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Luby’s Reports Second Quarter Fiscal 2017 Results

Same-store sales decreased 3.8%

Luby’s, Inc. (NYSE:  LUB) today announced unaudited financial results for its twelve-week second quarter fiscal 2017, which ended on March 15, 2017. Comparisons in this press release for the second quarter fiscal 2017 are referred to as “second quarter.”

Second Quarter Key Metrics

Chris Pappas, President and CEO, commented, “During the second quarter we achieved improved cost controls and reduced our capital expenditures as previously planned. Going forward we will continue our efforts to control costs while remaining focused on an enhanced guest experience across all of our brands in a reduced sales environment.  In addition, we continue to evaluate under-performing store locations and, when appropriate, close stores to improve overall company profitability.

“We opened three Fuddruckers franchise locations in the second quarter and one new company-owned location earlier this month in our third quarter of fiscal 2017. In December, we announced a new and exclusive partnership with H-E-B grocery stores in the state of Texas to sell Luby’s famous Mac & Cheese. We then expanded our retail product line to include Luby’s famous Fried Fish in February. We remain encouraged by the sales of these dishes and for the opportunity this additional product branding establishes for our company.  We remain optimistic in our ability to demonstrate financial improvement and to strengthen our iconic brands that guests have loved and trusted for decades.”

 

Same-Store Sales Year-Over-Year Comparison

Quarter Ended

Two Quarters
Ended

December 21,
 2016

March 15,
 2017

March 15,
 2017

Q1

2017(3)

Q2

2017(3)

YTD Q2

2017(3)

(16 weeks vs 16 weeks)

(12 weeks vs 12 weeks)

(28 weeks vs 28 weeks)

Luby’s Cafeterias

(2.2)%

(4.4)%

(3.1)%

Fuddruckers Restaurants

(1.6)%

(1.1)%

(1.4)%

Combo locations (1)

(2.3)%

(6.5)%

(4.3)%

Cheeseburger in Paradise

(7.8)%

(7.3)%

(7.6)%

Total same-store sales (2)

(2.3)%

(3.8)%

(2.9)%

 

(1)

Combo locations consist of a side-by-side Luby’s Cafeteria and Fuddruckers Restaurant at one property location.

(2)

Luby’s includes a restaurant’s sales results into the same-store sales calculation in the quarter after that store has been open for six complete consecutive quarters. In the second quarter, there were 86 Luby’s Cafeterias, 58 Fuddruckers locations, all 6 Combo locations, and all 8 Cheeseburger in Paradise locations that met the definition of same-stores. 

(3)

Q1 2017, Q2 2017, and Year-to-date Fiscal  2017 same-store sales reflect the change in restaurant sales for the locations included in the same-store grouping for each of the comparable periods.

 

Second Quarter Restaurant Sales: 

($ thousands)

 

Quarter Ended

Restaurant Brand

March 15,
 2017

March 9,
 2016

Change

($)

Change

(%)

(12 weeks)

(12 weeks)

(12 weeks vs 12 weeks)

Luby’s Cafeterias

$

49,975

$

52,915

$

(2,940)

(5.6)%

Fuddruckers

22,860

24,567

(1,707)

(6.9)%

Combo locations

4,951

5,295

(344)

(6.5)%

Cheeseburger in Paradise

3,278

3,537

(259)

(7.3)%

Total Restaurant Sales

$

81,064

$

86,314

$

(5,250)

(6.1)%

 

 

Reconciliation of Loss from continuing operations to Loss from continuing operations,

before special items (1,2):

 

Q2 FY2017

Q2 FY2016

Item

Amount
($000s)

Per Share 
($)

Amount 
($000s)

Per Share
($)

Loss from continuing operations

$

(12,836)

$

(0.44)

$

(582)

$

(0.02)

Net loss (gain) on disposition of property and equipment, and provision for asset impairments and restaurant closings, net

4,153

0.14

(343)

(0.01)

Deferred tax asset valuation allowance

$

6,627

0.22

Loss from continuing operations, before special items

$

(2,056)

$

(0.07)

$

(925)

$

(0.03)

 

(1)

We use loss from continuing operations, before special items, in analyzing results, which is a non-GAAP financial measure. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. Luby’s has reconciled loss from continuing operations, before special items, to loss from continuing operations, the nearest GAAP measure in context.

(2)

Per share amounts are per diluted share after tax (adjustments assume an effective 34% tax rate).

