1
================================================================================
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 MAY 6, 2001.
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
-------------------------
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 June 8, 2001 was 12,953,375 shares.
2
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 6, April 30,
2001 2000
---------- ----------
Food and beverage revenues $ 43,612 $ 38,980
Amusement and other revenues 44,598 38,869
---------- ----------
Total revenues 88,210 77,849
Cost of revenues 16,495 14,015
Operating payroll and benefits 27,224 23,265
Other store operating expenses 24,209 21,838
General and administrative expenses 5,296 4,850
Depreciation and amortization expense 6,751 5,734
Preopening costs 1,079 2,055
---------- ----------
Total costs and expenses 81,054 71,757
---------- ----------
Operating income 7,156 6,092
Interest expense, net 2,322 1,527
---------- ----------
Income before provision for income taxes 4,834 4,565
Provision for income taxes 1,750 1,675
---------- ----------
Net income $ 3,084 $ 2,890
Basic net income per share $ 0.24 $ 0.22
Basic weighted average shares outstanding 12,953 12,953
Diluted net income per share $ 0.24 $ 0.22
Diluted weighted average shares outstanding 13,068 12,960
See accompanying notes to consolidated financial statements.
3
DAVE & BUSTER'S, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
May 6,
2001 February 4,
(unaudited) 2001
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,672 $ 3,179
Inventories 22,960 21,758
Prepaid expenses 5,190 3,663
Other current assets 1,996 1,787
------------ ------------
Total current assets 31,818 30,387
Property and equipment, net 262,666 260,467
Goodwill, net of accumulated amortization of $2,327 and $2,263 7,381 7,445
Other assets 5,745 5,576
------------ ------------
Total assets $ 307,610 $ 303,875
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 4,125 $ 4,124
Accounts payable 10,884 9,291
Accrued liabilities 6,130 7,050
Income taxes payable 3,811 3,567
Deferred income taxes 1,225 1,229
------------ ------------
Total current liabilities 26,175 25,261
Deferred income taxes 7,683 7,667
Other liabilities 4,859 4,700
Long-term debt, less current installments 103,422 103,860
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 May 6, 2001 and February 4, 2001, respectively 131 131
Paid in capital 115,659 115,659
Restricted stock awards 243 243
Retained earnings 51,284 48,200
------------ ------------
167,317 164,233
Less: treasury stock, at cost (175,000 shares) 1,846 1,846
------------ ------------
Total stockholders' equity 165,471 162,387
------------ ------------
Total liabilities and stockholders' equity $ 307,610 $ 303,875
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 Restricted Treasury
Shares Amount Capital Earnings Stock Awards Stock Total
---------- ---------- ---------- ---------- ------------ ---------- ----------
Balance, February 4, 2001 12,953 $ 131 $ 115,659 $ 48,200 $ 243 $ (1,846) $ 162,387
Net income -- -- -- 3,084 -- -- 3,084
---------- ---------- ---------- ---------- ------------ ---------- ----------
Balance, May 6, 2001 12,953 $ 131 $ 115,659 $ 51,284 $ 243 $ (1,846) $ 165,471
See accompanying notes to consolidated financial statements.
5
DAVE & BUSTER'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
13 Weeks Ended
------------------------
May 6, April 30,
2001 2000
---------- ----------
Cash flows from operating activities
Net income $ 3,084 $ 2,890
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,751 5,734
Provision for deferred income taxes 12 (578)
Changes in assets and liabilities
Inventories (1,202) (589)
Prepaid expenses (1,527) (1,160)
Other assets (379) (278)
Accounts payable 1,593 193
Accrued liabilities (920) 1,966
Income taxes payable 244 1,872
Other liabilities 159 466
---------- ----------
Net cash provided by operating activities 7,815 10,516
---------- ----------
Cash flows from investing activities:
Capital expenditures (8,885) (15,239)
---------- ----------
Net cash used by investing activities (8,885) (15,239)
---------- ----------
Cash flows from financing activities:
Borrowings under long-term debt 8,000 4,420
Repayments of long-term debt (8,437) (1,000)
---------- ----------
Net cash provided (used) by financing activities (437) 3,420
---------- ----------
Decrease in cash and cash equivalents (1,507) (1,303)
Beginning cash and cash equivalents 3,179 3,091
---------- ----------
Ending cash and cash equivalents $ 1,672 $ 1,788
See accompanying notes to consolidated financial statements.
6
DAVE & BUSTER'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 6, 2001
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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 wholly-owned subsidiaries (the "Company").
All material intercompany accounts and transactions have been eliminated in
consolidation. The consolidated balance sheet data presented herein for
February 4, 2001 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.
CHANGE IN METHOD OF ACCOUNTING. The Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("FAS 133") effective February 5, 2001. FAS 133 requires the Company
to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of hedge, changes in fair value
of derivatives will either be offset against the change in fair value of the
hedged assets, liabilities, or firm commitments through earnings or recognized
in other comprehensive income until the hedged item is recognized in earnings.
The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. During the current quarter, the Company has
entered into an agreement that expires in 2007, to fix its variable-rate debt to
fixed-rate debt (5.44% at May 6, 2001) on notional amounts aggregating $55,000.
