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

For the Quarterly Period Ended September 27, 2022July 4, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

33-0485615

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

7755 Center Avenue, Suite 300

Huntington Beach, California92647

(714) (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 every interactive data file required to be submitted 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 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.

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 October 28, 2022,August 4, 2023, there were 23,392,09223,573,109 shares of Common Stock of the Registrant outstanding.


BJ’S RESTAURANTS, INC.

TABLE OF CONTENTS

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements

1

Consolidated Balance Sheets –
   September 27, 2022July 4, 2023 (Unaudited) and December 28, 2021January 3, 2023

1

Unaudited Consolidated Statements of Operations –
Thirteen and Thirty-NineTwenty-Six Weeks Ended September 27,July 4, 2023 and June 28, 2022 and September 28, 2021

2

Unaudited Consolidated Statements of Shareholders’ Equity –
Thirteen and Thirty-NineTwenty-Six Weeks Ended September 27,July 4, 2023 and June 28, 2022 and September 28, 2021

3

Unaudited Consolidated Statements of Cash Flows –
Thirteen and Thirty-NineTwenty-Six Weeks Ended September 27,July 4, 2023 and June 28, 2022 and September 28, 2021

4

Notes to Unaudited Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

11

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

1918

Item 4.

Controls and Procedures

1918

Item 5.

Other Information

19

PART II.

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

2019

Item 1A.

Risk Factors

2019

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

2019

Item 6.

Exhibits

2120

SIGNATURES

2221


PART I. FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

BJ’S RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

September 27, 2022

 

 

December 28, 2021

 

 

July 4, 2023

 

 

January 3, 2023

 

 

(unaudited)

 

 

 

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

19,179

 

 

$

38,527

 

 

$

6,053

 

 

$

24,873

 

Accounts and other receivables, net

 

 

19,874

 

 

 

29,055

 

 

 

33,091

 

 

 

28,593

 

Inventories, net

 

 

11,760

 

 

 

11,579

 

 

 

11,994

 

 

 

11,887

 

Prepaid expenses and other current assets

 

 

10,984

 

 

 

11,654

 

 

 

14,636

 

 

 

16,905

 

Total current assets

 

 

61,797

 

 

 

90,815

 

 

 

65,774

 

 

 

82,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

505,247

 

 

 

506,111

 

 

 

522,610

 

 

 

507,116

 

Operating lease assets

 

 

368,001

 

 

 

365,244

 

 

 

361,494

 

 

 

368,784

 

Goodwill

 

 

4,673

 

 

 

4,673

 

 

 

4,673

 

 

 

4,673

 

Deferred income taxes

 

 

37,805

 

 

 

24,902

 

Equity method investment

 

 

4,900

 

 

 

5,000

 

Deferred income taxes, net

 

 

41,969

 

 

 

38,312

 

Other assets, net

 

 

40,023

 

 

 

43,421

 

 

 

39,841

 

 

 

39,779

 

Total assets

 

$

1,017,546

 

 

$

1,035,166

 

 

$

1,041,261

 

 

$

1,045,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

51,088

 

 

$

48,840

 

 

$

53,816

 

 

$

59,563

 

Accrued expenses

 

 

93,657

 

 

 

112,354

 

 

 

98,111

 

 

 

97,258

 

Current operating lease obligations

 

 

40,100

 

 

 

39,240

 

 

 

31,954

 

 

 

40,037

 

Total current liabilities

 

 

184,845

 

 

 

200,434

 

 

 

183,881

 

 

 

196,858

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term operating lease obligations

 

 

433,095

 

 

 

436,016

 

 

 

427,609

 

 

 

432,676

 

Long-term debt

 

 

50,000

 

 

 

50,000

 

 

 

53,000

 

 

 

60,000

 

Other liabilities

 

 

10,592

 

 

 

14,945

 

 

 

10,725

 

 

 

10,873

 

Total liabilities

 

 

678,532

 

 

 

701,395

 

 

 

675,215

 

 

 

700,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 23,363 and 23,304 shares issued and outstanding as of September 27, 2022 and December 28, 2021, respectively

 

 

 

 

 

 

Common stock, no par value, 125,000 shares authorized and 23,544 and 23,392 shares issued and outstanding as of July 4, 2023 and January 3, 2023, respectively

 

 

 

 

 

 

Capital surplus

 

 

72,861

 

 

 

72,513

 

 

 

73,407

 

 

 

74,459

 

Retained earnings

 

 

266,153

 

 

 

261,258

 

 

 

292,639

 

 

 

271,056

 

Total shareholders’ equity

 

 

339,014

 

 

 

333,771

 

 

 

366,046

 

 

 

345,515

 

Total liabilities and shareholders’ equity

 

$

1,017,546

 

 

$

1,035,166

 

 

$

1,041,261

 

 

$

1,045,922

 

See accompanying notes to unaudited consolidated financial statements.


1


BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

 

July 4, 2023

 

 

June 28, 2022

 

 

July 4, 2023

 

 

June 28, 2022

 

Revenues

 

$

349,670

 

 

$

329,697

 

 

$

690,950

 

 

$

628,426

 

Restaurant operating costs (excluding depreciation and amortization):

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

90,614

 

 

 

90,928

 

 

 

181,491

 

 

 

172,394

 

Labor and benefits

 

 

126,522

 

 

 

123,111

 

 

 

254,855

 

 

 

239,397

 

Occupancy and operating

 

 

81,912

 

 

 

76,560

 

 

 

161,058

 

 

 

148,261

 

General and administrative

 

 

21,194

 

 

 

16,905

 

 

 

40,900

 

 

 

35,158

 

Depreciation and amortization

 

 

17,708

 

 

 

17,565

 

 

 

35,320

 

 

 

35,541

 

Restaurant opening

 

 

378

 

 

 

1,045

 

 

 

1,222

 

 

 

1,628

 

Loss on disposal and impairment of assets, net

 

 

1,130

 

 

 

438

 

 

 

3,276

 

 

 

595

 

Total costs and expenses

 

 

339,458

 

 

 

326,552

 

 

 

678,122

 

 

 

632,974

 

Income (loss) from operations

 

 

10,212

 

 

 

3,145

 

 

 

12,828

 

 

 

(4,548

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(1,108

)

 

 

(436

)

 

 

(2,229

)

 

 

(1,070

)

Other income (expense), net (1)

 

 

622

 

 

 

(187

)

 

 

818

 

 

 

(575

)

Total other expense

 

 

(486

)

 

 

(623

)

 

 

(1,411

)

 

 

(1,645

)

Income (loss) before income taxes

 

 

9,726

 

 

 

2,522

 

 

 

11,417

 

 

 

(6,193

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (benefit) expense

 

 

(2,206

)

 

 

2,225

 

 

 

(3,996

)

 

 

(7,950

)

Net income

 

$

11,932

 

 

$

297

 

 

$

15,413

 

 

$

1,757

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.51

 

 

$

0.01

 

 

$

0.66

 

 

$

0.08

 

Diluted

 

$

0.50

 

 

$

0.01

 

 

$

0.64

 

 

$

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

23,539

 

 

 

23,434

 

 

 

23,510

 

 

 

23,405

 

Diluted

 

 

23,971

 

 

 

23,576

 

 

 

23,961

 

 

 

23,658

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Thirteen Weeks Ended

 

 

For the Thirty-Nine Weeks Ended

 

 

 

September 27, 2022

 

 

September 28,

 2021

 

 

September 27, 2022

 

 

September 28,

 2021

 

Revenues

 

$

311,348

 

 

$

282,180

 

 

$

939,774

 

 

$

795,770

 

Restaurant operating costs (excluding depreciation and amortization):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

85,010

 

 

 

76,647

 

 

 

257,404

 

 

 

208,382

 

Labor and benefits

 

 

117,476

 

 

 

105,023

 

 

 

356,873

 

 

 

290,921

 

Occupancy and operating

 

 

76,931

 

 

 

68,876

 

 

 

225,192

 

 

 

196,271

 

General and administrative

 

 

18,885

 

 

 

17,293

 

 

 

54,043

 

 

 

49,586

 

Depreciation and amortization

 

 

17,356

 

 

 

18,224

 

 

 

52,897

 

 

 

54,660

 

Restaurant opening

 

 

482

 

 

 

375

 

 

 

2,110

 

 

 

1,224

 

Loss on disposal and impairment of assets

 

 

379

 

 

 

2,700

 

 

 

974

 

 

 

3,225

 

Total costs and expenses

 

 

316,519

 

 

 

289,138

 

 

 

949,493

 

 

 

804,269

 

Loss from operations

 

 

(5,171

)

 

 

(6,958

)

 

 

(9,719

)

 

 

(8,499

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(645

)

 

 

(1,047

)

 

 

(1,715

)

 

 

(4,043

)

Other income (expense), net

 

 

57

 

 

 

446

 

 

 

(518

)

 

 

748

 

Total other expense

 

 

(588

)

 

 

(601

)

 

 

(2,233

)

 

 

(3,295

)

Loss before income taxes

 

 

(5,759

)

 

 

(7,559

)

 

 

(11,952

)

 

 

(11,794

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

 

(4,117

)

 

 

(5,383

)

 

 

(12,067

)

 

 

(12,846

)

Net (loss) income

 

$

(1,642

)

 

$

(2,176

)

 

$

115

 

 

$

1,052

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.07

)

 

$

(0.09

)

 

$

0.00

 

 

$

0.05

 

Diluted

 

$

(0.07

)

 

$

(0.09

)

 

$

0.00

 

 

$

0.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

23,427

 

 

 

23,290

 

 

 

23,413

 

 

 

23,154

 

Diluted

 

 

23,427

 

 

 

23,290

 

 

 

23,628

 

 

 

24,054

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)
For the thirteen weeks ended July 4, 2023 and June 28, 2022, related party costs included in other income (expense), net was an equity method investment loss of $60,000 and zero, respectively. For the twenty-six weeks ended July 4, 2023 and June 28, 2022, related party costs included in other income (expense), net was an equity method investment loss of $100,000 and zero, respectively. See Note 10 for further information.

See accompanying notes to unaudited consolidated financial statements.


