Business Wire | Jul 23, 2020 04:05PM EDT

Del Taco Restaurants, Inc. Reports Fiscal Second Quarter 2020 Financial Results

Jul. 23, 2020

LAKE FOREST, Calif.--(BUSINESS WIRE)--Jul. 23, 2020--Del Taco Restaurants, Inc. ("Del Taco" or the "Company"), (NASDAQ: TACO), the second largest Mexican-American quick service restaurant chain by units in the United States, today reported fiscal second quarter 2020 financial results for the 12-week period ending June 16, 2020 and provided a business update related to the impact of COVID-19.

Management Commentary

John D. Cappasola, Jr., President and Chief Executive Officer of Del Taco, commented, "Our restaurant teams, franchise partners and support staff are doing exceptional work supporting our people, serving our guests and strengthening our brand as we successfully navigate the business recovery phase of our strategy while preparing for brand acceleration. Despite the pandemic-induced headwind affecting our industry, our system-wide comparable restaurant sales continue to improve sequentially and are slightly positive thus far in the fiscal third quarter, led by our franchise base who is sustaining positive comparable restaurant sales across a broad 14 state geographic footprint."

Cappasola continued, "Importantly, the sequential company comparable restaurant sales improvement paired with strong cost controls helped optimize restaurant contribution and Adjusted EBITDA performance during the second quarter. This performance, coupled with the deferral of certain non-essential capital expenditures, enabled us to reduce our outstanding debt, net of cash, at the end of the second quarter by over $9 million and maintain a relatively stable net debt to Adjusted EBITDA leverage ratio compared to the end of fiscal 2019. Our financial stability and profitability improvements have allowed us to reinforce our people-centric culture by paying company General Managers healthy second quarter bonuses and introducing an enhanced employee meal program to reward our restaurant teams for their leadership and dedication to serving their communities."

Cappasola concluded, "As 2020 progresses we will further optimize performance while laying the groundwork for brand acceleration. We plan to leverage our QSR+ strengths with innovation across our powerful barbell menu, expand our engagement in social and digital channels, and further our strategy to be a trusted and safe brand for our guests and employees. Next week, we will launch New Crispy Chicken, a unique protein within the Mexican QSR category, which will debut on the Del's Dollar Deals menu as a new $1 Crispy Chicken Taco and in a New $5 Epic Burrito with Fresh Guacamole. We are excited to bring this new protein to market on the heels of a recent successful launch of Fresh Guacamole."

Fiscal Second Quarter 2020 Comparable Restaurant Sales

Twelve weeks Four weeks Four weeks Four weeks ended ended ended ended

June 16, 2020 April 21, May 19, 2020 June 16, 2020 2020

Company-operated -12.6% -23.9% -10.4% -3.7%

Franchised -7.2% -22.7% -2.9% 3.5%

System-wide -10.1% -23.4% -6.9% -0.3%

The results in the table above are compared to the comparable prior year period.

Fiscal Second Quarter 2020 Highlights

* System-wide comparable restaurant sales decreased 10.1%; Company-operated comparable restaurant sales decreased 12.6%; Franchised comparable restaurant sales decreased 7.2%; * Total revenue of $104.6 million, representing a 13.9% decline from the fiscal second quarter 2019; * Company-operated restaurant sales of $95.3 million, representing a 15.1% decline from the fiscal second quarter 2019; * Net loss of $0.6 million, or $0.02 per diluted share, compared to net income of $2.1 million, or $0.06 per diluted share, in the fiscal second quarter 2019; * Adjusted net loss* of $0.1 million, or $0.00 per diluted share, compared to adjusted net income* of $5.4 million, or $0.15 per diluted share, in the fiscal second quarter 2019; * Restaurant contribution* margin of 16.4% compared to 19.0% in the fiscal second quarter 2019; * Adjusted EBITDA* of $12.1 million compared to $16.7 million in the fiscal second quarter 2019; and * One company-operated and two franchise restaurant closures. Del Taco also refranchised one restaurant to an existing franchisee.

* Adjusted net income/loss, restaurant contribution, and adjusted EBITDA are non-GAAP measures and defined below under "Key Financial Definitions". Please see the reconciliation of non-GAAP measures accompanying this release.

