- Second quarter revenue increased 39.8% to $14.9 million
- Operating income increased 653.8% to $1.4 million (or 9.1% of revenue)
- Net income increase to $449 thousand or 3.0% of revenue vs. -4.8% prior year
SOUTHFIELD, Mich., Aug. 10, 2011 (GLOBE NEWSWIRE) -- Diversified Restaurant Holdings, Inc. (OTCBB:DFRH) ("DRH" or the "Company"), the owner, operator, and franchisor of the unique, full-service, ultra-casual restaurant and bar Bagger Dave's Legendary Burger Tavern® ("Bagger Dave's") and a leading franchisee for Buffalo Wild Wings® ("BWW"), reports a second quarter revenue increase of $4.3 million or 39.8% to $14.9 million in 2011 from $10.7 million in 2010. The increase was due to a $3.7 million increase associated with the opening of seven new restaurants within the past 15 months. The remaining $530 thousand increase was related to a 5.1% increase in same-store sales for 16 BWW restaurants opened prior to 2010 and a 9.4% increase in same-store sales for two Bagger Dave's restaurants opened prior to 2010.
Net income attributable to DRH in the second quarter of 2011 was $449 thousand, or $0.02 per diluted share, compared to an adjusted loss of $514 thousand, or $(0.03) per diluted share, in the same period of the prior year.
David G. Burke, CFO of DRH, commented, "We are pleased to announce another successful quarter of profitable growth. We experienced strong same-store sales performance for both our Bagger Dave's and Buffalo Wild Wings concepts. In addition, we recorded great performance at our three newest stores which opened earlier this year."
Restaurant Openings
The following table outlines the restaurant unit information for the years indicated. "Total owned restaurants" reflects the number of restaurants owned and operated by DRH for each year. From the Company's inception to February 1, 2010, it managed nine existing BWW restaurants that were owned by affiliated parties. On February 1, 2010, these restaurants were acquired by the Company. "Total managed restaurants" reflects the total number of restaurants managed and/or owned by the Company. 2009 comparative results are a consolidation of owned and managed restaurants based on the accounting of an acquisition of entities under common control.
Restaurant Count
| 2011 | 2010 | 2009 | 2008 | 2007 | |
| Beginning of year | 22 | 9 | 8 | 2 | 0 |
| Acquisitions | 0 | 9 | 0 | 0 | 0 |
| Openings | 3 | 4 | 1 | 6 | 2 |
| Planned Openings | 3 | ||||
| Total owned restaurants | 28 | 22 | 9 | 8 | 2 |
| Affiliate restaurants under common control | 0 | 0 | 9 | 9 | 9 |
| Total managed restaurants | 28 | 22 | 18 | 17 | 11 |
Results of Operations
Our operating results for the three months ended June 26, 2011 and June 27, 2010 are expressed as a percentage of total revenue on the basis of comparison to prior periods.
| Three Months Ended | ||
| June 26 | June 27 | |
| 2011 | 2010 | |
| Total revenue | 100.0% | 100.0% |
| Operating expenses | ||
| Compensation costs | 28.6% | 31.8% |
| Food and beverage costs | 28.1% | 29.4% |
| General and administrative | 23.2% | 24.7% |
| Pre-opening | 0.1% | 1.0% |
| Occupancy | 5.3% | 5.4% |
| Depreciation and amortization | 5.6% | 6.0% |
| Total operating expenses | 90.9% | 98.3% |
| Operating profit | 9.1% | 1.7% |
Total revenue for Second Quarter 2011 was $14.9 million, an increase of $4.3 million or 39.8% over the $10.7 million of revenue generated during Second Quarter 2010. The increase was primarily attributable to two factors. First, approximately $3.7 million of the increase was attributable to revenues generated from the opening of three new restaurants in 2011 (one Bagger Dave's restaurant and two BWW restaurants) and revenues generated by four restaurants (one Bagger Dave's restaurant and three BWW restaurants) that opened prior to 2011 but did not meet the criteria for same-store sales for all or part of the three-month period. Second, we believe the remaining $530 thousand increase was related to a 5.1% increase in same-store sales for 16 BWW restaurants opened prior to 2010 and a 9.4% increase in same-store sales for two Bagger Dave's restaurants opened prior to 2010.
