Famous Dave’s of America Inc. said on Monday that it defaulted on two requirements in its credit agreement, just months after it renegotiated that deal following a previous violation.
The default came in a first quarter ended April 3 that saw the barbecue chain continue to struggle with plunging sales.
Same-store sales fell 7.7 percent in the first quarter, on top of a decrease of 5.9 percent in the same quarter a year ago. The decline led to steep declines in restaurant margins and revenue.
The trends were “in line with trends experienced over the past several quarters,” CEO Adam Wright said in a statement. But, “our financial performance during the quarter was unsatisfactory."
[CHARTBEAT:3]
“We now have a new leadership team in place that is laser focused on improving performance and shares the [board of directors’] sense of urgency.”
Revenue fell 17 percent to $23.5 million, from $28.3 million. Net income increased to $830,000, or 12 cents per share, up from $197,000, or 3 cents in the same period a year ago.
The company said that restaurant level operating margin at company-owned restaurants fell 590 basis points as a result of higher food costs and higher labor costs.
The company said it complied with all of the covenants on its lending deal with Wells Fargo Bank, except for two: its cash flow ratio and minimum-adjusted earnings before interest, taxes, depreciation and amortization.
The company said that it has reached a forbearance agreement with Wells Fargo and will look to restructure its credit deal in the future. The company said it has net debt of $7.7 million, which is far lower than the $15.7 million in net debt it had a year ago.
Famous Dave’s has 178 restaurants, 141 of which are franchisee-operated locations.
Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze