ITEM 2.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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The following discussion and analysis of our financial condition and results of operations should be read together with the accompanying
unaudited consolidated financial statements and the related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our Annual Report on Form
10-K
as filed with
the Securities and Exchange Commission (SEC) on March 28, 2017. Unless otherwise specified, the meanings of all defined terms in Managements Discussion and Analysis of Financial Condition and Results of Operations
are consistent with the meanings of such terms as defined in the Notes to Consolidated Financial Statements. This discussion contains statements that are, or may be deemed to be, forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These forward-looking statements can be identified by the use of forward-looking terminology,
including the terms believes, estimates, anticipates, expects, intends, may, will or should or, in each case, their negative or other variations or
comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations
concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may
or may not occur in the future. Forward-looking statements are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ
materially from those made in or suggested by the forward-looking statements contained in this annual report as a result of various factors, including those set forth in the section entitled Risk Factors in our Annual Report on Form
10-K
filed with the SEC on March 28, 2017. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the
forward-looking statements contained in this Form
10-Q,
those results or developments may not be indicative of results or developments in subsequent periods.
General
We are a leading owner and
operator of high-volume venues in North America that combine dining and entertainment for both adults and families under the name Dave & Busters. Founded in 1982, the core of our concept is to offer our customers the
opportunity to Eat, Drink, Play and Watch all in one location. Eat and Drink are offered through a full menu of Fun American New Gourmet entrées and appetizers and a full selection of
non-alcoholic
and alcoholic beverages. Our Play and Watch offerings provide an extensive assortment of entertainment attractions centered around playing games and watching live sports and other televised
events. Our customer mix skews moderately to males, primarily between the ages of 21 and 39, and we believe we also serve as an attractive venue for families with children and teenagers. We believe we appeal to a diverse customer base by providing a
highly customizable experience in a dynamic and fun setting.
Our stores average 42,000 square feet, range in size between 16,000 and
66,000 square feet and are open seven days a week, with hours of operation typically from 11:30 a.m. to midnight on Sunday through Thursday and 11:30 a.m. to 2:00 a.m. on Friday and Saturday.
Our Growth Strategies and Outlook
Our
growth is based primarily on the following strategies:
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|
|
Pursue disciplined new store growth;
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|
|
Grow our comparable stores sales; and
|
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|
Expand the Dave & Busters brand internationally.
|
We intend for new store
expansion to be a key growth driver. Our long-term plan is to open new stores at an annual rate of at least 10% of our existing stores. During the first thirty-nine weeks of fiscal 2017, the Company opened nine new stores, compared to seven new
store openings in the comparable 2016 period. As of October 29, 2017, there were 101 stores in the United States and Canada. To increase comparable store sales we plan to provide our customers with the latest exciting games, leverage the
D&B Sports concept by building awareness through national cable advertising and drive customer frequency by enhancing customer experience through providing new product offerings in each of the Eat, Drink, Play and Watch components of
our business. We currently anticipate opening fourteen new stores in fiscal 2017.
16
We believe that in addition to the growth potential that exists in North America, the
Dave & Busters brand can also have significant appeal in certain international markets. We have signed a seven store agreement for licensed development in six countries in the Middle East, and we are targeting our first international
opening outside of Canada in 2018.
We believe that we are well positioned for growth with a corporate infrastructure and national
marketing platform that can support a larger store base than we currently have, and that we will benefit from economies of scale as we expand.
For further information about our growth strategies and outlook, see the section entitled Business Our Growth Strategies in
our Annual Report on Form
10-K
filed with the SEC.
Key Measures of Our Performance
We monitor and analyze a number of key performance measures to manage our business and evaluate financial and operating performance. These
measures include:
Comparable store sales.
Comparable store sales are a year-over-year comparison of sales at stores open at
the end of the period which have been open for at least 18 months as of the beginning of each of the fiscal years. It is a key performance indicator used within the industry and is indicative of acceptance of our initiatives as well as local
economic and consumer trends. Our comparable store base consisted of 76 stores as of October 29, 2017.
New store openings.
Our ability to expand our business and reach new customers is influenced by the opening of additional stores in both new and existing markets. The success of our new stores is indicative of our brand appeal and the efficacy of our site
selection and operating models. Between October 31, 2016 and October 29, 2017, we opened thirteen new stores.
Non-GAAP
Financial Measures
In addition to the results provided in accordance with generally accepted accounting principles (GAAP), we provide
non-GAAP
measures which present operating results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with GAAP and include Adjusted EBITDA,
Adjusted EBITDA Margin, Store Operating Income Before Depreciation and Amortization and Store Operating Income Before Depreciation and Amortization Margin (defined below). These
non-GAAP
measures do not
represent and should not be considered as an alternative to net income or cash flows from operations, as determined in accordance with GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other
companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Although we use these
non-GAAP
measures to assess the operating performance
of our business, they have significant limitations as an analytical tool because they exclude certain material costs. For example, Adjusted EBITDA does not take into account a number of significant items, including our interest expense and
depreciation and amortization expense. In addition, Adjusted EBITDA excludes
pre-opening
and other costs which may be important in analyzing our GAAP results. Because Adjusted EBITDA does not account for these
expenses, its utility as a measure of our operating performance has material limitations. Our calculations of Adjusted EBITDA adjust for these amounts because they vary from period to period and do not directly relate to the ongoing operations of
the currently underlying business of our stores and therefore complicate comparison of underlying business between periods. Nevertheless, because of the limitations described above, management does not view Adjusted EBITDA or Store Operating Income
Before Depreciation and Amortization in isolation and also uses other measures, such as revenues, gross margin, operating income and net income (loss), to measure operating performance.
Adjusted EBITDA and Adjusted EBITDA Margin
. We define Adjusted EBITDA as net income (loss), plus interest expense,
net, loss on debt refinancing, provision (benefit) for income taxes, depreciation and amortization expense, loss on asset disposal, share-based compensation,
pre-opening
costs, currency transaction (gains)
losses and other costs. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by total revenues.
Adjusted EBITDA is
presented because we believe that it provides useful information to investors and analysts regarding our operating performance. By reporting Adjusted EBITDA, we provide a basis for comparison of our business operations between current, past and
future periods by excluding items that we do not believe are indicative of our core operating performance.
Store Operating Income
Before Depreciation and Amortization and Store Operating Income Before Depreciation and Amortization Margin.
We define Store Operating Income Before Depreciation and Amortization as operating income (loss), plus depreciation and
amortization expense, general and administrative expenses and
pre-opening
costs. Store Operating Income Before Depreciation and Amortization Margin is defined as Store Operating Income Before
Depreciation and Amortization divided by total revenues. Store Operating Income Before Depreciation and Amortization Margin allows us to evaluate operating performance of each store across stores of varying size and volume.
17
We believe that Store Operating Income Before Depreciation and Amortization is another useful
measure in evaluating our operating performance because it removes the impact of general and administrative expenses, which are not incurred at the store-level, and the costs of opening new stores, which are
non-recurring
at the store-level, and thereby enables the comparability of the operating performance of our stores for the periods presented. We also believe that Store Operating Income Before Depreciation and
Amortization is a useful measure in evaluating our operating performance within the entertainment and dining industry because it permits the evaluation of store-level productivity, efficiency and performance, and we use Store Operating Income Before
Depreciation and Amortization as a means of evaluating store financial performance compared with our competitors. However, because this measure excludes significant items such as general and administrative expenses and
pre-opening
costs, as well as our interest expense, net and depreciation and amortization expense, which are important in evaluating our consolidated financial performance from period to period, the value of
this measure is limited as a measure of our consolidated financial performance.
Presentation of Operating Results
We operate on a 52 or 53 week fiscal year that ends on the Sunday after the Saturday closest to January 31. Each quarterly period has 13
weeks, except in a 53 week year when the fourth quarter has 14 weeks. All references to the third quarter of 2017 relate to the 13 week period ended October 29, 2017. All references to the third quarter of 2016 relate to the 13 week period
ended October 30, 2016. Fiscal 2017 and fiscal 2016 consist of 53 and 52 weeks, respectively. All dollar amounts are presented in thousands, unless otherwise noted, except share and per share amounts.
Liquidity and Cash Flows
The primary
source of cash flow is from our operating activities and availability under the revolving credit facility.
Store-Level Variability, Quarterly
Fluctuations, Seasonality and Inflation
We have historically operated stores varying in size and have experienced significant
variability among stores in volumes, operating results and net investment costs.
Our new locations typically open with sales volumes in
excess of their expected long term
run-rate
levels, which we refer to as a honeymoon effect. We expect our new store sales volumes in year two to be 10% to 20% lower than our year one targets, and
to grow in line with the rest of our comparable store base thereafter. As a result of the substantial revenues associated with each new store, the number and timing of new store openings will result in significant fluctuations in quarterly results.
In the first year of operation new store operating margins (excluding
pre-opening
expenses)
typically benefit from honeymoon sales leverage on occupancy, management labor and other fixed costs. This benefit is partially offset by normal inefficiencies in hourly labor and other costs associated with establishing a new location. In year two,
operating margins may decline due to the loss of honeymoon sales leverage on fixed costs which is partially offset by improvements in store operating efficiency. Furthermore, rents in our new stores are typically higher than our comparable store
base.
We also expect seasonality to be a factor in the operation or results of the business in the future with higher first and fourth
quarter revenues associated with the spring and
year-end
holidays. Customer traffic and sales during these quarters may be susceptible to the unfavorable impact of severe or unseasonably mild weather or to the
generally favorable impact of cold weather. Our third quarter, which encompasses the
back-to-school
fall season, has historically had lower revenues as compared to the
other quarters.
We expect that economic and environmental conditions and changes in tax and other regulatory legislation will continue to
exert pressure on both supplier pricing and consumer spending related to entertainment and dining alternatives. Although there is no assurance that our cost of products will remain stable or that federal, state or local minimum wage rates will not
increase beyond amounts currently legislated, the effects of any supplier price increases or wage rate increases are expected to be partially offset by selected menu price increases where competitively appropriate.
18
Thirteen Weeks Ended October 29, 2017 Compared to Thirteen Weeks Ended October 30, 2016
Results of operations.
The following table sets forth selected data, in thousands of dollars and as a percentage of total
revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying unaudited consolidated statements of comprehensive income.
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|
|
|
|
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|
|
|
|
|
|
Thirteen Weeks
Ended
|
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|
Thirteen Weeks
Ended
|
|
|
October 29, 2017
|
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|
October 30, 2016
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|
Food and beverage revenues
|
|
$
|
107,690
|
|
|
|
43.1
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%
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|
$
|
101,343
|
|
|
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44.3
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%
|
Amusement and other revenues
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142,289
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|
|
|
56.9
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|
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|
127,316
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|
|
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55.7
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total revenues
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249,979
|
|
|
|
100.0
|
|
|
|
228,659
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|
|
|
100.0
|
|
Cost of food and beverage (as a percentage of food and beverage revenues)
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28,387
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|
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26.4
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|
|
|
26,560
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|
|
|
26.2
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|
Cost of amusement and other (as a percentage of amusement and other revenues)
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16,220
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|
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|
11.4
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|
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|
15,581
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|
|
|
12.2
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total cost of products
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44,607
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|
|
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17.8
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|
|
|
42,141
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|
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|
18.4
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|
Operating payroll and benefits
