Fiesta Restaurant Group, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - 8-K - Fiesta Restaurant Group, Inc.	frgi-2018q28xk.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

Investor Relations Contact:

Raphael Gross

203-682-8253

investors@frgi.com

Fiesta Restaurant Group, Inc. Reports Second Quarter 2018 Results

Pollo Tropical Quarterly Comparable Restaurant Sales Growth of 3.4%

Taco Cabana Quarterly Comparable Restaurant Sales Growth of 3.1%

July Comparable Restaurant Sales Increased 2.2% at Pollo Tropical and 8.8% at Taco Cabana

DALLAS, Texas - (Business Wire) - August 6, 2018 - 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 second quarter of 2018, which ended on July 1, 2018. The Company also provided an update on the continuing progress of its ongoing Strategic Renewal Plan (the "Plan") to drive long-term shareholder value creation.

Fiesta President and Chief Executive Officer Richard Stockinger said, “Our solid second quarter results are in-line with what we expected to see from our Plan, which is aimed at restoring our iconic brands to full strength and growth. Quarterly comparable restaurant sales grew over three percent at both Pollo Tropical and Taco Cabana, validating the tremendous job our teams are doing in executing our Plan. We believe our guests truly appreciate the heightened food quality and other hospitality improvements in place and this is reflected in both our rising Net Promoter Scores and our positive restaurant sales trajectory. However, our work is far from done. In the second half of 2018, we will introduce new delivery, catering and digital loyalty platforms to grow sales and upgrade our POS tablets to increase speed of service. We will also continue to innovate our product pipeline while continuing to rebalance our mix of broadcast, digital and social media and extend our local store marketing programs to drive increased awareness and frequency. Finally, we will test kiosks and complete the implementation of several initiatives already underway to improve food and labor costs.”

Mr. Stockinger continued, “Through July, we have reported eight consecutive months of positive comparable restaurant sales growth at Pollo Tropical. To date, our hand-battered crispy chicken platform has been a resounding success, with broad appeal and high sales mix across all markets while leveraging our signature 24-hour citrus marinated chicken. We continue to focus on operational execution to support sales increases across all markets as we continue to implement the Plan.”

Mr. Stockinger concluded, “Taco Cabana has also made significant headway in enhancing the overall guest experience. Our brand re-launch began in July when we completed numerous menu enhancements. We have improved the breadth and depth of our menu which now features USDA Choice steak and applewood-smoked brisket, and improved chicken and ground beef, delivering on our promise of authentic, high quality and freshly prepared cuisine, inspired by our original recipes. We are further encouraged by the brand’s sales trajectory and its four consecutive months of comparable restaurant sales growth. We plan to build on this momentum with, among other things, all day breakfast tacos, tacos by the dozen and patio parties featuring an expansion of alcoholic beverages such as our frozen raspberry lemonade made with Tito’s® handmade vodka, complementing our new, shareable appetizers. We are gaining traction and believe that our strategic repositioning of Taco Cabana is attracting new and returning loyal guests.”

Second Quarter 2018 Financial Summary


•	Total revenues increased 2.4% from the prior year period to $176.8 million due primarily to comparable restaurant sales growth at both Pollo Tropical and Taco Cabana;


•	Comparable restaurant sales at Pollo Tropical increased 3.4%, the second consecutive quarter of positive comparable restaurant sales. Comparable restaurant sales were positively impacted by approximately 0.2% related to the fiscal calendar shift of Easter;


•	Comparable restaurant sales at Taco Cabana increased 3.1%, the first quarter of positive comparable restaurant sales since the second quarter of 2016. Comparable restaurant sales were positively impacted by approximately 0.3% related to the fiscal calendar shift of Easter;


•	Net income of $9.5 million or $0.35 per diluted share, compared to the prior year period net loss of $(2.2) million, or $(0.08) per diluted share;


•	Adjusted net income of $6.8 million, or $0.25 per diluted share, compared to the prior year period adjusted net income of $8.1 million, or $0.30 per diluted share (see non-GAAP reconciliation table below); and


•	Consolidated Adjusted EBITDA of $20.2 million compared to the prior year period Consolidated Adjusted EBITDA of $24.1 million (see non-GAAP reconciliation table below).