Compensation cost increased by $880 thousand or 25.9% to $4.3 million in Second Quarter 2011 from $3.4 million in Second Quarter 2010. The increase was primarily due to the addition of six restaurants. Compensation cost as a percentage of sales decreased to 28.6% in Second Quarter 2011 from 31.8% in Second Quarter 2010 primarily due to a reduction in hourly labor costs and because our proportional increase in revenue exceeded the increase of management compensation.
Food and beverage cost increased by $1.1 million or 33.7% to $4.2 million in Second Quarter 2011 from $3.1 million in Second Quarter 2010. The increase was primarily due to the addition of six restaurants. Food and beverage cost as a percentage of sales decreased to 28.1% in Second Quarter 2011 from 29.4% in Second Quarter 2010 primarily due to lower bone-in chicken wing cost, menu price increases and efficiencies in food preparation. This decrease was partially offset by increases in other food and beverage costs.
General and administrative cost increased by $821 thousand or 31.1% to $3.5 million in Second Quarter 2011 from $2.6 million in Second Quarter 2010. This increase was primarily due to the addition of six restaurants. General and administrative cost as a percentage of sales decreased to 23.2% in Second Quarter 2011 from 24.7% in Second Quarter 2010 due to cost reduction initiatives and because the proportional increase in revenue was greater than that of fixed general and administrative overhead expenses.
Pre-opening cost decreased by $97 thousand or 87.0% to $15 thousand in Second Quarter 2011 from $112 thousand in Second Quarter 2010. The difference in pre-opening cost was due to the timing and overall cost to build and open new stores during the period. The company did not have any new store openings in the Second Quarter 2011 versus one store opening in June 2010. Pre-opening cost as a percentage of sales decreased to 0.1% in Second Quarter 2011 from 1.0% in Second Quarter 2010 for the same reason.
Occupancy cost increased by $220 thousand or 38.4% to $794 thousand in Second Quarter 2011 from $574 thousand in Second Quarter 2010. This increase was primarily due to the addition of six new stores. Occupancy cost as a percentage of sales decreased to 5.3% in Second Quarter 2011 from 5.4% in Second Quarter 2010.
Depreciation and amortization cost increased by $194 thousand or 30.3% to $835 thousand in Second Quarter 2011 from $641 thousand in Second Quarter 2010. This increase was primarily due to the addition of six restaurants. Depreciation and amortization cost as a percentage of sales decreased to 5.6% in Second Quarter 2011 from 6.0% in Second Quarter 2010 primarily due to the increase in sales.
Balance Sheet and Cash Flow
Cash and cash equivalents were $2.1 million at June 26, 2011, compared with $1.4 million Dec 26, 2010.
DRH generated $3.2 million in cash from operations during the first half of 2011 compared with cash from operations of $1.6 million in the first half of the prior year. The increase in cash flow is attributed to the increase in the number of stores and efficiencies gained at existing stores.
Total capital expenditures for the year are expected to be approximately $9.1 million, of which approximately $7.2 million is for new restaurant construction, $0.6 million is for real estate, and $1.3 million is for existing store renovations.
Outlook
During the second half of 2011, DRH plans to build three additional restaurants – its 22nd Buffalo Wild Wings in University Park, Florida; its 5th Bagger Dave's in East Lansing, Michigan; and its 6th Bagger Dave's in Grand Rapids, Michigan. In addition, the Company is investing in remodels of varying degrees in up to eight existing restaurants, one of which is an expansion of its first Bagger Dave's location in Berkley, Michigan.
The Company recently hired an industry veteran in franchise development to lead the initiative to franchise its Bagger Dave's concept throughout the Midwest, more specifically Michigan, Indiana, Illinois, Ohio, Kentucky, and Wisconsin.
Michael Ansley, President and CEO of DRH, stated, "Our restaurant-level leadership plays an important role in ensuring that our guests have a positive experience. This contributes to our increase in same-store sales and customer retention. Similarly, our management team has grown to become very proficient at opening new restaurants – from construction to training new staff; we have the human resources and processes necessary to continue our rate of growth."
About Diversified Restaurant Holdings, Inc.
DRH owns and operates its own unique, full-service, ultra-casual restaurant and bar concept, Bagger Dave's Legendary Burger Tavern®, which was launched in January 2008. The concept focuses on local flair with the interior showcasing historic photos of the city in which it resides. It also features an electric train that runs above the dining room and bar areas. Bagger Dave's offers a full-service, family-friendly restaurant and bar with a casual, comfortable atmosphere. The menu features freshly-made burgers (never frozen), accompanied by more than 30 toppings from which to choose, 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®. Currently, there are four locations in the state of Michigan. DRH is approved to franchise Bagger Dave's in the states of Michigan, Indiana, Ohio, Illinois, Kentucky and Wisconsin. For more information, please visit www.baggerdaves.com.
