BJs RESTAURANTS INC 10-Q for FY2024 Q2
BJs RESTAURANTS INC (BJRI)
About this 10-Q
BJs RESTAURANTS INC filed this 10-Q on August 5, 2024, covering the quarter ended July 2, 2024 (FY2024 Q2).
Headline figures
Quarter ended July 2, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $349.93M
- up 0.1% from $349.67M a year earlier
- Net income
- $17.16M
- up 43.8% from net income of $11.93M a year earlier
- Diluted EPS
- $0.72
- up 44.0% from $0.50 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________ to ______
Commission file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
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Trading Symbol |
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Name of each exchange on which registered |
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(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of August 2, 2024, there were
BJ’S RESTAURANTS, INC.
TABLE OF CONTENTS
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PART I. |
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Item 1. |
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Consolidated Balance Sheets – |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 5. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 6. |
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PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
BJ’S RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
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July 2, 2024 |
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January 2, 2024 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts and other receivables, net |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease assets |
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Goodwill |
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Equity method investment |
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Deferred income taxes, net |
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Other assets, net |
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Total assets |
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$ |
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$ |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Current operating lease obligations |
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Total current liabilities |
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Long-term operating lease obligations |
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Long-term debt |
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Other liabilities |
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Total liabilities |
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Shareholders’ equity: |
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Preferred stock, |
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Common stock, |
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Capital surplus |
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Retained earnings |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
1
BJ’S RESTAURANTS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
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For the Thirteen Weeks Ended |
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For the Twenty-Six Weeks Ended |
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July 2, 2024 |
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July 4, 2023 |
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July 2, 2024 |
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July 4, 2023 |
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Revenues |
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$ |
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$ |
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$ |
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$ |
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Restaurant operating costs (excluding depreciation and amortization): |
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Cost of sales |
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Labor and benefits |
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Occupancy and operating |
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General and administrative |
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Depreciation and amortization |
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Restaurant opening |
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Loss on disposal and impairment of assets, net |
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Total costs and expenses |
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Income from operations |
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Other income (expense): |
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Interest expense, net |
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( |
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Other income, net (1) |
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Total other income (expense) |
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Income before income taxes |
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Income tax benefit |
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( |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Net income per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of shares outstanding: |
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Basic |
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Diluted |
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See accompanying notes to unaudited consolidated financial statements.
2
BJ’S RESTAURANTS, INC.
(In thousands)
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For the Thirteen Weeks Ended |
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Common Stock |
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Capital |
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Retained |
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Shares |
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Amount |
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Surplus |
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Earnings |
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Total |
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Balance, April 4, 2023 |
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$ |
— |
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$ |
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$ |
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$ |
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Exercise of stock options |
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— |
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( |
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— |
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Issuance of restricted stock units |
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( |
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— |
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— |
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Repurchase, retirement and reclassification of common stock |
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— |
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( |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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Balance, July 4, 2023 |
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$ |
— |
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$ |
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$ |
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$ |
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Balance, April 2, 2024 |
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$ |
— |
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$ |
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$ |
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$ |
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Issuance of restricted stock units |
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( |
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— |
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( |
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Repurchase, retirement and reclassification of common stock |
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( |
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( |
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— |
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( |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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Adjustment to dividends previously accrued |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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Balance, July 2, 2024 |
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$ |
— |
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$ |
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$ |
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$ |
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For the Twenty-Six Weeks Ended |
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Common Stock |
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Capital |
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Retained |
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Shares |
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Amount |
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Surplus |
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Earnings |
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Total |
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Balance, January 3, 2023 |
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$ |
— |
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$ |
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$ |
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$ |
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Exercise of stock options |
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— |
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( |
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— |
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Issuance of restricted stock units |
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( |
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— |
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( |
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Repurchase, retirement and reclassification of common stock |
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— |
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( |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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Adjustment to dividends previously accrued |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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Balance, July 4, 2023 |
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$ |
— |
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$ |
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$ |
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$ |
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Balance, January 2, 2024 |
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$ |
— |
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$ |
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$ |
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$ |
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Exercise of stock options |
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( |
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— |
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Issuance of restricted stock units |
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( |
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— |
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( |
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Repurchase, retirement and reclassification of common stock |
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( |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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Adjustment to dividends previously accrued |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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Balance, July 2, 2024 |
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$ |
— |
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$ |
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$ |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
3
BJ’S RESTAURANTS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
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For the Twenty-Six Weeks Ended |
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July 2, 2024 |
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July 4, 2023 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Non-cash lease expense |
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Amortization of financing costs |
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Deferred income taxes |
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( |
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Stock-based compensation expense |
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Loss on disposal and impairment of assets, net |
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Equity method investment |
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Changes in assets and liabilities: |
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Accounts and other receivables |
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( |
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Inventories, net |
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Prepaid expenses and other current assets |
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Other assets, net |
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( |
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( |
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Accounts payable |
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( |
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( |
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Accrued expenses |
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( |
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Operating lease obligations |
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( |
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( |
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Other liabilities |
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( |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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( |
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Proceeds from sale of assets |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Borrowings on line of credit |
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Payments on line of credit |
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( |
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( |
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Taxes paid on vested stock units under employee plans |
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( |
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( |
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Proceeds from exercise of stock options |
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Cash dividends accrued under stock compensation plans |
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( |
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( |
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Repurchase of common stock |
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( |
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Net cash used in financing activities |
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( |
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( |
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Net decrease in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
4
BJ’S RESTAURANTS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
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For the Twenty-Six Weeks Ended |
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July 2, 2024 |
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July 4, 2023 |
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Supplemental disclosure of cash flow information: |
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Cash paid for income taxes |
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$ |
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$ |
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Cash paid for interest, net of capitalized interest |
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$ |
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$ |
|
||
Cash paid for operating lease obligations |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
||||
Operating lease assets obtained in exchange for operating lease obligations |
|
$ |
|
|
$ |
|
||
Property and equipment acquired and included in accounts payable |
|
$ |
|
|
$ |
|
||
Stock-based compensation capitalized |
|
$ |
|
|
$ |
|
||
See accompanying notes to unaudited consolidated financial statements.
5
BJ’S RESTAURANTS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the accounts of BJ’s Restaurants, Inc. (referred to herein as the “Company,” “we,” “us” and “our”) and our wholly owned subsidiaries. The consolidated financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of our financial condition, results of operations, shareholders’ equity and cash flows for the periods presented. Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and footnote disclosures normally included in consolidated financial statements in accordance with U.S. GAAP have been omitted pursuant to the U.S. Securities and Exchange Commission (“SEC”) rules.
