Luby's Reports Fourth Quarter and Fiscal Year 2019 Results

HOUSTON, Nov. 26, 2019 /PRNewswire/ -- Luby's, Inc. (NYSE: LUB) ("Luby's") today announced financial results for its fifty-two week fiscal year 2019 and its twelve-week fourth quarter fiscal 2019, which ended on August 28, 2019.  Comparisons in this press release for the fourth quarter fiscal 2019 are referred to as "fourth quarter". Comparisons to the fourth quarter fiscal 2018 are to the twelve-week period that ended August 29, 2018.

Fiscal Fourth Quarter Summary:

  • Same-store sales decreased 3.7%; total sales decreased 14.9% to $71.4 million due in large part to operating 22 fewer stores.
  • Net loss was $9.1 million compared to a net loss of $1.9 million in the fourth quarter fiscal 2018 due primarily to store level profit declines and gains on the sale of assets in the prior year.

Chris Pappas, President and CEO, commented, "We are not pleased with our shareholder value, same-store sales, guest traffic results, or corporate overhead.  The Special Committee of the Board continues its focus on developing shareholder value initiatives.  Operationally, we made strategic personnel changes in fiscal 2019, including appointment of a new Chief Operating Officer, VP of Marketing, and VP of Information Technology.  Our whole team is working diligently and we are making progress on our turnaround efforts.  Already in fiscal 2020, we have realized improved guest traffic and sales trends.  Additionally, we are transitioning portions of our accounting, payroll, operational reporting, and other back-office functions to a leading multi-unit restaurant outsourcing firm.  We anticipate completing the transition in the first calendar quarter of 2020 and expect to realize additional cost savings and enhanced capabilities from this transition.

"At the restaurant level, our managers and restaurant team members are working hard to maintain and build value by consistently delivering great guest experiences.  They are our greatest brand assets, and I applaud their hard work and dedication to showcasing our brand values."

Other Fiscal Fourth Quarter Results:

  • Luby's Cafeterias same-store sales decreased 3.2%: guest traffic decreased 1.1% and average spend per guest decreased 2.2%.
  • Fuddruckers Restaurants same-store sales decreased 5.5%: guest traffic decreased 3.8% and average spend per guest decreased 1.8%.
  • Culinary Contract Services revenues increased to $7.3 million with 31 operating locations at the end of the fourth quarter compared to $6.4 million with 28 operating locations at the end of fiscal 2018.
  • Franchise revenue was approximately level at $1.6 million in the fourth quarters of fiscal 2019 and fiscal 2018. We ended fiscal 2019 with a franchise network of 102 locations.
  • Selling, general, and administrative expenses decreased $1.2 million, or 12.7% compared to the fourth quarter fiscal 2018, resulting from reduced headcount, partially offset by increased marketing and advertising spending.
  • Loss from continuing operations was $9.1 million, or a loss of $0.30 per diluted share, in the fourth quarter compared to a loss of $1.9 million, or $0.06 per diluted share, in the fourth 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 $4.9 million, or 7.9% of restaurant sales, in the fourth quarter compared to $8.2 million, or 10.8% of restaurant sales, during the fourth quarter fiscal 2018.
  • Adjusted EBITDA was a loss of $1.5 million in the fourth quarter compared to a profit of $0.5 million in fiscal 2018.
  • Capital expenditures for the fourth quarter were $1.2 million, a decrease from $1.5 million in the fourth quarter last year.

