ProfitScout
7 years ago
Diversified Restaurant Holdings Reports Third Quarter 2017 Results
SOUTHFIELD, Mich.--(BUSINESS WIRE)-- Diversified Restaurant Holdings, Inc. (NASDAQ:SAUC) ("DRH" or the "Company"), the largest franchisee for Buffalo Wild Wings® ("BWW") with 65 stores across five states, today announced results for its third quarter ended September 24, 2017.
Third Quarter and Year-to-date Key Information (from continuing operations)
Revenue for the quarter totaled $39.3 million, down 5.7%
Same-store sales declined 4.4% and are down 2.7% for the year
Net loss was $0.5 million in the quarter; near breakeven for the year-to-date period
Restaurant-level EBITDA(1) was $6.2 million, or 15.9% of sales, and stands at $21.1 million for the year, or 17.1% of sales
Adjusted EBITDA(1) was $4.3 million for the quarter and $14.9 million for the year
Cash generated from operations totaled $3.3 million for the quarter and $9.8 million for the year
(1) See attached table for a reconciliation of GAAP net loss to Restaurant-level EBITDA and Adjusted EBITDA
Total sales during the quarter were reduced by approximately $0.6 million related to Hurricane Irma, and an additional $0.3 million as a result of deferrals recorded related to the Blazin’ Rewards loyalty program.
“While facing multiple headwinds during the quarter, we focused our efforts on operational excellence to increase efficiency and run a leaner organization,” commented David G. Burke, President and CEO. “While cost of sales increased over 200 basis points as a direct result of record high chicken wing prices, we controlled our labor and other operating expenses despite lower sales.”
Mr. Burke added, “We also had some solid wins in the quarter and are making great progress with our productivity initiatives. We continued our ‘BOGO’ traditional wing promotional test in our captive markets, which replaced the half-off promotion with a “buy one, get one” offer limited to smaller order sizes. The test continues to demonstrate improved sales and average check with lower wing costs as a percent of sales. We intend to invest more in revenue-driving initiatives in the fourth quarter in addition to our delivery and loyalty programs. We also expect to benefit from a new corporate promotional campaign that is slated to kick off in the second half of the fourth quarter.”
Third Quarter Results (from continuing operations)
(Unaudited, $ in thousands) Q3 2017 Q3 2016 Change % Change
Revenue $ 39,262.9 $ 41,625.3 $ (2,362.4 ) (5.7 )%
Operating income $ 320.5 $ 1,946.6 $ (1,626.1 ) (83.4 )%
Operating margin 0.8 % 4.7 %
Net income (loss) $ (543.2 ) $ 596.7 $ (1,139.9 ) (191.0 )%
Diluted net income (loss) per share $ (0.02 ) $ 0.02 $ (0.04 ) (200.0 )%
Same-store sales(1) (4.4 )% (1.8 )%
Restaurant-level EBITDA(2) $ 6,246.5 $ 8,112.4 $ (1,865.9 ) (23.0 )%
Restaurant-level EBITDA margin 15.9 % 19.5 %
Adjusted EBITDA(2) $ 4,322.0 $ 5,746.0 $ (1,424.0 ) (24.8 )%
Adjusted EBITDA margin 11.0 % 13.8 %
Year-to-date Results (from continuing operations)
(Unaudited, $ in thousands) YTD 2017 YTD 2016 Change % Change
Revenue $ 123,535.5 $ 125,719.7 $ (2,184.2 ) (1.7 )%
Operating income $ 3,408.4 $ 6,449.7 $ (3,041.3 ) (47.1 )%
Operating margin 2.8 % 5.1 %
Net income (loss) $ (39.0 ) $ 2,123.5 $ (2,162.5 ) (101.8 )%
Diluted net income (loss) per share $ — $ 0.08 $ (0.08 ) (100.0 )%
Same-store sales(1) (2.7 )% (2.6 )%
Restaurant-level EBITDA(2) $ 21,121.0 $ 25,547.7 $ (4,426.7 ) (17.3 )%
Restaurant-level EBITDA margin 17.1 % 20.3 %
Adjusted EBITDA(2) $ 14,934.6 $ 18,885.3 $ (3,950.7 ) (20.9 )%
Adjusted EBITDA margin 12.1 % 15.0 %
(1)
Same store sales calculations exclude related closures in September from Hurricane Irma
(2)
Please see attached table for a reconciliation of GAAP net loss to Restaurant-level EBITDA and Adjusted EBITDA
Balance Sheet Highlights - Continuing Operations
Cash and cash equivalents were $4.7 million at September 24, 2017, compared with $4.0 million at 2016 year-end. Capital expenditures were $4.5 million during the first nine months of 2017 and were primarily for one new restaurant, restaurant refreshes and remodels. Capital expenditures were $12.2 million in the first nine months of 2016. Total debt was $116.8 million at the end of the quarter, down $4.4 million for the year.
Updated Fiscal 2017 Guidance
Reducing revenue guidance to $166 million to $168 million
Targeting restaurant-level EBITDA of $28 million to $29 million
Expect adjusted EBITDA of approximately $20 million
Planned capital expenditures of approximately $5 million
Board of Directors Exploring Strategic Alternatives
DRH also announced that its Board of Directors, working together with management, is exploring strategic alternatives to enhance shareholder value. These alternatives could include, among other things, financial restructuring or a possible sale, merger or other strategic transaction. The Company is working with Duff & Phelps Securities, LLC as financial advisor to assist in this evaluation.
The Company stated that no decision has been made with regard to any alternatives and that there can be no assurance that the Board’s exploration of strategic alternatives will result in any transaction being entered into or consummated. DRH does not intend to discuss or disclose developments with respect to this process until the Board has approved a definitive course of action or otherwise concludes the review.
