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Luby's Reports Second Quarter Fiscal 2019 Results

HOUSTON, April 22, 2019 /PRNewswire/ -- Luby's, Inc. (LUB) ("Luby's") today announced unaudited financial results for its twelve-week second quarter fiscal 2019 referred to as "second quarter."  Comparisons in this earnings release are for the second quarter compared to second quarter fiscal 2018.

Second Quarter Key Metrics

  • Same-store sales decreased 3.3%
  • Culinary Contract Services sales increased by 28% to $7.5 million, up from $5.9 million
  • Income from continuing operations of $6.6 million (including $12.7 million in gains on sales of property) compared to loss of $11.5 million in the second quarter fiscal 2018
  • Store level profit was 10.7%, up from 7.7% -- a 300 basis points improvement (see non-GAAP reconciliation below)
  • Adjusted EBITDA increased $2.9 million (see non-GAAP reconciliation below)

Chris Pappas, President and CEO, commented, "We continue to make positive progress through our turn-around efforts to reduce costs while repositioning our brands for improved sales and increased store-level profit efficiencies to drive better financial results in 2019 and beyond. Since the beginning of the second quarter last year, we have closed 27 underperforming units and through our $45.0 million asset sales program that began last year, we have generated proceeds of $34.7 million.

"Cost management remains a primary focus throughout our organization and even after adjusting for the number of closed stores, our cost run-rate came down in the second quarter. Store-level profit as a percentage of restaurant sales improved in the second quarter to 10.7% compared to 7.7% in the same quarter last year due primarily to effective cost controls to reduce food and supply expenses, efficient hourly labor scheduling, and reductions in repairs and maintenance expense.

"While our same-store sale results for the quarter are below our expectations for the full year, they improved sequentially at both our Luby's Cafeteria and Fuddruckers brands. Our chief operating officer, Todd Coutee, continues to realign our organization by putting the right people in the right positions. Todd and the team are also hard at work at several initiatives to enhance sales at each brand with new everyday value choices, focus on  convenience and the dinner meal part, and re-introducing a breakfast service option at several Luby's locations.

"Lastly, as we transition to primarily a franchise model for Fuddruckers, we converted five company-operated Fuddruckers restaurants to franchise-operated restaurants.  These restaurants are in the San Antonio market and were transferred in early April to a new franchise operator with prior Fuddruckers experience. We continue to work on additional re-franchising opportunities in markets outside of our home market in Houston, Texas."

2019 Same-Store Sales Year-Over-Year Comparison


Q1

2019

Q2

2019

YTD

2019

Luby's Cafeterias

(3.0)%

(2.2)%

(2.6)%

Fuddruckers

(11.2)%

(5.3)%

(8.8)%

Combo locations (1)

(11.1)%

(7.1)%

(9.5)%

Cheeseburger in Paradise

(0.6)%

(3.1)%

(1.6)%

Total same-store sales (2)

(5.5)%

(3.3)%

(4.6)%



(1)

Combo locations consist of a side-by-side Luby's Cafeteria and Fuddruckers Restaurant at one property location.

(2)

Luby's includes a restaurant's sales results into the same-store sales calculation in the quarter after that store has been open for six complete consecutive quarters. In the second quarter, there were 75 Luby's Cafeterias locations, 48 Fuddruckers locations, all six Combo locations, and one Cheeseburger in Paradise location that met the definition of same-stores.

Second Quarter Restaurant Sales:
($ thousands)

Restaurant Brand

Q2
2019

Q2
2018

Change
($)

Change
(%)

Luby's Cafeterias

$

44,366


$

47,261


$

(2,895)


(6.1)

%

Fuddruckers

16,156


19,941


(3,785)


(19.0)

%

Combo locations

4,355


4,685


(330)


(7.0)

%

Cheeseburger in Paradise

592


2,465


(1,873)


(76.0)

%

Other Revenue

(100)



(100)



Total Restaurant Sales

$

65,369


$

74,352


$

(8,983)


(12.1)

%


Note:  Luby's Cafeterias store count reduced from 82 at Q2 2018 start to 75 at Q2 2019 end; Fuddruckers store count reduced from 62 at Q2 2018 start to 48 at Q2 2019 end; Combo location count at six (12 restaurants) at Q2 2018 start and at Q2 2019 end; Combo restaurant sales change percent differs from Combo same-store sales change percent due to rounding. Cheeseburger in Paradise store count reduced from seven at Q2 2018 start to one at Q2 2019 end.

