Del Frisco’s Restaurant Group, Inc. (“Del Frisco’s”) (NASDAQ: DFRG)
today reported financial results for the first quarter ended March
26, 2019. We also reiterated guidance for the fiscal year 2019,
which is a 53-week period ending on December 31, 2019.
Given the sale of Sullivan’s Steakhouse during
fiscal 2018, operating results for Sullivan’s Steakhouse are
included in discontinued operations for the 13 weeks ended
March 27, 2018. Numbers below for the 13 weeks ended
March 27, 2018, are therefore for continuing operations unless
otherwise stated.
Key Highlights from the 13-Week First
Quarter 2019 Compared to the 13-Week First Quarter 2018
Include:
- Consolidated revenues increased
64.1% to $120.4 million from $73.3 million due primarily to $17.4
million in contributions from Barcelona Wine Bar and $20.6 million
in contributions from bartaco.
- Total comparable restaurant sales
increased 1.3%.
- GAAP net loss of $18.3 million, or
$0.55 per diluted share, compared to GAAP net income of $0.0
million, or $0.00 per diluted share.
- Adjusted net loss* of $3.4 million,
or $0.10 per diluted share, compared to adjusted net income* of
$1.1 million, or $0.05 per diluted share.
- Adjusted EBITDA* increased 5.0% to
$7.1 million from $6.8 million. As a percentage of consolidated
revenues, adjusted EBITDA margin decreased 330 basis points to 5.9%
from 9.2%.
- GAAP operating loss of $11.8
million, compared to GAAP operating income of $0.3 million.
- Restaurant-level EBITDA* increased
57.9% to $22.7 million from $14.4 million due primarily to $3.6
million in contributions from Barcelona Wine Bar and $4.3 million
in contributions from bartaco. As a percentage of consolidated
revenues, restaurant-level EBITDA margin decreased 70 basis points
to 18.9% from 19.6%, primarily due to inefficiencies from new
restaurant openings.
* Adjusted net loss/income, adjusted EBITDA, and
restaurant-level EBITDA are non-GAAP measures. For a reconciliation
of these non-GAAP measures to GAAP net income and operating
(loss)/income, respectively, and a discussion of why we consider
them useful, see the reconciliation of non-GAAP measures
accompanying this release.
Norman Abdallah, Chief Executive Officer of Del
Frisco's, said, “We experienced a sequential improvement in
comparable sales across all four brands during the first quarter of
2019. Barcelona and bartaco delivered low and mid-single digit
growth, respectively, Del Frisco’s Grille was slightly positive,
while the Double Eagle was only modestly negative, and would also
have been positive without planned sales transfer from the Boston
Seaport restaurant to Boston Back Bay opening last summer which
impacted comparable sales by 110 basis points. The Double Eagle and
Del Frisco’s Grille both continue to capitalize on their
significant opportunities to generate private dining sales, which
grew 4.6% and 2.0%, respectively on a comparable basis. We
attribute their traction to improved banquet menu offerings,
flawless execution, and effectiveness in building relationships
with local businesses and luxury hotels through impactful marketing
campaigns.”
Abdallah continued, “Our 2018 new restaurant
openings and our latest four openings during the first quarter of
2019 are collectively off to strong starts and we are building
lasting relationships with our guests through unforgettable dining
experiences while positioning these restaurants to hit their
three-year ROIC targets of 35% to 40%. However, similar to what we
experienced in the fourth quarter last year, new restaurant
inefficiencies weighed heavily on our results at Double Eagle and
bartaco where we have seen particularly significant recent
growth.”
Abdallah added, “During the first quarter of
2019, our 21 non-comparable restaurants, representing over 25% of
our total restaurant base, had a 270 basis point impact to
restaurant-level EBITDA margins. This compared to a 290 basis point
impact from non-comparable restaurants during the fourth quarter
last year. The new restaurant inefficiencies were most notable in
the Double Eagle and bartaco, which have experienced the fastest
growth recently, with non-comparable restaurants having a 520 basis
point impact on restaurant level EBITDA in each brand. With
new restaurant margins improving from period to period as they
mature and six of our planned seven to eight new restaurants opened
thus far, we anticipate the impact of new restaurant inefficiencies
on our total restaurant-level EBITDA margins to begin moderating in
the second half of 2019.”
Abdallah concluded, “The Barcelona and bartaco
integration is nearly complete and we intend to finalize the
process ahead of the original 12-18 month timeframe. All of our
brands are now online with our new Human Resources and payroll
system and we expect to transition Barcelona Wine Bar and bartaco
to our new accounting system next month. We will begin to recognize
more of the $10 million in integration benefits, up from the
original $3 million to $5 million, in the second half of this year
when the transition of back office systems and support is complete.
The full amount will be realized by 2020 or 2021.”
Review of First Quarter 2019 Operating
Results
Consolidated revenues increased $47.1 million,
or 64.1%, to $120.4 million in the first quarter of 2019 from $73.3
million in the first quarter of 2018. All results exclude any
contributions from Sullivan’s Steakhouse, which was sold in the
third quarter of 2018, and which sale is reflected as discontinued
operations for the first quarter of 2018. The increase is due
primarily to $17.4 million in contributions from Barcelona Wine Bar
and $20.6 million in contributions from bartaco, which were
acquired on June 27, 2018.
