Famous Dave's Reports Third Quarter Loss of $0.08 Per Share
Includes one-time net charges of $0.24 per share
Minneapolis--(BUSINESS WIRE)--Famous Dave's of America, Inc. (NASDAQ: DAVE) today announced revenue of $35.1 million and a net loss of $763,000, or $0.08 per diluted share, for its fiscal third quarter ending September 28, 2008. As previously announced, results include asset impairment, lease termination and other closing costs relating to underperforming restaurants and a restaurant closure. These charges were approximately $3.9 million, or $0.27 per diluted share. In addition, there were deferred rent credits of approximately $477,000 or $0.03 per diluted share, for these locations reflected as a reduction of operating expense. Total revenue for the quarter increased 10.0 percent over the comparable period in 2007.
Same store sales for the company's restaurants open for 24 months or more declined 4.7 percent during the quarter, reflecting declines in dine-in, To-Go, and catering, while same store sales for its franchise-operated restaurants declined 4.6 percent. Franchise royalty revenue for the quarter totaled $4.4 million, an increase of 6.2 percent over the comparable period in 2007.
Sales growth in the third quarter for company-owned restaurants was driven by the four new restaurants opened since the third quarter of 2007 and weighted average price increases of approximately 3.6 percent.
For the nine months ended September 28, 2008 revenue was $107.6 million and net income was $2.3 million, or $0.24 per diluted share.
Same store sales for the company's restaurants open for 24 months or more were essentially flat on a year-to-date basis, while same store sales for its franchise-operated restaurants declined 2.8 percent.
"The continued and increasing challenges posed by the economy, including rising costs and downward pressure on sales, have made the environment very difficult for the entire restaurant industry," said Christopher O'Donnell, president and CEO of Famous Dave's. "Famous Dave's is addressing these challenges with, among other things, initiatives to lower expenses and to further enhance our menu offerings. Once the economy begins to improve we will be in a stronger position than ever before."
Sales for the third quarter, on a year-over-year basis, reflect the opening of four new company-owned restaurants since the third quarter of 2007. These sales gains were partially offset by increased food, labor and utility costs.
Charges
During the quarter, the company evaluated its company-owned restaurant base and the long-term prospects of those restaurants that have not been meeting sales, profitability and cash flow goals. That evaluation resulted in the decision to record net impairment charges of approximately $2.0 million 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. Additionally, there was $477,000 in deferred rent for these locations that will be taken into income by offsetting operating expense.
In September, the company closed a restaurant in Carpentersville, Illinois, in conjunction with the opening of a new restaurant less than four miles away in Algonquin, Illinois. The move supports the company's strategy to reposition legacy restaurants within a market when opportunities arise. Famous Dave's recorded a charge of approximately $207,000 representing the disposal of assets. There was also $59,000 of deferred rent for this location that offset operating expense. The company has been in negotiations with the landlord to buyout this lease as well as the lease for a location that closed in 2006. Subsequent to the quarter, the company reached a tentative agreement for a total buyout of these two leases, and has recorded a liability of $80,000, reflected in the company's third quarter results.
Also, in the third quarter, Famous Dave's acquired three franchise restaurants in Atlanta from a franchisee in exchange for amounts owed. These restaurants generated a cash flow loss of approximately $213,000 for the third quarter. Based on the company's assessment of expected future cash flows from these locations, a net impairment charge was recorded for approximately $1.7 million related to assets acquired. The company has completed its assessment of the long-term viability of these restaurants and continues to have discussions with the landlords regarding the buyout of these leases.
"We made what we believe is a prudent decision to incur charges and write-offs during the quarter that will negatively impact us in the short term, but will strengthen our position in the long term," said O'Donnell.
Stock-Based Compensation and Common Share Repurchases
Earnings results for the third quarter of 2008 included approximately $100,000 or $0.01 per diluted share, in compensation expense related to the company's stock-based incentive programs, as compared to approximately $424,000, or $0.03 per diluted share, for the prior year comparable period. Stock-based compensation expense for the nine months ended September 2008 was approximately $698,000 compared to approximately $1.5 million for the prior year comparable period.
During the third quarter of fiscal 2008, the company repurchased 576,956 shares of common stock at an average price of $8.52 per share, excluding commissions, and during the nine month period, the company repurchased 592,956 shares of common stock at an average price of $8.55 per share, excluding commissions.
Marketing and Development
Marketing and Development highlights during the quarter included a Smokehouse Steak "limited time offer". The promotion, which featured Certified Angus Beef(R) flank steak, is available through November, and continues to exceed expectations.
During the third quarter of fiscal 2008, the company opened three franchise-operated restaurants, while two franchise-operated restaurants closed in the Pittsburgh market and three franchise-operated restaurants were taken over by the company in the Atlanta market for amounts owed. Famous Dave's ended the quarter with 170 restaurants, including 47 company-owned restaurants and 123 franchise-operated restaurants, located in 36 states.
Outlook
Famous Dave's recently updated its guidance regarding system growth and anticipates opening a total of approximately 15 restaurants in 2008 including four company-owned locations. Several franchise operated restaurants originally expected to open during the fourth quarter, recently experienced construction delays and have now moved into 2009.
At the beginning of October, the company took a price increase of 2.0% to mitigate increasing costs. No further price increases are expected in fiscal 2008.
Conference Call
The company will host a conference call tomorrow, October 30, 2008, at 10:00 a.m. Central Time to discuss its third quarter financial results. There will be a live webcast of the discussion through the Investor Relations section of Famous Dave's web site at www.famousdaves.com.
About Famous Dave's
Famous Dave's of America, Inc. develops, owns, operates and franchises barbeque restaurants. As of today, the company owns 50 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.