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57,967
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|
|
|
23.2
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|
|
|
55,034
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|
|
|
24.1
|
|
Other store operating expenses
|
|
|
82,766
|
|
|
|
33.1
|
|
|
|
71,888
|
|
|
|
31.4
|
|
General and administrative expenses
|
|
|
13,432
|
|
|
|
5.4
|
|
|
|
13,506
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|
|
|
5.9
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|
Depreciation and amortization expense
|
|
|
25,672
|
|
|
|
10.3
|
|
|
|
22,864
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|
|
|
10.0
|
|
Pre-opening
costs
|
|
|
5,609
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|
|
|
2.2
|
|
|
|
4,553
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
|
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|
230,053
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|
|
|
92.0
|
|
|
|
209,986
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|
|
|
91.8
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Operating income
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|
19,926
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|
|
|
8.0
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|
|
|
18,673
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|
|
|
8.2
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Interest expense, net
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|
2,156
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|
|
|
0.9
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|
|
|
1,578
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|
|
|
0.7
|
|
Loss on debt refinancing
|
|
|
718
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|
|
|
0.3
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Income before provision for income taxes
|
|
|
17,052
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|
|
|
6.8
|
|
|
|
17,095
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|
|
|
7.5
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|
Provision for income taxes
|
|
|
4,895
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|
|
|
1.9
|
|
|
|
6,340
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|
|
|
2.8
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net income
|
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$
|
12,157
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|
|
|
4.9
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%
|
|
$
|
10,755
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|
|
|
4.7
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Change in comparable store sales
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(1.3
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)%
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|
|
|
|
|
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5.9
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%
|
Company-owned stores open at end of period
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101
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|
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|
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88
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Comparable stores open at end of period
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|
|
|
|
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76
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|
|
|
|
|
|
|
66
|
|
19
Reconciliations of
Non-GAAP
Financial Measures
Adjusted EBITDA
The following table reconciles Net income to Adjusted EBITDA for the periods indicated:
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|
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|
|
|
Thirteen Weeks
|
|
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Thirteen Weeks
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
October 29, 2017
|
|
|
October 30, 2016
|
|
Net income
|
|
$
|
12,157
|
|
|
$
|
10,755
|
|
Interest expense, net
|
|
|
2,156
|
|
|
|
1,578
|
|
Loss on debt refinancing
|
|
|
718
|
|
|
|
|
|
Provision for income taxes
|
|
|
4,895
|
|
|
|
6,340
|
|
Depreciation and amortization expense
|
|
|
25,672
|
|
|
|
22,864
|
|
|
|
|
|
|
|
|
|
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EBITDA
|
|
|
45,598
|
|
|
|
41,537
|
|
Loss on asset disposal
|
|
|
321
|
|
|
|
514
|
|
Share-based compensation
|
|
|
2,557
|
|
|
|
1,668
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|
Pre-opening
costs
|
|
|
5,609
|
|
|
|
4,553
|
|
Other costs
(1)
|
|
|
46
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(2)
|
|
$
|
54,131
|
|
|
$
|
48,267
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin
(2)
|
|
|
21.7
|
%
|
|
|
21.1
|
%
|
(1)
|
Primarily represents costs related to currency transaction (gains) or losses.
|
(2)
|
Beginning in the fourth quarter of 2016 we revised our calculation of Adjusted EBITDA to exclude adjustments for changes in deferred amusement revenue and ticket liabilities. This change has been applied retrospectively
to all periods presented.
|
Store Operating Income Before Depreciation and Amortization
The following table reconciles Operating income to Store Operating Income Before Depreciation and Amortization for the periods indicated:
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|
|
|
|
|
|
|
Thirteen Weeks
Ended
|
|
|
Thirteen Weeks
Ended
|
|
|
|
October 29, 2017
|
|
|
October 30, 2016
|
|
Operating income
|
|
$
|
19,926
|
|
|
$
|
18,673
|
|
General and administrative expenses
|
|
|
13,432
|
|
|
|
13,506
|
|
Depreciation and amortization expense
|
|
|
25,672
|
|
|
|
22,864
|
|
Pre-opening
costs
|
|
|
5,609
|
|
|
|
4,553
|
|
|
|
|
|
|
|
|
|
|
Store Operating Income Before Depreciation and Amortization
|
|
$
|
64,639
|
|
|
$
|
59,596
|
|
|
|
|
|
|
|
|
|
|
Store Operating Income Before Depreciation and Amortization Margin
|
|
|
25.9
|
%
|
|
|
26.1
|
%
|
20
Capital Additions
The following table represents total accrual-based additions to property and equipment. Total capital additions do not include any reductions
for accrual-based tenant improvement allowances (Payments from landlords).
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|
|
|
|
|
|
|
|
Thirteen Weeks
|
|
|
Thirteen Weeks
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
October 29, 2017
|
|
|
October 30, 2016
|
|
New store
|
|
$
|
51,232
|
|
|
$
|
49,115
|
|
Operating initiatives, including remodels
|
|
|
2,762
|
|
|
|
3,258
|
|
Games
|
|
|
2,229
|
|
|
|
348
|
|
Maintenance Capital
|
|
|
4,912
|
|
|
|
4,667
|
|
|
|
|
|
|
|
|
|
|
Total capital additions
|
|
$
|
61,135
|
|
|
$
|
57,388
|
|
|
|
|
|
|
|
|
|
|
Payments from landlords
|
|
$
|
2,618
|
|
|
$
|
6,118
|
|
Results of Operations
Revenues
Total
revenues increased $21,320, or 9.3%, to $249,979 in the third quarter of fiscal 2017 compared to total revenues of $228,659 in the third quarter of fiscal 2016. For the thirteen weeks ended October 29, 2017, we derived 29.1% of our total
revenue from food sales, 14.0% from beverage sales, 56.1% from amusement sales and 0.8% from other sources. For the thirteen weeks ended October 30, 2016, we derived 29.8% of our total revenue from food sales, 14.5% from beverage sales, 54.9%
from amusement sales and 0.8% from other sources.
The increased revenues in the third quarter of fiscal 2017 were from the following
sources:
|
|
|
|
|
Comparable stores
|
|
$
|
(2,496
|
)
|
Non-comparable
stores
|
|
|
22,916
|
|
Other
|
|
|
900
|
|
|
|
|
|
|
Total
|
|
$
|
21,320
|
|
|
|
|
|
|
Comparable store revenue decreased $2,496, or 1.3%, in the third quarter of fiscal 2017 compared to the third
quarter of fiscal 2016. Comparable store revenue compared to prior year was in part negatively impacted by catastrophic events occurring in the third quarter of fiscal 2017, including Hurricane Harvey and Hurricane Irma as well as wildfires in
California. Comparable
walk-in
revenues, which accounted for 90.7% of comparable store revenue for the third quarter of fiscal 2017, decreased $1,574, or 0.9% compared to the third quarter of fiscal 2016.
