OREANDA-NEWS. Del Frisco’s Restaurant Group, Inc. (NASDAQ:DFRG), the owner and operator of the Del Frisco’s Double Eagle Steak House, Sullivan’s Steakhouse, and Del Frisco’s Grille restaurant concepts, reported financial results today for the second quarter ended June 14, 2016.  We also reiterated our outlook for fiscal year 2016.

Key highlights from the second quarter 2016 compared to the second quarter 2015 include:

  • Consolidated revenues increased 8.3% to $79.9 million from $73.8 million.
  • Revenues at Del Frisco’s Grille increased 27.6% to $24.4 million from $19.1 million.
  • Total comparable restaurant sales decreased 0.7%.
  • Comparable restaurant sales decreased 1.9% at Del Frisco’s Double Eagle Steak House comprised of a 0.7% decrease in average check and 1.2% decrease in customer counts.
  • Comparable restaurant sales increased 2.9% at Sullivan’s Steakhouse comprised of a 1.1% increase in average check and 1.8% increase in customer counts. 
  • Comparable restaurant sales decreased 2.0% at Del Frisco’s Grille comprised of a 1.7% decrease in average check and 0.3% decrease in customer counts.
  • Cost of sales, as a percentage of consolidated revenues, improved to 28.3% from 28.8%.
  • Net Income of $4.4 million, or $0.19 per diluted share, compared to Net Income of $3.7 million, or $0.16 per diluted share.
  • Restaurant-level EBITDA*, a non-GAAP measure, increased 3.8% to $17.1 million from $16.5 million.
   
*  Restaurant-level EBITDA is a non-GAAP measure. For a reconciliation of restaurant-level EBITDA to the most directly comparable financial measure presented in accordance with GAAP and a discussion of why we consider it useful, see the financial information accompanying this release.
   

Mark S. Mednansky, Chief Executive Officer of Del Frisco's Restaurant Group, Inc., said, “We grew diluted EPS approximately 20% during the second quarter, which was in line with our expectations, and based upon our year-to-date results, we’re tracking to our annual earnings guidance range.  The slightly negative comparable restaurant sales overall can partially be attributed to continued energy-related industry challenges, affecting some restaurants, and a reduction in foreign tourism activity affecting several prominent restaurants, although we will begin to cycle over the oil-industry slowdown in the latter half of 2016.  Combined guest counts and sales were positive at the beginning and end of the quarter with soft traffic and sales in May.  Sullivan’s exhibited solid performance while Del Frisco’s Grille messaging as an everyday affordable, upscale dining and drinking destination resonated particularly well during the lunch daypart, where comparable lunch sales rose more than 6%.”

Mednansky concluded, “We continue to work on our initiatives to improve traffic and EBITDA flow-thru during this transitional year to deliver stronger operating results and thank our brand leaders for aggressively pursuing these critical objectives and for developing a strong talent pool within their ranks that will position the Company for higher growth in 2017 and beyond.”

Review of Second Quarter 2016 Operating Results
Consolidated revenues increased $6.1 million, or 8.3%, to $79.9 million in the second quarter of 2016 from $73.8 million in the second quarter of 2016.  Total net operating weeks increased to 600 from 553. 

Total comparable restaurant sales decreased 0.7% in the second quarter of 2016 following a total comparable restaurant sales decrease of 1.4% in the second quarter of 2015.  Restaurants affected by persistent energy-related industry challenges negatively impacted total comparable restaurant sales by approximately 140 basis points.

Restaurant-level EBITDA* increased $0.6 million, or 3.8%, to $17.1 million in the second quarter of 2016 from $16.5 million in the second quarter of 2015.  As a percentage of consolidated revenues, restaurant-level EBITDA decreased to 21.4% from 22.4%.

General and administrative costs increased slightly to $6.0 million in the second quarter of 2016 from $5.9 million in the second quarter of 2015.  As a percentage of consolidated revenues, general and administrative costs improved to 7.5% from 8.0%.

Net Income was $4.4 million, or $0.19 per diluted share, in the second quarter of 2016 compared to Net Income of $3.7 million, or $0.16 per diluted share, in the second quarter of 2015. 

Outlook
The following statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them.  We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks that could impact future operating results and financial conditions.

