Famous Dave's Reports Results for Third Quarter Fiscal 2013

Income From Operations Grew 65%
Restaurant Level Cash Flow Margins Increased 630 Basis Points
Comparable Sales Outperformed the Industry Index

MINNEAPOLIS, Oct. 23, 2013 // GLOBE NEWSWIRE // -- Famous Dave's of America, Inc. (Nasdaq:DAVE) today reported financial results for the third quarter and nine months ending September 29, 2013.

Highlights for the third quarter of 2013 as compared to the third quarter of 2012:

  • Revenue decreased to $39.2 million from $39.9 million, reflecting a comparable sales decrease and lower franchise fee revenue.
  • Comparable sales for Company-owned restaurants open 24 months or more decreased 0.8%, however outperformed the casual dining industry as measured by Black Box Intelligence (BBI) by 60 basis points.
  • Franchise royalty revenue of $4.4 million was essentially flat to the prior year, primarily reflecting revenue contribution from four net new franchise restaurants that opened since the third quarter of 2012, partially offset by a comparable sales decrease of 2.3%.
  • Restaurant level cash flow margins increased 630 basis points, reflecting year over year improvement in all line items.
  • Net income was $737,000, reflecting significant operational improvements offset by a $1.2 million, or $0.12 per diluted share, non-cash restaurant asset impairment at a Maryland restaurant and a lease restructuring at a Virginia restaurant. It also includes a bonus accrual of approximately $435,000, or $0.04 per diluted share. In comparison, net income for the third quarter of fiscal 2012 was $845,000and did not include a bonus accrual.
  • Earnings for the third quarter of 2012 were favorably impacted by the cumulative impact from a favorable tax rate adjustment for employment tax credits equal to approximately $0.07 per diluted share.
  • Diluted net income per share was $0.10 compared to $0.11 in the third quarter of 2012.
  • Diluted adjusted net income per share was $0.21 compared to $0.04 in the third quarter of 2012.
  • Adjusted EBITDA for the third quarter of 2013 was $3.9 million compared to $2.3 million for the same period in 2012.

Highlights for the nine months ended September 29, 2013 as compared to the nine months ended September 30, 2012:

  • Revenue increased to $119.2 million from $118.7 million.
  • Comparable sales for Company-owned restaurants open 24 months or more increased 0.4% compared to a decrease of 0.6% in 2012. Company-owned restaurants also performed 100 basis points better than the casual dining industry as measured by BBI.
  • Franchise royalty revenue was $13.1 million, compared to $13.4 million, reflecting a franchise comparable sales decrease of 3.4% for the year-to-date period.
  • Cash flows provided by operations were $11.8 million for the first nine months of fiscal 2013, compared to $6.0 million for the first nine months of fiscal 2012.
  • Net income decreased to $2.9 million from $3.6 million, reflecting improvements in restaurant level operations partially offset by the unfavorable impact of the non-cash charges.
  • Net income for the first nine months of fiscal 2013 includes a bonus accrual of approximately $1.4 million, or $0.13 per diluted share and severance costs as a result of a recent reduction in force of approximately $271,000, or $0.02 per diluted share. Net income for the first nine months of fiscal 2012 did not include a bonus accrual.
  • Diluted net income per share was $0.38 compared to $0.47, for 2012.
  • Diluted adjusted net income per share was $0.49, compared to $0.43 for the first nine months of 2012, reflecting the year-over-year impact from the non-cash charges and the favorable tax rate adjustment for employment tax credits for 2012.
  • Adjusted EBITDA was approximately $10.6 million, compared to approximately $10.2 million for the first nine months of 2012.
  • The Company paid down $7.4 million of debt since the end of fiscal 2012.
  • The Company used approximately $1.2 million to repurchase approximately 75,000 shares at an average price of $16.13, excluding commissions.

John Gilbert, CEO of Famous Dave's, commented, "I am pleased with our overall performance despite a particularly challenging operating environment for restaurants in general. While many of our competitors appear to have had an equally difficult comparable sales quarter, our solid year to date ranking in BBI's casual dining category is encouraging."

Mr. Gilbert continued, "Throughout this fiscal year we have continued to take several important steps toward improving our business fundamentals. Overall, we have a much more focused, leaner organization executing with urgency on what matters most: optimizing sales at each point of customer interaction (dine-in, To Go, catering and retail), improving store-level operating margins, and extracting unnecessary costs throughout the entire organization. I firmly believe we are a stronger company today than we were one year ago and when the macroeconomic headwinds begin to change in our favor, we will be well-positioned to take advantage of associated growth opportunities."