Webcast, Conference Call and Presentation
DRH will host a conference call and live webcast on Friday, November 3, 2017 at 10:00 A.M. Eastern Time, during which management will review the financial and operating results for the third quarter, and discuss its corporate strategies and outlook. A question-and-answer session will follow.
The teleconference can be accessed by calling (201) 389-0879. The webcast can be monitored at www.diversifiedrestaurantholdings.com. A presentation that will be referenced during the conference call is also available on the website.
A telephonic replay will be available from 1:00 P.M. ET on the day of the call through Friday, November 10, 2017. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13671718, or access the webcast replay at http://www.diversifiedrestaurantholdings.com, where a transcript will also be posted once available.
About Diversified Restaurant Holdings, Inc.
Diversified Restaurant Holdings, Inc. is the largest franchisee for Buffalo Wild Wings with 65 franchised restaurants in key markets in Florida, Illinois, Indiana, Michigan and Missouri. DRH’s strategy is to generate cash, reduce debt and leverage its strong franchise operating capabilities for future growth. The Company routinely posts news and other important information on its website at http://www.diversifiedrestaurantholdings.com.
Safe Harbor Statement
The information made available in this news release and the Company’s November 3, 2017 earnings conference call contain 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, 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 safety issues, store 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 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 FOLLOW
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended
September
24, 2017
September
25, 2016
September
24, 2017
September
25, 2016
Revenue $ 39,262,940 $ 41,625,312 $ 123,535,506 $ 125,719,745
Operating expenses
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage, and packaging costs 11,569,925 11,402,389 36,529,901 34,881,667
Compensation costs 9,991,381 10,288,623 31,125,287 31,112,586
Occupancy costs 2,969,250 2,899,508 8,701,927 8,440,075
Other operating costs 8,770,406 8,922,440 26,188,432 25,808,943
General and administrative expenses 2,301,061 2,375,476 6,724,436 6,896,819
Pre-opening costs 79,605 84,650 405,448 654,034
Depreciation and amortization 3,244,255 3,626,377 10,149,050 11,212,555
Loss on asset disposal 16,578 79,220 302,652 263,371
Total operating expenses 38,942,461 39,678,683 120,127,133 119,270,050
Operating profit 320,479 1,946,629 3,408,373 6,449,695
Interest expense (1,822,876 ) (1,439,273 ) (5,041,136 ) (4,324,765 )
Other income, net 26,000 11,849 78,307 87,856
Income (loss) from continuing operations before income taxes (1,476,397 ) 519,205 (1,554,456 ) 2,212,786
Income tax benefit (expense) of continuing operations 933,157 77,504 1,515,453 (89,304 )
Income (loss) from continuing operations (543,240 ) 596,709 $ (39,003 ) $ 2,123,482
Discontinued operations
Loss from discontinued operations before income taxes (22,960 ) (2,748,012 ) $ (155,552 ) $ (4,593,907 )
Income tax benefit of discontinued operations 7,806 762,178 58,191 1,329,278
Loss from discontinued operations (15,154 ) (1,985,834 ) (97,361 ) (3,264,629 )
Net Loss $ (558,394 ) $ (1,389,125 ) $ (136,364 ) $ (1,141,147 )
Basic earnings (loss) per share from:
Continuing operations $ (0.02 ) $ 0.02 $ — $ 0.08
Discontinued operations $ — $ (0.07 ) $ — $ (0.12 )
Basic net earnings (loss) per share $ (0.02 ) $ (0.05 ) $ — $ (0.04 )
Diluted earnings (loss) per share from:
Continuing operations $ (0.02 ) $ 0.02 $ — $ 0.08
Discontinued operations $ — $ (0.07 ) $ — $ (0.12 )
Diluted net earnings (loss) per share $ (0.02 ) $ (0.05 ) $ — $ (0.04 )
Weighted average number of common shares outstanding
Basic 26,764,776 26,625,615
26,672,057
26,434,238
Diluted 26,764,776 26,625,615
26,672,057
26,434,238
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS
September 24,
2017
(UNAUDITED)
December 25,
2016
Current assets
Cash and cash equivalents $ 4,665,491 $ 4,021,126
Accounts receivable 103,843 276,238
Inventory 1,503,617 1,700,604
Prepaid and other assets 1,171,343 1,305,936
Total current assets 7,444,294 7,303,904
Deferred income taxes 18,020,997 16,250,928
Property and equipment, net
50,684,927
56,630,031
Intangible assets, net 2,493,602 2,666,364
Goodwill 50,097,081 50,097,081
Other long-term assets
187,084
233,539
Total assets $ 128,927,985 $ 133,181,847
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 5,135,349 $ 3,995,846
Accrued compensation 1,640,664 2,803,549
Other accrued liabilities 2,544,416 2,642,269
Current portion of long-term debt 11,375,468 11,307,819
Current portion of deferred rent 471,365 194,206
Total current liabilities 21,167,262 20,943,689
Deferred rent, less current portion 2,103,398 2,020,199
Unfavorable operating leases 531,018 591,247
Other long-term liabilities 3,316,271 3,859,231
Long-term debt, less current portion 105,381,002 109,878,201
Total liabilities 132,498,951 137,292,567
Stockholders' deficit
Common stock - $0.0001 par value; 100,000,000 shares authorized; 26,848,507 and 26,632,222, respectively, issued and outstanding 2,623 2,610
Additional paid-in capital 21,624,434 21,355,270
Accumulated other comprehensive loss (795,281 ) (934,222 )
Accumulated deficit (24,402,742 ) (24,534,378 )
Total stockholders' deficit (3,570,966 ) (4,110,720 )
Total liabilities and stockholders' deficit $ 128,927,985 $ 133,181,847
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 24, 2017 September 25, 2016
