Newport Harbor Corporation 2013 Annual Report

Size: px

Start display at page:

Download "Newport Harbor Corporation 2013 Annual Report"

Cory Sutton
6 years ago
Views:

1 Newport Harbor Corporation 2013 Annual Report

2 Consolidated Financial Highlights In 2013 we experienced significant post acquisition operational challenges while attempting to assimilate the Papa Razzi locations into the company. These challenges ultimately led to significantly lower than expected profits from our newly acquired restaurants. Fortunately we did experience a strong year in many other areas of the company. We were also able to successfully complete three major capital investment projects at 22 Bowen s, Castle Hill and The Smokehouse Café, all of which are now well positioned to grow historical profits. Net revenue increased from $59.4 million in 2012 to $78.6 million in 2013 ($15 million of the increase attributed to a full year of Papa Razzi) while income from operations increased from approximately $2.9 million in 2012 to approximately $3.1 million in Net income improved from $1.1 million in 2012 to $1.5 million in

3 Newport Harbor Corp EBITDA Pre-ESOP / Pre Loss on Disposals and Impairments (Earnings before Interest, Taxes, Depreciation and Amortization) 3

4 Newport Harbor Corp EBITDA Pre-ESOP 4

5 The chart on the previous page demonstrates how we have been able to continue to grow profitability in our Rhode Island operations. The Newport Yachting Center, Waterman Grille, Trio, The Smokehouse Café, The Boathouse and Hemenways were all able to continue the trend of improved profitability. Castle Hill and 22 Bowens were the only Rhode Island operations that did not improve profitability over 2012 due to the fact that they were closed for renovations and experienced many of the typical one time start up expenses related to re opening a restaurant after a major project and change to the menu. They are now well positioned to grow profitability in The major 2013 capital expense projects at the Smokehouse, 22 Bowen s and Castle Hill increased our kitchen production space and seating capacity in all three locations. The Newport Yachting Center had a particularly strong year due to improvements in their concert/festival business and the growing strength of the Newport international Boat Show. Newport Harbor Corp EBITDA Pre-ESOP 5

6 Five-Year Sales by Principal Business Activities 6

7 Restaurants - a la carte $ 54,069,658 $ 37,825,522 $ 25,731,592 $ 25,613,756 $ 20,633,963 Restaurants - Private Dining 5,087,888 3,920,267 2,845,525 2,822,887 2,162,724 Catering 4,933,655 4,555,490 3,734,493 5,887,777 6,293,672 Inns 4,603,375 4,794,442 4,369,900 4,165,298 3,899,691 Marina / Parking 3,084,333 3,032,461 3,060,692 2,571,670 2,369,538 Shows and Events 6,344,161 4,832,214 5,153,046 4,932,149 4,766,672 Other 523, , , , ,143 $ 78,646,079 $ 59,477,076 $ 45,178,735 $ 46,372,537 $ 40,590, Restaurants - a la carte 68.75% 63.60% 56.96% 55.23% 50.83% Restaurants - Private Dining 6.47% 6.59% 6.30% 6.09% 5.33% Catering 6.27% 7.66% 8.27% 12.70% 15.51% Inns 5.85% 8.06% 9.67% 8.98% 9.61% Marina / Parking 3.92% 5.10% 6.77% 5.55% 5.84% Shows and Events 8.07% 8.12% 11.41% 10.64% 11.74% Other 0.67% 0.87% 0.63% 0.82% 1.14% 100% 100% 100% 100% 100% Five-Year Sales by Principal Business Activities 7

8 The previous chart shows how we continue to become more of a restaurant company, which has been part of our strategic plan. During the early part of the restaurant growth we invested in both our corporate infrastructure as well as in the build out of new locations and as a result, our EBITDA in the restaurant portion did not see the same growth as the corresponding sales. However, over the past 4 years, we have seen significant improvement in our returns in the restaurant portion of our business. Five-Year Sales by Principle Business Activities 8

