Fiesta Restaurant Group, Inc. Reports Second Quarter 2021 Results

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, which ended on July 4, 2021, and provided a business update related to current operations.

On July 1, 2021 the Company announced the entry into an agreement to sell the Taco Cabana business to an affiliate of Yadav Enterprises, Inc. Additional details regarding the transaction are referenced in the Company's Form 8-K filed on July 7, 2021. The divestiture transaction is expected to close in the third quarter of 2021, subject to the satisfactory completion of customary closing conditions.

Fiesta President and Chief Executive Officer Richard Stockinger said, "We were pleased with Pollo Tropical’s performance in the second quarter, characterized by comparable restaurant sales improving to near 2019 levels and strong margins, despite hourly staffing challenges over the quarter. We believe that workforce availability challenges had an increasingly negative impact on sales through the quarter. We took a number of steps to improve recruiting and retention of our hourly workforce, which resulted in improved staffing levels in July compared to the second quarter of 2021."

Stockinger added, "We delivered strong margin performance in the second quarter, which resulted in second quarter 2021 income from continuing operations of $2.7 million and income from continuing operations before income taxes of $1.8 million, compared to a loss for both measures in the second quarter of 2020. Continuing Operations Adjusted EBITDA, a non-GAAP measure⁽¹⁾, was $9.1 million or 10.0% of total revenues compared to $2.6 million and 4.2% of revenue in the second quarter of 2020. Pollo Tropical increased restaurant-level Adjusted EBITDA margin, a non-GAAP measure⁽¹⁾, from 16.3% in the second quarter of 2020 to 20.4% in the second quarter of 2021. In addition, our total cash balance continued to grow, reaching $69.9 million at the end of the second quarter."

Stockinger continued, "We made strong progress on Pollo Tropical’s strategic growth initiatives during the second quarter, including our ongoing brand positioning research that will inform our digital, brand expansion and existing unit remodel efforts. The design phase of our digital drive thru customer experience is advancing, and we intend to begin the pilot of this greatly enhanced drive thru platform in select units later this year. We are also testing key restaurant design elements and operating platform improvements in remodels during the balance of 2021, and initial consumer feedback on our first remodel completed in the second quarter has been very positive."

Stockinger concluded, "We expect that the Taco Cabana divestiture will allow us to create a more effective, efficient and focused organization, applying appropriate resources to accelerate the exciting growth potential we believe we have in our Pollo Tropical brand. This will include our ongoing efforts to drive an upgraded customer experience across all service channels, continuing to invest in expanding our growing digital platform and finalizing our new unit expansion plans targeted for 2022."

_____________________________

(1)

See non-GAAP reconciliation table below.

Second Quarter 2021 Financial Summary

• Total revenues from continuing operations increased 43.7% to $91.2 million in the second quarter of 2021 from $63.4 million in the second quarter of 2020;
• Comparable restaurant sales at Pollo Tropical increased 43.5%. Compared to the same fiscal period in 2019, comparable restaurant sales for Pollo Tropical decreased 1.8%;
• Comparable restaurant sales at Taco Cabana increased 15.6%. Compared to the same fiscal period in 2019, comparable restaurant sales for Taco Cabana decreased 6.7%;
• A net loss of $(0.1) million, or $0.00 per diluted share, in the second quarter of 2021, compared to a net loss of $(8.3) million, or $(0.33) per diluted share, in the second quarter of 2020;
• Net income from continuing operations of $2.7 million, or $0.11 per diluted share, in the second quarter of 2021, compared to a net loss of $(6.6) million, or $(0.26) per diluted share, in the second quarter of 2020;
• Adjusted net income (a non-GAAP financial measure) of $3.4 million, or $0.13 per diluted share, in the second quarter of 2021, compared to adjusted net loss of $(3.1) million, or $(0.12) per diluted share, in the second quarter of 2020 (see non-GAAP reconciliation table below);
• Continuing Operations Consolidated Adjusted EBITDA (a non-GAAP financial measure) of $9.1 million in the second quarter of 2021 compared to $2.6 million in the second quarter of 2020 (see non-GAAP reconciliation table below);
• Adjusted EBITDA for Pollo Tropical of $11.9 million in the second quarter of 2021 compared to $5.0 million in the second quarter of 2020;
• Restaurant-level Adjusted EBITDA (a non-GAAP financial measure) for Pollo Tropical of $18.5 million, or 20.4% of Pollo Tropical restaurant sales, in the second quarter of 2021 compared to $10.3 million, or 16.3% of Pollo Tropical restaurant sales, in the second quarter of 2020 (see non-GAAP reconciliation table below);
• Adjusted EBITDA for Taco Cabana of $3.0 million in the second quarter of 2021 compared to $2.7 million in the second quarter of 2020;
• Restaurant-level Adjusted EBITDA (a non-GAAP financial measure) for Taco Cabana of $8.4 million, or 12.8% of Taco Cabana restaurant sales, in the second quarter of 2021 compared to $7.3 million, or 12.6% of Taco Cabana restaurant sales, in the second quarter of 2020 (see non-GAAP reconciliation table below); and

