- Achieved record first quarter revenue of $27.1 million;
up 52.6% over prior-year period
- Achieved $4.8 million in restaurant-level EBITDA in the
quarter
- Fiscal 2013 revenue expected to be between
$110.0 million and $115.0 million with
restaurant-level EBITDA in the $21.0
million to $23.0 million range
- Company expects to open eight additional locations
during the year to bring its corporate-owned restaurant count up to
54
Diversified Restaurant Holdings, Inc. (NASDAQ: BAGR) ("DRH" or the
"Company"), the creator, developer, and operator of the unique,
full-service, ultra-casual restaurant and bar Bagger Dave's
Legendary Burger Tavern® ("Bagger Dave's") and one of the largest
franchisees for Buffalo Wild Wings® ("BWW"), announced results for
the first quarter of 2013.
First quarter revenue of $27.1 million was up $9.3 million, or
52.6%, from the first quarter of 2012. Sales growth was primarily
driven by the addition of eight corporate-owned restaurants and
eight acquired locations since the prior-year period. On a
consolidated basis, same-store-sales were up 3.5% for the first
quarter of 2013.
"Our revenue performance continues to highlight the combined
impact of our growth strategy, brand acceptance, and customer
experience," commented Michael Ansley, President and CEO of DRH.
"During our expansion periods, our customers continued to enjoy a
consistent and unique dining experience. Despite our rapid growth,
we never lost focus of keeping our customers' experiences a top
priority."
At the end of the first quarter, there were 45 total restaurants
(corporate-owned and franchised) operating, comprised of 12 Bagger
Dave's and 33 BWW, compared with 28 restaurants at the end of the
first quarter of 2012.
First Quarter Operating Results
The increase in the number of locations was the primary factor
operating expenses increased year over year. Food, beverage,
and packaging costs increased to $8.6 million in the first quarter
of 2013 from $5.5 million in the prior-year period, and reflects a
9.4% increase in chicken wing prices compared with the same quarter
a year ago. As a result, food, beverage, and packaging costs
as a percentage of total revenue increased 60 basis points to 31.7%
compared with 31.1% in the first quarter of 2012.
Compensation costs increased $2.6 million to $7.0 million in the
first quarter of 2013 from $4.4 million in the first quarter of
2012 due to the increased staffing needs for new
restaurants. As a percentage of total revenue, compensation
costs were 26.0% in first quarter of 2013 compared with 24.8% in
the prior-year period.
For the quarter, pre-opening costs were $0.6 million, up
significantly from $0.1 million in the prior-year period, as the
Company was preparing for the opening of new restaurants.
First quarter 2013 depreciation and amortization increased $0.7
million to $1.7 million compared with $1.0 million in the 2012
first quarter, reflective of the capital investments made over the
past year.
Restaurant-level EBITDA increased $1.3 million, or 36.2%, to
$4.8 million for the first quarter of 2013 from $3.5 million in the
same period of the prior year. Adjusted EBITDA was $3.2 million for
the 2013 first quarter, an increase from $2.2 million in the first
quarter of 2012. DRH believes that, when used in conjunction
with GAAP measures, restaurant-level EBITDA and adjusted EBITDA,
which are non-GAAP measures, provide additional information related
to its operating performance. (See Reconciliation of
restaurant-level EBITDA and adjusted EBITDA in the supplemental
table included at the end of this release.)
Net income attributable to DRH in the first quarter of 2013 was
$0.2 million compared with $0.6 million in the same period of the
prior year.
Balance Sheet
Cash and cash equivalents were $1.7 million at March 31, 2013,
compared with $2.7 million at December 30, 2012. The Company
generated $0.8 million in cash from operations during the first
quarter, a decrease from the $1.6 million generated during the same
prior-year period, due to lower net earnings and changes in working
capital.
Capital expenditures were $3.4 million during the first three
months of 2013. The Company remains committed to reinvesting
in its stores and is following a definitive schedule of continued
improvements and remodeling to maintain a positive dining
experience for its guests. For 2013, DRH estimates capital
expenditures to range between $22.5 million and $26.0 million, with
the majority focused on new restaurants.
Fiscal 2013 Outlook
DRH plans to open eight additional restaurants during
the year, which will be comprised mostly of Bagger Dave's. Two
BWW locations have already opened this year. By the end of
2017, the Company plans to operate approximately 50 Bagger Dave's
and 47 BWW locations.