Marketing and Development

Several initiatives will continue to contribute to improved sales performance. These include:

  • Continued improvement of the menu, including the introduction of fresh, new products and separate lunch and dinner menus designed to improve per-customer transaction profitability throughout the day.
  • A more effective, data-driven promotional strategy, resulting in incremental sales with better marketing.
  • Improved brand awareness with a new advertising campaign emphasizing Famous Dave's best attributes – unmatched BBQ authenticity and expertise.
  • Two great new product tests which we expect to improve our menu selection and become customer favorites next year.

Additionally, the company continues to evaluate all aspects of its business, including ways to improve restaurant economics and restructure underperforming assets.

Gilbert added, "During the second and third quarter we took decisive action to address an underperforming restaurant in Salisbury, Maryland and are currently evaluating the best alternatives for this location. As a result, we were required to take a non-cash asset impairment charge in the quarter of approximately $943,000. Though this is a disappointing situation, the Salisbury market is somewhat isolated from the rest of our trade areas and has been particularly hard hit during the economic downturn; we don't anticipate any broader carry-over impact from this decision."

Famous Dave's opened 5 franchise-operated restaurants in Holt, Michigan, Benson Park, Nebraska, Hayward, California, Independence, Missouri, and Union Gap, Washington as well as 1 company-owned restaurant in Germantown, Maryland during the third quarter. We closed 1 franchise-operated location in Overland Park, Kansas, which represented a relocation of the Independence, Missouri location. Additionally, the Company closed a company-owned location in Gaithersburg, Maryland at the end of its lease term, and relocated it to the new Germantown, Maryland location. Famous Dave's ended the quarter with 191 restaurants, including 53 company-owned restaurants and 138 franchise-operated restaurants, located in 34 states, the Commonwealth of Puerto Rico, and 1 Canadian province.

We expect to open 1 company-owned restaurant, as well as 2 franchise-operated restaurants in the fourth quarter, for a total of 10 new restaurants for 2013.

Outlook

Gilbert concluded by saying, "We will continue to improve our consumer outreach approach by line-of-business in company restaurants and further uncover what's working well within the system at large, with an aim toward improving franchisee results along with company-owned restaurants. I remain confident that our cost reduction measures and strategic initiatives introduced and tested throughout this year will continue to drive improvement for our franchisees over the long-term. To ensure these positive results will endure, we will continue to implement new initiatives aimed at creating a distinct advantage for us within the marketplace.

  • We will continue to optimize the customer experience within our multiple lines of business (dine-in, To Go, catering and retail) with innovative, profitable solutions and have added the requisite organizational talent to lead these initiatives.
  • We have begun to allocate additional resources to the exciting quick-casual segment of our brand and recently appointed a new leader responsible for managing this exciting growth initiative.
  • We continue to test new menus, new products, and new designs in an effort to accelerate our same store sales momentum.
  • We made decisions during the third quarter regarding G&A reductions, which combined with similar efforts in the second quarter, will result in a total annualized savings of over $3.0 million.

Conference Call

The company will host a conference call tomorrow, October 24, 2013, 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 53 locations and franchises 138 additional units in 34 states, the Commonwealth of Puerto Rico, and 1 Canadian province. Its menu features award-winning barbequed and grilled meats, an ample selection of salads, side items and sandwiches, and unique made-from-scratch desserts.

Use of Non-GAAP Financial Measures

To supplement its financial statements, Famous Dave's of America, Inc. also provides investors with adjusted net income per share and adjusted EBITDA which are non-GAAP financial measures. The Company believes that these non-GAAP measures provide useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. Famous Dave's management uses these non-GAAP measures to compare the Company's performance to that of prior periods for trend analysis and planning purposes.

Adjusted net income per share consists of net income plus non-cash items, such as, asset impairment and estimated lease termination and other closing costs and net loss on disposal of equipment divided by the weighted average number of shares of common stock outstanding during each period presented. Famous Dave's of America, Inc. believes adjusted net income per share is useful to an investor because it is widely used to measure a company's operating performance.

EBITDA consists of income from operations plus depreciation and amortization. Adjusted EBITDA consists of EBITDA plus non-cash items, such as, asset impairment and estimated lease termination and other closing costs and net loss on disposal of equipment. Famous Dave's uses Adjusted EBITDA as a measure of operating performance because it assists the Company in comparing performance on a consistent basis, as it removes from operating results the impact of non-cash events. The Company believes Adjusted EBITDA is useful to an investor in evaluating the company's operating performance because it is widely used to measure a Company's operating performance without the impact of items such as depreciation and amortization, which can vary depending upon accounting methods and the book value of assets, and to present a meaningful measure of corporate performance exclusive of the impact of non-cash events and the method by which assets were acquired.

