Fiesta Restaurant Group, Inc. Reports Second Quarter 2018 Results
Aug. 06, 2018
DALLAS--(BUSINESS WIRE)--Aug 6, 2018--Fiesta Restaurant Group, Inc. (“Fiesta” or the “Company”) (NASDAQ:FRGI), parent company of the Pollo Tropical® and Taco Cabana® restaurant brands, today reported results for the 13-week second quarter of 2018, which ended on July 1, 2018. The Company also provided an update on the continuing progress of its ongoing Strategic Renewal Plan (the "Plan") to drive long-term shareholder value creation.
Fiesta President and Chief Executive Officer Richard Stockinger said, “Our solid second quarter results are in-line with what we expected to see from our Plan, which is aimed at restoring our iconic brands to full strength and growth. Quarterly comparable restaurant sales grew over three percent at both Pollo Tropical and Taco Cabana, validating the tremendous job our teams are doing in executing our Plan. We believe our guests truly appreciate the heightened food quality and other hospitality improvements in place and this is reflected in both our rising Net Promoter Scores and our positive restaurant sales trajectory. However, our work is far from done. In the second half of 2018, we will introduce new delivery, catering and digital loyalty platforms to grow sales and upgrade our POS tablets to increase speed of service. We will also continue to innovate our product pipeline while continuing to rebalance our mix of broadcast, digital and social media and extend our local store marketing programs to drive increased awareness and frequency. Finally, we will test kiosks and complete the implementation of several initiatives already underway to improve food and labor costs.”
Mr. Stockinger continued, “Through July, we have reported eight consecutive months of positive comparable restaurant sales growth at Pollo Tropical. To date, our hand-battered crispy chicken platform has been a resounding success, with broad appeal and high sales mix across all markets while leveraging our signature 24-hour citrus marinated chicken. We continue to focus on operational execution to support sales increases across all markets as we continue to implement the Plan.”
Mr. Stockinger concluded, “Taco Cabana has also made significant headway in enhancing the overall guest experience. Our brand re-launch began in July when we completed numerous menu enhancements. We have improved the breadth and depth of our menu which now features USDA Choice steak and applewood-smoked brisket, and improved chicken and ground beef, delivering on our promise of authentic, high quality and freshly prepared cuisine, inspired by our original recipes. We are further encouraged by the brand’s sales trajectory and its four consecutive months of comparable restaurant sales growth. We plan to build on this momentum with, among other things, all day breakfast tacos, tacos by the dozen and patio parties featuring an expansion of alcoholic beverages such as our frozen raspberry lemonade made with Tito’s® handmade vodka, complementing our new, shareable appetizers. We are gaining traction and believe that our strategic repositioning of Taco Cabana is attracting new and returning loyal guests.”
Second Quarter 2018 Financial SummaryTotal revenues increased 2.4% from the prior year period to $176.8 million due primarily to comparable restaurant sales growth at both Pollo Tropical and Taco Cabana; Comparable restaurant sales at Pollo Tropical increased 3.4%, the second consecutive quarter of positive comparable restaurant sales. Comparable restaurant sales were positively impacted by approximately 0.2% related to the fiscal calendar shift of Easter; Comparable restaurant sales at Taco Cabana increased 3.1%, the first quarter of positive comparable restaurant sales since the second quarter of 2016. Comparable restaurant sales were positively impacted by approximately 0.3% related to the fiscal calendar shift of Easter; Net income of $9.5 million or $0.35 per diluted share, compared to the prior year period net loss of $(2.2) million, or $(0.08) per diluted share; Adjusted net income of $6.8 million, or $0.25 per diluted share, compared to the prior year period adjusted net income of $8.1 million, or $0.30 per diluted share (see non-GAAP reconciliation table below); and Consolidated Adjusted EBITDA of $20.2 million compared to the prior year period Consolidated Adjusted EBITDA of $24.1 million (see non-GAAP reconciliation table below).
July 2018 Comparable Restaurant Sales
July 2018 comparable restaurant sales increased 2.2% at Pollo Tropical and increased 8.8% at Taco Cabana.
Second Quarter 2018 Brand Results
Pollo Tropical restaurant sales increased 1.1% to $95.4 million in the second quarter of 2018 compared to the prior year period due primarily to a comparable restaurant sales increase of 3.4%, partially offset by the impact of closing unprofitable restaurants in 2017. The increase in comparable restaurant sales resulted from a 4.4% increase in average check, partially offset by a 1.0% decrease in comparable restaurant transactions. Comparable restaurant sales were positively impacted by approximately 0.2% related to the fiscal calendar shift of Easter. The increase in average check was driven by menu price increases of 4.5%.
