Del Taco Restaurants, Inc. Reports Fiscal Second Quarter 2020 Financial Results

07/23/2020

System-wide Comparable Restaurant Sales Turn Positive in the Fiscal Third Quarter to Date

Operating Performance Optimized during the Second Quarter 2020

Reduces Outstanding Debt, Net of Cash, by Over $9 Million

LAKE FOREST, Calif.--(BUSINESS WIRE)-- Del Taco Restaurants, Inc. (“Del Taco” or the “Company”), (NASDAQ: TACO), the second largest Mexican-American quick service restaurant chain by units in the United States, today reported fiscal second quarter 2020 financial results for the 12-week period ending June 16, 2020 and provided a business update related to the impact of COVID-19.

Management Commentary

John D. Cappasola, Jr., President and Chief Executive Officer of Del Taco, commented, “Our restaurant teams, franchise partners and support staff are doing exceptional work supporting our people, serving our guests and strengthening our brand as we successfully navigate the business recovery phase of our strategy while preparing for brand acceleration. Despite the pandemic-induced headwind affecting our industry, our system-wide comparable restaurant sales continue to improve sequentially and are slightly positive thus far in the fiscal third quarter, led by our franchise base who is sustaining positive comparable restaurant sales across a broad 14 state geographic footprint.”

Cappasola continued, “Importantly, the sequential company comparable restaurant sales improvement paired with strong cost controls helped optimize restaurant contribution and Adjusted EBITDA performance during the second quarter. This performance, coupled with the deferral of certain non-essential capital expenditures, enabled us to reduce our outstanding debt, net of cash, at the end of the second quarter by over $9 million and maintain a relatively stable net debt to Adjusted EBITDA leverage ratio compared to the end of fiscal 2019. Our financial stability and profitability improvements have allowed us to reinforce our people-centric culture by paying company General Managers healthy second quarter bonuses and introducing an enhanced employee meal program to reward our restaurant teams for their leadership and dedication to serving their communities.”

Cappasola concluded, “As 2020 progresses we will further optimize performance while laying the groundwork for brand acceleration. We plan to leverage our QSR+ strengths with innovation across our powerful barbell menu, expand our engagement in social and digital channels, and further our strategy to be a trusted and safe brand for our guests and employees. Next week, we will launch New Crispy Chicken, a unique protein within the Mexican QSR category, which will debut on the Del’s Dollar Deals menu as a new $1 Crispy Chicken Taco and in a New $5 Epic Burrito with Fresh Guacamole. We are excited to bring this new protein to market on the heels of a recent successful launch of Fresh Guacamole.”

Fiscal Second Quarter 2020 Comparable Restaurant Sales

 

Twelve weeks
ended

 

Four weeks
ended

 

Four weeks
ended

 

Four weeks
ended

 

June 16, 2020

 

April 21, 2020

 

May 19, 2020

 

June 16, 2020

Company-operated

 

-12.6%

 

-23.9%

 

-10.4%

 

-3.7%

Franchised

 

-7.2%

 

-22.7%

 

-2.9%

 

3.5%

System-wide

 

-10.1%

 

-23.4%

 

-6.9%

 

-0.3%

The results in the table above are compared to the comparable prior year period.

Fiscal Second Quarter 2020 Highlights

  • System-wide comparable restaurant sales decreased 10.1%;
    • Company-operated comparable restaurant sales decreased 12.6%;
    • Franchised comparable restaurant sales decreased 7.2%;
  • Total revenue of $104.6 million, representing a 13.9% decline from the fiscal second quarter 2019;
  • Company-operated restaurant sales of $95.3 million, representing a 15.1% decline from the fiscal second quarter 2019;
  • Net loss of $0.6 million, or $0.02 per diluted share, compared to net income of $2.1 million, or $0.06 per diluted share, in the fiscal second quarter 2019;
  • Adjusted net loss* of $0.1 million, or $0.00 per diluted share, compared to adjusted net income* of $5.4 million, or $0.15 per diluted share, in the fiscal second quarter 2019;
  • Restaurant contribution* margin of 16.4% compared to 19.0% in the fiscal second quarter 2019;
  • Adjusted EBITDA* of $12.1 million compared to $16.7 million in the fiscal second quarter 2019; and
  • One company-operated and two franchise restaurant closures. Del Taco also refranchised one restaurant to an existing franchisee.