 Second Quarter 2021 Comparable Restaurant Sales

	First Quarter 2021		Fiscal April		Fiscal May		Fiscal June		Second Quarter 2021
Pollo Tropical
2021 vs. 2020	4.3	%	94.4	%	36.9	%	18.2	%	43.5	%
2021 vs. 2019	-3.3	%	-1.3	%	-1.4	%	-2.9	%	-1.8	%
Taco Cabana
2021 vs. 2020	-4.3	%	26.5	%	9.2	%	14.0	%	15.6	%
2021 vs. 2019	-17.1	%	-6.9	%	-6.7	%	-6.5	%	-6.7	%

• As a result of the 53^rd week in fiscal 2020, our 2021 fiscal year began one week later than our 2020 fiscal year. Changes in comparable restaurant sales are impacted by the shift in weeks as the thirteen weeks ended July 4, 2021 are not directly comparable on a calendar basis to the thirteen weeks ended June 28, 2020.
• For Pollo Tropical comparable restaurant sales comparisons in 2021 vs. 2019, the Fourth of July holiday timing had an impact on fiscal June. After adjusting for the holiday timing difference, June 2021 comparable restaurant sales vs. 2019 would have been 40 to 50 basis points higher.

Cash and Liquidity

• At the end of the second quarter of 2021, we had $65.8 million in cash, $3.8 million in restricted cash and $72.4 million in outstanding debt, which includes $71.5 million of term loan borrowings under our new senior credit facility and $0.9 million in finance lease obligations. In addition, we had $0.3 million in cash and $0.8 million in finance lease obligations within discontinued operations. Our outstanding term loan borrowings under our senior credit facility are net of unamortized debt issuance costs and original issue discount totaling $3.2 million.
• Our cash balance grew from the first quarter balance of $58.8 million at April 4, 2021 to a second quarter balance of $65.8 million at July 4, 2021. Net debt, a non-GAAP financial measure⁽²⁾, decreased from $13.5 million at the end of the first quarter on April 4, 2021 to $6.6 million at the end of the second quarter on July 4, 2021.
• Proceeds from the sale of Taco Cabana will be used to fully repay our outstanding term loan borrowings under our senior credit facility, and to pay a loan prepayment premium of 3.0% of the principal repaid ($2.2 million).

Second Quarter 2021 Brand Results

Total Pollo Tropical restaurant sales increased 43.4% to $90.8 million in the second quarter of 2021 compared to $63.3 million in the second quarter of 2020 primarily due to a comparable restaurant sales increase of 43.5%. Pollo Tropical dine-in and counter take-out comparable restaurant sales increased 117% from the second quarter of 2020 to the second quarter of 2021 due primarily to the negative impact of the pandemic on dine-in traffic and closures of our dining rooms during a portion of the second quarter of 2020. The increase in dine in channel sales was supplemented by off-premise channel growth. Second quarter 2021 drive-thru comparable restaurant sales increased 18% compared to the second quarter of 2020, while second quarter 2021 delivery comparable restaurant sales nearly doubled compared to the second quarter of 2020. The increase in comparable restaurant sales resulted from a net impact of product/channel mix and pricing of 14.3% and an increase in comparable restaurant transactions of 29.2%. The increase in product/channel mix and pricing was driven primarily by increases in delivery and drive-thru average check and sales channel penetration, and menu price increases of 4.0%. Beginning in April, Pollo Tropical began to experience increased hourly staffing challenges due to workforce availability which we believe had an increasingly negative impact on sales through the remainder of the quarter, driven in part by reduced operating hours.

_____________________________

(2)

We define net debt as long-term debt, including current portion of long-term debt, as reported in our (continuing operations) balance sheet less unrestricted cash as reported in our (continuing operations) balance sheet, which were $72.4 million and $65.8 million, respectively, as of July 4, 2021 and $72.4 million and $58.8 million, respectively, as of April 4, 2021. Net debt is a non-GAAP measures which we believe assist investors in understanding of our management of our overall liquidity and financial flexibility.

		Comparable Restaurant Sales Mix by Channel - Pollo Tropical
Channel		Second Quarter 2021(1)				% of Total			Second Quarter 2020				% of Total			Second Quarter 2019				% of Total
($ in thousands)
Counter(2)		$	24,389			27	%		$	11,262			18	%		$	44,038			49	%
Drive-thru		52,245				58	%		44,165				70	%		42,970				47	%
Delivery		9,012				10	%		4,954				8	%		1,666				2	%
Online		3,100				4	%		1,722				3	%		1,293				1	%
Catering		1,062				1	%		477				1	%		653				1	%
Total		$	89,808			100	%		$	62,580			100	%		$	90,620			100	%
(1) Second quarter 2021 comparable restaurant sales based on the comparable second quarter 2020 restaurants.
(2) Counter sales include dine-in and counter take-out sales.

Adjusted EBITDA for Pollo Tropical increased to $11.9 million in the second quarter of 2021 from $5.0 million in the second quarter of 2020, an increase of 139.3%. The increase was primarily due to the impact of higher restaurant sales, and improved cost of sales margins, partially offset by higher advertising expenses and repair and maintenance costs. Restaurant-level Adjusted EBITDA for Pollo Tropical as a percentage of restaurant sales continues to be strong, with second quarter Restaurant-level Adjusted EBITDA as a percentage of restaurant sales of 20.4% in 2021 compared to 16.3% in 2020 and 23.1% in 2019. Continuing Operations Adjusted EBITDA increased to $9.1 million compared to $2.6 million in 2020.

