Chanticleer Holdings Reports Operating Results for

Fourth Quarter and Year Ended December 31, 2016

 

CHARLOTTE, NC – March 28, 2017 — Chanticleer Holdings, Inc. (NASDAQ: HOTR) (“Chanticleer,” or the “Company”), owner, operator and franchisor of multiple branded restaurants in the U.S. and abroad, today announced financial results for the fourth quarter and year ended December 31, 2016.

 

Annual Revenue Growth of 18.0%; First Full Year of Positive Adjusted EBITDA

 

  Total revenue for year increased 18.0% to $41.7 million, primarily resulting from growth in the Fast Casual Better Burger segment.
     
  Cost of sales as a percentage of restaurant sales improved to 33.0%, compared to 34.4% in the comparable period last year.
     
  Operating expenses as a percentage of restaurant sales improved to 55.7% compared to 57.5% in the comparable period last year.
     
  General and administrative expenses as a percentage of total revenue decreased to 13.9% from 19.2% of sales in the comparable period last year.
     
  Loss from continuing operations improved to $(4.3) million or $(0.20) per share, compared to $(8.1) million or $(0.57) in the comparable period last year.
     
  Net cash used in operating activities of continuing operations improved to $0.4 million compared to $4.2 million in the prior year.
     
  Restaurant EBITDA improved 60.9% to $5.0 million compared to $3.1 million for the year.
     
  Adjusted EBITDA improved to positive $82 thousand for the current year compared to a loss of $(1.8) million last year, with 2016 being the Company’s first year of positive Adjusted EBITDA.

 

Fourth Quarter Revenue Decreased 9.7%, Margins Improved, Quarterly Comparisons Impacted by Strong Dollar and Investment Management Revenue decline

 

  Total revenue for the fourth quarter decreased 9.7% to $9.9 million from $10.9 million in the prior year, primarily due to the absence of non-recurring investment management revenue related to the Hooters dividend that was included in prior year revenue, as well as the impact of the stronger dollar on our foreign operations.
     
  Cost of sales as a percentage of restaurant sales improved to 32.8% compared to 34.3% in the comparable quarter last year.
     
  Operating expenses as a percentage of restaurant sales increased to 57.5% compared to 56.6% in the comparable quarter last year.
     
  General and administrative expenses as a percentage of total revenue decreased to 14.2% from 15.0% in the comparable quarter last year.
     
  Net loss from continuing operations increased to $(1.9) million or $(0.09) per share, compared to $(1.8) million or $(0.08) in the comparable quarter last year.
     
  Restaurant EBITDA was relatively unchanged at $1.1 million compared to $1.0 million for the comparable quarter of last year.
     
  Adjusted EBITDA was negative $(0.1) million compared to positive $0.1 million in the comparable quarter last year. The decline in quarterly Adjusted EBITDA was primarily due to the prior year including investment management revenue related to Hooters dividends, which did not recur in the fourth quarter of 2016.

 

Mike Pruitt, Chairman and CEO of Chanticleer commented, “We made great progress in fiscal 2016 and our annual results demonstrate the efforts to build scale and drive efficiencies in our business over the past two years. We achieved our first year of EBITDA profitability, while establishing our regional brand strategy and laying the foundation to begin to accelerate growth.

 

 
 

 

“We have three Little Big Burger stores opening in the first four months of 2017 and are on track to open 8-12 new company and franchise stores by the end of this year. That’s a significant change coming out of a year where we opened no new company stores as we shift our focus from internal integration projects to external growth and franchising initiatives.”

 

Mr. Pruitt continued, “Given our increased emphasis on high returning assets and expanding our core brands, we are also committed to taking actions to strengthen our balance sheet and improve liquidity as we prepare to accelerate our growth in 2017.”

 

Conference Call

 

The Company will hold a conference call on Tuesday March 28, 2017 at 4:30 pm. Eastern Time.

 

To access the call, dial (877) 407-8133 approximately five minutes prior to the scheduled start time. International callers please dial (201) 689-8040. To access the webcast, including the quarterly slide presentation, log onto the Chanticleer website at: http://www.chanticleerholdings.com/

 

A replay of the teleconference will be available until April 28, 2017 and may be accessed by dialing (877) 481-4010. International callers may dial (919) 882-2331. Callers should use conference ID: 10289.

 

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 also excludes pre-opening and closing costs for our restaurants, non-cash expenses, transaction and severance related expenses, change in fair value of derivative liability and other income and expenses.

