Fiesta Restaurant Group, Inc. Reports Fourth Quarter and Full Year 2013 Results

  Fiesta Restaurant Group, Inc. Reports Fourth Quarter and Full Year 2013   Results  Business Wire  ADDISON, Texas -- February 25, 2014  Fiesta Restaurant Group, Inc. (“Fiesta” or the “Company”) (NASDAQ:FRGI), the owner, operator, and franchisor of the Pollo Tropical® and Taco Cabana® fast-casual restaurant brands, today reported results for the fourth quarter and the full year 2013, which ended on December 29, 2013.  Highlights of fourth quarter 2013 results include:    *Total revenues increased 7.6% to $136.2 million;   *Comparable restaurant sales increased 7.0% and comparable restaurant guest     traffic increased 3.8% at Pollo Tropical;   *Comparable restaurant sales decreased 2.9% and comparable restaurant guest     traffic decreased 3.4% at Taco Cabana, negatively affected by unfavorable     weather and a slowed remodeling schedule;   *Two Company-owned Pollo Tropical restaurants and one Company-owned Taco     Cabana restaurant were opened;   *The fourth quarter 2013 included a pre-tax charge of $16.4 million, or     $0.42 per share after tax, related to the early extinguishment of debt,     resulting in a net loss of $5.6 million, or $0.22 per share (on a base of     24.3 million shares), compared to net income of $2.6 million, or $0.11 per     share (on a base of 22.7 million shares), in the fourth quarter of 2012;   *Adjusted net income increased $2.2 million to $4.9 million, or $0.20 per     share, compared to adjusted net income of $2.7 million, or $0.12 per     share, in the fourth quarter of 2012 (see non-GAAP reconciliation table     below); and   *Raised $135.3 million in net proceeds from an equity offering and secured     a new $150 million senior secured revolving credit facility to reduce     outstanding debt by $129.0 million to $71.0 million at quarter end and     reduce the interest rate on the Company’s long-term borrowings from 8.88%     to a weighted average rate of 2.25% at quarter end.  Highlights of the full year 2013 results include:    *Revenues increased 8.2% to $551.3 million;   *Comparable restaurant sales increased 5.9% and comparable guest traffic     increased 2.7% at Pollo Tropical;   *Comparable restaurant sales increased 0.5% and comparable guest traffic     decreased 1.1% at Taco Cabana, negatively affected by unfavorable weather     and a slowed remodeling schedule;   *18 Company-owned restaurants were opened in 2013, including 12 Pollo     Tropical and six Taco Cabana restaurants;   *2013 net income increased $1.0 million to $9.3 million, or $0.39 per share     (on a base of 23.3 million shares), compared to $8.3 million, or $0.35 per     share (on a base of 22.9 million shares), in 2012; and   *2013 adjusted net income increased $6.0 million to $20.2 million, or $0.84     per share, compared to $14.1 million in 2012, or $0.60 per share, in 2012     (see non-GAAP reconciliation table below).  Fiesta President and Chief Executive Officer Tim Taft commented, “The fourth quarter marked the completion of a transformative year at Fiesta and we are proud of the many accomplishments our teams have produced. Our quarterly financial results were solid in large part due to Pollo’s performance and, despite weather challenges at Taco Cabana, we significantly expanded restaurant-level EBITDA and increased adjusted EPS on a larger share base. We also completed the administrative transition from our former parent company 18 months ahead of the original schedule, reduced and refinanced our outstanding debt, and issued new equity.”  Taft continued, “Our development strategy is centered on aggressive expansion of Pollo Tropical westward while backfilling existing southeastern markets to achieve media efficiency. This year we will nearly double the number of Company-owned Pollo Tropical openings including restaurants across four Texas cities with a completely reworked prototype. We are also introducing an elevated Taco Cabana concept in Atlanta named Cabana Grill^TM that will feature an updated menu, softer color scheme, and new service model.”  Taft concluded, “I believe our management team of corporate and brand leaders have solidified Fiesta for ongoing, successful execution of our business plan.”  Fourth Quarter 2013 Financial Review  Consolidated Results  Total revenues increased 7.6% in the fourth quarter of 2013 to $136.2 million from $126.6 million in the fourth quarter of 2012. Restaurant sales in the fourth quarter of 2013 increased 7.6% to $135.5 million from $125.9 million in the fourth quarter of 2012 due to the opening of new Company-owned restaurants and comparable restaurant sales growth at Pollo Tropical, which was partially offset by a comparable restaurant sales decline at Taco Cabana due largely to unfavorable weather.  Cost of sales decreased as a percentage of restaurant sales in the fourth quarter of 2013 compared to the prior year period as supply chain management initiatives and modest price increases mitigated commodity cost increases.  