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March 2016 Investor Presentation

This document provides an investor presentation for Fiesta Restaurant Group. It discusses Fiesta's two brands, Pollo Tropical and Taco Cabana, and outlines their growth strategies. Both brands have experienced strong sales growth and margin expansion in recent years. Fiesta plans to separate the two brands into independent companies to allow for dedicated focus and execution. The presentation provides details on unit growth, financial performance, marketing initiatives and regional expansion plans for each brand.

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1 www.frgi.com Investor Presentation March 2016
2 www.frgi.com Tim Taft President & Chief Executive Officer Presenters President & Chief Executive Officer Lynn Schweinfurth Chief Financial Officer
3 www.frgi.com Forward-looking Statements This document and our presentation 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 and are intended to be covered by the “safe harbor” created by those sections. All statements, other than statements of historical facts included herein, including, without limitation, statements regarding our future financial position and results of operations, business strategy, budgets, projected costs and plans and objectives of management for future operations, are “forward-looking statements.” Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” or “continue” or the negative of such words or variations of such words and similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements and we can give no assurance that such forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, or “cautionary statements,” include, but are not limited to: increases in food and other commodity costs; risks associated with the expansion of our business; our ability to manage our growth and successfully implement our business strategy; general economic conditions, particularly in the retail sector; competitive conditions; weather conditions; fuel prices; significant disruptions in service or supply by any of our suppliers or distributors; changes in consumer perception of dietary health and food safety; labor and employment benefit costs; regulatory factors; the outcome of pending or future legal claims or proceedings; environmental conditions and regulations; our borrowing costs; the availability and terms of necessary or desirable financing or refinancing and other related risks and uncertainties; the risk of an act of terrorism or escalation of any insurrection or armed conflict involving the United States or any other national or international calamity; factors that affect the restaurant industry generally, including product recalls, liability if our products cause injury, ingredient disclosure and labeling laws and regulations, reports of cases of food-borne illnesses such as “mad cow” disease and “avian” flu, and the possibility that consumers could lose confidence in the safety and quality of certain food products, as well as negative publicity regarding food quality, illness, injury or other health concerns.
4 www.frgi.com Strategic & Operational Overview
5 www.frgi.com Investment Considerations Accelerating Development Given Significant Potential Compelling Business Model Well Positioned Within the Growing Fast-Casual Segment Proven Financial Results Two Leading, Differentiated Brands What you want to know
6 www.frgi.com Recent Development Gradually Build Two Fully Independent Management Teams Announced Intention to Separate Pollo Tropical and Taco Cabana Businesses Tax-efficient Distribution of 100% of TC’s Stock to Fiesta’s Shareholder Expected Completion in 2017 or 2018 Two Entirely Focused Companies Will Have Dedicated Execution
7 www.frgi.com Meaningful EPS Growth Margin Expansion 10%-12% Revenue Growth 2%-3% SSS Growth Long-term Business Model 8%-10% Company Restaurant Growth
8 www.frgi.com Industry-leading AUVs $s in millions. Sources: company filings. $2.6 $2.6 $2.4 $1.1$1.2 $1.0 $1.6 $1.9 FY 2015, Average Annual Sales at Company-owned Restaurants
9 www.frgi.com Industry-leading AUVs AUV Growth CAGR = 4.7% AUV Growth CAGR = 3.5% $1.6 $1.7 $1.8 $1.8 2010 2011 2012 2013 2014 $1.8 $2.1 $2.3 $2.5 $2.7 $2.7 20142013201220112010 $2.6 2015 $1.9 2015
10 www.frgi.com Compelling Restaurant-level EBITDA Restaurant-level EBITDA is defined as restaurant sales minus cost of sales, labor, occupancy, other operating and advertising expenses. Pre-opening cost is excluded from the calculation. Sources: company filings 24.8% 26.1% 16.3% 16.2% 19.4% 21.1% 16.6% 19.0% FY 2015, % of Restaurant Sales
11 www.frgi.com Restaurant Growth Potential Unit 3,200 4,500 2,000 N/A 2,500 N/A N/A N/A N/A 1,600 Potential % of Unit 62% 44% 32% N/A 20% N/A N/A N/A N/A 10% Potential 169 168 160 1,972 661 611 492 433 396 1,971 174 FY 2015, Number of System-wide Restaurants in U.S. Sources: Domestic system wide unit counts for competitors as of the most recent filings.
12 www.frgi.com
13 www.frgi.com A Unique and Extraordinary Brand Freshly prepared Caribbean-inspired food you feel good about eating. A 28 year old brand originating in South Florida Truly differentiated restaurant concept with no direct competitor Signature offerings: fresh, grilled bone-in chicken marinated with tropical fruit juices and spices, rice and beans • Additional proteins, side dishes, salads and wraps further broaden target audience • Rum punch and Caribbean beer • Self service Saucing Island includes made from scratch salsas and sauces Significant restaurant growth potential Best-in-class restaurant economics Attractive value proposition - great quality food with an average check of ~ $10 Convenience with dine-in, take out and drive-thru Catering growth is a meaningful opportunity
14 www.frgi.com Restaurant Sales Growth and Margin Trends 2012 2013 2014 2015 8.1% 5.9% 6.6% 3.8% SSS Growth Restaurant-level EBITDA Margin (% of Restaurant Sales) 2012 2013 2014 2015 25.6% 26.3% 25.9% 24.8%
15 www.frgi.com Freshly Prepared, Caribbean-inspired Menu
16 www.frgi.com Our Differentiated Restaurant Growth Vehicle New Prototype Introduced in Texas in March 2014
17 www.frgi.com Our Differentiated Restaurant Growth Vehicle
18 www.frgi.com Accelerating Growth and National Potential 155 Company & 35 Franchise Restaurants 36-40 New Company Restaurants in 2016, or 23% Brand Restaurant Growth Short-term Southern Focus; Long-term National Potential Market Share Growth with Planned Cannibalization Non-traditional U.S. Licensing Opportunities
19 www.frgi.com Accelerating Growth and National Potential 23/ 0 11 / 0 117 / 5 Current U.S. Footprint New Company-Owned Restaurants Opened 2010................................................................ 2011................................................................ 2012................................................................ 2013.............................................................. 2014……………………………...……………. 2015…………………………………………..... 2016 ………………………………………. 2 2 5 12 22 32 36-40E Where two numbers appear on the map, the first represents company-owned restaurants and the second represents franchised and licensed restaurants.
