July 12, 2017 - 4:12 PM EDT
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Luby's Reports Third Quarter Fiscal 2017 Results

HOUSTON, July 12, 2017 /PRNewswire/ -- Luby's, Inc. (NYSE: LUB) ("Luby's") today announced unaudited financial results for its twelve-week third quarter fiscal 2017, which ended on June 7, 2017. Comparisons in this earnings release for the third quarter fiscal 2017 are referred to as "third quarter."

Third Quarter Key Metrics

  • Same-store sales decreased 2.7% compared to third quarter fiscal 2016, which also represented an improvement sequentially compared to the second quarter fiscal 2017
  • Culinary Contract Services opened three new locations contributing approximately $1.0 million of revenue in the third quarter
  • Retail product sales generated approximately $0.4 million in revenue in the third quarter
  • Fuddruckers opened its newest company-owned location with first self-order kiosks near The Woodlands, Texas
  • Capital expenditures decreased $1.2 million in the third quarter compared to the third quarter fiscal 2016

Chris Pappas, President and CEO, commented, "In the third quarter, our team continued to exercise solid cost controls and reduce capital expenditures as previously planned, despite persistent economic and restaurant industry pressures that challenged same-store sales results. At our core brands, Luby's Cafeterias and Fuddruckers, same-store sales improved sequentially, but reported declines of 2.5% and 0.9%, respectively, for the third quarter compared to the same period last year.

During the quarter, we were pleased with the addition of three new Culinary Contact Services locations which contributed over $1.0 million in revenue for this segment. In addition, retail product sales added $0.4 million in revenue in the third quarter. We also opened a new company-operated Fudduckers location near The Woodlands, Texas, with our first self-order kiosks."

Same-Store Sales Year-Over-Year Comparison


Quarter Ended

Three Quarters
Ended


December 21,
 2016

March 15,
 2017

June 7,
 2017

June 7,
 2017


Q1

2017(3)

Q2

2017(3)

Q3

2017(3)

YTD Q3

2017(3)


(16 weeks vs 16 weeks)

(12 weeks vs 12 weeks)

(12 weeks vs 12 weeks)

(40 weeks vs 40 weeks)

Luby's Cafeterias

(2.2)%

(4.4)%

(2.5)%

(2.9)%

Fuddruckers

(1.6)%

(1.1)%

(0.9)%

(1.2)%

Combo locations (1)

(2.3)%

(6.5)%

(5.5)%

(4.7)%

Cheeseburger in Paradise

(7.8)%

(7.3)%

(9.8)%

(8.4)%

Total same-store sales (2)

(2.3)%

(3.8)%

(2.7)%

(2.9)%



(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 third quarter, there were 84 Luby's Cafeterias locations, 62 Fuddruckers locations, all six Combo locations, and all eight Cheeseburger in Paradise locations that met the definition of same-stores.

(3)

Q1 2017, Q2 2017, Q3 2017, and YTD Q3 Fiscal  2017 same-store sales reflect the change in restaurant sales for the locations included in the same-store grouping for each of the comparable periods.

Third Quarter Restaurant Sales:
($ thousands)


Quarter Ended


Restaurant Brand

June 7,
 2017

June 1,
 2016

Change

($)

Change

(%)


(12 weeks)

(12 weeks)

(12 weeks vs 12 weeks)

Luby's Cafeterias

$

49,746

$

51,808

$

(2,062)

(4.0)%

Fuddruckers

23,713

24,790

(1,077)

(4.3)%

Combo locations

4,988

5,280

(292)

(5.5)%

Cheeseburger in Paradise

4,147

4,598

(451)

(9.8)%

Total Restaurant Sales

$

82,594

$

86,476

$

(3,882)

(4.5)%

 