9 Newport Harbor Corporation and Subsidiaries Current Ratio Quick Ratio Debt to Equity Return on Assets 2.93% 3.70% 0.00% -1.85% -0.45% Return on Equity 8.01% 10.92% 0.01% -3.55% -0.82% Total Capital Expenditures $ 4,810,398 $ 2,561,438 $ 1,880,027 $ 1,413,025 $ 1,313,859 Working Capital $ (3,610,090) $ (1,075,977) $ 3,455,692 $ 1,629,445 $ 1,075,572 Leading into 2012, we were improving our liquidity ratios and our working capital each year. With the acquisition of Papa Razzi and significant capital expense projects beginning at the end of 2012 and into 2013, our liquidity ratios have declined the past 2 years. With the Papa Razzi acquisition, our debt to equity increased in 2012, however, the increased borrowing and deployment of capital is a significant contributor to the improved profitability. 9

10 Papa Razzi 10

11 Unfortunately we experienced significant problems in 2013 assimilating the Papa Razzi restaurants into the company, which negatively impacted the sales and profits of the new acquisition. At this point, we have stabilized the restaurants operationally and have much stronger control of the guest experience, but the sales are continuing to trend downward. We will be focused on repositioning the Papa Razzi brand in the marketplace to reverse the downward trend by investing into the locations over a 2 year period beginning at the end of We still feel very strongly that the locations are very strong and have significant upside potential for the company. Actual 2013 Budget Gross Sales $24,146,742 $24,899,848 EBITDA - Pre ESOP / Pre Loss on Disposals $716,178 $2,650,000 Capital Expenditures $628,688 $1,645,000 Papa Razzi 11

12 Newport Yachting Center 12

13 The Newport Yachting Center operates primarily in the following lines of business: marina, parking, festivals, private events, and boat shows. The following chart shows the change in profitability from year to year by major department. Annual EBITDA Increase (Decrease) Marina $ (65,658) $ 213,443 $ (89,299) $ (10,751) $ 40,749 Parking (25,278) 52,715 (14,940) 35,608 (22,451) Festivals/Sponsorship/Venue 232,143 (378,424) (89,826) 115, ,540 Private Events 5, ,778 77,900 (14,018) 4,402 Boat Shows 224,749 22, ,630 (102,337) (656,467) Admin/Fixed 53,693 (24,754) (52,591) 11,077 76,212 Total $ 424,989 $ 30,039 $ (17,126) $ 35,165 $ (430,015) Newport Yachting Center 13

14 Marina, Parking, Festivals & Private Events Although a slight decline in the marina and parking continue to be strong and reliable contributors to the Yachting Center profits. In 2013 we secured a partnership with Live Nation and Ticketmaster ( one of the largest concert promoters in the country ) and that partnership proved to be a real win for NYC. We were able to significantly improve the profitability of the concert festival business at NYC and are now well positioned to continue to grow profitability at these shows in the future. While we seem to have found the right economic model for the concert/festival business, we have had problems attaining a noise variance to comply with the local noise ordinance which could prove to be a problem for the long term viability of the concert business at NYC. Prior to 2011, private events at the Newport Yachting Center were executed by Blackstone Caterers. After the sale of Blackstone, we made the decision to execute these events ourselves in This was a huge success as sales executed by Blackstone in 2010 were approximately $800,000 compared to sales executed by Newport Yachting Center in 2011 of approximately $1.1 million, $1.2 million in 2012 and $1.3 million in Newport Yachting Center 14

15 Boat Shows Boat shows is where we saw a steady decline in profitability through The global economy was the driving factor behind this deterioration, however, sales and profitability started to stabilize in 2009 and we have now seen 3 consecutive years of growth at our major show, Newport International Boat Show (NIBS), with significant growth in Since 2007, decisions were made to reduce the overhead in order to be more in line with demand as well as the need to minimize the impact on the lost profits of the boat shows. As sales and profitability improved going into 2011, the decision was made to increase in some areas of overhead in order to properly invest in the future growth of the Newport Yachting Center. Fortunately we were able to continue to grow the profitability in 2013 and are well positioned for another strong year in Newport Yachting Center 15

16 Castle Hill 16

17 Restaurant Only Gross Restaurant Sales $4,743,070 $4,333,998 $3,877,514 $3,796,014 $3,611,026 Average Cover $73 $89 $83 $74 $70 Total Covers 64,560 48,757 46,509 51,101 51,535 Catering Only Gross Catering Sales $3,631,168 $3,334,004 $2,661,186 $2,595,748 $2,615,289 Gross Margin 75.15% 76.08% 74.10% 73.13% 73.60% Hotel Castle Hill Gross Sales $4,629,365 $4,814,174 $4,384,354 $4,179,214 $3,914,365 Revenue per Available Room $ $ $ $ $ Average Daily Rate $ $ $ $ $ Available Rooms 12,180 12,058 11,639 11,228 11,744 Occupied Rooms 7,418 7,406 7,367 7,488 6,837 Occupancy 60.90% 61.42% 63.30% 66.69% 58.22% Total Income before Taxes as a % of Sales 5.45% 6.86% 5.56% 4.14% 3.89% Capital Expenditures $2,512,266 $850,050 $885,835 $558,631 $597,604 Castle Hill17

