MINNEAPOLIS Famous Dave’s of America Inc., operator or franchisor of 176 barbecue restaurants, said last week it has paid down debt to reduce interest expense and closed on lease terminations for two locations in Atlanta.
The moves resulted in a 3-cents-per-share charge for early termination on a portion of its debt, and a 3-cents-per-share gain on reduced asset impairment costs for the terminated leases. Famous Dave’s will report its full second-quarter results on July 29. In the year-ago second quarter, the company posted earnings of 23 cents per share. On average, analysts expect the company to earn 22 cents per share in this year’s second quarter, according to data from Thomson Financial.
“The operating environment continues to be very difficult, as the graduation and summer barbecue season to date hasn’t delivered the sales improvement that we had hoped for,” Christopher O’Donnell, president and chief executive of Famous Dave’s, said in a statement. “In spite of these conditions, we have been paying extremely close attention to our cash flow and balance sheet in order to position the company for future growth when economic conditions improve.”
Famous Dave’s retired about $4.2 million of long-term debt at interest rates between 8.83 percent and 10.53 percent, the company said. The debt was originally due between February 2020 and June 2022. The company said it expects to repay an additional $2.6 million of long-term fixed-rate debt, with no early termination fee, by fiscal year-end. In fiscal 2009, total long-term debt repaid should result in about $600,000 of interest savings for fiscal 2010, the company said. As of the end of the second quarter, Famous Dave’s line of credit balance was $14.5 million.
Famous Dave’s also noted that its two lease terminations were completed for about $1 million, and that the company is in negotiations to terminate a third lease in Atlanta.
Growth plans for the casual-dining chain include between nine and 11 franchised openings, eight of which are already open and have qualified for a reduced royalty rate of 4 percent for 12 months from the date of opening. The company said that any additional openings this year and next will qualify for a reduced royalty rate of 1.5 percent for the first year of operation.
Contact Sarah E. Lockyer at [email protected].