2



BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

 

For the Thirteen Weeks Ended

 

 

Common Stock

 

 

Capital

 

 

Retained

 

 

 

 

 

 

For the Thirteen Weeks Ended

 

 

Shares

 

 

Amount

 

 

Surplus

 

 

Earnings

 

 

Total

 

 

Common Stock

 

 

Capital

 

 

Retained

 

 

 

 

Balance, June 29, 2021

 

 

23,267

 

 

$

 

 

$

68,713

 

 

$

266,421

 

 

$

335,134

 

 

Shares

 

 

Amount

 

 

Surplus

 

 

Earnings

 

 

Total

 

Balance, March 29, 2022

 

 

23,416

 

 

$

 

 

$

69,326

 

 

$

268,336

 

 

$

337,662

 

Issuance of restricted stock units

 

 

29

 

 

 

1,233

 

 

 

(1,233

)

 

 

 

 

 

 

 

 

23

 

 

 

978

 

 

 

(978

)

 

 

 

 

 

 

Reclassification of common stock

 

 

 

 

 

(1,233

)

 

 

 

 

 

1,233

 

 

 

 

 

 

 

 

 

(978

)

 

 

 

 

 

978

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,500

 

 

 

 

 

 

2,500

 

 

 

 

 

 

 

 

 

2,380

 

 

 

 

 

 

2,380

 

Adjustment to dividends previously accrued

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

5

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,176

)

 

 

(2,176

)

Balance, September 28, 2021

 

 

23,296

 

 

$

 

 

$

69,980

 

 

$

265,482

 

 

$

335,462

 

Net income

 

 

 

 

 

 

 

 

 

 

 

297

 

 

 

297

 

Balance, June 28, 2022

 

 

23,439

 

 

$

 

 

$

70,728

 

 

$

269,616

 

 

$

340,344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 28, 2022

 

 

23,439

 

 

$

 

 

$

70,728

 

 

$

269,616

 

 

$

340,344

 

Balance, April 4, 2023

 

 

23,529

 

 

$

 

 

$

71,035

 

 

$

280,199

 

 

$

351,234

 

Exercise of stock options

 

 

 

 

 

8

 

 

 

(2

)

 

 

 

 

 

6

 

Issuance of restricted stock units

 

 

15

 

 

 

563

 

 

 

(567

)

 

 

 

 

 

(4

)

 

 

15

 

 

 

500

 

 

 

(500

)

 

 

 

 

 

 

Repurchase, retirement and reclassification of common stock

 

 

(91

)

 

 

(563

)

 

 

 

 

 

(1,822

)

 

 

(2,385

)

 

 

 

 

 

(508

)

 

 

 

 

 

508

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,700

 

 

 

 

 

 

2,700

 

 

 

 

 

 

 

 

 

2,874

 

 

 

 

 

 

2,874

 

Adjustment to dividends previously accrued

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,642

)

 

 

(1,642

)

Balance, September 27, 2022

 

 

23,363

 

 

$

 

 

$

72,861

 

 

$

266,153

 

 

$

339,014

 

Net income

 

 

 

 

 

 

 

 

 

 

 

11,932

 

 

 

11,932

 

Balance, July 4, 2023

 

 

23,544

 

 

$

 

 

$

73,407

 

 

$

292,639

 

 

$

366,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Thirty-Nine Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

Common Stock

 

 

Capital

 

 

Retained

 

 

 

 

 

 

Common Stock

 

 

Capital

 

 

Retained

 

 

 

 

 

Shares

 

 

Amount

 

 

Surplus

 

 

Earnings

 

 

Total

 

 

Shares

 

 

Amount

 

 

Surplus

 

 

Earnings

 

 

Total

 

Balance, December 29, 2020

 

 

22,318

 

 

$

 

 

$

71,722

 

 

$

222,066

 

 

$

293,788

 

Exercise of stock options

 

 

122

 

 

 

6,394

 

 

 

(1,883

)

 

 

 

 

 

4,511

 

Issuance of common stock

 

 

704

 

 

 

28,907

 

 

 

 

 

 

 

 

 

28,907

 

Balance, December 28, 2021

 

 

23,304

 

 

$

 

 

$

72,513

 

 

$

261,258

 

 

$

333,771

 

Issuance of restricted stock units

 

 

152

 

 

 

7,049

 

 

 

(7,514

)

 

 

 

 

 

(465

)

 

 

135

 

 

 

6,593

 

 

 

(6,953

)

 

 

 

 

 

(360

)

Reclassification of common stock

 

 

 

 

 

(42,350

)

 

 

 

 

 

42,350

 

 

 

 

 

 

 

 

 

(6,593

)

 

 

 

 

 

6,593

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

7,655

 

 

 

 

 

 

7,655

 

 

 

 

 

 

 

 

 

5,168

 

 

 

 

 

 

5,168

 

Adjustment to dividends previously accrued

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

8

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

1,052

 

 

 

1,052

 

Balance, September 28, 2021

 

 

23,296

 

 

$

 

 

$

69,980

 

 

$

265,482

 

 

$

335,462

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,757

 

 

 

1,757

 

Balance, June 28, 2022

 

 

23,439

 

 

$

 

 

$

70,728

 

 

$

269,616

 

 

$

340,344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 28, 2021

 

 

23,304

 

 

$

 

 

$

72,513

 

 

$

261,258

 

 

$

333,771

 

Balance, January 3, 2023

 

 

23,392

 

 

$

 

 

$

74,459

 

 

$

271,056

 

 

$

345,515

 

Exercise of stock options

 

 

 

 

 

8

 

 

 

(2

)

 

 

 

 

 

6

 

Issuance of restricted stock units

 

 

150

 

 

 

7,156

 

 

 

(7,520

)

 

 

 

 

 

(364

)

 

 

152

 

 

 

6,161

 

 

 

(6,659

)

 

 

 

 

 

(498

)

Repurchase, retirement and reclassification of common stock

 

 

(91

)

 

 

(7,156

)

 

 

 

 

 

4,771

 

 

 

(2,385

)

 

 

 

 

 

(6,169

)

 

 

 

 

 

6,169

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

7,868

 

 

 

 

 

 

7,868

 

 

 

 

 

 

 

 

 

5,609

 

 

 

 

 

 

5,609

 

Adjustment to dividends previously accrued

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Net income

 

 

 

 

 

 

 

 

 

 

 

115

 

 

 

115

 

 

 

 

 

 

 

 

 

 

 

 

15,413

 

 

 

15,413

 

Balance, September 27, 2022

 

 

23,363

 

 

$

 

 

$

72,861

 

 

$

266,153

 

 

$

339,014

 

Balance, July 4, 2023

 

 

23,544

 

 

$

 

 

$

73,407

 

 

$

292,639

 

 

$

366,046

 

See accompanying notes to unaudited consolidated financial statements.


3


BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

For the Thirty-Nine Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

September 27, 2022

 

 

September 28, 2021

 

 

July 4, 2023

 

 

June 28, 2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

115

 

 

$

1,052

 

 

$

15,413

 

 

$

1,757

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

52,897

 

 

 

54,660

 

 

 

35,320

 

 

 

35,541

 

Non-cash lease expense

 

 

25,030

 

 

 

23,383

 

 

 

16,310

 

 

 

16,585

 

Amortization of financing costs

 

 

163

 

 

 

429

 

 

 

109

 

 

 

109

 

Deferred income taxes

 

 

(12,903

)

 

 

(13,139

)

 

 

(3,657

)

 

 

(8,273

)

Stock-based compensation expense

 

 

7,608

 

 

 

7,432

 

 

 

5,420

 

 

 

4,999

 

Loss on disposal and impairment of assets

 

 

974

 

 

 

3,225

 

Loss on disposal and impairment of assets, net

 

 

3,276

 

 

 

595

 

Equity method investment

 

 

100

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts and other receivables

 

 

10,931

 

 

 

1,297

 

 

 

(2,898

)

 

 

7,557

 

Inventories, net

 

 

262

 

 

 

(172

)

 

 

186

 

 

 

95

 

Prepaid expenses and other current assets

 

 

128

 

 

 

2,750

 

 

 

1,796

 

 

 

2,052

 

Other assets, net

 

 

479

 

 

 

(1,359

)

 

 

(1,638

)

 

 

(810

)

Accounts payable

 

 

(132

)

 

 

5,976

 

 

 

(5,093

)

 

 

(5

)

Accrued expenses

 

 

(17,246

)

 

 

(7,595

)

 

 

874

 

 

 

(8,596

)

Operating lease obligations

 

 

(30,163

)

 

 

(32,342

)

 

 

(23,770

)

 

 

(20,099

)

Other liabilities

 

 

(4,353

)

 

 

645

 

 

 

(148

)

 

 

(1,295

)

Net cash provided by operating activities

 

 

33,790

 

 

 

46,242

 

 

 

41,600

 

 

 

30,212

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(50,959

)

 

 

(25,166

)

 

 

(52,912

)

 

 

(31,119

)

Proceeds from sale of assets

 

 

650

 

 

 

21

 

 

 

4

 

 

 

566

 

Net cash used in investing activities

 

 

(50,309

)

 

 

(25,145

)

 

 

(52,908

)

 

 

(30,553

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings on line of credit

 

 

470,000

 

 

 

913,000

 

 

 

355,000

 

 

 

320,000

 

Payments on line of credit

 

 

(470,000

)

 

 

(958,000

)

 

 

(362,000

)

 

 

(320,000

)

Payments of debt issuance costs

 

 

(3

)

 

 

(315

)

 

 

 

 

 

(3

)

Proceeds from issuance of common stock, net

 

 

 

 

 

28,907

 

Taxes paid on vested stock units under employee plans

 

 

(364

)

 

 

(938

)

 

 

(498

)

 

 

(360

)

Proceeds from exercise of stock options

 

 

 

 

 

4,511

 

 

 

6

 

 

 

 

Cash dividends accrued under stock compensation plans

 

 

(77

)

 

 

(111

)

 

 

(20

)

 

 

(62

)

Repurchase of common stock

 

 

(2,385

)

 

 

 

Net cash used in financing activities

 

 

(2,829

)

 

 

(12,946

)

 

 

(7,512

)

 

 

(425

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(19,348

)

 

 

8,151

 

Net decrease in cash and cash equivalents

 

 

(18,820

)

 

 

(766

)

Cash and cash equivalents, beginning of period

 

 

38,527

 

 

 

51,664

 

 

 

24,873

 

 

 

38,527

 

Cash and cash equivalents, end of period

 

$

19,179

 

 

$

59,815

 

 

$

6,053

 

 

$

37,761

 

See accompanying notes to unaudited consolidated financial statements.


