will be Tim Taft,
President and Chief Executive Officer, and Lynn Schweinfurth, Vice
President and Chief Financial Officer.
The conference call can be accessed live over the phone by dialing
888-461-2014 or for international callers by dialing 719-457-2694. A
replay will be available after the call and can be accessed by dialing
877-870-5176 or for international callers by dialing 858-384-5517; the
passcode is 6143045. The replay will be available until Wednesday,
August 15, 2012.
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 with 247 company-owned and
operated restaurants and 40 franchised restaurants in the U.S., Puerto
Rico, the Bahamas, Costa Rica, Ecuador, Honduras, Panama, Trinidad, and
Venezuela as of July 1, 2012. The brands specialize in the operation of
fast-casual, ethnic restaurants that offer distinct and unique flavors
with a broad appeal at a compelling value. Both brands feature
made-from-scratch cooking, fresh salsa bars, and drive-thru service and
catering. For more information about Fiesta Restaurant Group, Inc. visit
our 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 our 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 our 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 our control. Investors are referred
to the full discussion of risks and uncertainties as included in our
filings with the Securities and Exchange Commission.
Fiesta Restaurant Group, Inc.
Consolidated Statements of Operations
(in thousands except per share amounts)
(unaudited)
(unaudited)
Three Months Ended (a)
Six Months Ended (a)
July 1, 2012
July 3, 2011
July 1, 2012
July 3, 2011
Revenues:
Restaurant sales
$
128,208
$
120,748
$
253,774
$
235,999
Franchise royalty revenues and fees
625
501
1,201
866
Total revenues
128,833
121,249
254,975
236,865
Costs and expenses:
Cost of sales
41,301
39,675
82,085
76,019
Restaurant wages and related expenses (b)
34,136
32,769
67,961
64,402
Restaurant rent expense
5,422
4,232
9,389
8,292
Other restaurant operating expenses
16,241
15,744
32,070
30,487
Advertising expense
4,023
3,774
8,318
7,893
General and administrative expenses (b) (c)
10,522
9,052
21,602
17,973
Depreciation and amortization
4,377
4,949
9,217
9,746
Impairment and other lease charges
(39
)
820
6,861
1,084
Total costs and expenses
115,983
111,015
237,503
215,896
Income from operations
12,850
10,234
17,472
20,969
Interest expense
6,329
4,842
14,298
9,687
Income (loss) before income taxes
6,521
5,392
3,174
11,282
Provision (benefit) for income taxes
2,600
1,757
1,118
4,033
Net income (loss)
$
3,921
$
3,635
$
2,056
$
7,249
Basic and diluted net income (loss) per share
$
0.17
$
0.16
$
0.09
$
0.31
Basic and diluted weighted average common shares outstanding
22,903
23,163
23,032
23,162
(a)
The Company uses a 52 or 53 week fiscal year that ends on the Sunday
closest to December 31. The three and six months ended July 1, 2012
and July 3, 2011 included 13 and 26 weeks, respectively.
(b)
Restaurant wages and related expenses include stock-based
compensation expense of $4 and $7 for the three months ended July 1,
2012 and July 3, 2011, respectively, and $8 and $12 for the six
months ended July 1, 2012 and July 3, 2011, respectively. General
and administrative expenses include stock-based compensation expense
of $169 and $436 for the three months ended July 1, 2012 and July 3,
2011, respectively, and $1,215 and $847 for the six months ended
July 1, 2012 and July 3, 2011, respectively.
(c)
General and administrative expenses include expenses related
directly to Fiesta Restaurant Group and corporate expenses allocated
from Carrols (parent company of Fiesta until May 7, 2012). Such
allocated expenses are for administrative support including
executive management, information systems and certain accounting,
legal and other administrative functions. Following the spin-off,
the Company performs these functions or purchases services from
either Carrols (under the Transition Services Agreement) or third
parties. General and administrative expenses included $141 and $771
of expenses related to the spin-off from Carrols for the three and
six months ended July 1, 12012, respectively.
Fiesta Restaurant Group, Inc.
Condensed Consolidated Balance Sheet
(in thousands)
(unaudited)
(unaudited)
July 1, 2012
January 1, 2012
Assets
Cash
$
2,753
$
13,670
Other current assets
15,152
13,939
Property and equipment, net
120,672
195,122
Goodwill
123,485
123,484
Intangible assets, net
243
301
Deferred income taxes
14,369
11,659
Deferred financing costs, net
6,397
6,908
Other assets
2,890
5,083
Total assets
$
285,961
$
370,166
Liabilities
Current liabilities
$
32,605
$
36,673
Long-term debt, net of current portion
200,918
200,949
Lease financing obligations
3,025
123,019
Deferred-income sale-leaseback of real estate
35,622
4,055
Other liabilities
11,232
10,142
Total stockholders' equity (deficit)
2,559
(4,672
)
Total liabilities and stockholders' equity (deficit)
$
285,961
$
370,166
Fiesta Restaurant Group, Inc.
Supplemental Information
The following table sets forth certain unaudited supplemental
financial and other data for the periods indicated
(in thousands, except percentages and number of restaurants):
(unaudited)
(unaudited)
Three Months Ended
Six Months Ended
July 1, 2012
July 3, 2011
July 1, 2012
July 3, 2011
Segment Revenues:
Pollo Tropical
$
57,190
$
52,642
$
115,024
$
104,877
Taco Cabana
71,643
68,607
139,951
131,988
Total revenues
$
128,833
$
121,249
$
254,975
$
236,865
Change in Comparable Restaurant Sales: (a)
Pollo Tropical
7.8
%
10.7
%
8.6
%
12.0
%
Taco Cabana
4.5
%
4.5
%
5.3
%
3.3
%
Adjusted Segment EBITDA: (b)
Pollo Tropical
$
10,450
$
9,467
$
21,664
$
19,337
Taco Cabana
6,911
6,979
13,109
13,321
Average Sales per Restaurant: (c)
Pollo Tropical
647
580
1,279
1,157
Taco Cabana
455
435
889
844
Number of Company-owned Restaurants:
Pollo Tropical
89
90
89
90
Taco Cabana
158
157
158
157
Total company-owned restaurants
247
247
247
247
Company-owned Restaurant Openings:
Pollo Tropical
3
-
3
-
Taco Cabana
1
2
1
3
Total new restaurant openings
4
2
4
3
Company-owned Restaurant Closings:
Pollo Tropical
-
-
(5
)
(1
)
Taco Cabana
-
(1
)
(1
)
(1
)
Net change in restaurants
4
1
(2
)
1
(a)
Restaurants are included in comparable restaurant sales after they
have been open for 18 months.
(b)
Adjusted Segment EBITDA is defined as earnings attributable to the
applicable segment before interest, income taxes, depreciation and
amortization, impairment and other lease charges, stock-based
compensation expense, and other income and expense. Adjusted Segment
EBITDA is used because it is the measure of segment profit or loss
reported to our chief operating decision maker for purposes of
allocating resources to the segments and assessing each segment's
performance. This may not be necessarily comparable to other
similarly titled captions of other companies due to differences in
methods of calculation.
(c)
Average sales for company-owned or operated restaurants are derived
by dividing restaurant sales for such period for the applicable
segment by the average number of restaurants for the applicable
segment for such period.
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