Famous Dave’s of America, Inc. Reports Results for Second Quarter of Fiscal 2019

Date : 08/12/2019 @ 8:01PM
Source : GlobeNewswire Inc.
Stock : Famous Daves of America Inc (DAVE)
Quote : 4.68  0.0 (0.00%) @ 12:00AM

Famous Dave’s of America, Inc. Reports Results for Second Quarter of Fiscal 2019

Famous Daves of America (NASDAQ:DAVE)
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Famous Dave's of America, Inc. (NASDAQ: DAVE), an innovating owner and operator of barbeque restaurants, globally, today reported financial results for the second fiscal quarter ended June 30, 2019.

Second Quarter 2019 Highlights:

  • Company-owned same store net sales decreased 0.8%, driven by traffic decreases in Dine-In, partially offset by a 6.8% increase in To-Go same store net sales.
  • Domestic franchise-operated same store net sales increased 0.7% year-over-year. Franchise-operated system, including international units, increased by 0.5%.
  • Reacquired eight Famous Dave’s franchise stores at attractive valuations, which are slated for upgrades and relaunches. 
  • Generated over $800,000 in operating cash flow.
  • Launched 2,300 square foot small-footprint restaurant in Tucson, Arizona through a Famous Dave’s franchisee.
  • Approximately 102,000 downloads of loyalty app since it was launched in December 2018.

Highlights Subsequent to the Second Quarter 2019:

  • Reacquired five restaurants in Arizona and Kentucky from franchisees.
  • Announced agreement with Beyond Meat to add innovative and delicious non-meat items to the Famous Dave’s menu. 

Executive Comments

Jeff Crivello, CEO, commented, “For the second time since 2011, our franchise community posted positive same store net sales, driven by a 0.7% increase from domestic franchisees, partially offset by a 5.8% decline from our international community.  During the first half of fiscal 2019, we have reinvested approximately $5.7 million into our system, including repurchasing franchise restaurants, and refreshes of company owned restaurants.  In addition, we refinanced our credit facility in preparation of our growth initiatives.  We have also begun the process to open new, small footprint restaurants in select markets.”

Key Operating Metrics

              
  Three Months Ended  Six Months Ended 
  June 30, 2019 July 1, 2018  June 30, 2019  July 1, 2018 
Restaurant count:             
Franchise-operated  107   135   107   135  
Company-owned  29   15   29   15  
Total  136   150   136   150  
Same store net restaurant sales %:             
Franchise-operated, domestic  0.7 % (1.4)% 0.6 % (1.4)%
Franchise-operated, international(1)  (5.8)% (17.8)% (14.8)% (9.3)%
Franchise-operated total  0.5 % (2.0)% 0.2 % (1.5)%
Company-owned  (0.8)% 1.2 % 1.0 % 3.2 %
Total  0.4 % (1.6)% 0.3 % (1.0)%
              
(in thousands, expect per share data)             
              
System-wide restaurant sales(2) $90,647  $97,262  $173,386  $184,429  
              
Net income $1,040  $1,392  $1,122  $2,390  
Adjusted net income(3)  1,439   1,701   2,060   2,653  
              
Net income, per diluted share $0.11  $0.16  $0.12  $0.29  
Adjusted net income, per diluted share(3)  0.16   0.19   0.22   0.33  
              
Adjusted EBITDA(3) $2,446  $2,700  $3,477  $4,494  

___________________________________(1) International franchise comparable sales declines are primarily related to Puerto Rico, which is still yet to recover from the effects of recent hurricanes.(2) 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.(3) Adjusted net income (loss) 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 2019 Review

Total revenue for the second quarter of 2019 was $21.1 million, up 45.3% from the second quarter of 2018. The increase in year-over-year restaurant sales, net for the three months ended June 30, 2019 was driven primarily by the acquisition of Famous Dave’s stores in Colorado, Michigan, Ohio, Wisconsin, Indiana and Iowa and a 0.5% increase in franchise-operated same store net sales. 

On a weighted basis, same store net sales for our To-Go line of business increased 2.2% in the second quarter of fiscal 2019 as compared to the prior year period, partially offset by a decline in Dine In and Catering lines of business of 2.7% and 0.3%, respectively. During the second quarter of fiscal 2019, Dine In represented approximately 51% of our total restaurant sales, net, while To Go and Catering represented 36% and 13% of restaurant sales, net, respectively.   

