(1)	Outstanding revolving credit facility balance plus outstanding letters of credit.

(2)	We define net revolver debt as outstanding revolving credit facility borrowings plus outstanding letters of credit less unrestricted cash. Net revolver debt is a non-GAAP measure which we believe assists investors in understanding of our management of our overall liquidity and financial flexibility.

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•	Total revenues decreased 28.9% to $121.9 million in the second quarter of 2020 from $171.4 million in the second quarter of 2019;

•	Comparable restaurant sales at Pollo Tropical decreased 31.6%;

•	Comparable restaurant sales at Taco Cabana decreased 19.2%;

•	Net loss of $8.3 million, or $0.33 per diluted share, in the second quarter of 2020 compared to net loss of $43.4 million, or $1.62 per diluted share, in the second quarter of 2019, which included the unfavorable impact of $46.5 million, or $1.73 per diluted share, related to a non-cash impairment of goodwill;

•	Adjusted net loss (a non-GAAP financial measure) of $2.9 million, or $0.11 per diluted share, in the second quarter of 2020, compared to adjusted net income of $5.7 million, or $0.21 per diluted share, in the second quarter of 2019 (see non-GAAP reconciliation table below);

•	Adjusted EBITDA for Pollo Tropical of $5.0 million in the second quarter of 2020 compared to $14.6 million in the second quarter of 2019;

•	Restaurant-level Adjusted EBITDA (a non-GAAP financial measure) for Pollo Tropical of $10.3 million, or 16.3% of Pollo Tropical restaurant sales, in the second quarter of 2020 compared to $21.4 million, or 23.1% of Pollo Tropical restaurant sales, in the second quarter of 2019 (see non-GAAP reconciliation table below);

•	Adjusted EBITDA for Taco Cabana of $2.7 million in the second quarter of 2020 compared to $4.1 million in the second quarter of 2019;

•	Restaurant-level Adjusted EBITDA (a non-GAAP financial measure) for Taco Cabana of $7.3 million, or 12.6% of Taco Cabana restaurant sales, in the second quarter of 2020 compared to $9.5 million, or 12.1% of Taco Cabana restaurant sales, in the second quarter of 2019 (see non-GAAP reconciliation table below); and

•	Consolidated Adjusted EBITDA (a non-GAAP financial measure) of $7.7 million in the second quarter of 2020 compared to Consolidated Adjusted EBITDA of $18.8 million in the second quarter of 2019 (see non-GAAP reconciliation table below).

•

Due to ongoing uncertainty and volatility surrounding the COVID-19 pandemic and guidelines, effective July 12, 2020, we closed all of our dining rooms until further notice to ensure team member and guest safety. We continue to operate our restaurants for drive-thru, delivery and pick up, and we are accelerating efforts to better enable our customers to enjoy our brands safely and conveniently across all channels—wherever and whenever they choose.

•	At the end of the second quarter of 2020, we had $101.4 million in cash and $148.5 million in debt, which includes $146.5 million outstanding under our amended senior credit facility and $2.0 million in capital lease obligations.

•

As previously announced, we completed the amendment to our senior credit facility on July 10, 2020. Under this amendment, our available revolving credit borrowings under the amended senior credit facility will be reduced from $150 million to $95 million in a phased reduction beginning with a $30 million permanent reduction at the closing of the amendment on July 10, 2020, a $15 million reduction in the fourth quarter of 2020, and a $10 million reduction in the first quarter of 2021. We repaid borrowings under our amended senior credit facility as follows: $30.0 million on July 10, 2020, pursuant to the terms of the amended senior credit facility, and an additional $62.5 million through July 31, 2020. On July 31, 2020, there were $54.0 million in outstanding revolving credit borrowings under our amended senior credit facility. In addition, as of July 31, 2020, we were current on all lease obligations.

•	We have aggressively cut our capital expenditure budget for 2020. Capital expenditures in the first half of 2020 totaled $8.7 million compared to $21.7 million in the first half of 2019. 2020 full year capital expenditures will not exceed $22.0 million.

