Luby's Reports Third Quarter Fiscal 2020 Results

HOUSTON, July 20, 2020 /PRNewswire/ -- Luby's, Inc. (NYSE: LUB) ("Luby's") today announced unaudited financial results for its twelve-week third quarter fiscal 2020 ended June 3, 2020, referred to as "third quarter."  Comparisons in this earnings release are for the third quarter compared to the twelve-week third quarter fiscal 2019.

Third Quarter Restaurant Sales:
($ thousands)

Restaurant Brand

Q3

2020

Q3

2019

Change

($)

Change

(%)

   Luby's Cafeterias

$

11,857


$

44,930


$

(33,073)


(73.6)

%

   Combo locations

540


4,591


(4,051)


(88.2)

%

Luby's cafeteria segment

12,397


49,521


(37,124)


(75.0)

%

Fuddruckers restaurants segment

1,405


15,312


(13,907)


(90.8)

%

Cheeseburger in Paradise segment

30


778


(748)


(96.1)

%

Total Restaurant Sales

$

13,832


$

65,611


$

(51,779)


(78.9)

%

Luby's restaurant sales were significantly impacted (like all restaurant operators) by the unprecedented nature of the COVID-19 pandemic and sate and local governments' responses, which resulted in temporary store closures and limited service at operating stores.

Restaurant Counts:


August 28, 2019


FY20 YTDQ3

Openings


FY20 YTDQ3

Closings


June 3,

2020

Luby's Cafeterias(1)

79





(3)



76


Fuddruckers Restaurants(1)

44





(13)



31


Cheeseburger in Paradise

1







1


Total

124





(16)



108



(1)     Includes 6 restaurants that are part of Combo locations

 

As of the date of this release, Luby's is operating 43 stand-alone Luby's Cafeterias, 3 Combo locations, and  17 Fuddruckers Restaurants.   The remaining locations (included in the restaurant counts as of June 3, 2020 above) were classified as temporarily closed.

Previously announced results of strategic review process conducted by Luby's Board of Directors

On June 3, 2020, we announced that our Board of Directors approved a course of action whereby we will immediately pursue the sale of our operating divisions and assets, including real estate assets, or the sale of the Company in its entirety, and distribute the net proceeds to our stockholders after payment of debt and other obligations. During the sale process, many of our restaurants will remain open.

Comments related to our operations in the context of COVID-19

Beginning in May 2020, we began to gradually reopen the dining rooms with state-mandated limits on guest capacity at the 28 Luby's Cafeterias  locations and 3  Fuddruckers locations that had been previously operating with food-to-go service only. We also began to reopen restaurants that were temporarily closed. As of June 3, 2020, there were 31 Luby's Cafeteria's and Combo locations, and 8 Fuddruckers restaurants operating, all of which had their dining rooms open at limited capacity.  There were 59 franchise locations in operation as of June 3, 2020. We are continuing a gradual reopening of our restaurants and as of the date of this release there were 46 stand-alone Luby's Cafeteria's and Combo locations and 17 Fuddruckers Restaurants operating with dining rooms open at limited capacity and there were 64 franchise locations in operation. By the end of the fiscal third quarter, for the stores that were in operation, we were achieving weekly sales levels in excess of 80% of prior year levels at our cafeteria brand and in excess of 70% at our Fuddruckers brand. Approximately 40% of our restaurant sales were for off-premise dining (food-to-go and delivery).  At these sales levels and with a re-defined operating model, we are generating positive store level profit, in the aggregate, at these 46 cafeteria and 18 Fuddruckers locations. Within our Culinary Contract Services segment, we continue operations at each of our clients' hospital locations.  In addition, we experienced increased demand for our Luby's-branded frozen packaged good products that are sold through HEB, our third-party grocery retail partner in Texas.

