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Same store sales for Bagger Dave's and Buffalo Wild Wings increased 17.8% and 5.9%, respectively
- Plans to open six additional restaurants throughout remaining 2012
SOUTHFIELD, Mich., May 11, 2012 (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"), reported first quarter 2012 financial results, ending March 25, 2012.
Michael Ansley, President and Chief Executive Officer of DRH, commented, "We have experienced a very strong start to 2012 with a substantial increase in same store sales, led by our Bagger Dave's concept. By continuing to successfully execute our growth and cost efficiency efforts, we anticipate this will be a very exciting year for the Company."
First quarter revenue grew 17.6%, or $2.7 million, to $17.8 million, from $15.1 million during the first quarter of 2011. Approximately $1.8 million of the increase was attributable to revenue generated from the opening of six restaurants in 2011 (three Bagger Dave's restaurants and three BWW restaurants). The remaining $0.9 million increase was related to a 17.8% increase in same-store-sales for three Bagger Dave's restaurants and a 5.9% increase in same-store-sales for 19 BWW restaurants. The Company believes that unseasonably warm weather in Michigan was a factor contributing to increased revenues for both concepts. BWW same-store-sales also benefited from gift card redemption and increased national advertising while Bagger Dave's double-digit same-store-sales were attributable to overall customer awareness, increased customer satisfaction due to increased market penetration, and continued improvement of the overall guest experience.
Net income in the first quarter of 2012 was $646 thousand, down slightly over net income of $714 thousand in the same period the prior year due to the overall inflationary pressures in food costs driven by a significant increase in bone-in chicken wing costs, which contributed to approximately two-thirds of the 2.9% increase as a percentage of sales. Diluted earnings per share in the first quarter of 2012 also dropped slightly to $0.03 per diluted share compared with $0.04 per diluted share in the first quarter of 2011.
Operating Performance
|
(in millions) |
Three Months Ended |
|||
|
Mar. 25, 2012 |
Mar. 27, 2011 |
YOY Increase (Decrease) |
YOY Percent Change |
|
| Food, beverage, and packaging costs | $ 5.5 | $ 4.3 | $ 1.3 | 29.8% |
| % of revenue | 31.1% | 28.2% | ||
| G&A expense | $ 1.3 | $ 1.1 | $0.2 | 14.2% |
| % of revenue | 7.2% | 7.4% | ||
| Operating income | $ 1.2 | $ 1.4 | ($0.2) | (12.4)% |
| Operating margin | 6.7% | 9.0% | ||
Other operating costs were up 22.3% to $3.4 million in the first quarter from $2.8 million in the first quarter of 2011, reflecting the addition of six new stores. Other operating costs as a percentage of sales increased to 19.3% in the first quarter 2012 from 18.6% in the first quarter 2011.
Food, beverage, and packaging costs increased by $1.3 million, or 29.8%, to $5.5 million in first quarter from $4.2 million in the prior-year period, primarily due to the opening of six new restaurants coupled with an increase in commodity food prices as the result of inflation. In particular, a 50.8% increase in bone-in wing costs. The average cost per pound of bone-in-wing was $1.22 in the first quarter of 2011 compared with $1.84 in the first quarter of 2012.
David G. Burke, DRH's Chief Financial Officer, noted, "Despite continued pressure from commodity inflation, our team is actively managing costs to significantly increase margins. Our strong performance reflects the sales growth we realized from an improvement in guest count trends through accentuating value with the continued success of our offerings and execution of revenue-driving initiatives."
Balance Sheet
Cash and cash equivalents increased $0.6 million, or 39.9%, to $2.2 million at March 25, 2012, compared with $1.5 million at December 25, 2011. The Company generated $1.6 million in cash from operations in the first quarter of 2012, down $0.6 million over the prior year.
Stockholders' equity increased 46.1% to $2.2 million in the first quarter of 2012 from $1.5 million in the prior-year period, emphasizing the Company's continued commitment to growing shareholders' value.
Outlook
During the remaining part of 2012, DRH plans to increase the presence of its Bagger Dave's restaurants by opening four new restaurants, three of which are currently under construction. DRH will also open two additional Buffalo Wild Wings restaurants during the year; both are currently under construction. Although there are no mandatory renovations scheduled for fiscal year 2012, the Company is committed to maintaining its restaurants in a manner that will retain the positive dining experience guests have come to enjoy and expect.