•	From the beginning of the COVID-19 pandemic in mid-March through late July, we significantly reduced our total debt, revolving credit facility and net revolver debt(3) balances. On March 18, 2020, we had a total debt balance of $148.4 million, an outstanding revolving credit facility balance (including letters of credit) of $149.9 million and net revolver

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•

Working capital efficiency has been significantly improved as a result of vendor payment term extensions and pricing renegotiations, which contributed to cash flows from operations of $24.5 million during the second quarter of 2020. We believe that a significant portion of the improvement in working capital efficiency represent sustainable improvements in cash flow. We are also marketing 16 owned properties for sale or sale-leaseback, which are expected to result in cash flow increases, although there can be no assurance that any such sales or sale-leaseback transactions will be consummated.

(3)

Total debt is comprised of capital lease obligations of $2.0 million as of March 18, 2020 and July 31, 2020 and outstanding revolving credit facility borrowings. We define net revolver debt as outstanding revolving credit facility borrowings plus outstanding letters of credit less unrestricted cash balance, which were $146.4 million, $3.5 million and $75.5 million, respectively, as of March 18, 2020 and $54.0 million, $3.5 million and $9.1 million, respectively, as of July 31, 2020. Net revolver debt is a non-GAAP measure which we believe assists investors in understanding of our management of our overall liquidity and financial flexibility.

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FIESTA RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 28, 2020 AND JUNE 30, 2019

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended (a)								Six Months Ended (a)
	June 28, 2020				June 30, 2019				June 28, 2020				June 30, 2019
Revenues:
Restaurant sales	$	121,547			$	170,713			$	267,633			$	335,894
Franchise royalty revenues and fees	321				668				934				1,339
Total revenues	121,868				171,381				268,567				337,233
Costs and expenses:
Cost of sales	37,807				53,758				84,083				104,268
Restaurant wages and related expenses (b)	33,747				45,766				74,242				90,802
Restaurant rent expense	11,279				11,898				22,618				23,643
Other restaurant operating expenses	18,989				22,513				40,500				44,276
Advertising expense	2,143				5,883				7,926				11,404
General and administrative expenses (b)(c)	12,288				13,496				26,672				28,567
Depreciation and amortization	9,565				9,807				18,995				19,355
Pre-opening costs	—				385				69				786
Impairment and other lease charges (d)	2,285				1,751				6,518				1,413
Goodwill impairment (e)	—				46,485				—				46,485
Closed restaurant rent, net of sublease income (f)	1,830				1,335				3,462				2,759
Other expense (income), net (g)	784				154				1,692				856
Total operating expenses	130,717				213,231				286,777				374,614
Loss from operations	(8,849		)		(41,850		)		(18,210		)		(37,381		)
Interest expense	1,237				967				2,198				2,201
Loss before income taxes	(10,086		)		(42,817		)		(20,408		)		(39,582		)
Provision for (benefit from) income taxes (h)	(1,743		)		623				(4,748		)		1,569
Net loss	$	(8,343	)		$	(43,440	)		$	(15,660	)		$	(41,151	)
Earnings (loss) per common share:
Basic	$	(0.33	)		$	(1.62	)		$	(0.62	)		$	(1.53	)
Diluted	(0.33		)		(1.62		)		(0.62		)		(1.53		)
Weighted average common shares outstanding:
Basic	25,267,404				26,807,068				25,393,325				26,825,286
Diluted	25,267,404				26,807,068				25,393,325				26,825,286

(a)	The Company uses a 52- or 53-week fiscal year that ends on the Sunday closest to December 31. The three- and six-month periods ended June 28, 2020 and June 30, 2019 each included 13 and 26 weeks, respectively.

(b)

Restaurant wages and related expenses include stock-based compensation of $69 and $16 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $105 and $43 for the six months ended June 28, 2020 and June 30, 2019, respectively. General and administrative expenses include stock-based compensation expense of $959 and $719 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $1,735 and $1,484 for the six months ended June 28, 2020 and June 30, 2019, respectively.

