UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549  
____________________________________________________________________

FORM 8-K
____________________________________________________________________

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 16, 2018
____________________________________________________________________ 
Del Taco Restaurants, Inc.
(Exact name of registrant as specified in its charter)
____________________________________________________________________

	
					
Delaware	 	001-36197	 	46-3340980	
(State or other jurisdiction
of incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	

25521 Commercentre Drive
Lake Forest, CA 92630
(Address of Principal executive offices, including Zip Code)

(949) 462-9300
(Registrant’s telephone number, including area code)  
____________________________________________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

	
		
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	

		
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	

		
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	

	
		
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

Item 2.02    Results of Operations and Financial Condition

On October 16, 2018 , Del Taco Restaurants, Inc. issued a press release announcing results for the fiscal quarter ended September 11, 2018 .

The information in this Current Report on Form 8-K and Exhibit 99.1 attached hereto is being furnished pursuant to Item 2.02 and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01    Financial Statements and Exhibits

(d) Exhibits

	

 	 	
Exhibit No.	Description of Exhibit	
Exhibit 99.1	Press Release issued on October 16, 2018 announcing third fiscal quarter ended September 11, 2018 financial results	

SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	

 	 	
DEL TACO RESTAURANTS, INC.	
 	 	
By:	/s/ Steven L. Brake	
Name:	Steven L. Brake	
Title:	Executive Vice President and Chief Financial Officer	

Date: October 16, 2018

Exhibit 99.1

For Immediate Release

Del Taco Restaurants, Inc. Reports Fiscal Third Quarter 2018 Financial Results
Updates Fiscal Year 2018 Annual Guidance

Lake Forest, CA. October 16, 2018 - 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 third quarter 2018 financial results. The Company also updated its guidance for fiscal year 2018.

Fiscal Third Quarter 2018 Highlights
		
•	System-wide comparable restaurant sales grew 1.4%, marking the 20th consecutive quarter of gains;	
		
◦	Company-operated comparable restaurant sales grew 0.3%, marking the 25th consecutive quarter of gains. Company-operated comparable restaurant sales growth was comprised of average check growth of 2.9%, partially offset by a transaction decrease of 2.6%;	
		
◦	Franchised comparable restaurant sales grew 3.0%;	
		
•	Total revenue increased 6.2% to $117.8 million (including $3.2 million of franchise advertising contributions and $0.2 million of other franchise revenue required as part of the new revenue recognition rules adopted in the fiscal first quarter whereby the offsetting impact is an increase to expenses such that there is no impact on operating income and net income) compared to $111.0 million in the fiscal third quarter 2017;	
		
•	Company restaurant sales increased 3.1% to $109.6 million compared to $106.3 million in the fiscal third quarter 2017;	
		
•	Net income was $5.9 million, or $0.15 per diluted share, compared to $5.1 million in the fiscal third quarter 2017, or $0.13 per diluted share;	
		
•	Adjusted net income* was $6.0 million, or $0.15 per diluted share, compared to $5.1 million in the fiscal third quarter 2017, or $0.13 per diluted share;	
		
•	Restaurant contribution* margin increased 70 basis points to 19.9% compared to 19.2% in the fiscal third quarter 2017; and	
		
•	Adjusted EBITDA* increased 6.4% to $17.7 million compared to $16.6 million in the fiscal third quarter 2017.	

Adjusted net income*, 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.

John D. Cappasola, Jr., President and Chief Executive Officer of Del Taco, commented, “During the quarter we made strategic progress led by the launch of Elevated Combined Solutions which furthers our mission to be the leader in the value oriented QSR+ segment. We again experienced strong franchise comparable restaurant sales trends demonstrating our strengthening franchise system which supports brand portability. We remained focused on strengthening our great culture with the launch of our company values and our new advertising campaign centered on real employees. And, despite soft company-operated comparable restaurant sales, our effective margin management strategy helped us deliver an improved restaurant contribution margin after adjusting for the favorable timing of advertising expenses.”