20 www.frgi.com Development Strategy CORE SOUTH FLORIDA MARKETS SUPERIOR BRAND AWARENESS Miami-Dade, Broward, & Palm Beach Counties Exceptional financial performance OTHER FLORIDA MARKETS DRIVING TRAFFIC GROWTH WITH MEDIA Orlando, Naples/Fort Myers, Tampa, Jacksonville & Nashville Driving higher brand awareness through new development and media strategies At scale to drive meaningful sales growth with media EMERGING MARKETS LOW BRAND AWARENESS, NOT ON BROADCAST MEDIA Dallas, Houston, San Antonio & Atlanta Robust development pipeline in Texas; build out Atlanta over time as trade areas develop Atlanta to begin broadcast media by 4Q 2016, San Antonio started media in mid- February
21 www.frgi.com Reimaging Program Initiated in 2015 Former Reimaged
22 www.frgi.com
23 www.frgi.com Broad Menu Offerings with Mexican Authenticity Fresh, contemporary food prepared with authentic flavors of Mexico A 38 year old brand originating in San Antonio 24-hour format Broad, authentic Mexican product offerings including sizzling fajitas, enchiladas, quesadillas, burritos and salads • Margaritas and beer • Fresh tortillas made daily • Self service salsa bar includes made from scratch salsas and sauces Top five AUV in the fast casual segment, operating performance at peak Expansion in Texas Attractive value proposition - great quality food with an average check of ~ $9 Convenience with dine-in, take out and drive-thru Catering growth is a meaningful opportunity
24 www.frgi.com Restaurant Sales Growth and Margin Trends 2012 2013 2014 2015 4.7% 0.5% 3.3% 4.4% SSS Growth Restaurant-level EBITDA Margin (% of Restaurant Sales) 2012 2013 2014 2015 16.9% 16.7% 17.9% 19.0% Restaurant-level EBITDAMargin excludes pre-opening costs.
25 www.frgi.com Fresh, Authentic Flavors of Mexico
26 www.frgi.com Renewed Texas Expansion Leveraging Proven Brand Affinity 2012 Prototype New Prototype All stores reimaged between 2012 and 2015
27 www.frgi.com Renewed Texas Expansion Leveraging Proven Brand Affinity
28 www.frgi.com 2016 sales and traffic drivers 1% pricing Incremental advertising expense at Pollo ~ 50 bps or $4 million+ • Increased media weights in mature markets • At least 84% of restaurants will be supported by broadcast media • Earlier investment in new markets New “Real People” advertising campaign at Pollo New product news with limited-time-promotions Continuation of the Pollo remodel program Introduction of new loyalty programs Continuation of new focus on off-premise Ongoing operations focus and execution Guidance – at least low single digit comparable sales growth at both brands 1% to 2% of pricing New product news with limited-time-promotions Completed Taco Cabana remodel program Introduction of new loyalty programs Continuation of new focus on off premise Ongoing operations focus and execution
29 www.frgi.com
30 www.frgi.com The rest of the story. (what you need to know)
31 www.frgi.com Not the typical growth story THE BIG 3 Miami-Dade, Palm Beach and Broward • Represents 65 of the 91 restaurants in 2012 • Average Unit Volume of $2.8 in 2012 Atlanta Jacksonville Orlando Tampa Ft. Myers 26restaurants 5cities $1.9Million AUV Other five markets
32 www.frgi.com From 2012 to 2015 THE BIG 3 65 to 77 units $2.8 to $3.3 AUV
33 www.frgi.com Growth of the other five cities 26 to 50 units $1.9 to $2.0 AUV Now Media Efficient Atlanta Jacksonville Orlando Tampa Ft. Myers • Media in Atlanta to begin 4Q 2016
34 www.frgi.com In 2016, 84% Restaurants in Markets with Broadcast Media
35 www.frgi.com Case Study – Naples / Ft Myers Ft. Myers
36 www.frgi.com Case Study – Naples / Ft Myers, Building Market Share 2012 3 2013 4 2014 6 2015 7 Company-owned Restaurants 2012 0.4 2013 0.7 2014 1.1 2015 1.3 Total Transactions 2012 $1.6 2013 $2.1 2014 $2.4 2015 $2.3 Annual Unit Volume (in millions)
37 www.frgi.com Growth in Texas Opened Texas in 2014 Increased units in 2015 from 10 to 23 Dallas Houston Austin San Antonio Project 41 total units by the end of 2016 San Antonio media turned on Feb 2016
38 www.frgi.com The rest of the story • Management teams overhauled • Recipes & portion sizes made consistent • Achieving all-time best customer feedback scores • Positive transactions despite sizable price increases • Enhanced culinary team • System reimage program completed
39 www.frgi.com • The Big 3 represent 50% of all restaurants • Maintain highest AUVs in the industry • Funded emerging Florida markets • Reworked process, procedures, I.T. infrastructure, HR, development and supply chain all while plane is flying The rest of the story
40 www.frgi.com Still many levers to pull to drive SSS 53% OFF PREMISE CONSUMPTION MARKETING CATERING INNOVATIONLOYALTY
41 www.frgi.com By end of 2016 Doubling in size since 2012
42 www.frgi.com And now you know the rest of the story.
