SOURCE: Chanticleer Holdings, Inc.

Chanticleer Holdings, Inc. Logo

November 14, 2014 08:00 ET

Chanticleer Holdings Reports Positive Adjusted EBITDA in the Third Quarter 2014 and a $7.49 Million Increase in Restaurant Revenue

CHARLOTTE, NC--(Marketwired - November 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 third quarter ended September 30, 2014 ("Q3").

"We are pleased to report that as a company we achieved a significant milestone of positive adjusted EBITDA for the third quarter. We see an opportunity to take advantage of the investment we've made in the last two years in both talent and the platform which is now starting to bear fruit in both domestic and international markets," commented Mike Pruitt, Chairman and Chief Executive Officer. "We are encouraged by our operational improvements but believe there is more that can be accomplished. We also have garnered increased activity for new international Hooters locations as we've achieved scale and success in Australia, South Africa and the United Kingdom. As we plan for 2015, franchising our American Burger and Just Fresh concepts will play a significant part of our growth as will strategic/accretive acquisitions." 

Highlights for the third quarter 2014 include:

  • Restaurant revenue for Q3 2014 increased by $7.49 million or 473.5% from the comparable period in 2013, and increased 33% quarter-over-quarter from $6.82 million in the previous quarter ended June 30, 2014 ("Q2"). In Q3 2014 the Company acquired 60% ownership of the Hooters franchisee's management company in Australia, as well as 60% ownership of two existing Australia Hooters restaurants in Penrith and Parramatta, and opened Australia's fourth Hooters location in Surfers Paradise, an iconic destination area on Australia's east coast.

  • The Company's Adjusted EBITDA improved to $509,805 in Q3 from a loss of $455,601 in the comparable period in 2013.

  • The Company's net loss decreased in Q3 2014 to $490,231 from $1.54 million net loss in Q2 2014. The Company had a decrease in net loss per share sequentially, to a net loss of $0.08 per share in Q3 from a net loss of $0.22 per share in Q2 2014.

  • Restaurant EBITDA, a non-GAAP measure,* for Q3 2014 was $949,561, compared to $83,276 in the comparable period in 2013, and increased 114.9% sequentially from $442k in Q2 2014.

  • Cost of sales percentages for Q3 2014 improved to 33.8%, compared to 36.5% in the comparable period in 2013, and 36.0% in Q2 2014. Management believes our cost of sales percentage will continue to improve as we expand, specifically our Australia and US Hooters operations have historically had cost of sales percentages in the range of 26-29%.

  • Restaurant operating expenses for Q3 2014 decreased to $5.2 million, or 57.3% of restaurant revenue, compared to $920,630, or 58.2% of restaurant revenue, in the comparable period in 2013 and 58.8% of restaurant revenue in Q2 2014.

  • The Company also generated $141,156 in revenue from gaming licenses in Sydney, Australia, and Oregon, US, an 86% increase quarter-over-quarter from Q2 2014.

  • Management believes the fourth quarter 2014 restaurant and gaming revenue will increase based on historical seasonality in Australia and South Africa, a full quarter of revenue from The Burger Co. acquisition, and partial period revenues related to the opening of our 7th Just Fresh and our third Hooters South Africa location in Johannesburg.

Additional highlights:

  • During August 2014, Chanticleer Holdings received a dividend from its portion of our investment in Hooters® of America ("HOA").

  • On September 9, 2014, the Company acquired The Burger Company in Charlotte, NC, an award winning casual burger joint in the fast growing better-burger space. The acquisition contributed positive net income in the quarter and was an integral step in the Company's strategic growth plan to take the better-burger category into its international markets. The company is currently in talks with its management teams in these markets to add the concept in their region as early as 2015.

  • The Company relocated its Hooters Cape Town location in South Africa to Johannesburg, a more marketable and appealing location. The Company expects to open the new location in December and is currently assessing other areas of Cape Town with plans to open a location mid-2015.

  • The Company is also expecting to open its 7th Just Fresh location in Ballantyne Corporate Place in Charlotte, NC on or about November 19, 2014. Just Fresh's brand and concept is well received in the Charlotte area and management will continue to look to expand its footprint in 2015.

Highlights for the nine months ended September 30, 2014 include:

  • Restaurant revenue for 2014 increased by $16.57 million or 340.6% from the comparable period in 2013.

  • Cost of sales percentages for 2014 improved to 35.0%, compared to 37.8% in the comparable period in 2013.

  • The Company's net loss increased in 2014 to $3.48 million from $2.95 million net loss in the comparable period in 2013. The Company had a decrease in net loss per share sequentially, to a net loss of $0.54 per share in 2014 from a net loss of $0.77 per share in the comparable period in 2013. The Company Adjusted EBITDA improved to a loss of $1.09 million in 2014 from a loss of $1.69 million in the comparable period in 2013.

