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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 JULY 30, 2000.
[ ] 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.)
2481 MANANA DRIVE
DALLAS, TEXAS 75220
(Address of Principle 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 September 8, 2000 was 12,953,375 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 26 Weeks Ended
--------------------- ---------------------
July 30, August 1, July 30, August 1,
2000 1999 2000 1999
--------- --------- --------- ---------
Food and beverage revenues $ 38,490 $ 27,444 $ 77,470 $ 56,145
Amusement and other revenues 39,076 30,173 77,945 61,172
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Total revenues 77,566 57,617 155,415 117,317
Cost of revenues 14,539 10,657 28,554 21,695
Operating payroll and benefits 23,291 17,902 46,556 35,669
Other store operating expenses 21,773 15,569 43,611 30,624
General and administrative expenses 4,804 3,654 9,654 7,095
Depreciation and amortization expense 6,248 4,705 11,982 8,863
Preopening costs 1,502 1,461 3,557 3,157
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Total costs and expenses 72,157 53,948 143,914 107,103
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Operating income 5,409 3,669 11,501 10,214
Interest expense, net 2,012 545 3,539 1,038
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Income before provision for income taxes and
cumulative effect of a change in an accounting principle 3,397 3,124 7,962 9,176
Provision for income taxes 1,247 1,134 2,922 3,373
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Income before cumulative effect of a
change in an accounting principle 2,150 1,990 5,040 5,803
Cumulative effect of a change in an accounting
principle, net of income tax benefit of $2,928 -- -- -- 4,687
--------- --------- --------- ---------
Net income $ 2,150 $ 1,990 $ 5,040 $ 1,116
Net income (loss) per share - basic
Before cumulative effect of a change in an accounting principle $ 0.17 $ 0.15 $ 0.39 $ 0.44
Cumulative effect of a change in an accounting principle -- -- -- (0.35)
--------- --------- --------- ---------
$ 0.17 $ 0.15 $ 0.39 $ 0.09
Net income (loss) per share - diluted
Before cumulative effect of a change in an accounting principle $ 0.17 $ 0.15 $ 0.39 $ 0.43
Cumulative effect of a change in an accounting principle -- -- -- (0.35)
--------- --------- --------- ---------
$ 0.17 $ 0.15 $ 0.39 $ 0.08
Weighted average shares outstanding:
Basic 12,953 13,111 12,953 13,091
Diluted 12,954 13,461 12,957 13,369
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
July 30, January 30,
2000 2000
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(unaudited)
Current assets:
Cash and cash equivalents $ 1,946 $ 3,091
Inventories 17,487 16,243
Prepaid expenses 4,074 2,104
Other current assets 6,207 5,582
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Total current assets 29,714 27,020
Property and equipment, net 247,790 232,216
Goodwill, net of accumulated amortization of $2,073 and $1,883 7,635 7,826
Other assets 4,325 1,122
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Total assets $ 289,464 $ 268,184
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 2,750 $ --
Accounts payable 13,422 11,868
Accrued liabilities 6,868 4,858
Income taxes payable 1,448 --
Deferred income taxes 1,022 1,337
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Total current liabilities 25,510 18,063
Deferred income taxes 6,216 6,377
Other liabilities 4,049 2,845
Long-term debt, less current installments 98,750 91,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, 10,000,000 authorized; none issued -- --
Common stock, $0.01 par value, 50,000,000 authorized;
12,953,375 shares issued and outstanding
as of July 30, 2000 and January 30, 2000, respectively 131 131
Paid in capital 115,659 115,659
Retained earnings 40,995 35,955
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156,785 151,745
Less: treasury stock, at cost (175,000 shares at July 30, 2000) 1,846 1,846
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Total stockholders' equity 154,939 149,899
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Total liabilities and stockholders' equity $ 289,464 $ 268,184
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 Treasury
Shares Amount Capital Earnings Stock Total
-------- -------- -------- -------- -------- --------
Balance, January 30, 2000 12,953 $ 131 $115,659 $ 35,955 $ (1,846) $149,899
Net income -- -- -- 5,040 -- 5,040
-------- -------- -------- -------- -------- --------
Balance, July 30, 2000 12,953 $ 131 $115,659 $ 40,995 $ (1,846) $154,939
See accompanying notes to consolidated financial statements.
