UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 5, 2015
Famous Daves of America, Inc.
(Exact name of registrant as specified in its charter)
Minnesota | 0-21625 | 41-1782300 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
12701 Whitewater Drive, Suite 200, Minnetonka, MN | 55343 | |
(Address of principal executive offices) | (Zip Code) |
(952) 294-1300
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
The information in this Item is furnished to, but not filed with, the Securities and Exchange Commission (the Commission) solely under Item 2.02 of Form 8-K, Results of Operations and Financial Condition.
On August 5, 2015, we issued a press release reporting the financial results for our second fiscal quarter ended June 28, 2015. A copy of the press release is furnished as Exhibit 99.1 to this report.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Chief Operating Officer; Employment Agreement with Abelardo Ruiz
On August 5, 2015, the Company announced the hiring and appointment of Abelardo Ruiz as the Companys Chief Operating Officer, effective as of August 31, 2015. From July 2012 until joining the Company, Mr. Ruiz, age 44, served as Chief Operating Officer of Colon Genera Restaurant Group, a franchisee of Wendys, Applebees, Famous Daves, Longhorn, Sizzler, and Olive Garden restaurants in the Puerto Rico market. Previously, from May 2008 through June 2012, Mr. Ruiz served as Vice President of Operations of Il Mulino NYC, where he oversaw the operations of eight fine dining Italian restaurants in Puerto Rico and the United States.
Mr. Ruizs employment with the Company is governed by an employment agreement entered into on August 3, 2015, but to be effective as of August 31, 2015, that has a four year term. Under the employment agreement, Mr. Ruiz is entitled to receive an annual base salary of $250,000 and is eligible for annual bonus compensation in the discretion of the Board in amounts expected to be in the range of 20%-30% of his base salary. During the first twelve months of his employment, however, Mr. Ruiz will be entitled to receive a minimum guaranteed bonus equal to not less than 20% of his base salary, which will be prorated if his employment is terminated prior to the one year anniversary of his start date. Mr. Ruizs 2016 annual bonus will be prorated to reflect the portion of 2016 worked following the one year guaranteed bonus period.
Pursuant to the employment agreement, at the commencement of his employment term, the Company will grant to Mr. Ruiz a five-year, 71,324 share non-qualified stock option under the Companys 2015 Equity Incentive Plan that will vest in equal monthly installments over the employment term (the Stock Option). The Stock Option will have an exercise price equal to the fair market value of the Companys common stock on the grant date.
Mr. Ruiz may participate in the Companys benefit plans that are currently and hereafter maintained by the Company and for which he is eligible, including, without limitation, group medical, 401(k), life insurance and other benefit plans. Mr. Ruiz is entitled to be reimbursed for reasonable travel and other expenses prior his relocating to a permanent residence within commuting distance of the Companys headquarters. He will also receive a temporary residence living allowance of $3,000 per month that will terminate after one year or upon his earlier relocation. The Company will reimburse Mr. Ruiz for relocation expenses of up to $10,000. The Company has also agreed to lease or reimburse Mr. Ruiz for the lease of a car with aggregate annual costs not to exceed $10,000, and will provide Mr. Ruiz with a computer and cell phone (or reimburse Mr. Ruiz for the costs thereof).
Mr. Ruiz has agreed not to compete with the Company during the term of his employment and for a period thereafter the length of which will depend on the circumstances on which his employment is terminated. If Mr. Ruizs employment is terminated by the Company other than for Cause or by Mr. Ruiz for Good Reason (each as defined in the employment agreement), Mr. Ruiz has agreed not to compete with the Company during the period in which he is entitled to or receives severance payments (as outlined below). If Ruizs employment is terminated by the Company for Cause or by Mr. Ruiz other than Good Reason, Mr. Ruiz has agreed not to compete with the Company for twelve months following the date of such termination. For purposes of the noncompetition restriction, competition includes engaging, owning, having an interest, or participating in the financing, operation, management or control of any person, firm, corporation or business whose primary business is the retail sale of barbeque format food or whose restaurant business derives a majority (i.e. 50% or more) of its food-related revenues from the sale of barbeque type food or barbeque-related products, in each case in the United States and its territories, in Canada and in any other country in which the Company does business during the employment term. Mr. Ruiz has also agreed not to solicit employees of the Company during the employment term and for 18 months thereafter.
Under the employment agreement, if Mr. Ruizs employment is terminated by the Company for any reason other than Cause (including any termination by the Company following a Change in Control (as defined in the employment agreement), death or disability, or if Mr. Ruiz resigns for Good Reason, so long as he has signed and has not revokes a release agreement, he will be entitled to receive severance comprised of continuing payments of his base salary (i) for a twelve month period following the termination date, if termination occurs prior to the two year anniversary of the commencement of the employment term, or (ii) for a six month period following the termination date or, if less, the remainder of the four year employment term, if termination occurs on or after the two year anniversary of the commencement of the employment term. At its option and in its sole discretion, the Company shall, so long as it continues to make payments of base salary to Mr. Ruiz, have the right to extend the length of the severance period for an additional period of time so long as the entire severance period does not exceed twelve months. To the extent not exempt from rules governing deferred compensation under Section 409A of the Internal Revenue Code of 1986, severance payments to Mr. Ruiz are intended to comply with Section 409A and are subject to corresponding requirements regarding the timing of such payments.
The employment agreement is attached as Exhibit 10.1 to this report.
Item 9.01 Financial Statements and Exhibits.
(d) | Exhibits |
10.1 | Employment Agreement entered into on August 3, 2015 between Famous Daves of America, Inc. and Abelardo Ruiz | |
99.1 | Famous Daves of America, Inc. Press Release dated August 5, 2015 |
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 hereunto duly authorized.
FAMOUS DAVEs OF AMERICA, I NC . | ||||||||
Date: August 6, 2015 | By: |
/s/ Richard A. Pawlowski |
||||||
Name: | Richard A. Pawlowski | |||||||
Title: | Chief Financial Officer |
Exhibit Index
Exhibit
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Description |
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10.1 | Employment Agreement entered into on August 3, 2015 between Famous Daves of America, Inc. and Abelardo Ruiz | |
99.1 | Famous Daves of America, Inc. Press Release dated August 5, 2015 |
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this Agreement ) is entered into August 3, 2015 and shall be effective as of the Employees start date at the Company, which is anticipated to be August 31, 2015 (the Effective Date ), by and between Famous Daves of America, Inc., a Minnesota corporation (the Company ), and Abelardo Ruiz, an individual with an address at 1357 Ashford Avenue, Apt. 156, San Juan, PR 00907 ( Executive ).
WHEREAS, Executive wishes to be employed by the Company and the Company desires to employ Executive as its Chief Operating Officer ( COO ) on the terms and conditions set forth herein to perform duties generally typical for a COO of a publicly traded company operating and conducting business in the United States and its territories, Canada and such other countries as the Company may conduct operations and do business in during the Employment Term.
