Market Overview

Fiesta Restaurant Group, Inc. Reports Second Quarter 2018 Results

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Pollo Tropical Quarterly Comparable Restaurant Sales Growth of 3.4%

Taco Cabana Quarterly Comparable Restaurant Sales Growth of 3.1%

July Comparable Restaurant Sales Increased 2.2% at Pollo Tropical and
8.8% at Taco Cabana

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 Summary

  • Total 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.

Capital Allocation

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.

Restaurant Portfolio

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.

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 SIX MONTHS ENDED JULY 1, 2018 AND JULY 2, 2017

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

(Unaudited)

 
Three months ended (a)   Six months ended (a)
July 1, 2018   July 2, 2017 July 1, 2018   July 2, 2017
 
Revenues:
Restaurant sales $ 176,152 $ 172,005 $ 344,985 $ 346,982
Franchise royalty revenues and fees 675   619   1,326   1,249  
Total revenues 176,827 172,624 346,311 348,231
Costs and expenses:
Cost of sales 56,689 50,728 110,254 101,676
Restaurant wages and related expenses (b) 47,677 46,269 94,160 94,401
Restaurant rent expense 8,840 8,915 17,732 18,777
Other restaurant operating expenses 24,654 24,636 48,104 48,704
Advertising expense 5,361 4,292 11,574 11,831
General and administrative expenses (b)(c) 12,820 18,996 27,739 34,694
Depreciation and amortization 9,170 8,596 18,169 17,782
Pre-opening costs 877 910 1,258 1,334
Impairment and other lease charges (d) 784 10,762 122 43,176
Other expense (income), net (e) (3,545 ) 798   (3,179 ) 1,252  
Total operating expenses 163,327   174,902   325,933   373,627  
Income (loss) from operations 13,500 (2,278 ) 20,378 (25,396 )
Interest expense 986   654   2,055   1,238  
Income (loss) before income taxes 12,514   (2,932 ) 18,323   (26,634 )
Provision for (benefit from) income taxes 3,021   (772 ) 4,646   (9,414 )
Net income (loss) $ 9,493   $ (2,160 ) $ 13,677   $ (17,220 )
Basic net income (loss) per share $ 0.35   $ (0.08 ) $ 0.50   $ (0.64 )
Diluted net income (loss) per share $ 0.35   $ (0.08 ) $ 0.50   $ (0.64 )
Basic weighted average common shares outstanding 26,916,295   26,815,015   26,895,302   26,794,560  
Diluted weighted average common shares outstanding 26,919,914   26,815,015   26,901,829   26,794,560  

(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".

FIESTA RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

 
July 1, 2018   December 31, 2017
 
Assets
Cash $ 4,698 $ 3,599
Other current assets 32,388 37,449
Property and equipment, net 239,647 234,561
Goodwill 123,484 123,484
Deferred income taxes 15,091 17,232
Other assets 7,511   6,988
Total assets $ 422,819   $ 423,313
 
Liabilities and Stockholders' Equity
Current liabilities $ 50,277 $ 59,844
Long-term debt, net of current portion 74,691 76,425
Deferred income sale-leaseback of real estate 21,664 23,466
Other liabilities 29,983   32,062
Total liabilities 176,615 191,797
Stockholders' equity 246,204   231,516
Total liabilities and stockholders' equity $ 422,819   $ 423,313

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 Six months ended
July 1, 2018   July 2, 2017 July 1, 2018   July 2, 2017
Segment revenues:
Pollo Tropical $ 95,836 $ 94,801 $ 190,778 $ 194,560
Taco Cabana 80,991   77,823   155,533   153,671  
Total revenues $ 176,827   $ 172,624   $ 346,311   $ 348,231  
 
Change in comparable restaurant sales (a):
Pollo Tropical 3.4 % (7.7 )% 2.2 % (7.2 )%
Taco Cabana 3.1 % (4.7 )% 0.7 % (4.6 )%
 