July 2018 Comparable Restaurant Sales

July 2018 comparable restaurant sales increased 2.2% at Pollo Tropical and increased 8.8% at Taco Cabana.

Second Quarter 2018 Brand Results

Pollo Tropical restaurant sales increased 1.1% to $95.4 million in the second quarter of 2018 compared to the prior year period due primarily to a comparable restaurant sales increase of 3.4%, partially offset by the impact of closing unprofitable restaurants in 2017. The increase in comparable restaurant sales resulted from a 4.4% increase in average check, partially offset by a 1.0% decrease in comparable restaurant transactions. Comparable restaurant sales were positively impacted by approximately 0.2% related to the fiscal calendar shift of Easter. The increase in average check was driven by menu price increases of 4.5%.

Adjusted EBITDA for Pollo Tropical decreased to $15.5 million in the second quarter of 2018 from $17.1 million in the second quarter of 2017 due primarily to the impact of an increase in cost of sales as a percentage of restaurant sales and higher advertising costs primarily driven by the Plan, partially offset by higher comparable restaurant sales and the impact of closing unprofitable restaurants in 2017.

Taco Cabana restaurant sales increased 4.0% to $80.8 million in the second quarter of 2018 compared to the prior year period due primarily to a comparable restaurant sales increase of 3.1%. The increase in comparable restaurant sales resulted from a 10.2% increase in average check, partially offset by a 7.1% decrease in comparable restaurant transactions. Comparable restaurant transactions were negatively impacted primarily by the elimination of deep discounting related to the repositioning of the brand, and by the reduction in overnight operating hours which negatively impacted comparable restaurant sales by 1.5%. Comparable restaurant sales were positively impacted by approximately 0.3% related to the fiscal calendar shift of Easter. The increase in average check was primarily driven by menu price increases of 6.3% and positive sales mix associated with higher priced promotions and new menu items related to brand repositioning.

Adjusted EBITDA for Taco Cabana decreased to $4.6 million in the second quarter of 2018 from $7.0 million in the second quarter of 2017 due primarily to the impact of higher cost of sales as a percentage of restaurant sales and higher restaurant wages and related expenses primarily driven by the Plan, partially offset by higher comparable restaurant sales.

Other Expense (Income)

Other income, net was $3.5 million in the second quarter of 2018 and primarily consisted of $2.8 million in additional insurance recoveries related to Hurricanes Harvey and Irma (the “Hurricanes”) and total gains of $1.1 million on the sales of two restaurant properties, partially offset by the write-off of site development costs of $0.2 million and costs for the removal, transfer and storage of equipment from previously closed restaurants of $0.2 million.

Capital Allocation

Anticipated capital expenditures in 2018 include opening seven new Company-owned Pollo Tropical restaurants in Florida and seven new Company-owned Taco Cabana restaurants in Texas. Up to five of the new Taco Cabana restaurants are conversions from closed Pollo Tropical restaurants, four of which were completed by the end of the second quarter of 2018. Total capital

expenditures in 2018 are now expected to be at the high-end of the $60.0 million to $70.0 million range due in part to additional restaurant investments being made to improve food quality and support new menu, catering and technology platforms. We continue to anticipate capital expenditures for the development of new restaurants to be $22.0 million to $25.0 million in 2018.

Restaurant Portfolio

As of July 1, 2018, there were 150 Company-owned Pollo Tropical restaurants, 170 Company-owned Taco Cabana restaurants, 30 franchised Pollo Tropical restaurants in the U.S., Puerto Rico, the Bahamas, Guyana and Panama and eight franchised Taco Cabana restaurants in the U.S.

During the second quarter of 2018, Fiesta opened four Company-owned Pollo Tropical restaurants in Florida and six Company-owned Taco Cabana restaurants in Texas. Two Taco Cabana restaurants closed during the second quarter of 2018 when we opened new Taco Cabana restaurants in superior sites in the same trade areas.

Investor Conference Call Today

Fiesta will host a conference call at 4:30 p.m. ET today. The conference call can be accessed live over the phone by dialing 201-689-8562. A replay will be available after the call until Monday, August 13, 2018, and can be accessed by dialing 412-317-6671. The passcode is 13681560. 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 Fiesta Restaurant Group, Inc.