* Adjusted net income/loss, restaurant contribution, and adjusted EBITDA are non-GAAP measures and defined below under “Key Financial Definitions”. Please see the reconciliation of non-GAAP measures accompanying this release.

Cash and Liquidity

During the fiscal second quarter 2020, Del Taco reduced its outstanding borrowing on its revolving credit facility to $145 million, consistent with its revolving credit facility balance at the end of fiscal year 2019. At the end of the second fiscal quarter the Company’s debt, net of cash, totaled $133.8 million compared to $143.4 million at the end of fiscal year 2019, representing a reduction of approximately $9.6 million and a relatively stable net debt to Adjusted EBITDA* leverage ratio. This performance has allowed us to maintain meaningful financial cushion with respect to our lease adjusted leverage and fixed charge coverage covenants which the Company currently expects to maintain.

As of July 23, Del Taco had over $12 million in cash on hand and $87.7 million of remaining availability under its revolving credit facility.

Review of Fiscal Second Quarter 2020 Financial Results

Total revenue decreased 13.9% to $104.6 million compared to $121.5 million in the fiscal second quarter 2019. Comparable restaurant sales decreased 10.1% system-wide, decreased 12.6% at company-operated restaurants, and decreased 7.2% at franchised restaurants.

Net loss was $0.6 million, or $0.02 per diluted share, compared to net income of $2.1 million, or $0.06 per diluted share, last year.

Adjusted net income/loss*, which excludes sublease income for closed restaurants, impairment of long-lived assets, restaurant closure charges, loss on disposal of assets and adjustments to assets held for sale, and other income, was an adjusted net loss* of $0.1 million or $0.00 per diluted share compared to adjusted net income* of $5.4 million or $0.15 per diluted share last year.

Restaurant contribution* was $15.6 million compared to $21.3 million in the fiscal second quarter 2019. As a percentage of company-operated restaurant sales, restaurant contribution margin decreased 260 basis points year-over-year to 16.4%. The decrease was the result of approximately an approximately 80 basis point increase in labor and related expenses and an approximately 240 basis point increase in occupancy and other operating expenses, partially offset by a 60 basis point decrease in food and paper costs.

Adjusted EBITDA* was $12.1 million compared to $16.7 million in the fiscal second quarter 2019.

Portfolio Optimization and Restaurant Development

During the fiscal second quarter 2020, there were one company-operated and two franchise restaurant closures. Del Taco also refranchised one restaurant to an existing franchisee.

One new company-operated restaurant and two new franchised restaurants have already opened in the fiscal third quarter 2020 and there are up to three planned franchised restaurant openings later this year.

Fiscal Year 2020 Guidance Withdrawn

As a reminder, Del Taco previously withdrew guidance for the 52-week fiscal year 2020 ending December 29, 2020. However, the Company expects to demonstrate sequential improvement in year over year restaurant contribution* margin trends during the third and fourth fiscal quarters due to our comparable restaurant sales recovery coupled with sequentially less commodity inflation and a continued focus on managing our other restaurant expenses.

Conference Call and Webcast

A conference call and webcast is scheduled for 4:30 p.m. ET today. Hosting the conference call and webcast will be John D. Cappasola, Jr., President and Chief Executive Officer; and Steven L. Brake, Executive Vice President and Chief Financial Officer.

Interested parties may listen to the conference call via telephone by dialing 201-689-8471. A telephone replay will be available shortly after the call has concluded and can be accessed by dialing 412-317-6671; the passcode is 13706145.

