Fiesta Restaurant Group, Inc. Reports Second Quarter 2016 Results
OREANDA-NEWS. August 04, 2016.
Select second quarter 2016 results as compared to the second quarter 2015 include:
-
Total revenues increased 5.6% to
\\$181.5 million ; - Comparable restaurant sales at Pollo Tropical decreased 1.4% and comparable guest traffic decreased 2.6%, including the impact of sales cannibalization that negatively impacted comparable restaurant transaction growth by approximately 2.0%;
- Comparable restaurant sales at Taco Cabana decreased 3.8% and comparable guest traffic decreased 5.5%, including the impact of weather that negatively impacted comparable restaurant transaction growth by approximately 1.0%;
- Eleven Company-owned Pollo Tropical and two Company-owned Taco Cabana restaurants were opened;
-
Net income decreased
\\$2.3 million to \\$8.9 million , or\\$0.33 per diluted share, compared to the prior year period of net income of\\$11.2 million , or\\$0.42 per diluted share; and -
Adjusted net income decreased
\\$2.0 million to \\$9.2 million , or\\$0.34 per diluted share, compared to the prior year period of adjusted net income of\\$11.2 million , or\\$0.42 per diluted share (see non-GAAP reconciliation table below).
Fiesta President and Chief Executive Officer
Tim Taft commented,
“Although we had a challenging first half to 2016 given industrywide
softness, oil-related economic pressure affecting both brands in
Taft added, “As we look to the second half of 2016, our mission is to
strengthen our sales and margin trajectory through several initiatives
as we navigate a challenging consumer environment. Effective media
spending to further build brand awareness is already benefiting newer
media markets such as
Second Quarter 2016 Financial Review
Consolidated Results
Total revenues increased 5.6% to
Cost of sales as a percentage of restaurant sales improved 150 basis points compared to the prior year period due primarily to favorable chicken and other commodity costs and successful implementation of supply chain management initiatives.
Restaurant wages and related expenses as a percentage of restaurant sales increased 130 basis points compared to the prior year period due primarily to higher labor costs, including the impact of new Company-owned restaurants, sales deleverage and the addition of restaurant managers that will be deployed to new restaurants opening later in the year.
Other restaurant operating expenses as a percentage of restaurant sales increased 90 basis points compared to the prior year period due primarily to higher repair and maintenance costs, higher insurance costs, higher real estate taxes and sales deleverage.
Restaurant rent expense as a percentage of restaurant sales increased 30 basis points compared to the prior year period due primarily to new restaurants, which generally have higher rent, and sales deleverage.
General and administrative expenses increased
The provision for income taxes was derived using an estimated annual
effective tax rate for 2016 of 36.5% which was lower than the prior year
period rate of 38.3%. In
Net income decreased
Adjusted net income, a non-GAAP financial measure, decreased
Brand Results
Pollo Tropical restaurant sales increased 13.7% to
Taco Cabana restaurant sales decreased 3.4% to
During the second quarter 2016, Fiesta opened 11 Company-owned Pollo
Tropical restaurants including six in
As of
Full Year 2016 Outlook
The Company will continue to provide a limited, updated set of operating
targets for 2016 which do not include any impact or costs related to the
potential separation transaction, including severance and relocation
costs associated with transitioning our Pollo Tropical headquarters from
- Comparable restaurant sales are now expected to be between -3% to -1% at Taco Cabana;
- Comparable restaurant sales are now expected to be between -1% and +1% at Pollo Tropical; and
-
General and administrative expenses are now expected to be
\\$54 to \\$57 million .
Previously communicated 2016 projections that remain unchanged include:
- Cost of sales improvement of approximately 100 basis points at Taco Cabana and approximately 180 basis points at Pollo Tropical, both as a percent of brand restaurant sales
-
Depreciation and amortization of
\\$36 to \\$38 million ; - An effective tax rate of 36% to 37%;
- Company-owned restaurant openings of 30 to 34 Pollo Tropical and up to four Taco Cabana restaurants; and
-
Capital expenditures of
\\$90 to \\$100 million .
