System-wide comparable restaurant sales growth of 3.2%
Reiterates fiscal year 2016 guidance
Conference call and webcast will be held at 5:00 p.m. ET today
LAKE FOREST, Calif.--(BUSINESS WIRE)--
Del Taco Restaurants, Inc. (“Del Taco” or the “Company”),
(NASDAQ:TACO)(NASDAQ:TACOW), the second largest Mexican-American QSR
chain by units in the United States, operating restaurants under the
name Del Taco, today announced fiscal first quarter 2016 financial
results. The Company also reiterated its fiscal year 2016 guidance.
Del Taco became a public company when it completed a business
combination with Levy Acquisition Corp. on June 30, 2015. This resulted
in a fiscal first quarter financial statement presentation that includes
a predecessor period for the twelve-weeks ended March 24, 2015 compared
to a successor period for the twelve-weeks ended March 22, 2016.
Fiscal First Quarter 2016 Highlights
-
System-wide comparable restaurant sales growth of 3.2% and
company-owned comparable restaurant sales growth of 2.8%, marking the
tenth and fifteenth consecutive quarter of gains, respectively;
-
Company-owned comparable restaurant sales growth comprised check
growth of 5.4%, including over 1% of menu mix growth, and a
transaction decrease of (2.6%);
-
Total revenue of $97.4 million, representing 3.2% growth from the
fiscal first quarter of 2015;
-
Restaurant sales of $93.6 million, representing 2.9% growth from the
fiscal first quarter of 2015;
-
Restaurant contribution margin, a non-GAAP financial measure, of
18.7%, an improvement of approximately 10 basis points from the fiscal
first quarter of 2015;
-
Net income increased to $3.1 million from a net loss of ($4.9) million
in the fiscal first quarter of 2015, representing diluted earnings
(loss) per share of $0.08 and ($1.21) in the fiscal first quarter of
2016 and 2015, respectively;
-
Adjusted EBITDA, a non-GAAP financial measure, of $13.1 million
compared to $13.2 million in the fiscal first quarter of 2015; and
-
The opening of two restaurants system wide, including one
company-owned and one franchised restaurant.
Paul J.B. Murphy, III, President and Chief Executive Officer of Del
Taco, commented, “We achieved solid quarterly results and are on track
to deliver on our fiscal year outlook. The Del Taco system extended its
record of system-wide comparable restaurant sales growth to ten
consecutive quarters with a 3.2% gain, in spite of significant
competitive discounting and cycling over a 7.7% increase in the
prior-year. At company restaurants, we also generated restaurant
contribution margin expansion through favorable menu mix shifts and
effective menu price increases which helped offset cost pressures,
including the California minimum wage increase to $10/hour. Our ability
to operate effectively in this environment is a testament to the
strength and resiliency of our brand, our positioning, and our menu
strategy.”
Murphy continued, “In June, we plan to launch our Fresh Combined
Solutions strategy. This next iteration of Combined Solutions consists
of a combination of operational and brand improvements to further embed
our fresh paired with value positioning, improve speed and quality,
expand our usage occasions, and differentiate Del Taco through new and
delicious Mexican food platforms. Driving brand reappraisal by aligning
improved guest experiences with an elevated brand promise will help
drive higher quality and freshness perceptions and move us toward our
average unit volume goal of $1.5 million by 2018.”
Review of Fiscal First Quarter 2016 Financial Results
Total revenue was $97.4 million, an increase of 3.2% compared to $94.4
million in the fiscal first quarter of 2015. The growth in revenue was
driven by a 2.9% increase in Company restaurant sales and a 10.9%
increase in franchise revenue.
Comparable restaurant sales increased 3.2% system-wide for the fiscal
first quarter ended March 22, 2016 compared to the 7.7% gain in the
prior year fiscal first quarter, for a two-year growth rate of 10.9%.
The Del Taco system has now generated comparable restaurant sales growth
for ten consecutive quarters. Company-owned comparable restaurant sales
increased 2.8%, marking the fifteenth consecutive quarter of comparable
restaurant sales growth. Franchise comparable restaurant sales increased
3.7%.