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DAVE & BUSTER'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
26 Weeks Ended
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July 30, August 1,
2000 1999
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Cash flows from operating activities
Net income $ 5,040 $ 1,116
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in an accounting principle -- 4,687
Depreciation and amortization 11,982 8,863
Provision for deferred income taxes (476) 266
Changes in assets and liabilities
Inventories (1,244) (2,475)
Prepaid expenses (1,970) (255)
Other assets (3,833) 1,942
Accounts payable 1,554 (6,220)
Accrued liabilities 2,010 (234)
Income taxes payable 1,448 --
Other liabilities 1,204 541
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Net cash provided by operating activities 15,715 8,231
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Cash flows from investing activities:
Capital expenditures (27,360) (37,086)
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Net cash used by investing activities (27,360) (37,086)
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Cash flows from financing activities:
Proceeds from issuance of common stock, net -- 757
Borrowings under long-term debt 113,420 27,500
Repayments of long-term debt (102,920) --
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Net cash provided by financing activities 10,500 28,257
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Decrease in cash and cash equivalents (1,145) (598)
Beginning cash and cash equivalents 3,091 4,509
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Ending cash and cash equivalents $ 1,946 $ 3,911
See accompanying notes to consolidated financial statements.
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DAVE & BUSTER'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 30, 2000
(UNAUDITED)
(DOLLARS IN THOUSANDS)
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 fairly
present the results of operations and financial position for the interim
periods.
NOTE 2: BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Dave & Buster's,
Inc. and all wholly-owned subsidiaries (the "Company"). All material
intercompany accounts and transactions have been eliminated in consolidation.
The consolidated balance sheet data presented herein for January 30, 2000 was
derived from the Company's audited consolidated financial statements for the
fiscal year then ended. The preparation of financial statements in accordance
with generally accepted accounting principles requires the Company's management
to make certain estimates and assumptions for the reporting periods covered by
the financial statements. These estimates and assumptions affect the reported
amounts of assets, liabilities, revenues and expenses. Actual amounts could
differ from these estimates. The Company's one industry segment is the ownership
and operation of restaurant/entertainment Complexes (a "Complex" or "Store")
under the name "Dave & Buster's" which are principally located in the United
States.
NOTE 3: LONG-TERM DEBT
The Company completed a new $110,000,000 senior secured revolving credit and
term loan facility. This facility replaced the existing $100,000,000 secured
revolving line of credit. See "Liquidity and Capital Resources" under
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
NOTE 4: RESTRICTED STOCK
In April 2000, the Company amended and restated the Dave & Buster's, Inc. 1995
Stock Incentive Plan to allow the Company to grant restricted stock awards.
These restricted stock awards will fully vest at the end of the vesting period
or the attainment of one or more performance targets established by the Company.
Recipients are not required to provide consideration to the Company other than
render service and have the right to vote the shares and to receive dividends.
In June 2000, the Company issued 242,000 shares of restricted stock at a market
value of $6.75 which vest at the earlier of attaining certain performance
targets or seven years. The total market value of the restricted shares, as
determined at the date of issuance, is treated as unearned compensation and is
charged to expense over the vesting period. For the second quarter, the charge
to expense for the unearned compensation was insignificant.
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NOTE 5: 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 conditions of the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS)
Results of Operations - 13 Weeks Ended July 30, 2000 Compared to 13 Weeks Ended
August 1, 1999
Total revenues increased to $77,566 for the 13 weeks ended July 30, 2000 from
$57,617 for the 13 weeks ended August 1, 1999, an increase of $19,949 or 35%.
The increase in revenues was attributable to incremental revenues from eight
complexes opened after June 1, 1999 and increased revenues at comparable stores.
Revenues at comparable stores increased 2.2% for the 13 weeks ended July 30,
2000. The increase in comparable stores revenues was attributable to a 2%
overall price increase and a higher average check. Total revenues for the 13
weeks ended July 30, 2000 from licensing agreements were $324.
