Luby's Reports Third Quarter Fiscal 2020 Results
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Luby's Reports Third Quarter Fiscal 2020 Results

HOUSTON, July 20, 2020 // PRNewswire // - Luby's, Inc. (NYSE: LUB) ("Luby's") today announced unaudited financial results for its twelve-week third quarter fiscal 2020 ended June 3, 2020, referred to as "third quarter." Comparisons in this earnings release are for the third quarter compared to the twelve-week third quarter fiscal 2019.

Third Quarter Restaurant Sales:
($ thousands)

Restaurant Brand

Q3

2020

Q3

2019

Change

($)

Change

(%)

   Luby's Cafeterias

$

11,857

 

$

44,930

 

$

(33,073)

 

(73.6)

%

   Combo locations

540

 

4,591

 

(4,051)

 

(88.2)

%

Luby's cafeteria segment

12,397

 

49,521

 

(37,124)

 

(75.0)

%

Fuddruckers restaurants segment

1,405

 

15,312

 

(13,907)

 

(90.8)

%

Cheeseburger in Paradise segment

30

 

778

 

(748)

 

(96.1)

%

Total Restaurant Sales

$

13,832

 

$

65,611

 

$

(51,779)

 

(78.9)

%

Luby's restaurant sales were significantly impacted (like all restaurant operators) by the unprecedented nature of the COVID-19 pandemic and sate and local governments' responses, which resulted in temporary store closures and limited service at operating stores.

Restaurant Counts:

 

August 28, 2019

 

FY20 YTDQ3

Openings

 

FY20 YTDQ3

Closings

 

June 3,

2020

Luby's Cafeterias(1)

79

   

   

(3)

   

76

 

Fuddruckers Restaurants(1)

44

   

   

(13)

   

31

 

Cheeseburger in Paradise

1

   

   

   

1

 

Total

124

   

   

(16)

   

108

 
 

(1)     Includes 6 restaurants that are part of Combo locations

As of the date of this release, Luby's is operating 43 stand-alone Luby's Cafeterias, 3 Combo locations, and 17 Fuddruckers Restaurants. The remaining locations (included in the restaurant counts as of June 3, 2020 above) were classified as temporarily closed.

Previously announced results of strategic review process conducted by Luby's Board of Directors

On June 3, 2020, we announced that our Board of Directors approved a course of action whereby we will immediately pursue the sale of our operating divisions and assets, including real estate assets, or the sale of the Company in its entirety, and distribute the net proceeds to our stockholders after payment of debt and other obligations. During the sale process, many of our restaurants will remain open.

Comments related to our operations in the context of COVID-19

Beginning in May 2020, we began to gradually reopen the dining rooms with state-mandated limits on guest capacity at the 28 Luby's Cafeterias locations and 3 Fuddruckers locations that had been previously operating with food-to-go service only. We also began to reopen restaurants that were temporarily closed. As of June 3, 2020, there were 31 Luby's Cafeteria's and Combo locations, and 8 Fuddruckers restaurants operating, all of which had their dining rooms open at limited capacity. There were 59 franchise locations in operation as of June 3, 2020. We are continuing a gradual reopening of our restaurants and as of the date of this release there were 46 stand-alone Luby's Cafeteria's and Combo locations and 17 Fuddruckers Restaurants operating with dining rooms open at limited capacity and there were 64 franchise locations in operation. By the end of the fiscal third quarter, for the stores that were in operation, we were achieving weekly sales levels in excess of 80% of prior year levels at our cafeteria brand and in excess of 70% at our Fuddruckers brand. Approximately 40% of our restaurant sales were for off-premise dining (food-to-go and delivery). At these sales levels and with a re-defined operating model, we are generating positive store level profit, in the aggregate, at these 46 cafeteria and 18 Fuddruckers locations. Within our Culinary Contract Services segment, we continue operations at each of our clients' hospital locations. In addition, we experienced increased demand for our Luby's-branded frozen packaged good products that are sold through HEB, our third-party grocery retail partner in Texas.

In response to the changed operating environment as a result of the COVID-19 pandemic, we took the following actions:

  • We revamped restaurant operations to generate cost efficiencies resulting in higher restaurant operating margins even while sales levels have not returned to pre-COVID-19 pandemic levels. As the restaurants adapted to the new operating environment, a lower labor cost model was deployed, food costs declined as menu offerings were concentrated among the historically top selling items, and various restaurant service and supplier costs were reevaluated. As a result of these changes, we achieved store level profit of approximately $1.0 million in the last month of our fiscal third quarter at the restaurants that were operational.
  • We began restructuring corporate overhead earlier in calendar 2020 prior to the COVID-19 pandemic, including a transition to a 3rd party provider for certain accounting and payroll functions. Significant further restructuring took place in April, May, and June of 2020, as we reviewed all corporate service providers, information technology needs, and personnel requirements to support a reduced level of operations going forward. As a result of these restructuring efforts that began earlier in calendar 2020 and accelerated as a result of the pandemic, we have reduced our general and administrative expense by over 50%.
  • In addition to the approximate $7.2 million proceeds in property sales achieved in fiscal 2020 through the third quarter, we generated an additional $10.7 million in in June 2020 and anticipate an additional $9.2 million proceeds from property sales before the end of fiscal 2020 in August.

