Market Overview

Fiesta Restaurant Group, Inc. Reports Fourth Quarter and Full Year 2017 Results

Share:

Pollo Tropical Comparable Restaurant Sales Increased in December,
January and Month to Date February

Company Initiates Share Repurchase Program

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 fourth quarter and
52-week full year 2017, which ended on December 31, 2017. The Company
also announced that its board of directors has approved a share
repurchase program for up to 1.5 million shares of the Company's common
stock.

Fiesta President and Chief Executive Officer Richard Stockinger said,
"The improvement in Pollo Tropical's sales trajectory demonstrates that
key elements of our Strategic Renewal Plan are building business
momentum as we enter 2018. This is especially true in our core
Miami-Dade and Broward county areas where we initially focused our
revitalization efforts. Pollo Tropical recorded its best quarterly
comparable restaurant sales performance over the past seven quarters in
the fourth quarter of 2017 while, more importantly, the brand's
comparable restaurant sales rose 2.4% in December. In January,
comparable restaurant sales increased 0.6% despite the approximately
0.7% negative impact related to a fiscal calendar shift of New Year's
Day. Pollo Tropical's January comparable restaurant sales in Florida
were 0.2% lower than TDnK's Black Box Intelligence's fast-casual Florida
benchmark, while January comparable restaurant sales in Miami-Dade and
Broward county areas exceeded TDnK's Black Box Intelligence's
fast-casual Miami-Dade and Broward county benchmarks by 0.7% and 1.4%,
respectively. This momentum has continued into the first three weeks in
February, with Pollo Tropical comparable restaurant sales growth of
1.2%."

Mr. Stockinger added, "Since the Taco Cabana brand re-launch will start
later than that of Pollo Tropical, sales trends at Taco Cabana have
remained challenged but are improving as our team works in earnest to
implement operational, culinary and facility initiatives to revitalize
the brand. We are focused on attracting loyal guests as well as
increasing the profitability of each transaction by offering high
quality menu and promotional items at reasonable prices, while
eliminating deep discounting, thereby increasing our average check. Our
efforts to evolve our guest base have initially resulted in transaction
declines but we anticipate a gradual improvement in trends as we build
guest loyalty and frequency. With the focus and leadership of a new
brand President, Taco Cabana is on track for a full re-launch by
mid-2018. Taco Cabana's January comparable restaurant sales declined by
3.4%, including the approximately 0.6% negative impact related to the
fiscal calendar shift of New Year's Day and the approximately 1.6%
negative impact related to reduced overnight operating hours. Taco
Cabana's January comparable restaurant sales were 1.1% lower than TDnK's
Black Box Intelligence's fast-casual Texas benchmark. Additionally,
comparable restaurant sales declined 2.0% in the first three weeks in
February. Improving guest metrics continue to provide us confidence of
anticipated future performance improvement, similar to what we are
experiencing at Pollo Tropical."

Mr. Stockinger concluded, "We believe that as our sales improve at both
brands, our deliberate focus on improving margins, while staying
committed to delivering exceptional and consistent hospitality and
craveable food at a great value will further bolster profitability
during the year. We still have much work to do, but are optimistic that
the Strategic Renewal Plan is reinvigorating our brands and will create
strong value for our shareholders."

Fourth Quarter 2017 Financial Summary

Select Fourth quarter 2017 results:

  • Total revenues decreased 5.3% from the prior year period to $162.2
    million;
  • Comparable restaurant sales at Pollo Tropical decreased 0.1%,
    primarily driven by a decrease in comparable restaurant transactions
    of 2.7%;
  • Comparable restaurant sales at Taco Cabana decreased 7.4%, primarily
    driven by a decrease in comparable restaurant transactions of 12.2%;
  • Net loss of $10.8 million or $0.40 per diluted share, compared to the
    prior year period net income of $2.4 million, or $0.09 per diluted
    share.
  • Adjusted net loss of $(0.1) million, or $0.00 per diluted share,
    compared to the prior year period adjusted net income of $7.4 million,
    or $0.28 per diluted share (see non-GAAP reconciliation table below);
    and
  • Consolidated Adjusted EBITDA of $8.9 million compared to the prior
    year period Consolidated Adjusted EBITDA of $22.2 million (see
    non-GAAP reconciliation table below); and
  • Refinanced Company debt and entered into a new senior secured credit
    facility that provides up to $150 million of revolving credit
    borrowings.

Debt Refinancing, Initial Share Repurchase Plan and Capital Allocation

During the fourth quarter of 2017, as previously disclosed, Fiesta
refinanced its debt, entering into a new senior secured credit facility
with a syndicate of lenders that matures in November 2022 and provides
up to $150 million of revolving credit borrowings.

The Company also announced that its board of directors has approved a
share repurchase program for up to 1.5 million shares of the Company's
common stock.