The Company is also a leading BWW franchisee and currently operates 21 BWW restaurants (seven in Florida and 14 in Michigan). The recipient of many franchise awards, including an award for the Highest Annual Restaurant Sales, DRH remains on track to fulfill its Area Development Agreement with Buffalo Wild Wings, Inc., which requires a total of 32 BWW restaurants in Michigan and Florida by 2017. Combined with the six restaurants DRH has outside of this Area Development Agreement, the total restaurant count for the Company will be 38.
Safe Harbor Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as "expects," "estimates," "projects," "anticipates," "believes," "could," and other similar words. Forward-looking statements are based upon the current beliefs and expectations of management. All statements addressing operating performance, events, or developments that DRH expects or anticipates will occur in the future, including but not limited to franchise sales, restaurant openings, financial performance, and adverse developments with respect to litigation or increased litigation costs, the operation or performance of the Company's business units, or the market price of its common stock are forward-looking statements. Because they are forward looking, they should be evaluated in light of important risk factors and uncertainties. Actual results may vary materially from those contained in forward-looking statements based on a number of risk factors and uncertainties including, without limitation, our ability to operate in new markets, the cost of commodities, the success of our marketing and other initiatives to attract customers, customer preferences, operating costs, economic conditions, competition, the availability of financing for franchisees and the Company, and the impact of applicable regulations. These and other risk factors and uncertainties are more fully described in the Company's most recent annual and quarterly reports filed with the Securities and Exchange Commission. Undue reliance should not be placed on the Company's forward-looking statements. Except as required by law, DRH disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this press release.
|
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
||
| ASSETS |
June 26 2011 |
December 26 2010 |
| Current assets | ||
| Cash and cash equivalents | $2,108,654 | $1,358,381 |
| Accounts receivable | 12,366 | -- |
| Inventory | 403,241 | 339,059 |
| Prepaid assets | 201,331 | 209,708 |
| Other current assets | -- | 43,348 |
| Total current assets | 2,725,592 | 1,950,496 |
| Property and equipment, net - restricted assets of VIE | 1,472,882 | 1,487,993 |
| Property and equipment, net | 19,340,121 | 17,252,599 |
| Intangible assets, net | 1,043,226 | 975,461 |
| Other long-term assets | 68,809 | 80,099 |
| Deferred income taxes | 83,266 | 607,744 |
| Total assets | $24,733,896 | $22,354,392 |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||
| Current liabilities | ||
| Current portion of long-term debt (including VIE debt of $89,414) | $2,428,804 | $1,947,676 |
| Accounts payable | 719,803 | 1,388,397 |
| Accrued liabilities | 1,264,617 | 1,089,112 |
| Deferred rent | 171,208 | 127,075 |
| Total current liabilities | 4,584,432 | 4,552,260 |
| Deferred rent | 1,762,639 | 1,622,943 |
| Other liabilities - interest rate swap | 571,801 | 367,181 |
| Long-term debt, less current portion (including VIE debt of $1,184,731 and $1,229,437) | 16,695,641 | 15,936,193 |
| Total liabilities | 23,614,513 | 22,478,577 |
| Commitments and contingencies (Notes 6, 10, and 11) | ||
| Stockholders' equity (deficit) | ||
| Common stock -- $0.0001 par value; 100,000,000 shares authorized, 18,876,000 shares issued and outstanding | 1,888 | 1,888 |
| Additional paid-in capital | 2,675,266 | 2,631,304 |
| Retained earnings (accumulated deficit) | (1,932,896) | (3,096,017) |
| Total DRH stockholders' equity (deficit) | 744,258 | (462,825) |
| Noncontrolling interest in VIE | 375,125 | 338,640 |
| Total stockholders' equity (deficit) | 1,119,383 | (124,185) |
