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Chanticleer Holdings Announces Second Quarter 2012 Financial Results

Stocks in this article: HOTR

In June 2012, the Company successfully completed an $11 million secondary public offering, where the company received net proceeds of approximately $10.1 million before expenses. We have used a portion of this capital to pay off substantially all of our existing debt, with the substantial remainder of capital to be used to open new Hooters restaurants in South Africa, Brazil, Hungary, Australia and Europe.

Use of Non-GAAP Measures

Chanticleer Holdings, Inc. prepares its consolidated financial statements in accordance with United States generally accepted accounting principles ("GAAP"). In addition to disclosing financial results prepared in accordance with GAAP, the company discloses information regarding EBITDA, which differs from the term EBITDA as it is commonly used. In addition to adjusting net income (loss) from continuing operations to exclude taxes, interest, and depreciation and amortization, EBITDA also excludes pre-opening costs for our restaurants. EBITDA is not a measure of performance defined in accordance with GAAP. However, EBITDA is used internally in planning and evaluating the company's operating performance. Accordingly, management believes that disclosure of this metric offers investors, bankers and other stakeholders an additional view of the company's operations that, when coupled with the GAAP results, provides a more complete understanding of the company's financial results.

EBITDA should not be considered as an alternative to net loss or to net cash used in operating activities as a measure of operating results or of liquidity. It may not be comparable to similarly titled measures used by other companies, and it excludes financial information that some may consider important in evaluating the company's performance. A reconciliation of GAAP net income (loss) to EBITDA is included in the accompanying financial schedules.

About Chanticleer Holdings, Inc.

Chanticleer Holdings is focused on expanding the Hooters ® casual dining restaurant brand in international emerging markets. Chanticleer currently owns all or part of the exclusive franchise rights to develop and operate Hooters restaurants in South Africa, Hungary and parts of Brazil, and has joint ventured with the current Hooters franchisee in Australia, while evaluating several additional international opportunities. The Company currently owns and operates in whole or part five Hooters restaurants in its international franchise territories: Durban, Johannesburg, Cape Town and Emperor's Palace in South Africa; and Campbelltown, Australia.

In 2011, Chanticleer and a group of noteworthy private equity investors, which included H.I.G. Capital, KarpReilly, LLC and Kelly Hall, president of Texas Wings Inc., the largest Hooters franchisee in the United States, acquired Hooters of America (HOA), a privately held company. Today, HOA is the franchisor and operator of over 430 Hooters® restaurants in 27 countries. Chanticleer maintains a minority ownership stake in HOA and its CEO, Mike Pruitt, is also a member of HOA's Board of Directors. For further information, please visit www.chanticleerholdings.com or www.hooters.com and follow us on Twitter at @ChantHoldings or @Hooters.

Safe Harbor Statement

This press release contains forward-looking statements subject to the inherent uncertainties in predicting future results and conditions. Any statements that are not statement of historical fact (including statements containing the words "believes," "plans," "anticipate," "expects," "estimates," and similar expressions) should also be considered to be forward-looking statements. Certain factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements. These factors are identified from time to time in our filings with the Securities and Exchange Commission. We undertake no obligation to update such statements to reflect subsequent events. Further information on our business, including important factors which could affect actual results are discussed in the Company's filings with the SEC, including its Annual Report on Form 10-K under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Chanticleer Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
  Three months ended June 30, Six months ended June 30,
  2012 2011 2012 2011
Revenue:        
Restaurant sales, net $1,654,829  $--  $3,003,816  $-- 
Management fee income - non-affiliates 25,000 25,000 50,000 441,667
Management fee income - affiliates 6,698 7,830 6,698 32,476
Total revenue 1,686,527 32,830 3,060,514 474,143
Expenses:        
Restaurant cost of sales 606,221  --  1,102,770  -- 
Restaurant operating expenses 711,808  --  1,327,578  -- 
Restaurant pre-opening expenses 25,000  --  91,120  -- 
General and administrative expense 656,596 259,766 1,137,868 484,224
Depreciation and amortization 127,087 2,512 235,699 5,061
Total expenses 2,126,712 262,278 3,895,035 489,285
Earnings (loss) from operations  (440,185)  (229,448)  (834,521)  (15,142)
Other income (expense)        
Equity in earnings (losses) of investments  (33,348)  6,461  (43,886)  11,564
Realized gains from sales of investments  --  361  --  19,991
Interest income  --   --   --  4,540
Miscellaneous income  --   --   --  476
Interest expense  (201,550)  (3,927)  (378,768)  (22,686)
Total other income (expense) (234,898) 2,895 (422,654) 13,885
Net earnings (loss) before income taxes  (675,083)  (226,553)  (1,257,175)  (1,257)
Provision for income taxes 47,327  --  51,143  -- 
Net earnings (loss) before non-controlling interest (722,410) (226,553) (1,308,318) (1,257)
Non-controlling interest (10,971) 566 6,824 977
Net earnings (loss) (733,381) (225,987) (1,301,494) (280)
Other comprehensive income (loss):        
Unrealized gain (loss) on available-for-sale securities (none applies to non-controlling interest) (132,021) (38,209) (237,639) (52,209)
Foreign translation income (loss) (4,193)  --  (5,472)  -- 
Other comprehensive income (loss)  $ (869,595)  $ (264,196)  $ (1,544,605)  $ (52,489)
         
