Fiesta Restaurant Group, Inc. Reports First Quarter 2014 Results

  Fiesta Restaurant Group, Inc. Reports First Quarter 2014 Results

Business Wire

ADDISON, Texas -- May 6, 2014

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 first quarter
2014, which ended on March 30, 2014.

Highlights of first quarter 2014 results include:

  *Total revenues increased 8.8% to $145.4 million;
  *Comparable restaurant sales increased 6.3% and comparable restaurant guest
    traffic increased 4.6% at Pollo Tropical;
  *Comparable restaurant sales increased 0.8% and comparable restaurant guest
    traffic decreased 2.0% at Taco Cabana, negatively impacted by unfavorable
    weather and fewer newly remodeled restaurants;
  *Four Company-owned Pollo Tropical restaurants were opened, including the
    first restaurant in Texas;
  *Net income increased $3.9 million to $8.7 million, or $0.33 per diluted
    share, compared to net income of $4.8 million, or $0.20 per diluted share.

Fiesta President and Chief Executive Officer Tim Taft commented, “With a
successful start to 2014, we increased revenues by almost nine percent,
expanded operating margins and grew EPS over 60%. We also opened our newest
Pollo Tropical restaurant prototype in Addison, Texas. This is the first of
approximately 10 slated to open in three key Texas markets in 2014.”

Taft continued, “In April, we opened our first Cabana Grill restaurant in the
greater Atlanta market. In addition to the westward expansion of Pollo
Tropical and testing Cabana Grill in the east, we continue to focus our
development efforts on building Pollo Tropical restaurants in markets where we
already have presence, driving profitable growth.”

First Quarter 2014 Financial Review

Consolidated Results

Total revenues increased 8.8% in the first quarter of 2014 to $145.4 million
from $133.6 million in the first quarter of 2013. Restaurant sales in the
first quarter of 2014 increased 8.8% to $144.8 million from $133.1 million in
the first quarter of 2013 due to the opening of new Company-owned restaurants
and comparable restaurant sales growth.

Cost of sales decreased as a percentage of restaurant sales in the first
quarter of 2014 compared to the prior year period as modest price increases
and supply chain management initiatives more than offset commodity cost
increases.

Restaurant wages and related expenses improved as a percentage of restaurant
sales in the first quarter of 2014 compared to the prior year period due
primarily to lower workers’ compensation claim costs along with the favorable
impact of sales increases on fixed costs.

Other restaurant operating expenses increased slightly as a percentage of
restaurant sales in the first quarter of 2014 compared to the prior year
period. Pre-opening costs were $0.7 million compared to $0.8 million in the
prior year period due to the timing of expenses for future openings. Rent
expense increased slightly as a percentage of restaurant sales compared to the
prior year period as a consequence of new Company-owned restaurant openings
and sale-leaseback transactions completed over the course of a year.

Advertising expense increased as a percentage of restaurant sales in the first
quarter of 2014 compared to the prior year period due primarily to an increase
in expenditures and the timing of promotions.

General and administrative expenses were $12.2 million in both the first
quarters of 2014 and 2013 and decreased as a percentage of restaurant sales in
the first quarter of 2014 due to the favorable impact of higher sales on fixed
costs.

Depreciation and amortization increased to $5.3 million in the first quarter
of 2014 compared to $4.8 million in the prior year period. This increase was
due to new Company-owned restaurant development, partially offset by the
impact of sale-leaseback transactions.

Interest expense decreased $4.4 million to $0.6 million in the first quarter
of 2014 from $5.0 million in the first quarter 2013 due to the reduction in
Fiesta’s outstanding debt and a lower interest rate on borrowings under the
new senior credit facility.

The provision for income taxes for the first quarter of 2014 was derived using
an estimated annual effective income tax rate for 2014 of 38.3%, while the
provision for income taxes for the first quarter of 2013 was derived using an
estimated effective annual income tax rate for 2013 of 35.8%, excluding
discrete items. The estimated effective annual income tax rate for 2014 is
higher than the estimated effective annual income tax rate for the first
quarter of 2013, primarily due to the expiration of the Work Opportunity Tax
Credit on December 31, 2013.