Average sales per Company-owned restaurant:
Pollo Tropical
Comparable restaurants (b) $ 669 $ 622 $ 1,342 $ 1,236
New restaurants (c) 445 471 878 824
Total company-owned (d) 645 594 1,292 1,148
Taco Cabana
Comparable restaurants (b) $ 487 $ 462 $ 941 $ 914
New restaurants (c) 416 500 769 960
Total company-owned (d) 481 463 929 916
 
Income (loss) before income taxes:
Pollo Tropical $ 10,797 $ (3,502 ) $ 18,925 $ (28,598 )
Taco Cabana 1,717 570 (602 ) 1,964
 
Adjusted EBITDA:
Pollo Tropical $ 15,529 $ 17,139 $ 29,976 $ 31,861
Taco Cabana 4,648 6,982 7,159 13,476
 
Restaurant-Level Adjusted EBITDA (e):
Pollo Tropical $ 22,261 $ 24,269 $ 43,845 $ 46,864
Taco Cabana 10,702 12,910 19,365 25,174

(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   Six months ended
July 1, 2018   July 2, 2017 July 1, 2018   July 2, 2017
 
Company-owned restaurant openings:
Pollo Tropical 4 3 4 6
Taco Cabana 6   2   6   3  
Total new restaurant openings 10 5 10 9
 
Company-owned restaurant closings:
Pollo Tropical (30 ) (30 )
Taco Cabana (2 )   (2 )  
Net change in restaurants 8 (25 ) 8 (21 )
 
Number of Company-owned restaurants:
Pollo Tropical 150 153 150 153
Taco Cabana 170   169   170   169  
Total Company-owned restaurants 320 322 320 322
 
Number of franchised restaurants:
Pollo Tropical 30 32 30 32
Taco Cabana 8   7   8   7  
Total franchised restaurants 38 39 38 39
 
Total number of restaurants:
Pollo Tropical 180 185 180 185
Taco Cabana 178   176   178   176  
Total restaurants 358 361 358 361

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
July 1, 2018   July 2, 2017
(a)   (a)
Pollo Tropical:
Restaurant sales $ 95,377 $ 94,374
Cost of sales 31,482 33.0% 28,956 30.7%
Restaurant wages and related expenses 21,549 22.6% 21,691 23.0%
Restaurant rent expense 4,335 4.5% 4,472 4.7%
Other restaurant operating expenses 12,634 13.2% 12,930 13.7%
Advertising expense 3,130 3.3% 2,011 2.1%
Depreciation and amortization 5,363 5.6% 5,435 5.8%
Pre-opening costs 341 0.4% 451 0.5%
Impairment and other lease charges 685 0.7% 10,536 11.2%
 
Taco Cabana:
Restaurant sales $ 80,775 $ 77,631
Cost of sales 25,207 31.2% 21,772 28.0%
Restaurant wages and related expenses 26,128 32.3% 24,578 31.7%
Restaurant rent expense 4,505 5.6% 4,443 5.7%
Other restaurant operating expenses 12,020 14.9% 11,706 15.1%
Advertising expense 2,231 2.8% 2,281 2.9%
Depreciation and amortization 3,807 4.7% 3,161 4.1%
Pre-opening costs 536 0.7% 459 0.6%
Impairment and other lease charges 99 0.1% 226 0.3%
 
Six months ended
July 1, 2018 July 2, 2017
(a) (a)
Pollo Tropical:
Restaurant sales $ 189,855 $ 193,684
Cost of sales 62,497 32.9% 58,903 30.4%
Restaurant wages and related expenses 43,705 23.0% 45,737 23.6%
Restaurant rent expense 8,632 4.5% 9,847 5.1%
Other restaurant operating expenses 24,749 13.0% 26,319 13.6%
Advertising expense 6,446 3.4% 6,336 3.3%
Depreciation and amortization 10,679 5.6% 11,518 5.9%
Pre-opening costs 565 0.3% 783 0.4%
Impairment and other lease charges 144 0.1% 42,607 22.0%
 