In response to the changed operating environment as a result of  the COVID-19 pandemic, we took the following actions:

  • We revamped restaurant operations to generate cost efficiencies resulting in higher restaurant operating margins even while sales levels have not returned to pre-COVID-19 pandemic levels. As the restaurants adapted to the new operating environment, a lower labor cost model was deployed, food costs declined as menu offerings were concentrated among the historically top selling items, and various restaurant service and supplier costs were reevaluated. As a result of these changes, we achieved store level profit of approximately $1.0 million in the last month of our fiscal third quarter at the restaurants that were operational.

  • We began restructuring corporate overhead earlier in calendar 2020 prior to the COVID-19 pandemic, including a transition to a 3rd party provider for certain accounting and payroll functions. Significant further restructuring took place in April, May, and June of 2020, as we reviewed all corporate service providers, information technology needs, and personnel requirements to support a reduced level of operations going forward.  As a result of these restructuring efforts that began earlier in calendar 2020 and accelerated as a result of the pandemic, we have reduced our general and administrative expense by over 50%.

  • In addition to the approximate $7.2 million proceeds in property sales achieved in fiscal 2020 through the third quarter, we generated an additional $10.7 million in in June 2020 and anticipate an additional $9.2 million proceeds from property sales before the end of fiscal 2020 in August.

As of this release, the uncertainty regarding the spread of the COVID-19 pandemic and the timing of the economic recovery, could continue to materially impact our results of operations and cash flows.

About Luby's

Luby's, Inc. (NYSE: LUB) operates two core restaurant brands: Luby's Cafeterias and Fuddruckers. Luby's is also the franchisor for the Fuddruckers restaurant brand. In addition, through its Luby's Culinary Contract Services business segment, Luby's provides food service management to 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; disruptions to our business from the COVID-19 pandemic, including the duration of government mandated and voluntary shut-down of our operations, the speed with which the Company's restaurants can safely be reopened, the level of guest demand following reopening, and the impacts on our financial resources and liquidity; the continued service of key management personnel; and other risks and uncertainties disclosed in Luby's annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-k..

 

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



Quarter Ended


Three Quarters Ended


June 3,

2020


June 5,

2019


June 3,

2020


June 5,

2019


(12 weeks)


(12 weeks)


(40 weeks)


(40 weeks)

SALES:








Restaurant sales

$

13,832



$

65,611



$

157,781



$

222,079


Culinary contract services

4,963



7,571



21,735



24,610


Franchise revenue

193



1,482



3,058



5,126


Vending revenue

6



102



130



292


TOTAL SALES

18,994



74,766



182,704



252,107


COSTS AND EXPENSES:








Cost of food

4,039



18,478



45,378



61,707


Payroll and related costs

5,487



25,015



61,402



84,258


Other operating expenses

5,766



11,491



30,625



39,404


Occupancy costs

3,696



4,023



12,470



14,064


Opening costs



6



14



49


Cost of culinary contract services

4,712



6,791



20,060



22,324


Cost of franchise operations

437



330



1,411



849


Depreciation and amortization

2,709



2,927



9,149



11,052


Selling, general and administrative expenses

3,339



8,623



20,313



26,386


Other Charges

164



803



2,912



3,280


Provision for asset impairments and restaurant closings

12,708



675



14,478



3,097


Net gain on disposition of property and equipment

(364)



(434)



(2,861)



(12,935)


Total costs and expenses

42,693



78,728



215,351



253,535


LOSS FROM OPERATIONS

(23,699)



(3,962)



(32,647)



(1,428)


Interest income

19



11



47



30


Interest expense

(1,641)



(1,324)



(5,076)



(4,593)


Other income, net

402



112



790



198


Loss before income taxes and discontinued operations

(24,919)



(5,163)



(36,886)



(5,793)


Provision for income taxes

53



132



210



346


Loss from continuing operations

(24,972)



(5,295)



(37,096)



(6,139)


Loss from discontinued operations, net of income taxes

(7)



(6)



(23)



(18)


NET LOSS

$

(24,979)



$

(5,301)



$

(37,119)



$

(6,157)


Loss per share from continuing operations:








