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CST: 16/06/2019 17:41:46   

Famous Dave’s of America, Inc. Reports Results for Fourth Quarter and Full Year 2018 and Appoints David L. Kanen as Non-Executive Chairman of the Board

104 Days ago

MINNEAPOLIS, March 04, 2019 (GLOBE NEWSWIRE) -- Famous Dave's of America, Inc. (NASDAQ: DAVE), an innovating owner and operator of barbeque restaurants, globally, today reported financial results for the fourth quarter and full year ended December 30, 2018 compared to the fourth quarter and full year ended December 31, 2017.

Famous Dave’s of America, Inc. also today announced the appointment of David L. Kanen as Non-Executive Chairman of the Board of Directors. Mr. Kanen joined the Company’s board in October 2018.

Fourth Quarter 2018 Highlights:

  • Net income increased to $1.1 million, or $0.12 per share.
  • Consolidated Adjusted EBITDA, a non-GAAP measure, decreased 6.7% to $1.2 million.
  • General and administrative expenses decreased to $2.1 million from $2.8 million in the fourth quarter 2017.
  • Reacquired Famous Dave’s restaurant in Greenwood, Indiana.
  • Company-owned comparable restaurant sales increased 2.2%, with traffic up 6.3%.
  • Franchise-operated comparable restaurant sales decreased 1.5%.

Full Year 2018 Highlights:

  • Net income increased to $4.9 million, or $0.57 per share. 
  • Consolidated Adjusted EBITDA, a non-GAAP measure, increased 36.7% to $7.7 million.
  • General and administrative expenses decreased to $8.0 million from $14.6 million in fiscal year 2017.
  • Company-owned comparable restaurant sales increased 2.7%, with traffic up 4.2%.
  • Franchise-operated comparable restaurant sales declined 1.4%.
  • Tested and launched a new menu in all Company-owned and most franchise-operated stores, featuring 11 new menu items.
  • Collaborated with MomentFeed and OpenTable, and launched a loyalty app, to allow us to engage with Guests in ways that we have not been able to historically and allow our Guests to engage with our brand conveniently.

Key Operating Metrics

                         
    Three Months Ended     Year Ended
    December 30, 2018   December 31, 2017     December 30, 2018   December 31, 2017
Restaurant count:                        
Franchise-operated     127       134       127       134  
Company-owned     17       16       17       16  
Total     144       150       144       150  
Comparable restaurant sales %:                        
Franchise-operated     (1.5 )%     1.1 %     (1.4 )%     (2.3 )%
Company-owned     2.2  %     8.0  %     2.7  %     2.4  %
Total     (1.1 )%     1.8 %     (0.9 )%     (1.8 )%
                         
(in thousands, expect per share data)                        
                         
System-wide restaurant sales(1)   $ 83,412     $ 89,296     $ 358,073     $ 400,390  
                         
Net income (loss) from continuing operations   $ 1,070     $ (1,501 )   $ 4,862     $ (6,666 )
Adjusted net income (loss) from continuing operations(2)     1,138       (103 )     5,304       410  
                         
Net income (loss) from continuing operations, per share   $ 0.12     $ (0.21 )   $ 0.57     $ (0.95 )
Adjusted net income (loss) from continuing operations, per share(2)     0.13       (0.01 )     0.62       0.06  
                         
Adjusted EBITDA(2)   $ 1,226     $ 1,314     $ 7,736     $ 5,661  

___________________

(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.”
   

Fourth Quarter 2018 Review

Total revenue for the fourth quarter of 2018 was $13.4 million, up 7.2% from the fourth quarter of 2017. The same store sales increase of 2.2% in Company-owned net restaurant sales revenue was primarily a result of an increased focus on the To-Go and Catering lines of business. The declines in franchise royalty and fee revenue were driven by a decline in franchise-operated same store sales of 1.5% and a decline in franchise operated restaurants.  Royalty abatements were granted for a number of restaurants that would otherwise be unprofitable with a commitment to investing necessary resources to refresh these stores. Additionally, the adoption of ASC 606 – Revenue From Contracts with Customers resulted in approximately $624,000 of additional revenue during the fourth quarter of 2018.

Restaurant-level operating margin, as a percentage of restaurant sales, net, for Company-owned restaurants was (2.9%) compared to 1.3% in the fourth quarter of fiscal 2017.  This decline in restaurant-level operating margin was primarily a result of new initiatives tested in our corporate stores, including our comprehensive new menu that was rolled out in October 2018. We believe that further training and operational efficiency surrounding the new menu will improve food costs and labor as a percentage of restaurant sales, net, in fiscal 2019.

