MINNEAPOLIS, Nov. 13, 2018 (GLOBE NEWSWIRE) — Famous Dave’s of America, Inc. (NASDAQ: DAVE) today reported financial results for the third fiscal quarter ended September 30, 2018 compared to the third fiscal quarter ended October 1, 2017.
Highlights for the third quarter of 2018 include the following:
- Net income from continuing operations of $1.4 million, or $0.15 per share, compared to net loss from continuing operations of $1.9 million, or ($0.28) per share in the prior year.
- Consolidated Adjusted EBITDA, a non-GAAP measure, increased 41.6% to $2.0 million.
- General and administrative expenses decreased to $1.9 million from $3.8 million in the third quarter 2017.
- Reacquired Famous Dave’s restaurant in Janesville, Wisconsin.
- Company-owned comparable restaurant sales increased 2.1%, with traffic up 4.2%.
- Franchise-operated comparable restaurant sales declined 1.8%.
Key Operating Metrics
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2018 | October 1, 2017 | September 30, 2018 |
October 1, 2017 |
|||||||||||||
| Restaurant count: | ||||||||||||||||
| Franchise-operated | 131 | 129 | 131 | 129 | ||||||||||||
| Company-owned | 16 | 25 | 16 | 25 | ||||||||||||
| Total | 147 | 154 | 147 | 154 | ||||||||||||
| Comparable restaurant sales %: | ||||||||||||||||
| Franchise-operated | (1.8 | )% | (2.1 | )% | (1.5 | )% | (3.4 | )% | ||||||||
| Company-owned | 2.1 | % | 0.9 | % | 2.8 | % | (1.4 | )% | ||||||||
| Total | (1.4 | )% | (1.5 | )% | (1.0 | )% | (3.0 | )% | ||||||||
| (in thousands, expect per share data) | ||||||||||||||||
| System-wide restaurant sales(1) | $ | 90,232 | $ | 99,725 | $ | 274,661 | $ | 311,020 | ||||||||
| Net income (loss) from continuing operations | $ | 1,402 | $ | (1,914 | ) | $ | 3,792 | $ | (4,984 | ) | ||||||
| Adjusted net income (loss) from continuing operations(2) | 1,499 | (283 | ) | 4,157 | (82 | ) | ||||||||||
| Net income (loss) from continuing operations, per share | $ | 0.15 | $ | (0.28 | ) | $ | 0.45 | $ | (0.72 | ) | ||||||
| Adjusted net income (loss) from continuing operations, per share(2) | 0.16 | (0.04 | ) | 0.49 | (0.01 | ) | ||||||||||
| Adjusted EBITDA(2) | $ | 2,016 | $ | 1,425 | $ | 6,510 | $ | 4,346 | ||||||||
____________________________________
(1) System-wide restaurant sales include sales for all Company-owned and franchise-operated restaurants, as reported by franchisees. Restaurant sales for franchise-operated restaurants are not revenues of the Company and are not included in the Company’s consolidated financial statements.
(2) Adjusted net 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.”
Third Quarter 2018 Review
Total revenue for the third quarter of 2018 was $14.1 million, down 12.4% from the third quarter of 2017. The decrease in Company-owned net restaurant sales revenue was primarily a result of the closure of nine Company-owned restaurants. The impact of these closures was partially offset by a 2.1% increase in same-store sales. The declines in franchise royalty and fee revenue were driven by a decline in franchise-operated same store sales of 1.8% and royalty abatements agreed upon to facilitate the transfer of certain of our franchise-operated restaurants to new operators, who have committed to investing necessary resources to refresh these transferred stores. Additionally, the adoption of ASC 606 – Revenue From Contracts with Customers resulted in approximately $569,000 of additional revenue during the third quarter of 2018.
Restaurant-level operating margin, as a percentage of restaurant sales, net, for Company-owned restaurants was 2.0% compared to 5.6% in the third quarter of fiscal 2017.
General and administrative expenses decreased to $1.9 million from $3.8 million in the third quarter of fiscal 2017. The year over year decline was primarily a result of reduced legal and professional fees, occupancy costs at our corporate office, and compensation expense.
We recognized net income from continuing operations of approximately $1.4 million, or $0.15 per share, in the third quarter of fiscal 2018 compared to a loss from continuing operations of $1.9 million, or ($0.28) per share, in the third quarter of fiscal 2017. We recognized net income from discontinued operations of approximately $100,000, or $0.01 per share, in the third quarter of fiscal 2017.
Adjusted net income from continuing operations, a non-GAAP measure, was approximately $1.5 million, or $0.16 per share, compared to adjusted net loss from continuing operations of approximately $283,000, or ($0.04) per share, in the third quarter of fiscal 2017. A reconciliation between adjusted net income (loss) from continuing operations and its most directly comparable GAAP measure is included in the accompanying financial tables.
