Financial

LRI Holdings, Inc., the Parent Company of Logan's Roadhouse, Inc., Announces Financial Results for the Fourth Quarter and Fiscal Year 2014

Net sales increased 4.8% to $169.5 million from $161.7 million. Restaurant operating profit increased 10.2% to $18.8 million from $17.1 million.

Logan's Roadhouse

LRI Holdings, Inc., the parent company of Logan's Roadhouse, Inc., today announced financial results for the fourth quarter and fiscal year ended August 3, 2014.

Selected Highlights for the Fourth Quarter 2014 Compared to the Fourth Quarter 2013:

  • Fourth Quarter 2014 included a 14th week.
  • Net sales increased 4.8% to $169.5 million from $161.7 million.
  • Restaurant operating profit increased 10.2% to $18.8 million from $17.1 million.
  • Comparable restaurant sales decreased 2.6%, average check increased by 3.3%, and customer traffic decreased by 5.7%.
  • Net loss of $40.0 million compared to a net loss of $104.4 million. Included in the fourth quarter 2014 and 2013 results were non-cash goodwill and intangible asset impairment charges of $29.7 million and $91.5 million, respectively. Excluding these charges, adjusted net loss for the fourth quarter 2014 and fourth quarter 2013 was $10.3 million and $12.9 million, respectively.
  • Adjusted EBITDA increased 15.9% to $14.1 million from $12.2 million. (*)

Selected Highlights for Fiscal Year 2014 Compared to Fiscal Year 2013:

  • Opened 1 new company-owned Logan's Roadhouse® restaurant.
  • Fiscal year 2014 included a 53rd week.
  • Net sales decreased 1.4% to $638.7 million from $647.4 million.
  • Comparable restaurant sales decreased 4.0%, average check increased by 2.9%, and customer traffic decreased by 6.7%.
  • Restaurant operating profit decreased 14.9% to $66.7 million from $78.5 million.
  • Net loss was $62.8 million compared to net loss of $108.4 million. Included in fiscal year 2014 and fiscal year 2013 results were non-cash goodwill and intangible asset impairment charges of $29.7 million and $91.5 million, respectively. Excluding these charges, adjusted net loss for the fiscal year 2014 was $33.1 million and adjusted net loss for fiscal year 2013 was $16.9 million.
  • Adjusted EBITDA decreased 20.6% to $47.9 million from $60.3 million. (*)

(*) Please see reconciliation table at the end of this release.

Additional discussion and analysis of the Company's financial condition and results of operations can be found in its Annual Report on Form 10-K for the fiscal year ended August 3, 2014.

(In thousands)

Fourteen weeks ended August 3, 2014

Thirteen weeks ended July 28, 2013

Fifty-three weeks ended August 3, 2014

Fifty-two weeks ended July 28, 2013

Net sales

$

169,455

$

161,676

$

638,665

$

647,425

Restaurant operating profit

18,844

17,093

66,748

78,468

Restaurant operating margin

11.1

%

10.6

%

10.5

%

12.1

%

Net loss

(39,984)

(104,374)

(62,773)

(108,405)

Adjusted EBITDA

14,141

12,198

47,877

60,303

 

About Logan's Roadhouse

Logan's opened its first restaurant in 1991 in Lexington, KY, and has grown as an affordable, full-service casual dining steakhouse offering specially seasoned aged steaks and sizzling southern-inspired dishes in a roadhouse atmosphere. Headquartered in Nashville, Tennessee, Logan's Roadhouse presently runs 234 company-operated and 26 franchised Logan's Roadhouse restaurants in 23 states. LRI Holdings, Inc. is the parent company of Logan's Roadhouse.

LRI HOLDINGS, INC CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

Fourteen weeks ended August 3, 2014

Thirteen weeks ended July 28, 2013

Fifty-three weeks ended August 3, 2014

Fifty-two weeks ended July 28, 2013

(unaudited)

(unaudited)

Revenues:

Net sales 

$

169,455

$

161,676

$

638,665

$

647,425

Franchise fees and royalties 

599

560

2,216

2,175

Total revenues 

170,054

162,236

640,881

649,600

Costs and expenses:

Restaurant operating costs:

Cost of goods sold 

58,937

54,789

218,448

218,327

Labor and other related expenses 

51,614

48,448

195,245

191,945

Occupancy costs 

13,697

13,467

55,200

52,926

Other restaurant operating expenses 

26,363

27,879

103,024

105,759

Depreciation and amortization 

5,195

5,270

20,366

20,949

Pre-opening expenses 

43

198

324

2,721

General and administrative 

8,156

7,805

31,564

30,901

Goodwill and intangible asset impairment

29,665

91,488

29,665

91,488

Store impairment and closing charges 

5,096

1,515

7,139

4,658

Total costs and expenses 

198,766

250,859

660,975

719,674

Operating loss

(28,712)

