Famous Dave’s of America, Inc. (Nasdaq:DAVE) today announced revenue and net income of $38.7 million and $1.5 million, respectively, or $0.17 per diluted share, for the third quarter ended October 3, 2010. This compares to revenue and net income of $33.3 million and $1.2 million, respectively, or $0.13 per diluted share for the comparable period in 2009. For the nine months ended October 3, 2010, the Company had revenue and net income of $112.1 million and $6.7 million, respectively, or $0.76 per diluted share. For the 2009 comparable period, the Company had revenue and net income of $103.4 million and $4.9 million, respectively, or $0.54 per diluted share.
“During the third quarter, a number of strong promotions, combined with continued discipline on cost control, produced improved same store sales and financial results,” said Christopher O’Donnell, president and CEO of Famous Dave’s. “We experienced year-over-year improvement in all sales levers of our business, including dine-in, catering and to-go.”
Same store sales for company-owned restaurants open for 24 months or more increased 2.4 percent during the quarter, an improvement over a negative 6.8 percent for the third quarter of 2009. The comparable sales increase included a weighted average price increase of approximately 1.0 percent. Comparable sales for company-owned restaurants decreased 0.3 percent on a year-to-date basis, compared to a decrease of 7.3 percent for the comparable period in 2009.
Franchise royalty revenue for the third quarter of 2010 totaled $4.0 million, a decrease of 5.4 percent from the comparable period in 2009. The decrease in royalty revenue primarily reflects the impact of lost royalties from eight New York and New Jersey locations, seven of which were purchased by the company in March of this year, partially offset by an increase in comparable sales of 0.7 percent. Franchise royalty revenue on a year-to-date basis totaled $12.2 million, with the year over year decrease of 5.0 percent again reflecting the impact of lost royalties from the New York and New Jersey restaurants acquisition, as well as a decrease of approximately 0.8 percent in comparable sales.
Stock-based and Board of Directors Cash Compensation and Common Share Repurchase
Earnings results for the third quarter of 2010 included approximately $325,000 or $0.02 per diluted share, in compensation expense related to the company’s stock-based incentive programs and board of directors’ cash compensation, as compared to approximately $236,000 or $0.02 per diluted share, for the prior year comparable period. The increase in stock-based compensation is primarily due to an increase in the Company’s stock price over the prior year. Stock-based compensation expense and board of directors’ cash compensation expense for the nine months ended October 3, 2010 was approximately $1.0 million or $0.08 per diluted share, compared to approximately $610,000 or $0.04 per diluted share for the prior year comparable period.
During the fiscal 2010 third quarter, the company completed its share buyback authorization, and repurchased 239,040 shares of common stock, at an average price of $8.42 per share, excluding commissions, for a total of approximately $2.0 million. The company repurchased approximately 893,000 shares of common stock during the year-to-date period of 2010 at an average price of $7.76 per share, excluding commissions, for a total of $6.9 million.
Marketing and Development
Development and marketing highlights during the quarter included a successful “limited time offer” of “Wing Wars” – an offering of both bone-in and boneless wings featuring two new hot sauces – Pineapple Rage™ and Wilbur’s Revenge™. Also during the quarter, we had a second successful “Dave’s Day” which included increased participation from our franchise system. The current limited time offering, “Ribzilla,” consists of a beef short rib prepared as an entree or sandwich and also features a bleu cheese wedge salad and cherry cobbler. Included in this offering is a special beer pairing with Samuel Adams® Seasonals.
“In early August, we resumed our company-owned growth with the Bel Air restaurant opening,” O’Donnell said. “This was a very successful opening where we achieved the highest opening week of sales in our history and further expanded our footprint on the East Coast.”
In addition, during the third quarter, Famous Dave’s opened one new franchise-operated restaurant in San Jose, CA. Famous Dave’s ended the quarter with 179 restaurants, including 53 company-owned restaurants and 126 franchise-operated restaurants, located in 36 states. Subsequent to the quarter end, the company opened a franchise-operated restaurant in Peoria, IL to bring the total current count of restaurants to 180.
