Luby's Reports First Quarter Fiscal 2017 Results

HOUSTON - Jan. 25, 2017 // PRNewswire // - Luby's, Inc. (NYSE: LUB) ("Luby's") today announced unaudited financial results for its sixteen-week first quarter fiscal 2017, which ended on December 21, 2016. Comparisons in this press release for the first quarter fiscal 2017 are referred to as "first quarter."

First Quarter Key Metrics

  • Opened four Fuddruckers franchise locations: two domestic and two international
  • Capital expenditures decreased $0.7 million in the first quarter compared to the first quarter fiscal 2016
  • Same-store sales decreased 2.3%

Chris Pappas, President and CEO, commented, "We continue to execute our operational plans and initiatives to drive guest satisfaction. While we are not satisfied with our first quarter results, and despite the continued challenges that are pressuring sales throughout the restaurant industry, we remain optimistic in our ability to demonstrate improvement over the long term. Most importantly, our entire team remains focused on providing an enhanced guest experience at each of our brands to change the trajectory of our business and drive shareholder value."

Same-Store Sales Year-Over-Year Comparison

 
 

Quarter Ended

Four Quarters
Ended

 

December 21,
2016

December 16,
2015

August 31,
2016

 

Q1

2017(3)

Q1

2016(3)

Fiscal

2016(3)

 

(16 weeks vs 16 weeks)

(16 weeks vs 16 weeks)

(52 weeks vs 52 weeks)

Luby's Cafeterias

(2.2)%

1.2%

1.1%

Fuddruckers Restaurants

(1.6)%

1.3%

0.0%

Cheeseburger in Paradise

(7.8)%

5.5%

0.8%

Combo locations (1)

(2.3)%

(1.3)%

(1.4)%

Total same-store sales (2)

(2.3)%

1.4%

0.7%

 

   

(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 first quarter, there were 86 Luby's Cafeterias, 58 Fuddruckers Restaurants, 5 Combo locations, and 8 Cheeseburger in Paradise locations that met the definition of same-stores.

(3)

Q1 2017, Q1 2016, and fiscal 2016 same-store sales reflect the change in restaurant sales for the locations included in the same-store grouping for each of the comparable periods.

 

First Quarter Restaurant Sales:

($ thousands)

 
 

Quarter Ended

 

Restaurant Brand

December 21,
2016

December 16,
2015

Change

Change
(%)

 

(16 weeks)

(16 weeks)

(16 weeks vs 16 weeks)

Luby's Cafeterias

$

68,339

 

$

70,905

 

$

(2,566)

 

(3.6)%

 

Fuddruckers

28,748

 

30,880

 

(2,132)

 

(6.9)%

 

Combo locations

6,626

 

7,020

 

(394)

 

(5.6)%

 

Cheeseburger in Paradise

4,369

 

4,741

 

(372)

 

(7.8)%

 

Total Restaurant Sales

$

108,082

 

$

113,546

 

$

(5,464)

 

(4.8)%

 

*Restaurant sales in the first quarter decreased to $108.1 million, a decrease of 4.8% versus the first quarter fiscal 2016.

  • Luby's Cafeterias sales decreased $2.6 million versus the first quarter fiscal 2016, due to the closure of two locations and a 2.2% decrease in Luby's same-store sales. The 2.2% decrease was the result of a 1.4% decrease in guest traffic and a 0.8% decrease in average spend per guest.
  • Fuddruckers sales at company-owned restaurants decreased $2.1 million versus the first quarter fiscal 2016, due to six restaurant closings (five on a permanent basis and one on a temporary basis for remodeling) and a 1.6% decrease in same-store sales, offset by the opening of three Fuddruckers locations. The 1.6% decrease in same-store sales was the result of a 2.7% decrease in guest traffic offset by a 1.1% increase in average spend per guest.
  • Combo location sales decreased $0.4 million and represented 6.1% of total restaurant sales in the first quarter. Our sixth Combo location opened in the third quarter fiscal 2015 with a high volume of sales which was sustained through the first quarter fiscal 2016, creating a challenging comparison for first quarter fiscal 2017. The $0.4 million decrease in Combo location sales was due to that comparison and a 2.3% same-store sales decrease at the other five Combo locations.
  • Cheeseburger in Paradise sales decreased $0.4 million, or 7.8%, compared to a significant prior year same-store sales increase of 5.5%.

*Store level profit, defined as restaurant sales plus vending revenue less cost of food, payroll and related costs, other operating expenses, and occupancy costs, was $12.6 million, or 11.7% of restaurant sales, in the first quarter compared to $16.8 million, or 14.8% of restaurant sales, during the first quarter fiscal 2016. Lower sales volumes coupled with higher other operating expenses and higher average hourly wage rates as well as the fixed cost component of payroll and related costs (mainly management labor) led to this decrease in store level profitability. Store level profit is a non-GAAP measure, and reconciliation to income from continuing operations is presented after the financial statements.