Executive Comments
Jeff Crivello, CEO, commented, “In the third quarter of 2018 we saw our initiatives related to increasing our corporate catering sales come to fruition, as we increased the sales in that line of business by 2.9% year over year. Our new menu launched throughout the majority of the corporate and franchise system as of October 29, 2018, and we are making significant progress with the development of our Clark Crew BBQ concept. We look forward to our continuous effort to evolve the Famous Dave’s brand.”
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 November 13, 2018, the Company owns 17 locations and franchises an additional 129 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) from continuing operations is net income (loss) from continuing operations, plus asset impairment, estimated lease termination and other closing costs, settlement agreements, net (loss) gain on disposal of equipment, stock-based compensation, severance, and the related tax impact. This number is divided by the weighted-average number of basic shares of common stock outstanding during each period presented to arrive at adjusted net income (loss) from continuing operations, per share. Adjusted EBITDA is net income (loss), including discontinued operations, plus asset impairment, estimated lease termination and other closing costs, settlement agreements, depreciation and amortization, interest expense, net, net (loss) gain on disposal of equipment, stock-based compensation, severance and provision (benefit) for income taxes.
Forward-Looking Statements
Statements in this press release that are not strictly historical, including but not limited to statements regarding the timing of the Company’s restaurant openings and the timing or success of refranchising plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, which may cause the Company’s actual results to differ materially from expected results. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectation will be attained. Factors that could cause actual results to differ materially from Famous Dave’s expectation include financial performance, restaurant industry conditions, execution of restaurant development and construction programs, franchisee performance, changes in local or national economic conditions, availability of financing, governmental approvals and other risks detailed from time to time in the Company’s SEC reports.
| Contact: | Jeff Crivello – Chief Executive Officer | |
| 952-294-1300 | ||
| FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||||||
| Revenue: | ||||||||||||||||
| Restaurant sales, net | $ | 9,903 | $ | 12,292 | $ | 28,571 | $ | 39,955 | ||||||||
| Franchise royalty and fee revenue | 3,462 | 3,591 | 10,623 | 11,412 | ||||||||||||
| Franchisee national advertising fund contributions | 497 | — | 1,495 | — | ||||||||||||
| Licensing and other revenue | 211 | 183 | 766 | 696 | ||||||||||||
| Total revenue | 14,073 | 16,066 | 41,455 | 52,063 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Food and beverage costs | 3,091 | 3,679 | 8,907 | 12,017 | ||||||||||||
| Labor and benefits costs | 3,601 | 4,441 | 10,158 | 14,426 | ||||||||||||
| Operating expenses | 3,011 | 3,484 | 8,746 | 11,845 | ||||||||||||
| Depreciation and amortization | 281 | 1,207 | 983 | 2,311 | ||||||||||||
| General and administrative expenses | 1,937 | 3,753 | 5,922 | 11,796 | ||||||||||||
| National advertising fund expenses | 497 | — | 1,495 | — | ||||||||||||
| Asset impairment, estimated lease termination charges and other closing costs, net | 31 | 2,405 | 143 | 7,011 | ||||||||||||
| Net loss on disposal of property | — | 45 | 29 | 61 | ||||||||||||
| Total costs and expenses | 12,449 | 19,014 | 36,383 | 59,467 | ||||||||||||
| Income (loss) from operations | 1,624 | (2,948 | ) | 5,072 | (7,404 | ) | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (80 | ) | (153 | ) | (422 | ) | (510 | ) | ||||||||
| Interest income | 54 | 20 | 79 | 20 | ||||||||||||
| Total other expense | (26 | ) | (133 | ) | (343 | ) | (490 | ) | ||||||||
| Income (loss) before income taxes | 1,598 | (3,081 | ) | 4,729 | (7,894 | ) | ||||||||||
| Income tax (expense) benefit | (196 | ) | 1,167 | (937 | ) | 2,910 | ||||||||||
| Net income (loss) from continuing operations | 1,402 | (1,914 | ) | 3,792 | (4,984 | ) | ||||||||||