Restaurant wages and related expenses improved as a percentage of restaurant sales in the fourth quarter of 2013 compared to the prior year period due primarily to the favorable impact of sales increases on fixed costs and lower medical and other benefits costs.  Other restaurant operating expenses increased slightly as a percentage of restaurant sales in the fourth quarter of 2013 compared to the prior year period due primarily to higher insurance costs. Pre-opening costs were $0.4 million compared to $0.6 million in the prior year period due to the timing of expenses for future openings. Rent expense increased as a percentage of restaurant sales as a consequence of new Company-owned restaurant openings and sale-leasebacks completed during the year.  Advertising expense decreased as a percentage of restaurant sales in the fourth quarter of 2013 compared to the prior year period due primarily to the timing of promotions and a reduction in advertising given adverse weather conditions.  General and administrative expenses increased $1.6 million to $12.6 million in the fourth quarter of 2013 from $11.1 million in the fourth quarter of 2012, due primarily to Fiesta employee additions and costs incurred related to completing the transition of various functions from the Company's former parent company, Carrols Restaurant Group, Inc.  Depreciation and amortization increased to $5.3 million in the fourth quarter of 2013 compared to $4.6 million in the prior year period. This increase was due to new Company-owned restaurant development as well as restaurant remodeling expenditures.  Interest expense decreased $1.5 million to $3.6 million in the fourth quarter of 2013 from $5.1 million in the fourth quarter 2012 due to the reduction in Fiesta’s outstanding debt and a lower interest rate on our borrowings under the new senior credit facility.  Loss on extinguishment of debt in the fourth quarter of 2013 of $16.4 million was related to the repurchase and redemption of the 8.875% Senior Secured Second Lien Notes due 2016, and included a write-off of $3.9 million in deferred financing costs and $12.5 million of debt redemption premiums, consent payments, additional interest and other fees.  The effective tax rate for 2013 decreased to 29.1% as compared to an effective tax rate for 2012 of 34.2%, due primarily to the effect of the Work Opportunity Tax Credit that was renewed in early 2013. The 2013 effective tax rate also includes the positive impacts of discrete items, which include the retroactive effect of renewing the 2012 Work Opportunity Tax Credit in 2013.  Net loss was $5.6 million, or $0.22 per share (on a base of 24.3 million shares), compared to net income of $2.6 million, or $0.11 per share (on a base of 22.7 million shares), in the fourth quarter of 2012. Net loss for the fourth quarter of 2013 included a pre-tax charge of $16.4 million, or $0.42 per share after tax, related to the early extinguishment of debt.  Brand Results  Pollo Tropical restaurant sales increased 16.7% to $65.5 million in the fourth quarter of 2013 from $56.1 million in the fourth quarter of 2012 due to a comparable restaurant sales increase of 7.0% along with a net increase in the number of Company-owned restaurants. This is the seventeenth consecutive quarter the brand has delivered comparable restaurant sales growth and, on a two year basis, fourth quarter comparable restaurant sales grew 15.3%. The growth in comparable restaurant sales resulted from a 3.8% increase in comparable restaurant guest traffic along with a 3.2% increase in average check. Adjusted EBITDA for Pollo Tropical, a non-GAAP financial measure, increased to $11.3 million in the fourth quarter of 2013 from $7.9 million in the fourth quarter of 2012.  Taco Cabana restaurant sales increased 0.4% to $70.1 million in the fourth quarter of 2013 from $69.8 million in the fourth quarter of 2012 due to a net increase in the number of Company-owned restaurants that was largely offset by a 2.9% decrease in comparable restaurant sales. Prior to this quarter, the brand has delivered thirteen consecutive quarters of comparable restaurant sales growth and, on a two year basis, fourth quarter comparable restaurant sales grew 3.9%. The decrease in comparable restaurant sales resulted from a decrease of 3.4% in comparable restaurant guest traffic due to unfavorable weather conditions in Texas and a strategic slow-down of the number of remodeled restaurants completed, partially offset by a 0.5% increase in average check. Adjusted EBITDA for Taco Cabana, a non-GAAP financial measure, decreased to $5.6 million in the fourth quarter of 2013 from $5.9 million in the fourth quarter of 2012.  Full Year 2013 Financial Summary  Total revenues increased 8.2% to $551.3 million compared to $509.7 million in the prior year period, driven by comparable restaurant sales growth of 5.9% at Pollo Tropical and 0.5% at Taco Cabana. The growth in comparable restaurant sales resulted from an increase in comparable restaurant guest traffic of 2.7% at Pollo Tropical and an increase in average check of 3.2% at Pollo Tropical and 1.6% at Taco Cabana, partially offset by a decrease in comparable restaurant guest traffic of 1.1% at Taco Cabana.  