The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ from these estimates. Our operating results for the twenty-six weeks ended July 2, 2024 may not be indicative of operating results for the entire year.
A description of our accounting policies and other financial information is included in our audited consolidated financial statements filed with the SEC on Form 10-K for the fiscal year ended January 2, 2024. The disclosures included in our accompanying interim consolidated financial statements and footnotes should be read in conjunction with our consolidated financial statements and notes thereto included in the Annual Report on Form 10-K and our other reports filed from time to time with the Securities and Exchange Commission.
2. REVENUE RECOGNITION
Our revenues are comprised of food and beverage sales from our restaurants, including takeout, delivery and catering sales. Revenues from restaurant sales are recognized when payment is tendered. Amounts paid with a credit card are recorded in accounts and other receivables until payment is collected from the credit card processor. We sell gift cards which do not have an expiration date, and we do not deduct non-usage fees from outstanding gift card balances. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. Based on historical redemption rates, a portion of our gift card sales are not expected to be redeemed and will be recognized as gift card “breakage.” Estimated gift card breakage is recorded as revenue and recognized in proportion to our historical redemption pattern, unless there is a legal obligation to remit the unredeemed gift cards to government authorities.
Our “BJ’s Premier Rewards Plus” guest loyalty program enables participants to earn points for qualifying purchases that can be redeemed for food and beverages in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered on a relative standalone selling price basis, and defer the revenues allocated to the points, less expected expirations, until such points are redeemed.
The liability related to our gift card and loyalty program, included in “Accrued expenses” on our Consolidated Balance Sheets is as follows (in thousands):
|
|
July 2, 2024 |
|
|
January 2, 2024 |
|
||
Gift card liability |
|
$ |
|
|
$ |
|
||
Deferred loyalty revenue |
|
$ |
|
|
$ |
|
||
Revenue recognized for the redemption of gift cards and loyalty rewards deferred at the beginning of each respective fiscal year is as follows (in thousands):
|
|
For the Thirteen Weeks Ended |
|
|
For the Twenty-Six Weeks Ended |
|
||||||||||
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
||||
Revenue recognized from gift card liability |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Revenue recognized from guest loyalty program |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
3. LEASES
We determine if a contract contains a lease at inception. Our material operating leases consist of restaurant locations and office space. U.S. GAAP requires that our leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date, and the lease term used in the evaluation includes the non-cancellable
6
period for which we have the right to use the underlying asset, together with optional lease term extension periods when the exercise of the lease term extension is reasonably certain and failure to exercise such option would result in an economic penalty. All of our restaurant and office space leases are classified as operating leases. We have elected to account for lease and non-lease components as a single lease component for office and beverage gas equipment. We do not have any finance leases.
Lease costs included in “Occupancy and operating” on the Consolidated Statements of Operations consisted of the following (in thousands):
|
|
For the Thirteen Weeks Ended |
|
|
For the Twenty-Six Weeks Ended |
|
||||||||||
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
||||
Lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
4. LONG-TERM DEBT
Line of Credit
On
Our Credit Facility matures on
Borrowings under the Line of Credit bear interest at an annual rate equal to either (a) the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus a percentage not to exceed
Pursuant to the Line of Credit, we are required to pay certain customary fees and expenses associated with maintenance and use of the Line of Credit, including letter of credit issuance fees, unused commitment fees and interest, which are payable monthly. Interest expense and commitment fees under the Credit Facility were approximately $
5. NET INCOME PER SHARE
Basic and diluted net income per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. The number of diluted shares reflects the potential dilution that could occur if holders of in-the-money options and warrants were to exercise their right to convert these instruments into common stock and the restrictions on restricted stock units (“RSUs”) were to lapse. Additionally, performance-based RSUs are considered contingent shares; therefore, at each reporting date we determine the probable number of shares that will vest and include these contingently issuable shares in our diluted share calculation unless they are anti-dilutive. Once these performance-based RSUs vest, they are included in our basic net income per share calculation.
7
The following table presents a reconciliation of basic and diluted net income per share, including the number of dilutive equity awards included in the dilutive net income per share computation (in thousands):
|
|
For the Thirteen Weeks Ended |
|
|
For the Twenty-Six Weeks Ended |
|
||||||||||
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average shares outstanding – basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of equity awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average shares outstanding – diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
For each of the thirteen weeks ended July 2, 2024 and July 4, 2023, there were approximately
6. STOCK-BASED COMPENSATION
Our current shareholder approved stock-based compensation plan is the BJ’s Restaurants, Inc. 2024 Equity Incentive Plan, (as it may be amended from time to time, “the Plan”), which replaced our prior Equity Incentive Plan. Under the Plan, we may issue shares of our common stock to team members, officers, directors and consultants. We have historically granted incentive stock options, non-qualified stock options, and service- and performance-based RSUs. In Fiscal 2024, we also granted market-based RSUs. Stock options are charged against the Plan share reserve on the basis of
We use the Black-Scholes option-pricing model to determine the fair value of our stock options, and we use the Monte Carlo simulation model to determine the fair value of our market-based RSUs. Both models require assumptions to be made regarding our stock price volatility, the expected life of the award, risk-free interest rate and expected dividend rates. The fair value of service-based and performance-based RSUs granted is equal to the fair value of our common stock at market close on the date of grant or the last trading day prior to the date of grant when grants take place on a day when the market is closed. The grant date fair value of each stock option, market-based and service-based RSU is expensed over the vesting period (e.g., , or years) and the fair value of each performance-based RSU is expensed based on the estimated quantity that is expected to vest corresponding with management's current estimate of the level that the performance goal will be achieved.