As of this release, the uncertainty regarding the spread of the COVID-19 pandemic and the timing of the economic recovery, could continue to materially impact our results of operations and cash flows.

About Luby's

Luby's, Inc. (NYSE: LUB) operates two core restaurant brands: Luby's Cafeterias and Fuddruckers. Luby's is also the franchisor for the Fuddruckers restaurant brand. In addition, through its Luby's Culinary Contract Services business segment, Luby's provides food service management to sites consisting of healthcare, corporate dining locations, sports stadiums, and sales through retail grocery stores.

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; disruptions to our business from the COVID-19 pandemic, including the duration of government mandated and voluntary shut-down of our operations, the speed with which the Company's restaurants can safely be reopened, the level of guest demand following reopening, and the impacts on our financial resources and liquidity; the continued service of key management personnel; and other risks and uncertainties disclosed in Luby's annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-k.

Luby's, Inc.
Consolidated Statements of Operations (unaudited)
(In thousands, except per share data)   

 
 

Quarter Ended

 

Three Quarters Ended

 

June 3,

2020

 

June 5,

2019

 

June 3,

2020

 

June 5,

2019

 

(12 weeks)

 

(12 weeks)

 

(40 weeks)

 

(40 weeks)

SALES:

             

Restaurant sales

$

13,832

   

$

65,611

   

$

157,781

   

$

222,079

 

Culinary contract services

4,963

   

7,571

   

21,735

   

24,610

 

Franchise revenue

193

   

1,482

   

3,058

   

5,126

 

Vending revenue

6

   

102

   

130

   

292

 

TOTAL SALES

18,994

   

74,766

   

182,704

   

252,107

 

COSTS AND EXPENSES:

             

Cost of food

4,039

   

18,478

   

45,378

   

61,707

 

Payroll and related costs

5,487

   

25,015

   

61,402

   

84,258

 

Other operating expenses

5,766

   

11,491

   

30,625

   

39,404

 

Occupancy costs

3,696

   

4,023

   

12,470

   

14,064

 

Opening costs

   

6

   

14

   

49

 

Cost of culinary contract services

4,712

   

6,791

   

20,060

   

22,324

 

Cost of franchise operations

437

   

330

   

1,411

   

849

 

Depreciation and amortization

2,709

   

2,927

   

9,149

   

11,052

 

Selling, general and administrative expenses

3,339

   

8,623

   

20,313

   

26,386

 

Other Charges

164

   

803

   

2,912

   

3,280

 

Provision for asset impairments and restaurant closings

12,708

   

675

   

14,478

   

3,097

 

Net gain on disposition of property and equipment

(364)

   

(434)

   

(2,861)

   

(12,935)

 

Total costs and expenses

42,693

   

78,728

   

215,351

   

253,535

 

LOSS FROM OPERATIONS

(23,699)

   

(3,962)

   

(32,647)

   

(1,428)

 

Interest income

19

   

11

   

47

   

30

 

Interest expense

(1,641)

   

(1,324)

   

(5,076)

   

(4,593)

 

Other income, net

402

   

112

   

790

   

198

 

Loss before income taxes and discontinued operations

(24,919)

   

(5,163)

   

(36,886)

   

(5,793)

 

Provision for income taxes

53

   

132

   

210

   

346

 

Loss from continuing operations

(24,972)

   

(5,295)

   

(37,096)

   

(6,139)

 

Loss from discontinued operations, net of income taxes

(7)

   

(6)

   

(23)

   

(18)

 

NET LOSS

$

(24,979)

   

$

(5,301)

   

$

(37,119)

   

$

(6,157)

 

Loss per share from continuing operations:

             

Basic

$

(0.82)

   

$

(0.18)

   

$

(1.23)

   

$

(0.21)

 

Assuming dilution

$

(0.82)

   

$

(0.18)

   

$

(1.23)

   

$

(0.21)

 

Loss per share from discontinued operations:

             

Basic

$

0.00

   

$

0.00

   

$

0.00

   

$

0.00

 

Assuming dilution

$

0.00

   

$

0.00

   

$

0.00

   

$

0.00

 

Loss per share:

             

Basic

$

(0.82)

   

$

(0.18)

   

$

(1.23)

   

$

(0.21)

 

Assuming dilution

$

(0.82)

   

$

(0.18)