Net income increased $1.0 million to $9.3 million, or $0.39 per share (on a base of 23.3 million shares), compared to $8.3 million, or $0.35 per share (on a base of 22.9 million shares), in 2012. Full year 2013 results included the negative impact of a pre-tax charge of $16.4 million related to the early extinguishment of debt, or $0.42 per share after tax. Full year 2012 results included the impact of the spin-off from Carrols on May 7, 2012, and related expenses, the establishment of a separate public company with a transitioning infrastructure and senior management team, and impairment charges primarily associated with the closure of Pollo Tropical restaurants in the New Jersey market.  Restaurant Development  During the fourth quarter of 2013, Fiesta opened two new Company-owned Pollo Tropical restaurants, one in the Atlanta market and one in the Tampa market, and one new Company-owned Taco Cabana restaurant in the Austin market. In addition, one international franchised Pollo Tropical restaurant in Panama was opened during the quarter.  As of December 29, 2013, the Company owned and operated 102 Pollo Tropical restaurants and 165 Taco Cabana restaurants and franchised 39 Pollo Tropical restaurants in the U.S., Puerto Rico, the Bahamas, Costa Rica, Ecuador, Honduras, India, Panama, Trinidad & Tobago, Venezuela and the Dominican Republic, and seven Taco Cabana restaurants in the U.S.  Refinancing and Public Offering of Common Stock  On November 20, 2013, the Company completed an underwritten public offering of its common stock, which included 3,078,336 shares of common stock issued and sold by the Company.  On December 11, 2013, the Company entered into a new senior secured revolving credit facility with a new syndicate of lenders, which provides for up to $150 million of revolving credit borrowings (including $15 million available for letters of credit).  The Company used the net proceeds of the equity offering and revolving credit borrowings under its new senior credit facility, to (i) repurchase and redeem all of its $200 million of 8.875% Senior Secured Second Lien Notes due 2016 and (ii) pay fees and expenses related to the transactions.  Investor Conference Call Today  Fiesta will host a conference call to review fourth quarter and full year 2013 results today at 4:30 PM ET. Hosting the call will be President and Chief Executive Officer Tim Taft and Vice President and Chief Financial Officer Lynn Schweinfurth.  The conference call can be accessed live over the phone by dialing 877-795-3604 or for international callers by dialing 719-325-4853. A replay will be available after the call and can be accessed by dialing 877-870-5176 or for international callers by dialing 858-384-5517; the passcode is 5697508. The replay will be available until Tuesday, March 4, 2014.  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 the Pollo Tropical®and Taco Cabana® restaurant brands. The brands specialize in the operation of fast-casual, ethnic restaurants that offer distinct and unique flavors with broad appeal at a compelling value. Both brands feature made-from-scratch cooking, fresh salsa bars, and 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.  Consolidated Statements of Operations  (in thousands, except share and per share amounts) (unaudited)                                                                     Three months ended (a)            Twelve months ended (a)                    December 29,   December 30,     December 29,   December 30,                    2013             2012             2013             2012                                                                        Revenues: Restaurant         $  135,545       $  125,929       $  548,980       $  507,351 sales Franchise royalty            610             649             2,357           2,375       revenues and fees Total revenues     136,155          126,578          551,337          509,726 Costs and expenses: Cost of sales      43,232           40,408           176,123          163,514 Restaurant wages and          35,478           34,444           143,392          136,265 related expenses (b) Restaurant rent expense       7,150            6,174            26,849           21,595 (c) Other restaurant         17,235           15,694           69,021           63,813 operating expenses Advertising        3,863            4,868            17,138           16,791 expense General and administrative     12,626           11,070           48,521           43,870 expenses (b)(d)(e) Depreciation and                5,258            4,575            20,375           18,278 amortization (c) Pre-opening        388              617              2,767            1,673 costs Impairment and other lease        (40        )     223              199              7,039 charges Other income       —               (92        )     (554       )     (92        ) Total costs        125,190         117,981         503,831         472,746     and expenses Income from        10,965           8,597            47,506           36,980 