43 www.frgi.com Financial Summary
44 www.frgi.com Accelerating Growth Since 2012 Spin-off Note: Restaurant-level EBITDA Margin excludes pre-opening costs. Company-owned Restaurant Growth Adjusted Diluted EPS CAGR = 36.3% Revenue Growth 0.8% 6.4% 9.0% 8.9% 2012 2013 2014 2015 7.3% 8.2% 10.8% 12.5% 2012 2013 2014 2015 20.8% 21.2% 21.9% 22.1% 2012 2013 2014 2015 Restaurant-level EBITDA Margin % of Restaurant Sales 130 bps Margin Expansion $0.60 $0.83 $1.33 $1.52 2012 2013 2014 2015
45 www.frgi.com Proven Business Model Note: Restaurant-level EBITDA Margin excludes pre-opening costs. 0.0% 12.1% 21.6% 25.0% 2012 2013 2014 2015 Company-owned Restaurant Growth 11.3% 16.5% 16.5% 14.5% 2012 2013 2014 2015 Restaurant-level EBITDA Growth 8.5% 13.3% 20.5% 12.5% 2012 2013 2014 2015 Adjusted EBITDA Growth 9.5% 13.2% 18.4% 19.3% 2012 2013 2014 2015 Revenue Growth
46 www.frgi.com Performance Trends Improved to Current Record Level Note: Restaurant-level EBITDA Margin excludes pre-opening costs. Company-owned Restaurant Growth Adjusted EBITDA Growth 1.3% 3.1% 1.2% -3.0% 2012 2013 2014 2015 Restaurant-level EBITDA Growth 5.2% 3.1% 11.4% 12.2% 2012 2013 2014 2015 -4.2% 1.7% 26.5% 20.3% 2012 2013 2014 2015 Revenue Growth 5.6% 4.0% 4.1% 5.6% 2012 2013 2014 2015
47 www.frgi.com FY 2015 Financial Results ($s in millions) FY 2014 FY 2015 % Growth Restaurant Sales $608.5 $684.6 Franchise Revenues $2.6 $2.8 Total Revenues $611.1 $687.4 12.5% Restaurant-level EBITDA $133.2 $151.2 13.5% % Restaurant Sales 21.9% 22.1% Adjusted Net Income $35.7 $40.8 14.3% % Revenues 5.8% 5.9% Adjusted Diluted EPS $1.33 $1.52 14.3%
48 www.frgi.com Leverage and Liquidity End of Q4 2015, $73.5M in Borrowing Capacity, 2.1% rate $150M revolving credit facility (currently, LIBOR + 150 bps) through 2018 Repurchased $200M, 8.875% Notes in Q4 2013 • Refinancing including $135M equity offering net proceeds • New Capital Structure Contributed ~ 25% EPS Growth in 2014 ($s in millions) FY 2012 FY 2013 FY 2014 FY 2015 Senior Secured Second Lien Notes $200.0 - - - Senior Secured Credit Facility - $71.0 $66.0 $71.0 Capital Leases $1.0 $1.4 $1.3 $1.7 Lease Financing Obligations $3.0 $1.7 $1.7 $1.7 Total Debt $204.0 $74.0 $69.0 $74.3 Less: Cash and Cash Equivalents $15.5 $11.0 $5.1 $5.3 Total Net Debt $188.5 $63.0 $63.9 $69.1 Total Adjusted EBITDA $64.2 $69.8 $85.7 $99.0 Total Net Debt / Total Adjusted EBITDA 2.9x 0.9x 0.7x 0.7x
49 www.frgi.com 2016 Operating Targets Cost of Sales Improvement, as a % of Sales, Approximately 100 bps at TC and 180 bps at PT Effective Tax Rate of 36% to 37% Depreciation and Amortization Expense of Approximately $36 million to $38 million SSS At Least Low Single Digit at Both Brands Company-owned Restaurant Openings of 40 to 44 Capital Expenditures of $95 million to $110 million
50 www.frgi.com Commodity Cost Overview The Company Contracts Commodities With Some Suppliers 2016 Projected Consolidate Commodity Decrease ~ Low Single Digits 2016 Commodities Under Fixed Pricing By Year End ~ 70%-80% COGS Top 5 Food Purchases – 2016F Top 5 Food Purchases – 2016F
51 www.frgi.com Focused Capital Allocation New Restaurant Development Focused on Pollo Tropical Continued Reimaging Initiative at Pollo Tropical, ~ 15 in 2016 Ongoing Strategic Investments to Optimize Restaurant Management, Guest Experience and Infrastructure
52 www.frgi.com Appendix
53 www.frgi.com Franchising Franchise Locations Bahamas.................... Honduras .................... Guatemala.................. Panama....................... Puerto Rico ................. Trinidad and Tobago … Venezuela................... United States………….. 1 3 1 5 17 2 11 1 • Current focus is U.S. non-traditional franchising (universities and airports) - Currently, 5 Pollo and 2 Taco locations • International franchise locations are Pollo Tropical restaurants • We have one traditional Taco franchisee in Albuquerque, NM with 4 restaurants • Franchise revenues are not meaningful today, <1% of total revenues • Franchise expansion anticipated to be a growth platform in the future
54 www.frgi.com Total Adjusted EBITDA Reconciliation ($s in millions) FY2012 FY2013 FY2014 FY2015 Restaurant-level Adjusted EBITDA Excluding Pre-Opening Costs: Pollo Tropical 58.2$ 67.8$ 79.0$ 90.4$ Taco Cabana 47.2 48.7 54.2 60.8 Consolidated 105.4$ 116.5$ 133.2$ 151.2$ Less: Pre-Opening Costs 1.7 2.8 4.1 4.6 Restaurant-level Adjusted EBITDA: Pollo Tropical 57.1 65.7 75.6 86.1 Taco Cabana 46.6 48.0 53.5 60.6 Consolidated 103.7$ 113.7$ 129.1$ 146.6$ Add: Franchise Royalty Revenues and Fees 2.4 2.4 2.6 2.8 Less: General and Administrative (Excluding Stock-based Compensation) 41.8 46.2 46.0 50.4 Adjusted EBITDA Pollo Tropical 38.6 43.7 52.7 59.3 Taco Cabana 25.6 26.1 33.0 39.7 Consolidated 64.2$ 69.8$ 85.7$ 99.0$ Less: Depreciation and Amortization 18.3 20.4 23.0 30.6 Impairment and Other Lease Charges 7.0 0.2 0.4 2.4 Interest Expense 24.4 18.0 2.2 1.9 Loss on Extinguishment of Debt - 16.4 - - Provision for Income Taxes 4.3 3.8 21.0 22.0 Stock-Based Compensation 2.0 2.3 3.5 4.3 Other Expense / (Gain) (0.1) (0.6) (0.6) (0.7) Net Income 8.3$ 9.3$ 36.2$ 38.5$
