Granite City Food & Brewery® Reports 0.7% Increase In Revenue In Third Quarter 2013

Granite City Food & Brewery Ltd. (OTCQB: GCFB), a casual dining restaurant group, today reported results for the third quarter ended October 1, 2013.

Highlights were as follows:
  • Total restaurant sales increased 0.7% to $31.4 million for the third quarter of 2013 from $31.1 million in the third quarter of 2012
  • Total restaurant sales increased 11.3% to $100.3 million for the first three quarters of 2013 from $90.1 million in the first three quarters of 2012
  • Same store sales decreased 3.8% in the third quarter of 2013 over the third quarter of 2012
  • Same store sales increased 0.4% in the first three quarters of 2013 over the first three quarters of 2012
  • Company recorded approximately $6.1 million in Adjusted EBITDA in the first three quarters of 2013 compared to $5.4 million in the first three quarters of 2012

“This past quarter provided us with a number of challenges, both internally and externally,” commented Rob Doran, CEO. “During the third quarter we saw an overall softening of same-store-sales for the casual dining industry. This occurred shortly after we placed additional pressure on our field staff with a new menu roll-out. In general, the menu roll-out caused food and labor costs to increase as the kitchen executed new menu items and our servers spent additional time explaining new items to our guests and ensuring guest satisfaction. As a result, our sales and margins during the quarter fell below our internal expectations. The good news is that we believe we are now building back our margins to levels prior to the new menu roll-out as the restaurants and our guests become comfortable with the changes to our updated menu. However, a softer sales environment is expected to persist. Finally, we are very pleased to announce the opening of an additional prototype restaurant in Lyndhurst, Ohio. Although the sales figures are still very early, we are pleased with the opening and anticipate that this restaurant will be one of our stronger locations.”

Third Quarter 2013 Financial Results

Total revenue for third quarter 2013 increased by 0.7% to $31.4 million compared to $31.1 million for the third quarter of 2012. This increase was the result of two additional locations in operation in the third quarter of 2013 compared to that of 2012. Comparable restaurant revenue, which includes restaurants which we have operated for over 18 months, decreased 3.8%. Total cost of sales before occupancy was $23.9 million in the third quarter of 2013 or 76.1% of revenue compared to prior year third quarter cost of sales before occupancy of $23.5 million or 75.3% of revenue.

General and administrative expenses were $2.5 million or 7.8% of revenue for the third quarter of 2013 compared to $2.3 million or 7.4% of revenue for the third quarter of 2012. We believe that the benefit of restaurant, menu and food upgrades, and future restaurant unit growth will help to reduce general and administrative expenses as a percentage of revenue.

The net loss for the third quarter of 2013 was $1.7 million compared to a net loss of $0.9 million in the third quarter of 2012. Net loss per share available to common shareholders was $(0.23) and $(0.14) for the third quarters of 2013 and 2012, respectively. Net loss per share available to common shareholders in the third quarters of 2013 and 2012 included $(0.02) and $(0.03) attributable to a declared dividend on preferred stock, respectively. Weighted average shares outstanding in the third quarters of 2013 and 2012 were 8.2 million and 8.0 million, respectively.

Year-to-Date 2013 Financial Results

Total revenue for first three quarters 2013 increased by 11.3% to $100.3 million compared to $90.1 million for the first three quarters of 2012. This increase was the result of an additional fiscal week in the first quarter of 2013 and three additional locations in operation in the first three quarters of 2013 compared to that of 2012. Comparable restaurant revenue, which includes restaurants which we have operated for over 18 months, increased 0.4%. Total cost of sales before occupancy was $75.7 million in the first three quarters of 2013 or 75.5% of revenue compared to prior year first three quarters cost of sales before occupancy of $67.4 million or 74.8% of revenue.

General and administrative expenses were $7.6 million or 7.5% of revenue for the first three quarters of 2013 compared to $7.2 million or 8.0% of revenue for the first three quarters of 2012. This decrease in general and administrative expense as a percent of revenue was primarily attributable to the larger sales base associated with the additional fiscal week in the first quarter of 2013 and the additional restaurants in operation during the first three quarters of 2013.