Same-Store Sales Year-Over-Year Comparison


Q1

2019(3)

Q2

2019(3)

Q3

2019(3)

Q4

2019(3)

Full Year

2019(3)


(16 weeks vs 16 weeks)

(12 weeks vs 12 weeks)

(12 weeks vs 12 weeks)

(12 weeks vs 12 weeks)

(52 weeks vs 52 weeks)

Luby's Cafeterias

(3.0)%

(2.2)%

(3.1)%

(3.2)%

(2.9)%

Fuddruckers Restaurants

(11.2)%

(5.3)%

(6.1)%

(5.5)%

(7.5)%

Combo locations (1)

(11.1)%

(7.1)%

(4.8)%

(2.5)%

(6.8)%

Cheeseburger in Paradise

(0.6)%

(3.1)%

(4.4)%

(3.6)%

(2.9)%

Total same-store sales (2)

(5.5)%

(3.3)%

(4.0)%

(3.7)%

(4.2)%



(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.  At the end of the fourth quarter, there were 73 Luby's Cafeterias, 38 Fuddruckers Restaurants, 6 Combo locations, and 1 Cheeseburger in Paradise locations that met the definition of same-stores.

(3)

Q1 2019, Q2 2019, Q3 2019, Q4 2019 and Full Year 2019 same-store sales reflect the year-over-year change in restaurant sales for the locations included in the same-store grouping for each of the comparable periods.

Fourth Quarter Total Restaurant Sales:
($ thousands)

Restaurant Brand

Q4

2019

Q4

2018

Change

($)

Change

(%)

Luby's Cafeterias

$

42,937


$

47,216


$

(4,279)


(9.1)

%

Fuddruckers restaurants

14,331


20,142


(5,811)


(28.9)

%

Combo locations

4,548


4,667


(119)


(2.5)

%

Cheeseburger in Paradise

780


3,756


(2,976)


(79.2)

%

Gift card discount and breakage, net

(161)



(161)



Total Restaurant Sales

$

62,435


$

75,781


$

(13,346)


(17.6)

%

Fiscal Year 2019 Summary:

  • Total sales were $323.5 million, including $284.5 million in restaurant sales, compared to total sales of $365.2 million, including $332.5 million in restaurant sales, in fiscal 2018.
  • Same-store sales decreased 4.2%, including a 2.9% sales decrease at Luby's Cafeterias and a 7.5% sales decrease at Fuddruckers.
  • 17 underperforming company-owned restaurants were closed in fiscal 2019 and five company-owned Fuddruckers restaurants transitioned to a franchisee in fiscal 2019. These 22 restaurants accounted for $19.1 million in sales and $2.3 million in store-level loss for the portion of the year that they operated in fiscal 2019 as company-owned restaurants.
  • Culinary contract services revenue increased $6.1 million, or 23.7%, to $31.9 million compared to fiscal 2018. We operated at 31 Culinary contract services locations at the end of fiscal 2019.
  • Franchise revenue increased $0.3 million, or 5.1%, to $6.7 million compared to fiscal 2018. We ended fiscal 2019 with a franchise network of 102 locations.
  • Loss from continuing operations was $15.2 million, or $0.51 per diluted share, in fiscal 2019, compared to a loss of $33.0 million, or $1.10 per diluted share, in fiscal 2018.
  • Adjusted EBITDA was $3.7 million in fiscal 2019 compared to approximately zero in fiscal 2018.
  • The company's $45.0 million asset sales program that began in fiscal 2018 has generated $35.9 million in proceeds from the sale of property through the end of fiscal 2019.
  • The company incurred $4.3 million in restructuring expenses, employee severance, and proxy services in fiscal 2019. These expenses, recorded in Other charges, were included in Selling, general and administrative expenses in previously reported quarters of fiscal 2019.
  • The company transitioned a total of seven company-owned Fuddruckers restaurants to franchisees since announcing its initiative to pursue a franchisee-centric business model for the Fuddruckers brand.

Balance Sheet and Capital Expenditures

We ended the fourth quarter with net debt (total debt less cash) of $35.9 million, compared to $35.8 million at the end of fiscal 2018.  During the fourth quarter, our capital expenditures were $1.2 million, compared to $1.5 million in the fourth quarter fiscal 2018.  For the full year, capital expenditures were $4.0 million for fiscal 2019, compared to $13.2 million for fiscal 2018.  At the end of the fourth quarter, we had $3.6 million in cash and $101.0 million in total shareholders' equity.

