Based in Southlake, TX, Del Frisco's Restaurant Group (DFRG) scheduled a $105 million IPO with a market capitalization of $335 at a price range mid-point of $15, for Friday, July 27, 2012.
Seven other IPOs are scheduled for the week of July 23. The full IPO calendar is available here.
DFRG filed on an updated S-1 on July 17, 2012.
Manager, Joint Managers: Deutsche; Piper Jaffray; Wells Fargo
Co Managers: Cowen; Raymond James
DFRG currently operates 32 high volume restaurants across 18 states, including Del Frisco's Double Eagle Steak House, Sullivan's Steakhouse and Del Frisco's Grille.
DFRG believes there are opportunities to open three to five restaurants annually. In 2011, DFRG's restaurants averaged $6.7 million in sales.
DRFG says it is a leader in the full-service steakhouse industry based on average unit volume, or AUV, EBITDA margin and comparable restaurant sales growth.
|Annualizing March '12 qtr|
|Del Frisco's Restaurant Group|
|Ruth's Hospitality (RUTH)|
Two other high volume steakhouses were public and have gone private: Morton's Restaurant Group and Smith & Wollensky Restaurant Group
DFRG is priced at a price-to-sales and price-to-earnings premium compared to RUTH, but at a discount relative to price-to-book.
DFRG is in 18 states with a profitable footprint. One risk, however, is that the upscale end of the restaurant business might suffer is there is a prolonged downturn in the economy. IPOdesktop would pass at the price range mid-point.
DFRG's estimated revenues for the 12 weeks ended June 12, 2012 are between $51.1 million and $51.3 million, representing an increase of between $7.6 million and $7.8 million, or 17.5% and 17.9%, from revenues of $43.5 million for the 12 weeks ended June 14, 2011.
Net income for the period is estimated to be between $3.1 million and $3.5 million, representing an increase of between $2.1 million and $2.5 million, or 210.0% and 250.0%, from net income of $1.0 million for the 12 weeks ended June 14, 2011. The increase in revenues was primarily due to an additional 32 restaurant operating weeks related to the opening of Del Frisco's and two Grille locations during 2011, as well as an increase of 4.0% in total comparable restaurant sales.
Comparable restaurant sales increased by 7.3% at Del Frisco's restaurants, following an increase of 13.2% for the prior year fiscal quarter ended June 14, 2011, and comparable restaurant sales increased 0.3% at Sullivan's restaurants, following an increase of 11.2% for the prior year fiscal quarter ended June 14, 2011. DFRG's comparable restaurant base consisted of 28 restaurants at June 12, 2012. The increase in net income was primarily due to higher revenues and an improved operating income margin, driven by favorable year-over-year restaurant operating expenses as a percentage of revenue, lower management fees paid to a related party, and lower general and administrative expenses.
DFRG currently operates 32 restaurants in 27 cities across 18 states. DFRG is a leader in the full-service steakhouse industry based on average unit volume, or AUV, EBITDA margin and comparable restaurant sales growth.
DFTG develops, owns and operates three contemporary, high end, complementary restaurant concepts: Del Frisco's Double Eagle Steak House, Sullivan's Steakhouse and Del Frisco's Grille.
Each of DFRG's three 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 selection
In 2011, food accounted for 66% of food and beverage sales, with beverage making up the remaining 34%
Following this offering, DFGR plans to continue the current pace of new restaurant growth, including the development and promotion of the Grille.
DFRG believes there are opportunities to open three to five restaurants annually, generally composed of one Del Frisco's and two to four Sullivan's and/or Grilles, with new openings of Grille concepts likely serving as the primary driver of new unit growth in the near term.
DFRG typically targets an average cash investment of approximately $7.0 million to $9.0 million per restaurant for a Del Frisco's restaurant, and $3.0 million to $4.5 million for a Sullivan's or a Grille, in each case net of landlord contributions and equipment financing and including pre-opening costs.
DFRG is also "refreshing" a number of its Del Frisco's and Sullivan's locations to, among other things, add additional seating, further grow the private dining business and add patio seating.
During 2012, DFRG expects to complete refreshes of four to five Del Frisco's and four to five Sullivan's at an average cost of $0.3 million per location. Thereafter, DFRG expects to complete one to two refreshes each year at an approximate cost of $0.5 million per location.
DFRG launched its new concept, the Grille, in the third quarter of 2011 with the opening of the New York location. DFRG also opened a second location in Dallas in the fourth quarter of 2011.
DFRG believes that new openings of the Grille are likely to serve as the primary driver of new unit growth in the near term.
DFRG is targeting restaurant-level EBITDA margins of between 20% and 25% for the Grille.
DFRG's New York Del Frisco's location represented approximately 19%, 20% and 18% of revenues in 2009, 2010 and 2011, respectively.
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.
Smith & Wollensky and Morton's The Steakhouse were public and have since gone private.
Pre-IPO, DFRG's Equity Sponsor LSF5 Wagon Holdings, LLC owns 100%
LSF5 Wagon Holdings is managed by Lone Star Funds.
As of March 20, 2012, DFRG had 3,094 employees.
USE OF PROCEEDS
DFRG expects to net $57 million from its IPO. Shareholders intent on selling 3.7 million shares. IPO proceeds are allocated as follows:
$50.0 million to repay debt
$3.0 million to make a one-time payment to Lone Star Funds
Remainder of the net proceeds for working capital and other general corporate purposes
Disclaimer: This DFRG IPO report is based on a reading and analysis of DFRG's S-1 filing which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.