Fiesta Restaurant Group, Inc., owns, operates and franchises 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, drive-thru service and catering. For more information about Fiesta Restaurant Group, Inc., visit the corporate website at www.frgi.com.

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 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 Securities and Exchange Commission.

FIESTA RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JULY 1, 2018 AND JULY 2, 2017

(In thousands of dollars, except share and per share amounts)

(Unaudited)



	Three months ended (a)						Six months ended (a)
	July 1, 2018			July 2, 2017			July 1, 2018			July 2, 2017

Revenues:
Restaurant sales	$	176,152		$	172,005		$	344,985		$	346,982
Franchise royalty revenues and fees	675			619			1,326			1,249
Total revenues	176,827			172,624			346,311			348,231
Costs and expenses:
Cost of sales	56,689			50,728			110,254			101,676
Restaurant wages and related expenses (b)	47,677			46,269			94,160			94,401
Restaurant rent expense	8,840			8,915			17,732			18,777
Other restaurant operating expenses	24,654			24,636			48,104			48,704
Advertising expense	5,361			4,292			11,574			11,831
General and administrative expenses (b)(c)	12,820			18,996			27,739			34,694
Depreciation and amortization	9,170			8,596			18,169			17,782
Pre-opening costs	877			910			1,258			1,334
Impairment and other lease charges (d)	784			10,762			122			43,176
Other expense (income), net (e)	(3,545		)	798			(3,179		)	1,252
Total operating expenses	163,327			174,902			325,933			373,627
Income (loss) from operations	13,500			(2,278		)	20,378			(25,396		)
Interest expense	986			654			2,055			1,238
Income (loss) before income taxes	12,514			(2,932		)	18,323			(26,634		)
Provision for (benefit from) income taxes	3,021			(772		)	4,646			(9,414		)
Net income (loss)	$	9,493		$	(2,160	)	$	13,677		$	(17,220	)
Basic net income (loss) per share	$	0.35		$	(0.08	)	$	0.50		$	(0.64	)
Diluted net income (loss) per share	$	0.35		$	(0.08	)	$	0.50		$	(0.64	)
Basic weighted average common shares outstanding	26,916,295			26,815,015			26,895,302			26,794,560
Diluted weighted average common shares outstanding	26,919,914			26,815,015			26,901,829			26,794,560

(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 1, 2018 and July 2, 2017 each included 13 and 26 weeks, respectively.

(b) Restaurant wages and related expenses include stock-based compensation of $33 and $(74) for the three months ended July 1, 2018 and July 2, 2017, respectively, and $50 and $35 for the six months ended July 1, 2018 and July 2, 2017, respectively. General and administrative expenses include stock-based compensation expense of $984 and $1,248 for the three months ended July 1, 2018 and July 2, 2017, respectively, and $1,856 and $1,785 for the six months ended July 1, 2018 and July 2, 2017, respectively.

(c) See notes (e) through (h) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information".

(d) See note (b) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information".

(e) See note (c) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information".

FIESTA RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars, except share and per share amounts)

(Unaudited)



	July 1, 2018		December 31, 2017

Assets
Cash	$	4,698	$	3,599
Other current assets	32,388		37,449
Property and equipment, net	239,647		234,561
Goodwill	123,484		123,484
Deferred income taxes	15,091		17,232
Other assets	7,511		6,988
Total assets	$	422,819	$	423,313

Liabilities and Stockholders' Equity
Current liabilities	$	50,277	$	59,844
Long-term debt, net of current portion	74,691		76,425
Deferred income sale-leaseback of real estate	21,664		23,466
Other liabilities	29,983		32,062
Total liabilities	176,615		191,797
Stockholders' equity	246,204		231,516
Total liabilities and stockholders' equity	$	422,819	$	423,313

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 1, 2018			July 2, 2017			July 1, 2018			July 2, 2017
Segment revenues:
Pollo Tropical	$	95,836		$	94,801		$	190,778		$	194,560
Taco Cabana	80,991			77,823			155,533			153,671
Total revenues	$	176,827		$	172,624		$	346,311		$	348,231

Change in comparable restaurant sales (a):
Pollo Tropical	3.4		%	(7.7		)%	2.2		%	(7.2		)%
Taco Cabana	3.1		%	(4.7		)%	0.7		%	(4.6		)%