  • Restaurant EBITDA* for 2014 was $1.74 million, compared to $195k in the comparable period in 2013.

For full disclosure relating to our third quarter financial information, please refer to Chanticleer's Quarterly Report on Form 10-Q, expected to be filed with the SEC on November 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. To date, Chanticleer has twenty-five restaurants worldwide and continues to build its portfolio of brands/concepts, expecting additional restaurants over the next several years, through organic growth and/or acquisitions. 

For further information, please visit www.chanticleerholdings.com 
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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 affect 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  
   
  September 30,   December 31,  
  2014   2013  
ASSETS (Unaudited)      
Current assets:          
 Cash $322,770   $442,694  
 Accounts receivable  386,145    227,181  
 Other receivable  44,494    50,380  
 Inventories  542,344    381,408  
 Due from related parties  108,417    116,305  
 Prepaid expenses and other current assets  510,694    495,165  
   TOTAL CURRENT ASSETS  1,914,864    1,713,133  
Property and equipment, net  14,591,942    5,620,189  
Goodwill  18,191,967    6,496,756  
Intangible assets, net  3,751,653    3,424,632  
Investments at fair value  35,362    55,112  
Other investments  1,550,000    2,491,963  
Deposits and other assets  463,455    285,821  
  TOTAL ASSETS $40,499,243   $20,087,606  
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
 Current maturities of long-term debt and notes payable $2,092,005   $835,454  
 Current maturities of convertible note payable, net of discount of $136,908  363,092    -  
 Derivative liability  1,513,500    2,146,000  
 Accounts payable and accrued expenses  5,368,606    2,425,873  
 Current maturities of capital leases payable  85,728    59,162  
 Deferred rent  132,180    53,303  
 Loan payable  951,360    -  
 Due to related parties  186,627    12,191  
  TOTAL CURRENT LIABILITIES  10,693,098    5,531,983  
Convertible notes payable, net of discount of $1,833,333 and $2,583,333, respectively  1,166,667    416,667  
Capital leases payable, less current maturities  60,284    105,918  
Deferred rent  1,857,763    1,055,138  
Deferred tax liabilities  1,242,975    1,340,000  
Long-term debt, less current maturities  5,016,715    398,906  
  TOTAL LIABILITIES  20,037,502    8,848,612  
Commitments and contingencies          
           
Stockholders' equity:          
 Common stock: $0.0001 par value; authorized 45,000,000 shares; issued and outstanding 6,978,061 and 5,387,897 shares at September 30, 2014 and December 31, 2013, respectively  700    541  
 Additional paid in capital  32,615,110    25,404,994  
 Other comprehensive income (loss)  146,880    (88,370 )
 Accumulated deficit  (17,885,631 )  (14,472,816 )
 Non-controlling interest  5,584,682    394,645  
  TOTAL STOCKHOLDERS' EQUITY  20,461,741    11,238,994  
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $40,499,243   $20,087,606  
  
  
Chanticleer Holdings, Inc. and Subsidiaries  
Condensed Consolidated Statements of Operations  
(Unaudited)  
  
  For the Three Months Ended  
  September 30,  
  2014   2013  
Revenue:          
  Restaurant sales, net $9,067,744   $1,581,245  
  Gaming sales, net  141,156    -  
  Management fee income - non-affiliates  417,842    25,000  
   Total revenue  9,626,742    1,606,245  
Expenses:          
 Restaurant cost of sales  3,062,628    577,299  
 Restaurant operating expenses  5,197,890    920,630  
 Restaurant pre-opening expenses  62,293    7,337  
 General and administrative expenses  1,426,461    948,035  
 Depreciation and amortization  465,819    129,126  
  Total expenses  10,215,091    2,582,427  
Loss from operations  (588,349 )  (976,182 )
Other income (expense)          
 Equity in losses of investments  -    (13,131 )
 Miscellaneous income  438,607    -  
 Change in fair value of derivative liabilities  221,000    (75,900 )
 Interest expense  (581,215 )  (383,595 )
  Total other income (expense)  78,392    (472,626 )
Loss from operations before income taxes  (509,957 )  (1,448,808 )
  (Benefit) expense for income taxes  (19,726 )  6,019  
Net loss  (490,231 )  (1,454,827 )
  Less: Net (income) loss attributable to non-controlling interest  (61,209 )  31,355  
Net loss attributable to Chanticleer Holdings, Inc. $(551,440 ) $(1,423,472 )
           
