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Del Taco Restaurants, Inc. Announces Fiscal Forth Quarter and Fiscal year 2015 Financial Results

Del Taco Restaurants, Inc. ("Del Taco" or the "Company"), (NASDAQ: TACO, TACOW), the second largest Mexican-American QSR chain by units in the United States, operating restaurants under the name Del Taco, today announced fiscal fourth quarter and fiscal year 2015 financial results. Del Taco also announced that its Board of Directors has authorized a share repurchase program under which the Company may repurchase up to $25 million of its outstanding common stock and warrants.

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 fourth quarter financial statement presentation that includes a predecessor period for the sixteen-weeks ended December 30, 2014 compared to a successor period for the sixteen-weeks ended December 29, 2015. Consequently, the fiscal year 2015 financial statement presentation includes a predecessor period for the twenty-six weeks ended June 30, 2015 followed by a successor period for the twenty-six weeks ended December 29, 2015. The financial results referenced for fiscal year 2015 have been aggregated to reflect, on a pro forma basis, the combined successor and predecessor periods for the fifty-two weeks ended December 29, 2015 compared to the comparable fifty-two weeks during fiscal year 2014.

Fiscal Fourth Quarter 2015 Highlights
• System-wide comparable restaurant sales growth of 5.8% and company-owned comparable restaurant sales growth of 5.9%, marking the ninth and fourteenth consecutive quarter of gains, respectively; ◦ Company-owned comparable restaurant sales growth comprised check growth of 6.0%, including over 2% of menu mix growth, and approximately flat transactions at (0.1%);
• Total revenue of $133.4 million, representing 6.1% growth from the fiscal fourth quarter of 2014;
• Restaurant sales of $128.1 million, representing 6.0% growth from the fiscal fourth quarter of 2014;
• Restaurant contribution margin, a non-GAAP financial measure, of 21.2%, an improvement of approximately 90 basis points from the fiscal fourth quarter of 2014;
• Net income increased to $4.8 million from a net loss of $8.1 million in the fiscal fourth quarter of 2014, representing diluted earnings (loss) per share of $0.12 and ($2.08) in the fiscal fourth quarter of 2015 and 2014, respectively;
• Adjusted EBITDA, a non-GAAP financial measure, of $21.2 million, representing 8.4% growth from the fiscal fourth quarter of 2014; and
• The opening of nine restaurants system wide, including three company-owned and six franchised restaurants.

Fiscal Year 2015 Highlights
• System-wide comparable restaurant sales growth of 6.3% and company-owned comparable restaurant sales growth of 6.4%; ◦ Company-owned comparable restaurant sales growth comprises check growth of 4.8% and transaction growth of 1.6%;
• Total revenue of $424.0 million, representing 7.1% growth from the prior fiscal year;
• Restaurant sales of $407.6 million, representing 7.0% growth from the prior fiscal year;
• Restaurant contribution margin, a non-GAAP financial measure, of 20.0%, an improvement of approximately 130 basis points from the prior fiscal year;
• Adjusted EBITDA, a non-GAAP financial measure, of $65.0 million, representing 10.4% growth from the prior fiscal year; and
• The opening of 12 restaurants system wide, including 6 company-owned and 6 franchised restaurants.

Paul J.B. Murphy, III, President and Chief Executive Officer of Del Taco, commented, "2015 was an incredibly successful year at Del Taco as we solidified our QSR+ positioning by elevating brand perceptions and guest experiences. Strong execution of our initiatives is reflected in the progress we made in increasing operating margins and towards reaching our average unit volume goal of $1.5 million by 2018. This past year also marked Del Taco's entry into the public markets, laying the foundation for our next growth phase. I thank all of our team members for their hard work without which these achievements would not have been possible."

Murphy continued, "As we look to 2016, we are striving to improve the guest experience with a great line up of new products including continued innovation within our Buck & Under value platform. We are also investing in our operations to drive speed of service and expand our QSR+ capabilities, and we are focused on embedding and enhancing our positioning by taking a fresh approach to everything we do."

Murphy concluded, "Today's announcement of a share repurchase plan reflects the marked improvement in our financial condition over the past year, as represented by our strong free cash flow profile and increased borrowing capacity, as well as our confidence in Del Taco's growth strategy. We are committed to generating long-term returns for our shareholders through all the means at our disposal, including opportunistic repurchases of our common stock and warrants."

Review of Fiscal Fourth Quarter 2015 Financial Results

Total revenue was $133.4 million, an increase of 6.1% compared to $125.7 million in the fiscal fourth quarter of 2014. The growth in revenue was driven by a 6.0% increase in Company restaurant sales and an 11.5% increase in franchise revenue.

Comparable restaurant sales increased 5.8% system-wide for the fiscal fourth quarter ended December 29, 2015 compared to the 5.8% gain in the prior year fiscal fourth quarter, for a two-year growth rate of 11.6%. The Del Taco system has now generated comparable restaurant sales growth for nine consecutive quarters.

Company-owned comparable restaurant sales increased 5.9%, marking the fourteenth consecutive quarter of comparable restaurant sales growth. Average check growth contributed meaningfully to the comparable restaurant sales increase as guests continued to respond favorably to the introduction of new premium products that embed Del Taco's QSR+ positioning. Franchise comparable restaurant sales increased 5.7%.

Restaurant contribution, a non-GAAP financial measure, increased 10.3% year-over-year to $27.1 million. As a percentage of Company restaurant sales, restaurant contribution increased approximately 90 basis points year-over-year to 21.2%. The increase was driven by an approximate 90 basis point improvement in labor and related expenses and 10 basis point improvement in occupancy and other operating expenses, partially offset by a 10 basis point increase in food and paper costs. 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 $21.2 million, an increase of 8.4% from $19.6 million in the previous year's fiscal fourth quarter. A reconciliation between adjusted EBITDA and the nearest GAAP financial measure is included in the accompanying financial data.

Net income was $4.8 million, compared to net loss of $8.1 million in the fiscal fourth quarter of 2014. Earnings per diluted share were $0.12, compared to a loss of $2.08 per diluted share in the fourth quarter of 2014.

Restaurant Development

Del Taco opened three company-owned and six franchise restaurants during the fiscal fourth quarter, resulting in twelve system-wide openings during fiscal year 2015. One company-owned restaurant previously expected to open last year was delayed due to significant rains in Georgia and opened on January 6, 2016. Additionally, Del Taco closed twelve previously discussed underperforming company-owned restaurants late in the fiscal fourth quarter.

Fiscal Year 2016 Guidance

The Company is providing the following guidance for fiscal year 2016, the 53-week period ending January 3, 2017 and currently expects the following for fiscal year 2016:
• 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.

Share Repurchase Program

The Del Taco Board of Directors has approved a share repurchase program under which the Company may purchase up to $25 million of its outstanding common stock and warrants. The authorization is effective immediately, and will expire upon completion of the repurchase program, unless terminated earlier by the Board of Directors. Purchases under the program may be made in open market or privately negotiated transactions (including, without limitation, the use of Rule 10b5-1 plans) in compliance with applicable federal securities laws, including the Securities and Exchange Commission Rule 10b-18. The Company has no obligation to repurchase shares under this authorization, and the timing, actual number and value of shares purchased will depend on the Company's stock price, market conditions, and other factors.
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