55 www.frgi.com Adjusted EBITDA Reconciliation ($s in millions) FY2012 FY2013 FY2014 FY2015 Restaurant Sales 227.4$ 257.8$ 305.4$ 364.5$ Less: Cost of Sales 75.4 85.5 100.5 121.7 Restaurant Wages and Related Expenses 53.6 57.9 67.5 81.6 Restaurant Rent Expense 7.7 10.1 12.5 16.0 Other Restaurant Operating Expenses 26.8 30.8 38.3 45.4 Advertising Expense 5.7 5.7 7.7 9.5 Restaurant-Level Adjusted EBITDA Excluding Pre-Opening Costs 58.2$ 67.8$ 79.0$ 90.4$ Less: Pre-Opening Costs 1.1 2.0 3.4 4.3 Restaurant-Level Adjusted EBITDA 57.1$ 65.7$ 75.6$ 86.1$ Add: Franchise Revenue 1.9 1.9 2.1 2.2 Less: General and Administrative Expenses 20.4 23.9 24.9 28.9 Adjusted EBITDA 38.6$ 43.7$ 52.7$ 59.3$
56 www.frgi.com Adjusted EBITDA Reconciliation Restaurant Sales 279.9$ 291.1$ 303.1$ 320.0$ Less: Cost of Sales 88.1 90.6 91.8 95.6 Restaurant Wages and Related Expenses 82.6 85.5 87.6 92.5 Restaurant Rent Expense 13.9 16.7 17.2 17.1 Other Restaurant Operating Expenses 37.0 38.2 40.6 41.9 Advertising Expense 11.1 11.4 11.8 12.1 Restaurant-Level Adjusted EBITDA Excluding Pre-Opening Costs 47.2$ 48.7$ 54.2$ 60.8$ Less: Pre-Opening Costs 0.6 0.7 0.7 0.3 Restaurant-Level Adjusted EBITDA 46.6$ 48.0$ 53.5$ 60.6$ Add: Franchise Revenue 0.5 0.5 0.5 0.6 Less: General and Administrative Expenses 21.4 22.4 21.1 21.5 Adjusted EBITDA 25.6$ 26.1$ 33.0$ 39.7$
57 www.frgi.com Adjusted Net Income Reconciliation (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 the twelve months ended January 3, 2016 are primarily related to the suspension of our Cabana Grill concept at the end of fiscal 2015. Impairment and other lease charges for each period are presented net of taxes of $0.9 million, $0.1 million, $0.1 million and $2.4 million for the twelve months ended January 3, 2016, December 28, 2014, 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. The amount reported as "qualification for sale leaseback accounting" represents 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 the full year ended December 30, 2012. Qualification for sale leaseback accounting is shown net of taxes of $0.6 million in the twelve months ended December 30, 2012. This amount is 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 $0.4 million. The Company did not receive any proceeds from the sale of shares in the offering. Secondary offering expenses are presented net of taxes of $0.2 million. (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 twelve months ended December 29, 2013 is presented net of taxes of $5.9 million. (e) Gain on condemnation in 2015 primarily includes a previously deferred gain from a sale-leaseback transaction that was recognized upon termination of the lease. Gain on condemnation in 2014 includes a gain from a condemnation award resulting from an eminent domain proceeding. Gain on condemnation for each period is presented net of taxes of $(0.1) million and $(0.2) million for the twelve months ended January 3, 2016 and December 28, 2014, respectively. (f) Legal settlements and related costs in 2015 include legal fees and other costs, including estimated settlement charges, associated with a class action litigation, and in 2014 include the benefit of a payment received as settlement of a litigation matter. Legal settlements and related costs for each period are presented net of taxes of $0.6 million and $(0.2) million for the twelve months ended January 3, 2016 and December 28, 2014, respectively. (g) Gain on sale of property for each period is presented net of taxes of $(0.2) million and $(0.0) million for the twelve months ended December 29, 2013 and December 30, 2012, respectively. ($s in millions, except per share amounts) $ EPS $ EPS $ EPS $ EPS Net Income 8.3$ 0.35$ 9.3$ 0.39$ 36.2$ 1.35$ 38.5$ 1.44$ Add (each net of tax effect): Impairment and other lease charges (a) 4.6 0.20 0.1 - 0.2 0.01 1.5 0.05 Qualification for sale leaseback accounting (b) 1.2 0.05 - - - - - - Secondary offering expenses (c) - - 0.3 0.01 - - - - Loss on extinguishment of debt (d) - - 10.5 0.44 - - - - Gain on condemnation (e) - - - - (0.3) (0.01) (0.2) (0.01) Legal settlements and related costs (f) - - - - (0.3) (0.01) 1.0 0.04 Gain on sale of property (g) (0.1) - (0.3) (0.01) - - - - Adjusted net income & EPS 14.1$ 0.60$ 19.9$ 0.83$ 35.7$ 1.33$ 40.8$ 1.52$ * Amounts do not add to adjusted total due to rounding FY2012 FY2013 FY2014 FY2015
58 www.frgi.com Use of Non-GAAP Financial Measures Adjusted EBITDA, restaurant-level adjusted EBITDA, and restaurant-level adjusted EBITDA excluding pre-opening costs are all non-GAAP financial measures. Adjusted EBITDA is defined as earnings attributable to the applicable segment 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. It includes an allocation of corporate and brand general and administrative expenses (each excluding stock-based compensation). Restaurant-level adjusted EBITDA (excluding pre-opening costs) is defined as Adjusted EBITDA excluding franchise royalty revenues and fees, pre-opening costs and general and administrative expenses. Management believes that such financial measures, when viewed with our results of operations calculated in accordance with GAAP and our reconciliation of restaurant-level adjusted EBITDA and restaurant-level adjusted EBITDA excluding pre-opening costs and adjusted EBITDA to net income (i) provide useful information about our operating performance and period-over-period growth (including at the restaurant level), (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. 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, loss on extinguishment of debt, gain on condemnation, legal settlements and related costs and gain on sale of property. 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.