| Net income from discontinued operations, net of tax | — | 100 | — | 661 | ||||||||||||
| Net income (loss) | $ | 1,402 | $ | (1,814 | ) | $ | 3,792 | $ | (4,323 | ) | ||||||
| Income (loss) per common share: | ||||||||||||||||
| Basic net income (loss) per share – continuing operations | $ | 0.15 | $ | (0.28 | ) | $ | 0.45 | $ | (0.72 | ) | ||||||
| Basic net income per share – discontinued operations | — | 0.01 | — | 0.10 | ||||||||||||
| Basic net income (loss) per share | $ | 0.15 | $ | (0.26 | ) | $ | 0.45 | $ | (0.62 | ) | ||||||
| Diluted net income (loss) per share – continuing operations | $ | 0.15 | $ | (0.28 | ) | $ | 0.45 | $ | (0.72 | ) | ||||||
| Diluted net income per share – discontinued operations | — | 0.01 | — | 0.10 | ||||||||||||
| Diluted net income (loss) per share | $ | 0.15 | $ | (0.26 | ) | $ | 0.45 | $ | (0.62 | ) | ||||||
| Weighted average shares outstanding – basic | 9,090 | 6,955 | 8,435 | 6,955 | ||||||||||||
| Weighted average shares outstanding – diluted | 9,111 | 6,955 | 8,459 | 6,955 | ||||||||||||
| FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES | ||||||||||||
| OPERATING RESULTS | ||||||||||||
| (unaudited) | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||
| September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | |||||||||
| Food and beverage costs(1) | 31.2 | % | 29.9 | % | 31.2 | % | 30.1 | % | ||||
| Labor and benefits costs(1) | 36.4 | % | 36.1 | % | 35.6 | % | 36.1 | % | ||||
| Operating expenses(1) | 30.4 | % | 28.3 | % | 30.6 | % | 29.6 | % | ||||
| Restaurant level operating margin(1)(3) | 2.0 | % | 5.6 | % | 2.7 | % | 4.2 | % | ||||
| Depreciation and amortization expenses (2) | 2.0 | % | 7.5 | % | 2.4 | % | 4.4 | % | ||||
| General and administrative(2) | 13.8 | % | 23.4 | % | 14.3 | % | 22.7 | % | ||||
| Income (loss) from continuing operations(2) | 11.5 | % | (18.3 | )% | 12.2 | % | (14.2 | )% | ||||
________________________________
(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: | September 30, 2018 | December 31, 2017 | ||||
| Cash and cash equivalents | $ | 4,941 | $ | 8,836 | ||
| Restricted cash | 1,132 | 1,590 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $234,000 and $592,000, respectively | 3,835 | 3,768 | ||||
| Held-to-maturity securities | 7,012 | — | ||||
| Inventories | 657 | 633 | ||||
| Prepaid income taxes and income taxes receivable | — | 689 | ||||
| Prepaid expenses and other current assets | 712 | 793 | ||||
| Assets held for sale | — | 475 | ||||
| Total current assets | 18,289 | 16,784 | ||||
| Property, equipment and leasehold improvements, net | 10,307 | 11,442 | ||||
| Other assets: | ||||||
| Intangible assets, net | 1,419 | 1,840 | ||||
| Deferred tax asset, net | 6,587 | 5,823 | ||||
| Other assets | 1,596 | 1,018 | ||||
| $ | 38,198 | $ | 36,907 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Current portion of long-term debt and financing lease obligations | $ | 1,460 | $ | 1,307 | ||
| Accounts payable | 4,182 | 4,365 | ||||
| Accrued compensation and benefits | 1,221 | 1,545 | ||||
| Other current liabilities | 2,607 | 3,118 | ||||
| Total current liabilities | 9,470 | 10,335 | ||||
| Long-term liabilities: | ||||||
| Long-term debt, less current portion | 2,448 | 7,932 | ||||
| Financing lease obligation, less current portion | — | 1,196 | ||||
| Other liabilities | 4,847 | 3,963 | ||||
| Total liabilities | 16,765 | 23,426 | ||||
| Shareholders’ equity: | ||||||
| Common stock, $.01 par value, 100,000 shares authorized, 9,092 and 7,376 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively | 91 | 70 | ||||
| Additional paid-in capital | 7,321 | 1,460 | ||||
| Retained earnings | 14,021 | 11,951 | ||||
| Total shareholders’ equity | 21,433 | 13,481 | ||||
| $ | 38,198 | $ | 36,907 | |||
| FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Nine Months Ended | ||||||||
| September 30, 2018 | October 1, 2017 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) from continuing operations | $ | 3,792 | $ | (4,984 | ) | |||
| Adjustments to reconcile net income (loss) to cash flows provided by operations: | ||||||||
| Depreciation and amortization | 983 | 2,311 | ||||||
| (Gain) loss from asset impairment and estimated lease termination and other closing costs | (257 | ) | 4,976 | |||||
| Net loss on disposal of property | 29 | 61 | ||||||