*Culinary Contract Services revenues decreased to $4.3 million with 23 operating locations during the first quarter compared to $4.9 million with 28 operating locations during the first quarter fiscal 2016. Culinary Contract Services profit was 11.3% of Culinary Contract Services sales in the first quarter compared to 10.0% in the first quarter fiscal 2016.

*Franchise revenue decreased $254 thousand, or 12.0%, in the first quarter compared to first quarter fiscal 2016. The decrease included (1) a $151 thousand decrease in franchise royalties due in part to the closure of franchise locations, lower international royalty income, and same-store sales declines at franchise locations and (2) an approximate $103 thousand decrease in non-royalty related fee income due to fewer openings in the first quarter compared to the first quarter fiscal 2016. In the first quarter, franchisees opened two U.S. locations (in Pennsylvania and South Carolina) and two international locations (in Panama and the Dominican Republic). Four locations also closed during the first quarter.

Income from continuing operations was a loss of $5.5 million, or a loss of $0.19 per diluted share, compared to a loss of $1.7 million, or a loss of $0.06 per diluted share, in the first quarter fiscal 2016. Excluding special items, loss from continuing operations was $5.3 million, or a loss of $0.18 per diluted share, in the first quarter compared to a loss of $1.9 million, or a loss of $0.07 per diluted share, in the first quarter fiscal 2016.

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

before special items (1,2):

 
 

Q1 FY2017

Q1 FY2016

 

Item

Amount
($000s)

Per Share
($)

Amount
($000s)

Per Share
($)

 

Loss from continuing operations

 

$

(5,514)

   

$

(0.19)

   

$

(1,739)

   

$

(0.06)

   

Less:  Net loss (gain) on disposition of property and equipment, and provision for asset impairments

 

246

   

0.01

   

(184)

   

(0.01)

   

Loss from continuing operations, before special items

 

$

(5,268)

   

$

(0.18)

   

$

(1,923)

   

$

(0.07)

   

 

   

(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 first quarter with a debt balance outstanding of $39.4 million, up from $37.0 million at the end of fiscal 2016. During the first quarter, our capital expenditures were $5.0 million, compared to $5.7 million in the first quarter fiscal 2016. At the end of the first quarter, we had $1.4 million in cash and $160.6 million in total shareholders' equity.

Restaurant Counts:

 
 

August 31,
2016

 

FY17Q1

Openings

 

FY17Q1

Closings

 

December 21,
2016

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

Conference Call

Luby's will host a conference call on January 26, 2017 at 10:00 a.m. Central Time to discuss further its first quarter fiscal 2017 results. To access the call live, dial (412) 902-0030 and use the access code 13652944# at least 10 minutes prior to the start time, or listen live over the Internet by visiting the events page in the investor relations section of www.lubysinc.com. For those who cannot listen to the live call, a telephonic replay will be available through February 2, 2017 and may be accessed by calling (201) 612-7415 and using the access code 13652944#. Also, an archive of the webcast will be available after the call for a period of 90 days on the "Investors" section of the Company's website.

About Luby's

Luby's, Inc. (NYSE: LUB) operates 173 restaurants nationally: 91 Luby's Cafeterias, 73 Fuddruckers, 8 Cheeseburger in Paradise and one Bob Luby's Seafood Grill. Luby's is the franchisor for 114 Fuddruckers franchise locations across the United States (including Puerto Rico), Canada, Mexico, Italy, the Dominican Republic, Panama, and Colombia. Additionally, a licensee operates 34 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.

This press release contains statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release, other than statements of historical fact, are "forward-looking statements" for purposes of these provisions, including the statements under the caption "Outlook" and any other statements regarding scheduled openings of units, scheduled closures of units, sales of assets, expected proceeds from the sale of assets, expected levels of capital expenditures, effects of food commodity costs, anticipated financial results in future periods and expectations of industry conditions.

Luby's cautions readers that various factors could cause its actual financial and operational results to differ materially from those indicated by forward-looking statements made from time-to-time in news releases, reports, proxy statements, registration statements, and other written communications, as well as oral statements made from time to time by representatives of Luby's. The following factors, as well as any other cautionary language included in this press release, provide examples of risks, uncertainties and events that may cause Luby's actual results to differ materially from the expectations Luby's describes in such forward-looking statements: general business and economic conditions; the impact of competition; our operating initiatives; fluctuations in the costs of commodities, including beef, poultry, seafood, dairy, cheese and produce; increases in utility costs, including the costs of natural gas and other energy supplies; changes in the availability and cost of labor; the seasonality of Luby's business; changes in governmental regulations, including changes in minimum wages; the effects of inflation; the availability of credit; unfavorable publicity relating to operations, including publicity concerning food quality, illness or other health concerns or labor relations; the continued service of key management personnel; and other risks and uncertainties disclosed in Luby's annual reports on Form 10-K and quarterly reports on Form 10-Q.

