Diversified Restaurant Holdings, Inc. (OTCBB:DFRH), the owner/operator and franchisor of the unique, full-service, ultra-casual restaurant and bar, Bagger Dave’s Legendary Burger Tavern (“Bagger Dave’s”) and a leading franchisee for Buffalo Wild Wings (“BWW”), today announced financial results for its third quarter 2010, which ended September 26, 2010.
Revenue for the third quarter of 2010 was $11.4 million, 129% above prior year third quarter revenue of $5.0 million on a non-GAAP basis. Third quarter 2010 revenue included food and beverage sales for 18 BWW and three Bagger Dave’s locations while the non-GAAP measure for the 2009 quarter included sales from seven BWW and two Bagger Dave’s locations as well as management fees for nine BWW restaurants which were acquired by the Company in the first quarter of this year. On a GAAP basis, which includes results of the nine restaurants under common control, our third quarter revenue for 2010 was 9% above prior year revenue of $10.5 million, which included sales from 16 BWW and two Bagger Dave’s restaurants.
Net income for the 2010 third quarter was $200 thousand compared with net income in last year’s third quarter of $174 thousand (on a non-GAAP basis) and $183 thousand (on a GAAP basis), a 15% and 9% improvement, respectively, as DRH continued to reinvest operational cash in new restaurant development.
On a GAAP basis, operating cash flow for the first nine months of 2010 was $2.9 million, or 9% of revenue.
Michael Ansley, President and Chief Executive Officer of DRH, commented, “Our revenue for the quarter improved measurably and is a result of our February 1, 2010 acquisition of nine Buffalo Wild Wings restaurants coupled with the opening of three additional locations in 2010. We are currently realizing the benefits of our nineteenth Buffalo Wild Wings restaurant, which opened in Fort Myers, Florida on November 7, 2010. We look forward to opening our fourth Bagger Dave’s restaurant, along with our twentieth and twenty-first Buffalo Wild Wings restaurants, in the first quarter of 2011. The Company is also evaluating additional restaurant openings during 2011 which will enable us to maintain our aggressive growth strategy.”
Note regarding GAAP v. Non-GAAP Financial Measures
On February 1, 2010, the Company completed an acquisition of nine BWW restaurants that were previously under common control (the “Affiliates Acquisition”). Under Generally Accepted Accounting Principles (“GAAP”), the Affiliates Acquisition was reported as if the transaction had occurred at the beginning of the Company’s 2010 fiscal year. Financial results of the Company’s existing operations were combined, or “pooled”, with the results of the acquired affiliates and reported accordingly. Consistent with GAAP, comparative financial information for prior years was also combined for reporting purposes. Prior to the Affiliates Acquisition, and for a period dating back to 2006, the Company received a fee to manage the acquired affiliates and reported its financial results without regard to “pooling” treatment. Given this historical financial reporting practice, the Company believes a presentation of comparative financial information on both a “pooled” (GAAP) and “unpooled” (non-GAAP) basis provides meaningful financial measures for its shareholders.