Chuy’s Holdings, Inc. Second Quarter 2014 Revenue Increased 18.4%

2014-08-06
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  • Comparable restaurant sales increased 2.4% as compared to the same period in 2013, including a 0.9% increase in average weekly customers and a 1.5% increase in average check.

    Chuy’s Holdings, Inc. (NASDAQ:CHUY) today announced financial results for the second quarter ended June 29, 2014.

    Highlights for the second quarter ended June 29, 2014 were as follows:

    • Revenue increased 18.4% to $63.3 million from $53.4 million in the second quarter of 2013.
    • Comparable restaurant sales increased 2.4% as compared to the same period in 2013, including a 0.9% increase in average weekly customers and a 1.5% increase in average check.
    • Net income was $3.4 million, or $0.21 per diluted share, compared to $3.2 million, or $0.19 per diluted share, in the second quarter of 2013 and $3.7 million, or $0.22 per diluted share on a pro forma basis (1).
    • Restaurant-level EBITDA(1) increased 5.6% to $11.6 million from $11.0 million in last year’s second quarter.
    • Three new restaurants opened during the second quarter of 2014.

    (1)

     

    Pro forma net income and restaurant-level EBITDA are non-GAAP measures. For reconciliations of pro forma net income and restaurant-level EBITDA to GAAP net income and discussions of why we consider them useful, see the “Reconciliation of Non-GAAP Measures” accompanying this release.

     

    Steve Hislop, President and Chief Executive Officer of Chuy’s Holdings, Inc. stated, “We maintained our top-line momentum in the second quarter with an 18.4% increase in revenues, highlighted by a comparable restaurant sales increase of 2.4%. Our made-from-scratch, Tex Mex-inspired menu, commitment to value and upbeat, irreverent atmosphere continue to clearly resonate with our guests. While we continue to face short-term cost challenges related to commodities and increased labor related to some of our newer openings, we are making progress in back-filling existing markets that are meeting or exceeding our expectations.”

    Added Hislop, “With eight new restaurants opened this year, as of today, our 2014 development plan, which now includes eleven new units (versus a range of ten to eleven units, previously), is on track. Our development strategy will include opening 80% of our new units in 2014 through 2015 in markets with existing Chuy’s restaurants. We believe this strategy will continue to drive awareness for the Chuy’s brand and provide a solid geographic footprint for continued growth.”

    Second Quarter 2014 Financial Results

    Revenue increased $9.9 million, or 18.4%, to $63.3 million in the second quarter of 2014 compared to the second quarter of 2013. The increase was primarily driven by $10.0 million in incremental revenue from an additional 129 operating weeks provided by 13 new restaurants opened during and subsequent to the second quarter of 2013. These increases were partially offset by a decrease in revenue related to non-comparable restaurants that are not included in the incremental revenue discussed above. Revenue for these non-comparable restaurants is historically lower as the stores transition out of the 'honeymoon' period that follows a restaurant's initial opening.

    Comparable restaurant sales increased 2.4% in the second quarter of 2014 as compared to the same period in 2013. The increase in comparable sales was driven by a 1.5% increase in average check and a 0.9% increase in average weekly customers. The comparable restaurant base consisted of 38 restaurants during the second quarter of 2014.

    Total restaurant operating costs as a percentage of revenue increased to 81.6% in the second quarter of 2014 from 79.4% in the second quarter of 2013, driven primarily by the impact of higher labor costs as a percentage of revenue related to increased training and staffing levels and lower store volumes at our newer restaurants; higher food costs as a percentage of revenue, particularly beef, dairy and produce costs; and higher rent expense as a percentage of revenue at certain new restaurants as we expand and “backfill” into newer markets. These increased costs were partially offset by lower liquor taxes as a result of opening more locations outside of Texas, which charges a higher liquor tax than other jurisdictions, and a lower liquor tax in Texas, which went into effect on January 1, 2014.

    Net income for the second quarter of 2014 was $3.4 million, or $0.21 per diluted share, compared to $3.2 million, or $0.19 per diluted share, in the second quarter of 2013. Net income for the second quarter of 2013 included approximately $508,000 in costs associated with two separate secondary offerings of the Company’s common stock which had a negative $0.03 per diluted share impact on 2013 earnings per share.