Comparable Restaurant Average Weekly Sales - Pollo Tropical
Period	April	May	June
2021	$52,594	$50,908	$49,351
2020	$27,055	$37,177	$41,744
2019	$53,303	$51,646	$50,827

Pollo Tropical average weekly sales trends from April/May to June/July have historically declined due to reductions in visitors to Florida during summer months and the negative traffic impact of school closures.

Taco Cabana restaurant sales increased 13.5% to $66.1 million in the second quarter of 2021 from $58.3 million in the second quarter of 2020 due primarily to a comparable restaurant sales increase of 15.6%. Taco Cabana comparable restaurant sales increased across all sales channels from the second quarter of 2020 to the second quarter of 2021 due to the negative impact of the pandemic on dine-in traffic and closures of our dining rooms during a portion of the second quarter of 2020. The increase in comparable restaurant sales resulted from an increase in comparable restaurant transactions of 13.0% and an increase in the net impact of product/channel mix and pricing of 2.6%. The increase in product/channel mix and pricing was driven primarily by menu price increases of 4.3%.

		Comparable Restaurant Sales Mix by Channel - Taco Cabana
Channel		Second Quarter 2021(1)				% of Total			Second Quarter 2020				% of Total			Second Quarter 2019				% of Total
($ in thousands)
Counter(2)		$	11,595			18	%		$	6,339			11	%		$	29,410			42	%
Drive-thru		46,977				71	%		45,982				81	%		37,979				54	%
Delivery		4,525				7	%		2,727				5	%		981				1	%
Online		1,698				3	%		1,624				3	%		1,232				2	%
Catering		951				1	%		207				—	%		350				1	%
Total		$	65,746			100	%		$	56,879			100	%		$	69,952			100	%
(1) Second quarter 2021 comparable restaurant sales based on the comparable second quarter 2020 restaurants.
(2) Counter sales include dine-in and counter take-out sales.

Adjusted EBITDA for Taco Cabana increased to $3.0 million in the second quarter of 2021 from $2.7 million in the second quarter of 2020. The increase was primarily due to higher restaurant sales, partially offset by higher repair and maintenance costs including winter storm costs such as repairs and landscaping debris removal costs, increased advertising and higher delivery fee expense. Second quarter Adjusted EBITDA for Taco Cabana as a percentage of total revenues was 4.6% in 2020 and in 2021, and Restaurant-level Adjusted EBITDA for Taco Cabana as a percentage of restaurant sales increased from 12.6% in 2020 to 12.8% in 2021. Second quarter Adjusted EBITDA as a percentage of total revenues decreased compared to 5.3% in 2019 and Restaurant-level Adjusted EBITDA for Taco Cabana as a percentage of restaurant sales increased compared to 12.1% in 2019.

Restaurant Portfolio

As of July 4, 2021, there were 138 Company-owned Pollo Tropical restaurants, 142 Company-owned Taco Cabana restaurants, 29 franchised Pollo Tropical restaurants in the U.S., Puerto Rico, Panama, Guyana, Ecuador and the Bahamas, and six franchised Taco Cabana restaurants in the U.S.

Investor Conference Call Today

We will host a conference call at 4:30 p.m. ET today. The conference call can be accessed live over the phone by dialing 1- 412-317-6026. A replay will be available after the call until Thursday, August 19, 2021 and can be accessed by dialing 1-412-317-6671. The passcode is 10158958. The conference call will also be webcast live and archived on 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 the 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

Certain statements contained in this news release and in our public disclosures, whether written, oral or otherwise made, relating to future events or future performance, including any discussion, express or implied regarding the anticipated closing of the Taco Cabana divestiture transaction and its impact on our future business, our anticipated growth, plans, objectives and the impact of our initiatives, our investments in strategic and sales building initiatives, including those relating to operations improvements, digital infrastructure supporting ordering and online sales, catering and third-party delivery and drive thru improvements and the impact of the COVID-19 pandemic and our initiatives designed to respond to the COVID-19 pandemic on future sales, margins, earnings and liquidity, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are often identified by the words "may," "might," "believes," "thinks," "anticipates," "plans," "positioned," "target," "continue," "expects," "look to," "intends" and other similar expressions, whether in the negative or the affirmative, that are not statements of historical fact. These forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict, and you should not place undue reliance on our forward-looking statements. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those discussed from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our quarterly reports on Form 10-Q. All forward-looking statements and the internal projections and beliefs upon which we base our expectations included in this release are made only as of the date of this release and may change. While we may elect to update forward-looking statements at some point in the future, we expressly disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

