Luby's Results

Luby's Reports First Quarter Fiscal 2018 Results

Same-store sales increased 0.8%

Luby's

Luby's, Inc. (NYSE:  LUB) today announced unaudited financial results for its sixteen-week first quarter fiscal 2018, which ended on December 20, 2017. Comparisons in this earnings release for the first quarter fiscal 2018 are referred to as "first quarter."

First Quarter Key Metrics

(comparisons to first quarter fiscal 2017)

  • Same-store sales increased 0.8% 
  • Culinary Contract Services sales increased $3.2 million
  • Adjusted EBITDA increased $1.1 million
  • Three new Fuddruckers franchise locations opened (one international location in Mexico, and domestic locations in Florida and Pennsylvania) in the first quarter 
  • Capital expenditures decreased $0.7 million

Chris Pappas, President and CEO, commented, "We are pleased to have generated positive same-store sales in the first quarter at both of our primary brands, Luby's Cafeteria and Fuddruckers, leading to a company-wide increase of 0.8% same-store sales.

"We are encouraged by the progress of the operational and guest initiatives that we began implementing last year to help improve guest services, store level profit and EBITDA while closely managing expenses. These efforts are contributing to same-store sales growth as well as improving cost controls. In the first quarter, we grew Adjusted EBITDA by over $1.0 million.

"Our team continues to focus on enhancing guest experiences across all of our brands, including through in-store operational efficiencies, menu variety and new offerings and speed of service.

"In Culinary Contract Services, revenue grew significantly in the first quarter and remains on track to show substantial growth in fiscal year 2018. We remain optimistic in our ability to strengthen our iconic brands, grow our Culinary Contract Services segment and continue to control costs company-wide."

Same-Store Sales Year-Over-Year Comparison

 

Q1

2018(3)

Q1

2017(3)

Luby's Cafeterias

1.5%

(2.2)%

Fuddruckers

0.6%

(1.6)%

Combo locations (1)

1.3%

(2.3)%

Cheeseburger in Paradise

(10.5)%

(7.8)%

Total same-store sales (2)

0.8%

(2.3)%

 

(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 82 Luby's Cafeterias locations, 59 Fuddruckers locations, all six Combo locations, and all seven Cheeseburger in Paradise locations that met the definition of same-stores.  

(3)

Q1 2018, Q1 2017 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)

 

Restaurant Brand

Q1

2018

Q1

2017

Change

($)

Change

(%)

Luby's Cafeterias

$

67,430

$

68,339

$

(909)

(1.3)%

Fuddruckers

26,914

28,748

(1,834)

(6.4)%

Combo locations

6,712

6,626

86

1.3%

Cheeseburger in Paradise

3,527

4,369

(842)

(19.3)%

Total Restaurant Sales

$

104,583

$

108,082

$

(3,499)

(3.2)%

 