The following table presents the stock-based compensation recognized within our consolidated financial statements (in thousands):
|
|
For the Thirteen Weeks Ended |
|
|
For the Twenty-Six Weeks Ended |
|
||||||||||
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
||||
Labor and benefits |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Capitalized (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total stock-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Stock Options
The fair value of each stock option was estimated on the grant date using the Black‑Scholes option-pricing model with the following weighted average assumptions:
8
|
|
For the Twenty-Six Weeks Ended |
|
|||||
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
||
Volatility |
|
|
% |
|
|
% |
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Expected life (years) |
|
|
|
|
||||
Expected dividend yield |
|
|
— |
% |
|
|
— |
% |
Fair value of options granted |
|
$ |
|
|
$ |
|
||
Under our stock-based compensation plan, the exercise price of a stock option is required to equal or exceed the fair value of our common stock at market close on the option grant date or the last trading day prior to the date of grant when grants take place on a day when the market is closed. The following table presents stock option activity:
|
|
Options Outstanding |
|
|
Options Exercisable |
|
||||||||||
|
|
Shares |
|
|
Weighted |
|
|
Shares |
|
|
Weighted |
|
||||
Outstanding at January 2, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at July 2, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
As of July 2, 2024, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $
Restricted Stock Units
Service-Based Restricted Stock Units
The following table presents service-based restricted stock unit activity:
|
|
Shares |
|
|
Weighted |
|
||
Outstanding at January 2, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Released |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at July 2, 2024 |
|
|
|
|
$ |
|
||
As of July 2, 2024, total unrecognized stock-based compensation expense related to non-vested service-based RSUs was approximately $
Market-Based and Performance-Based Restricted Stock Units
The following table presents market-based and performance-based restricted stock unit activity:
|
|
Shares |
|
|
Weighted |
|
||
Outstanding at January 2, 2024 |
|
|
|
|
$ |
|
||
Awarded |
|
|
|
|
|
|
||
Released |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at July 2, 2024 |
|
|
|
|
$ |
|
||
The fair value of market-based RSUs was estimated on the grant date using the Monte Carlo simulation model with the following weighted average assumptions:
9
|
|
For the Twenty-Six Weeks Ended |
||||
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
Volatility |
|
|
% |
|
n/a |
|
Risk-free interest rate |
|
|
% |
|
n/a |
|
Expected life (years) |
|
|
|
n/a |
||
Expected dividend yield |
|
|
— |
% |
|
n/a |
Fair value of market-based awards granted |
|
$ |
|
|
n/a |
|
As of July 2, 2024, the total unrecognized stock-based compensation expense related to non-vested market-based and performance-based RSUs was approximately $
7. INCOME TAXES
We calculate our interim income tax provision in accordance with ASC Topic 270, “Interim Reporting” and ASC Topic 740, “Accounting for Income Taxes.” The related tax expense or benefit is recognized in the interim period in which it occurs. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires significant estimates and judgment including estimating the expected operating income for the year, permanent and temporary differences because of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year. The accounting estimates used to compute income tax expense may change as new events occur, additional information is obtained or the tax environment changes.
Our effective income tax rate for the twenty-six weeks ended July 2, 2024 was a benefit of
As of July 2, 2024, we had unrecognized tax benefits of approximately $
A reconciliation of the beginning and ending amount of unrecognized tax benefits is the following (in thousands):
|
|
For the Twenty-Six Weeks Ended |
|
|||||
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
||
Beginning gross unrecognized tax benefits |
|
$ |
|
|
$ |
|
||
Increases for tax positions taken in prior years |
|
|
— |
|
|
|
— |
|
Increases for tax positions taken in the current year |
|
|
|
|
|
|
||
Decreases due to lapse of statute of limitations |
|
|
— |
|
|
|
( |
) |
Ending gross unrecognized tax benefits |
|
$ |
|
|
$ |
|
||
Our uncertain tax positions are related to tax years that remain subject to examination by tax agencies. As of July 2, 2024, the earliest tax year still subject to examination by the Internal Revenue Service is
8. LEGAL PROCEEDINGS
We are subject to lawsuits, administrative proceedings and demands that arise in the ordinary course of our business and which typically involve claims from guests, team members and others related to operational, employment, real estate and intellectual property issues common to the foodservice industry. A number of these claims may exist at any given time. We are self-insured for a portion of our general liability, team member workers’ compensation and employment practice liability insurance requirements. We maintain coverage with a third-party insurer to limit our total exposure. We believe that most of our claims will be covered by our insurance, subject to coverage limits and the portion of such claims that are self-insured; however, punitive damages awards are not covered by our insurance. To date, we have not been ordered to pay punitive damages with respect to any claims, but there can be no assurance that punitive damages will not be awarded with respect to any future claims. We could be affected by adverse publicity resulting from allegations in lawsuits, claims and proceedings, regardless of whether these allegations are valid or whether we are ultimately determined to be liable. We currently believe that the final disposition of these types of lawsuits, proceedings and claims will not have a material adverse effect on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, proceedings or claims.
10
9. SHAREHOLDERS’ EQUITY
Stock Repurchases
During the twenty-six weeks ended July 2, 2024, we repurchased and retired approximately
Cash Dividends
We currently do
10. RELATED PARTY TRANSACTIONS
Equity Method Investment
During fiscal 2022, we contributed assets valued at $
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE
Certain information included in this Form 10-Q and other filings with the Securities and Exchange Commission, in our press releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers may contain “forward-looking” statements about our current and expected performance trends, growth plans, business goals and other matters. Words or phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is anticipated,” “estimate,” “project,” “may,” “could,” “would,” “should,” and similar expressions are intended to identify “forward-looking” statements. These statements, and any other statements that are not historical facts, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended from time to time. The cautionary statements made in this Form 10-Q should be read as being applicable to all related “forward-looking” statements wherever they appear in this Form 10-Q. These forward-looking statements are based on information available to us as of the date any such statements are made, and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the risk factors described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 2, 2024, as updated in our Form 10-Q for the twenty-six weeks ended July 2, 2024, and in other reports filed subsequently with the SEC.
GENERAL
BJ’s Restaurants is a leading casual dining restaurant brand differentiated by a high-quality, varied menu with compelling value, and a dining experience that offers our customers (referred to as “guests”) best-in-class service, hospitality and enjoyment, in a high-energy, welcoming and approachable atmosphere. As of August 5, 2024, BJ's owns and operates 216 restaurants located in 31 states.
The first BJ’s restaurant opened in 1978 in Orange County, California, and was a small sit-down pizzeria that featured Chicago style deep-dish pizza with a unique California twist. In 1996, we introduced our proprietary craft beers and expanded the BJ’s concept to a full-service, high-energy casual dining restaurant when we opened our first large format restaurant with an on-site brewing operation in Brea, California. Today our restaurants feature a broad menu with approximately 100 menu items designed to offer something for everyone including: slow roasted entrees such as prime rib, EnLIGHTened Entrees® such as our Cherry Chipotle Glazed Salmon, our original signature deep-dish pizza, and the world-famous Pizookie® dessert. We also offer our award-winning BJ’s craft beers, which are produced at four in-house brewing facilities, two standalone brewpubs and by independent third-party brewers using our proprietary recipes, alongside a full bar featuring innovative cocktails.