FIESTA RESTAURANT GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND SIX MONTHS ENDED JULY 4, 2021 AND JUNE 28, 2020 (In thousands, except share and per share data) (Unaudited)
	Three Months Ended (a)										Six Months Ended (a)
	July 4, 2021					June 28, 2020					July 4, 2021					June 28, 2020
Revenues:
Restaurant sales	$	90,764				$	63,292				$	178,604				$	149,013
Franchise royalty revenues and fees	391					146					766					550
Total revenues	91,155					63,438					179,370					149,563
Costs and expenses:
Cost of sales	27,558					20,321					54,859					48,052
Restaurant wages and related expenses (b)	21,901					15,108					42,240					36,145
Restaurant rent expense	5,824					5,660					11,701					11,300
Other restaurant operating expenses	14,215					10,823					27,520					23,347
Advertising expense	2,898					1,174					5,273					4,678
General and administrative expenses (b)(c)	11,050					9,240					21,716					19,458
Depreciation and amortization	4,875					5,455					9,963					10,948
Impairment and other lease charges (d)	(202		)			1,932					(254		)			5,628
Closed restaurant rent, net of sublease income (e)	966					1,258					1,716					2,381
Other expense (income), net (f)	170					698					293					927
Total operating expenses	89,255					71,669					175,027					162,864
Income (loss) from operations	1,900					(8,231		)			4,343					(13,301		)
Interest expense	61					63					122					126
Income (loss) from continuing operations before income taxes	1,839					(8,294		)			4,221					(13,427		)
Provision for (benefit from) income taxes (g)	(841		)			(1,687		)			2,236					(3,112		)
Income (loss) from continuing operations	2,680					(6,607		)			1,985					(10,315		)
Income (loss) from discontinued operations, net of tax	(2,763		)			(1,736		)			(4,157		)			(5,345		)
Net loss	(83		)			(8,343		)			(2,172		)			(15,660		)
Earnings (loss) per common share:
Continuing operations – basic	$	0.11				$	(0.26	)			$	0.07				$	(0.41	)
Discontinued operations – basic	(0.11		)			(0.07		)			(0.16		)			(0.21		)
Basic	—					(0.33		)			(0.09		)			(0.62		)
Continuing operations – diluted	0.11					(0.26		)			0.07					(0.41		)
Discontinued operations – diluted	(0.11		)			(0.07		)			(0.16		)			(0.21		)
Diluted	—					(0.33		)			(0.09		)			(0.62		)
Weighted average common shares outstanding:
Basic	25,496,038					25,267,404					25,410,123					25,393,325
Diluted	25,496,038					25,267,404					25,410,783					25,393,325

(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 4, 2021 and June 28, 2020 each included 13 and 26 weeks, respectively.
(b)		Restaurant wages and related expenses include stock-based compensation of $15 and $27 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $31 and $38 for the six months ended July 4, 2021 and June 28, 2020, respectively. General and administrative expenses include stock-based compensation expense of $1,046 and $850 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $2,040 and $1,348 for the six months ended July 4, 2021 and June 28, 2020, respectively.
(c)		See note (f) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information."
(d)		See note (c) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information."
(e)		See note (d) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information."
(f)		See note (e) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information."
(g)		See notes (a) and (b) 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) (Unaudited)
	July 4, 2021				January 3, 2021
Assets
Cash	$	65,830			$	49,778
Current assets held for sale	159,564				8,478
Other current assets	19,825				25,770
Property and equipment, net	94,773				97,867
Operating lease right-of-use assets	157,533				164,665
Goodwill	56,307				56,307
Non-current assets held for sale	—				160,023
Other assets	6,557				5,855
Total assets	$	560,389			$	568,743
Liabilities and Stockholders' Equity
Current portion of long-term debt	$	71,541			$	816
Current liabilities held for sale	120,956				27,225
Other current liabilities	39,942				36,868
Long-term debt, net of current portion	810				71,588
Operating lease liabilities	166,793				174,116
Deferred tax liabilities	2,353				2,269
Non-current liabilities held for sale	—				98,323
Other non-current liabilities	9,981				9,757
Total liabilities	412,376				420,962
Stockholders' equity	148,013				147,781
Total liabilities and stockholders' equity	$	560,389			$	568,743

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 4, 2021					June 28, 2020					July 4, 2021					June 28, 2020
Segment revenues:
Pollo Tropical	$	91,155				$	63,438				$	179,370				$	149,563
Taco Cabana (a)	66,352					58,430					122,876					119,004
Total revenues	$	157,507				$	121,868				$	302,246				$	268,567
Change in comparable restaurant sales (b):
Pollo Tropical	43.5			%		(31.6		)	%		21.1			%		(19.5		)	%
Taco Cabana	15.6			%		(19.2		)	%		5.5			%		(16.4		)	%
Average sales per Company-owned restaurant:
Pollo Tropical
Comparable restaurants (c)	$	662				$	461				$	1,304				$	1,076
Non-comparable restaurants (d)	418					369					760					857
Total Company-owned (e)	658					458					1,294					1,067
Taco Cabana
Comparable restaurants (c)	$	465				$	399				$	859				$	809
Non-comparable restaurants (d)	347					435					767					740
Total Company-owned (e)	464					399					858					806
Income (loss) before income taxes:
Pollo Tropical	$	4,336				$	(5,186	)			$	9,271				$	(7,013	)
Taco Cabana (a)	(4,338		)			(4,900		)			(10,029		)			(13,395		)
Adjusted EBITDA:
Pollo Tropical	$	11,949				$	4,993				$	24,296				$	13,773
Taco Cabana	3,039					2,672					3,836					1,765
Restaurant-level Adjusted EBITDA (f):
Pollo Tropical	$	18,498				$	10,338				$	37,278				$	25,772
Taco Cabana	8,445					7,313					14,824					12,597