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

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

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

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

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

(h)	See notes (a) and (b) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information."

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FIESTA RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	June 28, 2020				December 29, 2019
Assets
Cash	$	101,375			$	13,413
Other current assets	38,986				25,870
Property and equipment, net	187,928				211,944
Operating lease right-of-use assets	257,654				251,272
Goodwill	56,307				56,307
Other assets	8,134				9,835
Total assets	$	650,384			$	568,641
Liabilities and Stockholders' Equity
Current liabilities	$	79,097			$	63,620
Long-term debt, net of current portion	148,233				76,823
Operating lease liabilities	264,157				256,798
Deferred tax liabilities	7,866				4,759
Other non-current liabilities	10,343				8,405
Total liabilities	509,696				410,405
Stockholders' equity	140,688				158,236
Total liabilities and stockholders' equity	$	650,384			$	568,641

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FIESTA RESTAURANT GROUP, INC.

Supplemental Information

The following table sets forth certain unaudited supplemental financial and other data for the periods indicated

(In thousands, except percentages):

	(Unaudited)								(Unaudited)
	Three Months Ended								Six Months Ended
	June 28, 2020				June 30, 2019				June 28, 2020				June 30, 2019
Segment revenues:
Pollo Tropical	$	63,438			$	93,058			$	149,563			$	184,539
Taco Cabana	58,430				78,323				119,004				152,694
Total revenues	$	121,868			$	171,381			$	268,567			$	337,233
Change in comparable restaurant sales (a):
Pollo Tropical	(31.6		)%		(1.3		)%		(19.5		)%		(1.9		)%
Taco Cabana	(19.2		)%		(3.0		)%		(16.4		)%		(1.8		)%
Average sales per Company-owned restaurant:
Pollo Tropical
Comparable restaurants (b)	$	461			$	677			$	1,076			$	1,347
New restaurants (c)	369				452				857				887
Total Company-owned (d)	458				662				1,067				1,316
Taco Cabana
Comparable restaurants (b)	$	399			$	476			$	809			$	935
New restaurants (c)	435				482				740				920
Total Company-owned (d)	399				476				806				933
Income (loss) before income taxes:
Pollo Tropical	$	(5,186	)		$	6,918			$	(7,013	)		$	12,874
Taco Cabana	(4,900		)		(49,735		)		(13,395		)		(52,456		)
Adjusted EBITDA:
Pollo Tropical	$	4,993			$	14,646			$	13,773			$	28,963
Taco Cabana	2,672				4,120				1,765				7,015
Restaurant-level Adjusted EBITDA (e):
Pollo Tropical	$	10,338			$	21,432			$	25,772			$	42,601
Taco Cabana	7,313				9,479				12,597				18,943

(a)	Restaurants are included in comparable restaurant sales after they have been open for 18 months or longer.

(b)	Comparable restaurants are restaurants that have been open for 18 months or longer. Average sales for comparable Company-owned restaurants are derived by dividing comparable restaurant sales for such period for the applicable segment by the average number of comparable restaurants for the applicable segment for such period.

(c)	New restaurants are restaurants that have been open for less than 18 months. Average sales for new Company-owned restaurants are derived by dividing new restaurant sales for such period for the applicable segment by the average number of new restaurants for the applicable segment for such period.

(d)	Average sales for total Company-owned restaurants are derived by dividing restaurant sales for such period for the applicable segment by the average number of open restaurants for the applicable segment for such period.

(e)	Restaurant-level Adjusted EBITDA is a non-GAAP financial measure. Please see the reconciliation from net income (loss) to Restaurant-level Adjusted EBITDA in the table titled "Supplemental Non-GAAP Information."

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FIESTA RESTAURANT GROUP, INC.