 

  • Luby's Cafeterias sales decreased $2.9 million versus the second quarter fiscal 2018, due to the closure of seven locations over the prior year and a 2.2% decrease in Luby's same-store sales. The decrease in same-store sales was the result of a 4.0% decrease in guest traffic, partially offset by a 1.9% increase in average spend per guest.
  • Fuddruckers sales at company-owned restaurants decreased $3.8 million versus the second quarter fiscal 2018, due to 14 restaurant closings and a 5.3% decrease in same-store sales. The decrease in same-store sales was the result of a 9.3% decrease in guest traffic, partially offset by a 4.4% increase in average spend per guest.
  • Combo location sales decreased $0.3 million, or 7.0%, versus second quarter fiscal 2018.
  • Cheeseburger in Paradise sales decreased $1.9 million. The decrease in sales is related to reducing operations to a single store compared to operating seven locations in the second quarter fiscal 2018.
  • Income from continuing operations was $6.6 million, or $0.22 per diluted share, compared to a loss of $11.5 million, or $0.38 per diluted share, in the second quarter fiscal 2018.
  • Store level profit, defined as restaurant sales plus vending revenue less cost of food, payroll and related costs, other operating expenses, and occupancy costs, was $7.0 million, or 10.7% of restaurant sales, in the second quarter compared to $5.7 million, or 7.7% of restaurant sales, in the second quarter fiscal 2018. The improvement in store level profit, despite a decline in same-store sales, was the result of effective cost management in several areas. Food costs as percent of restaurant sales decreased as we focused on on a return to "classic favorites" with favorable food costs as well as an overall higher average spend per guest. Our restaurant supplies expense and repairs and maintenance expense each experienced significant reductions over prior year as these expenses continued to be opportunities of focus. We also managed to reduce our hourly labor costs on a per store basis through efficient restaurant staffing. Store level profit is a non-GAAP measure, and reconciliation to loss from continuing operations is presented after the financial statements.
  • Culinary Contract Services revenues increased by $1.7 million to $7.5 million with 33 operating locations during the second quarter. New locations contributed approximately $1.4 million in revenue and locations continually operated over the prior full year increased revenue approximately $0.3 million. Culinary Contract Services profit margin increased to 11.0% of Culinary Contract Services sales in the second quarter compared to 3.6% in the second quarter fiscal 2018.
  • Selling, general and administrative expenses decreased $0.2 million. Removing one-time proxy-solicitation and communication costs of approximately $1.0 million, selling, general and administrative expenses decreased $1.2 million. The decrease reflects reductions in corporate staff and related costs as well as reductions in other overhead expenses, including general liability claims expense, corporate travel, and corporate supplies expense. Included in selling, general, and administrative expenses was approximately $0.8 million in marketing and advertising expense which represents 1.0% of total sales.

Balance Sheet and Capital Expenditures

We ended the second quarter with net debt (total debt less cash) of $29.6 million, a decrease from $35.8 million at the end of fiscal 2018. During the second quarter, our capital expenditures decreased to $0.7 million compared to $3.7 million in the second quarter fiscal 2018. At the end of the second quarter, we had $3.9 million in available cash, $10.8 million in restricted cash, and $115.1 million in total shareholders' equity.

Restaurant Counts:


August 29,
2018


FY19 YTD Q2
Openings


FY19 YTD Q2
Closings


March 13,
 2019

Luby's Cafeterias(1)

84





(3)



81


Fuddruckers Restaurants(1)

60





(6)



54


Cheeseburger in Paradise

2





(1)



1


Total

146





(10)



136




(1)

Includes 6 restaurants that are part of Combo locations

Conference Call

Luby's will host a conference call on April 22, 2019 at 10:00 a.m. Central Time to discuss further its second quarter fiscal 2019 results. To access the call live, dial (412) 902-0030 and use the access code 13689012# at least 10 minutes prior to the start time, or listen live over the Internet by visiting the events page in the investor relations section of www.lubysinc.com. For those who cannot listen to the live call, a telephonic replay will be available through April 29, 2019 and may be accessed by calling (201) 612-7415 and using the access code 13689012#.  Also, an archive of the webcast will be available after the call for a period of 90 days on the "Investors" section of the Company's website.

About Luby's

Luby's, Inc. (LUB) operates 136 restaurants nationally as of March 13, 2019: 81 Luby's Cafeterias, 54 Fuddruckers, one Cheeseburger in Paradise restaurants. Luby's is the franchisor for 102 Fuddruckers franchise locations across the United States (including Puerto Rico), Canada, Mexico, Colombia, and Panama. Luby's Culinary Contract Services provides food service management to 33 sites consisting of healthcare, corporate dining locations, sports stadiums, and sales through retail grocery stores.