  • Luby's Cafeterias sales decreased $0.9 million versus the first quarter fiscal 2017, due to the closure of four locations over the prior year partially offset by a 1.5% increase in Luby's same-store sales. The increase was the result of a 4.8% increase in average spend per guest partially offset by a 3.3% decrease in guest traffic. 
  • Fuddruckers sales at company-owned restaurants decreased $1.8 million versus the first quarter fiscal 2017, due to seven permanent restaurant closings and two temporary closures for post-Hurricane renovations partially offset by a 0.6% increase in same-store sales. The 0.6% increase in same-store sales was the result of a 4.5% increase in average spend per guest partially offset by a 3.9% decrease in guest traffic. 
  • Combo location sales increased $0.1 million, or 1.3%, versus first quarter fiscal 2017. 
  • Cheeseburger in Paradise sales decreased $0.8 million. The closure of one location reduced sales by $0.4 millionand declines in sales at the remaining seven locations reduced sales by $0.4 million. 
  • 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 $11.1 million, or 10.6% of restaurant sales, in the first quarter compared to $12.6 million, or 11.7% of restaurant sales, during the first quarter fiscal 2017. While higher menu pricing was sufficient to cover food commodity cost inflation and we achieved reductions in repairs and maintenance costs, store level profit margins were negatively impacted by certain expense items. The first quarter included approximately $0.3 million related to net uninsured losses and last year the first quarter fiscal 2017 benefited from an approximate $0.5 million decrease in workers' compensation expense. Store level profit margin was also negatively impacted, but to a lesser extent, from higher packaging and catering supplies related to an approximate 4.5% increase in holiday sales, and higher fees to third party delivery services associated with higher sales through this channel. Store level profit is a non-GAAP measure, and reconciliation to loss from continuing operations is presented after the financial statements. 
  • Culinary Contract Services revenues increased by $3.2 million to $7.5 million with 22 operating locations during the first quarter. New Culinary Contract Services locations and retail sales combined contributed approximately $4.3 million in revenue which was partially offset by a $0.8 million decrease in revenue from locations that ceased operations and an approximate $0.3 million decrease in revenue at locations continually operated over the prior full year. Culinary Contract Services profit margin increased to 15.8% of Culinary Contract Services sales in the first quarter compared to 11.3% in the first quarter fiscal 2017. 
  • Franchise revenue increased $16 thousand, or 0.9%, in the first quarter compared to the first quarter fiscal 2017. In the first quarter, Franchisees opened three locations (one international location in Mexico, and domestic locations in Florida and Pennsylvania) and closed five locations (one international location in Italy and four domestic locations, one in each of Tennessee, North Carolina, South Dakota, and North Dakota) in the first quarter. 
  • Loss from continuing operations was $4.9 million, or a loss of $0.17 per diluted share, compared to a loss of $5.5 million, or a loss of $0.19 per diluted share, in the first quarter fiscal 2017. Excluding special non-cash items, loss from continuing operations was $3.7 million, or a loss of $0.13 per diluted share, in the first quarter compared to a loss of $4.8 million, or $0.17 per diluted share, in the first quarter fiscal 2017. Loss from continuing operations, excluding special items, is a non-GAAP measure, and reconciliation to loss from continuing operations is presented below.

Balance Sheet and Capital Expenditures

We ended the first quarter with a debt balance outstanding of $30.8 million (net of deferred financing costs of $0.3 million), up slightly from $30.7 million (net of deferred financing costs of $0.3 million) at the end of fiscal 2017. During the first quarter, our capital expenditures decreased to $4.3 million compared to $5.0 million in the first quarter fiscal 2017. At the end of the first quarter, we had $0.8 million in cash and $140.0 million in total shareholders' equity.

Restaurant Counts:

 

August 30,

2017

FY18 Q1

Openings

FY18 Q1

Closings

December 20,

 2017

Luby's Cafeterias(1)

88

88

Fuddruckers Restaurants(1)

71

(3)

68

Cheeseburger in Paradise

8

(1)

7

Total

167

(4)

163

 

(1)

Includes 6 restaurants that are part of Combo locations

About Luby's

Luby's, Inc. (NYSE:  LUB) operates 163 restaurants nationally as of December 20, 2017: 88 Luby's Cafeterias, 68 Fuddruckers, seven Cheeseburger in Paradise restaurants. Luby's is the franchisor for 111 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 22 sites consisting of healthcare and corporate dining locations.

Luby's, Inc.

Consolidated Statements of Operations (unaudited)

(In thousands, except per share data)

Quarter Ended

December 20,

 2017

December 21,

 2016

(16 weeks)

(16 weeks)

SALES:

Restaurant sales

$

104,583

$

108,082

Culinary contract services

7,519

4,297

Franchise revenue

1,887

1,871

Vending revenue

143

159

TOTAL SALES

114,132

114,409

COSTS AND EXPENSES:

Cost of food

29,754

30,850

Payroll and related costs

38,126

38,673

Other operating expenses

19,499

19,648

Occupancy costs

6,261

6,475

Opening costs

75

165

Cost of culinary contract services

6,332

3,811

Cost of franchise operations

488

580

Depreciation and amortization

5,353

6,550

Selling, general and administrative expenses

11,525

13,759

Provision for asset impairments and restaurant closings

845

287

Net loss on disposition of property and equipment

222

85

Total costs and expenses

118,480

120,883

LOSS FROM OPERATIONS

(4,348)