Supplemental Information

The following table sets forth certain unaudited supplemental data for the periods indicated:

	Three Months Ended						Six Months Ended
	June 28, 2020			June 30, 2019			June 28, 2020			June 30, 2019
Company-owned restaurant openings:
Pollo Tropical	—			1			—			1
Taco Cabana	—			1			1			3
Total new restaurant openings	—			2			1			4
Company-owned restaurant closings:
Pollo Tropical	—			—			(1	)		—
Taco Cabana	—			—			(19	)		—
Net change in restaurants	—			2			(19	)		4
Number of Company-owned restaurants:
Pollo Tropical	141			140			141			140
Taco Cabana	146			165			146			165
Total Company-owned restaurants	287			305			287			305
Number of franchised restaurants:
Pollo Tropical	33			31			33			31
Taco Cabana	7			8			7			8
Total franchised restaurants	40			39			40			39
Total number of restaurants:
Pollo Tropical	174			171			174			171
Taco Cabana	153			173			153			173
Total restaurants	327			344			327			344

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FIESTA RESTAURANT GROUP, INC.

Supplemental Information

The following table sets forth certain unaudited supplemental financial and other data for the periods indicated

(In thousands, except percentages):

	Three Months Ended
	June 28, 2020						June 30, 2019
Pollo Tropical:				(a)						(a)
Restaurant sales	$	63,292					$	92,620
Cost of sales	20,321			32.1	%		29,318			31.7	%
Restaurant wages and related expenses	15,108			23.9	%		21,290			23.0	%
Restaurant rent expense	5,660			8.9	%		5,495			5.9	%
Other restaurant operating expenses	10,714			16.9	%		11,900			12.8	%
Advertising expense	1,178			1.9	%		3,189			3.4	%
Depreciation and amortization	5,233			8.3	%		5,376			5.8	%
Pre-opening costs	—			—	%		153			0.2	%
Impairment and other lease charges	1,932			3.1	%		52			0.1	%
Closed restaurant rent expense, net of sublease income	671			1.1	%		1,039			1.1	%
Taco Cabana:
Restaurant sales	$	58,255					$	78,093
Cost of sales	17,486			30.0	%		24,440			31.3	%
Restaurant wages and related expenses	18,639			32.0	%		24,476			31.3	%
Restaurant rent expense	5,619			9.6	%		6,403			8.2	%
Other restaurant operating expenses	8,275			14.2	%		10,613			13.6	%
Advertising expense	965			1.7	%		2,694			3.4	%
Depreciation and amortization	4,332			7.4	%		4,431			5.7	%
Pre-opening costs	—			—	%		232			0.3	%
Impairment and other lease charges	353			0.6	%		1,699			2.2	%
Goodwill impairment	—			—	%		46,485			59.5	%
Closed restaurant rent expense, net of sublease income	1,159			2.0	%		296			0.4	%
	Six Months Ended
	June 28, 2020						June 30, 2019
Pollo Tropical:				(a)						(a)
Restaurant sales	$	149,013					$	183,646
Cost of sales	48,052			32.2	%		57,616			31.4	%
Restaurant wages and related expenses	36,145			24.3	%		42,443			23.1	%
Restaurant rent expense	11,300			7.6	%		10,916			5.9	%
Other restaurant operating expenses	23,100			15.5	%		23,858			13.0	%
Advertising expense	4,682			3.1	%		6,221			3.4	%
Depreciation and amortization	10,511			7.1	%		10,589			5.8	%
Pre-opening costs	—			—	%		239			0.1	%
Impairment and other lease charges	5,628			3.8	%		(327		)	(0.2	)%
Closed restaurant rent expense, net of sublease income	1,273			0.9	%		2,183			1.2	%
Taco Cabana:
Restaurant sales	$	118,620					$	152,248
Cost of sales	36,031			30.4	%		46,652			30.6	%
Restaurant wages and related expenses	38,097			32.1	%		48,359			31.8	%
Restaurant rent expense	11,318			9.5	%		12,727			8.4	%
Other restaurant operating expenses	17,400			14.7	%		20,418			13.4	%
Advertising expense	3,244			2.7	%		5,183			3.4	%
Depreciation and amortization	8,484			7.2	%		8,766			5.8	%
Pre-opening costs	69			0.1	%		547			0.4	%
Impairment and other lease charges	890			0.8	%		1,740			1.1	%
Goodwill impairment	—			—	%		46,485			30.5	%
Closed restaurant rent expense, net of sublease income	2,189			1.8	%		576			0.4	%