Comparable Restaurant Sales
|
Total |
|
Double Eagle |
|
Del Frisco’s Grille |
|
Barcelona |
|
bartaco |
Comparable Restaurant Sales |
1.3 |
% |
|
(0.4 |
)% |
|
0.2 |
% |
|
3.7 |
% |
|
6.7 |
% |
Customer Counts |
(0.6 |
)% |
|
(1.5 |
)% |
|
(6.9 |
)% |
|
3.6 |
% |
|
5.5 |
% |
Average Check |
1.9 |
% |
|
1.1 |
% |
|
7.1 |
% |
|
0.1 |
% |
|
1.2 |
% |
As a percentage of consolidated revenues,
general and administrative costs increased to 13.6% from 10.6%. The
additional costs were primarily related to the addition of
Barcelona Wine Bar and bartaco, and additional compensation costs,
including stock-based compensation related to growth in the number
of restaurant support center and regional management-level
personnel to support recent and anticipated growth. Included in
this general and administrative costs total were also $0.4 million
of non-recurring legal expenses and $0.4 million of non-recurring
corporate expenses as set out in the Adjusted Net (Loss) Income
Reconciliation attached. Finally we incurred approximately $0.5
million in costs related to our annual General Managers conference
in the first quarter of 2019. We expect that full general and
administrative cost synergies from the Barteca acquisition will
only be realized beginning in the second half of 2019 as we
complete the back office integration.
GAAP net loss was $18.3 million, or $0.55 per
diluted share, in the first quarter of 2019, compared to GAAP net
income of $0.0 million, or $0.00 per diluted share, in the first
quarter of 2018.
Adjusted net loss* was $3.4 million, or $0.10
per diluted share, in the first quarter of 2019, compared to
adjusted net income* of $1.1 million, or $0.05 per diluted share in
the first quarter of 2018. Adjustments include costs totaling
$14.9 million in the first quarter of 2019 consisting of consulting
project costs of $4.5 million, lease termination and closing costs
of $2.9 million, reorganization severance costs of $0.3 million,
the aforementioned non-recurring legal and corporate expenses each
totaling $0.4 million respectively, and a change in tax benefit of
$6.4 million.
Adjusted EBITDA* increased 5.0% to $7.1 million
from $6.8 million. As a percentage of consolidated revenues,
Adjusted EBITDA margin decreased 330 basis points to 5.9% from
9.2%.
Restaurant-level EBITDA* increased $8.3 million,
or 57.9%, to $22.7 million in the first quarter of 2019, primarily
due to $3.6 million in contributions from Barcelona and $4.3
million in contributions from bartaco. As a percentage of
consolidated revenues, restaurant-level EBITDA* decreased to 18.9%
from 19.6% primarily due to inefficiencies from new restaurant
openings.
Recent Development
- A Del Frisco’s Double Eagle Steakhouse restaurant opened in
Century City, CA during the first quarter of 2019.
- A Barcelona Wine Bar opened in Charlotte, NC during the first
quarter of 2019 and in Raleigh, NC during the second quarter of
2019.
- A bartaco restaurant opened in each of Madison, WI and King of
Prussia, PA during the first quarter of 2019 and in Deerfield, IL
during the second quarter of 2019.
Fiscal Year 2019 Guidance &
Long-Term Growth Outlook
The following statements are not guarantees of
future performance, and therefore, undue reliance should not be
placed upon them. We refer you to the statement below regarding
Forward-Looking Statements and our recent filings with the SEC for
a more detailed discussion of the risks that could impact our
future operating results and financial condition.
For the 53-week fiscal year 2019, which ends on
December 31, 2019, we are providing the following outlook.
- Total comparable restaurant sales
of 0% to 1.5%.
- Seven to eight restaurant openings,
consisting of one Del Frisco’s Double Eagle Steakhouse, two to
three Barcelona Wine Bars, and three to four bartaco restaurants.
Six restaurants have already opened year-to-date.
- Restaurant-level EBITDA** of 20.0%
to 22.0% of consolidated revenues.
- General and administrative costs of
approximately $53 million to $55 million, which excludes items we
consider non-recurring in nature.
- Pre-opening expenses of $5 million
to $7 million.
- Net capital expenditures, after
tenant allowances, of $25 million to $35 million.
- Adjusted EBITDA** of $58 million to
$66 million.
** Restaurant-level EBITDA and Adjusted EBITDA
are non-GAAP measures.
By the end of fiscal year 2023, we are targeting
generation on an annual basis of at least $800 million in
consolidated revenues and $130 million in adjusted EBITDA**. To
achieve these long-term targets, we would need to satisfy the
following key annual goals:
- Consolidated revenue growth of at least 10%.
- Total comparable restaurant sales growth of 0% to 2%.
- Total net restaurant growth of 10% to 12% annually.
- Maintaining strong restaurant-level EBITDA** margins.
- General and administrative cost leverage.
- Adjusted EBITDA** growth of at least 15%.
We are also targeting net debt to
adjusted EBITDA** of approximately 3x by the end of fiscal year
2021 and 2x by the end of fiscal year 2023.
**A reconciliation of the differences between
the non-GAAP expectations and GAAP measures for adjusted EBITDA,
restaurant-level EBITDA and net debt to Adjusted EBITDA generally
is not available without unreasonable effort due to the potentially
high variability, complexity and low visibility as to the items
that would be excluded from the GAAP measure in the relevant future
period, such as unusual gains and losses, the ultimate outcome of
pending litigation, the impact and timing of potential acquisitions
and divestitures and other structural changes or their probable
significance. The variability of the excluded items may have a
significant, and potentially unpredictable, impact on our future
GAAP results.
Barteca Selected Financial
Information
Contained within this earnings press release are
unaudited selected quarterly historical financial information for
Barteca (consisting of Barcelona Wine Bar and bartaco), recast to
align with our fiscal calendar. This information is derived from
financial statements prepared by the former management of Barteca.
This unaudited selected financial information has been presented
for informational purposes only and is not necessarily indicative
of what the combined company’s results of operations actually would
have been had the Barteca Acquisition been completed as of the
dates indicated. In addition, the unaudited selected financial
information does not purport to project the future financial
position or results of operations of the combined company and does
not reflect synergies that might be achieved from the combined
operations.
Strategic Alternatives
Review
Regarding the strategic alternatives review
process announced in late December, we are limited in what we can
disclose or comment but the Board is continuing to work with Piper
Jaffray and Kirkland & Ellis in a diligent manner. No
assurances can be made with regard to the timeline for completion
of the strategic review, or whether the review will result in any
particular outcome.
