SOURCE: Chanticleer Holdings, Inc.

Chanticleer Holdings, Inc. Logo

August 14, 2014 19:28 ET

Chanticleer Holdings Reports 2014 Second Quarter Earnings

22.9% Restaurant Revenue Increase and 32.9% Increase in Restaurant EBITDA Quarter-Over-Quarter

CHARLOTTE, NC--(Marketwired - August 14, 2014) - Chanticleer Holdings, Inc. (NASDAQ: HOTR) ("Chanticleer," or the "Company"), owner and operator of multiple restaurant brands internationally and domestically, announces its financial results for the second quarter ended June 30, 2014 ("Q2").

Restaurant revenue for Q2 2014 increased to $6.82 million, compared to $1.64 million in the comparable period in 2013, and increased 22.9% quarter-over-quarter from $5.55 million in the previous quarter ended March 31, 2014 ("Q1"). Restaurant revenue for the six months ended June 30, 2014 increased to $12.37 million, compared to $3.28 million in the comparable period in 2013, an increase of 276.6%.The sequential increase from Q1 2014 as well as the year-to-date increases are attributable mostly to our acquisitions of the Hooters restaurants in the Pacific Northwest on January 31, 2014 and the increase in our ownership in our Hooters restaurant in Campbelltown, Australia on April 1, 2014 (collectively, the "2014 Acquisitions").

Restaurant cost of sales for Q2 2014 were 36.0% compared to 38.7% in the comparable period in 2013 and 35.8% in Q1 2014. Restaurant cost of sales for the six months ended June 30, 2014 were 35.9% compared to 38.5% in the comparable period in 2013. The Company anticipates continuing quarter-over-quarter gross profit margin decreases across its restaurant territories and brands throughout the remainder of 2014. 

Restaurant operating expenses for Q2 2014 were $4.01 million, or 58.8% of restaurant revenue, compared to $932,250, or 56.8% of restaurant revenue, in the comparable period in 2013 and 59.2% in Q1 2014. Restaurant operating expenses for the six months ended June 30, 2014 were $7.29 million, or 59.0% of restaurant revenue, compared to $1.91 million, or 58.2% of restaurant revenue, in the comparable period in 2013. The increases in restaurant operating expenses in 2014 are attributable largely to the 2014 Acquisitions. General and administrative expenses ("G&A") for Q2 2014 were $1.25 million, or 18.0% of total revenue, compared to $645,648, or 38.8% of total revenue, in the comparable period in 2013. G&A for the six months ended June 30, 2014 were $2.86 million, or 22.8% of total revenue, compared to $1.37 million, or 41.0% of total revenue, in the comparable period in 2013. The dollar increase in G&A was primarily due to increased payroll, professional and consulting fees related to our growth both for the Company and its subsidiaries.

Restaurant EBITDA, a non-GAAP measure,* for Q2 2014 increased to $451,776, compared to $74,707 in the comparable period in 2013, and increased 32.9% sequentially from $339,926 in Q1 2014. Restaurant EBITDA for the six months ended June 30, 2014 increased to $791,702, compared to $111,349 in the comparable period in 2013.

The Company had an increase in quarter-over-quarter net loss to $1.54 million in Q2 from a net loss of $1.45 million in Q1. The Company had a decrease in net loss per share sequentially, to a net loss of $0.22 per share in Q2 from a net loss of $0.24 per share in Q1. The Company had a net loss of $2.99 million (net loss of $0.47 per share) and a net loss of $1.50 million (net loss of $0.39 per share) for the six months ended June 30, 2014 and 2013, respectively. The Company incurred approximately $261,000 of pre-opening expenses in Q2 2014, primarily attributable to two of our restaurant sites in Australia. One of the Australia locations has since opened in Surfers Paradise and the other location in Townsville is expected to open in late September 2014. Management is hopeful that the Company will have positive adjusted EBITDA, a non-GAAP measure,* in the fourth quarter of 2014, although there is no assurance this will occur.

To date, Chanticleer has twenty-five restaurants worldwide, including its most recent opening of a Hooters restaurant in Surfers Paradise, Australia and the acquisition of 60% ownership interest of Australia Hooters franchisee, TMIX Management Australia Pty, Ltd, which includes Hooters restaurants in Parramatta and Penrith, both suburbs of Sydney. The Company continues to build its portfolio of brands/concepts, expecting four additional restaurants by 2014 year end, through organic growth or acquisitions. 

