WASHINGTON, D. C. 20549


                                   FORM 10-Q


          ACT OF 1934 FOR THE TRANSACTION PERIOD FROM         TO        .
- -----                                                 -------    ------- 

                        COMMISSION FILE NUMBER: 0-25858


                             DAVE & BUSTER'S, INC.
             (Exact Name of Registrant as Specified in Its Charter)

        MISSOURI                                      43-1532756
 (State of Incorporation)                (I.R.S. Employer Identification No.)

         2751 ELECTRONIC LANE
             DALLAS, TEXAS                               75220
(Address of Principal Executive Offices)               (Zip Code)

              Registrant's telephone number, including area code:
                                 (214) 357-9588

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]

     The number of shares of the Registrant's common stock, $.01 par value,
outstanding as of June 16, 1997 was 7,268,856 shares.




                             DAVE & BUSTER'S, INC.

13 Weeks Ended ----------------------- May 4, May 5, 1997 1996 --------- --------- Food and beverage revenues $ 14,778 $ 11,085 Amusement and other revenues 13,854 9,132 --------- --------- Total revenues 28,632 20,217 --------- --------- Cost of revenues 5,533 4,176 Operating payroll and benefits 7,972 5,809 Other restaurant operating expenses 7,143 4,748 General and administrative expenses 1,886 1,335 Depreciation and amortization expense 1,844 1,230 Preopening cost amortization 778 486 --------- --------- Total costs and expenses 25,156 17,784 --------- --------- Operating income 3,476 2,433 Interest (income) expense, net 197 (15) --------- --------- Income before provision for income taxes 3,279 2,448 Provision for income taxes 1,278 1,029 --------- --------- Net income $ 2,001 $ 1,419 ========= ========= Earnings per common share $ 0.28 $ 0.20 ========= ========= Weighted average number of common shares outstanding 7,268 7,267
See accompanying notes to consolidated financial statements. 3 DAVE & BUSTER'S, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS May 4, 1997 February 2, (unaudited) 1997 --------- --------- Current assets: Cash and cash equivalents $ 125 $ 358 Inventories 4,819 3,890 Prepaid expenses 1,460 881 Preopening costs 2,276 1,947 Other current assets 813 1,019 --------- --------- Total current assets 9,493 8,095 Property and equipment, net 85,588 82,037 Goodwill, net of accumulated amortization of $836 and $741 8,872 8,920 Other assets 335 384 --------- --------- $ 104,288 $ 99,436 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,149 $ 3,174 Accrued liabilities 1,897 1,747 Income taxes payable 2,123 924 Deferred income taxes 1,247 1,173 --------- --------- Total current liabilities 8,416 7,018 Deferred income taxes 2,064 2,075 Other liabilities 822 727 Long-term debt 15,619 14,250 Commitments and contingencies Stockholders' equity: Preferred stock, 10,000,000 authorized; none issued 0 0 Common stock, $0.01 par value, 50,000,000 authorized; 7,268,056 shares issued and outstanding as of May 4, 1997 and February 2, 1997 73 73 Paid in capital 66,999 66,999 Retained earnings 10,295 8,294 --------- --------- Total stockholders' equity 77,367 75,366 --------- --------- $ 104,288 $ 99,436 ========= =========
See accompanying notes to consolidated financial statements. 4 DAVE & BUSTER'S, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (IN THOUSANDS) (UNAUDITED)
Common Stock ------------------- Paid in Retained Shares Amount Capital Earnings Total ------- ------- ------- ------- ------- Balance, February 2, 1997 7,268 $ 73 $66,999 $ 8,294 $75,366 Net income 0 0 0 2,001 2,001 ------- ------- ------- ------- ------- Balance, May 4, 1997 7,268 $ 73 $66,999 $10,295 $77,367 ======= ======= ======= ======= =======
See accompanying notes to consolidated financial statements. 5 DAVE & BUSTER'S, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
13 Weeks Ended -------------- May 4, May 5, 1997 1996 ---------- ---------- Cash flows from operating activities Net income $ 2,001 $ 1,419 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 2,622 1,716 Provision for deferred income taxes 63 (73) Changes in assets and liabilities Inventories (929) (45) Prepaid expenses (579) (118) Preopening costs (1,107) (822) Other assets 205 (54) Accounts payable (25) (486) Accrued liabilities 150 135 Income taxes payable 1,199 387 Other liabilities 96 184 ---------- ---------- Net cash provided by operating activities 3,696 2,243 Cash flows from investing activities Capital expenditures (5,298) (6,740) Cash flows from financing activities Borrowings under long-term debt 5,669 2,000 Repayments of long-term debt (4,300) 0 ---------- ---------- Net cash provided by financing activities 1,369 2,000 ---------- ---------- Decrease in cash and cash equivalents (233) (2,497) Beginning cash and cash equivalents 358 4,325 ---------- ---------- Ending cash and cash equivalents $ 125 $ 1,828 ========== ==========
See accompanying notes to consolidated financial statements. 6 DAVE & BUSTER'S, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MAY 4, 1997 (UNAUDITED) NOTE 1: RESULTS OF OPERATIONS The results of operations for the interim periods reported are not necessarily indicative of results to be expected for the year. The information furnished herein reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods. NOTE 2: BASIS OF PRESENTATION The consolidated financial statements include the accounts of Dave & Buster's, Inc. (the "Company") and all wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The primary business of the Company is the ownership and operation of restaurant/entertainment complexes (a "Complex") under the name "Dave & Buster's" which are located in Texas, Georgia, Pennsylvania, Illinois, Florida, Maryland and California. NOTE 3: EARNINGS PER COMMON SHARE Earnings per common share are computed by dividing net income by the weighted average number of shares of common stock and dilutive options outstanding during the period. Primary and fully diluted earnings per share are not materially different for the interim periods presented. The Financial Accounting Standards Board ("FASB") has issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share". The Company does not believe that the adoption of this statement in the fourth quarter of fiscal 1997 will have a significant impact on the Company. NOTE 4: CONTINGENCIES The Company is subject to certain legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, based on discussions with and advice of legal counsel, the amount of ultimate liability with respect to these actions will not materially affect the consolidated results of operations or financial condition of the Company. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Results of Operations - 13 Weeks Ended May 4, 1997 Compared to 13 Weeks Ended May 5, 1996 Total revenues for the 13 weeks ended May 4, 1997 increased by 42% over the 13 weeks ended May 5, 1996. The increase was attributable to the Hollywood, Florida location being open the full quarter in 1997, the North Bethesda, Maryland location which opened in fiscal year 1996, the opening of the newest location in Ontario, California which opened on March 13, 1997, increased revenues at comparable stores and the addition of the Power Card which has increased chip buy-ins and allowed for greater pricing flexibility. Cost of revenues, as a percentage of revenues, decreased to 19.3% from 20.7% in the prior comparable period. The decrease in cost of revenues was a result of lower costs associated with food and beverage revenues and a shift in revenue mix toward more amusement revenues. Operating payroll and benefits decreased to 27.8% from 28.7% in the prior comparable period. Operating payroll and benefits was lower due to cost reductions in variable labor offset by higher fixed labor costs. Other operating expenses increased to 24.9% compared to 23.5% in the prior comparable period. Other operating expenses were higher primarily due to increased occupancy costs associated with the additions of Hollywood, Florida, North Bethesda, Maryland and Ontario, California. The remainder of the increase was attributable to higher fixed costs at the stores. General and administrative costs increased by $551,000 over the prior comparable period as a result of increased administrative payroll, related costs for new personnel and additional costs associated with the Company's future growth plans. As a percentage of revenues, general and administrative expenses remained level at 6.6% for both periods. Depreciation and amortization expense, as a percentage of revenues, increased to 9.1% from 8.5% due to the opening of Hollywood, Florida in the first quarter of 1996, North Bethesda, Maryland in the fourth of quarter of 1996 and Ontario, California in the first quarter of 1997 and the Power Card installations completed in the fourth quarter of 1996 and the first quarter of 1997. The effective tax rate for the first quarter of 1997 was 39% as compared to 42% for the comparable period last year and was the result of a lower effective state tax rate. Liquidity and Capital Resources Cash flows from operations increased from $2.2 million in the first 13 weeks of fiscal 1996 to $3.7 million in the first 13 weeks of fiscal 1997. This increase was due to the opening of Hollywood, Florida and North Bethesda, Maryland in the first and fourth quarters of fiscal 1996, respectively, and Ontario, California in the first quarter of 1997. The increase in cash flows from operations was reduced by an increase in inventories, prepaid costs and preopening costs related to the new openings. The Company has a secured revolving line of credit which permits borrowing up to a maximum of $23,500,000 at the prime interest rate (8.50% at May 4, 1997). The line of credit is secured by various assets including land, buildings and personal property. At May 4, 1997, $7,881,000 was available. On May 29, 1997, the Company secured a new $50,000,000 senior revolving credit facility. The facility is based on the London Interbank Offered Rate ("LIBOR") plus a margin based on the Company's leverage ratio. The arranger for the transaction was Chase Securities, Inc. with Texas Commerce Bank National Association acting as administrative agent for a syndicate of banks. The facility matures three years from date of closing. The facility has certain financial covenants requiring a maximum consolidated tangible net worth level, a maximum leverage ratio, minimum fixed charge coverage and maximum level of capital expenditures on new stores. 8 The Company's plan is to open three new stores in fiscal 1997. The first store opened in Ontario, California during the first quarter on March 13, 1997. The next two stores will open in Cincinnati, Ohio and Denver, Colorado in the third and fourth quarters, respectively. In fiscal 1998, the Company's goal is to open four new stores. The Company estimates that its capital expenditures will be approximately $33.5 million and $38.3 million for 1997 and 1998, respectively. The Company intends to finance this development with cash flow from operations, the new credit facility described above and equipment leases. "Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995 Certain statements in this Form 10-Q constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors with may cause the actual results, performance or achievements of Dave & Buster's, Inc. to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions; competition; development and operating costs; adverse publicity; consumer trial and frequency; availability, locations and terms of sites for complex development; quality of management; business abilities and judgement of personnel; availability of qualified personnel; food, labor and employee benefit costs; changes in, or the failure to comply with, government regulations; and other risks indicated in this filing. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the 13 weeks ended May 4, 1997. 9 SIGNATURE Pursuant to 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. DAVE & BUSTER'S, INC. Dated: June 16, 1997 by /s/ David O. Corriveau ------------- ---------------------------------- David O. Corriveau Co-Chairman of the Board, Co- Chief Executive Officer and President Dated: June 16, 1997 by: /s/ Charles Michel ------------- --------------------------------- Charles Michel Vice President, Chief Financial Officer and Treasurer 10 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 Financial Data Schedule

5 3-MOS FEB-01-1998 MAY-04-1997 125 0 0 0 4,819 9,493 102,420 16,832 104,288 8,416 15,619 0 0 73 77,294 104,288 28,632 28,632 5,533 25,156 0 0 197 3,279 1,278 2,001 0 0 0 2,001 .28 .28