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Three Months Ended		Pollo Tropical				Taco Cabana				Consolidated
June 28, 2020:
Net loss										$	(8,343	)
Benefit from income taxes										(1,743		)
Loss before taxes		$	(5,186	)		$	(4,900	)		$	(10,086	)
Add:
Non-general and administrative expense adjustments:
Depreciation and amortization		5,233				4,332				9,565
Impairment and other lease charges		1,932				353				2,285
Interest expense		625				612				1,237
Closed restaurant rent expense, net of sublease income		671				1,159				1,830
Other expense (income), net		644				140				784
Stock-based compensation expense in restaurant wages		27				42				69
Total non-general and administrative expense adjustments		9,132				6,638				15,770
General and administrative expense adjustments:
Stock-based compensation expense		523				436				959
Restructuring costs and retention bonuses		452				439				891
Digital and brand repositioning costs		72				59				131
Total general and administrative expense adjustments		1,047				934				1,981
Adjusted EBITDA		$	4,993			$	2,672			$	7,665
Restaurant-level adjustments:
Add: Other general and administrative expense(1)		5,491				4,816				10,307
Less: Franchise royalty revenue and fees		146				175				321
Restaurant-level Adjusted EBITDA		$	10,338			$	7,313			$	17,651
June 30, 2019:
Net loss										$	(43,440	)
Provision for income taxes										623
Income (loss) before taxes		$	6,918			$	(49,735	)		$	(42,817	)
Add:
Non-general and administrative expense adjustments:
Depreciation and amortization		5,376				4,431				9,807
Impairment and other lease charges		52				1,699				1,751
Goodwill impairment		—				46,485				46,485
Interest expense		480				487				967
Closed restaurant rent expense, net of sublease income		1,039				296				1,335
Other expense (income), net		148				6				154
Stock-based compensation expense in restaurant wages		4				12				16
Total non-general and administrative expense adjustments		7,099				53,416				60,515
General and administrative expense adjustments:
Stock-based compensation expense		351				368				719
Restructuring costs and retention bonuses		278				71				349
Total general and administrative expense adjustments		629				439				1,068
Adjusted EBITDA		$	14,646			$	4,120			$	18,766
Restaurant-level adjustments:
Add: Pre-opening costs		153				232				385
Add: Other general and administrative expense(1)		7,071				5,357				12,428
Less: Franchise royalty revenue and fees		438				230				668
Restaurant-level Adjusted EBITDA		$	21,432			$	9,479			$	30,911

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Six Months Ended		Pollo Tropical				Taco Cabana				Consolidated
June 28, 2020:
Net loss										$	(15,660	)
Benefit from income taxes										(4,748		)
Loss before taxes		$	(7,013	)		$	(13,395	)		$	(20,408	)
Add:
Non-general and administrative expense adjustments:
Depreciation and amortization		10,511				8,484				18,995
Impairment and other lease charges		5,628				890				6,518
Interest expense		1,108				1,090				2,198
Closed restaurant rent expense, net of sublease income		1,273				2,189				3,462
Other expense (income), net		751				941				1,692
Stock-based compensation expense in restaurant wages		38				67				105
Total non-general and administrative expense adjustments		19,309				13,661				32,970
General and administrative expense adjustments:
Stock-based compensation expense		833				902				1,735
Restructuring costs and retention bonuses		452				439				891
Digital and brand repositioning costs		192				158				350
Total general and administrative expense adjustments		1,477				1,499				2,976
Adjusted EBITDA		$	13,773			$	1,765			$	15,538
Restaurant-level adjustments:
Add: Pre-opening costs		—				69				69
Add: Other general and administrative expense(1)		12,549				11,147				23,696
Less: Franchise royalty revenue and fees		550				384				934
Restaurant-level Adjusted EBITDA		$	25,772			$	12,597			$	38,369
June 30, 2019:
Net loss										$	(41,151	)
Provision for income taxes										1,569
Income (loss) before taxes		$	12,874			$	(52,456	)		$	(39,582	)
Add:
Non-general and administrative expense adjustments:
Depreciation and amortization		10,589				8,766				19,355
Impairment and other lease charges		(327		)		1,740				1,413
Goodwill impairment		—				46,485				46,485
Interest expense		1,136				1,065				2,201
Closed restaurant rent expense, net of sublease income		2,183				576				2,759
Other expense (income), net		744				112				856
Stock-based compensation expense in restaurant wages		9				34				43
Total non-general and administrative expense adjustments		14,334				58,778				73,112
General and administrative expense adjustments:
Stock-based compensation expense		928				556				1,484
Restructuring costs and retention bonuses		827				137				964
Total general and administrative expense adjustments		1,755				693				2,448
Adjusted EBITDA		$	28,963			$	7,015			$	35,978
Restaurant-level adjustments:
Add: Pre-opening costs		239				547				786
Add: Other general and administrative expense(1)		14,292				11,827				26,119
Less: Franchise royalty revenue and fees		893				446				1,339
Restaurant-level Adjusted EBITDA		$	42,601			$	18,943			$	61,544