| Amortization of deferred financing costs | 96 | 26 | ||||||
| Amortization of lease interest assets | 27 | 27 | ||||||
| Deferred income taxes | (185 | ) | 351 | |||||
| Deferred rent | (514 | ) | 285 | |||||
| Bad debts (recovery) expense | (35 | ) | 921 | |||||
| Stock-based compensation | 225 | 183 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | (49 | ) | (441 | ) | ||||
| Inventories | (24 | ) | 432 | |||||
| Prepaid income taxes and income taxes receivable | 689 | (1,068 | ) | |||||
| Prepaid expenses and other current assets | 81 | (18 | ) | |||||
| Other assets | 172 | (23 | ) | |||||
| Accounts payable | (183 | ) | 349 | |||||
| Accrued compensation and benefits | (411 | ) | 1,013 | |||||
| Other current liabilities | (203 | ) | (179 | ) | ||||
| Other liabilities | (409 | ) | (789 | ) | ||||
| Cash flows provided by continuing operating activities | 3,824 | 3,433 | ||||||
| Cash flows provided by discontinued operating activities | — | 1,058 | ||||||
| Cash flows provided by operating activities | 3,824 | 4,491 | ||||||
| Cash flows from investing activities: | ||||||||
| Proceeds from the sale of assets | 1,187 | — | ||||||
| Payments for acquired restaurants | (37 | ) | — | |||||
| Advances on notes receivable | (750 | ) | — | |||||
| Purchases of held to maturity securities | (6,995 | ) | — | |||||
| Purchases of property, equipment and leasehold improvements | (597 | ) | (252 | ) | ||||
| Cash flows used for continuing investing activities | (7,192 | ) | (252 | ) | ||||
| Cash flows used for discontinued investing activities | — | (49 | ) | |||||
| Cash flows used for investing activities | (7,192 | ) | (301 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payments for debt issuance costs | — | (15 | ) | |||||
| Payments on long-term debt and financing lease obligations | (6,625 | ) | (1,206 | ) | ||||
| Proceeds from sale of common stock, net of offering costs | 5,120 | — | ||||||
| Proceeds from exercise of stock options | 520 | — | ||||||
| Cash flows used for financing activities | (985 | ) | (1,221 | ) | ||||
| Increase (decrease) in cash, cash equivalents and restricted cash | (4,353 | ) | 2,969 | |||||
| Cash, cash equivalents and restricted cash, beginning of period | 10,426 | 6,164 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 6,073 | $ | 9,133 | ||||
| FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES | ||||||||||||||||
| NON-GAAP RECONCILIATION | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| (dollars in thousands) | September 30, 2018 | October 1, 2017 | September 30, 2018 | October 1, 2017 | ||||||||||||
| Net income (loss) from continuing operations | $ | 1,402 | $ | (1,914 | ) | 3,792 | (4,984 | ) | ||||||||
| Asset impairment and estimated lease termination and other closing costs | 31 | 2,405 | 143 | 7,011 | ||||||||||||
| Net loss on disposal of equipment | — | 45 | 29 | 61 | ||||||||||||
| Stock-based compensation | 58 | 52 | 225 | 183 | ||||||||||||
| Severance | 22 | 124 | 58 | 509 | ||||||||||||
| Tax adjustment | (14 | ) | (995 | ) | (90 | ) | (2,862 | ) | ||||||||
| Adjusted net income (loss) from continuing operations | $ | 1,499 | $ | (283 | ) | $ | 4,157 | $ | (82 | ) | ||||||
| Basic adjusted net income (loss) per common share from continuing operations | $ | 0.16 | $ | (0.04 | ) | $ | 0.49 | $ | (0.01 | ) | ||||||
| Diluted adjusted net income (loss) per common share from continuing operations | $ | 0.16 | $ | (0.04 | ) | $ | 0.49 | $ | (0.01 | ) | ||||||
| Weighted average common share outstanding – basic | 9,090 | 6,955 | 8,435 | 6,955 | ||||||||||||
| Weighted average common share outstanding – diluted | 9,111 | 6,955 | 8,459 | 6,955 | ||||||||||||
| Net income (loss) | $ | 1,402 | $ | (1,814 | ) | $ | 3,792 | $ | (4,323 | ) | ||||||
| Asset impairment and estimated lease termination and other closing costs | 31 | 2,405 | 143 | 7,011 | ||||||||||||
| Depreciation and amortization | 281 | 1,380 | 983 | 2,868 | ||||||||||||
| Interest expense, net | 26 | 133 | 343 | 490 | ||||||||||||
| Net loss on disposal of equipment | — | 45 | 29 | 63 | ||||||||||||
| Stock-based compensation | 58 | 52 | 225 | 183 | ||||||||||||
| Severance | 22 | 124 | 58 | 509 | ||||||||||||
| Provision (benefit) for income taxes | 196 | (900 | ) | 937 | (2,455 | ) | ||||||||||
| Adjusted EBITDA | $ | 2,016 | $ | 1,425 | $ | 6,510 | $ | 4,346 | ||||||||