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 marginare neither required by, nor presented in accordance with, GAAP. Restaurant contribution and restaurant contribution margin are supplemental measures of operating performance of restaurants and the calculations thereof may not be comparable to those reported by other companies. Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of results as reported under GAAP. Management believes that restaurant contribution and restaurant contribution margin are important tools for investors because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency and performance. Management uses restaurant contribution and restaurant contribution margin as key performance indicators to evaluate the profitability of incremental sales at Del Taco restaurants, to evaluate restaurant performance across periods and to evaluate restaurant financial performance compared with competitors.

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 impairment of goodwill, trademark and long-lived assets, stock-based compensation expense and restaurant closure charges, 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. We believe Adjusted EBITDA facilitates operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). We also present Adjusted EBITDA because (i) we believe this measure is frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry and (ii) we use Adjusted EBITDA internally as a benchmark to compare performance to that of competitors.

Adjusted net income/loss* represents company net income before impairment of goodwill, trademark and long-lived assets, restaurant closure charges, sublease income related to closed restaurants, other income, executive transition costs and loss on disposal of assets and adjustments to assets held for sale, net of tax. Adjusted diluted net income/loss per share* represents company diluted net income per share before impairment of goodwill, trademark and long-lived assets, restaurant closure charges, sublease income related to closed restaurants, other income, executive transition costs and loss on disposal of assets and adjustments to assets held for sale, net of tax.

About Del Taco Restaurants, Inc.

Del Taco (NASDAQ: TACO) offers a unique variety of both Mexican and American favorites such as burritos and fries, prepared fresh in every restaurant's working kitchen with the value and convenience of a drive-thru. Del Taco's menu items taste better because they are made with quality ingredients like fresh grilled chicken and carne asada steak, hand-sliced avocado, hand-grated cheddar cheese, slow-cooked beans made from scratch, and creamy Queso Blanco. The brand's campaign further communicates Del Taco's commitment to providing guests with the best quality and value for their money through cooking, chopping, shredding and grilling menu items from scratch. Founded in 1964, today Del Taco serves more than three million guests each week at its approximately 600 restaurants across 15 states. For more information, visit www.deltaco.com.

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 on 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 include, without limitation, the impact of the COVID-19 pandemic, consumer demand, our inability to successfully open company-operated 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 (including minimum wage regulations), food safety and foodborne illness concerns, our inability to manage existing and to obtain additional franchisees, our inability to successfully execute our portfolio optimization strategy, 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, including under Part I. Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II., Item 1A. Risk Factors in our Quarterly Report on Form 10-Q for the period ended March 24, 2020, 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 Sheets
(In thousands, except share and per share data)
 
June 16, 2020 December 31, 2019
(Unaudited)
Assets
Current assets:
Cash and cash equivalents

$

10,749

 

$

1,421

 

Accounts and other receivables, net

 

5,301

 

 

3,580

 

Inventories

 

2,471

 

 

3,123

 

Prepaid expenses and other current assets

 

1,776

 

 

2,289

 

Assets held for sale

 

1,495

 

 

8,411

 

Total current assets

 

21,792

 

 

18,824

 

Property and equipment, net

 

150,245

 

 

156,921

 

Operating lease right-of-use assets

 

253,180

 

 

258,278

 

Goodwill

 

108,979

 

 

192,739

 

Trademarks

 

208,400

 

 

220,300

 

Intangible assets, net

 

10,543

 

 

10,827

 

Other assets, net

 

4,705

 

 

4,568

 

Total assets

$

757,844

 

$

862,457

 

 
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable

$

17,818

 

$

19,652

 

Other accrued liabilities

 

41,700

 

 

34,577

 

Current portion of finance lease obligations and other debt

 

198

 

 

220

 

Current portion of operating lease liabilities

 

20,667

 

 

17,848

 

Total current liabilities

 

80,383

 

 

72,297

 

Long-term debt, finance lease obligations and other debt, excluding current
portion, net

 

144,368

 

