Silver Diner sets new opening despite continued losses in '99

Nation's Restaurant News, Sept 20, 1999 by Richard L. Papiernik

ROCKVILLE, MD. -- Silver Diner Inc., which had suspended its unit growth program last year, said it is launching a restart of expansion, with a scheduled opening of a new restaurant in the spring of 2000 in Virginia Beach, Va.

Announcement of the planned opening came at the same time that the company revealed that same-store sales increased 7.1 percent through the first six months of fiscal 1999, but bottom-line losses continued to plague the company

The 11-unit diner operator said it had sustained a loss of $652,165 for the six-month period ended July 18, about half the loss of $1.12 million reported for the comparable period a year earlier. Revenues were $15.54 million, up 4.7 percent from revenues of $14.84 million in the first half of fiscal 1998.

In the second quarter the company lost $339,671, just slightly under the $346,672 lost in the year-ago quarter. Revenues grew 3.9 percent, to $6.82 million, from $6.56 million.

The company said same-store sales were up 5.7 percent, marking the fifth consecutive quarter for same-store sales increase.

"The unit-level performance of our restaurants continues to be strong," said Silver Diner founder, president and chief executive Robert Giaimo. "As a result, restaurant operating income increased by over $230,000 or 90 percent in the second quarter of 1999 and by over $550,000 or 77 percent in the 28-week period as compared to the same periods last year."

Giaimo noted that the company's first restaurant, which opened 10 years ago in Rockville, Md., still was generating a more than 5-percent increase in same-store sales.

The company-wide same-store sales growth, he said, has been driven "primarily by increased customer counts, combined with a slight increase in the average guest check."

General and administrative expenses, however, were up 33.4 percent in the second quarter, to $781 ,583, from $585,764 in the year-earlier quarter. The G&A expenses in the six-month period rose 24.5 percent, to $1.89 million, from $1.45 million.

The company said the increase in G&A expenses was attributable to several factors. One of them was an increase in professional fees, of which a significant portion "involved reorganizing and streamlining the company's stock option plans."

G&A also included an increase in management training and recruitment expense due to an increase in the hiring of store managers to support the company's higher sales.''

Also cited as a contributor to G&A expense growth were additional investor relations costs.

The net loss per share on a fully diluted basis was reported as 3 cents for the second quarter and 6 cents for the 6month period vs. 3 cents a share in the comparable quarter and 7 cents a share for the first half of fiscal 1998.