Famous Dave’s of America, Inc. Reports Results for First Quarter of Fiscal 2018

MINNEAPOLIS, May 14, 2018 (GLOBE NEWSWIRE) — Famous Dave’s of America, Inc. (NASDAQ:DAVE) today reported financial results for the first fiscal quarter ended April 1, 2018 compared to the first fiscal quarter ended April 2, 2017.

Highlights for the first fiscal quarter of 2018 include the following:

  • Net income from continuing operations was $998,000, or $0.13 per share, compared to net loss from continuing operations of $1.4 million, or ($0.21) per share in the prior year.
  • Consolidated adjusted EBITDA, a non-GAAP measure, increased 394% to $1.8 million. See “Non-GAAP Reconciliation” below.
  • Company-owned comparable restaurant sales increased 5.2%, with traffic up 5.3%.
  • Franchise-operated comparable restaurant sales declined 1.6%.

Key Operating Metrics

    Three Months Ended  
    April 1, 2018   April 2, 2017  
Restaurant count:              
Franchise-operated     136     138  
Company-owned     16     35  
Total     152     173  
Comparable restaurant sales %:              
Franchise-operated     (1.6) %   (4.8) %
Company-owned     5.2 %   (3.3) %
Total     (0.9) %   (4.5) %
               
(in thousands, expect per share data)              
               
System-wide restaurant sales(1)   $ 87,166   $ 100,389  
               
Net (loss) income from continuing operations   $ 998   $ (1,428)  
Adjusted net income (loss) from continuing operations(2)     954     (451)  
               
Net (loss) income from continuing operations, per share   $ 0.13   $ (0.21)  
Adjusted net income (loss) from continuing operations, per share(2)     0.13     (0.06)  
               
Adjusted EBITDA(2)   $ 1,794   $ 363  

(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 (loss) income 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 2018 Review

Total revenue for the first quarter of 2018 was $12.8 million, down 24.2% from the first quarter of 2017. The decrease in Company-owned net restaurant sales revenue was primarily a result of the closure of 12 Company-owned restaurants. The impact of these closures was partially offset by a 5.2% increase in same-store sales. The declines in franchise royalty and fee revenue were driven to the net closure of two franchise operated restaurants, a decline in franchise-operated same store sales of 1.6% 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 $525,000 of additional revenue during the first quarter of 2018.

Restaurant-level operating margin, as a percentage of restaurant sales, net, for Company-owned restaurants was (0.5%), a decrease from 0.8% in the first quarter of fiscal 2017. The decrease was primarily driven by a smaller restaurant base over which to allocate fixed costs, as well as commodities inflation, partially offset by lower labor costs, as a percentage of net restaurant sales.

General and administrative expenses decreased to $1.9 million from $4.5 million in the first quarter of fiscal 2017. The year over year decline was primarily a result of the alignment of our general and administrative expense structure to be commensurate with that of a more dedicated franchisor, lowering overhead strategically as we reduced our Company-owned restaurant count from 35 restaurants as of April 2, 2017 to 16 restaurants as of April 1, 2018.

We recognized net income from continuing operations of approximately $998,000, or $0.13 per share, in the first quarter of fiscal 2018 compared to a loss from continuing operations of $1.4 million, or ($0.21) per share, in the first quarter of fiscal 2017. We recognized a net income from discontinued operations of $182,000, or $0.03 per share, in the first quarter of fiscal 2017.

Adjusted net income from continuing operations, a non-GAAP measure, was approximately $954,000, or $0.13 per share, compared to a loss of approximately $451,000, or ($0.06) per share, in the first quarter of fiscal 2017. A reconciliation between adjusted net loss and its most directly comparable GAAP measure is included in the accompanying financial tables.