NOW, THEREFORE, in consideration of these premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and intending to be legally bound, the parties hereto hereby agree as follows:
1. Employment; Employment Term . Upon the terms and conditions hereinafter set forth, the Company hereby agrees to retain the services of Executive and Executive hereby accepts such employment and agrees to faithfully and diligently serve as directed by the Company in accordance with this Agreement, commencing on the Effective Date and, unless terminated earlier pursuant to Section 6 of this Agreement, continuing until the close of business on four (4) year anniversary of the Effective Date (the Employment Term ).
2. Duties .
(a) Services . During the Employment Term, Executive agrees to serve as COO of the Company and shall render his duties as COO in a manner that is consistent with Executives position within the Company and as assigned by the Companys Board of Directors (the Board ) and/or, at the option of the Board, assigned by the Companys Chief Executive Officer ( CEO ). In addition to his duties as COO, Executive agrees to serve as an elected/appointed officer of the Company and Executive shall serve in such capacity without additional compensation during the Employment Term. Executive also agrees to serve as any elected/appointed director or officer of any subsidiary of the Company that the Company may, in its sole discretion, deem fit and Executive shall serve in such capacity or capacities without additional compensation during the Employment Term.
(b) Certain Obligations . During the Employment Term, Executive (i) shall devote all of his business time and attention as shall be necessary to achieve, in accordance with the policies and directives of the Board, and/or, at the option of the Board, the CEO, established from time to time in its/their/his discretion, the objectives of the Company, (ii) shall be subject to, and comply with, the rules, practices and policies applicable to executive employees whether reflected in an employee handbook, code of conduct, compliance policy or otherwise, as the same may exist and be amended from time to time, of the Company; and (iii) shall not engage in any business activities other than the performance of his duties under this Agreement. Executive may have investments in other entities and act as a director for the entities and in the capacities set forth on Exhibit A hereto, or as otherwise approved by the Board; provided that such other entities are not competitive with the Company, and provided that so acting shall not interfere with Executives duties with the Company.
(c) Executive shall spend substantially all of his business time and attention at the Companys headquarters in Minnetonka, Minnesota, however his employment under this Agreement may require travel and stay outside Minnetonka, Minnesota and the United States in order to fulfill his duties hereunder.
3. Compensation . For the services rendered herein by Executive, and the promises and covenants made by Executive herein, during the Employment Term the Company shall pay compensation to Executive as follows.
(a) Base Salary . The Company shall pay to Executive the sum of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) as an annual salary (the Base Salary ), payable in accordance with the normal payroll practices of the Company.
(b) Bonus . Executive shall be eligible to receive a discretionary annual bonus, which shall be determined by the Board in its sole discretion (the Bonus ) based upon Executives achievement of milestones, with said milestones determined by the Board (and recorded in the minutes of the meeting of the Board), with input from Executive, prior to the commencement of each fiscal year (the Milestones ) , and (b) the value all other compensation received by Executive for such fiscal year, as determined by the Board in its sole discretion; provided however that for the initial twelve (12) months of the Employment Term there will be no Milestones established (the initial set of Milestones will be determined in 2016) and Executive shall be entitled to a minimum guaranteed Bonus equal to not less than 20% of his Base Salary ( Guaranteed First Year Bonus ). The achievement of the Milestones will be determined by the Board in its reasonable discretion. The targeted amount of each Bonus is expected to be in the range of 20% to 30% of Base Salary, although the Board may determine that it is appropriate in certain instances to increase or decrease the Bonus outside of this range. If the Employment Term ends prior to the one (1) year anniversary of the Effective Date, the Guaranteed First Year Bonus shall be prorated based upon the number of days worked versus the standard twelve (12) month year. The annual Bonus for the partial year of 2016 (the portion of the year worked following the Guaranteed First Year Bonus period), if any, shall be prorated based upon the number of days worked versus the standard calendar year. The Company shall have the right to condition the payment of any Bonus on Executives contemporaneous execution of a reasonable document acceptable to the Company pursuant to which Executive confirms, ratifies and agrees that his obligations under Section 5 are valid and binding and are enforceable against Executive in accordance with the terms of Section 5 . Any Bonus amounts shall be paid at the same time as annual bonuses are paid to the Companys other executive officers, but no later than the end of the year following the year in which the Bonus was earned; provided however that with respect to the Guaranteed First Year Bonus, 5/12ths of the Guaranteed First Year Bonus shall be paid to the Executive in December 2015 and balance of the Guaranteed First Year Bonus shall be paid in July 2016.
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(c) Equity Grants. The Company shall grant to Executive stock options (the Options ), exercisable for 71,324 shares of the Companys common stock ( Common Stock ). The Options shall be granted pursuant to and governed by the terms of the Companys 2015 Equity Incentive Plan, as amended from time to time (the Plan ) and evidenced by a separate notice of stock option grant along with an accompanying stock option agreement between Executive and the Company. The exercise price of the Options shall be no less than the fair market value of the shares of Common Stock on the date of grant, as determined in good faith by the Board. Subject to the accelerated vesting described herein and Executive remaining continuously employed by the Company on each vesting date ( Continuous Service Status ), the Options shall vest in equal ratable installments on the monthly anniversary of the Effective Date over the Employment Term (the first vesting date being on the one (1) month anniversary of the Effective Date hereof). Notwithstanding anything to the contrary set forth in the Plan, the Options shall have the following terms:
(i) In the event of a Change of Control (as defined below) during the Employment Term in which the acquiring company or successor company opts not to assume this Agreement, the vesting of the Options will accelerate such that the Options shall be fully vested and exercisable immediately prior to such Change of Control;
(ii) In the event of a Corporate Transaction (as defined in the Plan), at the option of the Board in its sole discretion, Executive shall exercise the Options or such failure to exercise will result in the Options terminating immediately prior to such Corporate Transaction;
(iii) In the event of a Corporate Transaction, in exchange for the termination of the Options the Board in its sole discretion may make a cash payment to Executive in an amount equal to the product obtained by multiplying (x) the amount (if any) by which the transaction proceeds per share exceed the exercise price per share covered by the Option times (y) the number of shares of Common Stock covered by the Option;
(iv) The Options will terminate if not exercised within six (6) months of Executives termination from the Company for any reason; and
(v) The Options shall expire on the five (5) year anniversary of the date of grant.
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(d) No Additional Compensation . Except for compensation set forth in this Agreement, Executive shall not receive additional compensation in connection with providing services to or holding executive or directorial office(s) in the Company or any of its subsidiaries unless otherwise agreed to by Executive and the Company in the Companys sole discretion.
(e) Change of Control. For purposes of this Agreement Change of Control shall mean any of the following:
(i) Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act ) (a Person ) becomes the beneficial owner (within the meaning of Rule 13d 3 promulgated under the Exchange Act) of 50% or more of either (A) the then-outstanding shares of Common Stock (the Outstanding Company Common Stock ) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the Outstanding Company Voting Securities ); provided, however , that, for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, or (D) any acquisition pursuant to a transaction that complies with Sections 3(e)(ii)(1), 3(e)(ii)(2) and 3(e)(ii)(3) below;
(ii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a Business Combination ), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Companys assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination)
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beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board (as defined in the Plan) at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or
(iii) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing definition or any other provision of the Plan the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company; provided, however, that no Change in Control shall be deemed to occur upon announcement or commencement of a tender offer or upon a potential takeover or upon shareholder approval of a merger or other transaction, in each case without a requirement that the Change in Control actually occur. If required for compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the Code ), in no event will a Change in Control be deemed to have occurred if such transaction is not also a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder). The Board may, in its sole discretion and without Executives consent, amend the definition of Change in Control to conform to the definition of Change in Control under Section 409A of the Code, and the regulations thereunder.
4. Benefits .
(a) Vacation . During Employment Term, Executive shall also be eligible to receive paid time off ( PTO ) as outlined in the Companys PTO program.
(b) Other Benefits . During the Employment Term, Executive will be eligible to participate in the Companys benefit plans that are currently and hereafter maintained by the Company and for which he is eligible including, without limitation, group medical, 401k, life insurance and other benefit plans (the Benefits ). The Company reserves the right to cancel or change at any time the Benefits that it offers to its employees.
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(c) Expenses . During the Employment Term, Executive shall be reimbursed for reasonable (travel and other) expenses incurred (including Executives reasonable travel expenses incurred in commuting to the Companys headquarters prior to his move from his current residence to permanent housing within commuting distance of the Companys headquarters (the Relocation )) by Executive in the furtherance of or in connection with the performance of Executives duties hereunder, in accordance with the Companys expense reimbursement policy as in effect from time to time. Executive agrees to provide detailed backup of any expenses and indicate on any submission for reimbursement those expenses that relate to meals and entertainment.
(d) Living Allowance . To subsidize Executives housing expenses prior to the Relocation the Company agrees to reimburse Executive for his temporary residence within commuting distance to the Companys headquarters in an amount up to $3,000 per month (the Living Allowance ); provided that such Living Allowance shall terminate upon the first to occur of: (x) the one (1) year anniversary of the Effective Date, (y) the date of his Relocation, and (z) the date of Executives termination as an employee of the Company for any reason.
(e) Relocation Reimbursement . In addition, the Company shall pay (either by reimbursement of Executive or by direct payment, as determined by the Company) up to $10,000 in moving expenses for Executives Relocation, for only those Relocation related expenses that: (A) Executive has incurred within twelve (12) months after the Effective Date, so long as Executive is employed by the Company, and (B) are reasonably connected to Executives Relocation (the Eligible Relocation Expenses ). Executive agrees to provide detailed backup of any Eligible Relocation Expenses.
(f) Transportation . During the Employment Term, the Company shall lease or reimburse Executive for (at the Companys option) the lease of a car for Executive; provided however that the aggregate lease payments and other car related costs (including insurance, maintenance etc.) for such car shall not exceed $10,000 annually. Gasoline and tolls shall be reimbursed in accordance with Company policy.
(g) Telephone; Computer. During the Employment Term, the Company shall provide Executive with a computer and cell phone (or reimburse Executive for the costs of a computer and/or a cell phone).
5. Non-Disclosure of Information, Assignment of Intellectual Property, and Restrictive Covenants . Executive acknowledges that the Company is in the business of developing, owning, operating and franchising barbeque restaurants globally, with a focus on the United States, the Commonwealth of Puerto Rico, and in Canada; that the Company has and will develop and assemble extensive know-how and trade secrets relating to its business, the business of its franchisees and the business of its suppliers and has developed an extensive relationship with its franchisees, suppliers and customers. During Executives employment with the Company, Executive will have access to such trade secrets and relationships and other proprietary information of the Company. Executive agrees to protect the Companys Confidential Information (as defined below) as provided in this Section 5 .
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(a) Confidential Information . Executive agrees to enter into and remain bound by the Companys Employee Confidentiality Agreement (the Employee Confidentiality Agreement ) and the Companys Information Technology and Data Security Policy, as amended from time to time (the Data Security Policy ).
(b) Assignment of Intellectual Property . Executive agrees to assign and hereby assigns to the Company (the Assignment ) any and all rights, improvements and copyrightable or patentable subject matter, know-how, and other intellectual property relating to the Companys business (or any of its subsidiaries businesses) which Executive conceived or developed, or may conceive or develop, either alone or with others, or which otherwise arose or may arise during Executives employment with the Company and for a period of nine (9) months thereafter ( Assignable Property ). Executive shall promptly disclose to the Company all Assignable Property. Executive agrees not to assert any rights against the Company (or any of its subsidiaries) or seek compensation from the Company (or any of its subsidiaries) for the foregoing Assignment or the Companys (or any of its subsidiaries) use of Assignable Property. Executive shall promptly disclose to the Company all knowledge that Executive has or obtains regarding Assignable Property and, at the request of the Company, Executive shall, at the sole cost and expense of the Company, provide the Company with whatever assistance that the Company may request of Executive including, but not limited to: (i) signing documents to further evidence and perfect an Assignment; (ii) obtaining for the Company patents, trademarks and trademark protection, copyrights and copyright protection, assignment of rights, and protection of trade secrets; and (iii) taking any other action the Company deems appropriate for securing or protecting its rights in Assignable Property or other intellectual property of the Company or its subsidiaries. If such assistance is requested after termination of the Employment Term, the Company shall reimburse Executive for his reasonable expenses in connection therewith and pay Executive a $750 per diem for his time.
(d) Non-Solicitation . During the Employment Term and for a period of eighteen (18) months thereafter, Executive shall not, whether for his own benefit or that of any other individual, partnership, firm, corporation, or other business organization, directly or indirectly: (i) solicit or attempt to induce any employee of the Company or any of its subsidiaries (an Employee ) to leave his/her employment with the Company or in any way interfere with the relationship between or among the Company and any Employee; (ii) hire any person who was an Employee at any time during the Employment Term, or (iii) induce or attempt to induce any supplier, licensee, franchisee or other business relation of the Company (collectively, the Partners ) to limit or reduce his, her or its relationship with the Company including, without limitation, making any negative or disparaging statements or communications regarding the Company or any of its Employees or Partners (collectively, Soliciting ).
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(e) Non-Compete . During the Employment Term and (i) if the Employees employment was terminated by the Company other than for Cause, or by the Employee for Good Reason, during the Severance Period (as defined below), and (ii) if the Employees employment was terminated by the Company for Cause or by the Employee not for Good Reason, for twelve months following the date of termination of the Employment Term, Executive shall not (whether as an employee, consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director or otherwise) directly engage, own, have an interest, or participate in the financing, operation, management or control of any person, firm, corporation or business whose primary business is the retail sale of barbeque format food or whose restaurant business derives a majority (i.e. 50% or more) of its food-related revenues from the sale of barbeque type food or barbeque-related products, other than as a stockholder with less than one percent (1%) of the outstanding common stock of a publicly traded company. The foregoing covenant shall cover Executives activities in the United States and its territories (including for the avoidance of doubt Puerto Rico), in Canada and in any other country in which the Company does business during the Employment Term.