Net income was $8.7 million, or $0.33 per diluted share (on a base of 26.2
million shares), compared to net income of $4.8 million, or $0.20 per diluted
share (on a base of 22.9 million shares), in the first quarter of 2013.

Brand Results

Pollo Tropical restaurant sales increased 15.3% to $71.4 million in the first
quarter of 2014 from $61.9 million in the first quarter of 2013 due to a
comparable restaurant sales increase of 6.3% along with a net increase of 13
Company-owned restaurants. This is the eighteenth consecutive quarter the
brand has delivered comparable restaurant sales growth and, on a two year
basis, first quarter comparable restaurant sales grew 10.1%. The growth in
comparable restaurant sales resulted from a 4.6% increase in comparable
restaurant guest traffic along with a 1.7% increase in average check. Adjusted
EBITDA for Pollo Tropical, a non-GAAP financial measure, increased to $13.7
million in the first quarter of 2014 from $9.8 million in the first quarter of
2013.

Taco Cabana restaurant sales increased 3.2% to $73.5 million in the first
quarter of 2014 from $71.2 million in the first quarter of 2013 due to a 0.8%
increase in comparable restaurant sales along with a net increase of three
Company-owned restaurants. On a two year basis, first quarter comparable
restaurant sales grew 2.8%. The increase in comparable restaurant sales
resulted from a decrease of 2.0% in comparable restaurant guest traffic
negatively impacted by unfavorable weather conditions in Texas and fewer newly
remodeled restaurants, partially offset by a 2.8% increase in average check.
Menu price increases drove an increase in restaurant sales of 1.3% while the
remaining increase in average check is primarily driven by a positive change
in sales mix due to the implementation of new menu boards. Adjusted EBITDA for
Taco Cabana, a non-GAAP financial measure, increased to $7.1 million in the
first quarter of 2014 from $6.5 million in the first quarter of 2013.

Restaurant Development

During the first quarter of 2014, Fiesta opened four new Company-owned Pollo
Tropical restaurants, one in Texas and three in Florida. Subsequent to the end
of the first quarter of 2014, the Company opened its first Cabana Grill
restaurant in Snellville, Georgia, outside of Atlanta.

As of March 30, 2014, the Company owned and operated 106 Pollo Tropical
restaurants and 165 Taco Cabana restaurants and franchised 39 Pollo Tropical
restaurants in the U.S., Puerto Rico, the Bahamas, Costa Rica, Ecuador,
Guatemala, Honduras, India, Panama, Trinidad & Tobago, Venezuela and the
Dominican Republic, and seven Taco Cabana restaurants in the U.S.

Investor Conference Call Today

Fiesta will host a conference call to review first quarter 2014 results today
at 4:30 PM ET. Hosting the call will be President and Chief Executive Officer
Tim Taft and Vice President and Chief Financial Officer Lynn Schweinfurth.

The conference call can be accessed live over the phone by dialing
877-407-0789 or for international callers by dialing 201-689-8562. 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
13581029. The replay will be available until Tuesday, May 13, 2014.

The conference call will also be webcast live from the corporate website at
www.frgi.com, under the investor relations section. A replay of the webcast
will be available through the corporate website shortly after the call has
concluded.

About Fiesta Restaurant Group, Inc.

Fiesta Restaurant Group, Inc. owns, operates and franchises the Pollo
Tropical® and Taco Cabana® restaurant brands. The brands specialize in the
operation of fast-casual, ethnic restaurants that offer distinct and unique
flavors with broad appeal at a compelling value. The 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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 30, 2014 AND MARCH 31, 2013
(In thousands of dollars, except share and per share amounts)
(Unaudited)

                                              Three months ended (a)
                                               March 30, 2014  March 31, 2013
                                                                             