Cash flows from operating activities
Net loss $ (136,364 ) $ (1,141,147 )
Net loss from discontinued operations (97,361 ) (3,264,629 )
Net income (loss) from continuing operations (39,003 ) 2,123,482
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization 10,149,050
11,212,555
Amortization of debt discount and loan fees 156,951 178,287
Amortization of gain on sale-leaseback (99,657 ) (95,878 )
Loss on asset disposals 302,652 263,371
Share-based compensation 284,100 351,377
Deferred income taxes (1,573,644 ) (100,119 )
Changes in operating assets and liabilities that provided (used) cash
Accounts receivable 172,395 (56,139 )
Inventory 196,987 135,837
Prepaid and other assets 134,593 (704,206 )
Intangible assets (28,729 ) 31,763
Other long-term assets 46,455 746,772
Accounts payable 1,228,025 (1,049,207 )
Accrued liabilities (1,270,506 ) (1,049,327 )
Deferred rent 137,342 81,177
Net cash provided by operating activities of continuing operations 9,797,011
12,069,745
Net cash used in operating activities of discontinued operations (97,361 ) (3,859,500 )
Net cash provided by operating activities 9,699,650
8,210,245
Cash flows from investing activities
Purchases of property and equipment (4,453,861 )
(12,161,596
)
Net cash used in investing activities of continuing operations (4,453,861 )
(12,161,596
)
Net cash used in investing activities of discontinued operations —
(640,655
)
Net cash used in investing activities (4,453,861 )
(12,802,251
)
Cash flows from financing activities
Proceeds from issuance of long-term debt 4,650,965 8,609,154
Repayments of long-term debt (9,237,466 ) (13,634,717 )
Proceeds from employee stock purchase plan 45,005 31,223
Tax withholdings for restricted stock units (59,928 ) (9,326 )
Net cash used in financing activities (4,601,424 ) (5,003,666 )
Net increase (decrease) in cash and cash equivalents 644,365 (9,595,672 )
Cash and cash equivalents, beginning of period 4,021,126 13,499,890
Cash and cash equivalents, end of period $ 4,665,491 $ 3,904,218
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation between Net Loss and Adjusted EBITDA and Adjusted Restaurant-Level EBITDA
Three Months Ended (Unaudited) Nine Months Ended (Unaudited)
September 24,
2017
September 25,
2016
September 24,
2017
September 25,
2016
Net Loss $ (558,394 ) $ (1,389,125 ) $ (136,364 ) $ (1,141,147 )
+ Loss from discontinued operations 15,154 1,985,834 97,361 3,264,629
+ Income tax expense (benefit) (933,157 ) (77,504 ) (1,515,453 ) 89,304
+ Interest expense 1,822,876 1,439,273 5,041,136 4,324,765
+ Other income, net (26,000 ) (11,849 ) (78,307 ) (87,856 )
+ Loss on asset disposal 16,578 79,220 302,652 263,371
+ Depreciation and amortization 3,244,255 3,626,377 10,149,050 11,212,555
EBITDA $ 3,581,312 $ 5,652,226 $ 13,860,075 $ 17,925,621
+ Pre-opening costs 79,605 84,650 405,448 654,034
+ Non-recurring expenses (Restaurant-level) 284,549 — 131,000 71,184
+ Non-recurring expenses (Corporate-level) 376,530 9,087 538,083 234,477
Adjusted EBITDA $ 4,321,996 $ 5,745,963 $ 14,934,606 $ 18,885,316
Adjusted EBITDA margin (%) 11.0 % 13.8 % 12.1 % 15.0 %
+ General and administrative 2,301,061 2,375,476 6,724,436 6,896,819
+ Non-recurring expenses (Corporate-level) (376,530 ) (9,087 ) (538,083 ) (234,477 )
Restaurant–Level EBITDA $ 6,246,527 $ 8,112,352 $ 21,120,959 $ 25,547,658
Restaurant–Level EBITDA margin (%) 15.9 % 19.5 % 17.1 % 20.3 %
Restaurant-Level EBITDA represents net income (loss) plus the sum of non-restaurant specific general and administrative expenses, restaurant pre-opening costs, loss on property and equipment disposals, depreciation and amortization, other income and expenses, interest, taxes, and non-recurring expenses. Adjusted EBITDA represents net income (loss) plus the sum of restaurant pre-opening costs, loss on property and equipment disposals, depreciation and amortization, other income and expenses, interest, taxes, and non-recurring expenses. We are presenting Restaurant-Level EBITDA and Adjusted EBITDA, which are not presented in accordance with GAAP, because we believe they provide additional metrics by which to evaluate our operations. 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 the 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 investors will find these measures useful in assessing our ability to service or incur indebtedness; and (iii) they are used 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 and restaurant pre-opening costs, which is non-recurring. 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 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 structure and cost of capital (which affect interest expense and tax rates) and differences in book depreciation of property and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Our management team 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.
http://cts.businesswire.com/ct/CT?id=bwnews&sty=20171102006774r1&sid=acqr7&distro=nx&lang=en
View source version on businesswire.com: http://www.businesswire.com/news/home/20171102006774/en/
Investors and Media:
Kei Advisors LLC
Deborah K. Pawlowski, 716-843-3908
dpawlowski@keiadvisors.com
Source: Diversified Restaurant Holdings, Inc.
ProfitScout
7 years ago
Diversified Restaurant Holdings Reports Second Quarter 2017 Results
SOUTHFIELD, Mich.--(BUSINESS WIRE)-- Diversified Restaurant Holdings, Inc. (NASDAQ:SAUC) ("DRH" or the "Company"), the largest franchisee for Buffalo Wild Wings® ("BWW") with 65 stores across five states, today announced results for its second quarter ended June 25, 2017.