   

$

(1.23)

   

$

(0.21)

 

Weighted average shares outstanding:

             

Basic

30,398

   

29,874

   

30,206

   

29,732

 

Assuming dilution

30,398

   

29,874

   

30,206

   

29,732

 

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

 

Three Quarters Ended

 

June 3,

2020

 

June 5,

2019

 

June 3,

2020

 

June 5,

2019

 

(12 weeks)

 

(12 weeks)

 

(40 weeks)

 

(40 weeks)

               

Restaurant sales

72.8

%

 

87.8

%

 

86.4

%

 

88.1

%

Culinary contract services

26.1

%

 

10.1

%

 

11.9

%

 

9.8

%

Franchise revenue

1.0

%

 

2.0

%

 

1.7

%

 

2.0

%

Vending revenue

0.0

%

 

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

29.2

%

 

28.2

%

 

28.8

%

 

27.8

%

Payroll and related costs

39.7

%

 

38.1

%

 

38.9

%

 

37.9

%

Other operating expenses

41.7

%

 

17.5

%

 

19.4

%

 

17.7

%

Occupancy costs

26.7

%

 

6.1

%

 

7.9

%

 

6.3

%

Vending revenue

0.0

%

 

(0.2)

%

 

(0.1)

%

 

(0.1)

%

Store level profit

(37.2)

%

 

10.2

%

 

5.1

%

 

10.3

%

               

(As a percentage of total sales)

             

General and administrative expenses

16.1

%

 

9.8

%

 

9.3

%

 

9.3

%

Marketing and advertising expenses

1.5

%

 

1.7

%

 

1.8

%

 

1.2

%

Selling, general and administrative expenses

17.6

%

 

11.5

%

 

11.1

%

 

10.5

%

 

Luby's, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)

 
 

June 3,

2020

 

August 28,

2019

 

 (Unaudited)

   
       

ASSETS

     

Current Assets:

     

Cash and cash equivalents

$

14,122

   

$

3,640

 

Restricted cash and cash equivalents

7,917

   

9,116

 

Trade accounts and other receivables, net

5,498

   

8,852

 

Food and supply inventories

2,120

   

3,432

 

Prepaid expenses

1,399

   

2,355

 

Total current assets

31,056

   

27,395

 

Property held for sale

17,916

   

16,488

 

Assets related to discontinued operations

1,691

   

1,813

 

Property and equipment, net

104,288

   

121,743

 

Intangible assets, net

15,695

   

16,781

 

Goodwill

195

   

514

 

Operating lease right-of-use assets

17,790

   

 

Other assets

625

   

1,266

 

Total assets

$

189,256

   

$

186,000

 

LIABILITIES AND SHAREHOLDERS' EQUITY

     

Current Liabilities:

     

Accounts payable

$

9,808

   

$

8,465

 

Liabilities related to discontinued operations

11

   

14

 

Current portion of long-term debt

6,386

   

 

Operating lease liabilities-current

4,412

   

 

Accrued expenses and other liabilities

21,360

   

24,475

 

Total current liabilities

41,977

   

32,954

 

Long-term debt, less current portion

57,316

   

45,439

 

Operating lease liabilities-noncurrent

22,771

   

 

Other liabilities

1,550

   

6,577

 

Total liabilities

$

123,614

   

$

84,970

 

Commitments and Contingencies

     

SHAREHOLDERS' EQUITY

     

Common stock, 0.32 par value; 100,000,000 shares authorized; shares issued were
30,998,504 and 30,478,972; and shares outstanding were 30,498,504 and 29,978,972 at
June 3, 2020 and August 28, 2019, respectively

9,921

   

9,753

 

Paid-in capital

35,407

   

34,870

 

Retained earnings

25,089

   

61,182

 

Less cost of treasury stock, 500,000 shares

(4,775)

   

(4,775)

 

Total shareholders' equity

65,642

   

101,030

 

Total liabilities and shareholders' equity

$

189,256

   

$

186,000

 

 

Luby's, Inc.
Consolidated Statements of Cash Flows (unaudited)
(In thousands)

 
 

Quarter Ended

 

June 3,

2020

 

June 5,

2019

 

(40 weeks)

 

(40 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:

     

Net loss

$

(37,119)

   

$

(6,157)

 

Adjustments to reconcile net loss to net cash used in operating activities:

     

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

11,617

   

(9,838)

 

Depreciation and amortization

9,149

 

8.126

 

11,052

 

Amortization of debt issuance cost

974

   

1,063

 

Share-based compensation expense

746

   

1,192

 

Cash used in operating activities before changes in operating assets and liabilities

(14,633)

   

(2,688)

 

Changes in operating assets and liabilities:

     

Decrease (increase) in trade accounts and other receivables

3,424

   

(880)

 

Decrease in food and supply inventories

179

   