Mike Pruitt, Chairman and Chief Executive Officer, commented, "We are pleased with our current growth rate, already exceeding full year 2013 restaurant revenue in just the first six months of 2014. Our brands continue to improve quarter-over-quarter led by our Hooters South Africa market, Hooters Nottingham and Just Fresh. We are excited to see the growth in our Company with our current restaurant portfolio averaging $700,000 in net sales per week for the last several weeks, highlighted by our Surfers Paradise location which has been top three international Hooters location each of the first four weeks of being open. With our top-line growth and continued operating improvements, we are closer to our goal of being adjusted EBITDA positive by year-end." 

For full disclosure relating to our second quarter financial information, please refer to Chanticleer's Quarterly Report on Form 10-Q, filed with the SEC on August 14, 2014, available online at www.sec.gov.

*Adjusted EBITDA and restaurant EBITDA are non-GAAP financial measures - see "Use of Non-GAAP Measures" below and see the reconciliation of GAAP to adjusted EBITDA and restaurant EBITDA in the table accompanying this release.

Use of Non-GAAP Measures
Chanticleer Holdings, Inc. prepares its condensed 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 adjusted EBITDA and restaurant EBITDA, which differ 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, adjusted EBITDA and restaurant EBITDA also exclude pre-opening costs for our restaurants, non-cash expenses for services, change in fair value of derivative liability and gain on extinguishment of debt. Adjusted EBITDA and restaurant EBITDA are not measures of performance defined in accordance with GAAP. However, adjusted EBITDA and restaurant EBITDA are used internally in planning and evaluating the company's operating performance. Accordingly, management believes that disclosure of these metrics 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.

Adjusted EBITDA and restaurant EBITDA should not be considered as alternatives 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 adjusted EBITDA and restaurant EBITDA is included in the accompanying financial schedules.

About Chanticleer Holdings, Inc.
Headquartered in a Charlotte, NC, Chanticleer Holdings, Inc. (HOTR), together with its subsidiaries, owns and operates restaurant brands in the United States and internationally. The Company is a franchisee owner of Hooters® restaurants in international markets including Australia, England, South Africa, Hungary, and Brazil, and recently acquired two Hooters restaurants in the United States. The Company also owns and operates American Roadside Burgers, Spoon Bar & Kitchen and owns a majority interest in Just Fresh restaurants in the U.S. 

For further information, please visit www.chanticleerholdings.com 
Facebook: www.Facebook.com/ChanticleerHOTR
Twitter: http://Twitter.com/ChanticleerHOTR
Google+: https://plus.google.com/u/1/b/118048474114244335161/118048474114244335161/posts

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these forward-looking statements by the words "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "target," "aim," "expect," "believe," "intend," "may," "will," "should," "could," or the negative of these words and other comparable words. Forward-looking statements are based on expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:

  • Operating losses continuing for the foreseeable future; we may never be profitable;
  • Inherent risks in expansion of operations, including our ability to acquire additional territories, generate profits from new restaurants, find suitable sites and develop and construct locations in a timely and cost-effective way;
  • General risk factors affecting the restaurant industry, including current economic climate, costs of labor and food prices;
  • Intensive competition in our industry and competition with national, regional chains and independent restaurant operators;
  • Our rights to operate and franchise Hooters-branded restaurants are dependent on the Hooters' franchise agreements;
  • Our business depends on our relationship with Hooters;
  • We do not have full operational control over the businesses of our franchise partners;
  • Failure by Hooters to protect its intellectual property rights, including its brand image;
  • Our business has been adversely affected by declines in discretionary spending and may be affected by changes in consumer preferences;
  • Increases in costs, including food, labor and energy prices;
  • Our business and the growth of our Company is dependent on the skills and expertise of management and key personnel;
  • Constraints could effect our ability to maintain competitive cost structure, including, but not limited to labor constraints;
  • Work stoppages at our restaurants or supplier facilities or other interruptions of production;
  • Our food service business and the restaurant industry are subject to extensive government regulation;
  • We may be subject to significant foreign currency exchange controls in certain countries in which we operate;
  • Inherent risk in foreign operation;
  • We may not attain our target development goals and aggressive development could cannibalize existing sales;
  • Current conditions in the global financial markets and the distressed economy;
  • A decline in market share or failure to achieve growth;
  • Unusual or significant litigation, governmental investigations or adverse publicity, or otherwise;
  • Adverse effects on our operations resulting from the current class action litigation in which the Company is one of several defendants;
  • Adverse effects on our results from a decrease in or cessation or clawback of government incentives related to investments; and
  • Adverse effects on our operations resulting from certain geo-political or other events.