Restaurant Counts:


August 29, 2018


Fiscal 2019
YTD
Openings


Fiscal 2019
YTD
Closings


Fiscal 2019

Transfers

to Franchisee


August 28,
 2019

Luby's Cafeterias(1)

84





(5)





79


Fuddruckers Restaurants(1)

60





(11)



(5)



44


Cheeseburger in Paradise

2





(1)





1


Total

146





(17)



(5)



124




(1)

Includes 6 restaurants that are part of Combo locations.

Special Committee Update:

The Special Committee of the Board, as previously announced, that has been formed with the purpose of establishing a strategic review process to identify, examine, and consider a range of strategic alternatives available to the Company with the objective of maximizing shareholder value, continues its work.

Conference Call

Luby's will host a conference call on November 26, 2019 at 10:00 a.m. Central Time to discuss further its fourth quarter fiscal 2019 results. To access the call live, dial (412) 902-0030 and use the access code 13695072# 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 December 6, 2019, and may be accessed by calling (201) 612-7415 and using the access code 13695072#.  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) operated 119 restaurants nationally as of November 26th: 78 Luby's Cafeterias, 40 Fuddruckers, and one Cheeseburger in Paradise restaurant.  Luby's is the franchisor for 98 Fuddruckers franchise locations across the United States (including Puerto Rico), Canada, Mexico, and Panama.  Luby's Culinary Contract Services provides food service management to 32 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.

Luby's, Inc.

Consolidated Statements of Operations (unaudited)

(In thousands, except per share data)



Quarter Ended


Year Ended


August 28,
 2019


August 29,
 2018


August 28,
 2019


August 29,
 2018


(12 weeks)


(12 weeks)


(52 weeks)


(52 weeks)

SALES:








Restaurant sales

$

62,435



$

75,781



$

284,513



$

332,518


Culinary contract services

7,278



6,369



31,888



25,782


Franchise revenue

1,563



1,634



6,690



6,365


Vending revenue

87



119



379



531


TOTAL SALES

71,363



83,903



323,470



365,196


COSTS AND EXPENSES:








Cost of food

17,775



21,049



79,479



94,238


Payroll and related costs

24,251



28,448



108,509



124,478


Other operating expenses

11,481



13,404



50,886



62,286


Occupancy costs

4,069



4,822



18,133



20,399


Opening costs

6



64



56



554


Cost of culinary contract services

6,230



6,048



28,554



24,161


Cost of franchise operations

783



330



1,633



1,528


Depreciation and amortization

2,946



4,051



13,998



17,453


Selling, general and administrative expenses

8,298



9,506



34,179



38,725


Other charges

485





4,270




Provision for asset impairments and restaurant closings

2,506



2,200



5,603



8,917


Net loss (gain) on disposition of property and equipment

103



(5,529)



(12,832)



(5,357)


Total costs and expenses

78,933



84,393



332,468



387,382


LOSS FROM OPERATIONS

(7,570)



(490)



(8,998)



(22,186)


Interest income





30



12


Interest expense

(1,384)



(1,112)



(5,977)



(3,348)


Other income (expense), net

(3)



(20)



195



298


Loss before income taxes and discontinued operations

(8,957)



(1,622)



(14,750)



(25,224)


Provision for income taxes

123



236



469



7,730


Loss from continuing operations

(9,080)



(1,858)



(15,219)



(32,954)


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

11



(5)



(7)



(614)


NET LOSS

$

(9,069)



$

(1,863)



$

(15,226)



$

(33,568)


Loss per share from continuing operations:








Basic

$

(0.30)



$

(0.06)



$

(0.51)



$

(1.10)


Assuming dilution

$

(0.30)



$

(0.06)



$

(0.51)



$

(1.10)


Loss per share from discontinued operations:








Basic

$

0.00



$

(0.00)



$

0.00



$

(0.02)


Assuming dilution

$

0.00



$

(0.00)