Under the share repurchase program, shares may be repurchased from time
to time in open market transactions at prevailing market prices, in
privately negotiated transactions or by other means in accordance with
federal securities laws, including Rule 10b-18 under the Securities
Exchange Act of 1934, as amended. The number of shares repurchased and
the timing of repurchases will depend on a number of factors, including,
but not limited to, stock price, trading volume, general market and
economic conditions, and other corporate considerations. The share
repurchase program has no time limit and may be modified, suspended,
superseded or terminated at any time by the board of directors.

In 2018, anticipated capital expenditures include opening nine 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 may come from converting closed Pollo Tropical
restaurants. Total capital expenditures in 2018 are expected to be $60.0
million to $70.0 million, including $26.0 million to $29.0 million for
the development of new restaurants.

Fourth Quarter 2017 Brand Sales Results

Pollo Tropical restaurant sales decreased 5.1% to $90.8 million in the
fourth quarter of 2017 compared to the prior year period due primarily
to a comparable restaurant sales decrease of 0.1% and 31 fewer
Company-owned restaurants in operation compared to the prior year period
as a result of restaurant closures. The decrease in comparable
restaurant sales resulted from a 2.7% decrease in comparable restaurant
transactions, partially offset by a 2.6% increase in average check.
Comparable restaurant sales and transactions were negatively impacted by
sales cannibalization from new restaurants on existing restaurants by
approximately 0.7%. The increase in average check was primarily driven
by menu price increases that positively impacted restaurant sales by
2.9%.

Taco Cabana restaurant sales decreased 5.7% to $70.7 million in the
fourth quarter of 2017 compared to the prior year period due primarily
to a comparable restaurant sales decrease of 7.4%. The decrease in
comparable restaurant sales resulted from a 12.2% decrease in comparable
restaurant transactions which were negatively impacted by the reduction
in overnight operating hours, partially offset by a 4.8% increase in
average check. The increase in average check was primarily driven by
menu price increases that positively impacted restaurant sales by 3.2%
and positive sales mix associated with higher priced promotions and
lower discounts.

2017 Change in Tax Law and 2018 Estimated Effective Tax Rate

On December 22, 2017, the Tax Cuts and Jobs Act (the "Act"), which
includes a provision that reduces the federal corporate income tax rate
from 35.0% to 21.0% effective January 1, 2018, was signed into law. In
accordance with generally accepted accounting principles, the enactment
of this new tax legislation required us to revalue our net deferred
income tax assets at the new corporate statutory rate of 21.0% as of the
enactment date, which resulted in a one-time adjustment to our deferred
income taxes of $9.0 million with a corresponding non-cash increase to
the provision for income taxes as a discrete item during the fourth
quarter of 2017. The change in the corporate tax rate reduced the
nominal value of our deferred tax assets, but it did not reduce the
future tax deductions they represent.

The Company estimates an effective tax rate in 2018 of 23% to 25%.

Full Year 2017 Financial Summary

Total revenues decreased 6.0% in 2017 to $669.1 million from $711.8
million in 2016, driven primarily by a decrease in comparable restaurant
sales partially attributable to Hurricanes Harvey and Irma (the
"Hurricanes"), permanent restaurant closures in the fourth quarter of
2016 and in 2017, reduced promotional discounts and our planned
reduction in advertising while we implemented initiatives related to the
Strategic Renewal Plan (the "Plan").

The Company recognized a net loss of $(36.2) million in 2017, or $(1.35)
per diluted share, compared to net income of $16.7 million, or $0.62 per
diluted share in 2016, due primarily to impairment and other lease
charges, the net impact of lower comparable restaurant sales and the
effect of the Act. The increase in net loss is also due to higher
incentive based compensation costs related to new executives and
retention incentive plans and investments in enhanced food quality,
hospitality and restaurant facilities associated with the Plan,
partially offset by the impact of closing unprofitable restaurants and
lower pre-opening costs.

Consolidated Adjusted EBITDA decreased $29.1 million in 2017 to $67.4
million compared to $96.6 million in 2016 (see non-GAAP reconciliation
table below).

Hurricanes

We estimate the Hurricanes negatively impacted Adjusted EBITDA and
income (loss) from operations by approximately $2.5 million to $3.5
million for Pollo Tropical, net of $0.7 million in estimated insurance
recoveries, and approximately $0.5 million to $1.5 million for Taco
Cabana, net of $0.2 million in estimated insurance recoveries, and
negatively impacted comparable restaurant sales and transactions by
approximately 1.0% to 2.0% for Pollo Tropical and approximately 0.5% to
1.0% for Taco Cabana for the twelve months ended December 31, 2017. We
will record additional expected insurance proceeds related to hurricane
affected restaurants in future periods when additional information is
available or, for business interruption coverage for lost profit, at the
time of final settlement.