Restaurant-level operating margin, as a percentage of restaurant sales, net, for Company-owned restaurants was 3.4% compared to 6.0% in the second quarter of fiscal 2018. This decline in restaurant-level operating margin was primarily a result of acquisitions of new stores in 2019, which we believe will stabilize over the remainder of fiscal 2019.

General and administrative expenses for the three months ended June 30, 2019 and July 1, 2018 represented approximately 11.3% and 14.5% of total revenues, respectively. The increase to general and administrative expenses primarily related to acquisition costs incurred related to our completed and pending acquisitions.

Net income was approximately $1.0 million, or $0.11 per share, in the second quarter of fiscal 2019 compared to net income of approximately $1.4 million, or $0.16 per share, in the second quarter of fiscal 2018.  Adjusted net income, a non-GAAP measure, was approximately $1.4 million, or $0.16 per share, compared to adjusted net income of approximately $1.7 million, or $0.19 per share, in the second quarter of fiscal 2018. A reconciliation between adjusted net income and its most directly comparable GAAP measure is included in the accompanying financial tables.

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 12, 2019, the Company owns 33 locations and franchises an additional 101 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 income (loss) is net income (loss), plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs, and the related tax impact. This number is divided by the weighted-average number of diluted shares of common stock outstanding during each period presented to arrive at adjusted net income (loss), per share. Adjusted EBITDA is net income (loss), plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, depreciation and amortization, interest expense, net, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs 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, the timing of refreshes 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
   
  Darrow Associates, Inc.
  Peter Seltzberg – Managing Director
  516-419-9915
  pseltzberg@darrowir.com
   

 
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)(Unaudited)
              
  Three Months Ended Six Months Ended 
  June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018 
Revenue:             
Restaurant sales, net $16,898  $9,955  $27,212  $18,668  
Franchise royalty and fee revenue  3,447   3,753   6,651   7,161  
Franchisee national advertising fund contributions  471   529   880   998  
Licensing and other revenue  312   301   578   555  
Total revenue  21,128   14,538   35,321   27,382  
              
Costs and expenses:             
Food and beverage costs  5,325   3,099   8,685   5,816  
Labor and benefits costs  5,819   3,361   9,776   6,557  
Operating expenses  5,187   2,894   8,356   5,735  
Depreciation and amortization expenses  515   309   779   702  
General and administrative expenses  2,377   2,111   4,894   3,985  
National advertising fund expenses  471   529   880   998  
Asset impairment, estimated lease termination charges and other closing costs, net  97   216   504   112  
Net (gain) loss on disposal of property  (140)  30   (146)  29  
Total costs and expenses  19,651   12,549   33,728   23,934  
              
Income from operations  1,477   1,989   1,593   3,448  
              
Other income (expense):             
Interest expense  (288)  (197)  (359)  (342) 
Interest income  33   20   87   25  
Total other expense  (255)  (177)  (272)  (317) 
              
Income before income taxes  1,222   1,812   1,321   3,131  
              
Income tax expense  (182)  (420)  (199)  (741) 
              
Net income  $1,040  $1,392  $1,122  $2,390  
              
Basic net income per share $0.11  $0.16  $0.12  $0.29  
Diluted net income per share  $0.11  $0.16  $0.12  $0.29  
Weighted average shares outstanding - basic  9,093   8,809   9,089   8,108  
Weighted average shares outstanding - diluted  9,278   8,835   9,191   8,131  
                  

 
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIESOPERATING RESULTS(unaudited)
          
  Three Months Ended Six Months Ended 
  June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018 
Food and beverage costs(1) 31.5%31.1%31.9%31.2%
Labor and benefits costs(1) 34.4%33.8%35.9%35.1%
Operating expenses(1) 30.7%29.1%30.7%30.7%
Restaurant level operating margin(1)(3)  3.4%6.0%1.5%3.0%
Depreciation and amortization expenses(2) 2.4%2.1%2.2%2.6%
General and administrative expenses(2) 11.3%14.5%13.9%14.6%
Income from operations(2) 7.0%13.7%4.5%12.6%

_____________________________(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 SUBSIDIARIESCONSOLIDATED BALANCE SHEETS (in thousands, except per share data)(unaudited)
         
ASSETS        
Current assets:  June 30, 2019 December 30, 2018
Cash and cash equivalents $8,220  $11,598 
Restricted cash  800   842 
Accounts receivable, net of allowance for doubtful accounts of $87,000 and $192,000, respectively  4,470   4,300 
Inventories  1,250   722 
Prepaid income taxes and income taxes receivable  379   377 
Prepaid expenses and other current assets  1,238   1,363 
Assets held for sale  2,842    
Total current assets   19,199   19,202 
         