Cappasola continued, “Although the new $1 Chicken Quesadilla Snacker did not support check or transaction trends during the third quarter, our flexible barbell menu strategy allowed us to quickly pivot to mid-tier and premium products which achieved an immediate improvement in menu mix. As we enter the fourth quarter our plan to generate transaction momentum includes the launch of Shredded Beef as a limited time offer, which has already sequentially improved our trends, and premium innovation with a new Triple Meat Epic Burrito. Still, we have opted to take a more cautious approach to our fiscal year outlook and have therefore updated our annual guidance.”

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Cappasola concluded, “Next month, we will launch our Del Taco mobile app and begin offering delivery in the Los Angeles market through GrubHub, followed by a system-wide launch in 2019 that will include partnerships with Postmates and DoorDash. We believe delivery will provide another convenient channel to enjoy our fresh, high quality food and that moving toward a multiple delivery service provider approach will position us to maximize consumer demand.”

Review of Fiscal Third Quarter 2018 Financial Results

Total revenue increased 6.2% to $117.8 million (including $3.2 million of franchise advertising contributions and $0.2 million of other franchise revenue required as part of the new revenue recognition rules adopted in the fiscal first quarter whereby the offsetting impact is an increase to expenses such that there is no impact on operating income and net income) compared to $111.0 million in the fiscal third quarter 2017. Excluding these revenue recognition impacts, total revenue increased 3.1%.

Comparable restaurant sales increased 1.4% system-wide, resulting in a 5.5% increase on a two-year basis. The Del Taco system has now generated comparable restaurant sales growth for 20 consecutive quarters. Company-operated comparable restaurant sales increased 0.3%, marking 25 consecutive quarters of comparable restaurant sales growth. Franchise comparable restaurant sales increased 3.0%, reflecting the strength of our system across a diverse geographic footprint.

Net income was $5.9 million, representing $0.15 per diluted share, compared to $5.1 million in the fiscal third quarter 2017, representing $0.13 per diluted share.

Adjusted net income* was $6.0 million, or $0.15 per diluted share, compared to $5.1 million in the fiscal third quarter 2017, or $0.13 per diluted share.

Restaurant contribution* was $21.8 million compared to $20.4 million in the fiscal third quarter 2017. As a percentage of Company restaurant sales, restaurant contribution margin increased approximately 70 basis points year-over-year to 19.9%. The increase was the result of an approximate 90 basis point decrease in food and paper costs and a 40 basis point decrease in occupancy and other operating expenses, which was due to the timing of advertising expenses, offset by an approximate 60 basis point increase in labor and related expenses.

Adjusted EBITDA* increased 6.4% to $17.7 million compared to $16.6 million in the fiscal third quarter 2017.

Restaurant Portfolio

During the fiscal third quarter 2018, we opened two company-operated restaurants and three franchised restaurants and closed three company-operated restaurants and one franchised restaurant. We also purchased three restaurants from franchisees.

Thus far in the fiscal fourth quarter 2018, we have opened two company-operated restaurants and there are currently 17 restaurants (eleven franchised and six company) under construction, of which 13 to 16 are expected to open this fiscal year.

Repurchase Program for Common Stock and Warrants

During the fiscal third quarter 2018, we repurchased 235,041 shares of common stock at average price of $12.74 per share for a total of $3.0 million, and repurchased 5,972 warrants at an average price per warrant of $3.07. At the end of the fiscal third quarter approximately $38.1 million remained under our $75 million repurchase authorization.

Updated Fiscal Year 2018 Guidance

We are updating our guidance for fiscal year 2018, which is a 52-week period ending January 1, 2019.

