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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 NOVEMBER 3, 1996.
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 December 12, 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 39 Weeks Ended
-------------- --------------
November 3, October 29, November 3, October 29,
1996 1995 1996 1995
---- ---- ---- ----
Food and beverage revenues $ 11,086 $ 6,261 $ 33,635 $ 19,202
Amusement and other revenues 9,010 5,459 27,823 16,640
-------- -------- -------- --------
Total revenues 20,096 11,720 61,458 35,842
-------- -------- -------- --------
Cost of revenues 4,187 2,395 12,678 7,343
Operating payroll and benefits 5,668 3,564 17,761 10,666
Other restaurant operating expenses 4,523 2,735 13,999 8,116
General and administrative expenses 1,216 1,135 3,888 2,902
Depreciation and amortization expense 1,381 847 3,992 2,375
Preopening cost amortization 767 -- 1,983 --
Earn-out and special compensation -- -- -- 1,607
-------- -------- -------- --------
Total costs and expenses 17,742 10,676 54,301 33,009
-------- -------- -------- --------
Operating income 2,354 1,044 7,157 2,833
Interest (income) expense, net (11) 61 (52) 98
-------- -------- -------- --------
Income before provision for income taxes 2,365 983 7,209 2,735
Provision for income taxes 946 414 2,953 1,155
-------- -------- -------- --------
Net income $ 1,419 $ 569 $ 4,256 $ 1,580
======== ======== ======== ========
Earnings per common share $ 0.20 $ 0.10 $ 0.59 $ 0.30
======== ======== ======== ========
Weighted average number of common
shares outstanding 7,268 5,514 7,268 5,303
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 3,
1996 February 4,
(unaudited) 1996
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Current assets:
Cash and cash equivalents $ 115 $ 4,325
Inventories 3,512 2,621
Prepaid expenses 632 360
Preopening costs 1,643 1,946
Other current assets 236 831
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Total current assets 6,138 10,083
Property and equipment, net 73,561 56,384
Intangible assets:
Goodwill, net of accumulated amortization of $646 and $361 9,015 9,300
Other 113 170
Other assets 234 264
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Total Assets $89,061 $76,201
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,482 $ 2,456
Accrued liabilities 1,432 1,354
Deferred income taxes 598 639
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Total current liabilities 4,512 4,449
Deferred income taxes 1,742 1,368
Other liabilities 625 876
Long-term debt 8,900 500
Commitments and contingencies
Stockholders' equity:
Preferred stock, 10,000,000 authorized; none issued -- --
Common stock, $0.01 par value, 50,000,000 authorized;
7,268,056 and 7,267,056 shares issued and outstanding
as of November 3, 1996 and February 4, 1996,
respectively 73 73
Paid in capital 66,999 66,981
Retained earnings 6,210 1,954
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Total stockholders' equity 73,282 69,008
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$89,061 $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 -- 18 -- 18
Net income -- -- -- 4,256 4,256
----- --- ------- ------ -----
Balance, November 3, 1996 7,268 $73 $66,999 $6,210 $73,282
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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)
39 Weeks Ended
--------------
November 3, October 29,
1996 1995
---- ----
Cash flows from operating activities
Net income $ 4,256 $ 1,580
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 5,975 2,375
Provision for deferred income taxes 333 232
Changes in assets and liabilities
Inventories (891) (303)
Prepaid expenses (272) (203)
Preopening costs (1,680) (974)
Other assets 625 152
Accounts payable 27 1,142
Accrued liabilities (452) 276
Other liabilities 279 439
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Net cash provided by operating activities 8,200 4,716
Cash flows from investing activities
Capital expenditures (20,828) (11,265)
Cash flows from financing activities
Net transactions with Edison Brothers -- (11,584)
Proceeds from issuance of common stock 18 24,916
Borrowings under long-term debt 9,700 16,000
Repayments of long-term debt (1,300) (15,500)
------- -------
Net cash provided by financing activities 8,418 13,832
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Cash provided (used) (4,210) 7,283
Beginning cash and cash equivalents 4,325 1,233
------- -------
Ending cash and cash equivalents $ 115 $ 8,516
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See accompanying notes to consolidated financial statements.
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DAVE & BUSTER'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 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".
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 October 29, 1995 the
weighted average number of shares outstanding is based on the assumption that
5,197,000 shares of common stock were outstanding prior to the completion in
of a public offering of common stock for 2,070,000 shares. 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 November 3, 1996 Compared to 13 Weeks
Ended October 29, 1995
Total revenues for the 13 weeks ended November 3, 1996 increased by 71.2%
over the 13 weeks ended October 29, 1995. The increase in revenues was
attributable to the Chicago locations 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. Eight stores were operating for the 13
weeks ended November 3, 1996 as compared to five for the 13 weeks ended October
29, 1995.
Cost of revenues, as a percentage of revenues, increased to 20.8% from
20.4% in the prior comparable period. The increase in cost of revenues was a
result of a shift in revenue mix toward more food and beverage revenues.
Operating payroll and benefits decreased to 28.2% from 30.4% in the prior
comparable period. Operating payroll and benefits was lower due to decreased
variable labor costs. Other operating expenses decreased to 22.5% compared to
23.3% in the prior comparable period. Other operating expenses were lower as a
percentage of revenue in 1996 due to improved costs controls.
General and administrative costs, as a percentage of revenues, decreased
to 6.1% compared to 9.7% for the comparable prior period. The percentage
decrease is attributable to the leverage from increased revenues, lower
operating costs and gain on sale of equipment.
Depreciation and amortization and preopening costs amortization, as a
percentage of revenues, increased to 10.7% from 7.2% 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 - 39 Weeks Ended November 3, 1996 Compared to 39 Weeks
Ended October 29, 1995
Total revenues for the 39 weeks ended November 3, 1996 increased by 71.5%
over the 39 weeks ended October 29, 1995. The increase in revenues was
primarily attributable to the Chicago locations 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, increased to 20.6% from
20.5% in the prior comparable period. Operating payroll and benefits decreased
to 28.9% from 29.8% in the prior comparable period due to decreased variable
labor costs. Other operating expenses increased to 22.8% compared to 22.6% 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 $986,000 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 6.3% compared to 8.1% 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 9.7% from 6.6% 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.
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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 increased to $8.2 million in the first 39 weeks
of fiscal 1996 from $4.7 million in the first 39 weeks of fiscal 1995. This
increase was due to the opening of one new store in Hollywood, Florida in the
first fiscal quarter of 1996 and two new locations in the Chicago market in the
fourth quarter of 1995.
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 (8.25% at
November 3, 1996). The line of credit is secured by various assets including
land, buildings and personal property. At November 3, 1996, $14,500,000 was
available. The line matures in September 1998. The line of credit has certain
covenants which include financial covenants requiring debt to equity, tangible
net worth, and current debt maturity levels.
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
November 3, 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: December 16, 1996 by /s/ David O. Corriveau
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David O. Corriveau
Co-Chairman of the Board, Co-
Chief Executive Officer and
President
Dated: December 16, 1996 by: /s/ Charles Michel
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Charles Michel
Vice President,
Chief Financial Officer and
Treasurer
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EXHIBIT INDEX
Exhibit
No. Description
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27 Financial Data Schedule