Net earnings (loss) per share, basic and diluted ($0.49) ($0.18) ($0.52) $0.00
Weighted average shares outstanding 1,502,418 1,230,487 2,498,882 1,129,124
         
Unaudited Pro Forma Results of Operations
(As if the Company acquired majority ownership of the South African Hooters restaurants on January 1, 2011)
     
  Three Months Ended Six Months Ended
  June 30, 2011 June 30, 2011
     
Net revenues  $ 1,093,134  $ 2,492,182
Net earnings (loss)  $ (163,757)  $ 107,465
Net earnings (loss) per share, basic and diluted  $ (0.13)  $ 0.10
     
Chanticleer Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, 2012 (Unaudited) and December 31, 2011
     
  2012 2011
ASSETS    
Current assets:    
Cash and cash equivalents  $ 3,673,005  $ 151,928
Accounts receivable  41,667  103,982
Inventory  122,499  59,266
Due from related parties  110,676  76,591
Prepaid expenses  125,056  231,914
TOTAL CURRENT ASSETS  4,072,903  623,681
Property and equipment, net  3,102,917  2,508,823
Intangible assets, net  769,386  470,164
Investments at fair value  80,713  318,353
Other investments  2,077,176  1,579,677
Deposits and other assets  3,980  3,980
TOTAL ASSETS  $ 10,107,075  $ 5,504,678
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Current maturities of long-term debt and notes payable  $ 7,722  $ 1,171,855
Convertible notes payable  --  1,625,000
Accounts payable  579,282  267,475
Accrued expenses  13,681  21,521
Other current liabilities  332,340  496,643
Income taxes payable  62,555  14,608
Due to related parties  27,485  30,204
TOTAL CURRENT LIABILITIES  1,023,065  3,627,306
Long-term debt, less current maturities  231,519  236,109
TOTAL LIABILITIES  1,254,584  3,863,415
Commitments and contingencies    
     
Stockholders' equity:    
Common stock: $0.0001 par value; authorized 20,000,000 and 200,000,000 shares; issued 3,955,511 shares and 1,506,061; and outstanding 3,698,896 and 1,249,446 shares at June 30, 2012 and December 31, 2011, respectively  396  151
Additional paid in capital  16,509,226  6,459,656
Other comprehensive income (loss)  (194,446)  48,665
Non-controlling interest  398,037  1,692,019
Accumulated deficit  (7,334,302)  (6,032,808)
Less treasury stock, 256,615 shares at June 30, 2012 and December 31, 2011  (526,420)  (526,420)
TOTAL STOCKHOLDERS' EQUITY  8,852,491  1,641,263
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 10,107,075  $ 5,504,678
     
Chanticleer Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2012 and 2011
(Unaudited)
  2012 2011
Cash flows from operating activities:    
Net earnings (loss)  $ (1,301,494)  $ (280)
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:    
Non-controlling interest  (6,824)  (977)
Depreciation and amortization  235,699  5,061
Bad debt expense  12,315  --
Equity in (earnings) loss of investments  43,886  (11,564)
(Gain) loss on sale of investments  --  (19,991)
Common stock issued for services  9,406  --
Amortization of warrants  72,063  --
(Increase) decrease in accounts receivable  50,000  (37,410)
(Increase) decrease in prepaid expenses and other assets  170,374  (30,482)
(Increase) decrease inventory  (63,233)  --
Increase (decrease) in accounts payable and accrued expenses  424,261  40,162
Increase (decrease) in income taxes payable  47,947  --
Increase (decrease) in deferred revenue and other liabilities  (70,802)  (1,750)
Advance from related parties for working capital  (63,202)  (36,805)
Net cash used by operating activities  (439,604)  (94,036)
     
Cash flows from investing activities:    
Proceeds from sale of investments  --  190,325
Investment distribution  --  6,228
Purchase of investments  (933,948)  (160,471)
Franchise fees incurred  (312,674)  --
Purchase of property and equipment  (816,341)  --
Net cash provided (used) by investing activities  (2,062,963)  36,082
     
Cash flows from financing activities:    
Proceeds for sale of common stock warrants, net  --  16,058
Proceeds for sale of common stock, net  7,051,464  --
Loan proceeds, debt and line of credit  2,915,000  --
Loan repayments, debt and line of credit  (3,939,098)  --
Loan repayments, bank note  (3,722)  (2,240)
Net cash provided by financing activities  6,023,644  13,818
Net increase (decrease) in cash and cash equivalents  3,521,077  (44,136)
Cash and cash equivalents, beginning of period  151,928  46,007
Cash and cash equivalents, end of period  $ 3,673,005  $ 1,871
     
RESTAURANT OPERATIONS          
           
The following is a condensed unaudited statement of operations for our restaurant operations for the three and six months ended June 30, 2012, which currently consists of four Hooters locations in South Africa.
           