Investor Conference Call Today
President and Chief Executive Officer
Tim Taft and Senior Vice President and Chief Financial Officer
Lynn Schweinfurth will host a conference
call to review second quarter 2016 results today at
The conference call can be accessed live over the phone by dialing
201-689-8562. A replay will be available after the call until
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
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, including, without limitation, any
statements relating to the proposed separation transaction, 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
FIESTA RESTAURANT GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND SIX MONTHS ENDED JULY 3, 2016 AND JUNE 28, 2015 (In thousands of dollars, except share and per share amounts) (Unaudited) |
||||||||||||||||
Three months ended (a) | Six months ended (a) | |||||||||||||||
July 3, 2016 | June 28, 2015 | July 3, 2016 | June 28, 2015 | |||||||||||||
Revenues: | ||||||||||||||||
Restaurant sales | \\$ | 180,835 | \\$ | 171,268 | \\$ | 356,774 | \\$ | 334,326 | ||||||||
Franchise royalty revenues and fees | 697 | 632 | 1,435 | 1,449 | ||||||||||||
Total revenues | 181,532 | 171,900 | 358,209 | 335,775 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales | 54,607 | 54,223 | 108,657 | 105,346 | ||||||||||||
Restaurant wages and related expenses (b) | 46,981 | 42,383 | 92,033 | 82,973 | ||||||||||||
Restaurant rent expense | 9,113 | 8,048 | 18,034 | 16,055 | ||||||||||||
Other restaurant operating expenses | 24,263 | 21,362 | 46,651 | 41,221 | ||||||||||||
Advertising expense | 7,006 | 5,144 | 14,001 | 10,698 | ||||||||||||
General and administrative expenses (b) (c) | 14,253 | 13,624 | 28,101 | 27,388 | ||||||||||||
Depreciation and amortization | 8,625 | 7,401 | 16,961 | 14,248 | ||||||||||||
Pre-opening costs | 2,016 | 1,211 | 3,198 | 2,162 | ||||||||||||
Impairment and other lease charges | 82 | — | 94 | 94 | ||||||||||||
Other expense (income) (d) | 10 | (142 | ) | (238 | ) | (514 | ) | |||||||||
Total operating expenses | 166,956 | 153,254 | 327,492 | 299,671 | ||||||||||||
Income from operations | 14,576 | 18,646 | 30,717 | 36,104 | ||||||||||||
Interest expense | 535 | 414 | 1,093 | 852 | ||||||||||||
Income before income taxes | 14,041 | 18,232 | 29,624 | 35,252 | ||||||||||||
Provision for income taxes | 5,125 | 6,983 | 10,813 | 13,502 | ||||||||||||
Net income | \\$ | 8,916 | \\$ | 11,249 | \\$ | 18,811 | \\$ | 21,750 | ||||||||
Basic net income per share | \\$ | 0.33 | \\$ | 0.42 | \\$ | 0.70 | \\$ | 0.81 | ||||||||
Diluted net income per share | \\$ | 0.33 | \\$ | 0.42 | \\$ | 0.70 | \\$ | 0.81 | ||||||||
Basic weighted average common shares outstanding | 26,654,280 | 26,490,673 | 26,629,999 | 26,462,919 | ||||||||||||
Diluted weighted average common shares outstanding | 26,660,269 | 26,497,658 | 26,636,145 | 26,470,130 |
(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 3, 2016 and June 28, 2015 each included 13 and 26 weeks, respectively. |
(b) Restaurant wages and related expenses include stock-based compensation expense of \\$40 and \\$40 for the three month periods ended July 3, 2016 and June 28, 2015, respectively, and \\$76 and \\$107 for the six month periods ended July 3, 2016 and June 28, 2015, respectively. General and administrative expenses include stock-based compensation expense of \\$1,218 and \\$1,055 for the three month periods ended July 3, 2016 and June 28, 2015, respectively, and \\$2,193 and \\$1,929 for the six month periods ended July 3, 2016 and June 28, 2015, respectively. |
