UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended October 3, 2017March 29, 2022
OR
☐ |
|
For the transition period from _______________ to ______
Commission file number 0-21423
BJ’S RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
California |
|
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
7755 Center Avenue, Suite 300
Huntington Beach, California 92647
(714) 500-2400
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol | Name of each exchange on which registered | ||
Common Stock, No Par Value | BJRI | NASDAQ Global Select Market |
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑ No ☐.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
☑ | Large accelerated filer |
| ☐ | Accelerated filer |
☐ | Non-accelerated filer | ☐ | Smaller reporting company | |
☐ | Emerging growth company |
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑.
As of November 3, 2017,April 29, 2022, there were 20,633,39423,438,991 shares of Common Stock of the Registrant outstanding.
BJ’S RESTAURANTS, INC.
TABLE OF CONTENTS
|
|
| Page |
PART I. |
|
| |
|
|
|
|
Item 1. |
|
| |
|
|
|
|
|
| 1 | |
|
|
|
|
|
| 2 | |
3 | |||
4 | |||
|
|
|
|
|
|
| |
| |||
|
|
|
|
Item 2. |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
|
|
|
|
Item 3. |
|
| |
|
|
|
|
Item 4. |
|
| |
|
|
|
|
|
|
|
|
PART II. |
|
| |
|
|
|
|
Item 1. |
|
| |
|
|
|
|
Item 1A. |
|
| |
|
|
|
|
Item 2. |
|
| |
|
|
|
|
Item 6. |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
BJ’S RESTAURANTS, INC.
(In thousands)
|
| October 3, 2017 |
|
| January 3, 2017 |
| ||
|
| (unaudited) |
|
|
|
|
| |
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 28,694 |
|
| $ | 22,761 |
|
Accounts and other receivables, net |
|
| 12,537 |
|
|
| 14,698 |
|
Inventories, net |
|
| 10,226 |
|
|
| 9,907 |
|
Prepaid expenses and other current assets |
|
| 8,368 |
|
|
| 11,324 |
|
Total current assets |
|
| 59,825 |
|
|
| 58,690 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 599,450 |
|
|
| 601,324 |
|
Goodwill |
|
| 4,673 |
|
|
| 4,673 |
|
Other assets, net |
|
| 29,118 |
|
|
| 26,625 |
|
Total assets |
| $ | 693,066 |
|
| $ | 691,312 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable (1) |
| $ | 23,984 |
|
| $ | 31,145 |
|
Accrued expenses |
|
| 83,634 |
|
|
| 94,553 |
|
Total current liabilities |
|
| 107,618 |
|
|
| 125,698 |
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
| 37,073 |
|
|
| 37,587 |
|
Deferred rent |
|
| 32,047 |
|
|
| 30,424 |
|
Deferred lease incentives |
|
| 53,951 |
|
|
| 54,119 |
|
Long-term debt |
|
| 194,000 |
|
|
| 148,000 |
|
Other liabilities |
|
| 23,199 |
|
|
| 20,587 |
|
Total liabilities |
|
| 447,888 |
|
|
| 416,415 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, 5,000 shares authorized, none issued or outstanding |
|
| — |
|
|
| — |
|
Common stock, no par value, 125,000 shares authorized and 20,746 and 22,332 shares issued and outstanding as of October 3, 2017 and January 3, 2017, respectively |
|
| — |
|
|
| — |
|
Capital surplus |
|
| 68,228 |
|
|
| 66,200 |
|
Retained earnings |
|
| 176,950 |
|
|
| 208,697 |
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity |
|
| 245,178 |
|
|
| 274,897 |
|
Total liabilities and shareholders’ equity |
| $ | 693,066 |
|
| $ | 691,312 |
|
��
See accompanying notes to unaudited consolidated financial statements.
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
|
| For the Thirteen |
|
| For the Thirty-Nine |
| ||||||||||
|
| Weeks Ended |
|
| Weeks Ended |
| ||||||||||
|
| October 3, 2017 |
|
| September 27, 2016 |
|
| October 3, 2017 |
|
| September 27, 2016 |
| ||||
Revenues |
| $ | 247,009 |
|
| $ | 233,702 |
|
| $ | 770,642 |
|
| $ | 727,431 |
|
Restaurant operating costs (excluding depreciation and amortization): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (1) |
|
| 65,553 |
|
|
| 59,882 |
|
|
| 200,465 |
|
|
| 183,091 |
|
Labor and benefits |
|
| 91,228 |
|
|
| 82,034 |
|
|
| 277,724 |
|
|
| 252,793 |
|
Occupancy and operating (1) |
|
| 55,238 |
|
|
| 50,474 |
|
|
| 164,054 |
|
|
| 149,691 |
|
General and administrative |
|
| 13,035 |
|
|
| 12,921 |
|
|
| 41,536 |
|
|
| 41,050 |
|
Depreciation and amortization |
|
| 17,430 |
|
|
| 16,292 |
|
|
| 51,231 |
|
|
| 47,930 |
|
Restaurant opening |
|
| 534 |
|
|
| 2,218 |
|
|
| 3,205 |
|
|
| 5,216 |
|
Loss on disposal and impairment of assets |
|
| 1,070 |
|
|
| 810 |
|
|
| 4,168 |
|
|
| 2,266 |
|
Natural disaster and related |
|
| 905 |
|
|
| — |
|
|
| 905 |
|
|
| — |
|
Severance and legal settlements |
|
| 423 |
|
|
| — |
|
|
| 423 |
|
|
| 369 |
|
Total costs and expenses |
|
| 245,416 |
|
|
| 224,631 |
|
|
| 743,711 |
|
|
| 682,406 |
|
Income from operations |
|
| 1,593 |
|
|
| 9,071 |
|
|
| 26,931 |
|
|
| 45,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| (1,177 | ) |
|
| (344 | ) |
|
| (3,178 | ) |
|
| (1,100 | ) |
Other income, net |
|
| 423 |
|
|
| 378 |
|
|
| 1,474 |
|
|
| 813 |
|
Total other (expense) income |
|
| (754 | ) |
|
| 34 |
|
|
| (1,704 | ) |
|
| (287 | ) |
Income before income taxes |
|
| 839 |
|
|
| 9,105 |
|
|
| 25,227 |
|
|
| 44,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense |
|
| (1,550 | ) |
|
| 1,868 |
|
|
| 3,933 |
|
|
| 12,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 2,389 |
|
| $ | 7,237 |
|
| $ | 21,294 |
|
| $ | 32,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.11 |
|
| $ | 0.30 |
|
| $ | 0.98 |
|
| $ | 1.35 |
|
Diluted |
| $ | 0.11 |
|
| $ | 0.30 |
|
| $ | 0.97 |
|
| $ | 1.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 21,354 |
|
|
| 24,091 |
|
|
| 21,620 |
|
|
| 24,172 |
|
Diluted |
|
| 21,670 |
|
|
| 24,486 |
|
|
| 22,032 |
|
|
| 24,589 |
|
See accompanying notes to unaudited consolidated financial statements.
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
| For the Thirty-Nine Weeks Ended |
| |||||
|
| October 3, 2017 |
|
| September 27, 2016 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 21,294 |
|
| $ | 32,670 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 51,231 |
|
|
| 47,930 |
|
Deferred income taxes |
|
| (514 | ) |
|
| 4,117 |
|
Stock-based compensation expense |
|
| 5,271 |
|
|
| 4,580 |
|
Loss on disposal and impairment of assets |
|
| 4,168 |
|
|
| 2,266 |
|
Natural disaster and related |
|
| 194 |
|
|
| — |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts and other receivables |
|
| 2,559 |
|
|
| 12,844 |
|
Landlord contribution for tenant improvements |
|
| 124 |
|
|
| 559 |
|
Inventories, net |
|
| (319 | ) |
|
| (620 | ) |
Prepaid expenses and other current assets |
|
| 2,603 |
|
|
| 3,891 |
|
Other assets, net |
|
| (3,509 | ) |
|
| (3,729 | ) |
Accounts payable |
|
| (4,788 | ) |
|
| (3,172 | ) |
Accrued expenses |
|
| (10,919 | ) |
|
| 4,895 |
|
Deferred rent |
|
| 1,623 |
|
|
| 2,225 |
|
Deferred lease incentives |
|
| (168 | ) |
|
| 660 |
|
Other liabilities |
|
| 204 |
|
|
| (485 | ) |
Net cash provided by operating activities |
|
| 69,054 |
|
|
| 108,631 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (57,358 | ) |
|
| (80,682 | ) |
Proceeds from sale of assets |
|
| 4,739 |
|
|
| — |
|
Net cash used in investing activities |
|
| (52,619 | ) |
|
| (80,682 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Borrowings on line of credit |
|
| 1,604,600 |
|
|
| 749,700 |
|
Payments on line of credit |
|
| (1,558,600 | ) |
|
| (740,900 | ) |
Excess tax benefit from stock-based compensation |
|
| — |
|
|
| 289 |
|
Taxes paid on vested stock units under employee plans |
|
| (248 | ) |
|
| (208 | ) |
Proceeds from exercise of stock options |
|
| 1,029 |
|
|
| 1,890 |
|
Repurchases of common stock |
|
| (57,283 | ) |
|
| (47,376 | ) |
Net cash used in financing activities |
|
| (10,502 | ) |
|
| (36,605 | ) |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
| 5,933 |
|
|
| (8,656 | ) |
Cash and cash equivalents, beginning of period |
|
| 22,761 |
|
|
| 34,604 |
|
Cash and cash equivalents, end of period |
| $ | 28,694 |
|
| $ | 25,948 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for income taxes |
| $ | 4,909 |
|
| $ | 6,786 |
|
Cash paid for interest, net of capitalized interest |
| $ | 2,968 |
|
| $ | 904 |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Property and equipment acquired and included in accounts payable |
| $ | 6,947 |
|
| $ | 14,802 |
|
Stock-based compensation capitalized |
| $ | 218 |
|
| $ | 226 |
|
|
| March 29, 2022 |
|
| December 28, 2021 |
| ||
|
| (unaudited) |
|
|
|
|
| |
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 27,201 |
|
| $ | 38,527 |
|
Accounts and other receivables, net |
|
| 24,108 |
|
|
| 29,055 |
|
Inventories, net |
|
| 11,391 |
|
|
| 11,579 |
|
Prepaid expenses and other current assets |
|
| 10,890 |
|
|
| 11,654 |
|
Total current assets |
|
| 73,590 |
|
|
| 90,815 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 498,789 |
|
|
| 506,111 |
|
Operating lease assets |
|
| 362,872 |
|
|
| 365,244 |
|
Goodwill |
|
| 4,673 |
|
|
| 4,673 |
|
Deferred income taxes |
|
| 35,217 |
|
|
| 24,902 |
|
Other assets, net |
|
| 44,919 |
|
|
| 43,421 |
|
Total assets |
| $ | 1,020,060 |
|
| $ | 1,035,166 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 49,076 |
|
| $ | 48,840 |
|
Accrued expenses |
|
| 97,038 |
|
|
| 112,354 |
|
Current operating lease obligations |
|
| 39,575 |
|
|
| 39,240 |
|
Total current liabilities |
|
| 185,689 |
|
|
| 200,434 |
|
|
|
|
|
|
|
|
|
|
Long-term operating lease obligations |
|
| 431,332 |
|
|
| 436,016 |
|
Long-term debt |
|
| 50,000 |
|
|
| 50,000 |
|
Other liabilities |
|
| 15,377 |
|
|
| 14,945 |
|
Total liabilities |
|
| 682,398 |
|
|
| 701,395 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, 5,000 shares authorized, NaN issued or outstanding |
|
| — |
|
|
| — |
|
Common stock, no par value, 125,000 shares authorized and 23,416 and 23,304 shares issued and outstanding as of March 29, 2022 and December 28, 2021, respectively |
|
| — |
|
|
| — |
|
Capital surplus |
|
| 69,326 |
|
|
| 72,513 |
|
Retained earnings |
|
| 268,336 |
|
|
| 261,258 |
|
Total shareholders’ equity |
|
| 337,662 |
|
|
| 333,771 |
|
Total liabilities and shareholders’ equity |
| $ | 1,020,060 |
|
| $ | 1,035,166 |
|
See accompanying notes to unaudited consolidated financial statements.
UNAUDITEDCONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
|
| For the Thirteen Weeks Ended |
| |||||
|
| March 29, 2022 |
|
| March 30, 2021 |
| ||
Revenues |
| $ | 298,729 |
|
| $ | 223,307 |
|
Restaurant operating costs (excluding depreciation and amortization): |
|
|
|
|
|
|
|
|
Cost of sales |
|
| 81,466 |
|
|
| 56,149 |
|
Labor and benefits |
|
| 116,286 |
|
|
| 81,680 |
|
Occupancy and operating |
|
| 71,701 |
|
|
| 59,828 |
|
General and administrative |
|
| 18,253 |
|
|
| 15,261 |
|
Depreciation and amortization |
|
| 17,976 |
|
|
| 18,203 |
|
Restaurant opening |
|
| 583 |
|
|
| 128 |
|
Loss on disposal and impairment of assets |
|
| 157 |
|
|
| 273 |
|
Total costs and expenses |
|
| 306,422 |
|
|
| 231,522 |
|
Loss from operations |
|
| (7,693 | ) |
|
| (8,215 | ) |
|
|
|
|
|
|
|
|
|
Other (expense) income: |
|
|
|
|
|
|
|
|
Interest expense, net |
|
| (634 | ) |
|
| (1,402 | ) |
Other (expense) income, net |
|
| (388 | ) |
|
| 310 |
|
Total other expense |
|
| (1,022 | ) |
|
| (1,092 | ) |
Loss before income taxes |
|
| (8,715 | ) |
|
| (9,307 | ) |
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
| (10,175 | ) |
|
| (6,166 | ) |
Net income (loss) |
| $ | 1,460 |
|
| $ | (3,141 | ) |
|
|
|
|
|
|
|
|
|
Net income (loss) per share: |
|
|
|
|
|
|
|
|
Basic |
| $ | 0.06 |
|
| $ | (0.14 | ) |
Diluted |
| $ | 0.06 |
|
| $ | (0.14 | ) |
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
| 23,377 |
|
|
| 22,926 |
|
Diluted |
|
| 23,716 |
|
|
| 22,926 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
BJ’S RESTAURANTS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
|
| For the Thirteen Weeks Ended |
| |||||||||||||||||
|
| Common Stock |
|
| Capital |
|
| Retained |
|
|
|
|
| |||||||
|
| Shares |
|
| Amount |
|
| Surplus |
|
| Earnings |
|
| Total |
| |||||
Balance, December 29, 2020 |
|
| 22,318 |
|
| $ | — |
|
| $ | 71,722 |
|
| $ | 222,066 |
|
| $ | 293,788 |
|
Exercise of stock options |
|
| 94 |
|
|
| 5,192 |
|
|
| (1,582 | ) |
|
| — |
|
|
| 3,610 |
|
Issuance of common stock |
|
| 704 |
|
|
| 28,957 |
|
|
| — |
|
|
| — |
|
|
| 28,957 |
|
Issuance of restricted stock units |
|
| 103 |
|
|
| 4,915 |
|
|
| (5,366 | ) |
|
| — |
|
|
| (451 | ) |
Reclassification of common stock |
|
| — |
|
|
| (39,064 | ) |
|
| — |
|
|
| 39,064 |
|
|
| — |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 2,515 |
|
|
| — |
|
|
| 2,515 |
|
Adjustment to dividends previously accrued |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| 5 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,141 | ) |
|
| (3,141 | ) |
Balance, March 30, 2021 |
|
| 23,219 |
|
| $ | — |
|
| $ | 67,289 |
|
| $ | 257,994 |
|
| $ | 325,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 28, 2021 |
|
| 23,304 |
|
| $ | — |
|
| $ | 72,513 |
|
| $ | 261,258 |
|
| $ | 333,771 |
|
Issuance of restricted stock units |
|
| 112 |
|
|
| 5,615 |
|
|
| (5,975 | ) |
|
| — |
|
|
| (360 | ) |
Reclassification of common stock |
|
| — |
|
|
| (5,615 | ) |
|
| — |
|
|
| 5,615 |
|
|
| — |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 2,788 |
|
|
| — |
|
|
| 2,788 |
|
Adjustment to dividends previously accrued |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| 3 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,460 |
|
|
| 1,460 |
|
Balance, March 29, 2022 |
|
| 23,416 |
|
| $ | — |
|
| $ | 69,326 |
|
| $ | 268,336 |
|
| $ | 337,662 |
|
See accompanying notes to unaudited consolidated financial statements.
BJ’S RESTAURANTS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
| For the Thirteen Weeks Ended |
| |||||
|
| March 29, 2022 |
|
| March 30, 2021 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 1,460 |
|
| $ | (3,141 | ) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 17,976 |
|
|
| 18,203 |
|
Non-cash lease expense |
|
| 8,230 |
|
|
| 7,606 |
|
Amortization of financing costs |
|
| 54 |
|
|
| 137 |
|
Deferred income taxes |
|
| (10,315 | ) |
|
| (6,299 | ) |
Stock-based compensation expense |
|
| 2,712 |
|
|
| 2,419 |
|
Loss on disposal and impairment of assets |
|
| 157 |
|
|
| 273 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts and other receivables |
|
| 6,277 |
|
|
| (172 | ) |
Inventories, net |
|
| 334 |
|
|
| 392 |
|
Prepaid expenses and other current assets |
|
| 526 |
|
|
| 543 |
|
Other assets, net |
|
| (2,181 | ) |
|
| 484 |
|
Accounts payable |
|
| 130 |
|
|
| 6,078 |
|
Accrued expenses |
|
| (15,271 | ) |
|
| (1,453 | ) |
Operating lease obligations |
|
| (9,912 | ) |
|
| (10,844 | ) |
Other liabilities |
|
| 432 |
|
|
| (14 | ) |
Net cash provided by operating activities |
|
| 609 |
|
|
| 14,212 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (12,096 | ) |
|
| (6,877 | ) |
Proceeds from sale of assets |
|
| 566 |
|
|
| — |
|
Net cash used in investing activities |
|
| (11,530 | ) |
|
| (6,877 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Borrowings on line of credit |
|
| 170,000 |
|
|
| 442,200 |
|
Payments on line of credit |
|
| (170,000 | ) |
|
| (442,200 | ) |
Payments of debt issuance costs |
|
| (3 | ) |
|
| (315 | ) |
Proceeds from issuance of common stock, net |
|
| — |
|
|
| 28,957 |
|
Taxes paid on vested stock units under employee plans |
|
| (360 | ) |
|
| (924 | ) |
Proceeds from exercise of stock options |
|
| — |
|
|
| 3,610 |
|
Cash dividends accrued under stock compensation plans |
|
| (42 | ) |
|
| (80 | ) |
Net cash (used in) provided by financing activities |
|
| (405 | ) |
|
| 31,248 |
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
| (11,326 | ) |
|
| 38,583 |
|
Cash and cash equivalents, beginning of period |
|
| 38,527 |
|
|
| 51,664 |
|
Cash and cash equivalents, end of period |
| $ | 27,201 |
|
| $ | 90,247 |
|
See accompanying notes to unaudited consolidated financial statements.
BJ’S RESTAURANTS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
| For the Thirteen Weeks Ended |
| |||||
|
| March 29, 2022 |
|
| March 30, 2021 |
| ||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for income taxes |
| $ | 266 |
|
| $ | 4 |
|
Cash paid for interest, net of capitalized interest |
| $ | 360 |
|
| $ | 1,459 |
|
Cash paid for operating lease obligations |
| $ | 16,635 |
|
| $ | 17,285 |
|
Supplemental disclosure of non-cash operating, investing and financing activities: |
|
|
|
|
| |||
Operating lease assets obtained in exchange for operating lease obligations |
| $ | 7,278 |
|
| $ | 3,946 |
|
Tenant improvement allowance receivable |
| $ | 1,601 |
|
| $ | 4,163 |
|
Property and equipment acquired and included in accounts payable |
| $ | 8,327 |
|
| $ | 2,295 |
|
Stock-based compensation capitalized |
| $ | 76 |
|
| $ | 96 |
|
See accompanying notes to unaudited consolidated financial statements.
BJ’S RESTAURANTS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the accounts of BJ’s Restaurants, Inc. (referred to herein as the “Company,” “we,” “us” and “our”) and our wholly owned subsidiaries. The consolidated financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of our financial condition, results of operations, shareholders’ equity and cash flows for the period.periods presented. Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and footnote disclosures normally included in consolidated financial statements in accordance with U.S. GAAP have been omitted pursuant to the U.S. Securities and Exchange Commission (“SEC”) rules.
The preparation of financial statements in accordanceconformity with U.S. GAAP requires us to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ from these estimates.Our operating results for the thirteen weeks ended March 29, 2022 may not be indicative of operating results for the entire year.
A description of our accounting policies and other financial information is included in our audited consolidated financial statements filed with the SEC on Form 10-K for the fiscal year ended January 3, 2017.December 28, 2021. The disclosures included in our accompanying interim consolidated financial statements and footnotes should be read in conjunction with our consolidated financial statements and notes thereto included in the Annual Report on Form 10-K and our other reports filed from time to time with the Securities and Exchange Commission.
ReclassificationsCOVID-19 Pandemic Update
AsThe COVID-19 pandemic has adversely affected, and is expected to continue to adversely affect, our operations and financial results for the foreseeable future. Currently, national, state and local jurisdictions have removed their capacity restrictions on businesses and therefore our restaurants are serving customers (referred to as “guests”) in our dining rooms without social distancing requirements. However, it is possible additional outbreaks could require us to reduce our capacity, implement social distancing, or further suspend our in-restaurant dining operations. In addition, our restaurant performance could be adversely affected if we are required by law to have guests present evidence of vaccination or negative tests in a resultsignificant number of jurisdictions. There is also no guarantee that state and local jurisdictions that ease restrictions will not later reverse or roll-back the adoption ofrestrictions, as many have done in the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), reclassifications of financial statement amountspast. Additionally, our restaurant operations have been madeand could continue to be disrupted by employee (referred to as “team member”) staffing issues because of illness, exclusion, fear of contracting COVID-19 or caring for family members due to COVID-19, legal requirements for team member vaccinations or COVID testing, lack of labor supply, competitive labor pressures, or for other reasons. Furthermore, we remain in regular contact with our major suppliers and while to date we have not experienced material disruptions in our supply chain due to COVID-19, we could see material future disruptions should the impacts of COVID-19 continue. For more information regarding the risks to our business relating to the prior period to conform to the current period’s presentation. The adoption of this standard resultedCOVID-19 pandemic, see “Risk Factors” in the reclassification of $18.4 million from current to long-term deferred taxes on January 3, 2017.
Recently Issued Accounting Standards
In February 2016, the FASB issued Accounting Standards Update ASU 2016-02, Leases (Topic 842). This guidance requires the recognition of most leases on the balance sheet to give investors, lenders, and other financial statement users a more comprehensive view of a company’s long-term financial obligations as well as the assets it owns versus leases. ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Currently, allItem 1A of our restaurant and our restaurant support center leases are accountedAnnual Report on Form 10-K for as operating leases, and therefore are not recorded within our balance sheet. We are currently evaluating the impact that this guidance will have on our consolidated financial statements as well as the expected adoption method.fiscal year ended December 28, 2021.
In April 2016, the FASB issued ASU 2016-10, an amendment to ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services and expands related disclosure requirements. ASU 2016-10 clarifies ASU 2014-09 to address the potential for diversity in practice at the adoption. ASUs 2016-10 and 2014-09 are effective for annual and interim reporting periods beginning after December 15, 2017, and early application is permitted.
The majority of the Company’s2. REVENUE RECOGNITION
Our revenues are fromcomprised of food and beverage sales atfrom our restaurants. ASU 2014-09 willRevenues from restaurant sales are recognized when payment is tendered. Amounts paid with a credit card are recorded in accounts and other receivables until payment is collected from the credit card processor. We sell gift cards which do not have an impactexpiration date and we do not deduct non-usage fees from outstanding gift card balances. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. Based on historical redemption rates, a portion of our gift card sales are not expected to be redeemed and are recognized as gift card “breakage” over time. Estimated gift card breakage is recorded as revenue recognition relatedand recognized in proportion to our historical redemption pattern, unless there is a legal obligation to remit the unredeemed gift cards to government authorities. The estimated gift card breakage is based on when the likelihood of redemption becomes remote, which has typically been 24 months after the original gift card issuance date.
Our “BJ’s Premier Rewards Plus” customer loyalty program enables participants to earn points for qualifying purchases that can be redeemed for food and beverage sales unlessbeverages in the sales are to a customer participating in our loyalty program. Currently, we measure our total loyalty rewards obligation based on the estimated number of customers who will ultimately claim the rewards earned under the program using the estimated cost of the rewards. Under this approach, we estimate the cost of a loyalty point based on the equivalent cost of the food and beverage earned by our customers. These expenses are accrued for and recorded as marketing expenses and are included in “Occupancy and operating” expenses on our Consolidated Statements of Income. Under ASU 2016-10, we will be required tofuture. We allocate the transaction price between the goods delivered and the future goods that will be delivered, using the loyalty points earned, on a relative standalone selling price basis. The portion ofbasis, and defer the transaction pricerevenues allocated to the futurepoints, less expected expirations, until such points are redeemed.
The liability related to our gift card and loyalty program, included in “Accrued expenses” on our Consolidated Balance Sheets is as follows (in thousands):
|
| March 29, 2022 |
|
| December 28, 2021 |
| ||
Gift card liability |
| $ | 15,078 |
|
| $ | 19,499 |
|
Deferred loyalty revenue |
| $ | 3,848 |
|
| $ | 3,949 |
|
Revenue recognized for the redemption of gift cards and loyalty rewards willdeferred at the beginning of each respective fiscal year is as follows (in thousands):
| For the Thirteen Weeks Ended |
| |||||
| March 29, 2022 |
|
| March 30, 2021 |
| ||
Revenue recognized from gift card liability | $ | 6,680 |
|
| $ | 4,900 |
|
Revenue recognized from customer loyalty program | $ | 4,105 |
|
| $ | 5,548 |
|
3. LEASES
We determine if a contract contains a lease at inception. Our material operating leases consist of restaurant locations and office space. U.S. GAAP requires that our leases be deferred untilevaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the related loyalty rewards are redeemed. We will no longer record a marketing expense related to loyalty points earned. These new standards will not impactcommencement date, and the way we account for gift card breakage. We arelease term used in the processevaluation includes the non-cancellable period for which we have the right to use the underlying asset, together with renewal option periods when the exercise of quantifying the impactrenewal option is reasonably certain and failure to exercise such option would result in an economic penalty. All of adopting this new standardour restaurant leases and office space are classified as well as determiningoperating leases. We do not have any finance leases.