"We are advancing our growth strategy and continue to invest
time and resources into building brand recognition for our Bagger
Dave's restaurants," commented Mr. Ansley. "We are also
implementing initiatives to improve the operating performance of
our recently acquired BWW restaurants."
DRH expects revenue will be in the range of $110.0 million to
$115.0 million in fiscal 2013, an improvement of approximately
42.1% to 48.5% from fiscal 2012. The Company expects that
restaurant-level EBITDA for fiscal 2013 will be in the $21.0
million to $23.0 million range while adjusted EBITDA for fiscal
2013 is expected to be between $15.0 million to $16.0 million.
Webcast and Conference Call
DRH will host a conference call and webcast on Thursday, May 16,
2013 at 10:00 a.m. Eastern Time, during which management will
review the financial and operating results for the first quarter
and discuss its corporate strategies and outlook. A question
and answer session will follow.
The teleconference can be accessed by calling (201)
493-6780. The webcast can be monitored on the Company's
website at www.diversifiedrestaurantholdings.com, where it will be
archived afterwards.
A telephonic replay will be available from 1:00 p.m. ET on the
day of the teleconference through Thursday, May 23, 2013. To
listen to a replay of the call, dial (858) 384-5517 and enter the
conference ID number 413982. An archive of the webcast will be
available on the Company's website at
www.diversifiedrestaurantholdings.com and will include a
transcript, once available.
About Diversified Restaurant Holdings
Diversified Restaurant Holdings, Inc. ("DRH" or the "Company")
is the creator, developer, and operator of the unique,
full-service, ultra-casual restaurant concept, Bagger Dave's
Legendary Burger Tavern® ("Bagger Dave's") and one
of the largest Buffalo Wild Wings® ("BWW")
franchisees. Between the two concepts, the Company currently
operates 46 corporate-owned restaurants in Michigan, Florida,
Illinois, and Indiana, and one franchised Bagger Dave's in
Missouri, for a total of 47 restaurants. The Company routinely
posts news and other important information on its website at
www.diversifiedrestaurantholdings.com.
Bagger Dave's offers a full-service, family-friendly restaurant
and bar with a casual, comfortable atmosphere. The menu features
freshly-made burgers, accompanied by more than 30 toppings from
which to choose, along with fresh-cut fries, hand-dipped
milkshakes, and a selection of craft beer and wine. Signature items
include Sloppy Dave's BBQ®, Train Wreck Burger®, and Bagger Dave's
Amazingly Delicious Turkey Black Bean Chili®. The Bagger
Dave's concept emphasizes local flair by showcasing historical
photos of the city in which each restaurant resides and features an
electric train that runs above the dining room and bar
areas. Currently, there are 11 corporate-owned locations and
one franchised location. For more information, visit
www.baggerdaves.com.
DRH currently operates 35 BWW restaurants: 17 in Michigan, 10 in
Florida, 4 in Illinois and 4 in Indiana. The Company has
opened 21 new BWW restaurants in fulfillment of its 32-store Area
Development Agreement ("ADA") with franchisor Buffalo Wild Wings,
Inc. (Nasdaq:BWLD). The remaining 11 restaurants under the ADA
agreement, along with an additional franchise agreement in Indiana,
suggest that the Company will operate 47 BWW restaurants by
2017.
Safe Harbor Statement
The information made available in this news release contains
forward-looking statements which reflect DRH's current view of
future events, results of operations, cash flows, performance,
business prospects and opportunities. Wherever used, the words
"anticipate," "believe," "expect," "intend," "plan," "project,"
"will continue," "will likely result," "may," and similar
expressions identify forward-looking statements as such term is
defined in the Securities Exchange Act of 1934. Any such
forward-looking statements are subject to risks and uncertainties
and the Company's actual growth, results of operations, financial
condition, cash flows, performance, business prospects and
opportunities could differ materially from historical results or
current expectations. Some of these risks include, without
limitation, the impact of economic and industry conditions,
competition, food and drug safety issues, restaurant expansion and
remodeling, labor relations issues, costs of providing employee
benefits, regulatory matters, legal and administrative proceedings,
information technology, security, severe weather, natural
disasters, accounting matters, other risk factors relating to our
business or industry and other risks detailed from time to time in
the Securities and Exchange Commission filings of DRH.