 

144,581

 

Operating lease liabilities, excluding current portion

 

256,277

 

 

257,361

 

Deferred income taxes

 

59,148

 

 

69,510

 

Other non-current liabilities

 

16,020

 

 

16,601

 

Total liabilities

 

556,196

 

 

560,350

 

 
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; 37,122,976
shares issued and outstanding at June 16, 2020; 37,059,202
shares issued and outstanding at December 31, 2019

 

4

 

 

4

 

Additional paid-in capital

 

335,912

 

 

333,379

 

Accumulated other comprehensive loss

 

 

 

(52

)

Accumulated deficit

 

(134,268

)

 

(31,224

)

Total shareholders’ equity

 

201,648

 

 

302,107

 

Total liabilities and shareholders’ equity

$

757,844

 

$

862,457

 

Del Taco Restaurants, Inc.
Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
(In thousands, except share and per share data)
 
12 Weeks Ended 24 Weeks Ended
June 16, 2020 June 18, 2019 June 16, 2020 June 18, 2019
Revenue:
Company restaurant sales

$

95,261

 

$

112,180

 

$

195,594

 

$

218,083

 

Franchise revenue

 

4,520

 

 

4,638

 

 

8,911

 

 

8,703

 

Franchise advertising contributions

 

2,783

 

 

3,459

 

 

5,994

 

 

6,590

 

Franchise sublease and other income

 

2,006

 

 

1,183

 

 

3,881

 

 

2,281

 

Total revenue

 

104,570

 

 

121,460

 

 

214,380

 

 

235,657

 

Operating expenses:
Restaurant operating expenses:
Food and paper costs

 

25,642

 

 

30,855

 

 

53,937

 

 

59,673

 

Labor and related expenses

 

31,609

 

 

36,338

 

 

66,545

 

 

72,238

 

Occupancy and other operating expenses

 

22,389

 

 

23,703

 

 

46,797

 

 

48,136

 

General and administrative

 

9,432

 

 

10,849

 

 

19,298

 

 

21,314

 

Franchise advertising expenses

 

2,783

 

 

3,459

 

 

5,994

 

 

6,590

 

Depreciation and amortization

 

6,285

 

 

5,813

 

 

12,422

 

 

11,720

 

Occupancy and other - franchise subleases and other

 

1,727

 

 

993

 

 

3,322

 

 

1,847

 

Pre-opening costs

 

63

 

 

155

 

 

296

 

 

255

 

Impairment of goodwill

 

 

 

 

 

87,277

 

 

 

Impairment of trademarks

 

 

 

 

 

11,900

 

 

 

Impairment of long-lived assets

 

 

 

3,694

 

 

8,287

 

 

3,694

 

Restaurant closure charges, net

 

499

 

 

490

 

 

993

 

 

1,130

 

Loss on disposal of assets and adjustments to assets held for
sale, net

 

435

 

 

594

 

 

557

 

 

884

 

Total operating expenses

 

100,864

 

 

116,943

 

 

317,625

 

 

227,481

 

Income (loss) from operations

 

3,706

 

 

4,517

 

 

(103,245

)

 

8,176

 

Other expense (income), net:
Interest expense

 

1,281

 

 

1,722

 

 

2,789

 

 

3,506

 

Other income

 

 

 

(97

)

 

 

 

(201

)

Total other expense, net

 

1,281

 

 

1,625

 

 

2,789

 

 

3,305

 

Income (loss) from operations before provision (benefit) for income taxes

 

2,425

 

 

2,892

 

 

(106,034

)

 

4,871

 

Provision (benefit) for income taxes

 

3,001

 

 

800

 

 

(2,990

)

 

1,354

 

Net (loss) income

 

(576

)

 

2,092

 

 

(103,044

)

 

3,517

 

Other comprehensive income (loss):
Change in fair value of interest rate cap, net of tax

 

 

 

(131

)

 

 

 

(270

)

Reclassification of interest rate cap amortization included in net
income, net of tax

