Luby's Reports Third Quarter Fiscal 2014 Results

2014-06-17
  • Send
  • PDF
  • Print
  • Bookmark
  • Text Size:
  •  Repost This Article
  • Luby's Restaurant sales rose to $90.9 million, compared to $90.5 million in the prior fiscal year's third quarter.

    Luby's, Inc. (NYSE: LUB) announced unaudited financial results for its twelve-week third quarter fiscal 2014, which ended on May 7, 2014.

    Chris Pappas, President and CEO, remarked, "We are pleased with our results in the third quarter including continued same-store sale growth at our core Luby's Cafeterias. We opened 3 new restaurants during the quarter and we continued to enhance our brand building initiatives.  

    "Our Luby's Cafeterias generated strong same-store sales growth of 2.0% in the third quarter driven entirely by increases in guest traffic.  We are also especially pleased with our side-by-side Luby's and Fuddruckers locations which have all been well received.  We have opened three side-by-side locations, totaling six new restaurants.

    "We continue to execute on our new restaurant development plans, opening seven new restaurants (excluding openings related to converted restaurants) so far in fiscal 2014.  By early Fall 2014, we will open two more side-by-side Luby's and Fuddruckers locations and at least two more stand-alone Fuddruckers. 

    "Our brand initiatives, which include enhanced restaurant performance plans at Fuddruckers and converting several Cheeseburger in Paradise restaurants to Fuddruckers locations, are gaining traction. During the quarter we continued our guest engagement activities at Fuddruckers and ensured that we retained our everyday value pricing to build long term guest loyalty and frequency.  At Cheeseburger in Paradise, we have already converted two locations to Fuddruckers restaurants with a third conversion opening later this month. Two additional locations are undergoing conversions currently with plans to re-open later this summer." 

    Same-Store Sales Year-Over-Year Comparison:

    Q1

    20141

    Q2

    20141

    Q3 

    2014

    YTD 2014

    Luby's Cafeterias

     

    2.4%

     

    1.2%

     

    2.0%

     

    1.9%

    Fuddruckers

     

    (2.3%)

     

    (2.7%)

     

    (3.9%)

     

    (3.0%)

    Koo Koo Roo (one location)

     

    (6.9%)

     

    (12.0%)

     

    (13.3%)

     

    (10.6%)

    Combos 2 (one location)

     

    2.2%

     

    2.2%

    Total same-store sales

     

    1.1%

     

    0.1%

     

    0.3%

     

    0.5%

    1 Luby's same store sales are shown after adjusting for a calendar shift, for comparability between quarters.  Before adjusting for this calendar shift, Luby's cafeteria same store sales were negative 0.9% in Q1 and positive 4.4% in Q2.  Total same store sales before adjusting for this calendar shift were negative 1.3% in Q1 and positive 2.5% in Q2.

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

    Note: Luby's includes a restaurant's sales results into the same-store sales calculation in the quarter after a store as been open for 18 consecutive accounting periods.  The first combo location met the definition of same-stores in the third quarter of fiscal 2014.

    • Restaurant sales rose to $90.9 million, compared to $90.5 million in the prior fiscal year's third quarter.  Luby's Cafeterias sales increased $1.3 million and sales from locations where we have a side-by-side Luby's Cafeteria and Fuddruckers ("Combo" location) increased $1.7 million.  These sales increases were offset by a decline in sales at Fuddruckers locations of $0.6 million and a sales decline at Cheeseburger in Paradise of $2.0 million.  The sales increase at Luby's Cafeterias resulted from a 2.0% increase in same-store guest traffic, and the incremental sales contribution from one new Luby's Cafeteria; those additions were partially offset by the absence of sales from two closed Luby's Cafeterias.  The increase in sales at our combo locations is due to the addition of two new combo locations, as well as a 2.2% increase in sales at our first such location.  The decline in sales at our Fuddruckers restaurants resulted from a 3.6% decrease in same-store guest traffic, a modest 0.3% decrease in per person average spend, and the absence of sales from two closed locations.  Those declines were partially offset by the sales contribution from three new Fuddruckers restaurants.  
    • Franchise revenue was $1.7 million in the third quarter fiscal 2014 compared to $1.6 million in the prior fiscal year's third quarter. 
    • Revenue from Culinary Contract Services increased to $4.5 million compared to $4.1 million in the same quarter last fiscal year. We ended the third quarter fiscal 2014 operating 26 facilities, an increase from 19 facilities at the end of the third quarter fiscal 2013.  
    • Store level profit, defined as restaurant sales less food costs, payroll and related costs, other operating expenses, and occupancy costs, was $13.5 million, or 14.8% of restaurant sales.  Removing the impact of Cheeseburger in Paradise, store level profit was $13.3 million, or 16.1% of restaurant sales. In the prior fiscal year's third quarter, store level profit was $13.2 million, or 16.5% of restaurant sales, after removing the impact of Cheeseburger in Paradise. Store level profit is a non-GAAP measure and reconciliation to income from continuing operations is presented after the financial statements.
    • We produced income from continuing operations of $1.7 million, or $0.06 per share, compared to income from continuing operations of $2.7 million, or $0.09 per diluted share, in the prior fiscal year's third quarter. Results in fiscal 2014 and fiscal 2013 included various special items. Excluding special items and the loss from Cheeseburger in Paradise, third quarter fiscal 2014 income from continuing operations was $1.3 million, or $0.04 per diluted share compared to third quarter fiscal 2013 income from continuing operations of $3.0 million, or $0.10 per diluted share.

