Famous Dave's of America, Inc. Reports Results for Second Quarter of Fiscal 2018

MINNEAPOLIS, Aug. 13, 2018 // GLOBE NEWSWIRE // -- Famous Dave's of America, Inc. (NASDAQ: DAVE) today reported financial results for the second fiscal quarter ended July 1, 2018 compared to the second fiscal quarter ended July 2, 2017.

Highlights for the second quarter of 2018 include the following:

  • Net income from continuing operations of $1.4 million, or $0.16 per share, compared to net loss from continuing operations of $1.6 million, or ($0.24) per share in the prior year.
  • Consolidated Adjusted EBITDA, a non-GAAP measure, increased 5.5% to $2.7 million.
  • General and administrative expenses decreased to $2.1 million from $3.5 million in the second quarter 2017.
  • Repaid $5.8 million of long-term debt and financing lease obligations.
  • Company-owned comparable restaurant sales increased 1.2%, with traffic up 1.3%.
  • Franchise-operated comparable restaurant sales declined 1.9%.

Highlights subsequent to the close of the second quarter of 2018 include the following:

  • UAE-based Tablez amended the existing area development agreement to develop four new units over the next two years.
  • Repaid an additional $740,000 in long-term debt.
  • Executed agreements with Travis Clark to launch the Clark Crew BBQ restaurant concept.
  • Reacquired the Janesville, Wisconsin restaurant from a franchisee, which we will refresh.

Key Operating Metrics

                         
    Three Months Ended     Six Months Ended
    July 1, 2018   July 2, 2017     July 1, 2018   July 2, 2017
Restaurant count:                        
Franchise-operated      135        139        135        139  
Company-owned      15        37        15        37  
Total      150        176        150        176  
Comparable restaurant sales %:                        
Franchise-operated      (1.9 )%      (5.1 )%      (1.6 )%      (4.2 )%
Company-owned      1.2  %      (2.2 )%      3.2  %       (0.6 )%
Total      (1.6 )%      (4.5 )%      (1.1 )%      (3.8 )%
                         
(in thousands, expect per share data)                        
                         
System-wide restaurant sales(1)   $  97,296     $  110,906     $  184,462     $  204,764  
                         
Net (loss) income from continuing operations   $  1,392     $  (1,640 )   $  2,390     $  (3,068 )
Adjusted net income from continuing operations(2)      1,701        796        2,653        (34 )
                         
Net (loss) income from continuing operations, per share   $  0.16     $  (0.24 )   $  0.29     $  (0.44 )
Adjusted net income from continuing operations, per share(2)      0.19        0.11        0.33        (0.00 )
                         
Adjusted EBITDA(2)   $  2,700     $  2,560     $  4,494     $  2,923  
                                 

 

(1) System-wide restaurant sales include sales for all Company-owned and franchise-operated restaurants, as reported by franchisees. Restaurant sales for franchise-operated restaurants are not revenues of the Company and are not included in the Company’s consolidated financial statements.
(2) Adjusted net (loss) income from continuing operations and adjusted EBITDA are non-GAAP measures. A reconciliation of all non-GAAP measures to the most directly comparable GAAP measure is included in the accompanying financial tables.  See “Non-GAAP Reconciliation.”
   

Second Quarter 2018 Review

Total revenue for the second quarter of 2018 was $14.5 million, down 23.7% from the second quarter of 2017. The decrease in Company-owned net restaurant sales revenue was primarily a result of the closure of nine Company-owned restaurants. The impact of these closures was partially offset by a 1.2% increase in same-store sales. The declines in franchise royalty and fee revenue were driven by a decline in franchise-operated same store sales of 1.9% and royalty abatements agreed upon to facilitate the transfer of certain of our franchise-operated restaurants to new operators, who have committed to investing necessary resources to refresh these transferred stores. Additionally, the adoption of ASC 606 – Revenue From Contracts with Customers resulted in approximately $585,000 of additional revenue during the second quarter of 2018.

Restaurant-level operating margin, as a percentage of restaurant sales, net, for Company-owned restaurants was 6.0%, flat to the second quarter of fiscal 2017.

