SOUTHFIELD, Mich. (Restaurant News Release) 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”), today announced financial results for its third quarter 2010, which ended September 26, 2010.
Revenue for the third quarter of 2010 was $11.4 million, 129% above prior year third quarter revenue of $5.0 million on a non-GAAP basis. Third quarter 2010 revenue included food and beverage sales for 18 BWW and three Bagger Dave’s locations while the non-GAAP measure for the 2009 quarter included sales from seven BWW and two Bagger Dave’s locations as well as management fees for nine BWW restaurants which were acquired by the Company in the first quarter of this year. On a GAAP basis, which includes results of the nine restaurants under common control, our third quarter revenue for 2010 was 9% above prior year revenue of $10.5 million, which included sales from 16 BWW and two Bagger Dave’s restaurants.
Net income for the 2010 third quarter was $200 thousand compared with net income in last year’s third quarter of $174 thousand (on a non-GAAP basis) and $183 thousand (on a GAAP basis), a 15% and 9% improvement, respectively, as DRH continued to reinvest operational cash in new restaurant development.
On a GAAP basis, operating cash flow for the first nine months of 2010 was $2.9 million, or 9% of revenue.
Michael Ansley, President and Chief Executive Officer of DRH, commented, “Our revenue for the quarter improved measurably and is a result of our February 1, 2010 acquisition of nine Buffalo Wild Wings restaurants coupled with the opening of three additional locations in 2010. We are currently realizing the benefits of our nineteenth Buffalo Wild Wings restaurant, which opened in Fort Myers, Florida on November 7, 2010. We look forward to opening our fourth Bagger Dave’s restaurant, along with our twentieth and twenty-first Buffalo Wild Wings restaurants, in the first quarter of 2011. The Company is also evaluating additional restaurant openings during 2011 which will enable us to maintain our aggressive growth strategy.”
Note regarding GAAP v. Non-GAAP Financial Measures
On February 1, 2010, the Company completed an acquisition of nine BWW restaurants that were previously under common control (the “Affiliates Acquisition”). Under Generally Accepted Accounting Principles (“GAAP”), the Affiliates Acquisition was reported as if the transaction had occurred at the beginning of the Company’s 2010 fiscal year. Financial results of the Company’s existing operations were combined, or “pooled”, with the results of the acquired affiliates and reported accordingly. Consistent with GAAP, comparative financial information for prior years was also combined for reporting purposes. Prior to the Affiliates Acquisition, and for a period dating back to 2006, the Company received a fee to manage the acquired affiliates and reported its financial results without regard to “pooling” treatment. Given this historical financial reporting practice, the Company believes a presentation of comparative financial information on both a “pooled” (GAAP) and “unpooled” (non-GAAP) basis provides meaningful financial measures for its shareholders.
About Diversified Restaurant Holdings
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. 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®. There’s also an electric train that runs above the dining room and bar areas. All current and future locations will be smoke-free. Currently, there are three locations in the State of Michigan, with the fourth scheduled to open in the first quarter of 2011. DRH has filed for rights, and has been approved, to franchise Bagger Dave’s in the States of Michigan, Indiana, Ohio, and Illinois. For more information, please visit www.baggerdaves.com.
The Company is also a leading BWW franchisee and currently operates 19 BWW restaurants (six in Florida and 13 in Michigan) with the 20th and 21st scheduled to open in the first quarter of 2011. DRH is also the recipient of many franchise awards, including an award for the Highest Annual Restaurant Sales.
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.