DAB Dave & Busters

Dave & Buster's Announces Third Quarter Results of Operations DALLAS, Dec. 8 /PRNewswire-FirstCall/ -- Dave & Buster's, Inc. (NYSE:DAB), a leading operator of upscale restaurant/entertainment complexes, announced today that it has entered into a definitive merger agreement with an affiliate of Wellspring Capital Management LLC, a private equity firm, pursuant to which an affiliate of Wellspring will acquire all of Dave & Buster's outstanding shares for $18.05 per share in cash. The merger agreement has been unanimously approved by the Dave & Buster's board of directors. The total transaction value is approximately $375 million, including the assumption of Dave & Buster's debt. Completion of the transaction is subject to customary conditions and regulatory approvals, and the approval of Dave & Buster's shareholders. The parties expect that the merger will be consummated in the second quarter of 2006. Wellspring has furnished Dave & Buster's with commitment letters for the equity and debt financing necessary for the transaction. The merger is not subject to a financing condition. "We believe that this proposal to buy the company offers all of us as shareholders a unique opportunity to realize value at a time when the company has been challenged to perform up to expectations," said Buster Corley, Chief Executive Officer of Dave & Buster's. Dave Corriveau, President of Dave & Buster's, continued, "We have been impressed with Wellspring's level of commitment and financial backing. They will contribute to the enhancement of the Dave & Buster's brand with their management expertise, innovative operating and financing strategies and access to capital." Greg S. Feldman, Partner of Wellspring Capital, said, "Dave & Buster's has been a leader in combining high-quality food and interactive entertainment. We look forward to working with the Dave & Buster's management team to continue the expansion of the Dave & Buster's concept." Piper Jaffray & Co. is acting as exclusive financial advisor to Dave & Buster's in connection with the merger transaction and has rendered a fairness opinion to the Dave & Buster's Board of Directors. J.P. Morgan Securities Inc. is acting as exclusive financial advisor to Wellspring Capital and as sole lead arranger for the financing. THIRD QUARTER RESULTS OF OPERATIONS Separately, Dave & Buster's announced today its results of operations for its fiscal third quarter and 39 weeks ending October 30, 2005. Total revenue for the third quarter increased 25.7 percent to $105.6 million from $84.0 million in the prior year's comparable quarter. Food and beverage revenue increased 28.2 percent, and amusement and other revenue increased 22.7 percent. Revenue from comparable stores increased 3.2 percent for the quarter. Special event revenue on a comparable store basis was 13.9 percent of total revenue, compared to 14.5 percent of total revenue in the third quarter last year. The company estimates that hurricane Wilma reduced revenues for the quarter by approximately $0.3 million. Operating loss for the quarter was $(3.6) million compared to operating income of $0.7 million in the prior year. The current quarter includes $.5 million in previously disclosed expenses related to the second quarter closing of the Mall of America Jillian's location. In addition, pre-opening expenses of $1.5 million were incurred in the quarter compared to $0.9 million last year. Utility expense during the quarter increased by approximately 70 basis points compared to the same period last year primarily as a result of higher oil and natural gas prices. The net loss for the quarter was $(3.2) million, or $(0.23) per basic share compared to net income breakeven for the same period last year. Total revenues for the 39-week period increased 23.6 percent to $332.2 million from $268.9 million for the comparable period last year. Food and beverage revenue increased 27.2 percent, and amusement and other revenue increased 19.5 percent. Special event revenue on a comparable store basis was 13.6 percent of total revenue, compared to 13.5 percent of total revenue in the comparable period last year. Operating income was $5.1 million, compared to $12.1 million for the prior year. The period includes the pretax charge of $3.0 million for the closure of the Mall of America location. Pre-opening expenses during the 