Our net proceeds from this offering will be approximately $66.9 million, based
on the initial public offering price of $13.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses
payable by us. We intend to use the net proceeds from this offering as
follows:
• $61.0 million to repay outstanding borrowings under our credit facility,
including accrued interest;
• $3.0 million to make a one-time payment to Lone Star Fund, an affiliate
of our controlling shareholder, in consideration for the termination of our
asset advisory agreement upon consummation of this offering.
• the remainder of the net proceeds for working capital and other general
corporate purposes.
The terms of our credit facility require us to use at least 50% of the net
proceeds from all equity offerings, including this offering, to repay
outstanding indebtedness under the facility. As of July 25, 2012, the
balance outstanding under our credit facility was $61.5 million. Our credit
facility matures in July 2016 and bears interest at an amount between LIBOR
plus 4.75% and LIBOR plus 5.75%, depending on our leverage ratio.
The selling stockholder will receive approximately $11.3 million in gross
proceeds if the underwriters exercise in full their over-allotment option.
We will not receive any proceeds from the sale of shares by the selling
stockholder.
The full-service steak industry and general upscale restaurant businesses
are highly competitive and fragmented, and the number, size and strength of
competitors vary widely by region, especially within the general upscale
restaurant segment. We believe restaurant competition is based on quality
of food products, customer service, reputation, restaurant décor, location,
name recognition and price. Depending on the specific concept, our restaurants
compete with a number of restaurants within their markets, both locally-owned
restaurants and restaurants that are part of regional or national chains.
The principal upscale steakhouse chains with which Del Frisco’s, Sullivan’s
and the Grille compete are Fleming’s Prime Steakhouse and Wine Bar, The
Capital Grille, Smith & Wollensky, The Palm, Ruth’s Chris Steak House and
Morton’s The Steakhouse. Our concepts also compete with additional
restaurants in the broader upscale dining segment.
Company Description
We develop, own and operate three contemporary, high-end, complementary
restaurants: Del Frisco’s Double Eagle Steak House, or Del Frisco’s,
Sullivan’s Steakhouse, or Sullivan’s, and Del Frisco’s Grille, or the Grille.
We are a leader in the full-service steakhouse industry based on average
unit
volume, or AUV, EBITDA margin and comparable restaurant sales growth.
We currently operate 32 restaurants in 18 states. Each of our three
restaurant concepts offers steaks as well as other menu selections, such
as chops and fresh seafood. These menu selections are complemented by an
extensive, award-winning wine list. Del Frisco’s, Sullivan’s and the Grille
are positioned within the fine dining segment and are designed to appeal to
both business and local dining customers. Our Del Frisco’s restaurants are
sited in urban locations to target customers seeking a “destination dining”
experience while our Sullivan’s and Grille restaurants are intended to
appeal to a broader demographic, allowing them to be located either in urban
areas or in close proximity to affluent residential neighborhoods. We believe
our success reflects consistent execution across all aspects of the dining
experience, from the formulation of proprietary recipes to the procurement
and presentation of high quality menu items and delivery of a positive
customer experience.
We generated revenues of $201.6 million for the fiscal year ended December
27, 2011, representing 21.8% total revenue growth and 11.2% comparable
restaurant sales growth over 2010. We recorded net income of $9.0 million
and adjusted EBITDA of $36.8 million for 2011, representing 2.8% net income
growth and 22.5% adjusted EBITDA growth over 2010. Our 2011 operating income
and adjusted EBITDA margins were 11.0% and 18.2%, respectively. For the
twelve weeks ended March 20, 2012, we generated revenues of $53.7 million,
representing 23.8% total revenue growth and 6.7% comparable restaurant
sales growth over the twelve weeks ended March 22, 2011. We recorded net
income of $5.0 million and adjusted EBITDA of $10.9 million for the twelve
weeks ended March 20, 2012, representing 81.8% net income growth and 37.9%
adjusted EBITDA growth over the twelve weeks ended March 22, 2011. Our
operating income and adjusted EBITDA margins for the twelve weeks ended
March 20, 2012 were 15.6% and 20.3%, respectively.
Del Frisco’s Double Eagle Steak House
We believe Del Frisco’s is one of the premier steakhouse concepts in the
United States. The Del Frisco’s brand is defined by its menu, which includes
USDA Prime grade, wet-aged steaks hand-cut at the time of order and a range
of other high-quality offerings, including prime lamb, fresh seafood, and
signature side dishes and desserts. It is also distinguished by its “swarming
service,” whereby customers are served simultaneously by multiple servers.
Each restaurant has a sommelier to guide diners through an extensive,
award-winning wine list and our bartenders specialize in hand-shaken martinis
and crafted cocktails. Del Frisco’s restaurants target customers seeking a
full-service, fine dining steakhouse experience. We believe the décor and
ambiance, with both contemporary and classic designs, enhance our customers’
experience and differentiate Del Frisco’s from other upscale steakhouse
concepts. We currently operate nine Del Frisco’s steakhouses in seven states.
These restaurants range in size from 11,000 to 24,000 square feet with seating
capacity for at least 300 people. Annual AUVs per Del Frisco’s restaurant
were $12.5 million for the fiscal year ended December 27, 2011. During the
same period, the average check at Del Frisco’s was $100.
Sullivan’s Steakhouse
Sullivan’s was created in the mid-1990’s as a complementary concept to Del
Frisco’s. The Sullivan’s brand is defined by a fine dining experience at a
more accessible price point, along with a vibrant atmosphere created by an
open kitchen, live music and a bar area designed to be a center for social
gathering and entertainment. Each Sullivan’s features fine hand-selected aged
steaks, fresh seafood and a broad list of custom cocktails, along with an
extensive selection of award-winning wines. We currently operate 19
Sullivan’s steakhouses in 15 states. These restaurants range in size from
7,000 to 11,000 feet with seating capacity for at least 250 people. Annual
AUVs per current Sullivan’s restaurant were $4.4 million for the fiscal
year ended December 27, 2011. During the same period, the average check at
Sullivan’s was $59.
Del Frisco’s Grille
We developed the Grille, our newest concept, to take advantage of the
positioning of the Del Frisco’s brand and to provide greater potential for
expansion due to its smaller size, lower build out cost and more diverse
menu. The Grille’s menu is designed to appeal more broadly to both business
and casual diners and features a variety of Del Frisco’s prime aged steaks,
top selling signature menu items and a broad selection of the same quality
wines. The Grille also offers an assortment of relatively less expensive
entrees, such as flatbread pizzas, sandwiches and salads, all prepared with
the same signature flavors, high quality ingredients and presentation
associated with the Del Frisco’s brand. We believe the ambiance of the
concept appeals to a wide range of customers seeking a less formal
atmosphere for their dining occasions. Our first Grille opened in August
2011 at Rockefeller Center in New York City, and we opened additional
locations in Dallas, Texas in November 2011, Phoenix, Arizona in June 2012
and Washington D.C. in July 2012. Additional Grille openings are planned
over the next year and we anticipate they will range in size from 6,500 to
8,500 square feet with seating capacity for at least 200 people. We are
targeting annual AUVs per Grille restaurant of between $4.5 million and
$6.0 million with an average check of between $45 and $55.
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Our corporate headquarters is located at 930 S. Kimball Avenue, Suite 100,
Southlake, TX 76092, and our telephone number is (817) 601-3421. Our website
address is www.dfrg.com, and we also host www.delfriscos.com,
www.sullivanssteakhouse.com and www.delfriscosgrille.com.