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(a)

The provision for (benefit from) income taxes related to the adjustments was calculated using the Company's combined federal statutory and estimated state rate of 23.9% and 24.9% for the periods ending June 28, 2020, and June 30, 2019, respectively. For fiscal years beginning January 1, 2018, our federal statutory tax rate is 21% as a result of the enactment of the Tax Cuts and Jobs Act (the "Act") in December 2017. For the six months ended June 28, 2020, we recorded a $1.8 million tax benefit related to prior year net operating losses as a result of a provision in the CARES Act that allows net operating losses from 2018–2020 to be carried back for five years.

(b)	We recorded an additional valuation allowance of $1.0 million and $1.7 million for the three and six months ended June 28, 2020, respectively, against deferred income tax assets where it was determined to be more likely than not that the deferred income tax assets will not be realized through the reversal of existing deferred tax liabilities.

(c)

Impairment and other lease charges for the three and six months ended June 28, 2020, consist of impairment charges of $1.6 million and $5.9 million, respectively, and other lease charges of $0.6 million. The impairment charges primarily relate to the write-down of assets held for sale to their fair value for the three and six months ended June 28, 2020 and two underperforming Taco Cabana restaurants and three underperforming Pollo Tropical restaurants that we continue to operate for the six months ended June 28, 2020. The other lease charges

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(d)	Goodwill impairment for the three and six months ended June 30, 2019 consists of a non-cash impairment charge to write down the value of goodwill for the Taco Cabana reporting unit.

(e)

Closed restaurant rent expense, net of sublease income for the three and six months ended June 28, 2020, primarily consists of closed restaurant lease costs of $3.0 million and $5.9 million, respectively, partially offset by sublease income of $(1.2) million and $(2.4) million, respectively. Closed restaurant rent expense, net of sublease income for the three and six months ended June 30, 2019, primarily consists of closed restaurant lease costs of $2.2 million and $4.4 million, respectively, partially offset by sublease income of $(0.9) million and $(1.6) million, respectively.

(f)

Other expense (income), net for the three and six months ended June 28, 2020, primarily consists of the write-off of site development costs of $0.6 million and costs for the removal, transfer, and storage of equipment from closed restaurants and other closure related costs of $0.2 million and $1.1 million, respectively. Other expense (income), net for the three and six months ended June 30, 2019, primarily consists of costs for the removal, transfer, and storage of equipment from closed restaurants of $0.2 million and $0.6 million, respectively.

(g)	Restructuring costs and retention bonuses for the three and six months ended June 28, 2020, include severance costs related to terminations in response to the COVID-19 pandemic. Restructuring costs and retention bonuses for the three and six months ended June 30, 2019, include severance costs related to eliminated positions.

(h)	Digital and brand repositioning costs for the three and six months ended June 28, 2020, include consulting costs related to repositioning the digital experience for our customers.