Revenues:
Restaurant sales                               $   144,825      $   133,090
Franchise royalty revenues and fees            611             534          
Total revenues                                 145,436          133,624
Costs and expenses:
Cost of sales                                  45,529           42,411
Restaurant wages and related expenses (b)      36,506           35,116
Restaurant rent expense                        7,204            6,435
Other restaurant operating expenses            17,885           16,164
Advertising expense                            5,419            4,549
General and administrative expenses (b)(c)     12,151           12,211
Depreciation and amortization                  5,345            4,810
Pre-opening costs                              683              831
Impairment and other lease charges             (15          )   95
Other income                                   (6           )   (497         )
Total costs and expenses                       130,701         122,125      
Income from operations                         14,735           11,499
Interest expense (d)                           603             5,007        
Income before income taxes                     14,132           6,492
Provision for income taxes                     5,413           1,693        
Net income                                     $   8,719       $   4,799    
Basic net income per share (e)                 $   0.33        $   0.20     
Diluted net income per share (e)               $   0.33        $   0.20     
Basic weighted average common shares           26,201,747      22,868,894   
outstanding
Diluted weighted average common shares         26,202,309      22,868,894   
outstanding

(a) The Company uses a 52 or 53 week fiscal year that ends on the Sunday
closest to December 31. The three month periods ended March 30, 2014 and March
31, 2013 included 13 weeks.

(b) Restaurant wages and related expenses include stock-based compensation
expense of $9 and $1 for the three month periods ended March 30, 2014 and
March 31, 2013, respectively. General and administrative expenses include
stock-based compensation expense of $712 and $425 for the three month periods
ended March 30, 2014 and March 31, 2013, respectively.

(c) General and administrative expenses for the three months ended March 31,
2013 include expenses related to the underwritten secondary public equity
offering completed during March 2013 totaling $403. The Company did not
receive any proceeds from the sale of shares in the offering.

(d) Fiesta repurchased and redeemed its $200.0 million in aggregate principal
amount of 8.875% Senior Secured Second Lien Notes due 2016, sold 3,078,336
shares of its common stock, and entered into a new senior secured revolving
credit facility in the fourth quarter of 2013 that provides for aggregate
borrowings of up to $150.0 million with variable rate interest.

(e) 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 audited financial
statements to be included in the Company's Annual Report on Form 10-K for the
year ended December 29, 2013.


FIESTA RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except share and per share amounts)
(unaudited)

                                           March 30, 2014  December 29, 2013
                                                             
Assets
Cash                                        $  2,406         $   10,978    
Other current assets                        19,971           21,947
Property and equipment, net                 149,429          144,527
Goodwill                                    123,484          123,484
Intangible assets, net                      101              121
Deferred income taxes                       12,259           12,046
Deferred financing costs, net               1,459            1,530
Other assets                                4,165           4,152         
Total assets                                $  313,274      $   318,785   
                                                             
Liabilities and Stockholders' Equity
Current liabilities                         $  26,883        $   38,087
Long-term debt, net of current portion      65,310           72,324
Lease financing obligations                 1,658            1,657
Deferred income sale-leaseback of real      36,843           35,873
estate
Other liabilities                           13,784          12,538        
Total liabilities                           144,478          160,479
Stockholders' equity                        168,796         158,306       
Total liabilities and stockholders'         $  313,274      $   318,785   
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)
                                               Three months ended
                                               March 30, 2014  March 31, 2013
Segment revenues:
Pollo Tropical                                 $  71,844        $  62,282
Taco Cabana                                    73,592          71,342      
Total revenues                                 $  145,436      $  133,624  
                                                                            
Change in comparable restaurant sales (a):
Pollo Tropical                                 6.3         %    3.8         %
Taco Cabana                                    0.8         %    2.0         %
                                                                            
Average sales per Company-owned restaurant
(b):
Pollo Tropical                                 $  682           $  672
Taco Cabana                                    445              443
                                                                            
Income before income taxes:
Pollo Tropical                                 $  10,496        $  5,718
Taco Cabana                                    3,636            774
                                                                            
Adjusted EBITDA (c):
Pollo Tropical                                 $  13,677        $  9,805
Taco Cabana                                    7,103            6,528
                                                                            
Restaurant-Level Adjusted EBITDA (c):
Pollo Tropical                                 $  19,077        $  15,431
Taco Cabana                                    12,531           12,154
                                                                            