•	System-wide same store sales growth of approximately 3% (previously 2% to 4%);	
		
•	Total revenue between $504 million and $507 million (previously $506 to $516 million), reflecting the new revenue recognition rules adopted in the first fiscal quarter whereby franchise advertising contributions and other franchise revenue, which totaled $12.7 million and $0.8 million in fiscal year 2017, respectively, will now be reported on a gross basis. This guidance also includes an estimated $0.5 million unfavorable impact from the timing of initial franchise fees and renewal fees which must be deferred and recognized over the term of the related franchise agreement;	
		
•	Total company-operated restaurant sales between $470 million and $473 million (previously $473 to $483 million);	
		
•	Restaurant contribution margin between 19.3% and 19.5% (previously 19.3% to 19.8%);	

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•	General and administrative expenses between approximately 8.5% and 8.7% of total revenue (previously 8.2% to 8.5%), including the expense side of the other franchise revenue that will now be reported on a gross basis;	
		
•	Effective tax rate of approximately 26.0% to 27.0% (previously 26.5% to 27.5%);	
		
•	Adjusted diluted earnings per share of approximately $0.53 to $0.56 (previously $0.59 to $0.63);	
		
•	Adjusted EBITDA between $70.5 million and $71.5 million (previously $71.5 to $74.0 million);	
		
•	25 to 28 new system-wide restaurant openings; and	
		
•	Net capital expenditures between $39.0 million to $42.0 million (previously $35.0 million to $38.0 million).	

We have not reconciled guidance for Adjusted diluted earnings per share and Adjusted EBITDA to the corresponding GAAP financial measure because we do not provide guidance for the various reconciling items. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted since these items could vary significantly from period to period. Accordingly, a reconciliation to the corresponding GAAP financial measure is not available without unreasonable effort.

Conference Call

A conference call and webcast to discuss Del Taco’s financial results and annual guidance 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 13683448.

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 18 th 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 U.S. 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 stock-based compensation expense and transaction-related costs, 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.

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Adjusted net income * represents company net income before impairment of long-lived assets, restaurant closure charges, and other income related to the write-off of unfavorable lease liabilities, net of tax. Adjusted diluted net income per share represents company diluted net income per share before impairment of long-lived assets, restaurant closure charges, and other income related to the write-off of unfavorable lease liabilities, 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. Del Taco’s new advertising campaign, “Celebrating the Hardest Working Hands in Fast Food,” further communicates the company’s commitment to providing guests with fresh, quality food prepared by hand every day. Founded in 1964, today Del Taco serves more than three million guests each week at its more than 560 restaurants across 14 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 included, without limitation, 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, food safety and foodborne illness concerns, our inability to manage existing and to obtain additional franchisees, 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 Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended January 2, 2018, 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.

### #### ###
### #### ###

Media Contact:
Julia Young
(646) 277-1280
julia.young@icrinc.com

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

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Del Taco Restaurants, Inc.	
Consolidated Balance Sheets	
(In thousands, except share and per share data)	
 	 	 	
 	 	September 11, 2018	 	January 2, 2018	
Assets	 	(Unaudited)	 	 	
Current assets:	 	 	 	 	
Cash and cash equivalents	 	$	6,628		 	$	6,559		
Accounts and other receivables, net	 	3,565		 	3,828		
Inventories	 	2,596		 	2,712		
Prepaid expenses and other current assets	 	4,793		 	6,784		
Total current assets	 	17,582		 	19,883		
Property and equipment, net	 	172,094		 	156,124		
Goodwill	 	321,531		 	320,638		
Trademarks	 	220,300		 	220,300		
Intangible assets, net	 	19,450		 	21,498		
Other assets, net	 	4,562		 	3,881		
Total assets	 	$	755,519		 	$	742,324		
Liabilities and shareholders’ equity	 	 	 	 	
Current liabilities:	 	 	 	 	
Accounts payable	 	$	20,172		 	$	18,759		
Other accrued liabilities	 	40,706		 	35,257		
Current portion of capital lease obligations and deemed landlord financing liabilities	 	1,109		 	1,415		
Total current liabilities	 	61,987		 	55,431		
Long-term debt, capital lease obligations and deemed landlord financing liabilities, excluding current portion, net	 	169,174		 	170,639		
Deferred income taxes	 	69,137		 	68,574		
Other non-current liabilities	 	31,945		 	31,431		
Total liabilities	 	332,243		 	326,075		
Commitments and contingencies ( Note 14 )	 	 	 	 	
Shareholders’ equity:	 	 	 	 	
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding	 	—		 	—		
Common stock, $0.0001 par value; 400,000,000 shares authorized; 38,066,801 shares issued and outstanding at September 11, 2018; 38,434,274 shares issued and outstanding at January 2, 2018	 	4		 	4		
Additional paid-in capital	 	343,412		 	349,334		
Accumulated other comprehensive income	 	357		 	14		
Retained earnings	 	79,503		 	66,897		
Total shareholders’ equity	 	423,276		 	416,249		
Total liabilities and shareholders’ equity	 	$	755,519		 	$	742,324		

