Fiesta Restaurant Group, Inc. Reports Third Quarter 2012 Results

  Fiesta Restaurant Group, Inc. Reports Third Quarter 2012 Results

                 Provides Initial Operating Targets for 2013

Business Wire

ADDISON, Texas -- November 13, 2012

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 third quarter of
2012 which ended on September 30, 2012. Fiesta also provided certain initial
operating targets for 2013.

Highlights of Third Quarter 2012 Results Include:

  *Total revenues increased 5.8% to $128.2 million compared to $121.2 million
    in the prior year period;
  *Comparable restaurant sales increased 7.0% at Pollo Tropical and 1.8% at
    Taco Cabana;
  *Comparable restaurant guest traffic increased 5.9% at Pollo Tropical and
    0.6% at Taco Cabana;
  *Three new company-owned restaurants opened, including one Pollo Tropical
    restaurant and two Taco Cabana restaurants; and
  *Net Income increased $1.2 million to $3.6 million in the third quarter of
    2012, or $0.16 per diluted share, compared to net income of $2.4 million,
    or $0.10 per diluted share, in the third quarter of 2011.

Tim Taft, President and Chief Executive Officer of Fiesta Restaurant Group,
Inc., commented, “Fiesta delivered outstanding results in the third quarter
characterized by healthy revenue gains, positive guest traffic, expanding
operating margins and profitability growth. Pollo Tropical continues to post
strong comparable restaurant sales. Taco Cabana continues to post positive
comparable restaurant sales with transaction growth, while being affected by
lapping significant price increases taken last year. In October, both brands
produced strong sales performance driven by transaction growth, with
comparable restaurant sales increases of 7.5% at Pollo Tropical and 6.4% at
Taco Cabana.”

Taft continued, “We are committed to building restaurants in target markets
where we can achieve a compelling return on investment. In addition to the 10
new Company-owned restaurants that we have and will develop in 2012, we are
planning to open an additional 14 to 17 new Company-owned restaurants in 2013,
including further Pollo Tropical expansion in Atlanta, Georgia and our initial
entry into Nashville, Tennessee. We continue to pursue international franchise
expansion, with more than 10 Pollo Tropical franchised restaurant openings
planned in 2013, including our first new restaurant in India.”

Taft concluded, “With the spin-off now behind us, we are continuing to build
out our capabilities within various functional areas, and to that end, have
established our corporate headquarters in the city of Addison, Texas, within
Dallas County. We hope to complete our infrastructure and administrative
transition from Carrols Restaurant Group by the end of 2013, well ahead of the
full three-year term of our transition services agreement.”

Third Quarter Financial Review

Revenues

Total revenues increased 5.8% in the third quarter of 2012 to $128.2 million
from $121.2 million in the third quarter of 2011. Restaurant sales in the
third quarter of 2012 increased 5.7% to $127.6 million from $120.8 million in
the third quarter of 2011, due primarily to comparable restaurant sales growth
at both Pollo Tropical and Taco Cabana. Franchise revenues in the third
quarter of 2012 increased to $0.5 million from $0.4 million in the prior year
period.

Operating Expenses

Cost of sales, restaurant wages and related expenses, and other restaurant
operating expenses each decreased as a percentage of restaurant sales in the
third quarter of 2012 compared to the third quarter of 2011, due to the
positive impact of a sales increase on fixed costs and lower utility rates.
Advertising expense declined as a percentage of restaurant sales due primarily
to the timing of advertising.

Rent expense increased $2.1 million to $6.3 million compared to $4.2 million
in the prior year period. Rent expense was $1.6 million higher in the third
quarter of 2012 compared to the third quarter of 2011 as a result of the
qualification for sale treatment of certain sale-leaseback transactions upon
completion of the spin-off on May 7, 2012, as previously disclosed.

General and administrative expenses increased $2.1 million to $11.2 million in
the third quarter of 2012 from $9.1 million in the third quarter of 2011, due
primarily to Fiesta employee additions and a $0.6 million expense associated
with retirement agreements that were entered into during the quarter.

Depreciation and amortization decreased $0.4 million to $4.5 million in the
third quarter of 2012 from $4.8 million in the third quarter of 2011,
primarily due to the elimination of depreciation expense of $0.5 million as a
result of the qualification for sale treatment of certain sale-leaseback
transactions upon completion of the spin-off.