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three Months Ended Nine Months Ended
------------------------ ------------------------
September September September September
28, 30, 28, 30,
2008 2007 2008 2007
----------- ------------ ----------- ------------
Revenue:
Restaurant sales,
net $ 30,407 $ 27,168 $ 93,219 $ 80,835
Franchise royalty
revenue 4,366 4,113 13,194 11,894
Franchise fee
revenue 110 437 457 993
Licensing and other
revenue 205 184 707 718
----------- ------------ ----------- ------------
Total revenue 35,088 31,902 107,577 94,440
----------- ------------ ----------- ------------
Costs and expenses:
Food and beverage
costs 9,523 8,231 28,754 24,503
Labor and benefits
costs 9,816 8,270 28,726 24,073
Operating expenses 7,497 6,782 24,162 20,236
Depreciation and
amortization 1,397 1,109 4,126 3,394
Asset impairment
and lease
termination and
other closing
costs 3,879 --- 3,879 ---
General and
administrative
expenses 3,337 4,247 12,370 12,943
Pre-opening
expenses 333 349 636 391
Net loss on
disposal of
property 10 10 16 110
----------- ------------ ----------- ------------
Total costs and
expenses 35,792 28,998 102,669 85,650
----------- ------------ ----------- ------------
(Loss) income from
operations (704) 2,904 4,908 8,790
----------- ------------ ----------- ------------
Other expense:
Interest expense (504) (352) (1,478) (1,065)
Interest income 73 70 172 223
Other (expense)
income, net (3) (5) (33) 25
----------- ------------ ----------- ------------
Total other
expense (434) (287) (1,339) (817)
----------- ------------ ----------- ------------
(Loss) income before
income taxes (1,138) 2,617 3,569 7,973
Income tax benefit
(expense) 375 (885) (1,225) (2,700)
----------- ------------ ----------- ------------
Net (loss) income $ (763) $ 1,732 $ 2,344 $ 5,273
=========== ============ =========== ============
Basic net (loss)
income per common
share $ (0.08) $ 0.17 $ 0.25 $ 0.53
=========== ============ =========== ============
Diluted net (loss)
income per
common share $ (0.08) $ 0.17 $ 0.24 $ 0.51
=========== ============ =========== ============
Weighted average
common shares
outstanding - basic 9,304,000 9,932,000 9,516,000 10,043,000
=========== ============ =========== ============
Weighted average
common shares
outstanding -
diluted 9,445,000 10,285,000 9,671,000 10,396,000
=========== ============ =========== ============
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
OPERATING RESULTS
(unaudited)
Three Months Ended Nine Months Ended
------------------- -------------------
September September September September
28, 30, 28, 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Food and beverage costs (1) 31.3% 30.3% 30.8% 30.3%
Labor and benefits costs (1) 32.3% 30.4% 30.8% 29.8%
Operating expenses (1) 24.6% 25.0% 25.9% 25.0%
Depreciation & amortization
(restaurant level) (1) 4.2% 3.6% 4.0% 3.7%
Depreciation & amortization
(corporate level) (2) 0.4% 0.4% 0.3% 0.4%
Asset impairment and lease
termination and other closing
costs (1) 12.8% --- 4.2% ---
General and administrative
expenses (2) 9.5% 13.3% 11.5% 13.7%
Pre-opening expenses and loss
on disposal of property (1) 1.1% 1.3% 0.7% 0.6%
Total costs and expenses (1) 106.3% 90.6% 96.5% 89.4%
(Loss) income from operations
(2) (2.0%) 9.1% 4.6% 9.3%
(1) As a percentage of restaurant sales, net
(2) As a percentage of total revenue
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 28, December 30,
2008 2007
------------- ------------
ASSETS
Current assets $12,951 $14,255
Property, equipment and leasehold
improvements, net 58,669 57,243
Other assets 1,430 2,444
------------- ------------
Total assets $73,050 $73,942
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $29,795 $28,085
Long-term obligations 15,026 15,457
Shareholders' equity 28,229 30,400
------------- ------------
Total liabilities and shareholders' equity $73,050 $73,942
============= ============
SUPPLEMENTAL SALES INFORMATION
(unaudited)
Three Months Ended Nine Months Ended
------------------- -------------------
September September September September
28, 30, 28, 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Total weighted average weekly
net sales (AWS):
Company-Owned $49,429 $51,667 $52,368 $50,907
Franchise-Operated $58,276 $58,196 $58,449 $58,343
AWS 2005 and Post 2005:(1)
Company-Owned $62,578 $67,610 $67,918 $70,057
Franchise-Operated $64,600 $65,184 $65,691 $67,187
AWS Pre 2005: (1)
Company-Owned $46,295 $49,827 $48,608 $48,783
Franchise-Operated $50,355 $51,483 $49,834 $50,567
Operating Weeks:
Company-Owned 608 522 1,772 1,582
Franchise-Operated 1,597 1,443 4,723 4,155
24 month comparable net sales:
Company-Owned (4.7%) 2.1% 0.1% 1.7%
Franchise-Operated (4.6%) (3.2%) (2.8%) (2.8%)
18 month comparable net sales:
Company-Owned (4.8%) 2.1% (0.1%) 1.7%
Franchise-Operated (5.2%) (3.5%) (3.7%) (4.1%)
Total number of restaurants:
Company-Owned 47 41 47 41
Franchise-Operated 123 114 123 114
--------- --------- --------- ---------
Total 170 155 170 155
(1) Provides further delineation of AWS for restaurants opened during the pre-fiscal 2005, and restaurants opened during the post-fiscal 2005, timeframes.
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.
CONTACT: Famous Dave's of America, Inc.
Diana G. Purcel, 952-294-1300
Chief Financial Officer
SOURCE: Famous Dave's of America, Inc.
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