Basic

$

(0.82)



$

(0.18)



$

(1.23)



$

(0.21)


Assuming dilution

$

(0.82)



$

(0.18)



$

(1.23)



$

(0.21)


Loss per share from discontinued operations:








Basic

$

0.00



$

0.00



$

0.00



$

0.00


Assuming dilution

$

0.00



$

0.00



$

0.00



$

0.00


Loss per share:








Basic

$

(0.82)



$

(0.18)



$

(1.23)



$

(0.21)


Assuming dilution

$

(0.82)



$

(0.18)



$

(1.23)



$

(0.21)


Weighted average shares outstanding:








Basic

30,398



29,874



30,206



29,732


Assuming dilution

30,398



29,874



30,206



29,732


 

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


Three Quarters Ended


June 3,

2020


June 5,

2019


June 3,

2020


June 5,

2019


(12 weeks)


(12 weeks)


(40 weeks)


(40 weeks)









Restaurant sales

72.8

%


87.8

%


86.4

%


88.1

%

Culinary contract services

26.1

%


10.1

%


11.9

%


9.8

%

Franchise revenue

1.0

%


2.0

%


1.7

%


2.0

%

Vending revenue

0.0

%


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

29.2

%


28.2

%


28.8

%


27.8

%

Payroll and related costs

39.7

%


38.1

%


38.9

%


37.9

%

Other operating expenses

41.7

%


17.5

%


19.4

%


17.7

%

Occupancy costs

26.7

%


6.1

%


7.9

%


6.3

%

Vending revenue

0.0

%


(0.2)

%


(0.1)

%


(0.1)

%

Store level profit

(37.2)

%


10.2

%


5.1

%


10.3

%









(As a percentage of total sales)








General and administrative expenses

16.1

%


9.8

%


9.3

%


9.3

%

Marketing and advertising expenses

1.5

%


1.7

%


1.8

%


1.2

%

Selling, general and administrative expenses

17.6

%


11.5

%


11.1

%


10.5

%

 

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



June 3,

2020


August 28,

2019


 (Unaudited)







ASSETS




Current Assets:




Cash and cash equivalents

$

14,122



$

3,640


Restricted cash and cash equivalents

7,917



9,116


Trade accounts and other receivables, net

5,498



8,852


Food and supply inventories

2,120



3,432


Prepaid expenses

1,399



2,355


Total current assets

31,056



27,395


Property held for sale

17,916



16,488


Assets related to discontinued operations

1,691



1,813


Property and equipment, net

104,288



121,743


Intangible assets, net

15,695



16,781


Goodwill

195



514


Operating lease right-of-use assets

17,790




Other assets

625



1,266


Total assets

$

189,256



$

186,000


LIABILITIES AND SHAREHOLDERS' EQUITY




Current Liabilities:




Accounts payable

$

9,808



$

8,465


Liabilities related to discontinued operations

11



14


Current portion of long-term debt

6,386




Operating lease liabilities-current

4,412




Accrued expenses and other liabilities

21,360



24,475


Total current liabilities

41,977



32,954


Long-term debt, less current portion

57,316



45,439


Operating lease liabilities-noncurrent

22,771




Other liabilities

1,550



6,577


Total liabilities

$

123,614



$

84,970


Commitments and Contingencies




SHAREHOLDERS' EQUITY




Common stock, 0.32 par value; 100,000,000 shares authorized; shares issued were
30,998,504 and 30,478,972; and shares outstanding were 30,498,504 and 29,978,972 at
June 3, 2020 and August 28, 2019, respectively

9,921



9,753


Paid-in capital

35,407



34,870


Retained earnings

25,089



61,182


Less cost of treasury stock, 500,000 shares

(4,775)



(4,775)


Total shareholders' equity

65,642



101,030


Total liabilities and shareholders' equity

$

189,256



$

186,000


 

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



Quarter Ended


June 3,

2020


June 5,

2019


(40 weeks)


(40 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:




Net loss

$

(37,119)