148

 

Decrease in prepaid expenses and other assets

783

   

1,106

 

Decrease in operating lease assets

3,954

   

 

Decrease in operating lease liabilities

(5,239)

   

 

Decrease in accounts payable, accrued expenses and other liabilities

(2,563)

   

(8,567)

 

Net cash used in operating activities

(14,095)

   

(10,881)

 

CASH FLOWS FROM INVESTING ACTIVITIES:

     

Proceeds from disposal of assets and property held for sale

7,580

   

21,761

 

Purchases of property and equipment

(1,890)

   

(2,866)

 

Net cash provided by investing activities

5,690

   

18,895

 

CASH FLOWS FROM FINANCING ACTIVITIES:

     

Revolver borrowings

4,700

   

37,500

 

Revolver repayments

   

(55,500)

 

Proceeds from term loan

5,000

   

58,400

 

Term loan repayments

(2,012)

   

(36,107)

 

Proceeds from PPP Loan

10,000

   

 

Debt issuance costs

   

(3,236)

 

Taxes paid on equity withheld

   

(12)

 

Net cash provided by financing activities

17,688

   

1,045

 

Net increase in cash and cash equivalents and restricted cash

9,283

   

9,059

 

Cash and cash equivalents and restricted cash at beginning of period

12,756

   

3,722

 

Cash and cash equivalents and restricted cash at end of period

$

22,039

   

$

12,781

 

Cash paid for:

     

Income taxes, net of (refunds)

$

13

   

$

510

 

Interest

3,955

   

3,255

 
                 

Store Level Profit

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 segments.   The following table reconciles between store level profit, a non-GAAP measure to loss from continuing operations, a GAAP measure:

($ thousands)

Quarter Ended

 

Two Quarters Ended

 

June 3,

2020

 

June 5,

2019

 

June 3,

2020

 

June 5,

2019

 

(12 weeks)

 

(12 weeks)

 

(40 weeks)

 

(40 weeks)

               

Store level profit

$

(5,150)

   

$

6,706

   

$

8,036

   

$

22,938

 
               

Plus:

             

Sales from culinary contract services

4,963

   

7,571

   

21,735

   

24,610

 

Sales from franchise operations

193

   

1,482

   

3,058

   

5,126

 
               

Less:

             

Opening costs

   

6

   

14

   

49

 

Cost of culinary contract services

4,712

   

6,791

   

20,060

   

22,324

 

Cost of franchise operations

437

   

330

   

1,411

   

849

 

Depreciation and amortization

2,709

   

2,927

   

9,149

   

11,052

 

Selling, general and administrative expenses

3,339

   

8,623

   

20,313

   

26,386

 

Other Charges

164

   

803

   

2,912

   

3,280

 

Provision for asset impairments and restaurant closings

12,708

   

675

   

14,478

   

3,097

 

Net gain on disposition of property and equipment

(364)

   

(434)

   

(2,861)

   

(12,935)

 

Interest income

(19)

   

(11)

   

(47)

   

(30)

 

Interest expense

1,641

   

1,324

   

5,076

   

4,593

 

Other income, net

(402)

   

(112)

   

(790)

   

(198)

 

Provision for income taxes

53

   

132

   

210

   

346

 

Loss from continuing operations

$

(24,972)

   

$

(5,295)

   

$

(37,096)

   

$

(6,139)

 

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 loss (gain) on disposing of property and equipment, provision for asset impairments and restaurant closings, other charges,  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

 

Three Quarters Ended

   

June 3,

2020

 

June 5,

2019

 

June 3,

2020

 

June 5,

2019

   

(12 weeks)

 

(12 weeks)

 

(40 weeks)

 

(40 weeks)

Loss from continuing operations

 

$

(24,972)

   

$

(5,295)

   

(37,096)

   

(6,139)

 

Depreciation and amortization

 

2,709

   

2,927

   

9,149

   

11,052

 

Provision for income taxes

 

53

   

132

   

$

210

   

$

346

 

Interest expense

 

1,641

   

1,324

   

5,076

   

4,593

 

Interest income

 

(19)

   

(11)

   

(47)

   

(30)

 

Other Charges

 

164

   

803

   

2,912

   

3,280

 

Net loss on disposition of property and equipment

 

(364)

   

(434)

   

(2,861)

   

(12,935)

 

Provision for asset impairments and restaurant closings

 

12,708

   

675

   

14,478

   

3,097

 

Non-cash compensation expense

 

14

   

369

   

746

   

1,192

 

Franchise Taxes

 

42

   

56

   

139

   

164

 

Increase in fair value of derivative

 

   

   

   

88

 

Adjusted EBITDA

 

$

(8,024)

   

$

546

   

$

(7,294)

   

$

4,708

 

SOURCE Luby's, Inc.

###

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