Other comprehensive income (loss):          
  Unrealized loss on available-for-sale securities (none applies to non-controlling interest) $-   $(7,922 )
  Foreign translation income  177,219    15,841  
   Other comprehensive loss $(374,221 ) $(1,415,553 )
           
Net loss attributable to Chanticleer Holdings, Inc. per common share, basic and diluted: $(0.08 ) $(0.38 )
Weighted average shares outstanding, basic and diluted  6,628,011    3,704,526  
  
  
Chanticleer Holdings, Inc. and Subsidiaries  
Condensed Consolidated Statements of Operations  
(Unaudited)  
  
  For the Nine Months Ended  
  September 30,  
  2014   2013  
Revenue:          
 Restaurant sales, net $21,433,613   $4,864,410  
 Gaming income, net  272,391    -  
 Management fee income - non-affiliates  467,993    75,000  
   Total revenue  22,173,997    4,939,410  
Expenses:          
Restaurant cost of sales  7,500,535    1,840,535  
Restaurant operating expenses  12,471,771    2,833,035  
Restaurant pre-opening expenses  323,274    17,538  
General and administrative expenses  4,307,257    2,313,883  
Depreciation and amortization  1,243,195    373,226  
 Total expenses  25,846,032    7,378,217  
Loss from operations  (3,672,035 )  (2,438,807 )
Other income (expense)          
 Equity in losses of investments  (40,694 )  (46,184 )
 Gain on extinguishment of debt  -    70,900  
 Miscellaneous income  446,445    3,785  
 Realized gains  101,472    -  
 Change in fair value of derivative liabilities  925,200    (75,900 )
 Interest expense  (1,268,756 )  (438,941 )
  Total other income (expense)  163,667    (486,340 )
Loss from operations before income taxes  (3,508,368 )  (2,925,147 )
  (Benefit) expense for income taxes  (27,235 )  27,216  
Consolidated net loss  (3,481,133 )  (2,952,363 )
  Less: Net loss attributable to non-controlling interest  68,318    84,114  
Net loss attributable to Chanticleer Holdings, Inc. $(3,412,815 ) $(2,868,249 )
           
Other comprehensive (loss) income:          
  Unrealized loss on available-for-sale securities (none applies to non-controlling interest) $(15,527 ) $(44,887 )
  Foreign translation income  228,384    70,756  
   Other comprehensive loss $(3,199,958 ) $(2,842,380 )
           
Net loss per attributable to Chanticleer Holdings, Inc. per common share, basic and diluted: $(0.54 ) $(0.77 )
Weighted average shares outstanding, basic and diluted  6,279,688    3,701,804  
  
  
Chanticleer Holdings, Inc. and Subsidiaries  
Condensed Consolidated Statements of Cash Flows  
(Unaudited)  
  
  Nine Months Ended  
  September 30,  
  2014   2013  
Cash flows from operating activities:          
 Net loss $(3,481,133 ) $(2,952,363 )
 Adjustments to reconcile net loss to net cash provided by (used in) operating activities:          
  Depreciation and amortization  1,243,195    373,226  
  Equity in losses of investments  40,694    46,184  
  Common stock issued for services  354,617    124,720  
  Amortization of debt discount  930,392    316,867  
  Derivative liability adjustment  (925,200 )  75,900  
  Decrease in deferred tax liability  (97,025 )  -  
  Increase in deferred rent  3,431    14,670  
  Amortization of warrants  152,325    272,529  
  Gain on debt extinguishment  -    (70,900 )
Changes in operating assets and liabilities:          
  (Increase) decrease in accounts and other receivables  (244,553 )  46,427  
  Decrease in prepaid expenses and other assets  (107,161 )  (108,942 )
  Decrease in inventory  33,845    86,496  
  Increase in accounts payable and accrued expenses  3,215,111    93,397  
  Advance from related parties for working capital  -    52  
   Net cash provided by (used in) operating activities  1,118,538    (1,681,737 )
           
Cash flows from investing activities:          
 Franchise costs  -    (75,000 )
 Cash acquired in acquisitions  27,527    53,684  
 Restricted cash  -    (3,000,000 )
 Repayments of investments  -    98,434  
 Purchase of property and equipment  (3,569,775 )  (86,919 )
   Net cash used in investing activities  (3,542,248 )  (3,009,801 )
           
Cash flows from financing activities:          
 Loan proceeds  1,458,308    3,342,000  
 Advances from investors and partners  -    575,000  
 Decrease in other liabilities  -    (270,646 )
 Proceeds from common stock issuances  835,000    -  
 Subsidiary capital received  33,500    -  
 Capital lease and loan payments  (142,906 )  (36,821 )
   Net cash provided by financing activities  2,183,902    3,609,533  
 Effect of exchange rate changes on cash  119,884    71,431  
Net change in cash  (119,924 )  (1,010,574 )
Cash, beginning of period  442,694    1,223,803  
Cash, end of period $322,770   $213,229  
                            