Forward-looking statements contained herein speak only as of the
date made and, thus, DRH undertakes no obligation to update or
publicly announce the revision of any of the forward-looking
statements contained herein to reflect new information, future
events, developments or changed circumstances or for any other
reason.
FINANCIAL TABLES TO FOLLOW
DIVERSIFIED RESTAURANT
HOLDINGS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS
OF OPERATIONS (UNAUDITED) |
|
|
Three Months
Ended |
|
March 31 |
March 25 |
|
2013 |
2012 |
|
|
|
Revenue |
$ 27,079,114 |
$ 17,749,818 |
Restaurant operating costs: |
|
|
Food, beverage, and packaging |
8,576,047 |
5,517,972 |
Compensation costs |
7,048,902 |
4,405,434 |
Occupancy |
1,533,005 |
915,119 |
Other operating costs |
5,306,634 |
3,422,179 |
Total restaurant costs |
22,464,588 |
14,260,704 |
|
|
|
Restaurant profit |
4,614,526 |
3,489,114 |
|
|
|
General and administrative expenses |
1,524,130 |
1,274,518 |
Pre-opening costs |
592,726 |
47,871 |
Depreciation and amortization |
1,655,484 |
973,058 |
Loss on disposal of property and
equipment |
35,074 |
-- |
Total operating
expenses |
26,272,002 |
16,556,151 |
|
|
|
Operating profit |
807,112 |
1,193,667 |
Change in fair value of derivative
instruments |
-- |
20,689 |
Interest expense |
(469,211) |
(312,541) |
Other income, net |
2,319 |
33,773 |
|
|
|
Income before income
taxes |
340,220 |
935,588 |
|
|
|
Income tax provision |
101,820 |
249,390 |
|
|
|
Net income |
238,400 |
686,198 |
|
|
|
Less: (Income) attributable to noncontrolling
interest |
-- |
(39,810) |
Net income attributable to
DRH |
$ 238,400 |
$ 646,388 |
Basic earnings per share |
$ 0.01 |
$ 0.03 |
Fully diluted earnings per share |
$ 0.01 |
$ 0.03 |
Weighted average number of common
shares outstanding |
|
|
Basic |
18,959,846 |
18,941,708 |
Diluted |
19,094,786 |
19,044,287 |
|
|
DIVERSIFIED RESTAURANT
HOLDINGS, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE
SHEETS (UNAUDITED) |
|
|
|
|
March 31 |
December 30 |
ASSETS |
2013 |
2012 |
Current assets |
|
|
Cash and cash equivalents |
$ 1,663,595 |
$ 2,700,328 |
Accounts receivable |
274,226 |
248,403 |
Inventory |
1,060,129 |
809,084 |
Prepaid assets |
275,262 |
447,429 |
Total current assets |
3,273,212 |
4,205,244 |
|
|
|
Deferred income taxes |
749,247 |
846,746 |
Property and equipment, net |
41,998,274 |
40,286,490 |
Intangible assets, net |
2,490,319 |
2,509,337 |
Goodwill |
8,578,776 |
8,578,776 |
Other long-term assets |
97,603 |
118,145 |
Total assets |
$ 57,187,431 |
$ 56,544,738 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
|
|
|
Current liabilities |
|
|
Accounts payable |
$ 3,018,769 |
$ 3,952,017 |
Accrued compensation |
1,188,283 |
1,647,075 |
Other accrued liabilities |
899,774 |
1,013,369 |
Current portion of long-term debt |
6,803,836 |
6,095,684 |
Current portion of deferred rent |
268,329 |
226,106 |
Total current
liabilities |
12,178,991 |
12,934,251 |
|
|
|
Deferred rent, less current portion |
2,604,553 |
2,274,753 |
Unfavorable operating leases |
823,748 |
849,478 |
Other liabilities - interest rate swap |
369,303 |
430,751 |
Long-term debt, less current portion |
39,348,924 |
38,551,601 |
Total liabilities |
55,325,519 |
55,040,834 |
Stockholders' equity |
|
|
Common stock -- $0.0001 par value;
100,000,000 shares authorized; 19,019,525 and 18,951,700,
respectively, issued and outstanding |
1,888 |
1,888 |
Additional paid-in capital |
3,070,578 |
2,991,526 |
Accumulated other comprehensive loss |
(243,738) |
(284,294) |
Accumulated deficit |
(966,816) |
(1,205,216) |
Total stockholders'
equity |
1,861,912 |
1,503,904 |
|
|
|
Total liabilities and stockholders'
equity |
$ 57,187,431 |
$ 56,544,738 |
|
|
DIVERSIFIED RESTAURANT
HOLDINGS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS
OF CASH FLOWS (UNAUDITED) |
|
Three Months Ended |
|
March 31 |
March 25 |
|
2013 |
2012 |
Cash flows from operating
activities |
|
|
Net income |
$ 238,400 |
$ 686,198 |
Adjustments to reconcile net income to
net cash provided by operating activities |
|
|
Depreciation and amortization |
1,655,484 |
973,058 |
Loss on disposal of property and
equipment |
35,074 |
-- |
