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Fiesta Restaurant Group, Inc. Reports Second Quarter 2013 Results

  Fiesta Restaurant Group, Inc. Reports Second Quarter 2013 Results

Business Wire

ADDISON, Texas -- August 8, 2013

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 2013 which ended on June 30, 2013. Fiesta also announced that it
anticipates it will exceed the high-end of its previously announced 2013
restaurant development expectations, driven by new Pollo Tropical restaurant
openings.

Highlights of Second Quarter 2013 Results Include:

  *Total revenues increased 9.4% to $140.9 million, compared to $128.8
    million in the prior year period;
  *Comparable restaurant sales increased 6.4% at Pollo Tropical and 1.1% at
    Taco Cabana;
  *Comparable restaurant guest traffic increased 2.8% at Pollo Tropical and
    decreased 0.5% at Taco Cabana;
  *Four company-owned Pollo Tropical and three company-owned Taco Cabana
    restaurants were opened; and
  *Net income increased $1.0 million to $5.0 million in the second quarter of
    2013, or $0.21 per diluted share, compared to net income of $3.9 million,
    or $0.17 per diluted share, in the second quarter of 2012.

Tim Taft, President and Chief Executive Officer of Fiesta, commented, “We are
successfully executing against our stated objectives and are very excited by
what we expect to accomplish this year. Our team is growing comparable
restaurant sales against robust comparisons, expanding profitability through
effective cost controls and sales leverage, making infrastructure investments
to support anticipated growth, and moving closer to completing our
administrative transition from Carrols. Year-to-date through the second
quarter, we opened a total of 11 company-owned and three international
franchised restaurants. In addition, since the onset of the third quarter, we
have opened three additional company-owned restaurants and have four more
under construction, positioning us to exceed the high end of our annual
restaurant development goals. Our development team has also completed value
engineering our Pollo Tropical prototype to deliver an elevated and compelling
brand experience, which will be reflected in our first restaurant built in
Texas in the first quarter of 2014.”

Taft continued, “With industry-leading restaurant economics and limited direct
fast-casual competitors in our markets, we continue to view Pollo Tropical as
our primary expansion vehicle for the foreseeable future. In 2013, 12 of our
now planned 18 new company-owned restaurants will be Pollo Tropical, and we
will look to accelerate the brand's pace of new openings over the next several
years as we backfill Florida, increase our penetration in Georgia and
Tennessee, and build a scalable footprint in Texas. Taco Cabana is also a
proven concept and an exceptionally strong cash generator. In the near-term,
we are concentrating on backfilling Texas, while preparing to enter a new
Southeastern market, in the first quarter of 2014. Development outside of
Texas will showcase an elevated concept offering that we hope will lead to a
second growth concept for FRGI.”

Taft concluded, “We believe that Pollo Tropical and Taco Cabana already
possess significant brand equity and have demonstrated strong financial
performance. We intend to make further enhancements to the guest experience,
as well as continue to refine our economic model so that we deliver
increasingly profitable sales growth over time and build long-term value for
our shareholders.”

Second Quarter 2013 Financial Review

Consolidated Results

Total revenues increased 9.4% in the second quarter of 2013 to $140.9 million
from $128.8 million in the second quarter of 2012. Restaurant sales in the
second quarter of 2013 increased 9.4% to $140.3 million from $128.2 million in
the second quarter of 2012 due to the opening of new company-owned restaurants
and comparable restaurant sales growth.

Cost of sales increased slightly as a percentage of restaurant sales in the
second quarter of 2013 compared to the prior year period as supply chain
management initiatives and modest price increases mitigated commodity cost
increases.

Restaurant wages and related expenses improved as a percentage of restaurant
sales in the second quarter of 2013 compared to the prior year period
primarily due to the positive impact of sales increases on fixed costs, lower
workers' compensation claims and lower medical and other benefit costs.

Other restaurant operating expenses increased slightly primarily due to higher
costs associated with general liability claims, partially offset by lower
utility costs. Pre-opening costs increased by $0.3 million as three additional
company-owned restaurants were opened compared to the prior year period.