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March 2016 Investor Presentation

  • 1.
  • 2.
    2 www.frgi.com Tim Taft President &Chief Executive Officer Presenters President & Chief Executive Officer Lynn Schweinfurth Chief Financial Officer
  • 3.
    3 www.frgi.com Forward-looking Statements This documentand our presentation 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 and are intended to be covered by the “safe harbor” created by those sections. All statements, other than statements of historical facts included herein, including, without limitation, statements regarding our future financial position and results of operations, business strategy, budgets, projected costs and plans and objectives of management for future operations, are “forward-looking statements.” Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” or “continue” or the negative of such words or variations of such words and similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements and we can give no assurance that such forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, or “cautionary statements,” include, but are not limited to: increases in food and other commodity costs; risks associated with the expansion of our business; our ability to manage our growth and successfully implement our business strategy; general economic conditions, particularly in the retail sector; competitive conditions; weather conditions; fuel prices; significant disruptions in service or supply by any of our suppliers or distributors; changes in consumer perception of dietary health and food safety; labor and employment benefit costs; regulatory factors; the outcome of pending or future legal claims or proceedings; environmental conditions and regulations; our borrowing costs; the availability and terms of necessary or desirable financing or refinancing and other related risks and uncertainties; the risk of an act of terrorism or escalation of any insurrection or armed conflict involving the United States or any other national or international calamity; factors that affect the restaurant industry generally, including product recalls, liability if our products cause injury, ingredient disclosure and labeling laws and regulations, reports of cases of food-borne illnesses such as “mad cow” disease and “avian” flu, and the possibility that consumers could lose confidence in the safety and quality of certain food products, as well as negative publicity regarding food quality, illness, injury or other health concerns.
  • 4.
  • 5.
    5 www.frgi.com Investment Considerations Accelerating DevelopmentGiven Significant Potential Compelling Business Model Well Positioned Within the Growing Fast-Casual Segment Proven Financial Results Two Leading, Differentiated Brands What you want to know
  • 6.
    6 www.frgi.com Recent Development Gradually BuildTwo Fully Independent Management Teams Announced Intention to Separate Pollo Tropical and Taco Cabana Businesses Tax-efficient Distribution of 100% of TC’s Stock to Fiesta’s Shareholder Expected Completion in 2017 or 2018 Two Entirely Focused Companies Will Have Dedicated Execution
  • 7.
  • 8.
    8 www.frgi.com Industry-leading AUVs $s inmillions. Sources: company filings. $2.6 $2.6 $2.4 $1.1$1.2 $1.0 $1.6 $1.9 FY 2015, Average Annual Sales at Company-owned Restaurants
  • 9.
    9 www.frgi.com Industry-leading AUVs AUV GrowthCAGR = 4.7% AUV Growth CAGR = 3.5% $1.6 $1.7 $1.8 $1.8 2010 2011 2012 2013 2014 $1.8 $2.1 $2.3 $2.5 $2.7 $2.7 20142013201220112010 $2.6 2015 $1.9 2015
  • 10.
    10 www.frgi.com Compelling Restaurant-level EBITDA Restaurant-levelEBITDA is defined as restaurant sales minus cost of sales, labor, occupancy, other operating and advertising expenses. Pre-opening cost is excluded from the calculation. Sources: company filings 24.8% 26.1% 16.3% 16.2% 19.4% 21.1% 16.6% 19.0% FY 2015, % of Restaurant Sales
  • 11.
    11 www.frgi.com Restaurant Growth Potential Unit3,200 4,500 2,000 N/A 2,500 N/A N/A N/A N/A 1,600 Potential % of Unit 62% 44% 32% N/A 20% N/A N/A N/A N/A 10% Potential 169 168 160 1,972 661 611 492 433 396 1,971 174 FY 2015, Number of System-wide Restaurants in U.S. Sources: Domestic system wide unit counts for competitors as of the most recent filings.
  • 12.
  • 13.
    13 www.frgi.com A Unique andExtraordinary Brand Freshly prepared Caribbean-inspired food you feel good about eating. A 28 year old brand originating in South Florida Truly differentiated restaurant concept with no direct competitor Signature offerings: fresh, grilled bone-in chicken marinated with tropical fruit juices and spices, rice and beans • Additional proteins, side dishes, salads and wraps further broaden target audience • Rum punch and Caribbean beer • Self service Saucing Island includes made from scratch salsas and sauces Significant restaurant growth potential Best-in-class restaurant economics Attractive value proposition - great quality food with an average check of ~ $10 Convenience with dine-in, take out and drive-thru Catering growth is a meaningful opportunity
  • 14.
    14 www.frgi.com Restaurant Sales Growthand Margin Trends 2012 2013 2014 2015 8.1% 5.9% 6.6% 3.8% SSS Growth Restaurant-level EBITDA Margin (% of Restaurant Sales) 2012 2013 2014 2015 25.6% 26.3% 25.9% 24.8%
  • 15.
  • 16.
    16 www.frgi.com Our Differentiated RestaurantGrowth Vehicle New Prototype Introduced in Texas in March 2014
  • 17.
  • 18.
    18 www.frgi.com Accelerating Growth andNational Potential 155 Company & 35 Franchise Restaurants 36-40 New Company Restaurants in 2016, or 23% Brand Restaurant Growth Short-term Southern Focus; Long-term National Potential Market Share Growth with Planned Cannibalization Non-traditional U.S. Licensing Opportunities
  • 19.
    19 www.frgi.com Accelerating Growth andNational Potential 23/ 0 11 / 0 117 / 5 Current U.S. Footprint New Company-Owned Restaurants Opened 2010................................................................ 2011................................................................ 2012................................................................ 2013.............................................................. 2014……………………………...……………. 2015…………………………………………..... 2016 ………………………………………. 2 2 5 12 22 32 36-40E Where two numbers appear on the map, the first represents company-owned restaurants and the second represents franchised and licensed restaurants.
  • 20.