Our revenues are comprised of food and beverage sales from our restaurants, including takeout, delivery and catering sales. Revenues from restaurant sales are recognized when payment is tendered. Amounts paid with a credit card are recorded in accounts and other
11
receivables until payment is collected from the credit card processor. We sell gift cards which do not have an expiration date, and we do not deduct non-usage fees from outstanding gift card balances. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. Based on historical redemption rates, a portion of our gift card sales are not expected to be redeemed and will be recognized as gift card “breakage.” Estimated gift card breakage is recorded as revenue and recognized in proportion to our historical redemption pattern, unless there is a legal obligation to remit the unredeemed gift cards to government authorities.
Our guest loyalty program enables participants to earn points for qualifying purchases that can be redeemed for food and beverages in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points until such points are redeemed.
All of our restaurants are Company-owned. In calculating comparable restaurant sales, we include a restaurant in the comparable base once it has been open for 18 months. Guest traffic for our restaurants is estimated based on the number of guest checks.
Cost of sales is comprised of food and beverage costs, including the cost to produce and distribute our proprietary craft beer, soda and ciders. The components of cost of sales are variable and typically fluctuate directly with sales volumes but also may be impacted by changes in commodity prices, a shift in sales mix to higher cost proteins or other higher cost items, or varying levels of promotional activities.
Labor and benefit costs include direct hourly and management wages, bonuses, payroll taxes, fringe benefits and stock-based compensation, and workers’ compensation expense that are directly related to restaurant level team members.
Occupancy and operating expenses include restaurant supplies, credit card fees, third-party delivery company commissions, marketing costs, fixed rent, percentage rent, common area maintenance charges, utilities, real estate taxes, repairs and maintenance and other related restaurant costs.
General and administrative expenses include costs for our corporate administrative functions that support existing operations and provide infrastructure to facilitate our future growth. Components of this category include corporate management, field supervision and corporate hourly staff salaries and related team member benefits (including stock-based compensation expense and cash-based incentive compensation), travel and relocation costs, information systems, the cost to recruit and train new restaurant management team members, corporate rent, certain brand marketing-related expenses and legal and consulting fees.
Depreciation and amortization are composed primarily of depreciation of capital expenditures for restaurant and brewing equipment and leasehold improvements.
Restaurant opening expenses, which are expensed as incurred, consist of the costs of hiring and training the initial hourly work force for each new restaurant, travel, the cost of food and supplies used in training, grand opening promotional costs, the cost of the initial stock of operating supplies and other direct costs related to the opening of a restaurant, including rent during the construction and in-restaurant training period.
12
RESULTS OF OPERATIONS
The following table provides, for the periods indicated, our unaudited Consolidated Statements of Operations expressed as percentages of total revenues. The results of operations for the thirteen and twenty-six weeks ended July 2, 2024 and July 4, 2023, are not necessarily indicative of the results to be expected for the full fiscal year. Percentages below may not reconcile due to rounding.
|
|
For the Thirteen Weeks Ended |
|
|
For the Twenty-Six Weeks Ended |
|
||||||||||
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
||||
Revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Restaurant operating costs (excluding depreciation and amortization): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales |
|
|
25.7 |
|
|
|
25.9 |
|
|
|
25.4 |
|
|
|
26.3 |
|
Labor and benefits |
|
|
36.1 |
|
|
|
36.2 |
|
|
|
36.6 |
|
|
|
36.9 |
|
Occupancy and operating |
|
|
22.7 |
|
|
|
23.4 |
|
|
|
22.8 |
|
|
|
23.3 |
|
General and administrative |
|
|
5.9 |
|
|
|
6.1 |
|
|
|
6.3 |
|
|
|
5.9 |
|
Depreciation and amortization |
|
|
5.2 |
|
|
|
5.1 |
|
|
|
5.2 |
|
|
|
5.1 |
|
Restaurant opening |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.2 |
|
Loss on disposal and impairment of assets, net |
|
|
0.6 |
|
|
|
0.3 |
|
|
|
0.4 |
|
|
|
0.5 |
|
Total costs and expenses |
|
|
96.2 |
|
|
|
97.1 |
|
|
|
96.9 |
|
|
|
98.1 |
|
Income from operations |
|
|
3.8 |
|
|
|
2.9 |
|
|
|
3.1 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
(0.4 |
) |
|
|
(0.3 |
) |
|
|
(0.4 |
) |
|
|
(0.3 |
) |
Other income, net |
|
|
0.8 |
|
|
|
0.2 |
|
|
|
0.5 |
|
|
|
0.1 |
|
Total other income (expense) |
|
|
0.4 |
|
|
|
(0.1 |
) |
|
|
0.1 |
|
|
|
(0.2 |
) |
Income before income taxes |
|
|
4.2 |
|
|
|
2.8 |
|
|
|
3.2 |
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax benefit |
|
|
(0.7 |
) |
|
|
(0.6 |
) |
|
|
(0.4 |
) |
|
|
(0.6 |
) |
Net income |
|
|
4.9 |
% |
|
|
3.4 |
% |
|
|
3.6 |
% |
|
|
2.2 |
% |
Thirteen Weeks Ended July 2, 2024 Compared to Thirteen Weeks Ended July 4, 2023
Revenues. Total revenues increased by $0.3 million, or 0.1%, to $349.9 million during the thirteen weeks ended July 2, 2024, from $349.7 million during the comparable thirteen-week period of 2023. The increase in revenues consisted of a $6.0 million increase related to sales from new restaurants not yet in our comparable restaurant sales base, offset by a 0.6%, or $2.0 million, decline in comparable restaurant sales, and a $3.3 million decrease related to closed restaurants. The decrease in comparable restaurant sales was due to a decrease in guest traffic of approximately 3.0%, offset by an increase in average check of approximately 2.4%, resulting from menu price increases and changes in mix.
Cost of Sales. Cost of sales decreased by $0.8 million, or 0.9%, to $89.8 million during the thirteen weeks ended July 2, 2024, from $90.6 million during the comparable thirteen-week period of 2023. This was primarily due to lower commodity costs and the effects of our cost savings initiatives. As a percentage of revenues, cost of sales decreased to 25.7% for the current thirteen-week period from 25.9% for the prior year comparable period. This decrease was primarily due to lower inflationary pressure on food costs, menu price increases and the effectiveness of our cost savings initiatives.
