DFRG Del Friscos Restaurant Group Inc

Del Frisco’s Restaurant Group, Inc. (“Del Frisco’s” or the “Company”) (NASDAQ: DFRG) today reported financial results for the second quarter ended June 25, 2019.

On June 24, 2019, Del Frisco’s announced that it had entered into a definitive agreement under which affiliates of L Catterton, a consumer-focused private equity firm, will acquire the Company in an all cash transaction valued at approximately $650 million. Del Frisco’s stockholders will receive $8.00 per share, representing a 22% percent premium to the closing share price on December 19, 2018, the last trading day prior to Company’s announcement of a strategic alternatives process, and a premium of approximately 21% to the 30-day volume weighted average price ended on June 21, 2019.

The agreement was unanimously approved by Del Frisco’s Board of Directors (the “Board”) following a thorough review of a full range of strategic alternatives by the Board with the assistance of the Board’s Strategic Alternatives Review Committee (the “Committee”), which was first announced on December 20, 2018. The transaction is expected to be completed by the fourth quarter of 2019, subject to approval by Del Frisco’s stockholders and other customary closing conditions.

In view of the pending transaction, Del Frisco’s has withdrawn its fiscal year 2019 guidance and long-term outlook and will not host a conference call to discuss these second quarter 2019 financial results.

Key Highlights from the 13-Week Second Quarter 2019 Compared to the 13-Week Second Quarter 2018 Include:

• Consolidated revenues increased 73.9% to $131.7 million from $75.7 million due primarily to $21.1 million in contributions from Barcelona Wine Bar and $28.2 million in contributions from bartaco.
• Total comparable restaurant sales increased 0.5%.
• GAAP net loss of $6.4 million, or $0.19 per diluted share, compared to GAAP net loss of $1.6 million, or $0.08 per diluted share.
• Adjusted net loss* of $1.5 million, or $0.05 per diluted share, compared to adjusted net income* of $3.0 million, or $0.15 per diluted share.
• GAAP operating loss of $0.6 million, compared to GAAP operating loss of $3.0 million
• Adjusted EBITDA* increased 60.3% to $13.1 million from $8.2 million. As a percentage of consolidated revenues, adjusted EBITDA margin decreased 80 basis points to 10.0% from 10.8%.
• Restaurant-level EBITDA* increased 74.9% to $28.3 million from $16.2 million due primarily to $5.2 million in contributions from Barcelona Wine Bar and $6.9 million in contributions from bartaco. As a percentage of consolidated revenues, restaurant-level EBITDA margin increased 10 basis points to 21.5% from 21.4%. Sequentially, restaurant-level EBITDA margin improved 260 basis points relative to the first quarter of 2019.

* Adjusted net loss/income, adjusted EBITDA, and restaurant-level EBITDA are non-GAAP measures. For a reconciliation of these non-GAAP measures to GAAP net income and operating (loss)/income, respectively, and a discussion of why we consider them useful, see the reconciliation of non-GAAP measures accompanying this release.

Review of Second Quarter 2019 Operating Results

Consolidated revenues increased $56.0 million, or 73.9%, to $131.7 million in the second quarter of 2019 from $75.7 million in the second quarter of 2018. All results exclude any contributions from Sullivan’s Steakhouse, which was sold in the third quarter of 2018, and which sale is reflected as discontinued operations for the second quarter of 2018. The increase is due primarily to $21.1 million in contributions from Barcelona Wine Bar and $28.2 million in contributions from bartaco, which were acquired on June 27, 2018.

Comparable Restaurant Sales

	Total		Double Eagle		Del Frisco’s Grille		Barcelona		bartaco
Comparable Restaurant Sales	0.5%		(1.5)%		(0.6)%		2.4%		5.5%
Customer Counts	(1.2)%		(3.7)%		(8.3)%		4.9%		3.3%
Average Check	1.7%		2.2%		7.7%		(2.5)%		2.2%

General and administrative costs increased to $17.1 million in the second quarter of 2019 from $8.0 million in the second quarter of 2018. As a percentage of consolidated revenues, general and administrative costs increased to 13.0% from 10.5%. The additional costs were primarily related to the addition of Barcelona Wine Bar and bartaco, and additional compensation costs, including stock-based compensation related to growth in the number of restaurant support center and regional management-level personnel to support recent and anticipated growth.

We also incurred non-recurring consulting project costs of $3.4 million, non-recurring legal expense of $2.0 million, reorganization severance costs of $0.5 million, and donations of $0.2 million as set out in the Adjusted Net (Loss) Income Reconciliation attached.

GAAP net loss was $6.4 million, or $0.19 per diluted share, in the second quarter of 2019, compared to GAAP net loss of $1.6 million, or $0.08 per diluted share, in the second quarter of 2018.

Adjusted net loss* was $2.3 million, or $0.07 per diluted share, in the second quarter of 2019, compared to adjusted net income* of $3.0 million, or $0.15 per diluted share, in the second quarter of 2018.

Adjusted EBITDA* increased 60.3% to $13.1 million from $8.2 million. As a percentage of consolidated revenues, Adjusted EBITDA margin decreased 80 basis points to 10.0% from 10.8%.

Restaurant-level EBITDA* increased $12.1 million, or 74.9%, to $28.3 million in the second quarter of 2019, primarily due to $5.2 million in contributions from Barcelona and $6.9 million in contributions from bartaco. As a percentage of consolidated revenues, restaurant-level EBITDA* increased to 21.5% from 21.4%.