Adjusted EBITDA for Pollo Tropical decreased to $15.5 million in the second quarter of 2018 from $17.1 million in the second quarter of 2017 due primarily to the impact of an increase in cost of sales as a percentage of restaurant sales and higher advertising costs primarily driven by the Plan, partially offset by higher comparable restaurant sales and the impact of closing unprofitable restaurants in 2017.
Taco Cabana restaurant sales increased 4.0% to $80.8 million in the second quarter of 2018 compared to the prior year period due primarily to a comparable restaurant sales increase of 3.1%. The increase in comparable restaurant sales resulted from a 10.2% increase in average check, partially offset by a 7.1% decrease in comparable restaurant transactions. Comparable restaurant transactions were negatively impacted primarily by the elimination of deep discounting related to the repositioning of the brand, and by the reduction in overnight operating hours which negatively impacted comparable restaurant sales by 1.5%. Comparable restaurant sales were positively impacted by approximately 0.3% related to the fiscal calendar shift of Easter. The increase in average check was primarily driven by menu price increases of 6.3% and positive sales mix associated with higher priced promotions and new menu items related to brand repositioning.
Adjusted EBITDA for Taco Cabana decreased to $4.6 million in the second quarter of 2018 from $7.0 million in the second quarter of 2017 due primarily to the impact of higher cost of sales as a percentage of restaurant sales and higher restaurant wages and related expenses primarily driven by the Plan, partially offset by higher comparable restaurant sales.
Other Expense (Income)
Other income, net was $3.5 million in the second quarter of 2018 and primarily consisted of $2.8 million in additional insurance recoveries related to Hurricanes Harvey and Irma (the “Hurricanes”) and total gains of $1.1 million on the sales of two restaurant properties, partially offset by the write-off of site development costs of $0.2 million and costs for the removal, transfer and storage of equipment from previously closed restaurants of $0.2 million.
Anticipated capital expenditures in 2018 include opening seven new Company-owned Pollo Tropical restaurants in Florida and seven new Company-owned Taco Cabana restaurants in Texas. Up to five of the new Taco Cabana restaurants are conversions from closed Pollo Tropical restaurants, four of which were completed by the end of the second quarter of 2018. Total capital expenditures in 2018 are now expected to be at the high-end of the $60.0 million to $70.0 million range due in part to additional restaurant investments being made to improve food quality and support new menu, catering and technology platforms. We continue to anticipate capital expenditures for the development of new restaurants to be $22.0 million to $25.0 million in 2018.
As of July 1, 2018, there were 150 Company-owned Pollo Tropical restaurants, 170 Company-owned Taco Cabana restaurants, 30 franchised Pollo Tropical restaurants in the U.S., Puerto Rico, the Bahamas, Guyana and Panama and eight franchised Taco Cabana restaurants in the U.S.
During the second quarter of 2018, Fiesta opened four Company-owned Pollo Tropical restaurants in Florida and six Company-owned Taco Cabana restaurants in Texas. Two Taco Cabana restaurants closed during the second quarter of 2018 when we opened new Taco Cabana restaurants in superior sites in the same trade areas.
Investor Conference Call Today
Fiesta will host a conference call at 4:30 p.m. ET today. The conference call can be accessed live over the phone by dialing 201-689-8562. A replay will be available after the call until Monday, August 13, 2018, and can be accessed by dialing 412-317-6671. The passcode is 13681560. 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 Pollo Tropical® and Taco Cabana® restaurant brands. The brands specialize in the operation of fast casual/quick service restaurants that offer distinct and unique flavors with broad appeal at a compelling value. The brands feature fresh-made cooking, drive-thru service and catering. For more information about Fiesta Restaurant Group, Inc., visit the corporate website at www.frgi.com.
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.
(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 July 1, 2018 and July 2, 2017 each included 13 and 26 weeks, respectively.
(b) Restaurant wages and related expenses include stock-based compensation of $33 and $(74) for the three months ended July 1, 2018 and July 2, 2017, respectively, and $50 and $35 for the six months ended July 1, 2018 and July 2, 2017, respectively. General and administrative expenses include stock-based compensation expense of $984 and $1,248 for the three months ended July 1, 2018 and July 2, 2017, respectively, and $1,856 and $1,785 for the six months ended July 1, 2018 and July 2, 2017, respectively.
(c) See notes (e) through (h) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information".
(d) See note (b) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information".
(e) See note (c) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information".
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