operations Interest           3,568            5,090            18,043           24,424 expense (c) Loss on extinguishment     16,411          —               16,411          —           of debt (f) Income (loss) before income      (9,014     )     3,507            13,052           12,556 taxes Provision (benefit) for      (3,461     )     945             3,795           4,289       income taxes Net income         $  (5,553  )     $  2,562        $  9,257        $  8,267    (loss)                                                                        Basic and diluted net        $  (0.22   )     $  0.11         $  0.39         $  0.35     income (loss) per share (g)                                                                        Basic and diluted weighted           24,322,025      22,748,241      23,271,431      22,890,018  average common shares outstanding                                                                                                                                    (a) The Company uses a 52 or 53 week fiscal year that ends on the Sunday closest to December 31. The three and twelve month periods ended December 29, 2013 and December 30, 2012 included 13 and 52 weeks, respectively.  (b) Restaurant wages and related expenses include stock-based compensation expense of $0 and $2 for the three month periods ended December 29, 2013 and December 30, 2012, respectively, and $2 and $11 for the years ended December 29, 2013 and December 30, 2012, respectively. General and administrative expenses include stock-based compensation expense of $619 and $431 for the three month periods ended December 29, 2013 and December 30, 2012, respectively, and $2,296 and $2,025 for the years ended December 29, 2013 and December 30, 2012, respectively.  (c) Prior to the spin-off from Carrols Restaurant Group, Inc. ("Carrols"), certain sale-leaseback transactions were classified as lease financing transactions because Carrols guaranteed the related lease payments. Effective upon the spin-off, the provisions that previously precluded sale-leaseback accounting were cured or eliminated. As a result, the real property leases entered into in connection with these transactions are now recorded as operating leases. Additionally, in the second quarter of 2012, we exercised purchase options associated with the leases for five restaurant properties also previously accounted for as lease financing obligations and purchased those properties from the lessor. Subsequently, four of the five properties have been sold in qualifying sale-leaseback transactions. Because of the qualification of these leases and purchase of the five properties, restaurant rent expense was $2.8 million higher, depreciation expense was $0.7 million lower, and interest expense was $3.9 million lower in the twelve month period ended December 29, 2013 as compared to the twelve month period ended December 30, 2012.  (d) General and administrative expenses include expenses related directly to Fiesta and corporate expenses allocated from Carrols (parent company of Fiesta until May 7, 2012). Such allocated expenses were for administrative support including executive management, information systems and certain accounting, legal and other administrative functions. Following the spin-off, the Company performs these functions or purchases services from either Carrols (under a transition services agreement) or third parties. The Company terminated the remaining services under the transition services agreement in December 2013.  (e) General and administrative expenses for the twelve months ended December 29, 2013 include expenses related to the underwritten secondary public equity offering completed during March 2013 totaling $425. The Company did not receive any proceeds from the sale of shares in the offering. General and administrative expenses in the year ended December 30, 2012 include a charge of $0.6 million associated with announced retirements of the Executive Vice Presidents of both the Pollo Tropical and Taco Cabana brands effective January 31, 2013.  (f) In the year ended December 29, 2013, we commenced a tender offer and consent solicitation for all of our outstanding $200.0 million 8.875% Senior Secured Second Lien Notes due 2016 (the "Notes") and called for redemption of the Notes that were not validly tendered and accepted for payment in the tender offer. We recognized a loss on extinguishment of debt of $16.4 million in the fourth quarter of 2013 related to the repurchase and redemption of the Notes. The loss on extinguishment of debt includes the write-off of $3.9 million in deferred financing costs related to the Notes and $12.5 million of debt redemption premiums, consent payments, additional interest and other fees related to the redemption of the Notes.  (g) As previously disclosed, Fiesta has granted shares of restricted stock to certain of its employees. Because the unvested shares participate in any dividends declared, the unvested shares are considered a second class of common stock for accounting purposes, impacting the calculation of net income per share. For further information, please see the Company's audited financial statements to be included in the Company's Annual Report on Form 10-K for the year ended December 29, 2013.   