 

7

 

 

26

 

 

52

 

 

47

 

Total other comprehensive income (loss), net

 

7

 

 

(105

)

 

52

 

 

(223

)

Comprehensive (loss) income

$

(569

)

$

1,987

 

$

(102,992

)

$

3,294

 

(Loss) Earnings per share:
Basic

$

(0.02

)

$

0.06

 

$

(2.78

)

$

0.10

 

Diluted

$

(0.02

)

$

0.06

 

$

(2.78

)

$

0.09

 

Weighted average shares outstanding
Basic

 

37,086,962

 

 

36,821,728

 

 

37,081,511

 

 

36,988,853

 

Diluted

 

37,086,962

 

 

37,083,799

 

 

37,081,511

 

 

37,215,059

 

Del Taco Restaurants, Inc.
Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA
(Unaudited)
(In thousands)
 
12 Weeks Ended 24 Weeks Ended
June 16, 2020 June 18, 2019 June 16, 2020 June 18, 2019
Net (loss) income

$

(576

)

$

2,092

 

$

(103,044

)

$

3,517

 

Non-GAAP adjustments:
Provision (benefit) for income taxes

 

3,001

 

 

800

 

 

(2,990

)

 

1,354

 

Interest expense

 

1,281

 

 

1,722

 

 

2,789

 

 

3,506

 

Depreciation and amortization

 

6,285

 

 

5,813

 

 

12,422

 

 

11,720

 

EBITDA

 

9,991

 

 

10,427

 

 

(90,823

)

 

20,097

 

Stock-based compensation expense (a)

 

1,413

 

 

1,676

 

 

2,638

 

 

3,253

 

Loss on disposal of assets and adjustments to assets
held for sale, net (b)

 

435

 

 

594

 

 

557

 

 

884

 

Impairment of goodwill (c)

 

 

 

 

 

87,277

 

 

 

Impairment of trademarks (d)

 

 

 

 

 

11,900

 

 

 

Impairment of long-lived assets (e)

 

 

 

3,694

 

 

8,287

 

 

3,694

 

Restaurant closure charges, net (f)

 

499

 

 

490

 

 

993

 

 

1,130

 

Amortization of favorable and unfavorable lease
assets and liabilities, net (g)

 

(66

)

 

(23

)

 

(115

)

 

63

 

Pre-opening costs (h)

 

63

 

 

155

 

 

296

 

 

255

 

Sublease income for closed restaurants (i)

 

(248

)

 

(180

)

 

(498

)

 

(381

)

Executive transition costs (j)

 

 

 

 

 

287

 

 

 

Other income (k)

 

 

 

(97

)

 

 

 

(201

)

Adjusted EBITDA

$

12,087

 

$

16,736

 

$

20,799

 

$

28,794

 

(a) Includes non-cash, stock-based compensation.
(b) Loss on disposal of assets and adjustments to assets held for sale, net includes adjustments to reduce the carrying amount for assets held for sale to estimated fair value less cost to sell, loss or gain on disposal of assets related to sales, retirements and replacement or write-off of leasehold improvements or equipment in the ordinary course of business, net gains or losses recorded associated with the sale of company-operated restaurants to franchisees, gains from the write-off of right-of-use assets and operating lease liabilities related to the termination of leases and net gains or losses recorded associated with sale-leaseback transactions.
(c) Includes non-cash charges related to impairment of goodwill.
(d) Includes non-cash charges related to impairment of trademarks.
(e) Includes non-cash charges related to impairment of long-lived assets.
(f) Restaurant closure costs include rent expense, non-lease executory costs, other direct costs associated with previously closed restaurants and future obligations associated with the closure or net sublease shortfall of a restaurant.
(g) Includes amortization of favorable lease assets and unfavorable lease liabilities.
(h) Pre-opening costs consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including restaurant labor, supplies, cash and non-cash rent expense and other related pre-opening costs. These are generally incurred over the three to five months prior to opening.
(i) Includes other sublease income related to closed restaurants that have been subleased to third parties.
(j) Includes costs associated with the transition of former Company executives, such as severance expense.
(k) During 2019, other income consists of insurance proceeds related to a fire at a company-operated restaurant.
Del Taco Restaurants, Inc.
Reconciliation of Company Restaurant Sales to Restaurant Contribution
(Unaudited)
(In thousands)
 