Cash and Liquidity

During the fiscal second quarter 2020, Del Taco reduced its outstanding borrowing on its revolving credit facility to $145 million, consistent with its revolving credit facility balance at the end of fiscal year 2019. At the end of the second fiscal quarter the Company's debt, net of cash, totaled $133.8 million compared to $143.4 million at the end of fiscal year 2019, representing a reduction of approximately $9.6 million and a relatively stable net debt to Adjusted EBITDA* leverage ratio. This performance has allowed us to maintain meaningful financial cushion with respect to our lease adjusted leverage and fixed charge coverage covenants which the Company currently expects to maintain.

As of July 23, Del Taco had over $12 million in cash on hand and $87.7 million of remaining availability under its revolving credit facility.

Review of Fiscal Second Quarter 2020 Financial Results

Total revenue decreased 13.9% to $104.6 million compared to $121.5 million in the fiscal second quarter 2019. Comparable restaurant sales decreased 10.1% system-wide, decreased 12.6% at company-operated restaurants, and decreased 7.2% at franchised restaurants.

Net loss was $0.6 million, or $0.02 per diluted share, compared to net income of $2.1 million, or $0.06 per diluted share, last year.

Adjusted net income/loss*, which excludes sublease income for closed restaurants, impairment of long-lived assets, restaurant closure charges, loss on disposal of assets and adjustments to assets held for sale, and other income, was an adjusted net loss* of $0.1 million or $0.00 per diluted share compared to adjusted net income* of $5.4 million or $0.15 per diluted share last year.

Restaurant contribution* was $15.6 million compared to $21.3 million in the fiscal second quarter 2019. As a percentage of company-operated restaurant sales, restaurant contribution margin decreased 260 basis points year-over-year to 16.4%. The decrease was the result of approximately an approximately 80 basis point increase in labor and related expenses and an approximately 240 basis point increase in occupancy and other operating expenses, partially offset by a 60 basis point decrease in food and paper costs.

Adjusted EBITDA* was $12.1 million compared to $16.7 million in the fiscal second quarter 2019.

Portfolio Optimization and Restaurant Development

During the fiscal second quarter 2020, there were one company-operated and two franchise restaurant closures. Del Taco also refranchised one restaurant to an existing franchisee.

One new company-operated restaurant and two new franchised restaurants have already opened in the fiscal third quarter 2020 and there are up to three planned franchised restaurant openings later this year.

Fiscal Year 2020 Guidance Withdrawn

As a reminder, Del Taco previously withdrew guidance for the 52-week fiscal year 2020 ending December 29, 2020. However, the Company expects to demonstrate sequential improvement in year over year restaurant contribution* margin trends during the third and fourth fiscal quarters due to our comparable restaurant sales recovery coupled with sequentially less commodity inflation and a continued focus on managing our other restaurant expenses.

Conference Call and Webcast

A conference call and webcast is scheduled for 4:30 p.m. ET today. Hosting the conference call and webcast will be John D. Cappasola, Jr., President and Chief Executive Officer; and Steven L. Brake, Executive Vice President and Chief Financial Officer.

Interested parties may listen to the conference call via telephone by dialing 201-689-8471. A telephone replay will be available shortly after the call has concluded and can be accessed by dialing 412-317-6671; the passcode is 13706145.

The webcast will be available at www.deltaco.com under the investors section and will be archived on the site shortly after the call has concluded.

Key Financial Definitions

Comparable restaurant sales growth reflects the change in year-over-year sales for the comparable company, franchise and total system restaurant base. Restaurants are included in the comparable store base in the accounting period following its 18th full month of operations and excludes restaurant closures.

Restaurant contribution* is defined as company restaurant sales less restaurant operating expenses, which are food and paper costs, labor and related expenses and occupancy and other operating expenses. Restaurant contribution margin is defined as restaurant contribution as a percentage of company restaurant sales. Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP. Restaurant contribution and restaurant contribution margin are supplemental measures of operating performance of restaurants and the calculations thereof may not be comparable to those reported by other companies. Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of results as reported under GAAP. Management believes that restaurant contribution and restaurant contribution margin are important tools for investors because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency and performance. Management uses restaurant contribution and restaurant contribution margin as key performance indicators to evaluate the profitability of incremental sales at Del Taco restaurants, to evaluate restaurant performance across periods and to evaluate restaurant financial performance compared with competitors.