Interest expense decreased $1.6 million to $5.0 million in the third quarter
of 2012 from $6.7 million in the third quarter 2011, primarily because of the
elimination of $2.7 million in interest expense as a result of the
qualification for sale treatment of certain sale-leaseback transactions,
partially offset by interest expense associated with the issuance of $200
million of 8.875% Senior Secured Second Lien Notes in the third quarter of
2011.

The provision for income taxes in the third quarter of 2012 was derived using
an estimated effective annual income tax rate of 39.3%. During the third
quarter, Fiesta was able to lower its estimated effective annual income tax
rate primarily as a result of adopting a consolidated tax filing position in
the state of Florida. However, the estimated effective annual rate does not
include any impact from a reenactment of the Work Opportunity Tax Credit. If
reenacted, the related benefit would be recognized in the period of
reenactment.

Net Income increased $1.2 million to $3.6 million in the third quarter of
2012, or $0.16 per diluted share, compared to net income of $2.4 million, or
$0.10 per diluted share, in the third quarter of 2011.

Brand Results

Pollo Tropical restaurant sales increased 9.8% to $57.4 million in the third
quarter of 2012 from $52.4 million in the third quarter of 2011, primarily due
to a comparable restaurant sales increase of 7.0%. The growth in comparable
restaurant sales resulted from a 5.9% increase in guest traffic along with a
1.1% increase in average check. Pollo Tropical franchise revenues increased to
$0.4 million in the third quarter of 2012 from $0.3 million in the third
quarter of 2011. Adjusted Segment EBITDA for Pollo Tropical increased to $9.1
million in the third quarter of 2012 from $8.5 million in the third quarter of
2011. Adjusted Segment EBITDA was negatively impacted by a $0.3 million
expense associated with a retirement agreement that was entered into during
the quarter and an increase in rent expense of $0.6 million in the third
quarter of 2012 compared to the third quarter of 2011 due to the qualification
for sale treatment of sale-leaseback transactions, as discussed above.

Taco Cabana restaurant sales increased 2.8% to $70.3 million in the third
quarter of 2012 from $68.4 million in the third quarter of 2011, primarily due
to a comparable restaurant sales increase of 1.8%. The growth in comparable
restaurant sales resulted from a 0.6% increase in guest traffic along with a
1.2% increase in average check. Taco Cabana franchise revenues of $0.1 million
in the third quarter of 2012 were consistent with the third quarter of 2011.
Adjusted Segment EBITDA for Taco Cabana decreased to $6.7 million in the third
quarter of 2012 from $7.3 million in the third quarter of 2011. Adjusted
Segment EBITDA was negatively impacted by a $0.3 million expense associated
with a retirement agreement that was entered into during the quarter and an
increase in rent expense of $1.0 million in the third quarter 2012 compared to
the third quarter of 2011 due to the qualification for sale treatment of
sale-leaseback transactions, as discussed above.

Restaurant Development

Fiesta opened three company-owned restaurants during the third quarter of 2012
including one Pollo Tropical restaurant in Miami and two Taco Cabana
restaurants, one each in the Houston and Dallas markets. During the third
quarter of 2012, the Company entered into a development agreement with a new
franchisee in India that has committed to opening 10 Pollo Tropical franchised
restaurants in India over the next five years.

As of September 30, 2012, the Company owned 90 Pollo Tropical restaurants and
160 Taco Cabana restaurants and franchised 35 Pollo Tropical restaurants in
the U.S., Puerto Rico, the Bahamas, Costa Rica, Ecuador, Honduras, Panama,
Trinidad & Tobago, and Venezuela, and five Taco Cabana restaurants in the U.S.

Fiscal 2013 Initial Operating Targets

Initial operating targets expected in fiscal 2013:

  *Comparable restaurant sales growth of 5% to 6% for Pollo Tropical and 3%
    to 4% for Taco Cabana;
  *Commodity cost inflation will negatively impact margins as a percent of
    restaurant sales by approximately 50 to 60 basis points, net of price
    increases;
  *14 to 17 new Company-owned restaurant openings;
  *General and administrative expenses (excluding stock compensation) of
    approximately $44 million to $46 million, including up to $2 million of
    non-recurring, implementation expenses associated with establishing
    self-sufficient corporate support functions;
  *Effective tax rate of 38% to 40%, excluding the reinstatement of the Work
    Opportunity Tax Credits; and
  *Capital expenditures of approximately $45 million to $50 million.

