GCFB Granite City Food and Brewery Ltd (CE)

Granite City Food & Brewery Ltd. (OTCQB: GCFB), a casual dining restaurant group, today reported results for the second quarter ended July 2, 2013.

Highlights were as follows:

• Total restaurant sales increased 11.8% to $34.0 million for the second quarter of 2013 from $30.4 million in the second quarter of 2012
• Total restaurant sales increased 16.9% to $68.9 million for the first half of 2013 from $59.0 million in the first half of 2012
• Same store sales increased 2.1% in the second quarter of 2013 over the second quarter of 2012
• Same store sales increased 2.5% in the first half of 2013 over the first half of 2012
• Company recorded approximately $2.3 million in Adjusted EBITDA in the second quarter of 2013 compared to $1.9 million in the second quarter of 2012
• Company recorded approximately $4.5 million in Adjusted EBITDA in the first half of 2013 compared to $3.5 million in the first half of 2012

“We incorporated a variety changes to our menu during the second quarter which caused some increases in our labor and food costs as the staff adjusted to the enhanced menu,” commented Rob Doran, CEO. That said, we performed strongly as a company, our Troy and Franklin prototypes continued to perform very well, and we increased our EBITDA on a quarter over quarter basis. During the quarter we also completed the construction of our downtown Indianapolis restaurant that recently opened in July 2013. We feel the team is well positioned and we look forward to future restaurant openings including the upcoming new restaurant in Lyndhurst, Ohio later this fall.”

Second Quarter 2013 Financial Results

Total revenue for second quarter 2013 increased by 11.8% to $34.0 million compared to $30.4 million for the second quarter of 2012. This increase was the result of three additional locations in operation in the second quarter of 2013 compared to that of 2012. Comparable restaurant revenue, which includes restaurants which we have operated for over 18 months, increased 2.1%. Total cost of sales before occupancy was $25.5 million in the second quarter of 2013 or 75.1% of revenue compared to prior year second quarter cost of sales before occupancy of $22.7 million or 74.8% of revenue.

General and administrative expenses were $2.4 million or 6.9% of revenue for the second quarter of 2013 compared to $2.4 million or 7.8% of revenue for the second quarter of 2012. This decrease in general and administrative expense as a percent of revenue was primarily attributable to the larger sales base associated with our additional restaurants in the second quarter of 2013. We believe that the benefit of restaurant, menu and food upgrades, and future restaurant unit growth will help to further reduce general and administrative expenses as a percentage of revenue.

The net loss for the second quarter of 2013 was $0.5 million compared to a net loss of $1.0 million in the second quarter of 2012. Net loss per share available to common shareholders was $(0.09) and $(0.25) for the second quarters of 2013 and 2012, respectively. Net loss per share available to common shareholders in the second quarters of 2013 and 2012 included $(0.02) and $(0.04) attributable to a declared dividend on preferred stock, respectively. Weighted average shares outstanding in the second quarters of 2013 and 2012 were 8.2 million and 4.9 million, respectively.

Year-to-Date 2013 Financial Results

Total revenue for first half 2013 increased by 16.9% to $68.9 million compared to $59.0 million for the first half of 2012. This increase was the result of an additional fiscal week in the first quarter of 2013 and three additional locations in operation in the first half of 2013 compared to that of 2012. Comparable restaurant revenue, which includes restaurants which we have operated for over 18 months, increased 2.5%. Total cost of sales before occupancy was $51.8 million in the first half of 2013 or 75.2% of revenue compared to prior year first half cost of sales before occupancy of $44.0 million or 74.6% of revenue.

General and administrative expenses were $5.1 million or 7.4% of revenue for the first half of 2013 compared to $4.9 million or 8.3% of revenue for the first half of 2012. This decrease in general and administrative expense as a percent of revenue was primarily attributable to the larger sales base associated with the additional fiscal week in the first quarter and additional restaurants in the first half of 2013.

The net loss for the first half of 2013 was $1.0 million compared to a net loss of $2.2 million in the first half of 2012. Net loss per share available to common shareholders was $(0.17) and $(0.55) for the first half of 2013 and 2012, respectively. Net loss per share available to common shareholders in the first half of 2013 and 2012 included $(0.05) and $(0.08) attributable to a declared dividend on preferred stock, respectively. Weighted average shares outstanding in the first half of 2013 and 2012 were 8.1 million and 4.8 million, respectively.

Outlook

Guidance for fiscal year 2013 is as follows:

• Net sales are anticipated to be between $130 million and $140 million.
• Adjusted EBITDA is expected to be between $8.5 million and $9.5 million. As the reconciliation tables below indicate, we derive EBITDA by adding back the following items to operating loss: net interest expense, disposal and exit activities and any related gain or (loss), depreciation and amortization, acquisition cost, pre-opening costs, termination costs, property write-off costs, non cash compensation and any provision for income taxes. Since the company has many capital leases, we further reduce EBITDA for the difference between the fixed rent recorded and the actual amount paid for rent expense to generate Adjusted EBITDA.