Average sales per Company-owned restaurant:
Pollo Tropical
Comparable restaurants (b)	$	669		$	622		$	1,342		$	1,236
New restaurants (c)	445			471			878			824
Total company-owned (d)	645			594			1,292			1,148
Taco Cabana
Comparable restaurants (b)	$	487		$	462		$	941		$	914
New restaurants (c)	416			500			769			960
Total company-owned (d)	481			463			929			916

Income (loss) before income taxes:
Pollo Tropical	$	10,797		$	(3,502	)	$	18,925		$	(28,598	)
Taco Cabana	1,717			570			(602		)	1,964

Adjusted EBITDA:
Pollo Tropical	$	15,529		$	17,139		$	29,976		$	31,861
Taco Cabana	4,648			6,982			7,159			13,476

Restaurant-Level Adjusted EBITDA (e):
Pollo Tropical	$	22,261		$	24,269		$	43,845		$	46,864
Taco Cabana	10,702			12,910			19,365			25,174

(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".

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 1, 2018		July 2, 2017		July 1, 2018		July 2, 2017

Company-owned restaurant openings:
Pollo Tropical	4		3		4		6
Taco Cabana	6		2		6		3
Total new restaurant openings	10		5		10		9

Company-owned restaurant closings:
Pollo Tropical	—		(30	)	—		(30	)
Taco Cabana	(2	)	—		(2	)	—
Net change in restaurants	8		(25	)	8		(21	)

Number of Company-owned restaurants:
Pollo Tropical	150		153		150		153
Taco Cabana	170		169		170		169
Total Company-owned restaurants	320		322		320		322

Number of franchised restaurants:
Pollo Tropical	30		32		30		32
Taco Cabana	8		7		8		7
Total franchised restaurants	38		39		38		39

Total number of restaurants:
Pollo Tropical	180		185		180		185
Taco Cabana	178		176		178		176
Total restaurants	358		361		358		361

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 1, 2018					July 2, 2017
				(a)				(a)
Pollo Tropical:
Restaurant sales	$	95,377				$	94,374
Cost of sales	31,482			33.0	%	28,956		30.7	%
Restaurant wages and related expenses	21,549			22.6	%	21,691		23.0	%
Restaurant rent expense	4,335			4.5	%	4,472		4.7	%
Other restaurant operating expenses	12,634			13.2	%	12,930		13.7	%
Advertising expense	3,130			3.3	%	2,011		2.1	%
Depreciation and amortization	5,363			5.6	%	5,435		5.8	%
Pre-opening costs	341			0.4	%	451		0.5	%
Impairment and other lease charges	685			0.7	%	10,536		11.2	%

Taco Cabana:
Restaurant sales	$	80,775				$	77,631
Cost of sales	25,207			31.2	%	21,772		28.0	%
Restaurant wages and related expenses	26,128			32.3	%	24,578		31.7	%
Restaurant rent expense	4,505			5.6	%	4,443		5.7	%
Other restaurant operating expenses	12,020			14.9	%	11,706		15.1	%
Advertising expense	2,231			2.8	%	2,281		2.9	%
Depreciation and amortization	3,807			4.7	%	3,161		4.1	%
Pre-opening costs	536			0.7	%	459		0.6	%
Impairment and other lease charges	99			0.1	%	226		0.3	%

	Six months ended
	July 1, 2018					July 2, 2017
				(a)				(a)
Pollo Tropical:
Restaurant sales	$	189,855				$	193,684
Cost of sales	62,497			32.9	%	58,903		30.4	%
Restaurant wages and related expenses	43,705			23.0	%	45,737		23.6	%
Restaurant rent expense	8,632			4.5	%	9,847		5.1	%
Other restaurant operating expenses	24,749			13.0	%	26,319		13.6	%
Advertising expense	6,446			3.4	%	6,336		3.3	%
Depreciation and amortization	10,679			5.6	%	11,518		5.9	%
Pre-opening costs	565			0.3	%	783		0.4	%
Impairment and other lease charges	144			0.1	%	42,607		22.0	%

Taco Cabana:
Restaurant sales	$	155,130				$	153,298
Cost of sales	47,757			30.8	%	42,773		27.9	%
Restaurant wages and related expenses	50,455			32.5	%	48,664		31.7	%
Restaurant rent expense	9,100			5.9	%	8,930		5.8	%
Other restaurant operating expenses	23,355			15.1	%	22,385		14.6	%
Advertising expense	5,128			3.3	%	5,495		3.6	%
Depreciation and amortization	7,490			4.8	%	6,264		4.1	%
Pre-opening costs	693			0.4	%	551		0.4	%
Impairment and other lease charges	(22		)	—	%	569		0.4	%

(a) Percent of restaurant sales for the applicable segment.

