<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 April 4, 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)
Minnesota 41-1782300
(State or other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
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 May 10, 1999 there were 8,837,590 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
April 4, 1999
<TABLE>
<CAPTION>
Page Number
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - 3
April 4, 1999 and January 3, 1999
Condensed Consolidated Statements of Operations - 4
For the thirteen weeks ended April 4, 1999 and March 29, 1998
Condensed Consolidated Statements of Cash Flows - 5
For the thirteen weeks ended April 4, 1999 and March 29, 1998
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Items 1, 5 and 6. 14
Signatures 15
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 4, JANUARY 3,
1999 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,117,000 $ 1,951,000
Securities available-for-sale 1,549,000 1,624,000
Inventories 924,000 908,000
Prepaids and other current assets 1,009,000 824,000
------------ ------------
Total current assets 5,599,000 5,307,000
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, NET 36,401,000 35,576,000
OTHER ASSETS - DEPOSITS 295,000 286,000
------------ ------------
$ 42,295,000 $ 41,169,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,862,000 $ 4,173,000
Current portion of capital lease obligations 403,000 403,000
Note payable 0 683,000
Other current liabilities 1,859,000 1,837,000
------------ ------------
Total current liabilities 4,124,000 7,096,000
NOTE PAYABLE - LONG TERM 4,500,000 0
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT
PORTION 914,000 1,000,000
------------ ------------
Total liabilities 9,538,000 8,096,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares authorized,
8,837,590 and 8,837,590 shares issued and outstanding 88,000 88,000
Additional paid-in capital 42,721,000 42,721,000
Accumulated deficit (10,052,000) (9,736,000)
------------ ------------
Total shareholders' equity 32,757,000 33,073,000
------------ ------------
$ 42,295,000 $ 41,169,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-------------------------------------
APRIL 4, MARCH 29,
1999 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
REVENUES, NET $ 10,388,000 $ 7,734,000
------------ ------------
COSTS AND EXPENSES:
Food and beverage costs 3,546,000 2,731,000
Labor and benefits 2,924,000 2,156,000
Operating expenses 2,516,000 1,886,000
Depreciation and amortization 609,000 436,000
Pre-opening expenses 103,000 510,000
General and administrative 1,002,000 2,820,000
Reserve for loss on closed sites 0 1,589,000
------------ ------------
Total costs and expenses 10,700,000 12,128,000
------------ ------------
LOSS FROM OPERATIONS (312,000) (4,394,000)
Interest and other income (expense), net (4,000) 135,000
------------ ------------
NET LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ (316,000) $ (4,259,000)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 0 (120,000)
------------ ------------
NET LOSS $ (316,000) $ (4,379,000)
============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE BEFORE
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ (0.04) $ (0.49)
============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.04) $ (0.50)
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 8,837,590 8,761,074
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------------------------
APRIL 4, MARCH 29,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (316,000) $ (4,379,000)
Adjustments to reconcile net loss to
cash flows from operating activities:
Depreciation and amortization 688,000 524,000
Reserve for loss on closed sites (32,000) 1,589,000
Write-off of certain other non-operating assets 0 559,000
Cumulative effect of change in accounting principle 0 120,000
Changes in working capital items -
Inventories (16,000) (132,000)
Prepaids and other current assets (185,000) 221,000
Other assets - deposits (9,000) (98,000)
Accounts payable (2,311,000) (2,251,000)
Other current liabilities 22,000 (202,000)
------------ ------------
Cash flows from operating activities (2,159,000) (4,049,000)
------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of available-for-sale securities 0 (8,058,000)
Proceeds from available-for-sale securities 75,000 11,297,000
Purchase of property, equipment
and leasehold improvements (1,481,000) (4,293,000)
------------ ------------
Cash flows from investing activities (1,406,000) (1,054,000)
------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payments on capital lease obligations (86,000) (87,000)
Proceeds from exercise of stock options 0 784,000
Advances on notes payable 6,100,000 0
Payments on note payable (2,283,000) 0
------------ ------------
Cash flows from financing activities 3,731,000 697,000
------------ ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 166,000 (4,406,000)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,951,000 7,984,000
------------ ------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 2,117,000 $ 3,578,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 4, 1999
(UNAUDITED)
(1) GENERAL
Famous Dave's of America, Inc. ("Famous Dave's") currently operates twenty-two
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 April 4, 1999 we operated twenty-two restaurants
with one additional unit in development, a Chicago Blues Club which opened May
3, 1999. As of March 29, 1998 we operated eighteen restaurants, with an
additional seven units in development.
(2) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed 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 financial statements be read in conjunction with our most recent
audited 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 weeks ended April 4, 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 or
(loss) by the weighted average number of common shares outstanding during the
quarter. Diluted EPS is computed by dividing net income or (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 April 4, 1999, there was one unit open under this franchise
agreement.
