Famous Dave's reports Q2 net earnings of US$2.1M, compared with year-ago earnings of US$1.9M, as revenue rises 5% to US$43.4M

Nevin Barich

MINNEAPOLIS , July 25, 2013 (press release) – Revenue increased 5% to $43.4 million

Same Store Sales increased 3.8%

Earnings Per Share increased 8.0% to $0.27

Second Quarter Restaurant Level Margin increased 360 basis points

Famous Dave's of America, Inc. (DAVE) today reported financial results for the second quarter and six months ending June 30, 2013.

Highlights for the second quarter of 2013 as compared to the second quarter of 2012 include:

Revenue increased to $43.4 million from $41.3 million

Comparable sales for Company-owned restaurants open 24 months or more increased 3.8%, compared to a decrease of 0.6% for the second quarter of 2012

Franchise royalty revenue of $4.6 million was essentially flat to the prior year, reflecting a comparable sales decrease of 1.9%

Net income increased to $2.1 million, up from $1.9 million

Net income for the second quarter of fiscal 2013 includes a bonus accrual of approximately $540,000, or $0.05 per diluted share and severance costs as a result of a recent reduction in force of approximately $271,000, or $0.02 per diluted share

Net income for fiscal 2012's second quarter included the favorable impact of approximately $431,000 due to the bonus recapture, or approximately $0.04 per diluted share

Diluted net income per share increased 8.0% to $0.27, compared to $0.25 in 2012

Highlights for the six months ended June 30, 2013 as compared to the six months ended July 1, 2012 include:

Revenue increased to $80.0 million from $78.8 million

Comparable sales for Company-owned restaurants open 24 months or more increased 1.1% compared to a decrease of 1.0% in 2012

Franchise royalty revenue was $8.7 million, compared to $9.0 million, reflecting a franchise comparable sales decrease of 3.9% for the year-to-date period

Cash flows provided by operations were $9.4 million for the first six months of fiscal 2013, compared to $4.5 million for the first six months of fiscal 2012

Net income decreased to $2.2 million from $2.8 million

Net income for the first half of fiscal 2013 includes a bonus accrual of approximately $1.0 million, or $0.09 per diluted share and severance costs as a result of a recent reduction in
force of approximately $271,000, or $0.02 per diluted share

Net income for the first half of fiscal 2012 did not include a bonus accrual

Diluted net income per share was $0.28 compared to $0.36, for 2012

Diluted adjusted net income per share was $0.28 which represents a decrease from $0.38 for the first six months of 2012

Adjusted EBITDA was $6.7 million, compared to $7.9 million for the first six months of 2012

The Company paid down $7.3 million of debt since the end of fiscal 2012

John Gilbert, CEO of Famous Dave's, commented, "I am pleased with our performance in spite of the economic environment that continues to challenge the restaurant industry. Our improved quarterly financials are the result of a more focused organization executing on our previously announced program to optimize the customer experience at each point of interaction: dine-in, To Go, catering and retail. As a result of these efforts I firmly believe we are a stronger company today than we were one year ago with company-owned same store sales growth, improved store level profitability and reduced G&A expenses more appropriate for the size of our business."

Mr. Gilbert continued, "For example, with regard to G&A expenses this quarter, we recorded $271,000 of severance costs associated with a comprehensive 18-month profit improvement program. We will realize the benefits from the reduction in force over the balance of this year and far into the future. Furthermore, this will bring our G&A expenses in alignment with restaurant companies within our peer set and is consistent with our redesigned incentive compensation program, which is now closely tied to the Company's EBITDA."

Marketing and Development

Several initiatives have led to sequential sales growth at company-owned restaurants and improvements at franchise restaurants. These include:

Significant changes to the menu that included the launch of new products, a simpler, easier to use menu design, and better product pricing informed by our onging margin optimization program with RMS.

A more effective, data-driven promotional strategy, resulting in improved sales and fewer overall discounts.

Improved brand awareness with a new advertising campaign emphasizing Famous Dave's best attributes -- unmatched BBQ authenticity and expertise.

Famous Dave's opened a restaurant in Puerto Rico during the second quarter, and closed a franchise location in New York, New York. Famous Dave's ended the quarter with 187 restaurants, including 53 company-owned restaurants and 134 franchise-operated restaurants, located in 34 states, the Commonwealth of Puerto Rico, and 1 Canadian province.
Subsequent to the quarter, the Company opened 3 franchise-operated restaurants, in Holt, Michigan, Omaha, Nebraska, and Hayward, California and closed a restaurant for relocation purposes, in Overland Park, Kansas.

In addition to 2 company-owned restaurants expected to open in the third and fourth quarter, we expect to see a total of 9 franchise units opened in 2013, with one expected opening shifting from late 2013 to early 2014.

Outlook

Gilbert concluded by saying, "We are now beginning to realize the benefits of our improved business model and I am confident that our cost reduction measures and strategic initiatives introduced throughout this year will continue to drive value improvement for our investors over the long-term. To ensure these positive results will endure, we will continue to implement new initiatives aimed at creating a distinct advantage for us within the marketplace.

We will continue to optimize the customer experience within our multiple lines of business (dine-in, To Go, catering and retail) with innovative, profitable solutions.

We will continue to improve our marketing with advertising campaigns that build and strengthen our brand throughout our system-wide restaurants.

We will test new menus, new products, and new designs in an effort to accelerate our same store sales momentum.

We will continue to examine ways to reduce unnecessary expenses in all facets of our business."

Conference Call

The company will host a conference call tomorrow, July 25, 2013, at 10:00 a.m. Central Time to discuss its second quarter financial results. There will be a live webcast of the discussion through the Investor Relations section of Famous Dave's web site at www.famousdaves.com.

About Famous Dave's

Famous Dave's of America, Inc. develops, owns, operates and franchises barbeque restaurants. As of today, the company owns 53 locations and franchises 136 additional units in 34 states, the Commonwealth of Puerto Rico, and 1 Canadian province. Its menu features award-winning barbequed and grilled meats, an ample selection of salads, side items and sandwiches, and unique made-from-scratch desserts.

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