PR Newswire | Jul 20, 2020 04:59PM EDT

07/20 15:59 CDT

Luby's Reports Third Quarter Fiscal 2020 Results HOUSTON, July 20, 2020

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)

Q3 Q3 Change Change Restaurant Brand 2020 2019 ($) (%)

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 segment30 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:

FY20 YTDQ3FY20 YTDQ3June 3, August 28, 2019 Openings Closings 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, June 5, June 3, June 5, 2020 2019 2020 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 closings12,708 675 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, June 5,June 3,June 5, 2020 2019 2020 2019

(12 (12 (40 (40 weeks) weeks) weeks) 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 expenses17.6 %11.5 %11.1 %10.5 %

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



June 3, August 28, 2020 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 9,921 9,753 29,978,972 at June 3, 2020 and August 28, 2019, respectively

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, June 5, 2020 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 8.12611,052

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 (14,633) (2,688) liabilities

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, June 5, June 3, June 5, 2020 2019 2020 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 closings12,708 675 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, June 5, June 3, June 5, 2020 2019 2020 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 closings12,708 675 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 RelationsRick Black / Ken DennardInvestor Relations713-529-6600

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SOURCE Luby's, Inc.