Fiesta Restaurant Group, Inc. Reports Third Quarter 2013 Results

  Fiesta Restaurant Group, Inc. Reports Third Quarter 2013 Results

                 Provides Initial Operating Targets for 2014

Business Wire

ADDISON, Texas -- November 5, 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 third quarter of
2013 which ended on September 29, 2013. The Company also provided initial
operating targets for 2014.

Highlights of Third Quarter 2013 Results Include:

  *Total revenues increased 9.8% to $140.7 million, compared to $128.2
    million in the prior year period;
  *Comparable restaurant sales increased 6.5% at Pollo Tropical and 1.8% at
    Taco Cabana;
  *Comparable restaurant guest traffic increased 3.2% at Pollo Tropical and
    decreased 0.1% at Taco Cabana;
  *Four company-owned Pollo Tropical restaurants were opened; and
  *Net income increased 38.2% to $5.0 million, or $0.21 per diluted share,
    compared to net income of $3.6 million, or $0.16 per diluted share, in the
    third quarter of 2012.

Tim Taft, President and Chief Executive Officer of Fiesta, commented, “We had
an exceptionally strong third quarter characterized by positive comparable
restaurant sales, increased restaurant-level profitability and meaningful
growth in earnings per share Additionally, the infrastructure investments
we’ve made have enabled us to substantially complete the administrative
transition from Carrols while further providing ongoing support to our growing
restaurant footprint. We expect to end 2013 with 18 new company-owned
restaurants, of which 12 are Pollo Tropical and six are Taco Cabana.”

Taft concluded, “We are optimistic about 2014 as we continue to implement our
long-term business plan. In addition to backfilling Pollo Tropical in Florida,
we are also building our presence in Georgia and Tennessee. The restaurants in
these markets are already generating healthy sales volumes despite not having
yet achieved media efficiency. In 2014, we expect to nearly double the pace of
Company-owned Pollo Tropical restaurant openings which will include our first
Texas-based Pollo Tropical restaurant, in Dallas. Development of Taco Cabana
restaurants was limited to Texas in 2013, but next year we will be entering
Georgia with our new elevated concept that we believe will emerge as a growth
vehicle for the Taco Cabana concept outside of Texas. Above all, we are
fortunate to have two concepts that possess significant brand equity and are
positioned to make meaningful contributions to our success.”

Third Quarter 2013 Financial Review

Consolidated Results

Total revenues increased 9.8% in the third quarter of 2013 to $140.7 million
from $128.2 million in the third quarter of 2012. Restaurant sales in the
third quarter of 2013 increased 9.7% to $140.1 million from $127.6 million in
the third 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
third quarter of 2013 compared to the prior year period as supply chain
management initiatives and modest price increases largely mitigated commodity
cost increases.

Restaurant wages and related expenses improved slightly as a percentage of
restaurant sales in the third quarter of 2013 compared to the prior year
period primarily due to the favorable impact of sales increases on fixed costs
and lower workers' compensation claims, partially offset by higher medical and
other benefits costs.

Other restaurant operating expenses increased slightly as a percentage of
restaurant sales in the third quarter of 2013 compared to the prior year
period primarily due to higher insurance costs. Pre-opening costs increased by
$0.4 million due to one additional company-owned restaurant opening compared
to the prior year period and expenses incurred for future openings. Rent
expense held steady as a percentage of restaurant sales.

General and administrative expenses increased $0.5 million to $11.7 million in
the third quarter of 2013 from $11.2 million in the third quarter of 2012,
primarily due to Fiesta employee additions and costs incurred relating to the
transition of various functions from the Company's former parent company,
Carrols Restaurant Group, Inc.

Depreciation and amortization increased $0.6 million to $5.1 million in the
third quarter of 2013 compared to $4.5 million in the prior year period. This
increase was due to new company-owned restaurant development as well as
restaurant remodeling expenditures.

Impairment and other lease charges in the third quarter of 2013 consisted of
$0.3 million of lease charge recoveries related to previously closed
locations.

Interest expense decreased $0.6 million to $4.5 million in the third quarter
of 2013 from $5.0 million in the third quarter 2012 due to the year to date
capitalization of interest, of which a portion is attributable to the first
and second quarters, driven by an increase in new store construction.

The provision for income taxes in the third quarter of 2013 was derived using
an estimated annual effective income tax rate of 36.5% for 2013, while the
provision for income taxes for the third quarter of 2012 was derived using an
estimated annual effective income tax rate of 39.3%, 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 third quarter of 2012,
primarily due to the effect of the Work Opportunity Tax Credit that was
renewed in early 2013.