Balance Sheet and Capital Expenditures

We ended the second quarter with a debt balance outstanding of $37.4 million, up from $37.0 million at the end of fiscal 2016. During the second quarter, our capital expenditures decreased to $3.0 million, compared to $5.2 million in the second quarter fiscal 2016. At the end of the second quarter, we had $1.4 million in cash and $147.9 million in total shareholders’ equity.

 

Restaurant Counts:

 

August 31,
2016

FY17 YTD 
Q2
Openings

FY17 YTD 
Q2
Closings

March 15, 
2017

Luby’s Cafeterias(1)

91

91

Fuddruckers Restaurants(1)

75

(2)

73

Cheeseburger in Paradise

8

8

Other restaurants(2)

1

1

Total

175

(2)

173

 

(1)

  Includes 6 restaurants that are part of Combo locations

(2)

  Other restaurants include one Bob Luby’s Seafood Grill

About Luby’s

Luby’s, Inc. (NYSE:  LUB) operates 172 restaurants nationally as of April 19, 2017: 90 Luby’s Cafeterias, 73 Fuddruckers, 8 Cheeseburger in Paradise and one Bob Luby’s Seafood Grill. Luby’s is the franchisor for 113 Fuddruckers franchise locations across the United States(including Puerto Rico), Canada, Mexico, Italy, the Dominican Republic, and Colombia. Additionally, a licensee operates 35 restaurants with the exclusive right to use the Fuddruckers proprietary marks, trade dress, and system in certain countries in the Middle East. The Company does not receive revenue or royalties from these Middle East restaurants. Luby’s Culinary Contract Services provides food service management to 23 sites consisting of healthcare and corporate dining locations.

Luby’s, Inc.

Consolidated Statements of Operations (unaudited)

(In thousands, except per share data)

Quarter Ended

Two Quarters Ended

March 15,
 2017

March 9,
 2016

March 15,
 2017

March 9,
 2016

(12 weeks)

(12 weeks)

(28 weeks)

(28 weeks)

SALES:

Restaurant sales

$

81,064

$

86,314

$

189,147

$

199,861

Culinary contract services

3,306

3,918

7,602

8,833

Franchise revenue

1,819

1,700

3,691

3,825

Vending revenue

125

137

284

295

TOTAL SALES

86,314

92,069

200,724

212,814

COSTS AND EXPENSES:

Cost of food

22,583

24,600

53,433

57,034

Payroll and related costs

29,295

29,834

67,968

69,258

Other operating expenses

13,763

13,736

33,411

32,157

Occupancy costs

5,322

5,535

11,797

12,177

Opening costs

132

174

298

571

Cost of culinary contract services

2,960

3,520

6,771

7,942

Cost of franchise operations

436

428

1,016

1,039

Depreciation and amortization

4,788

5,220

11,338

12,235

Selling, general and administrative expenses

9,008

9,843

22,767

23,086

Provision for asset impairments and restaurant closings, net

5,963

37

6,250

37

Net loss (gain) on disposition of property and equipment

329

(556)

414

(835)

Total costs and expenses

94,579

92,371

215,463

214,701

LOSS FROM OPERATIONS

(8,265)

(302)

(14,739)

(1,887)

Interest income

1

1

3

2

Interest expense

(727)

(495)

(1,330)

(1,191)

Other income (expense), net

(242)

29

(139)

(90)

Loss before income taxes and discontinued operations

(9,233)

(767)

(16,205)

(3,166)

Provision (benefit) for income taxes

3,603

(185)

2,145

(845)

Loss from continuing operations

(12,836)

(582)

(18,350)

(2,321)

Loss from discontinued operations, net of income taxes

(343)

(17)

(415)

(89)

NET LOSS

$

(13,179)

$

(599)

$

(18,765)

$

(2,410)

Loss per share from continuing operations:

Basic

$

(0.44)

$

(0.02)

$

(0.62)

$

(0.08)

Assuming dilution

$

(0.44)

$

(0.02)

$

(0.62)

$

(0.08)

Loss per share from discontinued operations:

Basic

$

(0.01)

$

(0.00)

$

(0.02)

$

(0.00)

Assuming dilution

$

(0.01)

$

(0.00)

$

(0.02)

$

(0.00)

Net loss per share:

Basic

$

(0.45)

$

(0.02)

$

(0.64)

$

(0.08)

Assuming dilution

$

(0.45)

$

(0.02)

$

(0.64)

$

(0.08)

Weighted average shares outstanding:

Basic

29,522

29,247

29,418

29,182

Assuming dilution

29,522

29,247

29,418

29,182

The following table contains information derived from the Company’s Consolidated Statements of Operations expressed as a percentage of sales. Percentages may not total due to rounding.