Second Quarter 2013 Conference Call

The company will host a conference call to discuss its second quarter financial results on Thursday, August 15, 2013 at 9:30 a.m. Central Time. The call may be accessed by calling 1-800-925-5203 and referencing code 21670680. A replay of the call will be available for 30 days and may be accessed by calling 1-800-633-8625 and entering replay code 21670680.

About Granite City

Granite City Food & Brewery Ltd. develops and operates two casual dining concepts: Granite City Food & Brewery and Cadillac Ranch All American Bar & Grill. Granite City Food & Brewery is a polished casual American restaurant that features a great dining experience with affordable, high-quality menu items prepared from made-from-scratch recipes, served in generous portions. There is a brewery onsite, serving hand-crafted and micro brews. Granite City opened its first restaurant in 1999 and is expanding nationwide; there are currently 29 Granite City restaurants in 13 states. Cadillac Ranch restaurants feature freshly prepared, authentic, All-American cuisine in a fun, dynamic environment. Its patrons enjoy a warm, Rock N’ Roll inspired atmosphere, with plenty of room for friends, music and dancing. The Cadillac Ranch menu is diverse with offerings ranging from homemade meatloaf to pasta dishes, all freshly prepared using quality ingredients. The Company purchased its first Cadillac Ranch in November 2011 and has since purchased five additional Cadillac Ranch restaurants along with its intellectual property. The Company currently operates six Cadillac Ranch restaurants in five states. Additional information about Granite City Food & Brewery can be found at www.gcfb.com.

Forward-Looking Statements, Non-GAAP Financial Measurements and Adjusted Financial Measures

Certain statements made in this press release of a non-historical nature constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. Such factors include, but are not limited to, changes in economic conditions, changes in consumer preferences or discretionary consumer spending, a significant change in the performance of any existing restaurants, our ability to continue funding our operations and meet our debt service obligations, and the risks and uncertainties described in the Cautionary Statement filed as Exhibit 99 to our Quarterly Report on 10-Q filed with the Securities and Exchange Commission on May 17, 2013.

Additionally, this press release contains certain non-GAAP financial measures, including references to restaurant-level IBO, company-wide EBITDA and adjusted EBITDA. As compared to the nearest GAAP measurement for our company, restaurant-level IBO represents revenue less cost of food, beverage, retail, labor and direct restaurant operating expenses. We use restaurant-level IBO and restaurant-level IBO as a percentage of revenue as internal measurements of restaurant-level operating performance. Restaurant-level IBO as we define it may not be comparable to similar measurements used by other companies and is not a measure of performance or liquidity presented in accordance with GAAP. We believe that restaurant-level IBO is an important component of our financial results because it is a widely used measurement within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance. We use restaurant-level IBO as a means of evaluating our restaurants’ financial performance compared with our competitors. As compared to the nearest GAAP measurement for our company, company-wide EBITDA represents operating income (loss) with the add-back of depreciation and amortization, net loss (gain) on disposal of assets and exit or disposal costs. We use company-wide EBITDA as a way to measure our overall internal operational performance without restaurant closings and as a means of evaluating our financial performance compared with our competitors. As compared to the nearest GAAP measurement for our company, adjusted EBITDA represents operating income (loss) with the add-back of net interest expense, disposal and exit activities and any related gain or (loss), depreciation and amortization, acquisition cost, pre-opening costs, termination costs, property write-off costs, non cash compensation and any provision for income taxes, and further adjusts for the difference between the amount of fixed rent recorded on the statements of operations and the actual amount paid for rent expense. We use adjusted EBITDA as a way to measure our overall internal operational performance without restaurant openings and/or closings and as a means of evaluating our restaurants’ financial performance compared with our competitors. These non-GAAP measurements should not be used as substitutes for net loss, net cash provided by or used in operations or other financial data prepared in accordance with GAAP. Schedules of reconciliations of restaurant-level IBO, company-wide EBITDA and adjusted EBITDA for the second quarter and first half of 2013 and 2012 are provided herein.

Finally, in order to provide supplemental results of operations information, we have included certain adjusted financial measures. In particular, we have presented various financial metrics for comparable restaurants, which are those restaurants that we have operated for more than 18 months, and our new restaurants which are those restaurants that we have operated for 18 months or less. The contributions of these groups of restaurants to company-wide performance are set forth herein.