Lease costs included in “Occupancy & operating” on the adoption method.Consolidated Statements of Operations consisted of the following (in thousands):
|
| For the Thirteen Weeks Ended |
| |||||
|
| March 29, 2022 |
|
| March 30, 2021 |
| ||
Lease cost |
| $ | 14,835 |
|
| $ | 14,209 |
|
Variable lease cost |
|
| 708 |
|
|
| 133 |
|
Total lease costs |
| $ | 15,543 |
|
| $ | 14,342 |
|
2.4. LONG-TERM DEBT
Line of Credit
On November 3, 2021, we entered into a Fourth Amended and Restated Credit Agreement (“Credit Facility”) with Bank of America, N.A. (“BofA”), JPMorgan Chase Bank, N.A., and certain other parties to amend and restate our revolving line of credit (the “Line of Credit”) to improve the pricing, extend the maturity date, change the interest reference rate, eliminate certain financial covenants and conditions, and reset other financial covenants starting with the fourth quarter of 2021.
Our Credit Facility which matures on November 18, 2021,3, 2026, and provides us with revolving loan commitments totaling $250$215 million, which may be increased up to $315 million, of which $50 million may be used for the issuance of letters of credit. Availability under the Credit Facility is reduced by outstanding letters of credit, which are used to support our self-insurance programs. Our obligations under the Credit Facility are unsecured. As of October 3, 2017,On March 29, 2022, there were borrowings of $194.0$50.0 million and letters of credit totaling approximately $14.4$17.2 million outstanding, leaving $147.8 million available to borrow.
Borrowings under the Line of Credit Facility. Available borrowings under the Credit Facility were $41.6 million as of October 3, 2017. The Credit Facility bearsbear interest at our choice of LIBORan annual rate equal to either (a) the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus a percentage not to exceed 1.75%2.00% (with a floor on BSBY of 0.00%), or at(b) a percentage not to exceed 1.00% above a Base Rate equal to the highest of (i) the Federal Funds Rate plus 1/2 of 1.00%, (ii) BofA’s Prime Rate, (iii) the BSBY rate ranging from Bank of America’s prime rate to 0.75% above Bank of America’s prime rate, basedplus 1.00%, and (iv) 1.00%, in either case depending on ourthe level of lease and debt obligations of the Company as compared to EBITDA plus lease expenses. The weighted average interest rate during the thirty-ninethirteen weeks ended October 3, 2017March 29, 2022 was approximately 2.2%2.1%.
The Credit Facility is secured by the Company’s assets and contains provisions requiring us to maintain compliance with certain covenants, including a Fixed Charge Coverage Ratio and a Lease Adjusted Leverage Ratio. At October 3, 2017,March 29, 2022, we were in compliance with these covenants.
Pursuant to the Line of Credit, we are required to pay certain customary fees and expenses associated with maintenance and use of the Line of Credit, including letter of credit issuance fees, unused commitment fees and interest on the Line of Credit, which are payable
monthly. Interest expense and commitment fees under the Credit Facility were approximately $0.6 million and $1.4 million, for the thirty-ninethirteen weeks ended October 3, 2017March 29, 2022 and September 27, 2016 wasMarch 30, 2021, respectively. We also capitalized approximately $3.2$0.04 million and $1.1 million, respectively. We capitalized approximately $0.1 million and $0.2$0.03 million of interest expense related to new restaurant construction during each of the thirty-ninethirteen weeks ended October 3, 2017,March 29, 2022 and September 27, 2016, respectively. March 30, 2021.
3.5. NET INCOME (LOSS) PER SHARE
Basic and diluted net income (loss) per share is computedcalculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. DilutedPotentially dilutive shares are excluded from the computation of diluted net (loss) per share since they have an anti-dilutive effect, yet potentially dilutive shares are included in the computation of diluted net income per shareshare. The number of diluted shares reflects the potential dilution that could occur if holders of in-the-money stock options issued by usand warrants exercised their right to sellconvert these instruments into common stock at set prices were exercised and ifthe restrictions on restricted stock units issued by us were to lapse (collectively, equity awards) using(“RSUs”) lapse. Additionally, performance-based RSUs are considered contingent shares; therefore, at each reporting date we determine the treasury stock method. Performance-based restricted stock units have been excluded from theprobable number of shares that will vest and include these contingently issuable shares in our diluted share calculation unless they are antidilutive. Once these performance-based RSUs vest, they are included in our basic net income (loss) per share computation because the performance-based criteria have not yet been met. calculation.
The following table presents a reconciliation of basic and diluted net income (loss) per share, including the number of dilutive equity awards that were included in the dilutive net income (loss) per share computation (in thousands):
|
| For the Thirteen |
|
| For the Thirty-Nine |
| ||||||||||||||||||
|
| Weeks Ended |
|
| Weeks Ended |
|
| For the Thirteen Weeks Ended |
| |||||||||||||||
|
| October 3, 2017 |
|
| September 27, 2016 |
|
| October 3, 2017 |
|
| September 27, 2016 |
|
| March 29, 2022 |
|
| March 30, 2021 |
| ||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 2,389 |
|
| $ | 7,237 |
|
| $ | 21,294 |
|
| $ | 32,670 |
| ||||||||
Net income (loss) |
| $ | 1,460 |
|
| $ | (3,141 | ) | ||||||||||||||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding – basic |
|
| 21,354 |
|
|
| 24,091 |
|
|
| 21,620 |
|
|
| 24,172 |
|
|
| 23,377 |
|
|
| 22,926 |
|
Dilutive effect of equity awards |
|
| 316 |
|
|
| 395 |
|
|
| 412 |
|
|
| 417 |
|
|
| 339 |
|
|
| — |
|
Weighted-average shares outstanding – diluted |
|
| 21,670 |
|
|
| 24,486 |
|
|
| 22,032 |
|
|
| 24,589 |
|
|
| 23,716 |
|
|
| 22,926 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net income (loss) per share: |
|
|
|
|
|
|
|
| ||||||||||||||||
Basic |
| $ | 0.06 |
|
| $ | (0.14 | ) | ||||||||||||||||
Diluted |
| $ | 0.06 |
|
| $ | (0.14 | ) |
For the thirteen weeks ended October 3, 2017March 29, 2022 and September 27, 2016,March 30, 2021, there were approximately 1.1 million and 0.40.5 million shares of common stock equivalents,equity awards, respectively, that were excluded from the calculation of diluted net income (loss) per share because they are anti-dilutive. For the thirty-nine weeks ended October 3, 2017 and September 27, 2016, there were approximately 0.5 million and 0.3 million shares of common stock equivalents, respectively, that were excluded from the calculation of diluted net income per share because they are anti-dilutive.
4. RELATED PARTY
The Jacmar Companies and their affiliates (collectively referred to herein as “Jacmar”) is one of our shareholders and James Dal Pozzo, the Chief Executive Officer of Jacmar, is a member of our Board of Directors. Jacmar, through its affiliation with Distribution Market Advantage (“DMA”), a consortium of large, regional food distributors located throughout the United States, is currently our largest supplier of food, beverage, paper products and supplies. In 2006, we began using DMA to deliver the majority of our food products to our restaurants. In July 2017, after conducting a market evaluation, we entered into a new five-year agreement with DMA. The new agreement expires in June 2022.
Jacmar services our restaurants in California and Nevada, while other DMA distributors service our restaurants in all other states. Under the terms of our agreement with DMA, Jacmar is required to sell products to us at the same prices as the other DMA distributors. Jacmar does not provide us with any produce, liquor, wine or beer products, all of which are provided by other third party vendors and are included in “Cost of sales” on the Consolidated Statements of Income.
The cost of food, beverage, paper products and supplies provided by Jacmar included within cost of sales and occupancy and operating expenses consisted of the following (in thousands):
|
| For the Thirteen |
|
| For the Thirty-Nine |
| ||||||||||||||||||||||||||
|
| Weeks Ended |
|
| Weeks Ended |
| ||||||||||||||||||||||||||
|
| October 3, 2017 |
|
| September 27, 2016 |
|
| October 3, 2017 |
|
| September 27, 2016 |
| ||||||||||||||||||||
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party suppliers |
| $ | 45,066 |
|
|
| 68.7 | % |
| $ | 40,642 |
|
|
| 67.9 | % |
| $ | 138,089 |
|
|
| 68.9 | % |
| $ | 122,681 |
|
|
| 67.0 | % |
Jacmar |
|
| 20,487 |
|
|
| 31.3 |
|
|
| 19,240 |
|
|
| 32.1 |
|
|
| 62,376 |
|
|
| 31.1 |
|
|
| 60,410 |
|
|
| 33.0 |
|
Total cost of sales |
| $ | 65,553 |
|
|
| 100.0 | % |
| $ | 59,882 |
|
|
| 100.0 | % |
| $ | 200,465 |
|
|
| 100.0 | % |
| $ | 183,091 |
|
|
| 100.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy and operating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party suppliers |
| $ | 52,913 |
|
|
| 95.8 | % |
| $ | 48,305 |
|
|
| 95.7 | % |
| $ | 157,186 |
|
|
| 95.8 | % |
| $ | 143,148 |
|
|
| 95.6 | % |
Jacmar |
|
| 2,325 |
|
|
| 4.2 |
|
|
| 2,169 |
|
|
| 4.3 |
|
|
| 6,868 |
|
|
| 4.2 |
|
|
| 6,543 |
|
|
| 4.4 |
|
Total occupancy and operating |
| $ | 55,238 |
|
|
| 100.0 | % |
| $ | 50,474 |
|
|
| 100.0 | % |
| $ | 164,054 |
|
|
| 100.0 | % |
| $ | 149,691 |
|
|
| 100.0 | % |
The amounts included in trade payables related to Jacmar consisted of the following (in thousands):
|
| October 3, 2017 |
|
| January 3, 2017 |
| ||
Third party suppliers |
| $ | 20,168 |
|
| $ | 25,363 |
|
Jacmar |
|
| 3,816 |
|
|
| 5,782 |
|
Total accounts payable |
| $ | 23,984 |
|
| $ | 31,145 |
|
5.6. STOCK-BASED COMPENSATION
Our current shareholder approved stock-based compensation plan is the 2005BJ’s Restaurants, Inc. Equity Incentive Plan, (as amended from time to time, “the Plan”). Under the Plan, we may issue shares of our common stock to employees,team members, officers, directors and consultants. We have granted incentive stock options, non-qualified stock options, restricted stock and performance and time-based restricted stock units. Stock options and stock appreciation rights, if any, are charged against the Plan share reserve on the basis of one1 share for each share granted. Other typesGrants of grants, including restricted stock, RSUs, performance shares and performance units, (“RSUs”),if any, are currently charged against the Plan share reserve on the basis of 1.5 shares for each share granted. The Plan also contains other limits on the terms of incentive grants such as limits on the number that can be granted to an employeea team member during any fiscal year. All options granted under the Plan expire within 10 years of their date of grant.
Under the Plan, we issue non-qualified stock options as well as time-based and performance-based RSUs and non-qualified stock options to vice presidents and above.above on an annual basis, as well as new hires who are given the option between receiving their full grant as a time-based RSU or split evenly between non-qualified stock options and time-based RSUs. We issue time-based RSUs and/or non-qualified stock options to other select support employees.team members, and we issue time-based RSUs to non-employee members of our Board of Directors. We also issue RSUs, and previously issued non-qualified stock options, in connection with the BJ’s Gold Standard Stock Ownership Program (the “GSSOP”). The GSSOP is a long-term equity incentive program for our restaurant general managers, executive kitchen mangers,managers, directors of operations and directors of kitchen operations. GSSOP grants are dependent on the length of each participant’s service with us and position. All GSSOP participants are required to remain in good standing during their servicevesting period.
The Plan permits usour Board of Directors to set the vesting terms and exercise period for awards at our discretion.their discretion; however, the grant of awards with no minimum vesting period or a vesting period less than one year may not exceed 5% of the total number of shares authorized under the Plan. Stock options and time-based RSUs vest ratably over one, three or five years for non-GSSOP participants and either cliff vest at three or five years or cliff vest at 33% on the third anniversary and 67% on the fifth anniversary for GSSOP participants. Performance-based RSUs generally cliff vest on the third anniversary of the grant date in an amount from 0% to 150%225% of the grant quantity, dependent on the level of performance target achievement.
On January 15, 2021, our Board of Directors approved special fully-vested restricted stock grants, in lieu of cash bonuses to Restaurant Support Center team members at the Vice President and Director levels. These grants were in amounts designed to approximate a portion of their potential incentive compensation, which was approximately $0.5 million.