(a)		Results of Taco Cabana are included in discontinued operations. Adjusted EBITDA and Restaurant-level Adjusted EBITDA include corporate allocations that were not included in discontinued operations.
(b)		Restaurants are included in comparable restaurant sales after they have been open for 18 months or longer. Restaurants are excluded from comparable restaurant sales for any fiscal month in which the restaurant was closed for more than five days. Comparable restaurant sales are compared to the same period in the prior year.
(c)		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.
(d)		Non-comparable restaurants are restaurants that have been open for less than 18 months, or that were temporarily closed during the period. 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.
(e)		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.
(f)		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 4, 2021				June 28, 2020			July 4, 2021				June 28, 2020
Company-owned restaurant openings:
Pollo Tropical	—				—			—				—
Taco Cabana	—				—			—				1
Total new restaurant openings	—				—			—				1
Company-owned restaurant closings:
Pollo Tropical	—				—			—				(1	)
Taco Cabana	(1	)			—			(1	)			(19	)
Net change in restaurants	(1	)			—			(1	)			(19	)
Number of Company-owned restaurants:
Pollo Tropical	138				141			138				141
Taco Cabana	142				146			142				146
Total Company-owned restaurants	280				287			280				287
Number of franchised restaurants:
Pollo Tropical	29				33			29				33
Taco Cabana	6				7			6				7
Total franchised restaurants	35				40			35				40
Total number of restaurants:
Pollo Tropical	167				174			167				174
Taco Cabana	148				153			148				153
Total restaurants	315				327			315				327

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 4, 2021								June 28, 2020
Pollo Tropical:					(a)							(a)
Restaurant sales	$	90,764							$	63,292
Cost of sales	27,558				30.4		%		20,321			32.1	%
Restaurant wages and related expenses	21,901				24.1		%		15,108			23.9	%
Restaurant rent expense	5,824				6.4		%		5,660			8.9	%
Other restaurant operating expenses	14,100				15.5		%		10,714			16.9	%
Advertising expense	2,898				3.2		%		1,178			1.9	%
Depreciation and amortization	4,844				5.3		%		5,233			8.3	%
Impairment and other lease charges	(332		)		(0.4	)	%		1,932			3.1	%
Closed restaurant rent expense, net of sublease income	567				0.6		%		671			1.1	%
Taco Cabana (b):
Restaurant sales	$	66,132							$	58,255
Cost of sales	18,823				28.5		%		17,486			30.0	%
Restaurant wages and related expenses	20,640				31.2		%		18,639			32.0	%
Restaurant rent expense	5,657				8.6		%		5,619			9.6	%
Other restaurant operating expenses (c)	10,574				16.0		%		8,275			14.2	%
Advertising expense (c)	2,017				3.0		%		965			1.7	%
Depreciation and amortization (c)	3,992				6.0		%		4,332			7.4	%
Impairment and other lease charges (c)	494				0.7		%		353			0.6	%
Closed restaurant rent expense, net of sublease income (c)	640				1.0		%		1,159			2.0	%
	Six Months Ended
	July 4, 2021								June 28, 2020
Pollo Tropical:					(a)							(a)
Restaurant sales	$	178,604							$	149,013
Cost of sales	54,859				30.7		%		48,052			32.2	%
Restaurant wages and related expenses	42,240				23.7		%		36,145			24.3	%
Restaurant rent expense	11,701				6.6		%		11,300			7.6	%
Other restaurant operating expenses	27,284				15.3		%		23,100			15.5	%
Advertising expense	5,273				3.0		%		4,682			3.1	%
Depreciation and amortization	9,782				5.5		%		10,511			7.1	%
Impairment and other lease charges	(222		)		(0.1	)	%		5,628			3.8	%
Closed restaurant rent expense, net of sublease income	807				0.5		%		1,273			0.9	%
Taco Cabana (b):
Restaurant sales	$	122,456							$	118,620
Cost of sales	34,608				28.3		%		36,031			30.4	%
Restaurant wages and related expenses	38,345				31.3		%		38,097			32.1	%
Restaurant rent expense	11,413				9.3		%		11,318			9.5	%
Other restaurant operating expenses (c)	19,686				16.1		%		17,400			14.7	%
Advertising expense (c)	3,630				3.0		%		3,244			2.7	%
Depreciation and amortization (c)	7,980				6.5		%		8,484			7.2	%
Pre-opening costs	—				—		%		69			0.1	%
Impairment and other lease charges (c)	262				0.2		%		890			0.8	%
Closed restaurant rent expense, net of sublease income (c)	1,491				1.2		%		2,189			1.8	%

(a)		Percent of restaurant sales for the applicable segment.
(b)		Results of Taco Cabana are included in discontinued operations.
(c)		Includes corporate allocations not included in discontinued operations.

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 (including Continuing Operations Adjusted EBITDA and Discontinued Operations Adjusted EBITDA) and Restaurant-level Adjusted EBITDA are non-GAAP financial measures. Adjusted EBITDA is defined as earnings (loss) attributable to the applicable operating segments before interest expense, income taxes, depreciation and amortization, impairment and other lease charges, goodwill impairment, closed restaurant rent expense, net of sublease income, 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). The "Other" column includes corporate costs that were allocated to Taco Cabana and are not included in discontinued operations.