4


BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

For the Thirty-Nine Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

September 27, 2022

 

 

September 28, 2021

 

 

July 4, 2023

 

 

June 28, 2022

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

493

 

 

$

386

 

 

$

345

 

 

$

469

 

Cash paid for interest, net of capitalized interest

 

$

909

 

 

$

3,207

 

 

$

1,669

 

 

$

631

 

Cash paid for operating lease obligations

 

$

49,939

 

 

$

53,743

 

 

$

31,559

 

 

$

33,238

 

Supplemental disclosure of non-cash operating, investing and financing activities:

Supplemental disclosure of non-cash operating, investing and financing activities:

 

 

 

 

 

Supplemental disclosure of non-cash operating, investing and financing activities:

 

 

 

 

Operating lease assets obtained in exchange for operating lease obligations

 

$

29,207

 

 

$

19,965

 

 

$

9,020

 

 

$

22,118

 

Tenant improvement allowance receivable

 

$

2,000

 

 

$

2,100

 

 

$

1,600

 

 

$

1,600

 

Property and equipment acquired and included in accounts payable

 

$

10,601

 

 

$

1,844

 

 

$

14,234

 

 

$

7,260

 

Stock-based compensation capitalized

 

$

260

 

 

$

223

 

 

$

189

 

 

$

169

 

See accompanying notes to unaudited consolidated financial statements.


5


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 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 conformity 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 thirty-ninetwenty-six weeks ended September 27, 2022July 4, 2023 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 December 28, 2021.January 3, 2023. 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.

COVID-19 Pandemic and Other Impacts to our Operating Environment

Our operating results were impacted by the COVID-19 pandemic and operating challenges that followed, including lower availability of workers and supply chain disruptions, which increased costs to operate restaurants. The ongoing effects of the COVID-19 pandemic and the impacts to the operating environment could lead to further inflation, staffing challenges, disruptions in the supply chain and even a return of safety restrictions, including limits to in-restaurant dining. For more information regarding the risks to our business relating to the COVID-19 pandemic, see “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 28, 2021.

2. REVENUE RECOGNITION

Our revenues are comprised of food and beverage sales from our restaurants. Revenues 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 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. Based on historical redemption rates, a portion of our gift card sales are not expected to be redeemed and arewill be recognized as gift card “breakage.” Estimated gift card breakage is recorded as revenue and 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 approximately 24 months after the original gift card issuance date.

Our “BJ’s Premier Rewards Plus” customerguest 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, 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):

 

 

July 4, 2023

 

 

January 3, 2023

 

Gift card liability

 

$

9,262

 

 

$

14,417

 

Deferred loyalty revenue

 

$

3,274

 

 

$

3,129

 

 

 

September 27, 2022

 

 

December 28, 2021

 

Gift card liability

 

$

13,313

 

 

$

19,499

 

Deferred loyalty revenue

 

$

3,192

 

 

$

3,949

 


Revenue recognized for the redemption of gift cards and loyalty rewards deferred at the beginning of each respective fiscal year is as follows (in thousands):

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

 

July 4, 2023

 

 

June 28, 2022

 

 

July 4, 2023

 

 

June 28, 2022

 

Revenue recognized from gift card liability

 

$

2,186

 

 

$

1,887

 

 

$

8,430

 

 

$

8,568

 

Revenue recognized from guest loyalty program

 

$

1,227

 

 

$

1,209

 

 

$

5,309

 

 

$

5,314

 

 

 

For the Thirteen Weeks Ended

 

 

For the Thirty-Nine Weeks Ended

 

 

 

September 27, 2022

 

 

September 28,

 2021

 

 

September 27, 2022

 

 

September 28,

 2021

 

Revenue recognized from gift card liability

 

$

1,278

 

 

$

1,305

 

 

$

9,846

 

 

$

8,049

 

Revenue recognized from customer loyalty program

 

$

1,271

 

 

$

1,014

 

 

$

6,584

 

 

$

7,940

 

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 evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date, and the lease term used in the evaluation 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 the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty. All of our restaurant leases and office

6


space leases are classified as operating leases. We have elected to account for lease and non-lease components as a single lease component for office and beverage gas equipment. We do not have any finance leases.

Lease costs included in “Occupancy &and operating” on the Consolidated Statements of Operations consisted of the following (in thousands):

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

 

July 4, 2023

 

 

June 28, 2022

 

 

July 4, 2023

 

 

June 28, 2022

 

Lease cost

 

$

14,788

 

 

$

14,827

 

 

$

29,684

 

 

$

29,662

 

Variable lease cost

 

 

1,417

 

 

 

1,037

 

 

 

2,407

 

 

 

1,745

 

Total lease costs

 

$

16,205

 

 

$

15,864

 

 

$

32,091

 

 

$

31,407

 

 

 

For the Thirteen Weeks Ended

 

 

For the Thirty-Nine Weeks Ended

 

 

 

September 27, 2022

 

 

September 28,

 2021

 

 

September 27, 2022

 

 

September 28,

 2021

 

Lease cost

 

$

15,043

 

 

$

14,615

 

 

$

44,705

 

 

$

43,202

 

Variable lease cost

 

 

751

 

 

 

544

 

 

 

2,496

 

 

 

1,146

 

Total lease costs

 

$

15,794

 

 

$

15,159

 

 

$

47,201

 

 

$

44,348

 

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 matures on November 3, 2026, and provides us with revolving loan commitments totaling $215$215 million, which may be increased up to $315$315 million, of which $50$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. On September 27, 2022,July 4, 2023, there were borrowings of $50.0$53.0 million and letters of credit of $17.1$16.2 million outstanding, leaving $147.9$145.8 million available to borrow.

Borrowings under the Line of Credit bear interest at an annual rate equal to either (a) the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus a percentage not to exceed 2.00%2.00% (with a floor on BSBY of 0.00%), or (b) a percentage not to exceed 1.00%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 plus 1.00%, and (iv) 1.00%, in either case depending on the level of lease and debt obligations of the Company as compared to EBITDA plus lease expenses. The weighted average interest rate during the thirty-ninetwenty-six weeks ended September 27,July 4, 2023 and June 28, 2022 was approximately 2.7%.6.6% and 2.2%, respectively.

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 September 27, 2022, On July 4, 2023, 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, which are payable monthly. Interest expense and commitment fees under the Credit Facility were approximately $1.7$2.2 million and $4.0$1.1 million, for the thirty-ninetwenty-six weeks ended September 27,July 4, 2023 and June 28, 2022, and September 28, 2021, respectively. We also capitalized approximately $174,000$0.3 million and $70,000$0.1 million of interest expense related to new restaurant construction during each of the thirty-ninetwenty-six weeks ended September 27,July 4, 2023 and June 28, 2022, and September 28, 2021, respectively.


5. NET (LOSS) INCOME PER SHARE

Basic and diluted net (loss) income per share is calculated by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Potentially 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 share. The number of diluted shares reflects the potential dilution that could occur if holders of in-the-money options and warrants were to exercise their right to convert these instruments into common stock and the restrictions on restricted stock units (“RSUs”) were to lapse. Additionally, performance-based RSUs are considered contingent shares; therefore, at each reporting date we determine the probable number of shares that will vest and include these contingently issuable shares in our diluted share calculation unless they are antidilutive.anti-dilutive. Once these performance-based RSUs vest, they are included in our basic net (loss) income per share calculation.

7


The following table presents a reconciliation of basic and diluted net (loss) income per share, including the number of dilutive equity awards that were included in the dilutive net income per share computation (in thousands):

 

For the Thirteen Weeks Ended

 

 

For the Thirty-Nine Weeks Ended

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

September 27, 2022

 

 

September 28,

 2021

 

 

September 27, 2022

 

 

September 28,

 2021

 

 

July 4, 2023

 

 

June 28, 2022

 

 

July 4, 2023

 

 

June 28, 2022

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(1,642

)

 

$

(2,176

)

 

$

115

 

 

$

1,052

 

Net income

 

$

11,932

 

 

$

297

 

 

$

15,413

 

 

$

1,757

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding – basic

 

 

23,427

 

 

 

23,290

 

 

 

23,413

 

 

 

23,154

 

 

 

23,539

 

 

 

23,434

 

 

 

23,510

 

 

 

23,405

 

Dilutive effect of equity awards

 

 

 

 

 

 

 

 

215

 

 

 

900

 

 

 

432

 

 

 

142

 

 

 

451

 

 

 

253

 

Weighted-average shares outstanding – diluted

 

 

23,427

 

 

 

23,290

 

 

 

23,628

 

 

 

24,054

 

 

 

23,971

 

 

 

23,576

 

 

 

23,961

 

 

 

23,658

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.07

)

 

$

(0.09

)

 

$

0.00

 

 

$

0.05

 

 

$

0.51

 

 

$

0.01

 

 

$

0.66

 

 

$

0.08

 

Diluted

 

$

(0.07

)

 

$

(0.09

)

 

$

0.00

 

 

$

0.04

 

 

$

0.50

 

 

$

0.01

 

 

$

0.64

 

 

$

0.07

 

For the thirteen weeks ended September 27,July 4, 2023 and June 28, 2022, and September 28, 2021, there were approximately 2.10.9 million and 0.52.2 million shares of equity awards, and warrants, respectively, that were excluded from the calculation of diluted net income per share because they are anti-dilutive. For the thirty-ninetwenty-six weeks ended September 27,July 4, 2023 and June 28, 2022, and September 28, 2021, there were approximately 2.00.9 million and 0.22.0 million shares of equity awards, and warrants, respectively, that were excluded from the calculation of diluted net income per share because they are anti-dilutive.

6. STOCK-BASED COMPENSATION

Our current shareholder approved stock-based compensation plan is the BJ’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 team members, officers, directors and consultants. We have historically granted incentive stock options, non-qualified stock options, restricted stock and performance and time-based restricted stock units. Stock options are charged against the Plan share reserve on the basis of one share for each share of common stock issuable upon exercise of options granted. All options granted under the Plan expire within 10 years of their date of grant. Grants of restricted stock, RSUs, performance shares and performance units, 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 maximum number that can be granted to a team member during any fiscal year.