Recent Development

• A Barcelona Wine Bar opened in Raleigh, NC during the second quarter of 2019.
• A bartaco restaurant opened in Deerfield, IL during the second quarter of 2019.

Barteca Selected Financial Information

Contained within this earnings press release are unaudited selected quarterly historical financial information for Barteca (consisting of Barcelona Wine Bar and bartaco), recast to align with our fiscal calendar. This information is derived from financial statements prepared by the former management of Barteca. This unaudited selected financial information has been presented for informational purposes only and is not necessarily indicative of what the combined company’s results of operations actually would have been had the Barteca Acquisition been completed as of the dates indicated. In addition, the unaudited selected financial information does not purport to project the future financial position or results of operations of the combined company and does not reflect synergies that might be achieved from the combined operations.

About Del Frisco’s Restaurant Group, Inc.

Based in Irving, Texas, Del Frisco's Restaurant Group, Inc. is a collection of 78 restaurants across 17 states and Washington, D.C., including Del Frisco's Double Eagle Steakhouse, Del Frisco's Grille, Barcelona Wine Bar, and bartaco.

Del Frisco’s Double Eagle Steakhouse creates an environment where our guests can celebrate life through cuisine that is bold and innovative, award-winning wine lists, hand crafted specialty cocktails and superior hospitality with each dining occasion. Del Frisco's Grille is modern, inviting, stylish, and fun, taking the classic bar and grill to new heights, and drawing inspiration from bold flavors and market-fresh ingredients. Barcelona serves tapas, both simple and elegant, using the best seasonal picks from local markets and unusual specialties from Spain and the Mediterranean, and offers an extensive selection of wines from Spain and South America featuring over 40 wines by the glass. bartaco combines fresh, upscale street food and award-winning cocktails made with artisanal spirits and freshly-squeezed juices with a coastal vibe in a relaxed environment.

For further information about our restaurants, to make reservations, or to purchase gift cards, please visit: www.DelFriscos.com, www.DelFriscosGrille.com, www.BarcelonaWineBar.com, and www.bartaco.com. For more information about Del Frisco's Restaurant Group, Inc., please visit www.DFRG.com.

Additional Information and Where to Find It

In connection with the proposed transaction, Del Frisco’s expects to file with the Securities and Exchange Commission (the “SEC”) and furnish to its stockholders a definitive proxy statement on Schedule 14A, as well as other relevant documents concerning the proposed transaction. Promptly after filing its definitive proxy statement with the SEC, Del Frisco’s will mail the definitive proxy statement and a proxy card to each Company stockholder entitled to vote at the special meeting relating to the proposed transaction. The proxy statement will contain important information about the proposed transaction and related matters. STOCKHOLDERS AND SECURITY HOLDERS OF DEL FRISCO’S ARE URGED TO READ THESE MATERIALS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE PROPOSED TRANSACTION THAT DEL FRISCO’S WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, THE PROPOSED TRANSACTION AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT THAT HOLDERS OF DEL FRISCO’S SECURITIES SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING VOTING. This communication is not a substitute for the proxy statement or for any other document that Del Frisco’s may file with the SEC and send to its stockholders in connection with the proposed transaction. The proposed transaction will be submitted to Company stockholders for their consideration.

Stockholders and securityholders of Del Frisco’s will be able to obtain the proxy statement, as well as other filings containing information about Del Frisco’s and the proposed transaction, without charge, at the SEC’s website (http://www.sec.gov). Copies of the proxy statement (when available) and the filings with the SEC that will be incorporated by reference therein can also be obtained, without charge, by contacting Del Frisco’s Investor Relations at investorrelations@dfrg.com or (203) 682-8253, or by going to Del Frisco’s Investor Relations page on its website at https://investor.dfrg.com.

Participants in the Solicitation

Del Frisco’s and certain of its directors, executive officers and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding the interests of Del Frisco’s directors and executive officers and their ownership of shares of Del Frisco’s  common stock is set forth in Del Frisco’s proxy statement on Schedule 14A filed with the SEC on April 16, 2019, and will be included in Del Frisco’s definitive proxy statement to be filed with the SEC in connection with the proposed transaction, and certain of its Current Reports on Form 8-K. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests in the proposed transaction, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials to be filed with the SEC in connection with the proposed transaction. Free copies of this document may be obtained as described in the preceding paragraph.

Notice Regarding Forward-Looking Statements

Certain statements in this press release are forward-looking statements, including, without limitation, the statements made concerning the pending acquisition of Del Frisco’s by affiliates of L Catterton and Del Frisco’s outlook, expectations, or other characterizations of future events, circumstances, or results are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “aim,” “potential,” “continue,” “ongoing,” “goal,” “can,” “seek,” “target” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. You should read any such forward-looking statements carefully, as they involve a number of risks, uncertainties and assumptions that may cause actual results to differ significantly from those projected or contemplated in any such forward-looking statement. Those risks, uncertainties and assumptions include: (i) the risk that the proposed transaction may not be completed in a timely manner or at all, which may adversely affect Del Frisco’s business and the price of Del Frisco’s common stock; (ii) the failure to satisfy any of the conditions to the consummation of the proposed transaction, including the adoption of the merger agreement by Del Frisco’s stockholders and the receipt of certain regulatory approvals; (iii) the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the merger agreement; (iv) the effect of the announcement or pendency of the proposed transaction on Del Frisco’s business relationships, operating results and business generally; (v) risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the proposed transaction; (vi) risks related to diverting management’s attention from Del Frisco’s ongoing business operations; (vii) the outcome of any legal proceedings that may be instituted against Del Frisco’s related to the merger agreement or the proposed transaction, (viii) unexpected costs, charges or expenses resulting from the proposed transaction; (ix) uncertainties as to Parent’s ability to obtain financing in order to consummate the proposed transaction; and (x) other risks described in Del Frisco’s filings with the SEC, such as its Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. Forward-looking statements speak only as of the date of this Form 8-K or the date of any document incorporated by reference in this document. Except as required by applicable law or regulation, Del Frisco’s does not assume any obligation to update any such forward-looking statements whether as the result of new developments or otherwise.