    Development Update

    During the second quarter, three new Chuy’s restaurants were opened — Noblesville, Indiana; Jacksonville, North Carolina; and Midlothian, Virginia. Subsequent to the end of the second quarter, two additional Chuy’s restaurants were opened in San Antonio, Texas and Kennesaw, Georgia.

    2014 Outlook

    The Company has revised its fiscal year 2014 guidance and now expects its diluted net income per share to range from $0.76 to $0.78 versus a previous range of $0.81 to $0.84. This compares to pro forma diluted net income per share of $0.69 in 2013. The net income guidance for fiscal year 2014 is based, in part, on the following annual assumptions:

    • Comparable restaurant sales growth of approximately 2.3% to 2.6%, which implies 1.5% to 2.0% comparable restaurant sales growth during the last two quarters of 2014 (versus a range of 2.0% to 2.5% previously);
    • Restaurant pre-opening expenses of approximately $4.4 million (versus $3.8 million to $4.3 million previously);
    • General and administrative expense of approximately $12.5 million to $13.0 million;
    • An effective tax rate of approximately 29% to 31%;
    • The opening of 11 new restaurants (versus a range of 10 to 11 restaurants previously);
    • Net capital expenditures (net of tenant improvement allowances) of approximately $27.5 million to $30.0 million; and
    • Annual weighted average diluted shares outstanding of 16.7 million to 16.8 million shares.

    The following definitions apply to these terms as used in this release:

    Comparable restaurant sales reflect changes in sales for the comparable group of restaurants over a specified period of time. We consider a restaurant to be comparable in the first full quarter following the 18th month of operations. Changes in comparable sales reflect changes in customer count trends as well as changes in average check.

    Average check is calculated by dividing revenue by total entrées sold for a given time period. Average check reflects menu price influences as well as changes in menu mix.

    About Chuy’s

    Founded in Austin, Texas in 1982, Chuy’s owns and operates 56 full-service restaurants across fourteen states serving a distinct menu of authentic, made from scratch Tex Mex inspired dishes. Chuy’s highly flavorful and freshly prepared fare is served in a fun, eclectic and irreverent atmosphere, while each location offers a unique, “unchained” look and feel, as expressed by the concept’s motto “If you’ve seen one Chuy’s, you’ve seen one Chuy’s!”. 

           

    Chuy’s Holdings, Inc. and Subsidiaries

    Unaudited Condensed Consolidated Income Statements

    (In thousands, except share and per share data)

     
    Thirteen Weeks Ended Twenty-Six Weeks Ended
    June 29,

    2014

        June 30,

    2013

    June 29,

    2014

        June 30,

    2013

    Revenue $ 63,284 $ 53,427 $ 119,235 $ 100,125
     
    Costs and expenses:
    Cost of sales 17,980 14,644 33,508 27,201
    Labor 20,806 16,740 39,516 31,715
    Operating 8,595 7,537 16,156 14,084
    Occupancy 3,804 3,108 7,358 5,999
    General and administrative 2,939 2,507 5,862 5,302
    Secondary offering costs 508 925
    Marketing 483 402 905 754
    Restaurant pre-opening 1,305 1,050 2,460 2,021
    Depreciation and amortization 2,439   2,126   4,755   4,094
    Total costs and expenses 58,351   48,622   110,520   92,095
    Income from operations 4,933 4,805 8,715 8,030
    Interest expense 19   24   41   57
    Income before income taxes 4,914 4,781 8,674 7,973
    Income tax expense 1,468   1,621   2,596   2,172
    Net income 3,446   3,160   6,078   5,801
     
    Net income per common share:
    Basic $ 0.21   $ 0.19   $ 0.37   $ 0.36
    Diluted $ 0.21   $ 0.19   $ 0.36   $ 0.35
     
    Weighted-average shares outstanding:
    Basic 16,435,687   16,269,243   16,416,658   16,190,264
    Diluted 16,719,316   16,677,221   16,715,791   16,626,012
     
           

    Chuy’s Holdings, Inc. and Subsidiaries

    Unaudited Selected Balance Sheet Data

    (In thousands)

     
    June 29,

    2014

    December 29,

    2013

    Cash and cash equivalents $ 4,439 $ 5,323
    Total assets 165,957 151,162
    Long-term debt 7,500 6,000
    Total stockholders’ equity 111,970 104,488
     

