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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 AUGUST 4, 1996.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- ACT OF 1934 FOR THE TRANSACTION PERIOD FROM TO .
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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 September 6, 1996 was 7,268,056 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
-------------- --------------
August 4, July 30, August 4, July 30,
1996 1995 1996 1995
---- ---- ---- ----
Food and beverage revenues $11,464 $ 6,320 $22,549 $12,942
Amusement and other revenues 9,681 5,535 18,813 11,180
-------- -------- ---------- -----------
Total revenues 21,145 11,855 41,362 24,122
-------- -------- ---------- -----------
Cost of revenues 4,315 2,483 8,491 4,948
Operating payroll and benefits 6,284 3,456 12,093 7,102
Other restaurant operating expenses 4,728 2,812 9,476 5,381
General and administrative expenses 1,337 980 2,672 1,767
Depreciation and amortization expense 1,381 813 2,611 1,528
Preopening cost amortization 730 0 1,216 0
Earn-out and special compensation 0 1,043 0 1,607
-------- -------- ---------- -----------
Total costs and expenses 18,775 11,587 36,559 22,333
-------- -------- ---------- -----------
Operating income 2,370 268 4,803 1,789
Interest (income) expense, net (26) 11 (41) 37
-------- -------- ---------- -----------
Income before provision for income taxes 2,396 257 4,844 1,752
Provision for income taxes 978 109 2,007 741
-------- -------- ---------- -----------
Net income $ 1,418 $ 148 $ 2,837 $ 1,011
======== ======== ========== ===========
Earnings per common share $ 0.20 $ 0.03 $ 0.39 $ 0.19
======== ======== ========== ===========
Weighted average number of common shares
outstanding 7,267 5,197 7,267 5,197
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
August 4,
1996 February 4,
(unaudited) 1996
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Current assets:
Cash and cash equivalents $ 403 $ 4,325
Inventories 3,051 2,621
Prepaid expenses 646 360
Preopening costs 1,882 1,946
Other current assets 613 831
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Total current assets 6,595 10,083
Property and equipment, net 66,354 56,384
Intangible assets:
Goodwill, net of accumulated amortization of $551 and $361 9,110 9,300
Other 130 170
Other assets 279 264
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Total assets $82,468 $76,201
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,352 $ 2,456
Accrued liabilities 1,034 1,354
Deferred income taxes 527 639
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Total current liabilities 3,913 4,449
Deferred income taxes 1,439 1,368
Other liabilities 753 876
Long-term debt 4,500 500
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 August 4, 1996
and February 4, 1996 73 73
Paid in capital 66,999 66,981
Retained earnings 4,791 1,954
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Total stockholders' equity 71,863 69,008
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Total liabilities and stockholders' equity $82,468 $76,201
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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 4, 1996 7,267 $73 $66,981 $1,954 $69,008
Issuance of common stock 1 0 18 - 18
Net income 0 0 0 2,837 2,837
------ ------ ------- -------- -------
Balance, August 4, 1996 7,268 $73 $66,999 $4,791 $71,863
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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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August 4, July 30,
1996 1995
---- ----
Cash flows from operating activities
Net income $ 2,837 $ 1,011
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 2,111 1,528
Provision for deferred income taxes (41) 123
Changes in assets and liabilities
Inventories (430) 173
Prepaid expenses (286) (202)
Preopening costs (666) (391)
Other assets 203 24
Accounts payable (104) 308
Accrued liabilities (320) 1,772
Other liabilities (123) 256
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Net cash provided by operating activities 3,181 4,602
Cash flows from investing activities
Capital expenditures (11,121) (5,606)
Cash flows from financing activities
Net transactions with Edison Brothers 0 1,161
Proceeds from issuance of common stock 18 0
Borrowings under long-term debt 4,000 0
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Net cash provided by financing activities 4,018 1,161
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Cash provided (used) (3,922) 157
Beginning cash and cash equivalents 4,325 1,233
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Ending cash and cash equivalents $ 403 $ 1,390
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See accompanying notes to consolidated financial statements.
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DAVE & BUSTER'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 4, 1996
(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. 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 and
Florida.
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. For the periods ended July 30, 1995, the
weighted average number of shares outstanding is based on the assumption that
5,197,000 shares of common stock were outstanding. Primary and fully diluted
earnings per share are not materially different for the interim periods
presented.
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 August 4, 1996 Compared to 13 Weeks
Ended July 30, 1995
Total revenues for the 13 weeks ended August 4, 1996 increased by 78.4%
over the 13 weeks ended July 30, 1995. The increase in revenues was primarily
attributable to the Chicago market which the Company opened in the fourth
quarter of fiscal year 1995 and the Hollywood, Florida location which opened in
the first quarter of fiscal year 1996.
Cost of revenues, as a percentage of revenues, decreased to 20.4% from
20.9% in the prior comparable period. The decrease in cost of revenues was a
result of lower costs associated with food and beverage revenues. Operating
payroll and benefits increased to 29.7% from 29.2% in the prior comparable
period. Operating payroll and benefits was higher due to increased training
costs associated with a new lunch menu introduced during the second quarter
1996. Other operating expenses decreased to 22.4% compared to 23.7% in the
prior comparable period. Other operating expenses were lower as a percentage
of revenue in 1996 due to the leverage from increased revenues.
General and administrative costs increased $357,000 over the prior
comparable period as a result of increased administrative payroll and related
costs for new personnel and additional costs resulting from the Company
operating as a public company for the entire period in 1996. As a percentage
of revenues, general and administrative expenses decreased to 6.3% compared to
8.3% for the comparable prior period. The percentage decrease is attributable
to the leverage from increased revenues.
Depreciation and amortization and preopening costs amortization, as a
percentage of revenues, increased to 10.0% from 6.9% due to opening two
locations in the Chicago market in the fourth quarter of 1995 and one location
in Hollywood, Florida in the first quarter of 1996.
Results of Operations - 26 Weeks Ended August 4, 1996 Compared to 26 Weeks
Ended July 30, 1995
Total revenues for the 26 weeks ended August 4, 1996 increased by 71.5%
over the 26 weeks ended July 30, 1995. The increase in revenues was primarily
attributable to the Chicago market which the Company opened in the fourth
quarter of fiscal year 1995 and the Hollywood, Florida location which opened in
the first quarter of fiscal year 1996.
Cost of revenues, as a percentage of revenues, remained level at 20.5% for
both periods. Operating payroll and benefits decreased to 29.2% from 29.4% in
the prior comparable period. Other operating expenses increased to 22.9%
compared to 22.3% in the prior comparable period. Other operating expenses
were lower in 1995 due to a one time credit for rent related charges.
General and administrative costs increased $905,000 over the prior
comparable period as a result of increased administrative payroll and related
costs for new personnel and additional costs resulting from the Company
operating as a public company. As a percentage of revenues, general and
administrative expenses decreased to 6.5% compared to 7.3% for the comparable
prior period. The percentage decrease is attributable to the leverage from
increased revenues.
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Depreciation and amortization and preopening costs amortization, as a
percentage of revenues, increased to 9.3% from 6.3% due to opening two new
locations in the Chicago market in the fourth quarter of 1995 and one location
in Hollywood, Florida in the first quarter of 1996.
Liquidity and Capital Resources
Prior to June 29, 1995, the Company financed its capital expenditures and
operations through cash flows from operations and advances from Edison
Brothers. Subsequent to June 29, 1995, the Company has financed its capital
expenditures and operations through cash flows from operations, draws under a
line of credit agreement and a common stock offering.
Cash flows from operations decreased from $4.6 million in the first 26
weeks of fiscal 1995 to $3.2 million in the first 26 weeks of fiscal 1996.
This decrease was due to the opening of one new store in Hollywood, Florida in
the first fiscal quarter of 1996 which increased inventory and preopening
costs.
The Company has a secured revolving line of credit which permits borrowing
up to a maximum of $23,500,000. At August 4, 1996, $19,000,000 was available.
In 1995, the Company completed a public offering of common stock for the
sale of 2,070,000 shares at $15.00 per share for net proceeds of approximately
$28,653,000, after deducting related offering costs.
The Company's plan is to open two new stores in fiscal 1996. One store
opened in South Florida, in the Hollywood/Fort Lauderdale market on April 25,
1996. The other store in the White Flint Mall, North Bethesda, Maryland market
will open later in fiscal 1996. In fiscal 1997, the Company's goal is to open
three new stores. The Company estimates that its capital expenditures will be
approximately $24.0 million and $31.0 million for 1996 and 1997, respectively.
The Company intends to finance this development with cash flow from operations
and the unused portion of the revolving line of credit described above.
"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 13 weeks ended August 4, 1996.
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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 17, 1996 by /s/ DAVID O. CORRIVEAU
- -------------------------- --------------------------------
David O. Corriveau
Co-Chairman of the Board,
Co-Chief Executive Officer
and President
Dated: September 17, 1996 by: /s/ CHARLES MICHEL
- -------------------------- -------------------------------
Charles Michel
Vice President,
Chief Financial Officer
and Treasurer
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EXHIBIT INDEX
27 Financial Data Schedule