DEL FRISCO'S RESTAURANT GROUP, INC.Condensed Consolidated Statements of (Loss) Income — Unaudited

		13 Weeks Ended														26 Weeks Ended
(Amounts in thousands, except per share data)		June 25, 2019							June 26, 2018							June 25, 2019							June 26, 2018
Revenues		$	131,687			100.0	%		$	75,718			100.0	%		$	252,068			100.0	%		$	149,064			100.0	%
Costs and expenses:
Costs of sales		35,873				27.2			21,537				28.4			69,165				27.4			42,754				28.7
Restaurant operating expenses (excluding depreciation and amortization shown separately below)		65,261				49.6			36,337				48.0			127,399				50.5			72,558				48.7
Marketing and advertising costs		2,260				1.7			1,666				2.2			4,512				1.8			3,196				2.1
Pre-opening costs		1,301				1.0			1,403				1.9			4,050				1.6			2,549				1.7
General and administrative costs		17,117				13.0			7,988				10.5			33,489				13.3			15,778				10.6
Donations		163				0.1			16				—			195				0.1			58				—
Consulting project costs		3,450				2.6			621				0.8			7,954				3.2			854				0.6
Acquisition costs		—				—			4,338.0				5.7			—				—			4,946				3.3
Reorganization severance		480				0.4			—				—			777				0.3			113				0.1
Lease termination and closing costs		(1,754		)		(1.3	)		589				0.8			1,154				0.5			591				0.4
Depreciation and amortization		8,144				6.2			4,237				5.6			15,795				6.3			8,372				5.6
Total costs and expenses		132,295				100.5			78,732				104.0			264,490				104.9			151,769				101.8
Operating loss		(608		)		(0.5	)		(3,014		)		(4.0	)		(12,422		)		(4.9	)		(2,705		)		(1.8	)
Other income (expense), net:
Interest, net of capitalized interest		(8,409		)		(6.4	)		(510		)		(0.7	)		(16,129		)		(6.4	)		(814		)		(0.5	)
Other		(32		)		—			(50		)		(0.1	)		(19		)		—			(49		)		—
Loss before income taxes		(9,049		)		(6.9	)		(3,574		)		(4.7	)		(28,570		)		(11.3	)		(3,568		)		(2.4	)
Income tax benefit		(2,651		)		(2.0	)		(2,182		)		(2.9	)		(3,845		)		(1.5	)		(2,181		)		(1.5	)
Loss from continuing operations		(6,398		)		(4.9	)		(1,392		)		(1.8	)		(24,725		)		(9.8	)		(1,387		)		(0.9	)
(Loss) income from discontinued operations, net of tax		—				—			(170		)		(0.2	)		—				—			225				0.2
Net loss		$	(6,398	)		(4.9	)%		$	(1,562	)		(2.1	)%		$	(24,725	)		(9.8	)%		$	(1,162	)		(0.8	)%
Net loss per average common share outstanding — basic and diluted
Loss from continuing operations		$	(0.19	)					$	(0.07	)					$	(0.74	)					$	(0.07	)
(Loss) income from discontinued operations		—							(0.01		)					—							0.01
Net loss		$	(0.19	)					$	(0.08	)					$	(0.74	)					$	(0.06	)
Weighted-average number of common shares outstanding:
Basic:		33,417							20,377							33,387							20,347
Diluted:		33,417							20,377							33,387							20,347

DEL FRISCO'S RESTAURANT GROUP, INC.Selected Consolidated Balance Sheet Data - Unaudited

		As of
(Amounts in thousands)		June 25, 2019				December 25, 2018
Cash and cash equivalents		$	10,671			$	8,535
Total assets		896,618				726,032
Long-term debt		350,755				320,736
Total stockholders' equity		198,916				213,582

DEL FRISCO'S RESTAURANT GROUP, INC.Segment Information - Unaudited

		13 Weeks Ended June 25, 2019
(Amounts in thousands)		Double Eagle							Barcelona							bartaco							Grille
Revenues		$	49,423			100.0	%		$	21,096			100.0	%		$	28,227			100.0	%		$	32,941			100.0	%
Costs and expenses:
Cost of sales		14,412				29.2			5,612				26.6			6,742				23.9			9,107				27.6
Restaurant operating expenses:
Labor		12,056				24.4			6,378				30.2			9,257				32.8			10,337				31.4
Operating expenses		5,866				11.9			2,632				12.5			3,648				12.9			4,751				14.4
Occupancy		4,292				8.7			1,040				4.9			1,571				5.6			3,433				10.4
Restaurant operating expenses		22,214				44.9			10,050				47.6			14,476				51.3			18,521				56.2
Marketing and advertising costs		1,292				2.6			226				1.1			108				0.4			634				1.9
Restaurant-level EBITDA		$	11,505			23.3	%		$	5,208			24.7	%		$	6,901			24.4	%		$	4,679			14.2	%
Restaurant operating weeks		208							221							270							312
Average weekly volume		$	238						$	95						$	105						$	106

