- This is the Company's fourth consecutive year of increased revenue
- Opened a total of four new restaurants in 2010 (three Buffalo Wild Wings and one Bagger Dave's Legendary Burger Tavern)
- Acquired nine affiliated Buffalo Wild Wings restaurants
- 2010 operating cash flow of $4.6M is up 16.5% vs. prior year
SOUTHFIELD, Mich., April 14, 2011 (GLOBE NEWSWIRE) -- Diversified Restaurant Holdings, Inc. (OTCBB:DFRH) ("DRH" or the "Company"), the owner, operator, and franchisor of the unique, full-service, ultra-casual restaurant and bar Bagger Dave's Legendary Burger Tavern® ("Bagger Dave's") and a leading franchisee for Buffalo Wild Wings® ("BWW"), announced today financial results for its 2010 year, which ended on December 26, 2010.
Revenue for its 2010 year was $45.2 million, 8.4% above prior year revenue of $41.8 million. 2010 revenue included food and beverage sales for 22 restaurants, four of which were opened during the second to fourth quarter of 2010, while 2009 revenue included revenue from 18 restaurants, which included only one new restaurant opened in June of 2009. On a non-GAAP basis, 2010 revenue of approximately $43.1 million was 126% above its 2009 revenue of $19.1 million. 2010 non-GAAP basis revenue included food and beverage sales for 22 restaurants, four of which were opened during the year and nine of which were acquired by the Company from affiliated parties on February 1, 2010. The non-GAAP basis revenue for 2009 included sales from nine Company-owned restaurants as well as management fees for, but not the revenue of, the nine affiliated BWW restaurants that were later acquired.
Net income for 2010 was $535,035, down 55.2% vs. prior year's net income of $1,194,238. This was primarily due to $654,764 of new restaurant development expenses (pre-opening costs) that were necessary to open seven new restaurants, four of which opened in 2010 and three of which opened in February of 2011.
Operating cash flow for 2010 was $4.6 million, 16.5% above prior year operating cash flow of $3.9 million.
Michael Ansley, President and Chief Executive Officer, commented, "2010 was a very successful year for our Company. With the acquisition of nine restaurants, opening of four new restaurants, and development of three which opened in early 2011, we continue to prove our ability to increase our top line and generate the cash needed to help with the continued expansion of both our Bagger Dave's and BWW concepts. Despite adverse economic conditions, we were confident to push forward with our growth plan based on our belief in the brands, our choice of current locations, and our opportunity to take advantage of a favorable real estate market for new locations. We believe that this, coupled with an experienced leadership team and the ability to utilize our expanding base of dedicated employees to grow organically, is the success factor necessary to sustain our profitable growth plan."
GAAP v. Non-GAAP Financial Measures
On February 1, 2010, the Company completed an acquisition of nine BWW restaurants (the "Affiliates Acquisition") that were previously under common control. Under the Generally Accepted Accounting Principles ("GAAP"), the Affiliates Acquisition was reported as if the transaction had occurred at the beginning of the Company's 2010 year. Financial results of the Company's existing operations were combined, or "pooled", with the results of the acquired affiliates and reported accordingly. In order to comply with GAAP, comparative financial information for prior years was also combined for reporting purposes. Prior to the Affiliates Acquisition, and for a period that dates as far back as 2006, the Company received a fee to manage these nine commonly-controlled restaurants and, accordingly, reported the management fee in the financial results without regard to a "pooling" treatment. Given this historical financial reporting practice, the Company believes a presentation of the comparative financial information on both a "pooled" (GAAP) and "unpooled" (non-GAAP) basis provides meaningful financial measures for shareholders.
2010 Operating Results
On a GAAP basis, the 2010 operating expenses increased 10.0%, primarily as a result of the additional locations opened during the year. Further explanations for fluctuations in the percentage of total revenue are detailed below as comparisons of the year ended December 27, 2009 to the year ended December 26, 2010.
Compensation costs increased 15.9% primarily due to the addition of staff needed for four new restaurants that opened in 2010. As a percentage of revenue, compensation costs increased from 27.5% to 29.4%. This increase, as a percentage of revenue, is primarily attributed to labor inefficiencies and training associated with new restaurant openings.
Food and beverage costs increased 2.4%. As a percentage of revenue, food and beverage costs decreased from 31.2% to 29.5%. The decrease in our food and beverage cost, as a percentage of revenue, is primarily a result of the decrease in fresh, bone-in chicken wing prices.
General and administrative costs increased by 11.8%. As a percentage of revenue, general and administrative costs increased from 23.4% to 24.1%, primarily due to an increase in overall advertising, higher repair and maintenance charges, and loan termination fees (a result of the new credit facility). These increases were offset by economies of scale recognized for professional services and restaurant-specific supplies. In addition, as a result of a tax cost segregation study, we were able to ultimately decrease personal property taxes due to the allocation of certain capital assets into lower tax brackets.
Pre-opening costs increased by 264.2% due to more restaurants undergoing a construction phase in 2010. As a percentage of revenue, pre-opening costs increased from 0.3% to 1.1% for the same reason.
Occupancy costs increased 0.8% primarily due to the additional rents assumed with the new restaurant locations. As a percentage of revenue, occupancy costs decreased from 7.0% to 6.5% primarily due to negotiated rent reductions in locations where such opportunities existed.
Depreciation and amortization costs increased by 13.3%. As a percentage of revenue, depreciation and amortization costs increased from 5.7% to 5.9%. This was a result of depreciable equipment being put into service for a total of four new restaurants in 2010.