Rent expense increased $1.1 million to $6.4 million in the second quarter of
2013 compared to $5.3 million in the prior year period. Of this increase, $0.9
million was due to certain transactions that qualified for sale-leaseback
accounting treatment (and the related leases being treated as operating
leases) upon the spin-off on May 7, 2012, that, until that time, had been
classified as lease financing obligations.

General and administrative expenses increased $1.4 million to $12.0 million in
the second quarter of 2013 from $10.6 million in the second quarter of 2012,
primarily due to Fiesta employee additions and costs incurred to transition
various functions from the Company's former parent company, Carrols Restaurant
Group, Inc. ("Carrols").

Depreciation and amortization increased $0.8 million to $5.2 million in the
second quarter of 2013 compared to $4.4 million in the prior year period. This
increase was due to new company-owned restaurant development as well as
remodeling expenditures for restaurants that have been updated over the past
year. These expenses were offset by $0.2 million as a result of the
qualification for sale treatment of certain sale-leaseback transactions upon
completion of the spin-off.

Interest expense decreased $1.3 million to $5.0 million in the second quarter
of 2013 from $6.3 million in the second quarter 2012, primarily due to the
elimination of $1.2 million in interest expense as a result of the
qualification for sale treatment of certain sale-leaseback transactions upon
the completion of the spin-off.

The provision for income taxes in the second quarter of 2013 was derived using
an estimated annual effective income tax rate for 2013 of 36.5%, while the
provision for income taxes for the second quarter of 2012 was derived using an
estimated annual effective income tax rate of 42.7%, both excluding discrete
items. The estimated effective annual income tax rate for 2013 is lower than
the effective annual income tax rate estimated in the second quarter of 2012,
primarily due to the effect of the Work Opportunity Tax Credit that was
renewed in early 2013, and adopting a consolidated filing position in the
state of Florida in the third quarter of 2012.

Net income increased $1.0 million to $5.0 million in the second quarter of
2013, or $0.21 per diluted share, compared to net income of $3.9 million, or
$0.17 per diluted share, in the second quarter of 2012.

Brand Results

Pollo Tropical restaurant sales increased 13.9% to $64.5 million in the second
quarter of 2013 from $56.6 million in the second quarter of 2012 due to a
comparable restaurant sales increase of 6.4% along with a net increase in
company-owned restaurants. The growth in comparable restaurant sales resulted
from a 2.8% increase in guest traffic along with a 3.6% increase in average
check. Adjusted EBITDA, a non-GAAP financial measure, increased to $12.0
million in the second quarter of 2013 from $10.5 million in the second quarter
of 2012. Adjusted EBITDA was negatively impacted by an increase in rent
expense of $0.3 million in the second quarter of 2013 compared to the second
quarter of 2012 due to the qualification for sale treatment of sale-leaseback
transactions upon the completion of the spin-off, as discussed above, in
addition to higher general and administrative and pre-opening costs associated
with new restaurant development.

Taco Cabana restaurant sales increased 5.9% to $75.8 million in the second
quarter of 2013 from $71.6 million in the second quarter of 2012 due to a
comparable restaurant sales increase of 1.1% along with a net increase in
company-owned restaurants. The growth in comparable restaurant sales resulted
from a 1.6% increase in average check partially offset by a 0.5% decrease in
guest traffic. Adjusted EBITDA, a non-GAAP financial measure, increased to
$7.2 million in the second quarter of 2013 from $6.9 million in the second
quarter of 2012. Adjusted EBITDA was negatively impacted by an increase in
rent expense of $0.6 million in the second quarter of 2013 compared to the
second quarter of 2012 due to the qualification for sale treatment of
sale-leaseback transactions upon the completion of the spin-off, as discussed
above, in addition to higher general and administrative and pre-opening costs
associated with new restaurant development.

Restaurant Development

During the second quarter of 2013, Fiesta opened four new company-owned Pollo
Tropical restaurants in Gainesville, Melbourne, and Pompano Beach, Florida and
Kennesaw, Georgia and three new company-owned Taco Cabana restaurants in
Texas, including two in Dallas and one in Waxahachie. International franchised
Pollo Tropical restaurants were opened in Costa Rica, India and Panama.