Taco Cabana:
Restaurant sales $ 155,130 $ 153,298
Cost of sales 47,757 30.8% 42,773 27.9%
Restaurant wages and related expenses 50,455 32.5% 48,664 31.7%
Restaurant rent expense 9,100 5.9% 8,930 5.8%
Other restaurant operating expenses 23,355 15.1% 22,385 14.6%
Advertising expense 5,128 3.3% 5,495 3.6%
Depreciation and amortization 7,490 4.8% 6,264 4.1%
Pre-opening costs 693 0.4% 551 0.4%
Impairment and other lease charges (22 ) —% 569 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. Adjusted EBITDA is 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   Consolidated
July 1, 2018:
Net income $ 9,493
Provision for income taxes     3,021  
Income before taxes $ 10,797 $ 1,717 $ 12,514
Add:
Non-general and administrative expense adjustments:
Depreciation and amortization 5,363 3,807 9,170
Impairment and other lease charges 685 99 784
Interest expense 491 495 986
Other expense (income), net (1,894 ) (1,651 ) (3,545 )
Stock-based compensation expense in restaurant wages 14   19   33  
Total Non-general and administrative expense adjustments 4,659 2,769 7,428
General and administrative expense adjustments:
Stock-based compensation expense 584 400 984
Board and shareholder matter costs (328 ) (269 ) (597 )
Strategic Renewal Plan restructuring costs and retention bonuses (16 ) 31 15
Legal settlements and related costs (167 )   (167 )
Total General and administrative expense adjustments 73   162   235  
Adjusted EBITDA: $ 15,529   $ 4,648   $ 20,177  
Restaurant-level Adjustments:
Add: Pre-opening costs 341 536 877
Add: Other general and administrative expense(1) 6,850 5,734 12,584
Less: Franchise royalty revenue and fees 459   216   675  
Restaurant-level Adjusted EBITDA: $ 22,261   $ 10,702   $ 32,963  
 
July 2, 2017:
Net loss $ (2,160 )
Benefit from income taxes     (772 )
Income (loss) before taxes $ (3,502 ) $ 570 $ (2,932 )
Add:
Non-general and administrative expense adjustments:
Depreciation and amortization 5,435 3,161 8,596
Impairment and other lease charges 10,536 226 10,762
Interest expense 295 359 654
Other expense (income), net 853 (55 ) 798
Stock-based compensation expense in restaurant wages (45 ) (29 ) (74 )
Unused pre-production costs in advertising expense   88   88  
Total Non-general and administrative expense adjustments 17,074 3,750 20,824
General and administrative expense adjustments:
Stock-based compensation expense 640 608 1,248
Terminated capital project 7 6 13
Board and shareholder matter costs 1,767 1,332 3,099
Strategic Renewal Plan restructuring costs and retention bonuses 1,153   716   1,869  
Total General and administrative expense adjustments 3,567   2,662   6,229  
Adjusted EBITDA: $ 17,139   $ 6,982   $ 24,121  
Restaurant-level Adjustments:
Add: Pre-opening costs 451 459 910
Add: Other general and administrative expense(1) 7,106 5,661 12,767
Less: Franchise royalty revenue and fees 427   192   619  
Restaurant-level Adjusted EBITDA: $ 24,269   $ 12,910   $ 37,179  
 
 
 
Six Months Ended Pollo Tropical Taco Cabana Consolidated
July 1, 2018:
Net income $ 13,677
Provision for income taxes     4,646  
Income (loss) before taxes $ 18,925 $ (602 ) $ 18,323
Add
Non-general and administrative expense adjustments
Depreciation and amortization 10,679 7,490 18,169
Impairment and other lease charges 144 (22 ) 122
Interest expense 1,019 1,036 2,055
Other expense (income), net (1,548 ) (1,631 ) (3,179 )
Stock-based compensation expense in restaurant wages 19   31   50  
Total Non-general and administrative expense adjustments 10,313 6,904 17,217
General and administrative expense adjustments
Stock-based compensation expense 1,051 805 1,856
Board and shareholder matter costs (328 ) (269 ) (597 )
Strategic Renewal Plan restructuring costs and retention bonuses 182 321 503
Legal settlements and related costs (167 )   (167 )
Total General and administrative expense adjustments 738   857   1,595  
Adjusted EBITDA $ 29,976   $ 7,159   $ 37,135  
Restaurant-level Adjustments:
Add: Pre-opening costs 565 693 1,258
Add: Other general and administrative expense(1) 14,227 11,916 26,143
Less: Franchise royalty revenue and fees 923   403   1,326  
Restaurant-level Adjusted EBITDA: $ 43,845   $ 19,365   $ 63,210  
 