The following table presents the stock-based compensation recognized within our consolidated financial statements (in thousands):
|
| For the Thirteen |
|
| For the Thirty-Nine |
| ||||||||||||||||||
|
| Weeks Ended |
|
| Weeks Ended |
|
| For the Thirteen Weeks Ended |
| |||||||||||||||
|
| October 3, 2017 |
|
| September 27, 2016 |
|
| October 3, 2017 |
|
| September 27, 2016 |
|
| March 29, 2022 |
|
| March 30, 2021 |
| ||||||
Labor and benefits |
| $ | 406 |
|
| $ | 413 |
|
| $ | 1,404 |
|
| $ | 1,321 |
|
| $ | 751 |
|
| $ | 808 |
|
General and administrative |
| $ | 1,335 |
|
| $ | 1,061 |
|
| $ | 3,867 |
|
| $ | 3,259 |
|
| $ | 1,961 |
|
| $ | 1,611 |
|
Capitalized (1) |
| $ | 75 |
|
| $ | 64 |
|
| $ | 218 |
|
| $ | 226 |
|
| $ | 76 |
|
| $ | 96 |
|
| (1) | Capitalized stock-based compensation relates to our restaurant development personnel and is included in “Property and equipment, net” on the Consolidated Balance Sheets. |
Stock Options
The fair value of each stock option was estimated on the grant date using the Black‑Scholes option-pricing model with the following weighted average assumptions:
|
| For the Thirty-Nine Weeks Ended |
|
| For the Thirteen Weeks Ended |
| ||||||||||
|
| October 3, 2017 |
|
| September 27, 2016 |
|
| March 29, 2022 |
|
| March 30, 2021 |
| ||||
Expected volatility |
|
| 34.7 | % |
|
| 35.9 | % |
|
| 63.2 | % |
|
| 60.4 | % |
Risk free interest rate |
|
| 1.9 | % |
|
| 1.5 | % | ||||||||
Risk-free interest rate |
|
| 1.6 | % |
|
| 0.5 | % | ||||||||
Expected option life |
| 5 years |
|
| 5 years |
|
| 5 years |
|
| 5 years |
| ||||
Dividend yield |
|
| 0 | % |
|
| 0 | % |
|
| 0.0 | % |
|
| 0.0 | % |
Fair value of options granted |
| $ | 12.12 |
|
| $ | 14.30 |
|
| $ | 17.38 |
|
| $ | 23.78 |
|
U.S. GAAP requires us to make certain assumptions and judgmentsestimates regarding the grant date fair value. These judgments include expected volatility, risk freerisk-free interest rate, expected option life, and dividend yield. These estimationsassumptions and judgmentsestimates are determined by us using assumptionsinputs that, in many cases, are outside of our control. The changesChanges in these variables or trends,assumptions and estimates, including stock price volatility, dividend yield and risk freerisk-free interest rate, may significantly impact the fair value of future grants resulting in a significant impact to our financial results.
TheUnder our stock-based compensation plan the exercise price of oura stock options under our stock-based compensation planoption is required to equal or exceed the market close fair value of our sharescommon stock at market close on the option grant date or the most recent trading day when grants take place on market holidays. The following table presents stock option activity:
|
| Options Outstanding |
|
| Options Exercisable |
|
| Options Outstanding |
|
| Options Exercisable |
| ||||||||||||||||||||
|
| Shares (in thousands) |
|
| Weighted Average Exercise Price |
|
| Shares (in thousands) |
|
| Weighted Average Exercise Price |
|
| Shares (in thousands) |
|
| Weighted Average Exercise Price |
|
| Shares (in thousands) |
|
| Weighted Average Exercise Price |
| ||||||||
Outstanding at January 3, 2017 |
|
| 1,227 |
|
| $ | 31.95 |
|
|
| 802 |
|
| $ | 27.73 |
| ||||||||||||||||
Outstanding at December 28, 2021 |
|
| 775 |
|
| $ | 41.77 |
|
|
| 519 |
|
| $ | 41.02 |
| ||||||||||||||||
Granted |
|
| 168 |
|
|
| 36.25 |
|
|
|
|
|
|
|
|
|
|
| 98 |
|
|
| 32.27 |
|
|
|
|
|
|
|
|
|
Exercised |
|
| (38 | ) |
|
| 27.08 |
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
Forfeited |
|
| (23 | ) |
|
| 39.67 |
|
|
|
|
|
|
|
|
|
|
| (8 | ) |
|
| 45.30 |
|
|
|
|
|
|
|
|
|
Outstanding at October 3, 2017 |
|
| 1,334 |
|
| $ | 32.50 |
|
|
| 880 |
|
| $ | 29.42 |
| ||||||||||||||||
Outstanding at March 29, 2022 |
|
| 865 |
|
| $ | 40.66 |
|
|
| 621 |
|
| $ | 41.69 |
|
As of October 3, 2017, March 29, 2022, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $3.6$3.4 million, which is generally expected to be recognized over the next fivethree years.
Restricted Stock Units
Time-Based Restricted Stock Units
The following table presents time-based restricted stock unit activity:
|
| Shares (in thousands) |
|
| Weighted Average Fair Value |
| ||
Outstanding at January 3, 2017 |
|
| 460 |
|
| $ | 39.75 |
|
Granted |
|
| 157 |
|
|
| 37.26 |
|
Vested or released |
|
| (76 | ) |
|
| 43.70 |
|
Forfeited |
|
| (50 | ) |
|
| 39.82 |
|
Outstanding at October 3, 2017 |
|
| 491 |
|
| $ | 38.34 |
|
|
| Shares (in thousands) |
|
| Weighted Average Fair Value |
| ||
Outstanding at December 28, 2021 |
|
| 619 |
|
| $ | 39.35 |
|
Granted |
|
| 161 |
|
|
| 32.33 |
|
Released |
|
| (96 | ) |
|
| 43.76 |
|
Forfeited |
|
| (10 | ) |
|
| 44.92 |
|
Outstanding at March 29, 2022 |
|
| 674 |
|
| $ | 36.97 |
|
The fair value of our time-based RSUs is equal to the fair value of our common stock at market close on the date of grant or the most recent trading day when grants take place on market holidays. The fair value of each time-based RSU is expensed over the vesting period (e.g., one, three or five years). As of October 3, 2017,March 29, 2022, total unrecognized stock-based compensation expense related to non-vested RSUs was approximately $9.4$13.7 million, which is generally expected to be recognized over the next five years.
Performance-Based Restricted Stock Units
The following table presents performance-based restricted stock unit activity:
|
| Shares (in thousands) |
|
| Weighted Average Fair Value |
| ||
Outstanding at January 3, 2017 |
|
| 54 |
|
| $ | 37.87 |
|
Granted |
|
| 40 |
|
|
| 35.95 |
|
Vested or released |
|
| — |
|
|
| — |
|
Forfeited |
|
| (24 | ) |
|
| 32.49 |
|
Outstanding at October 3, 2017 |
|
| 70 |
|
| $ | 38.68 |
|
|
| Shares (in thousands) |
|
| Weighted Average Fair Value |
| ||
Outstanding at December 28, 2021 |
|
| 112 |
|
| $ | 45.60 |
|
Granted |
|
| 52 |
|
|
| 32.27 |
|
Released |
|
| (27 | ) |
|
| 53.22 |
|
Forfeited |
|
| (1 | ) |
|
| 53.22 |
|
Outstanding at March 29, 2022 |
|
| 136 |
|
| $ | 38.93 |
|
The fair value of our performance-based RSUs is equal to the fair value of our common stock at market close on the date of grant or the most recent trading day when grants take place on market holidays. The fair value of each performance-based RSU is expensed, based on management’s current estimate of the level that the performance goal will be achieved. As of October 3, 2017,March 29, 2022, based on the target level of performance, the total unrecognized stock-based compensation expense related to non-vested
performance-based RSUs was approximately $1.2$3.9 million, which is generally expected to be recognized over the next three years.
6.7. INCOME TAXES
We calculate our interim income tax provision in accordance with ASC Topic 270, “Interim Reporting” and ASC Topic 740, “Accounting for Income Taxes.” At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary year to date earnings. The related tax expense or benefit is recognized in the interim period in which it occurs. TheIn addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change is effective.occurs. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including the expected operating income for the year, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year.assets. The accounting estimates used to compute income tax expense may change as new events occur, additional information is obtained or the tax environment changes.
Our effective income tax rate for the thirteen weeks ended March 29, 2022 was a benefit of 116.8% compared to a benefit of 66.3% for the comparable thirteen week period of 2021. The effective tax rate benefit for the thirteen weeks ended March 29, 2022 and March 30, 2021, was different from the statutory tax rate primarily due to FICA tax tip credits.
As of October 3, 2017,March 29, 2022, we had unrecognized tax benefits of approximately $1.3$1.2 million, of which approximately $0.9$1.1 million, if reversed, would impact our effective tax rate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is the following (in thousands):
Balance at January 3, 2017 |
| $ | 1,245 |
|
Decrease for tax positions taken in prior years |
|
| (3 | ) |
Increase for tax positions taken in current year |
|
| 96 |
|
Decrease for statute expiration |
|
| (64 | ) |
Balance at October 3, 2017 |
| $ | 1,274 |
|
|
| For the Thirteen Weeks Ended |
| |||||
|
| March 29, 2022 |
|
| March 30, 2021 |
| ||
Beginning gross unrecognized tax benefits |
| $ | 1,198 |
|
| $ | 1,333 |
|
Increases for tax positions taken in prior years |
|
| 3 |
|
|
| — |
|
Decreases for tax positions taken in prior years |
|
| (1 | ) |
|
| — |
|
Increases for tax positions taken in the current year |
|
| 19 |
|
|
| 22 |
|
Ending gross unrecognized tax benefits |
| $ | 1,219 |
|
| $ | 1,355 |
|
Our uncertain tax positions are related to tax years that remain subject to examination by tax agencies. As of October 3, 2017,March 29, 2022, the earliest tax year still subject to examination by the Internal Revenue Service is 2014.2015. The earliest year still subject to examination by a significant state or local taxing jurisdiction is 2012.2017.
7.8. LEGAL PROCEEDINGS
We are subject to lawsuits, administrative proceedings and demands that arise in the ordinary course of our business and which typically involve claims from customers, employeesguests, team members and others related to operational, employment, real estate and intellectual property issues common to the foodservice industry. A number of these claims may exist at any given time. We are self-insured for a portion of our general liability, our employeeteam member workers’ compensation and our employment practice liability insurance requirements. We maintain coverage with a third partythird-party insurer to limit our total exposure. We believe that most of our customerteam member claims will be covered by our general liability insurance, subject to coverage limits and the portion of such claims that are self-insured. Punitive damages awards and employeeteam member unfair practice claims, however, are not covered by our general liability insurance. To date, we have not been ordered to pay punitive damages with respect to any claims, but there can be no assurance that punitive damages will not be awarded with respect to any future claims. We could be affected by adverse publicity resulting from allegations in lawsuits, claims and proceedings, regardless of whether these allegations are valid or whether we are ultimately determined to be liable. We currently believe that the final disposition of these typestype of lawsuits, proceedings and claims will not have a material adverse effect on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, proceedings or claims.
9. SHAREHOLDERS’ EQUITY
8. STOCK REPURCHASESAt-the-Market Offering
During the thirty-nine weeks ended October 3, 2017,On January 21, 2021, we repurchased and retired approximately 1.7 millionsold 703,399 shares of our common stock at an average price of $34.02$42.65 per share for cash proceeds of $30.0 million (before commission and other fees) through an “at-the market” (“ATM”) offering program. As a totalresult of $57.3the anti-dilution provisions contained in ACT III’s warrant, the number of shares issuable upon exercise of such warrant was adjusted to 876,949 and the exercise price was adjusted to $26.94.
Stock Repurchases
As of March 29, 2022, we have approximately $24.4 million which is recorded as a reduction in common stock, with any excess charged to retained earnings. In March 2017,remaining under the Company’scurrent $500 million share repurchase plan approved by our Board of Directors approved an expansionDirectors. We have suspended our repurchase program until the Board determines that resumption of repurchases is in the best interest of the authorized share repurchase programCompany and its shareholders and is permitted by $50 millionour Credit Facility.
Cash Dividends
Due to $400 million in the aggregate. As of October 3, 2017, approximately $52.2 million remains available for additional repurchases under our share repurchase program.
9. SUBSEQUENT EVENTS
On October 24, 2017,COVID-19 pandemic, our Board of Directors authorized and declared a quarterly cash dividend of $0.11 per share of common stock payable on December 4, 2017, to shareholders of record at the close of business on November 13, 2017. While the Company intends to pay regularsuspended quarterly cash dividends until it is determined that resumption of dividend payments is in future periods, any decisions to pay or to increase or decreasethe best interest of the Company and its shareholders. As such, the only cash dividends will be reviewed quarterly and declared bypaid during the Board of Directors at its discretion.thirteen weeks ended March 29, 2022 were related to dividends (declared prior to fiscal 2020) which vested under our stock compensation plans.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE
Certain information included in this Form 10-Q and other filings with the Securities and Exchange Commission, in our press releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers may contain “forward-looking” statements about our current and expected performance trends, growth plans, business goals and other matters. Words or phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is anticipated,” “estimate,” “project,” “may,” “could,” “would,” “should,” and similar expressions are intended to identify “forward-looking” statements. These
statements, and any other statements that are not historical facts, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended from time to time (the “Act”). The cautionary statements made in this Form 10-Q should be read as being applicable to all related “forward-looking” statements wherever they appear in this Form 10-Q.
The following discussion These forward-looking statements are based on information available to us as of the date any such statements are made, and analysis should be read in conjunction with our consolidated financialwe assume no obligation to update these forward-looking statements. These statements and notes thereto included elsewhere in this Form 10-Q, our Annual Report on Form 10-K for the fiscal year ended January 3, 2017, and our other reports filed from timeare subject to time with the Securities and Exchange Commission. Except for the historical information contained herein, the discussion in this Form 10-Q contains certain “forward-looking” statements that involve known and unknown risks and uncertainties such as statements of our plans, objectives, expectations and intentions. The risksthat could cause actual results to differ materially from those described in this Form 10-Q, as well as the statements. These risks identifiedand uncertainties include, but are not limited to, the risk factors described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 3, 2017, are not the only risks we face. These statements reflect our current perspectives and outlook with respect to the Company’s future expansion plans, key business initiatives, expected operating conditions and other factors. We operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. Additional risks and uncertainties that we are currently unaware of, or that we currently deem immaterial, also may become important factors that affect us. It is not possible for us to predict the impact of all of these factors on our business, financial condition or results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any “forward-looking” statements. Given the volatility of the operating environment and its associated risks and uncertainties, investors should not rely on “forward-looking” statementsDecember 28, 2021, as any prediction or guarantee of actual results.
