Q2 Restaurant Sales up 27% to $1.8 Million, Driving Company's First Quarter of Positive Gross Profit
Maintains New Unit Guidance of Two Restaurant Openings in 2015, with Four New Carve Barbecue Fast-Casual Restaurants Slated for 2016
COLORADO SPRINGS, Colo., Aug. 12, 2015 (GLOBE NEWSWIRE) -- Southern Concepts Restaurant Group, Inc. (OTCQB:RIBS), an innovator of the fast casual barbecue concept, reported financial results for the second quarter ended June 30, 2015.
Second Quarter 2015 Highlights
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Restaurant sales increased 27% over the same year-ago quarter to $1.8 million, driving gross profit of $12,000 versus a loss of $35,000.
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Opened third full-service Southern Hospitality restaurant in Lone Tree, Colorado.
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Began build-out of the company's first Carve Barbecue fast casual restaurant in Glendale, Colorado.
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Received the Five Star Diamond Award from The American Academy of Hospitality Sciences for Global Excellence. The award is described as 'the most prestigious emblem of achievement and true quality in the hospitality industry worldwide,' and 'its recipients are deemed to be of pinnacle quality and global recognition.'
- Southern Hospitality Southern Kitchen voted "Best New Restaurant" by editors of the Colorado Springs Gazette.
Second Quarter 2015 Financial Results
Restaurant sales in the second quarter of 2015 increased 27% to $1.8 million compared to $1.4 million in the same year-ago period. The increase in revenue is primarily attributable to the opening of a third Southern Hospitality full-service restaurant in Lone Tree, Colorado, as well as increased same-store sales by the company's downtown Denver location. The downtown Denver location, which opened in January 2013 generated a same-store sales increase of 17% compared to the year-ago quarter.
Gross profit in the second quarter of 2015 totaled $12,000 compared to a loss of $35,000 in the year-ago period. The increase in gross profit is primarily attributable to increased scale achieved by opening the second full service Southern Hospitality location in the Denver metro area, as well as increased sales in catering and party takeout.
Operating expenses in the second quarter of 2015 increased 23% to $1.8 million compared to $1.4 million in the same year-ago period. The increase in operating expense is primarily attributable to the opening expenses related to the company's new full-service Southern Hospitality location in Lone Tree, Colorado.
Net loss in the second quarter of 2015 totaled $996,000 or ($0.02) per diluted share, compared to net loss of $860,000 or ($0.02) per diluted share in the year-ago quarter. The wider net loss is primarily due to increased operating costs associated with the development and pre-opening expenses for Southern Hospitality in Lone Tree and the development of Carve Barbecue, as well as the operating expenses associated with the two previously existing restaurants, including the cost of food, alcohol, labor and other costs of the restaurants.
Cash at June 30, 2015 was $368,000 compared to $1.1 million at December 31, 2014.
In the second quarter of 2015, the company opened one restaurant location, ending the quarter with three full-service restaurants operating in the Denver metro area.
Management Commentary
"Revenue growth in the second quarter was primarily driven by the opening of our third Southern Hospitality restaurant in Lone Tree, Colorado," said Southern Concepts CEO, Mitchell Roth. "This expansion, combined with improving our operating income at our existing locations, helped produce our first quarter of positive gross profit.
"These positive trends also reflect our ability to keep our menus fresh and appealing to our customers, along with providing exceptional customer service. We are especially proud that that these efforts were recently recognized with the Five Star Diamond Award from The American Academy of Hospitality Sciences for Global Excellence.
"Our Denver and Lone Tree stores cumulatively earned 7% as a percentage of revenue, while our Colorado Springs location has yet to turn cash flow positive. However, we believe Colorado Springs is destined to become one of our most successful restaurants because of its ideal location, with a Bass Pro Shop recently opening next door, and a new resort and water park that is currently under development nearby. This development is expected to create one of the highest trafficked intersections in Northern Colorado Springs.
"During the quarter we invested in improving one of the most profitable revenue streams for any full service restaurant, which is large take out and catering. While it resulted in increased SG&A as we invested in a stronger catering infrastructure, the system can now be used by any of our locations. We have also hired a full-time sales professional to take advantage of the new system and drive increased catering and large take-out orders.
"Our planned expansion into the fast casual category with our Carve Barbecue concept will enable us to employ a more economical labor model, as well as achieve greater economy of scale in terms of food cost and revenue per square foot. More importantly, our Carve Barbecue concept will be more scalable from a development standpoint, and reflects the tastes and healthier preferences of consumers which has generated the strong momentum within the fast casual category.
"We expect the typical Carve Barbecue fast casual location to generate approximately $1.8 million in annual revenues, with 20% store-level EBITDA margins. We see the operating model of this concept as potentially more scalable, profitable and more easily franchised.
"Carve will be different than the traditional pit barbecue restaurant – it will be "barbecue without boundaries." Its menu will reflect barbecue influences from around the country, and will set itself apart by choosing only the finest quality, all-natural meats, such as those produced by Creekstone Farms.
"In 2016, we are targeting strong growth with Carve Barbecue, with one new location opening per quarter, and are currently evaluating sites in Colorado Springs and Boulder, as well as in Phoenix and Scottsdale.
"We look forward to presenting our growth strategy at the upcoming Liolios Group Gateway Conference in San Francisco on September 9-10, where we will be meeting with a number of institutional investors and analysts."