 

Quarter Ended

Two Quarters Ended

March 15,
 2017

March 9,
 2016

March 15,
 2017

March 9,
 2016

(12 weeks)

(12 weeks)

(28 weeks)

(28 weeks)

Restaurant sales

93.9

%

93.7

%

94.2

%

93.9

%

Culinary contract services

3.8

%

4.3

%

3.8

%

4.2

%

Franchise revenue

2.1

%

1.8

%

1.8

%

1.8

%

Vending revenue

0.1

%

0.1

%

0.1

%

0.1

%

TOTAL SALES

100.0

%

100.0

%

100.0

%

100.0

%

COSTS AND EXPENSES:

(As a percentage of restaurant sales)

Cost of food

27.9

%

28.5

%

28.2

%

28.5

%

Payroll and related costs

36.1

%

34.6

%

35.9

%

34.7

%

Other operating expenses

17.0

%

15.9

%

17.7

%

16.1

%

Occupancy costs

6.6

%

6.4

%

6.2

%

6.1

%

Vending revenue

(0.2)

%

(0.2)

%

(0.2)

%

(0.1)

%

Store level profit

12.6

%

14.8

%

12.1

%

14.8

%

(As a percentage of total sales)

Marketing and advertising expenses

1.7

%

1.6

%

1.9

%

1.6

%

General and administrative expenses

8.7

%

9.1

%

9.4

%

9.2

%

Selling, general and administrative expenses

10.4

%

10.7

%

11.3

%

10.8

%

LOSS FROM OPERATIONS

(9.6)

%

(0.3)

%

(7.3)

%

(0.9)

%

 

Luby’s, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

March 15,
 2017

August 31,
 2016

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

1,352

$

1,339

Trade accounts and other receivables, net

5,389

5,919

Food and supply inventories

4,589

4,596

Prepaid expenses

3,035

3,147

Assets related to discontinued operations

1

Deferred income taxes

255

540

Total current assets

14,620

15,542

Property held for sale

3,929

5,522

Assets related to discontinued operations

2,830

3,192

Property and equipment, net

185,067

193,218

Intangible assets, net

20,298

21,074

Goodwill

1,068

1,605

Deferred income taxes

7,011

8,738

Other assets

3,278

3,334

Total assets

$

238,101

$

252,225

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

$

18,311

$

17,539

Liabilities related to discontinued operations

387

412

Current portion of credit facility debt

2,450

Accrued expenses and other liabilities

26,321

23,752

Total current liabilities

47,469

41,703

Credit facility debt, less current portion

34,617

37,000

Liabilities related to discontinued operations

16

17

Other liabilities

8,141

7,752

Total liabilities

$

90,243

$

86,472

Commitments and Contingencies

SHAREHOLDERS’ EQUITY

Common stock, $0.32 par value; 100,000,000 shares authorized; shares issued were 29,566,355 and 29,440,041, respectively; shares outstanding were 29,066,355 and 28,940,041, respectively

9,461

9,421

Paid-in capital

31,178

30,348

Retained earnings

111,994

130,759

Less cost of treasury stock, 500,000 shares

(4,775)

(4,775)

   Total shareholders’ equity

147,858

165,753

Total liabilities and shareholders’ equity

$

238,101

$

252,225

 

Luby’s, Inc.

Consolidated Statements of Cash Flows (unaudited)

(In thousands)

Two Quarters Ended

March 15,
 2017

March 9,
 2016

(28 weeks)

(28 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(18,765)

$

(2,410)

Adjustments to reconcile net loss to net cash provided by operating activities:

Provision for asset impairments and net (gains) on property sales

6,664

(798)

Depreciation and amortization

11,338

12,250

Amortization of debt issuance cost

283

202

Share-based compensation expense

870

803

Deferred tax provision (benefit)

2,399

(1,247)

Cash provided by operating activities before changes in operating assets and liabilities

2,789

8,800

Changes in operating assets and liabilities:

Decrease (Increase) in trade accounts and other receivables

530

(214)

Decrease (Increase) in food and supply inventories

7

(805)

Decrease in prepaid expenses and other assets

210

381

Increase (Decrease) in accounts payable, accrued expenses and other liabilities

3,067

(971)