39-week period were $2.4 million compared to $1.0 million last year. Net income was $0.1 million, or $0.01 per diluted share, compared to $5.7 million, or $0.41 per diluted share, in the prior year. ABOUT DAVE & BUSTER'S Celebrating over 23 years of operations, Dave & Buster's was founded in 1982 and is one of the country's leading upscale, restaurant/entertainment concepts with 46 locations throughout the United States and in Canada. More information on the company, including the latest investor presentation is available on the company's Website, http://www.daveandbusters.com/ . ABOUT WELLSPRING Founded in 1995, Wellspring Capital Management LLC is a New York-based private equity firm with more than $2 billion in equity capital under management. The firm takes controlling positions in promising middle-market companies where it can realize substantial value by contributing innovative operating and financing strategies and capital. Wellspring's limited partners include some of the largest and most respected institutional investors in the U.S., Canada, and Europe. The firm consistently ranks among the top-performing private equity funds specializing in the middle market. Wellspring Capital's current portfolio includes investments in food distribution, for-profit, post-secondary education, golf retail, steel servicing, and other industries. For more information visit Wellspring Capital's website at http://www.wellspringcapital.com/ . NOTE CONCERNING THIRD QUARTER CONFERENCE CALL Tomorrow, Friday, December 9, 2005, at 11:30 a.m. Eastern Time (10:30 a.m. Central Time), Dave & Buster's will hold its regularly scheduled quarterly conference call to discuss its third quarter results of operations. The call will be webcast by CCBN and can be accessed at the Dave & Buster's web site at http://www.daveandbusters.com/. Individual investors can listen to the call through CCBN's individual investor center, http://www.companyboardroom.com/. In addition, investors can access the call by visiting any of the investor sites in the CCBN Individual Investor Network. Institutional investors can access the call via CCBN's password-protected event management site, http://www.streetevents.com/ . "Safe Harbor" Statements Under the Private Securities Litigation Reform Act of 1995 Certain information contained in this press release includes forward-looking statements. Forward-looking statements include statements regarding our expectations, beliefs, intentions, plans, projections, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical facts. These statements may be identified, without limitations, by the use of forward-looking terminology such as "may," "will," "anticipates," "expects," "projects," "believes," "intends," "should," or comparable terms or the negative thereof. All forward-looking statements included in this press release are based on information available to us on the date hereof. Such statements speak only as of the date hereof. These statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: our ability to open new high-volume restaurant/entertainment complexes; our ability to raise and access sufficient capital in the future; changes in consumer preferences, general economic conditions or consumer discretionary spending; the outbreak or continuation of war or other hostilities involving the United States; potential fluctuation in our quarterly operating result due to seasonality and other factors; the continued service of key management personnel; our ability to attract, motivate and retain qualified personnel; the impact of federal, state or local government regulations relating to our personnel or the sale of food or alcoholic beverages; the impact of litigation; the effect of competition in our industry; additional costs associated with compliance with the Sarbanes-Oxley Act and related regulations and requirements; and other risk factors described from time to time in our reports filed with the SEC. THIS COMMUNICATION IS BEING MADE IN RESPECT OF THE PROPOSED MERGER TRANSACTION INVOLVING DAVE & BUSTER'S, INC. AND AN AFFILIATE OF WELLSPRING CAPITAL MANAGEMENT LLC. IN CONNECTION WITH THE PROPOSED TRANSACTION, DAVE & BUSTER'S, INC. WILL BE FILING A PROXY STATEMENT AND RELEVANT DOCUMENTS CONCERNING THE TRANSACTION WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC"). STOCKHOLDERS OF DAVE & BUSTER'S, INC. ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. STOCKHOLDERS CAN OBTAIN FREE COPIES OF THE PROXY STATEMENT AND OTHER DOCUMENTS WHEN THEY BECOME AVAILABLE BY CONTACTING INVESTOR INFORMATION AT http://www.daveandbusters.com/ OR BY MAIL AT DAVE & BUSTER'S, INC. INVESTOR RELATIONS, 2481 MANANA DRIVE, DALLAS, TEXAS 75220, OR BY TELEPHONE: 972-458-8000. IN ADDITION, DOCUMENTS FILED WITH THE SEC BY DAVE AND BUSTER'S, INC. ARE AVAILABLE FREE OF CHARGE AT THE SEC'S WEB SITE AT http://www.sec.gov/. DAVE & BUSTER'S, INC. AND ITS DIRECTORS AND EXECUTIVE OFFICERS MAY BE DEEMED TO BE PARTICIPANTS IN THE SOLICITATION OF PROXIES FROM THE STOCKHOLDERS OF DAVE & BUSTER'S, INC. IN CONNECTION WITH THE PROPOSED TRANSACTION. INFORMATION REGARDING THE SPECIAL INTERESTS OF THESE DIRECTORS AND EXECUTIVE OFFICERS IN THE PROPOSED TRANSACTION WILL BE INCLUDED IN THE PROXY STATEMENT OF DAVE & BUSTER'S, INC. DESCRIBED ABOVE. INFORMATION REGARDING DAVE & BUSTER'S, INC.'S DIRECTORS AND EXECUTIVE OFFICERS IS ALSO AVAILABLE IN ITS PROXY STATEMENT FOR ITS 2005 ANNUAL MEETING OF STOCKHOLDERS, WHICH WAS FILED WITH THE SEC ON MAY 2, 2005. THIS DOCUMENT IS AVAILABLE FREE OF CHARGE AT THE SEC'S WEB SITE AT http://www.sec.gov/ AND FROM INVESTOR RELATIONS AT DAVE & BUSTER'S, INC. AS DESCRIBED ABOVE. DAVE & BUSTER'S, INC. Condensed Consolidated Balance Sheets (in thousands) (unaudited) October 30, 2005 January 30, 2005 ASSETS Current assets: Cash and cash equivalents $ 1,860 $ 7,624 Other current assets 47,888 34,581 Total current assets 49,748 42,205 Property and equipment, net 345,105 331,478 Other assets and deferred charges 21,767 23,725 Total assets $ 416,620 $ 397,408 Liabilities and Stockholders' Equity Total current liabilities $ 60,697 $ 49,861 Other long-term liabilities 74,292 70,251 Long-term debt 81,194 80,351 Stockholders' equity: Common stock 137 135 Paid-in capital 124,948 122,173 Restricted stock awards 1,998 1,454 Accumulated other comprehensive income 290 225 Retained earnings 74,910 74,804 202,283 198,791 Less: treasury stock 1,846 1,846 Total stockholders' equity 200,437 196,945 Total liabilities and stockholders' equity $ 416,620 $ 397,408 DAVE & BUSTER'S, INC. Consolidated Statements of Income (dollars in thousands, except per share amounts) (unaudited) 13 Weeks Ended 13 Weeks Ended October 30, 2005 October 31, 2004 (as restated) Food and beverage revenues $ 58,212 55.1% $ 45,395 54.0% Amusement and other revenues 47,433 44.9% 38,648 46.0% Total revenues 105,645 100.0% 84,043 100.0% Cost of products 20,858 19.7% 16,027 19.1% Operating payroll and benefits 31,590 29.9% 24,745 29.4% Other store operating expenses 37,530 35.5% 27,356 32.7% General and administrative expenses 7,819 7.4% 6,257 7.4% Depreciation and amortization 9,934 9.4% 8,089 9.6% Preopening costs 1,495 1.4% 876 1.0% Total operating expenses 109,226 103.3% 83,350 99.2% Operating income (loss) (3,581) (3.3)% 693 0.8% Interest expense, net 1,458 1.4% 832 1.0% Income (loss) before provision for income taxes (5,039) (4.7)% (139)(0.02)% Provision (benefit) for income taxes (1,839) (1.7)% (51)(0.01)% Net income (loss) $ (3,200) (3.0)% $ (88)(0.01)% Net income (loss) per share Basic $ (0.23) $ 0.00 Diluted $ (0.23) $ 0.00 Weighted average shares outstanding Basic weighted average shares outstanding 13,657 13,381 Diluted weighted average shares outstanding 13,657 13,381 Other information: Company operated stores open 45 34 EBITDA, which is earnings before interest, taxes, depreciation and amortization, is used by management, bankers and investors to evaluate a company's ability to repay debt and for compliance of certain debt covenants. Total net income (loss) $ (3,200) $ (88) Add back: depreciation and amortization 9,934 8,089 interest expense, net 1,458 832 provision for income taxes (1,839) (51) $ 6,353 $ 8,782 DAVE & BUSTER'S, INC. Consolidated Statements of Income (dollars in thousands, except per share amounts) (unaudited) 39 Weeks Ended 39 Weeks Ended October 30, 2005 October 31, 2004 (as restated) Food and beverage revenues $ 179,982 54.2% $ 141,446 52.6% Amusement and other revenues 152,227 45.8% 127,407 47.4% Total revenues 332,209 100.0% 268,853 100.0% Cost of products 63,061 19.0% 51,031 19.0% Operating payroll and benefits 96,665 29.1% 77,218 28.7% Other store operating expenses 110,339 33.2% 84,625 31.5% General and administrative expenses 22,715 