Restaurant Portfolio

During the fourth quarter of 2017, Fiesta opened one Company-owned Pollo
Tropical restaurant in Florida. The Company closed four Company-owned
underperforming Pollo Tropical restaurants in the Atlanta metropolitan
area, completing its restaurant portfolio analysis as part of the Plan.
The Company also closed two Company-owned Taco Cabana restaurants
including one location in the Houston metropolitan area that did not
reopen after it closed due to Hurricane Harvey and one restaurant that
was nearing lease expiration.

As of December 31, 2017, there were 146 Company-owned Pollo Tropical
restaurants, 166 Company-owned Taco Cabana restaurants, 31 franchised
Pollo Tropical restaurants in the U.S., Puerto Rico, the Bahamas,
Guyana, Panama and Venezuela and seven franchised Taco Cabana
restaurants in the U.S.

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,
March 5, 2018, and can be accessed by dialing 412-317-6671. The passcode
is 13675901. 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, ethnic 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.

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 AND TWELVE MONTHS ENDED DECEMBER 31, 2017 AND JANUARY 1,
2017

(In thousands of dollars, except share and per share amounts)

(Unaudited)

 
Three months ended (a) Twelve months ended (a)
       
December 31, 2017 January 1, 2017 December 31, 2017 January 1, 2017
 
Revenues:
Restaurant sales $ 161,502 $ 170,590 $ 666,584 $ 708,956
Franchise royalty revenues and fees 708   715   2,548   2,814  
Total revenues 162,210 171,305 669,132 711,770
Costs and expenses:
Cost of sales 52,061 51,226 202,888 214,609
Restaurant wages and related expenses (b) 45,692 45,769 184,742 185,305
Restaurant rent expense 9,055 9,971 36,936 37,493
Other restaurant operating expenses 25,367 24,091 98,927 96,457
Advertising expense 8,375 5,293 26,091 26,800
General and administrative expenses (b)(c) 12,931 13,463 60,144 56,084
Depreciation and amortization 8,692 10,302 34,957 36,776
Pre-opening costs 240 804 2,118 5,511
Impairment and other lease charges (d) 2,679 7,037 61,760 25,644
Other expense (income), net (e) 420   110   1,679   (128 )
Total operating expenses 165,512   168,066   710,242   684,551  
Income (loss) from operations (3,302 ) 3,239 (41,110 ) 27,219
Interest expense 967   536   2,877   2,171  
Income (loss) before income taxes (4,269 ) 2,703   (43,987 ) 25,048  
Provision for (benefit from) income taxes (f) 6,486   271   (7,755 ) 8,336  
Net income (loss) $ (10,755 ) $ 2,432   $ (36,232 ) $ 16,712  
Basic net income (loss) per share $ (0.40 ) $ 0.09   $ (1.35 ) $ 0.62  
Diluted net income (loss) per share $ (0.40 ) $ 0.09   $ (1.35 ) $ 0.62  
Basic weighted average common shares outstanding 26,851,049   26,752,695   26,821,471   26,682,227  
Diluted weighted average common shares outstanding 26,851,049   26,761,450   26,821,471   26,689,179  
(a) The Company uses a 52 or 53 week fiscal year that ends on the
Sunday closest to December 31. The three and twelve month periods
ended December 31, 2017 and January 1, 2017 each included 13 and 52
weeks, respectively.
 
(b) Restaurant wages and related expenses include stock-based
compensation of $8 and $31 for the three months ended December 31,
2017 and January 1, 2017, respectively, and $52 and $142 for the
twelve months ended December 31, 2017 and January 1, 2017,
respectively. General and administrative expenses include
stock-based compensation expense of $770 and $618 for the three
months ended December 31, 2017 and January 1, 2017, respectively,
and $3,493 and $3,141 for the twelve months ended December 31, 2017
and January 1, 2017, respectively.
 
(c) See notes (e) through (j) 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".
 
(f) See note (a) to the reconciliation of net income (loss) to
adjusted net income (loss) in the tables titled "Supplemental
Non-GAAP Information".
 
         

FIESTA RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars, except share and per share amounts)

(Unaudited)

 
December 31, 2017 January 1, 2017
 
Assets
Cash $ 3,599 $ 4,196
Other current assets 37,449 22,746
Property and equipment, net 234,561 270,920
Goodwill 123,484 123,484
Deferred income taxes 17,232 14,377
Other assets 6,988   5,842
Total assets $ 423,313   $ 441,565
 
Liabilities and Stockholders' Equity
Current liabilities $ 59,844 $ 46,769
Long-term debt, net of current portion 76,425 71,423
Deferred income sale-leaseback of real estate 23,466 27,165
Other liabilities 32,062   32,033
Total liabilities 191,797 177,390
Stockholders' equity 231,516   264,175
Total liabilities and stockholders' equity $ 423,313   $ 441,565
 
         

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):