Net cash provided by operating activities

6,603

7,191

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from disposal of assets and property held for sale

1,631

4,167

Decrease in notes receivable

17

Purchases of property and equipment

(7,962)

(10,970)

Net cash used in investing activities

(6,331)

(6,786)

CASH FLOWS FROM FINANCING ACTIVITIES:

Revolver borrowings

65,700

50,700

Revolver repayments

(99,700)

(51,200)

Proceeds from term loan

35,000

Term loan repayments

(613)

Debt issuance costs

(646)

(42)

Proceeds received on the exercise of employee stock options

75

Net cash used in financing activities

(259)

(467)

Net increase (decrease) in cash and cash equivalents

13

(62)

Cash and cash equivalents at beginning of period

1,339

1,501

Cash and cash equivalents at end of period

$

1,352

$

1,439

Cash paid for:

Income taxes

$

$

Interest

679

951

Although store level profit, defined as restaurant sales plus vending revenue, less cost of food, payroll and related costs, other operating expenses, and occupancy costs is a non-GAAP measure, we believe its presentation is useful because it explicitly shows the results of our most significant reportable segment.  The following table reconciles between store level profit, a non-GAAP measure to loss from continuing operations, a GAAP measure:

 

Quarter Ended

Two Quarters Ended

March 15,
 2017

March 9,
 2016

March 15,
 2017

March 9,
 2016

(12 weeks)

(12 weeks)

(28 weeks)

(28 weeks)

Store level profit

$

10,226

$

12,746

$

22,822

$

29,530

Plus:

Sales from culinary contract services

3,306

3,918

7,602

8,833

Sales from franchise operations

1,819

1,700

3,691

3,825

Less:

Opening costs

132

174

298

571

Cost of culinary contract services

2,960

3,520

6,771

7,942

Cost of franchise operations

436

428

1,016

1,039

Depreciation and amortization

4,788

5,220

11,338

12,235

Selling, general and administrative expenses

9,008

9,843

22,767

23,086

Provision for asset impairments and restaurant closings, net

5,963

37

6,250

37

Net loss (gain) on disposition of property and equipment

329

(556)

414

(835)

Interest income

(1)

(1)

(3)

(2)

Interest expense

727

495

1,330

1,191

Other income (expense), net

242

(29)

139

90

Provision (benefit) for income taxes

3,603

(185)

2,145

(845)

Loss from continuing operations

$

(12,836)

$

(582)

$

(18,350)

$

(2,321)

Adjusted EBITDA

Adjusted EBITDA is defined as income (loss) from continuing operations before interest, provision (benefit) for income taxes and depreciation and amortization and excluding net gain (loss) on disposing of property and equipment, provision for asset impairments and restaurant closings, non-cash compensation expense, franchise taxes, and decrease / (increase) in fair value of derivatives.

Adjusted EBITDA is intended as a supplemental measure of our performance that is not required by, or presented in accordance with GAAP. We believe Adjusted EBITDA  provides useful information to management and investors in valuing the Company and evaluating ongoing operating results and trends and in comparing our results to other competitors. Our management uses Adjusted EBITDA in evaluating management’s performance when determining incentive compensation.

Adjusted EBITDA, as defined, may not be comparable to other similarly titled measures as computed by other companies. These measures should be considered supplemental and not a substitute or superior to other GAAP performance measures.

 

($ thousands)

Quarter Ended

Two Quarters Ended

March 15,
 2017

March 9,
 2016

March 15,
 2017

March 9,
 2016

(12 weeks)

(12 weeks)

(28 weeks)

(28 weeks)

Loss from continuing operations

$

(12,836)

$

(582)

$

(18,350)

$

(2,321)

Depreciation and amortization

4,788

5,220

11,338

12,235

Provision (benefit) for income taxes

3,603

(185)

2,145

(845)

Interest expense

727

495

1,330

1,191

Interest income

(1)

(1)

(3)

(2)

Net loss (gain) on disposition of property and equipment

329

(556)

414

(835)

Provision for asset impairments and restaurant closings, net

5,963

37

6,250

37

Non-cash compensation expense

689

443

1,458

1,169

Franchise Taxes

42

42

97

97

Decrease / (Increase) in Fair Value of Derivative

(46)

45

Adjusted EBITDA

$

3,258

$

4,913

$

4,724

$

10,726

Posted by on April 19, 2017.

Categories: Financial

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