General and administrative expenses decreased to $2.1 million from $2.8 million in the fourth quarter of fiscal 2017. The decrease in general and administrative expenses was primarily related to the optimization of our general and administrative expense structure, reduced costs incurred for the corporate office, third party consulting services and professional fees.

We recognized net income from continuing operations of approximately $1.1 million, or $0.12 per share, in the fourth quarter of fiscal 2018 compared to a loss from continuing operations of $1.5 million, or ($0.21) per share, in the fourth quarter of fiscal 2017. We recognized net loss from discontinued operations of approximately $2.3 million, or ($0.32) per share, in the fourth quarter of fiscal 2017.

Adjusted net income from continuing operations, a non-GAAP measure, was approximately $1.1 million, or $0.13 per share, compared to adjusted net loss from continuing operations of approximately $103,000, or ($0.01) per share, in the fourth 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.

Fiscal 2018 Review

Total revenue for fiscal 2018 was $54.9 million, down 15.0% from fiscal 2017. The decrease in Company-owned net restaurant sales revenue was primarily a result of the closure of eight Company-owned restaurants since January 2, 2017. The impact of these closures was partially offset by a 2.7% 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 1.4% and a decline in franchise operated restaurants.  Royalty abatements were granted for a number of restaurants that would otherwise be unprofitable with a commitment to investing necessary resources to refresh these stores. Additionally, the adoption of ASC 606 – Revenue From Contracts with Customers resulted in approximately $2.3 million of additional revenue during fiscal 2018.

Restaurant-level operating margin, as a percentage of restaurant sales, net, for Company-owned restaurants was 1.2% compared to 3.7% in the fiscal 2017.  This decline in restaurant-level operating margin was primarily a result of higher food and labor costs. We believe that further training and operational efficiency surrounding the new menu will improve food costs and labor as a percentage of restaurant sales, net, in fiscal 2019.

General and administrative expenses decreased to $8.0 million from $14.6 million in fiscal 2017.  The decrease in general and administrative expenses was primarily related to the optimization of our general and administrative expense structure, reduced costs incurred for the corporate office, third party consulting services and professional fees.

We recognized net income from continuing operations of approximately $4.9 million, or $0.57 per share, in fiscal 2018 compared to a loss from continuing operations of $6.7 million, or ($0.95) per share, in fiscal 2017. We recognized net loss from discontinued operations of approximately $1.5 million, or ($0.21) per share, in fiscal 2017.

Adjusted net income from continuing operations, a non-GAAP measure, was approximately $5.3 million, or $0.62 per share, compared to adjusted net income from continuing operations of approximately $410,000, or $0.06 per share, in 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, “During fiscal 2018 our team completed many initiatives designed to drive traffic to our stores and refresh our brand value proposition. We launched a new menu, a loyalty program with a mobile app, deployed additional optimization technologies in restaurants and continued to test initiatives aimed at maximizing restaurant efficiency. We believe that further training and operational efficiency surrounding the new menu will improve food costs as a percentage of restaurant sales, net, in fiscal 2019.  We look forward to honing these initiatives in fiscal 2019 and remain excited about plans to complete refreshes of certain Company-owned and franchise-operated stores.

“We are also welcoming Dave Kanen, who has been appointed our non-executive chairman.  He is a highly accomplished and mature leader with experience in strategic development and value creation for small companies, such as ours.  Famous Dave’s shareholders can rest assured of Mr. Kanen’s deep commitment to the creation of long-term shareholder value. He joins a team with a strong track record in turning around restaurant companies and fully supports the board’s focus on providing increased value to our franchisee partners and identifying and executing new future growth initiatives.”

