<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 3, 1999
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
-------------------- -----------------
Commission file number 0-21625
FAMOUS DAVE'S OF AMERICA, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
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Minnesota 41-1782300
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
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7657 Anagram Drive, Eden Prairie, MN 55344
(Address of Principal Executive Offices)
(612) 294-1300
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
---- ----
At November 9, 1999 there were 8,843,750 shares of common stock, $.01
par value, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
---- ----
1
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FAMOUS DAVE'S OF AMERICA, INC.
Form 10-QSB Index
October 3, 1999
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Page Number
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - 3
October 3, 1999 and January 3, 1999
Condensed Consolidated Statements of Operations - 4
For the thirteen weeks ended October 3, 1999 and
September 27, 1998 and for the thirty-nine weeks
ended October 3, 1999 and September 27, 1998
Condensed Consolidated Statements of Cash Flows - 5
For the thirty-nine weeks ended October 3, 1999 and September 27, 1998
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Items 1, 5 and 6. 13
Signatures 14
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2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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OCTOBER 3, JANUARY 3,
1999 1999
----------------- ---------------
(UNAUDITED)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 937,000 $ 1,951,000
Securities available-for-sale 0 1,624,000
Inventories 1,156,000 908,000
Prepaids and other current assets 952,000 824,000
----------------- ---------------
Total current assets 3,045,000 5,307,000
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, NET 39,248,000 35,576,000
OTHER ASSETS - DEPOSITS 301,000 286,000
----------------- ---------------
$ 42,594,000 $ 41,169,000
================= ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,304,000 $ 4,173,000
Current portion of capital lease obligations 445,000 403,000
Note payable 1,125,000 683,000
Other current liabilities 1,924,000 1,837,000
----------------- ---------------
Total current liabilities 4,798,000 7,096,000
NOTE PAYABLE - LONG TERM 4,500,000 0
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT
PORTION 688,000 1,000,000
----------------- ---------------
Total liabilities 9,986,000 8,096,000
----------------- ---------------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares authorized,
8,843,750 and 8,837,590 shares issued and outstanding 88,000 88,000
Additional paid-in capital 42,728,000 42,721,000
Accumulated deficit (10,208,000) (9,736,000)
----------------- ---------------
Total shareholders' equity 32,608,000 33,073,000
----------------- ---------------
$ 42,594,000 $ 41,169,000
================= ===============
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See accompanying notes to condensed consolidated financial statements.
3
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
--------------------------------- ----------------------------------
OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
1999 1998 1999 1998
------------- -------------- -------------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
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REVENUES, NET $12,693,000 $ 10,916,000 $35,712,000 $29,575,000
------------- -------------- -------------- ------------
COSTS AND EXPENSES:
Food and beverage costs 4,123,000 3,876,000 12,067,000 10,563,000
Labor and benefits 3,451,000 2,843,000 9,922,000 7,909,000
Operating expenses 3,043,000 2,227,000 8,442,000 6,262,000
Depreciation and amortization 725,000 526,000 2,027,000 1,519,000
Pre-opening expenses 13,000 173,000 455,000 1,081,000
General and administrative 1,024,000 1,170,000 3,057,000 5,314,000
Reserve for loss on closed sites 0 0 0 1,589,000
------------- -------------- -------------- ------------
Total costs and expenses 12,379,000 10,815,000 35,970,000 34,237,000
------------- -------------- -------------- ------------
INCOME (LOSS) FROM OPERATIONS 314,000 101,000 (258,000) (4,662,000)
Interest and other income (expense), net (177,000) 33,000 (214,000) 226,000
------------- -------------- -------------- ------------
NET INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 137,000 134,000 (472,000) (4,436,000)
------------- -------------- -------------- ------------
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 0 0 0 (120,000)
------------- -------------- -------------- ------------
NET INCOME (LOSS) $ 137,000 $ 134,000 $ (472,000) $(4,556,000)
============= ============== ============== ============
BASIC AND DILUTED NET INCOME (LOSS) PER
COMMON SHARE BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE $ 0.02 $ 0.02 $ (0.05) $ (0.50)
============= ============== ============== ============
BASIC AND DILUTED NET INCOME (LOSS) PER
COMMON SHARE $ 0.02 $ 0.02 $ (0.05) $ (0.52)
============= ============== ============== ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 8,842,972 8,827,590 8,839,695 8,805,418
============= ============== ============== ============
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See accompanying notes to condensed consolidated financial statements.