These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with generally accepted accounting principles in the United States. These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in the company's financial statements and are subject to inherent limitations. Famous Dave's of America, Inc. urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures that are included in this press release. The tables appearing at the end of this release provide reconciliations of net income to adjusted net income per share and Adjusted EBITDA.

FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SEPTEMBER 29, 2013 AND SEPTEMBER 30, 2012
 (in thousands, except per share data)
(Unaudited)
         
  Three Months Ended Nine Months Ended
  September 29, September 30, September 29, September 30,
  2013 2012 2013 2012
Revenue:            
Restaurant sales, net  $ 34,361  $ 34,896  $ 104,973  $ 103,938
Franchise royalty revenue 4,405 4,352 13,062 13,355
Franchise fee revenue 140 295 259 540
Licensing and other revenue 309 378 884 900
Total revenue 39,215 39,921 119,178 118,733
         
Costs and expenses:        
Food and beverage costs 10,504 11,007 32,010 32,419
Labor and benefits costs 10,960 11,456 33,404 33,659
Operating expenses 8,671 10,327 26,800 28,247
Depreciation and amortization 1,502 1,520 4,579 4,448
General and administrative expenses 4,892 4,837 16,041 13,922
Asset impairment and estimated lease termination and other closing costs 1,176 13 1,166 288
Pre-opening expenses 293 19 369 317
Net loss on disposal of property 1 3 8 17
Total costs and expenses 37,999 39,182 114,377 113,317
         
Income from operations 1,216 739 4,801 5,416
         
Other expense:        
Interest expense (233) (282) (771) (793)
Interest income 1 2 6 5
Other (expense) income, net (19) (13) (10) 7
Total other expense (251) (293) (775) (781)
         
Income before income taxes 965 446 4,026 4,635
         
Income tax (expense) benefit (228) 399 (1,131) (1,025)
         
Net income  $ 737  $ 845  $ 2,895  $ 3,610
         
Basic net income per common share  $ 0.10  $ 0.12  $ 0.39  $ 0.48
         
Diluted net income per common share  $ 0.10  $ 0.11  $ 0.38  $ 0.47
         
Weighted average common shares outstanding - basic 7,450 7,327 7,419 7,494
         
Weighted average common shares outstanding - diluted 7,721 7,478 7,695 7,659
         
See accompanying notes to consolidated financial statements.
         
         
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
OPERATING RESULTS
(unaudited)
         
  Three Months Ended Nine Months Ended
  September 29, September 30, September 29, September 30,
  2013 2012 2013 2012
Food and beverage costs (1) 30.6% 31.5% 30.5% 31.2%
Labor and benefits costs (1) 31.9% 32.8% 31.8% 32.4%
Operating expenses (1)(3)  25.2% 29.6% 25.5% 27.2%
         
Restaurant level cash flow margins (1)(5)  12.3% 6.0% 12.2% 9.2%
         
Depreciation & amortization (restaurant level) (1) 3.9% 3.9% 3.9% 3.8%
Asset impairment and estimated lease termination and other closing costs (1) 3.4% 0.0% 1.1% 0.3%
Pre-opening expenses and net loss on         
disposal of equipment (1) 0.9% 0.1% 0.4% 0.3%
Costs and expenses (restaurant level) (1) 95.9% 98.0% 93.2% 95.2%
Restaurant level margin (1)(4)  4.1% 2.0% 6.8% 4.8%
         
Depreciation & amortization (corporate level) (2) 0.4% 0.4% 0.4% 0.4%
General and administrative expenses (2)(3)  12.5% 12.1% 13.5% 11.7%
         
Total costs and expenses (2) 96.9% 98.1% 96.0% 95.4%
Income from operations (2) 3.1% 1.9% 4.0% 4.6%
         
 (1)As a percentage of restaurant sales, net
 (2) As a percentage of total revenue
 (3) In order to be consistent with what the Company believes to be a more prevalent practice among other public restaurant companies, the Company has decided to reflect multi-unit supervision expenses within general and administrative expenses, rather than as operating expenses, where they previously have been reflected. For the third quarter of fiscal 2012, this adjustment was approximately $467,000. For the first nine months of fiscal 2012, this adjustment was approximately $1,398,000.
 (4)Restaurant level margin is equal to taking restaurant sales, net less restaurant level costs and expenses. Restaurant level costs and expenses include food and beverage costs, labor and benefit costs, operating expenses, restaurant level depreciation and amortization, asset impairment and estimated lease termination and other closing costs, pre-opening expenses and net loss on disposal of equipment.
 (5)Restaurant level cash flows are equal to taking restaurant sales, net less restaurant level food and beverage costs, labor and benefit costs, and operating expenses.
     