Cost of revenues increased to $14,539 for the 13 weeks ended July 30, 2000 from
$10,657 for the 13 weeks ended August 1, 1999, an increase of $3,882 or 36%. The
increase was principally attributable to the 35% increase in revenues. As a
percentage of revenues, cost of revenues increased to 18.7% in the 13 weeks
ended July 30, 2000 from 18.5% in the 13 weeks ended August 1, 1999 due to lower
beverage and amusement costs offset by higher food costs and a shift in the
revenue mix.
Operating payroll and benefits increased to $23,291 for the 13 weeks ended July
30, 2000 from $17,902 for the 13 weeks ended August 1, 1999, an increase of
$5,389 or 30%. As a percentage of revenue, operating payroll and benefits
decreased to 30.0% in the 13 weeks ended July 30, 2000 from 31.1% in the 13
weeks ended August 1, 1999 due to higher variable labor costs offset by lower
fixed labor and fringe benefit costs.
Other store operating expenses increased to $21,773 for the 13 weeks ended July
30, 2000 from $15,569 for the 13 weeks ended August 1, 1999, an increase of
$6,204 or 40%. As a percentage of revenues, other store operating expenses were
28.1% of revenues in the 13 weeks ended July 30, 2000 as compared to 27.0% of
revenues in the 13 weeks ended August 1, 1999. Other store operating expenses
were higher due to increased marketing costs.
General and administrative increased to $4,804 for the 13 weeks ended July 30,
2000 from $3,654 for the 13 weeks ended August 1, 1999, an increase of $1,150 or
31%. The increase over the prior comparable period resulted from increased
administrative payroll and related costs for new personnel, and additional costs
associated with the Company's growth. As a percentage of revenues, general and
administrative expenses decreased to 6.2% in the 13 weeks ended July 30, 2000
from 6.3% in the 13 weeks ended August 1, 1999.
Depreciation and amortization increased to $6,248 for the 13 weeks ended July
30, 2000 from $4,705 for the 13 weeks ended August 1, 1999, an increase of
$1,543 or 33%. As a percentage of revenues, depreciation and amortization
decreased to 8.1% from 8.2% for the comparable period.
Preopening costs increased to $1,502 for the 13 weeks ended July 30, 2000 from
$1,461 for the 13 weeks ended August 1, 1999. The timing of complex openings
affects the amount of such costs in any given period.
Interest expense increased to $2,012 for the 13 weeks ended July 30, 2000 from
$545 for the 13 weeks ended August 1, 1999. The increase was primarily due to
higher debt and interest rates in fiscal year 2000.
The effective tax rate for the 13 weeks ended July 30, 2000 was 36.7% as
compared to 36.3% for the 13 weeks ended August 1, 1999.
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Results of Operations - 26 Weeks Ended July 30, 2000 Compared to 26 Weeks Ended
August 1, 1999
Total revenues increased to $155,415 for the 26 weeks ended July 30, 2000 from
$117,317 for the 26 weeks ended August 1, 1999, an increase of $38,098 or 32%.
The increase in revenues was attributable to incremental revenues from eight
complexes opened after April 1, 1999 and increased revenues at comparable
stores. Revenues at comparable stores increased 1.4% for the 26 weeks ended July
30, 2000. The increase in comparable stores revenues was attributable to a 2%
overall price increase and a higher average check. Total revenues for the 26
weeks ended July 30, 2000 from licensing agreements were $467.
Cost of revenues increased to $28,554 for the 26 weeks ended July 30, 2000 from
$21,695 for the 26 weeks ended August 1, 1999, an increase of $6,859 or 32%. The
increase was principally attributable to the 32% increase in revenues. As a
percentage of revenues, cost of revenues decreased to 18.4% in the 26 weeks
ended July 30, 2000 from 18.5% in the 26 weeks ended August 1, 1999 due to lower
beverage and amusement costs.
Operating payroll and benefits increased to $46,556 for the 26 weeks ended July
30, 2000 from $35,669 for the 26 weeks ended August 1, 1999, an increase of
$10,887 or 31%. As a percentage of revenue, operating payroll and benefits
decreased to 30.0% in the 26 weeks ended July 30, 2000 from 30.4% in the 26
weeks ended August 1, 1999 due to higher variable labor costs offset by lower
fixed labor and fringe benefit costs.