18 In 2013 Castle Hill invested in a major capital expense project to build a new outdoor restaurant overlooking the lawn on the back of the mansion. The new restaurant known as the Lawn has been extremely well received and will position Castle Hill to enhance the guest experience while generating increased sales and profits from our outdoor dining program. While we did experience strong dining sales as a result of the new facilities we did incur the typical first year opening expenses related to the project which reduced 2013 dining profits. Fortunately we are now well positioned in 2014 to grow both sales and profits in the dining department. The banquet department experienced another strong year of growth in sales and profitability in 2013 as the wedding market continues to respond very positively to the enhancements we made to the Chalet tent. Unfortunately we did experience a drop in lodging revenues in 2013 due to a more competitive pricing environment in Newport for upscale hotel rooms. Overall Castle Hill had a very strong year in 2013 and is very well positioned to grow profitability in Castle Hill 18

19 The Mooring & Smoke House 19

20 Mooring Gross Sales $8,224,143 $7,545,820 $6,401,602 $5,934,946 $5,610,353 Average Cover (Food and Beverage) $46 $44 $44 $44 $42 Total Covers 179, , , , ,606 Gross Margin 70.30% 70.09% 69.31% 68.58% 69.63% Smokehouse Gross Sales $1,154,792 $858,884 $821,343 $840,001 $817,934 Average Cover (Food and Beverage) $42 $33 $34 $33 $32 Total Covers 27,806 26,276 24,233 25,340 25,336 Gross Margin 71.70% 68.58% 68.03% 69.43% 68.22% Total Income before Taxes as a % of Sales 18.09% 15.75% 12.05% 8.31% 8.07% Capital Expenditures $393,886 $161,050 $90,446 $46,484 $29,032 The Mooring & Smoke House20

21 MOORING The Mooring had an exceptionally strong year in 2013 that far exceeded our expectations. Strong growth in average check and covers contributed to a record year for The Mooring. SMOKEHOUSE The renovation and expansion of seating at the Smokehouse in 2013 has proven to be a success. We were able to increase sales and profitability considerably over prior years. The Smokehouse is well positioned for another strong year in The Mooring & Smoke House 21

22 22 Bowen s Wine Bar & Grille 22

23 Gross Sales $5,974,619 $6,084,894 $5,701,108 $5,594,959 $5,019,891 Average Cover (Food and Beverage) $59 $55 $58 $58 $58 Total Covers 101, ,567 99,068 97,028 87,188 Gross Margin 65.66% 65.91% 65.94% 65.70% 64.91% Income before Taxes as a % of Sales 3.93% 9.47% 7.88% 7.01% 3.89% Capital Expenditures $684,150 $120,805 $14,434 $71,244 $164, Bowen s Wine Bar & Grille 23

24 In 2009 the recession significantly impacted private dining, but it rebounded nicely in Sales continued to grow in 2012 for the 3 rd consecutive year with the following year over year sales increase: % % % In 2012, 22 Bowens was flooded and closed for renovations in the beginning of We decided to use that opportunity to expand the kitchen and to build an outdoor 2 nd floor deck. We did not reopen fully until the Spring of 2013 and as a result we incurred significant operating losses that had a negative impact on 2013 profits. Fortunately with the renovations behind us, 22 Bowens is very well positioned to grow profits in Bowen s Wine Bar & Grille 24

25 The Boat House 25

26 Gross Sales $4,389,435 $3,862,557 $3,192,333 $2,852,725 $2,448,336 Average Cover (Food and Beverage) $48 $44 $41 $41 $40 Total Covers 91,241 87,075 77,030 70,075 61,075 Gross Margin 70.17% 70.70% 70.04% 70.58% 70.32% Income before Taxes as a % of Sales 5.31% 4.21% -3.48% -2.64% -4.99% Capital Expenditures $114,099 $266,198 $23,081 $28,811 $39,505 The Boat House 26

