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TheStreet Open House

Del Frisco's Restaurant Group, Inc. Announces Third Quarter 2012 Results

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

Forward-Looking Statements

Certain statements in this press release, including statements under the heading "Outlook" are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as "anticipate", "believe", "could", "should", "estimate", "expect", "intend", "may", "predict", "project", "target", and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on information available to us as of the date any such statements are made and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: factors that could affect our ability to achieve and manage our planned expansion, such as the availability of a sufficient number of suitable new restaurant sites and the availability of qualified employees; the uncertainty of our ability to achieve expected levels of comparable restaurant sales increases; the performance of new restaurants and their impact on existing restaurant sales; increases in the cost of food ingredients and other key supplies; the risk of food-borne illnesses and other health concerns about our food; the potential for increased labor costs or difficulty retaining qualified employees, including as a result of immigration enforcement activities; risks relating to our expansion into new markets; the impact of federal, state or local government regulations relating to our employees and the sale of food or alcoholic beverages.  Additional factors that could cause actual results to differ materially from our forward-looking statements are set forth in our reports filed with the Securities and Exchange Commission.

DEL FRISCO'S RESTAURANT GROUP, INC.
Condensed Consolidated Income Statements - Unaudited
(dollar amounts in thousands, except share and per share data)
         
  12 Weeks Ending 36 Weeks Ending
  September 4, September 6, September 4, September 6,
  2012 2011 2012 2011
         
Revenues  $ 47,887  $ 41,273  $ 151,565  $ 126,745
         
Costs and expenses:        
Costs of sales 14,526 12,454 46,489 38,800
Restaurant operating expenses 22,167 18,952 65,945 56,469
Marketing and advertising costs 1,127 983 3,133 2,626
Pre-opening costs 1,129 871 2,031 2,177
General and administrative costs 3,292 2,450 8,692 7,511
Management and accounting fees paid to related party 56 713 1,252 2,366
Asset advisory agreement termination fee 3,000  --  3,000  -- 
Initial public offering transaction bonuses 1,462  --  1,462  -- 
Depreciation and amortization 2,051 1,655 5,622 4,674
         
Operating income (923) 3,195 13,939 12,122
         
Other income (expense), net:        
Interest expense (619) (1,489) (2,847) (4,946)
Write-off of debt issuance costs (1,649) (2,501) (1,649) (2,501)
Other (14) (188) 51 (274)
         
Income (loss) from continuing operations before income taxes (3,205) (983) 9,494 4,401
         
Income tax expense (benefit) (1,411) (62) 2,762 1,500
         
Income (loss) from continuing operations  $ (1,794)  $ (921)  $ 6,732  $ 2,901
         
Discontinued operations, net of income tax benefit (628) (915) (543) (959)
         
Net income (loss)  $ (2,422)  $ (1,836)  $ 6,189  $ 1,942
         
Basic and diluted income (loss) per common share:        
Continuing operations  $ (0.09)  $ (0.05)  $ 0.36  $ 0.16
Discontinued operations  (0.03)  (0.05)  (0.03)  (0.05)
Basic and diluted income (loss) per share  $ (0.12)  $ (0.10)  $ 0.33  $ 0.11
         
Shares used in computing net income (loss) per common share:        
Basic and Diluted  20,825,619  17,994,667  18,938,318  17,994,667
DEL FRISCO'S RESTAURANT GROUP, INC.
Selected Balance Sheet Data
(dollar amounts in thousands)
       
  September 4, December 27,  
  2012 2011  
  (unaudited)    
       
Cash and cash equivalents  $ 5,756  $ 14,119  
Total assets  240,138  234,274  
Long-term debt  --   70,000  
Total stockholders' equity  170,063 95,872  