Other store operating expenses increased to $43,611 for the 26 weeks ended July
30, 2000 from $30,624 for the 26 weeks ended August 1, 1999, an increase of
$12,987 or 42%. As a percentage of revenues, other store operating expenses were
28.1% of revenues in the 26 weeks ended July 30, 2000 as compared to 26.1% of
revenues in the 26 weeks ended August 1, 1999. Other store operating expenses
were higher due to increased marketing and occupancy costs at the stores.
General and administrative increased to $9,654 for the 26 weeks ended July 30,
2000 from $7,095 for the 26 weeks ended August 1, 1999, an increase of $2,559 or
36%. The increase over the prior comparable period resulted from increased
administrative payroll and related costs for new personnel, and additional costs
associated with the Company's growth. As a percentage of revenues, general and
administrative expenses increased to 6.2% in the 26 weeks ended July 30, 2000
from 6.0% in the 26 weeks ended August 1, 1999.
Depreciation and amortization increased to $11,982 for the 26 weeks ended July
30, 2000 from $8,863 for the 26 weeks ended August 1, 1999, an increase of
$3,119 or 35%. As a percentage of revenues, depreciation and amortization
increased to 7.7% from 7.6% for the comparable period.
Preopening costs increased to $3,557 for the 26 weeks ended July 30, 2000 from
$3,157 for the 26 weeks ended August 1, 1999. The timing of complex openings
affects the amount of such costs in any given period.
Interest expense increased to $3,539 for the 26 weeks ended July 30, 2000 from
$1,038 for the 26 weeks ended August 1, 1999. The increase was primarily due to
higher debt and interest rates in fiscal year 2000.
The effective tax rate for the 26 weeks ended July 30, 2000 was 36.7% as
compared to 36.8% for the 26 weeks ended August 1, 1999.
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Liquidity and Capital Resources
Cash flows from operations increased to $15,715 for the 26 weeks ended July 30,
2000 from $8,231 for the 26 weeks ended August 1, 1999. The increase was
attributable to a decrease in income before cumulative effect of a change in an
accounting principle offset by an increase in depreciation and amortization and
an increase in operational receipts.
The Company secured a new $110,000,000 senior secured revolving credit and term
loan facility. This facility replaced the existing $100,000,000 secured
revolving line of credit. The facility includes a five-year revolver and five
and seven-year term debt. Borrowing under the facility bears interest at a
floating rate based on LIBOR or, at the Company's option, the bank's prime rate
plus, in each case, a margin based upon financial performance (10.2% at July 30,
2000) and is secured by all assets of the Company. The new facility 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. At July 30, 2000, $8,500 was available under this
facility.
The Company's plan is to open four complexes in fiscal 2000 and 2001,
respectively. The Company estimates that its capital expenditures will be
approximately $42,000 and $47,000 for 2000 and 2001, respectively. The Company
intends to finance this development with cash flow from operations, the senior
secured revolving credit and term loan facility, and other additional resources
which management is currently pursuing. During 2000, the Company has opened new
complexes in Milpitas (San Jose), California, Westminster (Denver), Colorado,
and Pittsburgh, Pennsylvania.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995
Certain statements in this Report on Form 10-Q are not based on historical facts
but are "forward-looking statements" that are based on numerous assumptions made
as of the date of this report. Forward looking statements are generally
identified by the words "believes", "expects", "intends", "anticipates",
"scheduled", and certain similar expressions. Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors which 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; availability; locations and terms of sites for Complex development;
quality of management; changes in, or the failure to comply with, government
regulations; and other risks indicated in this filing and discussed under
"Risks" in the Company's Form 10-K filed with the Securities and Exchange
Commission.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Revolving Credit and Term Loan Agreement, dated June 30,
2000, among the Company and its subsidiaries, Fleet
National Bank (as agent) and the financial institutions
named therein.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the 26 weeks ended July 30, 2000.
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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: September 12, 2000 by /s/ David O. Corriveau
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David O. Corriveau
Co-Chairman of the Board,
Co-Chief Executive Officer
and President
Dated: September 12, 2000 by /s/ Charles Michel
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Charles Michel
Vice President,
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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10.1 Revolving Credit and Term Loan Agreement
27 Financial Data Schedule