Under the Plan, we issue time-based and performance-based RSUs and non-qualified stock options to senior vice presidents and above on an annual basis, as well as newbasis. We issue time-based RSUs and non-qualified stock options to vice presidents on an annual basis. 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 to other select support team members, and we issue time-based RSUs to non-employee members of our Board of Directors. We also issue time-based 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 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 vesting period.

The Plan permits our Board of Directors to set the vesting terms and exercise period for awards at 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%33% on the third anniversary and 67%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%0% to 225%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 Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

 

July 4, 2023

 

 

June 28, 2022

 

 

July 4, 2023

 

 

June 28, 2022

 

Labor and benefits

 

$

410

 

 

$

640

 

 

$

1,276

 

 

$

1,390

 

General and administrative

 

$

2,368

 

 

$

1,648

 

 

$

4,144

 

 

$

3,609

 

Capitalized (1)

 

$

95

 

 

$

93

 

 

$

189

 

 

$

169

 

Total stock-based compensation

 

$

2,873

 

 

$

2,381

 

 

$

5,609

 

 

$

5,168

 

8


 

 

For the Thirteen Weeks Ended

 

 

For the Thirty-Nine Weeks Ended

 

 

 

September 27, 2022

 

 

September 28,

 2021

 

 

September 27, 2022

 

 

September 28,

 2021

 

Labor and benefits

 

$

653

 

 

$

641

 

 

$

2,043

 

 

$

2,171

 

General and administrative

 

$

1,957

 

 

$

1,808

 

 

$

5,565

 

 

$

5,261

 

Capitalized (1)

 

$

90

 

 

$

66

 

 

$

260

 

 

$

223

 

(1)
Capitalized stock-based compensation relates to our restaurant development personnel and is included in “Property and equipment, net” on the Consolidated Balance Sheets.

(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 Twenty-Six Weeks Ended

 

 

September 27, 2022

 

 

September 28, 2021

 

 

July 4, 2023

 

 

June 28, 2022

 

Expected volatility

 

 

63.2

%

 

 

60.7

%

 

 

66.9

%

 

 

63.2

%

Risk-free interest rate

 

 

1.6

%

 

 

0.5

%

 

 

3.5

%

 

 

1.6

%

Expected option life

 

5 years

 

 

5 years

 

 

5 years

 

 

5 years

 

Dividend yield

 

 

%

 

 

%

 

 

0.0

%

 

 

0.0

%

Fair value of options granted

 

$

17.35

 

 

$

23.54

 

 

$

18.29

 

 

$

17.35

 

U.S. GAAP requires us to make certain assumptions and estimates regarding the grant date fair value. These include expected volatility, risk-free interest rate, expected option life, and dividend yield. These assumptions and estimates are determined using inputs that, in many cases, are outside of our control. Changes in these assumptions and estimates, including stock price volatility, dividend yield and risk-free interest rate, may significantly impact the fair value of future grants resulting in a significant impact to our financial results.

Under our stock-based compensation plan, the exercise price of a stock option is required to equal or exceed the fair value of our common stock at market close on the option grant date or the most recentlast trading day prior to the date of grant when grants take place on a day when the market holidays.is closed. The following table presents stock option activity:

 

Options Outstanding

 

 

Options Exercisable

 

 

Shares

(in thousands)

 

 

Weighted

Average

Exercise

Price

 

 

Shares

(in thousands)

 

 

Weighted

Average

Exercise

Price

 

 

Options Outstanding

 

 

Options Exercisable

 

Outstanding at December 28, 2021

 

 

775

 

 

$

41.77

 

 

 

519

 

 

$

41.02

 

 

Shares
(in thousands)

 

 

Weighted
Average
Exercise
Price

 

 

Shares
(in thousands)

 

 

Weighted
Average
Exercise
Price

 

Outstanding at January 3, 2023

 

 

824

 

 

$

40.48

 

 

 

601

 

 

$

41.57

 

Granted

 

 

100

 

 

 

32.19

 

 

 

 

 

 

 

 

 

 

 

121

 

 

 

31.29

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29.88

 

 

 

 

 

 

 

Forfeited

 

 

(35

)

 

 

40.84

 

 

 

 

 

 

 

 

 

 

 

(36

)

 

 

36.73

 

 

 

 

 

 

 

Outstanding at September 27, 2022

 

 

840

 

 

$

40.68

 

 

 

624

 

 

$

41.58

 

Outstanding at July 4, 2023

 

 

909

 

 

$

39.41

 

 

 

686

 

 

$

41.19

 

As of September 27, 2022, July 4, 2023, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $2.3$2.9 million, which is generally expected to be recognized over the next three years.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 December 28, 2021

 

 

619

 

 

$

39.35

 

 

Shares
(in thousands)

 

 

Weighted
Average
Fair Value

 

Outstanding at January 3, 2023

 

 

729

 

 

$

34.10

 

Granted

 

 

282

 

 

 

28.98

 

 

 

215

 

 

 

30.54

 

Released

 

 

(135

)

 

 

42.54

 

 

 

(127

)

 

 

36.12

 

Forfeited

 

 

(71

)

 

 

36.06

 

 

 

(44

)

 

 

33.67

 

Outstanding at September 27, 2022

 

 

695

 

 

$

34.86

 

Outstanding at July 4, 2023

 

 

773

 

 

$

32.83

 

The fair value of time-based RSUs is equal to the fair value of our common stock at market close on the date of grant or the most recentlast trading day prior to the date of grant when grants take place on a day when the market holidays.is closed. The fair value of each time-based RSU is expensed over the vesting period (e.g., one, three or five years). As of September 27, 2022,July 4, 2023, total unrecognized stock-based compensation expense related to non-vested RSUs was approximately $11.7$12.7 million, which is generally expected to be recognized over the next five years.  years.

9


Performance-Based Restricted Stock Units

The following table presents performance-based restricted stock unit activity:

 

Shares

(in thousands)

 

 

Weighted

Average

Fair Value

 

Outstanding at December 28, 2021

 

 

112

 

 

$

45.60

 

 

Shares
(in thousands)

 

 

Weighted
Average
Fair Value

 

Outstanding at January 3, 2023

 

 

123

 

 

$

38.89

 

Granted

 

 

52

 

 

 

32.27

 

 

 

52

 

 

 

31.87

 

Released

 

 

(27

)

 

 

53.22

 

 

 

(40

)

 

 

38.90

 

Forfeited

 

 

(14

)

 

 

40.06

 

 

 

(7

)

 

 

35.01

 

Outstanding at September 27, 2022

 

 

123

 

 

$

38.89

 

Outstanding at July 4, 2023

 

 

128

 

 

$

36.24

 

The fair value of performance-based RSUs is equal to the fair value of our common stock at market close on the date of grant or the most recentlast trading day prior to the date of grant when grants take place on a day when the market holidays.is closed. 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 September 27, 2022,July 4, 2023, based on the target level of performance, the total unrecognized stock-based compensation expense related to non-vested performance-based RSUs was approximately $2.6$2.5 million, which is generally expected to be recognized over the next three years.

7years.

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.” The related tax expense or benefit is recognized in the interim period in which it occurs. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain significant 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. 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 benefit rate for the thirty-ninetwenty-six weeks ended September 27, 2022July 4, 2023 was 101.0%a benefit of 35.0% compared to a benefit rate of 108.9%128.4% for the comparable thirty-ninetwenty-six week period of 2021.2022. The effective tax rate benefit for the thirty-ninetwenty-six weeks ended September 27,July 4, 2023 and June 28, 2022, and September 28, 2021, was different from the statutory tax rate primarily as a result of significant FICAFederal Insurance Contributions Act (“FICA”) tax tip credits.

As of September 27, 2022,July 4, 2023, we had unrecognized tax benefits of approximately $1.3$1.0 million, of which approximately $1.1$0.9 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):

 

For the Thirty-Nine Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

September 27, 2022

 

 

September 28, 2021

 

 

July 4, 2023

 

 

June 28, 2022

 

Beginning gross unrecognized tax benefits

 

$

1,198

 

 

$

1,333

 

 

$

1,249

 

 

$

1,198

 

Increases for tax positions taken in prior years

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Decreases for tax positions taken in prior years

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Increases for tax positions taken in the current year

 

 

74

 

 

 

35

 

 

 

22

 

 

 

22

 

Decreases due to lapse of statute of limitations

 

 

(236

)

 

 

 

Ending gross unrecognized tax benefits

 

$

1,274

 

 

$

1,368

 

 

$

1,035

 

 

$

1,222

 

Our uncertain tax positions are related to tax years that remain subject to examination by tax agencies. As of September 27, 2022,July 4, 2023, the earliest tax year still subject to examination by the Internal Revenue Service is 2015.2015. The earliest year still subject to examination by a significant state or local taxing jurisdictionauthority is 2017.2018.

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 guests, 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, team member workers’ compensation and employment practice liability insurance requirements. We maintain coverage with a third-party insurer to limit our total exposure. We believe that most of our team member claims will be covered by our general liability

10


insurance, subject to coverage limits and the portion of such claims that are self-insured. Punitiveself-insured; however, punitive damages awards and team 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 typetypes 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

At-the-Market Offering

On January 21, 2021,Stock Repurchases

During the twenty-six weeks ended July 4, 2023, we sold 703,399did not repurchase shares of our common stock at $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 result of the 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

During the thirty-nine weeks ended September 27, 2022, we repurchased and retired approximately 91,000 shares of our common stock at an average price of $26.12 per share for a total of $2.4 million, which is recorded as a reduction in common stock, with any excess charged to retained earnings. These repurchases are the first since the program was suspended in the first quarter of 2020.stock. As of September 27, 2022,July 4, 2023, we have approximately $22.1$22.1 million remaining under the current $500$500 million share repurchase plan approved by our Board of Directors. Repurchases may be made at any time.

Cash Dividends

Due to the COVID-19 pandemic, we suspended quarterly cash dividends until such time as the Board of Directors determines that resumption of dividend payments is in the best interest of the Company and its shareholders. The only cash dividends paid during the thirty-ninetwenty-six weeks ended September 27, 2022July 4, 2023 were related to dividends (declared prior to fiscal 2020) on restricted stock grants, which vested under our stock compensation plans.