    Reconciliation of income from continuing operations to income from continuing operations, before special items (1,2)

    Q3 FY2014

    Q3 FY2013

    Item

    Amount

    ($000s)

    Per Share

    ($)

    Amount

    ($000s)

    Per Share

    ($)

    Income from continuing operations

    $

    1,737

    $

    0.06

    $

    2,652

    $

    0.09

    Asset charges, (gain) loss on disposal of assets

    (675)

    (0.02)

    168

    0.00

    Loss from Cheeseburger in Paradise 3

    219

    0.01

    204

    0.01

    Income from Continuing Operations, before special items

    $

    1,281

    $

    0.04

    $

    3,024

    $

    0.10

    • (1)     Luby's uses income from continuing operations, before special items, in analyzing its 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 income from continuing operations, before special items, to income from continuing operations, the nearest GAAP measure in context.

    (2)     Per share amounts are per diluted share after tax.

    (3)     Loss from Cheeseburger in Paradise is after allocation of depreciation, direct G&A and interest expense, net of an estimated tax benefit.

    Third Quarter Fiscal 2014 Operating Expense Review

    Food costs as a percentage of restaurant sales were 28.6% in the third quarter fiscal 2014 and in the comparable quarter last fiscal year.  Excluding the impact of Cheeseburger in Paradise, our food cost as a percentage of restaurant sales was 28.4% in the third quarter fiscal 2014.  Commodity price increases were mostly offset by efforts to effectively manage the mix of menu offerings and careful food cost control.

    In the third quarter fiscal 2014, payroll and related costs as a percentage of restaurant sales declined to 33.3% from 33.6% in the prior fiscal year's third quarter. This decline was primarily due to improved labor deployment management with continued progress on matching labor schedules with anticipated daily guest traffic as well as lower workers' compensation and state payroll tax expense.  Excluding the impact of Cheeseburger in Paradise our payroll and related costs as a percentage of restaurant sales was 33.0% in the third quarter fiscal 2014.

    Other operating expenses include restaurant-related expenses for utilities, repairs and maintenance, advertising, insurance, supplies, and services. As a percentage of restaurant sales, other operating expenses were 17.8% in the third quarter fiscal 2014 compared to 17.4% in the third quarter fiscal 2013. The increase was due to higher utility and insurance expenses and higher marketing expenses offset by lower repairs and maintenance expense as a percentage of restaurant sales. Excluding the impact of Cheeseburger in Paradise, our other operating expenses as a percentage of restaurant sales was 17.3%.

    Occupancy costs include property lease expense, property taxes, and common area maintenance charges.  Occupancy costs were $4.9 million in the third quarter fiscal 2014 and $5.0 million in the comparable period of the prior fiscal year.  Excluding the impact of Cheeseburger in Paradise, our Occupancy costs were $4.2 million in the third quarter of fiscal 2014 and in the comparable quarter last fiscal year.

    Depreciation and amortization expense increased $0.5 million to $4.7 million in the third quarter fiscal 2014 compared to the third quarter fiscal 2013 due to the increase in the depreciable asset base from recent new store construction and equipment and remodel activity, partially offset by certain assets coming to the end of their depreciable lives.

    General and administrative expenses increased to $8.3 million in the third quarter fiscal 2014 from $7.2 million in the third quarter fiscal 2013. As a percentage of total revenues, general and administrative expenses rose to 8.6% in the third quarter fiscal 2014, compared to 7.5% in the third quarter fiscal 2013.  The increase in general and administrative support included higher outside professional service fees, computer network costs, and corporate travel expense in part supporting the early stages of our restaurant unit count growth and franchise pipeline development.

