<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended October 1, 2000
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from to
-------------------- -----------------
Commission file number 0-21625
-------
FAMOUS DAVE'S OF AMERICA, INC.
(Exact Name of Registrant as Specified in Its Charter)
Minnesota 41-1782300
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
7657 Anagram Drive, Eden Prairie, MN 55344
(Address of Principal Executive Offices)
(952) 294-1300
(Registrant's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
Indicate by check whether the registrant: (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 3, 2000 there were 9,309,646 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-Q Index
October 1, 2000
<TABLE>
<CAPTION>
Page Number
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - 3
October 1, 2000 and January 2, 2000
Condensed Consolidated Statements of Operations - 4
For the thirteen and thirty-nine weeks ended October 1, 2000 and October 3, 1999
Condensed Consolidated Statements of Cash Flows - 5
For the thirty-nine weeks ended October 1, 2000 and October 3, 1999
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, 2 and 6.
13
Signatures
14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 1, JANUARY 2,
2000 2000
-------------- ---------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,252,000 $ 1,712,000
Inventories 1,249,000 1,108,000
Prepaids and other current assets 1,175,000 1,249,000
Current maturities of notes receivable 54,000 0
------------ ------------
Total current assets 4,730,000 4,069,000
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, NET 43,295,000 38,742,000
NOTES RECEIVABLE NET OF CURRENT MATURITIES 853,000 0
OTHER ASSETS:
Deposits 366,000 315,000
Debt issuance costs, net 563,000 200,000
------------ ------------
$ 49,807,000 $ 43,326,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 544,000 $ 3,050,000
Current portion of capital lease obligations 462,000 1,026,000
Current portion of notes payable 809,000 0
Accounts payable 2,463,000 4,220,000
Accrued payroll and related taxes 965,000 807,000
Other current liabilities 2,266,000 2,136,000
------------ ------------
Total current liabilities 7,509,000 11,239,000
NOTES PAYABLE, NET OF CURRENT PORTION 8,031,000 0
FINANCING LEASE OBLIGATIONS 4,500,000 4,500,000
DEFERRED GAIN, NET OF CURRENT PORTION 355,000 0
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT
PORTION 255,000 577,000
------------ ------------
Total liabilities 20,650,000 16,316,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares authorized,
9,178,593 and 9,055,139 shares issued and outstanding 92,000 91,000
Additional paid-in capital 43,632,000 43,265,000
Accumulated deficit (14,567,000) (16,346,000)
------------ ------------
Total shareholders' equity 29,157,000 27,010,000
------------ ------------
$ 49,807,000 $ 43,326,000
============ ============
</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 THIRTY-NINE WEEKS ENDED
------------------------------- ----------------------------
OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3,
2000 1999 2000 1999
--------------- -------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES, NET $ 18,994,000 $ 12,707,000 $ 52,452,000 $ 35,753,000
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Food and beverage costs 6,076,000 4,123,000 17,132,000 12,067,000
Labor and benefits 5,271,000 3,451,000 14,431,000 9,922,000
Operating expenses 4,091,000 3,043,000 11,601,000 8,442,000
Depreciation and amortization 928,000 725,000 2,700,000 2,027,000
Pre-opening expenses 326,000 13,000 680,000 455,000
General and administrative 1,422,000 1,024,000 3,955,000 3,057,000
------------ ------------ ------------ ------------
Total costs and expenses 18,114,000 12,379,000 50,499,000 35,970,000
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 880,000 328,000 1,953,000 (217,000)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 25,000 6,000 34,000 6,000
Interest expense (322,000) (197,000) (903,000) (261,000)
Other income 31,000 0 46,000 0
Gain on sale of property 10,000 0 650,000 0
------------ ------------ ------------ ------------
Total other income (expense) (256,000) (191,000) (173,000) (255,000)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 624,000 $ 137,000 $ 1,780,000 $ (472,000)
============ ============ ============ ============
BASIC NET INCOME (LOSS) PER COMMON
SHARE $ 0.07 $ 0.02 $ 0.20 $ (0.05)
============ ============ ============ ============
DILUTED NET INCOME (LOSS) PER
COMMON SHARE $ 0.06 $ 0.02 $ 0.18 $ (0.05)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC 9,131,590 8,842,972 9,096,949 8,839,695