Labor and Benefits. Labor and benefit costs for our restaurants decreased by $0.2 million, or 0.2%, to $126.3 million during the thirteen weeks ended July 2, 2024, from $126.5 million during the comparable thirteen-week period of 2023. This was primarily due to $0.2 million related to lower hourly labor and $0.4 million related to lower management compensation costs, offset by $0.2 million increase in taxes and benefits, $0.1 million in higher stock-based compensation expense, and $0.1 million related to higher workers’ compensation costs. As a percentage of revenues, labor and benefit costs decreased to 36.1% for the current thirteen-week period from 36.2% for the prior year comparable period. This decrease was primarily due improved labor efficiency and the effectiveness of our cost savings initiatives. Included in labor and benefits for the thirteen weeks ended July 2, 2024 and July 4, 2023, was approximately $0.5 million and $0.4 million, or 0.2% and 0.1%, of revenues, respectively, of stock-based compensation expense, related to equity awards granted in accordance with our Gold Standard Stock Ownership Program for certain restaurant management team members.
Occupancy and Operating. Occupancy and operating expenses decreased by $2.3 million, or 2.9%, to $79.6 million during the thirteen weeks ended July 2, 2024, from $81.9 million during the comparable thirteen-week period of 2023. This was primarily due to decreases of $1.8 million in restaurant facility expenses, $0.6 million in marketing-related expenses, and $0.3 million in kitchen and dining supplies, offset by increases of $0.1 million in delivery-related fees and expenses, and $0.3 million in credit card processing fees. As a percentage of revenues, occupancy and operating expenses decreased to 22.7% for the current thirteen-week period from
13
23.4% for the prior year comparable period. This decrease was primarily related to improved operational efficiency and the effectiveness of our cost savings initiatives.
General and Administrative. General and administrative expenses decreased by $0.6 million, or 2.8%, to $20.6 million during the thirteen weeks ended July 2, 2024, from $21.2 million during the comparable thirteen-week period of 2023. This was primarily due to decreases of $0.5 million in consulting fees, $0.5 million related to our deferred compensation liability, and $0.3 million in corporate expenses, offset by increases of $0.5 million in legal fees, $0.2 million in office expenses, and $0.1 million related to travel and lodging. General and administrative expenses during the thirteen weeks ended July 2, 2024 included $0.6 million of legal costs related to shareholder cooperation agreements and related matters. As a percentage of revenues, general and administrative expenses decreased to 5.9% for the current thirteen-week period from 6.1% for the prior year comparable period. This decrease was primarily due to our ability to leverage our fixed costs. Included in general and administrative costs for the thirteen weeks ended July 2, 2024 and July 4, 2023, was approximately $2.2 million and $2.4 million, or 0.6% and 0.7% of revenues, respectively, of stock-based compensation expense
Depreciation and Amortization. Depreciation and amortization increased by $0.5 million, or 2.6%, to $18.2 million during the thirteen weeks ended July 2, 2024, compared to $17.7 million during the comparable thirteen-week period of 2023. This increase was primarily related to depreciation expense related to our restaurants opened since the thirteen weeks ended July 4, 2023, coupled with depreciation related to our remodeled restaurants, partially offset by the impact of impairment and disposal charges taken in the prior year, and the closure of four restaurants since the thirteen weeks ended July 4, 2023. As a percentage of revenues, depreciation and amortization increased to 5.2% for the current thirteen-week period from 5.1% for the prior year comparable period. This increase was primarily due to a greater increase in depreciation and amortization than the increase in our revenue base.
Restaurant Opening. Restaurant opening expense decreased by $0.1 million, or 20.6%, to $0.3 million during the thirteen weeks ended July 2, 2024, compared to $0.4 million during the comparable thirteen-week period of 2023. This decrease was primarily due to the timing of openings.
Loss on Disposal and Impairment of Assets, Net. Loss on disposal and impairment of assets, net, was $1.9 million during the thirteen weeks ended July 2, 2024, and $1.1 million during the comparable thirteen-week period of 2023. For the thirteen weeks ended July 2, 2024, the cost primarily related to the impairment and reduction in the carrying value of the long-lived assets related to one of our restaurants. For the thirteen weeks ended July 4, 2023, these costs primarily related to disposals of assets in conjunction with initiatives to keep our restaurants up to date.
Interest Expense, Net. Interest expense, net, increased by $0.2 million to $1.3 million during the thirteen weeks ended July 2, 2024, compared to $1.1 million during the comparable thirteen-week period of 2023. This increase was primarily due to the increase in weighted average interest rate year over year, coupled with a higher average outstanding debt balance.
Other Income, Net. Other income, net, increased by $2.2 million to $2.8 million of income during the thirteen weeks ended July 2, 2024, compared to $0.6 million during the comparable thirteen-week period of 2023. This increase was primarily related to a payroll tax credit, offset by losses associated with the cash surrender value of certain life insurance policies under our deferred compensation plan.
Income Tax Benefit. Our effective income tax rate for the thirteen weeks ended July 2, 2024, was a benefit of 16.4% compared to a benefit of 22.7% for the comparable thirteen-week period of 2023. The effective tax rate for the thirteen weeks ended July 2, 2024 and July 4, 2023 was different than the statutory rate primarily due to FICA tax tip credits.
Twenty-Six Weeks Ended July 2, 2024 Compared to Twenty-Six Weeks Ended July 4, 2023
Revenues. Total revenues decreased by $3.7 million, or 0.5%, to $687.3 million during the twenty-six weeks ended July 2, 2024, from $691.0 million during the comparable twenty-six-week period of 2023. The decrease in revenues primarily consisted of a 1.1%, or $7.6 million, decline in comparable restaurant sales, and a $8.5 million decrease related to closed restaurants, offset by a $13.1 million increase related to sales from new restaurants not yet in our comparable restaurant sales base. The decrease in comparable restaurant sales was due to a decrease in guest traffic of approximately 4.4%, offset by an increase in average check of approximately 3.3%, resulting from menu price increases and changes in mix.
Cost of Sales. Cost of sales decreased by $6.7 million, or 3.7%, to $174.8 million during the twenty-six weeks ended July 2, 2024, from $181.5 million during the comparable twenty-six-week period of 2023. This was primarily due to lower commodity costs and the effects of our cost savings initiatives, coupled with lower sales. As a percentage of revenues, cost of sales decreased to 25.4% for the current twenty-six-week period from 26.3% for the prior year comparable period. This decrease was primarily due to lower inflationary pressure on food costs, menu price increases and the effectiveness of our cost savings initiatives.