Based upon current information, we are reiterating earnings per share outlook for the 52-week fiscal year 2016, which ends on December 27, 2016.

  • Total comparable restaurant sales growth of 0% to 1.0%.
  • One Del Frisco’s Double Eagle Steak House relocation and three Del Frisco’s Grille openings.
  • Cost of sales of 28.4% to 28.7% of consolidated revenues (down from 28.6% to 28.9%.)
  • Restaurant-level EBITDA* of 21.0% to 21.3% of consolidated revenues.
  • General and administrative costs of approximately $25.0 million to $25.5 million.
  • Pre-opening costs of approximately $3.2 million to $3.7 million.
  • Effective tax rate of approximately 30% to 32%.
  • Gross capital expenditures (before tenant allowances and inclusive of some expenditures related to 2017 openings) of $32.0 million to $35.0 million.
  • Annual net income per diluted share between $0.83 and $0.86.

Development
In the third quarter, we opened a Del Frisco’s Grille in Huntington, Long Island, New York.  Two additional Del Frisco’s Grille locations in Nashville and Brentwood, Tennessee will open in the fourth quarter.  In addition, early in the fourth quarter, we will be relocating the Del Frisco's Double Eagle Steak House in North Dallas to Uptown Dallas.  The North Dallas location will continue to serve guests until the new Uptown Dallas restaurant is completed.

For fiscal year 2017, we will be opening a Del Frisco’s Double Eagle Steak House in Plano, Texas and Del Frisco’s Grilles in downtown New York City and Westwood, Massachusetts.  Additional restaurants will be named in the coming quarters as leases are signed.

Conference Call
We will host a conference call to discuss the financial results for the second quarter 2016 ended June 14, 2016 today at 7:45 AM Central Time.  Hosting the conference call will be Mark S. Mednansky, Chief Executive Officer, and Tom Pennison, Chief Financial Officer.

The conference call can be accessed live over the phone by dialing 913-312-0648. A replay will be available afterwards and can be accessed by dialing 858-384-5517; the passcode is 8651842.  The replay will be available until Thursday, August 25, 2016.

About Del Frisco’s Restaurant Group, Inc.
Based in Southlake, Texas, near Dallas, Del Frisco's Restaurant Group, Inc. is a collection of 51 restaurants across 23 states and Washington, D.C., including Del Frisco's Double Eagle Steak House, Sullivan's Steakhouse, and Del Frisco's Grille. Del Frisco's Double Eagle Steak House serves up flawless cuisine that's bold and delicious, an extensive award-winning wine list and a level of service that reminds guests that they're the boss. Sullivan's Steakhouse is a great neighborhood place for a big night out on the town - with outstanding food, hand-shaken martinis, an award winning wine list, and live entertainment all under one roof. 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.

 

 

 
DEL FRISCO'S RESTAURANT GROUP, INC.
Condensed Consolidated Income Statements - Unaudited
(amounts in thousands, except share and per share data)
                           
      12 weeks ended   24 weeks ended
      June 14,   June 16,   June 14,   June 16,
        2016       2015       2016       2015  
                           
Revenues     $ 79,916     100.0 %   $ 73,776     100.0 %   $ 161,110     100.0 %   $ 148,878     100.0 %
                           
Costs and expenses:                          
Costs of sales       22,637     28.3 %     21,276     28.8 %     45,855     28.5 %     42,938     28.8 %
Restaurant operating expenses       38,017     47.6 %     34,260     46.4 %     76,643     47.6 %     69,207     46.5 %
Marketing and advertising costs       2,133     2.7 %     1,746     2.4 %     3,454     2.1 %     3,117     2.1 %
Pre-opening costs       591     0.7 %     1,479     2.0 %     685     0.4 %     1,746     1.2 %
General and administrative costs       6,030     7.5 %     5,908     8.0 %     11,780     7.3 %     11,386     7.6 %
Lease termination and closing costs     20     0.0 %     -     -       41     0.0 %     -     -  
Depreciation and amortization       4,163     5.2 %     3,613     4.9 %     8,448     5.2 %     7,190     4.8 %
        73,591     92.1 %     68,282     92.6 %     146,906     91.2 %     135,584     91.1 %
                           