Conference Call
We will host a conference call this morning at
7:00 AM Central Time to discuss our first quarter 2019 financial
results. Hosting the conference call will be Norman Abdallah, Chief
Executive Officer and Neil Thomson, Chief Financial Officer.
The conference call can be accessed live over
the phone by dialing 323-794-2597. A replay will be available
afterwards and can be accessed by dialing 412-317-6671; the
passcode is 3325005. The replay will be available until Tuesday,
May 14, 2019.
The conference call will also be webcast live
and archived on Del Frisco’s corporate website. To access the
webcast, please visit www.dfrg.com under the “Investor Relations”
tab.
About Del Frisco’s Restaurant Group,
Inc.
Based in Irving, Texas, Del Frisco's Restaurant
Group, Inc. is a collection of 78 restaurants across 17 states and
Washington, D.C., including Del Frisco's Double Eagle Steakhouse,
Del Frisco's Grille, Barcelona Wine Bar, and bartaco.
Del Frisco’s Double Eagle Steakhouse creates an
environment where our guests can celebrate life through cuisine
that is bold and innovative, our award-winning wine lists, hand
crafted specialty cocktails and superior hospitality with each
dining occasion. Del Frisco's Grille is modern, inviting, stylish,
and fun, taking the classic bar and grill to new heights, and
drawing inspiration from bold flavors and market-fresh ingredients.
Barcelona serves tapas, both simple and elegant, using the best
seasonal picks from local markets and unusual specialties from
Spain and the Mediterranean, and offers an extensive selection of
wines from Spain and South America featuring over 40 wines by the
glass. bartaco combines fresh, upscale street food and
award-winning cocktails made with artisanal spirits and
freshly-squeezed juices with a coastal vibe in a relaxed
environment.
For further information about our restaurants,
to make reservations, or to purchase gift cards, please visit:
www.DelFriscos.com, www.DelFriscosGrille.com,
www.BarcelonaWineBar.com, and www.bartaco.com. For more information
about Del Frisco's Restaurant Group, Inc., please visit
www.DFRG.com.
Forward-Looking Statements
Certain statements in this press release
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual
results, performance, or achievements of the Company to be
materially different from any future results, performance, or
achievements expressed or implied by such forward-looking
statements. Factors leading thereto may include, without
limitation, uncertainties as to the structure, terms, and timing of
any strategic transaction resulting from the strategic review and
whether it will be completed, the impact of any such strategic
transaction on Del Frisco’s, whether the strategic benefits of any
such strategic transaction can be achieved, general economic
conditions, conditions in the markets that the Company is engaged
in, behavior of customers, suppliers, and competitors, and the
legal and regulatory rules affecting Del Frisco’s. Statements
preceded by, followed by, or that otherwise include the words
“believes,” “expects,” “anticipates,” “intends,” “projects,”
“estimates,” “plans,” “may increase,” “may fluctuate,” “will,”
“should,” “would,” “may,” and “could” or similar words or
expressions are generally forward-looking in nature and not
historical facts. Any statements that refer to outlook,
expectations, or other characterizations of future events,
circumstances, or results, including all statements related to the
review of strategic alternatives for Del Frisco’s, are also
forward-looking statements. Important risks, assumptions and other
important factors that could cause future results to differ
materially from those expressed in the forward-looking statements
are specified in Del Frisco’s Annual Report on Form 10-K for the
year ended December 25, 2018 under headings such as
“Forward-Looking Statements”, “Risk Factors”, and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” and in other filings and furnishings made by the
Company with the Securities and Exchange Commission from time to
time. The Company undertakes no obligation to release publicly any
revisions to any forward-looking statements, to report events, or
to report the occurrence of unanticipated events.
DEL FRISCO'S RESTAURANT GROUP,
INC.Condensed Consolidated Statements of
(Loss) Income — Unaudited
|
|
13 Weeks Ended |
(Amounts in thousands,
except per share data) |
|
March 26, 2019 |
|
March 27, 2018 |
Revenues |
|
$ |
120,381 |
|
|
100.0 |
% |
|
$ |
73,347 |
|
|
100.0 |
% |
Costs and
expenses: |
|
|
|
|
|
|
|
|
Costs of
sales |
|
33,292 |
|
|
27.7 |
|
|
21,217 |
|
|
28.9 |
|
Restaurant
operating expenses (excluding depreciation and amortization shown
separately below) |
|
62,137 |
|
|
51.6 |
|
|
36,221 |
|
|
49.4 |
|
Marketing
and advertising costs |
|
2,252 |
|
|
1.9 |
|
|
1,531 |
|
|
2.1 |
|
Pre-opening costs |
|
2,750 |
|
|
2.3 |
|
|
1,146 |
|
|
1.6 |
|
General
and administrative costs |
|
16,373 |
|
|
13.6 |
|
|
7,792 |
|
|
10.6 |
|
Donations |
|
32 |
|
|
— |
|
|
42 |
|
|
0.1 |