Adjusted EBITDA* is defined as net income/loss prior to interest expense, income taxes, and depreciation and amortization, as adjusted to add back certain charges, such as impairment of goodwill, trademark and long-lived assets, stock-based compensation expense and restaurant closure charges, as these expenses are not considered an indicator of ongoing company performance. Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income/loss as a measure of operating performance or cash flows or as measures of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior to GAAP results. We believe Adjusted EBITDA facilitates operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). We also present Adjusted EBITDA because (i) we believe this measure is frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry and (ii) we use Adjusted EBITDA internally as a benchmark to compare performance to that of competitors.

Adjusted net income/loss* represents company net income before impairment of goodwill, trademark and long-lived assets, restaurant closure charges, sublease income related to closed restaurants, other income, executive transition costs and loss on disposal of assets and adjustments to assets held for sale, net of tax. Adjusted diluted net income/loss per share* represents company diluted net income per share before impairment of goodwill, trademark and long-lived assets, restaurant closure charges, sublease income related to closed restaurants, other income, executive transition costs and loss on disposal of assets and adjustments to assets held for sale, net of tax.

About Del Taco Restaurants, Inc.

Del Taco (NASDAQ: TACO) offers a unique variety of both Mexican and American favorites such as burritos and fries, prepared fresh in every restaurant's working kitchen with the value and convenience of a drive-thru. Del Taco's menu items taste better because they are made with quality ingredients like fresh grilled chicken and carne asada steak, hand-sliced avocado, hand-grated cheddar cheese, slow-cooked beans made from scratch, and creamy Queso Blanco. The brand's campaign further communicates Del Taco's commitment to providing guests with the best quality and value for their money through cooking, chopping, shredding and grilling menu items from scratch. Founded in 1964, today Del Taco serves more than three million guests each week at its approximately 600 restaurants across 15 states. For more information, visit www.deltaco.com.

Forward-Looking Statements

In addition to historical information, this release may contain a number of "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, information concerning Del Taco's possible or assumed future results of operations, business strategies, competitive position, industry environment, potential growth opportunities and the effects of regulation. These statements are based on Del Taco's management's current expectations and beliefs, as well as a number of assumptions concerning future events. When used in this press release, the words "estimates," "projected," "expects," "anticipates," "forecasts," "plans," "intends," "believes," "seeks," "target," "may," "will," "should," "future," "propose," "preliminary," "guidance," "on track" and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Del Taco's management's control that could cause actual results to differ materially from the results discussed in the forward-looking statements. These risks include, without limitation, the impact of the COVID-19 pandemic, consumer demand, our inability to successfully open company-operated or franchised restaurants or establish new markets, competition in our markets, our inability to grow and manage growth profitably, adverse changes in food and supply costs, our inability to access additional capital, changes in applicable laws or regulations (including minimum wage regulations), food safety and foodborne illness concerns, our inability to manage existing and to obtain additional franchisees, our inability to successfully execute our portfolio optimization strategy, our inability to attract and retain qualified personnel, our inability to profitably expand into new markets, changes in, or the discontinuation of, the Company's repurchase program, and the possibility that we may be adversely affected by other economic, business, and/or competitive factors. Additional risks and uncertainties are identified and discussed in Del Taco's reports filed with the SEC, including under Part I. Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II., Item 1A. Risk Factors in our Quarterly Report on Form 10-Q for the period ended March 24, 2020, and available at the SEC's website at www.sec.gov and the Company's website at www.deltaco.com.

Forward-looking statements included in this release speak only as of the date of this release. Del Taco undertakes no obligation to update its forward-looking statements to reflect events or circumstances after the date of this release or otherwise.

Del Taco Restaurants, Inc.Consolidated Balance Sheets(In thousands, except share and per share data) June 16, December 31, 2020 2019 (Unaudited)AssetsCurrent assets:Cash and cash equivalents $ 10,749 $ 1,421

Accounts and other receivables, net 5,301 3,580

Inventories 2,471 3,123

Prepaid expenses and other current assets 1,776 2,289

Assets held for sale 1,495 8,411

Total current assets 21,792 18,824

Property and equipment, net 150,245 156,921

Operating lease right-of-use assets 253,180 258,278

Goodwill 108,979 192,739

Trademarks 208,400 220,300

Intangible assets, net 10,543 10,827

Other assets, net 4,705 4,568

Total assets $ 757,844 $ 862,457

Liabilities and shareholders' equityCurrent liabilities:Accounts payable $ 17,818 $ 19,652

Other accrued liabilities 41,700 34,577

Current portion of finance lease obligations and 198 220 other debtCurrent portion of operating lease liabilities 20,667 17,848