“Forward-looking” statements include, among others, statements concerning:
our restaurant concept, its competitive advantages and our strategies for its continued evolution and expansion;
the rate and scope of our future restaurant development;
the total domestic capacity for our restaurants;
dates on which we will commence or complete the development and opening of new restaurants;
expectations for consumer spending on casual dining restaurant occasions;
the availability and cost of key commodities usedupdated in our restaurants and brewing operations;
menu price increases and their effect, if any, on revenue and results of operations;
the effectiveness of our planned operational, menu, marketing and capital expenditure initiatives;
capital requirement expectations and actual or available borrowings on our line of credit;
projected shareholder dividend frequency and amount; and
other statements of expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.
These “forward-looking” statements are subject to risks and uncertainties, including financial, regulatory, consumer behavior, demographic, industry growth and trend projections, that may cause actual events or results to differ materially from those expressed or implied by the statements. Significant factors that may prevent us from achieving our stated goals include, but are not limited to:
Failure to maintain a favorable image, credibility and the value of the BJ’s brand and our reputation for offering customers a higher quality more differentiated total dining experience at a good value.
Any inability or failure to recognize, respond to and effectively manage the accelerated impact of social media.
Any deterioration in general economic conditions, which may affect consumer spending.
Any deterioration in general economic conditions, which may also have a material adverse impact on our landlords or on businesses neighboring our locations.
Any inability or failure to successfully expand our restaurant operations.
Any inability to open new restaurants on schedule in accordance with our targeted capacity growth or problems associated with securing suitable restaurant locations, leases and licenses, recruiting and training qualified managers and hourly employees and other factors, some of which are beyond our control and difficult to forecast accurately.
Any inability to access sources of capital or to raise required capital in the future.
Any failure of our existing or new restaurants to achieve expected results.
Any strain on our infrastructure and resources due to growth, which may slow our development of new restaurants and adversely affect our ability to manage our existing restaurants.
Any decision to either reduce or accelerate the pace of openings.
Any fluctuation in our future operating results due to the expenditures required to open new restaurants.
Our concentration of a significant number of our restaurants in California, Texas and Florida, which makes us particularly sensitive to economic, regulatory, weather and other risk factors and conditions that are more prevalent in those states.
Any negative publicity about us, our restaurants, other restaurants, or others across the food supply chain, due to food borne illness or other reasons, whether or not accurate.
Any adverse changes in the cost of food, labor and related employee benefits (including, but not limited to, group health insurance coverage for our employees), brewing and energy.
Any inability of our independent third party brewers and manufacturers to timely supply our beer.
Periodic reviews and audits of our internal brewing, independent third party brewing and beer distribution arrangements by various federal, state and local governmental and regulatory agencies, which may be adversely affected by different interpretations of the laws and regulations that govern such arrangements or by new laws and regulations.
Government laws and regulations affecting the operation of our restaurants, including but not limited to those that apply to the acquisition and maintenance of our brewing and retail liquor licenses, minimum wages, federal or state exemption rules, health insurance coverage, or other employment benefits such as paid time off, consumer health and safety, nutritional disclosures, and employment eligibility-related documentation requirements, which may increase our operating costs, cause unexpected disruptions to our operations and restrict our growth.
Heavy dependence of our operations, including our loyalty and employee engagement programs on information technology, which may be adversely affected by any material failure of such technology, including but not limited to cyber-attacks.
Any suspension of, or failure to pay regular dividends or to repurchase the Company’s stock up to the maximum amounts permitted under, our previously announced repurchase program, either of which may negatively impact investor perceptions of us.
For a more detailed description of these risk factors and other considerations, see Part II, Item 1A – “Risk Factors” of our Annual Report on Form 10-K10-Q for the fiscal yearthirteen weeks ended January 3, 2017.March 29, 2022 and in other reports filed subsequently with the SEC.
GENERAL
As of November 6, 2017,May 2, 2022, we ownedown and operated 195operate 213 restaurants located in the 25 states of Alabama, Arizona, Arkansas, California, Colorado, Florida, Indiana, Kansas, Kentucky, Louisiana, Maryland, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and Washington. Each of our restaurants is operated either as a BJ’s Restaurant & Brewhouse®, a BJ’s Restaurant & Brewery®, a BJ’s Pizza & Grill®, or a BJ’s Grill® restaurant. Currently, the BJ’s Restaurant & Brewhouse® format represents our primary future expansion vehicle.29 states. Our proprietary craft beer is produced at several of our BJ’s Restaurant & Brewery® locations, our Temple, Texas brewpub locations and by independent third partythird-party brewers using our proprietary recipes. Our BJ’s Pizza & Grill® restaurants are smaller format, full-service restaurants relative to our BJ’s Restaurant & Brewhouse® and BJ’s Restaurant & Brewery® locations and reflect the original format of the BJ’s restaurant concept that was first introduced in 1978. Our BJ’s Grill® restaurant is a slightly smaller footprint restaurant, compared to our BJ’s Restaurant & Brewhouse® format, featuring all the amenities of our Brewhouse locations.
The first BJ’s restaurant, which opened in 1978 in Orange County, California, featuringwas a small sit-down pizzeria that featured Chicago style deep-dish pizza with a unique California twist. Over the yearsOur goal then and still today is to be a leading, varied menu casual dining restaurant brand that focuses on delivering high quality menu options at a compelling value, a dining experience that exceeds our guests’ expectations for service, hospitality and enjoyment, and an atmosphere that is always welcoming and approachable.
In 1996, we introduced our own proprietary craft beers and expanded the BJ’s concept from its beginnings as a small pizzeria to a full-service, high energyhigh-energy casual dining restaurant when we opened our first large format restaurant with our own internal brewing operations in Brea, California. Today our restaurants feature a broad menu includingwith over 100 menu items designed to offer something for everyone including: slow roasted entrees such as prime rib, EnLIGHTened Entrees® such as our BJ’s award‑winning,Cherry Chipotle Glazed Salmon, our original signature deep-dish pizza, the world-famous Pizookie® dessert, and our award-winning BJ’s proprietary craft beers. Our craft beer is produced at several of our restaurants, our Temple, Texas brewpub locations and by independent third-party brewers using our proprietary craft and other beers, as well as a large selection of appetizers, entrées, pastas, burgers and sandwiches, specialty salads and desserts, including our made to order, warm pizza cookie dessert, the Pizookie®.recipes.
Our revenues are comprised of food and beverage sales atfrom our restaurants. Revenues from restaurant sales are recognized when payment is tendered at the point of sale.tendered. Amounts paid with a credit card are recorded in accounts and other receivables until payment is collected. Revenuescollected from ourthe credit card processor. We sell gift cards which do not have an expiration date, and we do not deduct non-usage fees from outstanding gift card balances. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. GiftBased on historical redemption rates, a portion of our gift card sales are not expected to be redeemed and will be recognized as gift card “breakage” over time. Estimated gift card breakage is recorded as revenue and recognized asin proportion to our historical redemption pattern, unless there is a component of “Other income, net” on our Consolidated Statements of Income. Giftlegal obligation to remit the unredeemed gift cards to government authorities. The estimated gift card breakage is recordedbased on when the likelihood of redemption becomes remote, which ishas typically afterbeen 24 months fromafter the original gift card issuance date.
Our guest loyalty program enables participants to earn points for qualifying purchases that can be redeemed for food and beverages in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points until such points are redeemed.
All of our restaurants are Company-owned. In calculating comparable restaurant sales, we include a restaurant in the comparable base once it has been open for 18 months. CustomerGuest traffic for our restaurants is estimated based on individual customerguest checks.
Cost of sales is comprised of food and beverage costs, including the cost to produce and distribute our proprietary craft beer, soda and ciders. The components of cost of sales are variable and typically fluctuate directly with sales volumes, but may be impacted by changes in commodity prices, a shift in sales mix to higher cost proteins or other higher cost items, or varying levels of promotional activities.
Labor and benefit costs include direct hourly and management wages, bonuses, payroll taxes, fringe benefits and stock-based compensation and workers’ compensation expense that is directly related to restaurant level employees.team members.
Occupancy and operating expenses include restaurant supplies, credit card fees, third-party delivery company commissions, marketing costs, fixed rent, percentage rent, common area maintenance charges, utilities, real estate taxes, repairs and maintenance and other related restaurant costs. Since fiscal 2020, occupancy and operating expense also include COVID-19 related costs such as temporary patios and safety related items.
General and administrative costs include all corporate field supervision and administrative functions that support existing operations and provide infrastructure to facilitate our future growth. Components of this category include corporate management, field supervision and corporate hourly staff salaries and related employeeteam member benefits (including stock-based compensation expense and cash-based incentive compensation), travel and relocation costs, information systems, the cost to recruit and train new restaurant management employees,team members, corporate rent, certain brand marketing-related expenses and legal, professional and consulting fees.
Depreciation and amortization are composed primarily of depreciation of capital expenditures for restaurant and brewing equipment and leasehold improvements.
Restaurant opening expenses, which are expensed as incurred, consist of the costs of hiring and training the initial hourly work force for each new restaurant, travel, the cost of food and supplies used in training, grand opening promotional costs, the cost of the initial stock of operating supplies and other direct costs related to the opening of a restaurant, including rent during the construction and in-restaurant training period.
While we currently expect to pursue the renewal of substantially all of our expiring restaurant leases, there is no guarantee that we can mutually agree to a new lease that is satisfactory to our landlord and us or that, if renewed, rents will not increase substantially.
RESULTS OF OPERATIONS
The following table provides, for the periods indicated, our unaudited Consolidated Statements of IncomeOperations expressed as percentages of total revenues. The results of operations for the thirteen and thirty-nine weeks ended October 3, 2017 September 27, 2016,March 29, 2022 and March 30, 2021, are not necessarily indicative of the results to be expected for the full fiscal year. Percentages below may not reconcile due to rounding.
|
| For the Thirteen |
|
| For the Thirty-Nine |
| ||||||||||||||||||
|
| Weeks Ended |
|
| Weeks Ended |
|
| For the Thirteen Weeks Ended |
| |||||||||||||||
|
| October 3, 2017 |
|
| September 27, 2016 |
|
| October 3, 2017 |
|
| September 27, 2016 |
|
| March 29, 2022 |
|
| March 30, 2021 |
| ||||||
Revenues |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Restaurant operating costs (excluding depreciation and amortization): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
| 26.5 |
|
|
| 25.6 |
|
|
| 26.0 |
|
|
| 25.2 |
|
|
| 27.3 |
|
|
| 25.1 |
|
Labor and benefits |
|
| 36.9 |
|
|
| 35.1 |
|
|
| 36.0 |
|
|
| 34.8 |
|
|
| 38.9 |
|
|
| 36.6 |
|
Occupancy and operating |
|
| 22.4 |
|
|
| 21.6 |
|
|
| 21.3 |
|
|
| 20.6 |
|
|
| 24.0 |
|
|
| 26.8 |
|
General and administrative |
|
| 5.3 |
|
|
| 5.5 |
|
|
| 5.4 |
|
|
| 5.6 |
|
|
| 6.1 |
|
|
| 6.8 |
|
Depreciation and amortization |
|
| 7.1 |
|
|
| 7.0 |
|
|
| 6.6 |
|
|
| 6.6 |
|
|
| 6.0 |
|
|
| 8.2 |
|
Restaurant opening |
|
| 0.2 |
|
|
| 0.9 |
|
|
| 0.4 |
|
|
| 0.7 |
|
|
| 0.2 |
|
|
| 0.1 |
|
Loss on disposal of assets and impairments |
|
| 0.4 |
|
|
| 0.3 |
|
|
| 0.5 |
|
|
| 0.3 |
| ||||||||
Natural disaster and related |
|
| 0.4 |
|
|
| — |
|
|
| 0.1 |
|
|
| — |
| ||||||||
Severance and legal settlements |
|
| 0.2 |
|
|
| — |
|
|
| 0.1 |
|
|
| 0.1 |
| ||||||||
Loss on disposal and impairment of assets |
|
| 0.1 |
|
|
| 0.1 |
| ||||||||||||||||
Total costs and expenses |
|
| 99.4 |
|
|
| 96.1 |
|
|
| 96.5 |
|
|
| 93.8 |
|
|
| 102.6 |
|
|
| 103.7 |
|
Income from operations |
|
| 0.6 |
|
|
| 3.9 |
|
|
| 3.5 |
|
|
| 6.2 |
| ||||||||
Loss from operations |
|
| (2.6 | ) |
|
| (3.7 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| (0.5 | ) |
|
| (0.1 | ) |
|
| (0.4 | ) |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| (0.6 | ) |
Other income, net |
|
| 0.2 |
|
|
| 0.2 |
|
|
| 0.2 |
|
|
| 0.1 |
| ||||||||
Total other (expense) income |
|
| (0.3 | ) |
|
| — |
|
|
| (0.2 | ) |
|
| — |
| ||||||||
Income before income taxes |
|
| 0.3 |
|
|
| 3.9 |
|
|
| 3.3 |
|
|
| 6.2 |
| ||||||||
Other (expense) income, net |
|
| (0.1 | ) |
|
| 0.1 |
| ||||||||||||||||
Total other expense |
|
| (0.3 | ) |
|
| (0.5 | ) | ||||||||||||||||
Loss before income taxes |
|
| (2.9 | ) |
|
| (4.2 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense |
|
| (0.6 | ) |
|
| 0.8 |
|
|
| 0.5 |
|
|
| 1.7 |
| ||||||||
Net income |
|
| 1.0 | % |
|
| 3.1 | % |
|
| 2.8 | % |
|
| 4.5 | % | ||||||||
Income tax benefit |
|
| (3.4 | ) |
|
| (2.8 | ) | ||||||||||||||||
Net income (loss) |
|
| 0.5 | % |
|
| (1.4 | )% |
Thirteen Weeks Ended October 3, 2017March 29, 2022 Compared to Thirteen Weeks Ended September 27, 2016.March 30, 2021
Revenues. Total revenues increased by $13.3$75.4 million, or 5.7%33.8%, to $247.0$298.7 million during the thirteen weeks ended October 3, 2017,March 29, 2022, from $233.7$223.3 million during the comparable thirteen week period of 2016.2021. The increase in revenues primarily consisted of an approximate $17.2a 33.9%, or $74.0 million, increase in comparable restaurant sales, a $2.9 million increase in sales from new restaurants not yet in our comparable restaurant sales base, partiallycoupled with a net $0.7 million increase related to the re-opening in August 2021 of our temporarily closed restaurant due to the COVID pandemic. Revenue increases were offset by an approximate 1.7%, or $3.8a $1.2 million decrease in comparable restaurant sales andrevenues related to expired loyalty points during the same period in the prior year, which were recorded to revenue, a $0.1$0.5 million decrease related to the shift in weeksclosure of our Pasadena restaurant, and a $0.3 million decrease related to our temporarily closed restaurant as a result of our 53rd week in fiscal 2016.a fire. The decreaseincrease in comparable restaurant sales resulted from a reductionwas the result of an increase in customerguest traffic of approximately 3.0%26.4%, partially offset bycoupled with an increase in the average check of 1.3%approximately 7.5%. The increase in guest traffic was primarily due to the re-opening of our dining rooms, which were closed or restricted in operation during the same period in 2021.