|
Consulting project costs |
|
4,504 |
|
|
3.7 |
|
|
232 |
|
|
0.3 |
|
Acquisition costs |
|
— |
|
|
— |
|
|
608.0 |
|
|
0.8 |
|
Reorganization severance |
|
297 |
|
|
0.2 |
|
|
113 |
|
|
0.2 |
|
Lease
termination and closing costs |
|
2,908 |
|
|
2.4 |
|
|
2 |
|
|
— |
|
Depreciation and amortization |
|
7,651 |
|
|
6.4 |
|
|
4,135 |
|
|
5.6 |
|
Total
costs and expenses |
|
132,196 |
|
|
109.8 |
|
|
73,039 |
|
|
99.6 |
|
Operating (loss)
income |
|
(11,815 |
) |
|
(9.8 |
) |
|
308 |
|
|
0.4 |
|
Other income (expense),
net: |
|
|
|
|
|
|
|
|
Interest,
net of capitalized interest |
|
(7,720 |
) |
|
(6.4 |
) |
|
(303 |
) |
|
(0.4 |
) |
Other |
|
13 |
|
|
— |
|
|
1 |
|
|
— |
|
(Loss) income before
income taxes |
|
(19,522 |
) |
|
(16.2 |
) |
|
6 |
|
|
— |
|
Income tax (benefit)
expense |
|
(1,195 |
) |
|
(1.0 |
) |
|
1 |
|
|
— |
|
(Loss) income from
continuing operations |
|
(18,327 |
) |
|
(15.2 |
) |
|
5 |
|
|
— |
|
(Loss) income from
discontinued operations, net of tax |
|
— |
|
|
— |
|
|
395 |
|
|
0.5 |
|
Net (loss) income |
|
$ |
(18,327 |
) |
|
(15.2 |
)% |
|
$ |
400 |
|
|
0.5 |
% |
Net income (loss) per
average common share outstanding—basic |
|
|
|
|
|
|
|
|
(Loss)
income from continuing operations |
|
$ |
(0.55 |
) |
|
|
|
$ |
— |
|
|
|
(Loss)
income from discontinued operations |
|
— |
|
|
|
|
0.02 |
|
|
|
Net
(loss) income |
|
$ |
(0.55 |
) |
|
|
|
$ |
0.02 |
|
|
|
Net income (loss) per
average common share outstanding—diluted |
|
|
|
|
|
|
|
|
(Loss)
income from continuing operations |
|
$ |
(0.55 |
) |
|
|
|
$ |
— |
|
|
|
(Loss)
income from discontinued operations |
|
— |
|
|
|
|
0.02 |
|
|
|
Net
(loss) income |
|
$ |
(0.55 |
) |
|
|
|
$ |
0.02 |
|
|
|
Weighted-average number
of common shares outstanding: |
|
|
|
|
|
|
|
|
Basic: |
|
33,358 |
|
|
|
|
20,317 |
|
|
|
Diluted: |
|
33,358 |
|
|
|
|
20,603 |
|
|
|
DEL FRISCO'S RESTAURANT GROUP,
INC.Selected Consolidated Balance Sheet Data -
Unaudited
|
|
As of |
(Amounts in
thousands) |
|
March 26, 2019 |
|
December 25, 2018 |
Cash and cash
equivalents |
|
$ |
4,651 |
|
|
$ |
8,535 |
|
Total assets |
|
870,777 |
|
|
726,032 |
|
Long-term debt |
|
336,140 |
|
|
320,736 |
|
Total stockholders'
equity |
|
204,316 |
|
|
213,582 |
|
DEL FRISCO'S RESTAURANT GROUP,
INC.Segment Information - Unaudited
|
13 Weeks Ended March 26, 2019 |
(Amounts in
thousands) |
Double Eagle |
|
Barcelona |
|
bartaco |
|
Grille |
Revenues |
$ |
49,975 |
|
|
100.0 |
% |
|
$ |
17,437 |
|
|
100.0 |
% |
|
$ |
20,637 |
|
|
100.0 |
% |
|
$ |
32,332 |
|
|
100.0 |
% |
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
14,895 |
|
|
29.8 |
|
|
4,770 |
|
|
27.4 |
|
|
4,764 |
|
|
23.1 |
|
|
8,863 |
|
|
27.4 |
|
Restaurant operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labor |
13,377 |
|
|
26.8 |
|
|
5,485 |
|
|
31.5 |
|
|
6,985 |
|
|
33.8 |
|
|
10,350 |
|
|
32.0 |
|
Operating
expenses |
5,887 |
|
|
11.8 |
|
|
2,440 |
|
|
14.0 |
|
|
3,085 |
|
|
14.9 |
|
|
4,598 |
|
|
14.2 |
|
Occupancy |
4,042 |
|
|
8.1 |
|
|
1,052 |
|
|
6.0 |
|
|
1,358 |
|
|
6.6 |
|
|
3,478 |
|
|
10.8 |
|
Restaurant operating expenses |
23,306 |
|
|
46.6 |
|
|
8,977 |
|
|
51.5 |
|
|
11,428 |
|
|
55.4 |
|
|
18,426 |
|
|
57.0 |
|
Marketing
and advertising costs |
1,362 |
|
|
2.7 |
|
|
116 |
|
|
0.7 |
|
|
105 |
|
|
0.5 |
|
|
669 |
|
|
2.1 |
|
Restaurant-level
EBITDA |
$ |
10,412 |
|
|
20.8 |
% |
|
$ |
3,574 |
|
|
20.5 |
% |
|
$ |
4,340 |
|
|
21.0 |
% |
|
$ |
4,374 |
|
|
13.5 |
% |
Restaurant operating
weeks |
209 |
|
|
|
|
217 |
|
|
|
|
244 |
|
|
|
|
312 |
|
|
|
Average weekly
volume |
$ |
239 |
|
|
|
|
$ |
80 |
|
|
|
|
$ |
85 |
|
|
|
|
$ |
104 |
|
|
|
|
13 Weeks Ended March 27, 2018 |
(Amounts in
thousands) |
Double Eagle |
|
Barcelona |
|
bartaco |
|
Grille |
Revenues |
$ |
43,955 |
|
|
100.0 |
% |
|
$ |
— |
|
|
— |
% |
|
$ |
— |
|
|
— |
% |
|
$ |
29,392 |
|
|
100.0 |
% |
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
13,168 |
|
|
30.0 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
8,049 |
|
|
27.4 |
|
Restaurant operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labor |
10,367 |
|
|
23.6 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
9,813 |
|
|
33.4 |
|
Operating
expenses |
4,870 |
|
|
11.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,171 |
|
|
14.2 |
|
Occupancy |
3,608 |
|
|
8.2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,392 |
|
|
11.5 |
|
Restaurant operating expenses |
18,845 |
|
|
42.9 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
17,376 |
|
|
59.1 |
|
Marketing
and advertising costs |
896 |
|
|
2.0 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
635 |
|
|
2.2 |
|
Restaurant-level
EBITDA |
$ |
11,046 |
|
|
25.1 |
% |
|
$ |
— |
|
|
— |
% |
|
$ |
— |
|
|
— |
% |
|
$ |
3,332 |
|
|
11.3 |
% |
Restaurant operating
weeks |
169 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
314 |
|
|
|
Average weekly
volume |
$ |
260 |
|
|
|
|
$ |
— |
|
|
|
|
$ |
— |
|
|
|
|
$ |
94 |
|
|
|
Non-GAAP Measures
We prepare our consolidated financial statements
in accordance with generally accepted accounting principles (GAAP).