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 9,962,304 8,842,972 9,635,386 8,839,695
============ ============ ============ ============
</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>
THIRTY-NINE WEEKS ENDED
-------------------------------
OCTOBER 1 OCTOBER 3
2000 1999
-------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 1,780,000 $ (472,000)
Adjustments to reconcile net income (loss) to
cash flows from operating activities:
Depreciation and amortization 2,715,000 2,266,000
Reserve for restaurant closings (82,000) (81,000)
Gain on sale of assets (659,000) 0
Changes in working capital items -
Inventories (141,000) (248,000)
Prepaids and other current assets 74,000 (128,000)
Deposits (51,000) (15,000)
Accounts payable (1,757,000) (2,869,000)
Accrued payroll and related taxes 158,000 76,000
Other current liabilities 120,000 11,000
----------- -----------
Cash flows from operating activities 2,157,000 (1,460,000)
----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of available-for-sale securities 0 (24,000)
Proceeds from available-for-sale securities 0 1,648,000
Proceeds from sales of property 530,000 0
Receipts on notes receivable 13,000 0
Purchase of property, equipment
and leasehold improvements (6,429,000) (5,857,000)
----------- -----------
Cash flows from investing activities (5,886,000) (4,233,000)
----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Advances on debt issuance costs (378,000) 0
Net advances (payments) on line of credit (2,506,000) 3,725,000
Advances on notes payable 7,300,000 4,500,000
Payments on notes payable (153,000) (3,283,000)
Payments on capital lease obligations (310,000) (270,000)
Proceeds from exercise of stock options 316,000 7,000
----------- -----------
Cash flows from financing activities 4,269,000 4,679,000
----------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 540,000 (1,014,000)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,712,000 1,951,000
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 2,252,000 $ 937,000
=========== ===========
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Conversion of other current liabilities for
common stock $ 51,000 $ 0
Notes payable issued for land and property & equipment $ 1,117,000 $ 0
Note receivable issued for sale of property &
equipment $ 920,000 $ 0
Deferred gain on sale of property & equipment $ 394,000 $ 0
</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
OCTOBER 1, 2000
(UNAUDITED)
(1) GENERAL
Famous Dave's of America, Inc. ("Famous Dave's" or the "Company") currently
operates or franchises thirty-seven restaurants under the name "Famous Dave's"
in the Midwestern and Eastern regions 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 1,
2000 we operated or franchised thirty-seven restaurants with an additional three
company-owned and two franchised units in development. As of October 3, 1999 we
operated or franchised twenty-five restaurants, with one additional
company-owned unit 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 2, 2000. 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 thirty-nine week period ended October 1, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2000.
Certain amounts in the fiscal 1999 financial statements have been reclassified
to conform to the fiscal 2000 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 for 1999 because their
inclusion would be anti-dilutive.
(4) INCOME FROM FRANCHISEES
As of October 1, 2000 we had seven franchise units in operation, three in
Minnesota, three in Wisconsin and one in Illinois. All of our franchise
agreements require that each restaurant operate in accordance with our operating
procedures, adhere to the menu established by us and meet all quality, service
and cleanliness standards.
(5) SEVERANCE
In December 1999, we recorded a provision totaling $147,000 for executive
severance expense. During the quarter ended October 1, 2000, we charged $17,000
to this provision. During the thirty-nine week period ended October 1, 2000, we
charged $147,000 to this provision.
(6) IMPAIRMENT RESERVE FOR RESTAURANTS TO BE DISPOSED
In March 1998, we implemented a plan to close two restaurants. As part of
this plan, we recorded a provision, which was adjusted in December 1999. The
write-offs against this provision totaled $15,000 for the 13 weeks ended October
1, 2000 and $24,000 for the comparable period in 1999. The write-offs against
this provision totaled $82,000 for the thirty-nine week period ended October 1,
2000 and $81,000 for the comparable period in 1999.