10. RELATED PARTY TRANSACTIONS

BJ's Act III, LLC

We entered into a consulting agreement for defined services with Act III Management, LLC, an affiliate of BJ’s Act III, LLC, one of our beneficial stockholders, and Act III Holdings, LLC, of which one current member and one former member of the Board of Directors are partners, for $145,000. The services were completed, and the agreement expired on December 31, 2022.

Equity Method Investment

During fiscal 2022, we contributed internally developed software valued at $5.0 million to a company, of which our retired Chief Executive Officer and a member of our Board of Directors has a less than 1% interest. We recorded this non-cash contribution, in exchange for a 20% ownership of the company, as an investment within “Equity method investment” on our Consolidated Balance Sheets, and the related gain within “Loss on disposal and impairment of assets, net” on our Consolidated Statements of Operations. For the twenty-six weeks ended July 4, 2023 and June 28, 2022, we recorded a net loss related to the investment of $100,000 and zero, respectively, within “Other income (expense), net,” and accordingly adjusted the investment carrying amount on our Consolidated Balance Sheets.

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”).time. 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. These forward-looking statements are based on information available to us as of the date any such statements are made, and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and 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 December 28, 2021,January 3, 2023, as updated in our Form 10-Q for the thirty-ninetwenty-six weeks ended September 27, 2022July 4, 2023 and in other reports filed subsequently with the SEC.

GENERAL11


AsGENERAL

BJ’s Restaurants is a leading casual dining restaurant brand differentiated by a high-quality, varied menu with compelling value, and a dining experience that offers our customers (referred to as “guests”) best-in-class service, hospitality and enjoyment, in a high-energy, welcoming and approachable atmosphere. BJ’s is a national restaurant chain that, as of October 31, 2022, we ownAugust 7, 2023, owns and operate 214operates 215 restaurants located in 2930 states. Our proprietary craft beer is produced at several of our locations, our Temple, Texas brewpub locations and by independent third-party brewers using our proprietary recipes.

The first BJ’s restaurant which opened in 1978 in Orange County, California, and was a small sit-down pizzeria that featured Chicago style deep-dish pizza with a unique California twist. Our goal 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-energy casual dining restaurant when we opened our first large format restaurant with our own internalan on-site brewing operationsoperation in Brea, California. Today our restaurants feature a broad menu with over 100 menu items designed to offer something for everyone including: slow roasted entrees such as prime rib, EnLIGHTened Entrees® such as our 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 four in-restaurant brewing facilities, our Texas brewpub locations and by independent third-party brewers using our proprietary recipes.

Our revenues are comprised of food and beverage sales from our restaurants. Revenues 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 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. Based 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.” Estimated gift card breakage is recorded as revenue and 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 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. Guest traffic for our restaurants is estimated based on the number of guest 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 also 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 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.

General and administrative expenses include costs include allfor our corporate 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 team 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 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.

12


RESULTS OF OPERATIONS

The following table provides, for the periods indicated, our unaudited Consolidated Statements of Operations expressed as percentages of total revenues. The results of operations for the thirteen and thirty-ninetwenty-six weeks ended September 27,July 4, 2023 and June 28, 2022, and September 28, 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 Weeks Ended

 

 

For the Thirty-Nine Weeks Ended

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

September 27, 2022

 

 

September 28, 

2021

 

 

September 27, 2022

 

 

September 28,

 2021

 

 

July 4, 2023

 

 

June 28, 2022

 

 

July 4, 2023

 

 

June 28, 2022

 

Revenues

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Restaurant operating costs (excluding depreciation and amortization):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

27.3

 

 

 

27.2

 

 

 

27.4

 

 

 

26.2

 

 

 

25.9

 

 

 

27.6

 

 

 

26.3

 

 

 

27.4

 

Labor and benefits

 

 

37.7

 

 

 

37.2

 

 

 

38.0

 

 

 

36.6

 

 

 

36.2

 

 

 

37.3

 

 

 

36.9

 

 

 

38.1

 

Occupancy and operating

 

 

24.7

 

 

 

24.4

 

 

 

24.0

 

 

 

24.7

 

 

 

23.4

 

 

 

23.2

 

 

 

23.3

 

 

 

23.6

 

General and administrative

 

 

6.1

 

 

 

6.1

 

 

 

5.8

 

 

 

6.2

 

 

 

6.1

 

 

 

5.1

 

 

 

5.9

 

 

 

5.6

 

Depreciation and amortization

 

 

5.6

 

 

 

6.5

 

 

 

5.6

 

 

 

6.9

 

 

 

5.1

 

 

 

5.3

 

 

 

5.1

 

 

 

5.7

 

Restaurant opening

 

 

0.2

 

 

 

0.1

 

 

 

0.2

 

 

 

0.2

 

 

 

0.1

 

 

 

0.3

 

 

 

0.2

 

 

 

0.3

 

Loss on disposal and impairment of assets

 

 

0.1

 

 

 

1.0

 

 

 

0.1

 

 

 

0.4

 

Loss on disposal and impairment of assets, net

 

 

0.3

 

 

 

0.1

 

 

 

0.5

 

 

 

0.1

 

Total costs and expenses

 

 

101.7

 

 

 

102.5

 

 

 

101.0

 

 

 

101.1

 

 

 

97.1

 

 

 

99.0

 

 

 

98.1

 

 

 

100.7

 

Loss from operations

 

 

(1.7

)

 

 

(2.5

)

 

 

(1.0

)

 

 

(1.1

)

Income (loss) from operations

 

 

2.9

 

 

 

1.0

 

 

 

1.9

 

 

 

(0.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(0.2

)

 

 

(0.4

)

 

 

(0.2

)

 

 

(0.5

)

 

 

(0.3

)

 

 

(0.1

)

 

 

(0.3

)

 

 

(0.2

)

Other income (expense), net

 

 

 

 

 

0.2

 

 

 

(0.1

)

 

 

0.1

 

Other income (expense)

 

 

0.2

 

 

 

(0.1

)

 

 

0.1

 

 

 

(0.1

)

Total other expense

 

 

(0.2

)

 

 

(0.2

)

 

 

(0.2

)

 

 

(0.4

)

 

 

(0.1

)

 

 

(0.2

)

 

 

(0.2

)

 

 

(0.3

)

Loss before income taxes

 

 

(1.8

)

 

 

(2.7

)

 

 

(1.3

)

 

 

(1.5

)

Income (loss) before income taxes

 

 

2.8

 

 

 

0.8

 

 

 

1.7

 

 

 

(1.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

 

(1.3

)

 

 

(1.9

)

 

 

(1.3

)

 

 

(1.6

)

Net (loss) income

 

 

(0.5

)%

 

 

(0.8

)%

 

 

0.0

%

 

 

0.1

%

Income tax (benefit) expense

 

 

(0.6

)

 

 

0.7

 

 

 

(0.6

)

 

 

(1.3

)

Net income

 

 

3.4

%

 

 

0.1

%

 

 

2.2

%

 

 

0.3

%

Thirteen Weeks Ended September 27, 2022July 4, 2023 Compared to Thirteen Weeks Ended SeptemberJune 28, 20212022

Revenues. Total revenues increased by $29.2$20.0 million, or 10.3%6.1%, to $311.3$349.7 million during the thirteen weeks ended September 27, 2022,July 4, 2023, from $282.2$329.7 million during the comparable thirteen weekthirteen-week period of 2021.2022. The increase in revenues primarily consisted of an 8.9%a 4.7%, or $24.7$14.9 million, increase in comparable restaurant sales and a $4.8$10.5 million increase in sales from new restaurants not yet in our comparable restaurant sales base. Revenue increases were offset primarily offset by a $0.9$2.4 million decrease related to closed restaurants and a $2.8 million decrease related to the closureshift in weeks as a result of one restaurant.our 53rd week in fiscal 2022. The increase in comparable restaurant sales was the result of an increase in guest traffic of approximately 4.2% and an increase in average check of approximately 4.7%7.6%, due to menu price increases, partially offset by a decrease in guest traffic of approximately 2.9% coupled with changes in mix.

Cost of Sales. Cost of sales increaseddecreased by $8.4$0.3 million, or 10.9%0.3%, to $85.0$90.6 million during the thirteen weeks ended September 27, 2022,July 4, 2023, from $76.6$90.9 million during the comparable thirteen weekthirteen-week period of 2021.2022. This increase was primarily due to lower commodity costs and savings from our cost savings initiatives, offset by the increase in revenue commodity cost increases and associated costs related to our three new restaurants opened since the thirteen weeks ended SeptemberJune 28, 2021, offset by the closure of one restaurant at the beginning of the current fiscal year.2022. As a percentage of revenues, cost of sales increaseddecreased to 27.3%25.9% for the current thirteen weekthirteen-week period from 27.2%27.6% for the prior year comparable period. This slight increasedecrease was primarily due to easing of inflationary pressure on food costs, offset bycoupled with increased revenues from menu price increases.increases and the effectiveness of our cost savings initiatives.

Labor and Benefits. Labor and benefit costs for our restaurants increased by $12.5$3.4 million, or 11.9%2.8%, to $117.5$126.5 million during the thirteen weeks ended September 27, 2022,July 4, 2023, from $105.0$123.1 million during the comparable thirteen weekthirteen-week period of 2021.2022. This increase was primarily due to additional labor required to support increased revenue, coupled with higher wages, training and overtime costs,


expenses$2.4 million related to the three new restaurants opened since the thirteen weeks ended September 28, 2021, and our $3.1 million Employee Retention Tax Credit in conjunction with the CARES Act recognized during the thirteen weeks ended September 28, 2021. Increases inhigher management labor, and benefit costs were offset in part by the closure of one restaurant at the beginning of the current fiscal year.$0.9 million related to taxes and benefits. As a percentage of revenues, labor and benefit costs increaseddecreased to 37.7%36.2% for the current thirteen weekthirteen-week period from 37.2%37.3% for the prior year comparable period. This decrease was primarily due to our ability to leverage certain fixed costs over a higher revenue base and improved labor efficiency, coupled with the effectiveness of our cost savings initiatives. Included in labor and benefits for the thirteen weeks ended July 4, 2023 and June 28, 2022, was approximately $0.4 million and $0.6 million, respectively, or 0.1% and 0.2% 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 $5.4 million, or 7.0%, to $81.9 million during the thirteen weeks ended July 4, 2023, from $76.6 million during the comparable thirteen-week period of 2022. This was primarily due to increases of $1.5 million in rent related expenses, $1.4 million in marketing expenditures, $1.3 million related to restaurant facilities expenses, and $0.8 million in third-party delivery company fees.As a percentage of revenues, occupancy and operating expenses

13


increased to 23.4% for the current thirteen-week period from 23.2% for the prior year comparable period. This increase was primarily duerelated to our Employee Retention Tax Credit in conjunction with the CARES Act recognizedincreased marketing expenditures.