Total current liabilities 80,383 72,297

Long-term debt, finance lease obligations and other 144,368 144,581 debt, excluding currentportion, netOperating lease liabilities, excluding current 256,277 257,361 portionDeferred income taxes 59,148 69,510

Other non-current liabilities 16,020 16,601

Total liabilities 556,196 560,350

Shareholders' equity:Preferred stock, $0.0001 par value; 1,000,000 - - shares authorized; no sharesissued and outstandingCommon stock, $0.0001 par value; 400,000,000 sharesauthorized; 37,122,976 4 4 shares issued and outstanding at June 16, 2020;37,059,202shares issued and outstanding at December 31, 2019Additional paid-in capital 335,912 333,379

Accumulated other comprehensive loss - (52 )

Accumulated deficit (134,268 ) (31,224 )

Total shareholders' equity 201,648 302,107

Total liabilities and shareholders' equity $ 757,844 $ 862,457

Del Taco Restaurants, Inc.Consolidated Statements of Comprehensive (Loss) Income(Unaudited)(In thousands, except share and per share data) 12 Weeks Ended 24 Weeks Ended June 16, 2020 June 18, 2019 June 16, 2020 June 18, 2019Revenue:Company $ 95,261 $ 112,180 $ 195,594 $ 218,083 restaurant salesFranchise 4,520 4,638 8,911 8,703 revenueFranchise 2,783 3,459 5,994 6,590 advertisingcontributionsFranchise 2,006 1,183 3,881 2,281 sublease andother incomeTotal revenue 104,570 121,460 214,380 235,657

Operatingexpenses:Restaurantoperatingexpenses:Food and paper 25,642 30,855 53,937 59,673 costsLabor and 31,609 36,338 66,545 72,238 related expensesOccupancy and 22,389 23,703 46,797 48,136 other operatingexpensesGeneral and 9,432 10,849 19,298 21,314 administrativeFranchise 2,783 3,459 5,994 6,590 advertisingexpensesDepreciation and 6,285 5,813 12,422 11,720 amortizationOccupancy andother - 1,727 993 3,322 1,847 franchisesubleases andotherPre-opening 63 155 296 255 costsImpairment of - - 87,277 - goodwillImpairment of - - 11,900 - trademarksImpairment of - 3,694 8,287 3,694 long-livedassetsRestaurant 499 490 993 1,130 closure charges,netLoss on disposalof assets and 435 594 557 884 adjustments toassets held forsale, netTotal operating 100,864 116,943 317,625 227,481 expensesIncome (loss) 3,706 4,517 (103,245 ) 8,176 from operationsOther expense(income), net:Interest expense 1,281 1,722 2,789 3,506

Other income - (97 ) - (201 )

Total other 1,281 1,625 2,789 3,305 expense, netIncome (loss)from operations 2,425 2,892 (106,034 ) 4,871 before provision(benefit) forincome taxesProvision 3,001 800 (2,990 ) 1,354 (benefit) forincome taxesNet (loss) (576 ) 2,092 (103,044 ) 3,517 incomeOthercomprehensiveincome (loss):Change in fairvalue of - (131 ) - (270 )interest ratecap, net of taxReclassificationof interest ratecap amortization 7 26 52 47 included in netincome, net oftaxTotal othercomprehensive 7 (105 ) 52 (223 )income (loss),netComprehensive $ (569 ) $ 1,987 $ (102,992 ) $ 3,294 (loss) income(Loss) Earningsper share:Basic $ (0.02 ) $ 0.06 $ (2.78 ) $ 0.10

Diluted $ (0.02 ) $ 0.06 $ (2.78 ) $ 0.09

Weighted averagesharesoutstandingBasic 37,086,962 36,821,728 37,081,511 36,988,853

Diluted 37,086,962 37,083,799 37,081,511 37,215,059

Del Taco Restaurants, Inc.Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA(Unaudited)(In thousands) 12 Weeks Ended 24 Weeks Ended June 16, June 18, June 16, June 18, 2020 2019 2020 2019Net (loss) income $ (576 ) $ 2,092 $ (103,044 ) $ 3,517

Non-GAAP adjustments:Provision (benefit) for 3,001 800 (2,990 ) 1,354 income taxesInterest expense 1,281 1,722 2,789 3,506