Three months ended June 30, 2012:          
  (1) (2) (3) (4)  
  Durban Johannesburg CapeTown Emperors Palace Total Restaurants
   $ 294,293  $ 523,870  $ 162,341  $ 674,325  $ 1,654,829
Three months ended June 30, 2012:  109,940  187,338  62,942  246,001  606,221
Gross Profit  184,353  336,532  99,399  428,324  1,048,608
           
Recurring expenses:          
Operating expenses  152,689  266,943  116,715  258,249  794,596
Interest expense  1,352  2,349  2,018  --  5,719
Depreciation and amortization  16,712  45,293  17,229  44,936  124,170
Income taxes  2,537  7,078  --  37,712  47,327
   173,290  321,663  135,962  340,897  971,812
Net income (loss) before non-recurring expenses  11,063  14,869  (36,563)  87,427  76,796
Bad debt expense  12,092  --  --  --  12,092
Pre-opening costs  --  --  --  --  --
Net income (loss)  $ (1,029)  $ 14,869  $ (36,563)  $ 87,427  64,704
           
Income from management company not absorbed above      1,901
Total South Africa restaurants          $ 66,605
           
           
Six months ended June 30, 2012:          
  (1) (2) (3) (4)  
  Durban Johannesburg CapeTown Emperors Palace Total Restaurants
Revenues  $ 555,792  $ 1,016,539  $ 325,876  $ 1,105,609  $ 3,003,816
Cost of Sales  207,768  363,357  127,970  403,675  1,102,770
Gross Profit  348,024  653,182  197,906  701,934  1,901,046
           
Recurring expenses:          
Operating expenses  301,855  530,173  235,818  409,957  1,477,803
Interest expense  2,692  4,764  4,129  --  11,585
Depreciation and amortization  33,424  90,586  34,458  71,542  230,010
Income taxes  4,014  7,078  --  40,051  51,143
   341,985  632,601  274,405  521,550  1,770,541
Net income (loss) before non-recurring expenses  6,039  20,581  (76,499)  180,384  130,505
Bad debt expense  12,092  --  --  --  12,092
Pre-opening costs  --  --  --  78,287  78,287
Net income (loss)  $ (6,053)  $ 20,581  $ (76,499)  $ 102,097  40,126
           
Loss from management company not absorbed above          (2,793)
Total South Africa restaurants          $ 37,333
           
           
(1) Durban location opened in December 2009.          
(2) Johannesburg location opened in June 2010.          
(3) CapeTown location opened in June 2011.          
(4) Emperors Palace location opened mid-February 2012.        
           
Reconciliation of South African operations EBITDA to net income (loss)            
Unaudited                    
                     
Three months ended June 30, 2012:                    
  (1)   (2)   (3)   (4)      
  Durban % of net revenues Johannesburg % of net revenues CapeTown % of net revenues Emperors Palace % of net revenues Total Restaurants % of net revenues
EBITDA  $ 19,572 6.7%  $ 69,589 13.3%  $ (17,316) -10.7%  $ 170,075 25.2%  $ 241,920 14.6%
Interest expense  (1,352)    (2,349)    (2,018)    --     (5,719)  
Pre-opening costs  --     --     --     --     --   
Depreciation and amortization  (16,712)    (45,293)    (17,229)    (44,936)    (124,170)  
Income taxes  (2,537)    (7,078)    --     (37,712)    (47,327)  
Net income (loss)  $ (1,029) -0.3%  $ 14,869 2.8%  $ (36,563) -22.5%  $ 87,427 13.0%  $ 64,704 3.9%
Income from management company not absorbed above                  1,901  
Total South Africa restaurants                  $ 66,605 4.0%
                     
Six months ended June 30, 2012:                    
  Durban % of net revenues Johannesburg % of net revenues CapeTown % of net revenues Emperors Palace % of net revenues Total Restaurants % of net revenues
EBITDA  $ 34,077 6.1%  $ 123,009 12.1%  $ (37,912) -11.6%  $ 291,977 26.4%  $ 411,151 13.7%
Interest expense  (2,692)    (4,764)    (4,129)    --     (11,585)  
Pre-opening costs  --     --     --     (78,287)    (78,287)  
Depreciation and amortization  (33,424)    (90,586)    (34,458)    (71,542)    (230,010)  
Income taxes  (4,014)    (7,078)    --     (40,051)    (51,143)  
Net income (loss)  $ (6,053) -1.1%  $ 20,581 2.0%  $ (76,499) -23.5%  $ 102,097 9.2%  $ 40,126 1.3%
Loss from management company not absorbed above                  (2,793)  
                   $ 37,333 1.2%
                     
(1) Durban location opened in December 2009.                    
(2) Johannesburg location opened in June 2010.                    
(3) CapeTown location opened in June 2011.                    
(4) Emperors Palace location opened mid-February 2012.                    
                     
CONTACT: Company Contact:
         Shannon DiGennaro, V.P. Investor Relations
         Phone: 704.941.0959
         sd@chanticleerholdings.com
         
         Investor Contact:
         The Del Mar Consulting Group, Inc.
         Robert B. Prag, President
         858-794-9500
         bprag@delmarconsulting.com

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