(f) Equitable Relief . In the event of a breach of or threatened breach by Executive of the provisions of this Section 5 , the Company shall be entitled to an injunction restraining Executive from violating these covenants. Any breach or threatened breach of such provisions will cause irreparable injury to the Company and that money damages will not provide an adequate remedy therefor, and Executive hereby consents to the issuance of an injunction and to the ordering of such specific performance in the event the Company seeks injunctive relief and agrees that the Company shall be entitled to recover reasonable costs and attorneys fees in connection therewith. Executive further agrees that no bond or other security shall be required in obtaining such equitable relief, nor will proof of actual damages be required for such equitable relief.
(g) Tolling. In the event of a breach by Executive of any covenant set forth in this Section 5 , the period of time applicable to such covenant shall be extended by the duration of any violation by Executive of such covenant.
6. Termination; Severance Payments; Etc .
(a) At-Will Employment . Executive and the Company agree that Executives employment is at-will and that either Executive or the Company may terminate Executives employment, at any time, with or without any cause, with no prior notice; provided however that each party shall remain bound by the terms and provisions of this Agreement that survive the termination in accordance with Section 9(i) .
(b) Termination By Company Without Cause or by Executive With Good Reason; Accrued Obligations.
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(i) If Executives employment with the Company is terminated by the Company for any reason (for the avoidance of doubt, a termination of Executive by the Company within six (6) months after a Change of Control (as defined below) shall be deemed a not for Cause termination) other than Cause, death or Disability (as defined below) or if Executive resigns for Good Reason (a defined below), so long as Executive has signed (and at no time revokes) a Release Agreement (as defined below), then, subject to Executive continuing to fulfill his obligations under Section 5 hereof, Executive shall be entitled to receive (and paid periodically in accordance with the Companys normal payroll policies):
(x) If termination occurs prior to the two (2) year anniversary of the Effective Date, continuing payments of Base Salary for a period equal to twelve (12) months from the termination date; or
(y) If termination occurs on or after the two (2) year anniversary of the Effective Date, continuing payments of Base Salary for a period equal to the lesser of: (1) six (6) months after such termination; or (2) the remainder of what would have been the Employment Term had the Executive had not been terminated ((x) or (y) , as applicable, the Severance Period );
provided however , at its option and in its sole discretion, the Company shall, so long as it continues to make payments of Base Salary to Executive, have the right to extend the length of the Severance Period for an additional period of time, provided that the entire Severance Period shall in no event exceed twelve (12) months in total. The payments made or payable to Executive under this Section 6(b)(i) shall be hereinafter referred to as the Severance Payments .
(ii) Regardless of the reason for Executives termination from the Company, the Company shall pay Executive, or in the case of Executives death, his estate, (A) any portion of the Base Salary that has accrued but not been paid through the date of such termination, and (B) all accrued vacation, expense and housing reimbursements due to Executive through the date of termination (if any) (collectively the Accrued Obligations ).
(c) Definitions.
(i) As used herein, Cause for the Company to terminate this Agreement shall mean: (1) Executives indictment for, conviction of, or plea of guilty or nolo contendere , to a felony, a misdemeanor involving fraud or dishonesty, or any crime involving moral turpitude, (2) an act of personal dishonesty taken by Executive in connection with his responsibilities hereunder or in connection with his position at the Company, (3) an act taken by Executive that constitutes willful misconduct or gross negligence in the performance of Executives duties, (4) any breach by Executive of this Agreement, (5) Executives repeated and unexplained or unjustified absence from the Company, or (6) Executives failure to substantially perform his duties or comply with any written reasonable directive from the Board, and, if such failure is curable, failure to cure such failure within twenty one (21) days after receipt of written notice thereof.
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(ii) As used herein, Disability means Executive being unable to perform the principal functions of his duties in a reasonable manner due to a physical or mental impairment, but only if such inability has lasted or is reasonably expected to last for at least sixty (60) consecutive calendar days or ninety (90) non-consecutive calendar days of any twelve month (12) period and, whether Executive has a Disability will be determined by the Company.
(iii) As used herein, Good Reason for Executive to terminate this Agreement shall mean (1) any material reduction by the Company in Executives Base Salary, (2) any material diminution in Executives position or duties, or (3) any material breach by the Company of this Agreement, including its obligations to pay Executive his Base Salary, not cured by the Company in accordance with Section 6(d) below. In no event will Executive have Good Reason to terminate the Agreement if he resigns more than three (3) months following the initial existence of the condition that constitutes Good Reason.
(d) Termination Process . Either party may terminate this Agreement during the Employment Term; provided, however, that if such termination is by the Company for Cause or by Executive for Good Reason, the terminating party shall give the non-terminating party a written notice providing reasonable notice and detail of the alleged Cause or Good Reason, as the case may be, and the non-terminating party shall have twenty-one (21) days following such notice to cure such Cause or Good Reason. Notwithstanding the foregoing, the Company shall not be required to give Executive the right to cure any act of Cause as set forth in Sections 6(c)(i)(1) , (2) , (3) or (6) . If the Company terminates Executives employment with Cause, it shall have no liability to Executive other than to pay him the Accrued Obligations.
(e) Release Agreement . The Companys obligation to make any of the Severance Payments contemplated herein shall be conditioned upon the execution by Executive and the Company of a valid release agreement (the Release Agreement ) to be prepared by the Company and agreed to by Executive, pursuant to which Executive shall release the Company, to the maximum extent permitted by law, from any and all claims he may have against the Company that relate to or arise out of Executives employment or termination of employment, except for claims arising under the Release Agreement. The Companys initial draft of the Release Agreement shall be delivered to Executive no later than five (5) days following the date of Executives termination of employment. The Severance Payments shall begin to be paid to Executive on the first payroll date after the end of the fifty (50) day period following his termination of employment ; provided that Company has received a Release Agreement that is properly executed by Executive and is not revoked within the revocation period set forth in the Release Agreement. Executive shall forfeit all rights to the Severance Payments unless such Release Agreement is signed and delivered within twenty (20) days following the date of Executives termination of employment.
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7. Representations .
(a) Executive represents that his performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by him in confidence or in trust prior to his employment by the Company. Executive hereby represents and warrants that he has not entered into, and will not enter into, any oral or written agreement in conflict herewith.
(b) Executive hereby represents that, as of the Effective Date, Executive shall not be subject to any other agreement that Employee will violate by working with the Company or in the position for which the Company has hired Executive. Further, Executive represents that no conflict of interest or a breach of Executives fiduciary duties will result by working with and performing duties for the Company.
(c) Executive further acknowledges and agrees that he has carefully read this Agreement and that he has asked any questions needed for him to understand the terms, consequences and binding effect of this Agreement and fully understands it and that he has been provided an opportunity to seek the advice of legal counsel of his choice before signing this Agreement.
(d) Executive further agrees during the Severance Period to provide a prompt response to Company in the event Company requests non-confidential information connected to Executives subsequent employment after ceasing to be an employee of Company.