    20 www.frgi.com Development Strategy CORE SOUTHFLORIDA MARKETS SUPERIOR BRAND AWARENESS Miami-Dade, Broward, & Palm Beach Counties Exceptional financial performance OTHER FLORIDA MARKETS DRIVING TRAFFIC GROWTH WITH MEDIA Orlando, Naples/Fort Myers, Tampa, Jacksonville & Nashville Driving higher brand awareness through new development and media strategies At scale to drive meaningful sales growth with media EMERGING MARKETS LOW BRAND AWARENESS, NOT ON BROADCAST MEDIA Dallas, Houston, San Antonio & Atlanta Robust development pipeline in Texas; build out Atlanta over time as trade areas develop Atlanta to begin broadcast media by 4Q 2016, San Antonio started media in mid- February
  • 21.
  • 22.
  • 23.
    23 www.frgi.com Broad Menu Offeringswith Mexican Authenticity Fresh, contemporary food prepared with authentic flavors of Mexico A 38 year old brand originating in San Antonio 24-hour format Broad, authentic Mexican product offerings including sizzling fajitas, enchiladas, quesadillas, burritos and salads • Margaritas and beer • Fresh tortillas made daily • Self service salsa bar includes made from scratch salsas and sauces Top five AUV in the fast casual segment, operating performance at peak Expansion in Texas Attractive value proposition - great quality food with an average check of ~ $9 Convenience with dine-in, take out and drive-thru Catering growth is a meaningful opportunity
  • 24.
    24 www.frgi.com Restaurant Sales Growthand Margin Trends 2012 2013 2014 2015 4.7% 0.5% 3.3% 4.4% SSS Growth Restaurant-level EBITDA Margin (% of Restaurant Sales) 2012 2013 2014 2015 16.9% 16.7% 17.9% 19.0% Restaurant-level EBITDAMargin excludes pre-opening costs.
  • 25.
  • 26.
    26 www.frgi.com Renewed Texas ExpansionLeveraging Proven Brand Affinity 2012 Prototype New Prototype All stores reimaged between 2012 and 2015
  • 27.
    27 www.frgi.com Renewed Texas ExpansionLeveraging Proven Brand Affinity
  • 28.
    28 www.frgi.com 2016 sales andtraffic drivers 1% pricing Incremental advertising expense at Pollo ~ 50 bps or $4 million+ • Increased media weights in mature markets • At least 84% of restaurants will be supported by broadcast media • Earlier investment in new markets New “Real People” advertising campaign at Pollo New product news with limited-time-promotions Continuation of the Pollo remodel program Introduction of new loyalty programs Continuation of new focus on off-premise Ongoing operations focus and execution Guidance – at least low single digit comparable sales growth at both brands 1% to 2% of pricing New product news with limited-time-promotions Completed Taco Cabana remodel program Introduction of new loyalty programs Continuation of new focus on off premise Ongoing operations focus and execution
  • 29.
  • 30.
    30 www.frgi.com The rest ofthe story. (what you need to know)
  • 31.
    31 www.frgi.com Not the typicalgrowth story THE BIG 3 Miami-Dade, Palm Beach and Broward • Represents 65 of the 91 restaurants in 2012 • Average Unit Volume of $2.8 in 2012 Atlanta Jacksonville Orlando Tampa Ft. Myers 26restaurants 5cities $1.9Million AUV Other five markets
  • 32.
    32 www.frgi.com From 2012 to2015 THE BIG 3 65 to 77 units $2.8 to $3.3 AUV
  • 33.
    33 www.frgi.com Growth of theother five cities 26 to 50 units $1.9 to $2.0 AUV Now Media Efficient Atlanta Jacksonville Orlando Tampa Ft. Myers • Media in Atlanta to begin 4Q 2016
  • 34.
    34 www.frgi.com In 2016, 84%Restaurants in Markets with Broadcast Media
  • 35.
    35 www.frgi.com Case Study –Naples / Ft Myers Ft. Myers
  • 36.
    36 www.frgi.com Case Study –Naples / Ft Myers, Building Market Share 2012 3 2013 4 2014 6 2015 7 Company-owned Restaurants 2012 0.4 2013 0.7 2014 1.1 2015 1.3 Total Transactions 2012 $1.6 2013 $2.1 2014 $2.4 2015 $2.3 Annual Unit Volume (in millions)
  • 37.
    37 www.frgi.com Growth in Texas OpenedTexas in 2014 Increased units in 2015 from 10 to 23 Dallas Houston Austin San Antonio Project 41 total units by the end of 2016 San Antonio media turned on Feb 2016
  • 38.
    38 www.frgi.com The rest ofthe story • Management teams overhauled • Recipes & portion sizes made consistent • Achieving all-time best customer feedback scores • Positive transactions despite sizable price increases • Enhanced culinary team • System reimage program completed
  • 39.
    39 www.frgi.com • The Big3 represent 50% of all restaurants • Maintain highest AUVs in the industry • Funded emerging Florida markets • Reworked process, procedures, I.T. infrastructure, HR, development and supply chain all while plane is flying The rest of the story
  • 40.
    40 www.frgi.com Still many leversto pull to drive SSS 53% OFF PREMISE CONSUMPTION MARKETING CATERING INNOVATIONLOYALTY
  • 41.
    41 www.frgi.com By end of2016 Doubling in size since 2012
  • 42.
    42 www.frgi.com And now youknow the rest of the story.
  • 43.
  • 44.
    44 www.frgi.com Accelerating Growth Since2012 Spin-off Note: Restaurant-level EBITDA Margin excludes pre-opening costs. Company-owned Restaurant Growth Adjusted Diluted EPS CAGR = 36.3% Revenue Growth 0.8% 6.4% 9.0% 8.9% 2012 2013 2014 2015 7.3% 8.2% 10.8% 12.5% 2012 2013 2014 2015 20.8% 21.2% 21.9% 22.1% 2012 2013 2014 2015 Restaurant-level EBITDA Margin % of Restaurant Sales 130 bps Margin Expansion $0.60 $0.83 $1.33 $1.52 2012 2013 2014 2015
  • 45.