  • Luby's Cafeterias sales decreased $2.1 million versus the third quarter fiscal 2016, due to the closure of three locations over the prior year and a 2.5% decrease in Luby's same-store sales. The decrease was the result of a 7.1% decrease in guest traffic partially offset by a 4.6% increase in average spend per guest primarily due to a modest price increase and reduced discounting. We made a tactical discounting decision last year to promote our brand through BOGO ("buy one get one free") offers, which we estimate increased guest traffic by approximately 2.9% in the third quarter fiscal 2016.
  • Fuddruckers sales at company-owned restaurants decreased $1.1 million versus the third quarter fiscal 2016, due to five restaurant closings over the prior year and a 0.9% decrease in same-store sales, offset by the opening of one company-owned Fuddruckers location. The 0.9% decrease in same-store sales was the result of a 5.6% decrease in guest traffic offset by a 4.7% increase in average spend per guest.
  • Combo location sales decreased $0.3 million and represented 6.0% of total restaurant sales in the third quarter. Approximately 70% of the decline in sales occurred at one Combo location. Two of the six Combo locations increased sales by 5.5% and 1.2%, respectively.
  • Cheeseburger in Paradise sales decreased $0.5 million, or 9.8%.
  • Store level profit, defined as restaurant sales plus vending revenue less cost of food, payroll and related costs, other operating expenses, and occupancy costs, was $11.6 million, or 14.0% of restaurant sales, in the third quarter compared to $13.0 million, or 15.0% of restaurant sales, during the third quarter fiscal 2016. While cost controls were more efficient in labor scheduling, food cost management and lower restaurant supplies costs, an increase in certain restaurant services costs and utilities expense with lower overall sales volumes, led to the decrease in store level profitability. 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 $0.6 million to $4.5 million with 25 operating locations during the third quarter. Culinary Contract Services benefited from the opening of four locations over the prior year, adding over $1.0 million in revenue in the third quarter, and from retail product sales that added $0.4 million in revenue in the third quarter. These new sources of revenue were partially offset by the closure of six locations over the prior year. Culinary Contract Services profit margin decreased to 7.1% of Culinary Contract Services sales in the third quarter compared to 9.2% in the third quarter fiscal 2016.
  • Franchise revenue decreased $109 thousand, or 6.9%, in the third quarter compared to the third quarter fiscal 2016. In the third quarter, franchisees closed two locations (one in Maryland and one in the Dominican Republic). Domestic same-store Fuddruckers franchise sales decreased 4.0% in the third quarter compared to the third quarter fiscal 2016.
  • Loss from continuing operations was $0.4 million, or a loss of $0.01 per diluted share, compared to a loss of $0.1 million, or a loss of $0.01 per diluted share, in the third quarter fiscal 2016. Excluding special non-cash items, loss from continuing operations was $0.7 million, or a loss of $0.02 per diluted share, in the third quarter compared to a loss of $6 thousand, or $0.00 per diluted share, in the third quarter fiscal 2016. Loss from continuing operations, excluding special items, is a non-GAAP measure, and reconciliation to loss from continuing operations is presented below.

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


Q3 FY2017

Q3 FY2016


Item

Amount ($000s)

Per Share
($)

Amount ($000s)

Per Share
($)


Loss from continuing operations


$

(377)



$

(0.01)



$

(147)



$

(0.01)



Net loss (gain) on disposition of property and equipment, and provision for asset impairments and restaurant closings, net


445



0.02



141



0.01



Fair value adjustment to performance awards liability


(772)



(0.03)







Loss from continuing operations, before special items


$

(704)



$

(0.02)



$

(6)



$

(0.00)





(1)

We use income (loss) from continuing operations, before special items, in analyzing results, which is a non-GAAP financial measure. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. Luby's has reconciled loss from continuing operations, before special items, to loss from continuing operations, the nearest GAAP measure in context.

(2)

Per share amounts are per diluted share after tax (adjustments assume an effective 34% tax rate).

Balance Sheet and Capital Expenditures

We ended the third quarter with a debt balance outstanding of $40.4 million, up from $37.0 million at the end of fiscal 2016. During the third quarter, our capital expenditures decreased to $2.2 million compared to $3.4 million in the third quarter fiscal 2016. At the end of the third quarter, we had $1.3 million in cash and $147.8 million in total shareholders' equity.