Net income increased $1.4 million to $5.0 million in the third quarter of
2013, or $0.21 per diluted share, compared to net income of $3.6 million, or
$0.16 per diluted share, in the third quarter of 2012.

Brand Results

Pollo Tropical restaurant sales increased 15.1% to $66.0 million in the third
quarter of 2013 from $57.4 million in the third quarter of 2012 due to a
comparable restaurant sales increase of 6.5% along with a net increase in the
number of company-owned restaurants. The growth in comparable restaurant sales
resulted from a 3.2% increase in guest traffic along with a 3.3% increase in
average check. Adjusted EBITDA for Pollo Tropical, a non-GAAP financial
measure, increased to $10.7 million in the third quarter of 2013 from $9.1
million in the third quarter of 2012.

Taco Cabana restaurant sales increased 5.4% to $74.1 million in the third
quarter of 2013 from $70.3 million in the third quarter of 2012 due to a
comparable restaurant sales increase of 1.8% along with a net increase in the
number of company-owned restaurants. The growth in comparable restaurant sales
resulted from a 1.9% increase in average check partially offset by a slight
decrease of 0.1% in guest traffic. Adjusted EBITDA for Taco Cabana, a non-GAAP
financial measure, increased to $6.8 million in the third quarter of 2013 from
$6.7 million in the third quarter of 2012.

Restaurant Development

During the third quarter of 2013, Fiesta opened four new company-owned Pollo
Tropical restaurants located in Alpharetta, Georgia; Brandon and Stuart,
Florida; and Franklin, Tennessee. International franchised Pollo Tropical
restaurants were also opened in the Dominican Republic and Trinidad & Tobago.

As of September 29, 2013, the Company owned and operated 100 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, Venezuela and the Dominican
Republic, and eight Taco Cabana restaurants in the U.S.

2014 Initial Operating Targets

Initial operating targets expected in fiscal 2014 are as follows:

  *Comparable restaurant sales growth of 3% to 5% for Pollo Tropical;
  *Comparable restaurant sales growth of 1.5% to 3.5% at Taco Cabana;
  *20 to 22 new Company-owned restaurant openings for Pollo Tropical and two
    to four new Company-owned restaurant openings for Taco Cabana;
  *General and administrative expenses of approximately $48 million to $50
    million;
  *An effective tax rate of approximately 37% to 38%, assuming the
    reinstatement of the Work Opportunity Tax Credit in 2014; and
  *Capital expenditures between $60 million and $65 million.

Investor Conference Call Today

Fiesta will host a conference call to review third 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
888-437-9481 or for international callers by dialing 719-325-2322. 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 2557091.
The replay will be available until Tuesday, November 12, 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 310 restaurants in the U.S.
and internationally as of September 29, 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)            Nine months ended (a)
                   September      September        September      September
                   29,              30,              29,              30,
                   2013             2012             2013             2012
                                                                      
Revenues:
Restaurant         $  140,069       $  127,648       $  413,435       $  381,422
sales
Franchise
royalty            609             525             1,747           1,726
revenues and
fees
Total revenues     140,678         128,173         415,182         383,148
Costs and
expenses:
Cost of sales      45,162           41,021           132,891          123,106
Restaurant
wages and          36,979           33,860           107,914          101,821
related
expenses (b)
Restaurant
rent expense       6,853            6,224            19,699           15,421
(c)
Other
restaurant         18,283           16,529           51,786           48,119
operating
expenses
Advertising        4,271            3,757            13,275           11,923
expense
General and
administrative     11,685           11,198           35,895           32,800
expenses
(b)(d)(e)
Depreciation
and                5,129            4,486            15,117           13,703
amortization
(c)
Pre-opening        590              232              2,379            1,056
costs
Impairment and
other lease        (312       )     (45        )     239              6,816
charges (f)
Other income       (57        )     —               (554       )     —
Total costs        128,583         117,262         378,641         354,765
and expenses
Income from        12,095           10,911           36,541           28,383
operations
Interest           4,457           5,036           14,475          19,334
expense (c)
Income before      7,638            5,875            22,066           9,049
income taxes
Provision for      2,596           2,226           7,256           3,344
income taxes
Net income         $  5,042        $  3,649        $  14,810       $  5,705
                                                                   
Basic and
diluted net        $  0.21         $  0.16         $  0.63         $  0.25
income per
share (g)
                                                                      
Basic and
diluted
weighted           22,986,615      22,747,044      22,921,233      22,937,270
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 nine month periods ended September 29,
2013 and September 30, 2012 included 13 weeks and 39 weeks, respectively.