Comparable store special events revenues, which accounted for 9.3% of comparable store revenue for the third quarter of fiscal 2017, decreased $922, or 4.8% compared to the third quarter of fiscal 2016.
Food sales at comparable stores decreased by $2,489, or 4.2%, to $56,838 in the third quarter of fiscal 2017 from $59,327 in the third quarter
of fiscal 2016. Beverage sales at comparable stores decreased by $1,194, or 4.1%, to $27,833 in the third quarter of fiscal 2017 from $29,027 in the third quarter of fiscal 2016. The decrease in food and beverage unit sales at comparable stores was
partially offset by an overall increase in menu prices. Comparable store amusement and other revenues in the third quarter of fiscal 2017 increased by $1,187, or 1.1%, to $111,702 from $110,515 in the third quarter of fiscal 2016, due to an increase
in the revenue per Power Card sold. The growth over fiscal 2016 in amusement sales was driven in part by national advertising which highlighted our entertainment offerings, including a limited time offer which allowed customers to play certain new
games for free.
Non-comparable
store revenue increased $22,916, for the third quarter of fiscal
2017 compared to the third quarter of fiscal 2016. The increase in
non-comparable
store revenue was primarily driven by 170 additional operating store weeks contributed by our twenty-five
non-comparable
stores.
Cost of products
The total cost of products was $44,607 for the third quarter of fiscal 2017 and $42,141 for the third quarter of fiscal 2016. The total cost of
products as a percentage of total revenues was 17.8% and 18.4% for the third quarter of fiscal 2017 and the third quarter of fiscal 2016, respectively.
21
Cost of food and beverage products increased to $28,387 in the third quarter of fiscal 2017
compared to $26,560 for the third quarter of fiscal 2016 due primarily to the increased sales volume related to new store openings. Cost of food and beverage products, as a percentage of food and beverage revenues, increased 20 basis points to 26.4%
for the third quarter of fiscal 2017 from 26.2% for the third quarter of fiscal 2016. Higher product costs were partially offset by increases in food and beverage prices.
Cost of amusement and other increased to $16,220 in the third quarter of fiscal 2017 compared to $15,581 in the third quarter of fiscal 2016
as cost reductions at comparable stores were more than offset by costs related to our
non-comparable
stores. The costs of amusement and other, as a percentage of amusement and other revenues, decreased 80
basis points to 11.4% for the third quarter of fiscal 2017 from 12.2% for the third quarter of fiscal 2016. The decrease in cost of amusement and other as a percentage of revenue is due to price increases implemented earlier in the year and a shift
in game play from redemption to
non-redemption
games.
Operating payroll and benefits
Total operating payroll and benefits increased by $2,933, or 5.3%, to $57,967 in the third quarter of fiscal 2017 compared to
$55,034 in the third quarter of fiscal 2016. This increase was primarily due to labor associated with the additional operating store weeks of our
non-comparable
stores. The total cost of operating payroll and
benefits, as a percentage of total revenues, decreased 90 basis points to 23.2% in the third quarter of fiscal 2017 compared to 24.1% for the third quarter of fiscal 2016. This decrease was primarily due to store-level incentive compensation and
payroll related benefits which together decreased approximately 80 basis points. Additionally, increased focus on labor management helped reduce the adverse impact of wage rate increases on operating margins.
Other store operating expenses
Other store operating expenses increased by $10,878, or 15.1%, to $82,766 in the third quarter of fiscal 2017 compared to $71,888 in the third
quarter of fiscal 2016, primarily due to new store openings. Other store operating expenses as a percentage of total revenues increased 170 basis points to 33.1% in the third quarter of fiscal 2017 compared to 31.4% in the third quarter of fiscal
2016. This increase was due primarily to increased margin pressure on occupancy costs associated with our recent store openings, higher marketing costs and incremental sports viewing costs.
General and administrative expenses
General and administrative expenses decreased by $74, or 0.5%, to $13,432 in the third quarter of fiscal 2017 compared to $13,506 in the third
quarter of fiscal 2016, due to lower incentive compensation expenses which were partially offset by increased labor costs at our corporate headquarters and incremental compensation costs related to our share-based awards. General and administrative
expenses, as a percentage of total revenues decreased 50 basis points to 5.4% in the third quarter of fiscal 2017 compared to 5.9% in the third quarter of fiscal 2016 due to favorable leverage on sales.
Depreciation and amortization expense
Depreciation and amortization expense increased by $2,808, or 12.3%, to $25,672 in the third quarter of fiscal 2017 compared to $22,864 in the
third quarter of fiscal 2016. Increased depreciation due to our 2016 and 2017 capital expenditures for new stores, operating initiatives, including remodels, games and maintenance capital, was partially offset by other assets reaching the end of
their depreciable lives.
Pre-opening
costs
Pre-opening
costs increased by $1,056 to $5,609 in the third quarter of fiscal 2017 compared to $4,553
in the third quarter of fiscal 2016 due primarily to the number and timing of new store openings and stores in development.
Interest expense, net
Interest expense, net increased by $578 to $2,156 in the third quarter of fiscal 2017 compared to $1,578 in the third quarter of fiscal 2016
due primarily to higher variable interest rates and a slight increase in average outstanding debt.
Loss on debt refinancing
In connection with the August 17, 2017 debt refinancing (see Note 3,
Debt
, of Notes to Unaudited Consolidated
Financial Statements for further discussion), the Company recorded a charge of $718 during the third quarter of fiscal 2017.
22
Provision for income taxes
The effective income tax rate decreased to 28.7% for the thirteen weeks ended October 29, 2017 compared to 37.1% in the thirteen weeks
ended October 30, 2016. The decrease in the effective tax rate primarily reflects a favorable 7.5% impact from the recognition of excess tax benefits on share-based payments through income tax expense. Refer to Note 1,
Summary of Significant
Accounting Policies
, of Notes to Unaudited Consolidated Financial Statements, for information with respect to the tax impacts associated with share-based awards as a result of adoption of new accounting guidance in the first quarter of fiscal
2017.
Thirty-nine Weeks Ended October 29, 2017 Compared to Thirty-nine Weeks Ended October 30, 2016
Results of operations.