(88,623)

(20,094)

(70,074)

Interest expense, net 

11,163

10,285

42,570

40,917

Loss before income taxes 

(39,875)

(98,908)

(62,664)

(110,991)

Income tax provision (benefit)

109

5,466

109

(2,586)

Net loss

$

(39,984)

$

(104,374)

$

(62,773)

$

(108,405)

 

LRI HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

August 3, 2014

July 28, 2013

ASSETS

Current assets:

Cash and cash equivalents 

$

9,170

$

23,708

Receivables 

9,734

9,583

Inventories 

13,832

12,887

Prepaid expenses and other current assets 

6,887

4,337

Income taxes receivable 

115

432

Total current assets 

39,738

50,947

Property and equipment, net 

209,078

223,724

Other assets 

13,273

16,085

Goodwill 

163,368

192,590

Tradename 

71,251

71,694

Other intangible assets, net 

17,190

19,272

Total assets 

$

513,898

$

574,312

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:

Accounts payable 

17,414

18,770

Payable to RHI

2,721

1,118

Other current liabilities and accrued expenses 

51,683

52,383

Total current liabilities 

71,818

72,271

Long-term debt 

355,000

355,000

Deferred income taxes 

27,607

27,745

Other long-term obligations 

46,599

43,649

Total liabilities 

501,024

498,665

Commitments and contingencies

Stockholder's equity:

Common stock ($0.01 par value; 100 shares authorized; 1 share issued and outstanding)

Additional paid-in capital 

230,000

230,000

Retained deficit

(217,126)

(154,353)

Total stockholder's equity 

12,874

75,647

Total liabilities and stockholder's equity 

$

513,898

$

574,312

 

LRI HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Fiscal year 2014

Fiscal year 2013

Cash flows from operating activities:

Net loss

$

(62,773)

$

(108,405)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization 

20,366

20,949

Other amortization 

2,197

1,863

Loss on sale/disposal of property and equipment 

3,023

2,147

Amortization of deferred gain on sale and leaseback transactions

(50)

(43)

Impairment charges for long-lived assets 

7,139

4,658

Goodwill and intangible asset impairment

29,665

91,488

Share-based compensation expense 

1,728

1,107

Deferred income taxes 

(138)

(2,770)

Changes in operating assets and liabilities:

Receivables 

(151)

(1,295)

Inventories 

(1,140)

(538)

Prepaid expenses and other current assets 

(2,550)

(44)

Other non-current assets and intangibles 

(33)

(69)

Accounts payable 

(1,611)

171

Payable to RHI

(125)

(38)

Income taxes payable/receivable 

317

3,479

Other current liabilities and accrued expenses 

(669)

(2,775)

Other long-term obligations 

4,179

4,780

Net cash (used in) provided by operating activities 

(626)

14,665

Cash flows from investing activities:

Purchase of property and equipment 

(15,663)

(29,300)

Proceeds from sale and leaseback transactions, net of expenses 

1,751

16,611

Net cash used in investing activities 

(13,912)

(12,689)

Cash flows from financing activities:

Payments on revolving credit facility 

(36,000)

(12,600)

Borrowings on revolving credit facility 

36,000

12,600

Net cash provided by financing activities 

(Decrease) increase in cash and cash equivalents 

(14,538)

1,976

Cash and cash equivalents, beginning of period 

23,708

21,732

Cash and cash equivalents, end of period 

$

9,170

$

23,708

 

Forward-Looking Statements

This press release contains statements about future events and expectations that constitute forward-looking statements. These forward-looking statements can generally be identified by the use of forward-looking terminology such as "may," "plan," "seek," "will," "expect," "intend," "estimate," "anticipate," "believe" or the negative thereof or similar terminology. These statements are based on management's beliefs, assumptions and expectations of our future financial and operating performance and growth plans, taking into account the information currently available. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause the Company's actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements and you should not place undue reliance on such statements. Please refer to our Annual Report on Form 10-K for the fiscal year ended August 3, 2014, and other reports that we have filed with the Securities and Exchange Commission, for a discussion of risk factors that may contribute to these differences. Any forward-looking information presented herein is made only as of the date of this supplemental report, and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events or otherwise.

Non-GAAP Financial Measures

This press release also contains non-Generally Accepted Accounting Principles ("GAAP") financial measures such as EBITDA, Adjusted EBITDA, and Adjusted EBITDAR. The Company believes that these measures, together with reconciliations to the most comparable GAAP measure, are helpful to both management and investors in understanding and analyzing financial performance. However, the Company's non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures used by other companies. These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP financial measures.

