SOURCE: Kona Grill, Inc.

Kona Grill, Inc.

October 30, 2013 16:05 ET

Kona Grill Reports Third Quarter 2013 Results

Same-Store Sales Increase 2.6%; Net Income of $0.08 per Share

SCOTTSDALE, AZ--(Marketwired - Oct 30, 2013) - Kona Grill, Inc. (NASDAQ: KONA), an American grill and sushi bar, reported financial results for the third quarter ended September 30, 2013.

Third Quarter 2013 Summary vs. Year-Ago Quarter:

  • Restaurant sales increased 2.6% to $24.5 million from $23.9 million;
  • Same-store sales increased 2.6%;
  • Net income of $660,000, or $0.08 per share, compared to $984,000, or $0.11 per share.

"Our third quarter same-store sales of 2.6% exceeded our expectations, marking our twelfth positive same-store sales quarter out of the last thirteen," said Berke Bakay, President and CEO of Kona Grill. "Despite macro-economic uncertainty and other pressures in the casual-dining segment we believe our increase in guest traffic for the quarter speaks to our ability to consistently deliver a unique dining experience."

Bakay continued: "Momentum for Kona Grill remains strong as we continue the process of transitioning back into a growth company. We opened in Boise, Idaho on October 18th, our first new restaurant since 2010, and early guest feedback is promising. Moreover, we are on track to open our next restaurant in The Woodlands, Texas before year-end and plan to open our new Fort Worth, Texas location in the first quarter of 2014. We recently signed several leases and continue to make progress on our 2014 and 2015 development pipeline. We plan to open at least four new restaurants in 2014 and currently have two leases signed for 2015 openings. Our goal is to double our sales over the next five years, which translates to an approximately 15% compounded annual growth rate."

Third Quarter 2013 Financial Results
Restaurant sales in the third quarter of 2013 increased 2.6% to $24.5 million compared to $23.9 million in the third quarter of 2012. The sales improvement reflects a 2.6% increase in same-store sales, driven by a 1.6% increase in traffic and a 1.0% increase in average guest check.

Restaurant operating profit in the third quarter of 2013 of $4.4 million was flat compared to the third quarter of 2012. As a percentage of sales, restaurant operating profit was 18.0% compared to 18.5% in the year-ago quarter. The change in restaurant operating margin was primarily due to higher prime costs.

Net income in the third quarter of 2013 was $660,000, or $0.08 per share, compared to net income of $984,000, or $0.11 per share, in the year-ago quarter.

At September 30, 2013, cash and cash equivalents totaled $9.0 million compared to $8.0 million at December 31, 2012. The $20.0 million credit facility the company established in April 2013 remains fully available.

Guidance
For the fourth quarter of 2013, the company expects same-store sales growth of 3.0%, excluding the impact from two extensive restaurant remodels that commenced in October. As a result of the remodels and new restaurant openings, the company forecasts restaurant sales of $24.5 million for the fourth quarter of 2013, compared to $23.0 million in the same year-ago quarter.

The company expects a net loss for the fourth quarter of 2013 of $600,000 or $0.07 per share, which includes an approximate $0.18 per share impact from a combination of preopening expenses, lost sales and costs associated with two restaurant remodels, and G&A spending in support of new unit growth, compared to net income of $851,000, or $0.10 per share, for the fourth quarter of 2012. The company reaffirms its guidance of two restaurant openings in 2013, with the aforementioned Boise, Idaho location opened on October 18th, and The Woodlands, Texas restaurant slated to open before the end of the year.

Conference Call
The Company will host a conference call today, October 30, 2013, at 5:00 p.m. Eastern Time to discuss its third quarter 2013 results. President and CEO Berke Bakay and CFO Christi Hing will host the call, followed by a question and answer session.