    Granite City Food & Brewery Ltd. Condensed Consolidated Statements of Operations       Thirteen Weeks Ended     27 Weeks Ended     26 Weeks Ended July 2, 2013     June 26, 2012 July 2, 2013 June 26, 2012   Restaurant revenue $ 33,955,331 $ 30,367,622 $ 68,916,785 $ 58,937,622   Cost of sales: Food, beverage and retail 9,235,029 8,293,977 18,773,466 15,915,630 Labor 11,127,070 10,070,410 22,423,503 19,447,843 Direct restaurant operating 5,143,196 4,362,374 10,636,006 8,590,992 Occupancy   2,787,203     2,407,698     5,461,780     4,778,200   Total cost of sales and occupancy 28,292,499 25,134,459 57,294,755 48,732,665   General and administrative 2,353,387 2,362,852 5,104,508 4,891,546 Depreciation and amortization 2,001,162 1,804,163 3,952,805 3,573,294 Pre-opening 185,631 514,342 623,966 748,831 Acquisition costs 44,491 120,505 76,059 485,185 Loss on disposal of assets 244,640 195,435 300,406 223,313 Exit or disposal activities   15,287     16,390     32,075     33,275   Total costs and expenses   33,137,098     30,148,146     67,384,574     58,688,109   Operating income 818,233 219,476 1,532,211 249,513   Interest: Income - 9 - 32 Expense   (1,314,803 )   (1,247,569 )   (2,507,566 )   (2,488,940 ) Net interest expense   (1,314,803 )   (1,247,560 )   (2,507,566 )   (2,488,908 ) Net loss $ (496,570 ) $ (1,028,084 ) $ (975,355 ) $ (2,239,395 )   Loss per common share, basic $ (0.09 ) $ (0.25 ) $ (0.17 ) $ (0.55 )   Weighted average shares outstanding, basic   8,150,419     4,864,987     8,123,609     4,808,648      

Selected Balance Sheet Information

      July 2, 2013     December 25, 2012   Cash $ 862,072 $ 2,566,034 Current assets, including cash $ 5,717,537 $ 5,905,523 Total assets $ 72,415,747 $ 71,766,785 Current liabilities $ 13,220,023 $ 14,811,246 Total liabilities $ 72,003,544 $ 70,258,483 Shareholders' equity $ 412,203 $ 1,508,302    

Non-GAAP Reconciliations Q2 2013 Results

                      Total for All     Comparable % of New % of Restaurants As % of Restaurants

 Sales 

Restaurants

 Sales 

Reported

 Sales 

  Restaurant revenues $ 24,980,168 100 % $ 8,975,163 100 % $ 33,955,331 100 %   Cost of sales: Food, beverage and retail 6,812,909 27.3 % 2,422,120 27.0 % 9,235,029 27.2 % Labor 8,455,901 33.9 % 2,671,169 29.8 % 11,127,070 32.8 % Direct restaurant operating expenses 3,656,385 14.6 % 1,486,811 16.6 % 5,143,196 15.1 %             Restaurant-level IBO* $ 6,054,973 24.2 % $ 2,395,063 26.7 % $ 8,450,036 24.9 %   Occupancy 2,787,203 8.2 % General and administrative 2,353,387 Pre-opening 185,631 Acquisition costs   44,491     Company-wide EBITDA* 3,079,324 9.1 %   Depreciation and amortization 2,001,162 Exit or disposal activities, other   259,929     Operating loss 818,233   Interest: Income - Expense   (1,314,803 ) Net interest expense (1,314,803 )   Net loss $ (496,570 )  

Non-GAAP Reconciliations Q2 2013 Adjusted EBITDA

    Net loss $ (496,570 )   Net interest expense 1,314,803 Exit or disposal activities, other 259,927 Depreciation and amortization 2,001,162 Acquisition costs 44,491 Pre-opening 185,631 Termination/contract negotiation/property write-off costs 20,438 Share-based compensation 33,739 Lease adjustment (1,109,840 )   Adjusted EBITDA* $ 2,253,781     *See accompanying disclosure regarding use of non-GAAP financial measures. Certain percentages may not foot due to rounding.    