Luby's, Inc.

Consolidated Statements of Operations (unaudited)

(In thousands, except per share data)

 
 

Quarter Ended

 

December 21,
2016

 

December 16,
2015

 

(16 weeks)

 

(16 weeks)

SALES:

     

Restaurant sales

$

108,082

   

$

113,546

 

Culinary contract services

4,297

   

4,915

 

Franchise revenue

1,871

   

2,125

 

Vending revenue

159

   

158

 

TOTAL SALES

114,409

   

120,744

 

COSTS AND EXPENSES:

     

Cost of food

30,850

   

32,434

 

Payroll and related costs

38,673

   

39,424

 

Other operating expenses

19,648

   

18,421

 

Occupancy costs

6,475

   

6,642

 

Opening costs

165

   

397

 

Cost of culinary contract services

3,811

   

4,422

 

Cost of franchise operations

580

   

612

 

Depreciation and amortization

6,550

   

7,014

 

Selling, general and administrative expenses

13,759

   

13,243

 

Provision for asset impairments

287

   

 

Net loss (gain)  on disposition of property and equipment

85

   

(279)

 

Total costs and expenses

120,883

   

122,330

 

LOSS FROM OPERATIONS

(6,474)

   

(1,586)

 

Interest income

1

   

1

 

Interest expense

(602)

   

(696)

 

Other income (expense), net

103

   

(118)

 

Loss before income taxes and discontinued operations

(6,972)

   

(2,399)

 

Benefit for income taxes

(1,458)

   

(660)

 

Loss from continuing operations

(5,514)

   

(1,739)

 

Loss from discontinued operations, net of income taxes

(72)

   

(72)

 

NET LOSS

$

(5,586)

   

$

(1,811)

 

Loss per share from continuing operations:

     

Basic

$

(0.19)

   

$

(0.06)

 

Assuming dilution

$

(0.19)

   

$

(0.06)

 

Loss per share from discontinued operations:

     

Basic

$

(0.00)

   

$

(0.00)

 

Assuming dilution

$

(0.00)

   

$

(0.00)

 

Net loss per share:

     

Basic

$

(0.19)

   

$

(0.06)

 

Assuming dilution

$

(0.19)

   

$

(0.06)

 

Weighted average shares outstanding:

     

Basic

29,339

   

29,133

 

Assuming dilution

29,339

   

29,133

 

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

 

December 21,
2016

December 16,
2015

 

(16 weeks)

(16 weeks)

Restaurant sales

94.5

%

94.0

%

Culinary contract services

3.8

%

4.1

%

Franchise revenue

1.6

%

1.8

%

Vending revenue

0.1

%

0.1

%

TOTAL SALES

100.0

%

100.0

%

     

COSTS AND EXPENSES:

   

(As a percentage of restaurant sales)

   

Cost of food

28.5

%

28.6

%

Payroll and related costs

35.8

%

34.7

%

Other operating expenses

18.2

%

16.2

%

Occupancy costs

6.0

%

5.8

%

Vending revenue

(0.1)

%

(0.1)

%

Store level profit

11.7

%

14.8

%

     

(As a percentage of total sales)

       

Marketing and advertising expenses

2.0

%

1.5

%

General and administrative expenses

10.0

%

9.5

%

Selling, general and administrative expenses

12.0

%

11.0

%

LOSS FROM OPERATIONS

(5.7)

%

(1.3)

%

 

Luby's, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

 
 

December 21,
2016

 

August 31,
2016

 

(Unaudited)

   

ASSETS

     

Current Assets:

     

Cash and cash equivalents

$

1,413

   

$

1,339

 

Trade accounts and other receivables, net

5,665

   

5,919

 

Food and supply inventories

5,036

   

4,596

 

Prepaid expenses

3,264

   

3,147

 

Assets related to discontinued operations

   

1

 

Deferred income taxes

419

   

540

 

  Total current assets

15,797

   

15,542

 

Property held for sale

5,235

   

5,522

 

Assets related to discontinued operations

3,122

   

3,192

 

Property and equipment, net

191,957

   

193,218

 

Intangible assets, net

20,630

   

21,074

 

Goodwill

1,605

   

1,605

 

Deferred income taxes

10,396

   

8,738

 

Other assets

3,506

   

3,334

 

Total assets

$

252,248

   

$

252,225

 

LIABILITIES AND SHAREHOLDERS' EQUITY

     

Current Liabilities:

     

Accounts payable

$

16,883

   

$

17,539

 

Liabilities related to discontinued operations

384

   

412

 

Current portion of credit facility debt

2,450

   

 

Accrued expenses and other liabilities

27,450

   

23,752

 

  Total current liabilities

47,167

   