 
(unaudited) (unaudited)
Three months ended Twelve months ended
December 31, 2017     January 1, 2017 December 31, 2017     January 1, 2017
Segment revenues:
Pollo Tropical $ 91,271 $ 96,101 $ 374,115 $ 401,798
Taco Cabana 70,939   75,204   295,017   309,972  
Total revenues $ 162,210   $ 171,305   $ 669,132   $ 711,770  
 
Change in comparable restaurant sales (a):
Pollo Tropical (0.1 )% (4.0 )% (6.5 )% (1.6 )%
Taco Cabana (7.4 )% (3.5 )% (7.3 )% (2.5 )%
 
Average sales per Company-owned restaurant:
Pollo Tropical
Comparable restaurants (b) $ 650 $ 602 $ 2,498 $ 2,652
New restaurants (c) 390 357 1,609 1,599
Total company-owned (d) 612 536 2,331 2,354
Taco Cabana
Comparable restaurants (b) $ 428 $ 455 $ 1,763 $ 1,891
New restaurants (c) 366 504 1,710 2,020
Total company-owned (d) 424 456 1,760 1,894
 
Income (loss) before income taxes:
Pollo Tropical $ 1,583 $ 404 $ (37,831 ) $ 4,639
Taco Cabana (5,852 ) 2,299 (6,156 ) 21,231
 
Adjusted EBITDA:
Pollo Tropical $ 9,680 $ 14,454 $ 50,937 $ 58,286
Taco Cabana (744 ) 7,751 16,508 38,281
 
Restaurant-Level Adjusted EBITDA (e):
Pollo Tropical $ 16,029 $ 21,448 $ 78,371 $ 90,294
Taco Cabana 4,931 12,823 39,091 58,140
(a) Restaurants are included in comparable restaurant sales after
they have been open for 18 months or longer.
 
(b) Comparable restaurants are restaurants that have been open for
18 months or longer. Average sales for comparable Company-owned
restaurants are derived by dividing comparable restaurant sales for
such period for the applicable segment by the average number of
comparable restaurants for the applicable segment for such period.
 
(c) New restaurants are restaurants that have been open for less
than 18 months. Average sales for new Company-owned restaurants are
derived by dividing new restaurant sales for such period for the
applicable segment by the average number of new restaurants for the
applicable segment for such period.
 
(d) Average sales for total 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.
 
(e) Restaurant-Level Adjusted EBITDA is a non-GAAP financial
measure. Please see the reconciliation from net income (loss) to
Restaurant-Level Adjusted EBITDA in the table titled "Supplemental
Non-GAAP Information".
 
         

FIESTA RESTAURANT GROUP, INC.

Supplemental Information

The following table sets forth certain unaudited supplemental
data for the periods indicated
:

 
Three months ended Twelve months ended

December 31,
2017

   

January 1,
2017

December 31,
2017

   

January 1,
2017

 
Company-owned restaurant openings:
Pollo Tropical 1 6 9 32
Taco Cabana   2   6   4  
Total new restaurant openings 1 8 15 36
 
Company-owned restaurant closings:
Pollo Tropical (4 ) (10 ) (40 ) (10 )
Taco Cabana (2 )   (6 )  
Net change in restaurants (5 ) (2 ) (31 ) 26
 
Number of Company-owned restaurants:
Pollo Tropical 146 177 146 177
Taco Cabana 166   166   166   166  
Total Company-owned restaurants 312 343 312 343
 
Number of franchised restaurants:
Pollo Tropical 31 35 31 35
Taco Cabana 7   7   7   7  
Total franchised restaurants 38 42 38 42
 
Total number of restaurants:
Pollo Tropical 177 212 177 212
Taco Cabana 173   173   173   173  
Total restaurants 350 385 350 385
 
     

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
December 31, 2017     January 1, 2017
      (a)       (a)
Pollo Tropical:
Restaurant sales $ 90,756 $ 95,598
Cost of sales 30,063 33.1 % 30,104 31.5 %
Restaurant wages and related expenses 21,642 23.8 % 22,699 23.7 %
Restaurant rent expense 4,447 4.9 % 5,470 5.7 %
Other restaurant operating expenses 13,495 14.9 % 13,544 14.2 %
Advertising expense 5,081 5.6 % 2,346 2.5 %
Depreciation and amortization 5,053 5.6 % 6,544 6.8 %
Pre-opening costs 154 0.2 % 472 0.5 %
Impairment and other lease charges 1,611 1.8 % 6,029 6.3 %
 
Taco Cabana:
Restaurant sales $ 70,746 $ 74,992
Cost of sales 21,998 31.1 % 21,122 28.2 %
Restaurant wages and related expenses 24,050 34.0 % 23,070 30.8 %
Restaurant rent expense 4,608 6.5 % 4,501 6.0 %
Other restaurant operating expenses 11,872 16.8 % 10,547 14.1 %
Advertising expense 3,294 4.7 % 2,947 3.9 %
Depreciation and amortization 3,639 5.1 % 3,758 5.0 %
Pre-opening costs 86 0.1 % 332 0.4 %
Impairment and other lease charges 1,068 1.5 % 1,008 1.3 %
 