General and Administrative. General and administrative expenses increased by $4.3 million, or 25.4%, to $21.2 million during the thirteen weeks ended SeptemberJuly 4, 2023, from $16.9 million during the comparable thirteen-week period of 2022. This was primarily due to increases of $3.6 million in personnel costs, including a $2.3 million increase related to our deferred compensation liability and $0.5 million in corporate expenses. Included in general and administrative costs for the thirteen weeks ended July 4, 2023 and June 28, 2021,2022, was approximately $2.4 million and $1.6 million,or 0.7% and 0.5% of revenues, respectively, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses increased to 6.1% for the current thirteen-week period from 5.1% for the prior year comparable period. This increase was primarily related to our increased deferred compensation liability coupled with higher wages, trainingincentive compensation expense.

Depreciation and overtime hours,Amortization. Depreciation and amortization increased by $0.1 million, or 0.8%, to $17.7 million during the thirteen weeks ended July 4, 2023, compared to $17.6 million during the comparable thirteen-week period of 2022. This increase was primarily related to depreciation expense related to our restaurants opened since the thirteen weeks ended June 28, 2022, partially offset by impairment and disposal charges taken in the prior year, and the closure of three restaurants since the thirteen weeks ended June 28, 2022. As a percentage of revenues, depreciation and amortization decreased to 5.1% for the current thirteen-week period from 5.3% for the prior year comparable period. This decrease was primarily due to a higher revenue base.

Restaurant Opening. Restaurant opening expense decreased by $0.7 million, or 63.8%, to $0.4 million during the thirteen weeks ended July 4, 2023, compared to $1.0 million during the comparable thirteen-week period of 2022. This decrease was primarily due to the timing of openings.

Loss on Disposal and Impairment of Assets, Net. Loss on disposal and impairment of assets, net, was $1.1 million during the thirteen weeks ended July 4, 2023, and $0.4 million during the comparable thirteen-week period of 2022. For the thirteen weeks ended July 4, 2023, these costs primarily relate to disposals of assets in conjunction with initiatives to keep our restaurants up to date.

Interest Expense, Net. Interest expense, net, increased by $0.7 million to $1.1 million during the thirteen weeks ended July 4, 2023, compared to $0.4 million during the comparable thirteen-week period of 2022. This increase was primarily due to the increase in weighted average interest rate year over year, coupled with a slightly higher average outstanding debt balance.

Other Income (Expense), Net. Other income (expense), net, increased by $0.8 million to $0.6 million of income during the thirteen weeks ended July 4, 2023, compared to $0.2 million of expense during the comparable thirteen-week period of 2022. This increase was primarily related to gains associated with the cash surrender value of certain life insurance policies under our deferred compensation plan.

Income Tax (Benefit) Expense. Our effective income tax rate for the thirteen weeks ended July 4, 2023, reflected a 22.7% tax benefit compared to a 88.2% tax expense for the comparable thirteen-week period of 2022. The effective tax rate for the thirteen weeks ended July 4, 2023 and June 28, 2022 was different than the statutory rate primarily due to FICA tax tip credits. Additionally, the thirteen weeks ended June 28, 2022, include a $2.2 million income tax expense, which reflects our estimated annual effective tax rate and offsets a portion of the $10.2 million income tax benefit recorded in the first quarter of fiscal 2022.

Twenty-Six Weeks Ended July 4, 2023 Compared to Twenty-Six-Weeks Ended June 28, 2022

Revenues. Total revenues increased by $62.5 million, or 9.9%, to $691.0 million during the twenty-six weeks ended July 4, 2023, from $628.4 million during the comparable twenty-six week period of 2022. The increase in revenues primarily consisted of a 6.8%, or $42.0 million, increase in comparable restaurant sales, a $22.5 million increase in sales from new restaurants not yet in our comparable restaurant sales base, and a $1.6 million increase related to the shift in weeks as a result of our 53rd week in fiscal 2022. Revenue increases were offset primarily by a $3.1 million decrease related to closed restaurants. The increase in comparable restaurant sales was the result of an increase in average check of approximately 7.2%, due to menu price increases, offset by a decrease in guest traffic of approximately 0.4% coupled with changes in mix.

Cost of Sales. Cost of sales increased by $9.1 million, or 5.3%, to $181.5 million during the twenty-six weeks ended July 4, 2023, from $172.4 million during the comparable twenty-six week period of 2022. This was primarily due to the increase in revenue and costs related to our five new restaurants opened since the twenty-six weeks ended June 28, 2022, partially offset by the closure of three restaurants since the twenty-six weeks ended June 28, 2022. As a percentage of revenues, cost of sales decreased to 26.3% for the current twenty-six week period from 27.4% for the prior year comparable period. This decrease was primarily due to easing of inflationary pressure on food costs, coupled with increased revenues from menu price increases and cost savings benefits resulting from our cost savings initiatives.

Labor and Benefits. Labor and benefit costs for our restaurants increased by $15.5 million, or 6.5%, to $254.9 million during the twenty-six weeks ended July 4, 2023, from $239.4 million during the comparable twenty-six week period of 2022. This was primarily due to $8.1 million related to higher hourly labor, $4.1 million related to higher management labor and incentive compensation, and

14


$2.7 million related to taxes and benefits as a result of increases in hourly wage rates and the additional labor related to our five new restaurants opened since the twenty-six weeks ended June 28, 2022. As a percentage of revenues, labor and benefit costs decreased to 36.9% for the current twenty-six week period from 38.1% for the prior year comparable period. This decrease was primarily due to our ability to leverage ourcertain fixed costs over a higher revenue base, menu price increasesimproved labor efficiency, and more efficient labor scheduling tools derived fromteam member retention, coupled with the effectiveness of our margin improvement initiative. Excluding the Employee Retention Tax Credit recognized during the thirteen weeks ended September 28, 2021, the change in labor and benefits would have been favorable as a percentage of revenues.cost savings initiatives. Included in labor and benefits for the thirteentwenty-six weeks ended September 27,July 4, 2023 and June 28, 2022, and September 28, 2021, was approximately $0.7$1.3 million and $0.6$1.4 million, respectively, or 0.2% 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 $8.1$12.8 million, or 11.7%8.6%, to $76.9$161.1 million during the thirteentwenty-six weeks ended September 27, 2022,July 4, 2023, from $68.9$148.3 million during the comparable thirteentwenty-six week period of 2021.2022. This increase was primarily due to higherincreases of $3.0 million related to restaurant facilities expenses, $2.8 million in rent related expenses, $1.8 million in marketing expenditures, $1.7 million in utilities, $1.5 million in third-party delivery company fees, and $1.4 million in merchant credit card fees as a result of increased revenues and increased supply costs, janitorial and contract services, marketing expenses and costs related to the three new restaurants opened since the thirteen weeks ended September 28, 2021. fees.As a percentage of revenues, occupancy and operating expenses increaseddecreased to 24.7%23.3% for the current thirteentwenty-six week period from 24.4%23.6% for the prior year comparable period. This increasedecrease was primarily related to marketing in certain markets to drive incremental sales, partially offset by our ability to leverage certain fixed operating and occupancy costs over a higher revenue base. Excluding the additional marketing investment, occupancy and operating would have been favorable as a percentage of revenues.

General and Administrative. General and administrative expenses increased by $1.6$5.7 million, or 9.2%16.3%, to $18.9$40.9 million during the thirteentwenty-six weeks ended September 27, 2022,July 4, 2023, from $17.3$35.2 million during the comparable thirteentwenty-six week period of 2021.2022. This change was primarily due to increasedincreases of $4.9 million in personnel costs, including a $2.9 million increase related costs.to our deferred compensation liability, and $0.9 million in corporate expenses, offset by decreases of $0.2 million in rent related expenses, and $0.3 million in recruiting related expenses. Included in general and administrative costs for the thirteentwenty-six weeks ended September 27,July 4, 2023 and June 28, 2022, and September 28, 2021, was approximately $2.0$4.1 million and $1.8$3.6 million, or 0.6% of revenues, respectively, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses remained at 6.1%increased to 5.9% for the current thirteentwenty-six week period andfrom 5.6% for the prior year comparable period. This increase was primarily related to our increased deferred compensation liability.

Depreciation and Amortization. Depreciation and amortization decreased by $0.9$0.2 million, or 4.8%0.6%, to $17.4$35.3 million during the thirteentwenty-six weeks ended September 27, 2022,July 4, 2023, compared to $18.2$35.5 million during the comparable thirteentwenty-six week period of 2021.2022. This decrease was primarily related to impairment and disposal charges taken in fiscal 2021,the prior year, including the impairment and reduction of carrying value related tofor the closure of one restaurant atthree restaurants since the beginning of the current fiscal year.twenty-six weeks ended June 28, 2022. The decrease in depreciation and amortization was partially offset by depreciation expense related to our restaurants opened since the thirteentwenty-six weeks ended SeptemberJune 28, 2021.2022. As a percentage of revenues, depreciation and amortization decreased to 5.6%5.1% for the current thirteentwenty-six week period from 6.5%5.7% for the prior year comparable period. This decrease was primarily due to a higher revenue base.

Restaurant Opening. Restaurant opening expense increaseddecreased by $0.1$0.4 million, or 28.5%24.9%, to $0.5$1.2 million during the thirteentwenty-six weeks ended September 27, 2022,July 4, 2023, compared to $0.4$1.6 million during the comparable thirteentwenty-six week period of 2021.2022. This increase was primarily due to the timing of openings.