(e) Executive represents and warrants that he is not currently involved, directly or, to his knowledge, indirectly, in any litigation as a defendant or as a party subject to any counterclaims, nor is any such litigation threatened against Executive, directly or indirectly.
8. Background Verification . The Company has requested from an independent reviewer a complete background report with respect to Executive and the Company has approved such background report.
9. Miscellaneous .
(a) Notices . All notices, requests, consents and other communications hereunder (i) shall be in writing, (ii) shall be effective upon receipt, and (iii) shall be sufficient if delivered personally, electronically with receipt confirmation, or by mail, in each case addressed as follows:
If to the Company :
Suite 200
12701 Whitewater Drive Minnetonka, MN 55343
Attn: Adam Wright
11
Email: Adam.Wright@famousdaves.com
If to Executive :
Abelardo Ruiz
To Executives most recent residential address known by the Company or any other address Executive may provide to the Company in writing.
With copy to:
Jorge M. Ruiz Montilla, Esq.
270 Munoz Rivera Avenue
9 th Floor
San Juan, PR 00918
Email: jmrm@mcvpr.com
(b) Entire Agreement . This Agreement and the Employee Confidentiality Agreement (the terms of which are incorporated herein and made a part of this Agreement) constitutes the entire agreement by and between the parties with respect to the subject matter contained herein and supersedes all prior agreements or understandings, oral or written, with respect to the subject matter contained herein. Notwithstanding the foregoing, Executive shall remain subject to and bound by the Data Security Policy, any employee handbook and any other employee policies adopted from time to time.
(c) Amendments; Waivers; Etc . This Agreement may not be altered, amended or modified in any manner, nor may any of its provisions be waived, except by written amendment executed by the parties that specifically states that they intended to alter, amend or modify this Agreement or waive a right hereunder. Any such waiver, alteration, amendment or modification shall be effective only in the specific instance and for the specific purpose for which it was given. No remedy herein conferred upon or reserved by a party is intended to be exclusive of any other available remedy, but each and every such remedy shall be cumulative and in addition to every other remedy given under this Agreement or in connection with this Agreement and now or hereafter existing at law or in equity.
(d) Governing Law and Jurisdiction . Except as provided otherwise in Section 9(k), this Agreement shall be construed and enforced in accordance with the laws of the State of Minnesota without regard to the principle of the conflict of laws. Any dispute arising in connection with this Agreement may be adjudicated by binding arbitration pursuant to the rules of the American Arbitration Association, before a single arbitrator in Minneapolis, Minnesota except that the foregoing shall not preclude the Company or Executive from enforcing the award of the arbitrators in a state or Federal Court located in the State of Minnesota, and each of the parties hereto consent to the jurisdiction of such Courts.
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(e) Successors and Assigns . Neither this Agreement nor any rights or obligations hereunder are assignable by Executive. The Company shall have the right to assign its rights and obligations under this Agreement to any affiliate or successor of the Company. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executives death and (b) any successor of the Company. Any such successor of the Company (including but not limited to any person or entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company) will be deemed substituted for the Company under the terms of this Agreement for all purposes.
(f) Waiver of Jury Trial . TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS AMONG THEM RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED HEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT OR WITH ANY ARBITRATOR AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES HERETO ACKNOWLEDGE THAT (I) THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, (II) EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND (III) EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES AGREES THAT THE PREVAILING PARTY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE ENTITLED TO RECOVER ITS REASONABLE FEES AND EXPENSES IN CONNECTION THEREWITH, INCLUDING LEGAL FEES.
(g) Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument.
13
(h) Severability . Executive acknowledges that the provisions, restrictions and time limitations contained in Section 5 are reasonable and properly required for the adequate protection of the business of the Company and that in the event such restriction or limitation is deemed to be unreasonable by any court of competent jurisdiction, then Executive agrees to submit to the reduction of said restriction and limitation to such as any such court may deem reasonable. If any particular provision of Section 5 shall be adjudicated to be invalid or unenforceable, such provision shall be considered to be divisible with respect to scope, time and geographic area, and such lesser scope, time or geographic area, as a court of competent jurisdiction may determine to be reasonable, not arbitrary and not against public policy, shall be effective, binding and enforceable against Executive. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.
(i) Survival . Any termination of Executives employment and any expiration or termination of the Employment Term under this Agreement shall not affect the continuing operation and effect of Sections 5 , 6 and 9 hereof, which shall continue in full force and effect with respect to the Company and its successors and assigns and respect to Executive.
(j) Tax Withholding . All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.
(k) Internal Revenue Code Section 409(A) . The intent of the parties is that payments and benefits under the Agreement comply with or be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder ( Section 409A ) and, accordingly, to the maximum extent permitted the Agreement shall be interpreted to be in compliance therewith or exempt therefrom. To the extent any such cash payment or continuing benefit payable upon Executives termination of employment is nonqualified deferred compensation subject to Section 409A, then, only to the extent required by Section 409A, such payment or continuing benefit shall not commence until the date which is six (6) months after the date of separation from service, and any previously scheduled payments shall be made in a lump sum (without interest) on that date. For purposes of Section 409A, the phrase termination of employment (or other words to that effect), as used in this Agreement, shall be interpreted to mean separation from service as defined under Section 409A.
(l) Golden Parachute Limitation (Sec. 280G) . Notwithstanding anything to the contrary contained herein, if any payments or benefits provided under this Agreement constitute parachute payments within the meaning of Section 280G of the Code (the Parachute Payments ) and such Parachute Payments are subject to the excise tax imposed by Section 4999 of the Code or nondeductible under Code Section 280G ( Section 280G ) , then the Parachute Payments shall be reduced to an amount such that the aggregate of the Parachute Payments does not exceed 2.99 times the base amount, as defined in Section 280G, provided that the foregoing reduction shall not take place if, prior to the date of the change in ownership or control of the Company, the Parachute Payments shall have been approved in a vote satisfying the requirements of Section 280G(b)(5) of the Code by persons who, immediately before the change in ownership or control, own more than seventy-five (75%) of the voting power of all outstanding stock of the Company.
14
(m) Section Headings . The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof, affect the meaning or interpretation of this Agreement or of any term or provision hereof.
[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first set forth above.
FAMOUS DAVES OF AMERICA, INC. |
EXECUTIVE: | |
By: /s/ Adam J. Wright |
/s/ Abelardo Ruiz | |
Name: Adam J. Wright |
ABELARDO RUIZ | |
Title CEO |
16
Exhibit A
Commitments and or Investments:
1) | Vice President, Board of Directors, San Juan Community Library: A non-for-profit Community Library in San Juan. Mr. Ruiz does this on a voluntary basis and receives no monetary or any other kind of benefits from this. |
2) | General Investments in Life Insurance and Annuities with AXA Financial Advisers |
Exhibit 99.1
Famous Daves Reports Results For Second Quarter Fiscal 2015
MINNEAPOLIS, August 5, 2015 Famous Daves of America, Inc. (NASDAQ: DAVE) today reported financial results for the second quarter ending June 28, 2015.