Twelve months ended
December 31, 2017 January 1, 2017
(a) (a)
Pollo Tropical:
Restaurant sales $ 372,328 $ 399,736
Cost of sales 117,493 31.6 % 126,539 31.7 %
Restaurant wages and related expenses 88,587 23.8 % 93,958 23.5 %
Restaurant rent expense 18,949 5.1 % 19,998 5.0 %
Other restaurant operating expenses 52,848 14.2 % 54,198 13.6 %
Advertising expense 16,397 4.4 % 14,819 3.7 %
Depreciation and amortization 21,758 5.8 % 23,587 5.9 %
Pre-opening costs 1,167 0.3 % 4,837 1.2 %
Impairment and other lease charges 57,947 15.6 % 24,419 6.1 %
 
Taco Cabana:
Restaurant sales $ 294,256 $ 309,220
Cost of sales 85,395 29.0 % 88,070 28.5 %
Restaurant wages and related expenses 96,155 32.7 % 91,347 29.5 %
Restaurant rent expense 17,987 6.1 % 17,495 5.7 %
Other restaurant operating expenses 46,079 15.7 % 42,259 13.7 %
Advertising expense 9,694 3.3 % 11,981 3.9 %
Depreciation and amortization 13,199 4.5 % 13,189 4.3 %
Pre-opening costs 951 0.3 % 674 0.2 %
Impairment and other lease charges 3,813 1.3 % 1,225 0.4 %

(a) Percent of restaurant sales for the applicable segment.

 

FIESTA RESTAURANT GROUP, INC.
Supplemental Non-GAAP
Information

The following table sets forth certain unaudited
supplemental financial data for the periods indicated

(In
thousands):

Consolidated Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are
non-GAAP financial measures. Prior to the second quarter of 2017,
Adjusted EBITDA was defined as earnings before interest expense, income
taxes, depreciation and amortization, impairment and other lease
charges, stock-based compensation expense, and other expense (income),
net. In 2017, our board of directors appointed a new Chief Executive
Officer who initiated the Plan and uses an Adjusted EBITDA measure for
the purpose of assessing performance and allocating resources to
segments. The new Adjusted EBITDA measure used by the chief operating
decision maker includes adjustments for significant items that
management believes are related to strategic changes and/or are not
related to the ongoing operation of our restaurants. Beginning in the
second quarter of 2017, the primary measure of segment profit or loss
used by the chief operating decision maker to assess performance and
allocate resources is Adjusted EBITDA, which is now defined as earnings
attributable to the applicable operating segments before interest
expense, income taxes, depreciation and amortization, impairment and
other lease charges, stock-based compensation expense, other expense
(income), net, and certain significant items for each segment that are
related to strategic changes and/or are not related to the ongoing
operation of our restaurants as set forth in the reconciliation table
below. 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
finance, legal, supply chain, human resources, construction and other
administrative functions. Restaurant-Level Adjusted EBITDA is defined as
Adjusted EBITDA excluding franchise royalty revenues and fees,
pre-opening costs and general and administrative expenses (including
corporate-level general and administrative expenses).

Adjusted EBITDA for each of our segments is the primary measure of
segment profit or loss used by our chief operating decision maker for
purposes of allocating resources to our segments and assessing their
performance. In addition, management believes that Consolidated Adjusted
EBITDA and Restaurant-Level Adjusted EBITDA, when viewed with our
results of operations calculated in accordance with GAAP and our
reconciliation of net income (loss) to Consolidated Adjusted EBITDA and
Restaurant-Level Adjusted EBITDA (i) provide useful information about
our operating performance and period-over-period changes, (ii) provide
additional information that is useful for evaluating the operating
performance of our business, and (iii) permit 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 measures of financial performance or liquidity
under GAAP and, accordingly, should not be considered as alternatives to
net income or cash flow from operating activities as indicators of
operating performance or liquidity. Also, these measures may not be
comparable to similarly titled captions of other companies.

                 
Three Months Ended Pollo Tropical Taco Cabana Other Consolidated
December 31, 2017:
Net income (loss) $ (10,755 )
Provision for (benefit from) income taxes       6,486  
Income (loss) before taxes $ 1,583 $ (5,852 ) $ $ (4,269 )
Add:
Non-general and administrative expense adjustments:
Depreciation and amortization 5,053 3,639 8,692
Impairment and other lease charges 1,611 1,068 2,679
Interest expense 475 492 967
Other expense (income), net 754 (334 ) 420
Stock-based compensation expense in restaurant wages   8     8  
Total Non-general and administrative expense adjustments 7,893 4,873 12,766

General and administrative expense adjustments:

