SOUTHFIELD, Mich., Nov. 7, 2012 // GLOBE NEWSWIRE // - Diversified Restaurant Holdings, Inc. (OTCQB: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 the largest franchisee for Buffalo Wild Wings® ("BWW"), reported third quarter 2012 financial results, which ended September 23, 2012.
Third quarter 2012 revenue was $16.8 million, an increase of $2.2 million, or 15.4%, over the $14.6 million generated during third quarter of 2011. Approximately $1.3 million of the increase was attributable to revenue generated from newer locations that did not meet the criteria for being included in same-store-sales reporting. This included three Bagger Dave's that opened since the first quarter of 2011 and revenue from one BWW restaurant that opened during the fourth quarter of 2011. The remaining
$1.0 million increase was related to same-store-sales growth of 3.4% for Bagger Dave's and 7.5% for BWW.
T. Michael Ansley, President and Chief Executive Officer of DRH, commented, "Our commitment in creating a guest-centric culture continues to drive our success in attracting loyal customers and delivering solid financial results. Our management team is dedicated to developing top-performing restaurant teams who meet our high standards and are equally dedicated to delighting our guests to ensure our restaurants are the ultra-casual dining destination of choice."
Food, beverage, and packaging costs increased by $0.9 million, or 21.8%, to $5.2 million in the third quarter of 2012 from the prior-year period, primarily due to the opening of four new restaurants since the end of the 2011 second quarter, as well as the carry-over impact of increased commodity food prices. The average cost per pound for bone-in chicken wings was $1.97 in third quarter of 2012 compared with $1.16 in the third quarter of 2011
The addition of four new restaurants and the preparation of opening seven new locations in the fourth quarter drove higher labor costs, which increased 15.1% to $4.2 million in third quarter of 2012 from $3.6 million in third quarter of 2011. However, as a percentage of sales, labor costs improved slightly to 24.8% in third quarter of 2012 from 24.9% in the prior-year period.
Third quarter general and administrative expenses of $1.6 million increased by $0.4 million, or 37.6%, from $1.2 million in the third quarter of 2011. This increase was due to the hiring of personnel necessary to support the Company's rapid expansion. General and administrative expenses as a percentage of revenue increased to 9.5% in 2012 third quarter from 8.0% in the same period the prior year.
The Company was in the construction phase of seven additional restaurants during the third quarter of 2012 compared with no new stores opened or under construction in the third quarter of 2011. As a result, year-over-year pre-opening costs increased by $146 thousand to $281 thousand in third quarter.
Net income attributable to DRH for the third quarter of 2012 was $241 thousand, or $0.01 per diluted share, compared with net income of $151 thousand, or $0.01 per diluted share, in the same period of the prior year.
Total revenue for the nine months ended September 23, 2012 was $51.3 million, an increase of $6.7 million, or 15.0%, compared with $44.6 million generated during the same period in 2011, which ended September 25, 2011. Approximately $4.1 million of the increase was attributable to revenue generated from newer locations that did not meet the criteria for same-store-sales reporting. The remaining $2.6 million increase was related to same-store sales growth of 9.4% for three Bagger Dave's restaurants and 6.7% for 19 BWW restaurants meeting same-store-sales criteria.
For the first nine months of 2012, net income attributable to DRH was $0.8 million, or $0.04 per diluted share, compared with net income of $1.3 million, or $0.07 per diluted share, for the first nine months of 2011.
Cash flow from operations for the first nine months of 2012 was $5.7 million compared with $5.5 million for the same period last fiscal year.
Cash and cash equivalents substantially increased by approximately $1.5 million, or 99.7%, to $3.1 million at September 23, 2012, compared with the 2011 year-end balance.
Total DRH Stockholders' equity increased 46.7% to $2.2 million in the third quarter of 2012 from $1.5 million at the end of 2011.
On September 25, 2012, the Company entered into a senior secured credit facility with RBS, N.A., consisting of a five-year, $37.0 million term loan, a $10.0 million development line of credit and a $1.0 million revolving line of credit. The term loan was primarily used to refinance existing outstanding debt and $14.7 million went towards the recent acquisition of eight Buffalo Wild Wings restaurants (with rights to develop another restaurant in Indiana). DRH intends to fund up to 30% of all construction and start-up costs for future restaurants using the $10.0 million development line of credit. The Company believes that cash flow from operations and the development line will be sufficient to meet its operational funding, development, and obligations for the foreseeable future.