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					Other					Continuing Operations					Taco Cabana					Other					Discontinued Operations
July 4, 2021:
Net loss												$	(83	)													$	(2,763	)
Loss from discontinued operations, net of tax												2,763															—
Provision for (benefit from) income taxes												(841		)													922
Income (loss) before taxes		$	4,336				$	(2,497	)			$	1,839				$	(4,338	)			$	2,497				$	(1,841	)
Add:
Non-general and administrative adjustments:
Depreciation and amortization		4,844					31					4,875					3,992					(31		)			3,961
Impairment and other lease charges		(332		)			130					(202		)			494					(130		)			364
Interest expense		994					(933		)			61					973					933					1,906
Closed restaurant rent expense, net of sublease income		567					399					966					640					(399		)			241
Loss on extinguishment of debt		—					—					—					—					—					—
Other expense (income), net		130					40					170					76					(40		)			36
Stock-based compensation expense		15					—					15					24					—					24
Total non-general and administrative adjustments		6,218					(333		)			5,885					6,199					333					6,532
General and administrative adjustments:
Stock-based compensation expense		641					405					1,046					561					(405		)			156
Restructuring costs and retention bonuses		18					—					18					14					—					14
Digital and brand repositioning costs		335					—					335					275					—					275
Transaction costs		401					(401		)			—					328					401					729
Total general and administrative adjustments		1,395					4					1,399					1,178					(4		)			1,174
Adjusted EBITDA(1)		$	11,949				$	(2,826	)			$	9,123				$	3,039				$	2,826				$	5,865
Adjusted EBITDA as a percentage of total revenues		13.1			%							10.0			%		4.6			%							8.8			%
Restaurant-level adjustments:
Add: Other general and administrative expense(a)		6,940					2,711					9,651					5,626					(2,711		)			2,915
Less: Franchise royalty revenue and fees		391					—					391					220					—					220
Restaurant-level Adjusted EBITDA(1)		$	18,498				$	(115	)			$	18,383				$	8,445				$	115				$	8,560
Restaurant-level Adjusted EBITDA as a percentage of restaurant sales		20.4			%							20.3			%		12.8			%							12.9			%
Three Months Ended:		Pollo Tropical					Other					Continuing Operations					Taco Cabana					Other					Discontinued Operations
June 28, 2020:
Net loss												$	(8,343	)													$	(1,736	)
Loss from discontinued operations, net of tax												1,736															—
Benefit from income taxes												(1,687		)													(56		)
Income (loss) before taxes		$	(5,186	)			$	(3,108	)			$	(8,294	)			$	(4,900	)			$	3,108				$	(1,792	)
Add:
Non-general and administrative adjustments:
Depreciation and amortization		5,233					222					5,455					4,332					(222		)			4,110
Impairment and other lease charges		1,932					—					1,932					353					—					353
Interest expense		625					(562		)			63					612					562					1,174
Closed restaurant rent expense, net of sublease income		671					587					1,258					1,159					(587		)			572
Other expense (income), net		644					54					698					140					(54		)			86
Stock-based compensation expense		27					—					27					42					—					42
Total non-general and administrative adjustments		9,132					301					9,433					6,638					(301		)			6,337
General and administrative adjustments:
Stock-based compensation expense		523					327					850					436					(327		)			109
Restructuring costs and retention bonuses		452					133					585					439					(133		)			306
Digital and brand repositioning costs		72					—					72					59					—					59
Total general and administrative adjustments		1,047					460					1,507					934					(460		)			474
Adjusted EBITDA(1)		$	4,993				$	(2,347	)			$	2,646				$	2,672				$	2,347				$	5,019
Adjusted EBITDA as a percentage of total revenues		7.9			%							4.2			%		4.6			%							8.6			%
Restaurant-level adjustments:
Add: Other general and administrative expense(a)		5,491					2,242					7,733					4,816					(2,242		)			2,574
Less: Franchise royalty revenue and fees		146					—					146					175					—					175
Restaurant-level Adjusted EBITDA(1)		$	10,338				$	(105	)			$	10,233				$	7,313				$	105				$	7,418
Restaurant-level Adjusted EBITDA as a percentage of restaurant sales		16.3			%							16.2			%		12.6			%							12.7			%