Mr. Ansley concluded, "Over the past several years, we have been working diligently to build a stronger foundation and enhance value for our stockholders with the introduction of our Bagger Dave's concept. Our business model is constantly evolving, and we are confident we are continuing to build even stronger brand equity. Ongoing reinvestment is critical to improving long-term growth in revenue and earnings. We believe that we are only beginning to unlock the potential of all the DRH brands for our guests, franchisees, team members, and shareholders."
About Diversified Restaurant Holdings
Diversified Restaurant Holdings, Inc. ("DRH" or the "Company") is the owner, operator, and franchisor of the unique, full-service, ultra-casual restaurant concept, Bagger Dave's Legendary Burger Tavern® ("Bagger Dave's") and is a leading Buffalo Wild Wings® ("BWW") franchisee. Between the two concepts, the Company currently operates 28 restaurants in Michigan and Florida, with an additional three Bagger Dave's and two BWW restaurants currently under construction. The Company routinely posts news and other important information on its Web site 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 (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®. 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 six corporate-owned locations in the state of Michigan and an executed area development agreement to franchise six Bagger Dave's in five states outside of Michigan. Bagger Dave's first franchisee will open in June 2012 in Cape Girardeau, Missouri. DRH is approved to franchise Bagger Dave's in the states of Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio, and Wisconsin. For more information, visit www.baggerdaves.com.
DRH operates 22 BWW restaurants: 14 in Michigan and eight in Florida. The Company continues to build new BWW restaurants in fulfillment of its 32-store Area Development Agreement ("ADA") with franchisor Buffalo Wild Wings, Inc. (Nasdaq:BWLD). This agreement, in addition to the six BWW restaurants opened prior to the ADA, suggests that the Company will operate 38 BWW restaurants in Michigan and Florida by 2017.
Safe Harbor Regarding Forward Looking Statements
This news release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995, as amended. Such statements consist of words like "anticipate," "expect," "project," "continue" and similar words. These statements are based on the Company's and its subsidiaries' current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, include consumer acceptance of the Company's products, its ability to deliver new products, the success of its strategy to broaden market channels and the relationships it has with retailers and distributors. The risks associated with any investment in CHDT, which is a small business concern and a "penny-stock Company" and, as such, a highly risky investment suitable for only those who can afford to lose such investment, should be evaluated together with the risks and uncertainties more fully described in the Company's Annual and Quarterly Reports filed with the Securities and Exchange Commission. DRH undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
FINANCIAL TABLES FOLLOW
| DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||
| Three Months Ended | ||
|
March 25, 2012 |
March 27, 2011 |
|
| Revenue | ||
| Food and beverage sales | $ 17,749,818 | $ 15,094,616 |
| Franchise royalties and fees | -- | -- |
| Total revenue | 17,749,818 | 15,094,616 |
| Operating expenses | ||
| Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||
| Food, beverage, and packaging | 5,517,972 | 4,251,632 |
| Labor | 4,405,434 | 3,753,672 |
| Occupancy | 915,119 | 783,445 |
| Other operating costs | 3,422,179 | 2,797,944 |
| General and administrative expenses | 1,274,518 | 1,116,062 |
| Pre-opening costs | 47,871 | 254,136 |
| Depreciation and amortization | 973,058 | 775,361 |
| Total operating expenses | 16,556,151 | 13,732,252 |
| Operating profit | 1,193,667 | 1,362,364 |
| Change in fair value of derivative instruments | 20,689 | (5,840) |
| Interest expense | (312,541) | (286,810) |
| Other income (expense), net | 33,773 | (6,985) |
| Income before income taxes | 935,588 | 1,062,729 |