    45 www.frgi.com Proven Business Model Note:Restaurant-level EBITDA Margin excludes pre-opening costs. 0.0% 12.1% 21.6% 25.0% 2012 2013 2014 2015 Company-owned Restaurant Growth 11.3% 16.5% 16.5% 14.5% 2012 2013 2014 2015 Restaurant-level EBITDA Growth 8.5% 13.3% 20.5% 12.5% 2012 2013 2014 2015 Adjusted EBITDA Growth 9.5% 13.2% 18.4% 19.3% 2012 2013 2014 2015 Revenue Growth
  • 46.
    46 www.frgi.com Performance Trends Improvedto Current Record Level Note: Restaurant-level EBITDA Margin excludes pre-opening costs. Company-owned Restaurant Growth Adjusted EBITDA Growth 1.3% 3.1% 1.2% -3.0% 2012 2013 2014 2015 Restaurant-level EBITDA Growth 5.2% 3.1% 11.4% 12.2% 2012 2013 2014 2015 -4.2% 1.7% 26.5% 20.3% 2012 2013 2014 2015 Revenue Growth 5.6% 4.0% 4.1% 5.6% 2012 2013 2014 2015
  • 47.
    47 www.frgi.com FY 2015 FinancialResults ($s in millions) FY 2014 FY 2015 % Growth Restaurant Sales $608.5 $684.6 Franchise Revenues $2.6 $2.8 Total Revenues $611.1 $687.4 12.5% Restaurant-level EBITDA $133.2 $151.2 13.5% % Restaurant Sales 21.9% 22.1% Adjusted Net Income $35.7 $40.8 14.3% % Revenues 5.8% 5.9% Adjusted Diluted EPS $1.33 $1.52 14.3%
  • 48.
    48 www.frgi.com Leverage and Liquidity Endof Q4 2015, $73.5M in Borrowing Capacity, 2.1% rate $150M revolving credit facility (currently, LIBOR + 150 bps) through 2018 Repurchased $200M, 8.875% Notes in Q4 2013 • Refinancing including $135M equity offering net proceeds • New Capital Structure Contributed ~ 25% EPS Growth in 2014 ($s in millions) FY 2012 FY 2013 FY 2014 FY 2015 Senior Secured Second Lien Notes $200.0 - - - Senior Secured Credit Facility - $71.0 $66.0 $71.0 Capital Leases $1.0 $1.4 $1.3 $1.7 Lease Financing Obligations $3.0 $1.7 $1.7 $1.7 Total Debt $204.0 $74.0 $69.0 $74.3 Less: Cash and Cash Equivalents $15.5 $11.0 $5.1 $5.3 Total Net Debt $188.5 $63.0 $63.9 $69.1 Total Adjusted EBITDA $64.2 $69.8 $85.7 $99.0 Total Net Debt / Total Adjusted EBITDA 2.9x 0.9x 0.7x 0.7x
  • 49.
    49 www.frgi.com 2016 Operating Targets Costof Sales Improvement, as a % of Sales, Approximately 100 bps at TC and 180 bps at PT Effective Tax Rate of 36% to 37% Depreciation and Amortization Expense of Approximately $36 million to $38 million SSS At Least Low Single Digit at Both Brands Company-owned Restaurant Openings of 40 to 44 Capital Expenditures of $95 million to $110 million
  • 50.
    50 www.frgi.com Commodity Cost Overview TheCompany Contracts Commodities With Some Suppliers 2016 Projected Consolidate Commodity Decrease ~ Low Single Digits 2016 Commodities Under Fixed Pricing By Year End ~ 70%-80% COGS Top 5 Food Purchases – 2016F Top 5 Food Purchases – 2016F
  • 51.
    51 www.frgi.com Focused Capital Allocation NewRestaurant Development Focused on Pollo Tropical Continued Reimaging Initiative at Pollo Tropical, ~ 15 in 2016 Ongoing Strategic Investments to Optimize Restaurant Management, Guest Experience and Infrastructure
  • 52.
  • 53.
    53 www.frgi.com Franchising Franchise Locations Bahamas.................... Honduras .................... Guatemala.................. Panama....................... PuertoRico ................. Trinidad and Tobago … Venezuela................... United States………….. 1 3 1 5 17 2 11 1 • Current focus is U.S. non-traditional franchising (universities and airports) - Currently, 5 Pollo and 2 Taco locations • International franchise locations are Pollo Tropical restaurants • We have one traditional Taco franchisee in Albuquerque, NM with 4 restaurants • Franchise revenues are not meaningful today, <1% of total revenues • Franchise expansion anticipated to be a growth platform in the future
  • 54.
    54 www.frgi.com Total Adjusted EBITDAReconciliation ($s in millions) FY2012 FY2013 FY2014 FY2015 Restaurant-level Adjusted EBITDA Excluding Pre-Opening Costs: Pollo Tropical 58.2$ 67.8$ 79.0$ 90.4$ Taco Cabana 47.2 48.7 54.2 60.8 Consolidated 105.4$ 116.5$ 133.2$ 151.2$ Less: Pre-Opening Costs 1.7 2.8 4.1 4.6 Restaurant-level Adjusted EBITDA: Pollo Tropical 57.1 65.7 75.6 86.1 Taco Cabana 46.6 48.0 53.5 60.6 Consolidated 103.7$ 113.7$ 129.1$ 146.6$ Add: Franchise Royalty Revenues and Fees 2.4 2.4 2.6 2.8 Less: General and Administrative (Excluding Stock-based Compensation) 41.8 46.2 46.0 50.4 Adjusted EBITDA Pollo Tropical 38.6 43.7 52.7 59.3 Taco Cabana 25.6 26.1 33.0 39.7 Consolidated 64.2$ 69.8$ 85.7$ 99.0$ Less: Depreciation and Amortization 18.3 20.4 23.0 30.6 Impairment and Other Lease Charges 7.0 0.2 0.4 2.4 Interest Expense 24.4 18.0 2.2 1.9 Loss on Extinguishment of Debt - 16.4 - - Provision for Income Taxes 4.3 3.8 21.0 22.0 Stock-Based Compensation 2.0 2.3 3.5 4.3 Other Expense / (Gain) (0.1) (0.6) (0.6) (0.7) Net Income 8.3$ 9.3$ 36.2$ 38.5$
  • 55.
