0001534992-20-000055
8-K
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db0a2a6c-1db9-476a-ac68-c7179fc84d53 UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 ______________________
FORM 8-K
______________________
CURRENT REPORT Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 4, 2020 ______________________
Fiesta Restaurant Group, Inc.
(Exact name of registrant as specified in its charter)
______________________
Delaware
(State or other jurisdiction of incorporation)
001-35373
(Commission File Number)
90-0712224
(I.R.S. Employer Identification No.)
14800 Landmark Boulevard, Suite 500
Dallas Texas (Address of principal executive offices)
75254
(Zip Code)
Registrant's telephone number, including area code (972) 702-9300
N/A (Former name or former address, if changed since last report.)
______________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Common Stock, par value $0.01 per share
Trading Symbol FRGI
Name of Each Exchange on Which Registered NASDAQ Global Select Market
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On November 4, 2020, Fiesta Restaurant Group, Inc. (the "Company") issued a press release announcing financial results for its third fiscal quarter ended September 27, 2020. The entire text of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (d) Exhibits 99.1 Fiesta Restaurant Group, Inc. Press Release, dated November 4, 2020 104 Cover Page Interactive Data File (formatted as Inline XBRL)
Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
FIESTA RESTAURANT GROUP, INC.
Date: November 4, 2020 By: /s/ Dirk Montgomery Name: Dirk Montgomery Title: Senior Vice President, Chief Financial Officer and Treasurer
Exhibit 99.1
FOR IMMEDIATE RELEASE Investor Relations Contact: Raphael Gross 203-682-8253 investors@frgi.com
Fiesta Restaurant Group, Inc. Reports Third Quarter 2020 Results
Sequential Improvement in Comparable Restaurant Sales Trend Compared to Second Quarter Pollo Tropical Q3 Adjusted EBITDA as % of Restaurant Sales Increased from 12.4% in 2019 to 13.6% in 2020
Taco Cabana Q3 Adjusted EBITDA as % of Restaurant Sales Increased from 1.6% in 2019 to 7.0% in 2020 Company Generated Net Cash Provided by Operations of $18 Million during Quarter
DALLAS, Texas (Business Wire) November 4, 2020 - 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 third quarter 2020, which ended on September 27, 2020 and provided a business update related to current operations.
Fiesta President and Chief Executive Officer Richard Stockinger said, "While prioritizing the well-being of our team members and guests during these challenging times, we are very encouraged that our business trajectory continues to strengthen. Pollo Tropical's comparable sales trend improved from -31.6% in the second quarter of 2020 to -11.1% in the third quarter. Taco Cabana's comparable sales trend accelerated by 500 basis points compared to the second quarter of 2020. Notably, our progress was achieved despite reclosing our dining rooms in mid July in response to COVID outbreaks in Florida and Texas, the two states where we operate. Our evolving operating model is making it easier and safer for consumers to order the freshly prepared food that they love through an improved drive-thru experience, expanded delivery options, new curbside and pickup capabilities, and a much-enhanced online and mobile ordering experience at both brands. These off-premise initiatives and investments are addressing real consumer needs for convenience and we believe will be key revenue growth drivers going forward."
Stockinger added, "Our operating model optimization and cost management efforts have significantly increased profit margins at both brands at a sustainable level. Third quarter Pollo Tropical Adjusted EBITDA margin improved 120 basis points and Taco Cabana Adjusted EBITDA margin expanded by 540 basis points. Net income was $4.6 million, which includes benefits from deferred tax valuation allowance adjustments and benefits from the CARES Act, and pre-tax income was $0.4 million for the quarter. Consolidated Adjusted EBITDA, a non-GAAP measure(1), increased 22% vs. last year to $14.8 million, driven by significant improvement in Restaurant-level Adjusted EBITDA margins at both brands. Restaurant-level Adjusted EBITDA margins, a non-GAAP measure(1), improved in the third quarter of 2020 to 21.2% for Pollo Tropical and 14.9% for Taco Cabana. In this evolving environment, our primary focus remains on driving profitable sales growth. We will continue focusing on increasing ease of use and capacity for the most desired channels by consumers including online, drive-thru, pickup and delivery, and selectively opening dining rooms in situations in which we can achieve profitable sales."
Stockinger concluded, "We have bolstered our liquidity through better working capital management, generation of cash flow from operations, and by significantly reducing our revolving credit facility(2) and net revolver debt balances(3). As of November 2, total debt was $21.4 million and net revolver debt was $9.0 million(3). At the beginning of the COVID crisis, on March 18, our total debt was $148.4 million and our net revolver debt was $74.4 million(3). We continue to improve our financial position and believe we will exit this challenging period with a stronger financial position that will support continued growth." _____________________________
(1) See non-GAAP reconciliation table below. (2) Outstanding revolving credit facility balance plus outstanding letters of credit. (3) We define net revolver debt as outstanding revolving credit facility borrowings plus outstanding letters of credit less unrestricted cash balance as defined in our credit agreement (generally
cash in bank less outstanding payments), which were $$19.5 million, $3.5 million and $14.0 million, respectively, as of November 2, 2020 and $146.4 million, $3.5 million and $75.5 million, respectively, as of March 18, 2020. Net revolver debt is a non-GAAP measure which we believe assists investors in understanding of our management of our overall liquidity and financial flexibility.