Labor and Benefits. Labor and benefit costs for our restaurants decreased by $3.5 million, or 1.4%, to $251.3 million during the twenty-six weeks ended July 2, 2024, from $254.9 million during the comparable twenty-six-week period of 2023. This was primarily due to $3.2 million related to lower hourly labor, $0.6 million related to lower workers’ compensation, and $0.2 million in lower
14
stock-based compensation expense, offset by $0.6 million related to increased management compensation costs. As a percentage of revenues, labor and benefit costs decreased to 36.6% for the current twenty-six-week period from 36.9% for the prior year comparable period. This decrease was primarily due to improved labor efficiency and the effectiveness of our cost savings initiatives. Included in labor and benefits for the twenty-six weeks ended July 2, 2024 and July 4, 2023, was approximately $1.0 million and $1.3 million, respectively, or 0.2% of revenues of stock-based compensation expense, related to equity awards granted in accordance with our Gold Standard Stock Ownership Program for certain restaurant management team members.
Occupancy and Operating. Occupancy and operating expenses decreased by $4.6 million, or 2.9%, to $156.4 million during the twenty-six weeks ended July 2, 2024, from $161.1 million during the comparable twenty-six-week period of 2023. This was primarily due to decreases of $3.2 million in restaurant facilities expenses, $1.7 million related to other operating expenses, $0.6 million in utilities, and $0.4 million in delivery-related fees and expenses, offset by a $0.7 million increase in credit card processing fees. As a percentage of revenues, occupancy and operating expenses decreased to 22.8% for the current twenty-six-week period from 23.3% for the prior year comparable period. This decrease was primarily related to improved operational efficiency and the effectiveness of our cost savings initiatives.
General and Administrative. General and administrative expenses increased by $2.7 million, or 6.6%, to $43.6 million during the twenty-six weeks ended July 2, 2024, from $40.9 million during the comparable twenty-six-week period of 2023. This was primarily due to increases of $1.7 million in legal fees, $1.0 million in corporate expenses related to meeting costs and software amortization, and $0.3 million in travel and lodging, offset by a $0.3 million decrease in incentive compensation. General and administrative costs for the twenty-six weeks ended July 2, 2024 included $1.5 million of legal costs related to shareholder cooperation agreements and related matters, and $0.3 million in severance related to personnel changes. As a percentage of revenues, general and administrative expenses increased to 6.3% for the current twenty-six-week period from 5.9% for the prior year comparable period. This increase was primarily related to increased legal and corporate expenses arising in connection with our previously announced cooperation agreements and related matters with certain investors, coupled with the deleveraging from a lower revenue base. Included in general and administrative costs for the twenty-six weeks ended July 2, 2024 and July 4, 2023, was approximately $4.2 million and $4.1 million, respectively, or 0.6% of revenues of stock-based compensation expense.
Depreciation and Amortization. Depreciation and amortization increased by $0.7 million, or 2.0%, to $36.0 million during the twenty-six weeks ended July 2, 2024, compared to $35.3 million during the comparable twenty-six-week period of 2023. This increase was primarily related to depreciation expense related to our restaurants opened since the twenty-six weeks ended July 4, 2023, partially offset by the impact of impairment and disposal charges taken in the prior year, and the closure of four restaurants since the twenty-six weeks ended July 4, 2023. As a percentage of revenues, depreciation and amortization increased to 5.2% for the current twenty-six-week period from 5.1% for the prior year comparable period. This increase was primarily due to increased depreciation expense coupled with a lower revenue base.
Restaurant Opening. Restaurant opening expense decreased by $0.3 million, or 27.2%, to $0.9 million during the twenty-six weeks ended July 2, 2024, compared to $1.2 million during the comparable twenty-six-week period of 2023. This decrease was primarily due to the timing of openings.
Loss on Disposal and Impairment of Assets, Net. Loss on disposal and impairment of assets, net, was $2.7 million during the twenty-six weeks ended July 2, 2024, and $3.3 million during the comparable twenty-six-week period of 2023. For the twenty-six weeks ended July 2, 2024, the cost primarily related to the impairment and reduction in the carrying value of the long-lived assets related to one of our restaurants, coupled with the disposals of assets in conjunction with initiatives to keep our restaurants up to date. For the twenty-six weeks ended July 4, 2023, these costs primarily related to disposals of assets in conjunction with initiatives to keep our restaurants up to date, including the removal of glass partitions in our dining rooms that were installed early in the pandemic.
Interest Expense, Net. Interest expense, net, increased by $0.4 million to $2.7 million during the twenty-six weeks ended July 2, 2024, compared to $2.2 million during the comparable twenty-six-week period of 2023. This increase was primarily due to the increase in weighted average interest rate year over year, coupled with a higher average outstanding debt balance.
Other Income, Net. Other income, net, increased by $2.7 million to $3.5 million of income during the twenty-six weeks ended July 2, 2024, compared to $0.8 million during the comparable twenty-six-week period of 2023. This increase was primarily related to a payroll tax credit.
Income Tax Benefit. Our effective income tax rate for the twenty-six weeks ended July 2, 2024, was a benefit of 11.7% compared to a benefit of 35.0% for the comparable twenty-six-week period of 2023. The effective tax rate for the twenty-six weeks ended July 2, 2024 and July 4, 2023, was different than the statutory rate primarily due to FICA tax tip credits.
15
LIQUIDITY AND MATERIAL CASH REQUIREMENTS
The following table provides, for the periods indicated, a summary of our key liquidity measurements (dollars in thousands):
|
|
July 2, 2024 |
|
|
January 2, 2024 |
|
||
Cash and cash equivalents |
|
$ |
16,185 |
|
|
$ |
29,070 |
|
Net working capital |
|
$ |
(111,704 |
) |
|
$ |
(116,304 |
) |
Current ratio |
|
0.3:1.0 |
|
|
0.4:1.0 |
|
||
Our capital requirements are driven by our fundamental financial objective to improve total shareholder return through a balanced approach of new restaurant expansion plans, enhancements and initiatives focused on existing restaurants, and return of capital to our shareholders through our share repurchase program. In addition, we want to maintain a flexible balance sheet to provide the financial resources necessary to manage the risks and uncertainties of conducting our business operations in the restaurant industry. In order to achieve these objectives, we use a combination of operating cash flows, debt, landlord allowances and proceeds from stock option exercises.