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Del Taco Restaurants, Inc.	
Consolidated Statements of Comprehensive Income	
(Unaudited)	
(In thousands, except share and per share data)	
 	 	 	 	 	 	 	 	 	
 	 	12 Weeks Ended	 	36 Weeks Ended	
 	 	September 11, 2018	 	September 12, 2017	 	September 11, 2018	 	September 12, 2017	
Revenue:	 	 	 	 	 	 	 	 	
Company restaurant sales	 	$	109,559		 	$	106,298		 	$	324,468		 	$	311,542		
Franchise revenue	 	4,308		 	3,978		 	12,249		 	11,494		
Franchise advertising contributions	 	3,155		 	—		 	9,227		 	—		
Franchise sublease income	 	808		 	712		 	2,253		 	1,878		
Total revenue	 	117,830		 	110,988		 	348,197		 	324,914		
Operating expenses:	 	 	 	 	 	 	 	 	
Restaurant operating expenses:	 	 	 	 	 	 	 	 	
Food and paper costs	 	29,601		 	29,648		 	88,656		 	86,336		
Labor and related expenses	 	35,301		 	33,635		 	105,541		 	100,041		
Occupancy and other operating expenses	 	22,844		 	22,608		 	67,457		 	64,243		
General and administrative	 	9,606		 	8,817		 	30,356		 	27,177		
Franchise advertising expenses	 	3,155		 	—		 	9,227		 	—		
Depreciation and amortization	 	5,855		 	5,522		 	17,616		 	15,903		
Occupancy and other - franchise subleases	 	762		 	654		 	2,051		 	1,738		
Pre-opening costs	 	259		 	354		 	900		 	531		
Impairment of long-lived assets	 	—		 	—		 	1,661		 	—		
Restaurant closure charges, net	 	672		 	(16	)	 	635		 	(1	)	
Loss on disposal of assets, net	 	580		 	233		 	760		 	524		
Total operating expenses	 	108,635		 	101,455		 	324,860		 	296,492		
Income from operations	 	9,195		 	9,533		 	23,337		 	28,422		
Other expense:	 	 	 	 	 	 	 	 	
Interest expense	 	2,062		 	1,628		 	5,984		 	4,798		
Other income	 	(523	)	 	—		 	(523	)	 	—		
Total other expense	 	1,539		 	1,628		 	5,461		 	4,798		
Income from operations before provision for income taxes	 	7,656		 	7,905		 	17,876		 	23,624		
Provision for income taxes	 	1,782		 	2,804		 	4,563		 	8,955		
Net income	 	5,874		 	5,101		 	13,313		 	14,669		
Other comprehensive income (loss):	 	 	 	 	 	 	 	 	
Change in fair value of interest rate cap, net of tax	 	23		 	(35	)	 	312		 	(271	)	
Reclassification of interest rate cap amortization included in net income	 	15		 	—		 	31		 	—		
Total other comprehensive income (loss)	 	38		 	(35	)	 	343		 	(271	)	
Comprehensive income	 	$	5,912		 	$	5,066		 	$	13,656		 	$	14,398		
Earnings per share:	 	 	 	 	 	 	 	 	
Basic	 	$	0.15		 	$	0.13		 	$	0.35		 	$	0.38		
Diluted	 	$	0.15		 	$	0.13		 	$	0.34		 	$	0.37		
Weighted-average shares outstanding	 	 	 	 	 	 	 	 	
Basic	 	38,191,335		 	38,695,099		 	38,310,842		 	38,744,963		
Diluted	 	39,391,284		 	39,839,571		 	39,108,573		 	40,016,062		

