Famous Dave's Announces One Restaurant Closing, Other Impairments
Updates 2008 Restaurant Opening Guidance
MINNEAPOLIS--(BUSINESS WIRE)--Famous Dave's of America, Inc. (NASDAQ: DAVE) today announced that it would close one of its 48 company-owned restaurants, in Chicago, and would incur non-cash charges associated with that closure. The company also announced that it would record non-cash impairment charges on two other locations, one in Chicago and one in Minneapolis, write off assets related to the recent acquisition of the Atlanta market from a franchisee and record remaining lease obligations on a location previously closed.
The company expects that its actions could result in related non-cash charges and reserves of approximately $4.1 million, or $0.28 per diluted share on a year-to-date basis. This sum may be reduced by as much as $600,000, pending the outcome of negotiations for lease terminations due to the bankruptcy filing of a landlord on the location to close and on a location previously closed.
"Anyone watching the headlines concerning our industry, food costs and other economic factors recognizes that this remains a very difficult operating environment," said Christopher O'Donnell, Famous Dave's president and chief executive officer. "We believe that it's important to recognize these realities while at the same time positioning the company to deliver strong financial results when conditions improve."
The restaurant expected to close in Chicago, Illinois in mid-September, is the result of the company opening a new prototype restaurant within four miles of the existing restaurant, supporting the company's strategy to reposition legacy restaurants within a market when opportunities arise. Famous Dave's will recognize a net impact of approximately $557,000 representing the disposal of assets and the recording of a reserve for remaining lease obligations, if negotiations for a lease termination are not successful. All managers will be relocated to the new restaurant, and many associates are being offered the opportunity to work at the new location or to relocate to another Famous Dave's restaurant within the market.
The company will additionally record net impairment charges related to two locations, one in Chicago and one in Minneapolis, both of which are expected to remain operational through the end of their original lease terms, of approximately $1.6 million, and will record remaining lease obligations of approximately $217,000 on a location previously closed in 2006, if negotiations for a lease termination are not successful.
Subsequent to the end of the second quarter, Famous Dave's acquired three franchise restaurants in Atlanta from a franchisee in exchange for amounts owed and deemed uncollectible. Based on the company's assessment of expected cash flows from those locations, a net impairment charge will be recorded for approximately $1.7 million related to assets acquired. Over the next quarter, the company will continue to assess the long-term viability of these restaurants remaining operational and could engage in conversations with respective landlords regarding the potential buyout of remaining lease obligations.
Famous Dave's is updating its guidance regarding system growth and anticipates opening approximately 18 restaurants in 2008, including four company-owned locations.
About Famous Dave's
Famous Dave's of America, Inc. develops, owns, operates and franchises barbeque restaurants. As of today, the company owns 48 locations and franchises 123 additional units in 36 states. Its menu features award-winning barbequed and grilled meats, an ample selection of salads, side items and sandwiches, and unique desserts.
Statements in this press release that are not strictly historical, including but not limited to statements regarding the timing of our restaurant openings and the timing or success of our expansion plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, which may cause the company's actual results to differ materially from expected results. Although Famous Dave's of America, Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectation will be attained. Factors that could cause actual results to differ materially from Famous Dave's expectation include financial performance, restaurant industry conditions, execution of restaurant development and construction programs, franchisee performance, changes in local or national economic conditions, availability of financing, governmental approvals and other risks detailed from time to time in the company's SEC reports.
SOURCE: Famous Dave's of America, Inc.