Second Quarter Key Information (from continuing operations)
Revenue totaled $39.9 million, down 2.5%
Same-store sales decreased 3.67% for the quarter and are off 1.95% for the year
Restaurant-level EBITDA was $6.6 million, or 16.6% of sales(1)
Adjusted EBITDA totaled $4.6 million, or 11.6% of sales(1)
Net loss for the quarter was $0.3 million, with year-to-date net income of $0.5 million
Cash generated from operations was $2.1 million for the quarter and $6.5 million year-to-date
Total debt of $118.1 million is down $3.0 million for the year
(1) See attached table for a reconciliation of GAAP net income (loss) to Restaurant-level EBITDA and Adjusted EBITDA
“With a focus on productivity and prudent ROI-based spending decisions, we completed the bulk of our capital projects for the year and continued to generate positive free cash flow, which was used to pay down debt,” commented David G. Burke, President and CEO. “We also maintained efficient use of labor, and have decreased overhead expenses as we are on track to achieve at least $1 million in run rate savings in G&A. Additionally, we’ve implemented a number of productivity initiatives in an effort to combat inflationary input costs. These actions are targeting $3 to $4 million in annualized savings.”
Mr. Burke added, “Delivery service is now in place at 38 of our locations and continues to show strong growth without cannibalizing our carry-out business. The Half-Price Wing Tuesdays® promotion has been beneficial in driving strong traffic to our restaurants, and our ‘BOGO’ test, which replaced the half-off message with a buy one, get one offer limited to smaller order sizes, is showing promising early results. We believe actions such as these position us well for when macro headwinds subside.
“Our sales for the quarter were negatively impacted by unfavorable sports outcomes in each of our core markets, with 60 key NHL and NBA play-off games last year dropping an unprecedented level to only 20 this year. Coupled with the Easter holiday closure moving to the second quarter this year and two major road construction projects, the sales headwinds were difficult to overcome. However, adjusted for these items, we did see positive traffic, and sales momentum increased later in the quarter. We’re also contending with margin pressure driven by record high traditional chicken wing prices, which added 169 basis points to our cost of sales for the quarter,” concluded Mr. Burke.
The same-store sales decrease of 367 basis points was driven by 115 basis points from the Easter holiday shift, approximately 200 basis points from the unfavorable sports outcomes noted above and 60 basis points from significant traffic-disrupting construction in two of our locations. Geographically, the Midwest continued to perform relatively well, while the Florida market remains contracted, particularly in the coastal segments of the franchise region.
Second Quarter Results (from continuing operations)
(Unaudited, $ in thousands) Q2 2017 Q2 2016 Change % Change
Revenue $ 39,934.6 $ 40,951.2 $ (1,016.6 ) (2.5 )%
Operating income $ 721.3 $ 1,387.1 $ (665.8 ) (47.9 )%
Operating margin 1.8 % 3.4 %
Net income (loss) $ (291.3 ) $ 234.3 $ (525.6 ) (224.3 )%
Diluted net income (loss) per share $ (0.01 ) $ 0.01 $ (0.02 ) (200.0 )%
Same-store sales (3.7 )% (2.0 )%
Restaurant-level EBITDA(1) $ 6,617.7 $ 8,141.1 $ (1,523.4 ) (18.7 )%
Restaurant-level EBITDA margin 16.6 % 19.9 %
Adjusted EBITDA(1) $ 4,622.7 $ 5,955.5 $ (1,332.8 ) (22.4 )%
Adjusted EBITDA margin 11.6 % 14.5 %
Year-to-date Results (from continuing operations)
(Unaudited, $ in thousands) YTD 2017 YTD 2016 Change % Change
Revenue $ 84,272.6 $ 84,094.4 $ 178.2 0.2 %
Operating income $ 3,087.9 $ 4,503.1 $ (1,415.2 ) (31.3 )%
Operating margin 3.7 % 5.4 %
Net income $ 504.2 $ 1,526.8 $ (1,022.6 ) (67.0 )%
Diluted net income per share $ 0.02 $ 0.06 $ (0.04 ) (66.7 )%
Same-store sales (2.0 )% (2.5 )%
Restaurant-level EBITDA(1) $ 15,042.3 $ 17,435.3 $ (2,393.0 ) (13.7 )%
Restaurant-level EBITDA margin 17.8 % 20.7 %
Adjusted EBITDA(1) $ 10,780.5 $ 13,139.4 $ (2,358.9 ) (18.0 )%
Adjusted EBITDA margin 12.8 % 15.6 %
(1)Please see attached table for a reconciliation of GAAP net income to Restaurant-level EBITDA and Adjusted EBITDA
Balance Sheet Highlights - Continuing Operations
Cash and cash equivalents were $3.8 million at June 25, 2017, compared with $4.0 million at 2016 year-end. Year-to-date cash generated from continuing operations was $6.5 million, down from $8.1 million in the same period of 2016. Capital expenditures were $3.6 million during the first six months of 2017 and were primarily for one new restaurant and restaurant refreshes and remodels. Capital expenditures were $9.4 million in the first half of 2016.
Fiscal 2017 Guidance
Given the continued negative impacts to sales, combined with record high traditional wing costs, the Company revised its 2017 guidance:
Revenue of $170 million to $173 million
Restaurant-level EBITDA of $31 million to $33 million
Adjusted EBITDA between $22.5 million to $24.5 million
Capital expenditures of approximately $5 million to $6 million
Webcast, Conference Call and Presentation
DRH will host a conference call and live webcast on Friday, August 4, 2017 at 10:00 A.M. Eastern Time, during which management will review the financial and operating results for the second quarter, and discuss its corporate strategies and outlook. A question-and-answer session will follow.
The teleconference can be accessed by calling (201) 389-0879. The webcast can be monitored at www.diversifiedrestaurantholdings.com. A presentation that will be referenced during the conference call is also available on the website.
A telephonic replay will be available from 1:00 P.M. ET on the day of the call through Friday, August 11, 2017. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13665226, or access the webcast replay at http://www.diversifiedrestaurantholdings.com, where a transcript will also be posted once available.