The following table sets forth selected data, in thousands of dollars and as a percentage of total
revenues (unless otherwise noted) for the periods indicated. All information is derived from the unaudited accompanying consolidated statements of comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirty-nine Weeks
|
|
|
Thirty-nine Weeks
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
October 29, 2017
|
|
|
October 30, 2016
|
|
Food and beverage revenues
|
|
$
|
356,190
|
|
|
|
42.7
|
%
|
|
$
|
326,139
|
|
|
|
44.4
|
%
|
Amusement and other revenues
|
|
|
478,688
|
|
|
|
57.3
|
|
|
|
408,837
|
|
|
|
55.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
834,878
|
|
|
|
100.0
|
|
|
|
734,976
|
|
|
|
100.0
|
|
Cost of food and beverage (as a percentage of food and beverage revenues)
|
|
|
91,562
|
|
|
|
25.7
|
|
|
|
83,772
|
|
|
|
25.7
|
|
Cost of amusement and other (as a percentage of amusement and other revenues)
|
|
|
50,481
|
|
|
|
10.5
|
|
|
|
48,628
|
|
|
|
11.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of products
|
|
|
142,043
|
|
|
|
17.0
|
|
|
|
132,400
|
|
|
|
18.0
|
|
Operating payroll and benefits
|
|
|
187,610
|
|
|
|
22.5
|
|
|
|
166,614
|
|
|
|
22.7
|
|
Other store operating expenses
|
|
|
247,663
|
|
|
|
29.6
|
|
|
|
214,487
|
|
|
|
29.1
|
|
General and administrative expenses
|
|
|
45,172
|
|
|
|
5.4
|
|
|
|
40,131
|
|
|
|
5.5
|
|
Depreciation and amortization expense
|
|
|
74,447
|
|
|
|
8.9
|
|
|
|
65,108
|
|
|
|
8.9
|
|
Pre-opening
costs
|
|
|
14,626
|
|
|
|
1.8
|
|
|
|
10,390
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
|
|
|
711,561
|
|
|
|
85.2
|
|
|
|
629,130
|
|
|
|
85.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
123,317
|
|
|
|
14.8
|
|
|
|
105,846
|
|
|
|
14.4
|
|
Interest expense, net
|
|
|
6,073
|
|
|
|
0.7
|
|
|
|
5,573
|
|
|
|
0.8
|
|
Loss on debt refinancing
|
|
|
718
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
116,526
|
|
|
|
14.0
|
|
|
|
100,273
|
|
|
|
13.6
|
|
Provision for income taxes
|
|
|
31,217
|
|
|
|
3.8
|
|
|
|
36,845
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
85,309
|
|
|
|
10.2
|
%
|
|
$
|
63,428
|
|
|
|
8.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in comparable store sales
|
|
|
|
|
|
|
0.8
|
%
|
|
|
|
|
|
|
3.4
|
%
|
Company owned stores open at end of period
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
88
|
|
Comparable stores open at end of period
|
|
|
|
|
|
|
76
|
|
|
|
|
|
|
|
66
|
|
23
Reconciliations of
Non-GAAP
Financial Measures
Adjusted EBITDA
The following table reconciles Net income to Adjusted EBITDA for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Thirty-nine Weeks
|
|
|
Thirty-nine Weeks
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
October 29, 2017
|
|
|
October 30, 2016
|
|
Net income
|
|
$
|
85,309
|
|
|
$
|
63,428
|
|
Interest expense, net
|
|
|
6,073
|
|
|
|
5,573
|
|
Loss on debt refinancing
|
|
|
718
|
|
|
|
|
|
Provision for income taxes
|
|
|
31,217
|
|
|
|
36,845
|
|
Depreciation and amortization expense
|
|
|
74,447
|
|
|
|
65,108
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
197,764
|
|
|
|
170,954
|
|
Loss on asset disposal
|
|
|
1,205
|
|
|
|
987
|
|
Share-based compensation
|
|
|
7,006
|
|
|
|
4,665
|
|
Pre-opening
costs
|
|
|
14,626
|
|
|
|
10,390
|
|
Other costs
(1)
|
|
|
(329
|
)
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(2)
|
|
$
|
220,272
|
|
|
$
|
187,064
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin
(2)
|
|
|
26.4
|
%
|
|
|
25.5
|
%
|
(1)
|
Primarily represents costs related to currency transaction (gains) or losses.
|
(2)
|
Beginning in the fourth quarter of 2016 we revised our calculation of Adjusted EBITDA to exclude adjustments for changes in deferred amusement revenue and ticket liabilities. This change has been applied retrospectively
to all periods presented.
|
Store Operating Income Before Depreciation and Amortization
The following table reconciles Operating income to Store Operating Income Before Depreciation and Amortization for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Thirty-nine Weeks
|
|
|
Thirty-nine Weeks
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
October 29, 2017
|
|
|
October 30, 2016
|
|
Operating income
|
|
$
|
123,317
|
|
|
$
|
105,846
|
|
General and administrative expenses
|
|
|
45,172
|
|
|
|
40,131
|
|
Depreciaton and amortization expense
|
|
|
74,447
|
|
|
|
65,108
|
|
Pre-opening
costs
|
|
|
14,626
|
|
|
|
10,390
|
|
|
|
|
|
|
|
|
|
|
Store Operating Income Before Depreciation and Amortization
|
|
$
|
257,562
|
|
|
$
|
221,475
|
|
|
|
|
|
|
|
|
|
|
Store Operating Income Before Depreciation and Amortization Margin
|
|
|
30.9
|
%
|
|
|
30.1
|
%
|
Capital Additions
The following table represents total accrual-based additions to property and equipment. Total capital additions do not include any reductions
for Payments from landlords.
|
|
|
|
|
|
|
|
|
|
|
Thirty-nine Weeks
|
|
|
Thirty-nine Weeks
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
October 29, 2017
|
|
|
October 30, 2016
|
|
New store
|
|
$
|
119,638
|
|
|
$
|
106,134
|
|
Operating initiatives, including remodels
|
|
|
14,830
|
|
|
|
17,890
|
|
Games
|
|
|
10,521
|
|
|
|
15,180
|
|
Maintenance capital
|
|
|
10,448
|
|
|
|
11,058
|
|
|
|
|
|
|
|
|
|
|
Total capital additions
|
|
$
|
155,437
|
|
|
$
|
150,262
|
|
|
|
|
|
|
|
|
|
|
Payments from landlords
|
|
$
|
24,292
|
|
|
$
|
16,779
|
|
24
Results of Operations
Revenues
Total
revenues increased $99,902, or 13.6%, to $834,878 in the thirty-nine weeks ended October 29, 2017 compared to total revenues of $734,976 in the thirty-nine weeks ended October 30, 2016. For the thirty-nine weeks ended October 29,
2017, we derived 29.1% of our total revenue from food sales, 13.6% from beverage sales, 56.6% from amusement sales and 0.7% from other sources. For the thirty-nine weeks ended October 30, 2016, we derived 30.2% of our total revenue from food
sales, 14.2% from beverage sales, 54.8% from amusement sales and 0.8% from other sources.