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Del Taco Restaurants, Inc.	
Reconciliation of Net Income to EBITDA and Adjusted EBITDA	
(Unaudited)	
(In thousands)	
 	 	 	 	 	 	 	 	 	
 	 	12 Weeks Ended	 	36 Weeks Ended	
 	 	September 11, 2018	 	September 12, 2017	 	September 11, 2018	 	September 12, 2017	
Net income	 	5,874		 	$	5,101		 	13,313		 	$	14,669		
Non-GAAP adjustments:	 	 	 	 	 	 	 	 	
Provision for income taxes	 	1,782		 	2,804		 	4,563		 	8,955		
Interest expense	 	2,062		 	1,628		 	5,984		 	4,798		
Depreciation and amortization	 	5,855		 	5,522		 	17,616		 	15,903		
EBITDA	 	15,573		 	15,055		 	41,476		 	44,325		
Stock-based compensation expense (a)	 	1,445		 	1,191		 	4,079		 	3,340		
Loss on disposal of assets, net (b)	 	580		 	233		 	760		 	524		
Restaurant closure charges, net (c)	 	672		 	(16	)	 	635		 	(1	)	
Amortization of favorable and unfavorable lease assets and liabilities, net (d)	 	(352	)	 	(229	)	 	(602	)	 	(521	)	
Pre-opening costs (e)	 	259		 	354		 	900		 	531		
Impairment of long-lived assets (f)	 	—		 	—		 	1,661		 	—		
Other income (g)	 	(523	)	 	—		 	(523	)	 	—		
Adjusted EBITDA	 	$	17,654		 	$	16,588		 	$	48,386		 	$	48,198		

(a)	Includes non-cash, stock-based compensation.	
		
(b)	Loss on disposal of assets, net includes the loss or gain on disposal of assets related to sales, retirements and replacement or write-off of leasehold improvements or equipment in the ordinary course of business, net of gains or losses recorded associated with the sale of company-operated restaurants to franchisees.	
		
(c)	Includes costs related to future obligations associated with the closure or net sublease shortfall of a restaurant and lease termination costs, partially offset by sublease income from leases which are treated as deemed landlord financing.	
		
(d)	Includes amortization of favorable lease assets and unfavorable lease liabilities.	
		
(e)	Pre-opening costs consist of costs directly associated with the opening of new 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.	
		
(f)	Includes costs related to impairment of long-lived assets.	
		
(g)	Other income consists of a gain related to the write-off of unfavorable lease liabilities related to franchise subleases which were terminated in connection with the Company's acquisition of the related franchise-operated restaurants.	

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Del Taco Restaurants, Inc.	
Reconciliation of Company Restaurant Sales to Restaurant Contribution	
(Unaudited)	
(In thousands)	
 	 	 	 	 	 	 	 	 	
 	 	12 Weeks Ended	 	36 Weeks Ended	
 	 	September 11, 2018	 	September 12, 2017	 	September 11, 2018	 	September 12, 2017	
Company restaurant sales	 	$	109,559		 	$	106,298		 	$	324,468		 	$	311,542		
Restaurant operating expenses	 	87,746		 	85,891		 	261,654		 	250,620		
Restaurant contribution	 	$	21,813		 	$	20,407		 	$	62,814		 	$	60,922		
Restaurant contribution margin	 	19.9	%	 	19.2	%	 	19.4	%	 	19.6	%	