Reconciliation of Non-GAAP Measures and Segment Information

We prepare our financial statements in accordance with generally accepted accounting principles (GAAP). Within our press release, we make reference to non-GAAP Adjusted Net Income and Restaurant-level EBITDA. Adjusted Net Income represents pre-tax income from continuing operations plus the sum of the asset advisory agreement termination fee, related party management fees and expenses, the write-off of debt issuance costs, and the IPO transaction bonus, minus income tax expense at an effective tax rate of 32%. We believe that this measure represents a useful internal measure of performance as it excludes certain one-time expenditures associated with our IPO as well as the discontinuation of the asset advisory agreement. Restaurant-level EBITDA is calculated by adding back to operating income depreciation and amortization plus the sum of certain non-operating expenses, including pre-opening costs, management fees and expenses, IPO transaction bonuses and general and administrative expenses. We believe that this measure also represents a useful internal measure of performance. 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 a similarly titled measure 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 pre-tax income from continuing operations to adjusted net income and a reconciliation of restaurant-level EBITDA to operating income:

     
Adjusted Net Income Reconciliation    
     
  12 Weeks Ending 36 Weeks Ending
  September 4, September 6, September 4, September 6,
  2012 2011 2012 2011
Adjusted Net Income:        
Pre-tax Income from continung operations  $ (3,205)  $ (983)  $ 9,494  $ 4,401
Asset advisory agreement termination fee  3,000  --   3,000  -- 
Management and accounting fees paid to related party  56  713  1,252  2,366
Write-off of debt issuance costs  1,649  2,501  1,649  2,501
Initial public offering transaction bonuses  1,462  --   1,462  -- 
Adjusted Pre-tax Income  2,962  2,231  16,857  9,268
Income Tax @ 32%  948  714  5,394  2,966
Adjusted Net Income  $ 2,014  $ 1,517  $ 11,463  $ 6,302
Basic and Diluted EPS (Adjusted)  $ 0.10  $ 0.08  $ 0.61  $ 0.35
Segment Information and Restaurant-Level EBITDA Reconciliation      
                 
  12 Weeks Ending September 4, 2012 (unaudited)
  Del Frisco's Sullivan's Other Consolidated
                 
Revenues  $ 25,188 100.0%  $ 17,174 100.0%  $ 5,525 100.0%  $ 47,887 100.0%
Costs and expenses:                
 Cost of sales  7,795 30.9%  5,206 30.3%  1,525 27.6%  14,526 30.3%
 Restaurant operating expenses  10,161 40.3%  8,833 51.4%  3,173 57.4%  22,167 46.3%
 Marketing and advertising costs  431 1.7%  600 3.5%  96 1.7%  1,127 2.3%
Restaurant-level EBITDA  6,801 27.0%  2,535 14.8%  731 13.2%  10,067 21.1%
                 
 Pre-opening costs              1,129 2.4%
 General and administrative              3,292 6.9%
 Management and accounting fees  paid to related party              56 0.1%
 Asset advisory agreement termination fee            3,000 6.3%
 Initial public offering transaction bonuses            1,462 3.0%
 Depreciation and amortization              2,051 4.3%
                 
Operating Income              $ (923) -1.9%
                 
Restaurant operating weeks  108    228    45    381  
Average unit volume  $ 2,799    $ 904    $ 1,473    $ 1,508  
   
  12 Weeks Ending September 6, 2011 (unaudited)
  Del Frisco's Sullivan's Other Consolidated
                 
Revenues  $ 23,974 100.0%  $ 16,948 100.0%  $ 351 100.0%  $ 41,273 100.0%
Costs and expenses:                
 Cost of sales  7,296 30.4%  5,050 29.8%  108 30.8%  12,454 30.2%
 Restaurant operating expenses  9,941 41.5%  8,700 51.3%  312 88.7%  18,952 45.9%
 Marketing and advertising costs  459 1.9%  511 3.0%  13 3.7%  983 2.4%
Restaurant-level EBITDA  6,279 26.2%  2,687 15.9%  (82) -23.2%  8,884 21.5%
                 
 Pre-opening costs              871 2.1%
 General and administrative              2,450 6.0%
 Management and accounting fees  paid to related party              713 1.7%
 Depreciation and amortization              1,655 4.0%
                 
Operating Income              $ 3,195 7.7%
                 
Restaurant operating weeks  108    228    3    339  
Average unit volume  $ 2,664    $ 892    $ 1,404    $ 1,461  
CONTACT: Investor Relations Contact:
         Raphael Gross
         203-682-8253
         investorrelations@dfrg.com
         
         Media Relations Contact:
         Liz Brady DiTrapano
         646-277-1226
         liz.brady@icrinc.com

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