27 Since 2009, sales have been growing with a significantly. Demand at the Boathouse is extremely strong, which is why we invested in an upgrade to the kitchen in 2012 in order to capture the demand. We reconfigured the seating plan iin 2013 and were able to add more seating to the restaurant. Year over year sales increase during the past 4 years is as follows: % % % % The Boat House 27

28 Waterman Grille 28

29 Gross Sales $2,800,362 $2,449,859 $2,205,393 $1,855,484 $1,580,018 Average Cover (Food and Beverage) $50 $49 $47 $47 $48 Total Covers 55,948 50,318 47,263 39,301 33,083 Gross Margin 72.54% 72.00% 71.70% 68.87% 70.83% Income before Taxes as a % of Sales -7.91% % % % % Capital Expenditures $54,908 $55,586 $51,318 $32,539 $26,879 Waterman Grille 29

30 For the first time, Waterman Grille generated a positive EBITDA in 2013 and continues to trend in a positive direction. Sales continue to grow in both a la carte and private dining with the following year over year sales increase: % % % % To understand the true cash impact Waterman has on consolidated annual cash flow, we add back corporate overhead to EBITDA and deduct capital expenses as follows: EBITDA $4,924 ($100,898) ($212,671) ($328,921) ($348,783) Add Back: Corporate Overhead 140, , , , ,000 Less: Capital Expenses (54,908) (55,586) (51,318) (32,539) (26,879) Cash Flow $90,016 ($16,484) ($123,989) ($221,460) ($235,662) Waterman Grille 30

31 Trio 31

32 Gross Sales $2,889,230 $2,591,483 $2,414,133 $2,262,187 $2,210,661 Average Cover (Food and Beverage) $41 $40 $40 $38 $36 Total Covers 70,815 64,675 60,895 59,359 61,347 Gross Margin 69.38% 70.39% 69.68% 68.86% 68.75% Income before Taxes as a % of Sales % % % % % Capital Expenditures $18,833 $20,551 $55,018 $30,412 $25,389 Trio 32

33 Trio has also under performed since its opening in the summer of As previously mentioned, we over estimated the market demand in Narragansett to an upscale casual restaurant, particularly off season demand and summer lunch. However, we have adjusted to this reality and the above chart shows we have been able to significantly grow sales over the past 3 years and are experiencing a positive trend in both EBITDA and cash flow. The below chart shows how Trio has impacted our cash flow by adding back the corporate overhead charged each year and deducting capital expenses. In 2013, Trio was able to achieve positive cash flow EBITDA ($49,325) ($153,259) ($150,895) ($280,840) ($363,377) Add Back: Corporate Overhead 140, , , , ,000 Less: Capital Expenses (18,833) (20,551) (55,018) (30,412) (25,389) Cash Flow $71,842 ($33,810) ($65,913) ($171,252) ($248,766) Trio 33

34 Hemenway s Seafood Grill & Oyster Bar 34

35 * Gross Sales $5,661,354 $5,465,121 $5,164,897 $4,822,843 $2,069,892 Average Cover (Food and Beverage) $55 $54 $51 $48 $46 Total Covers 102, , , ,340 44,742 Gross Margin 65.94% 65.99% 65.62% 64.66% 65.31% Income before Taxes as a % of Sales 5.14% 3.83% 2.92% 1.50% 2.97% Capital Expenditures $31,883 $47,101 $96,800 $82,517 $48,258 * Acquired July 2009 Hemenway s Seafood Grill & Oyster Bar 35

36 Sales and profitability continue to increase at Hemenways with stable cover counts and average check growth each year. Year over year sales increase during the past 3 years is as follows: % % % Hemenway s Seafood Grill & Oyster Bar 36

COMPANY CONTACT. Sean Mahoney (240) FOR IMMEDIATE RELEASE

COMPANY CONTACT. Sean Mahoney (240) FOR IMMEDIATE RELEASE COMPANY CONTACT Sean Mahoney (240) 744-1150 FOR IMMEDIATE RELEASE DIAMONDROCK ACQUIRES L AUBERGE DE SEDONA AND ORCHARDS INN SEDONA FOR $97 MILLION Iconic Assets with Asset Management Upside in Attractive,