Six Months Ended		Pollo Tropical					Other					Continuing Operations					Taco Cabana					Other					Discontinued Operations
July 4, 2021:
Net loss												$	(2,172	)													$	(4,157	)
Loss from discontinued operations, net of tax												4,157															—
Provision for (benefit from) income taxes												2,236															(822		)
Income (loss) before taxes		$	9,271				$	(5,050	)			$	4,221				$	(10,029	)			$	5,050				$	(4,979	)
Add:
Non-general and administrative adjustments:
Depreciation and amortization		9,782					181					9,963					7,980					(181		)			7,799
Impairment and other lease charges		(222		)			(32		)			(254		)			262					32					294
Interest expense		1,964					(1,842		)			122					2,026					1,842					3,868
Closed restaurant rent expense, net of sublease income		807					909					1,716					1,491					(909		)			582
Other expense (income), net		196					97					293					(28		)			(97		)			(125		)
Stock-based compensation expense		31					—					31					50					—					50
Total non-general and administrative adjustments		12,558					(687		)			11,871					11,781					687					12,468
General and administrative adjustments:
Stock-based compensation expense		1,242					798					2,040					1,081					(798		)			283
Restructuring costs and retention bonuses		18					—					18					14					—					14
Digital and brand repositioning costs		651					—					651					534					—					534
Transaction costs		556					(556		)			—					455					556					1,011
Total general and administrative adjustments		2,467					242					2,709					2,084					(242		)			1,842
Adjusted EBITDA(a)		$	24,296				$	(5,495	)			$	18,801				$	3,836				$	5,495				$	9,331
Adjusted EBITDA as a percentage of total revenues(a)		13.5			%							10.5			%		3.1			%							7.6			%
Restaurant-level adjustments:
Add: Other general and administrative expense(b)		13,748					5,259					19,007					11,408					(5,259		)			6,149
Less: Franchise royalty revenue and fees		766					—					766					420					—					420
Restaurant-level Adjusted EBITDA(a)		$	37,278				$	(236	)			$	37,042				$	14,824				$	236				$	15,060
Restaurant-level Adjusted EBITDA as a percentage of restaurant sales(a)		20.9			%							20.7			%		12.1			%							12.3			%
Six Months Ended		Pollo Tropical					Other					Continuing Operations					Taco Cabana					Other					Discontinued Operations
June 28, 2020:
Net loss												$	(15,660	)													$	(5,345	)
Loss from discontinued operations, net of tax												5,345															—
Benefit from income taxes												(3,112		)													(1,636		)
Income (loss) before taxes		$	(7,013	)			$	(6,414	)			$	(13,427	)			$	(13,395	)			$	6,414				$	(6,981	)
Add:
Non-general and administrative adjustments:
Depreciation and amortization		10,511					437					10,948					8,484					(437		)			8,047
Impairment and other lease charges		5,628					—					5,628					890					—					890
Interest expense		1,108					(982		)			126					1,090					982					2,072
Closed restaurant rent expense, net of sublease income		1,273					1,108					2,381					2,189					(1,108		)			1,081
Other expense (income), net		751					176					927					941					(176		)			765
Stock-based compensation expense in restaurant wages		38					—					38					67					—					67
Total non-general and administrative adjustments		19,309					739					20,048					13,661					(739		)			12,922
General and administrative adjustments:
Stock-based compensation expense		833					515					1,348					902					(515		)			387
Restructuring and costs and retention bonuses		452					133					585					439					(133		)			306
Digital and brand repositioning costs		192					—					192					158					—					158
Total general and administrative adjustments		1,477					648					2,125					1,499					(648		)			851
Adjusted EBITDA		$	13,773				$	(5,027	)			$	8,746				$	1,765				$	5,027				$	6,792
Adjusted EBITDA as a percentage of total revenues		9.2			%							5.8			%		1.5			%							5.7			%
Restaurant-level adjustments:
Add: Pre-opening costs		—					—					—					69					—					69
Add: Other general and administrative expense(b)		12,549					4,784					17,333					11,147					(4,784		)			6,363
Less: Franchise royalty revenue and fees		550					—					550					384					—					384
Restaurant-level Adjusted EBITDA		$	25,772				$	(243	)			$	25,529				$	12,597				$	243				$	12,840
Restaurant-level Adjusted EBITDA as a percentage of restaurant sales		17.3			%							17.1			%		10.6			%							10.8			%

(a)		We estimate that Winter Storm Uri negatively impacted Taco Cabana and Consolidated Adjusted EBITDA and Taco Cabana and Consolidated Restaurant-level Adjusted EBITDA by approximately $3.1 million in the six months ended July 4, 2021. We estimate that Winter Storm Uri negatively impacted Taco Cabana Adjusted EBITDA as a percentage of total revenues and Taco Cabana Restaurant-level Adjusted EBITDA as a percentage of restaurant sales by approximately 2.4% and 2.2%, respectively.
(b)		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 discontinued operations, impairment and other lease charges, goodwill impairment, closed restaurant rent expense, net of sublease income, other expense (income), net, board and shareholder matter costs, 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 4, 2021																				June 28, 2020
		Income (Loss) Before Income Taxes					Benefit From Income Taxes (a)					Net Income (Loss)					Diluted EPS					Loss Before Income Taxes					Benefit From Income Taxes (a)					Net Income (Loss)					Diluted EPS
Reported - GAAP Net Income												$	(83	)			$	—														$	(8,343	)			$	(0.33	)
Loss from discontinued operations, net of tax												2,763					0.11															1,736					0.07
Income (loss) from continuing operations		$	1,839				$	(841	)			$	2,680				$	0.11				$	(8,294	)			$	(1,687	)			$	(6,607	)			$	(0.26	)
Adjustments:
Non-general and administrative expense adjustments:
Income tax due to tax law change (a)		—					—					—					—					—					662					(662		)			(0.03		)
Deferred tax asset valuation allowance (b)		—					255					(255		)			(0.01		)			—					(734		)			734					0.03
Impairment and other lease charges (c)		(202		)			(50		)			(152		)			(0.01		)			1,932					482					1,450					0.06
Closed restaurant rent expense, net of sublease income (d)		966					241					725					0.03					1,258					314					944					0.04
Other expense (income), net (e)		170					42					128					0.01					698					174					524					0.02
Total non-general and administrative expense		934					488					446					0.02					3,888					898					2,990					0.12
General and administrative expense adjustments:
Restructuring costs and retention bonuses (f)		18					4					14					—					585					146					439					0.02
Digital and brand repositioning costs (g)		335					84					251					0.01					72					18					54					—
Total general and administrative expense		353					88					265					0.01					657					164					493					0.02
Adjusted - Non-GAAP		$	3,126				$	(265	)			$	3,391				$	0.13				$	(3,749	)			$	(625	)			$	(3,124	)			$	(0.12	)
		(Unaudited)
		Six Months Ended
		July 4, 2021																				June 28, 2020
		Income (Loss) Before Income Taxes					Provision For Income Taxes (a)					Net Income (Loss)					Diluted EPS					Loss Before Income Taxes					Benefit From Income Taxes (a)					Net Loss					Diluted EPS
Reported - GAAP Net Income												$	(2,172	)			$	(0.09	)													$	(15,660	)			$	(0.62	)
Loss (income) from discontinued operations, net of tax												4,157					0.16															5,345					0.21
Income (loss) from continuing operations		$	4,221				$	2,236				$	1,985				$	0.07				$	(13,427	)			$	(3,112	)			$	(10,315	)			$	(0.41	)
Adjustments:
Non-general and administrative expense adjustments:
Income tax due to tax law change (a)		—					(563		)			563					0.02					—					2,234					(2,234		)			(0.09		)
Deferred tax asset valuation allowance (b)		—					(376		)			376					0.01					—					(2,032		)			2,032					0.08
Impairment and other lease charges (c)		(254		)			(63		)			(191		)			(0.01		)			5,628					1,404					4,224					0.17
Closed restaurant rent expense, net of sublease income (d)		1,716					428					1,288					0.05					2,381					594					1,787					0.07
Other expense (income), net (e)		293					73					220					0.01					927					231					696					0.03
Total non-general and administrative expense		1,755					(501		)			2,256					0.09					8,936					2,431					6,505					0.26
General and administrative expense adjustments:
Restructuring costs and retention bonuses (f)		18					4					14					—					585					146					439					0.02
Digital and brand repositioning costs (g)		651					162					489					0.02					192					48					144					0.01
Total general and administrative expense		669					166					503					0.02					777					194					583					0.02
Adjusted - Non-GAAP		$	6,645				$	1,901				$	4,744				$	0.19				$	(3,714	)			$	(487	)			$	(3,227	)			$	(0.13	)