Depreciation and amortization 6,285 5,813 12,422 11,720

EBITDA 9,991 10,427 (90,823 ) 20,097

Stock-based compensation 1,413 1,676 2,638 3,253 expense (a)Loss on disposal of assets 435 594 557 884 and adjustments to assetsheld for sale, net (b)Impairment of goodwill (c) - - 87,277 -

Impairment of trademarks (d) - - 11,900 -

Impairment of long-lived - 3,694 8,287 3,694 assets (e)Restaurant closure charges, 499 490 993 1,130 net (f)Amortization of favorable andunfavorable lease (66 ) (23 ) (115 ) 63 assets and liabilities, net(g)Pre-opening costs (h) 63 155 296 255

Sublease income for closed (248 ) (180 ) (498 ) (381 )restaurants (i)Executive transition costs - - 287 - (j)Other income (k) - (97 ) - (201 )

Adjusted EBITDA $ 12,087 $ 16,736 $ 20,799 $ 28,794

(a) Includes non-cash, stock-based compensation.(b) Loss on disposal of assets and adjustments to assets held for sale, netincludes adjustments to reduce the carrying amount for assets held for sale toestimated fair value less cost to sell, loss or gain on disposal of assetsrelated to sales, retirements and replacement or write-off of leaseholdimprovements or equipment in the ordinary course of business, net gains orlosses recorded associated with the sale of company-operated restaurants tofranchisees, gains from the write-off of right-of-use assets and operatinglease liabilities related to the termination of leases and net gains or lossesrecorded associated with sale-leaseback transactions.(c) Includes non-cash charges related to impairment of goodwill.(d) Includes non-cash charges related to impairment of trademarks.(e) Includes non-cash charges related to impairment of long-lived assets.(f) Restaurant closure costs include rent expense, non-lease executory costs,other direct costs associated with previously closed restaurants and futureobligations associated with the closure or net sublease shortfall of arestaurant.(g) Includes amortization of favorable lease assets and unfavorable leaseliabilities.(h) Pre-opening costs consist of costs directly associated with the opening ofnew restaurants and incurred prior to opening, including restaurant labor,supplies, cash and non-cash rent expense and other related pre-opening costs.These are generally incurred over the three to five months prior to opening.(i) Includes other sublease income related to closed restaurants that have beensubleased to third parties.(j) Includes costs associated with the transition of former Company executives,such as severance expense.(k) During 2019, other income consists of insurance proceeds related to a fireat a company-operated restaurant.

Del Taco Restaurants, Inc.Reconciliation of Company Restaurant Sales to Restaurant Contribution(Unaudited)(In thousands) 12 Weeks Ended 24 Weeks Ended June 16, June 18, June 16, June 18, 2020 2019 2020 2019Company restaurant sales $ 95,261 $ 112,180 $ 195,594 $ 218,083

Restaurant operating expenses 79,640 90,896 167,279 180,047

Restaurant contribution $ 15,621 $ 21,284 $ 28,315 $ 38,036

Restaurant contribution 16.4 % 19.0 % 14.5 % 17.4 %margin Del Taco Restaurants, Inc.Reconciliation of Income (Loss) from Operations to Restaurant Contribution(Unaudited)(In thousands) 12 Weeks Ended 24 Weeks Ended June 16, June 18, June 16, June 18, 2020 2019 2020 2019Income (loss) from operations $ 3,706 $ 4,517 $ (103,245 ) $ 8,176

Less:Franchise revenue (4,520 ) (4,638 ) (8,911 ) (8,703 )

Franchise advertising (2,783 ) (3,459 ) (5,994 ) (6,590 )contributionsFranchise sublease income and (2,006 ) (1,183 ) (3,881 ) (2,281 )otherPlus:General and administrative 9,432 10,849 19,298 21,314

Franchise advertising 2,783 3,459 5,994 6,590 expensesDepreciation and amortization 6,285 5,813 12,422 11,720

Occupancy and other - 1,727 993 3,322 1,847 franchisesubleases and otherPre-opening costs 63 155 296 255

Impairment of goodwill - - 87,277 -

Impairment of trademarks - - 11,900 -

Impairment of long-lived - 3,694 8,287 3,694 assetsRestaurant closure charges, 499 490 993 1,130 netLoss on disposal of assetsand 435 594 557 884 adjustments to assets heldfor sale, netRestaurant contribution $ 15,621 $ 21,284 $ 28,315 $ 38,036