Chanticleer cannot be certain that any expectation, forecast, or assumption made in preparing any forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there will be differences between projected and actual results. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its web site or otherwise. We undertake no obligation to update the forward-looking statements provided to reflect events or circumstances that occur after the date on which they were made. 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  
Condensed Consolidated Balance Sheets  
   
   June 30,   December 31,  
   2014   2013  
ASSETS  (Unaudited)      
Current assets:           
 Cash  $273,378   $442,694  
 Accounts receivable   118,354    227,181  
 Other receivable   45,210    50,380  
 Inventories   475,459    381,408  
 Due from related parties   113,481    116,305  
 Prepaid expenses and other current assets   552,490    495,165  
  TOTAL CURRENT ASSETS   1,578,372    1,713,133  
Property and equipment, net   12,697,117    5,620,189  
Goodwill   9,182,241    6,496,756  
Intangible assets, net   3,608,516    3,424,632  
Investments at fair value   35,362    55,112  
Other investments   1,550,000    2,491,963  
Deposits and other assets   517,526    285,821  
  TOTAL ASSETS  $29,169,134   $20,087,606  
            
LIABILITIES AND STOCKHOLDERS' EQUITY           
Current liabilities:           
 Current maturities of long-term debt and notes payable  $1,959,579   $835,454  
 Current maturities of convertible note payable, net of discount of $210,083   289,917    -  
 Derivative liability   1,734,500    2,146,000  
 Accounts payable and accrued expenses   3,572,145    2,425,873  
 Current maturities of capital leases payable   58,630    59,162  
 Deferred rent   111,722    53,303  
 Loan payable   1,571,646    -  
 Due to related parties   12,191    12,191  
  TOTAL CURRENT LIABILITIES   9,310,330    5,531,983  
Convertible notes payable, net of discount of $ 2,083,333 and $2,583,333, respectively   
916,667
   
416,667
 
Capital leases payable, less current maturities   73,033    105,918  
Deferred rent   1,852,611    1,055,138  
Deferred tax liabilities   1,275,317    1,340,000  
Long-term debt, less current maturities   180,874    398,906  
  TOTAL LIABILITIES   13,608,832    8,848,612  
Commitments and contingencies           
            
Stockholders' equity:           
 Common stock: $0.0001 par value; authorized 45,000,000 shares; issued and outstanding 6,499,433 and 5,387,897 shares at June 30, 2014 and December 31, 2013, respectively   

652
   

541
 
 Additional paid in capital   31,159,996    25,404,994  
 Other comprehensive loss   (30,339 )  (88,370 )
 Accumulated deficit   (17,334,191 )  (14,472,816 )
 Non-controlling interest   1,764,184    394,645  
  TOTAL STOCKHOLDERS' EQUITY   15,560,302    11,238,994  
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $29,169,134   $20,087,606  
           
           
  
Chanticleer Holdings, Inc. and Subsidiaries  
Condensed Consolidated Statements of Operations  
(Unaudited)  
   For the Three Months Ended  
   June 30,  
   2014   2013  
Revenue:           
 Restaurant sales, net  $6,818,932   $1,641,043  
 Gaming sales, net   75,724    -  
 Management fee income - non-affiliates   25,151    25,000  
  Total revenue   6,919,807    1,666,043  
Expenses:           
 Restaurant cost of sales   2,454,626    635,348  
 Restaurant operating expenses   4,012,399    932,250  
 Restaurant pre-opening expenses   260,981    10,201  
 General and administrative expenses   1,245,660    645,648  
 Depreciation and amortization   412,487    129,876  
  Total expenses   8,386,153    2,353,323  
Loss from operations   (1,466,346 )  (687,280 )
Other income (expense)           
 Equity in losses of investments   -    (18,806 )
 Realized gains   4,127    -  
 Miscellaneous income   4,552    1,263  
 Change in fair value of derivative liabilities   272,100    -  
 Interest expense   (350,760 )  (18,443 )
  Total other expense   (69,981 )  (35,986 )
Loss from operations before income taxes   (1,536,327 )  (723,266 )
 Expense for income taxes   1,379    12,106  
Net loss   (1,537,706 )  (735,372 )
 Less: Net loss attributable to non-controlling interest   126,642    28,428  
Net loss attributable to Chanticleer Holdings, Inc.  $(1,411,064 ) $(706,944 )
            