		13 Weeks Ended June 26, 2018
(Amounts in thousands)		Double Eagle							Barcelona							bartaco							Grille
Revenues		$	43,471			100.0	%		$	—			—	%		$	—			—	%		$	32,247			100.0	%
Costs and expenses:
Cost of sales		12,780				29.4			—				—			—				—			8,757				27.2
Restaurant operating expenses:
Labor		9,986				23.0			—				—			—				—			10,199				31.6
Operating expenses		5,011				11.5			—				—			—				—			4,395				13.6
Occupancy		3,545				8.2			—				—			—				—			3,201				9.9
Restaurant operating expenses		18,542				42.7			—				—			—				—			17,795				55.2
Marketing and advertising costs		1,019				2.3			—				—			—				—			647				2.0
Restaurant-level EBITDA		$	11,130			25.6	%		$	—			—	%		$	—			—	%		$	5,048			15.7	%
Restaurant operating weeks		169							—							—							316
Average weekly volume		$	257						$	—						$	—						$	102

		26 Weeks Ended June 25, 2019
(Amounts in thousands)		Double Eagle									Barcelona									bartaco									Grille
Revenues		$		99,398			100.0		%		$		38,287			100.0		%		$		49,109			100.0		%		$		65,274			100.0		%
Costs and expenses:
Cost of sales		29,306					29.5				10,249					26.8				11,640					23.7				17,970					27.5
Restaurant operating expenses:
Labor		25,452					25.6				11,964					31.2				16,444					33.5				20,699					31.7
Operating expenses		11,752					11.8				4,937					12.9				6,659					13.6				9,350					14.3
Occupancy		8,326					8.4				2,033					5.3				2,887					5.9				6,896					10.6
Restaurant operating expenses		45,530					45.8				18,934					49.5				25,990					52.9				36,945					56.6
Marketing and advertising costs		2,632					2.6				429					1.1				163					0.3				1,288					2.0
Restaurant-level EBITDA		$		21,930			22.1		%		$		8,675			22.7		%		$		11,316			23.0		%		$		9,071			13.9		%
Restaurant operating weeks		411									425									514									624
Average weekly volume		$		242							$		90							$		96							$		105

		26 Weeks Ended June 26, 2018
(Amounts in thousands)		Double Eagle										Barcelona										bartaco										Grille
Revenues		$			87,425			100.0		%		$			—			—		%		$			—			—		%		$			61,639			100.0		%
Costs and expenses:
Cost of sales		25,948						29.7				—						—				—						—				16,806						27.3
Restaurant operating expenses:
Labor		20,353						23.3				—						—				—						—				20,012						32.5
Operating expenses		9,881						11.3				—						—				—						—				8,566						13.9
Occupancy		7,153						8.2				—						—				—						—				6,593						10.7
Restaurant operating expenses		37,387						42.8				—						—				—						—				35,171						57.1
Marketing and advertising costs		1,914						2.2				—						—				—						—				1,282						2.1
Restaurant-level EBITDA		$			22,176			25.4		%		$			—			—		%		$			—			—		%		$			8,380			13.6		%
Restaurant operating weeks		338										—										—										638
Average weekly volume		$			259							$			—							$			—							$			97

Non-GAAP Measures

We prepare our consolidated financial statements in accordance with generally accepted accounting principles (GAAP). Within our press release, we make reference to non-GAAP adjusted net income, adjusted net (loss) income per share, adjusted EBIDTA and restaurant-level EBITDA. Adjusted net (loss) income represents GAAP net loss plus the sum of GAAP income tax expense (benefit), lease termination and closing costs, consulting project costs, acquisition costs, reorganization severance, non-recurring legal expenses, donations, non-recurring corporate expenses, and discontinued operations minus income tax expense at an effective tax rate of 68% during 2019, and (52)% during 2018. We believe that this non-GAAP operating measure represents a useful measure of performance internally and for investors as it excludes certain non-operating related expenditures. Adjusted EBIDTA is calculated by adding back to operating income, pre-opening costs, donations, consulting project costs, acquisition costs, non-recurring legal costs, reorganization severance, lease termination and closing costs, and depreciation and amortization. Restaurant-level EBITDA is calculated by adding back to adjusted EBIDTA general and administrative expenses. We believe that these operating measures also represent useful internal measures of performance. Restaurant-level EBITDA margin represents restaurant-level EBITDA as a percentage of our revenues. Adjusted net (loss) income per share represents income from continuing operations excluding the impact of certain adjustments such as the amortization of intangible assets, acquisition-related transaction and integration costs, goodwill impairments, gains and losses on divestitures and any other items specifically identified herein, divided by the Company’s weighted average diluted shares outstanding. We believe that this measure represents a useful measure of performance internally and for investors.

Accordingly, we include these non-GAAP measures so that investors have the same financial data that management uses in evaluating performance, and we believe that it will assist the investment community in assessing our underlying performance on a quarter-over-quarter basis. However, because these measures are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate these measures in the same manner. As a result, these measures as presented may not be directly comparable to similarly titled measures presented by other companies. These non-GAAP measures are presented as supplemental information and not as alternatives to any GAAP measurements. The following tables include a reconciliation of net income to adjusted net income and operating income to restaurant-level EBITDA.