About Diversified Restaurant Holdings, Inc.
Diversified Restaurant Holdings, Inc. is the largest franchisee for Buffalo Wild Wings with 65 franchised restaurants in key markets in Florida, Illinois, Indiana, Michigan and Missouri. DRH’s strategy is to generate cash, reduce debt and leverage its strong franchise operating capabilities for future growth. The Company routinely posts news and other important information on its website at http://www.diversifiedrestaurantholdings.com.
Safe Harbor Statement
The information made available in this news release and the Company’s August 4, 2017 earnings conference call contain 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, 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 safety issues, store 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 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 FOLLOW
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended
June 25, 2017 June 26, 2016 June 25, 2017 June 26, 2016
Revenue $ 39,934,602 $ 40,951,181 $ 84,272,566 $ 84,094,433
Operating expenses
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage, and packaging costs 11,921,549 11,419,519 24,959,976 23,479,278
Compensation costs 10,168,376 10,303,717 21,133,906 20,823,963
Occupancy costs 2,838,826 2,774,108 5,732,677 5,540,567
Other operating costs 8,388,150 8,312,756 17,418,026 16,886,503
General and administrative expenses 2,066,409 2,347,052 4,423,375 4,521,343
Pre-opening costs 294,473 445,941 325,843 569,384
Depreciation and amortization 3,271,541 3,824,076 6,904,795 7,586,178
Loss on asset disposal 264,015 136,927 286,074 184,151
Total operating expenses 39,213,339 39,564,096 81,184,672 79,591,367
Operating profit 721,263 1,387,085 3,087,894 4,503,066
Interest expense (1,642,306 ) (1,440,552 ) (3,218,260 ) (2,885,492 )
Other income, net 25,140 36,265 52,307 76,007
Income (loss) from continuing operations before income taxes (895,903 ) (17,202 ) (78,059 ) 1,693,581
Income tax benefit (expense) of continuing operations 604,560 251,546 582,296 (166,808 )
Income (loss) from continuing operations (291,343 ) 234,344 $ 504,237 $ 1,526,773
Discontinued operations
Loss from discontinued operations before income taxes (169,127 ) (422,191 ) $ (132,592 ) $ (1,845,895 )
Income tax benefit of discontinued operations 51,380 5,421 50,385 567,100
Loss from discontinued operations (117,747 ) (416,770 ) (82,207 ) (1,278,795 )
Net Income (Loss) $ (409,090 ) $ (182,426 ) $ 422,030 $ 247,978
Basic earnings (loss) per share from:
Continuing operations $ (0.01 ) $ 0.01 $ 0.02 $ 0.06
Discontinued operations $ (0.01 ) $ (0.02 ) $ — $ (0.05 )
Basic net earnings (loss) per share $ (0.02 ) $ (0.01 ) $ 0.02 $ 0.01
Diluted earnings (loss) per share from:
Continuing operations $ (0.01 ) $ 0.01 $ 0.02 $ 0.06
Discontinued operations $ (0.01 ) $ (0.02 ) $ — $ (0.05 )
Diluted net earnings (loss) per share $ (0.02 ) $ (0.01 ) $ 0.02 $ 0.01
Weighted average number of common shares outstanding
Basic 26,621,421 26,379,065 26,625,697 26,338,549
Diluted 26,621,421 26,379,065 26,625,697 26,338,549
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS June 25, 2017
(UNAUDITED) December 25, 2016
Current assets
Cash and cash equivalents $ 3,780,769 $ 4,021,126
Accounts receivable 132,962 276,238
Inventory 1,667,371 1,700,604
Prepaid and other assets 1,247,014 1,305,936
Total current assets 6,828,116 7,303,904
Deferred income taxes 17,230,959 16,250,928
Property and equipment, net 53,099,285 56,630,031
Intangible assets, net 2,538,260 2,666,364
Goodwill 50,097,081 50,097,081
Other long-term assets 192,717 233,539
Total assets $ 129,986,418 $ 133,181,847
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 3,912,160 $ 3,995,846
Accrued compensation 2,367,958 2,803,549
Other accrued liabilities 2,135,006 2,642,269
Current portion of long-term debt 12,929,400 11,307,819
Current portion of deferred rent 203,232 194,206
Total current liabilities 21,547,756 20,943,689
Deferred rent, less current portion 2,229,741 2,020,199
Unfavorable operating leases 551,094 591,247
Other long-term liabilities 3,802,789 3,859,231
Long-term debt, less current portion 105,218,920 109,878,201
Total liabilities 133,350,300 137,292,567
Stockholders' deficit
Common stock - $0.0001 par value; 100,000,000 shares authorized; 26,633,299 and 26,632,222, respectively, issued and outstanding 2,612 2,610
Additional paid-in capital 21,566,109 21,355,270
Accumulated other comprehensive loss (1,088,255 ) (934,222 )
Accumulated deficit (23,844,348 ) (24,534,378 )
Total stockholders' deficit (3,363,882 ) (4,110,720 )
Total liabilities and stockholders' deficit $ 129,986,418 $ 133,181,847
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 25, 2017 June 26, 2016
Cash flows from operating activities
Net income $ 422,030 $ 247,978
Net loss from discontinued operations (82,207 ) (1,278,795 )
Net income from continuing operations 504,237 1,526,773
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 6,904,795 7,586,179
Amortization of debt discount and loan fees 104,970 117,238
Amortization of gain on sale-leaseback (67,698 ) (78,604 )
Loss on asset disposals 286,076 184,151
Share-based compensation 181,922 187,710
Deferred income taxes (632,681 ) 298,537
Changes in operating assets and liabilities that provided (used) cash
Accounts receivable 143,276 3,843
Inventory 33,233 61,136
Prepaid and other assets 58,922 220,604
Intangible assets (8,653 ) 47,253
Other long-term assets 40,822 7,939
Accounts payable (75,913 ) (2,032,153 )
Accrued liabilities (941,964 ) (111,344 )
Deferred rent (4,448 ) 64,941
Net cash provided by operating activities of continuing operations 6,526,896 8,084,203