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Third Quarter 2020 Financial Summary
· Total revenues decreased 16.4% to $137.3 million in the third quarter of 2020 from $164.2 million in the third quarter of 2019; · Comparable restaurant sales at Pollo Tropical decreased 11.1%; · Comparable restaurant sales at Taco Cabana decreased 14.2%; · Net income of $4.6 million, or $0.18 per diluted share, in the third quarter of 2020, which included a benefit from income taxes of $4.2 million, compared
to net loss of $22.2 million, or ($0.84) per diluted share, in the third quarter of 2019, which included the unfavorable net impact of $19.3 million, or $0.73 per diluted share, related to a non-cash impairment of goodwill; · Adjusted net income (a non-GAAP financial measure) of $2.1 million, or $0.08 per diluted share, in the third quarter of 2020, compared to adjusted net income of $0.2 million, or $0.01 per diluted share, in the third quarter of 2019 (see non-GAAP reconciliation table below); · Adjusted EBITDA for Pollo Tropical of $10.6 million in the third quarter of 2020 compared to $11.0 million in the third quarter of 2019; · Restaurant-level Adjusted EBITDA (a non-GAAP financial measure) for Pollo Tropical of $16.4 million, or 21.2% of Pollo Tropical restaurant sales, in the third quarter of 2020 compared to $17.8 million, or 20.1% of Pollo Tropical restaurant sales, in the third quarter of 2019 (see non-GAAP reconciliation table below); · Adjusted EBITDA for Taco Cabana of $4.2 million in the third quarter of 2020 compared to $1.2 million in the third quarter of 2019; · Restaurant-level Adjusted EBITDA (a non-GAAP financial measure) for Taco Cabana of $8.8 million, or 14.9% of Taco Cabana restaurant sales, in the third quarter of 2020 compared to $6.9 million, or 9.2% of Taco Cabana restaurant sales, in the third quarter of 2019 (see non-GAAP reconciliation table below); and · Consolidated Adjusted EBITDA (a non-GAAP financial measure) of $14.8 million in the third quarter of 2020 compared to Consolidated Adjusted EBITDA of $12.2 million in the third quarter of 2019 (see non-GAAP reconciliation table below).
Third Quarter 2020 Comparable Restaurant Sales Summary
Pollo Tropical Taco Cabana
Fiscal July -13.8% -14.4%
Fiscal August -10.8% -14.1%
Fiscal September Third Quarter 2020
-8.7%
-11.1%
-14.2%
-14.2%
· Due to ongoing uncertainty and volatility surrounding the COVID-19 pandemic and guidelines, effective July 12, 2020, we closed all of our dining rooms and began re-opening certain dining rooms and patios with limited capacity and hours at both brands in late September at locations in which we believe we can generate profitable dining room sales while maintaining health safety. We continue to operate our restaurants for drive-thru, delivery and pickup, and we have accelerated efforts to better enable our customers to enjoy our brands safely and conveniently across all channels--wherever and whenever they choose.
· Third quarter comparable restaurant sales at Pollo Tropical benefited from the negative impact of Hurricane Dorian in 2019. After adjusting for the impact of that named storm, 2020 third quarter comparable sales would have been approximately 140 basis points lower.
Cash and Liquidity
· At the end of the third quarter of 2020, we had $18.0 million in cash and $41.8 million in debt, which includes $39.9 million outstanding under our amended senior credit facility and $1.9 million in finance lease obligations.
· The reduction in our net revolver debt to $9.0 million(3) as of November 2, 2020 was funded by cash flow from operations and the sale or sale-leaseback of nine Company-owned properties. We currently have offers or contracts in place for the sale or sale-leaseback of our seven remaining Company-owned properties being marketed, with additional transactions expected to close in the fourth quarter to enable further debt pay down. However, there can be no assurance that such transactions will be completed during the fourth quarter or at all. We are also exploring the potential refinancing of our current credit agreement, although we cannot make any assurance of the timing or certainty of completing any refinancing transactions at this time.
· 2020 full year capital expenditures will not exceed $22.0 million.
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Third Quarter 2020 Brand Results
Total Pollo Tropical restaurant sales decreased 12.1% to $77.6 million in the third quarter of 2020 compared to $88.3 million in the third quarter of 2019 primarily due to a comparable restaurant sales decrease of 11.1%. Comparable restaurant sales for Pollo Tropical improved through the third quarter, from a decrease of 13.8% in fiscal July to a decrease of 8.7% in fiscal September. Off-premise sales consisting of online, catering, and delivery orders comprised 12.1% of total restaurant sales in the third quarter of 2020 compared to 4.4% of total restaurant sales in the third quarter of 2019.