6
<PAGE> 7
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 4, 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 have 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 thirteen weeks ended April 4, 1999, an additional net
operating loss of approximately $316,000 was generated which, if not used, will
expire in 2014. 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.
7
<PAGE> 8
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 4, 1999
(UNAUDITED)
(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 April 4, 1999, we had a commitment
outstanding under one contract for construction of a Blues Club in Chicago. As
of April 4, 1999, the balance remaining to be paid under this contract was
approximately $1.7 million.
In addition, we have entered into a contract with a national real estate
services firm to provide real estate development and construction management
services for the development of a minimum of six restaurants in the future. The
estimated remaining commitment under this contract was $132,000 at April 4,
1999.
Other
At April 4, 1999, we had irrevocable letters of credit outstanding for a
total of $1,546,800, including a letter of credit for $1,500,000 expiring
September, 1999 related to the Blues Club under construction in Chicago. Such
letters of credit are fully secured by certificates of deposit.
8
<PAGE> 9
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 April 4,
1999 we owned and operated twenty-two restaurants: fourteen in Minnesota, four
in Wisconsin, three in Iowa and one in Illinois. A Blues Club opened in Chicago,
Illinois on May 3, 1999. 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 one Blues Club
(featuring an authentic Chicago Blues Club decor and live music seven nights a
week) and a Take-Out and Catering facility. All of the 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 assurances 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.
9
<PAGE> 10
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:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------
APRIL 4, MARCH 29,
1999 1998
------------- --------------
<S> <C> <C>
REVENUES, NET 100.0% 100.0%
------------- --------------
UNIT-LEVEL COSTS AND EXPENSES:
Food and beverage costs 34.1% 35.3%
Labor and benefits 28.1% 27.9%
Operating expenses 24.2% 24.3%
Depreciation and amortization 6.0% 5.6%
Pre-opening expenses 1.0% 6.6%
------------- --------------
Total costs and expenses 93.4% 99.7%
------------- --------------
INCOME FROM UNIT-LEVEL OPERATIONS 6.6% 0.3%
------------- --------------
General and administrative 9.6% 36.5%
Provision for loss on restaurants to be disposed 0.0% 20.5%
------------- --------------
LOSS FROM OPERATIONS (3.0)% (56.7%)
Interest and other income, net 0.0% 1.7%
------------- --------------
Net Loss before Cumulative Effect of Change in
Accounting Principle (3.0)% (55.0%)
Cumulative effect of change in accounting 0.0% (1.6%)
principle
------------- --------------
NET LOSS (3.0)% (56.6%)
============= ==============
</TABLE>
REVENUE, NET
Net revenue for the thirteen weeks ended April 4, 1999 was $10,388,000
compared to $7,734,000 for the same period in 1998, a 34% increase. The increase
in net revenue is primarily due to the addition of six restaurants opened during
the three quarters subsequent to March 29, 1998 ($3.2 million of the increase)
and retail and other non-restaurant revenue ($272,000 of the increase), offset
by a decline in revenue of restaurants open in all of both quarterly periods
($937,000). The Company has five restaurants in the Minneapolis/St. Paul market
which have been open for more than eighteen months. The opening of eight
additional units in the same market area within the past eighteen months has
significantly affected each of these restaurants. The resulting redistribution
of customer demand has resulted in reductions in same store sales of
approximately 5% in the thirteen weeks ended April 4, 1999. This is an
improvement in comparable store sales performance from last year's decline of
approximately 17%. Management anticipates that revenue levels at our locations
will improve as development efforts move outside of the Minneapolis/St. Paul
market, and local store and media marketing programs become effective.
FOOD AND BEVERAGE COSTS
Food and beverage costs for the thirteen weeks ended April 4, 1999 were
$3,546,000 or 34.1% of net revenue, compared to $2,731,000 or 35.3% of net
revenue for the same period in 1998. The decrease in food and beverage costs as
a percent of net revenue was primarily due to improved purchasing economies,
including contract pricing of certain pork items, partially offset by costs
associated with increased sales of lower margin retail grocery items.
10
<PAGE> 11
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 April 4, 1999 were
$2,924,000 or 28.1% of net revenue, compared to $2,156,000 or 27.9% of net sales
for the same period in 1998. Labor costs as a percent of net revenue are
slightly 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
Operating expenses as a percent of net revenue were virtually unchanged from
1998 to 1999. For the thirteen weeks ended April 4, 1999, operating costs were
$2,516,000 or 24.2% of net revenue, compared to $1,886,000 or 24.3% of net
revenue for the same period in 1998.
DEPRECIATION AND AMORTIZATION
Unit-level depreciation and amortization for the thirteen weeks ended April
4, 1999 was $609,000 or 6.0% of net revenue compared to $436,000 or 5.6% of net
revenue during the same period in 1998. The increase in unit-level depreciation
and amortization results from higher construction costs associated with units
operating in 1999 compared to those operating in fiscal 1998.
PRE-OPENING EXPENSES
Pre-opening expenses were $103,000 or 1.0% of net revenue for the thirteen
weeks ended April 4, 1999 compared to $510,000 or 6.6% of net revenue during 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 first quarter 1999 expenses reflect the development of
the Chicago Blues Club, which opened May 3, 1999, compared to the four units
opened in the same period in 1998 with an additional seven units in initial
development.
INCOME FROM UNIT-LEVEL OPERATIONS
Income from unit-level operations totaled $690,000 or 6.6% of net revenue,
for the thirteen weeks ended April 4, 1999, compared to $15,000 or 0.3 % of net
revenue, in the corresponding period of 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 additional units opened and the other changes in costs and
expenses as discussed above.
11
<PAGE> 12
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 April 4,
1999 were $1,002,000 or 9.6% of net revenue, compared to $2,820,000 or 36.5% of
net revenue for the same period in 1998. The 1998 amount reflects $1,146,000 in
severance and restructuring costs related to the reduction of the corporate
infrastructure. Without these restructuring charges, the comparable general and
administrative expenses would be $1,674,000 or 21.6% of net revenue. The
reduction in general and administrative expenses as a percent of net revenue
reflects increased sales and the adjustment of our corporate infrastructure to a
reduced level which we believe is appropriate to support our current, more
controlled plans for expansion.
LOSS FROM OPERATIONS
Loss from operations totaled $312,000 or 3.0% of net revenue, for the
thirteen weeks ended April 4, 1999 compared to a loss of $4,394,000, or 56.6% of
net revenue, in the corresponding period in 1998. The first quarter 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. Excluding these special provisions, the comparable loss would have been
$1,659,000 or 21.5% of net sales. The reduction in losses incurred is primarily
attributable to increased income from unit-level operations, the contribution
from new units opened 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. Interest expense was $4,000 for the thirteen weeks
ended April 4, 1999 and interest income was $135,000 for same period in 1998.
The decrease in income from 1998 to 1999 was primarily due to the reduced level
of short-term investments in 1998 and 1999.
NET LOSS /NET LOSS PER COMMON SHARE
The net loss for the thirteen weeks ended April 4, 1999 was $316,000, or $.04
per share on 8,837,590 weighted average shares outstanding, compared to a net
loss of $4,379,000, or $.50 per share on 8,761,074 weighted average shares
outstanding, during the comparable period in 1998. The first quarter 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. The decrease in net loss and net loss per share is attributable to
increased income from unit-level operations from new units opened and a
reduction in general and administrative expenses.
12
<PAGE> 13
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 April 4, 1999 we held cash and cash equivalents of approximately
$2,117,000 compared to $1,951,000 as of January 3, 1999. The increase in cash
and cash equivalents reflects the sale-leaseback financing deal that was
completed in March 1999, offset by cash used for the purchase and/or development
of property, equipment and leasehold improvements.
At April 4, 1999 we were party to a credit agreement with a financial
corporation which provides up to a $4.5 million line of credit (none outstanding
at April 4, 1999). As of January 3, 1999, approximately $683,000 was outstanding
and was repaid along with an additional $1.7 million of first quarter borrowing
with proceeds from our sale-leaseback transaction. 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, 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 the existing bank line of credit and the remaining amount is
available for working capital purposes and 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 currently held, 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 assurances that additional financing required for expansion will be
available on terms 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
the 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.
13
<PAGE> 14
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
14
<PAGE> 15
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/ Douglas S. Lanham
---------------------
Douglas S. Lanham
President, Chief Executive Officer
and Chief Operating Officer
/s/ Steven A. Sekely
--------------------
Steven A. Sekely
Corporate Controller
(Principal Accounting Officer)
Date: May 12, 1999
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FAMOUS
DAVE'S OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED APRIL 4, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-04-1999
<PERIOD-END> APR-04-1999
<CASH> 2,117,000
<SECURITIES> 1,549,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 924,000
<CURRENT-ASSETS> 5,599,000
<PP&E> 40,700,000
<DEPRECIATION> 4,299,000
<TOTAL-ASSETS> 42,295,000
<CURRENT-LIABILITIES> 4,124,000
<BONDS> 5,414,000
0
0
<COMMON> 42,809,000
<OTHER-SE> (10,052,000)
<TOTAL-LIABILITY-AND-EQUITY> 42,295,000
<SALES> 10,388,000
<TOTAL-REVENUES> 10,388,000
<CGS> 3,546,000
<TOTAL-COSTS> 10,700,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,000)
<INCOME-PRETAX> (316,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (316,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (316,000)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