This press release contains statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release, other than statements of historical fact, are "forward-looking statements" for purposes of these provisions, including the statements under the caption "Outlook" and any other statements regarding scheduled openings of units, scheduled closures of units, sales of assets, expected proceeds from the sale of assets, expected levels of capital expenditures, effects of food commodity costs, anticipated financial results in future periods and expectations of industry conditions.

Luby's cautions readers that various factors could cause its actual financial and operational results to differ materially from those indicated by forward-looking statements made from time-to-time in news releases, reports, proxy statements, registration statements, and other written communications, as well as oral statements made from time to time by representatives of Luby's. The following factors, as well as any other cautionary language included in this press release, provide examples of risks, uncertainties and events that may cause Luby's actual results to differ materially from the expectations Luby's describes in such forward-looking statements: general business and economic conditions; the impact of competition; our operating initiatives; fluctuations in the costs of commodities, including beef, poultry, seafood, dairy, cheese and produce; increases in utility costs, including the costs of natural gas and other energy supplies; changes in the availability and cost of labor; the seasonality of Luby's business; changes in governmental regulations, including changes in minimum wages; the effects of inflation; the availability of credit; unfavorable publicity relating to operations, including publicity concerning food quality, illness or other health concerns or labor relations; the continued service of key management personnel; and other risks and uncertainties disclosed in Luby's annual reports on Form 10-K and quarterly reports on Form 10-Q.

For additional information contact:

Dennard-Lascar Associates
Rick Black / Ken Dennard
Investor Relations
713-529-6600

Luby's, Inc.

Consolidated Statements of Operations (unaudited)

(In thousands, except per share data)  



Quarter Ended


Two Quarters Ended


March 13,

 2019


March 14,

 2018


March 13,

 2019


March 14,

 2018


(12 weeks)


(12 weeks)


(28 weeks)


(28 weeks)

SALES:








Restaurant sales

$

65,369



$

74,352



$

156,468



$

178,934


Culinary contract services

7,543



5,889



17,039



12,774


Franchise revenue

1,421



1,401



3,644



3,288


Vending revenue

90



151



190



294


TOTAL SALES

74,423



81,793



177,341



195,290


COSTS AND EXPENSES:








Cost of food

18,144



21,181



43,226



50,936


Payroll and related costs

24,730



28,512



59,244



66,640


Other operating expenses

11,412



14,360



27,914



33,858


Occupancy costs

4,166



4,707



10,041



10,968


Opening costs

11



331



44



406


Cost of culinary contract services

6,717



5,677



15,532



12,009


Cost of franchise operations

247



369



519



856


Depreciation and amortization

3,222



3,998



8,126



9,351


Selling, general and administrative expenses

9,017



9,188



20,240



20,712


Provision for asset impairments and restaurant closings

1,195



1,407



2,422



2,252


Net loss (gain) on disposition of property and equipment

(12,651)



(204)



(12,501)



18


Total costs and expenses

66,210



89,526



174,807



208,006


INCOME (LOSS) FROM OPERATIONS

8,213



(7,733)



2,534



(12,716)


Interest income

19



5



19



11


Interest expense

(1,554)



(545)



(3,269)



(1,194)


Other income, net

55



194



86



309


Income (loss) before income taxes and discontinued operations

6,733



(8,079)



(630)



(13,590)


Provision for income taxes

93



3,382



213



3,373


Income (loss) from continuing operations

6,640



(11,461)



(843)



(16,963)


Loss from discontinued operations, net of income taxes

(8)



(110)



(13)



(145)


NET INCOME (LOSS)

$

6,632



$

(11,571)



$

(856)



$

(17,108)


Income (loss) per share from continuing operations:








Basic

$

0.22



$

(0.38)



$

(0.03)



$

(0.57)


Assuming dilution

$

0.22



$

(0.38)



$

(0.03)



$

(0.57)


Loss per share from discontinued operations:








Basic

$

(0.00)



$

(0.01)



$

(0.00)



$

(0.00)


Assuming dilution

$

(0.00)



$

(0.01)



$

(0.00)



$

(0.00)


Net income (loss) per share:








Basic

$

0.22



$

(0.39)



$

(0.03)



$

(0.57)


Assuming dilution

$

0.22



$

(0.39)



$

(0.03)



$

(0.57)


Weighted average shares outstanding:








Basic

29,769



29,950



29,671



29,802


Assuming dilution

29,799



29,950



29,671



29,802


The following table contains information derived from the Company's Consolidated Statements of Operations expressed as a percentage of sales. Percentages may not total due to rounding.


