BJs RESTAURANTS INC 10-Q for FY2020 Q3
BJs RESTAURANTS INC (BJRI)
About this 10-Q
BJs RESTAURANTS INC filed this 10-Q on November 2, 2020, covering the quarter ended September 29, 2020 (FY2020 Q3).
Headline figures
Quarter ended September 29, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $198.89M
- down 28.6% from $278.74M a year earlier
- Net loss
- $6.58M
- compared with net income of $3.67M a year earlier
- Diluted EPS
- -$0.30
- compared with $0.18 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
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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
BJ’S RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
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Securities registered pursuant to Section 12(b) of the Act:
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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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Large accelerated filer |
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Non-accelerated filer |
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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
As of October 30, 2020, 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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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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29 |
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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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September 29, 2020 |
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December 31, 2019 |
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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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Deferred income taxes |
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— |
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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 (1) |
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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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Deferred income taxes |
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— |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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Shareholders’ equity: |
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Preferred stock, |
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Common stock, par value, |
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— |
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— |
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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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(1) |
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See accompanying notes to unaudited consolidated financial statements.
1
BJ’S RESTAURANTS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(In thousands, except per share data)
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For the Thirteen Weeks Ended |
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For the Thirty-Nine Weeks Ended |
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September 29, 2020 |
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October 1, 2019 |
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September 29, 2020 |
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October 1, 2019 |
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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 (1) |
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Labor and benefits |
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Occupancy and operating (1) |
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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 |
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Gain on lease transactions, net |
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— |
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( |
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— |
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Total costs and expenses |
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(Loss) income from operations |
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( |
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Other income (expense): |
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Interest expense, net |
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( |
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( |
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Gain from legal settlements |
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— |
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— |
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Other income, net |
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Total other income (expense) |
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( |
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(Loss) income before income taxes |
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( |
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Income tax (benefit) expense |
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( |
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( |
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( |
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Net (loss) income |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Net (loss) 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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Cash dividends declared per common share |
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$ |
— |
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$ |
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$ |
— |
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$ |
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(1) |
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See accompanying notes to unaudited consolidated financial statements.
2
BJ’S RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(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, July 2, 2019 |
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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 and retirement 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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Dividends paid or payable, $ |
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— |
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— |
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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, October 1, 2019 |
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$ |
— |
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$ |
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$ |
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$ |
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Balance, June 30, 2020 |
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$ |
— |
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$ |
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$ |
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$ |
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Issuance of common stock and warrant |
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— |
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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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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 loss |
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— |
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— |
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— |
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( |
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( |
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Balance, September 29, 2020 |
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$ |
— |
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$ |
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$ |
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$ |
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For the Thirty-Nine 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 1, 2019 |
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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 and retirement 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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Cumulative effect of adopting lease standard |
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— |
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— |
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— |
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Dividends paid or payable, $ |
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— |
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— |
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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, October 1, 2019 |
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$ |
— |
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$ |
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$ |
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$ |
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Balance, December 31, 2019 |
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$ |
— |
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$ |
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$ |
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$ |
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Issuance of common stock and warrant, net |
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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 loss |
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— |
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— |
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— |
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( |
) |
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( |
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Balance, September 29, 2020 |
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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 Thirty-Nine Weeks Ended |
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|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
Non-cash lease expense |
|
|
|
|
|
|
|
|
|
Amortization of financing costs |
|
|
|
|
|
|
— |
|
|
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
Loss on disposal and impairment of assets |
|
|
|
|
|
|
|
|
|
Gain on lease transactions, net |
|
|
( |
) |
|
|
— |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts and other receivables |
|
|
|
|
|
|
|
|
|
Inventories, net |
|
|
|
|
|
|
( |
) |
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
Other assets, net |
|
|
( |
) |
|
|
( |
) |
|
Accounts payable |
|
|
|
|
|
|
( |
) |
|
Accrued expenses |
|
|
( |
) |
|
|
( |
) |
|
Operating lease obligations |
|
|
( |
) |
|
|
( |
) |
|
Other liabilities |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from sale of assets |
|
|
|
|
|
|
— |
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Borrowings on line of credit |
|
|
|
|
|
|
|
|
|
Payments on line of credit |
|
|
( |
) |
|
|
( |
) |
|
Payments of debt issuance costs |
|
|
( |
) |
|
|
— |
|
|
Proceeds from issuance of common stock, net |
|
|
|
|
|
|
— |
|
|
Taxes paid on vested stock units under employee plans |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from exercise of stock options |
|
|
— |
|
|
|
|
|
|
Cash dividends paid |
|
|
( |
) |
|
|
( |
) |
|
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
( |
) |
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to unaudited consolidated financial statements.