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 attributable to the applicable operating segments before interest expense, income taxes, depreciation and amortization, impairment and other lease charges, 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.



Three Months Ended	Pollo Tropical			Taco Cabana			Consolidated
July 1, 2018:
Net income							$	9,493
Provision for income taxes							3,021
Income before taxes	$	10,797		$	1,717		$	12,514
Add:
Non-general and administrative expense adjustments:
Depreciation and amortization	5,363			3,807			9,170
Impairment and other lease charges	685			99			784
Interest expense	491			495			986
Other expense (income), net	(1,894		)	(1,651		)	(3,545		)
Stock-based compensation expense in restaurant wages	14			19			33
Total Non-general and administrative expense adjustments	4,659			2,769			7,428
General and administrative expense adjustments:
Stock-based compensation expense	584			400			984
Board and shareholder matter costs	(328		)	(269		)	(597		)
Strategic Renewal Plan restructuring costs and retention bonuses	(16		)	31			15
Legal settlements and related costs	(167		)	—			(167		)
Total General and administrative expense adjustments	73			162			235
Adjusted EBITDA:	$	15,529		$	4,648		$	20,177
Restaurant-level Adjustments:
Add: Pre-opening costs	341			536			877
Add: Other general and administrative expense⁽¹⁾	6,850			5,734			12,584
Less: Franchise royalty revenue and fees	459			216			675
Restaurant-level Adjusted EBITDA:	$	22,261		$	10,702		$	32,963

July 2, 2017:
Net loss							$	(2,160	)
Benefit from income taxes							(772		)
Income (loss) before taxes	$	(3,502	)	$	570		$	(2,932	)
Add:
Non-general and administrative expense adjustments:
Depreciation and amortization	5,435			3,161			8,596
Impairment and other lease charges	10,536			226			10,762
Interest expense	295			359			654
Other expense (income), net	853			(55		)	798
Stock-based compensation expense in restaurant wages	(45		)	(29		)	(74		)
Unused pre-production costs in advertising expense	—			88			88
Total Non-general and administrative expense adjustments	17,074			3,750			20,824
General and administrative expense adjustments:
Stock-based compensation expense	640			608			1,248
Terminated capital project	7			6			13
Board and shareholder matter costs	1,767			1,332			3,099
Strategic Renewal Plan restructuring costs and retention bonuses	1,153			716			1,869
Total General and administrative expense adjustments	3,567			2,662			6,229
Adjusted EBITDA:	$	17,139		$	6,982		$	24,121
Restaurant-level Adjustments:
Add: Pre-opening costs	451			459			910
Add: Other general and administrative expense⁽¹⁾	7,106			5,661			12,767
Less: Franchise royalty revenue and fees	427			192			619
Restaurant-level Adjusted EBITDA:	$	24,269		$	12,910		$	37,179



Six Months Ended	Pollo Tropical			Taco Cabana			Consolidated
July 1, 2018:
Net income							$	13,677
Provision for income taxes							4,646
Income (loss) before taxes	$	18,925		$	(602	)	$	18,323
Add
Non-general and administrative expense adjustments
Depreciation and amortization	10,679			7,490			18,169
Impairment and other lease charges	144			(22		)	122
Interest expense	1,019			1,036			2,055
Other expense (income), net	(1,548		)	(1,631		)	(3,179		)
Stock-based compensation expense in restaurant wages	19			31			50
Total Non-general and administrative expense adjustments	10,313			6,904			17,217
General and administrative expense adjustments
Stock-based compensation expense	1,051			805			1,856
Board and shareholder matter costs	(328		)	(269		)	(597		)
Strategic Renewal Plan restructuring costs and retention bonuses	182			321			503
Legal settlements and related costs	(167		)	—			(167		)
Total General and administrative expense adjustments	738			857			1,595
Adjusted EBITDA	$	29,976		$	7,159		$	37,135
Restaurant-level Adjustments:
Add: Pre-opening costs	565			693			1,258
Add: Other general and administrative expense⁽¹⁾	14,227			11,916			26,143
Less: Franchise royalty revenue and fees	923			403			1,326
Restaurant-level Adjusted EBITDA:	$	43,845		$	19,365		$	63,210