(b) Restaurant wages and related expenses include stock-based compensation
expense of $1 and $1 for the three month periods ended September 29, 2013 and
September 30, 2012, respectively, and $2 and $9 for the nine months periods
ended September 29, 2013 and September 30, 2012, respectively. General and
administrative expenses include stock-based compensation expense of $657 and
$379 for the three month periods ended September 29, 2013 and September 30,
2012, respectively, and $1,677 and $1,594 for the nine month periods ended
September 29, 2013 and September 30, 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 $2.8 million higher, depreciation expense was $0.7 million
lower, and interest expense was $3.9 million lower in the nine month period
ended September 29, 2013 as compared to the nine month period ended September
30, 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 nine months ended September
29, 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 nine months ended September 29,
2013 include an impairment charge related to a Taco Cabana location and lease
charge recoveries, net of lease charges, related to previously closed
locations. Impairment and other lease charges in the nine months ended
September 30, 2012 consisted of asset impairment charges and lease charges,
net of recoveries, associated with the closure of five Pollo Tropical
restaurants in New Jersey, two Taco Cabana restaurants and a Pollo Tropical
restaurant.

(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 September 29, 2013.


Fiesta Restaurant Group, Inc.

Condensed Consolidated Balance Sheet

(in thousands)

(unaudited)
                                                        
                                      September 29, 2013     December 30, 2012
                                                             
Assets
Cash                                  $    5,886             $     15,533
Other current assets                  18,883                 15,424
Property and equipment, net           144,407                126,516
Goodwill                              123,484                123,484
Intangible assets, net                141                    202
Deferred income taxes                 12,642                 13,101
Deferred financing costs, net         4,511                  5,690
Other assets                          3,308                 3,779
Total assets                          $    313,262          $     303,729
                                                             
Liabilities and Stockholders'
Equity
Current liabilities                   $    34,812            $     41,278
Long-term debt, net of current        200,847                200,889
portion
Lease financing obligations           3,035                  3,029
Deferred income sale-leaseback of     34,696                 36,096
real estate
Other liabilities                     11,957                11,933
Total liabilities                     285,347               293,225
Stockholders' equity                  27,915                10,504
Total liabilities and                 $    313,262          $     303,729
stockholders' 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              Nine months ended
                   September      September      September     September
                   29,              30,            29,             30,
                   2013             2012           2013            2012
Segment
Revenues:
Pollo Tropical     $  66,478        $ 57,784       $ 193,752       $ 172,808
Taco Cabana        74,200          70,389        221,430        210,340   
Total revenues     140,678          128,173        415,182         383,148
                                                                   
Change in
comparable
restaurant
sales (a):
Pollo Tropical     6.5        %     7.0      %     5.5       %     8.1       %
Taco Cabana        1.8        %     1.8      %     1.6       %     4.1       %
                                                                   
Average Sales
per
Company-Owned
Restaurant
(b):
Pollo Tropical     $  667           $ 638          $ 2,025         $ 1,916
Taco Cabana        452              442            1,357           1,330
                                                                   
Income (loss)
before income
taxes:
Pollo Tropical     $  6,132         $ 4,523        $ 19,083        $ 9,626
Taco Cabana        1,506            1,357          2,983           (572      )
                                                                   
Adjusted
EBITDA (c):
Pollo Tropical     $  10,709        $ 9,079        $ 32,487        $ 30,743
Taco Cabana        6,804            6,653          20,535          19,762
                                                                   
Number of
Company-Owned
Restaurants:
Pollo Tropical     100              90             100             90
Taco Cabana        164             160           164            160       
Total
company-owned      264              250            264             250
restaurants
                                                                   
Company-Owned
Restaurant
Openings:
Pollo Tropical     4                1              10              4
Taco Cabana        —               2             5              3         
Total new
restaurant         4                3              15              7
openings
                                                                   
Company-Owned
Restaurant
Closings:
Pollo Tropical     —                —              (1        )     (5        )
Taco Cabana        —               —             (1        )     (1        )
Net change in      4                3              13              1
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                 Nine months ended
                  September 29,     September        September       September
                                    30,              29,             30,
                  2013              2012            2013            2012
Adjusted
EBITDA:
Pollo             $  10,709         $  9,079         $  32,487       $  30,743
Tropical
Taco Cabana       6,804            6,653           20,535         19,762
Consolidated      17,513            15,732           53,022          50,505
Less:
Depreciation
and               5,129             4,486            15,117          13,703
amortization
Impairment
and other         (312       )      (45       )      239             6,816
lease charges
Interest          4,457             5,036            14,475          19,334
expense
Provision for     2,596             2,226            7,256           3,344
income taxes
Stock-based       658               380              1,679           1,603
compensation
Other income      (57        )      —               (554      )     —
Net income        $  5,042         $  3,649        $  14,810      $  5,705

Contact:

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