Within our press release, we make reference to non-GAAP adjusted
net income, adjusted net (loss) income per share, adjusted EBIDTA
and restaurant-level EBITDA. Adjusted net (loss) income represents
GAAP net loss plus the sum of GAAP income tax expense (benefit),
lease termination and closing costs, consulting project costs,
acquisition costs, reorganization severance, non-recurring legal
expenses, donations, non-recurring corporate expenses, and
discontinued operations minus income tax expense at an effective
tax rate of 69% during 2019, and 4% during 2018. We believe
that this non-GAAP operating measure represents a useful measure of
performance internally and for investors as it excludes certain
non-operating related expenditures. Adjusted EBIDTA is calculated
by adding back to operating income, pre-opening costs, donations,
consulting project costs, acquisition costs, non-recurring legal
costs, reorganization severance, lease termination and closing
costs, and depreciation and amortization. Restaurant-level EBITDA
is calculated by adding back to adjusted EBIDTA general and
administrative expenses. We believe that these operating
measures also represent useful internal measures of performance.
Restaurant-level EBITDA margin represents restaurant-level EBITDA
as a percentage of our revenues. Adjusted net (loss) income per
share represents income from continuing operations excluding the
impact of certain adjustments such as the amortization of
intangible assets, acquisition-related transaction and integration
costs, goodwill impairments, gains and losses on divestitures and
any other items specifically identified herein, divided by the
Company’s weighted average diluted shares outstanding. We believe
that this measure represents a useful measure of performance
internally and for investors.
Accordingly, we include these non-GAAP measures
so that investors have the same financial data that management uses
in evaluating performance, and we believe that it will assist the
investment community in assessing our underlying performance on a
quarter-over-quarter basis. However, because these measures
are not determined in accordance with GAAP, such measures are
susceptible to varying calculations and not all companies calculate
these measures in the same manner. As a result, these measures
as presented may not be directly comparable to similarly titled
measures presented by other companies. These non-GAAP measures are
presented as supplemental information and not as alternatives to
any GAAP measurements. The following tables include a
reconciliation of net income to adjusted net income and operating
income to restaurant-level EBITDA.
DEL FRISCO'S RESTAURANT GROUP,
INC.Adjusted Net (Loss) Income Reconciliation -
Unaudited
|
13 Weeks Ended |
(Amounts in thousands,
except per share data) |
March 26, 2019 |
|
March 27, 2018 |
Adjusted Net
Income: |
|
|
|
GAAP Net
loss |
$ |
(18,327 |
) |
|
$ |
400 |
|
GAAP
Income tax (benefit) expense |
(1,195 |
) |
|
1 |
|
Lease
termination and closing costs |
2,908 |
|
|
2 |
|
Consulting project costs |
4,504 |
|
|
232 |
|
Acquisition costs |
— |
|
|
608 |
|
Reorganization severance |
297 |
|
|
113 |
|
Non-recurring legal expenses |
378 |
|
|
159 |
|
Donations |
32 |
|
|
42 |
|
Non-recurring corporate expenses |
386 |
|
|
8 |
|
Discontinued operations |
— |
|
|
(395 |
) |
Adjusted
Pre-tax (loss) income |
(11,017 |
) |
|
1,170 |
|
Income
tax (benefit) expense |
(7,602 |
) |
|
47 |
|
Adjusted
net (loss) income |
$ |
(3,415 |
) |
|
$ |
1,123 |
|
Adjusted
net (loss) income per basic share |
$ |
(0.10 |
) |
|
$ |
0.06 |
|
Adjusted
net (loss) income per diluted share |
$ |
(0.10 |
) |
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
DEL FRISCO'S RESTAURANT GROUP,
INC.Adjusted EBITDA Reconciliation -
Unaudited
|
13 Weeks Ended |
(Amounts in
thousands) |
March 26, 2019 |
|
March 27, 2018 |
Operating loss |
$ |
(11,815 |
) |
|
$ |
308 |
|
Add: |
|
|
|
Pre-opening costs |
2,750 |
|
|
1,146 |
|
Donations |
32 |
|
|
42 |
|
Lease
termination and closing costs |
2,908 |
|
|
2 |
|
Depreciation and amortization |
7,651 |
|
|
4,135 |
|
Acquisition costs |
— |
|
|
608 |
|
Consulting project costs |
4,504 |
|
|
232 |
|
Non-recurring legal expenses |
378 |
|
|
159 |
|
Reorganization severance |
297 |
|
|
113 |
|
Adjusted EBITDA |
$ |
7,091 |
|
|
$ |
6,753 |
|
Adjusted EBITDA
margin |
5.9 |
% |
|
9.2 |
% |
|
|
|
|
|
|
DEL FRISCO'S RESTAURANT GROUP,
INC.Restaurant-Level EBITDA Reconciliation -
Unaudited
|
13 Weeks Ended |
(Amounts in
thousands) |
March 26, 2019 |
|
March 27, 2018 |
Operating income
loss |
$ |
(11,815 |
) |
|
$ |
308 |
|
Add: |
|
|
|
Pre-opening costs |
2,750 |
|
|
1,146 |
|
General
and administrative costs |
16,373 |
|
|
7,792 |
|
Donations |
32 |
|
|
42 |
|
Consulting project costs |
4,504 |
|
|
232 |
|
Acquisition costs |
— |
|
|
608 |
|
Reorganization severance |
297 |
|
|
113 |
|
Lease
termination and closing costs |
2,908 |
|
|
2 |
|
Depreciation and amortization |
7,651 |
|
|
4,135 |
|
Restaurant-level
EBITDA |
$ |
22,700 |
|
|
$ |
14,378 |
|
|
|
|
|
|
|
|
|
Recast 2018 Financial
Information
The unaudited combined adjusted financial
information for the 13 weeks ended March 27, 2018 in the following
tables represent information derived from financial statements
prepared by the former management of Barteca ("Barcelona and
bartaco Brands"), recast to align with our fiscal calendar, and
historical recast financial information of Del Frisco's Heritage
Brands, which represent Double Eagle and Grille, prior to the
Barteca Acquisition. This unaudited combined adjusted financial
information has been presented for informational purposes only and
is not necessarily indicative of what the combined company’s
results of operations actually would have been had the Barteca
Acquisition been completed as of the dates indicated. In
addition, the unaudited combined adjusted financial information
does not purport to project the future financial position or
results of operations of the combined company and do not reflect
synergies that might be achieved from the combined operations.