The market risks associated with the agreements are mitigated because increased
interest payments under the agreement resulting from a decrease in LIBOR are
effectively offset by decreased payments under the debt obligation. The Company
is exposed to credit losses for periodic settlements of amounts due under the
agreements. Such amounts were not material at May 6, 2001.
NOTE 3: 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.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS)
Results of Operations - 13 Weeks Ended May 6, 2001 Compared to 13 Weeks Ended
April 30, 2000
Total revenues increased to $88,210 for the 13 weeks ended May 6, 2001 from
$77,849 for the 13 weeks ended April 30, 2000, an increase of $10,361 or 13%.
New stores opened in fiscal 1999 and 2000 and the first quarter of 2001
increased revenues during the period by $12,253. Revenues at comparable stores
decreased 1.9% for the 13 weeks ended May 6, 2001. The decrease in comparable
stores revenues was primarily attributable to a decline in company sponsored
private parties offset by a higher average check. Total revenues for the 13
weeks ended May 6, 2001 from licensing agreements were $170.
Cost of revenues increased to $16,495 for the 13 weeks ended May 6, 2001 from
$14,015 for the 13 weeks ended April 30, 2000, an increase of $2,480 or 18%. The
increase was principally attributable to the 13% increase in revenues. As a
percentage of revenues, cost of revenues increased to 18.7% in the 13 weeks
ended May 6, 2001 from 18% in the 13 weeks ended April 30, 2000 due to lower
food and beverage costs offset by higher amusement costs associated with
redemption and freight costs.
Operating payroll and benefits increased to $27,224 for the 13 weeks ended May
6, 2001 from $23,265 for the 13 weeks ended April 30, 2000, an increase of
$3,959 or 17%. As a percentage of revenue, operating payroll and benefits
increased to 30.9% in the 13 weeks ended May 6, 2001 from 29.9% in the 13 weeks
ended April 30, 2000 due to slightly higher variable labor costs and higher
incentive and fringe benefit costs.
Other store operating expenses increased to $24,209 for the 13 weeks ended May
6, 2001 from $21,838 for the 13 weeks ended April 30, 2000, an increase of
$2,371 or 11%. As a percentage of revenues, other store operating expenses were
27.4% of revenues in the 13 weeks ended May 6, 2001 as compared to 28.1% of
revenues in the 13 weeks ended April 30, 2000. Other store operating expenses as
a percentage of revenue declined due to lower facility, marketing and occupancy
costs offset by higher utility costs.
General and administrative increased to $5,296 for the 13 weeks ended May 6,
2001 from $4,850 for the 13 weeks ended April 30, 2000, an increase of $446 or
9%. As a percentage of revenues, general and administrative expenses decreased
to 6.0% in the 13 weeks ended May 6, 2001 from 6.2% in the 13 weeks ended April
30, 2000.
Depreciation and amortization increased to $6,751 for the 13 weeks ended May 6,
2001 from $5,734 for the 13 weeks ended April 30, 2000, an increase of $1,017 or
18%. As a percentage of revenues, depreciation and amortization increased to
7.7% from 7.4% for the comparable period.
Preopening costs decreased to $1,079 for the 13 weeks ended May 6, 2001 from
$2,055 for the 13 weeks ended April 30, 2000. The timing of complex openings
affects the amount of such costs in any given period.
Interest expense increased to $2,322 for the 13 weeks ended May 6, 2001 from
$1,527 for the 13 weeks ended April 30, 2000. The increase was primarily due to
higher debt and interest rates in fiscal year 2001.
The effective tax rate for the 13 weeks ended May 6, 2001 was 36.2% as compared
to 36.7% for the 13 weeks ended April 30, 2000.
8
Liquidity and Capital Resources
Cash flows from operations decreased to $7,815 for the 13 weeks ended May 6,
2001 from $10,516 for the 13 weeks ended April 30, 2000. The decrease was
attributable to increases in expenditures for inventory, prepaid items and
previously accrued items.
The Company has a $110,000 senior secured revolving credit and term loan
facility. 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 (9.2% at May 6, 2001) and is secured
by all assets of the Company. The 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 May 6, 2001, $1,078 was available under this facility.
The Company has entered into an agreement that expires in 2007, to fix its
variable-rate debt to fixed-rate debt (5.44% at May 6, 2001) on notional amounts
aggregating $55,000. The market risks associated with the agreements are
mitigated because increased interest payments under the agreement resulting from
a decrease in LIBOR are effectively offset by decreased payments under the debt
obligation. The Company is exposed to credit losses for periodic settlements of
amounts due under the agreements. Such amounts were not material at May 6, 2001.
The Company's plan is to open four complexes in fiscal 2001 and 2002,
respectively. The Company estimates that its capital expenditures will be
approximately $44,000 and $48,000 for 2001 and 2002, 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 the first quarter of 2001, the
Company opened a new store in Miami, Florida.
"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
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the 13 weeks ended
May 6, 2001.
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 11, 2001 by /s/ David O. Corriveau
------------ ------------------------
David O. Corriveau
Co-Chairman of the Board,
Co-Chief Executive Officer
and President
Dated: June 11, 2001 by /s/ Charles Michel
------------- --------------------
Charles Michel
Vice President,
Chief Financial Officer