Highlights for the second quarter of 2015 as compared to the second quarter of 2014:
| Revenue decreased from $41.9 million to $37.4 million, primarily reflecting the combined impact of the closure of three Company-owned restaurants since the end of the second quarter 2014 and a comparable sales decrease of 9.2%; |
| Comparable sales for Company-owned restaurants open 24 months or more decreased 9.2% compared to a decrease of 5.2% for the same period in 2014; |
| Franchise royalty revenue of $4.6 million was essentially flat to the prior year; |
| Restaurant-level cash flow margins at Company-owned restaurants decreased 370 basis points primarily as a result of an anticipated increase in contracted food costs and negative operating leverage due to a year-over-year decline in restaurant sales; |
| General and administrative expenses increased by approximately $931,000, to approximately $5.0 million for the second quarter of 2015; and were 13.3% of revenue compared to 9.7% of revenue for the second quarter of 2014. This increase reflected approximately $448,000, or $0.05 per diluted share, of brand development related professional fees; a year over year increase in stock-based compensation as a result of the second quarter 2014 recapture of $349,000, or $0.03 per diluted share, due to executive departures. These increases were partially offset a by a year-over-year decrease in employee costs at the corporate headquarters; |
| The company entered into an agreement to refranchise the Smithtown, New York restaurant to a new franchisee, which resulted in an asset impairment charge of approximately $925,000 during the second quarter; |
| Net income was $654,000 compared to $2.9 million for the second quarter of 2014; |
| Diluted net income per share was $0.09 compared to $0.39 for the second quarter of 2014; |
| Diluted adjusted net income per share was $0.18 compared to $0.40 for the second quarter of 2014; |
| Adjusted EBITDA for the second quarter of 2015 was $3.4 million compared to $6.0 million for the same period in 2014; |
| Repurchased approximately 78,000 shares for $2.0 million at an average market price of $26.26, excluding commissions. |
Highlights for the six months ended June 28, 2015 as compared to the six months ended June 29, 2014:
| Revenue decreased from $77.6 million to $70.0 million; |
| Comparable sales for Company-owned restaurants open 24 months or more decreased 7.3% compared to a decrease of 5.0% for the same period in 2014; |
| Franchise royalty revenue increased to $9.0 million, compared to $8.8 million; |
| Net income decreased from $3.4 million to approximately $851,000; |
| Diluted net income per common share was $0.12 compared to $0.46, for 2014. |
| Diluted adjusted net income per share was $0.21, primarily reflecting a $0.10 charge related to asset impairment, estimated lease termination costs and other closing cost. This compared to $0.53 for the first six months of 2014; |
| Adjusted EBITDA was approximately $5.4 million, compared to approximately $9.3 million for the first six months of 2014. |
Over the last several quarters, prior management made multiple changes to the company restaurants throughout the corporate system. The changes included smaller portions, different plateware, and changes to iconic items
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such as cornbread muffins and other poor decisions. Ultimately, the significant changes made by prior management were not received well by our guests, extended beyond the restaurants and led to this poor second quarter and Adam Wrights appointment as interim CEO with a few days left in the quarter. Despite these challenges, the Companys long term growth prospects remain intact. The Company possesses high quality food, which has led to a remarkably resilient brand, dedicated people and strong franchise leadership.
In just a few weeks, the new board has taken significant action at the Company. The changes that were implemented at the board level include a new Chairman, two directors and the filling of a vacant board seat. The prior Chairman was replaced by one of the founding partners of Wexford Capital, the Companys largest shareholder with almost 20% of the shares. A Wexford partner also filled one of the other vacated board seats. The Company brought in an independent board member to head the audit committee. Finally, another vacant board seat was filled by Anand Gala, one of the Companys strongest franchisees and a successful restaurant entrepreneur. Following these changes it should be noted that the board members beneficially own approximately 45% of the Companys stock and all of the board members with significant ownership in the Company have agreed to waive their cash Board fees on an ongoing basis. The sole focus is on maximizing long term shareholder value by correcting the prior mistakes and building on the Companys strengths going forward.
The Company is also excited to announce that we have hired a new COO, Abe Ruiz, who has extensive operational experience, has overseen Famous Daves franchise units, along with other franchise concepts, and has an intimate knowledge with the Companys brand. Abes experience will be important to driving efficiencies at the store-level and help optimize unit economics, as we continue to address our existing issues and grow the business longer term.
Since becoming CEO, Wright has spent a large amount of time studying guest feedback, talking with restaurant employees, and studying what the franchisees as well as competitors do better than the company stores. This has led to the implementation of a series of changes to return the guest experience to what it was just 9 months ago, and improve the brand further from there. The first eight restaurants to return to the original plateware, increase portion size, add sauces back to the table, and return iconic items including the cornbread muffin have already seen significant improvements in guest feedback. Specifically, Overall Satisfaction increased 7%, Atmosphere increased 9.5%, and the Value scores have increased 11.8%, all of which are important leading indicators for the business. As a result, these changes have now been made in most company restaurants. Some changes, such as uniforms, will take longer to implement due to product lead times and a desire to test product to ensure the company is changing for the better.
Of course, Famous Daves needs to do more than just change things back to move the business forward and build sales and traffic. The company has been testing a new brisket in a select number of company stores as well as with one of the leading franchise partners. Specifically, the test is of a whole muscle brisket that is smoked in-house daily for 12 hours. This brisket is served fresh and has serious bark and moisture content. Famous Daves is excited to see the early positive feedback from guests related to this change, and is rolling these changes out to all company owned stores and many franchise partners, who will be changing their brisket in September. Starting this September, Famous Daves will begin marketing the brisket; by focusing on a core Bar B Que item the company will highlight the quality of its award-winning Bar B Que.
Famous Daves is also now testing more affordable lunch items as well as launching a happy hour. In May 2014, the company performed a happy hour test at four locations, and these restaurants showed both 3.6% positive SSS and a profit increase vs. a control group that compd negative 1.8%. Unfortunately, the company went with a bar bites menu for the system instead of the happy hour. The company is now making the change to the happy hour that showed very good results in test, and the bar bites has already been dropped following poor performance. Famous Daves is also developing additional tests around affordability at new restaurants, continuing to focus on building the significant catering and alcohol opportunity, implementing a digital marketing plan for the first time and also focusing the entire marketing strategy that needs to become much more effective.
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Interim CEO Adam Wright states, We have a very strong group of people who care deeply about our company and our future success, and Id like to thank and acknowledge the team and franchisees for their dedication to serving the best Bar B Que and exceptional hospitality in the USA. The past year has been difficult, but I am confident that as we continue to work together as partners, better days are in our future. With the significant alignment of the board with the shareholders, I am confident that the company will achieve its long-term growth potential, be run efficiently and deploy capital effectively.
Famous Daves closed one lower sales volume franchise-operated restaurants during the second quarter in St. Joseph, Missouri and one company-owned restaurant in Eden Prairie, Minnesota.