The decrease in comparable restaurant sales resulted from a 22.1% decrease in comparable restaurant transactions and an 11.0% increase in the net impact of product/channel mix and pricing. The increase in product/channel mix and pricing was driven primarily by increases in delivery and drive-thru average check and sales channel penetration, and menu price increases of 0.2%. Sales cannibalization from new restaurants on existing restaurants negatively impacted comparable restaurant sales by approximately 10 basis points. As noted above, comparable restaurant sales for Pollo Tropical in the third quarter of 2020 benefited from the negative impact of Hurricane Dorian in 2019. After adjusting for the impact of that named storm, 2020 third quarter comparable restaurant sales would have been approximately 140 basis points lower.
Adjusted EBITDA for Pollo Tropical decreased to $10.6 million in the third quarter of 2020 from $11.0 million in the third quarter of 2019. The decrease was primarily due to the impact of lower comparable restaurant sales. Rent expense and other restaurant operating expenses increased as a percentage of restaurant sales--driven in large part by the impact of lower comparable restaurant sales as well as higher delivery fee expense in operating expenses. This was partially offset by lower cost of sales, restaurant wages, and advertising expense. Pollo Tropical incurred incremental costs related to COVID-19 of $0.2 million for the quarter including quarantine pay, and costs related to COVID testing, masks and sanitizer. Restaurant wages and related expenses decreased as a percentage of restaurant sales, primarily driven by efficiency initiatives. Driven by operating model optimization and cost management efforts, third quarter Adjusted EBITDA as a percentage of revenues increased from 12.4% in 2019 to 13.6% in 2020 and Restaurant-level Adjusted EBITDA as a percentage of restaurant sales increased from 20.1% in 2019 to 21.2% in 2020.
Taco Cabana restaurant sales decreased 21.3% to $59.2 million in the third quarter of 2020 from $75.3 million in the third quarter of 2019 due primarily to a comparable restaurant sales decrease of 14.2% along with a decrease in sales related to closed restaurants. Off premise sales consisting of online, catering, and delivery orders comprised 7.9% of total restaurant sales in the third quarter of 2020 compared to 3.6% of total restaurant sales in the third quarter of 2019. The decrease in comparable restaurant sales resulted from a 23.8% decrease in comparable restaurant transactions and a 9.6% increase in the net impact of product/channel mix and pricing. The increase in product/channel mix and pricing was driven primarily by increases in drive-thru and delivery sales channel penetration, growth in average check for drive-thru versus last year due in part to an increase in transactions that include alcohol, and menu price increases of 1.6%.
Adjusted EBITDA for Taco Cabana increased to $4.2 million from $1.2 million in the third quarter of 2019. The increase was primarily due to lower cost of sales, restaurant wages, and advertising expense as a percentage of Taco Cabana restaurant sales. This was partially offset by higher rent expense as a percentage of restaurant sales and the impact of lower comparable restaurant sales. Higher delivery fee expense was offset by lower operating supplies, repair and maintenance and other costs within other operating expenses as a percentage of restaurant sales. Taco Cabana incurred incremental costs related to COVID-19 of $0.2 million for the quarter including quarantine pay, and costs related to COVID testing, masks and sanitizer. Restaurant wages and related expenses decreased as a percentage of restaurant sales, primarily driven by efficiency initiatives. Driven by operating model optimization and cost management efforts, third quarter Adjusted EBITDA as a percentage of revenues increased from 1.6% in 2019 to 7.0% in 2020 and Restaurant-level Adjusted EBITDA as a percentage of restaurant sales increased from 9.2% in 2019 to 14.9% in 2020.
Restaurant Portfolio
As of September 27, 2020, there were 138 Company-owned Pollo Tropical restaurants, 145 Company-owned Taco Cabana restaurants, 33 franchised Pollo Tropical restaurants in the U.S., Puerto Rico, Panama, Guyana, Ecuador and the Bahamas, and seven franchised Taco Cabana restaurants in the U.S.
Investor Conference Call Today
We will host a conference call at 4:30 p.m. ET today. The conference call can be accessed live over the phone by dialing 1-631-891-4304. A replay will be available after the call until Wednesday, November 11, 2020 and can be accessed by dialing 1-412-317-6671. The passcode is 10011317. 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.
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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/quick service restaurants that offer distinct and unique flavors with broad appeal at a compelling value. The brands feature fresh-made cooking, drivethru service and catering. For more information about Fiesta Restaurant Group, Inc., visit the corporate website at www.frgi.com.