The net loss for the first three quarters of 2013 was $2.7 million compared to a net loss of $3.1 million in the first three quarters of 2012. Net loss per share available to common shareholders was $(0.40) and $(0.64) for the first three quarters of 2013 and 2012, respectively. Net loss per share available to common shareholders in the first three quarters of 2013 and 2012 included $(0.07) and $(0.10) attributable to declared dividends on preferred stock, respectively. Weighted average shares outstanding in the first three quarters of 2013 and 2012 were 8.1 million and 5.9 million, respectively.

Outlook

Updated guidance for fiscal year 2013 is as follows:
  • Net sales are anticipated to be between $125 million and $135 million.
  • Adjusted EBITDA is expected to be between $7.5 million and $8.5 million. As the reconciliation tables below indicate, we derive EBITDA by adding back the following items to operating loss: net interest expense, disposal and exit activities and any related gain or (loss), depreciation and amortization, acquisition costs, pre-opening costs, termination costs, property write-off costs, non cash compensation and any provision for income taxes. Since the company has many capital leases, we further reduce EBITDA for the difference between the fixed rent recorded and the actual amount paid for rent expense to generate Adjusted EBITDA.

Third Quarter 2013 Conference Call

The company will host a conference call to discuss its third quarter financial results on Tuesday, November 12, 2013 at 10:00 a.m. Central Time. The call may be accessed by calling 1-855-214-4066 and referencing code 21687602. A replay of the call will be available for 30 days and may be accessed by calling 1-800-633-8625 and entering replay code 21687602.

About Granite City

Granite City Food & Brewery Ltd. develops and operates two casual dining concepts: Granite City Food & Brewery and Cadillac Ranch All American Bar & Grill. Granite City Food & Brewery is a polished casual American restaurant that features a great dining experience with affordable, high-quality menu items prepared from made-from-scratch recipes, served in generous portions. There is a brewery onsite, serving hand-crafted and micro brews. Granite City opened its first restaurant in 1999 and is expanding nationwide; there are currently 30 Granite City restaurants in 13 states. Cadillac Ranch restaurants feature freshly prepared, authentic, All-American cuisine in a fun, dynamic environment. Its patrons enjoy a warm, Rock N’ Roll inspired atmosphere, with plenty of room for friends, music and dancing. The Cadillac Ranch menu is diverse with offerings ranging from homemade meatloaf to pasta dishes, all freshly prepared using quality ingredients. The Company purchased its first Cadillac Ranch in November 2011 and has since purchased five additional Cadillac Ranch restaurants along with its intellectual property. The Company currently operates six Cadillac Ranch restaurants in five states. Additional information about Granite City Food & Brewery can be found at www.gcfb.com.

Forward-Looking Statements, Non-GAAP Financial Measurements and Adjusted Financial Measures

Certain statements made in this press release of a non-historical nature constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. Such factors include, but are not limited to, changes in economic conditions, changes in consumer preferences or discretionary consumer spending, a significant change in the performance of any existing restaurants, our ability to continue funding our operations and meet our debt service obligations, and the risks and uncertainties described in the Cautionary Statement filed as Exhibit 99 to our Quarterly Report on 10-Q filed with the Securities and Exchange Commission on May 17, 2013.