Operating income       6,325     7.9 %     5,494     7.4 %     14,204     8.8 %     13,294     8.9 %
                           
Other income (expense), net:                          
Interest expense       (24 )   -0.0 %     (7 )   -0.0 %     (55 )   0.0 %     (32 )   -0.0 %
Other       (5 )   0.0 %     (88 )   -0.1 %     (5 )   0.0 %     (177 )   -0.1 %
                           
Income before income taxes       6,296     7.9 %     5,399     7.3 %     14,144     8.8 %     13,085     8.8 %
                           
Income tax expense       1,852     2.3 %     1,686     2.3 %     4,289     2.7 %     3,978     2.7 %
                           
Net income     $ 4,444     5.6 %   $ 3,713     5.0 %   $ 9,855     6.1 %   $ 9,107     6.1 %
                           
Basic income per share     $ 0.19       $ 0.16       $ 0.42       $ 0.39    
Diluted income per share     $ 0.19       $ 0.16       $ 0.42       $ 0.39    
                           
Shares used in computing net income per common share:                          
Basic       23,349,718         23,445,716         23,332,397         23,444,381    
Diluted       23,436,983         23,672,028         23,418,735         23,599,213    
                           

 

 
DEL FRISCO'S RESTAURANT GROUP, INC.
Selected Balance Sheet Data
(dollar amounts in thousands)
           
      June 14,   December 29,
        2016       2015  
      (unaudited)    
           
Cash and cash equivalents $ 4,635     $ 5,176  
Total assets       344,290       346,655  
Long-term debt       -       4,500  
Total stockholders' equity     238,953       227,699  
                 

 

Restaurant-Level EBITDA Reconciliation to Net Income

We prepare our financial statements in accordance with generally accepted accounting principles (GAAP). Within our press release, we make reference to non-GAAP Restaurant-level EBITDA. Restaurant-level EBITDA is calculated by adding back to net income, income tax expense, other income (expenses), net, depreciation and amortization plus the sum of certain non-operating expenses, including pre-opening costs, lease termination and closing costs, and general and administrative costs.  We believe that this measure also represents a useful internal measure of performance. Accordingly, we include this non-GAAP measure 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 this measure is not determined in accordance with GAAP, the measure is susceptible to varying calculations and not all companies calculate this measure in the same manner. As a result, this measure as presented may not be directly comparable to a similarly titled measure presented by other companies. This non-GAAP measure is presented as supplemental information and not as alternatives to any GAAP measurements.  The following table provides a reconciliation of net income to restaurant-level EBITDA:

                   
    12 weeks ended   24 weeks ended
$ in thousands   June 14,     June 16,       June 14,     June 16,
    2016     2015       2016     2015
Net Income   $ 4,444     $ 3,713       $ 9,855     $ 9,107
Add:                                
Income tax expense     1,852       1,686         4,289       3,978
Other (income) expenses, net     29       95         60       209
Pre-opening costs     591       1,479         685       1,746
General and administrative  costs     6,030       5,908         11,780       11,386
Lease termination and closing costs     20       -         41       -
Depreciation and amortization       4,163         3,613           8,448         7,190
Restaurant-level EBITDA   $   17,129     $   16,494       $   35,158     $   33,616
                                 

 

 
Selected Segment Operating Information
                   
    12 Weeks Ended June 14, 2016 (unaudited)
$ in thousands   Del Frisco's Sullivan's Grille Consolidated
                   
Revenues   $   37,945     100.0 % $   17,575     100.0 % $   24,396     100.0 % $   79,916     100.0 %
Costs and expenses:                  
  Cost of sales       11,236     29.6 %     5,215     29.7 %     6,186     25.4 %     22,637     28.3 %
  Labor       8,430     22.2 %     5,237     29.8 %     7,836     32.1 %     21,503     26.9 %
  Operating expenses       4,395     11.6 %     2,612     14.9 %     3,266     13.4 %     10,273     12.9 %
  Occupancy       2,371     6.2 %     1,289     7.3 %     2,581     10.6 %     6,241     7.8 %
  Restaurant operating expenses       15,196     40.0 %     9,138     52.0 %     13,683     56.1 %     38,017     47.6 %
  Marketing and advertising costs     821     2.2 %     580     3.3 %     732     3.0 %     2,133     2.7 %
Restaurant-level EBITDA       10,692     28.2 %     2,642     15.0 %     3,795     15.6 %     17,129     21.4 %
                   