Forward Looking Statements
Certain statements contained in this news release and in our public disclosures, whether written, oral or otherwise made, relating to future events or future performance, including any discussion, express or implied regarding our anticipated growth, plans, objectives and the impact of our initiatives designed to strengthen our liquidity and cash position, including those related to working capital efficiency initiatives and sales of real property, our investments in strategic and sales building initiatives, including those relating to advertising and marketing, operations improvements, menu development and simplification, digital ordering and online sales, catering and third-party delivery and the impact of the recent COVID-19 outbreak and our initiatives designed to respond to the COVID19 outbreak on future sales, margins, earnings and liquidity, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are often identified by the words "may," "might," "believes," "thinks," "anticipates," "plans," "positioned," "target," "continue," "expects," "look to," "intends" and other similar expressions, whether in the negative or the affirmative, that are not statements of historical fact. These forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict, and you should not place undue reliance on our forward-looking statements. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those discussed from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 29, 2019 and our quarterly reports on Form 10-Q. All forward-looking statements and the internal projections and beliefs upon which we base our expectations included in this release are made only as of the date of this release and may change. While we may elect to update forward-looking statements at some point in the future, we expressly disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
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FIESTA RESTAURANT GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND NINE MONTHS ENDED SEPTEMBER 27, 2020 AND SEPTEMBER 29, 2019
(In thousands, except share and per share data) (Unaudited)
Three Months Ended (a)
Nine Months Ended (a)
Revenues:
September 27, 2020
September 29, 2019
September 27, 2020
September 29, 2019
Restaurant sales
$
136,819 $
163,589 $
404,452 $
499,483
Franchise royalty revenues and fees
513
659
1,447
1,998
Total revenues
137,332
164,248
405,899
501,481
Costs and expenses:
Cost of sales
41,752
52,056
125,835
156,324
Restaurant wages and related expenses (b)
35,545
44,459
109,787
135,261
Restaurant rent expense Other restaurant operating expenses
11,174 21,138
11,970 24,153
33,792 61,638
35,613 68,429
Advertising expense
2,033
6,385
9,959
17,789
General and administrative expenses (b)(c)
11,855
13,820
38,527
42,387
Depreciation and amortization
9,432
10,165
28,427
29,520
Pre-opening costs
--
77
69
863
Impairment and other lease charges (d)
2,404
3,254
8,922
4,667
Goodwill impairment (e)
--
21,424
--
67,909
Closed restaurant rent, net of sublease income (f)
1,481
726
4,943
3,485
Other expense (income), net (g)
(1,304)
64
388
920
Total operating expenses
135,510
188,553
422,287
563,167
Income (loss) from operations Interest expense
1,822 1,172
(24,305) 823
(16,388) 3,370
(61,686) 3,024
Loss on extinguishment of debt (i)
212
--
212
--
Income (loss) before income taxes
438
(25,128)
(19,970)
(64,710)
Benefit from income taxes (h)
(4,155)
(2,946)
(8,903)
(1,377)
Net income (loss)
$
4,593 $
(22,182) $
(11,067) $
(63,333)
Earnings (loss) per common share:
Basic Diluted
$
0.18 $
(0.84) $
(0.44) $
(2.37)
0.18
(0.84)
(0.44)
(2.37)
Weighted average common shares outstanding:
Basic
25,290,357
26,548,116
25,359,004
26,734,822
Diluted
25,291,719
26,548,116
25,359,004
26,734,822
(a) The Company uses a 52- or 53-week fiscal year that ends on the Sunday closest to December 31. The three- and nine-month periods ended September 27, 2020 and September 29, 2019 each included 13 and 39 weeks, respectively.
(b) Restaurant wages and related expenses include stock-based compensation of $47 and $102 for the three months ended September 27, 2020 and September 29, 2019, respectively, and $152 and $145 for the nine months ended September 27, 2020 and September 29, 2019, respectively. General and administrative expenses include stockbased compensation expense of $597 and $509 for the three months ended September 27, 2020 and September 29, 2019, respectively, and $2,332 and $1,993 for the nine months ended September 27, 2020 and September 29, 2019, respectively.
(c) See notes (h) and (i) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information." (d) See note (c) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information." (e) See note (d) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information." (f) See note (e) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information." (g) See note (f) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information." (h) See notes (a) and (b) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information." (i) See note (g) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information."
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Assets Cash Other current assets Property and equipment, net Operating lease right-of-use assets Goodwill Other assets Total assets
Liabilities and Stockholders' Equity Current liabilities Long-term debt, net of current portion Operating lease liabilities Deferred tax liabilities Other non-current liabilities Total liabilities Stockholders' equity Total liabilities and stockholders' equity
FIESTA RESTAURANT GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
September 27, 2020
December 29, 2019
$
17,997 $
13,413
36,261
25,870
174,551
211,944
258,913
251,272
56,307
56,307
7,739
9,835
$
551,768 $
568,641
$
80,944 $
63,620
41,586
76,823
265,356
256,798
5,311
4,759
12,646
8,405
405,843
410,405
145,925
158,236
$
551,768 $
568,641
6
Segment revenues: Pollo Tropical Taco Cabana Total revenues
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)
Three Months Ended
September 27, 2020
September 29, 2019
(Unaudited)
Nine Months Ended
September 27, 2020
September 29, 2019
$
77,940 $
88,741 $
227,503 $
273,280
59,392
75,507
178,396
228,201
$
137,332 $
164,248 $
405,899 $
501,481
Change in comparable restaurant sales (a): Pollo Tropical Taco Cabana
(11.1)% (14.2)%
(3.8)% (4.8)%
(16.8)% (15.7)%
(2.5)% (2.8)%
Average sales per Company-owned restaurant:
Pollo Tropical
Comparable restaurants (b)
$
New restaurants (c)
Total Company-owned (d)
Taco Cabana
Comparable restaurants (b)
$
New restaurants (c)
Total Company-owned (d)
568 $ 387 562
406 $ 410 406
639 $ 447 626
457 $ 460 456
1,644 $ 1,233 1,628
1,216 $ 1,140 1,212
1,986 1,333 1,943
1,392 1,369 1,389
Income (loss) before income taxes: Pollo Tropical Taco Cabana
$
3,035 $
3,857 $
(3,978) $
16,731
(2,385)
(28,985)
(15,780)
(81,441)
Adjusted EBITDA: Pollo Tropical Taco Cabana
$
10,621 $
10,980 $
24,394 $
39,943
4,172
1,174
5,937
8,189
Restaurant-level Adjusted EBITDA (e): Pollo Tropical Taco Cabana
$
16,430 $
17,751 $
42,202 $
60,352
8,794
6,917
21,391
25,860
(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."