Executive Comments

Jeff Crivello, CEO, commented, “We saw many of our previously announced initiatives come to fruition in the first quarter of fiscal 2018 as we returned to profitability and continued to see positive comparable sales at Company-owned restaurants. We believe the continued adoption of third party delivery will help drive the top line performance of our franchisees throughout the year as only half of the serviceable units are currently live. We look forward to focusing on strategic investments to enhance our brand and value proposition to current and prospective franchisees.”

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 14, 2018, the Company owns 15 locations and franchises an additional 136 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 (loss) income from continuing operations is net (loss) income 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 (loss) income from continuing operations, per share. Adjusted EBITDA is net (loss) income, 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
    April 1, 2018   April 2, 2017
Revenue:            
Restaurant sales, net   $ 8,713     $ 12,949  
Franchise royalty and fee revenue     3,408       3,782  
Franchisee national advertising fund contributions     469        
Licensing and other revenue     254       217  
Total revenue     12,844       16,948  
             
Costs and expenses:            
Food and beverage costs     2,717       3,934  
Labor and benefits costs     3,196       4,808  
Operating expenses     2,841       4,106  
Depreciation and amortization     393       563  
General and administrative expenses     1,874       4,548  
National advertising fund expenses     469        
Asset impairment, estimated lease termination (income) charges and other closing costs, net     (104 )     1,133  
Net (gain) loss on disposal of property     (1 )     1  
Total costs and expenses     11,385       19,093  
             
Income (loss) from operations     1,459       (2,145 )
             
Other income (expense):            
Interest expense     (145 )     (187 )
Interest income     5        
Total other expense     (140 )     (187 )
             
Income (loss) before income taxes     1,319       (2,332 )
             
Income tax (expense) benefit     (321 )     904  
             
Net income (loss) from continuing operations     998       (1,428 )
Net income from discontinued operations, net of tax           182  
Net income (loss)   $ 998     $ (1,246 )
             
Income (loss) per common share:            
Basic net income (loss) per share – continuing operations   $ 0.13     $ (0.21 )
Basic net income per share – discontinued operations           0.03  
Basic net income (loss) per share   $ 0.13     $ (0.18 )
Diluted net income (loss) per share – continuing operations   $ 0.13     $ (0.21 )
Diluted net income per share – discontinued operations           0.03  
Diluted net income (loss) per share   $ 0.13     $ (0.18 )
Weighted average shares outstanding – basic     7,407       6,954  
Weighted average shares outstanding – diluted     7,407       6,954  

FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
OPERATING RESULTS
(unaudited)

           
  Three Months Ended    
  April 1,   April 2,    
  2018   2017    
Food and beverage costs(1)  31.2  30.4  
Labor and benefits costs(1)  36.7  37.1  
Operating expenses(1)  32.6  31.7  
Restaurant level operating margin(1)(3)   (0.5)  0.8  
Depreciation and amortization expenses (2)  3.1  3.3  
General and administrative(2)  14.6  26.8  
Income (loss) from continuing operations(2)  11.4  (12.7)  

(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:   April 1, 2018   December 31, 2017
Cash and cash equivalents   $ 8,924   $ 8,836
Restricted cash     1,249     1,590
Accounts receivable, net of allowance for doubtful accounts of $429,000 and $592,000, respectively     4,429     3,768
Inventories     594     633
Prepaid income taxes and income taxes receivable     385     689
Prepaid expenses and other current assets     1,308     793
Assets held for sale     677     475
Total current assets     17,566     16,784
             
Property, equipment and leasehold improvements, net     10,326     11,442
             
Other assets:            
Intangible assets, net     1,431     1,840
Deferred tax asset, net     6,402     5,823
Other assets     1,298     1,018
    $ 37,023   $ 36,907
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
             
Current liabilities:            
Current portion of long-term debt and financing lease obligations   $ 2,387   $ 1,307
Accounts payable     4,397     4,365
Accrued compensation and benefits     1,166     1,545
Other current liabilities     2,688     3,118
Total current liabilities     10,638     10,335
             
