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Dave & Buster’s, Inc. Reports Financial Results for First Quarter Ended May 1, 2011

2011-06-15

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Dave & Buster’s Total revenues increased 5.0% to $148.6 million in the first quarter of 2011, compared to $141.6 million in the first quarter of 2010.

Dave & Buster's, Inc., a leading operator of high volume entertainment/dining complexes, today announced results for its first quarter ended May 1, 2011.

“The team did an outstanding job of controlling our costs and we were able to flow most of the sales increase to the bottom line.”

Total revenues increased 5.0% to $148.6 million in the first quarter of 2011, compared to $141.6 million in the first quarter of 2010. The year-over-year revenue increase was driven by a 6.2% increase in comparable store sales and a $1.4 million increase in revenues from non-comparable stores and other revenue sources. These revenue increases were partially offset by the loss of $2.7 million in revenues associated with the May 2010 flood-related closure of our store in Nashville, Tennessee. Total Food and Beverage revenues increased 4.1%, while revenues from Amusements and Other increased 5.9%.

Adjusted EBITDA increased 24.7% to $33.6 million versus $27.0 million in the first quarter of fiscal 2010. The Adjusted EBITDA for the quarter was not adversely affected by the closure of our Nashville store as the result of coverage under our business interruption insurance policy. “I’m very proud of the record breaking Adjusted EBITDA we achieved in the first quarter. Our efforts to build comparable store sales paid off as we realized solid growth in both walk in and special events sales,” said Steve King, Chief Executive Officer. “The team did an outstanding job of controlling our costs and we were able to flow most of the sales increase to the bottom line.”

Founded in 1982 and headquartered in Dallas, Texas, Dave & Buster’s is the premier national owner and operator of 56 high-volume venues that offer interactive entertainment options for adults and families, such as skill/sports-oriented redemption games and technologically advanced video and simulation games, combined with a full menu of high quality food and beverages. Dave & Buster’s currently has stores in 24 states and Canada.

DAVE & BUSTER’S, INC. Condensed Consolidated Balance Sheets (in thousands)

ASSETS	May 1, 2011		January 30, 2011
	(unaudited)		(audited)
Current assets:

Cash and cash equivalents	$	47,578	$	34,407
Other current assets		45,778		42,284

Total current assets	$	93,356	$	76,691

Property and equipment, net		300,051		304,819

Intangible and other assets, net		382,385		383,032

Total assets	$	775,792	$	764,542


LIABILITIES AND STOCKHOLDERS' EQUITY

Total current liabilities	$	80,572	$	81,877

Other long-term liabilities		102,337		96,417

Long-term debt, less current liabilities, net unamortized discount		345,730		346,418

Stockholders' equity		247,153		239,830

Total liabilities and stockholders' equity	$	775,792	$	764,542

DAVE & BUSTER’S, INC. Consolidated Statements of Operations (dollars in thousands) (unaudited)

	13 Weeks Ended					13 Weeks Ended
	May 1, 2011 (1)					May 2, 2010 (1)

Food and beverage revenues	$	74,262		50.0	%	$	71,357		50.4	%
Amusement and other revenues		74,341		50.0	%		70,218		49.6	%
Total revenues		148,603		100.0	%		141,575		100.0	%

Cost of products		28,299		19.0	%		27,863		19.7	%
Store operating expenses		79,371		53.5	%		79,073		55.8	%
General and administrative expenses		8,811		5.9	%		8,617		6.1	%
Depreciation and amortization		13,070		8.8	%		12,501		8.8	%
Pre-opening costs		740		0.5	%		1,189		0.8	%
Total operating expenses		130,291		87.7	%		129,243		91.2	%

Operating income		18,312		12.3	%		12,332		8.8	%
Interest expense, net		8,243		5.5	%		5,348		3.8	%

Income before provision for income taxes		10,069		6.8	%		6,984		5.0	%
Income tax provision		3,351		2.3	%		3,073		2.2	%
Net income	$	6,718		4.5	%	$	3,911		2.8	%

Other information:
Stores open at end of period (2)		58					57

The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown:

	13 Weeks Ended					13 Weeks Ended
	May 1, 2011					May 2, 2010

Total net income	$	6,718				$	3,911
Add back: Interest expense, net		8,243					5,348
Provision for income taxes		3,351					3,073
Depreciation and amortization		13,070					12,501
EBITDA		31,382					24,833
Add back: Loss on asset disposal		428					200
Share-based compensation		360					251
Currency transaction (gain)		(195	)				(85	)
Pre-opening costs		740					1,189
Reimbursement of affiliate expenses.		65					188
Deferred amusement revenue and ticket redemption liability adjustments		618					230
Transaction and other costs		237					160
Adjusted EBITDA (3)	$	33,635				$	26,966

NOTE

(1) As previously reported by the Company, on June 1, 2010, affiliates of Oak Hill Capital Partners acquired all of the outstanding capital stock of our direct parent, Dave & Buster’s Holdings, Inc. Accounting principles generally accepted in the United States require operating results for the Company prior to the June 1, 2010 acquisition to be presented as Predecessor’s results in the historical financial statements. Operating results for the Company subsequent to the June 1, 2010 acquisition are presented or referred to as Successor’s results in our historical financial statements. References to the 13 week period ended May 2, 2010 included in this release, relate to the Predecessor period. References to the 13 week period ended May 1, 2011 included in this release, relate to the Successor period. The results for the Successor period include the impacts of purchase accounting.

(2) The number of stores open at May 1, 2011 includes our store in Roseville, California which opened on May 3, 2010. The store counts as of the end of both fiscal periods include one franchise location in Canada, our location in Nashville, Tennessee, and a store in Dallas, Texas, which was permanently closed on May 2, 2011. The Nashville location remains closed as of May 1, 2011.

(3) EBITDA, a non-GAAP measure, is defined as net income (loss) before income tax expense (benefit), interest expense (net) and depreciation and amortization. Adjusted EBITDA, also a non-GAAP measure, is defined as EBITDA plus (gain) loss on asset disposal, share-based compensation expense, pre-opening costs, reimbursement of affiliate expenses, and other non-cash or non-recurring charges. The company believes that EBITDA and Adjusted EBITDA (collectively, “EBITDA – Based Measures”) provide useful information to debt holders regarding the Company’s operating performance and its capacity to incur and service debt and fund capital expenditures. The Company believes that the EBITDA – Based Measures are used by many investors, analysts and rating agencies as a measure of performance. In addition, Adjusted EBITDA is approximately equal to “Consolidated EBITDA” as defined in our Senior Credit Facility and indentures relating to the Company’s senior notes. Neither of the EBITDA – Based Measures is defined by GAAP and neither should be considered in isolation or as an alternative to other financial data prepared in accordance with GAAP or as an indicator of the Company’s operating performance. EBITDA and Adjusted EBITDA as defined in this release may differ from similarly titled measures presented by other companies.

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