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FIESTA RESTAURANT GROUP, INC. Supplemental Information
The following table sets forth certain unaudited supplemental data for the periods indicated:
Company-owned restaurant openings: Pollo Tropical Taco Cabana Total new restaurant openings
Company-owned restaurant closings: Pollo Tropical Taco Cabana Net change in restaurants
Number of Company-owned restaurants: Pollo Tropical Taco Cabana Total Company-owned restaurants
Number of franchised restaurants: Pollo Tropical Taco Cabana Total franchised restaurants
Total number of restaurants: Pollo Tropical Taco Cabana Total restaurants
Three Months Ended
September 27, 2020
September 29, 2019
Nine Months Ended
September 27, 2020
September 29, 2019
--
1
--
2
--
--
1
3
--
1
1
5
(3)
--
(4)
--
(1)
--
(20)
--
(4)
1
(23)
5
138
141
138
141
145
165
145
165
283
306
283
306
33
31
33
31
7
8
7
8
40
39
40
39
171
172
171
172
152
173
152
173
323
345
323
345
8
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):
Pollo Tropical: Restaurant sales Cost of sales Restaurant wages and related expenses Restaurant rent expense Other restaurant operating expenses Advertising expense Depreciation and amortization Pre-opening costs Impairment and other lease charges Closed restaurant rent expense, net of sublease income
Three Months Ended
September 27, 2020
September 29, 2019
(a)
(a)
$
77,604
$
88,309
24,614
31.7%
28,239
32.0 %
18,051
23.3%
20,944
23.7 %
5,585
7.2%
5,477
6.2 %
12,125
15.6%
12,807
14.5 %
815
1.1%
3,130
3.5 %
5,171
6.7%
5,529
6.3 %
--
--%
68
0.1 %
2,395
3.1%
165
0.2 %
356
0.5%
601
0.7 %
Taco Cabana: Restaurant sales Cost of sales Restaurant wages and related expenses Restaurant rent expense Other restaurant operating expenses Advertising expense Depreciation and amortization Pre-opening costs Impairment and other lease charges Goodwill impairment Closed restaurant rent expense, net of sublease income
$
59,215
$
75,280
17,138
28.9%
23,817
31.6 %
17,494
29.5%
23,515
31.2 %
5,589
9.4%
6,493
8.6 %
9,013
15.2%
11,346
15.1 %
1,218
2.1%
3,255
4.3 %
4,261
7.2%
4,636
6.2 %
--
--%
9
-- %
9
--%
3,089
4.1 %
--
--%
21,424
28.5 %
1,125
1.9%
125
0.2 %
Pollo Tropical: Restaurant sales Cost of sales Restaurant wages and related expenses Restaurant rent expense Other restaurant operating expenses Advertising expense Depreciation and amortization Pre-opening costs Impairment and other lease charges Closed restaurant rent expense, net of sublease income
Taco Cabana: Restaurant sales Cost of sales Restaurant wages and related expenses Restaurant rent expense Other restaurant operating expenses Advertising expense Depreciation and amortization Pre-opening costs Impairment and other lease charges
Nine Months Ended
September 27, 2020
September 29, 2019
(a)
(a)
$
226,617
$
271,955
72,666
32.1%
85,855
31.6 %
54,196
23.9%
63,387
23.3 %
16,885
7.5%
16,393
6.0 %
35,225
15.5%
36,665
13.5 %
5,497
2.4%
9,351
3.4 %
15,682
6.9%
16,118
5.9 %
--
--%
307
0.1 %
8,023
3.5%
(162)
(0.1)%
1,629
0.7%
2,784
1.0 %
$
177,835
$
227,528
53,169
29.9%
70,469
31.0 %
55,591
31.3%
71,874
31.6 %
16,907
9.5%
19,220
8.4 %
26,413
14.9%
31,764
14.0 %
4,462
2.5%
8,438
3.7 %
12,745
7.2%
13,402
5.9 %
69
--%
556
0.2 %
899
0.5%
4,829
2.1 %
Goodwill impairment Closed restaurant rent expense, net of sublease income
(a) Percent of restaurant sales for the applicable segment.