Net cash used in operating activities of discontinued operations (82,207 ) (2,660,649 )
Net cash provided by operating activities 6,444,689 5,423,554
Cash flows from investing activities
Purchases of property and equipment (3,571,296 ) (9,422,814 )
Net cash used in investing activities of continuing operations (3,571,296 ) (9,422,814 )
Net cash provided by investing activities of discontinued operations — (258,319 )
Net cash used in investing activities (3,571,296 ) (9,681,133 )
Cash flows from financing activities
Proceeds from issuance of long-term debt 3,215,641 7,109,154
Repayments of long-term debt (6,358,310 ) (11,134,717 )
Proceeds from employee stock purchase plan 28,919 20,782
Tax withholdings for restricted stock units — (9,326 )
Net cash used in financing activities (3,113,750 ) (4,014,107 )
Net decrease in cash and cash equivalents (240,357 ) (8,271,686 )
Cash and cash equivalents, beginning of period 4,021,126 13,499,890
Cash and cash equivalents, end of period $ 3,780,769 $ 5,228,204
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation between Net Income (Loss) and Adjusted EBITDA and Adjusted Restaurant-Level EBITDA
Three Months Ended (Unaudited) Six Months Ended (Unaudited)
June 25, 2017 June 26, 2016 June 25, 2017 June 26, 2016
Net lncome (Loss) $ (409,090 ) $ (182,426 ) $ 422,030 $ 247,978
+ Loss from discontinued operations 117,747 416,770 82,207 1,278,795
+ Income tax expense (benefit) (604,560 ) (251,546 ) (582,296 ) 166,808
+ Interest expense 1,642,306 1,440,552 3,218,260 2,885,492
+ Other income, net (25,140 ) (36,265 ) (52,307 ) (76,007 )
+ Loss on asset disposal 264,015 136,927 286,074 184,151
+ Depreciation and amortization 3,271,541 3,824,076 6,904,795 7,586,179
EBITDA $ 4,256,819 $ 5,348,088 $ 10,278,763 $ 12,273,396
+ Pre-opening costs 294,473 445,941 325,843 569,384
+ Non-recurring expenses (Restaurant-level) — — 14,300 71,184
+ Non-recurring expenses (Corporate-level) 71,457 161,436 161,554 225,390
Adjusted EBITDA $ 4,622,749 $ 5,955,465 $ 10,780,460 $ 13,139,354
Adjusted EBITDA margin (%) 11.6 % 14.5 % 12.8 % 15.6 %
+ General and administrative 2,066,409 2,347,052 4,423,375 4,521,343
+ Non-recurring expenses (Corporate-level) (71,457 ) (161,436 ) (161,554 ) (225,390 )
Restaurant–Level EBITDA $ 6,617,701 $ 8,141,081 $ 15,042,281 $ 17,435,307
Restaurant–Level EBITDA margin (%) 16.6 % 19.9 % 17.8 % 20.7 %
Restaurant-Level EBITDA represents net income (loss) plus the sum of non-restaurant specific general and administrative expenses, restaurant pre-opening costs, loss on property and equipment disposals, depreciation and amortization, other income and expenses, interest, taxes, and non-recurring expenses. Adjusted EBITDA represents net income (loss) plus the sum of restaurant pre-opening costs, loss on property and equipment disposals, depreciation and amortization, other income and expenses, interest, taxes, and non-recurring expenses. We are presenting Restaurant-Level EBITDA and Adjusted EBITDA, which are not presented in accordance with GAAP, because we believe they provide additional metrics by which to evaluate our operations. 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 the 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 investors will find these measures useful in assessing our ability to service or incur indebtedness; and (iii) they are used 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 and restaurant pre-opening costs, which is non-recurring. 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 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 structure and cost of capital (which affect interest expense and tax rates) and differences in book depreciation of property and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Our management team 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.
http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170803006543r1&sid=acqr7&distro=nx&lang=en
View source version on businesswire.com: http://www.businesswire.com/news/home/20170803006543/en/
Investors and Media:
Kei Advisors LLC
Deborah K. Pawlowski, 716-843-3908
dpawlowski@keiadvisors.com
Source: Diversified Restaurant Holdings, Inc.
ProfitScout
8 years ago
Diversified Restaurant Holdings Reports First Quarter 2017 Results
SOUTHFIELD, Mich.--(BUSINESS WIRE)-- Diversified Restaurant Holdings, Inc. (NASDAQ:SAUC) ("DRH" or the "Company"), the largest franchisee for Buffalo Wild Wings® ("BWW") with 64 stores across five states, today announced results for its first quarter ended March 26, 2017.
First Quarter Highlights (from continuing operations)
Revenue increased 2.8% to $44.3 million
Same-store sales were (0.3%)
Achieved net income of $0.8 million, or $0.03 per diluted share
Restaurant-level EBITDA of $8.4 million, or 19.0% of sales(1)
Adjusted EBITDA was $6.2 million, or 13.9% of sales(1)
Total debt, net of cash, reduced $3.0 million in the first quarter
(1) See attached table for a reconciliation of GAAP net income to Restaurant-level EBITDA and Adjusted EBITDA
“Our first quarter results were encouraging and not only validate our decision to focus solely on the BWW business, but demonstrate the strength of the franchise in the face of continued market headwinds,” commented David G. Burke, President and CEO. “Our promotional efforts, such as Half-Price Wing Tuesdays® helped to improve traffic while our delivery service continues to provide incremental sales. The Blazin' Rewards® loyalty program, which has now been rolled out to all 64 locations, continues to attract customers and drive higher tickets for those customers that actively participate in the program.”