Based on current operations, we believe that our current cash and cash equivalents, coupled with cash generated from operations and availability under our credit agreement will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months. Our future operating performance will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.
Similar to many restaurant chains, we typically utilize operating lease arrangements (principally ground leases) for our restaurant locations. We believe our operating lease arrangements provide appropriate leverage for our capital structure in a financially efficient manner. However, we are not limited to the use of lease arrangements as our only method of opening new restaurants and from time to time have purchased the underlying land for new restaurants. We typically lease our restaurant locations for periods of 10 to 20 years under operating lease arrangements. Our rent structures vary from lease to lease, but generally provide for the payment of both minimum and contingent (percentage) rent based on sales, as well as other expenses related to the leases (for example, our pro-rata share of common area maintenance, property tax and insurance expenses). Many of our lease arrangements include the opportunity to secure tenant improvement allowances to partially offset the cost of developing and opening the related restaurants. Generally, landlords recover the cost of such allowances from increased minimum rents. There can be no assurance that such allowances will be available to us on each project. From time to time, we may also decide to purchase the underlying land for a new restaurant if that is the only way to secure a highly desirable site. Currently, we own the underlying land for our Texas brewpub locations. We also own parcels of land adjacent to two of our restaurants. It is not our current strategy to own a large number of land parcels that underlie our restaurants. Therefore, in many cases we have subsequently entered into sale-leaseback arrangements for land parcels that we previously purchased. We disburse cash for certain site-related work, buildings, leasehold improvements, furnishings, fixtures and equipment to build our leased and owned premises. We own substantially all of the equipment, furniture and trade fixtures in our restaurants and currently plan to do so in the future.
CASH FLOWS
The following tables set forth, for the periods indicated, our cash flows from operating, investing, and financing activities (in thousands):
|
|
For the Twenty-Six Weeks Ended |
|
|||||
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
||
Net cash provided by operating activities |
|
$ |
42,532 |
|
|
$ |
41,600 |
|
Net cash used in investing activities |
|
|
(41,349 |
) |
|
|
(52,908 |
) |
Net cash used in financing activities |
|
|
(14,068 |
) |
|
|
(7,512 |
) |
Net decrease in cash and cash equivalents |
|
$ |
(12,885 |
) |
|
$ |
(18,820 |
) |
Operating Cash Flows
Net cash provided by operating activities was $42.5 million during the twenty-six weeks ended July 2, 2024, representing a $0.9 million increase from the $41.6 million provided during the twenty-six weeks ended July 4, 2023. The increase is primarily due to improved net income coupled with the timing of accounts receivable receipts, offset by the timing of accounts payable and accrued expense payments.
Investing Cash Flows
Net cash used in investing activities was $41.3 million during the twenty-six weeks ended July 2, 2024, representing a $11.6 million decrease from the $52.9 million used during the twenty-six weeks ended July 4, 2023. The decrease is primarily due to the timing of restaurants under construction, as well as the timing of restaurant remodel activity.
16
The following table provides, for the periods indicated, the components of capital expenditures (in thousands):
|
|
For the Twenty-Six Weeks Ended |
|
|||||
|
|
July 2, 2024 |
|
|
July 4, 2023 |
|
||
New restaurants |
|
$ |
15,406 |
|
|
$ |
20,970 |
|
Restaurant maintenance and remodels, and key productivity initiatives |
|
|
25,391 |
|
|
|
31,050 |
|
Restaurant and corporate systems |
|
|
552 |
|
|
|
892 |
|
Total capital expenditures |
|
$ |
41,349 |
|
|
$ |
52,912 |
|
As of August 5, 2024, we have opened one new restaurant this year and closed one restaurant. We currently plan to open a total of three new restaurants in fiscal 2024, and we have entered into signed leases, land purchase agreements or letters of intent for all of our 2024 new restaurant locations.
We currently anticipate our total capital expenditures for fiscal 2024 to be approximately $70 million to $75 million. This estimate includes costs to open new restaurants and remodel existing locations and excludes anticipated proceeds from tenant improvement allowances. We expect to fund our net capital expenditures with our current cash balance on hand, cash flows from operations and our line of credit. Our future cash requirements will depend on many factors, including the pace of our expansion, conditions in the retail property development market, construction costs, the nature of the specific sites selected for new restaurants, and the nature of the specific leases and associated tenant improvement allowances available, if any, as negotiated with landlords.
Financing Cash Flows
Net cash used in financing activities was $14.1 million during the twenty-six weeks ended July 2, 2024, representing a $6.6 million increase from the $7.5 million used during the twenty-six weeks ended July 4, 2023. This increase was primarily due to payments on our line of credit during the twenty-six weeks ended July 2, 2024.
OFF-BALANCE SHEET ARRANGEMENTS
We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities (“VIEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow limited purposes. As of July 2, 2024, we are not involved in any off-balance sheet arrangements.
IMPACT OF INFLATION
Inflation has had an impact on our operations, new restaurant construction and corresponding return on invested capital. While we have been able to partially offset inflation and other changes in the costs of key operating inputs by gradually increasing menu prices, coupled with cost savings initiatives, more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future. Increases in inflation could have a severe impact on the United States and global economies, which will have an adverse impact on our business, financial condition and results of operations. In addition, macroeconomic conditions that impact consumer discretionary spending for food away from home could make additional menu price increases imprudent. Whether we are able to continue to offset the effects of inflation through menu price increases or cost savings will determine to what extent, if any, inflation affects our restaurant profitability in future periods.
SEASONALITY AND ADVERSE WEATHER
Our business is impacted by weather and other seasonal factors that typically impact other restaurant operations. Holidays (and shifts in the holiday calendar) and severe weather including hurricanes, tornados, thunderstorms, snow and ice storms, prolonged extreme temperatures and similar conditions may impact restaurant sales volumes in some of the markets where we operate. Many of our restaurants are located in or near shopping centers and malls that typically experience seasonal fluctuations in sales. Quarterly results have been and will continue to be significantly impacted by the timing of new restaurant openings and their associated restaurant opening expenses. As a result of these and other factors, our financial results for any given quarter may not be indicative of the results that may be achieved for a full fiscal year.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenues and expenses in the reporting period. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. We continually review
17
the estimates and underlying assumptions to ensure they are appropriate for the circumstances. Accounting assumptions and estimates are inherently uncertain and actual results may differ materially from our estimates.
