Dave (NASDAQ:DAVE)
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Famous Dave's of America, Inc. (NASDAQ: DAVE) today announced revenue
and net income of $38.8 million and $2.3 million, respectively, or $0.23
per diluted share, for its fiscal second quarter ending June 29, 2008.
Revenue for the quarter increased 15.6 percent over the comparable
period in 2007.
Same store sales for the company's restaurants open for 24 months or
more increased 1.7 percent during the quarter, while same store sales
for its franchise-operated restaurants declined 1.4 percent. Franchise
royalty revenue for the quarter totaled $4.7 million, up 12.8 percent
over the comparable period in 2007.
Sales growth in the second quarter for company-owned restaurants was
driven by an increase in dine-in sales and weighted average price
increases of 3.8 percent, including a 1.6 percent increase that went
into effect June 1, 2008.
For the six months ended June 29, 2008 revenue and net income were $72.5
million and $3.1 million, respectively, or $0.32 per diluted share.
Same store sales for the company's restaurants open for 24 months or
more increased 2.3 percent on a year-to-date basis, while same store
sales for its franchise-operated restaurants declined 1.9 percent.
“Our operations team delivered a solid
quarter, but the business climate remains challenging and we expect that
we’ll face increasing sales and cost pressures
through the remainder of the year,” said
Wilson L. Craft, president and CEO of Famous Dave’s.
“We’re pleased with
the positive same store sales increases in our company-owned
restaurants, and while still in negative territory, this quarter’s
franchise comparable sales results reflect another sequential
improvement for our franchise system.”
Results from franchise-operated restaurants continue to be affected by
adverse economic conditions in several areas of the country hard-hit by
the widening effects of the housing and credit crisis and more recently,
rapidly increasing fuel prices.
“We had some strong pockets within our
franchise restaurants,” Craft said. “Approximately
45 percent of the 85 franchise restaurants in the comparable sales base
reported positive comparable sales this past quarter of almost 4
percent. We’ve put in place a number of
initiatives to help boost system-wide performance and hope to make
further progress in coming quarters.”
Earnings for the second quarter on a year-over-year basis reflect the
opening of five new company-owned restaurants since September 2007.
These sales gains were partially offset by increased food and utility
costs, a shift in the timing of advertising as well as an increase in
the number of markets in which we advertised.
The company’s 2008 second quarter also
reflected the following:
Approximately $90,000 of net expense related to the write-off of a
franchisee’s accounts receivable balance,
deemed uncollectable, as well as an adjustment to the general
franchise accounts receivable reserve, in accordance with our policy,
reflected in general and administrative expenses.
An increase in depreciation and amortization year-over-year, of
approximately $138,000 reflecting capital invested in the five
most-recently opened restaurants, in addition to the result of the
fourth quarter fiscal 2007 reclassification of assets previously held
for sale to assets held and used.
A year-over-year increase in interest expense primarily attributable
to a higher average balance on the company’s
revolver.
A year-over-year decrease of approximately $194,000 in general and
administrative expenses related to lower stock-based compensation
expense partially offset by higher professional services fees.
Earnings results for the second quarter of 2008 included approximately
$317,000 or $0.02 per diluted share, in compensation expense as related
to the company’s stock-based incentive
programs, as compared to approximately $500,000 or $0.03 per diluted
share, for the prior year comparable period. Stock-based compensation
expense for the six months ended June 29, 2008 was approximately
$597,000 compared to approximately $1.0 million for the prior year
comparable period.
Development and marketing highlights during the quarter included a
highly successful "limited time offer" promotion re-launching the “USA
BBQ Tour,” which included a combination of
ribs, brisket and chopped pork. This year’s
BBQ tour was paired with Famous Dave’s
strawberry shortcake, an addition that boosted sales of this promotional
item over last year’s results. For the second
quarter of 2008, catering sales were down year-over-year. The
system-wide marketing effort to promote catering during the graduation
season had a favorable impact on catering sales however, due to the
difficult economy, the company has realized a decline in commercial
catering events.
“In light of the difficult operating
environment faced by the entire casual dining industry, I’m
proud of the results achieved by the Famous Dave’s
operating team,” Craft said. “We
also recognize that these conditions present significant opportunities
for the best-performing restaurant concepts to gain market share and
improve operating efficiencies, and we fully intend to capitalize on
that.”