$

(6,157)


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




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

11,617



(9,838)


Depreciation and amortization

9,149


8.126


11,052


Amortization of debt issuance cost

974



1,063


Share-based compensation expense

746



1,192


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

(14,633)



(2,688)


Changes in operating assets and liabilities:




Decrease (increase) in trade accounts and other receivables

3,424



(880)


Decrease in food and supply inventories

179



148


Decrease in prepaid expenses and other assets

783



1,106


Decrease in operating lease assets

3,954




Decrease in operating lease liabilities

(5,239)




Decrease in accounts payable, accrued expenses and other liabilities

(2,563)



(8,567)


Net cash used in operating activities

(14,095)



(10,881)


CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from disposal of assets and property held for sale

7,580



21,761


Purchases of property and equipment

(1,890)



(2,866)


Net cash provided by investing activities

5,690



18,895


CASH FLOWS FROM FINANCING ACTIVITIES:




Revolver borrowings

4,700



37,500


Revolver repayments



(55,500)


Proceeds from term loan

5,000



58,400


Term loan repayments

(2,012)



(36,107)


Proceeds from PPP Loan

10,000




Debt issuance costs



(3,236)


Taxes paid on equity withheld



(12)


Net cash provided by financing activities

17,688



1,045


Net increase in cash and cash equivalents and restricted cash

9,283



9,059


Cash and cash equivalents and restricted cash at beginning of period

12,756



3,722


Cash and cash equivalents and restricted cash at end of period

$

22,039



$

12,781


Cash paid for:




Income taxes, net of (refunds)

$

13



$

510


Interest

3,955



3,255











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 segments.   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


June 3,

2020


June 5,

2019


June 3,

2020


June 5,

2019


(12 weeks)


(12 weeks)


(40 weeks)


(40 weeks)









Store level profit

$

(5,150)



$

6,706



$

8,036



$

22,938










Plus:








Sales from culinary contract services

4,963



7,571



21,735



24,610


Sales from franchise operations

193



1,482



3,058



5,126










Less:








Opening costs



6



14



49


Cost of culinary contract services

4,712



6,791



20,060



22,324


Cost of franchise operations

437



330



1,411



849


Depreciation and amortization

2,709



2,927



9,149



11,052


Selling, general and administrative expenses

3,339



8,623



20,313



26,386


Other Charges

164



803



2,912



3,280


Provision for asset impairments and restaurant closings

12,708



675



14,478



3,097


Net gain on disposition of property and equipment

(364)



(434)



(2,861)



(12,935)


Interest income

(19)



(11)



(47)



(30)


Interest expense

1,641



1,324



5,076



4,593


Other income, net

(402)



(112)



(790)



(198)


Provision for income taxes

53



132



210



346


Loss from continuing operations

$

(24,972)



$

(5,295)



$

(37,096)



$

(6,139)


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, other charges,  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 3,

2020


June 5,

2019


June 3,

2020


June 5,

2019



(12 weeks)


(12 weeks)


(40 weeks)


(40 weeks)

Loss from continuing operations


$

(24,972)



$

(5,295)



(37,096)



(6,139)


Depreciation and amortization


2,709



2,927



9,149



11,052


Provision for income taxes


53



132



$

210



$

346


Interest expense


1,641



1,324



5,076



4,593


Interest income


(19)



(11)



(47)



(30)


Other Charges


164



803



2,912



3,280


Net loss on disposition of property and equipment


(364)



(434)



(2,861)



(12,935)


Provision for asset impairments and restaurant closings


12,708



675



14,478



3,097


Non-cash compensation expense


14



369



746



1,192


Franchise Taxes


42



56



139



164


Increase in fair value of derivative








88


Adjusted EBITDA


$

(8,024)



$

546



$

(7,294)



$

4,708


 

For additional information contact:
Dennard-Lascar Investor Relations
Rick Black / Ken Dennard
Investor Relations
713-529-6600

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SOURCE Luby's, Inc.

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