Other comprehensive income (loss):           
 Unrealized loss on available-for-sale securities (none applies to non-controlling interest)           
$(3,809 ) $(13,202 )
 Foreign translation income   15,419    41,400  
  Other comprehensive loss  $(1,399,454 ) $(678,746 )
            
Net loss attributable to Chanticleer Holdings, Inc. per common share, basic and diluted:  $(0.22 ) $(0.19 )
Weighted average shares outstanding, basic and diluted   6,329,406    3,701,928  
         
         
  
Chanticleer Holdings, Inc. and Subsidiaries  
Condensed Consolidated Statements of Operations  
(Unaudited)  
   For the Six Months Ended  
   June 30,  
   2014   2013  
Revenue:           
 Restaurant sales, net  $12,365,870   $3,283,165  
 Gaming income, net   131,235    -  
 Management fee income - non-affiliates   50,151    50,000  
  Total revenue   12,547,256    3,333,165  
Expenses:           
 Restaurant cost of sales   4,437,907    1,263,236  
 Restaurant operating expenses   7,294,226    1,912,405  
 Restaurant pre-opening expenses   260,981    10,201  
 General and administrative expenses   2,860,453    1,365,848  
 Depreciation and amortization   777,375    244,100  
  Total expenses   15,630,942    4,795,790  
Loss from operations   (3,083,686 )  (1,462,625 )
Other income (expense)           
 Equity in losses of investments   (40,694 )  (33,053 )
 Gain on extinguishment of debt   -    70,900  
 Miscellaneous income   7,838    3,825  
 Realized gains   101,472    -  
 Change in fair value of derivative liabilities   704,200    -  
 Interest expense   (687,541 )  (55,386 )
  Total other income (expense)   85,275    (13,714 )
Loss from operations before income taxes   (2,998,411 )  (1,476,339 )
  (Provision) expense for income taxes   (7,509 )  21,197  
Consolidated net loss   (2,990,902 )  (1,497,536 )
  Less: Net loss attributable to non-controlling interest   129,528    52,759  
Net loss attributable to Chanticleer Holdings, Inc.  $(2,861,374 ) $(1,444,777 )
            
Other comprehensive loss (income):           
  Unrealized loss on available-for-sale securities (none applies to non-controlling interest)           
$(15,527 ) $(36,966 )
  Foreign translation income (loss)   51,165    54,916  
Other comprehensive loss  $(2,825,736 ) $(1,426,827 )
            
Net loss per attributable to Chanticleer Holdings, Inc. per common share, basic and diluted:  $(0.47 ) $(0.39 )
Weighted average shares outstanding, basic and diluted   6,152,931    3,700,420  
         
         

 

         
         
Reconciliation of net loss to Adjusted EBITDA                             
Unaudited                             
Three months ended June 30, 2014: Restaurants only                      
  South Africa  Hungary  ARB  Nottingham Australia  JF  Hoot Pac NW  Spoon  Management  Totals 
GAAP net income (loss) $(108,124) $(34,621
) $(392,808
) $54,830 $(280,568) $7,549  $(49,308  $(68,800) $(665,856
) $(1,537,706)
G&A to management  177,548   27,212   125,102   70,516  28,295   92,362   72,012   6,000   (599,047)  - 
GAAP net income (loss)  69,424   (7,409)  (267,706)  125,346  (252,273)  99,911
   22,704
   (62,800
)  (1,264,903
) $(1,537,706)
 Interest expense (income)  12,795
   -   477   32  -   4   -   -   337,452   350,760 
 Change in fair value of derivative liablility  -   -   -   -  -   -   -   -   (272,100)  (272,100)
 Non-cash expenses related to services  -   -   -   -  -   -   -   -   124,275   124,275 
 Pre-opening expenses  12,515   -   -   -  247,918   548   -   -   -   260,981 
 Depreciation and amortization  92,609   25,697   132,936   3,000  21,960   47,660   56,501   30,415   1,709   412,487 
 Income taxes  22,238   -   -   17,274  -   -   -   -   (38,133)  1,379 
Adjusted EBITDA $209,581  $18,288
  $(134,293
) $145,652 $17,605  $148,123  $79,205  $(32,385) $(1,111,700) $(659,924)
 Total Restaurants EBITDA                            $451,776         
 Change in EBITDA from Q1 - total restaurants                            $111,850         
                                        