Investor Conference Call Today

Fiesta will host a conference call and webcast to review third quarter 2012
results today at 8:30 AM ET. 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
888-401-4674 or for international callers by dialing 719-325-4756. 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 7664129.
The replay will be available until Tuesday, November 20, 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 250 company-owned and
operated restaurants and 40 franchised restaurants in the U.S., Puerto Rico,
the Bahamas, Costa Rica, Ecuador, Honduras, Panama, Trinidad & Tobago, and
Venezuela as of September 30, 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 Fiesta’s expectation or belief
concerning future events. Without limiting the foregoing, these statements are
often identified by the words “may,” “might,” “believes,” “thinks,”
“anticipates,” “plans,” “expects”, “intends” or similar expressions. In
addition, expressions of Fiesta’s strategies, intentions or plans, are also
forward-looking statements. Such statements reflect management’s current views
with respect to future events and are subject to risks and uncertainties, both
known and unknown. You are cautioned not to place undue reliance on these
forward-looking statements as there are important factors that could cause
actual results to differ materially from those in forward-looking statements,
many of which are beyond Fiesta’s control. Investors are referred to the full
discussion of risks and uncertainties as included in Fiesta’s filings with the
Securities and Exchange Commission.

                                                            
                                                                   
                                                                   
Fiesta Restaurant Group, Inc.
Consolidated Statements of Operations
(in thousands except per share amounts)
                                                                   
                       (unaudited)                  (unaudited)
                       Three Months Ended (a)       Nine Months Ended (a)
                       Sep 30, 2012   Oct 2, 2011   Sep 30, 2012   Oct 2, 2011
Revenues:
Restaurant sales       $  127,648     $ 120,781     $  381,422    $ 356,780 
Franchise
royalty revenues         525         376          1,726       1,242   
and fees
Total revenues            128,173       121,157        383,148       358,022
Costs and
expenses:
Cost of sales             41,021        38,833         123,106       114,852
Restaurant wages
and related               33,860        32,544         101,821       96,949
expenses (b)
Restaurant rent           6,311         4,232          15,700        12,526
expense (c)
Other restaurant
operating                 16,655        16,604         48,725        47,091
expenses
Advertising               3,776         4,468          12,094        12,361
expense
General and
administrative            11,198        9,118          32,800        27,086
expenses (b) (d)
(e)
Depreciation and          4,486         4,837          13,703        14,583
amortization (c)
Impairment and
other lease               (45     )     (68     )      6,816         1,016
charges
Other expense            -           107          -           107     
Total costs and          117,262     110,675      354,765     326,571 
expenses
Income from               10,911        10,482         28,383        31,451
operations
Interest expense         5,036       6,651        19,334      16,338  
(c)
Income before             5,875         3,831          9,049         15,113
income taxes
Provision for            2,226       1,409        3,344       5,442   
income taxes
Net income             $  3,649      $ 2,422      $  5,705      $ 9,671   
                                                                   
Basic and
diluted net            $  0.16       $ 0.10       $  0.25       $ 0.42    
income per share
                                                                   
Basic and
diluted weighted
average common            22,747        23,162         22,937        23,162
shares
outstanding


      The Company uses a 52 or 53 week fiscal year that ends on the Sunday
(a)  closest to December 31. The three and nine month periods ended September
      30, 2012 and October 2, 2011 included 13 and 39 weeks, respectively.
      
      Restaurant wages and related expenses include stock-based compensation
      expense of $1 and $3 for the three month period ended September 30, 2012
      and October 2, 2011, respectively, and $9 and $15 for the nine month
      period ended September 30, 2012 and October 2, 2011, respectively.
(b)   General and administrative expenses include stock-based compensation
      expense of $379 and $437 for the three month period ended September 30,
      2012 and October 2, 2011, respectively, and $1,594 and $1,284 for the
      nine month period ended September 30, 2012 and October 2, 2011,
      respectively.
      