Stock-based compensation expense 441 329 770
Board and shareholder matter costs (398 ) (301 ) (699 )
Write-off of site development costs 49 49
Plan restructuring costs and retention bonuses 112   207     319  
Total General and administrative expense adjustments 204   235     439  
Adjusted EBITDA: $ 9,680   $ (744 ) $   $ 8,936  
Restaurant-Level Adjustments:
Add: Pre-opening costs 154 86 240
Add: Other general and administrative expense(1) 6,710 5,782 12,492
Less: Franchise royalty revenue and fees 515   193     708  
Restaurant-Level Adjusted EBITDA: $ 16,029   $ 4,931   $   $ 20,960  
 
January 1, 2017:
Net income $ 2,432
Provision for income taxes       271  
Income before taxes $ 404 $ 2,299 $ $ 2,703
Add:

Non-general and administrative expense adjustments:

Depreciation and amortization 6,544 3,758 10,302
Impairment and other lease charges 6,029 1,008 7,037
Interest expense 222 314 536
Other expense (income), net 110 110
Stock-based compensation expense in restaurant wages 13   18     31  
Total Non-general and administrative expense adjustments 12,918 5,098 18,016

General and administrative expense adjustments:

Stock-based compensation expense 385 233 618
Board and shareholder matter costs 313 237 550
Write-off of site development costs 342 39 381
Plan restructuring costs and retention bonuses 45 41 86
Legal settlements and related costs 47   (196 )   (149 )
Total General and administrative expense adjustments 1,132   354     1,486  
Adjusted EBITDA: $ 14,454   $ 7,751   $   $ 22,205  
Restaurant-Level Adjustments:
Add: Pre-opening costs 472 332 804
Add: Other general and administrative expense(1) 7,025 4,952 11,977
Less: Franchise royalty revenue and fees 503   212     715  
Restaurant-Level Adjusted EBITDA: $ 21,448   $ 12,823   $   $ 34,271  
 
 
 
Twelve Months Ended Pollo Tropical Taco Cabana Other Consolidated
December 31, 2017:
Net income (loss) $ (36,232 )
Provision for (benefit from) income taxes       (7,755 )
Income (loss) before taxes $ (37,831 ) $ (6,156 ) $ $ (43,987 )

Add:

Non-general and administrative expense adjustments

Depreciation and amortization 21,758 13,199 34,957
Impairment and other lease charges 57,947 3,813 61,760
Interest expense 1,348 1,529 2,877
Other expense (income), net 2,208 (529 ) 1,679
Stock-based compensation expense in restaurant wages (4 ) 56 52
Unused pre-production costs in advertising expense 322   88     410  
Total Non-general and administrative expense adjustments 83,579 18,156 101,735

General and administrative expense adjustments

Stock-based compensation expense 1,983 1,510 3,493
Terminated capital project 484 365 849
Board and shareholder matter costs 1,738 1,311 3,049
Write-off of site development costs 219 292 511
Plan restructuring costs and retention bonuses 1,390 1,030 2,420
Office restructuring and relocation costs (152 ) (152 )
Legal settlements and related costs (473 )     (473 )
Total General and administrative expense adjustments 5,189   4,508     9,697  
Adjusted EBITDA $ 50,937   $ 16,508   $   $ 67,445  
Restaurant-Level Adjustments:
Add: Pre-opening costs 1,167 951 2,118
Add: Other general and administrative expense(1) 28,054 22,393 50,447
Less: Franchise royalty revenue and fees 1,787   761     2,548  
Restaurant-Level Adjusted EBITDA: $ 78,371   $ 39,091   $   $ 117,462  
 

January 1, 2017:

Net income $ 16,712
Provision for income taxes       8,336  
Income (loss) before taxes $ 4,639 $ 21,231 $ (822 ) $ 25,048
Add:

Non-general and administrative expense adjustments:

Depreciation and amortization 23,587 13,189 36,776
Impairment and other lease charges 24,419 1,225 25,644
Interest expense 930 1,241 2,171
Other expense (income), net 98 (226 ) (128 )
Stock-based compensation expense in restaurant wages 69   73     142  
Total Non-general and administrative expense adjustments 49,103 15,502 64,605

General and administrative expense adjustments:

Stock-based compensation expense 1,793 1,348 3,141
Board and shareholder matter costs 432 326 822 1,580
Write-off of site development costs 1,138 120 1,258
Plan restructuring costs and retention bonuses 45 41 86
Office restructuring and relocation costs 539 539
Legal settlements and related costs 597   (287 )   310  
Total General and administrative expense adjustments 4,544   1,548   822   6,914  
Adjusted EBITDA: $ 58,286   $ 38,281   $   $ 96,567  
Restaurant-Level Adjustments:
Add: Pre-opening costs 4,837 674 5,511
Add: Other general and administrative expense(1) 29,233 19,937 49,170
Less: Franchise royalty revenue and fees 2,062   752     2,814  
Restaurant-Level Adjusted EBITDA: $ 90,294   $ 58,140   $   $ 148,434  

(1) Excludes general and administrative adjustments
above.