Restaurant contribution, a non-GAAP financial measure, increased 3.4%
year-over-year to $17.5 million. As a percentage of Company restaurant
sales, restaurant contribution increased approximately 10 basis points
year-over-year to 18.7%. The increase was driven by an approximately 70
basis point improvement in food and paper costs and an approximately 50
basis point improvement in occupancy and other operating expenses,
partially offset by an approximately 110 basis point increase in labor
and related expenses. A reconciliation between restaurant
contribution and the nearest GAAP financial measure is included in the
accompanying financial data.
Adjusted EBITDA, a non-GAAP financial measure, was $13.1 million
compared to $13.2 million in the previous year’s fiscal first quarter. A
reconciliation between adjusted EBITDA and the nearest GAAP financial
measure is included in the accompanying financial data.
Net income was $3.1 million, compared to net loss of ($4.9) million in
the fiscal first quarter of 2015. Earnings per diluted share were $0.08,
compared to a loss per diluted share of ($1.21) in the first quarter of
2015.
Share Repurchase Program
Under the $25 million share repurchase authorization announced in March
2016, the Company repurchased 86,679 shares of common stock during the
fiscal first quarter of 2016 at an average price of $10.79 per share for
an aggregate cost of approximately $0.9 million. Approximately $24.1
million remains under this authorization. Del Taco remains committed to
enhancing long-term shareholder returns through all the means at its
disposal including opportunistic repurchases of common stock and
warrants.
Fiscal Year 2016 Guidance
The Company is reiterating the following guidance for fiscal year 2016,
the 53-week period ending January 3, 2017:
-
System-wide same store sales growth of approximately 2.5% to 4.5%;
-
Total revenue between $439 million and $449 million;
-
Total company-owned restaurant sales between $422 million and $432
million;
-
Restaurant contribution margin between 19.8% and 20.3%;
-
New California minimum wage impact estimated to increase labor and
related expenses by approximately $7.2 million, including preservation
of appropriate wage differentials and incremental payroll taxes;
-
General and administrative expenses of between approximately 7.9% and
8.3% of total revenue, including incremental public company costs and
non-cash stock-based compensation;
-
Adjusted EBITDA between $67.5 million and $70.0 million;
-
Effective tax rate of approximately 40%;
-
Diluted earnings per share of approximately $0.53 and $0.56;
-
Fifteen to eighteen new system-wide restaurant openings, including the
company-owned restaurant that opened in early January 2016; and
-
Net capital expenditures totaling approximately $36.0 to $41.0 million
including approximately $10.0 to $12.5 million for new unit
construction, approximately $10.0 to $11.0 million for capitalized
maintenance, approximately $10.0 to $11.5 million for discretionary
investment in equipment and technology, and approximately $6.0 million
for land acquisition for development after 2016.
Conference Call
A conference call and webcast to discuss Del Taco’s financial results is
scheduled for 5:00 p.m. ET today. Hosting the conference call and
webcast will be Paul J.B. Murphy, III, President and Chief Executive
Officer; John D. Cappasola, Jr., Executive Vice President and Chief
Brand Officer; and Steven L. Brake, Executive Vice President and Chief
Financial Officer.
Interested parties may listen to the conference call via telephone by
dialing 1-877-407-0789, or for international callers, 1-201-689-8562. A
telephone replay will be available shortly after the call has concluded
and can be accessed by dialing 1-877-870-5176, or for international
callers, 1-858-384-5517. The passcode is 13634361.
The webcast will be available at www.deltaco.com
under the investors section and will be archived on the site shortly
after the call has concluded.
Key Financial Definitions
Comparable restaurant sales growth reflects the change in
year-over-year sales for the comparable company, franchise and total
system restaurant base. Restaurants are included in the comparable store
base in the accounting period following its 18th full month
of operations and excludes restaurant closures.
Restaurant contribution is defined as company restaurant sales
less restaurant operating expenses, which are food and paper costs,
labor and related expenses and occupancy and other operating expenses. Restaurant
contribution margin is defined as restaurant contribution as a
percentage of company restaurant sales. Restaurant contribution and
restaurant contribution margin are neither required by, nor
presented in accordance with, GAAP. A reconciliation between
restaurant contribution and the nearest GAAP financial measure is
included in the accompanying financial data.