4
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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THIRTY-NINE WEEKS ENDED
--------------------------------------
OCTOBER 3, SEPTEMBER 27,
1999 1998
---------------- ------------------
(UNAUDITED) (UNAUDITED)
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CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (472,000) $ (4,556,000)
Adjustments to reconcile net loss to
cash flows from operating activities:
Depreciation and amortization 2,266,000 1,791,000
Reserve for loss on closed sites (81,000) 1,589,000
Write-off of certain other non-operating assets 0 492,000
Changes in working capital items -
Inventories (248,000) (303,000)
Prepaids and other current assets (128,000) 125,000
Other assets - deposits (15,000) (48,000)
Accounts payable (2,869,000) (3,196,000)
Other current liabilities 87,000 (2,000)
---------------- ------------------
Cash flows from operating activities (1,460,000) (4,108,000)
---------------- ------------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of available-for-sale securities (24,000) (9,053,000)
Proceeds from available-for-sale securities 1,648,000 17,381,000
Purchase of property, equipment
and leasehold improvements (5,857,000) (10,152,000)
---------------- ------------------
Cash flows from investing activities (4,233,000) (1,824,000)
---------------- ------------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payments on capital lease obligations (270,000) (262,000)
Proceeds from exercise of stock options 7,000 783,000
Advances on notes payable 8,225,000 0
Payments on note payable (3,283,000) 0
---------------- ------------------
Cash flows from financing activities 4,679,000 521,000
---------------- ------------------
DECREASE IN CASH
AND CASH EQUIVALENTS (1,014,000) (5,411,000)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,951,000 7,984,000
---------------- ------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 937,000 $ 2,573,000
================ ==================
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See accompanying notes to condensed consolidated financial statements.
5
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 3, 1999
(UNAUDITED)
(1) GENERAL
Famous Dave's of America, Inc. ("Famous Dave's") currently operates twenty-three
restaurants under the name "Famous Dave's" in the Midwestern region of the
United States. Our restaurants, the majority of which offer full table service,
feature hickory smoked off-the-grill meat entree favorites served in one of our
three casual formats: a "Northwoods" style lodge, a nostalgic roadhouse "shack",
or a Blues Club featuring nightly musical entertainment. We seek to
differentiate ourselves by providing high quality food in these distinctive and
comfortable environments. As of October 3, 1999 we operated twenty-three
restaurants with one additional unit in development, a lodge in Lincoln,
Nebraska. As of September 27, 1998 we operated twenty restaurants, with an
additional three units in development.
(2) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by us following the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. Although we believe that the disclosures are adequate to make the
information presented not misleading, it is suggested that these interim
condensed consolidated financial statements be read in conjunction with our most
recent audited consolidated financial statements and notes thereto included in
our Annual Report on Form 10-KSB for the fiscal year ended January 3, 1999. In
our opinion, all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented have been made.
Operating results for the thirteen and thirty-nine week periods ended October 3,
1999 are not necessarily indicative of the results that may be expected for the
fiscal year ending January 2, 2000.
Certain amounts in the fiscal 1998 financial statements have been reclassified
to conform to the fiscal 1999 presentation with no impact on previously reported
net loss or shareholders' equity.
(3) INCOME (LOSS) PER COMMON SHARE
Basic earnings (loss) per share (EPS) is computed by dividing net
income(loss) by the weighted average number of common shares outstanding during
the quarter. Diluted EPS is computed by dividing net income(loss) by the
weighted average common shares outstanding and dilutive common equivalent shares
assumed to be outstanding during each period. Dilutive common equivalent shares
have not been included in the computation of diluted EPS because their inclusion
would be anti-dilutive. Anti-dilutive common equivalent shares issuable based on
future exercise of stock options or warrants could potentially dilute basic EPS
in subsequent years.