Toll-free dial-in number: 1-877-941-8416
International dial-in number: 1-480-629-9808
Conference ID: 4645363

The conference call will be broadcast simultaneously and available for replay via the investors section of the company's website at www.konagrill.com.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

A replay of the call will be available after 8:00 p.m. Eastern Time on the same day through November 29, 2013.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 4645363

About Kona Grill
Kona Grill (NASDAQ: KONA) features American favorites with an international influence and award-winning sushi in a casually elegant atmosphere. Kona Grill owns and operates 24 restaurants, guided by a passion for quality food and personal service. Restaurants are currently located in 17 states: Arizona (Chandler, Gilbert, Phoenix, Scottsdale); Colorado (Denver); Connecticut (Stamford); Florida (Tampa); Idaho (Boise); Illinois (Lincolnshire, Oak Brook); Indiana (Carmel); Louisiana (Baton Rouge); Maryland (Baltimore); Michigan (Troy); Minnesota (Eden Prairie); Missouri (Kansas City); Nebraska (Omaha); New Jersey (Woodbridge); Nevada (Las Vegas); Texas (Austin, Dallas, Houston, San Antonio); Virginia (Richmond). For more information, visit www.konagrill.com.

Forward-Looking Statements
The financial guidance we provide for our fourth quarter 2013 results, statements about our beliefs regarding targeted sales growth, targeted new restaurant openings, profits and stockholder value, and certain other statements contained in this press release are forward-looking. Forward-looking statements include statements regarding our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events, or performance and underlying assumptions and other statements that are not purely historical. We have attempted to identify these statements by using forward-looking terminology such as "may," "will," "anticipates," "expects," "believes," "intends," "should," or comparable terms. All forward-looking statements included in this press release are based on information available to us on the date of this release and we assume no obligation to update these forward-looking statements for any reason. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements and the discussion of risk factors contained in the company's filings with the Securities and Exchange Commission.

   
   
KONA GRILL, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(in thousands)  
           
    September 30,   December 31,  
    2013   2012  
    (Unaudited)      
           
ASSETS              
  Cash and cash equivalents   $ 9,000   $ 7,989  
  Other current assets     1,666     1,597  
  Other assets     1,137     812  
  Property and equipment, net     31,906     28,927  
  Total assets   $ 43,709   $ 39,325  
              `
LIABILITIES AND STOCKHOLDERS' EQUITY              
  Current liabilities   $ 9,632   $ 8,542  
  Long-term obligations     11,418     11,915  
  Stockholders' equity     22,659     18,868  
  Total liabilities and stockholders' equity   $ 43,709   $ 39,325  
   
   
   
KONA GRILL, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  
(in thousands, except per share data)  
                         
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2013     2012     2013     2012  
    (Unaudited)     (Unaudited)  
                         
Restaurant sales   $ 24,507     $ 23,887     $ 73,799     $ 73,035  
Costs and expenses:                                
  Cost of sales     6,755       6,540       20,176       19,849  
  Labor     8,277       8,040       24,551       24,199  
  Occupancy     1,691       1,569       5,003       4,650  
  Restaurant operating expenses     3,382       3,310       9,954       10,248  
  General and administrative     1,905       1,761       5,790       5,365  
  Preopening expense     356       -       397       -  
  Gain on insurance recoveries     -       (101 )     -       (101 )
  Depreciation and amortization     1,395       1,392       4,236       4,311  
Total costs and expenses     23,761       22,511       70,107       68,521  
Income from operations     746       1,376       3,692       4,514  
Nonoperating income (expense):                                
  Write off of deferred financing costs     -       -       (66 )     -  
  Interest expense, net     (52 )     (6 )     (96 )     (26 )
Income from continuing operations before provision for income taxes     694       1,370       3,530       4,488  
Provision for income taxes     34       -       309       120  
Income from continuing operations     660       1,370       3,221       4,368  
Loss from discontinued operations, net of tax     -       (386 )     -       (433 )
Net income   $ 660     $ 984     $ 3,221     $ 3,935  
                                 