Share-based compensation |
79,052 |
53,132 |
Change in fair value of derivative
instruments |
-- |
(20,689) |
Deferred income taxes |
76,607 |
183,802 |
Changes in operating assets and
liabilities that provided (used) cash |
|
|
Accounts receivable |
(25,823) |
11,688 |
Inventory |
(251,045) |
48,760 |
Prepaid assets |
172,167 |
9,844 |
Intangible assets |
(20,416) |
(12,949) |
Other long-term assets |
20,542 |
290 |
Accounts payable |
(933,248) |
(586,174) |
Accrued liabilities |
(572,387) |
259,951 |
Deferred rent |
372,023 |
(40,975) |
Net cash provided by operating
activities |
846,430 |
1,565,936 |
Cash flows from investing
activities |
|
|
Purchases of property and equipment |
(3,388,638) |
(695,848) |
Net cash used in investing
activities |
(3,388,638) |
(695,848) |
|
|
|
Cash flows from financing
activities |
|
|
Proceeds from issuance of long-term
debt |
2,842,337 |
440,641 |
Repayments of long-term debt |
(1,336,862) |
(657,650) |
Distributions |
-- |
(40,000) |
Net cash provided by (used in)
financing activities |
1,505,475 |
(257,009) |
|
|
|
Net increase (decrease) in cash and
cash equivalents |
(1,036,733) |
613,079 |
Cash and cash equivalents, beginning of
period |
2,700,328 |
1,537,497 |
Cash and cash equivalents, end of
period |
$ 1,663,595 |
$ 2,150,576 |
|
|
DIVERSIFIED RESTAURANT
HOLDINGS, INC. AND SUBSIDIARIES |
Reconciliation between
Net Income and Restaurant-Level and Adjusted EBITDA |
|
Three Months Ended |
|
March 31 |
March 25 |
|
2013 |
2012 |
Net income attributable to
DRH |
$ 238,400 |
$ 646,388 |
+ Income tax provision |
101,820 |
249,390 |
+ Change in fair value of derivative
instruments |
-- |
20,689 |
+ Interest expense |
469,211 |
312,541 |
+ Other income, net |
(2,319) |
(33,773) |
+ Loss on disposal of property and
equipment |
35,074 |
-- |
+ Depreciation and amortization |
1,655,484 |
973,058 |
EBITDA |
$ 2,497,670 |
$ 2,168,293 |
+ Pre-opening costs |
592,726 |
47,871 |
+ Non-recurring expenses (restaurant
level) |
140,000 |
-- |
Adjusted EBITDA |
$ 3,230,396 |
$ 2,216,164 |
Adjusted EBITDA margin (%) |
11.9% |
12.5% |
+ General and administrative |
1,524,130 |
1,274,518 |
Restaurant–Level EBITDA |
$ 4,754,526 |
$ 3,490,682 |
Restaurant–Level EBITDA margin (%) |
17.6% |
19.7% |
Restaurant-Level EBITDA represents net income plus the sum of
non-restaurant specific general and administrative expenses,
restaurant pre-opening costs, loss on property and equipment
disposals, the change in fair value of derivative instruments,
depreciation and amortization, other income and expenses, interest,
taxes and non-recurring acquisition related expenses in Q1
2013. Adjusted EBITDA represents net income plus the
sum of restaurant pre-opening costs, loss on property and equipment
disposals, the change in fair value of derivative instruments,
depreciation and amortization, other income and expenses, interest
and taxes. We are presenting Restaurant-Level EBITDA and Adjusted
EBITDA, which are not prepared in accordance with GAAP, because we
believe that they provide an additional metric by which to evaluate
our operations and, when considered together with our GAAP results
and the reconciliation to our net income, we believe they provide a
more complete understanding of our business than could be obtained
absent this disclosure. We use Restaurant-Level EBITDA and Adjusted
EBITDA, together with financial measures prepared in accordance
with GAAP, such as revenue, income from operations, net income and
cash flows from operations, to assess our historical and
prospective operating performance and to enhance our understanding
of our core operating performance. Restaurant-Level EBITDA and
Adjusted EBITDA are presented because: (i) we believe they are
useful measures for investors to assess the operating performance
of our business without the effect of non-cash depreciation and
amortization expenses; (ii) we believe that investors will find
these measures useful in assessing our ability to service or incur
indebtedness; and (iii) we use Restaurant-Level EBITDA and Adjusted
EBITDA internally as benchmarks to evaluate our operating
performance or compare our performance to that of our
competitors.