(4) INCOME FROM FRANCHISEES
In 1998, we entered into a franchise agreement with two former employees.
This agreement provides that in exchange for the payment of certain fees, the
franchisee may open up to three units under the Famous Dave's brand, along with
receiving other benefits. The revenue generated by this arrangement is not
recognized until the franchised restaurant is open and the Company has provided
all services. At October 3, 1999, there was one unit open under this franchise
agreement.
6
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 3, 1999
(UNAUDITED)
(5) PRE-OPENING COSTS
In 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5
("SOP 98-5") entitled "Reporting on the Costs of Start-Up Activities." This
accounting standard requires entities to expense as incurred all start-up and
pre-opening costs that are not otherwise capitalizable as long-lived assets.
This new accounting standard is effective for fiscal years beginning after
December 15, 1998 with early adoption encouraged. We elected to adopt SOP 98-5
in fiscal 1998. The cumulative effect of this change in accounting principle was
$120,000 and was reflected in the quarter ended March 29, 1998. Prior to the
adoption of SOP 98-5, we deferred pre-opening costs until the month the related
unit opened and either charged such costs to expense in the month the restaurant
opened or, in certain cases prior to March 31, 1997, amortized such costs over a
period no longer than 12-months following the opening of the restaurant.
(6) SEVERANCE AND RESTRUCTURING
In March 1998, we recorded a provision totaling $1,146,000 for severance
and restructuring. This amount includes severance costs, real estate costs and a
provision for write-off of a discontinued point-of-sale system.
(7) PROVISION FOR LOSS ON RESTAURANTS TO BE DISPOSED
In March 1998, we implemented a plan to close two restaurants. As part of
this plan, we recorded a provision of $1,589,000 to reduce the carrying value of
the assets related to these restaurants to their estimated net realizable value.
(8) RELATED PARTY TRANSACTIONS
S&D LAND HOLDINGS, INC. - We lease the real estate for four of our units
from S&D Land Holdings, Inc., a company wholly owned by the Company's founding
shareholder.
(9) INCOME TAXES
The Company was an S Corporation through March 3, 1996. Accordingly, losses
incurred through March 3, 1996 have been recognized by the Company's founding
shareholder. From March 4, 1996 through January 3, 1999, we generated a net
operating loss of approximately $9,736,000 which, if not used, will begin to
expire in 2011. During the thirty-nine weeks ended October 3, 1999, an
additional net operating loss of approximately $472,000 was generated which, if
not used, will expire in 2009. Future changes in ownership may place limitations
on the use of these net operating loss carry-forwards. We have recorded a full
valuation allowance against the deferred tax asset due to the uncertainty of
realizing the related benefit.
(10) NOTE PAYABLE
On March 31, 1999 we completed a sale-leaseback transaction involving three of
our existing units that provided net proceeds of approximately $4.4 million.
Under this financing we are obligated to make monthly payments of $41,250 for a
minimum of twenty years.
(11) COMMITMENTS AND CONTINGENCIES
Construction and development contracts
In conjunction with our expansion activity, we enter into fixed price
construction contracts from time to time. At October 3, 1999, we had a
commitment outstanding under one contract for construction of a lodge in
Lincoln, Nebraska. As of October 3, 1999, the balance remaining to be paid under
this contract was approximately $1,000,000.
7
<PAGE> 8
ITEM 2.
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The business of Famous Dave's of America, Inc. is to develop, own and
operate casual dining restaurants under the name "Famous Dave's." As of October
3, 1999 we owned and operated twenty-three restaurants: fourteen in Minnesota,
four in Wisconsin, three in Iowa and two in Illinois. In addition, there was one
restaurant operating in Minnesota under a franchise agreement.