DEL FRISCO'S RESTAURANT GROUP, INC.Adjusted Net (Loss) Income Reconciliation - Unaudited

		13 Weeks Ended								26 Weeks Ended
(Amounts in thousands, except per share data)		June 25, 2019				June 26, 2018				June 25, 2019				June 26, 2018
Adjusted Net Income:
GAAP Net loss		$	(6,398	)		$	(1,562	)		$	(24,725	)		$	(1,162	)
GAAP Income tax (benefit) expense		(2,651		)		(2,182		)		(3,845		)		(2,181		)
Lease termination and closing costs		(1,754		)		589				1,154				591
Consulting project costs		3,450				440				7,954				506
Acquisition costs		—				4,338				—				4,946
Reorganization severance		480				—				777				113
Non-recurring legal expenses		1,954				179				2,332				338
Donations		163				16				195				58
Non-recurring corporate expenses		1				2				387				10
Discontinued operations		—				170				—				(225		)
Adjusted Pre-tax (loss) income		(4,755		)		1,990				(15,771		)		2,994
Income tax (benefit) expense		(3,233		)		(1,035		)		(10,724		)		(1,557		)
Adjusted net (loss) income		$	(1,522	)		$	3,025			$	(5,047	)		$	4,551
Adjusted net (loss) income per basic share		$	(0.05	)		$	0.15			$	(0.15	)		$	0.22
Adjusted net (loss) income per diluted share		$	(0.05	)		$	0.15			$	(0.15	)		$	0.22

DEL FRISCO'S RESTAURANT GROUP, INC.Adjusted EBITDA Reconciliation - Unaudited

		13 Weeks Ended								26 Weeks Ended
(Amounts in thousands)		June 25, 2019				June 26, 2018				June 25, 2019				June 26, 2018
Operating loss		$	(608	)		$	(3,014	)		$	(12,422	)		$	(2,705	)
Add:
Pre-opening costs		1,301				1,403				4,050				2,549
Donations		163				16				195				58
Lease termination and closing costs		(1,754		)		589				1,154				591
Depreciation and amortization		8,144				4,237				15,795				8,372
Acquisition costs		—				4,338				—				4,946
Consulting project costs		3,450				440				7,954				506
Non-recurring corporate expenses		1				2				387				10
Non-recurring legal expenses		1,954				179				2,332				338
Reorganization severance		480				—				777				113
Adjusted EBITDA		$	13,131			$	8,190			$	20,222			$	14,778
Adjusted EBITDA margin		10.0		%		10.8		%		8.0		%		9.9		%

DEL FRISCO'S RESTAURANT GROUP, INC.Restaurant-Level EBITDA Reconciliation - Unaudited

		13 Weeks Ended								26 Weeks Ended
(Amounts in thousands)		June 25, 2019				June 26, 2018				June 25, 2019				June 26, 2018
Operating income loss		$	(608	)		$	(3,014	)		$	(12,422	)		$	(2,705	)
Add:
Pre-opening costs		1,301				1,403				4,050				2,549
General and administrative costs		17,117				7,988				33,489				15,778
Donations		163				16				195				58
Consulting project costs		3,450				621				7,954				854
Acquisition costs		—				4,338				—				4,946
Reorganization severance		480				—				777				113
Lease termination and closing costs		(1,754		)		589				1,154				591
Depreciation and amortization		8,144				4,237				15,795				8,372
Restaurant-level EBITDA		$	28,293			$	16,178			$	50,992			$	30,556

Recast 2018 Financial Information

The unaudited combined adjusted financial information for the 13 weeks and 26 weeks ended June 26, 2018 in the following tables represent information derived from financial statements prepared by the former management of Barteca ("Barcelona and bartaco Brands"), recast to align with our fiscal calendar, and historical recast financial information of Del Frisco's Heritage Brands, which represent Double Eagle and Grille, prior to the Barteca Acquisition. This unaudited combined adjusted financial information has been presented for informational purposes only and is not necessarily indicative of what the combined company’s results of operations actually would have been had the Barteca Acquisition been completed as of the dates indicated. In addition, the unaudited combined adjusted financial information does not purport to project the future financial position or results of operations of the combined company and do not reflect synergies that might be achieved from the combined operations.

Adjusted net income, adjusted net (loss) income per share, adjusted pre-tax income, adjusted EBITDA and restaurant-level EBITDA are non-GAAP measures.  See the discussion above under "Non-GAAP Measures" regarding how we define these measures and why we believe they are useful for investors.

