Granite City Food & Brewery Reports Third Quarter 2009 Results

http://www.businesswire.com/news/home/20091109006746/en

Operating Momentum Continues Throughout Organization
MINNEAPOLIS--(Business Wire)--
Granite City Food & Brewery Ltd. (Nasdaq:GCFB), a Modern American upscale casual
restaurant chain, today reported results for the third quarter ended September
29, 2009.

Highlights for the third quarter of 2009 were as follows:

* Corporate charges decreased $1.3 million in third quarter 2009 compared to
third quarter 2008
* Prime cost (food, beverage, labor) as a percentage of revenue decreased 2.4
percentage points from 65.5% in prior year third quarter to 63.1% in third
quarter 2009
* Restaurant-level Income Before Occupancy ("IBO") improved to 21.7% from 19.5%
in prior year third quarter
* Restaurant-level IBO for comp stores increased to 22.2% from 20.9% in prior
year third quarter
* Comparable restaurant sales down 12.7% on an adjusted 13-week
quarter-over-quarter comparison
* Adjusted company-wide EBITDA improved by $0.9 million from $0.7 million in
third quarter 2008 to $1.6 million in third quarter 2009 and improved by $3.6
million from $0.3 million in the first three quarters of 2008 to $3.9 million in
the first three quarters of 2009

Third Quarter 2009 Financial Results

For all the restaurants, the restaurant-level IBO margin was 21.7% for the third
quarter of 2009 compared to 19.5% in the third quarter of 2008. This represents
an increase of 2.2 percentage points in restaurant-level IBO.

"We are pleased to have finalized the DHW transaction which now allows us to
turn our full attention to operations," commented Granite City`s CEO, Steve
Wagenheim. "The benefits of that transaction to the income statement and balance
sheet will become more apparent as we move through the 4th quarter. Our focus in
operations during the past quarter was to drive traffic back into the stores. We
concentrated on two areas; the lowering of our lunch time average check and
heavy discounting through strategic time periods. While the lowering of our
overall average check hurt our revenue, we are pleased to see that in September
our guest counts stabilized on a year over year basis, and in October we showed
positive comps. We feel this trend will allow us to pull back on our discounting
as we move into the all important holiday season."

Total revenue for the third quarter 2009 decreased by 15.7% to $21.5 million
compared to $25.5 million for the third quarter of 2008. The third quarter of
2008 included 14 weeks while the third quarter of 2009 included only 13 weeks.
On an adjusted 13-week basis, revenues decreased 9.2%.

Total cost of sales was $18.5 million in the third quarter or 86.1% of sales
compared to prior year third quarter cost of sales of $22.0 million or 86.3% of
sales. This improvement was due to several factors including our renegotiated
food and food distribution costs, sizing and scheduling our staff to
standardized sales-per-labor-hour levels, and a continued strong focus in
managing strategy.

General and administrative expenses were $1.4 million or 6.5% of sales for the
third quarter of 2009 compared to $2.7 million or 10.7% of sales for the third
quarter of 2008. The company capitalized previously recorded restructuring costs
which resulted in a benefit to general and administrative expenses of
approximately $400,000 in the third quarter of 2009.

The net loss for the third quarter of 2009 was $1.7 million or $(0.11) per share
compared to a net loss of $4.3 million or $(0.26) per share in the third quarter
of 2008.

Year-to-Date Financial Results

Total revenue for the first three quarters of 2009 decreased by 12.9% to $65.0
million compared to $74.6 million for the first three quarters of 2008. The
first three quarters of 2008 included 40 weeks while the first three quarters of
2009 included only 39 weeks. On an adjusted 39-week basis, revenue decreased
10.6%.

For all the restaurants, the restaurant-level IBO margin was 21.7% for the first
three quarters of 2009 compared to 19.5% in first three quarters of 2008. This
represents an increase of 2.2 percentage points in restaurant-level IBO.

Total cost of sales was $55.1 million in the first three quarters or 84.8% of
sales compared to prior year first three quarters cost of sales of $66.0 million
or 88.5% of sales.

General and administrative expenses were $5.9 million or 9.1% of sales for the
first three quarters of 2009 compared to $8.2 million or 11.0% of sales for the
first three quarters of 2008.