6
<PAGE> 7
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 1, 2000
(UNAUDITED)
(7) RELATED PARTY TRANSACTIONS
S&D LAND HOLDINGS, INC. - We lease the real estate for three of our
units from S&D Land Holdings, Inc., a company wholly owned by the Company's
founding shareholder and Chairman.
(8) INCOME TAXES
The Company has generated net operating losses of approximately $14,566,000
which, if not used, will begin to expire in 2011. 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.
(9) NOTES PAYABLE
On January 21, 2000 a note payable was signed with S&D Land Holdings Inc., a
company wholly owned by the Company Chairman, for $750,000 to facilitate
mortgage financing. The note is due January 21, 2002 and bears interest at 12%.
The Company exercised our option to prepay a portion of the note and paid down
$100,000 in the third quarter ended October 1, 2000. This note requires monthly
interest payments and principal payments of $150,000 on January 21, 2001 and
$250,000 on July 21, 2001 and January 21, 2002.
During January 2000, we completed a mortgage financing deal for two of our
existing restaurants. The proceeds of this financing were $3.7 million. The
Company is obligated to make monthly payments of $38,015 for a period of twenty
years.
During August 2000, we completed a mortgage financing deal for two of our
existing restaurants. The proceeds of this financing were $3.5 million. The
Company is obligated to make monthly payments of $34,557 for a period of twenty
years.
(10) FINANCING LEASE OBLIGATIONS
In March 1999, we completed a sale-leaseback transaction involving three of
our existing units that provided proceeds of approximately $4.5 million. Under
this financing we are obligated to make monthly payments of approximately
$41,250 (which increases 4.04% every two years) for a minimum of twenty years.
(11) DEFERRED GAIN AND NOTE RECEIVABLE
During the second quarter ended July 2, 2000, the company sold property and
equipment at two of its company-operated restaurants. These restaurants were
converted to franchises. The balance on the notes receivable was $907,000 as of
October 1, 2000. The notes receivable bear interest at 9.6% and 12.0% and
require monthly payments of principal and interest, are secured by equipment and
mature through July 2010. The note receivable for the sale of one restaurant was
approximately 90% of the selling price. The Company recorded a deferred gain on
this sale and will recognize the gain over the term of the note receivable.
(12) 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 1, 2000, we had commitments
outstanding under two contracts for construction of lodges in Lombard and North
Riverside, Illinois. As of October 1, 2000, the balance remaining to be paid
under these contracts was approximately $25,000.
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. ("Famous Dave's" or the
"Company") is to develop, own, operate and franchise casual dining restaurants
under the name "Famous Dave's." As of October 1, 2000 we owned and operated
thirty restaurants: thirteen in Minnesota, three in Wisconsin, three in Iowa,
six in Illinois, three in Maryland and one each in Nebraska and Virginia. In
addition, there were seven restaurants located in Minnesota, Wisconsin and
Illinois operating under franchise agreements.
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
eight lodge restaurants featuring hickory smoked off-the-grill entrees, a rustic
Northwoods decor and big band music. In addition, we operate nineteen nostalgic
roadhouse barbecue shacks of which twelve 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, the acceptance of our franchise concept, 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, repairs 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 2, 2000.