Famous Dave's was formed in March 1994 and we opened our first restaurant
in the Linden Hills neighborhood of Minneapolis in June 1995. We currently
operate three lodge restaurants featuring barbecue entrees, a rustic Northwoods
decor and big band music. In addition, we operate seventeen nostalgic roadhouse
barbecue shacks of which ten have been opened as, or converted to, a full
service format that resembles the Lodge concept. We also operate two Blues Clubs
(featuring authentic Chicago Blues Club decor and live music seven nights a
week) and a Take-Out and Catering facility. All of our restaurants feature
similar menu items, consistent preparation methods and uniform kitchen layouts.
Future revenues and profits, if any, will depend upon various factors,
including continued market acceptance of the Famous Dave's concept, the quality
of our restaurant operations, our ability to successfully expand into new
markets, our ability to raise additional financing as needed and general
economic conditions. There can be no assurance that we will successfully
implement our expansion plans, in which case we will continue to be dependent on
the revenues from existing operations. We also face all of the risks, expenses
and difficulties frequently encountered in connection with the expansion and
development of an expanding business. Furthermore, to the extent that our
expansion strategy is successful, we must manage the transition to multiple-site
and higher-volume operations, the control of overhead expenses and the addition
of necessary personnel.
Components of operating expenses include operating payroll and fringe
benefits, occupancy costs, repair and maintenance, and advertising and
promotion. Certain of these costs are variable and will fluctuate as sales
fluctuate. The primary fixed costs are corporate and restaurant management and
occupancy costs. Our experience is that when a new restaurant opens, it incurs
higher than normal levels of labor and food costs until operations stabilize,
usually during the first three months of operation. We believe, however, that as
restaurant management and staff gain experience, labor scheduling, food cost
management and operating expense control are improved to levels similar to those
at our more established restaurants.
General and administrative expenses include all corporate and
administrative functions that serve to support existing operations and provide
an infrastructure to support future growth. Management, supervisory and staff
salaries, employee benefits, travel, rent, depreciation, general insurance and
marketing expenses are major items in this category.
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the accompanying unaudited
condensed consolidated financial statements and notes thereto and the audited
consolidated financial statements and notes thereto included in the Company's
Form 10-KSB for the fiscal year ended January 3, 1999.
8
<PAGE> 9
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Our overall operating results expressed as a percentage of net revenue were as
follows:
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THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
October 3, September October 3, September 27,
1999 27, 1998 1999 1998
(unaudited) (unaudited) (unaudited) (unaudited)
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REVENUES, NET 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- -------------
UNIT-LEVEL COSTS AND EXPENSES:
Food and beverage costs 32.5% 35.5% 33.8% 35.7%
Labor and benefits 27.2% 26.0% 27.8% 26.7%
Operating expenses 24.0% 20.4% 23.6% 21.2%
Depreciation and amortization 5.7% 4.8% 5.7% 5.1%
Pre-opening expenses 0.1% 1.6% 1.3% 3.7%
----------- ----------- ----------- -------------
Total costs and expenses 89.5% 88.4% 92.2% 92.4%
----------- ----------- ----------- -------------
INCOME FROM UNIT-LEVEL OPERATIONS 10.5% 11.6% 7.8% 7.6%
General and administrative 8.1% 10.7% 8.6% 18.0%
Reserve for loss on closed sites 0.0% 0.0% 0.0% 5.4%
----------- ----------- ----------- -------------
INCOME (LOSS) FROM OPERATIONS 2.5% 0.9% (0.7%) (15.8%)
Interest and other income, net (1.4%) 0.3% (0.6%) 0.8%
NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 1.1% 1.2% (1.3%) (15.0%)
----------- ----------- ----------- -------------
Cumulative effect of change in accounting
principle 0.0% 0.0% 0.0% (0.4%)
----------- ----------- ----------- -------------
NET INCOME (LOSS) 1.1% 1.2% (1.3%) (15.4%)
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REVENUE, NET
Net revenue for the thirteen weeks ended October 3, 1999 was $12,693,000
compared to $10,916,000 for the same period in 1998, a 16.3% increase. The
increase in net revenue is primarily due to the addition of three restaurants
opened during the four quarters subsequent to September 27, 1998, an increase in
retail revenue, and an increase in same store sales. For the thirty-nine weeks
ended October 3, 1999 net revenue was $35,712,000, an increase of 20.8% over the
same period in 1998 of $29,575,000. The Company has thirteen restaurants that
have been open for more than eighteen months and these restaurants reported
increases in same store sales of approximately 2.1% in the thirteen weeks ended
October 3, 1999. This is the second consecutive quarter of comparable store
sales increases for our company and is an improvement in comparable store sales
performance from last year's decline of approximately 17%.