There were two favorable calendar shifts in the quarter, Christmas and Easter, which positively impacted same-store sales 170 basis points.
Mr. Burke added, “Our core Midwest markets are performing quite well, while our Florida market remains challenged, particularly in the southern end of our franchise area. And, while restaurant-level margins were pressured during the period as a result of all-time high wing costs and promotional activity, we maintained our disciplined approach to managing costs, produced high operating margins and continue to achieve industry-leading restaurant performance.”
First Quarter Results (Unaudited)
($ in thousands) Q1 2017 Q1 2016 Change % Change
Revenue $ 44,338.0 $ 43,143.3 $ 1,194.7 2.8 %
Operating income $ 2,366.6 $ 3,116.0 $ (749.4 ) (24.0 )%
Operating margin 5.3 % 7.2 %
Net income from continuing operations $ 795.6 $ 1,292.4 $ (496.8 ) (38.4 )%
Diluted net income per share (cont. ops.) $ 0.03 $ 0.05 $ (0.02 ) (40.0 )%
Same-store sales (0.3 )% (2.2 )%
Restaurant-level EBITDA(1) $ 8,424.6 $ 9,294.2 $ (869.6 ) (9.4 )%
Restaurant-level EBITDA margin 19.0 % 21.5 %
Adjusted EBITDA(1) $ 6,157.7 $ 7,183.9 $ (1,026.2 ) (14.3 )%
Adjusted EBITDA margin 13.9 % 16.7 %
(1)Please see attached table for a reconciliation of GAAP net income to Restaurant-level EBITDA and Adjusted EBITDA
Balance Sheet Highlights - Continuing Operations
Cash and cash equivalents were $5.4 million at March 26, 2017, compared with $4.0 million at 2016 year-end. Total debt decreased $1.6 million to $119.6 million at the end of the first quarter. Capital expenditures were $1.4 million and were primarily for one restaurant under construction and restaurant refreshes and remodels. Capital expenditures were $6.4 million in the first quarter of 2016.
Fiscal 2017 Guidance
The Company expects the following in 2017:
Revenue of $173 million to $178 million
Restaurant-level EBITDA of $33 million to $36 million
Adjusted EBITDA between $23.5 million to $26.5 million
Capital expenditures of approximately $4 million to $6 million One new restaurant: currently in development and expected to open in the second quarter Two to four remodels: planned at approximately $0.6 million each
Webcast, Conference Call and Presentation
DRH will host a conference call and live webcast on Friday, May 5, 2017 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) 389-0879. The webcast can be monitored at www.diversifiedrestaurantholdings.com. A presentation that will be referenced during the conference call is also available on the website.
A telephonic replay will be available from 1:00 P.M. ET on the day of the call through Friday, May 12, 2017. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13659679, or access the webcast replay at www.diversifiedrestaurantholdings.com, where a transcript will also be posted once available.
About Diversified Restaurant Holdings, Inc.
Diversified Restaurant Holdings, Inc. is the largest franchisee for Buffalo Wild Wings Grill & Bar with
64 BWW franchised restaurants in key markets in Florida, Illinois, Indiana, Michigan and Missouri. The Company routinely posts news and other important information on its website at www.diversifiedrestaurantholdings.com.
Safe Harbor Statement
The information made available in this news release and the Company’s May 5, 2017 earnings conference call contain 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, 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, store 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 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 FOLLOW
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended
March 26, 2017 March 27, 2016
Revenue $ 44,337,964 $ 43,143,252
Operating expenses
Restaurant operating costs (exclusive of depreciation and amortization shown
separately below):
Food, beverage, and packaging costs 13,038,426 12,059,759
Compensation costs 10,965,530 10,520,246
Occupancy costs 2,893,852 2,766,459
Other operating costs 9,029,876 8,573,747
General and administrative expenses 2,356,966 2,174,291
Pre-opening costs 31,370 123,443
Depreciation and amortization 3,633,254 3,762,102
Loss on asset disposal 22,059 47,224
Total operating expenses 41,971,333 40,027,271
Operating profit 2,366,631 3,115,981
Interest expense (1,575,954 ) (1,444,940 )
Other income, net 27,167 39,742
Income from continuing operations before income taxes 817,844 1,710,783
Income tax expense (22,264 ) (418,354 )
Income from continuing operations 795,580 1,292,429
Discontinued operations
Income (loss) from discontinued operations before income taxes 36,535 (1,423,704 )
Income tax (expense) benefit of discontinued operations (995 ) 561,679
Income (loss) from discontinued operations 35,540 (862,025 )
Net Income $ 831,120 $ 430,404
Basic earnings (loss) per share from:
Continuing operations $ 0.03 $ 0.05
Discontinued operations $ — $ (0.03 )
Basic net earnings per share $ 0.03 $ 0.02
Diluted earnings (loss) per share from:
Continuing operations $ 0.03 $ 0.05
Discontinued operations $ — $ (0.03 )
Diluted net earnings per share $ 0.03 $ 0.02
Weighted average number of common shares outstanding
Basic 26,629,974 26,298,034
Diluted 26,629,974 26,298,034
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
March 26, December 25,
ASSETS 2017 (UNAUDITED) 2016
Current assets
Cash and cash equivalents $ 5,382,263 $ 4,021,126
Accounts receivable 88,456 276,238
Inventory 1,631,565 1,700,604
Prepaid and other assets 992,732 1,305,936
Total current assets 8,095,016 7,303,904
Deferred income taxes 16,410,956 16,250,928
Property and equipment, net 54,817,201 56,630,031
Intangible assets, net 2,586,563 2,666,364
Goodwill 50,097,081 50,097,081
Other long-term assets 231,455 233,539
Total assets $ 132,238,272 $ 133,181,847
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 4,121,332 $ 3,995,846
Accrued compensation 1,980,366 2,803,549