Loss on Disposal and Impairment of Assets.  Assets, Net. Loss on disposal and impairment of assets, net, was $0.4$3.3 million during the thirteentwenty-six weeks ended September 27, 2022,July 4, 2023, and $2.7$0.6 million during the comparable thirteentwenty-six week period of 2021.2022. For the thirteentwenty-six weeks ended September 27, 2022,July 4, 2023, these costs primarily relate to disposals of assets in conjunction with initiatives to keep our restaurants up to date. Fordate, including the thirteen weeks ended September 28, 2021, these costsremoval of glass partitions in our dining rooms that were primarily related to the impairment and reductioninstalled early in the carrying value of the long-lived and operating lease assets related to one of our restaurants.pandemic.

Interest Expense, Net. Interest expense, net, decreasedincreased by $0.4$1.2 million to $0.6$2.2 million during the thirteentwenty-six weeks ended September 27, 2022,July 4, 2023, compared to $1.0$1.1 million during the comparable thirteentwenty-six week period of 2021. This decrease was primarily due to a lower average debt balance during the thirteen weeks ended September 27, 2022, compared to the comparable thirteen week period of 2021.

Other Income (Expense), Net.  Other income (expense), net, decreased by $0.4 million to $57,000 of income during the thirteen weeks ended September 27, 2022, compared to $0.4 million of income during the comparable thirteen week period of 2021. This decrease was primarily related to an insurance reimbursement for business interruptions related to the Texas winter storms during the thirteen weeks ended September 28, 2021.

Income Tax Expense (Benefit).  Our effective income tax rate for the thirteen weeks ended September 27, 2022, reflected a 71.5% tax benefit compared to a 71.2% tax benefit for the comparable thirteen week period of 2021. The effective tax rate for the thirteen weeks ended September 27, 2022 and September 28, 2021, was different than the statutory tax rate primarily due to the benefit from FICA tax tip credits.


Thirty-Nine Weeks Ended September 27, 2022 Compared to Thirty-Nine Weeks Ended September 28, 2021

Revenues.  Total revenues increased by $144.0 million, or 18.1%, to $939.8 million during the thirty-nine weeks ended September 27, 2022, from $795.8 million during the comparable thirty-nine week period of 2021. The increase in revenues primarily consisted of a 16.9%, or $132.2 million, increase in comparable restaurant sales, and an $13.2 million increase in sales from new restaurants not yet in our comparable restaurant sales base. Revenue increases were partially offset by a $2.3 million decrease related to the closure of one restaurant. The increase in comparable restaurant sales was the result of an increase in guest traffic of approximately 11.9% and an increase in average check of approximately 5.0%, due to menu price increases partially offset by changes in mix. The increase in guest traffic was primarily due to the re-opening of our dining rooms, which were closed or restricted in operation during portions of the same period in 2021.

Cost of Sales.  Cost of sales increased by $49.0 million, or 23.5%, to $257.4 million during the thirty-nine weeks ended September 27, 2022, from $208.4 million during the comparable thirty-nine week period of 2021.2022. This increase was primarily due to the increase in revenue, commodity cost increases and costs related to our three new restaurants opened since the thirty-nine weeks ended September 28, 2021, and one that re-opened in August 2021, partially offset by the closure of one restaurant at the beginning of the current fiscal year. As a percentage of revenues, cost of sales increased to 27.4% for the current thirty-nine week period from 26.2% for the prior year comparable period. This increase was primarily due to inflationary pressure on food costs, partially mitigated by menu price increases.

Labor and Benefits.  Labor and benefit costs for our restaurants increased by $66.0 million, or 22.7%, to $356.9 million during the thirty-nine weeks ended September 27, 2022, from $290.9 million during the comparable thirty-nine week period of 2021. This increase was primarily due to increased team members and higher wages, training and overtime costs due to the re-opening of our dining rooms, which were closed or had restricted operations during a portion of the same period in 2021, expenses related to the three new restaurants opened since the thirty-nine weeks ended September 28, 2021, and our $3.1 million Employee Retention Tax Credit in conjunction with the CARES Act recognized during the thirty-nine weeks ended September 28, 2021. Increases in labor and benefit costs were offset in part by the closure of one restaurant at the beginning of the current fiscal year. As a percentage of revenues, labor and benefit costs increased to 38.0% for the current thirty-nine week period from 36.6% for the prior year comparable period. This increase was primarily due to our Employee Retention Tax Credit in conjunction with the CARES Act recognized during the thirty-nine weeks ended September 28, 2021, higher wages, training and overtime hours due to increased hiring activities, and the deleveraging impact from the COVID-19 Omicron variant wave in January 2022 when sales were severely impacted, offset by our ability to leverage our fixed costs over a higher revenue base, menu price increases and more efficient labor scheduling tools derived from our margin improvement initiative. Included in labor and benefits for the thirty-nine weeks ended September 27, 2022 and September 28, 2021, was approximately $2.0 million and $2.2 million, or 0.2% and 0.3% 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 $28.9 million, or 14.7%, to $225.2 million during the thirty-nine weeks ended September 27, 2022, from $196.3 million during the comparable thirty-nine week period of 2021. This increase was primarily due to higher merchant credit card fees, supply costs, janitorial services related to the re-opening of our dining rooms, coupled with increased marketing expenses and costs related to the three new restaurants opened since thethirty-nine weeks ended September 28, 2021, and one restaurant that was re-opened in August 2021. As a percentage of revenues, occupancy and operating expenses decreased to 24.0% for the current thirty-nine week period from 24.7 % for the prior year comparable period. This decrease was primarily due to our ability to leverage certain fixed operating and occupancy costs over a higher revenue base.

General and Administrative.  General and administrative expenses increased by $4.5 million, or 9.0%, to $54.0 million during the thirty-nine weeks ended September 27, 2022, from $49.6 million during the comparable thirty-nine week period of 2021. 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, offset by a decrease in our deferred compensation plan liability.Included in general and administrative costs for thethirty-nine weeks ended September 27, 2022 and September 28, 2021, was approximately $5.6 million and $5.3 million, or 0.6% and 0.7% of revenues, respectively, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses decreased to 5.8% for the current thirty-nine week period from 6.2% for the prior year comparable period. This decrease was primarily due to our ability to leverage our fixed costs over a higher revenue base.

Depreciation and Amortization.  Depreciation and amortization decreased by $1.8 million, or 3.2%, to $52.9 million during the thirty-nine weeks ended September 27, 2022, compared to $54.7 million during the comparable thirty-nine week period of 2021. This decrease was primarily related to impairment and disposal charges taken in fiscal 2021, including the impairment and reduction of carrying value related to the closure of one restaurant at the beginning of the current fiscal year. The decrease in depreciation and amortization was partially offset by depreciation expense related to our three new restaurants opened since the thirty-nine weeks ended September 28, 2021. As a percentage of revenues, depreciation and amortization decreased to 5.6% for the current thirty-nine week period from 6.9% for the prior year comparable period. This decrease was primarily due to a higher revenue base.


Restaurant Opening.  Restaurant opening expense increased by $0.9 million, or 72.2%, to $2.1 million during the thirty-nine weeks ended September 27, 2022, compared to $1.2 million during the comparable thirty-nine week period of 2021. This increase was primarily due to the timing of our openings and increased costs. We opened three new restaurants during the thirty-nine weeks ended September 27, 2022 and one shortly after the quarter ended, compared to two new restaurants and one re-opening during the thirty-nine weeks ended September 28, 2021.

Loss on Disposal and Impairment of Assets.  Loss on disposal and impairment of assets was $1.0 million during the thirty-nine weeks ended September 27, 2022, and $3.2 million during the comparable thirty-nine week period of 2021.For the thirty-nine weeks ended September 27, 2022, these costs primarily relate to disposals of assets in conjunction with initiatives to keep our restaurants up to date. For the thirty-nine weeks ended September 28, 2021 these costs were primarily related to the impairment and reduction in the carrying value of the long-lived and operating lease assets related to one of our restaurants, coupled with the disposals of assets in conjunction with initiatives to keep our restaurants up to date and the disposal of certain unproductive restaurant assets.

Interest Expense, Net.  Interest expense, net, decreased by $2.3 million to $1.7 million during the thirty-nine weeks ended September 27, 2022, compared to $4.0 million during the comparable thirty-nine week period of 2021. This decrease was primarily due to a lower average debt balance and weighted average interest rate during the thirty-nine weeks ended September 27, 2022, compared to the comparable thirty-nine week period of 2021.year over year, coupled with a slightly higher average outstanding debt balance.

Other (Expense) Income (Expense), Net. Other (expense) income (expense), net, was $0.5increased by $1.4 million of expense during the thirty-nine weeks ended September 27, 2022, compared to $0.8 million of income during the twenty-six weeks ended July 4, 2023, compared to $0.6 million of expense during the comparable thirty-ninetwenty-six week period of 2021.2022. This increase was primarily duerelated to the changegains associated with the cash surrender value of certain life insurance policies under our deferred compensation plan. This change offsets the related deferred compensation income or expense impact included in “General and administrative” expenses on our Unaudited Consolidated Statements of Operations. During the thirty-nine weeks ended September 27, 2022, the impact related to the cash surrender value of certain life insurance policies was partially offset by an insurance reimbursement related to business interruptions due to civil unrest and compensation from the city related to a partial parking lot closure at one of our restaurants.

Income Tax Benefit.(Benefit) Expense. Our effective income tax rate for the thirty-ninetwenty-six weeks ended September 27, 2022,July 4, 2023, reflected a 101.0%35.0% tax benefit compared to a 108.9%128.4% tax benefit for the comparable thirty-ninetwenty-six week period of 2021.2022. The effective tax rate benefit for the thirty-ninetwenty-six weeks ended September 27,July 4, 2023 and June 28, 2022 and September 28, 2021, was different than the statutory tax rate primarily due to the benefit fromsignificant FICA tax tip credits.