(c) General and administrative expenses for the three and six months ended July 3, 2016 include \\$47 and \\$748, respectively, in costs related to the proposed separation transaction, \\$346 in severance and office relocation costs for the three and six months ended July 3, 2016 and a \\$350 reduction in estimated settlement charges related to a class action litigation for the six months ended July 3, 2016. |
(d) Other expense (income) for the six months ended July 3, 2016 includes additional proceeds related to a location that closed in 2015 as a result of an eminent domain proceeding. Other (income) expense for the three months ended June 28, 2015 primarily includes expected business interruption insurance proceeds related to a Pollo Tropical location that was temporarily closed due to a fire, and for the six months ended June 28, 2015 also includes a previously deferred gain from a sale-leaseback transaction that was recognized upon termination of the lease as a result of an eminent domain proceeding. |
FIESTA RESTAURANT GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars, except share and per share amounts) (Unaudited) |
|||||||
July 3, 2016 | January 3, 2016 | ||||||
Assets | |||||||
Cash | \\$ | 4,809 | \\$ | 5,281 | |||
Other current assets | 21,815 | 25,957 | |||||
Property and equipment, net | 274,960 | 248,992 | |||||
Goodwill | 123,484 | 123,484 | |||||
Deferred income taxes | 8,497 | 8,497 | |||||
Deferred financing costs, net | 764 | 918 | |||||
Other assets | 2,546 | 2,516 | |||||
Total assets | \\$ | 436,875 | \\$ | 415,645 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities | \\$ | 47,165 | \\$ | 46,305 | |||
Long-term debt, net of current portion | 69,498 | 72,612 | |||||
Lease financing obligations | 1,663 | 1,663 | |||||
Deferred income sale-leaseback of real estate | 29,036 | 30,086 | |||||
Other liabilities | 24,532 | 20,997 | |||||
Total liabilities | 171,894 | 171,663 | |||||
Stockholders' equity | 264,981 | 243,982 | |||||
Total liabilities and stockholders' equity | \\$ | 436,875 | \\$ | 415,645 |
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 3, 2016 | June 28, 2015 | July 3, 2016 | June 28, 2015 | |||||||||||||
Segment revenues: | ||||||||||||||||
Pollo Tropical | \\$ | 102,387 | \\$ | 90,046 | \\$ | 201,870 | \\$ | 177,616 | ||||||||
Taco Cabana | 79,145 | 81,854 | 156,339 | 158,159 | ||||||||||||
Total revenues | \\$ | 181,532 | \\$ | 171,900 | \\$ | 358,209 | \\$ | 335,775 | ||||||||
Change in comparable restaurant sales (a): | ||||||||||||||||
Pollo Tropical | (1.4 | )% | 4.3 | % | (0.7 | )% | 5.4 | % | ||||||||
Taco Cabana | (3.8 | )% | 5.6 | % | (1.2 | )% | 4.7 | % | ||||||||
Average sales per Company-owned restaurant: | ||||||||||||||||
Pollo Tropical | ||||||||||||||||
Comparable restaurants (b) | \\$ | 689 | \\$ | 729 | \\$ | 1,405 | \\$ | 1,466 | ||||||||
New restaurants (c) | 422 | 498 | 817 | 1,006 | ||||||||||||
Total Company-owned (d) | 614 | 672 | 1,237 | 1,358 | ||||||||||||
Taco Cabana | ||||||||||||||||
Comparable restaurants (b) | \\$ | 485 | \\$ | 504 | \\$ | 961 | \\$ | 966 | ||||||||
New restaurants (c) | 489 | 355 | 950 | 695 | ||||||||||||
Total Company-owned (d) | 485 | 499 | 961 | 957 | ||||||||||||
Income before income taxes: | ||||||||||||||||
Pollo Tropical | \\$ | 7,636 | \\$ | 10,908 | \\$ | 17,305 | \\$ | 22,498 | ||||||||
Taco Cabana | 6,452 | 7,324 | 13,067 | 12,754 | ||||||||||||
Adjusted EBITDA (e): | ||||||||||||||||
Pollo Tropical | \\$ | 13,993 | \\$ | 15,862 | \\$ | 29,741 | \\$ | 31,873 | ||||||||
Taco Cabana | 10,605 | 11,138 | 20,810 | 20,095 | ||||||||||||