-- 3,314
--% 1.9%
67,909 701
29.8 % 0.3 %
9
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 (loss) attributable to the applicable operating segments before interest expense, income taxes, depreciation and amortization, impairment and other lease charges, goodwill impairment, closed restaurant rent expense, net of sublease income, 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.
10
Three Months Ended September 27, 2020: Net income Benefit from income taxes Income (loss) before taxes Add:
Non-general and administrative expense adjustments: Depreciation and amortization Impairment and other lease charges Interest expense Closed restaurant rent expense, net of sublease income Loss on extinguishment of debt Other expense (income), net Stock-based compensation expense in restaurant wages Total non-general and administrative expense adjustments
General and administrative expense adjustments: Stock-based compensation expense Restructuring costs and retention bonuses Digital and brand repositioning costs Total general and administrative expense adjustments
Adjusted EBITDA Adjusted EBITDA as a percentage of total revenues Restaurant-level adjustments:
Add: Other general and administrative expense(1) Less: Franchise royalty revenue and fees Restaurant-level Adjusted EBITDA Restaurant-level Adjusted EBITDA as a percentage of restaurant sales
September 29, 2019: Net loss Benefit from income taxes Income (loss) before taxes Add:
Non-general and administrative expense adjustments: Depreciation and amortization Impairment and other lease charges Goodwill impairment Interest expense Closed restaurant rent expense, net of sublease income Other expense (income), net Stock-based compensation expense in restaurant wages Total non-general and administrative expense adjustments
General and administrative expense adjustments: Stock-based compensation expense Digital and brand repositioning costs Total general and administrative expense adjustments
Adjusted EBITDA Adjusted EBITDA as a percentage of total revenues Restaurant-level adjustments:
Add: Pre-opening costs Add: Other general and administrative expense(1) Less: Franchise royalty revenue and fees Restaurant-level Adjusted EBITDA
Pollo Tropical
Taco Cabana
Other
Consolidated
$
3,035 $
(2,385) $
$ (212) $
4,593 (4,155)
438
5,171 2,395
593 356 -- (1,404) 15 7,126
307
99
54
460
$
10,621 $
13.6%
6,145
336
$
16,430 $
21.2%
4,261 9
579 1,125
-- 100 32 6,106
290 117 44 451 4,172 $ 7.0%
4,799 177
8,794 $ 14.9%
$
3,857 $
(28,985) $
-- -- -- -- 212 -- -- 212
-- -- -- -- -- $
-- -- -- $
9,432 2,404 1,172 1,481
212 (1,304)
47 13,444
597 216 98 911 14,793 10.8%
10,944 513
25,224 18.4%
$ -- $
(22,182) (2,946) (25,128)
5,529 165 -- 398 601 5 39
6,737
268
118
386
$
10,980 $
12.4%
68
7,135
432
$
17,751 $
4,636 3,089 21,424
425 125 59 63 29,821
241 97 338 1,174 $ 1.6%
9 5,961
227 6,917 $
-- -- -- -- -- -- -- --
-- -- -- -- $
-- -- -- -- $
10,165 3,254 21,424
823 726 64 102 36,558
509 215 724 12,154 7.4%
77 13,096
659 24,668
Restaurant-level Adjusted EBITDA as a percentage of restaurant sales
20.1%
9.2%
11
15.1%
Nine Months Ended September 27, 2020: Net loss Benefit from income taxes Loss before taxes Add:
Non-general and administrative expense adjustments: Depreciation and amortization Impairment and other lease charges Interest expense Closed restaurant rent expense, net of sublease income Loss on extinguishment of debt Other expense (income), net Stock-based compensation expense in restaurant wages Total non-general and administrative expense adjustments
General and administrative expense adjustments: Stock-based compensation expense Restructuring costs and retention bonuses Digital and brand repositioning costs Total general and administrative expense adjustments
Adjusted EBITDA Adjusted EBITDA as a percentage of total revenues Restaurant-level adjustments:
Add: Pre-opening costs Add: Other general and administrative expense(1) Less: Franchise royalty revenue and fees Restaurant-level Adjusted EBITDA Restaurant-level Adjusted EBITDA as a percentage of restaurant sales
September 29, 2019: Net loss Benefit from income taxes Income (loss) before taxes Add:
Non-general and administrative expense adjustments: Depreciation and amortization Impairment and other lease charges Goodwill impairment Interest expense Closed restaurant rent expense, net of sublease income Other expense (income), net Stock-based compensation expense in restaurant wages Total non-general and administrative expense adjustments
General and administrative expense adjustments: Stock-based compensation expense Restructuring costs and retention bonuses Digital and brand repositioning costs Total general and administrative expense adjustments
Adjusted EBITDA Adjusted EBITDA as a percentage of total revenues Restaurant-level adjustments:
Add: Pre-opening costs Add: Other general and administrative expense(1)
Pollo Tropical
Taco Cabana
Other
Consolidated
$
(3,978) $
(15,780) $
$ (212) $
(11,067) (8,903) (19,970)
15,682 8,023 1,701 1,629
-- (653)
53 26,435