Property, equipment and leasehold improvements, net  10,468   10,385 
         
Other assets:        
Operating lease right-of-use assets  24,745    
Goodwill  435   61 
Intangible assets, net  3,488   1,428 
Deferred tax asset, net  5,753   5,747 
Other assets  1,699   1,533 
  $65,787  $38,356 
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
         
Current liabilities:         
Accounts payable $4,114  $3,765 
Current portion of lease liabilities  3,294    
Current portion of long-term debt and financing lease obligations  166   1,369 
Accrued compensation and benefits  1,685   808 
Other current liabilities  3,461   2,970 
Total current liabilities  12,720   8,912 
         
Long-term liabilities:        
Lease liabilities, less current portion  23,932    
Long-term debt, less current portion  2,404   2,411 
Other liabilities  2,869   4,492 
Total liabilities  41,925   15,815 
         
Shareholders’ equity:         
Common stock, $.01 par value, 100,000 shares authorized, 9,274 and 9,085 shares issued and outstanding at June 30, 2019 and December 30, 2018, respectively  93   91 
Additional paid-in capital  7,596   7,375 
Retained earnings  16,173   15,075 
Total shareholders’ equity  23,862   22,541 
  $65,787  $38,356 
         

 
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)
       
  Six Months Ended
  June 30, 2019 July 1, 2018
Cash flows from operating activities:      
Net income $1,122  $2,390 
Adjustments to reconcile net income to cash flows provided by operations:      
Depreciation and amortization  779   702 
Stock-based compensation  223   167 
Net (gain) loss on disposal of property  (146)  29 
Asset impairment and estimated lease termination charges (gain)  469   (268)
Bad debts recovery  (87)  (25)
Other non-cash items  124   (230)
Changes in operating assets and liabilities:      
Accounts receivable, net  (422)  (298)
Other assets  (411)  716 
Accounts payable  321   (851)
Accrued and other liabilities  481   (1,298)
Cash flows provided by operating activities  2,453   1,034 
       
Cash flows from investing activities:      
Proceeds from the sale of assets  6   1,187 
Purchases of property, equipment and leasehold improvements  (1,242)  (290)
Payments for acquired restaurants  (4,265)   
Advances on notes receivable  (150)  (648)
Payments received on note receivable  8    
Cash flows (used for) provided by investing activities  (5,643)  249 
       
Cash flows from financing activities:      
Payments for debt issuance costs  (54)   
Payments on long-term debt and financing lease obligations  (176)  (5,757)
Proceeds from sale of common stock, net of offering costs     5,132 
Proceeds from exercise of stock options     494 
Cash flows used for financing activities  (230)  (131)
       
(Decrease) increase in cash, cash equivalents and restricted cash  (3,420)  1,152 
Cash, cash equivalents and restricted cash, beginning of period  12,440   10,426 
Cash, cash equivalents and restricted cash, end of period $9,020  $11,578 
         

 
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIESNON-GAAP RECONCILIATION(in thousands, except per share data)(unaudited)
             
  Three Months Ended Six Months Ended
(dollars in thousands) June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Net income $1,040  $1,392   1,122   2,390 
Asset impairment and estimated lease termination charges and other closing costs  97   216   504   112 
Net gain on disposal of equipment  (140)  30   (146)  29 
Stock-based compensation  140   120   223   167 
Acquisition costs  357      521    
Severance     36   3   36 
Tax adjustment  (55)  (93)  (167)  (81)
Adjusted net income $1,439  $1,701  $2,060  $2,653 
Basic adjusted net income per common share $0.16  $0.19  $0.23  $0.33 
Diluted adjusted net income per common share $0.16  $0.19  $0.22  $0.33 
             
Weighted average common share outstanding - basic  9,093   8,809   9,089   8,108 
Weighted average common share outstanding - diluted  9,278   8,835   9,191   8,131 
             
Net income $1,040  $1,392  $1,122  $2,390 
Asset impairment and estimated lease termination charges and other closing costs  97   216   504   112 
Depreciation and amortization  515   309   779   702 
Interest expense, net  255   177   272   317 
Net (gain) loss on disposal of equipment  (140)  30   (146)  29 
Stock-based compensation  140   120   223   167 
Acquisition costs  357      521    
Severance     36   3   36 
Provision for income taxes  182   420   199   741 
Adjusted EBITDA $2,446  $2,700  $3,477  $4,494 
                 

 

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