| Total liabilities and stockholders' equity | $24,733,896 | $22,354,392 |
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DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
||||
| Three Months Ended | Six Months Ended | |||
| June 26 | June 27 | June 26 | June 27 | |
| 2011 | 2010 | 2011 | 2010 | |
| Revenue | ||||
| Food and beverage sales | $14,934,687 | $10,683,821 | $30,029,303 | $21,399,699 |
| Total revenue | 14,934,687 | 10,683,821 | 30,029,303 | 21,399,699 |
| Operating expenses | ||||
| Compensation costs | 4,276,765 | 3,397,029 | 8,503,318 | 6,434,026 |
| Food and beverage costs | 4,195,695 | 3,137,948 | 8,447,327 | 6,475,210 |
| General and administrative | 3,463,699 | 2,642,782 | 6,869,754 | 5,083,677 |
| Pre-opening | 14,569 | 111,921 | 268,705 | 217,179 |
| Occupancy | 793,790 | 573,619 | 1,590,324 | 1,333,839 |
| Depreciation and amortization | 834,856 | 640,715 | 1,610,217 | 1,245,604 |
| Total Operating Expenses | 13,579,374 | 10,504,014 | 27,289,645 | 20,789,535 |
|
Operating profit |
||||
| 1,355,313 | 179,807 | 2,739,658 | 610,164 | |
| Change in fair value of derivative instruments | ||||
| Interest expense | (198,780) | (404,921) | (204,620) | (404,921) |
| Other income (expense), net | (306,624) | (518,143) | (593,434) | (687,876) |
| (11,547) | (15,658) | (40,513) | 1,563 | |
| Income (loss) before income taxes | ||||
| 838,362 | (758,915) | 1,901,091 | (481,070) | |
| Income tax benefit (provision) | ||||
| (351,497) | 244,463 | (661,485) | 121,887 | |
| Net income (loss) | ||||
| $486,865 | $(514,452) | $1,239,606 | $(359,183) | |
| Less: Net income attributable to noncontrolling interest | ||||
| (37,985) | 0 | (76,485) | 0 | |
| Net income attributable to DRH | ||||
| $448,880 | $(514,452) | $1,163,121 | $(359,183) | |
| Basic earnings per share - as reported | ||||
| Fully diluted earnings per share - as reported | $0.02 | $(0.03) | $0.06 | $(0.02) |
| $0.02 | $(0.03) | $0.06 | $(0.02) | |
| Weighted average number of common shares outstanding | ||||
| Basic | 18,876,000 | 18,876,000 | 18,876,000 | 18,873,253 |
| Diluted | 19,054,752 | 18,876,000 | 19,048,648 | 18,873,253 |
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DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
||
| Six Months Ended | ||
|
June 26 2011 |
June 26 2010 |
|
| Cash flows from operating activities | ||
| Net income (loss) | $1,239,606 | $(359,183) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||
| Depreciation and amortization | 1,610,217 | 1,245,604 |
| Loss on disposal of property and equipment | 27,043 | 217,868 |
| Share-based compensation | 43,962 | 16,156 |
| Change in fair value of derivative instruments | 204,620 | 404,921 |
| Deferred income tax (provision) benefit | 524,478 | (320,695) |
| Changes in operating assets and liabilities that provided (used) cash | ||
| Accounts receivable | (12,366) | 376,675 |
| Inventory | (64,182) | 1,784 |
| Prepaid assets | 8,377 | (8,773) |
| Other current assets | 43,348 | (16,845) |
| Intangible assets | (87,195) | (88,329) |
| Other long-term assets | 11,290 | (6,864) |
| Accounts payable | (668,594) | (198,092) |
| Accrued liabilities | 175,505 | 211,001 |
| Deferred rent | 183,829 | 106,149 |
| Net cash provided by operating activities | 3,239,938 | 1,581,377 |
| Cash flows from investing activities | ||
| Purchases of property and equipment | (3,690,241) | (2,500,490) |
| Net cash used in investing activities | (3,690,241) | (2,500,490) |
| Cash flows from financing activities | ||
| Proceeds from issuance of long-term debt | 2,308,554 | 963,065 |
| Repayments of long-term debt | (1,067,978) | (666,491) |
| Proceeds from issuance of common stock | -- | 250,000 |
| Distributions | (40,000) | (552,861) |
| Net cash provided by (used in) financing activities | 1,200,576 | (6,287) |
| Net increase (decrease) in cash and cash equivalents | 750,273 | (925,400) |
| Cash and cash equivalents, beginning of period | 1,358,381 | 1,594,362 |
| Cash and cash equivalents, end of period | $2,108,654 | $668,962 |