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


MINNEAPOLIS, May 13, 2019 (GLOBE NEWSWIRE) -- Famous Dave's of America, Inc. (NASDAQ: DAVE), an innovating owner and operator of barbeque restaurants, globally, today reported financial results for the first fiscal quarter ended March 31, 2019.

First Quarter 2019 Highlights:

  • Company-owned comparable sales increased 1.3%, driven by increases in To-Go of 10.2% and 12.6% in Catering.
  • Domestic franchise-operated comparable sales were flat year-over-year. Franchise-operated system, including international units, declined by 1.0%.
  • Invested $4.2 million, representing 3.0x pro forma TTM EBITDA to reacquire four Famous Dave’s restaurants in Colorado.
  • Approximately 63,000 downloads of our loyalty app since launched in December 2018.

Highlights Subsequent to the First Quarter 2019:

  • Invested $132,000, representing 0.4x pro forma TTM EBITDA to reacquire six Famous Dave’s restaurants in Wisconsin, Michigan and Ohio.
  • Launched 2,300 square foot small-format restaurant in Tucson, Arizona through a Famous Dave’s franchisee.
  • Initiated $200,000 in comprehensive remodeling of Westbury, New York restaurant with an expected payback of two years.

Executive Comments

Jeff Crivello, CEO, commented, “Our commitment to re-evaluate and prudently invest in our restaurant portfolio and branding value remained a top priority during the first quarter of 2019. We completed the reacquisition of four stores in the Colorado market before the end of the quarter and reacquired six stores in Michigan, Wisconsin and Ohio subsequent to the end of the quarter. We intend to strategically refresh the stores in these markets and believe that higher efficiencies at these locations will result in higher cash flows from previous levels while under franchise ownership. We are also in the midst of refreshing two other stores in our Company-owned portfolio and expect those to be completed this summer. The turnaround strategy that we planned in 2017, and are now executing, is well-underway and we’re working on numerous initiatives to boost the financial performance of our Company-owned and franchise-operated stores to build a valuable portfolio of highly-performing restaurant properties. Investments we’ve made and continue to make in this multi-year turnaround should begin to deliver more significant financial improvements later this year.”

        
Key Operating Metrics
        
  Three Months Ended
  March 31, 2019   April 1, 2018 
Restaurant count:       
Franchise-operated  117     136  
Company-owned  21     16  
Total  138     152  
Comparable restaurant sales %:       
Franchise-operated, domestic  —    (1.6)%
Franchise-operated, international(1)  (28.0)   (1.8)
Franchise-operated total  (1.0)    (1.6) 
Company-owned  1.3    5.2 %
Total  (0.7)   (0.9)%
        
(in thousands, expect per share data)       
        
System-wide restaurant sales(2)$ 82,739   $ 87,166  
        
Net income (loss)$ 82   $ 998  
Adjusted net income (loss)(3)  620     954  
        
Net income (loss), per share$ 0.01   $ 0.13  
Adjusted net income (loss), per share(3)  0.07     0.13  
        
Adjusted EBITDA(3)$ 1,030   $ 1,794  


            
            
(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.”
            

First Quarter 2019 Review

Total revenue for the first quarter of 2019 was $14.2 million, up 10.5% from the first quarter of 2018. The increase in year-over-year restaurant sales, net for the three months ended March 31, 2019 was driven primarily by the acquisition of four Famous Dave’s stores in Colorado and a comparable sales increase of 1.3%. These increases were partially offset by a 1.1% decline in franchise-operated comparable sales for the quarter and the net closure of 13 franchise-operated restaurants since April 1, 2018. 

Comparable sales for our To-Go and Catering lines of business increased 10.2% and 12.6% in the first quarter of fiscal 2019, respectively, partially offset by a decline in Dine In of 5.6%. During the first quarter of fiscal 2019, Dine In represented approximately 53% of our total restaurant sales, net, while To Go and Catering represented 39% and 8% of restaurant sales, net, respectively.   

Restaurant-level operating margin, as a percentage of restaurant sales, net, for Company-owned restaurants was (1.7%) compared to (0.5%) in the first quarter of fiscal 2018. This decline in restaurant-level operating margin was primarily a result of new initiatives tested in our corporate stores, including our comprehensive new menu that was rolled out in October 2018. We believe that further training and operational efficiency surrounding the new menu will improve food costs and labor as a percentage of restaurant sales, net, throughout the remainder of fiscal 2019.

General and administrative expenses for the three months ended March 31, 2019 and April 1, 2018 represented approximately 17.7% and 14.6% of total revenues, respectively. The increase to general and administrative expenses primarily related to one-time savings in the prior year that did not recur during the three months ended March 31, 2019 and acquisition costs incurred related to our completed and pending acquisitions.

Net income was approximately $82,000, or $0.01 per share, in the first quarter of fiscal 2019 compared to net income of approximately $998,000, or $0.13 per share, in the first quarter of fiscal 2018.  Adjusted net income, a non-GAAP measure, was approximately $620,000, or $0.07 per share, compared to adjusted net income of approximately $954,000, or $0.13 per share, in the first 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 May 13, 2019, the Company owns 27 locations and franchises an additional 109 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 basic 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 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 SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
      
 Three Months Ended
 March 31, 2019 April 1, 2018
Revenue:     
Restaurant sales, net$ 10,314  $ 8,713 
Franchise royalty and fee revenue  3,204    3,408 
Franchisee national advertising fund contributions  409    469 
Licensing and other revenue  266    254 
Total revenue  14,193    12,844 
      
Costs and expenses:     
Food and beverage costs  3,360    2,717 
Labor and benefits costs  3,957    3,196 
Operating expenses  3,169    2,841 
Depreciation and amortization expenses  264    393 
General and administrative expenses  2,517    1,874 
National advertising fund expenses  409    469 
Asset impairment, estimated lease termination charges and other closing costs, net  407    (104)
Net loss on disposal of property  (6)   (1)
Total costs and expenses  14,077    11,385 
      