 

In addition, Restaurant EBITDA also excludes management fee income, franchise revenue and general and administrative expenses. 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 and by the Company’s creditors. 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.

 

For further information, please refer to Chanticleer’s Quarterly Report on Form 10-K to be filed with the SEC on or about March 29, 2017 available online at www.sec.gov.

 

About Chanticleer Holdings, Inc.

 

Headquartered in Charlotte, NC, Chanticleer Holdings (HOTR), owns, operates and franchises fast casual and full service restaurant brands, including American Burger Company, BGR – Burgers Grilled Right, Little Big Burger, Just Fresh and Hooters.

 

 
 

 

Forward-Looking Statements

 

This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. These statements include projections, predictions, expectations or statements as to beliefs or future events or results or refer to other matters that are not historical facts. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated by these statements. The forward-looking statements contained in this press release are based on various factors and were derived using numerous assumptions. 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 those words and other comparable words.

 

Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Forward-looking statements in this press release include, without limitation, statements reflecting management’s expectations for future financial performance and operating expenditures, expected growth, profitability and business outlook, increased sales and marketing expenses, and the expected results from the integration of our acquisitions.

 

Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from those anticipated by such statements. These factors include, but are not limited to, the Company’s ability to manage growth; integrate acquisitions; manage debt; meet development goals; and other important risks and uncertainties referenced and discussed under the heading titled “Risk Factors” in the Company’s filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements contained in this press release are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

 

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 website or otherwise. The Company does not assume any obligations to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

 

Contact:

Chanticleer Holdings, Inc.

Mike Pruitt, Chairman/CEO

Phone: 704.366.5122 x 1

mp@chanticleerholdings.com

 

Eric Lederer, CFO

Phone: 704.366.5736

elederer@chanticleerholdings.com

 

Press Information:

Chanticleer Holdings, Inc.

Investor Relations

Phone: 704.366.5122

ir@chanticleerholdings.com

 

Investor Relations

John Nesbett/Jennifer Belodeau

Institutional Marketing Services (IMS)

Phone 203.972.9200

jnesbett@institutionalms.com

 

 
 

 

Chanticleer Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

 

    December 31, 2016     December 31, 2015  
ASSETS                
Current assets:                
Cash   $ 268,575     $ 1,224,415  
Accounts and other receivables     524,481       862,935  
Inventories     539,550       569,545  
Prepaid expenses and other current assets     461,074       568,251  
Assets of discontinued operations, current     -       593,430  
TOTAL CURRENT ASSETS     1,793,680       3,818,576  
Property and equipment, net     11,513,693       12,144,064  
Goodwill     12,405,770       12,702,139  
Intangible assets, net     6,530,243       6,776,936  
Investments     800,000       800,000  
Deposits and other assets     442,737       574,192  
Assets of discontinued operations     -       5,389,300  
TOTAL ASSETS   $ 33,486,123     $ 42,205,207  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable and accrued expenses   $ 5,553,068     $ 4,740,131  
Current maturities of long-term debt and notes payable, net of discount of  of $0 and $171,868, respectively     6,171,649       5,383,003  
Current maturities of convertible notes payable, net of debt discount   of $0 and $914,724, respectively     -       2,810,276  
Current maturities of capital leases payable     18,449       39,303  
Due to related parties     194,350       12,963  
Deferred rent     173,775       683,793  
Derivative liabilities     -       1,231,608  
Liabilities of discontinued operations, current     -       1,279,955  
TOTAL CURRENT LIABILITIES     12,111,291       16,181,032  
Long-term debt, less current portion     287,445       1,098,641  
Convertible notes payable, net of debt discount  of $46,936 and $0, respectively     3,678,064       -  
Redeemable preferred stock: no par value, 19,050 and 0 issued and outstanding, respectively     257,175       -  
Capital leases payable, less current maturities     -       15,969  
Deferred rent     1,961,751       1,740,012  
Liabilities of discontinued operations     -       58,648  
Deferred tax liabilities     1,485,554       1,353,771  
TOTAL LIABILITIES     19,781,280       20,448,073  
Commitments and contingencies (Note 16)                
Common stock subject to repurchase obligation, 562,900 shares issued and outstanding     349,000       -  
Stockholders’ equity:                
Preferred stock: no par value; authorized 5,000,000 shares; 19,050 and 0 issued and outstanding, respectively     -       -  
Common stock: $0.0001 par value; authorized 45,000,000                
shares; issued and outstanding 21394,247 and 21,337,247                
shares, respectively     2,140       2,134  
Additional paid in capital     55,924,269       55,365,597  
Accumulated other comprehensive loss     (1,155,658 )     (987,695 )
Accumulated deficit     (42,206,325 )     (33,012,712 )
Total Chanticleer Holdings, Inc, Stockholder’s Equity     12,564,426       21,367,324  
Non-Controlling Interests     791,417       389,810  
TOTAL STOCKHOLDERS’ EQUITY     13,355,843       21,757,134  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 33,486,123     $ 42,205,207  