Restaurant-Level Adjusted EBITDA (e): | ||||||||||||||||
Pollo Tropical | \\$ | 23,443 | \\$ | 23,623 | \\$ | 46,869 | \\$ | 47,151 | ||||||||
Taco Cabana | 15,462 | 16,525 | 30,605 | 30,989 |
(a) Restaurants are included in comparable restaurant sales after they have been open for 18 months. |
(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) Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP financial measures. Please see the reconciliation of Restaurant-Level Adjusted EBITDA and Adjusted EBITDA to net income in the table titled "Supplemental Non-GAAP Information" on the last page of this release. |
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 3, 2016 | June 28, 2015 | July 3, 2016 | June 28, 2015 | |||||||||
Company-owned restaurant openings: | ||||||||||||
Pollo Tropical | 11 | 6 | 17 | 12 | ||||||||
Taco Cabana | 2 | 1 | 2 | 1 | ||||||||
Total new restaurant openings | 13 | 7 | 19 | 13 | ||||||||
Company-owned restaurant closings: | ||||||||||||
Pollo Tropical | — | — | — | — | ||||||||
Taco Cabana | — | (2 | ) | — | (5 | ) | ||||||
Net change in restaurants | 13 | 5 | 19 | 8 | ||||||||
Number of Company-owned restaurants: | ||||||||||||
Pollo Tropical | 172 | 136 | 172 | 136 | ||||||||
Taco Cabana | 164 | 163 | 164 | 163 | ||||||||
Total Company-owned restaurants | 336 | 299 | 336 | 299 | ||||||||
Number of franchised restaurants: | ||||||||||||
Pollo Tropical | 37 | 35 | 37 | 35 | ||||||||
Taco Cabana | 7 | 6 | 7 | 6 | ||||||||
Total franchised restaurants | 44 | 41 | 44 | 41 | ||||||||
Total number of restaurants: | ||||||||||||
Pollo Tropical | 209 | 171 | 209 | 171 | ||||||||
Taco Cabana | 171 | 169 | 171 | 169 | ||||||||
Total restaurants | 380 | 340 | 380 | 340 |
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 3, 2016 | June 28, 2015 | |||||||||||
(a) | (a) | |||||||||||
Pollo Tropical: | ||||||||||||
Restaurant sales | \\$ | 101,879 | \\$ | 89,569 | ||||||||
Cost of sales | 32,266 | 31.7 | % | 30,094 | 33.6 | % | ||||||
Restaurant wages and related expenses | 23,980 | 23.5 | % | 19,251 | 21.5 | % | ||||||
Restaurant rent expense | 4,825 | 4.7 | % | 3,820 | 4.3 | % | ||||||
Other restaurant operating expenses | 13,701 | 13.4 | % | 10,893 | 12.2 | % | ||||||
Advertising expense | 3,685 | 3.6 | % | 1,904 | 2.1 | % | ||||||
Depreciation and amortization | 5,428 | 5.3 | % | 4,340 | 4.8 | % | ||||||
Pre-opening costs | 1,795 | 1.8 | % | 1,144 | 1.3 | % | ||||||
Impairment and other lease charges | — | — | % | — | — | % | ||||||
Taco Cabana: | ||||||||||||
Restaurant sales | \\$ | 78,956 | \\$ | 81,699 | ||||||||
Cost of sales | 22,341 | 28.3 | % | 24,129 | 29.5 | % | ||||||
Restaurant wages and related expenses | 23,001 | 29.1 | % | 23,132 | 28.3 | % | ||||||
Restaurant rent expense | 4,288 | 5.4 | % | 4,228 | 5.2 | % | ||||||
Other restaurant operating expenses | 10,562 | 13.4 | % | 10,469 | 12.8 | % | ||||||
Advertising expense | 3,321 | 4.2 | % | 3,240 | 4.0 | % | ||||||
Depreciation and amortization | 3,197 | 4.0 | % | 3,061 | 3.7 | % | ||||||
Pre-opening costs | 221 | 0.3 | % | 67 | 0.1 | % | ||||||
Impairment and other lease charges | 82 | 0.1 | % | — | — | % | ||||||
Six months ended | ||||||||||||
July 3, 2016 | June 28, 2015 | |||||||||||
(a) | (a) | |||||||||||
Pollo Tropical: | ||||||||||||
Restaurant sales | \\$ | 200,785 | \\$ | 176,458 | ||||||||
Cost of sales | 63,870 | 31.8 | % | 58,633 | 33.2 | % | ||||||
Restaurant wages and related expenses | 46,876 | 23.3 | % | 38,005 | 21.5 | % | ||||||
Restaurant rent expense | 9,469 | 4.7 | % | 7,469 | 4.2 | % | ||||||