Adjusted EBITDA is defined as net income/loss prior to interest
expense, income taxes, and depreciation and amortization, as adjusted to
add back certain charges, such as stock-based compensation expense and
transaction-related costs, as these expenses are not considered an
indicator of ongoing company performance. Adjusted EBITDA is a
non-GAAP financial measure and should not be considered as an
alternative to operating income or net income/loss as a measure of
operating performance or cash flows or as measures of liquidity.
Non-GAAP financial measures are not necessarily calculated the same way
by different companies and should not be considered a substitute for or
superior to GAAP results. A reconciliation between adjusted EBITDA
and the nearest GAAP financial measure is included in the accompanying
financial data.
About Del Taco Restaurants, Inc.
At Del Taco (NASDAQ:TACO)(NASDAQ:TACOW) all menu items taste better
because they are made to order with fresh ingredients including cheddar
cheese grated from 40-pound blocks, handmade pico de gallo salsa,
lard-free beans slow-cooked from scratch, fresh sliced avocado and
marinated chicken and carne asada grilled in the restaurant. The menu,
which includes a full line of breakfast, includes classic Mexican dishes
such as tacos, burritos, quesadillas and nachos as well as American
favorites including hamburgers, crinkle-cut fries and shakes. Del Taco's
UnFreshing Believable campaign communicates the lengths the company goes
to in order to deliver quality, made-to-order menu items created with
freshly-prepared ingredients at unbelievable prices. With nearly 550
restaurants in 16 states Del Taco serves more than three million guests
each week. Stay up to date by following Del Taco on Twitter,
Facebook
and Instagram
or visit www.deltaco.com
for more information.
Forward-Looking Statements
In addition to historical information, this release may contain a number
of “forward-looking statements” as defined in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include,
without limitation, information concerning Del Taco’s possible or
assumed future results of operations, business strategies, competitive
position, industry environment, potential growth opportunities and the
effects of regulation. These statements are based Del Taco’s
management’s current expectations and beliefs, as well as a number of
assumptions concerning future events. When used in this press release,
the words “estimates,” “projected,” “expects,” “anticipates,”
“forecasts,” “plans,” “intends,” “believes,” “seeks,” “target,” “may,”
“will,” “should,” “future,” “propose,” “preliminary,” “guidance,” “on
track” and variations of these words or similar expressions (or the
negative versions of such words or expressions) are intended to identify
forward-looking statements. Such forward-looking statements are subject
to known and unknown risks, uncertainties, assumptions and other
important factors, many of which are outside Del Taco’s management’s
control that could cause actual results to differ materially from the
results discussed in the forward-looking statements. These risks
included, without limitation, consumer demand, our inability to
successfully open company-owned or franchised restaurants or establish
new markets, competition in our markets, our inability to grow and
manage growth profitably, adverse changes in food and supply costs, our
inability to access additional capital, changes in applicable laws or
regulations, food safety and foodborne illness concerns, our inability
to manage existing and to obtain additional franchisees, our inability
to attract and retain qualified personnel, our inability to profitably
expand into new markets, changes in, or the discontinuation of, the
Company’s repurchase program, and the possibility that we may be
adversely affected by other economic, business, and/or competitive
factors. Additional risks and uncertainties are identified and discussed
in Del Taco’s reports filed with the SEC and available at the SEC’s
website at www.sec.gov
and the Company’s website at www.deltaco.com.