Outlook
The company has opened one company-owned location and five franchise-operated locations to date and anticipates opening approximately three to four additional franchise-operated restaurants during the fourth quarter.
Conference Call
The company will host a conference call tomorrow, October 28, 2010, at 10:00 a.m. Central Time to discuss its third 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 53 locations and franchises 127 additional units in 36 states. 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 | Nine Months Ended | |||
| October 3, 2010 |
September 27, 2009 |
October 3, 2010 |
September 27, 2009 |
|
| Revenue: | ||||
| Restaurant sales, net | $ 34,313 | $ 28,763 | $ 98,919 | $ 89,600 |
| Franchise royalty revenue | 4,012 | 4,242 | 12,208 | 12,851 |
| Franchise fee revenue | 145 | 80 | 235 | 155 |
| Licensing and other revenue | 233 | 220 | 689 | 811 |
| Total revenue | 38,703 | 33,305 | 112,051 | 103,417 |
| Costs and expenses: | ||||
| Food and beverage costs | 10,177 | 8,762 | 29,121 | 27,046 |
| Labor and benefits costs | 10,944 | 9,174 | 31,217 | 27,857 |
| Operating expenses | 9,475 | 7,760 | 26,719 | 23,492 |
| Depreciation and amortization | 1,401 | 1,253 | 4,070 | 3,834 |
| General and administrative expenses | 4,027 | 3,701 | 11,753 | 11,976 |
| Asset impairment and estimated lease termination and other closing costs | 4 | 446 | (68) | 119 |
| Pre-opening expenses | 219 | — | 300 | — |
| Gain on acquisition, net of acquisition costs | — | — | (2,036) | — |
| Net loss on disposal of property | 12 | 7 | 20 | 13 |
| Total costs and expenses | 36,259 | 31,103 | 101,096 | 94,337 |
| Income from operations | 2,444 | 2,202 | 10,955 | 9,080 |
| Other expense: | ||||
| Loss on early extinguishment of debt | — | (40) | — | (489) |
| Interest expense | (238) | (277) | (800) | (1,177) |
| Interest income | 19 | 26 | 78 | 93 |
| Other (expense) income, net | (8) | 7 | (12) | (1) |
| Total other expense | (227) | (284) | (1,574) | |
| Income before income taxes | 2,217 | 1,918 | 10,221 | 7,506 |
| Income tax expense | (759) | (679) | (3,520) | (2,579) |
| Net income | $ 1,458 | $ 1,239 | $ 6,701 | $ 4,927 |
| Basic net income per common share | $ 0.17 | $ 0.14 | $ 0.77 | $ 0.54 |
| Diluted net income per common share | $ 0.17 | $ 0.13 | $ 0.76 | $ 0.54 |
| Weighted average common shares outstanding – basic | 8,498,000 | 9,124,000 | 8,715,000 | 9,104,000 |
| Weighted average common shares outstanding – diluted | 8,631,000 | 9,254,000 | 8,870,000 | 9,184,000 |
| FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES | ||||
| OPERATING RESULTS | ||||
| (unaudited) | ||||
| Three Months Ended | Nine Months Ended | |||
| October 3, 2010 |
September 27, 2009 |
October 3, 2010 |
September 27, 2009 |
|
| Food and beverage costs (1) | 29.7% | 30.5% | 29.4% | 30.2% |
| Labor and benefits (1) | 31.9% | 31.9% | 31.6% | 31.1% |
| Operating expenses (1) | 27.6% | 27.0% | 27.0% | 26.2% |
| Depreciation & amortization (restaurant level) (1) | 3.7% | 3.9% | 3.7% | 3.8% |