Additionally, this press release contains certain non-GAAP financial measures, including references to restaurant-level IBO, company-wide EBITDA and adjusted EBITDA. As compared to the nearest GAAP measurement for our company, restaurant-level IBO represents revenue less cost of food, beverage, retail, labor and direct restaurant operating expenses. We use restaurant-level IBO and restaurant-level IBO as a percentage of revenue as internal measurements of restaurant-level operating performance. Restaurant-level IBO as we define it may not be comparable to similar measurements used by other companies and is not a measure of performance or liquidity presented in accordance with GAAP. We believe that restaurant-level IBO is an important component of our financial results because it is a widely used measurement within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance. We use restaurant-level IBO as a means of evaluating our restaurants’ financial performance compared with our competitors. As compared to the nearest GAAP measurement for our company, company-wide EBITDA represents operating income (loss) with the add-back of depreciation and amortization, net loss (gain) on disposal of assets and exit or disposal costs. We use company-wide EBITDA as a way to measure our overall internal operational performance without restaurant closings and as a means of evaluating our financial performance compared with our competitors. As compared to the nearest GAAP measurement for our company, adjusted EBITDA represents operating income (loss) with the add-back of net interest expense, disposal and exit activities and any related gain or (loss), depreciation and amortization, acquisition costs, pre-opening costs, termination costs, property write-off costs, non cash compensation and any provision for income taxes, and further adjusts for the difference between the amount of fixed rent recorded on the statements of operations and the actual amount paid for rent expense. We use adjusted EBITDA as a way to measure our overall internal operational performance without restaurant openings and/or closings and as a means of evaluating our restaurants’ financial performance compared with our competitors. These non-GAAP measurements should not be used as substitutes for net loss, net cash provided by or used in operations or other financial data prepared in accordance with GAAP. Schedules of reconciliations of restaurant-level IBO, company-wide EBITDA and adjusted EBITDA for the third quarter and first three quarters of 2013 and 2012 are provided herein.

Finally, in order to provide supplemental results of operations information, we have included certain adjusted financial measures. In particular, we have presented various financial metrics for comparable restaurants, which are those restaurants that we have operated for more than 18 months, and our new restaurants which are those restaurants that we have operated for 18 months or less. The contributions of these groups of restaurants to company-wide performance are set forth herein.
 
Granite City Food & Brewery Ltd.
 
Condensed Consolidated Statements of Operations
           
Thirteen Weeks Ended 40 Weeks Ended 39 Weeks Ended
October 1, 2013     September 25, 2012 October 1, 2013 September 25, 2012
 
Restaurant revenue $ 31,356,336 $ 31,135,288 $ 100,273,122 $ 90,072,910
 
Cost of sales:
Food, beverage and retail 8,687,793 8,412,835 27,461,261 24,328,465
Labor 10,206,511 10,293,142 32,630,017 29,740,985
Direct restaurant operating 4,957,869 4,749,016 15,593,877 13,340,009
Occupancy   2,756,331     2,573,685     8,218,112     7,351,885  

Cost of sales and occupancy
26,608,504 26,028,678 83,903,267 74,761,344
 
General and administrative 2,451,488 2,315,538 7,555,994 7,207,083
Depreciation and amortization 2,042,082 1,920,425 5,994,887 5,493,719
Pre-opening 411,836 166,582 1,035,802 915,413
Acquisition costs 117,480 199,560 193,539 684,745
Loss on disposal of assets 162,494 144,950 462,900 368,263
 
Exit or disposal activities   14,315     15,986     46,390     49,261  
 
Total costs and expenses   31,808,199     30,791,719     99,192,779     89,479,828  
Operating income (451,863 ) 343,569 1,080,343 593,082
 
Interest:
Income - - - 32
 
Expense on capital leases (933,615 ) (948,818 ) (2,839,483 ) (2,821,590 )
Other interest expense   (293,865 )   (283,697 )   (895,563 )   (899,865 )
 
Net interest expense   (1,227,480 )   (1,232,515 )   (3,735,046 )   (3,721,423 )
 
Net loss $ (1,679,343 ) $ (888,946 ) $ (2,654,703 ) $ (3,128,341 )
 
Loss per common share, basic $ (0.23 ) $ (0.14 ) $ (0.40 ) $ (0.64 )
 
Weighted average shares outstanding, basic   8,199,432     8,002,478     8,148,251     5,873,258  
 
 