4
BJ’S RESTAURANTS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
For the Thirty-Nine Weeks Ended |
|
|||||
|
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
|
|
|
$ |
|
|
|
Cash paid for interest, net of capitalized interest |
|
$ |
|
|
|
$ |
|
|
|
Cash paid for operating lease obligations |
|
$ |
|
|
|
$ |
|
|
|
Supplemental disclosure of non-cash operating, investing and financing activities: |
|
|
|
|
|
|||
|
Operating lease assets obtained in exchange for operating lease obligations |
|
$ |
|
|
|
$ |
|
|
|
Tenant improvement allowance receivable |
|
$ |
|
|
|
$ |
|
|
|
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 period. 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. Due to the severe impact of the global coronavirus (“COVID-19”) pandemic, operating results for the thirty-nine weeks ended September 29, 2020 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 year ended December 31, 2019, as amended by Amendment No. 1 thereto, filed on April 22, 2020 (collectively, our “2019 Form10-K”). 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 our 2019 Form 10-K and our other reports filed from time to time with the Securities and Exchange Commission.
Impact of the COVID-19 Pandemic
In early March 2020, the COVID-19 pandemic was declared a National Public Health Emergency, and the Centers for Disease Control and Prevention, as well as state and local legislative bodies and health departments, began issuing orders related to social distancing requirements, reduced restaurant seating capacity and other restrictions resulting in a significant reduction in traffic at our restaurants. By April, at the request of most state and local legislative bodies, we closed all of our dining rooms and began to operate in a take-out and delivery only capacity.
In response to these conditions and to increase liquidity and enhance financial flexibility, we suspended our quarterly cash dividends, our share repurchase activity, our 401(k) plan employer matching contributions, and the payment of rent on our leases. Additionally, in April, we temporarily laid off approximately
In early May, states began allowing the re-opening of dining rooms in a limited capacity to adhere to social distancing guidelines. We re-opened our dining rooms as permitted by law, including
We assess the potential impairment of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. We review restaurant long-lived assets for impairment at the individual restaurant level, or
6
the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. We determine that a restaurant’s long-lived assets are impaired if the forecast of undiscounted cash flows is less than the carrying value of the restaurant’s assets. The reduced cash flow projections resulting from the COVID-19 pandemic triggered an asset impairment analysis. We determined four of our restaurants were impaired and for the thirty-nine weeks ended September 29, 2020, we recorded a $
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to estimate credit losses. We adopted ASU 2016-13 on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). This update clarifies the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We adopted ASU 2016-13 on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.
2. REVENUE RECOGNITION
Our revenues are primarily comprised of food and beverage sales at our restaurants. 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” over time. 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. The estimated gift card breakage is based on when the likelihood of redemption becomes remote, which has typically been
Our “BJ’s Premier Rewards Plus” customer 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. We temporarily suspended loyalty point expirations in response to the COVID-19 pandemic and resumed expirations during the quarter ended September 29, 2020.
The liability related to our gift card and loyalty program, included in “Accrued expenses,” on our Consolidated Balance Sheets is as follows (in thousands):
|
|
|
September 29, 2020 |
|
|
December 31, 2019 |
|
||
|
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 Thirty-Nine Weeks Ended |
|
||||||||||
|
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||||
|
Revenue recognized from gift card liability |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Revenue recognized from customer loyalty program |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
7
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 period for which we have the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty. All of our restaurant leases and office space are classified as operating leases. We do not have any finance leases.
Lease costs included in “Occupancy & operating” on the Consolidated Statements of (Loss) Income consisted of the following (in thousands):
|
|
|
For the Thirteen Weeks Ended |
|
|
For the Thirty-Nine Weeks Ended |
|
||||||||||
|
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||||
|
Lease cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease costs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
In response to the impact of the COVID-19 pandemic on our operations, beginning April 1, 2020, we suspended the payment of rent and did not make lease payments under our existing lease agreements for the majority of our leases. During the suspension of payments, we continued to recognize expenses and liabilities for lease obligations and corresponding lease assets on the balance sheet in accordance with ASU 2016-02, Leases (Topic 842).