$

0.00



$

(0.02)


Net loss per share:








Basic

$

(0.30)



$

(0.06)



$

(0.51)



$

(1.12)


Assuming dilution

$

(0.30)



$

(0.06)



$

(0.51)



$

(1.12)


Weighted average shares outstanding:








Basic

29,965



30,030



29,786



29,901


Assuming dilution

29,965



30,030



29,786



29,901


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


Year Ended


August 28,
 2019

August 29,
 2018


August 28,
 2019

August 29,
 2018


(12 weeks)

(12 weeks)


(52 weeks)

(52 weeks)

Restaurant sales

87.5

%

90.3

%


88.0

%

91.1

%

Culinary contract services

10.2

%

7.6

%


9.9

%

7.1

%

Franchise revenue

2.2

%

1.9

%


2.1

%

1.7

%

Vending revenue

0.1

%

0.1

%


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

28.5

%

27.8

%


27.9

%

28.3

%

Payroll and related costs

38.8

%

37.5

%


38.1

%

37.4

%

Other operating expenses

18.4

%

17.7

%


17.9

%

18.7

%

Occupancy costs

6.5

%

6.4

%


6.4

%

6.1

%

Vending revenue

(0.1)

%

(0.2)

%


(0.1)

%

(0.2)

%

Store level profit

7.9

%

10.8

%


9.8

%

9.5

%







(As a percentage of total sales)






Marketing and advertising expenses

1.3

%

0.8

%


1.2

%

1.0

%

General and administrative expenses

10.3

%

10.5

%


9.4

%

9.6

%

Selling, general and administrative expenses

11.6

%

11.3

%


10.6

%

10.6

%

LOSS FROM OPERATIONS

(10.6)

%

(0.6)

%


(2.8)

%

(6.1)

%

 

Luby's, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)



August 28,
 2019


August 29,
 2018





ASSETS




Current Assets:




Cash and cash equivalents

$

3,640



$

3,722


Restricted Cash and cash equivalents

9,116




Trade accounts and other receivables, net

8,852



8,787


Food and supply inventories

3,432



4,022


Prepaid and other assets

2,355



3,219


Total current assets

27,395



19,750


Property held for sale

16,488



19,469


Assets related to discontinued operations

1,813



1,813


Property and equipment, net

121,743



138,287


Intangible assets, net

16,781



18,179


Goodwill

514



555


Other assets

1,266



1,936


Total assets

$

186,000



$

199,989


LIABILITIES AND SHAREHOLDERS' EQUITY




Current Liabilities:




Accounts payable

$

8,465



$

10,457


Liabilities related to discontinued operations

14



14


Credit facility debt



39,338


Accrued expenses and other liabilities

24,475



31,755


Total current liabilities

32,954



81,564


Credit facility debt, less current portion

45,439




Liabilities related to discontinued operations



16


Other liabilities

6,577



5,781


Total liabilities

$

84,970



$

87,361


Commitments and Contingencies




SHAREHOLDERS' EQUITY




Common stock, $0.32 par value; 100,000,000 shares authorized; Shares issued were 30,478,972 and 30,003,642 at August 28, 2019 and  August 29, 2018, respectively; Shares outstanding were 29,978,972 and 29,503,642 at August 28, 2019 and August 29, 2018, respectively

9,753



9,602


Paid-in capital

34,870



33,872


Retained earnings

61,182



73,929


Less cost of treasury stock, 500,000 shares

(4,775)



(4,775)


Total shareholders' equity

101,030



112,628


Total liabilities and shareholders' equity

$

186,000



$

199,989


 

Luby's, Inc.