Number of Company-owned restaurants:
Pollo Tropical                                 106              93
Taco Cabana                                    165             162         
Total Company-owned restaurants                271              255
                                                                            
Company-owned restaurant openings:
Pollo Tropical                                 4                2
Taco Cabana                                    —               2           
Total new restaurant openings                  4                4
                                                                            
Company-owned restaurant closings:
Pollo Tropical                                 —                —
Taco Cabana                                    —               —           
Net change in restaurants                      4                4
                                                                            
Number of franchised restaurants:
Pollo Tropical                                 39               36
Taco Cabana                                    7               8           
Total franchised restaurants                   46               44

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

(b) Average sales for Company-owned restaurants are derived by dividing
restaurant sales for such period for the applicable segment by the average
number of open restaurants for the applicable segment for such period.

(c) Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP
financial measures. Please see the reconciliation of Restaurant-Level Adjusted
EBITDA and Adjusted EBITDA to net income in the table on the following page of
this release.


Fiesta Restaurant Group, Inc.
Supplemental Information
The following table sets forth certain unaudited supplemental financial and
other data for the periods indicated
(in thousands, except percentages):

                       Three months ended
                        March 30, 2014               March 31, 2013
                                        (a)                        (a)
Pollo Tropical:
Restaurant sales        $  71,356                     $  61,869  
Cost of sales           23,229           32.6  %      20,493          33.1  %
Restaurant wages and    15,265           21.4  %      14,317          23.1  %
related expenses
Restaurant rent         2,917            4.1   %      2,357           3.8   %
expense
Other restaurant        8,377            11.7  %      7,203           11.6  %
operating expenses
Advertising expense     1,962            2.7   %      1,574           2.5   %
Depreciation and        2,577            3.6   %      2,099           3.4   %
amortization
Pre-opening costs       533              0.7   %      493             0.8   %
Impairment and other    (39        )     (0.1  )%     39              0.1   %
lease charges
                                                                            
Taco Cabana:
Restaurant sales        $  73,469                     $  71,221
Cost of sales           22,300           30.4  %      21,918          30.8  %
Restaurant wages and    21,241           28.9  %      20,799          29.2  %
related expenses
Restaurant rent         4,287            5.8   %      4,078           5.7   %
expense
Other restaurant        9,508            12.9  %      8,961           12.6  %
operating expenses
Advertising expense     3,457            4.7   %      2,975           4.2   %
Depreciation and        2,768            3.8   %      2,711           3.8   %
amortization
Pre-opening costs       150              0.2   %      338             0.5   %
Impairment and other    24               0.0   %      56              0.1   %
lease charges

(a) Percent of restaurant sales


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

Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP financial
measures. 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. Restaurant-Level Adjusted EBITDA is defined as Adjusted EBITDA
excluding franchise royalty revenues and fees and general and administrative
expenses (including corporate-level general and administrative expenses).
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 and Restaurant-Level
Adjusted EBITDA, when viewed with our results of operations calculated in
accordance with GAAP and our reconciliation of Restaurant-Level Adjusted
EBITDA and Adjusted EBITDA to net income (i) provides useful information
(including at the restaurant level) 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 measures are 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 these measures may not be comparable to
similarly titled captions of other companies.

                                              (unaudited)
                                               Three months ended
                                               March 30, 2014  March 31, 2013
                                                                            
Restaurant-Level Adjusted EBITDA:
Pollo Tropical                                 $   19,077       $   15,431
Taco Cabana                                    12,531          12,154      
Consolidated                                   31,608           27,585
Add:
Franchise royalty revenue and fees             611              534
Less:
General and administrative (excluding
stock-based compensation expense of $712 and   11,439           11,786
$425, respectively)
Adjusted EBITDA:
Pollo Tropical                                 13,677           9,805
Taco Cabana                                    7,103           6,528       
Consolidated                                   20,780           16,333
Less:
Depreciation and amortization                  5,345            4,810
Impairment and other lease charges             (15         )    95
Interest expense                               603              5,007
Provision for income taxes                     5,413            1,693
Stock-based compensation                       721              426
Other income                                   (6          )    (497        )
Net income                                     $   8,719       $   4,799   

Contact:

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