1,140
551
246
1,937
$
24,394 $
10.7%
--
18,694
886
$
42,202 $
18.6%
12,745 899
1,669 3,314
-- 1,041
99 19,767
1,192 556 202
1,950 5,937 $
3.3%
69 15,946
561 21,391 $
12.0%
$
16,731 $
(81,441) $
-- -- -- -- 212 -- -- 212
-- -- -- -- -- $
-- -- -- -- $
28,427 8,922 3,370 4,943
212 388 152 46,414
2,332 1,107
448 3,887 30,331
7.5%
69 34,640 1,447 63,593
15.7%
$ -- $
(63,333) (1,377) (64,710)
16,118 (162) -- 1,534 2,784 749 48
21,071
1,196
827
118
2,141
$
39,943 $
14.6%
307 21,427
13,402 4,829 67,909 1,490
701 171 97 88,599
797 137 97 1,031 8,189 $ 3.6%
556 17,788
-- -- -- -- -- -- -- --
-- -- -- -- -- $
-- --
29,520 4,667 67,909 3,024 3,485
920 145 109,670
1,993 964 215
3,172 48,132
9.6%
863 39,215
Less: Franchise royalty revenue and fees Restaurant-level Adjusted EBITDA
Restaurant-level Adjusted EBITDA as a percentage of restaurant sales (1) Excludes general and administrative adjustments above.
$
12
1,325 60,352 $
22.2%
673 25,860 $
11.4%
-- -- $
1,998 86,212
17.3%
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, goodwill impairment, closed restaurant rent expense, net of sublease income, other expense (income), net, board and shareholder matter costs, 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.
13
Reported - GAAP Adjustments:
Non-general and administrative expense adjustments: Income tax due to tax law change (a) Deferred tax asset valuation allowance (b) Impairment and other lease charges (c) Goodwill impairment (d) Closed restaurant rent expense, net of sublease income (e) Other expense (income), net (f) Loss on extinguishment of debt (g) Total non-general and administrative expense
General and administrative expense adjustments: Restructuring costs and retention bonuses (h) Digital and brand repositioning costs (i) Total general and administrative expense Adjusted - Non-GAAP
Income Before Income Taxes
$
438
(Unaudited)
Three Months Ended
September 27, 2020
Benefit From Income Taxes (a)
Net Income
Diluted EPS
Income (Loss) Before Income Taxes
September 29, 2019
Provision For (Benefit
From) Income Taxes (a)
Net Income (Loss)
Diluted EPS
$
(4,155) $ 4,593 $ 0.18 $ (25,128) $ (2,946) $ (22,182) $ (0.84)
-- -- 2,404 -- 1,481 (1,304) 212 2,793
216
98
314
$
3,545 $
1,919 2,968
575 -- 354 (312) 51 5,555
(1,919) (2,968) 1,829
-- 1,127 (992)
161 (2,762)
(0.07) (0.11) 0.07
-- 0.04 (0.04) 0.01 (0.11)
-- -- 3,254 21,424 726 64 -- 25,468
--
--
--
--
--
--
903
2,351
0.09
2,111
19,313
0.73
201
525
0.02
18
46
--
--
--
--
3,233
22,235
0.84
52
164
0.01
23
75
--
75
239
0.01
1,475 $ 2,070 $ 0.08 $
-- 215 215 555 $
--
--
--
60
155
0.01
60
155
0.01
347 $ 208 $ 0.01
Reported - GAAP Adjustments:
Non-general and administrative expense adjustments: Income tax due to tax law change (a) Deferred tax asset valuation allowance (b) Impairment and other lease charges (c) Goodwill impairment (d) Closed restaurant rent expense, net of sublease income (e) Other expense (income), net (f) Loss on extinguishment of debt (g) Total non-general and administrative expense
General and administrative expense adjustments: Restructuring costs and retention bonuses (h) Digital and brand repositioning costs (i) Total general and administrative expense Adjusted - Non-GAAP
Loss Before Income Taxes
$
(19,970)
(Unaudited)
Nine Months Ended
September 27, 2020
Benefit From Income Taxes (a)
Net Income (Loss)
Diluted EPS
Income (Loss) Before Income Taxes
September 29, 2019
Provision For (Benefit
From) Income Taxes (a)
Net Income (Loss)
Diluted EPS
$
(8,903) $ (11,067) $ (0.44) $ (64,710) $ (1,377) $ (63,333) $ (2.37)
-- -- 8,922 -- 4,943 388 212 14,465
1,107
448
1,555
$
(3,950) $
3,522 1,294 2,132
-- 1,181
93 51 8,273
(3,522) (1,294) 6,790
-- 3,762
295 161 6,192
(0.14) (0.05) 0.27
-- 0.15 0.01 0.01 0.24
-- -- 4,667 67,909 3,485 920 -- 76,981
--
--
--
--
--
--
1,295
3,372
0.13
2,111
65,798
2.46
967
2,518
0.09
255
665
0.02
--
--
--
4,628
72,353
2.71
265
842
0.03
964
107
341
0.01
215
372
1,183
0.05
1,179
(258) $ (3,692) $ (0.15) $ 13,450 $
268
696
0.03
60
155
0.01
328
851
0.03
3,579 $ 9,871 $ 0.37
(a) The provision for (benefit from) income taxes related to the adjustments was calculated using the Company's combined federal statutory and estimated state rate of 23.9% and 27.7% for the periods ending September 27, 2020 and September 29, 2019, 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. For the three and nine months ended September 27, 2020, we recorded a $0.1 million and $1.9 million tax benefit, respectively, related to prior year net operating losses as a result of a provision in the CARES Act that allows net operating losses from 20182020 to be carried back for five years. Additionally, the three and nine months ended September 27, 2020 includes an incremental benefit of $1.9 million related to reclassifying certain assets as qualified improvement property as permitted by the CARES Act and other
14
changes to depreciation methods for certain assets made in conjunction with a cost segregation study conducted prior to filing the Company's 2019 federal income tax return.
