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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q
X QUARTERLY REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT FOR THE QUARTER ENDED MAY 4,1997.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934 FOR THE TRANSACTION PERIOD FROM TO .
- ----- ------- -------
COMMISSION FILE NUMBER: 0-25858
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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.
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
DAVE & BUSTER'S, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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.
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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, $0.01 par value, 50,000,000 authorized;
7,268,056 shares issued and outstanding as of May 4, 1997
and February 2, 1997 73 73
Paid in capital 66,999 66,999
Retained earnings 10,295 8,294
--------- ---------
Total stockholders' equity 77,367 75,366
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$ 104,288 $ 99,436
========= =========
See accompanying notes to consolidated financial statements.
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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.
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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
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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.
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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.
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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.
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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.
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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
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David O. Corriveau
Co-Chairman of the Board, Co-
Chief Executive Officer and
President
Dated: June 16, 1997 by: /s/ Charles Michel
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Charles Michel
Vice President,
Chief Financial Officer and
Treasurer
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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