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 March 4, 2019, the Company owns 17 locations and franchises an additional 124 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
   
  Darrow Associates, Inc.
  Peter Seltzberg – Managing Director
  516-419-9915
  pseltzberg@darrowir.com 
   
   
   


FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
(Unaudited)

                         
    Three Months Ended   Year Ended
    December 30, 2018   December 31, 2017   December 30, 2018   December 31, 2017
Revenue:                        
Restaurant sales, net   $ 9,480     $ 8,918     $ 38,051     $ 48,874  
Franchise royalty and fee revenue     3,248       3,355       13,871       14,767  
Franchisee national advertising fund contributions     437             1,932        
Licensing and other revenue     268       258       1,034       954  
Total revenue     13,433       12,531       54,888       64,595  
                         
Costs and expenses:                        
Food and beverage costs     3,066       2,765       11,973       14,782  
Labor and benefits costs     3,505       3,227       13,663       17,653  
Operating expenses     3,186       2,812       11,932       14,658  
Depreciation and amortization expenses     281       474       1,264       2,785  
General and administrative expenses     2,066       2,840       7,988       14,634  
National advertising fund expenses     437             1,932        
Asset impairment, estimated lease termination charges and other closing costs, net     2       (194 )     145       6,816  
Net loss on disposal of property           7       29       70  
Total costs and expenses     12,543       11,931       48,926       71,398  
                         
Income (loss) from operations     890       600       5,962       (6,803 )
                         
Other income (expense):                        
Interest expense     (71 )     (152 )     (493 )     (661 )
Interest income     43       1       122       22  
Other expense, net           (82 )           (82 )
Total other expense     (28 )     (233 )     (371 )     (721 )
                         
Income (loss) before income taxes     862       367       5,591       (7,524 )
                         
Income tax (expense) benefit     208       (1,868 )     (729 )     858  
                         
Net income (loss) from continuing operations     1,070       (1,501 )     4,862       (6,666 )
Net loss from discontinued operations, net of tax           (2,301 )           (1,457 )
Net income (loss)   $ 1,070     $ (3,802 )   $ 4,862     $ (8,123 )
                         
Income (loss) per common share:                        
Basic net income (loss) per share - continuing operations   $ 0.12     $ (0.21 )   $ 0.57     $ (0.95 )
Basic net loss per share - discontinued operations           (0.32 )           (0.21 )
Basic net income (loss) per share   $ 0.12     $ (0.53 )   $ 0.57     $ (1.16 )
Diluted net income (loss) per share - continuing operations   $ 0.12     $ (0.21 )   $ 0.56     $ (0.95 )
Diluted net loss per share - discontinued operations           (0.32 )           (0.21 )
Diluted net income (loss) per share   $ 0.12     $ (0.53 )   $ 0.56     $ (1.16 )
Weighted average shares outstanding - basic     9,092       7,195       8,599       7,015  
Weighted average shares outstanding - diluted     9,098       7,195       8,624       7,015  
                                 
                                 
                                 


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

                     
    Three Months Ended   Year Ended
    December 30, 2018   December 31, 2017     December 30, 2018     December 31, 2017
Food and beverage costs(1)   32.3 %   31.0 %   31.5 %   30.2 %
Labor and benefits costs(1)   37.0 %   36.2 %   35.9 %   36.1 %
Operating expenses(1)   33.6 %   31.5 %   31.4 %   30.0 %
Restaurant level operating margin(1)(3)    (2.9) %   1.3 %   1.2 %   3.7 %
Depreciation and amortization expenses(2)   2.1 %   3.8 %   2.3 %   4.3 %
General and administrative expenses(2)   15.4 %   22.7 %   14.6 %   22.7 %
Net income (loss) from continuing operations(2)   6.6 %   4.8 %   10.9 %   (10.5) %

___________________
(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:   December 30, 2018   December 31, 2017
Cash and cash equivalents   $ 11,598   $ 8,836
Restricted cash     842     1,590
Accounts receivable, net of allowance for doubtful accounts of $192,000 and $592,000, respectively     4,300     3,768
Inventories     722     633
Prepaid income taxes and income taxes receivable     377     689
Prepaid expenses and other current assets     1,363     793
Assets held for sale         475
Total current assets     19,202     16,784
             
Property, equipment and leasehold improvements, net     10,385     11,442
             
Other assets:            
Intangible assets, net     1,489     1,840
Deferred tax asset, net     5,747     5,823
Other assets     1,533     1,018
    $ 38,356   $ 36,907
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
             
Current liabilities:            
Current portion of long-term debt and financing lease obligations   $ 1,369   $ 1,307
Accounts payable     3,765     4,365
Accrued compensation and benefits     808     1,545
Other current liabilities     2,970     3,118
Total current liabilities     8,912     10,335
             
Long-term liabilities:            
Long-term debt, less current portion     2,411     7,932
Financing lease obligation, less current portion         1,196
Other liabilities     4,492     3,963
Total liabilities     15,815     23,426
             