Famous Daves ended the quarter with 184 restaurants, including 49 company-owned restaurants and 135 franchise-operated restaurants, located in 34 states, the Commonwealth of Puerto Rico, and Canada.
Conference Call
The company will host a conference call August 5, 2015, at 7:30 p.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 Daves web site at www.famousdaves.com .
About Famous Daves
Famous Daves of America, Inc. develops, owns, operates and franchises barbeque restaurants. As of today, the company owns 49 locations and franchises 132 additional units in 33 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.
Contact: |
Richard Pawlowski Chief Financial Officer 952-294-1300 |
To supplement its financial statements, Famous Daves of America, Inc. also provides investors with adjusted net income, adjusted basic and diluted net income per share and adjusted EBITDA which are non-GAAP financial measures. The Company believes that these non-GAAP measures provide useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. Famous Daves management uses these non-GAAP measures to compare the Companys performance to that of prior periods for trend analysis and planning purposes.
Adjusted basic and diluted net income per share consists of net income plus items, such as, asset impairment and estimated lease termination and other closing costs, net loss on disposal of equipment, and the recapture of stock-based compensation and severance costs related to the level of Vice President (VP) and above, divided by the weighted average number of shares of stock outstanding (plus stock equivalents for the diluted calculation) during each period presented. Famous Daves of America, Inc. believes adjusted basic and diluted net income per share is useful to an investor because it is widely used to measure a companys operating performance.
EBITDA consists of income from operations plus depreciation and amortization. Adjusted EBITDA consists of EBITDA plus items, such as, asset impairment and estimated lease termination and other closing costs, net loss on disposal of equipment, and the recapture of stock-based compensation and severance costs related to the level of Vice President (VP) and above. Famous Daves uses Adjusted EBITDA as a measure of operating performance because it assists the Company in comparing performance on a consistent basis, as it removes from operating results the impact of non-cash events. The Company believes Adjusted EBITDA is useful to an investor in evaluating the companys operating performance because it is widely used to measure a Companys operating
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performance without the impact of items such as depreciation and amortization, which can vary depending upon accounting methods and the book value of assets, and to present a meaningful measure of corporate performance exclusive of the impact of non-cash events and the method by which assets were acquired.
These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with generally accepted accounting principles in the United States. These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in the companys financial statements and are subject to inherent limitations. Famous Daves of America, Inc. urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures that are included in this press release. The tables appearing at the end of this release provide reconciliations of net income to adjusted net income, Adjusted EBITDA and basic and diluted net income per share to basic and diluted adjusted net income per share.
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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
JUNE 28, 2015 AND JUNE 29, 2014
(in thousands, except per share data)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 28,
2015 |
June 29,
2014 |
June 28,
2015 |
June 29,
2014 |
|||||||||||||
Revenue: |
||||||||||||||||
Restaurant sales, net |
$ | 32,203 | $ | 36,894 | $ | 60,309 | $ | 68,142 | ||||||||
Franchise royalty revenue |
4,620 | 4,607 | 8,951 | 8,810 | ||||||||||||
Franchise fee revenue |
250 | 100 | 255 | 135 | ||||||||||||
Licensing and other revenue |
335 | 336 | 520 | 512 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue |
37,408 | 41,937 | 70,035 | 77,599 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Costs and expenses: |
||||||||||||||||
Food and beverage costs |
9,797 | 10,678 | 18,321 | 19,804 | ||||||||||||
Labor and benefits costs |
10,216 | 11,411 | 19,597 | 21,831 | ||||||||||||
Operating expenses |
8,967 | 9,741 | 16,822 | 18,142 | ||||||||||||
Depreciation and amortization |
1,356 | 1,487 | 2,747 | 3,033 | ||||||||||||
General and administrative expenses |
4,981 | 4,050 | 9,873 | 8,277 | ||||||||||||
Asset impairment and estimated lease termination and other closing costs |
881 | 102 | 976 | 562 | ||||||||||||
Pre-opening expenses |
| | 1 | 7 | ||||||||||||
Net loss (gain) on disposal of property |
48 | (13 | ) | 25 | 421 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total costs and expenses |
36,246 | 37,456 | 68,362 | 72,077 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from operations |
1,162 | 4,481 | 1,673 | 5,522 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other expense: |
||||||||||||||||
Interest expense |
(227 | ) | (237 | ) | (435 | ) | (500 | ) | ||||||||
Interest income |
| | 5 | 1 | ||||||||||||
Other income (expense), net |
2 | (2 | ) | | (3 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other expense |
(225 | ) | (239 | ) | (430 | ) | (502 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
937 | 4,242 | 1,243 | 5,020 | ||||||||||||
Income tax expense |
(283 | ) | (1,391 | ) | (392 | ) | (1,653 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 654 | $ | 2,851 | $ | 851 | $ | 3,367 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic net income per common share |
$ | 0.09 | $ | 0.39 | $ | 0.12 | $ | 0.47 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted net income per common share |
$ | 0.09 | $ | 0.39 | $ | 0.12 | $ | 0.46 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average common shares outstanding - basic |
6,974 | 7,219 | 7,016 | 7,229 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average common shares outstanding - diluted |
6,993 | 7,250 | 7,037 | 7,260 | ||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
OPERATING RESULTS
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 28,
2015 |
June 29,
2014 |
June 28,
2015 |
June 29,
2014 |
|||||||||||||
Food and beverage costs (1) |
30.4 | % | 28.9 | % | 30.4 | % | 29.1 | % | ||||||||
Labor and benefits costs (1) |
31.7 | % | 30.9 | % | 32.5 | % | 32.0 | % | ||||||||
Operating expenses (1) |
27.8 | % | 26.4 | % | 27.9 | % | 26.6 | % | ||||||||
Restaurant level cash flow margins (1)(3) |
10.1 | % | 13.8 | % | 9.2 | % | 12.3 | % | ||||||||
Depreciation & amortization (restaurant level) (1) |
3.9 | % | 3.6 | % | 4.0 | % | 4.0 | % | ||||||||
Asset impairment and estimated lease termination and other closing costs (1) |
2.7 | % | 0.3 | % | 1.6 | % | 0.8 | % | ||||||||
Pre-opening expenses and net loss on disposal of equipment (1) |
0.1 | % | | | 0.6 | % | ||||||||||
Costs and expenses (restaurant level) (1) |
96.6 | % | 90.1 | % | 96.4 | % | 93.1 | % | ||||||||
Restaurant level margin (1)(4) |
3.4 | % | 9.9 | % | 3.6 | % | 6.9 | % | ||||||||
Depreciation & amortization (corporate level) (2) |
0.5 | % | 0.4 | % | 0.5 | % | 0.5 | % | ||||||||
General and administrative expenses (2) |
13.3 | % | 9.7 | % | 14.1 | % | 10.7 | % | ||||||||
Total costs and expenses (2) |