FOOD AND BEVERAGE COSTS
Food and beverage costs for the thirteen weeks ended October 3, 1999 were
$4,123,000 or 32.5% of net revenue, compared to $3,876,000 or 35.5% of net
revenue for the same period in 1998. For the thirty-nine weeks ended October 3,
1999, food and beverage costs were $12,067,000 or 33.8%, compared to $10,563,000
or 35.7% for the same period ended September 27, 1998. The decrease in food and
beverage costs as a percent of net revenue was primarily due to increased
revenue and improved purchasing economies, including contract pricing of certain
pork items.
9
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LABOR AND BENEFITS
Labor and benefits for the thirteen weeks ended October 3, 1999 were
$3,451,000 or 27.2% of net revenue, compared to $2,843,000 or 26.0% of net
revenue for the same period in 1998. For the thirty-nine weeks ended October 3,
1999 labor and benefits were $9,922,000 or 27.8% compared to $7,909,000 or 26.7%
of net revenue for the same period ended September 27, 1998. Labor costs as a
percent of net revenue are higher in 1999 compared to 1998 due to the
introduction of full table service in several restaurants that were formerly
counter service, as well as a heightened emphasis on training and execution in
company restaurants. Full service restaurants that operate in states without a
"tip credit" (such as Minnesota) experience a higher wage rate for dining room
labor. The migration toward full service dining in most of the Company's
restaurants is part of management's strategy for increasing unit-level sales.
OPERATING EXPENSES
For the thirteen weeks ended October 3, 1999, operating costs were
$3,043,000 or 24.0% of net revenue, compared to $2,227,000 or 20.4% of net
revenue for the same period in 1998. For the thirty-nine weeks ended October 3,
1999, operating costs were $8,442,000 or 23.6% of net revenue compared to
$6,262,000 or 21.2% for the same period ended September 27, 1998. The increase
in operating expense is due to increases in repair and maintenance costs, higher
rent and advertising expenses and entertainment costs at our Chicago Blues Club
location. Operation of the Chicago Blues Club facility during the third quarter
of fiscal 1999 resulted in losses and thus higher operating expense ratios than
for the comparable quarter of fiscal 1998.
DEPRECIATION AND AMORTIZATION
Unit-level depreciation and amortization for the thirteen weeks ended
October 3, 1999 was $725,000 or 5.7% of net revenue compared to $526,000 or 4.8%
of net revenue during the same period in 1998. For the thirty-nine weeks ended
October 3, 1999, depreciation and amortization costs were $2,027,000 or 5.7% of
net revenue compared to $1,519,000 or 5.1% for the same period ended September
27, 1998. The increase in unit-level depreciation and amortization results from
higher construction costs associated with units operating in 1999 and the
opening of the Chicago Blues Club compared to those operating in fiscal 1998.
PRE-OPENING EXPENSES
Pre-opening expenses were $13,000 or 0.1% of net revenue for the thirteen
weeks ended October 3, 1999 compared to $173,000 or 1.6% of net revenue during
the same period in 1998. For the thirty-nine weeks ended October 3, 1999
pre-opening expenses were $455,000 or 1.3% of net revenue compared to $1,081,000
or 3.7% for the same period in 1998. Pre-opening expenses are charged to expense
in the month that they are incurred. Prior to 1998, these expenses were expensed
in the month the restaurant opened or in some cases, deferred and charged to
expense over no longer than a twelve-month period following the opening of the
unit. In the first quarter of fiscal 1998, we took a $120,000 one-time charge
against earnings as a cumulative effect of a change in accounting principle to
reflect this policy change. The 1999 expenses reflect the development of the
Chicago Blues Club, which opened May 3, 1999, compared to the eight units opened
in the same period in 1998 with an additional three units in development.