General and administrative expenses decreased to $2.1 million from $3.5 million in the second quarter of fiscal 2017. The year over year decline was primarily a result of the alignment of our general and administrative expense structure to be commensurate with that of a more dedicated franchisor, lowering overhead strategically as we reduced our Company-owned restaurant count from 32 restaurants as of July 2, 2017 to 15 restaurants as of July 1, 2018.

We recognized net income from continuing operations of approximately $1.4 million, or $0.16 per share, in the second quarter of fiscal 2018 compared to a loss from continuing operations of $1.6 million, or ($0.24) per share, in the second quarter of fiscal 2017. We recognized a net income from discontinued operations of $379,000, or $0.05 per share, in the second quarter of fiscal 2017.

Adjusted net income from continuing operations, a non-GAAP measure, was approximately $1.7 million, or $0.19 per share, compared to approximately $796,000, or $0.11 per share, in the second quarter of fiscal 2017. A reconciliation between adjusted net loss and its most directly comparable GAAP measure is included in the accompanying financial tables.

Executive Comments

Jeff Crivello, CEO, commented, “We look forward to implementing throughout the system many of the improvements from the successful refresh of our Coon Rapids restaurant. We increased Company-owned same store sales by 1.2%, despite losing 1.0% in sales due to weather-related closures in April in the Minneapolis market. Although catering sales continued to be a challenge, we launched several initiatives during the quarter aimed at growing this line of business.  We look forward to opening the first Clark Crew BBQ in Oklahoma City, and finalizing the design of our new drive through concept.”

About Famous Dave’s

Famous Dave’s develops, owns, operates and franchises barbeque restaurants. Its menu features award-winning barbequed and grilled meats, a selection of salads, sandwiches, side items, and made-from-scratch desserts. As of August 13, 2018, the Company owns 16 locations and franchises an additional 134 restaurants in 33 states, the Commonwealth of Puerto Rico, Canada, and United Arab Emirates.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company uses non-GAAP measures including those indicated below. These non-GAAP measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s consolidated financial statements and are subject to inherent limitations. By providing non-GAAP measures, together with a reconciliation to the most comparable GAAP measure, the Company believes that it is enhancing investors’ understanding of the Company’s business and results of operations. These measures are not intended to be considered in isolation of, as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures presented may be different from the measures used by other companies. The Company urges investors to review the reconciliation of its non-GAAP measures to the most directly comparable GAAP measure, included in the accompanying financial tables.

Adjusted net (loss) income from continuing operations is net (loss) income from continuing operations, plus asset impairment, estimated lease termination and other closing costs, settlement agreements, net (loss) gain on disposal of equipment, stock-based compensation, severance, and the related tax impact. This number is divided by the weighted-average number of basic shares of common stock outstanding during each period presented to arrive at adjusted net (loss) income from continuing operations, per share. Adjusted EBITDA is net (loss) income, including discontinued operations, plus asset impairment, estimated lease termination and other closing costs, settlement agreements, depreciation and amortization, interest expense, net, net (loss) gain on disposal of equipment, stock-based compensation, severance and provision (benefit) for income taxes.

Forward-Looking Statements

Statements in this press release that are not strictly historical, including but not limited to statements regarding the timing of the Company’s restaurant openings and the timing or success of refranchising 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 the Company 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: Jeff Crivello – Chief Executive Officer
  952-294-1300
   

 

 
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
(Unaudited)
                       
  Three Months Ended   Six Months Ended
  July 1, 2018   July 2, 2017   July 1, 2018   July 2, 2017
Revenue:                      
Restaurant sales, net $  9,955     $  14,714     $  18,668     $  27,663  
Franchise royalty and fee revenue    3,753        4,039        7,161        7,821  
Franchisee national advertising fund contributions    529        —        998        —  
Licensing and other revenue    301        297        555        514  
Total revenue    14,538        19,050        27,382        35,998  
                       
Costs and expenses:                      
Food and beverage costs    3,099        4,404        5,816        8,338  
Labor and benefits costs    3,361        5,176        6,557        9,984  
Operating expenses    2,894        4,256        5,735        8,362  
Depreciation and amortization    309        541        702        1,104  
General and administrative expenses    2,111        3,494        3,985        8,042  
National advertising fund expenses    529        —        998        —  
Asset impairment, estimated lease termination charges and other closing costs, net    216        3,473        112        4,606  
Net loss on disposal of property    30        15        29        16  
Total costs and expenses    12,549        21,359        23,934        40,452  
                       