Net income per share - Basic                                
  Income from continuing operations   $ 0.08     $ 0.16     $ 0.38     $ 0.50  
  Loss from discontinued operations     -       (0.05 )     -       (0.05 )
  Net income   $ 0.08     $ 0.11     $ 0.38     $ 0.45  
                                 
Net income per share - Diluted                                
  Income from continuing operations   $ 0.08     $ 0.16     $ 0.37     $ 0.49  
  Loss from discontinued operations     -       (0.05 )     -       (0.05 )
  Net income   $ 0.08     $ 0.11     $ 0.37     $ 0.44  
                                 
Weighted average shares outstanding:                                
  Basic     8,585       8,710       8,565       8,776  
  Diluted     8,778       8,808       8,716       8,956  
                                 
Comprehensive income   $ 660     $ 984     $ 3,221     $ 3,935  
                         
                         
                         
Reconciliation of Restaurant Operating Profit to Income from Operations  
                         
The Company defines restaurant operating profit to be restaurant sales minus cost of sales, labor, occupancy, and restaurant operating expenses. Restaurant operating profit does not include general and administrative expenses, preopening expense and depreciation and amortization. The Company believes restaurant operating profit is an important component of financial results because it is a widely used metric within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance. The Company uses restaurant operating profit as a key metric to evaluate its restaurants' financial performance compared with its competitors. Restaurant operating profit is not a financial measurement determined in accordance with generally accepted accounting principles ("GAAP") and should not be considered in isolation or as an alternative to income from operations. Restaurant operating profit may not be comparable to the same or similarly titled measures computed by other companies. The table below sets forth the Company's calculation of restaurant operating profit and a reconciliation to income from operations, the most comparable GAAP measure (in thousands).  
                         
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2013     2012     2013     2012  
                         
Restaurant sales   $ 24,507     $ 23,887     $ 73,799     $ 73,035  
Costs and expenses:                                
  Cost of sales     6,755       6,540       20,176       19,849  
  Labor     8,277       8,040       24,551       24,199  
  Occupancy     1,691       1,569       5,003       4,650  
  Restaurant operating expenses     3,382       3,310       9,954       10,248  
Restaurant operating profit     4,402       4,428       14,115       14,089  
Deduct - other costs and expenses:                                
  General and administrative     1,905       1,761       5,790       5,365  
  Preopening expense     356       -       397       -  
  Gain on insurance recoveries     -       (101 )     -       (101 )
  Depreciation and amortization     1,395       1,392       4,236       4,311  
Income from operations   $ 746     $ 1,376     $ 3,692     $ 4,514  
                                 
                                 
      Percentage of Restaurant Sales       Percentage of Restaurant Sales  
      Three Months Ended September 30,       Nine Months Ended September 30,  
      2013       2012       2013       2012  
                                 
Restaurant sales     100.0 %     100.0 %     100.0 %     100.0 %
Costs and expenses:                                
  Cost of sales     27.6       27.4       27.3       27.2  
  Labor     33.8       33.7       33.3       33.1  
  Occupancy     6.9       6.6       6.8       6.4  
  Restaurant operating expenses     13.8       13.8       13.5       14.0  
Restaurant operating profit     18.0       18.5       19.1       19.3  
Deduct - other costs and expenses:                                
  General and administrative     7.8       7.4       7.8       7.3  
  Preopening expense     1.5       -       0.5       -  
  Gain on insurance recoveries     -       (0.4 )     -       (0.1 )
  Depreciation and amortization     5.7       5.8       5.7       5.9  
Income from operations     3.0 %     5.7 %     5.0 %     6.1 %
                                 
Certain amounts do not sum to total due to rounding.                                
                                 

Contact Information

  • Kona Grill Investor Relations Contact:
    Liolios Group, Inc.
    Cody Slach
    Tel 1-949-574-3860
    Email Contact