Additionally, we present Restaurant-Level EBITDA because it
excludes the impact of general and administrative expenses, which
are not incurred at the restaurant level, and restaurant
pre-opening costs, which are non-recurring at the restaurant level.
The use of Restaurant-Level EBITDA thereby enables us and our
investors to compare our operating performance between periods and
to compare our operating performance to the performance of our
competitors. The measure is also widely used within the restaurant
industry to evaluate restaurant level productivity, efficiency and
performance. The use of Restaurant-Level EBITDA and Adjusted EBITDA
as performance measures permits a comparative assessment of our
operating performance relative to our performance based on our GAAP
results, while 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. Companies
within our industry exhibit significant variations with respect to
capital structures and cost of capital (which affect interest
expense and tax rates) and differences in book depreciation of
facilities and equipment (which affect relative depreciation
expense), including significant differences in the depreciable
lives of similar assets among various companies. Our management
believes that Restaurant-Level EBITDA and Adjusted EBITDA
facilitate company-to-company comparisons within our industry by
eliminating some of the foregoing variations.
Restaurant-Level EBITDA and Adjusted EBITDA are not determined
in accordance with GAAP and should not be considered in isolation
or as an alternative to net income, income from operations, net
cash provided by operating, investing or financing activities or
other financial statement data presented as indicators of financial
performance or liquidity, each as presented in accordance with
GAAP. Neither Restaurant-Level EBITDA nor Adjusted EBITDA should be
considered as a measure of discretionary cash available to us to
invest in the growth of our business. Restaurant-Level EBITDA and
Adjusted EBITDA as presented may not be comparable to other
similarly titled measures of other companies and our presentation
of Restaurant-Level EBITDA and Adjusted EBITDA should not be
construed as an inference that our future results will be
unaffected by unusual items. Our management recognizes that
Restaurant-Level EBITDA and Adjusted EBITDA have limitations as
analytical financial measures, including the following:
- Restaurant-Level EBITDA and Adjusted EBITDA do not reflect our
current capital expenditures or future requirements for capital
expenditures;
- Restaurant-Level EBITDA and Adjusted EBITDA do not reflect the
interest expense, or the cash requirements necessary to service
interest or principal payments, associated with our
indebtedness;
- Restaurant-Level EBITDA and Adjusted EBITDA do not reflect
depreciation and amortization, which are non-cash charges, although
the assets being depreciated and amortized will likely have to be
replaced in the future, nor do Restaurant-Level EBITDA and Adjusted
EBITDA reflect any cash requirements for such replacements;
- Restaurant-Level EBITDA and Adjusted EBITDA do not reflect
changes in, or cash requirements for, our working capital
needs;
- Restaurant-Level EBITDA and Adjusted EBITDA do not reflect
disposals or other non-recurring income and expenses;
- Restaurant-Level EBITDA and Adjusted EBITDA do not reflect
changes in fair value of derivative instruments;
- Restaurant-Level EBITDA and Adjusted EBITDA do not reflect
restaurant pre-opening costs; and
- Restaurant-Level EBITDA does not reflect general and
administrative expenses.
CONTACT: Investor Contact:
Craig P. Mychajluk
Kei Advisors LLC
716.843.3832
cmychajluk@keiadvisors.com
Company Contact:
David G. Burke
Chief Financial Officer
248.223.9160
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