Forward-looking statements included in this release speak only as of the
date of this release. Del Taco undertakes no obligation to update its
forward-looking statements to reflect events or circumstances after the
date of this release or otherwise.
|
Del Taco Restaurants, Inc.
|
|
Consolidated Balance Sheet
|
|
(In thousands, except share and per share data)
|
|
|
|
|
|
Successor
|
|
|
|
March 22,
|
|
December 29,
|
|
|
|
2016
|
|
2015
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
13,404
|
|
|
$
|
10,194
|
|
|
Accounts and other receivables, net
|
|
|
2,631
|
|
|
|
3,220
|
|
|
Inventories
|
|
|
2,526
|
|
|
|
2,806
|
|
|
Prepaid expenses and other current assets
|
|
|
2,519
|
|
|
|
3,545
|
|
|
Total current assets
|
|
|
21,080
|
|
|
|
19,765
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
113,332
|
|
|
|
114,030
|
|
|
Goodwill
|
|
|
319,082
|
|
|
|
318,275
|
|
|
Trademarks
|
|
|
220,300
|
|
|
|
220,300
|
|
|
Intangible assets, net
|
|
|
27,481
|
|
|
|
28,373
|
|
|
Other assets, net
|
|
|
2,883
|
|
|
|
2,829
|
|
|
Total assets
|
|
$
|
704,158
|
|
|
$
|
703,572
|
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
15,977
|
|
|
|
16,831
|
|
|
Other accrued liabilities
|
|
|
31,523
|
|
|
|
32,897
|
|
|
Current portion of capital lease obligations and deemed landlord
financing liabilities
|
|
|
1,684
|
|
|
|
1,725
|
|
|
Total current liabilities
|
|
|
49,184
|
|
|
|
51,453
|
|
|
|
|
|
|
|
|
Long-term debt, capital lease obligations and deemed landlord
financing liabilities, excluding current portion, net
|
|
|
167,677
|
|
|
|
167,968
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
81,429
|
|
|
|
79,523
|
|
|
Other non-current liabilities
|
|
|
34,709
|
|
|
|
36,251
|
|
|
Total liabilities
|
|
|
332,999
|
|
|
|
335,195
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized;
|
|
|
|
|
|
no shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
|
Common stock, $0.0001 par value; 400,000,000 shares authorized;
|
|
|
|
|
|
38,715,746 shares issued and outstanding at March 22, 2016;
|
|
|
|
|
|
38,802,425 shares issued and outstanding at December 29, 2015
|
|
|
4
|
|
|
|
4
|
|
|
Additional paid-in capital
|
|
|
371,981
|
|
|
|
372,260
|
|
|
Accumulated deficit
|
|
|
(826
|
)
|
|
|
(3,887
|
)
|
|
Total shareholders' equity
|
|
|
371,159
|
|
|
|
368,377
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
704,158
|
|
|
$
|
703,572
|
|
|
|
|
Del Taco Restaurants, Inc.
|
|
Consolidated Statements of Comprehensive Income (Loss)
|
|
(Unaudited)
|
|
(In thousands, except share and per share data)
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
12 Weeks
|
|
|
12 Weeks
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 22, 2016
|
|
|
March 24, 2015
|
|
Revenue:
|
|
|
|
|
|
|
Company restaurant sales
|
|
$
|
93,550
|
|
|
|
$
|
90,883
|
|
|
Franchise revenue
|
|
|
3,329
|
|
|
|
|
3,001
|
|
|
Franchise sublease income
|
|
|
524
|
|
|
|
|
534
|
|
|
Total revenue
|
|
|
97,403
|
|
|
|
|
94,418
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
Restaurant operating expenses:
|
|
|
|
|
|
|
Food and paper costs
|
|
|
26,129
|
|
|
|
|
25,982
|
|
|
Labor and related expenses
|
|
|
29,784
|
|
|
|
|
27,923
|
|
|
Occupancy and other operating expenses
|
|
|
20,123
|
|
|
|
|
20,034
|
|
|
General and administrative
|
|
|
8,292
|
|
|
|
|
7,296
|
|
|
Depreciation and amortization
|
|
|
5,486
|
|
|
|
|
3,792
|