Other restaurant operating expenses | 26,293 | 13.1 | % | 20,982 | 11.9 | % | ||||||
Advertising expense | 7,447 | 3.7 | % | 4,262 | 2.4 | % | ||||||
Depreciation and amortization | 10,706 | 5.3 | % | 8,079 | 4.6 | % | ||||||
Pre-opening costs | 2,909 | 1.4 | % | 2,014 | 1.1 | % | ||||||
Impairment and other lease charges | — | — | % | — | — | % | ||||||
Taco Cabana: | ||||||||||||
Restaurant sales | \\$ | 155,989 | \\$ | 157,868 | ||||||||
Cost of sales | 44,787 | 28.7 | % | 46,713 | 29.6 | % | ||||||
Restaurant wages and related expenses | 45,157 | 28.9 | % | 44,968 | 28.5 | % | ||||||
Restaurant rent expense | 8,565 | 5.5 | % | 8,586 | 5.4 | % | ||||||
Other restaurant operating expenses | 20,358 | 13.1 | % | 20,239 | 12.8 | % | ||||||
Advertising expense | 6,554 | 4.2 | % | 6,436 | 4.1 | % | ||||||
Depreciation and amortization | 6,255 | 4.0 | % | 6,169 | 3.9 | % | ||||||
Pre-opening costs | 289 | 0.2 | % | 148 | 0.1 | % | ||||||
Impairment and other lease charges | 94 | 0.1 | % | 94 | 0.1 | % | ||||||
(a) Percent of restaurant sales for the applicable segment. |
Supplemental Non-GAAP
Information
The following table sets forth certain unaudited
supplemental financial data for the periods indicated
(In
thousands):
Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP financial measures. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense and other income and expense. Adjusted EBITDA for each of our segments includes an allocation of general and administrative expenses associated with administrative support for executive management, information systems and certain accounting, legal, supply chain, human resources, development 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 a 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 Adjusted EBITDA and Restaurant-Level Adjusted EBITDA, when viewed with our results of operations calculated in accordance with GAAP and our reconciliation of Restaurant-Level Adjusted EBITDA and Adjusted EBITDA to net income (i) 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 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.
(unaudited) | (unaudited) | |||||||||||||||
Three months ended | Six months ended | |||||||||||||||
July 3, 2016 | June 28, 2015 | July 3, 2016 | June 28, 2015 | |||||||||||||
Restaurant-Level Adjusted EBITDA: | ||||||||||||||||
Pollo Tropical | \\$ | 23,443 | \\$ | 23,623 | \\$ | 46,869 | \\$ | 47,151 | ||||||||
Taco Cabana | 15,462 | 16,525 | 30,605 | 30,989 | ||||||||||||
Consolidated | 38,905 | 40,148 | 77,474 | 78,140 | ||||||||||||
Add: | ||||||||||||||||
Franchise royalty revenue and fees | 697 | 632 | 1,435 | 1,449 | ||||||||||||
Less: | ||||||||||||||||
Pre-opening costs | 2,016 | 1,211 | 3,198 | 2,162 | ||||||||||||
General and administrative (excluding stock-based |
13,035 | 12,569 | 25,908 | 25,459 | ||||||||||||
Adjusted EBITDA: | ||||||||||||||||
Pollo Tropical | 13,993 | 15,862 | 29,741 | 31,873 | ||||||||||||
Taco Cabana | 10,605 | 11,138 | 20,810 | 20,095 | ||||||||||||
Fiesta | (47 | ) | — | (748 | ) | — | ||||||||||
Consolidated | 24,551 | 27,000 | 49,803 | 51,968 | ||||||||||||
Less: | ||||||||||||||||
Depreciation and amortization | 8,625 | 7,401 | 16,961 | 14,248 | ||||||||||||
Impairment and other lease charges | 82 | — | 94 | 94 | ||||||||||||
Interest expense | 535 | 414 | 1,093 | 852 | ||||||||||||
Provision for income taxes | 5,125 | 6,983 | 10,813 | 13,502 | ||||||||||||
Stock-based compensation expense | 1,258 | 1,095 | 2,269 | 2,036 | ||||||||||||
Other expense (income) | 10 | (142 | ) | (238 | ) | (514 | ) | |||||||||