Income from operations  116    1,459 
      
Other income (expense):     
Interest expense  (71)   (145)
Interest income  54    5 
Total other expense  (17)   (140)
      
Income before income taxes  99    1,319 
      
Income tax expense  (17)   (321)
      
Net income $ 82  $ 998 
      
Basic net income per share$ 0.01  $ 0.13 
Diluted net income per share $ 0.01  $ 0.13 
Weighted average shares outstanding - basic  9,085    7,407 
Weighted average shares outstanding - diluted  9,189    7,407 
        


FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
OPERATING RESULTS
(unaudited)
 
      
 Three Months Ended 
 March 31, 2019  April 1, 2018 
Food and beverage costs(1) 32.6   31.2 
Labor and benefits costs(1) 38.4   36.7 
Operating expenses(1) 30.7   32.6 
Restaurant level operating margin(1)(3)  (1.7)  (0.5)
Depreciation and amortization expenses(2) 1.9   3.1 
General and administrative expenses(2) 17.7   14.6 
Net income(2) 0.8   11.4 

 


            
            
(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:March 31, 2019  December 30, 2018 
Cash and cash equivalents$ 8,868  $ 11,598 
Restricted cash  840    842 
Accounts receivable, net of allowance for doubtful accounts of $202,000 and $192,000, respectively  3,194    4,300 
Inventories  843    722 
Prepaid income taxes and income taxes receivable  377    377 
Prepaid expenses and other current assets  1,102    1,363 
Total current assets   15,224    19,202 
        
Property, equipment and leasehold improvements, net  11,114    10,385 
        
Other assets:       
Operating lease right-of-use assets  16,338    — 
Goodwill  1,104    61 
Intangible assets, net  3,452    1,428 
Deferred tax asset, net  5,753    5,747 
Other assets  1,687    1,533 
 $ 54,672  $ 38,356 
        
LIABILITIES AND SHAREHOLDERS’ EQUITY       
        
Current liabilities:        
Accounts payable$ 3,772  $ 3,765 
Current portion of lease liabilities  1,927    — 
Current portion of long-term debt and financing lease obligations  164    1,369 
Accrued compensation and benefits  1,188    808 
Other current liabilities  3,043    2,970 
Total current liabilities  10,094    8,912 
        
Long-term liabilities:       
Lease liabilities, less current portion  16,908    — 
Long-term debt, less current portion  2,358    2,411 
Other liabilities  2,630    4,492 
Total liabilities  31,990    15,815 
        
Shareholders’ equity:        
Common stock, $.01 par value, 100,000 shares authorized, 9,274 and 9,085 shares issued and outstanding at March 31, 2019 and December 30, 2018, respectively  93    91 
Additional paid-in capital  7,456    7,375 
Retained earnings  15,133    15,075 
Total shareholders’ equity  22,682    22,541 
 $ 54,672  $ 38,356 
        


FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
      
 Three Months Ended
 March 31, 2019 April 1, 2018
Cash flows from operating activities:     
Net income$ 82  $ 998 
Adjustments to reconcile net income to cash flows provided by operations:     
Depreciation and amortization  264    393 
Stock-based compensation  83    47 
Net gain on disposal of property  (6)   (1)
Asset impairment and estimated lease termination charges (gain)  386    (185)
Bad debts expense (recovery)  21    (147)
Other non-cash items  33    (149)
Changes in operating assets and liabilities:     
Accounts receivable, net  743    61 
Other assets  53    6 
Accounts payable  (9)   32 
Accrued and other liabilities  (24)   (879)
Cash flows provided by operating activities  1,626    176 
      
Cash flows from investing activities:     
Proceeds from the sale of assets  6    1 
Purchases of property, equipment and leasehold improvements  (221)   (41)
Payments for acquired restaurants  (3,841)   — 
Advances on notes receivable  (150)   (458)
Cash flows used for investing activities  (4,206)   (498)
      
Cash flows from financing activities:     
Payments for debt issuance costs  (15)   — 
Payments on long-term debt and financing lease obligations  (137)   (320)
Proceeds from exercise of stock options  —    389 
Cash flows (used for) provided by financing activities  (152)   69 
      
Decrease in cash, cash equivalents and restricted cash  (2,732)   (253)
Cash, cash equivalents and restricted cash, beginning of period  12,440    10,426 
Cash, cash equivalents and restricted cash, end of period$ 9,708  $ 10,173 
        


FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION
(in thousands, except per share data)
(unaudited)
      
  Three Months Ended
(dollars in thousands) March 31, 2019  April 1, 2018
Net income  82    998 
Asset impairment and estimated lease termination charges and other closing costs  407    (104)
Net gain on disposal of equipment  (6)   (1)
Stock-based compensation  83    47 
Acquisition costs  163    — 
Severance  3    — 
Tax adjustment  (112)   14 
Adjusted net income$ 620  $ 954 
Basic adjusted net income per common share$ 0.07  $ 0.13 
Diluted adjusted net income per common share$ 0.07  $ 0.13 
      
Weighted average common share outstanding - basic  9,085    7,407 
Weighted average common share outstanding - diluted  9,189    7,407 
      
Net income$ 82  $ 998 
Asset impairment and estimated lease termination charges and other closing costs  407    (104)
Depreciation and amortization  264    393 
Interest expense, net  17    140 
Net gain on disposal of equipment  (6)   (1)
Stock-based compensation  83    47 
Acquisition costs  163    — 
Severance  3    — 
Provision for income taxes  17    321 
Adjusted EBITDA$ 1,030  $ 1,794