In February 2011, DRH opened three new restaurants – a BWW in Traverse City, Michigan and Lakeland, Florida and a Bagger Dave's in Brighton, Michigan. We plan to open two Bagger Dave's restaurants in Michigan and one BWW in Florida in the second half of 2011. In addition to the continued development of its own restaurants, the Company, through investment and given the recent strategic hire of a franchise development veteran, plans to franchise its Bagger Dave's concept in Michigan, Ohio, Indiana, Illinois, Wisconsin and Kentucky.
Mr. Ansley concluded, "We've made great strides in the continued development of our own concept, Bagger Dave's, in addition to Buffalo Wild Wings. Now, with the recent hire of Bill McClintock, Senior Vice President of Franchise Development, who spent a decade with Buffalo Wild Wings as its Vice President of Sales and Development and most recently headed up the same position within McAlister's Deli, we're very well positioned and excited to create another revenue stream for continued growth."
About Diversified Restaurant Holdings, Inc.
DRH owns and operates its own unique, full-service, ultra-casual restaurant and bar concept, Bagger Dave's Legendary Burger Tavern®, which was launched in January 2008. The concept focuses on local flair with the interior showcasing historic photos of the city in which it resides. It also features an electric train that runs above the dining room and bar areas. Bagger Dave's offers a full-service, family-friendly restaurant and bar with a casual, comfortable atmosphere. The menu features freshly-made burgers (never frozen), accompanied by more than 30 toppings from which to choose, fresh-cut fries, hand-dipped milkshakes, and a selection of craft beer and wine. Signature items include Sloppy Dave's BBQ®, Train Wreck Burger®, and Bagger Dave's Amazingly Delicious Turkey Black Bean Chili®. Currently, there are four locations in the state of Michigan. DRH is approved to franchise Bagger Dave's in the states of Michigan, Indiana, Ohio, and Illinois and plans to file for rights to franchise in the states of Wisconsin and Kentucky. For more information, please visit www.baggerdaves.com .
The Company is also a leading BWW franchisee and currently operates 21 BWW restaurants (seven in Florida and 14 in Michigan). The recipient of many franchise awards, including an award for the Highest Annual Restaurant Sales, DRH remains on track to fulfill its Area Development Agreement with Buffalo Wild Wings, Inc., which requires a total of 32 BWW restaurants in Michigan and Florida by 2017. Combined with the six restaurants DRH has outside of this Area Development Agreement, the total restaurant count for the Company will be 38.
Safe Harbor Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as "expects," "estimates," "projects," "anticipates," "believes," "could," and other similar words. Forward-looking statements are based upon the current beliefs and expectations of management. All statements addressing operating performance, events, or developments that DRH expects or anticipates will occur in the future, including but not limited to franchise sales, restaurant openings, financial performance, and adverse developments with respect to litigation or increased litigation costs, the operation or performance of the Company's business units, or the market price of its common stock are forward-looking statements. Because they are forward looking, they should be evaluated in light of important risk factors and uncertainties. Actual results may vary materially from those contained in forward-looking statements based on a number of risk factors and uncertainties including, without limitation, our ability to operate in new markets, the cost of commodities, the success of our marketing and other initiatives to attract customers, customer preferences, operating costs, economic conditions, competition, the availability of financing for franchisees and the Company, and the impact of applicable regulations. These and other risk factors and uncertainties are more fully described in the Company's most recent annual and quarterly reports filed with the Securities and Exchange Commission. Undue reliance should not be placed on the Company's forward-looking statements. Except as required by law, DRH disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this press release.
|DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|December 26||December 27|
|Food and beverage sales||$ 45,248,018||$ 41,754,515|
|Food and beverage costs||13,340,619||13,029,103|
|General and administrative||10,738,464||9,728,455|
|Depreciation and amortization||2,679,133||2,363,748|
|Total operating expenses||43,664,827||39,691,027|
|Other income, net||28,317||259,413|
|Income before income taxes||409,209||1,544,289|
|Income tax provision||125,826||(350,051)|
|Net income||$ 535,035||$ 1,194,238|
|Basic earnings per share - as reported||$ 0.03||$ 0.07|
|Fully diluted earnings per share - as restated||$ 0.02||$ 0.04|
|Weighted average number of common shares outstanding|
|DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES|
|CONSOLIDATED BALANCE SHEETS|
|Cash and cash equivalents||$ 1,305,031||$ 1,594,362|
|Accounts receivable - related party||--||376,675|
|Other current assets||43,348||42,382|
|Total current assets||1,897,146||2,473,422|
|Property and equipment, net||17,252,599||11,655,513|
|Intangible assets, net||975,461||789,279|
|Other long-term assets||63,539||11,780|
|Deferred income taxes||607,744||246,754|
|LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY|
|Current portion of long-term debt||1,858,262||2,443,057|
|Total current liabilities||4,462,846||3,749,916|
|Related party payable||--||430,351|
|Other liabilities - interest rate swap||367,181||213,604|
|Long-term debt, less current portion||14,706,756||6,517,041|
|Commitments and contingencies|
|Stockholders' (deficit) equity|
|Common stock -- $0.0001 par value; 100,000,000 shares authorized, 18,876,000 and 18,626,000 shares, respectively, issued and outstanding||1,888||1,863|
|Additional paid-in capital||2,631,304||2,356,155|
|Retained earnings (accumulated deficit)||(2,728,836)||423,780|
|Comprehensive (loss) income||(367,181)||--|
|Total stockholders' (deficit) equity||(462,826)||2,781,798|
|Total liabilities and stockholders' equity||$ 20,796,489||$ 15,176,748|
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