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
     
  September 29, December 30,
  2013 2012
ASSETS    
Cash and cash equivalents  $ 1,780  $ 2,074
Other current assets 10,581 10,272
Property, equipment and leasehold improvements, net 59,407 60,429
Other assets 3,422 3,478
Total assets  $ 75,190  $ 76,253
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities  $ 14,651  $ 12,117
Line of credit 6,900 13,600
Other long-term obligations 17,157 16,769
Shareholders' equity 36,482 33,767
Total liabilities and shareholders' equity  $ 75,190  $ 76,253
     
     
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
     
  Nine Months Ended
  September 29, September 30,
  2013 2012
     
Cash flows provided by operating activities  $ 11,797  $ 6,027
Cash flows used for investing activities (3,864) (3,060)
Cash flows used for financing activities (8,227) (2,111)
Net (decrease) increase in cash and cash equivalents  $ (294)  $ 856
     
         
SUPPLEMENTAL SALES INFORMATION
(unaudited)
         
  Three Months Ended Nine Months Ended
  September 29, September 30, September 29, September 30,
  2013 2012 2013 2012
         
Restaurant sales (in thousands):        
Company-Owned  $ 34,361  $ 34,896  $ 104,973  $ 103,938
Franchise-Operated  $ 93,673  $ 91,126  $ 277,977  $ 278,496
         
Total number of restaurants:        
Company-Owned 53 53 53 53
Franchise-Operated 138 134 138 134
Total 191 187 191 187
         
Total weighted average weekly net sales (AWS):        
Company-Owned  $ 49,788  $ 50,554  $ 50,751  $ 50,231
Franchise-Operated  $ 53,043  $ 53,016  $ 53,519  $ 54,258
         
AWS 2005 and Post 2005:(1)        
Company-Owned  $ 49,848  $ 53,200  $ 51,124  $ 52,910
Franchise-Operated  $ 55,506  $ 55,656  $ 56,116  $ 57,173
         
AWS Pre-2005:(1)        
Company-Owned  $ 49,738  $ 48,519  $ 50,441  $ 48,266
Franchise-Operated  $ 47,539  $ 47,549  $ 47,789  $ 48,218
         
Operating weeks:        
Company-Owned 687 688 2,065 2,063
Franchise-Operated 1,766 1,717 5,194 5,131
         
Weighted comparable net sales by category (24 month):        
Dine-in (2.4)% (0.6)% (1.4)% (1.2)%
To Go 2.4% 0.9% 2.6% 0.4%
Catering (0.8)% (0.1)% (0.8)% 0.2%
Total company-owned comparable sales % (0.8)% 0.2% 0.4% (0.6)%
         
Franchise-Operated % (2.3)% (2.8)% (3.4)% (1.5)%
         
Total number of comparable restaurants:        
Company-Owned 48 49 48 49
Franchise-Operated 117 112 114 109
         
(1)Provides further delineation of AWS for restaurants opened during the pre-fiscal 2005, and restaurants opened during the post-fiscal 2005, timeframes.
         
FAMOUS DAVE'S OF AMERICA, INC.
NON-GAAP RECONCILIATION
(in thousands, except share and per share data)
(unaudited)
         
  Three Months Ended Nine Months Ended
         
  September 29, September 30, September 29, September 30,
  2013 2012 2013 2012
         
Net income  $ 737  $ 845  $ 2,895  $ 3,610
Asset impairment and estimated lease termination and other closing costs 1,176 13 1,166 288
Net loss on disposal of equipment 1 3 8 17
Tax adjustment for the non-cash adjustments (278) 14 (330) (67)
         
Tax rate adjustment for employment tax credits ------  (551) ------  (551)
         
Adjusted net income  $ 1,636  $ 324  $ 3,739  $ 3,297
         
Non-GAAP adjusted income per share:        
Basic adjusted net income per common share  $ 0.22  $ 0.04  $ 0.50  $ 0.44
Diluted adjusted net income per common share  $ 0.21  $ 0.04  $ 0.49  $ 0.43
         
Shares used to compute non-GAAP income per share:        
Weighted average common share outstanding - basic 7,450 7,327 7,419 7,494
Weighted average common share outstanding - diluted 7,721 7,478 7,695 7,659
         
Income from Operations  $ 1,216  $ 739  $ 4,801  $ 5,416
Depreciation and amortization 1,502 1,520 4,579 4,448
         
EBITDA 2,718 2,259 9,380 9,864
         
Non-cash items:        
Asset impairment and estimated lease termination and other closing costs 1,176 13 1,166 288
Net loss on disposal of equipment 1 3 8 17
         
Adjusted EBITDA  $ 3,895  $ 2,275  $ 10,554  $ 10,169
         

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:

Diana G. Purcel
Chief Financial Officer
952-294-1300

SOURCE Famous Dave's of America

###

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