Cost of Sales. Cost of sales increased by $5.7$25.3 million, or 9.5%45.1%, to $65.6$81.5 million during the thirteen weeks ended October 3, 2017,March 29, 2022, from $59.9$56.1 million during the comparable thirteen week period of 2016.2021. This increase was primarily due to the opening of 13increase in revenue, commodity cost increases and costs related to our three new restaurants opened and one restaurant re-opened since the thirteen weeks ended September 27, 2016.March 30, 2021, offset by our Pasadena restaurant that was closed at the beginning of the current fiscal year. As a percentage of revenues, cost of sales increased to 26.5%27.3% for the current thirteen week period from 25.6%25.1% for the prior year comparable period. TheThis increase in cost of sales, as a percentage of revenues, was primarily due to an increase in commodityinflationary pressure on food costs, partially mitigated by menu mix shifts related to our new slow roasted items and Daily Brewhouse Specials, as well as increased promotional activities.price increases.
Labor and Benefits. Labor and benefit costs for our restaurants increased by $9.2$34.6 million, or 11.2%42.4%, to $91.2$116.3 million during the thirteen weeks ended October 3, 2017,March 29, 2022, from $82.0$81.7 million during the comparable thirteen week period of 2016.2021. This increase was
primarily due to increased team members and higher training and overtime costs due to the openingre-opening of 13our dining rooms, which were closed or had restricted operations during the same period in 2021, and expenses related to the three new restaurants opened and one restaurant re-opened since the thirteen weeks ended September 27, 2016.March 30, 2021. Increases in labor and benefit costs were offset in part by the closure of our Pasadena restaurant at the beginning of the current fiscal year. As a percentage of revenues, labor and benefit costs increased to 36.9%38.9% for the current thirteen week period from 35.1%36.6% for the prior year comparable period. The percentageThis increase was driven byprimarily due to higher hourly labor rates,wages, training and overtime hours due to increased training labor hours related to our majorhiring activities, and the deleveraging impact from the COVID-19 Omicron wave in January when sales building initiatives, and negative comparable restaurant sales.were severely impacted. Included in labor and benefits for the thirteen weeks ended October 3, 2017March 29, 2022 and September 27, 2016,March 30, 2021, was approximately $0.4$0.8 million, or 0.2%0.3% and 0.4% of revenues, respectively, of stock-based compensation expense related to equity awards granted in accordance with our Gold Standard Stock Ownership Program for certain restaurant management team members.
Occupancy and Operating. Occupancy and operating expenses increased by $4.8$11.9 million, or 9.4%19.8%, to $55.2$71.7 million during the thirteen weeks ended October 3, 2017,March 29, 2022, from $50.5$59.8 million during the comparable thirteen week period of 2016.2021. This increase was primarily due to higher merchant credit card fees as a result of increased revenues, increased supply costs, higher janitorial services related to the openingre-opening of 13our dining rooms, coupled with increased marketing costs and costs related to the three new restaurants opened and one restaurant re-opened since the thirteen weeks ended September 27, 2016.March 30, 2021. As a percentage of revenues, occupancy and operating expenses increaseddecreased to 22.4%24.0% for the current thirteen week period from 21.6%26.8% for the prior year comparable period. This percentage increasedecrease was primarily due to the deleveraging of theour ability to leverage certain fixed component of these expenses asoperating and occupancy costs over a result of negative comparable restaurant sales.higher revenue base.
General and Administrative. General and administrative expenses increased by $0.1$3.0 million, or 0.9%19.6%, to $13.0$18.3 million during the thirteen weeks ended October 3, 2017,March 29, 2022, from $12.9$15.3 million during the comparable thirteen week period of 2016. Also included2021. This increase was primarily due to increases in personnel, travel, recruiting and outside services as we returned closer to pre-pandemic operations and have invested in growth initiatives. Included in general and administrative costs for the thirteen weeks ended October 3, 2017March 29, 2022 and September 27, 2016,March 30, 2021, was approximately $1.3$2.0 million and $1.1$1.6 million,respectively, or 0.5%0.7% of revenues, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses decreased to 5.3%6.1% for the current thirteen week period from 5.5%6.8% for the prior year comparable period. This percentage decrease was primarily due to lower incentive compensation and the leveraging of our ability to leverage our fixed costs over a higher revenue base.
Depreciation and Amortization. Depreciation and amortization increaseddecreased by $1.1$0.2 million, or 7.0%1.2%, to $17.4$18.0 million during the thirteen weeks ended October 3, 2017,March 29, 2022, compared to $16.3$18.2 million during the comparable thirteen week period of 2016.2021. This increasedecrease was primarily duerelated to impairment and disposal charges taken in fiscal 2021, including the impairment and reduction of carrying value related to our Pasadena restaurant that closed at the beginning of the year. The decrease in depreciation and amortization was partially offset by depreciation expense related to the 13 newour restaurants opened since the thirteen weeks ended September 27, 2016.March 30, 2021. As a percentage of revenues, depreciation and amortization increased slightlydecreased to 7.1%6.0% for the current thirteen week period from 7.0%8.2% for the prior year comparable period. This decrease was primarily due to a higher revenue base.
Restaurant Opening. Restaurant opening expense decreasedincreased by $1.7$0.5 million, or 75.9%355.5%, to $0.5$0.6 million during the thirteen weeks ended October 3, 2017,March 29, 2022, compared to $2.2$0.1 million during the comparable thirteen week period of 2016.2021. This decreaseincrease was primarily due to the openingtiming of our openings. We opened one new restaurant during the thirteen weeks ended October 3, 2017,March 29, 2022 and a second restaurant two weeks after the thirteen weeks ended March 29, 2022, compared to fiveno new restaurantsrestaurant openings during the comparable thirteen week period of 2016.weeks ended March 30, 2021.
Loss on Disposal and Impairment of Assets. Loss on disposal and impairment of assets increased by $0.3 million, or 32.1%, to $1.1was $0.2 million during the thirteen weeks ended October 3, 2017, compared to $0.8 million during the comparable thirteen week period of 2016.These costs primarily related to the disposal of certain unproductive restaurant assets.
Natural DisasterMarch 29, 2022, and Related. Natural disaster and related expense of $0.9 million during the thirteen weeks ended October 3, 2017, related to property damages, food spoilage, labor and other expenses from Hurricanes Harvey and Irma, in excess of our related insurance coverage.
Severance and Legal Settlements. Severance and legal settlements of $0.4 million during the thirteen weeks ended October 3, 2017, related to the reduction of certain corporate overhead positions primarily related to supporting new restaurant openings.
Interest Expense, Net. Interest expense, net increased by $0.8 million to $1.2 million during the thirteen weeks ended October 3, 2017, compared to $0.3 million during the comparable thirteen week period of 2016.2021.These costs primarily relate to disposals of assets in conjunction with initiatives to keep our restaurants up to date, offset by a $0.3 million gain related to the sale of certain assets and our liquor license at our Pasadena restaurant in the current fiscal year.
Interest Expense, Net. Interest expense, net, decreased by $0.8 million to $0.6 million during the thirteen weeks ended March 29, 2022, compared to $1.4 million during the comparable thirteen week period of 2021. This increasedecrease was primarily due to increased borrowingsa lower average debt balance during the thirteen weeks ended March 29, 2022, compared to the comparable thirteen week period of 2021.
Other (Expense) Income, Net. Other (expense) income, net, decreased by $0.7 million to $0.4 million of expense during the thirteen weeks ended March 29, 2022, compared to $0.3 million of income during the comparable thirteen week period of 2021. This was primarily related to the decrease in the cash surrender value of certain life insurance policies under our Credit Facility.deferred compensation plan. This decrease offsets the related deferred compensation expense impact included within “General and administrative” expenses on our Unaudited Consolidated Statements of Operations.
Income Tax (Benefit) Expense. Benefit.Our effective income tax rate for the thirteen weeks ended October 3, 2017, wasMarch 29 2022, reflected a net116.8% tax benefit of $1.6 million compared to an incomea 66.3% tax expense of $1.9 millionbenefit for the comparable thirteen week period of 2016.2021. The incomeeffective tax rate benefit for the thirteen weeks ended October 3, 2017, March 29, 2022 and March 30, 2021, was a result of a change to our estimated annual effective tax rate principally attributable to a decrease in forecasted income for fiscal 2017. The effective income tax rate for the thirteen weeks ended October 3, 2017, differed fromdifferent than the statutory income tax rate primarily due to FICA tax credits.
Thirty-Nine Weeks Ended October 3, 2017 Comparedtip credits and its relationship to Thirty-Nine Weeks Ended September 27, 2016.
Revenues. Total revenues increased by $43.2 million, or 5.9%, to $770.6 million during the thirty-nine weeks ended October 3, 2017, from $727.4 million during the comparable thirty-nine week period of 2016. The increase in revenues primarily consisted of an approximate $56.3 million increase in sales from new restaurants not yet in our comparable restaurant sales base, partially offset by an approximate 1.5%, or $10.2 million, decrease in comparable restaurant sales, a $2.5 million decrease related to the shift in weeks as a result of our 53rd week in fiscal 2016 and a $0.4 million decrease in restaurant sales due to the closure of our Century City, California restaurant in January 2016. The decrease in comparable restaurant sales resulted from a reduction in customer traffic of approximately 3.9%, partially offset by an increase in the average check of 2.4%.
Cost of Sales. Cost of sales increased by $17.4 million, or 9.5%, to $200.5 million during the thirty-nine weeks ended October 3, 2017, from $183.1 million during the comparable thirty-nine week period of 2016. This increase was primarily due to the opening of 13 new restaurants since the thirty-nine weeks ended September 27, 2016. As a percentage of revenues, cost of sales increased to 26.0 % for the current thirty-nine week period from 25.2 % for the prior year comparable period. The increase in cost of sales, as a percentage of revenues, was primarily due to an increase in commodity costs, menu mix shifts related to our new slow roasted items and Daily Brewhouse Specials, as well as increased promotional activities.
Labor and Benefits. Labor and benefit costs for our restaurants increased by $24.9 million, or 9.9%, to $277.7 million during the thirty-nine weeks ended October 3, 2017, from $252.8 million during the comparable thirty-nine week period of 2016. This increase was primarily due to the opening of 13 new restaurants since the thirty-nine weeks ended September 27, 2016. As a percentage of revenues, labor and benefit costs increased to 36.0% for the current thirty-nine week period from 34.8% for the prior year comparable period. The percentage increase was driven by higher hourly labor rates, increased training labor hours related to our major sales building initiatives, and negative comparable restaurant sales. Included in labor and benefits for the thirty-nine weeks ended October 3, 2017 and September 27, 2016, was approximately $1.4 million and $1.3 million, respectively, or 0.2% of revenues, of stock-based compensation expense related to equity awards granted in accordance with our Gold Standard Stock Ownership Program for certain restaurant management team members.
Occupancy and Operating. Occupancy and operating expenses increased by $14.4 million, or 9.6%, to $164.1 million during the thirty-nine weeks ended October 3, 2017, from $149.7 million during the comparable thirty-nine week period of 2016. This increase was primarily due to the opening of 13 new restaurants since the thirty-nine weeks ended September 27, 2016. As a percentage of revenues, occupancy and operating expenses increased to 21.3% for the current thirty-nine week period from 20.6% for the prior year comparable period. This percentage increase was due to the deleveraging of the fixed component of these expenses as a result of negative comparable restaurant sales.
General and Administrative. General and administrative expenses increased by $0.5 million, or 1.2%, to $41.5 million during the thirty-nine weeks ended October 3, 2017, from $41.1 million during the comparable thirty-nine week period of 2016. The slight increase in general and administrative costs was primarily due to higher field supervision and support costs to manage our increasing number of restaurants offset by lower corporate incentive compensation. Also included in general and administrative costs for the thirty-nine weeks ended October 3, 2017 and September 27, 2016, was approximately $3.9 million and $3.3 million,or 0.5% and 0.4% of revenues, respectively, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses decreased to 5.4% for the current thirty-nine week period from 5.6% for the prior year comparable period. This percentage decrease was primarily due to the leveraging of our costs over a higher revenue base.