At the same time, the company is looking closely at its company-owned
restaurant base and evaluating the long-term prospects of those
restaurants that have not been meeting sales, profitability and cash
flow goals. Given the pressures on food costs and other economic
conditions, this process may lead to a decision to impair the assets of
some under-performing restaurants, resulting in non-cash charges
typically associated with such decisions. In addition, as a result of a
new company-owned restaurant expected to open in the Chicago market this
fall that is in close proximity to an existing legacy restaurant, we are
evaluating the possible closure of this restaurant in the third quarter
of fiscal 2008, and may incur non-cash charges associated with this
decision. Famous Dave’s anticipates that the
evaluation process on our company-owned restaurants will be completed by
the end of the third quarter, with any non-cash charges reflected in the
third and possibly the fourth quarter of the current fiscal year.
During the second quarter of fiscal 2008, the company opened four
franchise-operated restaurants, and two franchise-operated restaurants
closed. Famous Dave's ended the quarter with 170 restaurants, including
45 company-owned restaurants and 125 franchise-operated restaurants,
located in 34 states.
Subsequent to quarter end, the Company acquired three franchise
restaurants in the Atlanta market from a franchisee in exchange for
amounts owed.
Outlook
Famous Dave's is updating its guidance regarding system growth and
anticipates opening approximately 20 restaurants in 2008 including four
company-owned locations. In addition, the company will expand its
geographic reach with franchise restaurants opening in three new states:
Delaware, Idaho and Oregon.
The company currently has signed development agreements for 112 units. “We
are actively working with many of our franchise partners regarding their
development,” said Craft. “The
decision by many developers to slow down their growth has resulted in
delays in development timelines as well as challenges in identifying
quality real estate. Accordingly, we have agreed to adjust the timing
and number of restaurants required by some of the development schedules.”
“Our willingness to adjust these schedules,
particularly during this economy, puts less pressure on our partners to
simply get a restaurant open and helps ensure that we get the right
restaurant opened.” Craft said. “Lastly,
we are taking a hard look at the franchise partnership group, and in
some cases have been exercising our right to take back territory. Our
ultimate goal is to work with our partners to build a sustainable
franchise system for the long term.”
In addition, we are reiterating our outlook on food costs. The 1.6
percent price increase put into effect June 1 will help mitigate, but
will not completely offset higher food prices. In response, the company
is considering taking a price increase earlier than normal, in October,
in the 2 percent range, to help alleviate further cost pressures. The
company has contracted pork and brisket through year-end, and its
chicken contract through September 2008. Based on current information,
the company is anticipating an increase of approximately 5 percent in
chicken prices upon renewal.
Conference Call
The company will host a conference call tomorrow, July 31, 2008, at
10:00 a.m. Central Time to discuss its second quarter financial results.
There will be a live webcast of the discussion through the Investor
Relations section of Famous Dave's web site at www.famousdaves.com.
About Famous Dave’s
Famous Dave’s of America, Inc. develops,
owns, operates and franchises barbeque restaurants. As of today, the
company owns 48 locations and franchises 123 additional units in 34
states and has signed development agreements for an additional 112
franchised locations. Its menu features award-winning barbequed and
grilled meats, an ample selection of salads, side items and sandwiches,
and unique desserts.
FAMOUS DAVE’S OF AMERICA, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three Months Ended
Six Months Ended
June 29,
2008
July 1,
2007
June 29,
2008
July 1,
2007
Revenue:
Restaurant sales, net
$
33,565
$
28,726
$
62,812
$
53,667
Franchise royalty revenue
4,661
4,132
8,828
7,781
Franchise fee revenue
232
241
347
556
Licensing and other revenue
316
436
502
534
Total revenue
38,774
33,535
72,489
62,538
Costs and expenses:
Food and beverage costs
10,292
8,661
19,231
16,272
Labor and benefits costs