Fiesta Restaurant Group, Inc.  Condensed Consolidated Balance Sheet  (in thousands)                                                                                                 December 29, 2013     December 30, 2012                                                               Assets Cash                                   $   10,978            $     15,533 Other current assets                   21,947                15,424 Property and equipment, net            144,527               126,516 Goodwill                               123,484               123,484 Intangible assets, net                 121                   202 Deferred income taxes                  12,046                13,101 Deferred financing costs, net          1,530                 5,690 Other assets                           4,152                3,779 Total assets                           $   318,785          $     303,729                                                               Liabilities and Stockholders' Equity Current liabilities                    $   38,087            $     41,278 Long-term debt, net of current         72,324                200,889 portion Lease financing obligations            1,657                 3,029 Deferred income sale-leaseback of      35,873                36,096 real estate Other liabilities                      12,538               11,933 Total liabilities                      160,479               293,225 Stockholders' equity                   158,306              10,504 Total liabilities and                  $   318,785          $     303,729 stockholders' equity                                                                       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 and number of restaurants):                                                                      (unaudited)                    (unaudited)                      Three months ended             Twelve months ended                      December      December       December      December                      29, 2013        30, 2012       29, 2013        30, 2012 Segment Revenues: Pollo Tropical       $ 65,950        $ 56,535       $ 259,702       $ 229,343 Taco Cabana          70,205         70,043        291,635        280,383    Total revenues       136,155         126,578        551,337         509,726                                                                      Change in comparable restaurant sales: (a) Pollo Tropical       7.0      %      8.3      %     5.9       %     8.1       % Taco Cabana          (2.9     )%     6.8      %     0.5       %     4.7       %                                                                      Average Sales per Company-Owned Restaurant (b): Pollo Tropical       $ 644           $ 623          $ 2,666         $ 2,538 Taco Cabana          426             432            1,783           1,768                                                                      Income (loss) before income taxes (c): Pollo Tropical       $ 6,966         $ 3,425        $ 26,049        $ 13,051 Taco Cabana          431             104            3,414           (468      )                                                                      Adjusted EBITDA (d): Pollo Tropical       $ 11,251        $ 7,850        $ 43,738        $ 38,592 Taco Cabana          5,551           5,886          26,086          25,649                                                                      Restaurant-Level Adjusted EBITDA (d): Pollo Tropical       $ 16,845        $ 12,723       $ 65,738        $ 57,094 Taco Cabana          11,354          11,003         47,954          46,617                                                                      Number of Company-Owned Restaurants: Pollo Tropical       102             91             102             91 Taco Cabana          165            160           165            160        Total Company-owned        267             251            267             251 restaurants                                                                      Company-Owned Restaurant Openings: Pollo Tropical       2               1              12              5 Taco Cabana          1              2             6              5          Total new restaurant           3               3              18              10 openings                                                                      Company-Owned Restaurant Closings: Pollo Tropical       —               —              1               5 Taco Cabana          —              2             1              3          Net change in        3               1              16              2 restaurants                                                                      Number of Franchised Restaurants: Pollo Tropical       39              35             39              35 Taco Cabana          7              8             7              8          Total franchised     46              43             46              43 restaurants                                                                       (a) Restaurants are included in comparable restaurant sales after they have been open for 18 months.  (b) Average sales for 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.  (c) The Company recognized a loss on extinguishment of debt of $16.4 million in the fourth quarter of 2013 related to the repurchase and redemption of its Notes. This loss was not allocated to the Pollo Tropical and Taco Cabana segments as the notes were issued by Fiesta Restaurant Group, Inc.  (d) Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP financial measures. Please see the reconciliation of Restaurant-Level Adjusted EBITDA and Adjusted EBITDA to net income in the table on the following page of this release.                          Fiesta Restaurant Group, Inc.                       Supplemental Non-GAAP Information  The following table sets forth certain unaudited supplemental financial data                           for the periods indicated                   (in thousands, except per share amounts):  Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP financial measures. Adjusted EBITDA is defined as earnings before interest, loss on extinguishment of debt, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense and other income and expense. 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 accounting, legal and other administrative functions. Restaurant-Level Adjusted EBITDA is defined as Adjusted EBITDA excluding franchise royalty revenues and fees and general and administrative expenses (including corporate-level general and administrative expenses). Adjusted EBITDA for each of our segments is a measure of segment profitability reported to our chief operating decision maker for purposes of allocating resources to the segments and assessing each segment's performance. In addition, management believes that Adjusted EBITDA and Restaurant-Level Adjusted EBITDA, when viewed with our results of operations calculated in accordance with GAAP and our reconciliation of Restaurant-Level Adjusted EBITDA and Adjusted EBITDA (both on a consolidated basis and on a segment basis) to net income (i) provides useful information (including at the restaurant level) about our operating performance and period-over-period growth, (ii) provides additional information that is useful for evaluating the operating performance of our business, and (iii) permits 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 a measure of financial performance or liquidity under GAAP and, accordingly, should not be considered as an alternative 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)                    (unaudited)                       Three months ended             Twelve months ended                       December        December       December       December                       29,             30,            29,            30,                       2013            2012          2013           2012                                                                      Restaurant-Level Adjusted EBITDA: Pollo Tropical        $  16,845       $ 12,723       $ 65,738       $ 57,094 Taco Cabana           11,354         11,003        47,954        46,617    Consolidated          28,199          23,726         113,692        103,711 Add: Franchise royalty     610             649            2,357          2,375 revenue and fees Less: General and administrative (excluding stock-based compensation          12,007          10,639         46,225         41,845 expense of $619, $431, $2,296 and $2,025, respectively) Adjusted EBITDA: Pollo Tropical        11,251          7,850          43,738         38,592 Taco Cabana           5,551          5,886         26,086        25,649    Consolidated          16,802          13,736         69,824         64,241 Less: Depreciation and      5,258           4,575          20,375         18,278 amortization Impairment and other lease           (40       )     223            199            7,039 charges Interest expense      3,568           5,090          18,043         24,424 Loss on extinguishment of     16,411          —              16,411         — debt Provision for         (3,461    )     945            3,795          4,289 income taxes Stock-based           619             433            2,298          2,036 compensation Other income          —              (92      )     (554     )     (92      ) Net income (loss)     $  (5,553 )     $ 2,562       $ 9,257       $ 8,267                                                                                                                                                                                        Fiesta Restaurant Group, Inc.                       