As of June 30, 2013, the Company owned and operated 96 Pollo Tropical
restaurants and 164 Taco Cabana restaurants and franchised 38 Pollo Tropical
restaurants in the U.S., Puerto Rico, the Bahamas, Costa Rica, Ecuador,
Honduras, India, Panama, Trinidad & Tobago, and Venezuela, and eight Taco
Cabana restaurants in the U.S.

Investor Conference Call Today

Fiesta will host a conference call to review second quarter 2013 results today
at 4:30 PM 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
800-441-0022 or for international callers by dialing 719-325-2106. 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 7189720.
The replay will be available until Thursday, August 15, 2013.

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 over 300 restaurants in the
U.S. and internationally as of June 30, 2013. The brands specialize in the
operation of fast-casual, ethnic restaurants that offer distinct and unique
flavors with 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 the
corporate website at www.frgi.com.

Forward-Looking Statements

Except for the historical information contained in this news release, the
matters addressed are forward-looking statements. Forward-looking statements,
written, oral or otherwise made, represent Fiesta's expectation or belief
concerning future events. Without limiting the foregoing, these statements are
often identified by the words “may,” “might,” “believes,” “thinks,”
“anticipates,” “plans,” “expects”, “intends” or similar expressions. In
addition, expressions of Fiesta's strategies, intentions or plans, are also
forward-looking statements. Such statements reflect management's current views
with respect to future events and are subject to risks and uncertainties, both
known and unknown. You are cautioned not to place undue reliance on these
forward-looking statements as there are important factors that could cause
actual results to differ materially from those in forward-looking statements,
many of which are beyond Fiesta's control. Investors are referred to the full
discussion of risks and uncertainties as included in Fiesta's filings with the
Securities and Exchange Commission.

                                                                  
Fiesta Restaurant Group, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)
                 (unaudited)                     (unaudited)
                   Three months ended (a)            Six months ended (a)
                   June 30,       July 1, 2012     June 30,       July 1,
                   2013                              2013             2012
                                                                      
Revenues:
Restaurant         $  140,276       $  128,208       $  273,366       $  253,774
sales
Franchise
royalty            604             625             1,138          1,201
revenues and
fees
Total revenues     140,880         128,833         274,504         254,975
Costs and
expenses:
Cost of sales      45,318           41,301           87,729           82,085
Restaurant
wages and          35,819           34,136           70,935           67,961
related
expenses (b)
Restaurant
rent expense       6,411            5,282            12,846           9,197
(c)
Other
restaurant         17,339           15,761           33,503           31,590
operating
expenses
Advertising        4,455            3,874            9,004            8,166
expense
General and
administrative     11,999           10,586           24,210           21,602
expenses
(b)(d)(e)
Depreciation
and                5,178            4,377            9,988            9,217
amortization
(c)
Pre-opening        958              705              1,789            824
costs
Impairment and
other lease        456              (39        )     551              6,861
charges (f)
Other income       —               —               (497       )   —
Total costs        127,933         115,983         250,058         237,503
and expenses
Income from        12,947           12,850           24,446           17,472
operations
Interest           5,011           6,329           10,018          14,298
expense (c)
Income before      7,936            6,521            14,428           3,174
income taxes
Provision for      2,967           2,600           4,660           1,118
income taxes
Net income         $  4,969        $  3,921        $  9,768        $  2,056
                                                                   
Basic and
diluted net        $  0.21         $  0.17         $  0.41         $  0.09
income per
share (g)
                                                                      
Basic and
diluted
weighted           22,908,191      22,902,944      22,888,542      23,032,383
average common
shares
outstanding


(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 30, 2013
and July 1, 2012 included 13 weeks and 26 weeks, respectively.