July 2, 2017:
Net loss $ (17,220 )
Benefit from income taxes     (9,414 )
Income (loss) before taxes $ (28,598 ) $ 1,964 $ (26,634 )
Add:
Non-general and administrative expense adjustments:
Depreciation and amortization 11,518 6,264 17,782
Impairment and other lease charges 42,607 569 43,176
Interest expense 544 694 1,238
Other expense (income), net 1,050 202 1,252
Stock-based compensation expense in restaurant wages 35 35
Unused pre-production costs in advertising expense 322   88   410  
Total Non-general and administrative expense adjustments 56,041 7,852 63,893
General and administrative expense adjustments:
Stock-based compensation expense 955 830 1,785
Terminated capital project 484 365 849
Board and shareholder matter costs 2,225 1,678 3,903
Strategic Renewal Plan restructuring costs and retention bonuses 1,227 787 2,014
Legal settlements and related costs (473 )   (473 )
Total General and administrative expense adjustments 4,418   3,660   8,078  
Adjusted EBITDA: $ 31,861   $ 13,476   $ 45,337  
Restaurant-Level Adjustments:
Add: Pre-opening costs 783 551 1,334
Add: Other general and administrative expense(1) 15,096 11,520 26,616
Less: Franchise royalty revenue and fees 876   373   1,249  
Restaurant-Level Adjusted EBITDA: $ 46,864   $ 25,174   $ 72,038  

(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 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,
Strategic Renewal Plan restructuring costs and retention bonuses,
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
July 1, 2018   July 2, 2017
Income Before Income Taxes   Provision For Income Taxes (a)   Net Income   Diluted EPS Income (Loss) Before Income Taxes   Provision For (Benefit From) Income Taxes (a)   Net Income (Loss)   Diluted EPS
Reported - GAAP $ 12,514 $ 3,021 $ 9,493 $ 0.35 $ (2,932 ) $ (772 ) $ (2,160 ) $ (0.08 )
Adjustments:
Non-general and administrative expense adjustments:
Impairment and other lease charges (b) 784 193 591 0.02 10,762 4,100 6,662 0.25
Other expense (income), net (c) (3,545 ) (873 ) (2,672 ) (0.10 ) 798 304 494 0.02
Unused pre-production costs in advertising expense (d)         88   34   54    
Total Non-general and administrative expense (2,761 ) (680 ) (2,081 ) (0.08 ) 11,648 4,438 7,210 0.27
General and administrative expense adjustments:
Terminated capital project (e) 13 5 8
Board and shareholder matter costs (f) (597 ) (147 ) (450 ) (0.02 ) 3,099 1,181 1,918 0.07
Strategic Renewal Plan restructuring costs and retention bonuses (g) 15 4 11 1,869 712 1,157 0.04
Legal settlements and related costs (h) (167 ) (41 ) (126 )          
Total General and administrative expense (749 ) (184 ) (565 ) (0.02 ) 4,981   1,898   3,083   0.11  
Adjusted - Non-GAAP $ 9,004   $ 2,157   $ 6,847   $ 0.25   $ 13,697   $ 5,564   $ 8,133   $ 0.30  
 