Adjusted net income, adjusted net (loss) income
per share, adjusted pre-tax income, adjusted EBITDA and
restaurant-level EBITDA are non-GAAP measures. See the
discussion above under "Non-GAAP Measures" regarding how we define
these measures and why we believe they are useful for
investors.
DEL FRISCO'S RESTAURANT GROUP,
INC.Statements of Income Information -
Unaudited
|
13 Weeks Ended |
(Amounts in thousands,
except per share data) |
March 26, 2019 |
|
March 27, 2018(1) |
Revenues |
$ |
120,381 |
|
|
100.0 |
% |
|
$ |
104,340 |
|
|
100.0 |
% |
Costs and
expenses: |
|
|
|
|
|
|
|
Costs of
sales |
33,292 |
|
|
27.7 |
|
|
28,861 |
|
|
27.7 |
|
Restaurant
operating expenses (excluding depreciation and amortization shown
separately below) |
62,137 |
|
|
51.6 |
|
|
51,674 |
|
|
49.5 |
|
Marketing
and advertising costs |
2,252 |
|
|
1.9 |
|
|
1,725 |
|
|
1.7 |
|
Pre-opening costs |
2,750 |
|
|
2.3 |
|
|
1,411 |
|
|
1.4 |
|
General
and administrative costs |
16,373 |
|
|
13.6 |
|
|
11,259 |
|
|
10.8 |
|
Donations |
32 |
|
|
— |
|
|
42 |
|
|
— |
|
Consulting project costs |
4,504 |
|
|
3.7 |
|
|
232 |
|
|
0.2 |
|
Acquisition costs |
— |
|
|
— |
|
|
608 |
|
|
0.6 |
|
Reorganization severance |
297 |
|
|
0.2 |
|
|
113 |
|
|
0.1 |
|
Lease
termination and closing costs |
2,908 |
|
|
2.4 |
|
|
2 |
|
|
— |
|
Depreciation and amortization |
7,651 |
|
|
6.4 |
|
|
5,824 |
|
|
5.6 |
|
Total
costs and expenses |
132,196 |
|
|
109.8 |
|
|
101,751 |
|
|
97.5 |
|
Operating loss |
(11,815 |
) |
|
(9.8 |
) |
|
2,589 |
|
|
2.5 |
|
Other income (expense),
net: |
|
|
|
|
|
|
|
Interest,
net of capitalized interest |
(7,720 |
) |
|
(6.4 |
) |
|
(2,553 |
) |
|
(2.4 |
) |
Other |
13 |
|
|
— |
|
|
1 |
|
|
— |
|
Loss before income
taxes |
(19,522 |
) |
|
(16.2 |
) |
|
37 |
|
|
— |
|
Income tax (benefit)
expense |
(1,195 |
) |
|
(1.0 |
) |
|
73 |
|
|
0.1 |
|
Loss from continuing
operations |
(18,327 |
) |
|
(15.2 |
) |
|
(35 |
) |
|
— |
|
Loss from discontinued
operations, net of tax |
— |
|
|
— |
|
|
395 |
|
|
0.4 |
|
Net loss |
$ |
(18,327 |
) |
|
(15.2 |
)% |
|
$ |
360 |
|
|
0.3 |
% |
Net loss per average
common share outstanding—basic |
|
|
|
|
|
|
|
Loss from
continuing operations |
$ |
(0.55 |
) |
|
|
|
$ |
— |
|
|
|
Loss from
discontinued operations |
— |
|
|
|
|
0.02 |
|
|
|
Net
income loss |
$ |
(0.55 |
) |
|
|
|
$ |
0.02 |
|
|
|
Basic |
33,358 |
|
|
|
|
20,317 |
|
|
|
(1) Recast amounts for the 13 weeks ended March
27, 2018 include historical amounts for Barcelona and bartaco
Brands, which were acquired during the third quarter of 2018, prior
to acquisition.