INCOME FROM UNIT-LEVEL OPERATIONS
Income from unit-level operations totaled $1,338,000 or 10.5% of net
revenue for the thirteen weeks ended October 3, 1999, compared to $1,271,000 or
11.6 % of net revenue in the corresponding period of 1998, an increase of 5.3%.
For the thirty-nine weeks ended October 3, 1999 income from unit-level
operations was $2,799,000 (7.8% of net revenue) an increase of 24.9% over the
$2,241,000 (7.6% of net revenue) for the same period ended September 27, 1998.
Income from unit-level operations represents income from operations before
general and administrative expenses. Although income from unit-level operations
should not be considered an alternative to income/loss from operations as a
measure of our operating performance, such unit-level measurement is commonly
used as an additional measure of operating performance in the restaurant
industry and certain related industries. The change in income from unit-level
operations, both in amount and as a percent of revenue, from 1998 to 1999 is
attributable to the increase in net revenue from new units and retail and other
non-restaurant revenue and the other changes in costs and expenses as discussed
previously.
10
<PAGE> 11
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the thirteen weeks ended October 3,
1999 were $1,024,000 or 8.1% of net revenue, compared to $1,170,000 or 10.7% of
net revenue for the same period in 1998. For the thirty-nine weeks ended October
3, 1999, general and administrative expenses were $3,057,000 or 8.6% of net
revenue compared to $5,314,000 or 18.0% for the same period in 1998. The
thirty-nine week amount for 1998 reflects $1,146,000 in severance and
restructuring costs related to the reduction of the corporate infrastructure.
The reduction in general and administrative expenses both in amount and as a
percent of net revenue reflects continued efforts to maximize efficiency as
additional locations are opened, and the improved distribution of higher revenue
spread over reduced levels of general and administrative expenses.
INCOME (LOSS) FROM OPERATIONS
Income from operations totaled $314,000 or 2.5% of net revenue, for the
thirteen weeks ended October 3, 1999 compared to income from operations of
$101,000 or 0.9% of net revenue, in the corresponding period in 1998. For the
thirty-nine weeks ended October 3, 1999 the loss from operations was $258,000 or
0.7% compared to $4,662,000 or 15.8% for the thirty-nine weeks ended September
27, 1998. The 1998 amount reflects charges of approximately $2.7 million in
expenses associated with a provision for disposition of two restaurants and
severance and restructuring charges which were taken in the first quarter of
1998. The reduction in losses incurred is primarily attributable to increased
income from non-restaurant operations and significant reductions in the level of
general and administrative expense.
INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income (expense), net, primarily represents interest
income received from short-term investments offset by interest expense on
capital lease obligations and notes payable. Interest expense was $177,000 or
1.4% for the thirteen weeks ended October 3, 1999 compared to interest income of
$33,000 or 0.3% for same period in 1998. For the thirty-nine weeks ended October
3, 1999 interest expense was $214,000 or 0.6% of net revenue compared to
interest income of $226,000 or 0.8% for the same period in 1998. The decrease in
income from 1998 to 1999 was primarily due to the reduced level of short-term
investments in 1999, an increase in interest expense on a sale-leaseback
transaction that occurred on March 31, 1999 and interest incurred on a bank line
of credit.
