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Del Frisco's Restaurant Group, Inc. Announces Third Quarter 2013 Results

Conference Call

We will host a conference call to discuss the financial results for the third quarter ended September 3, 2013 today at 7:30 AM Central Time. Hosting the conference call will be Mark S. Mednansky, Chief Executive Officer, Tom Pennison, Chief Financial Officer, and Jeff Carcara, Chief Operating Officer.

The conference call can be accessed live over the phone by dialing 888-539-3612 or for international callers by dialing 719-325-2452. A replay will be available afterward and can be accessed by dialing 877-870-5176 or for international callers by dialing 858-384-5517; the passcode is 9881363. The replay will be available until Wednesday, October 16, 2013.

The conference call will also be webcast live from our corporate website at www.DFRG.com under the investor relations section. An archive of the webcast will also be available through the corporate website shortly after the call has concluded.

About Del Frisco's Restaurant Group, Inc.

Based in Southlake, Texas, near Dallas, Del Frisco's Restaurant Group, Inc. is a collection of 37 restaurants across 20 states and Washington, D.C., including Del Frisco's Double Eagle Steak House, Sullivan's Steakhouse, and Del Frisco's Grille. Del Frisco's Double Eagle Steak House serves up flawless cuisine that's bold and delicious, an extensive award-winning wine list and a level of service that reminds guests that they're the boss. Sullivan's Steakhouse is a great neighborhood place for a big night out on the town - with outstanding food, hand-shaken martinis, an award winning wine list, and live entertainment all under one roof. 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.

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 3, 2013 September 4, 2012 September 3, 2013 September 4, 2012
         
Revenues  $ 54,183  $ 47,887  $ 174,345  $ 151,565
         
Costs and expenses:        
Costs of sales  16,187  14,526  52,721  46,489
Restaurant operating expenses  25,693  22,167  79,147  65,945
Marketing and advertising costs  1,336  1,127  3,592  3,133
Pre-opening costs  835  1,129  1,754  2,031
General and administrative costs  4,174  3,292  12,112  8,692
Management and accounting fees paid to related party  --   56  --   1,252
Asset advisory agreement termination fee  --   3,000  --   3,000
Secondary public offering costs  381  --   793  -- 
Public offering transaction bonuses  3,705  1,462  5,510  1,462
Depreciation and amortization  2,631  2,051  7,637  5,622
         
Operating income (loss)  (759)  (923)  11,079  13,939
         
Other income (expense), net:        
Interest expense  (8)  (619)  (56)  (2,847)
Write-off of debt issuance costs  --   (1,649)  --   (1,649)
Other  (56)  (14)  (56)  51
         
Income (loss) from continuing operations before income taxes  (823)  (3,205)  10,967  9,494
         
Income tax expense (benefit)  (443)  (1,411)  3,347  2,762
         
Income (loss) from continuing operations  $ (380)  $ (1,794)  $ 7,620  $ 6,732
         
Discontinued operations, net of income tax  --   (628)  --   (543)
         
Net income (loss)  $ (380)  $ (2,422)  $ 7,620  $ 6,189
         
Basic income (loss) per common share:        
Continuing operations  $ (0.02)  $ (0.09)  $ 0.32  $ 0.36
Discontinued operations  --   (0.03)  --   (0.03)
Basic income (loss) per share  $ (0.02)  $ (0.12)  $ 0.32  $ 0.33
         
Diluted income (loss) per common share:        
Continuing operations  $ (0.02)  $ (0.09)  $ 0.32  $ 0.36
Discontinued operations  --   (0.03)  --   (0.03)
Diluted income (loss) per share  $ (0.02)  $ (0.12)  $ 0.32  $ 0.33
         
Shares used in computing net income per common share:        
Basic  23,801,335  20,825,619  23,796,890  18,938,318
Diluted  23,937,488  20,825,619  23,848,946  18,938,318
     
     
DEL FRISCO'S RESTAURANT GROUP, INC.
Selected Balance Sheet Data
(dollar amounts in thousands)
     