Depreciation and Amortization. Depreciation and amortization increased by $3.3 million, or 6.9%, to $51.2 million during the thirty-nine weeks ended October 3, 2017, compared to $47.9 million during the comparable thirty-nine week period of 2016. This increase was primarily due to depreciation expense related to the 13 new restaurants opened since the thirty-nine weeks ended September 27, 2016. As a percentage of revenues, depreciation and amortization remained consistent at 6.6% for the current thirty-nine week period and for the prior year comparable period.
Restaurant Opening. Restaurant opening expense decreased by $2.0 million, or 38.6%, to $3.2 million during the thirty-nine weeks ended October 3, 2017, compared to $5.2 million during the comparable thirty-nine week period of 2016. This decreasepre-tax earnings.
was due to the opening of eight new restaurants during thirty-nine weeks ended October 3, 2017, compared to 12 new restaurants during the comparable thirty-nine week period of 2016.
Loss on Disposal and Impairment of Assets. The loss on disposal and impairment of assets increased by $1.9 million, or 83.9%, to $4.2 million during the thirty-nine weeks ended October 3, 2017, compared to $2.3 million during the comparable thirty-nine week period of 2016. This increase was primarily due to the write-off of the remaining net book value of certain convection ovens and point of sale terminals following the recent rollout of our new slow roasting ovens and server handheld point of sale tablets.
Natural Disaster and Related. Natural disaster and related expense of $0.9 million during the thirty-nine weeks ended October 3, 2017, related to property damages, food spoilage, labor and other expenses from Hurricanes Harvey and Irma, in excess of our related insurance coverage.
Severance and Legal Settlements. Severance and legal settlements was $0.4 million during the thirty-nine weeks ended October 3, 2017, and for the comparable thirty-nine week period of 2016. For the current thirty-nine week period, this related to the reduction of certain corporate overhead positions primarily related to supporting new restaurant openings, and for the comparable prior year period, it related to the settlement of a wage and hour claim.
Interest Expense, Net. Interest expense, net increased by $2.1 million to $3.2 million during the thirty-nine weeks ended October 3, 2017, compared to $1.1 million during the comparable thirty-nine week period of 2016. This increase was due to increased borrowings under our Credit Facility.
Other Income, Net. Other income, net increased by $0.7 million to $1.5 million during the thirty-nine weeks ended October 3, 2017, compared to $0.8 million during the comparable thirty-nine week period of 2016. This increase was primarily due to greater gift card breakage income coupled with an increase in the cash surrender value of certain life insurance programs under our deferred compensation plan.
Income Tax Expense. Our effective income tax rate for the thirty-nine weeks ended October 3, 2017, was 15.6% compared to 27.0% for the comparable thirty-nine week period of 2016. The effective income tax rate for the thirty-nine weeks ended October 3, 2017, differed from the statutory income tax rate primarily due to tax credits. The decrease in our effective tax rate for fiscal 2017 compared to fiscal 2016 is a result of lower forecasted income for fiscal 2017.
LIQUIDITY AND CAPITAL RESOURCESMATERIAL CASH REQUIREMENTS
The following tables provide,table provides, for the periods indicated, a summary of our key liquidity measurements (dollars in thousands):
|
| October 3, 2017 |
|
| January 3, 2017 |
| ||
Cash and cash equivalents |
| $ | 28,694 |
|
| $ | 22,761 |
|
Net working capital |
| $ | (47,793 | ) |
| $ | (67,008 | ) |
Current ratio |
| 0.6:1.0 |
|
| 0.5:1.0 |
|
|
| For the Thirty-Nine Weeks Ended |
| |||||
|
| October 3, 2017 |
|
| September 27, 2016 |
| ||
Cash provided by operating activities |
| $ | 69,054 |
|
| $ | 108,631 |
|
Capital expenditures |
| $ | 57,358 |
|
| $ | 80,682 |
|
|
| March 29, 2022 |
|
| December 28, 2021 |
| ||
Cash and cash equivalents |
| $ | 27,201 |
|
| $ | 38,527 |
|
Net working capital |
| $ | (112,099 | ) |
| $ | (109,619 | ) |
Current ratio |
| 0.4:1.0 |
|
| 0.5:1.0 |
|
Our capital requirements are drivenAs a result of uncertainties in the near-term outlook for our business caused by the COVID-19 pandemic, we continue to focus on cash flow generation. Currently, we have no intention to repurchase shares or pay dividends until it is determined by our fundamental financial objective to improve total shareholder return through new restaurant expansion plans and restaurant enhancements and initiatives. In addition, we want to maintain a flexible and prudent balance sheet to provideBoard of Directors that it is in the financial resources necessary to manage the risks and uncertainties of conducting our business operations in a mature segmentbest interest of the restaurant industry. In orderCompany and its shareholders. We will review and, when appropriate, adjust our overall approach to achieve these objectives,capital allocation as we use a combinationknow more about the ultimate duration of operating cash flows, funded debtthe COVID-19 pandemic and landlord allowances. Overhow the last several years we have been augmentingpost-pandemic recovery will unfold and affect our cash flow from operations by increasing our funded debt and using these proceeds to return capital to shareholders in the form of share repurchases and, beginning in the fourth quarter of fiscal 2017, quarterly cash dividends.operating activities.
We currently estimate the total domestic capacity for BJ’s restaurantsare taking what we believe to be reasonably necessary and appropriate measures to control costs and maximize liquidity. Based on the current level of operations, we believe that our current cash and cash equivalents will be adequate to meet our capital expenditure and working capital needs for at least 425, given the size of our current restaurant prototype and the current structure of the BJ’s concept and menu. We expect to fund our growth plans from our ongoing operations, our cash balance on hand, proceeds from employee stock option exercises, tenant improvement allowances from
our landlords and our $250 million Credit Facility. However, depending on the expected level of new restaurant development, tenant improvement allowances that we receive from our landlords, other planned capital investments including ongoing maintenance capital expenditures, and results from our ongoing operations, we may not generate enough cash flow from operations to completely fund our plans. In addition, share repurchases and our quarterly cash dividend or any significant increases in such repurchases or dividends may impact our available capital resources. Accordingly, we continue to actively monitor overall conditions in the capital and credit markets with respect to the potential sources and the timing of additional financing in order to enhance total shareholder return. However, there can be no assurance that such financingnext twelve months. Our future operating performance will be available when required or available on terms acceptablesubject to us. If wefuture economic conditions and to financial, business and other factors, many of which are unable to secure additional capital resources, when needed, we may be required to reducebeyond our planned rate of expansion, share repurchases, quarterly cash dividends or other shareholder return initiatives.control.
Similar to many restaurant chains, we typically utilize operating lease arrangements (principally ground leases) for the majority of our restaurant locations. We believe our operating lease arrangements provide appropriate leverage for our capital structure in a financially efficient manner. However, we are not limited to the use of lease arrangements as our only method of opening new restaurants and from time to time have purchased the underlying land for new restaurants. While our operating lease obligations are not required to be reflected as indebtedness on our Consolidated Balance Sheets, the minimum rents and other related lease obligations, such as common area expenses, under our lease agreements must be satisfied by cash flows from our ongoing operations. Accordingly, our lease arrangements reduce, to some extent, our capacity to utilize debt in our capital structure.
We typically lease our restaurant locations for periods of 10 to 20 years under operating lease arrangements. Our rent structures vary from lease to lease, but generally provide for the payment of both minimum and contingent (percentage) rent based on sales, as well as other expenses related to the leases (for example, our pro-rata share of common area maintenance, property tax and insurance expenses). Many of our lease arrangements include the opportunity to secure tenant improvement allowances to partially offset the cost of developing and opening the related restaurants. Generally, landlords recover the cost of such allowances from increased minimum rents. However, thereThere can be no assurance that such allowances will be available to us on each project. From time to time, we may also decide to purchase the underlying land for a new restaurant if that is the only way to secure a highly desirable site. Currently, we own the underlying land for fourone of our operating restaurants that will be opened in fiscal 2022 and our Texas brewpub locations. We also own two parcels of land adjacent to two of our operating restaurants. It is not our current strategy to own a large number of land parcels that underlie our restaurants. Therefore, in many cases we have subsequently enterentered into sale-leaseback arrangements for land parcels that we may purchase.previously purchased. We disburse cash for certain site-related work, buildings, leasehold improvements, furnishings, fixtures and equipment to build our leased and owned premises. We own substantially all of the equipment, furniture and trade fixtures in our restaurants and currently plan to do so in the future.
We also require capital resources to evolve, maintain and increaseCASH FLOWS
The following tables set forth, for the productive capacity ofperiods indicated, our existing base of restaurants and brewing operations and to further expand and strengthen the capabilities of our corporate and information technology infrastructures. Our requirement for working capital is not significant since our restaurant customers pay for their food and beverage purchases in cash or credit cards at the time of the sale. Thus, we are able to sell many of our inventory items before we are required to pay our suppliers for such items.
Our cash flows from operating, investing, and financing activities as detailed in the Consolidated Statements of(in thousands):
|
| For the Thirteen Weeks Ended |
| |||||
|
| March 29, 2022 |
|
| March 30, 2021 |
| ||
Net cash provided by operating activities |
| $ | 609 |
|
| $ | 14,212 |
|
Net cash used in investing activities |
|
| (11,530 | ) |
|
| (6,877 | ) |
Net cash (used in) provided by financing activities |
|
| (405 | ) |
|
| 31,248 |
|
Net (decrease) increase in cash and cash equivalents |
| $ | (11,326 | ) |
| $ | 38,583 |
|
Operating Cash Flows
Net cash provided $69.1by operating activities was $0.6 million during the thirty-ninethirteen weeks ended October 3, 2017,March 29, 2022, representing a $39.6$13.6 million decrease from the $108.6$14.2 million provided by during the thirty-ninethirteen weeks ended September 27, 2016.March 30, 2021. The decrease in cash from operating activities forover the thirty-nine weeks ended October 3, 2017, in comparison the thirty-nine weeks ended September 27, 2016,prior year is primarily due to the payment timing of accounts payable and accrued expenses, offset by the collection of our $6.0 million lease termination fee in the prior year, coupled with a reduction in payroll related accruals as a result of the impact of the 53rd week in fiscal 2016accounts and lowerother receivable and higher net income during the current thirty-nine week period.
For the thirty-ninethirteen weeks ended October 3, 2017, total capital expenditures were approximately $57.4 million. Expenditures forMarch 29, 2022.
Investing Cash Flows
Net cash used in investing activities was $11.5 million during the purchasethirteen weeks ended March 29, 2022, representing a $4.7 million increase from the $6.9 million used during the thirteen weeks ended March 30, 2021. The increase over prior year is primarily due to an increase in the number of the underlying land fornew restaurant openings, new restaurants as well as the acquisition of restaurant and brewing equipment and leasehold improvements to construct new restaurants were $31.1 million. These expenditures were primarily related to theunder construction of our eight new restaurants that opened during the thirty-nine weeks ended October 3, 2017, as well as expenditures related to restaurants expected to open later in fiscal 2017. Total capital expenditures related to the maintenance and key productivity initiativesremodels.
The following table provides, for the periods indicated, the components of existing restaurants andcapital expenditures for restaurant and corporate systems were $25.7 million and $0.6 million, respectively.
We have a $250 million unsecured revolving line of credit that expires on November 18, 2021, and may be used for working capital and other general corporate purposes. We utilize the Credit Facility principally for letters of credit that are required to support certain of our self-insurance programs, to fund a portion of the Company’s stock repurchase program, our recently announced quarterly cash dividend and working capital and construction requirements.(in thousands):
|
| For the Thirteen Weeks Ended |
| |||||
|
| March 29, 2022 |
|
| March 30, 2021 |
| ||
New restaurants |
| $ | 7,865 |
|
| $ | 4,676 |
|
Restaurant maintenance and key productivity initiatives |
|
| 3,870 |
|
|
| 1,649 |
|
Restaurant and corporate systems |
|
| 361 |
|
|
| 552 |
|
Total capital expenditures |
| $ | 12,096 |
|
| $ | 6,877 |
|
As of November 6, 2017,May 2, 2022, we have opened eighttwo new restaurants and we have two additional restaurants, with signed leases, under construction that we expectclosed our Pasadena restaurant during fiscal 2022. We currently plan to open before year end. We expect to open four to six newas many as eight restaurants in fiscal 20182022, and we have entered into signed leases, land purchase agreements or letters of intent for all of our potential2022 new restaurant locations. While we expect our capital expenditures to remain significant, the reduction of restaurant openings in fiscal 2018 will reduce our capital expenditure spend as compared to fiscal 2017. The decision to continue to reduce our pace of expansion will generate increased free cash flow and provide added financial flexibility. It will also allow us to allocate greater resources to our core base of established restaurants to improve sales and profitability. While ourOur new restaurant unit economics remain solidcontinue to warrant an appropriate allocation of our available capital, and warrant continued capital allocation, we will continue to balance this new restaurant growth with our commitment to drive shareholder returns through our share repurchases programquality and beginning in the fourth quarter of fiscal 2017, quarterly cash dividends.hospitality.
We currently anticipate our total capital expenditures for fiscal 2018, including all expenditure categories,2022 to be approximately $50$90 million to $60$95 million. This estimate includes costs to open up to eight new restaurants and remodel several existing locations. Total capital expenditures exclude anticipated proceeds from tenant improvement allowances and sale-leasebacks. We expect to fund our anticipatednet capital expenditures for the remainder of fiscal 2017 and fiscal 2018 with our current cash balance on hand, expected cash flows from operations proceeds from sale-leaseback transactions, expected tenant improvement allowances and our line of credit. Our future cash requirements will depend on many factors, including the pace of our expansion, conditions in the retail property development market, construction costs, the nature of the specific sites selected for new restaurants, and the nature of the specific leases and associated tenant improvement allowances available, if any, as negotiated with landlords.