                            
Reconciliation of net income (loss) to Adjusted EBITDA                                      
Unaudited                                      
Three months ended September 30, 2014:  Restaurants only          
   South Africa   Hungary   ARB   Nottingham  Australia  JF   Hoot Pac NW  Spoon   Management   Totals  
GAAP net income (loss)  $21,310   $(5,177 ) $(204,916 ) $129,520  $376,761  $76,968   $49,958  $(51,954 ) $(882,701 ) $(490,231 )
 Interest expense (income)   17,847    -    70    -   -   (10 )  -   -    563,308    581,215  
 Change in fair value of derivative liablility   -    -    -    -   -   -    -   -    (221,000 )  (221,000 )
 Non-cash expenses related to services   -    -    -    -   -   -    -   -    131,435    131,435  
 Pre-opening expenses   -    -    -    -   52,076   10,217    -   -    -    62,293  
 Depreciation and amortization   100,961    12,933    131,928    3,000   88,643   39,895    56,500   30,415    1,544    465,819  
 Income taxes   (353 )  -    -    12,969   -   -    -   -    (32,342 )  (19,726 )
Adjusted EBITDA  $139,765   $7,756   $(72,918 ) $145,489  $517,480  $127,070   $106,458  $(21,539 ) $(439,756 ) $509,805  
  Total Restaurants EBITDA                                  $949,561            
                                                 
Three months ended September 30, 2013:                                                
                                                 
   South Africa   Hungary                              Management   Totals  
GAAP net income (loss)  $(34,923 ) $(28,815 )                            $(1,391,089 )  (1,454,827 )
 Interest expense   5,617    -                               377,978    383,595  
 Change in fair value of derivative liablility   -    -                               75,900    75,900  
 Non-cash expenses related to services   -    -                               397,249    397,249  
 Pre-opening costs   7,337    -                               -    7,337  
 Depreciation and amortization   96,150    31,891                               1,085    129,126  
 Income taxes   6,019    -                               -    6,019  
Adjusted EBITDA  $80,200   $3,076                              $(538,877 ) $(455,601 )
  Total Restaurants EBITDA                                  $83,276   $(89,196 )     
                                                 
                                                 
Nine months ended September 30, 2014:  Restaurants only          
   South Africa   Hungary   ARB   Nottingham  Australia  JF   Hoot Pac NW  Spoon   Management   Totals  
GAAP net income (loss)  $79,981   $(37,655 ) $(743,023 ) $358,374  $124,488  $293,033   $131,853  $(141,218 ) $(3,546,966 ) $(3,481,133 )
 Interest expense (income)   43,120    -    973    -   -   (10 )  -   -    1,224,673    1,268,756  
 Change in fair value of derivative liablility   -    -    -    -   -   -    -   -    (925,200 )  (925,200 )
 Non-cash expenses related to services   -    -    -    -   -   -    -   -    506,942    506,942  
 Pre-opening expenses   12,331    -    -    -   300,178   10,765    -   -    -    323,274  
 Depreciation and amortization   296,078    62,326    395,837    9,000   110,603   133,114    150,167   81,107    4,963    1,243,195  
 Income taxes   23,661    -    -    46,129   -   -    -   -    (97,025 )  (27,235 )
Adjusted EBITDA  $455,171   $24,671   $(346,213 ) $413,503  $535,269  $436,902   $282,020  $(60,111 ) $(2,832,613 ) $(1,091,401 )
  Total Restaurants EBITDA                                  $1,741,212            
                                                 
Nine months ended September 30, 2013:  Restaurants only                               
   South Africa   Hungary                        Management   Totals  
GAAP net loss  $(71,602 ) $(104,600 )                            $(2,776,161 ) $(2,952,363 )
 Interest expense   28,107    -                               410,834    438,941  
 Change in fair value of derivative liablility   -    -                               75,900    75,900  
 Non-cash expenses related to services   -    -                               397,249    397,249  
 Pre-opening expenses   17,538    -                               -    17,538  
 Gain on debt extinguishment   (70,900 )  -                               -    (70,900 )
 Depreciation and amortization   281,103    87,763                               4,360    373,226  
 Income taxes   27,216    -                               -    27,216  
Adjusted EBITDA  $211,462   $(16,837 )                            $(1,887,818 ) $(1,693,193 )
  Total Restaurants EBITDA       $194,625                                       
                                        

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