DEL FRISCO'S RESTAURANT GROUP,
INC.Segment Information - Unaudited
|
13 Weeks Ended March 26, 2019 |
(Amounts in
thousands) |
Double Eagle |
|
Barcelona |
|
bartaco |
|
Grille |
Revenues |
$ |
49,975 |
|
|
100.0 |
% |
|
$ |
17,437 |
|
|
100.0 |
% |
|
$ |
20,637 |
|
|
100.0 |
% |
|
$ |
32,332 |
|
|
100.0 |
% |
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
14,895 |
|
|
29.8 |
|
|
4,770 |
|
|
27.4 |
|
|
4,764 |
|
|
23.1 |
|
|
8,863 |
|
|
27.4 |
|
Restaurant operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labor |
13,377 |
|
|
26.8 |
|
|
5,485 |
|
|
31.5 |
|
|
6,985 |
|
|
33.8 |
|
|
10,350 |
|
|
32.0 |
|
Operating
expenses |
5,887 |
|
|
11.8 |
|
|
2,440 |
|
|
14.0 |
|
|
3,085 |
|
|
14.9 |
|
|
4,598 |
|
|
14.2 |
|
Occupancy |
4,042 |
|
|
8.1 |
|
|
1,052 |
|
|
6.0 |
|
|
1,358 |
|
|
6.6 |
|
|
3,478 |
|
|
10.8 |
|
Restaurant operating expenses |
23,306 |
|
|
46.6 |
|
|
8,977 |
|
|
51.5 |
|
|
11,428 |
|
|
55.4 |
|
|
18,426 |
|
|
57.0 |
|
Marketing
and advertising costs |
1,362 |
|
|
2.7 |
|
|
116 |
|
|
0.7 |
|
|
105 |
|
|
0.5 |
|
|
669 |
|
|
2.1 |
|
Restaurant-level
EBITDA |
$ |
10,412 |
|
|
20.8 |
% |
|
$ |
3,574 |
|
|
20.5 |
% |
|
$ |
4,340 |
|
|
21.0 |
% |
|
$ |
4,374 |
|
|
13.5 |
% |
Restaurant operating
weeks |
209 |
|
|
|
|
217 |
|
|
|
|
244 |
|
|
|
|
312 |
|
|
|
Average weekly
volume |
$ |
239 |
|
|
|
|
$ |
80 |
|
|
|
|
$ |
85 |
|
|
|
|
$ |
104 |
|
|
|
(1) Recast amounts for the 13 weeks ended March
27, 2018 include historical amounts for Barcelona and bartaco
Brands, which were acquired during the third quarter of 2018, prior
to acquisition.
|
13 Weeks Ended March 27, 2018(1) |
(Amounts in
thousands) |
Double Eagle |
|
Barcelona |
|
bartaco |
|
Grille |
Revenues |
$ |
43,954 |
|
|
100.0 |
% |
|
$ |
15,004 |
|
|
100.0 |
% |
|
$ |
15,990 |
|
|
100.0 |
% |
|
$ |
29,392 |
|
|
100.0 |
% |
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales |
13,168 |
|
|
30.0 |
|
|
4,061 |
|
|
27.1 |
|
|
3,584 |
|
|
22.4 |
|
|
8,049 |
|
|
27.4 |
|
Restaurant operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labor |
10,367 |
|
|
23.6 |
|
|
4,741 |
|
|
31.6 |
|
|
5,242 |
|
|
32.8 |
|
|
9,813 |
|
|
33.4 |
|
Operating
expenses |
4,870 |
|
|
11.1 |
|
|
1,959 |
|
|
13.1 |
|
|
1,981 |
|
|
12.4 |
|
|
4,171 |
|
|
14.2 |
|
Occupancy |
3,608 |
|
|
8.2 |
|
|
798 |
|
|
5.3 |
|
|
733 |
|
|
4.6 |
|
|
3,392 |
|
|
11.5 |
|
Restaurant operating expenses |
18,845 |
|
|
42.9 |
|
|
7,498 |
|
|
50.0 |
|
|
7,955 |
|
|
49.8 |
|
|
17,376 |
|
|
59.1 |
|
Marketing
and advertising costs |
895 |
|
|
2.0 |
|
|
92 |
|
|
0.6 |
|
|
102 |
|
|
0.6 |
|
|
635 |
|
|
2.2 |
|
Restaurant-level
EBITDA |
$ |
11,046 |
|
|
25.1 |
% |
|
$ |
3,353 |
|
|
22.3 |
% |
|
$ |
4,349 |
|
|
27.2 |
% |
|
$ |
3,332 |
|
|
11.3 |
% |
Insurance settlement
(Barteca) pre acquisition(2) |
|
|
|
|
(188 |
) |
|
|
|
(401 |
) |
|
|
|
|
|
|
Adjusted
Restaurant-level EBITDA |
$ |
11,046 |
|
|
25.1 |
% |
|
$ |
3,165 |
|
|
21.1 |
% |
|
$ |
3,948 |
|
|
24.7 |
% |
|
$ |
3,332 |
|
|
11.3 |
% |
Restaurant operating
weeks |
169 |
|
|
|
|
197 |
|
|
|
|
199 |
|
|
|
|
314 |
|
|
|
Average weekly
volume |
$ |
260 |
|
|
|
|
$ |
76 |
|
|
|
|
$ |
80 |
|
|
|
|
$ |
94.0 |
|
|
|
(1) Recast amounts for the 13 weeks ended March
27, 2018 include historical amounts for Barcelona and bartaco
Brands, which were acquired during the third quarter of 2018, prior
to acquisition.(2) Prior to the Barteca Acquisition, starting in Q4
of 2017 and continuing through the first half of 2018, Barteca
management recognized insurance settlement proceeds from a
location-specific incident as a reduction to restaurant operating
expenses, which therefore increased restaurant-level EBITDA margins
by the amount of those proceeds for that period of time. Under US
GAAP rules, the Company recognizes insurance settlement proceeds
from business interruptions as a separate line item below other
operating activity in its Consolidated Statements of Operations
and, therefore, such proceeds are not included within
restaurant-level EBITDA as calculated by the
Company. Accordingly, consistent with the Company’s accounting
policy, 2017 insurance settlement proceeds have been adjusted out
of restaurant operating expenses and restaurant-level EBITDA as
originally factored in by Barteca management prior to the Barteca
Acquisition.