Shareholders’ equity:            
Common stock, $.01 par value, 100,000 shares authorized, 9,085 and 7,376 shares issued and outstanding at December 30, 2018 and December 31, 2017, respectively     91     70
Additional paid-in capital     7,375     1,460
Retained earnings     15,075     11,951
Total shareholders’ equity     22,541     13,481
    $ 38,356   $ 36,907
 
 
 

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

             
    Year Ended
    December 30, 2018   December 31, 2017
Cash flows from operating activities:            
Net income (loss) from continuing operations   $  4,862     $  (6,666 )
Adjustments to reconcile net income (loss) to cash flows provided by operations:            
Depreciation and amortization      1,264        2,785  
(Gain) loss from asset impairment and estimated lease termination and other closing costs      (46 )      4,012  
Net loss on disposal of property      29        70  
Amortization of deferred financing costs      103        36  
Amortization of lease interest assets      36        37  
Deferred income taxes      639        (1,245 )
Deferred rent      (654 )      48  
Bad debts (recovery) expense      (30 )      1,172  
Stock-based compensation      278        313  
Changes in operating assets and liabilities:            
Accounts receivable, net      (225 )      141  
Inventories      (89 )      467  
Prepaid income taxes and income taxes receivable      103        1,479  
Prepaid expenses and other current assets      (570 )      473  
Other assets      167        312  
Accounts payable      (600 )      (946 )
Accrued compensation and benefits      (824 )      (3 )
Other current liabilities      58        (567 )
Other liabilities      (624 )      (139 )
Cash flows provided by continuing operating activities      3,877        1,779  
Cash flows provided by discontinued operating activities      —        1,350  
Cash flows provided by operating activities      3,877        3,129  
             
Cash flows from investing activities:            
Proceeds from the sale of assets      1,187        —  
Payments for acquired restaurants      (229 )      —  
Advances on notes receivable      (750 )      —  
Purchases of held to maturity securities      (6,995 )      —  
Maturity of held to maturity securities      6,995        —  
Purchases of property, equipment and leasehold improvements      (953 )      (378 )
Cash flows used for continuing investing activities      (745 )      (378 )
Cash flows used for discontinued investing activities      —        1,600  
Cash flows used for investing activities      (745 )      1,222  
             
Cash flows from financing activities:            
Payments for debt issuance costs      —        (15 )
Payments on long-term debt and financing lease obligations      (6,758 )      (1,538 )
Proceeds from sale of common stock, net of offering costs      5,120        1,464  
Proceeds from exercise of stock options      520        —  
Cash flows used for financing activities      (1,118 )      (89 )
             
Increase (decrease) in cash, cash equivalents and restricted cash      2,014        4,262  
Cash, cash equivalents and restricted cash, beginning of period      10,426        6,164  
Cash, cash equivalents and restricted cash, end of period   $  12,440     $  10,426  
 
 
 



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

                       
  Three Months Ended     Year Ended
(dollars in thousands) December 30, 2018   December 31, 2017     December 30, 2018   December 31, 2017
Net income (loss) from continuing operations $ 1,070     $ (1,501 )     4,862       (6,666 )
Asset impairment and estimated lease termination and other closing costs   2       (194 )     145       6,816  
Net loss on disposal of equipment         7       29       70  
Stock-based compensation   53       130       278       313  
Severance         287       58       796  
Tax adjustment   13       1,168       (68 )     (919 )
Adjusted net income (loss) from continuing operations $ 1,138     $ (103 )   $ 5,304     $ 410  
Basic adjusted net income (loss) per common share from continuing operations $ 0.13     $ (0.01 )   $ 0.62     $ 0.06  
Diluted adjusted net income (loss) per common share from continuing operations $ 0.13     $ (0.01 )   $ 0.62     $ 0.06  
                       
Weighted average common share outstanding - basic   9,092       7,195       8,599       7,015  
Weighted average common share outstanding - diluted   9,098       7,195       8,624       7,015  
                       
Net income (loss) $ 1,070     $ (3,802 )   $ 4,862     $ (8,123 )
Asset impairment and estimated lease termination and other closing costs   2       (513 )     145       6,497  
Depreciation and amortization   281       528       1,264       3,396  
Interest expense, net   28       232       371       721  
Net loss on disposal of equipment         3,744       29       3,808  
Stock-based compensation   53       130       278       313  
Severance         287       58       796  
Provision (benefit) for income taxes   (208 )     708       729       (1,747 )
Adjusted EBITDA $ 1,226     $ 1,314     $ 7,736     $ 5,661  

 

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