Income (loss) from operations    1,989        (2,309 )      3,448        (4,454 )
                       
Other income (expense):                      
Interest expense    (197 )      (170 )      (342 )      (357 )
Interest income    20        —        25        —  
Total other expense    (177 )      (170 )      (317 )      (357 )
                       
Income (loss) before income taxes    1,812        (2,479 )      3,131        (4,811 )
                       
Income tax (expense) benefit    (420 )      839        (741 )      1,743  
                       
Net income (loss) from continuing operations    1,392        (1,640 )      2,390        (3,068 )
Net income from discontinued operations, net of tax    —        379        —        561  
Net income (loss) $  1,392     $  (1,261 )   $  2,390     $  (2,507 )
                       
Income (loss) per common share:                      
Basic net income (loss) per share - continuing operations $  0.16     $  (0.24 )   $  0.29     $  (0.44 )
Basic net income per share - discontinued operations    —        0.05        —        0.08  
Basic net income (loss) per share $  0.16     $  (0.18 )   $  0.29     $  (0.36 )
Diluted net income (loss) per share - continuing operations $  0.16     $  (0.24 )   $  0.29     $  (0.44 )
Diluted net income per share - discontinued operations    —        0.05        —        0.08  
Diluted net income (loss) per share $  0.16     $  (0.18 )   $  0.29     $  (0.36 )
Weighted average shares outstanding - basic    8,809        6,955        8,108        6,955  
Weighted average shares outstanding - diluted    8,835        6,955        8,131        6,955  
                               

 

FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
OPERATING RESULTS
(unaudited)

                       
                       
    Three Months Ended     Six Months Ended
    July 1, 2018   July 2, 2017     July 1, 2018    July 2, 2017
Food and beverage costs(1)    31.1 %    29.9      31.2    30.1
Labor and benefits costs(1)    33.8 %    35.2      35.1    36.1
Operating expenses(1)    29.1 %    28.9      30.7    30.2
Restaurant level operating margin(1)(3)     6.0 %    6.0      3.0    3.5
Depreciation and amortization expenses (2)    2.1 %    2.8      2.6    3.1
General and administrative(2)    14.5 %    18.3      14.6    22.3
Income (loss) from continuing operations(2)    13.7 %    (12.1 )%      12.6    (12.4 )%
                           

 

(1) As a percentage of restaurant sales, net
(2) As a percentage of total revenue
(3) Restaurant level margins are equal to 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
CONSOLIDATED BALANCE SHEETS
 (in thousands, except per share data)
(unaudited)
           
ASSETS          
Current assets:       July 1, 2018   December 31, 2017
Cash and cash equivalents $  10,309   $  8,836
Restricted cash    1,269      1,590
Accounts receivable, net of allowance for doubtful accounts of 
$478,000 and $592,000, respectively
   4,091      3,768
Inventories    602      633
Prepaid income taxes and income taxes receivable    —      689
Prepaid expenses and other current assets    964      793
Assets held for sale    —      475
Total current assets    17,235      16,784
           
Property, equipment and leasehold improvements, net    10,229      11,442
           
Other assets:          
Intangible assets, net    1,422      1,840
Deferred tax asset, net    6,402      5,823
Other assets    1,499      1,018
  $  36,787   $  36,907
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
           
Current liabilities:          
Current portion of long-term debt and financing lease obligations $  1,516   $  1,307
Accounts payable    3,514      4,365
Accrued compensation and benefits    861      1,545
Other current liabilities    2,586      3,118
Total current liabilities    8,477      10,335
           
Long-term liabilities:          
Long-term debt, less current portion    3,252      7,932
Financing lease obligation, less current portion    —      1,196
Other liabilities    5,099      3,963
Total liabilities    16,828      23,426
           
Shareholders’ equity:          
Common stock, $.01 par value, 100,000 shares authorized, 
9,087 and 7,376 shares issued and outstanding at 
July 1, 2018 and December 31, 2017, respectively
   91      70
Additional paid-in capital    7,249      1,460
Retained earnings    12,619      11,951
Total shareholders’ equity    19,959      13,481
  $  36,787   $  36,907
           