Non-GAAP Reconciliations Q2 2012 Results

                      Total for All     Comparable % of New % of Restaurants As % of Restaurants

 Sales 

Restaurants

 Sales 

Reported

 Sales 

  Restaurant revenues $ 24,388,304 100 % $ 5,979,318 100 % $ 30,367,622 100 %   Cost of sales: Food, beverage and retail 6,654,026 27.3 % 1,639,951 27.4 % 8,293,977 27.3 % Labor 8,244,964 33.8 % 1,825,446 30.5 % 10,070,410 33.2 % Direct restaurant operating expenses 3,433,576 14.1 % 928,798 15.5 % 4,362,374 14.4 %             Restaurant-level IBO* $ 6,055,738 24.8 % $ 1,585,123 26.5 % $ 7,640,861 25.2 %   Occupancy 2,407,698 7.9 % General and administrative 2,362,852 Pre-opening 514,342 Acquisition costs   120,505     Company-wide EBITDA* 2,235,464 7.4 %   Depreciation and amortization 1,804,163 Exit or disposal activities, other   211,825     Operating loss 219,476   Interest: Income 9 Expense   (1,247,569 ) Net interest expense (1,247,560 )   Net loss $ (1,028,084 )    

Non-GAAP Reconciliations Q2 2012 Adjusted EBITDA

    Net loss $ (1,028,084 )   Net interest expense 1,247,560 Exit or disposal activities, other 211,825 Depreciation and amortization 1,804,163 Acquisition costs 120,505 Pre-opening 514,342 Share-based compensation 65,625 Lease adjustment (1,012,577 )   Adjusted EBITDA* $ 1,923,359     *See accompanying disclosure regarding use of non-GAAP financial measures. Certain percentages may not foot due to rounding.    

Non-GAAP Reconciliations Q2 YTD 2013 Results

            Total for All   Comparable % of New % of Restaurants % of Restaurants

 Sales 

Restaurants

 Sales 

As Reported

 Sales 

  Restaurant revenues $ 51,002,615 100 % $ 17,914,170 100 % $ 68,916,785 100 %   Cost of sales: Food, beverage and retail 13,918,504 27.3 % 4,854,962 27.1 % 18,773,466 27.2 % Labor 17,159,669 33.6 % 5,263,834 29.4 % 22,423,503 32.5 % Direct restaurant operating expenses 7,622,941 14.9 % 3,013,065 16.8 % 10,636,006 15.4 %             Restaurant-level IBO* $ 12,301,501 24.1 % $ 4,782,309 26.7 % $ 17,083,810 24.8 %   Occupancy 5,461,780 7.9 % General and administrative 5,104,508 Pre-opening 623,966 Acquisition costs   76,059     Company-wide EBITDA* 5,817,497 8.4 %   Depreciation and amortization 3,952,805 Exit or disposal activities, other   332,481     Operating loss 1,532,211   Interest: Income - Expense   (2,507,566 ) Net interest expense (2,507,566 )   Net loss $ (975,355 )    

Non-GAAP Reconciliations Q2 YTD 2013 Adjusted EBITDA

    Net loss $ (975,355 )   Net interest expense 2,507,566 Exit or disposal activities, other 332,481 Depreciation and amortization 3,952,805 Acquisition costs 76,059 Pre-opening 623,966 Termination/contract negotiation/property write-off costs 126,603 Share-based compensation 78,820 Lease adjustment (2,227,974 )   Adjusted EBITDA* $ 4,494,971     *See accompanying disclosure regarding use of non-GAAP financial measures. Certain percentages may not foot due to rounding.    

Non-GAAP Reconciliations Q2 YTD 2012 Results

                        Total for All Comparable % of New % of Restaurants As % of Restaurants

 Sales 

Restaurants

 Sales 

Reported

 Sales 

  Restaurant revenues $ 47,917,628 100 % $ 11,019,994 100 % $ 58,937,622 100 %   Cost of sales: Food, beverage and retail 12,964,962 27.1 % 2,950,668 26.8 % 15,915,630 27.0 % Labor 16,380,980 34.2 % 3,066,863 27.8 % 19,447,843 33.0 % Direct restaurant operating expenses 6,888,088 14.4 % 1,702,904 15.5 % 8,590,992 14.6 %             Restaurant-level IBO* $ 11,683,598 24.4 % $ 3,299,559 29.9 % $ 14,983,157 25.4 %   Occupancy 4,778,200 8.1 % General and administrative 4,891,546 Pre-opening 748,831 Acquisition costs   485,185     Company-wide EBITDA* 4,079,395 6.9 %   Depreciation and amortization 3,573,294 Exit or disposal activities, other   256,588     Operating loss 249,513   Interest: Income 32 Expense   (2,488,940 ) Net interest expense (2,488,908 )   Net loss $ (2,239,395 )    

Non-GAAP Reconciliations Q2 YTD 2012 Adjusted EBITDA

    Net loss $ (2,239,395 )   Net interest expense 2,488,908 Exit or disposal activities, other 256,588 Depreciation and amortization 3,573,294 Acquisition costs 485,185 Pre-opening 748,831 Share-based compensation 146,676 Lease adjustment (1,967,556 )   Adjusted EBITDA* $ 3,492,531     *See accompanying disclosure regarding use of non-GAAP financial measures. Certain percentages may not foot due to rounding.