Restaurant operating weeks       144         216         240         600    
Average weekly volume   $   263.5     $   81.4     $   101.7     $   133.2    
                   
    12 Weeks Ended June 16, 2015 (unaudited)
$ in thousands   Del Frisco's Sullivan's Grille Consolidated
                   
Revenues   $   37,175     100.0 % $   17,477     100.0 % $   19,124     100.0 % $   73,776     100.0 %
Costs and expenses:                  
  Cost of sales       11,004     29.6 %     5,366     30.7 %     4,906     25.7 %     21,276     28.8 %
  Labor       8,295     22.3 %     5,303     30.3 %     5,949     31.2 %     19,547     26.4 %
  Operating expenses       3,607     9.7 %     2,719     15.6 %     2,512     13.1 %     8,838     12.0 %
  Occupancy       2,525     6.8 %     1,168     6.7 %     2,182     11.4 %     5,875     8.0 %
  Restaurant operating expenses       14,427     38.8 %     9,190     52.6 %     10,643     55.7 %     34,260     46.4 %
  Marketing and advertising costs     615     1.7 %     536     3.1 %     595     3.1 %     1,746     2.4 %
Restaurant-level EBITDA       11,129     29.9 %     2,385     13.6 %     2,980     15.6 %     16,494     22.4 %
                   
Restaurant operating weeks       132         226         195         553    
Average weekly volume   $   281.6     $   77.3     $   98.1     $   133.4    
                   
    24 Weeks Ended June 14, 2016 (unaudited)
$ in thousands   Del Frisco's Sullivan's Grille Consolidated
                   
Revenues   $   76,288     100.0 % $   36,476     100.0 % $   48,346     100.0 % $   161,110     100.0 %
Costs and expenses:                  
  Cost of sales       22,633     29.7 %     10,781     29.6 %     12,441     25.7 %     45,855     28.5 %
  Labor       17,554     23.0 %     10,766     29.5 %     15,831     32.8 %     44,151     27.4 %
  Operating expenses       8,325     10.9 %     5,314     14.6 %     6,357     13.1 %     19,996     12.4 %
  Occupancy       4,932     6.5 %     2,487     6.8 %     5,077     10.5 %     12,496     7.8 %
  Restaurant operating expenses       30,811     40.4 %     18,567     50.9 %     27,265     56.4 %     76,643     47.6 %
  Marketing and advertising costs     1,439     1.9 %     938     2.6 %     1,077     2.2 %     3,454     2.1 %
Restaurant-level EBITDA       21,405     28.1 %     6,190     17.0 %     7,563     15.6 %     35,158     21.8 %
                   
Restaurant operating weeks       288         432         480         1,200    
Average weekly volume   $   264.9     $   84.4     $   100.7     $   134.3    
                   
                   
     
    24 Weeks Ended June 16, 2015 (unaudited)
$ in thousands   Del Frisco's Sullivan's Grille Consolidated
                   
Revenues   $   73,196     100.0 % $   37,315     100.0 % $   38,367     100.0 % $   148,878     100.0 %
Costs and expenses:                  
  Cost of sales       21,738     29.7 %     11,191     30.0 %     10,009     26.1 %     42,938     28.8 %
  Labor       16,842     22.9 %     10,959     29.4 %     12,179     31.7 %     39,980     26.8 %
  Operating expenses       7,077     9.7 %     5,490     14.7 %     4,942     12.9 %     17,509     11.8 %
  Occupancy       5,014     6.9 %     2,437     6.5 %     4,267     11.1 %     11,718     7.9 %
  Restaurant operating expenses       28,933     39.5 %     18,886     50.6 %     21,388     55.7 %     69,207     46.5 %
  Marketing and advertising costs     1,074     1.5 %     976     2.6 %     1,067     2.8 %     3,117     2.1 %
Restaurant-level EBITDA       21,451     29.3 %     6,262     16.8 %     5,903     15.4 %     33,616     22.6 %
                   
Restaurant operating weeks       264         454         387         1,105    
Average weekly volume   $   277.3     $   82.2     $   99.1     $   134.7