The net loss for the first three quarters of 2009 was $7.0 million or $(0.43)
per share compared to a net loss of $11.8 million or $(0.73) per share in the
first three quarters of 2008.

Investor Conference Call and Webcast

A conference call to review the results of the third quarter of 2009 will be
held on Tuesday, November 10, 2009 at 10:00 a.m. Central Time and may be
accessed by calling 1-888-732-6202 and referencing code 709037. An archive of
the presentation will be available for 30 days following the call and may be
accessed by calling 1-888-348-4629 and entering replay code 709037.

About Granite City

Granite City Food & Brewery Ltd. is a Modern American upscale casual restaurant
chain that operates 26 restaurants in 11 states. The menu features affordable
yet high quality family favorite menu items prepared from made-from-scratch
recipes and served in generous portions. The sophisticated yet unpretentious
restaurants, proprietary food and beverage products, attractive price points and
high service standards combine for a great dining experience. Granite City
opened its first restaurant in St. Cloud, Minnesota in 1999.

Forward-Looking Statements, Non-GAAP Financial Measurements, and Comparable
Restaurant Data

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, the ability to obtain financing for, and complete
construction of, additional restaurants at acceptable costs, and the risks and
uncertainties described in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 19, 2009, as amended by our
subsequent Quarterly Reports on Form 10-Q. Further, due to the trend of national
declines in spending in the polished casual dining sector and our store revenue
declines, we will seek to increase liquidity for our operations through
additional debt or equity capital. If we are not successful in these efforts, we
may be required to cease operations at some or all of our locations.

Additionally, this press release contains certain non-GAAP financial measures,
including references to prime costs, restaurant-level IBO, adjusted company-wide
EBITDA and adjusted revenue. Prime costs are the sum of the cost of food,
beverage and labor. We use prime costs to track the components in cost of sales
which are directly variable with sales, and we use prime costs as a percentage
of revenue as an internal measurement of restaurant-level operating performance.
As compared to the nearest GAAP measurement for our company, restaurant-level
IBO represents revenue less cost of food, beverage, labor and restaurant
operating costs. 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 are not measures 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,
adjusted company-wide EBITDA represents operating loss with the add-back of
pre-opening expenses, depreciation and amortization and exit or disposal costs
(Rogers & Troy). We use adjusted company-wide EBITDA as a way to measure our
overall internal operational performance without store openings and/or closings
and as a means of evaluating our restaurants` financial performance compared
with our competitors. Adjusted revenue is total revenue divided by the number of
weeks in one fiscal period and multiplied by the number of weeks in the same
fiscal period of the comparable year. Because we use a 52/53 week fiscal year,
we use adjusted revenue to compare periods as if there were the same number of
weeks in each. 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. A schedule of prime costs as a percentage of
revenue for the first three quarters of 2009 and 2008, and reconciliations of
restaurant-level IBO, adjusted company-wide EBITDA and adjusted revenue to net
loss for the first three quarters of 2009 and 2008 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 have been open for 18 months or more, and our new restaurants
which are those restaurants that have been open 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 Fourteen Thirty-nine Forty
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
September 29, September 30, September 29, September 30,
2009 2008 2009 2008

Restaurant revenues $ 21,478,123 $ 25,483,423 $ 65,004,189 $ 74,601,745

Cost of sales:
Food, beverage and retail 5,982,592 7,580,660 17,864,596 22,705,868
Labor 7,578,646 9,117,270 22,805,179 27,767,400
Direct restaurant operating 3,261,449 3,817,757 9,619,339 10,913,287
Occupancy 1,670,941 1,472,968 4,814,456 4,637,939
Total cost of sales 18,493,628 21,988,655 55,103,570 66,024,494

Pre-opening - 498,744 211,262 1,328,812
General and administrative 1,397,184 2,735,500 5,892,251 8,206,848
Depreciation and amortization 1,760,339 1,640,343 5,195,056 4,815,399
Exit or disposal activities 174,787 1,119,545 776,327 1,119,545
Other 8,278 53,768 58,686 105,138