Consolidated Statements of Cash Flows (unaudited)

(In thousands)



Year Ended


August 28,
 2019


August 29,
 2018


(52 weeks)


(52 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:




Net loss

$

(15,226)



$

(33,568)


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




Provision for asset impairments and net loss (gain) on property dispositions

(7,229)



3,619


Depreciation and amortization

13,998



17,453


Amortization of debt issuance cost

1,317



534


Share-based compensation expense

1,140



2,144


Deferred tax provision



8,192


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

(6,000)



(1,626)


Changes in operating assets and liabilities:




Increase in trade accounts and other receivables

(65)



(775)


Decrease in food and supply inventories

590



432


Decrease in prepaid expenses and other assets

1,657



808


Decrease in accounts payable, accrued expenses and other liabilities

(9,312)



(7,292)


Net cash used in operating activities

(13,130)



(8,453)


CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from disposal of assets and property held for sale

21,836



14,191


Insurance proceeds related to property and equipment



2,070


Purchases of property and equipment

(3,987)



(13,247)


Net cash provided by investing activities

17,849



3,014


CASH FLOWS FROM FINANCING ACTIVITIES:




Revolver borrowings

42,300



147,600


Revolver repayments

(57,000)



(132,000)


Debt issuance costs

(3,266)



(386)


Proceeds on term loan

58,400




Term loan repayments

(36,107)



(7,079)


Tax paid on equity withheld

(12)



(70)


Net cash provided by financing activities

4,315



8,065


Net increase in cash and cash equivalents and restricted cash

9,034



2,626


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

$

12,756



$

3,722


Cash paid for:




Income taxes

$

470



$

426


Interest

4,452



2,499


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


Year Ended


August 28,
 2019


August 29,
 2018


August 28,
 2019


August 29,
 2018


(12 weeks)


(12 weeks)


(52 weeks)


(52 weeks)


(In thousands)


(In thousands)

Store level profit

$

4,946



$

8,177



$

27,885



$

31,648










Plus:








Sales from culinary contract services

7,278



6,369



31,888



25,782


Sales from franchise operations

1,563



1,634



6,690



6,365










Less:








Opening costs

6



64



56



554


Cost of culinary contract services

6,230



6,048



28,554



24,161


Cost of franchise operations

783



330



1,633



1,528


Depreciation and amortization

2,946



4,051



13,998



17,453


Selling, general and administrative expenses(a)

8,298



9,506



34,179



38,725


Other charges

485





4,270




Provision for asset impairments and restaurant closings

2,506



2,200



5,603



8,917


Net loss (gain) on disposition of property and equipment

103



(5,529)



(12,832)



(5,357)


Interest income





(30)



(12)


Interest expense

1,384



1,112



5,977



3,348


Other income (expense), net

3



20



(195)



(298)


Provision for income taxes

123



236



469



7,730


Loss from continuing operations

$

(9,080)



$

(1,858)



$

(15,219)



$

(32,954)



(a) Marketing and advertising expense included in Selling, general and administrative expenses was $0.9 million and $0.6 million for the fourth quarter fiscal 2019 and 2018, respectively, and $3.9 million and $3.5 million for fiscal year 2019 and 2018, respectively.

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, other charges, franchise taxes, and non-cash compensation expense.

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


Year Ended


August 28,
 2019


August 29,
 2018


August 28,
 2019


August 29,
 2018


(12 weeks)


(12 weeks)


(52 weeks)


(52 weeks)

Loss from continuing operations

$

(9,080)



$

(1,858)



$

(15,219)



$

(32,954)


Depreciation and amortization

2,946



4,051



13,998



17,453


Provision for income taxes

123



236



469



7,730


Interest expense

1,384



1,112



5,977



3,348


Interest income





(30)



(12)


Other charges

485





4,270




Net loss (gain) on disposition of property and equipment

103



(5,529)



(12,832)



(5,357)


Provision for asset impairments and restaurant closings

2,506



2,200



5,603



8,917


Non-cash compensation expense

(53)



245



1,140



1,404


Franchise taxes

42



41



205



213


Decrease (Increase) in fair value of derivative





88



(701)


Adjusted EBITDA

$

(1,544)



$

498



$

3,669



$

41


For additional information contact:

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

 

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SOURCE Luby's, Inc.

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