FAT Brands Results

FAT Brands Inc. Announces 2017 Financial Results

Fatburger & Buffalo’s Express - Same-store sales growth in core domestic market of 7.4% in 2017 - System-wide same-store sales growth of 2.3% in 2017

FAT Brands

FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) today announced financial results for fiscal 2017.

Andy Wiederhorn, President and CEO of FAT Brands, commented, “2017 was an eventful year for FAT Brands. Not only did we form the company, but we successfully completed an IPO, acquired the Ponderosa and Bonanza Steakhouse (“Ponderosa”) brands, and signed a definitive agreement to purchase Hurricane Grill & Wings (“Hurricane”). Our company’s foundation is strong, our platform is highly scalable, and FAT Brands is poised for growth.”

Wiederhorn continued, “We saw continued strong business momentum in 2017, with positive same-store sales growth domestically across all of our brands. Trends at our flagship brand, Fatburger were particularly strong, with adjusted same-store sales growth in core domestic markets up 7.4% year-over-year, marking Fatburger’s 8th consecutive year of positive, domestic same-store sales growth. These results were driven by continued strength in delivery, as well as a strong reception to the initial launch of the Impossible Burger, a plant-based burger which tastes, cooks, and smells like fresh ground beef. We are pleased to report that we have seen the momentum from 2017 carry into 2018 across most of our brands, with Fatburger reporting system-wide same store sales growth of over 6%, Buffalo’s up 0.2% and Ponderosa system-wide down 0.6% year-to-date.”

“We now expect to close on the Hurricane acquisition in the second quarter of 2018. Pro forma for the Hurricane acquisition and after full integration of expected synergies, we continue to expect annualized revenue (next 12 months beginning in the 3rdquarter of 2018) to exceed $18.5 million, and annualized EBITDA of greater than $11 million, or $1.10 per share. Excluding Hurricane, we expect annualized revenues from our Fatburger, Buffalo’s, and Ponderosa brands to total $14 million, resulting in EBITDA of $7 million,” Wiederhorn concluded.

The Company was formed as a Delaware corporation on March 21, 2017 as a wholly-owned subsidiary of Fog Cutter Capital Group Inc. (“FCCG”). The Company was formed for the purpose of completing a public offering and related transactions, and to acquire and continue certain businesses previously conducted by subsidiaries of FCCG. These transactions occurred on October 20, 2017.

The following highlights present key components of our consolidated results of operations for the period beginning March 21, 2017 (inception) through December 31, 2017, which includes the operating results of Fatburger, Buffalo’s and Ponderosa for the period from October 20, 2017 (acquisition) through December 31, 2017. Because this is our initial year of operation, comparative information is not available.

2017 FAT Brands Inc. Highlights

  • Total revenues of $2.2 million
  • EBITDA of $21,000
  • Net loss of $613,000, or $0.07 per share(1)

(1)

 

For 2017, there was a one-time tax expense of approximately $505,000 related to the change in federal income tax rate which revalued our deferred tax assets.

Fatburger and Buffalo’s were historically under control of FCCG and are predecessors of FAT Brands for financial reporting purposes. To provide financial information by brand in the highlights below, the data presented was compiled for fiscal 2017, combining the audited financial statements of Fatburger and Buffalo’s for the pre-acquisition period from December 26, 2016 through October 19, 2017 with the Fatburger and Buffalo’s brand results included in the audited consolidated financial statements of FAT Brands Inc. for the period beginning March 21, 2017 (inception) through December 31, 2017 (which includes the brand results of Fatburger and Buffalo’s from October 20, 2017 through December 31, 2017).

FAT Brands was not affiliated with the Ponderosa entities until they became our wholly-owned subsidiaries on October 20, 2017. Accordingly, only the financial results of Ponderosa which occurred subsequent to our acquisition are presented in the highlights below.

2017 Brand Highlights

  • Fatburger & Buffalo’s Express
    • Same-store sales growth(1) in core domestic market of 7.4% in 2017
    • System-wide same-store sales growth(2) of 2.3% in 2017
    • Total revenues of $6.7 million
    • EBITDA of $4.2 million
    • Net income of $2.2 million
    • 20 new store openings
  • Buffalo’s Café
    • Same-store sales growth(3) of 1.4% in 2017
    • Total revenue of $1.8 million
    • EBITDA of $974,000
    • Net income of $639,000
  • Ponderosa & Bonanza Steakhouse
    • Same-store sales growth in core domestic market of 1.1% in 2017
    • System-wide same-store sales growth of negative 2.7% in 2017
    • Total revenue of $807,000(4)
    • EBITDA loss of $8,000(4)
    • 1 new store opening in 2017

(1)

  Excludes 1 Fatburger location that was adversely affected by ongoing construction

(2)

  Excludes 2 Fatburger locations that were adversely affected by ongoing construction

(3)

  Excludes 2 Buffalo’s locations with extraordinary adverse conditions from construction, changes in alcohol laws and political sanctions affecting supply chain

(4)

  Includes the operating results of Ponderosa for the period from October 20, 2017 (acquisition) through December 31, 2017.

2017 Key Events

FAT Brands Inc. was formed on March 21, 2017 as a wholly-owned subsidiary of FCCG.

On October 20, 2017, the Company completed its initial public offering, raising $20.9 million in net proceeds. In connection with the IPO, FCCG contributed its two operating subsidiaries, Fatburger North America, Inc. and Buffalo’s Franchise Concepts Inc. to the Company. Additionally, FCCG consummated the acquisition of Homestyle Dining LLC, and immediately contributed its franchising subsidiaries, Ponderosa Franchising Company, Bonanza Franchising Company and some of their affiliates to FAT Brands.