    Balance Sheet and Capital Expenditures

    At the end of the third quarter fiscal 2014, we had $1.8 million in cash and $176.0 million in shareholders' equity.  We ended the third quarter fiscal 2014 with a $36.0 million outstanding debt balance and  $20.0 million available under our credit facility.  During the first three quarters of fiscal 2014, our capital expenditures totaled $31.1 million and included investments of $13.7 million on new unit development, $7.6 million on the purchase of land, $4.9 million on remodeling of existing restaurants, and $5.9 million for ongoing maintenance and technology infrastructure. 

    Fiscal Year to Date:

    • Restaurant sales rose to $255.1 million during the first three fiscal quarters of 2014, up from $245.8 million in the comparable quarters in the prior fiscal year.
    • Culinary Contract Services revenue rose to $12.8 million during the first three quarters of fiscal 2014, compared to $11.6 million in the comparable quarters in the prior fiscal year.  Operating profits, before general and administrative expenses, for this service line rose to $1.6 million in the first three quarters of 2014, compared to $1.2 million in the comparable quarters in the prior fiscal year.
    • Store level profit in the first three fiscal quarters of 2014 was $31.8 million, or 12.5% of restaurant sales, a decrease from $33.3 million, or 13.6%, in the comparable quarters in the prior fiscal year.

    Reconciliation of income (loss) from continuing operations to income from continuing operations, before special items(1,2)

    YTD Q3 FY2014

    YTD Q3 FY2013

    Item

    Amount

    ($000s)

    Per Share

    ($)

    Amount

    ($000s)

    Per Share

    ($)

    Income (loss) from continuing operations

    $

    (742)

    $

    (0.03)

    $

    3,496

    $

    0.12

    Asset charges, (gain) loss on disposal of assets

    385

    0.01

    (804)

    (0.03)

    Loss from Cheeseburger in Paradise 3

    2,468

    0.09

    582

    0.02

    Income from Continuing Operations, before special items

    $

    2,111

    $

    0.07

    $

    3,274

    $

    0.11

    (1)     Luby's uses income from continuing operations, before special items, in analyzing its 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 income from continuing operations, before special items, to income from continuing operations, the nearest GAAP measure in context.

    (2)     Per share amounts are per diluted share after tax.

    (3)     Loss from Cheeseburger in Paradise is after allocation of depreciation, direct G&A and interest expense, net of an estimated tax benefit.

    2014 Outlook

    We now expect same-store sales growth of "up to 0.5%," a revision from our previous guidance of "up to 1.0%."  Total restaurant sales, including same-store sales plus the contribution from new store openings, offset by store closings, is now expected to be on the lower end of our total restaurant sales guidance range of $375 million to $385 million.  As we execute our plans to convert several Cheeseburger in Paradise locations to Fuddruckers, we expect a negative impact to sales and cash flow in the current fiscal year.  Sales will be impacted by a 60 to 90 day latency period while we close and refashion the stores; cash flow will be negatively impacted as we incur costs to close certain Cheeseburger in Paradise locations and incur costs to re-open these locations as Fuddruckers.

    We anticipate investing up to $42 million in capital expenditures in fiscal 2014, including up to $18 million for restaurant openings and beginning construction in fiscal 2014 for fiscal 2015 openings, up to $6 million in restaurant remodels and conversions, and up to $11 million to purchase parcels of land for new restaurant development; the balance of projected capital expenditures include on-going maintenance of our restaurant properties and equipment and technology infrastructure investments.  In fiscal 2015, excluding land purchases, we currently expect to have capital expenditures of approximately $25 million, compared to approximately $30 million in fiscal 2014.  This outlook is sensitive to changes in economic conditions and the effects of other risks and uncertainties described in our Annual Report on Form 10-K for the fiscal year ended August 28, 2013 filed with the Securities and Exchange Commission on November 12, 2013.

    For fiscal 2014, we expect to achieve the following restaurant development milestones:

    • At least nine new restaurants -- in line with our expectations at the beginning of the fiscal year for eight to ten new restaurants.  Year to date through the third quarter, we have opened seven new restaurants (one stand-alone cafeteria, two stand-alone Fuddruckers, and two combo locations). By year end fiscal 2014, we anticipate opening at least one additional combo location, which will add another Luby's Cafeteria and Fuddruckers restaurant. 
    • At least two additional restaurant construction starts for fiscal 2015 openings, consistent with prior expectations.
    • Up to seven remodel projects, revised from our previous expectation of up to ten remodel projects.  During the first three quarters of fiscal 2014, we have completed six remodel projects.
    • Four completed Cheeseburger in Paradise to Fuddruckers conversions, revised from our previous expectation of seven conversions by fiscal year end 2014. Two conversions have been completed and the restaurants are now open as Fuddruckers; two additional locations will be completed and open before the end of fiscal 2014.