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 restaurant revenues
(which consist of restaurant, retail and ribfest revenues), net were as follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
October 1, October 3, October 1, October 3,
2000 1999 2000 1999
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
RESTAURANT REVENUES, NET 100.0% 100.0% 100.0% 100.0%
------------- ------------- ------------ -------------
UNIT-LEVEL COSTS AND EXPENSES:
Food and beverage costs 32.4% 32.5% 33.0% 33.8%
Labor and benefits 28.1% 27.2% 27.8% 27.8%
Operating expenses 21.8% 24.0% 22.3% 23.6%
Depreciation and amortization 4.9% 5.7% 5.2% 5.7%
Pre-opening expenses 1.7% 0.1% 1.3% 1.3%
------- ------- -------- ---------
Total costs and expenses 88.9% 89.5% 89.6% 92.2%
------- ------- -------- ---------
INCOME FROM UNIT-LEVEL OPERATIONS 11.1% 10.5% 10.4% 7.8%
</TABLE>
RESTAURANT REVENUES, NET
Net restaurant, ribfest and retail revenue for the thirteen weeks ended
October 1, 2000 was $18,768,000 compared to $12,693,000 for the same period in
1999, a 47.9% increase. The increase in net revenue is primarily due to the
addition of five restaurants opened during the four quarters subsequent to
October 3, 1999, the purchase of four Red River Barbeque & Grille restaurants on
the East coast, and an increase in same store sales. For the thirty-nine weeks
ended October 1, 2000 net revenue was $51,975,000 compared to $35,711,000 for
the same period in 1999, a 45.5% increase. The Company has twenty restaurants
that have been open for more than eighteen months and these restaurants reported
increases in same store sales of approximately 8.5% in the thirteen weeks ended
October 1, 2000. This is the sixth consecutive quarter of comparable store sales
increases for our company.
OTHER REVENUE
Other revenue for the company consists of royalty revenues and franchise
fees. Franchise revenues for the thirteen weeks ended October 1, 2000 were
$207,000 compared to $14,000 for the thirteen weeks ended October 3, 1999. For
the thirty-nine weeks ended October 1, 2000, franchise revenues totaled $439,000
compared to $42,000 for the same period in 1999. Franchise revenue includes both
franchise royalty income and franchise fees. Royalties are based on a percent of
sales, while fee amounts reflect initial non-refundable fixed fees and are
recorded as revenue when an agreement is signed and no material services are
required by the company. The Company currently has seven franchises open
compared to two for the same period in 1999. During the quarter ended July 2,
2000 the Company sold its sauce and seasoning retail line of business and now
receives licensing royalty income. For the thirteen weeks and thirty-nine weeks
ending October 1, 2000 the licensing royalty income was $19,000 and $38,000
respectively.
FOOD AND BEVERAGE COSTS
Food and beverage costs for the thirteen weeks ended October 1, 2000 were
$6,076,000 or 32.4% of net restaurant revenue, compared to $4,123,000 or 32.5%
of net restaurant revenue for the same period in 1999. For the thirty-nine weeks
ended October 1, 2000 food and beverage costs were $17,132,000 or 33.0% of net
restaurant revenue compared to $12,067,000 and 33.8% for the same period in
1999. The decrease in food and beverage costs as a percent of net restaurant
revenue was primarily due to improved purchasing economies, including contract
pricing of certain pork items.
9
<PAGE> 10
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LABOR AND BENEFITS
Labor and benefits for the thirteen weeks ended October 1, 2000 were
$5,271,000 or 28.1% of net restaurant revenue, compared to $3,451,000 or 27.2%
of net restaurant revenue for the same period in 1999. For the thirty-nine weeks
ended October 1, 2000 labor and benefits were $14,431,000 or 27.8% of net
restaurant revenue compared to $9,922,000 or 27.8% in 1999. The increase in
dollar cost of labor for 2000 is caused by the growth in number of restaurants
compared to 1999. Labor costs as a percent of net restaurant revenue were higher
for the thirteen weeks ended October 1, 2000 compared to the comparable period
in 1999 due to the sale of our sauce and seasoning lines of business in the
second quarter 2000. The low labor costs associated with the additional retail
revenue lowered the 1999 labor costs as a percent of net restaurant revenue.
OPERATING EXPENSES
For the thirteen weeks ended October 1, 2000, operating costs were
$4,091,000 or 21.8% of net restaurant revenue, compared to $3,043,000 or 24.0%
of net restaurant revenue for the same period in 1999. For the thirty-nine weeks
ended October 1, 2000 operating expenses totaled $11,601,000 or 22.3% of net
restaurant revenue compared to $8,442,000 or $23.6% in 1999. The dollar increase
in operating expense is related to the growth of restaurant units. The decrease
in operating expense as a percent of net restaurant revenue is due to increased
revenue at both new and existing units and an emphasis placed on cost reduction
efforts. However, the savings as a percent of net revenue were impacted by
property tax expense revisions to fully assessed building values and entertainer
expense at our Chicago Blues Club.