Quarter Ended


Two Quarters Ended


March 13,

 2019


March 14,

 2018


March 13,

 2019


March 14,

 2018


(12 weeks)


(12 weeks)


(28 weeks)


(28 weeks)









Restaurant sales

87.8

%


90.9

%


88.2

%


91.6

%

Culinary contract services

10.1

%


7.2

%


9.6

%


6.5

%

Franchise revenue

1.9

%


1.7

%


2.1

%


1.7

%

Vending revenue

0.1

%


0.2

%


0.1

%


0.2

%

TOTAL SALES

100.0

%


100.0

%


100.0

%


100.0

%









COSTS AND EXPENSES:
















(As a percentage of restaurant sales)








Cost of food

27.8

%


28.5

%


27.6

%


28.5

%

Payroll and related costs

37.8

%


38.3

%


37.9

%


37.2

%

Other operating expenses

17.5

%


19.3

%


17.8

%


18.9

%

Occupancy costs

6.4

%


6.3

%


6.4

%


6.1

%

Vending revenue

(0.1)

%


(0.2)

%


(0.1)

%


(0.2)

%

Store level profit

10.7

%


7.7

%


10.4

%


9.4

%









(As a percentage of total sales)








Marketing and advertising expenses

1.0

%


0.9

%


1.0

%


1.1

%

One-time expenses1

1.4

%




1.2

%



General and administrative expenses

9.7

%


10.3

%


9.2

%


9.5

%

Selling, general and administrative expenses

12.1

%


11.2

%


11.4

%


10.6

%


1 One-time expenses include proxy solicitation and communication costs and severance expense

 

Luby's, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)



March 13,

 2019


August 29,

 2018


 (Unaudited)



ASSETS




Current Assets:




Cash and cash equivalents

$

3,907



$

3,722


Restricted cash and cash equivalents

10,832




Trade accounts and other receivables, net

9,201



8,787


Food and supply inventories

4,067



4,022


Prepaid expenses

2,688



3,219


Total current assets

30,695



19,750


Property held for sale

14,940



19,469


Assets related to discontinued operations

1,813



1,813


Property and equipment, net

130,921



138,287


Intangible assets, net

17,286



18,179


Goodwill

555



555


Other assets

1,372



1,936


Total assets

$

197,582



$

199,989


LIABILITIES AND SHAREHOLDERS' EQUITY




Current Liabilities:




Accounts payable

$

9,192



$

10,457


Liabilities related to discontinued operations

4



14


Current portion of credit facility debt



39,338


Accrued expenses and other liabilities

25,030



31,755


Total current liabilities

34,226



81,564


Credit facility debt, less current portion

40,674




Liabilities related to discontinued operations

16



16


Other liabilities

7,583



5,781


Total liabilities

$

82,499



$

87,361


Commitments and Contingencies




SHAREHOLDERS' EQUITY




Common stock, $0.32 par value; 100,000,000 shares authorized; shares issued were 30,289,492 and 30,003,642; and shares outstanding were 29,789,492 and 29,503,642, at March 13, 2019 and August 29, 2018, respectively

9,693



9,602


Paid-in capital

34,614



33,872


Retained earnings

75,551



73,929


Less cost of treasury stock, 500,000 shares

(4,775)



(4,775)


Total shareholders' equity

115,083



112,628


Total liabilities and shareholders' equity

$

197,582



$

199,989


 

Luby's, Inc.

Consolidated Statements of Cash Flows (unaudited)

(In thousands)



Two Quarters Ended


March 13,

 2019


March 14,

 2018


(28 weeks)


(28 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:




Net loss

$

(856)



$

(17,108)


Adjustments to reconcile net loss to net cash used in operating activities:




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

(10,079)



2,271


Depreciation and amortization

8,126



9,351


Amortization of debt issuance cost

811



70


Share-based compensation expense

823



1,252


Deferred tax provision



3,494


Cash used in operating activities before changes in operating assets and liabilities

(1,175)



(670)


Changes in operating assets and liabilities:




Increase in trade accounts and other receivables

(414)



(376)


Increase in food and supply inventories

(45)



(188)


Decrease in prepaid expenses and other assets

1,115



218


Decrease in accounts payable, accrued expenses and other liabilities

(7,110)