DEL FRISCO'S RESTAURANT GROUP, INC.Statements of Income Information - Unaudited

		13 Weeks Ended														26 Weeks Ended
(Amounts in thousands, except per share data)		June 25, 2019							June 26, 2018(1)							June 25, 2019							June 26, 2018(2)
Revenues		$	131,687			100.0	%		$	115,415			100.0	%		$	252,068			100.0	%		$	219,754			100.0	%
Costs and expenses:
Costs of sales		35,873				27.2			31,166				27.0			69,165				27.4			60,027				27.3
Restaurant operating expenses (excluding depreciation and amortization shown separately below)		65,261				49.6			54,439				47.2			127,399				50.5			106,113				48.3
Marketing and advertising costs		2,260				1.7			1,932				1.7			4,512				1.8			3,656				1.7
Pre-opening costs		1,301				1.0			1,892				1.6			4,050				1.6			3,303				1.5
General and administrative costs		17,117				13.0			20,631				17.9			33,489				13.3			31,888				14.5
Donations		163				0.1			16				—			195				0.1			58				—
Consulting project costs		3,450				2.6			621				0.5			7,954				3.2			854				0.4
Acquisition costs		—				—			5,462				4.7			—				—			6,070				2.8
Reorganization severance		480				0.4			—				—	%		777				0.3			113				0.1
Lease termination and closing costs		(1,754		)		(1.3	)		589				0.5			1,154				0.5			591				0.3
Depreciation and amortization		8,144				6.2			6,206				5.4			15,795				6.3			12,030				5.5
Total costs and expenses		132,295				100.5			122,954				106.5			264,490				104.9			224,703				102.3
Operating loss		(608		)		(0.5	)		(7,539		)		(6.5	)		(12,422		)		(4.9	)		(4,949		)		(2.3	)
Other income (expense), net:
Interest, net of capitalized interest		(8,409		)		(6.4	)		(513		)		(0.4	)		(16,129		)		(6.4	)		(3,061		)		(1.4	)
Other		(32		)		—			(50		)		—			(19		)		—			(49		)		—
Loss before income taxes		(9,049		)		(6.9	)		(8,102		)		(7.0	)		(28,570		)		(11.3	)		(8,059		)		(3.7	)
Income tax benefit		(2,651		)		(2.0	)		(1,964		)		(1.7	)		(3,845		)		(1.5	)		(1,892		)		(0.9	)
Loss from continuing operations		(6,398		)		(4.9	)		(6,133		)		(5.3	)		(24,725		)		(9.8	)		(6,167		)		(2.8	)
(Loss) income from discontinued operations, net of tax		—				—			(170		)		(0.1	)		—				—			225				0.1
Net loss		$	(6,398	)		(4.9	)%		$	(6,303	)		(5.5	)%		$	(24,725	)		(9.8	)%		$	(5,942	)		(2.7	)%
Net loss per average common share outstanding — basic
Loss from continuing operations		$	(0.19	)					$	(0.30	)					$	(0.74	)					$	(0.30	)
(Loss) income from discontinued operations		—							(0.01		)					—							0.01
Net loss		$	(0.19	)					$	(0.31	)					$	(0.74	)					$	(0.29	)
Basic		33,417							20,377							33,387							20,347

1. Recast amounts for the 13 weeks ended June 26, 2018 include historical amounts for Barcelona and bartaco Brands, which were acquired during the third quarter of 2018, prior to acquisition.
2. Recast amounts for the 26 weeks ended June 26, 2018 include historical amounts for Barcelona and bartaco Brands, which were acquired during the third quarter of 2018, prior to acquisition.

DEL FRISCO'S RESTAURANT GROUP, INC.Segment Information - Unaudited

		13 Weeks Ended June 25, 2019
(Amounts in thousands)		Double Eagle							Barcelona							bartaco							Grille
Revenues		$	49,423			100.0	%		$	21,096			100.0	%		$	28,227			100.0	%		$	32,941			100.0	%
Costs and expenses:
Cost of sales		14,412				29.2			5,612				26.6			6,742				23.9			9,107				27.6
Restaurant operating expenses:
Labor		12,056				24.4			6,378				30.2			9,257				32.8			10,337				31.4
Operating expenses		5,866				11.9			2,632				12.5			3,648				12.9			4,751				14.4
Occupancy		4,292				8.7			1,040				4.9			1,571				5.6			3,433				10.4
Restaurant operating expenses		22,214				44.9			10,050				47.6			14,476				51.3			18,521				56.2
Marketing and advertising costs		1,292				2.6			226				1.1			108				0.4			634				1.9
Restaurant-level EBITDA		$	11,505			23.3	%		$	5,208			24.7	%		$	6,901			24.4	%		$	4,679			14.2	%
Restaurant operating weeks		208							221							270							312
Average weekly volume		$	238						$	95						$	105						$	106

		13 Weeks Ended June 26, 2018(1)
(Amounts in thousands)		Double Eagle							Barcelona							bartaco							Grille
Revenues		$	43,471			100.0	%		$	18,145			100.0	%		$	21,552			100.0	%		$	32,247			100.0	%
Costs and expenses:
Cost of sales		12,780				29.4			4,750				26.2			4,879				22.6			8,757				27.2
Restaurant operating expenses:
Labor		9,986				23.0			5,276				29.1			6,752				31.3			10,199				31.6
Operating expenses		5,011				11.5			2,215				12.2			2,262				10.5			4,395				13.6
Occupancy		3,545				8.2			840				4.6			756				3.5			3,201				9.9
Restaurant operating expenses		18,542				42.7			8,332				45.9			9,770				45.3			17,795				55.2
Marketing and advertising costs		1,019				2.3			94				0.5			173				0.8			647				2.0
Restaurant-level EBITDA		$	11,130			25.6	%		$	4,969			27.4	%		$	6,730			31.2	%		$	5,048			15.7	%
Insurance settlement (Barteca) pre acquisition(2)																(601		)
Adjusted Restaurant-level EBITDA		$	11,130			25.6	%		$	4,969			27.4	%		$	6,129			28.4	%		$	5,048			15.7	%
Restaurant operating weeks		169							195							213							314
Average weekly volume		$	257						$	93						$	101						$	103.0