DEPRECIATION AND AMORTIZATION
Unit-level depreciation and amortization for the thirteen weeks ended
October 1, 2000 was $928,000 or 4.9% of net restaurant revenue compared to
$725,000 or 5.7% of net restaurant revenue during the same period in 1999. For
the thirty-nine weeks ended October 1, 2000 depreciation and amortization was
$2,700,000 or 5.2% of net restaurant revenue compared to $2,027,000 or 5.7% for
the thirty-nine weeks ended October 3, 1999. The decrease in unit-level
depreciation and amortization percentage results from lower construction costs
associated with units operating in 2000 compared to those operating in fiscal
1999 and an increase in operating revenues. In addition, the effect of
impairment write-downs made in the fourth quarter of fiscal 1999 contributed to
the decrease of depreciation as a percentage of net restaurant revenue.
PRE-OPENING EXPENSES
Pre-opening expenses were $326,000 or 1.7% of net restaurant revenue for the
thirteen weeks ended October 1, 2000 compared to $13,000 or 0.1% of net
restaurant revenue during the same period in 1999. For the thirty-nine weeks
ended October 1, 2000 pre-opening expenses were $680,000 or 1.3% of net
restaurant revenue compared to $455,000 or 1.3% of net restaurant revenue for
the same period in 1999. Pre-opening expenses are charged to expense in the
month that they are incurred. The 2000 expenses reflect the opening of four
units in Illinois in addition to the conversions of four Red River Barbeque and
Grille locations. This compares to the 1999 amount, which reflects the opening
of the Chicago Blues Club and the Lincoln location.
INCOME FROM UNIT-LEVEL OPERATIONS
Income from unit-level operations totaled $2,302,000 or 12.1% of net
operating revenue for the thirteen weeks ended October 1, 2000, compared to
$1,352,000 or 10.6% of net operating revenue in the corresponding period of
1999. For the thirty-nine weeks ended October 1, 2000 income from unit-level
operations totaled $5,908,000 or 11.3% of net operating revenue compared to
$2,840,000 or 7.9% for the same period in 1999. 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 net operating revenue, from 1999 to 2000 is attributable to the
increase in net revenue from new and existing units 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
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the thirteen weeks ended October 1,
2000 were $1,422,000 or 7.5% of net operating revenue, compared to $1,024,000 or
8.1% of net operating revenue for the same period in 1999. For the thirty-nine
weeks ended October 1, 2000 general and administrative expenses were $3,955,000
or 7.5% compared to $3,057,000 or 8.6% in 1999. The increase in general and
administrative expenses for the thirteen and thirty-nine weeks ended October 1,
2000 reflects increased personnel at the corporate level to support restaurant
and franchise growth. The decrease in general and administrative expense as a
percent of net operating revenue for the thirteen and thirty-nine weeks ended
October 1, 2000 is due to an increase in operating revenues.
INCOME (LOSS) FROM OPERATIONS
Income from operations totaled $880,000 or 4.6% of net operating revenue, for
the thirteen weeks ended October 1, 2000 compared to $328,000 or 2.6% of net
operating revenue, in the corresponding period in 1999. For the thirty-nine
weeks ended October 1, 2000 income from operations was $1,953,000 or 3.7%
compared to a loss of ($217,000) or (0.6%) in 1999. The increase in income is
primarily attributable to increased flow through restaurant operations and
control of operating expenses and increased franchise royalty revenue and fees.
INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income (expense), net, primarily represents interest
expense on capital lease obligations, a line of credit, notes payable and
financing lease obligations. Interest and other income (expense), net was
($266,000) or (1.4%) of net operating revenue for the thirteen weeks ended
October 1, 2000 compared to interest and other income (expense), net of
($191,000) or (1.5%) for same period in 1999. For the thirty-nine weeks ended
October 1, 2000 interest and other income (expense), net was ($823,000) or
(1.6%) of net operating revenue compared to ($255,000) or (0.7%) of net
operating revenue for the same period in 1999. The increase in net expense from
1999 to 2000 was primarily due to additional borrowings and the corresponding
interest expense on notes payable, interest incurred on a bank line of credit,
and the elimination of short-term investments in 2000.