Restaurant Counts:


August 31,
2016


FY17 YTD Q3
Openings


FY17 YTD Q3
Closings


June 7,
 2017

Luby's Cafeterias(1)

91





(2)



89


Fuddruckers Restaurants(1)

75



1



(4)



72


Cheeseburger in Paradise

8







8


Other restaurants(2)

1







1


Total

175



1



(6)



170




(1)

Includes 6 restaurants that are part of Combo locations

(2)

Other restaurants include one Bob Luby's Seafood Grill

Conference Call

Luby's will host a conference call on July 13, 2017 at 10:00 a.m. Central Time to discuss further its third quarter fiscal 2017 results. To access the call live, dial (412) 902-0030 and use the access code 13664737# 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 July 20, 2017 and may be accessed by calling (201) 612-7415 and using the access code 13664737#.  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. (NYSE: LUB) operates 169 restaurants nationally as of July 12, 2017: 89 Luby's Cafeterias, 71 Fuddruckers, eight Cheeseburger in Paradise and one Bob Luby's Seafood Grill. Luby's is the franchisor for 113 Fuddruckers franchise locations across the United States (including Puerto Rico), Canada, Mexico, Italy, the Dominican Republic, Panama, and Colombia. Additionally, a licensee operates 34 restaurants with the exclusive right to use the Fuddruckers proprietary marks, trade dress, and system in certain countries in the Middle East. The Company does not receive revenue or royalties from these Middle East restaurants. Luby's Culinary Contract Services provides food service management to 25 sites consisting of healthcare and corporate dining locations.

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.

Luby's, Inc.
Consolidated Statements of Operations (unaudited)
(In thousands, except per share data)






Quarter Ended


Three Quarters Ended


June 7,
 2017


June 1,
 2016


June 7,
 2017


June 1,
 2016


(12 weeks)


(12 weeks)


(40 weeks)


(40 weeks)

SALES:





Restaurant sales

$

82,594


 

$

86,476


 

$

271,741


 

$

286,336


Culinary contract services

4,515


 

3,892


 

12,117


 

12,726


Franchise revenue

1,477


 

1,586


 

5,167


 

5,411


Vending revenue

133


 

143


 

417


 

437


TOTAL SALES

88,719


 

92,097


 

289,442


 

304,910


COSTS AND EXPENSES:





Cost of food

22,922


24,221


76,353


81,256


Payroll and related costs

29,519


30,748


97,486


100,007


Other operating expenses

13,796


13,572


47,207


45,728


Occupancy costs

4,923


5,065


16,720


17,242


Opening costs

134


117


431


688


Cost of culinary contract services

4,194


3,534


10,966


11,476


Cost of franchise operations

361


441


1,378


1,480


Depreciation and amortization

4,639


5,304


15,977


17,538


Selling, general and administrative expenses

6,764


9,227


29,531


32,312


Provision for asset impairments and restaurant closings

869


172


7,120


209


Net loss (gain) on disposition of property and equipment

(195)


42


219


(793)


Total costs and expenses

87,926


92,443


303,388


307,143


INCOME (LOSS) FROM OPERATIONS

793


(346)


(13,946)


(2,233)


Interest income

3



5


3


Interest expense

(569)


(482)


(1,898)


(1,674)


Other income (expense), net

(173)


88


(312)


(2)


Income (loss) before income taxes and discontinued operations

54


(740)


(16,151)


(3,906)


Provision (benefit) for income taxes

431


(593)


2,576


(1,438)


Loss from continuing operations

(377)


(147)


(18,727)


(2,468)


Income (loss) from discontinued operations, net of income taxes

(19)


13


(434)


(77)


NET LOSS

$

(396)


 

$

(134)


 

$

(19,161)


 

$

(2,545)


Loss per share from continuing operations:





Basic

$

(0.01)


 

$

(0.01)


 

$

(0.64)


 

$

(0.09)


Assuming dilution

$

(0.01)


 

$

(0.01)


 

$

(0.64)


 

$

(0.09)


Income (loss) per share from discontinued operations:





Basic

$

(0.00)


 

$

0.00


 

$

(0.01)


 

$

(0.00)


Assuming dilution

$

(0.00)


 

$

0.00


 

$

(0.01)


 

$

(0.00)


Net loss per share:





Basic

$

(0.01)


 

$

(0.01)


 

$

(0.65)


 

$

(0.09)


Assuming dilution

$

(0.01)


 

$

(0.01)


 

$

(0.65)


 

$

(0.09)


Weighted average shares outstanding:





Basic

29,536


29,259


29,453


29,207


Assuming dilution

29,536


29,259


29,453


29,207


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.