12 Weeks Ended 24 Weeks Ended
June 16, 2020 June 18, 2019 June 16, 2020 June 18, 2019
Company restaurant sales

$

95,261

 

$

112,180

 

$

195,594

 

$

218,083

 

Restaurant operating expenses

 

79,640

 

 

90,896

 

 

167,279

 

 

180,047

 

Restaurant contribution

$

15,621

 

$

21,284

 

$

28,315

 

$

38,036

 

Restaurant contribution margin

 

16.4

%

 

19.0

%

 

14.5

%

 

17.4

%

 
 
Del Taco Restaurants, Inc.
Reconciliation of Income (Loss) from Operations to Restaurant Contribution
(Unaudited)
(In thousands)
 
12 Weeks Ended 24 Weeks Ended
June 16, 2020 June 18, 2019 June 16, 2020 June 18, 2019
Income (loss) from operations

$

3,706

 

$

4,517

 

$

(103,245

)

$

8,176

 

Less:
Franchise revenue

 

(4,520

)

 

(4,638

)

 

(8,911

)

 

(8,703

)

Franchise advertising contributions

 

(2,783

)

 

(3,459

)

 

(5,994

)

 

(6,590

)

Franchise sublease income and other

 

(2,006

)

 

(1,183

)

 

(3,881

)

 

(2,281

)

Plus:
General and administrative

 

9,432

 

 

10,849

 

 

19,298

 

 

21,314

 

Franchise advertising expenses

 

2,783

 

 

3,459

 

 

5,994

 

 

6,590

 

Depreciation and amortization

 

6,285

 

 

5,813

 

 

12,422

 

 

11,720

 

Occupancy and other - franchise
subleases and other

 

1,727

 

 

993

 

 

3,322

 

 

1,847

 

Pre-opening costs

 

63

 

 

155

 

 

296

 

 

255

 

Impairment of goodwill

 

 

 

 

 

87,277

 

 

 

Impairment of trademarks

 

 

 

 

 

11,900

 

 

 

Impairment of long-lived assets

 

 

 

3,694

 

 

8,287

 

 

3,694

 

Restaurant closure charges, net

 

499

 

 

490

 

 

993

 

 

1,130

 

Loss on disposal of assets and
adjustments to assets held for sale, net

 

435

 

 

594

 

 

557

 

 

884

 

Restaurant contribution

$

15,621

 

$

21,284

 

$

28,315

 

$

38,036

 

Company restaurant sales

$

95,261

 

$

112,180

 

$

195,594

 

$

218,083

 

Restaurant contribution margin

 

16.4

%

 

19.0

%

 

14.5

%

 

17.4

%

Del Taco Restaurants, Inc.
Reconciliation of Net (Loss) Income to Adjusted Net (Loss) Income
(Unaudited)
(In thousands, except per share data)
 
12 Weeks Ended 24 Weeks Ended
June 16, 2020 June 18, 2019 June 16, 2020 June 18, 2019
Net (loss) income, as reported

$

(576

)

$

2,092

 

$

(103,044

)

$

3,517

 

Sublease income for closed restaurants (a)

 

(248

)

 

(180

)

 

(498

)

 

(381

)

Impairment of goodwill (b)

 

 

 

 

 

87,277

 

 

 

Impairment of trademarks (c)

 

 

 

 

 

11,900

 

 

 

Impairment of long-lived assets (d)

 

 

 

3,694

 

 

8,287

 

 

3,694

 

Restaurant closure charges, net (e)

 

499

 

 

490

 