    Reconciliation of Non-GAAP Measures

    We prepare our financial statements in accordance with generally accepted accounting principles (GAAP). Within our press release, we make reference to non-GAAP restaurant-level EBITDA, and pro forma net income. Restaurant-level EBITDA represents net income plus the sum of general and administrative expenses, secondary offering costs, restaurant pre-opening costs, depreciation and amortization, interest and taxes. Restaurant-level EBITDA is presented because: (i) the Company believes it is a useful measure for investors to assess the operating performance of our business without the effect of non-cash depreciation and amortization expenses; and (ii) the Company uses restaurant-level EBITDA internally as a benchmark to evaluate its operating performance or compare our performance to that of our competitors. Additionally, the Company presents restaurant-level EBITDA because it excludes the impact of general and administrative expenses, which are not incurred at the restaurant level, and restaurant pre-opening costs, which are non-recurring at the restaurant level. The use of restaurant-level EBITDA thereby enables the Company and its investors to compare operating performance between periods and to compare our operating performance to the performance of the Company’s competitors. The measure is also widely used within the restaurant industry to evaluate restaurant level productivity, efficiency and performance. The use of restaurant-level EBITDA as a performance measure permits a comparative assessment of our operating performance relative to our performance based on our GAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. The Company presents restaurant-level EBITDA margin for the same reasons it presents restaurant-level EBITDA.

    Pro forma net income represents our net income plus the expenses incurred related to our secondary offerings, less the pro forma incremental income tax expense resulting from discrete tax items in 2013.

    The following table includes a reconciliation of net income to restaurant-level EBITDA (in thousands):

        Thirteen Weeks Ended     Twenty-Six Weeks Ended
    June 29,

    2014

        June 30,

    2013

    June 29,

    2014

        June 30,

    2013

     
    Net income as reported $ 3,446 $ 3,160 $ 6,078 $ 5,801
    Income tax provision 1,468 1,621 2,596 2,172
    Interest expense 19 24 41 57
    General and administrative 2,939 2,507 5,862 5,302
    Secondary offering costs 508 925
    Restaurant pre-opening expenses 1,305 1,050 2,460 2,021
    Depreciation and amortization 2,439   2,126   4,755   4,094  
    Restaurant-level EBITDA $ 11,616   $ 10,996   $ 21,792   $ 20,372  
     
    Restaurant-level EBITDA margin (1) 18.4 % 20.6 % 18.3 % 20.3 %
     

    (1) Restaurant-level EBITDA margin is calculated by dividing restaurant-level EBITDA by revenue.

     

    The following is a reconciliation of GAAP net income and net income per share to pro forma net income and pro forma net income per share (in thousands):

        Thirteen Weeks Ended     Twenty-Six Weeks Ended
    June 29,

    2014

        June 30,

    2013

    June 29,

    2014

        June 30,

    2013

     
    Net income as reported $ 3,446 $ 3,160 $ 6,078 $ 5,801
    Secondary offering costs (1) 508 925
    Income tax expense (2)   30     (497 )
    Pro forma net income $ 3,446   $ 3,698   $ 6,078   $ 6,229  
     
    Net income per share - pro forma:
    Basic - pro forma $ 0.21   $ 0.23   $ 0.37   $ 0.38  
    Diluted - pro forma $ 0.21   $ 0.22   $ 0.36   $ 0.37  
     
    Weighted-average shares outstanding - pro forma:
    Basic - pro forma 16,435,687   16,269,243   16,416,658   16,190,264  
    Diluted - pro forma 16,719,316   16,677,221   16,715,791   16,626,012  
     

    Notes to reconciliation of GAAP net income to non-GAAP pro forma net income:

    1.

     

    Reflects the elimination of the offering expenses associated with the two secondary offerings completed in January 2013 and April 2013.

     

    2.

    In 2013, the tax expense for the twenty-six weeks ended June 30, 2013 reflects the elimination of the favorable impact of a one-time tax adjustment for incremental employment tax credits from open tax years offset by the unfavorable tax impact of the non-deductible secondary offering costs. The tax expense for the thirteen-week period ended June 30, 2013 just reflects the tax impact of the non-deductible secondary offering costs.



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

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