Three Quarters Ended


March 15,
 2017


March 9,
 2016


June 7,
 2017


June 1,
 2016


(12 weeks)


(12 weeks)


(40 weeks)


(40 weeks)









Restaurant sales

93.1

%


93.9

%


93.9

%


93.9

%

Culinary contract services

5.1

%


4.2

%


4.2

%


4.2

%

Franchise revenue

1.7

%


1.7

%


1.8

%


1.8

%

Vending revenue

0.1

%


0.2

%


0.1

%


0.1

%

TOTAL SALES

100.0

%


100.0

%


100.0

%


100.0

%









COSTS AND EXPENSES:
















(As a percentage of restaurant sales)








Cost of food

27.8

%


28.0

%


28.1

%


28.4

%

Payroll and related costs

35.7

%


35.6

%


35.9

%


34.9

%

Other operating expenses

16.7

%


15.7

%


17.4

%


16.0

%

Occupancy costs

6.0

%


5.9

%


6.2

%


6.0

%

Vending revenue

(0.2)

%


(0.2)

%


(0.2)

%


(0.2)

%

Store level profit

14.0

%


15.0

%


12.7

%


14.9

%









(As a percentage of total sales)








Marketing and advertising expenses

0.9

%


1.2

%


1.6

%


1.4

%

General and administrative expenses

6.7

%


8.8

%


8.6

%


9.2

%

Selling, general and administrative expenses

7.6

%


10.0

%


10.2

%


10.6

%

INCOME (LOSS) FROM OPERATIONS

0.9

%


(0.4)

%


(4.8)

%


(0.7)

%

 

Luby's, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)





June 7,
 2017

August 31,
 2016


(Unaudited)



ASSETS




Current Assets:




Cash and cash equivalents

$

1,326



$

1,339

Trade accounts and other receivables, net

6,380


5,919

Food and supply inventories

4,528


4,596

Prepaid expenses

3,894


3,147

Assets related to discontinued operations


1

Deferred income taxes

176


540

   Total current assets

16,304


15,542

Property held for sale

3,614


5,522

Assets related to discontinued operations

2,817


3,192

Property and equipment, net

182,084


193,218

Intangible assets, net

19,968


21,074

Goodwill

1,068


1,605

Deferred income taxes

6,737


8,738

Other assets

2,623


3,334

Total assets

$

235,215



$

252,225

LIABILITIES AND SHAREHOLDERS' EQUITY




Current Liabilities:




Accounts payable

$

14,741



$

17,539

Liabilities related to discontinued operations

394


412

Current portion of credit facility debt

613


Accrued expenses and other liabilities

24,902


23,752

   Total current liabilities

40,650


41,703

Credit facility debt, less current portion

39,520


37,000

Liabilities related to discontinued operations

16


17

Other liabilities

7,234


7,752

   Total liabilities

$

87,420



$

86,472

Commitments and Contingencies




SHAREHOLDERS' EQUITY




Common stock, $0.32 par value; 100,000,000 shares authorized; shares issued were 29,591,836 and 29,440,041, respectively; shares outstanding were 29,091,836 and 28,940,041, respectively

9,469


9,421

Paid-in capital

31,503


30,348

Retained earnings

111,598


130,759

Less cost of treasury stock, 500,000 shares

(4,775


(4,775

   Total shareholders' equity

147,795


165,753

Total liabilities and shareholders' equity

$

235,215



$

252,225

 

Luby's, Inc.
Consolidated Statements of Cash Flows (unaudited)
(In thousands)




Three Quarters Ended


June 7,
 2017


June 1,
 2016


(40 weeks)