About Southern Concepts Restaurant Group
Headquartered in Colorado Springs, Southern Concepts Restaurant Group owns and manages three full-service Southern Hospitality restaurants in the Colorado market, and has introduced Carve Barbecue, a new fast casual barbecue concept. The full-service Southern Hospitality concept was co-created by Eytan Sugarman, Justin Timberlake, and Trace Eyala in New York City's Hell's Kitchen neighborhood. To learn more, visit www.southernconcepts.com.
Important Cautions Regarding Forward-Looking Statements
The information in this news 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. These forward-looking statements involve risks and uncertainties, including statements regarding the company's business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," or "continue," the negative of such terms or other comparable terminology. Actual events or results may differ materially. The company disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Second Quarter 2015 Financial Summary Tables
The following financial information should be read in conjunction with the unaudited financial statements and accompanying notes filed by the company with the Securities and Exchange Commission on August 12, 2015 in its Quarterly Report on Form 10-Q for the period ended June 30, 2015, and which can be viewed at www.sec.gov and in the investor relations section of the company's website at www.southernconcepts.com.
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SOUTHERN CONCEPTS RESTAURANT GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS |
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| June 30, | December 31, | |
| 2015 | 2014 | |
| (Unaudited) | ||
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 368,586 | $ 1,182,099 |
| Prepaid expenses and other | 207,269 | 66,023 |
| Inventory | 93,885 | 64,091 |
| Total current assets | 669,740 | 1,312,213 |
| Deposits | 96,113 | 80,525 |
| Deferred financing costs, net | 14,185 | 28,369 |
| Related party receivable | 25,787 | 25,787 |
| Intangible asset, net | 38,125 | 40,625 |
| Property and equipment, net | 4,017,157 | 2,986,050 |
| Total assets | $ 4,861,107 | $ 4,473,569 |
| Liabilities and equity | ||
| Current liabilities: | ||
| Accounts payable | $ 161,796 | $ 91,792 |
| Accrued expenses | 326,577 | 229,539 |
| Related party notes payable and accrued interest | -- | 117,318 |
| Note payable and accrued interest | 505,000 | 218,970 |
| Convertible notes payable and accrued interest, current portion | 98,554 | 129,589 |
| Total current liabilities | 1,091,927 | 787,208 |
| Deferred rent | 320,910 | 303,070 |
| Convertible notes payable and accrued interest, less current portion, (net of $531,509 (2015) and $528,019 (2014) discount) | 967,977 | 722,439 |
| Related party note payable (net of $548,910 (2015) and $731,880 (2014) discount) | 701,089 | 520,184 |
| Total liabilities | 3,081,903 | 2,332,901 |
| Commitments and contingencies | ||
| Equity | ||
| Preferred stock - par value $0.001; | ||
| Authorized Series A shares - 4,884,859 | ||
| Issued and outstanding Series A shares - 4,884,859 (2015 and 2014) | 248,994 | 248,994 |
| Common stock - no par value; | ||
| Authorized shares - 120,000,000 | ||
| Issued and outstanding shares - 51,630,793 (2015) and 48,783,363 (2014) | 8,502,441 | 7,916,942 |
| Additional paid-in capital | 2,836,665 | 2,602,171 |
| Accumulated deficit | (10,387,559) | (8,692,743) |
| Total Southern Concepts Restaurant Group, Inc ("SCRG") equity | 1,200,541 | 2,075,364 |
| Noncontrolling interest | 578,663 | 65,304 |
| Total equity | 1,779,204 | 2,140,668 |
| Total liabilities and equity | $ 4,861,107 | $ 4,473,569 |
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SOUTHERN CONCEPTS RESTAURANT GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF LOSS (Unaudited) |
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| Three months ended | Six months ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| Revenue | $ 1,815,129 | $ 1,428,261 | $ 3,055,795 | $ 2,698,150 |
| Operating expenses: | ||||
| Restaurant operating costs, (related party $100,300 and $200,600 for three and six months ended June 30, 2015 and $99,100 and $184,500 for three and six months ended June 30, 2014) exclusive of depreciation and amortization below | 1,802,726 | 1,463,646 | 3,070,644 | 2,805,468 |
| General and administrative | 548,898 | 492,520 | 1,108,016 | 1,304,490 |
| Selling and marketing | 125,745 | 195,332 | 147,963 | 285,858 |
| Depreciation and amortization | 139,376 | 111,013 | 252,224 | 211,545 |
| Total operating expenses | 2,616,745 | 2,262,511 | 4,578,847 | 4,607,361 |
| Loss from operations | (801,616) | (834,250) | (1,523,052) | (1,909,211) |
| Other expense: | ||||
| Interest expense (related party $33,100 and $67,851 for the three and six months ended June 30,2015 and nil in 2014) | (194,548) | (26,130) | (376,037) | (52,909) |
| Net loss | $ (996,164) | $ (860,380) | $ (1,899,089) | $ (1,962,120) |
| Net loss attributable to noncontrolling interest | $ (138,789) | $ (76,415) | $ (204,273) | $ (166,553) |
| Net loss attributable to SCRG | (857,375) | (783,965) | (1,694,816) | (1,795,567) |
| Net loss | $ (996,164) | $ (860,380) | $ (1,899,089) | $ (1,962,120) |
| Basic and diluted net loss per share attributable to SCRG common shareholders | $ (0.02) | $ (0.02) | $ (0.04) | $ (0.05) |
| Weighted average number of common shares outstanding - basic and diluted | 50,436,065 | 44,634,280 | 49,718,443 | 36,992,817 |