1. Recast amounts for the 13 weeks ended June 26, 2018 include historical amounts for Barcelona and bartaco Brands, which were acquired during the third quarter of 2018, prior to acquisition.
2. Prior to the Barteca Acquisition, starting in Q4 of 2017 and continuing through the first half of 2018, Barteca management recognized insurance settlement proceeds from a location-specific incident as a reduction to restaurant operating expenses, which therefore increased restaurant-level EBITDA margins by the amount of those proceeds for that period of time. Under US GAAP rules, the Company recognizes insurance settlement proceeds from business interruptions as a separate line item below other operating activity in its Consolidated Statements of Operations and, therefore, such proceeds are not included within restaurant-level EBITDA as calculated by the Company. Accordingly, consistent with the Company’s accounting policy, 2017 insurance settlement proceeds have been adjusted out of restaurant operating expenses and restaurant-level EBITDA as originally factored in by Barteca management prior to the Barteca Acquisition.

		26 Weeks Ended June 25, 2019
(Amounts in thousands)		Double Eagle							Barcelona							bartaco							Grille
Revenues		$	99,398			100.0	%		$	38,287			100.0	%		$	49,109			100.0	%		$	65,274			100.0	%
Costs and expenses:
Cost of sales		29,306				29.5			10,249				26.8			11,640				23.7			17,970				27.5
Restaurant operating expenses:
Labor		25,452				25.6			11,964				31.2			16,444				33.5			20,699				31.7
Operating expenses		11,752				11.8			4,937				12.9			6,659				13.6			9,350				14.3
Occupancy		8,326				8.4			2,033				5.3			2,887				5.9			6,896				10.6
Restaurant operating expenses		45,530				45.8			18,934				49.5			25,990				52.9			36,945				56.6
Marketing and advertising costs		2,632				2.6			429				1.1			163				0.3			1,288				2.0
Restaurant-level EBITDA		$	21,930			22.1	%		$	8,675			22.7	%		$	11,316			23.0	%		$	9,071			13.9	%
Restaurant operating weeks		411							425							514							624
Average weekly volume		$	242						$	90						$	96						$	105

		26 Weeks Ended June 26, 2018(1)
(Amounts in thousands)		Double Eagle							Barcelona							bartaco							Grille
Revenues		$	87,425			100.0	%		$	33,148			100.0	%		$	37,542			100.0	%		$	61,639			100.0	%
Costs and expenses:
Cost of sales		25,948				29.7			8,811				26.6			8,462				22.5			16,806				27.3
Restaurant operating expenses:
Labor		20,353				23.3			10,017				30.2			11,994				31.9			20,012				32.5
Operating expenses		9,881				11.3			4,174				12.6			4,242				11.3			8,566				13.9
Occupancy		7,153				8.2			1,638				4.9			1,489				4.0			6,593				10.7
Restaurant operating expenses		37,387				42.8			15,830				47.8			17,725				47.2			35,171				57.1
Marketing and advertising costs		1,914				2.2			185				0.6			275				0.7			1,282				2.1
Restaurant-level EBITDA		$	22,176			25.4	%		$	8,322			25.1	%		$	11,080			29.5	%		$	8,380			13.6	%
Insurance settlement (Barteca) pre acquisition(2)									(188		)					(1,002		)
Adjusted Restaurant-level EBITDA		$	22,176			25.4	%		$	8,134			24.5	%		$	10,078			26.8	%		$	8,380			13.6	%
Restaurant operating weeks		338							379							412							638
Average weekly volume		$	259						$	87						$	91						$	97.0

1. Recast amounts for the 26 weeks ended June 26, 2018 include historical amounts for Barcelona and bartaco Brands, which were acquired during the third quarter of 2018, prior to acquisition.
2. Prior to the Barteca Acquisition, starting in Q4 of 2017 and continuing through the first half of 2018, Barteca management recognized insurance settlement proceeds from a location-specific incident as a reduction to restaurant operating expenses, which therefore increased restaurant-level EBITDA margins by the amount of those proceeds for that period of time. Under US GAAP rules, the Company recognizes insurance settlement proceeds from business interruptions as a separate line item below other operating activity in its Consolidated Statements of Operations and, therefore, such proceeds are not included within restaurant-level EBITDA as calculated by the Company. Accordingly, consistent with the Company’s accounting policy, 2017 insurance settlement proceeds have been adjusted out of restaurant operating expenses and restaurant-level EBITDA as originally factored in by Barteca management prior to the Barteca Acquisition.

DEL FRISCO'S RESTAURANT GROUP, INC.Adjusted Net Income Reconciliation - Unaudited

		13 Weeks Ended								26 Weeks Ended
(Amounts in thousands, except per share data)		June 25, 2019				June 26, 2018(1)				June 25, 2019				June 26, 2018(2)
Adjusted Net Income:
Net loss		$	(6,398	)		$	(6,303	)		$	(24,725	)		$	(5,942	)
Income tax (benefit) expense		(2,651		)		(1,964		)		(3,845		)		(1,892		)
Lease termination and closing costs		(1,754		)		589				1,154				591
Consulting project costs		3,450				440				7,954				506
Acquisition costs		—				5,462				—				6,070
Reorganization severance		480				—				777				113
Non-recurring legal expenses		1,954				179				2,332				338
Donations		163				16				195				58
Non-recurring corporate expenses		1				2				387				10
Discontinued operations		—				170				—				(225		)
Adjusted pre-tax (loss) income		(4,755		)		(1,409		)		(15,771		)		(373		)
Income tax (benefit) expense		(3,233		)		733				(10,724		)		194
Adjusted net (loss) income		$	(1,522	)		$	(2,142	)		$	(5,047	)		$	(567	)
Adjusted  net (loss) income per basic share		$	(0.05	)		$	(0.11	)		$	(0.15	)		$	(0.03	)