We have negotiated restructuring of lease payments and rent concessions for the majority of our leases. The negotiated concessions primarily take the form of rent deferrals (full or partial) or abatements. In accordance with the relief issued in April 2020 by the FASB titled ASC Topic 842 and ASC Topic 840, Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic, we did not recognize contractual rent concessions as a lease contract modification when the total payments required by the modified contract were substantially the same or less than total payments required by the original contract. Lease concessions that provided a substantial increase in the rights of the lessor or our obligations under the lease were accounted for as lease modifications in accordance with ASC Topic 842.
4. LONG-TERM DEBT
Line of Credit
On
Borrowings under the Line of Credit bear interest at an annual rate equal to either (a) LIBOR plus a percentage not to exceed
8
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 on the Line of Credit, which are payable monthly. Interest expense and commitment fees under the Credit Facility for the thirty-nine weeks ended September 29, 2020 and October 1, 2019 were approximately $
5. NET (LOSS) INCOME PER SHARE
The following table presents a reconciliation of basic and diluted net (loss) income per share, including the number of dilutive equity awards that were included in the dilutive net income per share computation (in thousands):
|
|
|
For the Thirteen Weeks Ended |
|
|
For the Thirty-Nine Weeks Ended |
|
||||||||||
|
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||||
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding – basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of equity awards |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Weighted-average shares outstanding – diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Diluted |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
For the thirteen weeks ended September 29, 2020 and October 1, 2019, there were approximately
6. RELATED PARTY
James Dal Pozzo, the Chairman of the Board of the Jacmar Companies (“Jacmar”), is a member of our Board of Directors. Jacmar, through its affiliation with Distribution Market Advantage (“DMA”), a consortium of large, regional food distributors located throughout the United States, was our largest distributor of food, beverage, paper products and supplies from 2006 through June 30, 2020. Our contract with DMA expired on
Through June 30, 2020, Jacmar serviced our restaurants in California and Nevada, while other DMA distributors serviced our restaurants in all other states. Under the terms of our agreement with DMA, Jacmar was required to sell products to us at the same prices as the other DMA distributors. Jacmar did not provide us with any produce, liquor, wine or beer products, all of which were provided by other third party vendors and included in “Cost of sales” on the Consolidated Statements of (Loss) Income. Effective July 1, 2020, with the expiration of our DMA agreement, Jacmar is no longer considered a related party.
9
The cost of food, beverage, paper products and supplies provided by Jacmar included within restaurant operating costs consisted of the following (in thousands):
|
|
|
For the Thirteen Weeks Ended |
|
|
For the Thirty-Nine Weeks Ended |
|
||||||||||||||||||||||||||
|
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||||||||||||||||||||
|
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party suppliers |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Jacmar |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy and operating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party suppliers |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Jacmar |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total occupancy and operating |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
The amounts included in accounts payables related to Jacmar consisted of the following (in thousands):
|
|
|
September 29, 2020 |
|
|
December 31, 2019 |
|
||
|
Third party suppliers |
|
$ |
|
|
|
$ |
|
|
|
Jacmar |
|
|
— |
|
|
|
|
|
|
Total accounts payable |
|
$ |
|
|
|
$ |
|
|
7. STOCK-BASED COMPENSATION
Our current shareholder approved stock-based compensation plan is the BJ’s Restaurants, Inc. Equity Incentive Plan, (as amended from time to time, “the Plan”). Under the Plan, we may issue shares of our common stock to employees, officers, directors and consultants. We have granted incentive stock options, non-qualified stock options, restricted stock and performance and time-based restricted stock units. Stock options and stock appreciation rights, if any, are charged against the Plan share reserve on the basis of
Under the Plan, we issue time-based and performance-based RSUs and non-qualified stock options to vice presidents and above on an annual basis, as well as new hires who are given the option between receiving their full grant as a time-based RSU or split half and half between non-qualified stock options and time-based RSUs. We issue time-based RSUs to other select support employees, and we issue time-based RSUs to non-employee members of our Board of Directors. We also issue RSUs, and previously issued non-qualified stock options, in connection with the BJ’s Gold Standard Stock Ownership Program (the “GSSOP”). The GSSOP is a long-term equity incentive program for our restaurant general managers, executive kitchen managers, directors of operations and directors of kitchen operations. GSSOP grants are dependent on the length of each participant’s service with us and position. All GSSOP participants are required to remain in good standing during their vesting period.