(b) For the three and nine months ended September 27, 2020, we recorded a reduction of $3.0 million and $1.3 million, respectively, to our valuation allowance against deferred income tax assets primarily related to reclassifying certain assets as qualified improvement property and filing our 2019 federal income tax returns as well as other changes in our deferred income tax assets where it was determined to be more likely than not that the deferred tax assets will not be realized through the reversal of existing deferred tax liabilities.
(c) Impairment and other lease charges for the three and nine months ended September 27, 2020 consist of impairment charges of $2.6 million and $8.4 million, respectively, and other lease charges (gains) of $(0.2) million and $0.5 million, respectively. For the three months ended September 27, 2020, impairment charges primarily relate to the write-down of saucing islands and self-service soda machines that are being removed from dining rooms as a result of COVID-19. For the nine months ended September 27, 2020, impairment charges also include the impairment of assets from three underperforming Pollo Tropical restaurants, two of which were closed in the third quarter of 2020, and two underperforming Taco Cabana restaurants, as well as the write-down of assets held for sale to their fair value. For the three months ended September 27, 2020, other lease gains primarily relate to a gain from a lease termination of $(0.2) million. For the nine months ended September 27, 2020, other lease charges also include lease termination charges of $0.9 million for restaurant locations we decided not to develop, net of a gain from a lease termination of $(0.2) million.
Impairment and other lease charges for the three and nine months ended September 29, 2019 primarily consist of impairment charges of $3.3 million and $5.5 million, respectively, and a lease charge recoveries benefit related to closed restaurant lease terminations of $(0.9) million for the nine months ended September 29, 2019. The impairment charges primarily related to assets for eight underperforming Taco Cabana restaurants that we continued to operate and equipment from previously impaired restaurants.
(d) Goodwill impairment for the three and nine months ended September 29, 2019 consists of a non-cash impairment charge to write down the value of goodwill for the Taco Cabana reporting unit.
(e) Closed restaurant rent expense, net of sublease income for the three and nine months ended September 27, 2020 primarily consists of closed restaurant lease costs of $3.0 million and $8.9 million, respectively, partially offset by sublease income of $(1.5) million and $(3.9) million, respectively. Closed restaurant rent expense, net of sublease income for the three and nine months ended September 29, 2019 primarily consists of closed restaurant lease costs of $1.9 million and $6.2 million, respectively, partially offset by sublease income of $(1.1) million and $(2.8) million, respectively.
(f) Other expense (income), net for the three and nine months ended September 27, 2020 primarily consists of total gains of $(1.6) million on the sale-leaseback of two restaurant properties and the sale of two restaurant properties, partially offset by costs for the removal, transfer, and storage of equipment from closed restaurants and other closed restaurant related costs of $0.3 million and $1.4 million, respectively. Other expense (income), net for the nine months ended September 27, 2020 also includes the write-off of site development costs of $0.6 million. Other expense (income), net for the three and nine months ended September 29, 2019 consists of the write-off of site development costs of $0.1 million. Other expense (income), net for the nine months ended September 29, 2019 also includes costs for the removal, transfer, and storage of equipment from closed restaurants of $0.7 million.
(g) Loss on extinguishment of debt for the three and nine months ended September 27, 2020 consists of the write-off of unamortized deferred financing fees related to extinguished debt.
(h) Restructuring costs and retention bonuses for the three and nine months ended September 27, 2020 include severance costs related to terminations in response to the COVID-19 pandemic. Restructuring costs and retention bonuses for the nine months ended September 29, 2019 include severance costs related to eliminated positions.
(i) Digital and brand repositioning costs for the three and nine months ended September 27, 2020 and September 29, 2019 include consulting costs related to repositioning the digital experience for our customers.
15
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