(40 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(19,161)



$

(2,545)

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




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

7,338


(609)

Depreciation and amortization

15,977


17,555

Amortization of debt issuance cost

316


255

Share-based compensation expense

1,203


1,143

Deferred tax provision (benefit)

2,922


(1,983

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

8,595


13,816

Changes in operating assets and liabilities:




Increase in trade accounts and other receivables

(460)


(967)

Decrease (Increase) in food and supply inventories

68


(516

Increase in prepaid expenses and other assets

(5)


(614)

Decrease in accounts payable, accrued expenses and other liabilities

(4,522)


(311)

Net cash provided by operating activities

3,676


11,408

CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from disposal of assets and property held for sale

3,640


4,308

Decrease in notes receivable


17

Purchases of property and equipment

(10,114)


(14,358)

Net cash used in investing activities

(6,474)


(10,033)

CASH FLOWS FROM FINANCING ACTIVITIES:




Revolver borrowings

94,400


77,900

Revolver repayments

(122,900)


(79,400)

Proceeds from term loan

35,000


Term loan repayments

(3,063)


Debt issuance costs

(652)


(42)

Proceeds received on the exercise of employee stock options


75

Net cash provided by (used in) financing activities

2,785


(1,467)

Net decrease in cash and cash equivalents

(13)


(92)

Cash and cash equivalents at beginning of period

1,339


1,501

Cash and cash equivalents at end of period

$

1,326



$

1,409

Cash paid for:




Income taxes

$



$

Interest

1,228


1,368

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:


Quarter Ended


Three Quarters Ended


June 7,
 2017


June 1,
 2016


June 7,
 2017


June 1,
 2016


(12 weeks)


(12 weeks)


(40 weeks)


(40 weeks)







Store level profit

$

11,567


 

$

13,013


 

$

34,392


 

$

42,540








Plus:







Sales from culinary contract services

4,515


3,892


12,117


12,726

Sales from franchise operations

1,477


1,586


5,167


5,411









Less:








Opening costs

134


117


431


688

Cost of culinary contract services

4,194


3,534


10,966


11,476

Cost of franchise operations

361


441


1,378


1,480

Depreciation and amortization

4,639


5,304


15,977


17,538

Selling, general and administrative expenses

6,764


9,227


29,531


32,312

Provision for asset impairments and restaurant closings

869


172


7,120


209

Net loss (gain) on disposition of property and equipment

(195)


42


219


(793)

Interest income

(3)



(5)


(3)

Interest expense

569


482


1,898


1,674

Other income (expense), net

173


(88)


312


2

Provision (benefit) for income taxes

431


(593)


2,576


(1,438)

Loss from continuing operations

$

(377)


 

$

(147)


 

$

(18,727)


 

$

(2,468)

Adjusted EBITDA

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

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

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

($ thousands)

Quarter Ended


Three Quarters Ended


June 7,
 2017


June 1,
 2016


June 7,
 2017


June 1,
 2016


(12 weeks)


(12 weeks)


(40 weeks)


(40 weeks)






Loss from continuing operations

$

(377)



$

(147)



$

(18,727)



$

(2,468)

Depreciation and amortization

4,639


5,304


15,977


17,538

Provision (benefit) for income taxes

431


(593)


2,576


(1,438)

Interest expense

569


482


1,898


1,674

Interest income

(3)



(5)


(3)

Net loss (gain) on disposition of property and equipment

(195)


42


219


(793)

Provision for asset impairments and restaurant closings

869


172


7,120


209

Non-cash compensation expense (benefit)

(584)


425


874


1,594

Franchise Taxes

49


42


146


139

Decrease in Fair Value of Derivative

176



221


Adjusted EBITDA

$

5,574



$

5,727



$

10,299



$

16,452

 

For additional information contact:

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

 

View original content:http://www.prnewswire.com/news-releases/lubys-reports-third-quarter-fiscal-2017-results-300487321.html

SOURCE Luby's, Inc.


Source: PR Newswire (July 12, 2017 - 4:12 PM EDT)

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