Selected Balance Sheet Information
       
October 1, 2013 December 25, 2012
 
Cash $ 978,328 $ 2,566,034
Current assets, including cash $ 6,125,517 $ 5,905,523
Total assets $ 73,466,025 $ 71,766,785
Current liabilities $ 14,383,859 $ 14,811,246
Total liabilities $ 74,774,465 $ 70,258,483
Shareholders' (deficit) equity $ (1,308,440 ) $ 1,508,302
 
 

Non-GAAP Reconciliations Q3 2013 Results
                       
Total for All
Comparable

% of
New

% of
Restaurants

% of
Restaurants

Sales
Restaurants

Sales
As Reported

Sales
 
Restaurant revenues $ 27,184,833 100 % $ 4,171,503 100 % $ 31,356,336 100 %
 
Cost of sales:
Food, beverage and retail 7,891,904 29.0 % 795,889 19.1 % 8,687,793 27.7 %
Labor 9,153,945 33.7 % 1,052,566 25.2 % 10,206,511 32.6 %
Direct restaurant operating expenses   4,460,550 16.4 %   497,319 11.9 %   4,957,869   15.8 %
Restaurant-level IBO* $ 5,678,434 20.9 % $ 1,825,729 43.8 % $ 7,504,163 23.9 %
 
Occupancy 2,756,331 8.8 %
General and administrative 2,451,488
Pre-opening 411,836
Acquisition costs   117,480  
 
Company-wide EBITDA* 1,767,028 5.6 %
 
Depreciation and amortization 2,042,082
Exit or disposal activities, other   176,809  
 
Operating loss (451,863 )
 
Interest:
Income -
Expense   (1,227,480 )
Net interest expense (1,227,480 )
 
Net loss $ (1,679,343 )
 
 

Non-GAAP Reconciliations Q3 2013 Adjusted EBITDA
   
Net loss $ (1,679,343 )
 
Net interest expense 1,227,480
Exit or disposal activities, other 176,809
Depreciation and amortization 2,042,082
Acquisition costs 117,480
Pre-opening 411,836
Termination/contract negotiation/property write-off costs 356,754
Share-based compensation 57,905
Lease adjustment (1,084,411 )
 
Adjusted EBITDA* $ 1,626,592  
 

*See accompanying disclosure regarding use of non-GAAP financial measures.
Certain percentages may not foot due to rounding.
 
 

Non-GAAP Reconciliations Q3 2012 Results
                       
Total for All
Comparable

% of
New

% of
Restaurants

% of
Restaurants

Sales
Restaurants

Sales
As Reported

Sales
 
Restaurant revenues $ 28,272,244 100 % $ 2,863,044 100 % $ 31,135,288 100 %
 
Cost of sales:
Food, beverage and retail 8,044,063 28.5 % 368,772 12.9 % 8,412,835 27.0 %
Labor 9,948,958 35.2 % 344,184 12.0 % 10,293,142 33.1 %
Direct restaurant operating expenses   4,557,181 16.1 %   191,835 6.7 %   4,749,016   15.3 %
Restaurant-level IBO* $ 5,722,042 20.2 % $ 1,958,253 68.4 % $ 7,680,295 24.7 %
 
Occupancy 2,573,685 8.3 %
 
General and administrative 2,315,538
Pre-opening 166,582
Acquisition costs   199,560  
 
Company-wide EBITDA* 2,424,930 7.8 %
 
Depreciation and amortization 1,920,425
Exit or disposal activities, other   160,936  
 
Operating loss 343,569
 
Interest:
Income -
Expense   (1,232,515 )
Net interest expense (1,232,515 )
 
Net loss $ (888,946 )
 
 

Non-GAAP Reconciliations Q3 2012 Adjusted EBITDA
   
Net loss $ (888,946 )
 
Net interest expense 1,232,515
Exit or disposal activities, other 160,936
Depreciation and amortization 1,920,425
Acquisition costs 199,560
Pre-opening 166,582
Share-based compensation 77,071
Lease adjustment (1,045,072 )
 
Adjusted EBITDA* $ 1,823,071  
 

*See accompanying disclosure regarding use of non-GAAP financial measures.
Certain percentages may not foot due to rounding.
 