Net income | \\$ | 8,916 | \\$ | 11,249 | \\$ | 18,811 | \\$ | 21,750 |
Supplemental Non-GAAP
Information
The following table sets forth certain unaudited
supplemental financial data for the periods indicated
(In
thousands):
Adjusted net income and related adjusted diluted earnings per share are non-GAAP financial measures. Adjusted net income is defined as net income before impairment and other lease charges, gain on condemnation, separation costs, severance and office relocation costs, and legal settlements and related costs. 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) | (unaudited) | |||||||||||||||||||||||||||||||
Three months ended | Six months ended | |||||||||||||||||||||||||||||||
July 3, 2016 | June 28, 2015 | July 3, 2016 | June 28, 2015 | |||||||||||||||||||||||||||||
\\$ | EPS | \\$ | EPS | \\$ | EPS | \\$ | EPS | |||||||||||||||||||||||||
Net income | \\$ | 8,916 | \\$ | 0.33 | \\$ | 11,249 | \\$ | 0.42 | \\$ | 18,811 | \\$ | 0.70 | \\$ | 21,750 | \\$ | 0.81 | ||||||||||||||||
Add (each net of tax effect): | ||||||||||||||||||||||||||||||||
Impairment and other lease charges (a) | 52 | — | — | — | 60 | — | 58 | — | ||||||||||||||||||||||||
Gain on condemnation (b) | 7 | — | (5 | ) | — | (143 | ) | (0.01 | ) | (234 | ) | (0.01 | ) | |||||||||||||||||||
Separation costs (c) | 30 | — | — | — | 475 | 0.02 | — | — | ||||||||||||||||||||||||
Severance and office relocation costs (d) | 220 | 0.01 | — | — | 220 | 0.01 | — | — | ||||||||||||||||||||||||
Legal settlements and related costs (e) | — | — | — | — | (222 | ) | (0.01 | ) | — | — | ||||||||||||||||||||||
Adjusted net income | \\$ | 9,225 | \\$ | 0.34 | \\$ | 11,244 | \\$ | 0.42 | \\$ | 19,201 | \\$ | 0.71 | \\$ | 21,574 | \\$ | 0.80 |
(a) Impairment and other lease charges are presented net of a tax benefit of \\$30 for the three months ended July 3, 2016 and \\$34 and \\$36 for the six months ended July 3, 2016 and June 28, 2015, respectively. |
(b) Gain on condemnation for the six months ended July 3, 2016 includes additional proceeds related to a location that closed in 2015 as a result of an eminent domain proceeding. Gain on condemnation for the six months ended June 28, 2015 primarily includes a previously deferred gain from a sale-leaseback transaction that was recognized upon termination of a lease as a result of an eminent domain proceeding. Gain on condemnation for each period is presented net of a tax benefit of \\$3 for the three months ended July 3, 2016, and net of tax expense of \\$3 for the three months ended June 28, 2015 and \\$83 and \\$145 for the six months ended July 3, 2016 and June 28, 2015, respectively. |
(c) Separation costs for the six months ended July 3, 2016 include advisory fees related to the proposed separation transaction and is presented net of a tax benefit of \\$17 and \\$273 for the three and six months ended July 3, 2016, respectively. |
(d) Severance and office relocation costs for the three and six months ended July 3, 2016 include severance and relocation costs associated with transitioning our Pollo Tropical headquarters from Miami, Florida to Dallas, Texas and is presented net of a tax benefit of \\$126 for the three and six months ended July 3, 2016. |
(e) Legal settlements and related costs for the six months ended July 3, 2016 include a reduction in estimated costs for a legal settlement that was paid during the first quarter. Legal settlements and related costs are presented net of tax expense of \\$128 for the six months ended July 3, 2016. |
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