Del Frisco Restaurant Group

On June 24, L Catterton, a consumer-focused private equity firm, announced it will acquire Del Frisco's in a deal valued at approximately $650 million.

Del Frisco’s Posts Loss in Second Quarter Ahead of Sale

Del Frisco’s Restaurant Group, Inc. reported financial results for the second quarter ended June 25.

On June 24, Del Frisco’s announced that it had entered into a definitive agreement under which affiliates of L Catterton, a consumer-focused private equity firm, will acquire the company in an all cash transaction valued at approximately $650 million. Del Frisco’s stockholders will receive $8.00 per share, representing a 22 percent premium to the closing share price on December 19, 2018, the last trading day prior to company’s announcement of a strategic alternatives process, and a premium of approximately 21 percent to the 30-day volume weighted average price ended on June 21, 2019.

The agreement was unanimously approved by Del Frisco’s Board of Directors following a thorough review of a full range of strategic alternatives by the Board with the assistance of the Board’s Strategic Alternatives Review Committee, which was first announced on December 20, 2018. The transaction is expected to be completed by the fourth quarter of 2019, subject to approval by Del Frisco’s stockholders and other customary closing conditions.

In view of the pending transaction, Del Frisco’s has withdrawn its fiscal year 2019 guidance and long-term outlook and will not host a conference call to discuss these second quarter 2019 financial results.

Key Highlights from the 13-Week Second Quarter 2019 Compared to the 13-Week Second Quarter 2018 Include:

  • Consolidated revenues increased 73.9 percent to $131.7 million from $75.7 million due primarily to $21.1 million in contributions from Barcelona Wine Bar and $28.2 million in contributions from bartaco.
  • Total comparable restaurant sales increased 0.5 percent.
  • GAAP net loss of $6.4 million, or $0.19 per diluted share, compared to GAAP net loss of $1.6 million, or $0.08 per diluted share. 
  • Adjusted net loss of $1.5 million, or $0.05 per diluted share, compared to adjusted net income of $3.0 million, or $0.15 per diluted share. 
  • GAAP operating loss of $0.6 million, compared to GAAP operating loss of $3.0 million
  • Adjusted EBITDA increased 60.3 percent to $13.1 million from $8.2 million. As a percentage of consolidated revenues, adjusted EBITDA margin decreased 80 basis points to 10.0 percent from 10.8 percent.
  • Restaurant-level EBITDA increased 74.9 percent to $28.3 million from $16.2 million due primarily to $5.2 million in contributions from Barcelona Wine Bar and $6.9 million in contributions from bartaco. As a percentage of consolidated revenues, restaurant-level EBITDA margin increased 10 basis points to 21.5 percent from 21.4 percent. Sequentially, restaurant-level EBITDA margin improved 260 basis points relative to the first quarter of 2019.

Review of Second Quarter 2019 Operating Results

Consolidated revenues increased $56 million, or 73.9 percent, to $131.7 million in the second quarter of 2019 from $75.7 million in the second quarter of 2018. All results exclude any contributions from Sullivan’s Steakhouse, which was sold in the third quarter of 2018, and which sale is reflected as discontinued operations for the second quarter of 2018. The increase is due primarily to $21.1 million in contributions from Barcelona Wine Bar and $28.2 million in contributions from bartaco, which were acquired on June 27, 2018.

Comparable Restaurant Sales

 

Total

 

Double Eagle

 

Del Frisco’s Grille

 

Barcelona

 

bartaco

Comparable Restaurant Sales

0.5%

 

(1.5)%

 

(0.6)%

 

2.4%

 

5.5%

Customer Counts

(1.2)%

 

(3.7)%

 

(8.3)%

 

4.9%

 

3.3%

Average Check

1.7%

 

2.2%

 

7.7%

 

(2.5)%

 

2.2%

General and administrative costs increased to $17.1 million in the second quarter of 2019 from $8.0 million in the second quarter of 2018. As a percentage of consolidated revenues, general and administrative costs increased to 13.0 percent from 10.5 percent. The additional costs were primarily related to the addition of Barcelona Wine Bar and bartaco, and additional compensation costs, including stock-based compensation related to growth in the number of restaurant support center and regional management-level personnel to support recent and anticipated growth.

The company also incurred non-recurring consulting project costs of $3.4 million, non-recurring legal expense of $2.0 million, reorganization severance costs of $0.5 million, and donations of $0.2 million as set out in the Adjusted Net (Loss) Income Reconciliation attached.

GAAP net loss was $6.4 million, or $0.19 per diluted share, in the second quarter of 2019, compared to GAAP net loss of $1.6 million, or $0.08 per diluted share, in the second quarter of 2018.

Adjusted net loss was $2.3 million, or $0.07 per diluted share, in the second quarter of 2019, compared to adjusted net income of $3.0 million, or $0.15 per diluted share, in the second quarter of 2018.

Adjusted EBITDA increased 60.3 percent to $13.1 million from $8.2 million. As a percentage of consolidated revenues, Adjusted EBITDA margin decreased 80 basis points to 10.0 percent from 10.8 percent.

Restaurant-level EBITDA increased $12.1 million, or 74.9 percent, to $28.3 million in the second quarter of 2019, primarily due to $5.2 million in contributions from Barcelona and $6.9 million in contributions from bartaco. As a percentage of consolidated revenues, restaurant-level EBITDA increased to 21.5 percent from 21.4 percent.

Recent Development

A Barcelona Wine Bar opened in Raleigh, North Carolina during the second quarter of 2019.

A bartaco restaurant opened in Deerfield, Illinois during the second quarter of 2019.

News and information presented in this release has not been corroborated by FSR, Food News Media, or Journalistic, Inc.