 

Non-GAAP Reconciliations Q3 YTD 2013 Results
                       
Total for All
Comparable

% of
New

% of
Restaurants As

% of
Restaurants

Sales
Restaurants

Sales
Reported

Sales
 
Restaurant revenues $ 88,416,501 100 % $ 11,856,621 100 % $ 100,273,122 100 %
 
Cost of sales:
Food, beverage and retail 25,411,451 28.7 % 2,049,810 17.3 % 27,461,261 27.4 %
Labor 30,148,050 34.1 % 2,481,967 20.9 % 32,630,017 32.5 %
Direct restaurant operating expenses   14,337,224 16.2 %   1,256,653 10.6 %   15,593,877   15.6 %
Restaurant-level IBO* $ 18,519,776 20.9 % $ 6,068,191 51.2 % $ 24,587,967 24.5 %
 
Occupancy 8,218,112 8.2 %
General and administrative 7,555,994
Pre-opening 1,035,802
Acquisition costs   193,539  
 
Company-wide EBITDA* 7,584,520 7.6 %
 
Depreciation and amortization 5,994,887
Exit or disposal activities, other   509,290  
 
Operating loss 1,080,343
 
Interest:
Income -
Expense   (3,735,046 )
Net interest expense (3,735,046 )
 
Net loss $ (2,654,703 )
 
 

Non-GAAP Reconciliations Q3 YTD 2013 Adjusted EBITDA
   
Net loss $ (2,654,703 )
 
Net interest expense 3,735,046
Exit or disposal activities, other 509,290
Depreciation and amortization 5,994,887
Acquisition costs 193,539
Pre-opening 1,035,802
Termination/contract negotiation/property write-off costs 485,056
Share-based compensation 136,725
Lease adjustment (3,313,105 )
 
Adjusted EBITDA* $ 6,122,537  
 

*See accompanying disclosure regarding use of non-GAAP financial measures.
Certain percentages may not foot due to rounding.
 
 

Non-GAAP Reconciliations Q3 YTD 2012 Results
                       
Total for All
Comparable

% of
New

% of
Restaurants

% of
Restaurants

Sales
Restaurants

Sales
As Reported

Sales
 
Restaurant revenues $ 85,857,268 100 % $ 4,215,642 100 % $ 90,072,910 100 %
 
Cost of sales:
Food, beverage and retail 23,868,752 27.8 % 459,713 10.9 % 24,328,465 27.0 %
Labor 29,295,424 34.1 % 445,561 10.6 % 29,740,985 33.0 %
Direct restaurant operating expenses   13,091,382 15.2 %   248,627 5.9 %   13,340,009   14.8 %
Restaurant-level IBO* $ 19,601,710 22.8 % $ 3,061,741 72.6 % $ 22,663,451 25.2 %
 
Occupancy 7,351,885 8.2 %
General and administrative 7,207,083
Pre-opening 915,413
Acquisition costs   684,745  
 
Company-wide EBITDA* 6,504,325 7.2 %
 
Depreciation and amortization 5,493,719
Exit or disposal activities, other   417,524  
 
Operating loss 593,082
 
Interest:
Income 32
Expense   (3,721,455 )
Net interest expense (3,721,423 )
 
Net loss $ (3,128,341 )
 
 

Non-GAAP Reconciliations Q3 YTD 2012 Adjusted EBITDA
   
Net loss $ (3,128,341 )
 
Net interest expense 3,721,423
Exit or disposal activities, other 417,524
Depreciation and amortization 5,493,719
Acquisition costs 684,745
Pre-opening 915,413
Termination/contract negotiation/property write-off costs 85,210
Share-based compensation 223,747
Lease adjustment (3,013,397 )
 
Adjusted EBITDA* $ 5,400,043  
 

*See accompanying disclosure regarding use of non-GAAP financial measures.
Certain percentages may not foot due to rounding.
 

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