The increased revenues were derived from the
following sources:
|
|
|
|
|
Comparable stores
|
|
$
|
5,453
|
|
Non-comparable
stores
|
|
|
93,550
|
|
Other
|
|
|
899
|
|
|
|
|
|
|
Total
|
|
$
|
99,902
|
|
|
|
|
|
|
Comparable store revenue increased $5,453, or 0.8%, in the thirty-nine weeks ended October 29, 2017
compared to the thirty-nine weeks ended October 30, 2016. Comparable store
walk-in
revenues, which accounted for 90.9% of consolidated comparable store revenue in the thirty-nine weeks ended
October 29, 2017, increased $5,836, or 1.0% compared to the thirty-nine weeks ended October 30, 2016. Comparable store special events revenues, which accounted for 9.1% of consolidated comparable store revenue in the thirty-nine weeks
ended October 29, 2017, decreased $383, or 0.6% compared to the thirty-nine weeks ended October 30, 2016.
Food sales at
comparable stores decreased by $6,378, or 3.2%, to $192,070 in the thirty-nine weeks ended October 29, 2017 from $198,448 in the thirty-nine weeks ended October 30, 2016. Beverage sales at comparable stores decreased by $3,680, or 3.9%, to
$90,574 in the thirty-nine weeks ended October 29, 2017 from $94,254 in the thirty-nine weeks ended October 30, 2016. The decrease in food and beverage unit sales at comparable stores was partially offset by price increases. Comparable
store amusement and other revenues in the thirty-nine weeks ended October 29, 2017 increased by $15,511, or 4.2%, to $382,578 from $367,067 in the thirty-nine weeks ended October 30, 2016 due to an increase in the revenue per Power Card
sold. The growth over fiscal 2016 in amusement sales was driven by national advertising, which highlighted our new games offerings (including games available only at Dave & Busters stores) and included the introduction of several
games with highly recognizable and marketable content. Our new amusement offerings included limited time offers which allowed customers to play certain new games for free.
Non-comparable
store revenue increased $93,550, for the thirty-nine weeks ended October 29, 2017
compared to the same period of fiscal 2016. The increase in
non-comparable
store revenue was primarily driven by 515 additional operating store weeks contributed by our twenty-five
non-comparable
stores.
Cost of products
The total cost of products was $142,043 for the thirty-nine week period ended October 29, 2017 and $132,400 for the thirty-nine week
period ended October 30, 2016. The total cost of products as a percentage of total revenues was 17.0% and 18.0% for the thirty-nine weeks ended October 29, 2017 and the thirty-nine week period ended October 30, 2016, respectively.
Cost of food and beverage products increased to $91,562 in the thirty-nine week period ended October 29, 2017 compared to $83,772 in
the thirty-nine week period ended October 30, 2016 due primarily to the increased sales volume at our
non-comparable
stores. Cost of food and beverage products, as a percentage of food and beverage
revenues, was 25.7% for both the thirty-nine week period ended October 29, 2017 and the thirty-nine week period ended October 30, 2016, due to savings in our meat and seafood categories offset by higher poultry costs and the impact of our
larger
non-comparable
store group.
Cost of amusement and other increased to $50,481 in the
thirty-nine week period ended October 29, 2017 compared to $48,628 in the thirty-nine week period ended October 30, 2016. The costs of amusement and other, as a percentage of amusement and other revenues decreased 140 basis points to 10.5%
for the thirty-nine weeks ended October 29, 2017 from 11.9% for the thirty-nine weeks ended October 30, 2016. This decrease was due primarily to a $2,531, or 70 basis point, amusement cost reduction in the first quarter of fiscal 2017 due
to the favorable settlement of a multi-year use tax audit by the state of Texas. This cost reduction represents the excess use tax on redemption items during the period from July 2011 through January 2017. Additionally, the decrease in cost of
amusement and other as a percentage of revenue was positively impacted by a shift in game play from redemption to
non-redemption
games and price increases implemented earlier in the year.
25
Operating payroll and benefits
Total operating payroll and benefits increased by $20,996, or 12.6%, to $187,610 in the thirty-nine week period ended October 29, 2017
compared to $166,614 in the thirty-nine week period ended October 30, 2016, primarily due to labor associated with additional operating store weeks of our
non-comparable
stores. The total cost of
operating payroll and benefits, as a percent of total revenues, decreased 20 basis points to 22.5% for the thirty-nine weeks ended October 29, 2017 from 22.7% in the thirty-nine weeks ended October 30, 2016. This decrease was due to
store-level incentive compensation and payroll related benefits which decreased approximately 30 basis points, partially offset by an hourly wage rate increase of approximately 4.8% and normal labor inefficiencies associated with our
non-comparable
store base.
Other store operating expenses
Other store operating expenses increased by $33,176, or 15.5%, to $247,663, in the thirty-nine week period ended October 29, 2017 compared
to $214,487 in the thirty-nine week period ended October 30, 2016, primarily due to new store openings. Other store operating expenses during the thirty-nine week period ended October 29, 2017, as a percentage of total revenues, increased
50 basis points to 29.6% from 29.1% in the thirty-nine weeks ended October 30, 2016. This increase was due primarily to increased margin pressure on occupancy costs associated with our recent store openings partially offset by favorable
leverage of marketing expenses on increased revenue.