 

FIESTA RESTAURANT GROUP, INC.
Supplemental Non-GAAP
Information

The following table sets forth certain unaudited
supplemental financial data for the periods indicated

(In
thousands of dollars, except per share amounts):

Adjusted net income and related adjusted diluted earnings per share are
non-GAAP financial measures. Adjusted net income is defined as net
income (loss) before a one-time income tax provision adjustment due to
the enactment of the Tax Cuts and Jobs Act (the "Act"), impairment and
other lease charges, other expense (income), net, unused pre-production
costs in advertising expense, terminated capital project costs, board
and shareholder matter costs, write-off of site development costs, Plan
restructuring costs and retention bonuses, office restructuring and
relocation costs, certain legal settlements and related costs and other
significant items that are related to strategic changes and/or are not
related to the ongoing operation of our restaurants. Management believes
that adjusted net income and related adjusted earnings per diluted
share, when viewed with our results of operations calculated in
accordance with GAAP (i) provide useful information about our operating
performance and period-over-period growth, (ii) provide additional
information that is useful for evaluating the operating performance of
our business, and (iii) permit 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 measures of financial performance or liquidity under GAAP and,
accordingly should not be considered as alternatives 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
December 31, 2017     January 1, 2017

Income
(Loss)
Before
Income
Taxes

   

Provision
For
Income
Taxes
(a)

   

Net
Income
(Loss)

   

Diluted
EPS

Income
Before
Income
Taxes

   

Provision
For
Income
Taxes
(a)

   

Net
Income

   

Diluted
EPS

Reported - GAAP $ (4,269 ) $ 6,486 $ (10,755 ) $ (0.40 ) $ 2,703 $ 271 $ 2,432 $ 0.09
Adjustments:
Non-general and administrative expense adjustments:
Income tax due to federal rate change (a) (8,952 ) 8,952 0.33
Impairment and other lease charges (b) 2,679 1,015 1,664 0.06 7,037 2,656 4,381 0.16
Other expense (income), net (c) 420   159   261   0.01   110   42   68  
Total Non-general and administrative expense 3,099 (7,778 ) 10,877 0.40 7,147 2,698 4,449 0.17
General and administrative expense adjustments:
Board and shareholder matter costs (f) (699 ) (265 ) (434 ) (0.02 ) 550 208 342 0.01
Write-off of site development costs (g) 49 19 30 381 144 237 0.01
Plan restructuring costs and retention bonuses (h) 319 121 198 0.01 86 32 54
Legal settlements and related costs (j)         (149 ) (56 ) (93 )
Total General and administrative expense (331 ) (125 ) (206 ) (0.01 ) 868   328   540   0.02
Adjusted - Non-GAAP $ (1,501 ) $ (1,417 ) $ (84 ) $   $ 10,718   $ 3,297   $ 7,421   $ 0.28
 
 
(unaudited)
Twelve months ended
December 31, 2017 January 1, 2017

Income
(Loss)
Before
Income
Taxes

Benefit
From
Income
Taxes
(a)

Net
Income
(Loss)

Diluted
EPS

Income
Before
Income
Taxes

Provision
For
Income
Taxes
(a)

Net
Income

Diluted
EPS

Reported - GAAP $ (43,987 ) $ (7,755 ) $ (36,232 ) $ (1.35 ) $ 25,048 $ 8,336 $ 16,712 $ 0.62
Adjustments:
Non-general and administrative expense adjustments:
Income tax due to federal rate change (a) (8,952 ) 8,952 0.33
Impairment and other lease charges (b) 61,760 23,407 38,353 1.42 25,644 9,681 15,963 0.59
Other expense (income), net (c) 1,679 636 1,043 0.04 (128 ) (48 ) (80 )
Unused pre-production costs in advertising
expense (d)
410   155   255   0.01        
Total Non-general and administrative expense 63,849 15,246 48,603 1.80 25,516 9,633 15,883 0.59
General and administrative expense adjustments:
Terminated capital project (e) 849 322 527 0.02
Board and shareholder matter costs (f) 3,049 1,156 1,893 0.07 1,580 596 984 0.04
Write-off of site development costs (g) 511 194 317 0.01 1,258 475 783 0.03
Plan restructuring costs and retention bonuses (h) 2,420 917 1,503 0.06 86 32 54
Office restructuring and relocation costs (i) (152 ) (58 ) (94 ) 539 203 336 0.01
Legal settlements and related costs (j) (473 ) (179 ) (294 ) (0.01 ) 310   117   193   0.01
Total General and administrative expense 6,204   2,352   3,852   0.14   3,773   1,423   2,350   0.09
Adjusted - Non-GAAP $ 26,066   $ 9,843   $ 16,223   $ 0.60   $ 54,337   $ 19,392   $ 34,945   $ 1.30
(a) The provision (benefit) for income taxes related to the
adjustments was calculated using the Company's combined federal
statutory and estimated state rate of 37.9% and 37.8% for the
periods ending December 31, 2017 and January 1, 2017, respectively.
On December 22, 2017, the Act, which includes a provision that
reduces the federal corporate income tax rate from 35.0% to 21.0%
effective January 1, 2018, was signed into law. In accordance with
generally accepted accounting principles, the enactment of this new
tax legislation required us to revalue our net deferred income tax
assets at the new corporate statutory rate of 21.0% as of the
enactment date, which resulted in a one-time adjustment that
increased our provision for income taxes of $9.0 million as a
discrete item during the fourth quarter of 2017. For fiscal years
subsequent to 2017, our federal statutory tax rate will be 21%.
 
