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_____________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
__________________
FORM 10-Q
X QUARTERLY REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES
___ EXCHANGE ACT FOR THE QUARTER ENDED NOVEMBER 2, 1997.
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 FOR THE TRANSACTION PERIOD FROM
___________ T0 ____________.
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 December 15, 1997 was 13,017,534 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 39 Weeks Ended
-------------- --------------
November 2, November 3, November 2, November 3,
1997 1996 1997 1996
---- ---- ---- ----
Food and beverage revenues $15,458 $11,086 $44,891 $33,635
Amusement and other revenues 15,382 9,010 44,252 27,823
------- ------ ------- -------
Total revenues 30,840 20,096 89,143 61,458
Cost of revenues 6,109 4,187 17,402 12,678
Operating payroll and benefits 8,997 5,668 25,385 17,761
Other restaurant operating expenses 7,893 4,523 22,630 13,999
General and administrative expenses 2,115 1,216 5,948 3,888
Depreciation and amortization expense 2,238 1,381 6,103 3,992
Preopening cost amortization 833 767 2,328 1,983
------- ------ ------- -------
Total costs and expenses 28,185 17,742 79,796 54,301
------- ------ ------- -------
Operating income 2,655 2,354 9,347 7,157
Interest (income) expense, net 138 (11) 618 (52)
------- ------ ------- -------
Income before provision for income taxes 2,517 2,365 8,729 7,209
Provision for income taxes 982 946 3,404 2,953
------- ------ ------- -------
Net income $ 1,535 $ 1,419 $ 5,325 $ 4,256
======= ======= ======= =======
Earnings per common share $ 0.14 $ 0.13 $ 0.48 $ 0.39
======= ======= ======= =======
Weighted average number of common shares outstanding 11,300 10,902 11,036 10,901
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
November 2,
1997 February 2,
(unaudited) 1997
--------- ---------
Current assets:
Cash and cash equivalents $ 35,575 $ 358
Inventories 5,491 3,890
Prepaid expenses 1,551 881
Preopening costs 2,802 1,947
Other current assets 1,966 1,019
--------- ---------
Total current assets 47,385 8,095
Property and equipment, net 104,024 82,037
Goodwill, net of accumulated amortization of $1,026 and $741 8,682 8,920
Other assets 803 384
--------- ---------
Total assets $ 160,894 $ 99,436
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,484 $ 3,174
Accrued liabilities 3,125 1,747
Income taxes payable 0 924
Deferred income taxes 1,416 1,173
--------- ---------
Total current liabilities 9,025 7,018
Deferred income taxes 3,202 2,075
Other liabilities 849 727
Long-term debt 18,000 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;
13,017,534 and 10,902,084 shares issued and outstanding
as of November 2, 1997 and February 2, 1997, respectively 130 109
Paid in capital 116,115 66,999
Retained earnings 13,573 8,258
--------- ---------
Total stockholders' equity 129,818 75,366
--------- ---------
$ 160,894 $ 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 10,902 $109 $ 66,999 $ 8,258 $ 75,366
Stock options exercised 16 0 215 0 215
Tax benefit related to
Options exercised 0 0 37 0 37
Purchase of fractional shares
From three-for-two stock split 0 0 0 (10) (10)
Issuance of common stock,
net of offering costs 2,100 21 48,864 0 48,885
Net income 0 0 0 5,325 5,325
------ ---- -------- ------- --------
Balance, November 2, 1997 13,018 $130 $116,115 $13,573 $129,818
====== ==== ======== ======= ========
See accompanying notes to consolidated financial statements.
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DAVE & BUSTER'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
39 Weeks Ended
--------------
November 2, November 3,
1997 1996
---------- ----------
Cash flows from operating activities
Net income $ 5,325 $ 4,256
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 8,431 5,975
Provision for deferred income taxes 1,370 333
Changes in assets and liabilities
Inventories (1,601) (891)
Prepaid expenses (670) (272)
Preopening costs (3,183) (1,680)
Other assets (1,385) 625
Accounts payable 1,310 27
Accrued liabilities 1,378 (452)
Other liabilities (802) 279
---------- ----------
Net cash provided by operating activities 10,173 8,200
Cash flows from investing activities
Capital expenditures (27,796) (20,828)
Cash flows from financing activities
Proceeds from issuance of common stock 48,885 0
Proceeds from options exercised 215 18
Purchase of fractional shares (10) 0
Borrowings under long-term debt 36,411 9,700
Repayments of long-term debt (32,661) (1,300)
---------- ----------
Net cash provided by financing activities 52,840 8,418
---------- ----------
Cash provided (used) 35,217 (4,210)
Beginning cash and cash equivalents 358 4,325
---------- ----------
Ending cash and cash equivalents $ 35,575 $ 115
=========== ===========
See accompanying notes to consolidated financial statements.