On November 15, 2017 the Company announced that it has signed a definitive agreement to acquire Hurricane Grill & Wings, a Florida-based restaurant brand with over 60 units open or under construction. The acquisition is expected to close in the second quarter of 2018, subject to customary closing conditions including the receipt of financing.

About FAT (Fresh. Authentic. Tasty.) Brands

FAT Brands (NASDAQ: FAT) is a leading global franchising company that strategically acquires, markets and develops fast casual and casual dining restaurant concepts around the world. The Company currently owns five restaurant brands, Fatburger, Buffalo’s Cafe, Buffalo’s Express and Ponderosa & Bonanza Steakhouses, that have approximately 300 locations open and 300 under development in 32 countries.

 

Statement of operations data

                     
(In thousands)                    
    Fiscal year ended December 31, 2017
    FAT Brands   Fatburger   Buffalo’s   Ponderosa   Consolidated
    (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)
Statement of operations data:                    
                     
Revenues                    
Royalties   $ -   $ 985   $ 233   $ 805   $ 2,023
Franchise fees     -     138     -     2     140
Management fee     -     10     -     -     10
Total revenues     -     1,133     233     807     2,173
                     
General and administrative expenses     273     822     215     837     2,147
                     
Income (loss) from operations     (273)     311     18     (30)     26
                     
Other income (expense)                    
Interest income (expense)     (390)     84     96     4     (206)
Other expense     -     (28)     -     -     (28)
Other income (expense)     (390)     56     96     4     (234)
                     
Income (loss) before income tax expense (benefit)     (663)     367     114     (26)     (208)
                     
Income tax expense (benefit)     (179)     685     76     (176)     406
                     
Net income (loss)   $ (484)   $ (318)   $ 38   $ 150   $ (614)
Basic and diluted EPS     ($0.06)     ($0.04)   $ 0.00   $ 0.02     ($0.07)
 

Statement of operations data

                         
(In thousands)                        
    Fiscal year ended December 31, 2017   Fiscal year ended December 25, 2016
    Fatburger   Buffalo’s   Combined   Fatburger   Buffalo’s   Combined
    (unaudited)   (unaudited)   (unaudited)   (audited)   (audited)   (unaudited)
Statement of operations data:                        
                         
Revenues                        
Royalties   $ 4,782   $ 1,226   $ 6,008   $ 4,632   $ 1,349   $ 5,981
Franchise fees     1,869     530     2,399     3,750     255     4,005
Management fee     62     -     62     75     -     75
Total revenues     6,713     1,756     8,469     8,457     1,604     10,061
                         
General and administrative expenses     2,751     783     3,534     2,932     663     3,595
                         
Income from operations     3,962     973     4,935     5,525     941     6,466
                         
Other income                        
Interest income     84     96     180     -     -     -
Other income     185     -     185     -     36     36
Other income     269     96     365     -     36     36
                         
Income before income tax expense     4,231     1,069     5,300     5,525     977     6,502
                         
Income tax expense     2,029     429     2,458     1,979     319     2,298
                         
Net income   $ 2,202   $ 640   $ 2,842   $ 3,546   $ 658   $ 4,204
 

Consolidated Balance Sheet for FAT Brands, Inc. as of December 31, 2017

                         
(In thousands)                        
    December 31, 2017
    FAT Brands   FBNA   BFCI   Ponderosa   Elimination   Consolidated
    (audited)   (audited)   (audited)   (audited)   (unaudited)   (unaudited)
Consolidated balance sheet data:                        
                         
Cash   $ -     $ -   $ -   $ 32   $ -     $ 32
Total assets   $ 13,043     $ 11,356   $ 6,966   $ 10,828   $ (10,550 )   $ 31,643
Total liabilities   $ 22,508     $ 6,008   $ 990   $ 128   $ -     $ 29,634
Total stockholders' equity (deficit)   $ (9,465 )   $ 5,348   $ 5,976   $ 10,700   $ (10,550 )   $ 2,009
                         
 

EBITDA Reconciliation

                                       
    Fiscal year ended December 31, 2017
    FAT Brands     Fatburger     Buffalo's     Ponderosa     Consolidated
                                       
(in thousands)                                      
                                       
Net income (loss)   $ (484)     $ (318)     $ 38     $ 150     $ (614)
Depreciation and amortization expense     -       1       0       22       23
Interest (income) expense     390       (84)       (96)       (4)       206
Income tax expense (benefit)     (179)       685       76       (176)       406
EBITDA   $ (273)     $ 284     $ 18     $ (8)     $ 21
                       

EBITDA Reconciliation

                       
    Fiscal year ended December 31, 2017
    Fatburger     Buffalo's     Combined
                       
(in thousands)                      
                       
Net income   $ 2,202     $ 640     $ 2,842
Depreciation expense     5       1       6
Interest income     84       96       180
Income tax expense     2,029       429       2,458
EBITDA   $ 4,152     $ 974     $ 5,126
                       
                       
    Fiscal year ended December 25, 2016
    Fatburger     Buffalo's     Combined
                       
(in thousands)                      
                       
Net income   $ 3,546     $ 658     $ 4,204
Depreciation expense     -       -       -
Interest income     -       -       -
Income tax expense     1,979       319       2,298
EBITDA   $ 5,525     $ 977     $ 6,502



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