  September 3, 2013 December 25,  2012
  (unaudited)  
     
Cash and cash equivalents  $ 8,711  $ 10,763
Total assets  268,963 258,385
Long-term debt  --   -- 
Total stockholders' equity  192,085  177,901

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 related party management fees and expenses, secondary public offering costs, and the public offering transaction bonuses, minus income tax expense at an effective tax rate of 30%. We believe that this measure represents a useful internal measure of performance as it excludes certain one-time expenditures associated with our public offerings 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, public offering expenses, public offering 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:

         
  12 Weeks Ending 36 Weeks Ending
  September 3, 2013 September 4, 2012 September 3, 2013 September 4, 2012
Adjusted Net Income:        
Pre-tax income (loss) from continuing operations  $ (823)  $ (3,205)  $ 10,967  $ 9,494
Asset advisory agreement termination fee  --   3,000  --   3,000
Management and accounting fees paid to related party  --   56  --   1,252
Write-off of debt issuance costs  --   1,649  --   1,649
Secondary public offering costs  381  --   793  -- 
Public offering transaction bonuses  3,705  1,462  5,510  1,462
Proforma Adjustments  4,086  6,167  6,303  7,363
Adjusted Pre-tax Income  3,263  2,962  17,270  16,857
Income Tax (@ 30%)  979  889  5,181  5,057
Adjusted Net Income  $ 2,284  $ 2,073  $ 12,089  $ 11,800
Basic EPS (Adjusted)  $ 0.10  $ 0.10  $ 0.51  $ 0.62
Diluted EPS (Adjusted)  $ 0.10  $ 0.10  $ 0.51  $ 0.62
                 
                 
Segment Information and Restaurant-Level EBITDA Reconciliation
                 
  12 Weeks Ending September 3, 2013 (unaudited)
  Del Frisco's Sullivan's Del Frisco's Grille Consolidated
                 
Revenues  $ 28,786 100.0%  $ 16,061 100.0%  $ 9,336 100.0%  $ 54,183 100.0%
Costs and expenses:                
 Cost of sales  8,749 30.4%  4,870 30.3%  2,568 27.5%  16,187 29.9%
 Restaurant operating expenses  11,731 40.7%  8,908 55.5%  5,054 54.2%  25,693 47.4%
 Marketing and advertising costs  507 1.8%  678 4.2%  151 1.6%  1,336 2.5%
Restaurant-level EBITDA  7,799 27.1%  1,605 10.0%  1,563 16.7%  10,967 20.2%
                 
 Pre-opening costs              835 1.5%
 General and administrative              4,174 7.7%
 Secondary public offering costs              381 0.7%
 Public offering transaction bonuses              3,705 6.8%
 Depreciation and amortization              2,631 4.9%
                 
Operating income (loss)              $ (759) -1.4%
                 
Restaurant operating weeks  120    228    79    427  
Average unit volume  $ 2,879    $ 845    $ 1,418    $ 1,523  
                 
                 
  12 Weeks Ending September 4, 2012 (unaudited)
  Del Frisco's Sullivan's Del Frisco's Grille 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 31.0%  5,206 30.3%  1,525 27.6%  14,526 30.3%
 Restaurant operating expenses  10,251 40.7%  8,888 51.8%  3,028 54.8%  22,167 46.3%
 Marketing and advertising costs  431 1.7%  600 3.5%  96 1.7%  1,127 2.3%
Restaurant-level EBITDA  6,711 26.6%  2,480 14.4%  876 15.9%  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%
Public offering transaction bonuses              1,462 3.0%
 Depreciation and amortization              2,051 4.3%
                 
Operating income (loss)              $ (923) -1.9%
                 
Restaurant operating weeks  108    228    44    380  
Average unit volume  $ 2,799    $ 904    $ 1,507    $ 1,512  
CONTACT: Investor Relations Contact:
         Raphael Gross
         203-682-8253
         investorrelations@dfrg.com
         
         Media Relations Contact:
         Kristina Jorge
         646-277-1234
         kristina.jorge@icrinc.com

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