To the extent we discuss any non-GAAP financial measures on the earnings call, a reconciliation of each measure to the most directly comparable GAAP measure is available in this press release. In addition, the Current Report on Form 8-K furnished to the SEC concurrent with the issuance of this press release includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.

Restaurant Operating Margin

Restaurant operating margin represents net sales less (a) cost of goods sold, (b) labor and other related expenses, (c) occupancy costs and (d) other restaurant operating expenses, divided by net sales. The following table sets forth a reconciliation of net sales to restaurant operating margin:

(In thousands)

Fourteen weeks ended August 3, 2014

Thirteen weeks ended July 28, 2013

Fifty-three weeks ended August 3, 2014

Fifty-two weeks ended July 28, 2013

Net sales (A)

$

169,455

$

161,676

$

638,665

$

647,425

Restaurant operating expenses:

Cost of goods sold

58,937

54,789

218,448

218,327

Labor and other related expenses

51,614

48,448

195,245

191,945

Occupancy costs

13,697

13,467

55,200

52,926

Other restaurant operating expenses

26,363

27,879

103,024

105,759

Restaurant operating profit (B)

$

18,844

$

17,093

$

66,748

$

78,468

Restaurant operating margin (B / A)

11.1

%

10.6

%

10.5

%

12.1

%

 

EBITDA and Adjusted EBITDA

The following table sets forth a reconciliation of net loss, the most directly comparable GAAP financial measure to EBITDA, Adjusted EBITDA and Adjusted EBITDAR.

(In thousands)

Fourteen weeks ended August 3, 2014

Thirteen weeks ended July 28, 2013

Fifty-three weeks ended August 3, 2014

Fifty-two weeks ended July 28, 2013

Net loss

$

(39,984)

$

(104,374)

$

(62,773)

$

(108,405)

Interest expense, net 

11,163

10,285

42,570

40,917

Income tax expense (benefit) 

109

5,466

109

(2,586)

Depreciation and amortization 

5,195

5,270

20,366

20,949

EBITDA 

(23,517)

(83,353)

272

(49,125)

Adjustments

Sponsor management fees(a) 

250

250

1,000

1,000

Non-cash asset write-offs:

Goodwill and tradename impairment(b) 

29,665

91,488

29,665

91,488

Restaurant impairment(c) 

5,096

1,515

7,139

4,658

Loss on disposal of property and equipment(d) 

750

208

2,283

1,974

Restructuring costs(e) 

161

(37)

14

1,789

Pre-opening expenses (excluding rent)(f) 

29

198

282

2,387

Losses on sales of property(g) 

747

596

758

676

Non-cash rent adjustment(h) 

679

876

3,647

4,091

Costs related to the Transactions(i) 

20

Non-cash stock-based compensation(j) 

374

393

1,728

1,107

Other adjustments(k) 

(93)

64

1,089

238

Adjusted EBITDA 

14,141

12,198

47,877

60,303

Cash rent expense(l) 

10,526

10,195

41,790

39,889

Adjusted EBITDAR 

$

24,667

$

22,393

$

89,667

$

100,192

 

 

(a)

 

 

Sponsor management fees consist of fees accrued or paid to certain affiliates of Kelso & Company, L.P. (the "Kelso Affiliates") under an advisory agreement.

(b)

We recorded goodwill impairment charges in fiscal year 2014 and fiscal year 2013. Fiscal year 2014 also included tradename impairment charges.

(c)

Restaurant impairment charges were recorded in connection with the determination that the carrying value of certain of our restaurants exceeded their estimated fair value.

(d)

Loss on disposal of property and equipment consists of the loss on disposal or retirement of assets that are not fully depreciated.

(e)

Restructuring costs include severance, hiring replacement costs and other related costs, including the reversal of any such charges.

(f)

Pre-opening expenses (excluding rent) include expenses directly associated with the opening of a new restaurant. 

(g)

We recognize losses in connection with the sale and leaseback of restaurants when the fair value of the property being sold is less than the undepreciated cost of the property.

(h)

Non-cash rent adjustments represent the non-cash rent expense calculated as the difference between GAAP rent expense and amounts payable in cash under the leases during such time period. In measuring our operational performance, we focus on our cash rent payments. 

(i)

Costs related to the Transactions include legal, professional and other fees incurred in connection with our acquisition by the Kelso Affiliates and Management Investors (the "Transactions"). 

(j)

Non-cash stock-based compensation represents compensation expense recognized for time-based stock options issued by Roadhouse Holding Inc.

(k)

Other adjustments include non-recurring expenses and professional fees, legal and settlement fees related to contract termination, ongoing expenses of closed restaurants, as well as inventory write-offs, employee termination buyouts and incidental charges related to restaurant closings.

(l)

Cash rent expense represents actual cash payments required under our leases.

 

 

 



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