Total capital expenditures for fiscal year 2012 are expected to be approximately $10.0 million, the majority of which is for new construction. Approximately $0.4 million is for upgrading existing stores. Through the first nine months of 2012, capital expenditures were $7.2 compared with $6.1 for the comparable period in 2011. DRH has three planned restaurant openings for the remainder of 2012, which include BWW restaurants in Detroit, Michigan and Ybor City, Florida and one Bagger Dave's restaurant in Indianapolis, Indiana, bringing the Company's restaurant total to 45 by year's end.
On September 25, 2012, the Company completed an acquisition of eight Buffalo Wild Wings restaurants, with four operating in Illinois and four in Indiana, along with the right to develop a fifth Indiana location. This transaction expands the scope of the Company's operations, adds a number of new markets to the existing footprint, and strategically positions DRH for future expansion throughout the Midwest. Long term, the Company is looking to leverage these markets by expanding the Bagger Dave's concept within the same footprint.
Mr. Ansley concluded, "Our near-term focus will be to integrate the acquired restaurants and implement our processes and systems in an effort to realize the opportunities to improve its operating and financial performance. We are also going to continue with our aggressive expansion strategy. With the collective strength of our brands, the expertise and experience within the Company, and our cost-management initiatives, we believe we can achieve solid revenue and same-store-sales growth, successfully navigate commodity cost volatility and industry cycles, and produce consistently superior value for our guests and shareholders."
The Company will continue its growth in 2013 with rapid expansion of Bagger Dave's in both Michigan and Indiana. Current targeted locations in Indiana are: Avon, Westfield, Fishers, Greenwood, and Fort Wayne. Current targeted locations in Michigan are: Grand Rapids and Detroit. This is in addition to the already solidified, new Buffalo Wild Wings locations scheduled to open in Lapeer, Michigan, Sault Saint Marie, Michigan, and Hammond, Indiana.
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 the largest Buffalo Wild Wings® ("BWW") franchisee. Between the two concepts, the Company currently operates 41 restaurants in Michigan, Florida, Illinois, and Indiana, with an additional Bagger Dave's and two additional BWW restaurants scheduled to open in 2012. Including these locations, and one franchised Bagger Dave's in Missouri, the Company expects to have 45 restaurants by year's end. The Company routinely posts news and other important information on its website at www.diversifiedrestaurantholdings.com.
Bagger Dave's offers a full-service, family-friendly restaurant and bar with a casual, comfortable atmosphere. The menu features freshly-made burgers (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 ten corporate-owned locations in the state of Michigan and one franchised location in Missouri. The Company has an executed area development agreement to franchise five additional Bagger Dave's in five states outside of Michigan. 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 31 BWW restaurants: 14 in Michigan, nine in Florida, four in Illinois and four in Indiana. The Company has opened 17 new BWW restaurants in fulfillment of its 32-store Area Development Agreement ("ADA") with franchisor Buffalo Wild Wings, Inc. (Nasdaq:BWLD). The remaining 15 restaurants under the ADA agreement, along with an additional franchise agreement in Indiana, suggest that the Company will operate 47 BWW's by 2017.
The information made available in this news release contains forward-looking statements which reflect DRH's current view of future events, results of operations, cash flows, performance, business prospects and opportunities. Wherever used, the words "anticipate," "believe," "expect," "intend," "plan," "project," "will continue," "will likely result," "may," and similar expressions identify forward-looking statements as such term is defined in the Securities Exchange Act of 1934. Any such forward-looking statements are subject to risks and uncertainties and the Company's actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities could differ materially from historical results or current expectations. Some of these risks include, without limitation, the impact of economic and industry conditions, competition, food and drug safety issues, 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 our business or industry and other risks detailed from time to time in the Securities and Exchange Commission filings of DRH. Forward-looking statements contained herein speak only as of the date made and, thus, DRH undertakes no obligation to update or publicly announce the revision of any of the forward-looking statements contained herein to reflect new information, future events, developments or changed circumstances or for any other reason.
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Investor
Deborah K. Pawlowski
Kei Advisors LLC
716.843.3908
716.843.3874
dpawlowski@keiadvisors.com
Company
David Burke
Chief Financial Officer
248.223.9160
SOURCE Diversified Restaurant Holdings, Inc.
Diversified Restaurant Holdings, Inc. owns and operates Bagger Dave's Burger Tavern, a full-service, family-friendly restaurant and full bar.