     

    Restaurant Counts as of Fiscal Year 2014 Quarter 3 End

    Restaurant Counts                      

    Luby's Cafeterias

    Fuddruckers Hamburgers

    Cheeseburger in Paradise

    Other Restaurants1

    Total Restaurants

    Single brand locations

    91

    65

    15

    2

    173

    Combo locations

    3

    3

    6

    Total Restaurants

    94

    68

    15

    2

    179

    1 Other locations include one Bob Luby's Seafood, and one Koo Koo Roo Chicken Bistro.

    Restaurant Counts                      

    FY2014

    Year

    Begin

    YTD

    Q3 Openings

    YTD Q3

    Closings

    FY2014

    Q3 End

    Q4 Openings

    Q4

    Closings

    Estimated

    FY2014

    Year End

    Luby's Cafeterias

    91

    1

    (1)

    91

    (1)

    90

    Fuddruckers  - new

    61

    2

    63

    (1)

    62

    Fuddruckers - converted CIP

    0

    2

    2

    2

    4

    Cheeseburger in Paradise

    23

    (8)

    15

    (6)2

    9

    Other restaurants1

    3

    (1)

    2

    (1)

    1

    Combo locations

    2

    4

    6

    2

    8

    Total

    180

    9

    (10)

    179

    4

    (9)

    174

    1 Other restaurants include one Bob Luby's Seafood and Koo Koo Roos Chicken Bistro.

    2 Five of the six Cheeseburger in Paradise locations are selected for conversion to Fuddruckers in fiscal year 2015 or before.

    Leasehold Locations from Cheeseburger in Paradise Acquisition

    FY2014

    Year Begin

    6/13/2014

    Update

    Estimated

    FY2014

    Year End

    Operating as Cheeseburger in Paradise

    23

    15

    9

    Completed Conversions to Fuddruckers

    2

    4

    Selected for Conversion

    3

    5

    Disposals

    3

    5

    Total

    23

    23

    23

    About Luby's

    Luby's, Inc. operates restaurants under the brands Luby's Cafeteria and Fuddruckers and provides food service management through its Luby's Culinary Services division. The company-operated restaurants include 93 Luby's Cafeterias, 67 Fuddruckers restaurants, 15 Cheeseburger in Paradise full service restaurants and bars, and one Bob Luby's Seafood Grill. Its 93 Luby's Cafeterias are located primarily in Texas. In addition to the 67 company-operated Fuddruckers locations, Luby's is the franchisor for 112 Fuddruckers franchise locations across the United States (including Puerto Rico), Canada, Mexico, Dominican Republic, and Italy. Luby's Culinary Services provides food service management to 26 sites consisting of healthcare, higher education and corporate dining locations.

    Luby's, Inc.

    Consolidated Statements of Operations (unaudited)

    (In thousands except per share data)

    Quarter Ended

    Three Quarters Ended

    May 7,

    2014

    May 8,

    2013

    May 7,

    2014

    May 8,

    2013

    (12 weeks)

    (12 weeks)

    (36 weeks)

    (36 weeks)

    SALES:

    Restaurant sales

    $

    90,859

    $

    90,455

    $

    255,059

    $

    245,798

    Culinary contract services

    4,534

    4,099

    12,783

    11,607

    Franchise revenue

    1,684

    1,639

    4,744

    4,701

    Vending revenue

    131

    143

    358

    384

    TOTAL SALES

    97,208

    96,336

    272,944

    262,490

    COSTS AND EXPENSES:

    Cost of food

    26,014

    25,866

    73,349

    70,236

    Payroll and related costs

    30,298

    30,371

    88,325

    85,339

    Other operating expenses

    16,152

    15,694

    47,025

    42,990

    Occupancy costs

    4,912

    4,983

    14,570

    13,886

    Opening costs

    334

    39

    1,365

    506

    Cost of culinary contract services

    3,974

    3,573

    11,142

    10,382

    Depreciation and amortization

    4,688

    4,197

    13,508

    12,626

    General and administrative expenses

    8,342

    7,245

    24,526

    22,316

    Provision for asset impairments, net

    113

    1,539

    203

    Net loss (gain) on disposition of property and equipment

    (1,023)

    142

    (956)

    (1,421)

    Total costs and expenses

    93,691

    92,223

    274,393

    257,063

    INCOME (LOSS) FROM OPERATIONS

    3, 517

    4,113

    (1,449)

    5,427

    Interest income

    1

    2

    4

    6

    Interest expense

    (410)

    (228)

    (955)

    (618)