15


LIQUIDITY AND MATERIAL CASH REQUIREMENTS

The following table provides, for the periods indicated, a summary of our key liquidity measurements (dollars in thousands):

 

September 27, 2022

 

 

December 28, 2021

 

 

July 4, 2023

 

 

January 3, 2023

 

Cash and cash equivalents

 

$

19,179

 

 

$

38,527

 

 

$

6,053

 

 

$

24,873

 

Net working capital

 

$

(123,048

)

 

$

(109,619

)

 

$

(118,107

)

 

$

(114,600

)

Current ratio

 

0.3:1.0

 

 

0.5:1.0

 

 

0.4:1.0

 

 

0.4:1.0

 

Our second quarter ended on July 4, 2023, a national banking holiday. As a result and per our accounting policy, $19.2 million of uncertainties in the near-term macro environment caused by the COVID-19 pandemic, including supply chain challenges,credit card revenues was recorded as accounts and commodity and labor inflation, we continue toother receivables on July 4, 2023. These in-transit funds were subsequently received. We focus on cash flow generation and maintaining a solid and flexible financial position to execute our long-term strategy of investing in our business and opening new restaurants. We continue to monitor the macro environment and will review and, when appropriate, adjust our overall approach to capital allocation, including share repurchases and dividends, as the post-pandemic recovery unfolds.  environment changes.

We are 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, coupled with cash generated from operations and availability under our credit agreement will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months. Our future operating performance will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our 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. 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. There 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 one of our 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 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 entered into sale-leaseback arrangements for land parcels that we 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.

CASH FLOWS

The following tables set forth, for the periods indicated, our cash flows from operating, investing, and financing activities (in thousands):

 

For the Thirty-Nine Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

September 27, 2022

 

 

September 28, 2021

 

 

July 4, 2023

 

 

June 28, 2022

 

Net cash provided by operating activities

 

$

33,790

 

 

$

46,242

 

 

$

41,600

 

 

$

30,212

 

Net cash used in investing activities

 

 

(50,309

)

 

 

(25,145

)

 

 

(52,908

)

 

 

(30,553

)

Net cash used in financing activities

 

 

(2,829

)

 

 

(12,946

)

 

 

(7,512

)

 

 

(425

)

Net (decrease) increase in cash and cash equivalents

 

$

(19,348

)

 

$

8,151

 

Net decrease in cash and cash equivalents

 

$

(18,820

)

 

$

(766

)

Operating Cash Flows

Net cash provided by operating activities was $33.8$41.6 million during the thirty-ninetwenty-six weeks ended September 27, 2022,July 4, 2023, representing a $12.5$11.4 million decreaseincrease from the $46.2$30.2 million provided by during the thirty-ninetwenty-six weeks ended SeptemberJune 28, 2021.2022. The decreaseincrease over the prior year is primarily due to the timing of payments for accounts payableaccrued expenses, the change in deferred income taxes and accrued expenses,improved net income. This increase was offset by the collectiontiming of accounts and other receivable.  receivable receipts, including in transit credit card deposits due to the national banking holiday.

Investing Cash Flows

Net cash used in investing activities was $50.3$52.9 million during the thirty-nine twenty-six weeks ended September 27, 2022,July 4, 2023, representing a $25.2$22.4 million increase from the $25.1$30.6 million used during the thirty-nine twenty-six weeks ended SeptemberJune 28,, 2021. 2022. The increase over prior year is primarily due to an increase in the number of new restaurant openings, newrestaurants opened, restaurants under construction, and key productivity initiatives.an increase in restaurant remodel activity.

16


The following table provides, for the periods indicated, the components of capital expenditures (in thousands):

 

For the Thirty-Nine Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

September 27, 2022

 

 

September 28, 2021

 

 

July 4, 2023

 

 

June 28, 2022

 

New restaurants

 

$

27,102

 

 

$

11,706

 

 

$

20,970

 

 

$

18,168

 

Restaurant maintenance and key productivity initiatives

 

 

21,396

 

 

 

11,871

 

Restaurant maintenance and remodels, and key productivity initiatives

 

 

31,050

 

 

 

11,899

 

Restaurant and corporate systems

 

 

2,461

 

 

 

1,589

 

 

 

892

 

 

 

1,052

 

Total capital expenditures

 

$

50,959

 

 

$

25,166

 

 

$

52,912

 

 

$

31,119

 

AsYear to date as of October 31, 2022,August 7, 2023, we have opened fourtwo new restaurants and closed two.three restaurants. We currently plan to open as many as sixfive restaurants in fiscal 2022,2023, and we have entered into signed leases, land purchase agreements or letters of intent for all of our 20222023 new restaurant locations. Our new restaurant unit economics continue to warrant an appropriate allocation of capital.

We currently anticipate our total capital expenditures for fiscal 20222023 to be approximately $90 million to $95 million. This estimate includes costs to open sixfive new restaurants and remodel several35 to 40 existing locations. Total capital expenditures exclude anticipated proceeds from tenant improvement allowances and sale-leasebacks.allowances. We expect to fund our net capital expenditures with our current cash balance on hand, cash flows from operations 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.

Financing Cash Flows

Net cash used in financing activities was $2.8$7.5 million during the thirty-ninetwenty-six weeks ended September 27, 2022,July 4, 2023, representing a $10.1$7.1 million decreaseincrease from the $12.9$0.4 million used during the thirty-ninetwenty-six weeks ended SeptemberJune 28, 2021.2022. This decreaseincrease was primarily due


to repurchases of common stock, coupled with no common stock issuances or stock option exercises, offset by higher payments on our line of credit during the thirty-ninetwenty-six weeks ended SeptemberJune 28, 2021.2022.

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 September 27, 2022,July 4, 2023, we are not involved in any off-balance sheet arrangements.

IMPACT OF INFLATION

Our country is currently experiencing multi-decade high inflation. Inflation on food, labor, energy and occupancy and operating costs is currently impacting the profitability of our restaurant operations compared to historical trends. Our profitability is dependent, among other things,Heightened inflation has had a material impact on our ability to anticipateoperations, new restaurant construction and react to changes in the cost of key operating resources, including food and other raw materials, labor, energy and other supplies and services. 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 for many of our commodities.

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 pandemiccorresponding return on the labor market, has caused increases in the costs of recruiting and compensating such team members. Many of our restaurant team members are paid hourly rates subject to 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, certain operating and other costs, including health benefits in compliance with the Patient Protection and Affordable Care Act, taxes, insurance, COVID-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.

invested capital. While we have been able to partially offset inflation and other changes in the costs of key operating resourcesinputs by gradually increasing prices of our menu items,prices, coupled with cost savings initiatives, 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. Increases in inflation could have a severe impact on the United States and global economies, which will have an adverse impact on our business, financial condition and results of operations. 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 guests 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.

17


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.January 3, 2023. During the thirty-ninetwenty-six weeks ended September 27, 2022,July 4, 2023, 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 $215 million Credit Facility, of which $50.0$53.0 million is currently outstanding and 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 share repurchase program, 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 $0.4 million annual impact on our net income.

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. Our 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 lingering effects 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 September 27, 2022,July 4, 2023, 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 thirdsecond fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


18



Item 5. OTHER INFORMATION

None.

PART II. OTHER INFORMATION

See Note 8 of Notes to Unaudited Consolidated Financial Statements in Part I, Item 1 of this report for a summary of legal proceedings.

Item 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 28, 2021.January 3, 2023.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As of September 27, 2022,July 4, 2023, we have cumulatively repurchased shares valued at approximately $477.9 million in accordance with our approved share repurchase plan. We repurchased shares valued at approximately $2.4 million during the thirty-nine weeks ended September 27, 2022. The share repurchases were executed through open market purchases, and future share repurchases may be completed through a combination of individually negotiated transactions, accelerated share buyback, and/or open market purchases. As of September 27, 2022,July 4, 2023, we have approximately $22.1 million available under our share repurchase plan.

The following table sets forth information with respect to the repurchase of common shares during the thirty-nine weeks ended September 27, 2022:19

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

 

12/29/22 - 01/25/22

 

 

 

 

$

 

 

 

 

 

$

 

 

$

24,438,776

 

01/26/22 – 02/22/22

 

 

 

 

$

 

 

 

 

 

$

 

 

$

24,438,776

 

02/23/22 – 03/29/22

 

 

 

 

$

 

 

 

 

 

$

 

 

$

24,438,776

 

03/30/22 – 04/26/22

 

 

 

 

$

 

 

 

 

 

$

 

 

$

24,438,776

 

04/27/22 – 05/24/22

 

 

 

 

$

 

 

 

 

 

$

 

 

$

24,438,776

 

05/25/22 – 06/28/22

 

 

 

 

$

 

 

 

 

 

$

 

 

$

24,438,776

 

06/29/22 – 07/26/22

 

 

 

 

$

 

 

 

 

 

$

 

 

$

24,438,776

 

07/27/22 – 08/23/22

 

 

13,211

 

 

$

27.51

 

 

 

13,211

 

 

$

 

 

$

24,075,364

 

08/24/22 – 09/27/22

 

 

78,091

 

 

$

25.89

 

 

 

78,091

 

 

$

 

 

$

22,053,808

 

Total

 

 

91,302

 

 

$

26.12

 

 

 

91,302

 

 

 

 

 

 

 

 

 

(1)

Period information is presented in accordance with our fiscal months during the thirty-nine weeks ended September 27, 2022.



Item 6. EXHIBITS

Exhibit
Number

Description

3.1

Amended and Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Annual Report on Form 10-K for fiscal 2017.

3.2

Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.1 of the Form 8-K filed on August 14, 2020.

3.3

Certificate of Amendment of Articles of Incorporation, incorporated by reference to Exhibit 3.3 of the Annual Report on Form 10-K for fiscal 2004.

3.4

Certificate of Amendment of Articles of Incorporation, incorporated by reference to Exhibit 3.4 of the Annual Report on Form 10-K for fiscal 2010.

4.1

Specimen Common Stock Certificate of the Company, incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form SB‑2A filed with the Securities and Exchange Commission on August 22, 1996 (File No. 3335182‑LA).

3110.1

Investor Rights Termination Agreement, dated April 13, 2023, by and among the Company, SC 2018 Trust LLC and BJ's Act III, LLC, incorporated by reference to Exhibit 10.1 of the Form 8-K filed April 18, 2023.

31

Section 302 Certification of Chief Executive Officer and Chief Financial OfficerOfficer..

32

Section 906 Certification of Chief Executive Officer and Chief Financial OfficerOfficer.

.

101.INS

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.document.

101.SCH

Inline XBRL Taxonomy Extension Schema

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)


SIGNATURES20


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)

October 31, 2022August 7, 2023

By:

/s/ GREGORY S. LEVIN

Gregory S. Levin

Chief Executive Officer and President

(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)

2221