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.
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