Operating loss (356,093 ) (2,553,132 ) (2,232,963 ) (6,998,491 )

Interest:
Income 79 3,231 1,687 28,477
Expense (1,365,885 ) (1,701,871 ) (4,748,325 ) (4,841,825 )
Net interest expense (1,365,806 ) (1,698,640 ) (4,746,638 ) (4,813,348 )

Net loss $ (1,721,899 ) $ (4,251,772 ) $ (6,979,601 ) $ (11,811,839 )

Loss per common share, basic $ (0.11 ) $ (0.26 ) $ (0.43 ) $ (0.73 )

Weighted average shares outstanding, basic 16,197,849 16,197,849 16,197,849 16,192,844

Selected Balance Sheet Information

September 29, December 30,
2009 2008
Cash $ 547,160 $ 2,652,411
Current assets including cash $ 2,087,507 $ 3,899,222
Total assets $ 77,391,442 $ 82,110,665
Current liabilities $ 14,542,719 $ 11,708,886
Total liabilities $ 81,527,952 $ 79,634,099
Shareholders` (deficit ) equity $ (4,136,510 ) $ 2,476,566

Non-GAAP Reconciliations Q3 2009 Results

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

Restaurant revenues $ 17,942,177 100% $ 3,535,946 100% $ 21,478,123 100%

Cost of sales:
Food, beverage and retail 4,989,173 27.8% 993,419 28.1% 5,982,592 27.9%
Labor 6,301,373 35.1% 1,277,273 36.1% 7,578,646 35.3%
Direct restaurant operating 2,674,655 14.9% 586,794 16.6% 3,261,449 15.2%
Restaurant-level IBO* 3,976,976 22.2% 678,460 19.2% 4,655,436 21.7%

Occupancy 1,360,554 7.6% 310,387 8.8% 1,670,941 7.8%
Total cost of sales 15,325,755 85.4% 3,167,873 89.6% 18,493,628 86.1%

Pre-opening - 0.0%
General and administrative 1,397,184 6.5%
Company-wide EBITDA 1,587,311

Depreciation and amortization 1,760,339
Exit or disposal activities, other 183,065

Operating Loss (356,093)

Interest:
Income 79
Expense (1,365,885)
Net interest expense (1,365,806)

Net loss as reported under GAAP $ (1,721,899)

*See accompanying disclosure regarding use of non-GAAP financial measures.

Certain percentages may not foot due to rounding.

Non-GAAP Reconciliations Q3 2008 Results

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

Restaurant revenues $ 22,124,688 100% $ 3,358,735 100% $ 25,483,423 100%

Cost of sales:
Food, beverage and retail 6,513,658 29.4% 1,067,002 31.8% 7,580,660 29.7%
Labor 7,712,810 34.9% 1,404,460 41.8% 9,117,270 35.8%
Direct restaurant operating 3,268,087 14.8% 549,670 16.4% 3,817,757 15.0%
Restaurant-level IBO* 4,630,133 20.9% 337,603 10.1% 4,967,736 19.5%

Occupancy 1,209,155 5.5% 263,813 7.9% 1,472,968 5.8%
Total cost of sales 18,703,710 84.5% 3,284,945 97.8% 21,988,655 86.3%

Pre-opening 498,744 2.0%
General and administrative 2,735,500 10.7%
Company-wide EBITDA 260,524

Depreciation and amortization 1,640,343
Exit or disposal activities, other 1,173,313

Operating Loss (2,553,132)

Interest:
Income 3,231
Expense (1,701,871)
Net interest expense (1,698,640)

Net loss as reported under GAAP $ (4,251,772)

*See accompanying disclosure regarding use of non-GAAP financial measures.

Certain percentages may not foot due to rounding.