    Other income, net

    250

    261

    805

    711

    Income (loss) before income taxes and discontinued operations

    3,358

    4,148

    (1,595)

    5,526

    Provision (benefit) for income taxes

    1,621

    1,496

    (853)

    2,030

    Income (loss) from continuing operations

    1,737

    2,652

    (742)

    3,496

    Loss from discontinued operations, net of income taxes

    (8)

    (191)

    (1,258)

    (765)

    NET INCOME (LOSS)  

    $

    1,729

    $

    2,461

    $

    (2,000)

    $

    2,731

    Income per share from continuing operations:

    Basic

    $

    0.06

    $

    0.09

    $

    (0.03)

    $

    0.12

    Assuming dilution

    0.06

    0.09

    (0.03)

    0.12

    Loss per share from discontinued operations:

    Basic

    $

    $

    $

    (0.04)

    $

    (0.02)

    Assuming dilution

    (0.01)

    (0.04)

    (0.03)

    Net income (loss) per share:

    Basic

    $

    0.06

    $

    0.09

    $

    (0.07)

    $

    0.10

    Assuming dilution

    0.06

    0.08

    (0.07)

    0.09

    Weighted average shares outstanding:

    Basic

    28,791

    28,698

    28,777

    28,566

    Assuming dilution

    29,476

    28,952

    28,777

    28,786

     

    The accompanying notes are an integral part of these consolidated financial statements.

    The following table contains information derived from Luby's Consolidated Statements of Operations expressed as a percentage of sales.  Percentages may not add due to rounding.

     

    Quarter Ended

    Three Quarters Ended

    May 7,

    May 8,

    May 7,

    May 8,

    2014

    2013

    2014

    2013

    (12 weeks) 

    (12 weeks) 

    (36 weeks) 

    (36 weeks) 

    Restaurant sales

    93.5

    %

    93.9

    %

    93.4

    %

    93.6

    %

    Culinary contract services

    4.7

    %

    4.3

    %

    4.7

    %

    4.4

    %

    Franchise revenue

    1.7

    %

    1.7

    %

    1.7

    %

    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

    28.6

    %

    28.6

    %

    28.8

    %

    28.6

    %

    Payroll and related costs

    33.3

    %

    33.6

    %

    34.6

    %

    34.7

    %

    Other operating expenses

    17.8

    %

    17.4

    %

    18.4

    %

    17.5

    %

    Occupancy

    5.4

    %

    5.5

    %

    5.7

    %

    5.6

    %

    Store level profit

    14.8

    %

    15.0

    %

    12.5

    %

    13.6

    %

    (As a percentage of total sales)

    General and administrative expenses

    8.6

    %

    7.5

    %

    9.0

    %

    8.5

    %

    INCOME (LOSS) FROM OPERATIONS

    3.5

    %

    4.3

    %

    (0.5)

    %

    2.1

    %

    The following table removes the Restaurant Sales, Cost of food, Payroll and related costs, Other operating expenses, and Occupancy costs related to operating the Cheeseburger in Paradise locations.  As a result, the following table illustrates the costs as a percentage of restaurant sales for our core brands of Luby's and Fuddruckers combined.  Percentages may not add due to rounding.

     

    Quarter Ended

    Three Quarters Ended

    May 7,

    May 8,

    May 7,

    May 8,

    2014

    2013

    2014

    2013

    (12 weeks) 

    (12 weeks) 

    (36 weeks) 

    (36 weeks) 

    Restaurant sales

    92.9

    %

    93.2

    %

    92.8

    %

    93.2

    %

    Culinary contract services

    5.1

    %

    4.8

    %

    5.1

    %

    4.7

    %

    Franchise revenue

    1.9

    %

    1.9

    %

    1.9

    %

    1.9

    %

    Vending revenue

    0.1

    %

    0.2

    %

    0.1

    %

    0.2

    %

      TOTAL SALES

    100.0

    %

    100.0

    %

    100.0

    %

    100.0

    %

    COSTS AND EXPENSES:

    (As a percentage of restaurant sales)

    Cost of food

    28.4

    %

    28.2

    %

    28.4

    %

    28.4

    %

    Payroll and related costs

    33.0

    %

    33.2

    %



    Logos, product and company names mentioned are the property of their respective owners.

  • Send
  • PDF
  • Print
  • Bookmark
  • Go Back
  • Text Size:

  • comments powered by Disqus
    Ads by Nevistas

    Newsletters
    Restaurant
    Industry News
     
    Hospitality
    Newsletter
     
    Hospitality
    Trends
     
    Hospitality
    Technology
     
    Your Email Address
     
    Advertise Here