A summary of our other critical accounting policies is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended January 2, 2024. During the twenty-six weeks ended July 2, 2024, there were no significant changes in our critical accounting policies.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion of market risks contains “forward-looking” statements. Actual results may differ materially from the following discussion based on general conditions in the financial and commodity markets.
Interest Rate Risk
We have a $215 million Credit Facility, of which $63.5 million is currently outstanding and carries interest at a floating rate. We utilize the Credit Facility principally for letters of credit that are required to support our self-insurance programs, to fund a portion of our announced share repurchase program, and for working capital and construction requirements, as needed. We are exposed to interest rate risk through fluctuations in interest rates on our obligations under the Credit Facility. Based on our current outstanding balance, a hypothetical 1% change in the interest rates under our Credit Facility would have an approximate $0.5 million annual impact on our net income.
Food, Supplies and Commodity Price Risks
We purchase food, supplies and other commodities for use in our operations based upon market prices established with our suppliers. Our business is dependent on frequent and consistent deliveries of these items. We may experience shortages, delays or interruptions due to inclement weather, natural disasters, labor issues or other operational disruptions or other conditions beyond our control such as cyber breaches or ransomware attacks at our suppliers, distributors or transportation providers. Additionally, many of the commodities purchased by us can be subject to volatility due to market supply and demand factors outside of our control, whether contracted for or not. Costs can also fluctuate due to government regulation. To manage this risk in part, we attempt to enter into fixed-price purchase commitments, with terms typically up to one year, for some of our commodity requirements. However, it may not be possible for us to enter into fixed-price contracts for certain commodities or we may choose not to enter into fixed-price contracts for certain commodities. We believe that substantially all of our food and supplies are available from several sources, which helps to diversify our overall commodity cost risk. We also believe that we have some flexibility and ability to increase certain menu prices, or vary certain menu items offered or promoted, in response to food commodity price increases. Some of our commodity purchase arrangements may contain contractual features that limit the price paid by establishing certain price floors or caps. We do not use financial instruments to hedge commodity prices, since our purchase arrangements with suppliers, to the extent that we can enter into such arrangements, help control the ultimate cost that we pay.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 promulgated under the Securities Exchange Act of 1934 as amended, as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of July 2, 2024, our disclosure controls and procedures are designed and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our second fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 5. OTHER INFORMATION
None.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
18
See Note 8 of Notes to Unaudited Consolidated Financial Statements in Part I, Item 1 of this report for a summary of legal proceedings.
Item 1A. RISK FACTORS
There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended January 2, 2024.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
As of July 2, 2024, we have cumulatively repurchased shares valued at approximately $497.8 million in accordance with our approved share repurchase plan since its inception in 2014. During the twenty-six weeks ended July 2, 2024, we repurchased and retired shares valued at approximately $8.8 million. Share repurchases were executed through open market purchases, and future share repurchases may be completed through a combination of individually negotiated transactions, accelerated share buyback, and/or open market purchases. In February 2024, our Board of Directors approved an increase in our share repurchase program by $50 million. As a result, we had approximately $52.2 million available under our authorized $550 million share repurchase program as of July 2, 2024.
The following table sets forth information with respect to the repurchase of common shares during the twenty-six weeks ended July 2, 2024:
Period (1) |
|
Total |
|
|
Average |
|
|
Total |
|
|
Increase in |
|
|
Dollar Value |
|
|||||
01/03/24 - 01/30/24 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
11,055,206 |
|
01/31/24 - 02/27/24 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
50,000,000 |
|
|
$ |
61,055,206 |
|
02/28/24 - 04/02/24 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
61,055,206 |
|
04/03/24 - 04/30/24 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
61,055,206 |
|
05/01/24 - 05/28/24 |
|
|
86,960 |
|
|
$ |
34.54 |
|
|
|
86,960 |
|
|
$ |
— |
|
|
$ |
58,051,544 |
|
05/29/24 - 07/02/24 |
|
|
167,665 |
|
|
$ |
34.78 |
|
|
|
167,665 |
|
|
$ |
— |
|
|
$ |
52,220,358 |
|
Total |
|
|
254,625 |
|
|
|
|
|
|
254,625 |
|
|
|
|
|
|
|
|||
19
Item 6. EXHIBITS
Exhibit |
|
Description |
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
3.3 |
|
|
|
|
|
3.4 |
|
|
|
|
|
4.1 |
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31 |
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Section 302 Certification of Chief Executive Officer and Chief Financial Officer.
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32 |
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Section 906 Certification of Chief Executive Officer and Chief Financial Officer. |
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101.INS |
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Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
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Inline XBRL Taxonomy Extension Schema |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
20
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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BJ’S RESTAURANTS, INC. |
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(Registrant) |
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August 5, 2024 |
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By: |
/s/ GREGORY S. LEVIN |
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Gregory S. Levin |
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Chief Executive Officer and President |
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(Principal Executive Officer) |
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By: |
/s/ THOMAS A. HOUDEK |
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Thomas A. Houdek |
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Senior Vice President and Chief Financial Officer |
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(Principal Financial Officer) |
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By: |
/s/ JACOB J. GUILD |
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Jacob J. Guild |
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Senior Vice President and Chief Accounting Officer |
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(Principal Accounting Officer) |
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21
Exhibit 31
BJ’S RESTAURANTS, INC.
Certification of Chief Executive Officer
I, Gregory S. Levin, certify that:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 5, 2024 |
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By: |
/s/ GREGORY S. LEVIN |
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Gregory S. Levin |
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Chief Executive Officer and President |
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(Principal Executive Officer) |
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BJ’S RESTAURANTS, INC.
Certification of Chief Financial Officer
I, Thomas A. Houdek, certify that:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 5, 2024 |
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By: |
/s/ THOMAS A. HOUDEK |
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Thomas A. Houdek |
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Senior Vice President and Chief Financial Officer |
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(Principal Financial Officer) |
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Exhibit 32
BJ’S RESTAURANTS, INC.
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Gregory S. Levin, Chief Executive Officer of the Company, and Thomas A. Houdek, Chief Financial Officer of the Company, certify to their knowledge:
(1) The Quarterly Report on Form 10-Q of the Company for the quarter ended July 2, 2024, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
In Witness Whereof, each of the undersigned has signed this Certification as of this August 5, 2024.
/s/ GREGORY S. LEVIN |
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/s/ THOMAS A. HOUDEK |
Gregory S. Levin |
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Thomas A. Houdek |
Chief Executive Officer and President |
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Senior Vice President and Chief Financial Officer |
(Principal Executive Officer) |
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(Principal Financial Officer) |