6.8% 18,356 6.8% Depreciation and amortization 31,992 9.7% 24,484 9.1% Preopening costs 2,377 0.7% 1,012 0.4% Total operating expenses 327,149 98.5% 256,726 95.5% Operating income 5,060 1.5% 12,127 4.5% Interest expense, net 4,892 1.5% 3,412 1.3% Income before provision for income taxes 168 0.0% 8,715 3.2% Provision for income taxes 62 0.0% 3,001 1.1% Net income $ 106 0.0% $ 5,714 2.1% Net income per share Basic $ 0.01 $ 0.43 Diluted $ 0.01 $ 0.41 Weighted average shares outstanding Basic weighted average shares outstanding 13,562 13,302 Diluted weighted average shares outstanding 14,249 14,046 Other information: Company operated stores open 45 34 EBITDA, which is earnings before interest, taxes, depreciation and amortization, is used by management, bankers and investors to evaluate a company's ability to repay debt and for compliance of certain debt covenants. Total net income $ 106 $ 5,714 Add back: depreciation and amortization 31,992 24,484 interest expense, net 4,892 3,412 provision for income taxes 62 3,001 $ 37,052 $ 36,611 DAVE & BUSTER'S, INC. Consolidates Statements of Cash Flow (dollars in thousands) (unaudited) 39 Weeks Ended 39 Weeks Ended October 30, 2005 October 31, 2004 (as restated) Cash flows from operating activities: Income $ 106 $ 5,714 Adjustments to reconcile income to net cash provided by operating activities: Depreciation and amortization 31,992 24,484 Deferred income tax benefit (78) (2,086) Tax benefit related to stock option exercises 777 525 Amortization of restricted stock awards 544 386 Warrants related to convertible debt 192 191 Other, net 33 141 Changes in operating assets and liabilities Inventories (2,160) (1,638) Prepaid expenses (10,888) (1,459) Other current assets (260) 1,303 Other assets and deferred charges 3,591 1,548 Accounts payable 7,632 354 Accrued liabilities 2,045 2,648 Income taxes payable (4,452) (2,533) Deferred rent liability 2,935 (1,638) Other liabilities 1,033 3,677 Net cash provided by operating activities 33,042 31,617 Cash flows from investing activities: Capital expenditures (41,870) (28,721) Business acquisition --- (4,742) Proceeds from sales of property and equipment 198 519 Other investing activities (1,158) 86 Net cash used in investing activities (42,830) (32,858) Cash flows from financing activities: Borrowings under long-term debt 22,000 7,250 Repayments of long-term debt (19,974) (6,417) Proceeds from exercises of stock options 1,998 2,104 Net cash provided by (used in) financing activities 4,024 2,937 Increase (decrease) in cash and cash equivalents (5,764) 1,696 Beginning cash and cash equivalents 7,624 3,897 Ending cash and cash equivalents $ 1,860 $ 5,593 DAVE & BUSTER'S, INC. Earnings (Loss) per Share (dollars in thousands) (unaudited) The following table sets forth the computation of basic and diluted earnings (loss) per share: 13 Weeks Ended 39 Weeks Ended October 30, October 31, October 30, October 31, 2005 2004 2005 2004 (As restated, (As restated, Note 2) Note 2) Numerator for basic earnings (loss) per common share -- net income (loss) $ (3,200) $ (88) $ 106 $ 5,714 Impact of convertible debt interest and fees --- --- --- --- Amortization of convertible debt warrants --- --- --- --- Numerator for diluted earnings (loss) per common share $ (3,200) $ (88) $ 106 $ 5,714 Denominator for basic earnings (loss) per common share - weighted average shares (in thousands) 13,657 13,381 13,562 13,302 Dilutive securities: Employee stock options/restricted stock --- --- 561 632 Convertible debt --- --- --- --- Warrant shares --- --- 126 112 Denominator for diluted earnings per common share - adjusted weighted average shares (in thousands) 13,657 13,381 14,249 14,046 Basic earnings (loss) per common share $ (0.23) $ 0.00 $ 0.01 $ 0.43 Diluted earnings (loss) per common share $ (0.23) $ 0.00 $ 0.01 $ 0.41 Antidilutive shares excluded from the computation of diluted income (loss) per share (in thousands): Employee stock options/restricted stock 458 599 --- --- Convertible debt 2,322 2,322 2,322 2,322 Warrant shares 59 125 --- --- Total 2,839 3,046 2,322 2,322 DATASOURCE: Dave & Buster's, Inc. CONTACT: Jeff Elliott or Geralyn DeBusk, both of Halliburton Investor Relations, +1-972-458-8000, for Dave & Buster's, Inc. Web site: http://www.daveandbusters.com/ http://www.wellspringcapital.com/

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