(6,474)

Interest income

6

1

Interest expense

(649)

(602)

Other income, net

115

103

Loss before income taxes and discontinued operations

(4,876)

(6,972)

Benefit for income taxes

(9)

(1,458)

Loss from continuing operations

(4,867)

(5,514)

Loss from discontinued operations, net of income taxes

(35)

(72)

NET LOSS

$

(4,902)

$

(5,586)

Loss per share from continuing operations:

Basic

$

(0.17)

$

(0.19)

Assuming dilution

$

(0.17)

$

(0.19)

Loss per share from discontinued operations:

Basic

$

(0.00)

$

(0.00)

Assuming dilution

$

(0.00)

$

(0.00)

Net loss per share:

Basic

$

(0.17)

$

(0.19)

Assuming dilution

$

(0.17)

$

(0.19)

Weighted average shares outstanding:

Basic

29,691

29,339

Assuming dilution

29,691

29,339

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 20,

 2017

December 21,

 2016

(16 weeks)

(16 weeks)

Restaurant sales

91.6

%

94.5

%

Culinary contract services

6.6

%

3.8

%

Franchise revenue

1.7

%

1.6

%

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

%

28.5

%

Payroll and related costs

36.5

%

35.8

%

Other operating expenses

18.6

%

18.2

%

Occupancy costs

6.0

%

6.0

%

Vending revenue

(0.1)

%

(0.1)

%

Store level profit

10.6

%

11.7

%

(As a percentage of total sales)

Marketing and advertising expenses

1.3

%

2.0

%

General and administrative expenses

8.8

%

10.0

%

Selling, general and administrative expenses

10.1

%

12.0

%

LOSS FROM OPERATIONS

(3.8)

%

(5.7)

%

 

Luby's, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

December 20,

 2017

August 30,

 2017

 (Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

812

$

1,096

Trade accounts and other receivables, net

8,954

8,011

Food and supply inventories

4,743

4,453

Prepaid expenses

3,030

3,431

  Total current assets

17,539

16,991

Property held for sale

3,231

3,372

Assets related to discontinued operations

2,371

2,755

Property and equipment, net

171,426

172,814

Intangible assets, net

19,164

19,640

Goodwill

1,068

1,068

Deferred income taxes

7,348

7,254

Other assets

2,505

2,563

Total assets

$

224,652

$

226,457

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

15,866

$

15,937

Liabilities related to discontinued operations

20

367

Current portion of credit facility debt

295

Accrued expenses and other liabilities

31,070

28,076

  Total current liabilities

47,251

44,380

Credit facility debt, less current portion

30,525

30,698

Liabilities related to discontinued operations

16

16

Other liabilities

6,843

7,311

  Total liabilities

$

84,635

$

82,405

Commitments and Contingencies

SHAREHOLDERS' EQUITY

Common stock, $0.32 par value; 100,000,000 shares authorized; shares issued were 29,816,771 and 29,624,083, respectively; shares outstanding were 29,316,771 and 29,124,083, respectively

9,542

9,480

Paid-in capital

32,655

31,850

Retained earnings

102,595

107,497

Less cost of treasury stock, 500,000 shares

(4,775)

(4,775)

  Total shareholders' equity

140,017

144,052

Total liabilities and shareholders' equity

$

224,652

$

226,457

 

Luby's, Inc.