General and administrative expenses
General and administrative expenses increased by $5,041, or 12.6%, to $45,172 in the thirty-nine week period ended October 29, 2017
compared to $40,131 in the thirty-nine week period ended October 30, 2016. The increase in general and administrative expenses was primarily driven by a second quarter $2,550 charge for net litigation settlement costs, increased labor costs at
our corporate headquarters and incremental compensation costs related to our share-based awards partially offset by lower incentive compensation expenses. General and administrative expenses, as a percentage of total revenues, decreased 10 basis
points to 5.4% in the thirty-nine weeks ended October 29, 2017 compared to 5.5% in the same period of fiscal 2016 due to favorable leverage on sales.
Depreciation and amortization expense
Depreciation and amortization expense increased by $9,339, or 14.3%, to $74,447 in the thirty-nine week period ended October 29, 2017
compared to $65,108 in the thirty-nine week period ended October 30, 2016. Increased depreciation due to our 2016 and 2017 capital expenditures for new stores, operating initiatives, including remodels, games and maintenance capital, was
partially offset by other assets reaching the end of their depreciable lives.
Pre-opening
costs
Pre-opening
costs increased by $4,236 to $14,626 in the thirty-nine week period
ended October 29, 2017 compared to $10,390 in the thirty-nine week period ended October 30, 2016 due to the number and timing of new store openings and stores in development.
Interest expense, net
Interest expense, net increased by $500 to $6,073 in the thirty-nine week period ended October 29, 2017 compared to $5,573 in the
thirty-nine week period ended October 30, 2016 due primarily to higher variable interest rates offset by a slight reduction in average outstanding debt.
Loss on debt refinancing
In connection with the August 17, 2017 debt refinancing (see Note 3,
Debt
, of Notes to Unaudited Consolidated Financial Statements
for further discussion), the Company recorded a charge of $718 during the third quarter of fiscal 2017.
Provision for income taxes
The effective income tax rate decreased to 26.8% for the thirty-nine weeks ended October 29, 2017 compared to 36.7% in the
thirty-nine weeks ended October 30, 2016. The decrease in the effective tax rate primarily reflects a favorable 9.8% impact from the recognition of excess tax benefits on share-based payments through income tax expense. Refer to Note 1,
Summary of Significant Accounting Policies
, of Notes to Unaudited Consolidated Financial Statements, for information with respect to the tax impacts associated with share-based awards as a result of adoption of new accounting guidance in the
first quarter of fiscal 2017.
26
Liquidity and Capital Resources
Overview
We finance our activities
through cash flow from operations and availability under our existing credit facility. As of October 29, 2017, we had cash and cash equivalents of $15,258, net working capital deficit of $128,014 and outstanding debt obligations of $316,000. We
also had $479,029 in borrowing availability under our existing credit facility.
We currently have, and anticipate that in the future we
may continue to have, negative working capital balances. We are able to operate with a working capital deficit because cash from sales is usually received before related liabilities for product, supplies, labor and services become due. Funds
available from sales not needed immediately to pay for operating expenses have typically been used for capital expenditures and payment of long-term debt obligations.
Short-term liquidity requirements.
We generally consider our short-term liquidity requirements to consist of those items that
are expected to be incurred within the next twelve months and believe those requirements to consist primarily of funds necessary to pay operating expenses, interest and principal payments on our debt, capital expenditures related to the new store
construction and other expenditures associated with acquiring new games, remodeling facilities and recurring replacement of equipment and improvements.
As of October 29, 2017, we expect our short-term liquidity requirements to include approximately (a) $190,000 to $200,000 of capital
additions (net of tenant improvement allowances and other payments from landlords), (b) lease obligation payments of $101,000, (c) estimated cash income tax payments of $61,000, (d) scheduled debt service payments (see Contractual
Obligations and Commercial Commitments) and (e) the repurchase of our common stock.
Long-term liquidity
requirements.
We generally consider our long-term liquidity requirements to consist of those items that are expected to be incurred beyond the next twelve months and believe these requirements consist primarily of funds necessary for new
store development and construction, replacement of games and equipment, performance-necessary renovations and other
non-recurring
capital expenditures that need to be made periodically to our stores, principal
and interest payments on our outstanding term loan and scheduled lease obligation payments. We intend to satisfy our long-term liquidity requirements through various sources of capital, including our existing cash on hand, cash provided by
operations, and borrowings under the revolving portion of our credit facility.
Our Board of Directors approved a share repurchase
program, under which the Company may repurchase shares on the open market, through privately negotiated transactions, and through trading plans designed to comply with Rule
10b5-1
of the Securities Exchange
Act of 1934, as amended. The share repurchase program may be modified, suspended or discontinued at any time. Effective September 7, 2017, an additional $100,000 in common shares authorization was approved by our Board of Directors. As of
October 29, 2017. the Company has a total share repurchase authorization of $300,000 which expires at the end of fiscal 2018. During the thirteen and thirty-nine weeks ended October 29, 2017, the Company purchased 240,342 and 1,778,484
shares of common stock at an average cost of $48.69 and $61.84 per share, respectively. As of October 29, 2017, we have approximately $161,188 of share repurchase authorization remaining under the current plan.
Based on our current business plan, we believe the cash flows from operations, together with our existing cash balances and availability of
borrowings under the revolving portion of our credit facility will be sufficient to meet our anticipated cash needs for working capital, capital expenditures, debt service needs, and share repurchases in the foreseeable future. Our ability to make
scheduled principal and interest payments, or to refinance our indebtedness, or to fund planned capital expenditures and share repurchases, will depend on future performance, which is subject to general economic conditions, competitive environment
and other factors.
Borrowing Capacity
Our existing credit facility provides a $300,000 term loan facility and a $500,000 revolving credit facility and has a maturity date of
August 17, 2022. The $500,000 revolving credit facility includes a $35,000 letter of credit
sub-facility
and a $15,000 swing loan
sub-facility.
The revolving
facility was established to provide financing for general purposes. Principal payments on the term loan facility of $3,750 per quarter are required beginning December 31, 2017 through maturity, when the remaining balance is due. Our credit
facility is secured by the assets of Dave & Busters, Inc. and is unconditionally guaranteed by Dave & Busters Holdings, Inc. and each of its direct and indirect domestic wholly-owned subsidiaries.