|
|
Occupancy and other - franchise subleases
|
|
|
503
|
|
|
|
|
505
|
|
|
Pre-opening costs
|
|
|
93
|
|
|
|
|
119
|
|
|
Restaurant closure charges, net
|
|
|
178
|
|
|
|
|
22
|
|
|
Loss on disposal of assets
|
|
|
75
|
|
|
|
|
–
|
|
|
Total operating expenses
|
|
|
90,663
|
|
|
|
|
85,673
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
6,740
|
|
|
|
|
8,745
|
|
|
|
|
|
|
|
|
|
Other expenses:
|
|
|
|
|
|
|
Interest expense
|
|
|
1,472
|
|
|
|
|
6,811
|
|
|
Transaction-related costs
|
|
|
65
|
|
|
|
|
6,316
|
|
|
Debt modification costs
|
|
|
–
|
|
|
|
|
135
|
|
|
Change in fair value of warrant liability
|
|
|
–
|
|
|
|
|
(35
|
)
|
|
Total other expenses
|
|
|
1,537
|
|
|
|
|
13,227
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before provision for income taxes
|
|
|
5,203
|
|
|
|
|
(4,482
|
)
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
2,142
|
|
|
|
|
458
|
|
|
Net income (loss)
|
|
|
3,061
|
|
|
|
|
(4,940
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
Change in fair value of interest rate cap
|
|
|
–
|
|
|
|
|
(21
|
)
|
|
Reclassification of interest rate cap amortization included in net
income (loss)
|
|
|
–
|
|
|
|
|
22
|
|
|
Total other comprehensive income, net
|
|
|
–
|
|
|
|
|
1
|
|
|
Comprehensive income (loss)
|
|
$
|
3,061
|
|
|
|
$
|
(4,939
|
)
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.08
|
|
|
|
$
|
(1.21
|
)
|
|
Diluted
|
|
$
|
0.08
|
|
|
|
$
|
(1.21
|
)
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding
|
|
|
|
|
|
|
Basic
|
|
|
38,798,014
|
|
|
|
|
4,074,498
|
|
|
Diluted
|
|
|
38,798,301
|
|
|
|
|
4,074,498
|
|
|
|
|
Del Taco Restaurants, Inc.
|
|
Reconciliation of Net Income (Loss) to EBITDA and Adjusted
EBITDA
|
|
(Unaudited)
|
|
(In thousands)
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
12 Weeks
|
|
12 Weeks
|
|
|
|
Ended
|
|
Ended
|
|
|
|
March 22, 2016
|
|
March 24, 2015
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
3,061
|
|
|
|
$
|
(4,940
|
)
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
2,142
|
|
|
|
|
458
|
|
|
Interest expense
|
|
|
1,472
|
|
|
|
|
6,811
|
|
|
Depreciation and amortization
|
|
|
5,486
|
|
|
|
|
3,793
|
|
|
EBITDA
|
|
|
12,161
|
|
|
|
|
6,122
|
|
|
Stock-based compensation expense
|
|
|
699
|
|
|
|
|
532
|
|
|
Loss on disposal of assets
|
|
|
75
|
|
|
|
|
-
|
|
|
Restaurant closure charges, net
|
|
|
178
|
|
|
|
|
22
|
|
|
Amortization of favorable and unfavorable lease assets and
liabilities, net
|
|
|
(140
|
)
|
|
|
|
(1
|
)
|
|
Debt modification costs
|
|
|
-
|
|
|
|
|
135
|
|
|
Transaction-related costs
|
|
|
65
|
|
|
|
|
6,316
|
|
|
Change in fair value of warrant liability
|
|
|
-
|
|
|
|
|
(35
|
)
|
|
Pre-opening costs
|
|
|
93
|
|
|
|
|
119
|
|
|
Adjusted EBITDA
|
|
$
|
13,131
|
|
|
|
$
|
13,210
|
|
|
|
|
Del Taco Restaurants, Inc.
|
|
Reconciliation of Company Restaurant Sales to Restaurant
Contribution
|
|
(Unaudited)
|
|
(In thousands)
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
12 Weeks
|
|
12 Weeks
|
|
|
|
Ended
|
|
Ended
|
|
|
|
March 22, 2016
|
|
March 24, 2015
|
|
|
|
|
|
|
|
|
Company restaurant sales
|
|
$
|
93,550
|
|
|
|
$
|
90,883
|
|
|
Restaurant operating expenses
|
|
|
76,036
|
|
|
|
|
73,939
|
|
|
Restaurant contribution
|
|
$
|
17,514
|
|
|
|
$
|
16,944
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160502005975/en/
Source: Del Taco Restaurants, Inc.