(b) Restaurant wages and related expenses include stock-based compensation
expense of $0 and $4 for the three month periods ended June 30, 2013 and July
1, 2012, respectively, and $1 and $8 for the six months periods ended June 30,
2013 and July 1, 2012, respectively. General and administrative expenses
include stock-based compensation expense of $595 and $169 for the three month
periods ended June 30, 2013 and July 1, 2012, respectively, and $1,020 and
$1,215 for the six month periods ended June 30, 2013 and July 1, 2012,
respectively.

(c) Prior to the spin-off from Carrols Restaurant Group, Inc. ("Carrols"),
certain sale-leaseback transactions were classified as lease financing
transactions because Carrols guaranteed the related lease payments. Effective
upon the spin-off, the provisions that previously precluded sale-leaseback
accounting were cured or eliminated. As a result, the real property leases
entered into in connection with these transactions are now recorded as
operating leases. Additionally, in the second quarter of 2012, we exercised
purchase options associated with the leases for five restaurant properties
also previously accounted for as lease financing obligations and purchased
those properties from the lessor. Subsequently, four of the five properties
have been sold in qualifying sale-leaseback transactions. Because of the
qualification of these leases and purchase of the five properties, restaurant
rent expense was $0.9 million higher, depreciation expense was $0.2 million
lower, and interest expense was $1.2 million lower in the second quarter of
2013 as compared to the second quarter of 2012, and restaurant rent expense
was $2.8 million higher, depreciation expense was $0.7 million lower, and
interest expense was $3.9 million lower in the six month period ended June 30,
2013 as compared to the six month period ended July 1, 2012.

(d) General and administrative expenses include expenses related directly to
Fiesta 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 legal and
other administrative functions. Following the spin-off, the Company performs
these functions or purchases services from either Carrols (under a transition
services agreement) or third parties.

(e) General and administrative expenses for the six months ended June 30, 2013
include expenses related to the underwritten secondary public equity offering
completed during March 2013 totaling $425. The Company did not receive any
proceeds from the sale of shares in the offering.

(f) Impairment and other lease charges in the three and six months ended June
30, 2013 include an impairment charge related to a Taco Cabana location.
Impairment and other lease charges in the six months ended July 1, 2012
consisted of asset impairment charges and lease charges associated with the
closure of five Pollo Tropical restaurants in New Jersey and two Taco Cabana
restaurants.

(g) As previously disclosed, Fiesta has granted shares of restricted stock to
certain of its employees. Because the unvested shares participate in any
dividends declared, the unvested shares are considered a second class of
common stock for accounting purposes, impacting the calculation of net income
per share. For further information, please see the Company's unaudited
financial statements to be included in the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 2013.


Fiesta Restaurant Group, Inc.

Condensed Consolidated Balance Sheet

(in thousands)

(unaudited)
                                                        
                                           June 30, 2013     December 30, 2012
                                                             
Assets
Cash                                       $  7,268          $     15,533
Other current assets                       17,300            15,424
Property and equipment, net                143,256           126,516
Goodwill                                   123,484           123,484
Intangible assets, net                     161               202
Deferred income taxes                      13,004            13,101
Deferred financing costs, net              4,908             5,690
Other assets                               3,087            3,779
Total assets                               $  312,468       $     303,729
                                                             
Liabilities and Stockholders' Equity
Current liabilities                        $  39,461         $     41,278
Long-term debt, net of current portion     200,861           200,889
Lease financing obligations                3,033             3,029
Deferred income sale-leaseback of real     34,901            36,096
estate
Other liabilities                          12,258           11,933
Total liabilities                          290,514          293,225
Stockholders' equity                       21,954           10,504
Total liabilities and stockholders'        $  312,468       $     303,729
equity
                                                                   


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
                   June 30,       July 1,        June 30,      July 1,
                   2013             2012           2013            2012
Segment
Revenues:
Pollo Tropical     $  64,992        $ 57,190       $ 127,274       $ 115,024
Taco Cabana        75,888          71,643        147,230        139,951   
Total revenues     140,880          128,833        274,504         254,975
                                                                   
Change in
comparable
restaurant
sales: (a)
Pollo Tropical     6.4        %     7.8      %     5.1       %     8.6       %
Taco Cabana        1.1        %     4.5      %     1.5       %     5.3       %
                                                                   