Company restaurant sales $ 95,261 $ 112,180 $ 195,594 $ 218,083

Restaurant contribution 16.4 % 19.0 % 14.5 % 17.4 %margin

Del Taco Restaurants, Inc.Reconciliation of Net (Loss) Income to Adjusted Net (Loss) Income(Unaudited)(In thousands, except per share data) 12 Weeks Ended 24 Weeks Ended June 16, 2020 June 18, 2019 June 16, 2020 June 18, 2019Net (loss) $ (576 ) $ 2,092 $ (103,044 ) $ 3,517 income, asreportedSublease income (248 ) (180 ) (498 ) (381 )for closedrestaurants (a)Impairment of - - 87,277 - goodwill (b)Impairment of - - 11,900 - trademarks (c)Impairment of - 3,694 8,287 3,694 long-livedassets (d)Restaurantclosure 499 490 993 1,130 charges, net(e)Loss ondisposal ofassets and 435 594 557 884 adjustments toassetsheld for sale,net (f)Other income - (97 ) - (201 )(g)Executive - - 287 - transitioncosts (h)Tax impact of (185 ) (1,215 ) (5,809 ) (1,384 )adjustments (i)Non-GAAP $ (75 ) $ 5,378 $ (50 ) $ 7,259 adjusted net(loss) income (Loss) Earningsper share (asreported):Basic $ (0.02 ) $ 0.06 $ (2.78 ) $ 0.10

Diluted $ (0.02 ) $ 0.06 $ (2.78 ) $ 0.09

Weightedaverage sharesoutstanding (asreported):Basic 37,086,962 36,821,728 37,081,511 36,988,853

Diluted 37,086,962 37,083,799 37,081,511 37,215,059

Adjustedearnings pershare:Basic $ (0.00 ) $ 0.15 $ (0.00 ) $ 0.20

Diluted $ (0.00 ) $ 0.15 $ (0.00 ) $ 0.20

Shares used incomputingadjustedearnings pershare:Basic 37,086,962 36,821,728 37,081,511 36,988,853

Diluted 37,086,962 37,083,799 37,081,511 37,215,059

(a) Includes other sublease income related to closed restaurants that have beensubleased to third parties.(b) Includes non-cash charges related to impairment of goodwill.(c) Includes non-cash charges related to impairment of trademarks.(d) Includes non-cash charges related to impairment of long-lived assets.(e) Restaurant closure costs include rent expense, non-lease executory costs,other direct costs associated with previously closed restaurants and futureobligations associated with the closure or net sublease shortfall of arestaurant.(f) Loss on disposal of assets and adjustments to assets held for sale, netincludes adjustments to reduce the carrying amount for assets held for sale toestimated fair value less cost to sell, loss or gain on disposal of assetsrelated to sales, retirements and replacement or write-off of leaseholdimprovements or equipment in the ordinary course of business, net gains orlosses recorded associated with the sale of company-operated restaurants tofranchisees, gains from the write-off of right-of-use assets and operatinglease liabilities related to the termination of leases and net gains or lossesrecorded associated with sale-leaseback transactions.(g) During 2019, other income consists of insurance proceeds related to a fireat a company-operated restaurant.(h) Includes costs associated with the transition of former Company executives,such as severance expense.(i) Represents the income tax associated with the adjustments in (a) through(h) that are deductible for income tax purposes.

Del Taco Restaurants, Inc.Restaurant Development 12 Weeks Ended 24 Weeks Ended June 16, June 18, June 16, June 18, 2020 2019 2020 2019Company-operated restaurantactivity:Beginning of period 296 312 300 322

Openings - 1 2 1

Closures (1) (3) (2) (3)

Purchased from franchisees - - - 3

Sold to franchisees (1) - (6) (13)

Restaurants at end of period 294 310 294 310

Franchise-operated restaurantactivity:Beginning of period 300 271 296 258

Openings - 2 1 6

Closures (2) - (4) (1)

Purchased from Company 1 - 6 13

Sold to Company - - - (3)

Restaurants at end of period 299 273 299 273

Total restaurant activity:Beginning of period 596 583 596 580

Openings - 3 3 7

Closures (3) (3) (6) (4)

Restaurants at end of period 593 583 593 583

View source version on businesswire.com: https://www.businesswire.com/news/home/20200723005785/en/

CONTACT: Investor Relations Contact: Raphael Gross (203) 682-8253 investor@deltaco.com