(b) Impairment and other lease charges for the three months ended
December 31, 2017, primarily include additional impairment charges
related to previously impaired restaurants, an impairment charge for
an office location that was closed in December 2017, and other lease
charges, net of recoveries, related primarily to two Taco Cabana
restaurants and an office location that were closed during the
fourth quarter of 2017. Impairment and other lease charges for the
twelve months ended December 31, 2017, primarily include impairment
charges for 40 Pollo Tropical restaurants closed in 2017 (seven of
which were initially impaired in 2016), impairment charges for six
Taco Cabana restaurants closed in 2017 (four of which were initially
impaired in 2016), impairment charges with respect to two Pollo
Tropical restaurants and five Taco Cabana restaurants that the
Company continues to operate, impairment charges with respect to an
office location that was closed in December 2017, and other lease
charges, net of recoveries, related to restaurants and an office
location closed in 2017 as well as previously closed restaurants.
 
Impairment and other lease charges for the three and twelve months
ended January 1, 2017 primarily include impairment charges for one
Pollo Tropical restaurant, which was subsequently closed in 2017,
and six Taco Cabana restaurants, three of which were subsequently
closed in 2017, plus additional impairment charges related to
previously impaired Pollo Tropical and Taco Cabana locations as well
as lease charges related to the closure of 10 Pollo Tropical
restaurants in the fourth quarter of 2016. Impairment and other
lease charges for the twelve months ended January 1, 2017 also
include impairment charges related to 16 Pollo Tropical restaurants
that were closed in the fourth quarter of 2016 and second quarter of
2017 and one Taco Cabana restaurant, which was subsequently closed
in 2017.
 
(c) Other expense (income), net for the three and twelve months
ended December 31, 2017, primarily includes costs for the removal of
signs and equipment and equipment transfers and storage related to
the closure of restaurants, severance for closed restaurant
employees and food donated to charitable organizations, partially
offset by additional proceeds received related to two Taco Cabana
locations as a result of eminent domain proceedings and additional
expected insurance proceeds related to a Taco Cabana restaurant that
was temporarily closed due to a fire. Other expense (income), net
for the twelve months ended December 31, 2017 also includes
estimated insurance recoveries related to a Taco Cabana restaurant
closed due to Hurricane Harvey damage, and expected business
interruption insurance proceeds related to a Taco Cabana restaurant
that was temporarily closed due to a fire. Other expense (income),
net for the three and twelve months ended January 1, 2017, includes
costs for the removal of signs and equipment related to the closure
of 10 Pollo Tropical restaurants in the fourth quarter of 2016, and
for the twelve months ended January 1, 2017, includes additional
proceeds related to a location that closed in 2015 as a result of an
eminent domain proceeding.
 
(d) Unused pre-production costs for the twelve months ended December
31, 2017, include costs for advertising pre-production that will not
be used.
 
(e) Terminated capital project costs for the twelve months ended
December 31, 2017, include costs related to the write-off of a
capital project that was terminated in the first quarter.
 
(f) Board and shareholder matter costs for the three and twelve
months ended December 31, 2017, include fees and related insurance
recoveries related to shareholder activism and CEO and board member
searches. Board and shareholder matter costs for the three and
twelve months ended January 1, 2017, primarily include fees related
to shareholder activism and the previously proposed and terminated
separation transaction.
 
(g) Write-off of site development costs for the three and twelve
months ended December 31, 2017 and January 1, 2017, includes the
write-off of site costs related to locations that we decided not to
develop.
 
(h) Plan restructuring costs and retention bonuses for the three and
twelve months ended December 31, 2017 and January 1, 2017, include
severance related to the Plan and reduction in force and bonuses
paid to certain employees for retention purposes.
 
(i) Office restructuring and relocation costs for the twelve months
ended December 31, 2017 and January 1, 2017, include severance and
relocation adjustments and costs associated with the prior-year
restructuring of Pollo Tropical brand and corporate offices.
 
(j) Legal settlements and related costs for the twelve months ended
December 31, 2017 and three and twelve months ended January 1, 2017,
include costs and benefits related to litigation matters.
 

View Comments and Join the Discussion!
 
Lightning Fast
Market News Service
$199 Free 14 Day Trial