(unaudited)
Six months ended
July 1, 2018 July 2, 2017
Income Before Income Taxes Provision For Income Taxes (a) Net Income Diluted EPS Income (Loss) Before Income Taxes Provision For (Benefit From) Income Taxes (a) Net Income (Loss) Diluted EPS
Reported - GAAP $ 18,323 $ 4,646 $ 13,677 $ 0.50 $ (26,634 ) $ (9,414 ) $ (17,220 ) $ (0.64 )
Adjustments:
Non-general and administrative expense adjustments:
Impairment and other lease charges (b) 122 30 92 43,176 16,451 26,725 0.99
Other expense (income), net (c) (3,179 ) (783 ) (2,396 ) (0.09 ) 1,252 477 775 0.03
Unused pre-production costs in advertising expense (d)         410   156   254   0.01  
Total Non-general and administrative expense (3,057 ) (753 ) (2,304 ) (0.08 ) 44,838 17,084 27,754 1.03
General and administrative expense adjustments:
Terminated capital project (e) 849 323 526 0.02
Board and shareholder matter costs (f) (597 ) (147 ) (450 ) (0.02 ) 3,903 1,487 2,416 0.09
Strategic Renewal Plan restructuring costs and retention bonuses (g) 503 124 379 0.01 2,014 767 1,247 0.05
Legal settlements and related costs (h) (167 ) (41 ) (126 )   (473 ) (180 ) (293 ) (0.01 )
Total General and administrative expense (261 ) (64 ) (197 ) (0.01 ) 6,293   2,397   3,896   0.14  
Adjusted - Non-GAAP $ 15,005   $ 3,829   $ 11,176   $ 0.41   $ 24,497   $ 10,067   $ 14,430   $ 0.53  

(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 24.6% and 38.1% for the periods ending July 1,
2018 and July 2, 2017, respectively. For fiscal years beginning January
1, 2018, our federal statutory tax rate is 21% as a result of the
enactment of the Tax Cuts and Jobs Act (the "Act") in December 2017.

(b) Impairment and other lease charges for the three and six months
ended July 1, 2018 primarily include lease charges, net of recoveries,
of $0.5 million related to certain previously closed restaurants due to
adjustments to estimates of future lease costs and impairment charges of
$0.3 million primarily related to previously closed restaurants as well
as one underperforming Taco Cabana restaurant with a short remaining
lease term. Impairment and other lease charges for the six months ended
July 1, 2018 also include a net benefit of $(0.7) million in lease
charge recoveries due primarily to a lease termination, a lease
assignment, subleases and other adjustments to estimates of future lease
costs in the first quarter of 2018.

Impairment and other lease charges for the three and six months ended
July 2, 2017 include impairment charges of $3.8 million and $35.7
million, and other lease charges, net of recoveries, of $6.7 million and
$6.9 million, respectively, related to impairment and closures of
underperforming Pollo Tropical restaurants in the first and second
quarters of 2017. Impairment and other lease charges for the three and
six months ended July 2, 2017 also include impairment charges of $0.2
million and $0.6 million, respectively, related to underperforming Taco
Cabana restaurants.

(c) Other expense (income), net for the three and six months ended
July 1, 2018 primarily includes $2.8 million in insurance recoveries
related to the Hurricanes and total gains of $1.1 million and $1.2
million, respectively, on the sales of restaurant properties, partially
offset by the write-off of site development costs of $0.2 million and
$0.3 million, respectively, and costs for the removal, transfer and
storage of equipment from closed restaurants of $0.2 million and $0.5
million, respectively. Other expense (income), net for the three and six
months ended July 2, 2017, includes the write-off of site costs related
to locations that we decided not to develop, costs for the removal of
signs and equipment related to the closure of Pollo Tropical restaurants
and severance for restaurant employees, partially offset by expected
business interruption proceeds related to a Taco Cabana restaurant that
was temporarily closed due to a fire.

(d) Unused pre-production costs for the three and six months ended
July 2, 2017, include costs for advertising pre-production that were not
used.

(e) Terminated capital project costs for the three and six months ended
July 2, 2017, include costs related to the write-off of a capital
project that was terminated in the first quarter of 2017.

(f) Board and shareholder matter costs for the three and six months
ended July 1, 2018 include fee reductions and final insurance recoveries
related to 2017 shareholder activism costs. Board and shareholder matter
costs for the three and six months ended and July 2, 2017 include fees
related to shareholder activism and CEO and board member searches.

(g) Strategic Renewal Plan restructuring costs and retention bonuses for
the three and six months ended July 1, 2018 and July 2, 2017, include
severance related to the Plan and reduction in force and bonuses paid to
certain employees for retention purposes.

(h) Legal settlements and related costs for the three and six months
ended July 1, 2018 and six months ended July 2, 2017 include reductions
to final settlement amounts and benefits related to litigation matters.

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