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DAVE & BUSTER'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 2, 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 for a fair
presentation 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, California and Ohio.
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.
On August 14, 1997, the Company declared a three-for-two split in the form
of a stock dividend to stockholders of record as of August 25, 1997. The stock
dividend was distributed September 15, 1997. All share and per share
information has been adjusted to give effect to the three-for-two split in the
form of a stock dividend.
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: STOCK OFFERING
On October 16, 1997, the Company completed a public offering of common
stock for the sale of 1,800,000 shares at $24.75 per share for net proceeds of
$41,887,000, after deducting related offering costs. On October 22, 1997, an
additional 300,000 shares of common stock were sold as a result of the
Company's underwriters exercising an option granted by the Company in
connection with the public offering. These shares were sold at $24.75 per
share for net proceeds of $6,998,000, after deducting related offering costs.
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NOTE 5: CONTINGENCIES
In October 1997, an entity owned by the creditors of Edison Brothers filed a
lawsuit against multiple parties, including former Edison Brothers
shareholders, Edison family members and the Company, seeking recovery in
connection with the Spin-Off and certain related transactions. Although no
assurance can be made with respect to the results of the litigation, the
Company believes that the claims asserted against the Company are without
merit, and the Company intends to vigorously defend itself.
In addition, from time to time, 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations - 13 Weeks Ended November 2, 1997 Compared to 13 Weeks
Ended November 3, 1996
Total revenues for the 13 weeks ended November 2, 1997 increased by 53%
over the 13 weeks ended November 3, 1996. The increase in revenues was
primarily attributable to the North Bethesda, Maryland, Ontario, California and
Cincinnati, Ohio locations, which opened in the fourth quarter of fiscal 1996,
the first quarter of fiscal 1997 and the third quarter of fiscal 1997,
respectively. Increased revenues at comparable stores and the addition of the
Power Card also contributed to the increase in total revenues. Total revenues
also increased due to the opening of the first store under the Bass licensing
agreement. Total revenues for the third quarter of fiscal 1997 from the Bass
agreement were $50,000.
Cost of revenues, as a percentage of revenues, decreased to 19.8% from
20.8% in the prior comparable period. The decrease in cost of revenues was a
result of lower costs associated with beverage revenues and a shift in the
revenue mix towards more amusement revenues offset by increased costs
associated with food revenues primarily in meat and produce. Operating payroll
and benefits increased to 29.2% from 28.2% in the prior comparable period due
to increased minimum wage and higher variable payroll costs. Other operating
expenses increased to 25.6% compared to 22.5% in the prior comparable period.
Other operating expenses were higher due to increased occupancy costs
associated with the addition of the North Bethesda, Maryland, Ontario,
California and Cincinnati, Ohio locations as well as higher fixed costs at the
stores.
General and administrative costs increased $899,000 over the prior
comparable period as a result of increased administrative payroll and 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 increased to 6.9% compared to 6.1% for the comparable prior period.
Depreciation and amortization expense increased $857,000 over the prior
comparable period as a result of the opening of the North Bethesda, Maryland,
Ontario, California and Cincinnati, Ohio locations. Power Card installations
completed in the fourth quarter of 1996 and the first quarter of 1997 also
contributed to this increase. As a percentage of revenues, depreciation and
amortization increased to 7.3% from 6.9% for the comparable prior period.
Preopening cost amortization decreased to 2.7% compared to 3.8% in the prior
comparable period. The percentage decrease is attributable to the leverage
from increased revenues.
The effective tax rate for the third quarter of 1997 was 39.0% as compared to
40.0% for the comparable period last year and was the result of a lower
effective state tax rate.
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Results of Operations - 39 Weeks Ended November 2, 1997 Compared to 39 Weeks
Ended November 2, 1996
Total revenues for the 39 weeks ended November 2, 1997 increased by 45%
over the 39 weeks ended November 3, 1996. The increase in revenues was
primarily attributable to the Hollywood, Florida and North Bethesda, Maryland
locations open for the full 39 weeks in fiscal 1997 and the inclusion of the
Ontario, California and Cincinnati, Ohio locations, which opened in the first
and third quarters of fiscal 1997, respectively. Increased revenues at
comparable stores and the addition of the Power Card also contributed to the
increase in total revenues. Total revenues also increased due to the opening
of the first store under the Bass licensing agreement. Total revenues for the
fiscal 1997 period from the Bass agreement were $195,000.