(a)		The provision for (benefit from) income taxes related to the adjustments was calculated using the Company's combined federal statutory and estimated state rate of 25.0% for the periods ending July 4, 2021 and June 28, 2020. In the three months ended April 4, 2021, we recorded an out-of-period adjustment totaling $1.5 million related to tax depreciation on certain assets placed into service several years prior to the formation of Fiesta in 2011, of which $0.6 million is attributable to a change in tax rates as a result of the Tax Cuts and Jobs Act of 2017. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law. The CARES Act includes provisions that allow net operating losses in 2018, 2019, and 2020 to be carried back for up to five years and eliminates the 80% taxable income limitation on net operating loss deductions for 2018 through 2020. The CARES Act also includes technical amendments that are retroactive to 2018 which permit certain assets to be classified as qualified improvement property and expensed immediately. These changes allowed us to record an incremental benefit of $1.8 million in the three months ended March 29, 2020, which represents the impact of carrying net operating losses from 2018 and 2019 back to years with a higher federal corporate income tax rate.
(b)		We recorded adjustments totaling $(0.3) million and $0.4 million for the three and six months ended July 4, 2021, respectively, to our valuation allowance against deferred income tax assets primarily related to changes in our deferred income tax assets and the expected timing of the reversal of these temporary differences, which included a $0.9 million increase in our valuation allowance as a result of changes in our net deferred tax liabilities related to the out-of-period adjustment in the first quarter of 2021. We recorded an additional $0.7 million and $2.0 million valuation allowance for the three and six months ended June 28, 2020, respectively, against deferred income tax assets where it was determined to be more likely than not that the deferred income tax assets will not be realized through the reversal of existing deferred tax liabilities.
(c)		Impairment and other lease charges for the three and six months ended July 4, 2021, primarily relate to gains from lease terminations.
		Impairment and other lease charges for the three and six months ended June 28, 2020, consist of impairment charges of $1.1 million and $4.8 million, respectively, and other lease charges of $0.9 million. The impairment charges primarily relate to the write-down of assets held for sale to their fair value less costs to sell for the three and six months ended June 28, 2020 and assets for three underperforming Pollo Tropical restaurants, two of which we closed in the third quarter of 2020, for the six months ended June 28, 2020. The other lease charges primarily relate to lease termination charges of $0.9 million for restaurant locations we decided not to develop.
(d)		Closed restaurant rent expense, net of sublease income for the three and six months ended July 4, 2021, primarily consists of closed restaurant lease costs of $2.3 million and $4.6 million, respectively, partially offset by sublease income of $(1.3) million and $(2.9) million, respectively. Closed restaurant rent expense, net of sublease income for the three and six months ended June 28, 2020, primarily consists of closed restaurant lease costs of $2.3 million and $4.6 million, respectively, partially offset by sublease income of $(1.1) million and $(2.2) million, respectively.
(e)		Other expense (income), net for the three and six months ended July 4, 2021, primarily consists of costs for the removal, transfer, and storage of equipment from closed restaurants and other closed restaurant related costs. Other expense, net for the three and six months ended June 28, 2020, primarily consists of the write-off of site development costs of $0.6 million and costs for the removal, transfer, and storage of equipment from closed restaurants and other closure related costs.
(f)		Restructuring costs and retention bonuses for the three and six months ended June 28, 2020 include severance costs related to terminations in response to the COVID-19 pandemic.
(g)		Digital and brand repositioning costs for the three and six months ended July 4, 2021 and June 28, 2020, include consulting costs related to repositioning the digital experience for our customers.

 

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