 Change in EBITDA from Q1 - restaurants $103,572  $19,661
  $4,709
  $23,290 $17,605  $(13,586) $(17,152) $(26,249
) $166,574  $278,424 
                                        
Three months ended June 30, 2013:                             
                              
  South Africa  Hungary                   Management  Totals 
GAAP net income (loss) $(122,536) $(76,728
)                        $(536,108
) $(735,372
)
G&A to management  71,119   39,985                          (111,104)  - 
GAAP net income (loss)  (51,417)  (36,743)                         (647,212   (735,372)
 Interest expense  11,769   -                          6,673   18,442 
 Pre-opening costs  10,201   -                          -   10,201 
 Depreciation and amortization  97,081   31,710                          1,085   129,876 
 Income taxes  12,106   -                          -   12,106 
Adjusted EBITDA $79,740  $(5,033
)                        $(639,454
) $(564,747)
 Total Restaurants EBITDA                            $74,707          
                                        
                                        
                       
Six months ended June 30, 2014:   Restaurants only                          
    South Africa    Hungary    ARB    Nottingham   Australia    JF   Hoot Pac NW    Spoon    Management    Totals  
GAAP net loss  $(198,902 ) $(112,366 ) $(809,636 ) $105,015  $(280,568 ) $56,960  $(38,057 ) $(101,213 ) $(1,612,135 ) $(2,990,902 )
G&A to management   257,573    79,888    271,529    123,839   28,295    159,105   119,952    12,000    (1,052,181 )  -  
GAAP net loss   58,671    (32,478 )  (538,107 )  228,854   (252,273 )  216,065   81,895    (89,213 )  (2,661,430 ) $(2,988,016 )
Interest expense (income)   25,273    -    903    -   -    -   -    -    661,414    687,590  
Change in fair value of derivative liablility   -    -    -    -   -    -   -    -    (704,200 )  (704,200 )
Non-cash expenses related to services   -    -    -    -   -    -   -    -    375,507    375,507  
Pre-opening expenses   12,515    -    -    -   237,918    548   -    -    -    250,981  
Depreciation and amortization   195,117    49,393    263,909    6,000   21,960    93,219   93,667    50,692    3,418    777,375  
Income taxes   24,014    -    -    33,160   -    -   -    -    (64,683 )  (7,509 )
Adjusted EBITDA  $315,590   $16,915   $(273,295 ) $268,014  $7,605   $309,832  $175,562   $(38,521 ) $(2,389,974 ) $(1,608,272 )
Total Restaurants EBITDA  $-   $-   $-   $-       $-  $-   $781,702   $-       
                                                  
Six months ended June 30, 2013:   Restaurants only                          
    South Africa    Hungary                                Management    Totals  
Net loss from continuing operations  $(194,026 ) $(155,031 )                             $(1,148,479 ) $(1,497,536 )
G&A to management segment   157,347    79,246                                (236,593 )  -  
GAAP net loss   (36,679 )  (75,785 )                              (1,385,072 )  (1,497,536 )
Interest expense   22,490    -                                32,896    55,386  
Pre-opening expenses   10,201    -                                -    10,201  
Gain on debt extinguishment   (70,900 )                                        (70,900 )
Depreciation and amortization   184,953    55,872                                3,275    244,100  
Income taxes   21,197    -                                -    21,197  
Adjusted EBITDA  $131,262   $(19,913 )                             $(1,348,901 ) $(1,237,552 )
Total Restaurants EBITDA                                   $111,349            

Contact Information