Consolidated Statements of Cash Flows (unaudited)

(In thousands)

 Quarter Ended

December 20,

 2017

December 21,

 2016

(16 weeks)

(16 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(4,902)

$

(5,586)

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

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

1,067

372

Depreciation and amortization

5,353

6,550

Amortization of debt issuance cost

40

67

Share-based compensation expense

867

433

Deferred tax provision (benefit)

16

(1,466)

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

2,441

370

Changes in operating assets and liabilities:

Decrease (Increase) in trade accounts and other receivables

(1,287)

254

Decrease in insurance receivables

344

Increase in food and supply inventories

(290)

(440)

Decrease (Increase) in prepaid expenses and other assets

441

(59)

Insurance proceeds

276

Increase in accounts payable, accrued expenses and other liabilities

1,557

3,116

Net cash provided by operating activities

3,482

3,241

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from disposal of assets and property held for sale

185

38

Insurance proceeds

344

Purchases of property and equipment

(4,325)

(4,980)

Net cash used in investing activities

(3,796)

(4,942)

CASH FLOWS FROM FINANCING ACTIVITIES:

Revolver borrowings

22,900

45,700

Revolver repayments

(22,800)

(78,300)

Proceeds from term loan

35,000

Debt issuance costs

(625)

Taxes paid for shares withheld

(70)

Net cash provided by financing activities

30

1,775

Net (decrease) increase in cash and cash equivalents

(284)

74

Cash and cash equivalents at beginning of period

1,096

1,339

Cash and cash equivalents at end of period

$

812

$

1,413

Cash paid for:

Income taxes

$

$

Interest

515

478

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 loss from continuing operations, a GAAP measure:

 

($ thousands)

Quarter Ended

December 20,

 2017

December 21,

 2016

(16 weeks)

(16 weeks)

Store level profit

$

11,086

$

12,595

Plus:

Sales from culinary contract services

7,519

4,297

Sales from franchise operations

1,887

1,871

Less:

Opening costs

75

165

Cost of culinary contract services

6,332

3,811

Cost of franchise operations

488

580

Depreciation and amortization

5,353

6,550

Selling, general and administrative expenses

11,525

13,759

Provision for asset impairments and restaurant closings

845

287

Net loss on disposition of property and equipment

222

85

Interest income

(6)

(1)

Interest expense

649

602

Other income, net

(115)

(103)

Benefit for income taxes

(9)

(1,458)

Loss from continuing operations

$

(4,867)

$

(5,514)

The Company has also provided a non-GAAP measurement which presents income (loss) from continuing operations, before special items. The non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of income (loss) from continuing operations, before special items, provides additional information to investors to facilitate the comparison of past and present operations, excluding items that the Company does not believe are indicative of our ongoing operations due to their size and/or nature.

 

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

 

Q1 FY2018

Q1 FY2017

Item

Amount

($000s)

Per Share

($)

Amount

($000s)

Per Share

($)

Loss from continuing operations

$

(4,867)

$

(0.17)

$

(5,514)

$

(0.19)

Provision for asset impairments

558

0.02

189

0.01

Net loss (gain) on disposition of property and equipment

147

0.00

56

0.00

Fair value adjustment to performance awards liability

(114)

(0.00)

60

0.00

Loss from closed stores(3)

403

0.01

390

0.01

Net uninsured storm-related losses

219

0.01

-

0.00

Loss from continuing operations, before special items

$

(3,654)

$

(0.13)

$

(4,819)

$

(0.17)

 

(1)

We use income (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)

(3)

Losses from closed store include store level profit (loss) less depreciation for stores that closed in fiscal 2017 (9 restaurants) and subsequent to fiscal 2017 year-end through January 29, 2018 (7 restaurants, 2 of which are temporarily closed for renovations).

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 and restaurant closings, 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

December 20,

 2017

December 21,

 2016

(16 weeks)

(16 weeks)

Loss from continuing operations

$

(4,867)

$

(5,514)

Depreciation and amortization

5,353

6,550

Benefit for income taxes

(9)

(1,458)

Interest expense

649

602

Interest income

(6)

(1)

Net loss on disposition of property and equipment

222

85

Provision for asset impairments and restaurant closings

845

287

Non-cash compensation expense

558

769

Franchise Taxes

59

55

Decrease (Increase) in Fair Value of Derivative

(173)

91

Adjusted EBITDA

$

2,631

$

1,466



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