Average Sales
per Restaurant
(b):
Pollo Tropical     $  685           $ 647          $ 1,359         $ 1,279
Taco Cabana        462              455            906             889
                                                                   
Income (loss)
before income
taxes:
Pollo Tropical     $  7,233         $ 5,761        $ 12,951        $ 5,103
Taco Cabana        703              760            1,477           (1,929    )
                                                                   
Adjusted
EBITDA (c):
Pollo Tropical     $  11,973        $ 10,450       $ 21,778        $ 21,664
Taco Cabana        7,203            6,911          13,731          13,109
                                                                   
Number of
Company-Owned
Restaurants:
Pollo Tropical     96               89             96              89
Taco Cabana        164             158           164            158       
Total
company-owned      260              247            260             247
restaurants
                                                                   
Company-Owned
Restaurant
Openings:
Pollo Tropical     4                3              6               3
Taco Cabana        3               1             5              1         
Total new
restaurant         7                4              11              4
openings
                                                                   
Company-Owned
Restaurant
Closings:
Pollo Tropical     (1         )     —              (1        )     (5        )
Taco Cabana        (1         )     —             (1        )     (1        )
Net change in      5                4              9               (2        )
restaurants
                                                                   
Number of
Franchised
Restaurants:
Pollo Tropical     38               35             38              35
Taco Cabana        8               5             8              5         
Total
franchised         46               40             46              40
restaurants


(a) Restaurants are included in comparable restaurant sales after they have
been open for 18 months.

(b) 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 open restaurants for the applicable segment for such period.

(c) Adjusted EBITDA is a non-GAAP financial measure. Please see the
reconciliation of Adjusted EBITDA to net income in the table on the following
page of this release. Adjusted 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 EBITDA is used because it is a
measure of segment profit or loss reported to our chief operating decision
maker along with earnings before taxes 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.

                        Fiesta Restaurant Group, Inc.
                      Supplemental Non-GAAP Information
 The following table sets forth certain unaudited supplemental financial data
                          for the periods indicated
                  (in thousands, except per share amounts):

Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as
earnings before interest, income taxes, depreciation and amortization,
impairment and other lease charges, stock-based compensation expense and other
income and expense. Adjusted EBITDA for each of our segments includes an
allocation of general and administrative expenses associated with
administrative support for executive management, information systems and
certain accounting, legal and other administrative functions. Adjusted EBITDA
for each of our segments is a measure of segment profitability reported to our
chief operating decision maker for purposes of allocating resources to the
segments and assessing each segment's performance. In addition, management
believes that Adjusted EBITDA, when viewed with our results of operations
calculated in accordance with GAAP and our reconciliation of Adjusted EBITDA
(both on a consolidated basis and on a segment basis) to net income i)
provides useful information about our operating performance and
period-over-period growth, (ii) provides additional information that is useful
for evaluating the operating performance of our business, and (iii) permits
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 measure is not a measure of financial performance or
liquidity under GAAP and, accordingly should not be considered as an
alternative to net income or net income per share as indicators of operating
performance or liquidity. Also this measure may not be comparable to similarly
titled captions of other companies.

                                                             
                  (unaudited)                        (unaudited)
                  Three months ended                 Six months ended
                  June 30, 2013     July 1, 2012     June 30,         July 1,
                                                     2013             2012
Adjusted
EBITDA:
Pollo             $  11,973         $  10,450        $  21,778        $ 21,664
Tropical
Taco Cabana       7,203            6,911           13,731          13,109
Consolidated      19,176            17,361           35,509           34,773
Less:
Depreciation
and               5,178             4,377            9,988            9,217
amortization
Impairment
and other         456               (39        )     551              6,861
lease charges
Interest          5,011             6,329            10,018           14,298
expense
Provision for     2,967             2,600            4,660            1,118
income taxes
Stock-based       595               173              1,021            1,223
compensation
Other income      —                —               (497       )     —
Net income        $  4,969         $  3,921        $  9,768        $ 2,056
                                                                        

Contact:

Investor Relations:
Raphael Gross, 203-682-8253
investors@frgi.com