Other accrued liabilities 2,893,239 2,642,269
Current portion of long-term debt 11,313,759 11,307,819
Current portion of deferred rent 194,206 194,206
Total current liabilities 20,502,902 20,943,689
Deferred rent, less current portion 2,043,552 2,020,199
Unfavorable operating leases 571,171 591,247
Other long-term liabilities 3,570,054 3,859,231
Long-term debt, less current portion 108,263,169 109,878,201
Total liabilities 134,950,848 137,292,567
Commitments and contingencies (Notes 3, 11 and 12)
Stockholders' deficit
Common stock - $0.0001 par value; 100,000,000 shares authorized; 26,636,346 and 26,632,222,
respectively, issued and outstanding
2,611 2,610
Additional paid-in capital 21,489,849 21,355,270
Accumulated other comprehensive loss (769,778 ) (934,222 )
Accumulated deficit (23,435,258 ) (24,534,378 )
Total stockholders' deficit (2,712,576 ) (4,110,720 )
Total liabilities and stockholders' deficit $ 132,238,272 $ 133,181,847
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended
March 26, 2017 March 27, 2016
Cash flows from operating activities
Net income $ 831,120 $ 430,404
Net income (loss) from discontinued operations 35,540 (862,025 )
Net income from continuing operations 795,580 1,292,429
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 3,633,254 3,762,102
Amortization of debt discount and loan fees 52,443 50,880
Amortization of gain on sale-leaseback (34,794 ) (39,302 )
Impairment and loss on asset disposals 22,059 47,225
Share-based compensation 123,082 97,426
Deferred income taxes 23,259 317,225
Changes in operating assets and liabilities that provided (used) cash
Accounts receivable 187,782 (309,327 )
Inventory 69,039 (13,670 )
Prepaid and other assets 313,204 240,947
Intangible assets (18,915 ) 46,107
Other long-term assets 2,084 (8,792 )
Accounts payable (208,157 ) (289,041 )
Accrued liabilities (577,438 ) (942,775 )
Deferred rent 23,353 24,124
Net cash provided by operating activities of continuing operations 4,405,835 4,275,558
Net cash provided by (used in) operating activities of discontinued operations 35,540 (1,163,832 )
Net cash provided by operating activities 4,441,375 3,111,726
Cash flows from investing activities
Purchases of property and equipment (1,430,201 ) (6,405,269 )
Net cash used in investing activities of continuing operations (1,430,201 ) (6,405,269 )
Net cash used in investing activities of discontinued operations — (1,101,142 )
Net cash used in investing activities (1,430,201 ) (7,506,411 )
Cash flows from financing activities
Proceeds from issuance of long-term debt 1,217,621 3,311,231
Repayments of long-term debt (2,879,156 ) (7,500,000 )
Proceeds from employee stock purchase plan 11,498 10,707
Net cash used in financing activities (1,650,037 ) (4,178,062 )
Net increase (decrease) in cash and cash equivalents 1,361,137 (8,572,747 )
Cash and cash equivalents, beginning of period 4,021,126 13,499,890
Cash and cash equivalents, end of period $ 5,382,263 $ 4,927,143
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation between Net Income and Adjusted EBITDA and Adjusted Restaurant-Level EBITDA
Three Months Ended (Unaudited)
March 26, 2017 March 27, 2016
Net lncome $ 831,120 $ 430,404
+ (Income) loss from discontinued operations (35,540 ) 862,025
+ Income tax expense 22,264 418,355
+ Interest expense 1,575,954 1,444,940
+ Other income, net (27,167 ) (39,743 )
+ Loss on asset disposal 22,059 47,224
+ Depreciation and amortization 3,633,254 3,762,102
EBITDA $ 6,021,944 $ 6,925,307
+ Pre-opening costs 31,370 123,443
+ Non-recurring expenses (Restaurant-level) 14,300 71,184
+ Non-recurring expenses (Corporate-level) 90,097 63,954
Adjusted EBITDA $ 6,157,711 $ 7,183,888
Adjusted EBITDA margin (%) 13.9 % 16.7 %
+ General and administrative 2,356,966 2,174,291
+ Non-recurring expenses (Corporate-level) (90,097 ) (63,954 )
Restaurant–Level EBITDA $ 8,424,580 $ 9,294,225
Restaurant–Level EBITDA margin (%) 19.0 % 21.5 %
Restaurant-Level EBITDA represents net income (loss) plus the sum of non-restaurant specific general and administrative expenses, restaurant pre-opening costs, loss on property and equipment disposals, depreciation and amortization, other income and expenses, interest, taxes, and non-recurring expenses related to acquisitions, equity offerings or other non-recurring expenses. Adjusted EBITDA represents net income (loss) plus the sum of restaurant pre-opening costs, loss on property and equipment disposals, depreciation and amortization, other income and expenses, interest, taxes, and non-recurring expenses. We are presenting Restaurant-Level EBITDA and Adjusted EBITDA, which are not presented in accordance with GAAP, because we believe they provide an additional metric by which to evaluate our operations. 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 the 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 investors will find these measures useful in assessing our ability to service or incur indebtedness; and (iii) they are used 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 and restaurant pre-opening costs, which is non-recurring. 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 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 structure and cost of capital (which affect interest expense and tax rates) and differences in book depreciation of property and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Our management team 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.
http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170504006675r1&sid=acqr7&distro=nx&lang=en
View source version on businesswire.com: http://www.businesswire.com/news/home/20170504006675/en/
Investors and Media:
Kei Advisors LLC
Deborah K. Pawlowski, 716-843-3908
dpawlowski@keiadvisors.com
Source: Diversified Restaurant Holdings, Inc.
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