| Income tax provision | 249,390 | 309,988 |
| Net income | 686,198 | 752,741 |
| Less: Income attributable to non-controlling interest | (39,810) | (38,500) |
| Net income attributable to DRH | $ 646,388 | $ 714,241 |
| Basic earnings per share | $ 0.03 | $ 0.04 |
| Fully diluted earnings per share | $ 0.03 | $ 0.04 |
| Weighted average number of common shares outstanding | ||
| Basic | 18,941,708 | 18,876,000 |
| Diluted | 19,044,287 | 19,063,203 |
| DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||
| ASSETS |
March 25, 2012 |
December 25, 2011 |
| Current assets | ||
| Cash and cash equivalents | $ 2,150,576 | $ 1,537,497 |
| Accounts receivable - other | 8,809 | 20,497 |
| Inventory | 553,005 | 601,765 |
| Prepaid assets | 197,764 | 207,608 |
| Total current assets | 2,910,154 | 2,367,367 |
| Deferred income taxes | 88,530 | 272,332 |
| Property and equipment, net - restricted assets of VIE | 1,449,988 | 1,457,770 |
| Property and equipment, net | 21,804,707 | 22,064,544 |
| Intangible assets, net | 1,117,355 | 1,113,997 |
| Other long-term assets | 74,099 | 74,389 |
| Total assets | $ 27,444,833 | $ 27,350,399 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities | ||
| Accounts payable | $ 1,096,288 | $ 1,682,462 |
| Accrued compensation | 979,734 | 760,548 |
| Other accrued liabilities | 690,549 | 649,784 |
| Current portion of long-term debt (including VIE debt of $89,414) | 2,979,397 | 2,967,135 |
| Current portion of deferred rent | 177,387 | 180,480 |
| Total current liabilities | 5,923,355 | 6,240,409 |
| Deferred rent, less current portion | 1,712,135 | 1,750,017 |
| Other liabilities - interest rate swap | 593,310 | 613,999 |
| Long-term debt, less current portion, (including VIE debt of $1,117,670 and $1,140,025, respectively) | 16,612,084 | 16,841,355 |
| Total liabilities | 24,840,844 | 25,445,780 |
| Commitments and contingencies (Notes 9 and 10) | ||
| Stockholders' equity | ||
| Common stock -- $0.0001 par value; 100,000,000 shares authorized, 18,956,100 and 18,936,400 shares, respectively, issued and outstanding | 1,888 | 1,888 |
| Additional paid-in capital | 2,824,209 | 2,771,077 |
| Retained earnings (accumulated deficit) | (607,443) | (1,253,831) |
| Total DRH stockholders' equity | 2,218,654 | 1,519,134 |
| Non-controlling interest in VIE | 385,295 | 385,485 |
| Total stockholders' equity | 2,603,949 | 1,904,619 |
| Total liabilities and stockholders' equity | $ 27,444,833 | $ 27,350,399 |
| DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||
| Three Months Ended | ||
|
March 25, 2012 |
March 27, 2011 |
|
| Cash flows from operating activities | ||
| Net income | $ 686,198 | $ 752,741 |
| Adjustments to reconcile net income to net cash provided by operating activities | ||
| Depreciation and amortization | 973,058 | 775,361 |
| Loss on disposal of property and equipment | -- | 23,875 |
| Share-based compensation | 53,132 | 21,981 |
| Change in fair value of derivative instruments | (20,689) | 5,840 |
| Deferred income taxes | 183,802 | 277,281 |
| Changes in operating assets and liabilities that provided (used) cash | ||
| Accounts receivable - other | 11,688 | (57,307) |
| Inventory | 48,760 | (40,725) |
| Prepaid assets | 9,844 | 83,002 |
| Other current assets | -- | 43,348 |
| Intangible assets | (12,949) | (77,866) |
| Other long-term assets | 290 | 10,308 |
| Accounts payable | (586,174) | (172,399) |
| Accrued liabilities | 259,951 | 374,476 |
| Deferred rent | (40,975) | 109,697 |
| Net cash provided by operating activities | 1,565,646 | 2,129,613 |
| Cash flows from investing activities | ||
| Purchases of property and equipment | (695,848) | (2,558,994) |
| Net cash used in investing activities | (695,848) | (2,558,994) |
| Cash flows from financing activities | ||
| Proceeds from issuance of long-term debt | 440,641 | 1,740,906 |
| Repayments of long-term debt | (657,650) | (491,013) |
| Distributions | (40,000) | (40,000) |
| Net cash provided by (used in) financing activities | (257,009) | 1,209,893 |
| Net increase in cash and cash equivalents | 613,079 | 780,512 |
| Cash and cash equivalents, beginning of period | 1,537,497 | 1,358,381 |
| Cash and cash equivalents, end of period | $ 2,150,576 | $ 2,138,893 |