 

993

 

 

1,130

 

Loss on disposal of assets and adjustments to assets
held for sale, net (f)

 

435

 

 

594

 

 

557

 

 

884

 

Other income (g)

 

 

 

(97

)

 

 

 

(201

)

Executive transition costs (h)

 

 

 

 

 

287

 

 

 

Tax impact of adjustments (i)

 

(185

)

 

(1,215

)

 

(5,809

)

 

(1,384

)

Non-GAAP adjusted net (loss) income

$

(75

)

$

5,378

 

$

(50

)

$

7,259

 

 
(Loss) Earnings per share (as reported):
Basic

$

(0.02

)

$

0.06

 

$

(2.78

)

$

0.10

 

Diluted

$

(0.02

)

$

0.06

 

$

(2.78

)

$

0.09

 

Weighted average shares outstanding (as reported):
Basic

 

37,086,962

 

 

36,821,728

 

 

37,081,511

 

 

36,988,853

 

Diluted

 

37,086,962

 

 

37,083,799

 

 

37,081,511

 

 

37,215,059

 

 
Adjusted earnings per share:
Basic

$

(0.00

)

$

0.15

 

$

(0.00

)

$

0.20

 

Diluted

$

(0.00

)

$

0.15

 

$

(0.00

)

$

0.20

 

Shares used in computing adjusted earnings per share:
Basic

 

37,086,962

 

 

36,821,728

 

 

37,081,511

 

 

36,988,853

 

Diluted

 

37,086,962

 

 

37,083,799

 

 

37,081,511

 

 

37,215,059

 

(a) Includes other sublease income related to closed restaurants that have been subleased to third parties.
(b) Includes non-cash charges related to impairment of goodwill.
(c) Includes non-cash charges related to impairment of trademarks.
(d) Includes non-cash charges related to impairment of long-lived assets.
(e) Restaurant closure costs include rent expense, non-lease executory costs, other direct costs associated with previously closed restaurants and future obligations associated with the closure or net sublease shortfall of a restaurant.
(f) Loss on disposal of assets and adjustments to assets held for sale, net includes adjustments to reduce the carrying amount for assets held for sale to estimated fair value less cost to sell, loss or gain on disposal of assets related to sales, retirements and replacement or write-off of leasehold improvements or equipment in the ordinary course of business, net gains or losses recorded associated with the sale of company-operated restaurants to franchisees, gains from the write-off of right-of-use assets and operating lease liabilities related to the termination of leases and net gains or losses recorded associated with sale-leaseback transactions.
(g) During 2019, other income consists of insurance proceeds related to a fire at a company-operated restaurant.
(h) Includes costs associated with the transition of former Company executives, such as severance expense.
(i) Represents the income tax associated with the adjustments in (a) through (h) that are deductible for income tax purposes.
Del Taco Restaurants, Inc.
Restaurant Development
 
12 Weeks Ended 24 Weeks Ended
June 16, 2020 June 18, 2019 June 16, 2020 June 18, 2019
Company-operated restaurant activity:
Beginning of period

296

312

300

322

Openings

1

2

1

Closures

(1)

(3)

(2)

(3)

Purchased from franchisees

3

Sold to franchisees

(1)

(6)

(13)

Restaurants at end of period

294

310

294

310

Franchise-operated restaurant activity:
Beginning of period

300

271

296

258

Openings

2

1

6

Closures

(2)

(4)

(1)

Purchased from Company

1

6

13

Sold to Company

(3)

Restaurants at end of period

299

273

299

273

Total restaurant activity:
Beginning of period

596

583

596

580

Openings

3

3

7

Closures

(3)

(3)

(6)

(4)

Restaurants at end of period

593

583

593

583

 

Investor Relations Contact:
Raphael Gross
(203) 682-8253
investor@deltaco.com

Source: Del Taco Restaurants, Inc.

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Raphael Gross

Investor Relations

Direct: 203-682-8253

investor@deltaco.com