July 2, 2017:
Net loss							$	(17,220	)
Benefit from income taxes							(9,414		)
Income (loss) before taxes	$	(28,598	)	$	1,964		$	(26,634	)
Add:
Non-general and administrative expense adjustments:
Depreciation and amortization	11,518			6,264			17,782
Impairment and other lease charges	42,607			569			43,176
Interest expense	544			694			1,238
Other expense (income), net	1,050			202			1,252
Stock-based compensation expense in restaurant wages	—			35			35
Unused pre-production costs in advertising expense	322			88			410
Total Non-general and administrative expense adjustments	56,041			7,852			63,893
General and administrative expense adjustments:
Stock-based compensation expense	955			830			1,785
Terminated capital project	484			365			849
Board and shareholder matter costs	2,225			1,678			3,903
Strategic Renewal Plan restructuring costs and retention bonuses	1,227			787			2,014
Legal settlements and related costs	(473		)	—			(473		)
Total General and administrative expense adjustments	4,418			3,660			8,078
Adjusted EBITDA:	$	31,861		$	13,476		$	45,337
Restaurant-Level Adjustments:
Add: Pre-opening costs	783			551			1,334
Add: Other general and administrative expense⁽¹⁾	15,096			11,520			26,616
Less: Franchise royalty revenue and fees	876			373			1,249
Restaurant-Level Adjusted EBITDA:	$	46,864		$	25,174		$	72,038

⁽¹⁾ Excludes general and administrative adjustments above.

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, other expense (income), net, unused pre-production costs in advertising expense, terminated capital project costs, board and shareholder matter costs, Strategic Renewal Plan 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.



	(unaudited)
	Three months ended
	July 1, 2018												July 2, 2017
	Income Before Income Taxes			Provision For Income Taxes (a)			Net Income			Diluted EPS			Income (Loss) Before Income Taxes			Provision For (Benefit From) Income Taxes (a)			Net Income (Loss)			Diluted EPS
Reported - GAAP	$	12,514		$	3,021		$	9,493		$	0.35		$	(2,932	)	$	(772	)	$	(2,160	)	$	(0.08	)
Adjustments:
Non-general and administrative expense adjustments:
Impairment and other lease charges (b)	784			193			591			0.02			10,762			4,100			6,662			0.25
Other expense (income), net (c)	(3,545		)	(873		)	(2,672		)	(0.10		)	798			304			494			0.02
Unused pre-production costs in advertising expense (d)	—			—			—			—			88			34			54			—
Total Non-general and administrative expense	(2,761		)	(680		)	(2,081		)	(0.08		)	11,648			4,438			7,210			0.27
General and administrative expense adjustments:
Terminated capital project (e)	—			—			—			—			13			5			8			—
Board and shareholder matter costs (f)	(597		)	(147		)	(450		)	(0.02		)	3,099			1,181			1,918			0.07
Strategic Renewal Plan restructuring costs and retention bonuses (g)	15			4			11			—			1,869			712			1,157			0.04
Legal settlements and related costs (h)	(167		)	(41		)	(126		)	—			—			—			—			—
Total General and administrative expense	(749		)	(184		)	(565		)	(0.02		)	4,981			1,898			3,083			0.11
Adjusted - Non-GAAP	$	9,004		$	2,157		$	6,847		$	0.25		$	13,697		$	5,564		$	8,133		$	0.30