9,728
8,323
18,910
15,803
Operating expenses
9,172
7,261
16,665
13,454
Depreciation and amortization
1,268
1,130
2,729
2,285
General and administrative expenses
4,380
4,573
9,033
8,696
Pre-opening expenses
49
36
303
42
Loss on disposal of property
12
82
6
100
Total costs and expenses
34,901
30,066
66,877
56,652
Income from operations
3,873
3,469
5,612
5,886
Other expense:
Loss on early extinguishment of debt
---
---
---
(12
)
Interest expense
(463
)
(350
)
(974
)
(713
)
Interest income
41
77
99
153
Other (expense) income, net
(29
)
38
(30
)
42
Total other expense
(451
)
(235
)
(905
)
(530
)
Income before income taxes
3,422
3,234
4,707
5,356
Income tax expense
(1,150
)
(1,095
)
(1,600
)
(1,815
)
Net income
$
2,272
$
2,139
$
3,107
$
3,541
Basic net income per common share
$
0.24
$
0.21
$
0.32
$
0.35
Diluted net income per common share
$
0.23
$
0.21
$
0.32
$
0.34
Weighted average common shares outstanding –
basic
9,633,000
10,068,000
9,622,000
10,099,000
Weighted average common shares outstanding –
diluted
9,795,000
10,431,000
9,784,000
10,459,000
FAMOUS DAVE’S OF AMERICA, INC. AND
SUBSIDIARIES
OPERATING RESULTS
(unaudited)
Three Months Ended
Six Months Ended
June 29,2008
July 1,2007
June 29,2008
July 1,2007
Food and beverage costs (1)
30.7
%
30.2
%
30.6
%
30.3
%
Labor and benefits costs (1)
29.0
%
29.0
%
30.1
%
29.4
%
Operating expenses (1)
27.4
%
25.3
%
26.5
%
25.0
%
Depreciation & amortization
(restaurant level) (1)
3.4
%
3.5
%
4.0
%
3.8
%
Depreciation & amortization
(corporate level) (2)
0.3
%
0.4
%
0.3
%
0.4
%
General and administrative expenses (2)
11.3
%
13.6
%
12.5
%
13.9
%
Pre-opening expenses and
loss on disposal of property (1)
0.1
%
0.4
%
0.5
%
0.3
%
Total restaurant costs and expenses (1)
90.6
%
88.3
%
91.7
%
88.9
%
Income from operations (2)
10.0
%
10.3
%
7.7
%
9.4
%
(1) As a percentage of restaurant sales,
net
(2) As a percentage of total revenue
FAMOUS DAVE’S OF AMERICA, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 29,
December 30,
2008
2007
ASSETS
Current assets
$
11,838
$
14,255
Property, equipment and leasehold improvements, net
57,737
57,243
Other assets
2,467
2,444
Total assets
$
72,042
$
73,942
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
$
22,796
$
28,085
Long-term obligations
15,474
15,457
Shareholders’ equity
33,772
30,400
Total liabilities and shareholders’
equity
$
72,042
$
73,942
SUPPLEMENTAL SALES INFORMATION
(unaudited)
Three Months Ended
Six Months Ended
June 28,
2008
July 1,
2007
June 28,
2008
July 1,
2007
Total weighted average weekly net sales (AWS):
Company-Owned
$
57,259
$
54,316
$
53,903
$
50,533
Franchise-Operated
$
61,339
$
60,739
$
58,537
$
58,421
AWS 2005 and Post 2005: (1)
Company-Owned
$
73,117
$
73,464
$
70,658
$
71,328
Franchise-Operated
$
69,101
$
70,166
$
66,268
$
68,332
AWS Pre 2005: (1)
Company-Owned
$
53,295
$
52,219
$
49,822
$
48,271
Franchise-Operated
$
52,180
$
52,388
$
49,578
$
50,110
Operating Weeks:
Company-Owned
585
527
1,164
1,060
Franchise-Operated
1,587
1,386
3,126
2,712
24 month comparable net sales:
Company-Owned
1.7
%
3.5
%
2.3
%
1.5
%
Franchise-Operated
(1.4
%)
(3.3
%)
(1.9
%)
(2.9
%)
18 month comparable net sales:
Company-Owned
1.1
%
3.5
%
2.1
%
1.5
%
Franchise-Operated
(1.9
%)
(3.4
%)
(3.2
%)
(4.5
%)
Total number of restaurants:
Company-Owned
45
40
45
40
Franchise-Operated
125
112
125
112
Total
170
152
170
152
(1) Provides further delineation of AWS
for restaurants opened during the pre-fiscal 2005, and restaurants
opened during the post-fiscal 2005, timeframes.
Statements in this press release that are not strictly historical,
including but not limited to statements regarding the timing of our
restaurant openings and the timing or success of our expansion plans,
are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements involve known and unknown risks, which may cause the company’s
actual results to differ materially from expected results. Although
Famous Dave's of America, Inc. believes the expectations reflected in
any forward-looking statements are based on reasonable assumptions, it
can give no assurance that its expectation will be attained. Factors
that could cause actual results to differ materially from Famous Dave's
expectation include financial performance, restaurant industry
conditions, execution of restaurant development and construction
programs, franchisee performance, changes in local or national economic
conditions, availability of financing, governmental approvals and other
risks detailed from time to time in the company's SEC reports.