DEL FRISCO'S RESTAURANT GROUP,
INC.Adjusted Net Income Reconciliation -
Unaudited
|
13 Weeks Ended |
(Amounts in thousands,
except per share data) |
March 26, 2019 |
|
March 27, 2018(1) |
Adjusted Net
Income: |
|
|
|
Net
loss |
$ |
(18,327 |
) |
|
$ |
360 |
|
Income
tax (benefit) expense |
(1,195 |
) |
|
73 |
|
Lease
termination and closing costs |
2,908 |
|
|
2 |
|
Consulting project costs |
4,504 |
|
|
232 |
|
Acquisition costs |
— |
|
|
608 |
|
Reorganization severance |
297 |
|
|
113 |
|
Non-recurring legal expenses |
378 |
|
|
159 |
|
Non-recurring corporate expenses |
386 |
|
|
8 |
|
Donations |
32 |
|
|
42 |
|
Discontinued operations |
— |
|
|
(395 |
) |
Adjusted
pre-tax (loss) income |
(11,017 |
) |
|
1,202 |
|
Income
tax (benefit) expense |
(7,602 |
) |
|
48 |
|
Adjusted
net (loss) income |
$ |
(3,415 |
) |
|
$ |
1,154 |
|
Adjusted net (loss) income per basic share |
$ |
(0.10 |
) |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
(1) Recast amounts for the 13 weeks ended March
27, 2018 include historical amounts for Barcelona and bartaco
Brands, which were acquired during the third quarter of 2018, prior
to acquisition.
DEL FRISCO'S RESTAURANT GROUP,
INC.Adjusted EBITDA Reconciliation -
Unaudited
|
13 Weeks Ended |
(Amounts in
thousands) |
March 26, 2019 |
|
March 27, 2018(1) |
Operating loss |
$ |
(11,815 |
) |
|
$ |
2,589 |
|
Add: |
|
|
|
Pre-opening costs |
2,750 |
|
|
1,411 |
|
Donations |
32 |
|
|
42 |
|
Lease
termination and closing costs |
2,908 |
|
|
2 |
|
Depreciation and amortization |
7,651 |
|
|
5,824 |
|
Acquisition costs |
— |
|
|
608 |
|
Consulting project costs |
4,504 |
|
|
232 |
|
Non-recurring corporate expenses |
386 |
|
|
8 |
|
Non-recurring legal expenses |
378 |
|
|
159 |
|
Reorganization severance |
297 |
|
|
113 |
|
Adjusted EBITDA |
$ |
7,091 |
|
|
$ |
10,988 |
|
Insurance settlement
(Barteca) pre acquisition(2) |
— |
|
|
(589 |
) |
Adjusted EBITDA |
$ |
7,091 |
|
|
$ |
10,399 |
|
Adjusted EBITDA
margin |
5.9 |
% |
|
10.0 |
% |
|
|
|
|
|
|
(1) Recast amounts for the 13 weeks ended March
27, 2018 include historical amounts for Barcelona and bartaco
Brands, which were acquired during the third quarter of 2018, prior
to acquisition.(2) Prior to the Barteca Acquisition, starting in Q4
of 2017 and continuing through the first half of 2018, Barteca
management recognized insurance settlement proceeds from a
location-specific incident as a reduction to restaurant operating
expenses, which therefore increased restaurant-level EBITDA margins
by the amount of those proceeds for that period of time. Under US
GAAP rules, the Company recognizes insurance settlement proceeds
from business interruptions as a separate line item below other
operating activity in its Consolidated Statements of Operations
and, therefore, such proceeds are not included within
restaurant-level EBITDA as calculated by the
Company. Accordingly, consistent with the Company’s accounting
policy, 2017 insurance settlement proceeds have been adjusted out
of restaurant operating expenses and restaurant-level EBITDA as
originally factored in by Barteca management prior to the Barteca
Acquisition.
DEL FRISCO'S RESTAURANT GROUP,
INC.Restaurant-Level EBITDA Reconciliation -
Unaudited
|
13 Weeks Ended |
(Amounts in
thousands) |
March 26, 2019 |
|
March 27, 2018(1) |
Operating income |
$ |
(11,815 |
) |
|
$ |
2,589 |
|
Add: |
|
|
|
Pre-opening costs |
2,750 |
|
|
1,411 |
|
General
and administrative costs |
16,373 |
|
|
11,259 |
|
Donations |
32 |
|
|
42 |
|
Consulting project costs |
4,504 |
|
|
232 |
|
Acquisition costs |
— |
|
|
608 |
|
Reorganization severance |
297 |
|
|
113 |
|
Lease
termination and closing costs |
2,908 |
|
|
2 |
|
Depreciation and amortization |
7,651 |
|
|
5,824 |
|
Restaurant-level
EBITDA |
$ |
22,700 |
|
|
$ |
22,080 |
|
Insurance settlement
(Barteca) pre acquisition(2) |
|
|
$ |
(589 |
) |
Adjusted
Restaurant-level EBITDA |
$ |
22,700 |
|
|
$ |
21,491 |
|
|
|
|
|
|
|
|
|
(1) Recast amounts for the 13 weeks ended March
27, 2018 include historical amounts for Barcelona and bartaco
Brands, which were acquired during the third quarter of 2018, prior
to acquisition.(2) Prior to the Barteca Acquisition, starting in Q4
of 2017 and continuing through the first half of 2018, Barteca
management recognized insurance settlement proceeds from a
location-specific incident as a reduction to restaurant operating
expenses, which therefore increased restaurant-level EBITDA margins
by the amount of those proceeds for that period of time. Under US
GAAP rules, the Company recognizes insurance settlement proceeds
from business interruptions as a separate line item below other
operating activity in its Consolidated Statements of Operations
and, therefore, such proceeds are not included within
restaurant-level EBITDA as calculated by the
Company. Accordingly, consistent with the Company’s accounting
policy, 2017 insurance settlement proceeds have been adjusted out
of restaurant operating expenses and restaurant-level EBITDA as
originally factored in by Barteca management prior to the Barteca
Acquisition.
Investor Relations Contact: Raphael Gross 203-682-8253
investorrelations@dfrg.com Media Relations Contact: Alecia
Pulman 203-682-8200 DFRGPR@icrinc.com
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