      Prior to the spin-off from Carrols, certain sale-leaseback transactions
      were classified as lease financing transactions because Carrols
      guaranteed the related lease payments. Effective with the spin-off, the
      provisions that previously precluded sale-leaseback accounting were
      cured or eliminated. As a result, these transactions are now recorded as
      an operating lease. Because of this change in accounting treatment,
(c)   restaurant rent expense was $1.6 million higher, depreciation expense
      was $0.5 million lower, and interest expense was $2.7 million lower in
      the third quarter of 2012 as compared to the third quarter of 2011. For
      the nine months ended September 30, 2012, restaurant rent expense was
      $2.6 million higher, depreciation expense was $0.9 million lower, and
      interest expense was $4.3 million lower as compared to the nine months
      ended October 2, 2011.
      
      General and administrative expenses include expenses related directly to
      Fiesta and corporate expenses allocated from Carrols Restaurant Group
      (parent company of Fiesta until May 7, 2012). Such allocated expenses
(d)   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 in the three and nine months ended
(e)   September 30, 2012 include a charge of $0.6 million associated with
      announced retirements of the Executive Vice Presidents of both the Pollo
      Tropical and Taco Cabana brands effective January 31, 2013.
      



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                 Nine Months Ended
                  Sept 30, 2012     Oct 2, 2011      Sept 30,      Oct 2, 2011
                                                     2012
Segment
Revenues:
Pollo Tropical    $  57,784         $  52,675        $ 172,808     $ 157,552
Taco Cabana         70,389          68,482        210,340     200,470 
Total revenues    $  128,173       $  121,157      $ 383,148    $ 358,022 
                                                                   
Change in
Comparable
Restaurant
Sales: (a)
Pollo Tropical       7.0      %        7.9      %      8.1     %     10.6    %
Taco Cabana          1.8      %        5.3      %      4.1     %     4.0     %
                                                                   
Adjusted
Segment
EBITDA: (b)
Pollo Tropical    $  9,079          $  8,472         $ 30,743      $ 27,809
Taco Cabana          6,653             7,326           19,762        20,647
                                                                   
Average Sales
per
Restaurant:
(c)
Pollo Tropical    $  638            $  583           $ 1,916       $ 1,739
Taco Cabana          442               440             1,330         1,279
Number of
Company-owned
Restaurants:
Pollo Tropical       90                91              90            91
Taco Cabana         160             158           160         158     
Total
company-owned       250             249           250         249     
restaurants
                                                                   
Company-owned
Restaurant
Openings:
Pollo Tropical       1                 2               4             2
Taco Cabana         2               1             3           4       
Total new
restaurant           3                 3               7             6
openings
                                                                   
Company-owned
Restaurant
Closings:
Pollo Tropical       -                 (1       )      (5      )     (2      )
Taco Cabana         -               -             (1      )    (1      )
Net change in       3               2             1           3       
restaurants


(a)  Restaurants are included in comparable restaurant sales after they have
      been open for 18 months.
      
      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
(b)   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.
      
      Average sales for company-owned or operated restaurants are derived by
(c)   dividing restaurant sales for such period for the applicable segment by
      the average number of restaurants for the applicable segment for such
      period.

                                                             
                                                                   
Fiesta Restaurant Group, Inc.
Condensed Consolidated Balance Sheet
(in thousands)
                                                                   
                                                  (unaudited)      (unaudited)
                                                  Sep 30, 2012     Jan 1, 2012
                                                                   
Assets
Cash                                              $   3,098        $ 13,670
Other current assets                                  15,766         13,939
Property and equipment, net                           124,892        195,122
Goodwill                                              123,484        123,484
Intangible assets, net                                222            301
Deferred income taxes                                 12,914         11,659
Deferred financing costs, net                         6,027          6,908
Other assets                                         3,270         5,083   
Total assets                                      $   289,673      $ 370,166 
                                                                   
Liabilities
Current liabilities                               $   31,973       $ 36,673
Long-term debt, net of current portion                200,902        200,949
Lease financing obligations                           3,027          123,019
Deferred-income sale-leaseback of real                35,107         4,055
estate
Other liabilities                                    12,077        10,142  
Total liabilities                                     283,086        374,838
Stockholders' equity (deficit)                       6,587         (4,672  )
Total liabilities and stockholders' equity        $   289,673      $ 370,166 
(deficit)

Contact:

Fiesta Restaurant Group, Inc.
Investor Relations Contact:
Raphael Gross, 203-682-8253
investors@frgi.com
 
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