1. Recast amounts for the 13 weeks ended June 26, 2018 include historical amounts for Barcelona and bartaco Brands, which were acquired during the third quarter of 2018, prior to acquisition.
2. Recast amounts for the 26 weeks ended June 26, 2018 include historical amounts for Barcelona and bartaco Brands, which were acquired during the third quarter of 2018, prior to acquisition

DEL FRISCO'S RESTAURANT GROUP, INC.Adjusted EBITDA Reconciliation - Unaudited

		13 Weeks Ended								26 Weeks Ended
(Amounts in thousands)		June 25, 2019				June 26, 2018(1)				June 25, 2019				June 26, 2018(2)
Operating loss		$	(608	)		$	(7,539	)		$	(12,422	)		$	(4,949	)
Add:
Pre-opening costs		1,301				1,892				4,050				3,303
Donations		163				16				195				58
Lease termination and closing costs		(1,754		)		589				1,154				591
Depreciation and amortization		8,144				6,206				15,795				12,030
Acquisition costs		—				5,462				—				6,070
Consulting project costs		3,450				440				7,954				506
Non-recurring corporate expenses		—				2				387				10
Non-recurring legal expenses		1				179				2,332				338
Reorganization severance		480				—				777				113
Adjusted EBITDA		$	13,131			$	7,247			$	20,222			$	18,070
Insurance settlement (Barteca) pre acquisition(3)						$	(601	)		—				(1,190		)
Adjusted EBITDA		$	13,131			$	6,646			$	20,222			$	16,880
Adjusted EBITDA margin		10.0		%		5.8		%		8.0		%		7.7		%

1. Recast amounts for the 13 weeks ended June 26, 2018 include historical amounts for Barcelona and bartaco Brands, which were acquired during the third quarter of 2018, prior to acquisition.
2. Recast amounts for the 26 weeks ended June 26, 2018 include historical amounts for Barcelona and bartaco Brands, which were acquired during the third quarter of 2018, prior to acquisition
3. Prior to the Barteca Acquisition, starting in Q4 of 2017 and continuing through the first half of 2018, Barteca management recognized insurance settlement proceeds from a location-specific incident as a reduction to restaurant operating expenses, which therefore increased restaurant-level EBITDA margins by the amount of those proceeds for that period of time. Under US GAAP rules, the Company recognizes insurance settlement proceeds from business interruptions as a separate line item below other operating activity in its Consolidated Statements of Operations and, therefore, such proceeds are not included within restaurant-level EBITDA as calculated by the Company. Accordingly, consistent with the Company’s accounting policy, 2017 insurance settlement proceeds have been adjusted out of restaurant operating expenses and restaurant-level EBITDA as originally factored in by Barteca management prior to the Barteca Acquisition.

DEL FRISCO'S RESTAURANT GROUP, INC.Restaurant-Level EBITDA Reconciliation - Unaudited

		13 Weeks Ended								26 Weeks Ended
(Amounts in thousands)		June 25, 2019				June 26, 2018(1)				June 25, 2019				June 26, 2018(2)
Operating income		$	(608	)		$	(7,539	)		$	(12,422			$	(4,949	)
Add:
Pre-opening costs		1,301				1,892				4,050				3,303
General and administrative costs		17,117				20,631				33,489				31,888
Donations		163				16				195				58
Consulting project costs		3,450				621				7,954				854
Acquisition costs		—				5,462				—				6,070
Reorganization severance		480				—				777				113
Lease termination and closing costs		(1,754		)		589				1,154				591
Depreciation and amortization		8,144				6,206				15,795				12,030
Restaurant-level EBITDA		$	28,293			$	27,878			$	50,992			$	49,958
Insurance settlement (Barteca) pre acquisition(3)						$	(601	)						$	(1,190	)
Adjusted Restaurant-level EBITDA		$	28,293			$	27,277			$	50,992			$	48,768

1. Recast amounts for the 13 weeks ended June 26, 2018 include historical amounts for Barcelona and bartaco Brands, which were acquired during the third quarter of 2018, prior to acquisition.
2. Recast amounts for the 26 weeks ended June 26, 2018 include historical amounts for Barcelona and bartaco Brands, which were acquired during the third quarter of 2018, prior to acquisition.
3. Prior to the Barteca Acquisition, starting in Q4 of 2017 and continuing through the first half of 2018, Barteca management recognized insurance settlement proceeds from a location-specific incident as a reduction to restaurant operating expenses, which therefore increased restaurant-level EBITDA margins by the amount of those proceeds for that period of time. Under US GAAP rules, the Company recognizes insurance settlement proceeds from business interruptions as a separate line item below other operating activity in its Consolidated Statements of Operations and, therefore, such proceeds are not included within restaurant-level EBITDA as calculated by the Company. Accordingly, consistent with the Company’s accounting policy, 2017 insurance settlement proceeds have been adjusted out of restaurant operating expenses and restaurant-level EBITDA as originally factored in by Barteca management prior to the Barteca Acquisition.

Investor Relations Contact: Raphael Gross 203-682-8253 investorrelations@dfrg.com

Media Relations Contact: Alecia Pulman 203-682-8200 DFRGPR@icrinc.com