    55 www.frgi.com Adjusted EBITDA Reconciliation ($sin millions) FY2012 FY2013 FY2014 FY2015 Restaurant Sales 227.4$ 257.8$ 305.4$ 364.5$ Less: Cost of Sales 75.4 85.5 100.5 121.7 Restaurant Wages and Related Expenses 53.6 57.9 67.5 81.6 Restaurant Rent Expense 7.7 10.1 12.5 16.0 Other Restaurant Operating Expenses 26.8 30.8 38.3 45.4 Advertising Expense 5.7 5.7 7.7 9.5 Restaurant-Level Adjusted EBITDA Excluding Pre-Opening Costs 58.2$ 67.8$ 79.0$ 90.4$ Less: Pre-Opening Costs 1.1 2.0 3.4 4.3 Restaurant-Level Adjusted EBITDA 57.1$ 65.7$ 75.6$ 86.1$ Add: Franchise Revenue 1.9 1.9 2.1 2.2 Less: General and Administrative Expenses 20.4 23.9 24.9 28.9 Adjusted EBITDA 38.6$ 43.7$ 52.7$ 59.3$
  • 56.
    56 www.frgi.com Adjusted EBITDA Reconciliation RestaurantSales 279.9$ 291.1$ 303.1$ 320.0$ Less: Cost of Sales 88.1 90.6 91.8 95.6 Restaurant Wages and Related Expenses 82.6 85.5 87.6 92.5 Restaurant Rent Expense 13.9 16.7 17.2 17.1 Other Restaurant Operating Expenses 37.0 38.2 40.6 41.9 Advertising Expense 11.1 11.4 11.8 12.1 Restaurant-Level Adjusted EBITDA Excluding Pre-Opening Costs 47.2$ 48.7$ 54.2$ 60.8$ Less: Pre-Opening Costs 0.6 0.7 0.7 0.3 Restaurant-Level Adjusted EBITDA 46.6$ 48.0$ 53.5$ 60.6$ Add: Franchise Revenue 0.5 0.5 0.5 0.6 Less: General and Administrative Expenses 21.4 22.4 21.1 21.5 Adjusted EBITDA 25.6$ 26.1$ 33.0$ 39.7$
  • 57.
    57 www.frgi.com Adjusted Net IncomeReconciliation (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 the twelve months ended January 3, 2016 are primarily related to the suspension of our Cabana Grill concept at the end of fiscal 2015. Impairment and other lease charges for each period are presented net of taxes of $0.9 million, $0.1 million, $0.1 million and $2.4 million for the twelve months ended January 3, 2016, December 28, 2014, 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. The amount reported as "qualification for sale leaseback accounting" represents 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 the full year ended December 30, 2012. Qualification for sale leaseback accounting is shown net of taxes of $0.6 million in the twelve months ended December 30, 2012. This amount is 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 $0.4 million. The Company did not receive any proceeds from the sale of shares in the offering. Secondary offering expenses are presented net of taxes of $0.2 million. (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 twelve months ended December 29, 2013 is presented net of taxes of $5.9 million. (e) Gain on condemnation in 2015 primarily includes a previously deferred gain from a sale-leaseback transaction that was recognized upon termination of the lease. Gain on condemnation in 2014 includes a gain from a condemnation award resulting from an eminent domain proceeding. Gain on condemnation for each period is presented net of taxes of $(0.1) million and $(0.2) million for the twelve months ended January 3, 2016 and December 28, 2014, respectively. (f) Legal settlements and related costs in 2015 include legal fees and other costs, including estimated settlement charges, associated with a class action litigation, and in 2014 include the benefit of a payment received as settlement of a litigation matter. Legal settlements and related costs for each period are presented net of taxes of $0.6 million and $(0.2) million for the twelve months ended January 3, 2016 and December 28, 2014, respectively. (g) Gain on sale of property for each period is presented net of taxes of $(0.2) million and $(0.0) million for the twelve months ended December 29, 2013 and December 30, 2012, respectively. ($s in millions, except per share amounts) $ EPS $ EPS $ EPS $ EPS Net Income 8.3$ 0.35$ 9.3$ 0.39$ 36.2$ 1.35$ 38.5$ 1.44$ Add (each net of tax effect): Impairment and other lease charges (a) 4.6 0.20 0.1 - 0.2 0.01 1.5 0.05 Qualification for sale leaseback accounting (b) 1.2 0.05 - - - - - - Secondary offering expenses (c) - - 0.3 0.01 - - - - Loss on extinguishment of debt (d) - - 10.5 0.44 - - - - Gain on condemnation (e) - - - - (0.3) (0.01) (0.2) (0.01) Legal settlements and related costs (f) - - - - (0.3) (0.01) 1.0 0.04 Gain on sale of property (g) (0.1) - (0.3) (0.01) - - - - Adjusted net income & EPS 14.1$ 0.60$ 19.9$ 0.83$ 35.7$ 1.33$ 40.8$ 1.52$ * Amounts do not add to adjusted total due to rounding FY2012 FY2013 FY2014 FY2015
  • 58.
    58 www.frgi.com Use of Non-GAAPFinancial Measures Adjusted EBITDA, restaurant-level adjusted EBITDA, and restaurant-level adjusted EBITDA excluding pre-opening costs are all non-GAAP financial measures. Adjusted EBITDA is defined as earnings attributable to the applicable segment 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. It includes an allocation of corporate and brand general and administrative expenses (each excluding stock-based compensation). Restaurant-level adjusted EBITDA (excluding pre-opening costs) is defined as Adjusted EBITDA excluding franchise royalty revenues and fees, pre-opening costs and general and administrative expenses. Management believes that such financial measures, when viewed with our results of operations calculated in accordance with GAAP and our reconciliation of restaurant-level adjusted EBITDA and restaurant-level adjusted EBITDA excluding pre-opening costs and adjusted EBITDA to net income (i) provide useful information about our operating performance and period-over-period growth (including at the restaurant level), (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. 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, loss on extinguishment of debt, gain on condemnation, legal settlements and related costs and gain on sale of property. 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.