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Del Taco Restaurants, Inc.	
Reconciliation of Net Income and Diluted Earnings Per Share to Adjusted Net Income and Adjusted Diluted Earnings Per Share	
(Unaudited)	
(In thousands, except per share data)	
 	 	 	 	 	 	 	 	 	
 	 	12 Weeks Ended	 	12 Weeks Ended	
 	 	September 11, 2018	 	September 12, 2017	
 	 	$	 	Per Share	 	$	 	Per Share	
Net income and diluted earnings per share, as reported	 	$	5,874		 	$	0.15		 	$	5,101		 	$	0.13		
Impairment of long-lived assets (a)	 	—		 	—		 	—		 	—		
Restaurant closure charges, net (b)	 	672		 	0.02		 	(16	)	 	—		
Other income (c)	 	(523	)	 	(0.01	)	 	—		 	—		
Tax impact of adjustment (d)	 	(40	)	 	—		 	—		 	—		
Non-GAAP adjusted net income and adjusted diluted earnings per share	 	$	5,983		 	$	0.15		 	$	5,085		 	$	0.13		
 	 	 	 	 	 	 	 	 	
 	 	36 Weeks Ended	 	36 Weeks Ended	
 	 	September 11, 2018	 	September 12, 2017	
 	 	$	 	Per Share	 	$	 	Per Share	
Net income and diluted earnings per share, as reported	 	$	13,313		 	$	0.34		 	$	14,669		 	$	0.37		
Impairment of long-lived assets (a)	 	1,661		 	0.04		 	—		 	—		
Restaurant closure charges, net (b)	 	635		 	0.02		 	(1	)	 	—		
Other income (c)	 	(523	)	 	(0.01	)	 	—		 	—		
Tax impact of adjustment (d)	 	(479	)	 	(0.01	)	 	—		 	—		
Non-GAAP adjusted net income and adjusted diluted earnings per share	 	$	14,607		 	$	0.37		 	$	14,668		 	$	0.37		

(a)	Includes costs related to impairment of long-lived assets.	
		
(b)	Includes costs related to future obligations associated with the closure or net sublease shortfall of a restaurant and lease termination costs, partially offset by sublease income from leases which are treated as deemed landlord financing.	
		
(c)	Other income consists of a gain related to the write-off of unfavorable lease liabilities related to franchise subleases which were terminated in connection with the Company's acquisition of the related franchise-operated restaurants.	
		
(d)	Represents the income tax associated with the adjustments in (a) through (c) that are deductible for income tax purposes.	

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Del Taco Restaurants, Inc.	
Restaurant Development	
 	 	 	 	 	 	 	 	 	
 	 	12 Weeks Ended	 	36 Weeks Ended	
 	 	September 11, 2018	 	September 12, 2017	 	September 11, 2018	 	September 12, 2017	
Company-operated restaurant activity:	 	 	 	 	 	 	 	 	
Beginning of period	 	315		 	304		 	312		 	310		
Openings	 	2		 	2		 	6		 	3		
Closures	 	(3	)	 	(1	)	 	(4	)	 	(3	)	
Purchased from franchisees	 	3		 	—		 	3		 	—		
Sold to franchisees	 	—		 	—		 	—		 	(5	)	
Restaurants at end of period	 	317		 	305		 	317		 	305		
Franchise-operated restaurant activity:	 	 	 	 	 	 	 	 	
Beginning of period	 	251		 	251		 	252		 	241		
Openings	 	3		 	2		 	4		 	7		
Closures	 	(1	)	 	—		 	(3	)	 	—		
Purchased from Company	 	—		 	—		 	—		 	5		
Sold to Company	 	(3	)	 	—		 	(3	)	 	—		
Restaurants at end of period	 	250		 	253		 	250		 	253		
Total restaurant activity:	 	 	 	 	 	 	 	 	
Beginning of period	 	566		 	555		 	564		 	551		
Openings	 	5		 	4		 	10		 	10		
Closures	 	(4	)	 	(1	)	 	(7	)	 	(3	)	
Restaurants at end of period	 	567		 	558		 	567		 	558		

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