| Depreciation & amortization (corporate level) (2) | 0.4% | 0.4% | 0.4% | 0.4% |
| General and administrative (2) | 10.4% | 11.1% | 10.5% | 11.6% |
| Asset impairment and estimated lease termination and other closing costs (1) | — | 1.6% | (0.1%) | 0.1% |
| Pre-opening expenses and net loss on disposal of property (1) | 0.6% | — | 0.3% | — |
| Gain on acquisition, net of acquisition costs(1) | — | — | (2.1%) | — |
| Total costs and expenses (2) | 93.7% | 93.4% | 90.2% | 91.2% |
| Income from operations (2) | 6.3% | 6.6% | 9.8% | 8.8% |
| (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) |
||
| October 3, 2010 |
January 3, 2010 |
|
| ASSETS | ||
| Cash and cash equivalents | $ 1,712 | $ 2,996 |
| Other current assets | 9,495 | 9,486 |
| Property, equipment and leasehold improvements, net | 61,851 | 54,818 |
| Other assets | 3,387 | 1,081 |
| Total assets | $ 76,445 | $ 68,381 |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
| Current liabilities | $ 12,498 | $ 12,464 |
| Line of credit | 13,600 | 13,500 |
| Other long-term obligations | 16,462 | 9,423 |
| Shareholders’ equity | 33,885 | 32,994 |
| Total liabilities and shareholders’ equity | $ 76,445 | $ 68,381 |
| FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (in thousands) | ||
| (unaudited) | ||
| Nine Months Ended | ||
| October 3, 2010 |
September 27, 2009 |
|
| Cash flows provided by operating activities | $ 8,986 | $ 11,684 |
| Cash flows used for investing activities | (10,250) | (1,039) |
| Cash flows used for financing activities | (20) | (10,703) |
| Decrease in cash and cash equivalents | $ (1,284) | $ (58) |
| SUPPLEMENTAL SALES INFORMATION (unaudited) |
||||
| Three Months Ended | Nine Months Ended | |||
| October 3, 2010 |
September 27, 2009 |
October 3, 2010 |
September 27, 2009 |
|
| Restaurant Sales (in thousands) | ||||
| Company-Owned | $ 34,313 | $ 28,763 | $ 98,919 | $ 89,600 |
| Franchised-Operated | $ 85,968 | $ 90,138 | $ 261,245 | $ 270,993 |
| Total number of restaurants: | ||||
| Company-Owned | 53 | 46 | 53 | 46 |
| Franchise-Operated | 126 | 131 | 126 | 131 |
| Total | 179 | 177 | 179 | 177 |
| Total weighted average weekly net sales (AWS): | ||||
| Company-Owned | $ 50,106 | $ 47,706 | $ 49,927 | $ 49,427 |
| Franchise-Operated | $ 53,367 | $ 53,524 | $ 54,057 | $ 54,870 |
| AWS 2005 and Post 2005: (1) | ||||
| Company-Owned | $ 57,343 | $ 55,340 | $ 56,946 | $ 58,909 |
| Franchise-Operated | $ 56,740 | $ 57,683 | $ 58,002 | $ 60,201 |
| AWS Pre 2005: (1) | ||||
| Company-Owned | $ 45,791 | $ 45,011 | $ 46,183 | $ 46,112 |
| Franchise-Operated | $ 47,567 | $ 47,472 | $ 47,470 | $ 47,326 |
| Operating Weeks: | ||||
| Company-Owned | 680 | 598 | 1,969 | 1,807 |
| Franchise-Operated | 1,607 | 1,684 | 4,826 | 4,934 |
| Comparable net sales (24 month): | ||||
| Company-Owned % | 2.4% | (6.8%) | (0.3%) | (7.3%) |
| Franchise-Operated % | 0.7% | (9.5%) | (0.8%) | (8.8%) |
| Total number of comparable restaurants: | ||||
| Company-Owned | 42 | 38 | 41 | 38 |
| Franchise-Operated | 102 | 100 | 95 | 92 |
| (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.