The Plan permits our Board of Directors to set the vesting terms and exercise period for awards at its discretion. Stock options and time-based RSUs vest ratably over one, three or
On September 4, 2020, our Board of Directors approved special fully-vested restricted stock grants to the restaurant support center team members whose salaries were reduced due to the COVID-19 pandemic. These grants were in amounts designed to approximate the value of the foregone cash compensation resulting from the salary reductions. In order to effect the grants, the Board of Directors approved an amendment to the Plan to permit the immediate vesting of grants of no more than
10
The following table presents the stock-based compensation recognized within our consolidated financial statements (in thousands):
|
|
|
For the Thirteen Weeks Ended |
|
|
For the Thirty-Nine Weeks Ended |
|
||||||||||
|
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||||
|
Labor and benefits |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
General and administrative |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Capitalized (1) |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
(1) |
|
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:
|
|
|
For the Thirty-Nine Weeks Ended |
|
|||||
|
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||
|
Expected volatility |
|
|
|
% |
|
|
|
% |
|
Risk free interest rate |
|
|
|
% |
|
|
|
% |
|
Expected option life |
|
|
|
|
|
|
||
|
Dividend yield |
|
|
|
% |
|
|
|
% |
|
Fair value of options granted |
|
$ |
|
|
|
$ |
|
|
U.S. GAAP requires us to make certain assumptions and judgments regarding the grant date fair value. These judgments include expected volatility, risk free interest rate, expected option life, and dividend yield. These estimations and judgments are determined by us using assumptions that, in many cases, are outside of our control. The changes in these variables or trends, including stock price volatility, dividend yield and risk free interest rate may significantly impact the fair value of future grants resulting in a significant impact to our financial results.
The exercise price of our stock options under our stock-based compensation plan is required to equal or exceed the fair value of our common stock at market close on the option grant date or the most recent trading day when grants take place on market holidays.
|
|
|
Options Outstanding |
|
|
Options Exercisable |
|
||||||||||
|
|
|
Shares (in thousands) |
|
|
Weighted Average Exercise Price |
|
|
Shares (in thousands) |
|
|
Weighted Average Exercise Price |
|
||||
|
Outstanding at December 31, 2019 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 29, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
As of September 29, 2020, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $
11
Restricted Stock Units
Time-Based Restricted Stock Units
The following table presents time-based restricted stock unit activity:
|
|
|
Shares (in thousands) |
|
|
Weighted Average Fair Value |
|
||
|
Outstanding at December 31, 2019 |
|
|
|
|
|
$ |
|
|
|
Granted (1) |
|
|
|
|
|
|
|
|
|
Released (1) |
|
|
( |
) |
|
|
|
|
|
Forfeited (2) |
|
|
( |
) |
|
|
|
|
|
Outstanding at September 29, 2020 |
|
|
|
|
|
$ |
|
|
|
|
(1) |
Approximately |
|
|
(2) |
Approximately |
The fair value of our time-based RSUs is equal to the fair value of our common stock at market close on the date of grant or the most recent trading day when grants take place on market holidays. The fair value of each time-based RSU is expensed over the vesting period (e.g., one, three or five years). As of September 29, 2020, total unrecognized stock-based compensation expense related to non-vested RSUs was approximately $
Performance-Based Restricted Stock Units
The following table presents performance-based restricted stock unit activity:
|
|
|
Shares (in thousands) |
|
|
Weighted Average Fair Value |
|
||
|
Outstanding at December 31, 2019 |
|
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
Released |
|
|
( |
) |
|
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
|
Outstanding at September 29, 2020 |
|
|
|
|
|
$ |
|
|
The fair value of our performance-based RSUs is equal to the fair value of our common stock at market close on the date of grant or the most recent trading day when grants take place on market holidays. The fair value of each performance-based RSU is expensed, based on management’s current estimate of the level that the performance goal will be achieved. As of September 29, 2020, based on the target level of performance, the total unrecognized stock-based compensation expense related to non-vested performance-based RSUs was approximately $
8. 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.” At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary year-to-date earnings. 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 certain estimates and significant judgment including the expected operating (loss) income for the year, permanent and temporary differences as a result 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.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted. Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, allowing for the carryback of net operating losses generated in 2018, 2019 and 2020, refunds of alternative minimum tax credits, temporary modifications to the limitations placed on the tax deductibility of net interest expense, and technical amendments regarding the expensing of qualified
12
improvement property (“QIP”). As a result of the CARES Act, the Company is able to carryback losses generated in 2020 and reduce taxes payable for accelerated depreciation on qualified improvements property in 2018 and 2019.