 

See accompanying notes to consolidated financial statements

 

 
 

 

Chanticleer Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

 

    Three Months Ended     Year Ended  
    December 31, 2016     December 31, 2015     December 31, 2016     December 31, 2015  
Revenue:                                
Restaurant sales, net   $ 9,571,879     $ 10,374,165     $ 40,640,159     $ 34,201,668  
Gaming income, net     125,973       107,236       441,620       367,666  
Management fee income     25,000       349,829       100,000       424,829  
Franchise income     138,741       88,476       520,222       359,424  
Total revenue     9,861,593       10,919,706       41,702,001       35,353,587  
Expenses:                                
Restaurant cost of sales     3,143,308       3,562,882       13,392,078       11,754,515  
Restaurant operating expenses     5,501,259       5,873,416       22,641,951       19,677,617  
Restaurant pre-opening and closing expenses     27,143       24,453       145,130       505,098  
General and administrative expenses     1,400,207       1,634,716       5,801,033       6,798,642  
Depreciation and amortization     602,882       724,140       2,341,697       1,697,514  
Total expenses     10,674,799       11,819,607       44,321,889       40,433,386  
Operating loss from continuing operations     (813,206 )     (899,901 )     (2,619,888 )     (5,079,799 )
Other (expense) income                                
Interest expense     (642,463 )     (729,999 )     (2,347,019 )     (3,466,554 )
Change in fair value of derivative liabilities     -       35,453       1,231,608       868,592  
Loss on extinguishment of debt     -       -       -       (315,923 )
Other income (expense)     (424,660 )     49,209       (412,272 )     99,399  
Total other (expense) income     (1,067,123 )     (645,337 )     (1,527,683 )     (2,814,486 )
Loss from continuing operations before income taxes     (1,880,329 )     (1,545,238 )     (4,147,571 )     (7,894,285 )
Income tax benefit (expense)     (60,596 )     (217,867 )     (198,463 )     (187,568 )
Loss from continuing operations     (1,940,925 )     (1,763,105 )     (4,346,034 )     (8,081,853 )
Discontinued operations                                
Loss from operation of discontinued operations, net of tax     -       (795,040 )     (1,304,627 )     (6,373,790 )
Loss on write down of net assets     113,908       -       (3,762,253 )     -  
Consolidated net loss     (1,827,018 )     (2,558,145 )     (9,412,914 )     (14,455,643 )
Less: Net loss (income) attributable to non-controlling interest of continuing operations     21,805       4,162       75,417       (9,088 )
Less: Net loss (income) attributable to non-controlling interest of discontinued operations     -       148,386       260,925       2,328,206  
Net loss attributable to Chanticleer Holdings, Inc.   $ (1,805,213 )   $ (2,405,597 )   $ (9,076,572 )   $ (12,136,525 )
      -                          
Net loss attributable to Chanticleer Holdings, Inc.:                                
Loss from continuing operations   $ (1,919,121 )   $ (1,758,943 )   $ (4,270,617 )   $ (8,090,941 )
Loss from discontinued operations     113,908       (646,654 )     (4,805,955 )     (4,045,584 )
Net loss attributable to Chanticleer Holdings, Inc.   $ (1,805,213 )   $ (2,405,597 )   $ (9,076,572 )   $ (12,136,525 )
      -                          
Other comprehensive loss:                                
Unrealized loss on available-for-sale securities, net of tax   $ -     $ (4,039 )   $ (24,501 )   $ (4,039 )
Reclassification of loss recognized in net loss, net of tax     223,743       -       223,743       -  
Foreign currency translation     (131,613 )     (71,757 )     (271,452 )     (963,528 )
Total other comprehensive loss     92,130       (75,796 )     (72,210 )     (967,567 )
Comprehensive loss   $ (1,713,083 )   $ (2,481,393 )   $ (9,148,782 )   $ (13,104,092 )
                                 