NET INCOME (LOSS) /NET INCOME (LOSS) PER COMMON SHARE
The net income for the thirteen weeks ended October 3, 1999 was $137,000,
or $.02 per share on 8,842,972 weighted average shares outstanding, compared to
net income of $134,000, or $.02 per share on 8,827,590 weighted average shares
outstanding, during the comparable period in 1998. The net loss for the
thirty-nine weeks ended October 3, 1999 was $472,000 or $.05 on 8,839,695
weighted average shares outstanding compared to a loss of $4,556,000 or $.52 on
8,805,418 weighted average shares outstanding for the same period in 1998. The
1998 amount reflects charges of approximately $2.7 million in expenses
associated with a provision for disposition of two restaurants and severance and
restructuring charges taken in the first quarter of 1998. The decrease in net
loss and net loss per share is attributable to increased income from retail and
other non-restaurant operations and a reduction in general and administrative
expenses.
11
<PAGE> 12
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of October 3, 1999 we held cash and cash equivalents of approximately
$937,000 compared to $1,951,000 as of January 3, 1999. The decrease in cash and
cash equivalents reflects the use of cash for the purchase and/or development of
property, equipment and leasehold improvements.
At October 3, 1999 we were party to a credit agreement with a financial
corporation which provides up to a $4.5 million line of credit of which
$1,125,000 is outstanding. This facility is secured by substantially all of our
property, and in addition is guaranteed by and secured by certain assets of our
Chairman, David Anderson. The credit facility matures in April, 2000.
On March 31, 1999 we completed a sale-leaseback transaction involving three
of our existing units that provided net proceeds of approximately $4.4 million.
Under this financing we are obligated to make monthly payments of $41,250 for a
minimum period of twenty years. Approximately $2.4 million of the proceeds were
used to pay down an existing bank line of credit and the remaining amount was
used to complete the construction of the Chicago Blues Club.
We anticipate that future development and expansion will be funded
primarily through cash and short-term investments, proceeds from the sale of
additional equity and/or debt securities, and the proceeds from other forms of
financing such as lease financing or other credit facilities. However, there can
be no assurance that additional financing required will be available , or that
the terms will be acceptable or favorable to us.
SEASONALITY
Our units typically generate higher revenues during the second and third
quarters (which are summer months for our locations) than in the first and
fourth quarters (which are winter months) as a result of our concentration of
locations in Minnesota and Wisconsin market areas.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10-QSB and other materials filed or to be filed with the Securities and
Exchange Commission (as well as information included in oral statements or other
written statements made or to be made by us) contain statements that are
forward-looking. A number of important factors could, individually or in the
aggregate, cause actual results to differ materially from those expressed or
implied in any forward-looking statements. Such factors include, but are not
limited to, the following: competition in the casual dining restaurant market;
continued market acceptance of our concept; availability and terms of additional
financing: our ability to open additional restaurants in a timely manner;
consumer spending trends and habits; weather conditions in the regions in which
we develop and operate restaurants; and laws and regulations affecting labor and
employee benefit costs. For further information regarding these and other
factors, see our Annual Report on Form 10-KSB for the fiscal year ended January
3, 1999.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any material litigation and is not aware of
any threatened litigation that would have a material adverse effect on its
business.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
13
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FAMOUS DAVE'S OF AMERICA, INC.
/s/ Martin J. O'Dowd
--------------------
Martin J. O'Dowd
President and Chief Executive Officer
/s/ Steven A. Sekely
--------------------
Steven A. Sekely
Corporate Controller
(Principal Accounting Officer)
Date: November 10, 1999
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FAMOUS
DAVE'S AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE NINE MONTHS ENDED OCTOBER 3, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-04-1999
<PERIOD-END> OCT-03-1999
<CASH> 937,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,156,000
<CURRENT-ASSETS> 3,045,000
<PP&E> 45,125,000
<DEPRECIATION> 5,877,000
<TOTAL-ASSETS> 42,594,000
<CURRENT-LIABILITIES> 4,798,000
<BONDS> 5,188,000
0
0
<COMMON> 42,816,000
<OTHER-SE> (10,208,000)
<TOTAL-LIABILITY-AND-EQUITY> 42,594,000
<SALES> 35,712,000
<TOTAL-REVENUES> 35,712,000
<CGS> 12,067,000
<TOTAL-COSTS> 35,970,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (214,000)
<INCOME-PRETAX> (472,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (472,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (472,000)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
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