41,703

 

Credit facility debt, less current portion

36,622

   

37,000

 

Liabilities related to discontinued operations

16

   

17

 

Other liabilities

7,843

   

7,752

 

  Total liabilities

$

91,648

   

$

86,472

 

Commitments and Contingencies

     

SHAREHOLDERS' EQUITY

     

Common stock, $0.32 par value; 100,000,000 shares authorized; shares issued were 29,461,030 and 29,325,754, respectively; shares outstanding were 28,961,030 and 28,825,754, respectively

9,428

   

9,421

 

Paid-in capital

30,774

   

30,348

 

Retained earnings

125,173

   

130,759

 

Less cost of treasury stock, 500,000 shares

(4,775)

   

(4,775)

 

  Total shareholders' equity

160,600

   

165,753

 

Total liabilities and shareholders' equity

$

252,248

   

$

252,225

 

 

Luby's, Inc.

Consolidated Statements of Cash Flows (unaudited)

(In thousands)

 
 

Quarter Ended

 

December 21,
2016

 

December 16,
2015

 

(16 weeks)

 

(16 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:

     

Net loss

$

(5,586)

   

$

(1,811)

 

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

     

Net loss (gain) on disposition of property and equipment

372

   

(279)

 

Depreciation and amortization

6,550

   

7,021

 

Amortization of debt issuance cost

67

   

148

 

Share-based compensation expense

433

   

520

 

Deferred tax benefit

(1,466)

   

(927)

 

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

370

   

4,672

 

Changes in operating assets and liabilities:

     

Decrease in trade accounts and other receivables

254

   

226

 

Increase in food and supply inventories

(440)

   

(968)

 

Decrease (Increase) in prepaid expenses and other assets

(59)

   

364

 

Increase in accounts payable, accrued expenses and other liabilities

3,116

   

2,049

 

Net cash provided by operating activities

3,241

   

6,343

 

CASH FLOWS FROM INVESTING ACTIVITIES:

     

Proceeds from disposal of assets and property held for sale

38

   

1,916

 

Decrease in notes receivable

   

17

 

Purchases of property and equipment

(4,980)

   

(5,729)

 

Net cash used in investing activities

(4,942)

   

(3,796)

 

CASH FLOWS FROM FINANCING ACTIVITIES:

     

Credit facility borrowings

45,700

   

27,000

 

Credit facility repayments

(78,300)

   

(29,500)

 

Proceeds from term loan

35,000

   

 

Debt issuance costs

(625)

   

(42)

 

Proceeds received on the exercise of employee stock options

   

75

 

Net cash provided by (used in) financing activities

1,775

   

(2,467)

 

Net increase in cash and cash equivalents

74

   

80

 

Cash and cash equivalents at beginning of period

1,339

   

1,501

 

Cash and cash equivalents at end of period

$

1,413

   

$

1,581

 

Cash paid for:

     

Income taxes

$

   

$

 

Interest

478

   

520

 

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 income (loss) from continuing operations, a GAAP measure:

 

Quarter Ended

 

December 21,
2016

 

December 16,
2015

 

(16 weeks)

 

(16 weeks)

       

Store level profit

$

12,595

   

$

16,783

 
       

Plus:

     

Sales from culinary contract services

4,297

   

4,915

 

Sales from franchise operations

1,871

   

2,125

 
       

Less:

     

Opening costs

165

   

397

 

Cost of culinary contract services

3,811

   

4,422

 

Cost of franchise operations

580

   

612

 

Depreciation and amortization

6,550

   

7,014

 

Selling, general and administrative expenses

13,759

   

13,243

 

Provision for asset impairments

287

   

 

Net loss (gain) on disposition of property and equipment

85

   

(279)

 

Interest income

(1)

   

(1)

 

Interest expense

602

   

696

 

Other income (expense), net

(103)

   

118

 

Provision (benefit) for income taxes

(1,458)

   

(660)

 

Income (loss) from continuing operations

$

(5,514)

   

$

(1,739)

 

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, non-cash compensation expense, and other income (expense).

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

 

December 21,
2016

December 16,
2015

 

(16 weeks)

(16 weeks)

Loss from continuing operations

$

(5,514)

 

$

(1,739)

 

Depreciation and amortization

6,550

 

7,014

 

Benefit for income taxes

(1,458)

 

(660)

 

Interest expense

602

 

696

 

Interest income

(1)

 

(1)

 

Other expense (income), net

(103)

 

118

 

Net loss (gain) on disposition of property and equipment

85

 

(279)

 

Provision for asset impairments

287

 

 

Non-cash compensation expense

577

 

529

 

Adjusted EBITDA

$

1,025

 

$

5,678

 

SOURCE Luby's, Inc.

Contact:

Rick Black / Ken Dennard
Dennard-Lascar Associates
Investor Relations
713-529-6600

###

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