GAIN ON SALE OF PROPERTY
During June, 2000 the Company recorded a gain on sale of property associated
with the sale of our sauce and seasoning retail businesses and the sale of two
company-operated restaurants to franchisees. The Company also recorded a
$394,000 deferred gain, of which $10,000 or 0.1% was recognized in the thirteen
weeks ended October 1, 2000. For the thirty-nine weeks ended October 1, 2000 the
gain on sale of property was $650,000 or 1.2% of net operating revenue.
NET INCOME (LOSS) /NET INCOME (LOSS) PER COMMON SHARE
The net income for the thirteen weeks ended October 1, 2000 was $624,000 or
$.06 per share on 9,962,304 weighted average diluted shares outstanding,
compared to $137,000 or $.02 per share on 8,842,972 weighted average shares
outstanding during the comparable period in 1999. For the thirty-nine weeks
ended October 1, 2000 net income was $1,780,000 or $.18 per share on 9,635,386
weighted average diluted shares outstanding compared to a loss of ($472,000) or
($.05) per share on 8,839,695 weighted average shares outstanding for the same
period in 1999. The increase in net income and net income per share is
attributable to increased income from restaurant and franchise operations and an
emphasis on controlled expenses, but is offset by an increase in the number of
shares outstanding.
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of October 1, 2000 we had cash and cash equivalents of approximately
$2,252,000 compared to $1,712,000 as of January 2, 2000. The increase in cash
and cash equivalents reflects additional earnings, cash from financing
activities and the use of cash for the purchase and/or development of property,
equipment and leasehold improvements.
(Approximately $6.5 million)
At October 1, 2000 we were party to a credit agreement with a financial
corporation which provides up to a $4,500,000 line of credit of which $544,000
is outstanding. This facility is secured by certain of our property, and in
addition is guaranteed by and partially secured by the Chairman of the Company.
The credit facility matures in April 2002.
On March 31, 1999 we completed a sale-leaseback transaction involving three
of our existing units that provided proceeds of approximately $4.5 million.
As of October 1, 2000 we have mortgage financings secured by land and
buildings that provided proceeds of approximately $7.2 million for continued
development of Company owned restaurants.
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 the Illinois, Minnesota and Wisconsin market areas.
MARKET RISK SENSITIVITY
The Company uses financial instruments, including fixed and variable rate
debt, to finance operations. The Company does not enter into contracts for
speculative purposes, nor is it a party to any leveraged instruments. There has
been no material change in the Company's market risks associated with debt
obligations during the quarter ended October 1, 2000.
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-Q 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
2, 2000.
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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 2. Changes in Securities and Use of Proceeds
Recent Sales of Unregistered Securities
On August 22, 2000, we completed an acquisition of certain
assets comprising one restaurant known as Cascade Restaurant, Inc.,
d/b/a Hunter's Restaurant & Pub, which restaurant is located in
Sterling, Virginia. The purchase was completed in part through the
issuance of 70,000 shares of our common stock to the shareholders of
Cascade Restaurant, Inc. For purposes of the transaction, the common
stock was valued at $3.50 per share. In connection with this issuance,
the company relied on the exemption from registration under Section
4(2) of the Securities Act of 1933, as amended, based on the Company's
belief that the transaction did not involve any public offering. We
have undertaken to register the shares issued in connection with the
acquisition. In that regard, we filed a registration statement on Form
S-3 covering the resale of such shares with the Securities and Exchange
Commission on October 24, 2000. This registration statement was
declared effective by the SEC on November 3, 2000. The Company will
receive no proceeds from any sale of the Company's common stock by the
selling shareholders under the registration statement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, 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/ Kenneth J Stanecki
----------------------
Kenneth J. Stanecki
Chief Financial Officer
Date: November 8, 2000
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