	(unaudited)
	Six months ended
	July 1, 2018												July 2, 2017
	Income Before Income Taxes			Provision For Income Taxes (a)			Net Income			Diluted EPS			Income (Loss) Before Income Taxes			Provision For (Benefit From) Income Taxes (a)			Net Income (Loss)			Diluted EPS
Reported - GAAP	$	18,323		$	4,646		$	13,677		$	0.50		$	(26,634	)	$	(9,414	)	$	(17,220	)	$	(0.64	)
Adjustments:
Non-general and administrative expense adjustments:
Impairment and other lease charges (b)	122			30			92			—			43,176			16,451			26,725			0.99
Other expense (income), net (c)	(3,179		)	(783		)	(2,396		)	(0.09		)	1,252			477			775			0.03
Unused pre-production costs in advertising expense (d)	—			—			—			—			410			156			254			0.01
Total Non-general and administrative expense	(3,057		)	(753		)	(2,304		)	(0.08		)	44,838			17,084			27,754			1.03
General and administrative expense adjustments:
Terminated capital project (e)	—			—			—			—			849			323			526			0.02
Board and shareholder matter costs (f)	(597		)	(147		)	(450		)	(0.02		)	3,903			1,487			2,416			0.09
Strategic Renewal Plan restructuring costs and retention bonuses (g)	503			124			379			0.01			2,014			767			1,247			0.05
Legal settlements and related costs (h)	(167		)	(41		)	(126		)	—			(473		)	(180		)	(293		)	(0.01		)
Total General and administrative expense	(261		)	(64		)	(197		)	(0.01		)	6,293			2,397			3,896			0.14
Adjusted - Non-GAAP	$	15,005		$	3,829		$	11,176		$	0.41		$	24,497		$	10,067		$	14,430		$	0.53

(a) The provision (benefit) for income taxes related to the adjustments was calculated using the Company's combined federal statutory and estimated state rate of 24.6% and 38.1% for the periods ending July 1, 2018 and July 2, 2017, 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.

(b) Impairment and other lease charges for the three and six months ended July 1, 2018 primarily include lease charges, net of recoveries, of $0.5 million related to certain previously closed restaurants due to adjustments to estimates of future lease costs and impairment charges of $0.3 million primarily related to previously closed restaurants as well as one underperforming Taco Cabana restaurant with a short remaining lease term. Impairment and other lease charges for the six months ended July 1, 2018 also include a net benefit of $(0.7) million in lease charge recoveries due primarily to a lease termination, a lease assignment, subleases and other adjustments to estimates of future lease costs in the first quarter of 2018.

Impairment and other lease charges for the three and six months ended July 2, 2017 include impairment charges of $3.8 million and $35.7 million, and other lease charges, net of recoveries, of $6.7 million and $6.9 million, respectively, related to impairment and closures of underperforming Pollo Tropical restaurants in the first and second quarters of 2017. Impairment and other lease charges for the three and six months ended July 2, 2017 also include impairment charges of $0.2 million and $0.6 million, respectively, related to underperforming Taco Cabana restaurants.

(c) Other expense (income), net for the three and six months ended July 1, 2018 primarily includes $2.8 million in insurance recoveries related to the Hurricanes and total gains of $1.1 million and $1.2 million, respectively, on the sales of restaurant properties, partially offset by the write-off of site development costs of $0.2 million and $0.3 million, respectively, and costs for the removal, transfer and storage of equipment from closed restaurants of $0.2 million and $0.5 million, respectively. Other expense (income), net for the three and six months ended July 2, 2017, includes the write-off of site costs related to locations that we decided not to develop, costs for the removal of signs and equipment related to the closure of Pollo Tropical restaurants and severance for restaurant employees, partially offset by expected business interruption proceeds related to a Taco Cabana restaurant that was temporarily closed due to a fire.

(d) Unused pre-production costs for the three and six months ended July 2, 2017, include costs for advertising pre-production that were not used.

(e) Terminated capital project costs for the three and six months ended July 2, 2017, include costs related to the write-off of a capital project that was terminated in the first quarter of 2017.

(f) Board and shareholder matter costs for the three and six months ended July 1, 2018 include fee reductions and final insurance recoveries related to 2017 shareholder activism costs. Board and shareholder matter costs for the three and six months ended and July 2, 2017 include fees related to shareholder activism and CEO and board member searches.

(g) Strategic Renewal Plan restructuring costs and retention bonuses for the three and six months ended July 1, 2018 and July 2, 2017, include severance related to the Plan and reduction in force and bonuses paid to certain employees for retention purposes.

(h) Legal settlements and related costs for the three and six months ended July 1, 2018 and six months ended July 2, 2017 include reductions to final settlement amounts and benefits related to litigation matters.

Fiesta Restaurant Group, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE - August 6, 2018

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Fiesta Restaurant Group, Inc. Reports