(1,121)


Net cash used in operating activities

(7,629)



(2,137)


CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from disposal of assets and property held for sale

20,444



2,805


Insurance proceeds



756


Purchases of property and equipment

(1,781)



(8,030)


Net cash provided by (used in) investing activities

18,663



(4,469)


CASH FLOWS FROM FINANCING ACTIVITIES:




Revolver borrowings

34,500



47,900


Revolver repayments

(54,500)



(39,300)


Proceeds from term loan

58,400




Term loan repayments

(35,169)



(1,415)


Debt issuance costs

(3,236)




Taxes paid on equity withheld

(12)



(70)


Net cash provided by (used in) financing activities

(17)



7,115


Net increase in cash and cash equivalents and restricted cash

11,017



509


Cash and cash equivalents and restricted cash at beginning of period

3,722



1,096


Cash and cash equivalents and restricted cash at end of period

$

14,739



$

1,605


Cash paid for:




Income taxes

$

51



$


Interest

1,951



1,065


Store Level Profit

Although store level profit, defined as restaurant sales plus vending revenue, less cost of food, payroll and related costs, other operating expenses, and occupancy costs, is a non-GAAP measure, we believe its presentation is useful because it explicitly shows the results of our most significant reportable segment.   The following table reconciles between store level profit, a non-GAAP measure to loss from continuing operations, a GAAP measure:

($ thousands)

Quarter Ended


Two Quarters Ended


March 13,

 2019


March 14,

 2018


March 13,

 2019


March 14,

 2018


(12 weeks)


(12 weeks)


(28 weeks)


(28 weeks)









Store level profit

$

7,007



$

5,743



$

16,233



$

16,826










Plus:








Sales from culinary contract services

7,543



5,889



17,039



12,774


Sales from franchise operations

1,421



1,401



3,644



3,288










Less:








Opening costs

11



331



44



406


Cost of culinary contract services

6,717



5,677



15,532



12,009


Cost of franchise operations

247



369



519



856


Depreciation and amortization

3,222



3,998



8,126



9,351


Selling, general and administrative expenses

9,017



9,188



20,240



20,712


Provision for asset impairments and restaurant closings

1,195



1,407



2,422



2,252


Net loss (gain) on disposition of property and equipment

(12,651)



(204)



(12,501)



18


Interest income

(19)



(5)



(19)



(11)


Interest expense

1,554



545



3,269



1,194


Other income, net

(55)



(194)



(86)



(309)


Provision for income taxes

93



3,382



213



3,373


Income (loss) from continuing operations

$

6,640



$

(11,461)



$

(843)



$

(16,963)


Adjusted EBITDA

Adjusted EBITDA is defined as income (loss) from continuing operations before interest, provision (benefit) for income taxes, and depreciation and amortization, and excluding net loss (gain) on disposing of property and equipment, provision for asset impairments and restaurant closings, non-cash compensation expense, franchise taxes, and decrease / (increase) in fair value of derivatives.

Adjusted EBITDA is intended as a supplemental measure of our performance that is not required by, or presented in accordance with GAAP. We believe Adjusted EBITDA  provides useful information to management and investors in valuing the Company and evaluating ongoing operating results and trends and in comparing our results to other competitors. Our management uses Adjusted EBITDA in evaluating management's performance when determining incentive compensation.

Adjusted EBITDA, as defined, may not be comparable to other similarly titled measures as computed by other companies. These measures should be considered supplemental and not a substitute or superior to other GAAP performance measures.

($ thousands)

Quarter Ended


Two Quarters Ended


March 13,

 2019


March 14,

 2018


March 13,

 2019


March 14,

 2018


(12 weeks)


(12 weeks)


(28 weeks)


(28 weeks)









Income (loss) from continuing operations

$

6,640



$

(11,461)



$

(843)



$

(16,963)


Depreciation and amortization

3,222



3,998



8,126



9,351


Provision for income taxes

93



3,382



213



3,373


Interest expense

1,554



545



3,269



1,194


Interest income

(19)



(5)



(19)



(11)


Net loss (gain) on disposition of property and equipment

(12,651)



(204)



(12,501)



18


Provision for asset impairments and restaurant closings

1,195



1,407



2,422



2,252


Non-cash compensation expense

398



291



823



848


Franchise Taxes

42



42



108



101


Decrease / (Increase) in Fair Value of Derivative



(454)



88



(627)


Adjusted EBITDA

$

474



$

(2,459)



$

1,686



$

(464)


 

Cision

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