Net loss attributable to Chanticleer Holdings, Inc. per common share, basic and diluted:                                
Continuing operations attributable to common stockholders, basic and diluted   $ (0.09 )   $ (0.08 )   $ (0.20 )   $ (0.57 )
Discontinued operations attributable to common stockholders, basic and diluted   $ 0.01     $ (0.03 )   $ (0.22 )   $ (0.28 )
Weighted average shares outstanding, basic and diluted     21,957,147       21,337,247       21,695,030       14,245,437  

 

See accompanying notes to consolidated financial statements

 

 
 

 

Chanticleer Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

 

    December 31, 2016     December 31, 2015  
Cash flows from operating activities:                
Net loss   $ (9,412,914 )   $ (14,455,643 )
Net loss from discontinued operations     5,066,880       6,373,790  
Net loss from continuing operations     (4,346,034 )     (8,081,853 )
Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities:                
Depreciation and amortization     2,341,697       1,697,514  
Loss on extinguishment of debt     -       315,923  
Loss on disposal of property and equipment     -       514,522  
Loss (gain) on sales of investments     -       169,639  
Common stock and warrants issued for services     24,510       279,362  
Common stock and warrants issued for interest     349,000       -  
Amortization of debt discount     1,039,656       2,379,951  
Amortization of warrants     -       22,375  
Change in assets and liabilities:                
Accounts and other receivables     (336,546 )     96,261  
Prepaid and other assets     113,633       (78,236 )
Inventory     33,217       6,016  
Accounts payable and accrued liabilities     1,540,463       (235,283 )
Change in amounts payable to related parties     194,350       (198,669 )
Derivative liabilities     (1,231,607 )     (868,592 )
Deferred income taxes     131,783       94,527  
Deferred rent     (288,279 )     (300,259 )
Net cash used in operating activities from continuing operations     (434,158 )     (4,186,802 )
Net cash used in operating activities from discontinued operations     (75,000 )     (1,064,363 )
Net cash used in operating activities     (509,158 )     (5,251,165 )
                 
Cash flows from investing activities:                
Purchase of property and equipment     (1,191,174 )     (1,798,221 )
Cash paid for acquisitions, net of cash acquired     (72,215 )     (9,022,791 )
Proceeds from sale of investments     8,902       330,361  
Net cash used in investing activities from continuing operations     (1,254,487 )     (10,490,651 )
                 
Cash flows from financing activities:                
Proceeds from sale of common stock and warrants     -       14,921,903  
Proceeds from sale of preferred stock     257,175       -  
Loan proceeds     275,000       2,813,074  
Loan repayments     (513,523 )     (891,529 )
Capital lease payments     (40,636 )     (52,807 )
Contribution of non-controlling interest     823,671       -  
Net cash provided by financing activities from continuing operations     801,687       16,790,641  
Effect of exchange rate changes on cash     6,118       (4,944 )
Net increase (decrease) in cash     (955,840 )     1,043,881  
Cash, beginning of period     1,224,415       180,534  
Cash, end of period   $ 268,575     $ 1,224,415  

 

See accompanying notes to consolidated financial statements

 

 
 

 

Chanticleer Holdings, Inc. and Subsidiaries

Reconcilation of Net Loss to EBITDA

(Unaudited)

 

    Three Months Ended     Year Ended  
    December 31, 2016     December 31, 2015     December 31, 2016     December 31, 2015  
                         
Consolidated net loss   $ (1,940,925 )   $ (1,763,105 )   $ (4,346,034 )   $ (8,081,853 )
Interest expense     642,463       729,999       2,347,019       3,466,554  
Income tax     60,596       217,867       198,463       187,568  
Depreciation and amortization     602,882       724,140       2,341,697       1,697,514  
EBITDA   $ (634,984 )   $ (91,099 )   $ 541,145     $ (2,730,217 )
Restaurant pre-opening and closing expenses     27,143       24,453       145,130       505,098  
Change in fair value of derivative liabilities     -       (35,453 )     (1,231,608 )     (868,592 )
Loss on extinguishment of debt     -       -       -       315,923  
Transaction and severence related expenses     68,292       283,034       214,905       1,103,179  
Other income     424,660       (49,209 )     412,272       (99,399 )
Adjusted EBITDA   $ (114,889 )   $ 131,726     $ 81,844     $ (1,774,008 )
General and administrative expenses     1,331,915       1,351,682       5,586,128       5,695,463  
Franchise revenues     (138,741 )     (88,476 )     (520,222 )     (359,424 )
Management fee revenue     (25,000 )     (349,829 )     (100,000 )     (424,829 )
Restaurant EBITDA   $ 1,053,285     $ 1,045,103     $ 5,047,750     $ 3,137,202