As of October 29, 2017, we had letters of credit outstanding of $4,971 and $479,029 of borrowing available under our credit facility. The
interest rates per annum applicable to loans, other than swing loans, under our credit facility are currently set based on a defined LIBOR rate plus an applicable margin. Swing loans bear interest at a base rate plus an applicable margin. The loans
bear
27
interest subject to a pricing grid based on a total leveraged ratio, at LIBOR plus a spread ranging from 1.25% to 2.00% for the term loans and the revolving loans. The stated weighted average
interest rate on our credit facility at October 29, 2017 was 2.49%. The
year-to-date
weighted average effective interest rate incurred on our borrowings under our
credit facility was 3.06%. The weighted average effective rate includes amortization of debt issuance costs, commitment and other fees.
Cash Flows
The following
table presents a summary of our net cash provided by (used in) operating, investing and financing activities:
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Thirty-nine Weeks
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Thirty-nine Weeks
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Ended October 29, 2017
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Ended October 30, 2016
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Net cash provided by (used in):
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|
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Operating activities
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$
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201,063
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|
$
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174,550
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|
Investing activities
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|
|
(147,026
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)
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|
|
(130,453
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)
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Financing activities
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|
|
(58,862
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)
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|
|
(54,868
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)
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Net cash provided by operating activities was $201,063 for the thirty-nine weeks ended October 29, 2017
compared to $174,550 for the thirty-nine weeks ended October 30, 2016. Increased cash flows from operations were driven primarily by increased cash flows from additional
non-comparable
store sales and
slightly increased comparable store sales and improved operating margins.
Net cash used in investing activities was $147,026 for the
thirty-nine weeks ended October 29, 2017 compared to $130,453 for the same period of fiscal 2016. Capital expenditures increased $18,994 to $150,278 (excluding the increase in fixed asset accounts payable of $5,159) in the thirty-nine weeks of
fiscal 2017 from $131,284 in the thirty-nine weeks of fiscal 2016. During the thirty-nine weeks of fiscal 2017, the Company spent $114,663 ($90,371 net of tenant improvement allowances and other payments from landlords) for new store construction,
$14,825 related to major remodel projects on four existing stores, several smaller scale remodel projects and operating improvement initiatives, $11,024 for game refreshment and $9,766 for maintenance capital. During the thirty-nine weeks ended
October 30, 2016, we spent $88,039 ($71,260 net of tenant improvement allowances from landlords) for new store construction, $17,131 related to major remodel projects on six existing stores, several smaller scale remodel projects and operating
improvement initiatives, $15,048 for game refreshment and $11,066 for maintenance capital.
Net cash used in financing activities
increased by $3,994 to $58,862 in the thirty-nine weeks ended October 29, 2017 compared to $54,868 in the same period of fiscal 2016. The increase in cash used in financing activities was primarily due to increased repurchases of common stock
of $102,624 offset by net borrowings of debt of $51,250 in the thirty-nine weeks ended October 29, 2017 compared to net repayments of $59,625 in the thirty-nine weeks ended October 30, 2016.
We plan on financing future growth through existing cash on hand, future operating cash flows, debt facilities and tenant improvement
allowances from landlords. We expect to spend between $231,000 and $236,000 ($195,000 to $200,000 net of tenant improvement allowances) in capital additions during fiscal 2017. The fiscal 2017 additions are expected to include approximately $195,000
to $200,000 ($159,000 to $164,000 net of tenant improvement allowances) for new store construction and operating improvement initiatives, including four store remodels, $16,000 for game refreshment and $20,000 in maintenance capital. A portion of
the 2017 new store spend is related to stores that will be under construction in 2017 but will not be open until 2018.
Contractual Obligations and
Commercial Commitments
The following table sets forth our expected future annual contractual obligations and commercial
commitments as of October 29, 2017:
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Total
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1 Year
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2-3
Years
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4-5
Years
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After 5
Years
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Credit Facility
(1)
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$
|
316,000
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|
|
$
|
15,000
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|
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$
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30,000
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|
|
$
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271,000
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|
|
$
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|
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Interest requirements
(2)
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|
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33,969
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|
|
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7,920
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|
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14,406
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11,643
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Operating leases
(3)
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|
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1,403,810
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|
|
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100,701
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|
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193,205
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|
|
|
168,002
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|
|
941,902
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Total
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$
|
1,753,779
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|
|
$
|
123,621
|
|
|
$
|
237,611
|
|
|
$
|
450,645
|
|
|
$
|
941,902
|
|
|
|
|
|
|
|
|
|
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|
|
|
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(1)
|
The Credit Facility includes a $300,000 term loan facility and $500,000 revolving credit facility. As of October 29, 2017, we had borrowings of $300,000 under the term loan facility and borrowings of $16,000 under
the revolving credit facility.
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28
(2)
|
The cash obligations for interest requirements consist of variable rate debt obligations at rates in effect on October 29, 2017 of 2.49%.
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(3)
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Our operating leases generally provide for one or more renewal options. These renewal options allow us to extend the term of the lease for a specified time at an established annual lease payment. Future obligations
related to lease renewal options that have been exercised or were reasonably assured to be exercised as of the lease origination date, have been included in the table above.
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Accounting policies and estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue and expenses, and disclosures of contingent assets and liabilities. These estimates and assumptions affect amounts of assets, liabilities, revenues and expenses and the disclosure of gain and loss contingencies at the
date of the consolidated financial statements. Our current estimates are subject to change if different assumptions as to the outcome of future events were made. We evaluate our estimates and judgments on an ongoing basis and we adjust our
assumptions and judgments when facts and circumstances dictate. Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates we used in preparing the accompanying consolidated
financial statements. A complete description of our critical accounting policies and estimates is included in our annual consolidated financial statements and the related notes in our Annual Report on
Form10-K
filed with the SEC on March 28, 2017.
Recent accounting pronouncements.
Refer to Note 1,
Summary of Significant Accounting Policies
, of Notes to Unaudited Consolidated Financial Statements for information
regarding new accounting pronouncements.