 

 
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
(unaudited)
           
  Six Months Ended
  July 1, 2018   July 2, 2017
Cash flows from operating activities:          
Net income (loss) from continuing operations $  2,390     $  (3,068 )
Adjustments to reconcile net income (loss) to cash flows provided by operations:          
Depreciation and amortization    702        1,104  
(Gain) loss from asset impairment and estimated lease termination and other closing costs    (268 )      3,900  
Net loss on disposal of property    29        16  
Amortization of deferred financing costs    90        16  
Amortization of lease interest assets    18        18  
Deferred income taxes    —        240  
Deferred rent    (338 )      280  
Bad debts (recovery) expense    (25 )      313  
Stock-based compensation    167        131  
Changes in operating assets and liabilities:          
Restricted cash    321        74  
Accounts receivable, net    (298 )      (236 )
Inventories    31        43  
Prepaid income taxes and income taxes receivable    689        (1,493 )
Prepaid expenses and other current assets    (171 )      (531 )
Other assets    167        —  
Accounts payable    (851 )      619  
Accrued compensation and benefits    (762 )      527  
Other current liabilities    (202 )      (763 )
Other liabilities    (334 )      70  
Cash flows provided by continuing operating activities    1,355        1,260  
Cash flows provided by discontinued operating activities    —        894  
Cash flows provided by operating activities    1,355        2,154  
           
Cash flows from investing activities:          
Proceeds from the sale of assets    1,187        —  
Advances on notes receivable    (648 )      —  
Purchases of property, equipment and leasehold improvements    (290 )      (234 )
Cash flows provided by (used for) continuing investing activities    249        (234 )
Cash flows used for discontinued investing activities    —        (42 )
Cash flows provided by (used for) investing activities    249        (276 )
           
Cash flows from financing activities:          
Payments for debt issuance costs    —        (15 )
Payments on long-term debt and financing lease obligations    (5,757 )      (913 )
Proceeds from sale of common stock    5,132        —  
Proceeds from exercise of stock options    494        —  
Cash flows used for financing activities    (131 )      (928 )
           
Increase in cash and cash equivalents    1,473        950  
Cash and cash equivalents, beginning of period    8,836        4,450  
Cash and cash equivalents, end of period $  10,309     $  5,400  
               

 

 
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION
(in thousands, except per share data)
(unaudited)
                       
  Three Months Ended     Six Months Ended
(dollars in thousands) July 1, 2018   July 2, 2017     July 1, 2018     July 2, 2017
Net income (loss) from continuing operations $  1,392     $  (1,640 )      2,390        (3,068 )
Asset impairment and estimated lease termination and other closing costs    216        3,473        112        4,606  
Net loss on disposal of equipment    30        15        29        16  
Stock-based compensation    120        24        167        131  
Severance    36        170        36        4  
Tax adjustment    (93 )      (1,246 )      (81 )      (1,723 )
Adjusted net income (loss) from continuing operations $  1,701     $  796     $  2,653     $  (34 )
Basic adjusted net income (loss) per common share from continuing operations $  0.19     $  0.11     $  0.33     $  (0.00 )
Diluted adjusted net income (loss) per common share from continuing operations $  0.19     $  0.11     $  0.33     $  (0.00 )
                       
Weighted average common share outstanding - basic    8,809        6,955        8,108        6,955  
Weighted average common share outstanding - diluted    8,835        6,955        8,131        6,955  
                       
Net income (loss) $  1,392     $  (1,261 )   $  2,390     $  (2,507 )
Asset impairment and estimated lease termination and other closing costs    216        3,473        112        4,606  
Depreciation and amortization    309        733        702        1,488  
Interest expense, net    177        170        317        357  
Net loss on disposal of equipment    30        17        29        18  
Stock-based compensation    120        24        167        131  
Severance    36        31        36        385  
Provision (benefit) for income taxes    420        (627 )      741        (1,555 )
Adjusted EBITDA $  2,700     $  2,560     $  4,494     $  2,923  

Source: Famous Dave's of America, Inc.

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