Cost of revenues, as a percentage of revenues, decreased to 19.5% from
20.6% 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 28.5% from 28.9% in the prior comparable period. Operating
payroll and benefits was lower due to cost reductions in variable labor and
leverage from increased revenues. Other operating expenses increased to 25.4%
compared to 22.8% in the prior comparable period. Other operating expenses
were higher due to increased occupancy costs associated with a full 39 weeks of
revenues in the fiscal 1997 period for the Hollywood, Florida and North
Bethesda, Maryland locations and the addition of the Ontario, California and
Cincinnati, Ohio locations, which opened in the first and third quarters of
fiscal 1997, respectively. Higher fixed costs at the store level also
contributed to the increase in other operating expenses.
General and administrative costs increased $2,060,000 over the prior
comparable period as a result of increased administrative payroll and 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 increased to 6.7% compared to 6.3% for the comparable prior period.
Depreciation and amortization expense, as a percentage of revenues,
increased to 6.8% from 6.5% for the comparable prior period. This was due to
the inclusion of the Hollywood, Florida and North Bethesda Maryland locations
for the full 39 weeks in fiscal 1997 and the opening of the Ontario, California
and Cincinnati, Ohio locations, which opened in the first quarter and third
quarter of fiscal 1997, respectively. Power Card installations completed in
the fourth quarter of 1996 and the first quarter of 1997 also contributed to
this increase. As a percentage of revenues, preopening cost amortization
decreased to 2.6% compared to 3.2% for the comparable prior period. The
percentage decrease is attributable to the leverage from increased revenues.
The effective tax rate for the 39 weeks ended November 2, 1997 was 39.0%
compared to 41.0% 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 $8.2 million in the first 39
weeks of fiscal 1996 to $10.2 million in the first 39 weeks of fiscal 1997.
The increase was a result of the Hollywood, Florida and North Bethesda,
Maryland locations being open for the full 39 week period and the Ontario,
California and Cincinnati, Ohio locations opened in the first and third
quarters of fiscal 1997. The increase in cash flows from operations was
reduced by an increase in inventories, prepaid expenses, preopening costs and
other assets related to the new openings and an increased store base.
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The Company has a senior revolving credit facility which permits
borrowing up to a maximum of $50,000,000 at a floating rate based on the London
Interbank Offered Rate ("LIBOR") or, at the Company's option, the bank's prime
rate plus in each case a margin based upon financial performance (8.6% at
November 2, 1997). The facility, which matures in May 2000, has certain
financial covenants including a minimum consolidated tangible net worth level,
a maximum leverage ratio, minimum fixed charge coverage and maximum level of
capital expenditures on new stores. At November 2, 1997, $28,300,000 was
available under the senior revolving credit facility.
On October 16, 1997, the Company completed a public offering of common
stock for the sale of 1,800,000 shares at $24.75 per share for net proceeds of
$41,887,000, after deducting related offering costs. On October 22, 1997, an
additional 300,000 shares of common stock were sold as a result of the
Company's underwriters exercising an option granted by the Company in
connection with the public offering. These shares were sold at $24.75 per
share for net proceeds of $6,998,000, after deducting related offering costs.
A portion of the net proceeds were used by the Company to reduce bank
indebtedness with the remaining portion being used to open new stores and for
general corporate purposes.
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 second store opened in Cincinnati, Ohio during the third quarter on
September 11, 1997. The third store will open in Denver, Colorado in the
fourth quarter. In fiscal 1998, the Company's goal is to open four new stores.
The Company estimates that its capital expenditures will be approximately $41.1
million and $41.5 million for 1997 and 1998, respectively. The Company intends
to finance this development with cash flow from operations, the proceeds
received from the secondary offering and the new credit facility.
"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 judgment 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.
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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 39 weeks ended
November 2, 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: December 17, 1997 by /s/ David O. Corriveau
----------------- --------------------------
David O. Corriveau
Co-Chairman of the Board,
Co-Chief Executive Officer
and President
Dated: December 17, 1997 by: /s/ Charles Michel
----------------- -------------------------
Charles Michel
Vice President,
Chief Financial Officer and
Treasurer
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EXHIBIT INDEX
27 Financial Data Schedule
5
9-MOS
FEB-01-1998
NOV-02-1997
35,575
0
0
0
5,491
47,385
124,919
20,895
160,894
9,025
18,000
0
0
130
129,688
160,894
89,143
89,143
17,402
79,796
0
0
618
8,729
3,404
5,325
0
0
0
5,325
.48
.48