Non-GAAP Reconciliations First Three Quarters 2009 Results

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

Restaurant revenues $ 50,986,091 100% $ 14,018,098 100% $ 65,004,189 100%

Cost of sales:
Food, beverage and retail 13,956,063 27.4% 3,908,533 27.9% 17,864,596 27.5%
Labor 17,506,164 34.3% 5,299,015 37.8% 22,805,179 35.1%
Direct restaurant operating 7,416,919 14.5% 2,202,420 15.7% 9,619,339 14.8%
Restaurant-level IBO* 12,106,945 23.7% 2,608,130 18.6% 14,715,075 22.6%

Occupancy 3,496,407 6.9% 1,318,049 9.4% 4,814,456 7.4%
Total cost of sales 42,375,553 83.1% 12,728,017 90.8% 55,103,570 84.8%

Pre-opening 211,262 0.3%
General and administrative 5,892,251 9.1%
Company-wide EBITDA 3,797,106

Depreciation and amortization 5,195,056
Exit or disposal activities, other 835,013

Operating Loss (2,232,963)

Interest:
Income 1,687
Expense (4,748,325)
Net interest expense (4,746,638)

Net loss as reported under GAAP $ (6,979,601)

*See accompanying disclosure regarding use of non-GAAP financial measures.

Certain percentages may not foot due to rounding.

Non-GAAP Reconciliations First Three Quarters 2008 Results

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

Restaurant revenues $48,156,138 100% $26,445,607 100% $74,601,745 100%

Cost of sales:
Food, beverage and retail 14,282,330 29.7% 8,423,538 31.9% 22,705,868 30.4%
Labor 16,946,784 35.2% 10,820,616 40.9% 27,767,400 37.2%
Direct operating expense 7,091,289 14.7% 3,821,998 14.5% 10,913,287 14.6%
Restaurant-level IBO* 9,835,735 20.4% 3,379,455 12.8% 13,215,190 17.7%

Occupancy 2,818,474 5.9% 1,819,465 6.9% 4,637,939 6.2%
Total cost of sales 41,138,877 85.4% 24,885,617 94.1% 66,024,494 88.5%

Pre-opening 1,328,812 1.8%
General and administrative 8,206,848 11.0%
Company-wide EBITDA (958,409)

Depreciation and amortization 4,815,399
Exit or disposal activities, other 1,224,683

Operating Loss (6,998,491)

Interest:
Income 28,477
Expense (4,841,825)
Net interest expense (4,813,348)

Net loss as reported under GAAP $ (11,811,839)

*See accompanying disclosure regarding use of non-GAAP financial measures.

Certain percentages may not foot due to rounding.

Adjusted Company-Wide EBITDA

Thirteen Fourteen Thirty-nine Forty
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
September 29, September 30, September 29, September 30,
2009 2008 2009 2008

Operating loss $ (356,093 ) $ (2,553,132 ) $ (2,232,963 ) $ (6,998,491 )
Add:
Pre-opening - 498,744 211,262 1,328,812
Depreciation and amortization 1,760,339 1,640,343 5,195,056 4,815,399
Exit or disposal activities 174,787 1,119,545 776,327 1,119,545
Adjusted company-wide EBITDA* $ 1,579,033 $ 705,500 $ 3,949,682 $ 265,265

Selected Cost as a Percentage of Revenue

Thirteen Fourteen Thirty-nine Forty
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
September 29, September 30, September 29, September 30,
2009 2008 2009 2008

Cost as a percentage of revenue
Food, beverage and retail 27.9% 29.7% 27.5% 30.4%
Labor 35.3% 35.8% 35.1% 37.2%
Total prime costs * 63.1% 65.5% 62.6% 67.7%

Adjusted Revenue

Thirteen Fourteen Thirty-nine Forty
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
September 29, September 30, September 29, September 30,
2009 2008 2009 2008

Restaurant revenues $ 21,478,123 $ 25,483,423 $ 65,004,189 $ 74,601,745

Revenue per week 1,652,163 1,820,245 1,666,774 1,865,044
x 13 weeks x 13 weeks x 39 weeks x 39 weeks
Adjusted 13/39-week revenue * $ 21,478,123 $ 23,663,179 $ 65,004,189 $ 72,736,701
Decrease in adjusted 13/39-week revenue -9.2% -10.6%

*See accompanying disclosure regarding use of non-GAAP financial measures.

Certain percentages may not foot due to rounding.

Granite City Food & Brewery Ltd.
Steven J. Wagenheim, 952-215-0678
President and Chief Executive Officer
James G. Gilbertson, 952-215-0676
Chief Financial Officer

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