96.9 | % | 89.3 | % | 97.6 | % | 92.9 | % | ||||||||
Income from operations (2) |
3.1 | % | 10.7 | % | 2.4 | % | 7.1 | % |
(1) | As a percentage of restaurant sales, net |
(2) | As a percentage of total revenue |
(3) | Restaurant level cash flow margins are equal to restaurant sales, net, less restaurant level food and beverage costs, labor and benefit costs, and operating expenses. |
(4) | Restaurant level margin is equal to restaurant level cash flow margins less restaurant level depreciation and amortization, asset impairment and estimated lease termination and other closing costs, pre-opening expenses and net loss on disposal of equipment. |
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 28,
2015 |
December 28,
2014 |
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ASSETS |
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Cash and cash equivalents |
$ | 1,833 | $ | 2,133 | ||||
Other current assets |
13,996 | 11,442 | ||||||
Property, equipment and leasehold improvements, net |
46,809 | 49,495 | ||||||
Other assets |
3,763 | 3,607 | ||||||
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Total assets |
$ | 66,401 | $ | 66,677 | ||||
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities |
$ | 12,522 | $ | 14,211 | ||||
Line of credit |
14,240 | 5,000 | ||||||
Other long-term obligations |
12,396 | 15,664 | ||||||
Shareholders equity |
27,243 | 31,802 | ||||||
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Total liabilities and shareholders equity |
$ | 66,401 | $ | 66,677 | ||||
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Page 6 of 9
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended | ||||||||
June 28,
2015 |
June 29,
2014 |
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Cash flows provided by operating activities |
$ | 3,106 | $ | 7,050 | ||||
Cash flows used for investing activities |
(2,808 | ) | (976 | ) | ||||
Cash flows used for financing activities |
(598 | ) | (5,143 | ) | ||||
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Net (decrease) increase in cash and cash equivalents |
$ | (300 | ) | $ | 931 | |||
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Page 7 of 9
SUPPLEMENTAL SALES INFORMATION
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 28,
2015 |
June 29,
2014 |
June 28,
2015 |
June 29,
2014 |
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Restaurant sales ( in thousands ): |
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Company-Owned |
$ | 32,203 | $ | 36,894 | $ | 60,309 | $ | 68,142 | ||||||||
Franchise-Operated |
$ | 93,766 | $ | 100,029 | $ | 182,523 | $ | 190,571 | ||||||||
Total number of restaurants: |
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Company-Owned |
49 | 53 | 49 | 53 | ||||||||||||
Franchise-Operated |
135 | 141 | 135 | 141 | ||||||||||||
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Total |
184 | 194 | 184 | 194 | ||||||||||||
Total weighted average weekly net sales (AWS): |
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Company-Owned |
$ | 49,619 | $ | 53,532 | $ | 46,426 | $ | 48,980 | ||||||||
Franchise-Operated |
$ | 54,013 | $ | 55,234 | $ | 52,118 | $ | 52,629 | ||||||||
Operating weeks: |
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Company-Owned |
649 | 689 | 1,299 | 1,391 | ||||||||||||
Franchise-Operated |
1,736 | 1,811 | 3,488 | 3,621 | ||||||||||||
Weighted comparable net sales by category (24 month): |
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Dine-in |
(7.3 | )% | (4.9 | )% | (6.0 | )% | (4.7 | )% | ||||||||
To Go |
(2.2 | )% | (0.3 | )% | (1.5 | )% | 0.2 | % | ||||||||
Catering |
0.3 | % | (0.0 | )% | 0.2 | % | (0.5 | )% | ||||||||
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Total company-owned comparable sales % |
(9.2 | )% | (5.2 | )% | (7.3 | )% | (5.0 | )% | ||||||||
Franchise-Operated % |
(3.3 | )% | (2.8 | )% | (1.4 | )% | (3.0 | )% | ||||||||
Total number of comparable restaurants: |
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Company-Owned |
47 | 49 | 47 | 49 | ||||||||||||
Franchise-Operated |
123 | 121 | 122 | 119 |
Page 8 of 9
FAMOUS DAVES OF AMERICA, INC.
NON-GAAP RECONCILIATION
(in thousands, except share and per share data)
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 28,
2015 |
June 29,
2014 |
June 28,
2015 |
June 29,
2014 |
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Net income |
$ | 654 | $ | 2,851 | $ | 851 | $ | 3,367 | ||||||||
Asset impairment and estimated lease termination and other closing costs |
881 | 102 | 976 | 562 | ||||||||||||
Net loss on disposal of equipment |
48 | (13 | ) | 25 | 421 | |||||||||||
VP level and above stock-based compensation recapture |
(45 | ) | (335 | ) | (45 | ) | (1,071 | ) | ||||||||
VP level and above severance |
| 314 | | 815 | ||||||||||||
Tax adjustment for the non-cash adjustments |
(267 | ) | (22 | ) | (301 | ) | (239 | ) | ||||||||
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Adjusted net income |
$ | 1,271 | $ | 2,897 | $ | 1,506 | $ | 3,855 | ||||||||
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Non-GAAP adjusted income per share: |
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Basic adjusted net income per common share |
$ | 0.18 | $ | 0.40 | $ | 0.21 | $ | 0.53 | ||||||||
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Diluted adjusted net income per common share |
$ | 0.18 | $ | 0.40 | $ | 0.21 | $ | 0.53 | ||||||||
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Shares used to compute non-GAAP income per share: |
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Weighted average common share outstanding - basic |
6,974 | 7,219 | 7,016 | 7,229 | ||||||||||||
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Weighted average common share outstanding - diluted |
6,993 | 7,250 | 7,037 | 7,260 | ||||||||||||
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Income from Operations |
$ | 1,162 | $ | 4,481 | $ | 1,673 | $ | 5,522 | ||||||||
Depreciation and amortization |
1,356 | 1,487 | 2,747 | 3,033 | ||||||||||||
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EBITDA |
2,518 | 5,968 | 4,420 | 8,555 | ||||||||||||
Non-cash items: |
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Asset impairment and estimated lease termination and other closing costs |
881 | 102 | 976 | 562 | ||||||||||||
Net loss on disposal of equipment |
48 | (13 | ) | 25 | 421 | |||||||||||
VP level and above stock-based compensation recapture |
(45 | ) | (335 | ) | (45 | ) | (1,071 | ) | ||||||||
VP level and above severance |
| 314 | | 815 | ||||||||||||
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Adjusted EBITDA |
$ | 3,402 | $ | 6,036 | $ | 5,376 | $ | 9,282 | ||||||||
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Statements in this press release that are not strictly historical, including but not limited to statements regarding the timing of our restaurant openings and the timing or success of our expansion plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, which may cause the companys actual results to differ materially from expected results. Although Famous Daves of America, Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectation will be attained. Factors that could cause actual results to differ materially from Famous Daves expectation include financial performance, restaurant industry conditions, execution of restaurant development and construction programs, franchisee performance, changes in local or national economic conditions, availability of financing, governmental approvals and other risks detailed from time to time in the companys SEC reports.
Page 9 of 9