From time
Financing Cash Flows
Net cash used in financing activities was $0.4 million during the thirteen weeks ended March 29, 2022, representing a $31.7 million decrease from the $31.2 million provided during the thirteen weeks ended March 30, 2021. This decrease was primarily due to time, we will evaluate opportunities to acquire and convert other restaurant locations or entire restaurant chains toproceeds from the BJ’s restaurant concept. In the future we may consider joint venture arrangements to augment BJ’s expansion into new markets or we may evaluate non-controlling investments in other emerging restaurant concepts that offer complementary growth opportunities to our BJ’s restaurant operations. Currently, we have no binding commitments (other than the signed leases or land purchase agreements set forth in Item 1 - Business - “Restaurant Site Selection and Expansion Objectives” in our Annual Report on Form 10-K for the fiscal year ended January 3, 2017) or agreements to acquire or convert any other restaurant locations or chains to our concept, or to enter into any joint ventures or non-controlling investments. However, we would likely require additional capital resources to take advantage of any of these growth opportunities should they become feasible.
Historically, we have not paid any dividends to our shareholders. However, on October 24, 2017, our Board of Directors authorized and declared a quarterly cash dividend of $0.11 per shareissuance of common stock payable on December 4, 2017, to shareholders of record at the close of business on November 13, 2017. While we intend to pay regular quarterly cash dividends in future periods, any future decisions to pay or to increase or decrease cash dividends will be reviewed quarterly and declared by the Board of Directors at its discretion. Our Credit Facility contains, and debt instruments that we enter into in the future may contain, covenants that place limitations on the amount of dividends we may pay.
As of October 3, 2017, we have cumulatively repurchased approximately $347.8 million shares in accordance with our approved share repurchase plan. We repurchased approximately $57.3 million of these shares during the thirty-ninethirteen weeks ended October 3, 2017. The share repurchases were executed through open market purchases, and future share repurchases may be completed through the combination of individually negotiated transactions, accelerated share buyback, and/or open market purchases. In March 2017, the Company’s Board of Directors approved an expansion of the share repurchase program by $50 million to $400 million. As of October 3, 2017, we have approximately $52.2 million available under our share repurchase plan. Our Credit Facility does not contain any restrictions on the amount of borrowings that can be used to make share repurchases as long as we are in compliance with our financial and non-financial covenants.30, 2021.
OFF-BALANCE SHEET ARRANGEMENTS
We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities (“VIEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow limited purposes. As of October 3, 2017,March 29, 2022, we are not involved in any off-balance sheet arrangements.
IMPACT OF INFLATION
Inflation on food, labor, energy and occupancy costs can significantly affect the profitability of our restaurant operations. Our profitability is dependent, among other things, on our ability to anticipate and react to changes in the cost of key operating resources, including food and other raw materials, labor, energy and other supplies and services. Substantial increases in costs and expenses could impact our operating results to the extent that such increases cannot be passed along to our restaurant customers. While we have taken steps to enter into agreements for some of the commodities used in our restaurant operations, there can be no assurance that future supplies and costs for such commodities will not fluctuate due to weather or other market
conditions outside of our control. We are currently unable to contract for certain commodities, such as fluid dairy, fresh meat or seafood, and most fresh produce items, for long periods of time. Consequently, such commodities can be subject to unforeseen supply and cost fluctuations.While we have not had material disruptions in our supply chain, we have experienced some product shortages and higher costs and inflationary pressures, which have affected our average per-guest check.
A general shortage in the availability of qualified restaurant managers and hourly workers in certain geographic areas in which we operate, which has been exacerbated by continuing effects of the COVID-19 pandemic on the labor market, has caused increases in the costs of recruiting and compensating such team members. Many of our restaurant employeesteam members are paid hourly rates subject to the federal, state or local minimum wage requirements. Numerous state and local governments have their own minimum wage and other regulatory requirements for team members that are generally greater than the federal minimum wage and are subject to annual increases based on changes in their local consumer price indices. Additionally, a general shortage in the availability of qualified restaurant management and hourly workers in certain geographic areas in which we operate has caused increases in the costs of recruiting and compensating such employees. Certain operating and other costs, including health benefits in compliance with the Patient Protection and Affordable Care Act, taxes, insurance, federal and state exemption rules, and regulatory requirements relating to employeesCOVID-19 pandemic related benefits, and other outside services continue to increase with the general level of inflation and may also be subject to other cost and supply fluctuations outside of our control.
While we have been able to partially offset inflation and other changes in the costs of key operating resources by gradually increasing prices of our menu items, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future. From time to time, competitive conditions will limit our menu pricing flexibility. In addition, macroeconomic conditions that impact consumer discretionary spending for food away from home could make additional menu price increases imprudent. There can be no assurance that all of our future cost increases can
be offset by higher menu prices or that higher menu prices will be accepted by our restaurant customers without any resulting changes in their visit frequencies or purchasing patterns. Many of the leases for our restaurants provide for contingent rent obligations based on a percentage of sales. As a result, rent expense will absorb a proportionate share of any menu price increases in our restaurants. There can be no assurance that we will continue to generate increases in comparable restaurant sales in amounts sufficient to offset inflationary or other cost pressures.
SEASONALITY AND ADVERSE WEATHER
Our business is impacted by weather and other seasonal factors that typically impact other restaurant operations. Holidays (and shifts in the holiday calendar) and severe weather including hurricanes, tornados, thunderstorms, snow and ice storms, prolonged extreme temperatures and similar conditions may impact restaurant sales volumes in some of the markets where we operate. Many of our restaurants are located in or near shopping centers and malls that typically experience seasonal fluctuations in sales. Quarterly results have been and will continue to be significantly impacted by the timing of new restaurant openings and their associated restaurant opening expenses. As a result of these and other factors, our financial results for any given quarter may not be indicative of the results that may be achieved for a full fiscal year.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenues and expenses in the reporting period. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. We continually review the estimates and underlying assumptions to ensure they are appropriate for the circumstances. Accounting assumptions and estimates are inherently uncertain and actual results may differ materially from our estimates.
A summary of our other critical accounting policies is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 28, 2021. During the thirteen weeks ended March 29, 2022, there were no significant changes in our critical accounting policies.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion of market risks contains “forward-looking” statements. Actual results may differ materially from the following discussion based on general conditions in the financial and commodity markets.
Interest Rate Risk
We have a $250$215 million unsecured Credit Facility, of which $194.0$50.0 million is currently outstanding thatand carries interest at a floating rate. We utilize the Credit Facility principally for letters of credit that are required to support our self-insurance programs, to fund a portion of our announced stockshare repurchase program, which is currently suspended, and for working capital and construction requirements, as needed. We are exposed to interest rate risk through fluctuations in interest rates on our obligations under the Credit Facility. Based on our current outstanding balance, a hypothetical 1% change in the interest rates under our Credit Facility would have an approximate $1.6$0.4 million annual impact on our net income.income (loss).
Food, Supplies and Commodity Price Risks
We purchase food, supplies and other commodities for use in our operations based upon market prices established with our suppliers. ManyOur business is dependent on frequent and consistent deliveries of these items. We may experience shortages, delays or interruptions due to inclement weather, natural disasters, labor issues or other operational disruptions or other conditions beyond our control such as cyber breaches or ransomware attacks at our suppliers, distributors or transportation providers. Additionally, many of the commodities purchased by us can be subject to volatility due to market supply and demand factors outside of our control, whether contracted for or not. Costs can also fluctuate due to government regulation. As a result of the COVID-19 pandemic, we have experienced and expect to continue to experience distribution disruptions, commodity cost inflation and certain food and supply shortages. To manage this risk in part, we attempt to enter into fixed-price purchase commitments, with terms typically up to one year, for some of our commodity requirements. However, it may not be possible for us to enter into fixed-price contracts for certain commodities or we may choose not to enter into fixed-price contracts for certain commodities. We believe that substantially all of our food and supplies are available from several sources, which helps to diversify our overall commodity cost risk. We also believe that we have some flexibility and ability to increase certain menu prices, or vary certain menu items offered or promoted, in response to food
commodity price increases. Some of our commodity purchase arrangements may contain contractual features that limit the price paid by establishing certain price floors or caps. We do not use financial instruments to hedge commodity prices, since our purchase arrangements with suppliers, to the extent that we can enter into such arrangements, help control the ultimate cost that we pay.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 promulgated under the Securities Exchange Act of 1934 as amended, as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of October 3, 2017,March 29, 2022, our disclosure controls and procedures are designed and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our thirdfirst fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
See Note 78 of Notes to Unaudited Consolidated Financial Statements in Part I, Item 1 of this report for a summary of legal proceedings.
A discussion ofThere have been no material changes from the significant risks associated with investmentsrisk factors previously disclosed in our securities, as well as other matters, is set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 3, 2017. A summary of these risks and certain related information is included under “Statement Regarding Forward-Looking Disclosure” in Part I, Item 2 of this Form 10-Q and is incorporated herein by this reference. These cautionary statements are to be used as a reference in connection with any “forward-looking” statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a “forward-looking” statement or contained in any of our subsequent filings with the SEC. The risks described in this Form 10-Q and in our Annual Report on Form 10-K are not the only risks we face. New risks and uncertainties arise from time to time, and we cannot predict those events or how they may affect us. There may be other risks and uncertainties that are not currently known or that are currently deemed by us to be immaterial; however, they may ultimately adversely affect our business, financial condition and/or operating results.December 28, 2021.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Our share repurchase program is currently suspended until it is in the best interest of the Company and its shareholders to resume. As of October 3, 2017,March 29, 2022, we have cumulatively repurchased shares valued at approximately $347.8$475.6 million in accordance with our approved share repurchase plan. Approximately $57.3 million of theseWe did not repurchase shares were repurchased during the thirty-ninethirteen weeks ended October 3, 2017. The share repurchases were executed through open market purchases, and future share repurchases may be completed through the combination of individually-negotiated transactions, accelerated share buyback, and/or open market purchases. In March 2017, the Company’s Board of Directors approved an expansion of the share repurchase program by $50 million.29, 2022. As of October 3, 2017,March 29, 2022, we have approximately $52.2$24.4 million available under the current $400 millionour share repurchase plan approved by our Board of Directors. Our Credit Facility does not contain any restrictions on the amount of borrowings that can be used to make share repurchases as long as we are in compliance with our financial and non-financial covenants.plan.
The following table sets forth information with respect to the repurchase of common shares during the thirty-nine weeks ended October 3, 2017:
Period (1) |
| Total Number of Shares Purchased |
|
| Average Price Paid Per Share |
|
| Total Number of Shares Purchased as Part of the Publicly Announced Plans |
|
| Increase in Dollars for Share Repurchase Authorization |
|
| Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
| |||||
01/04/17 – 01/31/17 |
|
| 309,677 |
|
| $ | 36.12 |
|
|
| 309,677 |
|
| $ | — |
|
| $ | 48,279,389 |
|
02/01/17 – 02/28/17 |
|
| 316,423 |
|
| $ | 35.72 |
|
|
| 316,423 |
|
| $ | — |
|
| $ | 36,977,187 |
|
03/01/17 – 04/04/17 |
|
| 170,689 |
|
| $ | 38.12 |
|
|
| 170,689 |
|
| $ | 50,000,000 |
|
| $ | 80,469,746 |
|
04/05/17 – 05/02/17 |
|
| 33,916 |
|
| $ | 40.34 |
|
|
| 33,916 |
|
| $ | — |
|
| $ | 79,101,642 |
|
05/03/17 – 05/30/17 |
|
| 3,143 |
|
| $ | 43.98 |
|
|
| 3,143 |
|
| $ | — |
|
| $ | 78,963,417 |
|
05/31/17 – 07/04/17 |
|
| 36,348 |
|
| $ | 37.42 |
|
|
| 36,348 |
|
| $ | — |
|
| $ | 77,603,349 |
|
07/05/17 – 08/01/17 |
|
| 200,019 |
|
| $ | 35.26 |
|
|
| 200,019 |
|
| $ | — |
|
| $ | 70,550,137 |
|
08/02/17 – 08/29/17 |
|
| 57,968 |
|
| $ | 32.96 |
|
|
| 57,968 |
|
| $ | — |
|
| $ | 68,639,351 |
|
08/30/17 – 10/03/17 |
|
| 555,673 |
|
| $ | 29.62 |
|
|
| 555,673 |
|
| $ | — |
|
| $ | 52,181,393 |
|
Total |
|
| 1,683,856 |
|
|
|
|
|
|
| 1,683,856 |
|
|
|
|
|
|
|
|
|
|
|
Exhibit |
| Description |
3.1 |
| |
|
| |
3.2 |
| |
|
| |
3.3 |
| |
|
| |
3.4 |
| |
|
| |
4.1 |
| |
| ||
|
|
|
31 |
| Section 302 Certification of Chief Executive Officer and Chief Financial |
|
| |
32 |
| Section 906 Certification of Chief Executive Officer and Chief Financial |
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| BJ’S RESTAURANTS, INC. |
|
|
| (Registrant) |
|
|
|
| ||
| ||||
| ||||
|
May 2, 2022 |
| By: | /s/ GREGORY S. LEVIN |
|
|
|
| Gregory S. Levin |
|
|
|
| Chief Executive |
|
|
|
| (Principal Executive Officer) |
By: | /s/ THOMAS A. HOUDEK | |||
Thomas A. Houdek | ||||
Senior Vice President and Chief Financial Officer |
| |||
|
|
| (Principal Financial Officer) |
By: | /s/ JACOB J. GUILD | |||
Jacob J. Guild | ||||
Senior Vice President and Chief Accounting Officer | ||||
(Principal Accounting Officer) |
|
21
23