Supplemental Non-GAAP Information  The following table sets forth certain unaudited supplemental financial data                           for the periods indicated                   (in thousands, except per share amounts):  Adjusted net income and related adjusted earnings per share are non-GAAP financial measures. Adjusted net income is defined as net income before impairment and other lease charges, the impact of the qualification for sale-leaseback accounting (primarily upon the spin-off from Carrols) for certain leases previously accounted for as lease financing obligations, secondary offering expenses and loss on extinguishment of debt. Management believes that adjusted net income and related adjusted earnings per 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)                                           (unaudited)                    Three months ended                                      Twelve months ended                    December 29, 2013          December 30, 2012          December 29, 2013         December 30, 2012                    $            EPS           $           EPS          $            EPS          $            EPS Net income         $ (5,553 )     $ (0.22 )     $ 2,562       $ 0.11       $ 9,257        $ 0.39       $ 8,267        $ 0.35 Add (each net of tax effect): Impairment and other lease        (26      )     —             148           0.01         128            —            4,632          0.20 charges (a) Qualification for sale           —              —             —             —            —              —            1,249          0.05 leaseback accounting (b) Secondary offering           —                                                       272            0.01 expenses (c) Loss on extinguishment     10,521        0.42         —            —           10,521        0.44        —             — of debt (d) Adjusted net       $ 4,942       $ 0.20       $ 2,710      $ 0.12      $ 20,178      $ 0.84      $ 14,148      $ 0.60 income   (a) Impairment and other lease charges for the twelve months ended December 30, 2012 are primarily related to the closure of five Pollo Tropical restaurants in New Jersey in the first quarter of 2012. Impairment and other lease charges for each period are presented net of taxes of $(14), $76, $71 and $2,407 for the three and twelve months ended December 29, 2013 and December 30, 2012, respectively.  (b) Prior to the spin-off from Carrols Restaurant Group, Inc. ("Carrols"), certain sale-leaseback transactions were classified as lease financing transactions because Carrols guaranteed the related lease payments. Effective upon the spin-off, the provisions that previously precluded sale-leaseback accounting were cured or eliminated. As a result, the real property leases entered into in connection with these transactions are now recorded as operating leases. Additionally, in the second quarter of 2012, we exercised purchase options associated with the leases for five restaurant properties also previously accounted for as lease financing obligations and purchased those properties from the lessor. Subsequently, four of the five properties have been sold in qualifying sale-leaseback transactions. Because of the qualification of these leases and purchase of the five properties, restaurant rent expense was $2.8 million higher, depreciation expense was $0.7 million lower, and interest expense was $3.9 million lower in the twelve month period ended December 29, 2013 as compared to the twelve month period ended December 30, 2012 and restaurant rent expense was $1.6 million and $4.4 million higher, depreciation expense was $0.5 million and $1.4 million lower and interest expense was $2.7 million and $7.1 million lower in the three and twelve months ended December 30, 2012, respectively, compared to the prior year periods.  The amounts reported as "qualification for sale leaseback accounting" represent the net increase in rent expense, decrease in depreciation expense and decrease in interest expense, that would have impacted net income had the leases been accounted for as operating leases for all periods presented, based on the deferred gain on sale-leaseback transactions calculated at the time of the spin-off, and had the five properties been owned for all periods presented. These amounts are shown net of taxes of $649 in the twelve months ended December 30, 2012. These amounts are included for comparative purposes only, and may not be indicative of what actual results would have been had the qualification for sale-leaseback accounting treatment of these leases (and the treatment of such leases as operating leases) occurred on the dates described above.  (c) Secondary offering expenses for the twelve months ended December 29, 2013 include expenses related to the underwritten secondary public equity offering completed during March 2013 totaling $425. The Company did not receive any proceeds from the sale of shares in the offering. Secondary offering expenses are presented net of taxes of $153.  (d) The Company recognized a loss on extinguishment of debt of $16.4 million in the fourth quarter of 2013 related to the repurchase and redemption of its Notes. The loss on extinguishment of debt for the three and twelve months ended December 29, 2013 is presented net of taxes of $5,890.  Contact:  Fiesta Restaurant Group, Inc. Investor Relations: Raphael Gross, 203-682-8253 investors@frgi.com