Long-term liabilities:            
Long-term debt, less current portion     7,738     7,932
Financing lease obligation, less current portion         1,196
Other liabilities     5,454     3,963
Total liabilities     23,830     23,426
             
Shareholders’ equity:            
Common stock, $.01 par value, 100,000 shares authorized, 7,467 and 7,376 shares issued and outstanding at April 1, 2018 and December 31, 2017, respectively     71     70
Additional paid-in capital     1,895     1,460
Retained earnings     11,227     11,951
Total shareholders’ equity     13,193     13,481
    $ 37,023   $ 36,907


FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
(unaudited)

             
    Three Months Ended
    April 1, 2018   April 2, 2017
Cash flows from operating activities:            
Net income (loss) from continuing operations   $  998     $  (1,428 )
Adjustments to reconcile net income (loss) to cash flows provided by operations:            
Depreciation and amortization      393        563  
(Gain) loss from asset impairment and estimated lease termination and other closing costs      (185 )      662  
Net (gain) loss on disposal of property      (1 )      1  
Amortization of deferred financing costs      10        7  
Amortization of lease interest assets      9        9  
Deferred income taxes      —        348  
Deferred rent      (168 )      137  
Bad debts (recovery) expense      (147 )      57  
Stock-based compensation      47        107  
Changes in operating assets and liabilities:            
Restricted cash      341        (82 )
Accounts receivable, net      61        (309 )
Inventories      39        67  
Prepaid income taxes and income taxes receivable      304        (1,314 )
Prepaid expenses and other current assets      (515 )      (629 )
Other assets      178        28  
Accounts payable      32        988  
Accrued compensation and benefits      (441 )      536  
Other current liabilities      (289 )      673  
Other liabilities      (149 )      (79 )
Cash flows provided by continuing operating activities      517        342  
Cash flows provided by discontinued operating activities      —        522  
Cash flows provided by operating activities      517        864  
             
Cash flows from investing activities:            
Proceeds from the sale of assets      1        —  
Advances on notes receivable      (458 )      —  
Purchases of property, equipment and leasehold improvements      (41 )      (92 )
Cash flows used for continuing investing activities      (498 )      (92 )
Cash flows used for discontinued investing activities      —        (12 )
Cash flows used for investing activities      (498 )      (104 )
             
Cash flows from financing activities:            
Payments for debt issuance costs      —        (15 )
Payments on long-term debt and financing lease obligations      (320 )      (330 )
Payments from exercise of stock options      389        —  
Cash flows provided by (used for) financing activities      69        (345 )
             
Increase in cash and cash equivalents      88        415  
Cash and cash equivalents, beginning of period      8,836        4,450  
Cash and cash equivalents, end of period   $  8,924     $  4,865  

FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION
(in thousands, except per share data)
(unaudited)

             
    Three Months Ended
    April 1, 2018   April 2, 2017
Net income (loss) from continuing operations   $ 998     $ (1,428 )
Asset impairment, estimated lease termination (income) charges and other closing costs, net     (104 )     1,133  
Net (gain) loss on disposal of property     (1 )     1  
Stock-based compensation     47       107  
Severance           354  
Tax adjustment     14       (618 )
Adjusted net income (loss) from continuing operations   $ 954     $ (451 )
Basic adjusted net income (loss) per common share from continuing operations   $ 0.13     $ (0.06 )
Diluted adjusted net income (loss) per common share from continuing operations   $ 0.13     $ (0.06 )
             
Weighted average common share outstanding – basic     7,407       6,954  
Weighted average common share outstanding – diluted     7,407       6,954  
             
Net income (loss)   $ 998     $ (1,246 )
Asset impairment, estimated lease termination (income) charges and other closing costs, net     (104 )     1,133  
Depreciation and amortization     393       755  
Interest expense, net     140       187  
Net (gain) loss on disposal of property     (1 )     1  
Stock-based compensation     47       107  
Severance           354  
(Benefit) provision for income taxes     321       (928 )
Adjusted EBITDA   $ 1,794     $ 363