Our effective income tax rate for the thirty-nine weeks ended September 29, 2020, reflected a
As of September 29, 2020, 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 Thirty-Nine Weeks Ended |
|
|||||
|
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||
|
Gross unrecognized tax benefits at beginning of year |
|
$ |
|
|
|
$ |
|
|
|
Increases for tax positions taken in prior years |
|
|
|
|
|
|
|
|
|
Decreases for tax positions taken in prior years |
|
|
— |
|
|
|
( |
) |
|
Increases for tax positions taken in the current year |
|
|
|
|
|
|
|
|
|
Lapse in statute of limitations |
|
|
— |
|
|
|
( |
) |
|
Gross unrecognized tax benefits at end of year |
|
$ |
|
|
|
$ |
|
|
Our uncertain tax positions are related to tax years that remain subject to examination by tax agencies. As of September 29, 2020, the earliest tax year still subject to examination by the Internal Revenue Service is
9. 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 customers, employees 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, our employee workers’ compensation and our employment practice requirements. We maintain coverage with a third party insurer to limit our total exposure. We believe that most of our customer claims will be covered by our general liability insurance, subject to coverage limits and the portion of such claims that are self-insured. Punitive damages awards and employee unfair practice claims, however, are not covered by our general liability 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. SHAREHOLDERS’ EQUITY
Private Placement
We valued the common stock and the warrant issued based on their relative fair values. The fair value of the warrant was estimated using the Black-Scholes pricing model. We recorded the net proceeds of $
13
Stock Repurchases
During the thirty-nine weeks ended September 29, 2020, we repurchased and retired approximately
Cash Dividends
The Company’s Board of Directors has suspended quarterly cash dividends (including cancelling the dividend of $
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 “Act”). 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.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Form 10-Q, our 2019 Form 10-K, and our other reports filed from time to time with the Securities and Exchange Commission. Except for the historical information contained herein, the discussion in this Form 10-Q contains certain “forward-looking” statements that involve known and unknown risks and uncertainties, such as statements of our plans, objectives, expectations, intentions and our ability to manage difficulties associated with or related to the COVID-19 pandemic and the effects on our business, suppliers, customers and employees. The risks described in this Form 10-Q, as well as the risks identified in Item 1A of our 2019 Form 10-K, are not the only risks we face. These statements reflect our current perspectives and outlook with respect to the Company’s future expansion plans, key business initiatives, expected operating conditions and other factors. We operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. Additional risks and uncertainties that we are currently unaware of, or that we currently deem immaterial, also may become important factors that affect us. It is not possible for us to predict the impact of all of these factors on our business, financial condition or results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any “forward-looking” statements. Given the volatility of the operating environment and its associated risks and uncertainties, investors should not rely on “forward-looking” statements as any prediction or guarantee of actual results.
“Forward-looking” statements include, among others, statements concerning:
|
|
• |
our restaurant concept, its competitive advantages and our strategies for its continued evolution and expansion; |
|
|
• |
the rate and scope of our future restaurant development; |
|
|
• |
the total domestic capacity for our restaurants; |
|
|
• |
dates on which we will commence or complete the development and opening of new restaurants; |
|
|
• |
expectations for consumer spending on casual dining restaurant occasions; |
|
|
• |
the availability and cost of key commodities and labor used in our restaurants and brewing operations; |
|
|
• |
menu price increases and their effect, if any, on revenue and results of operations; |
|
|
• |
the effectiveness of our planned operational, menu, marketing and capital expenditure initiatives; |
|
|
• |
capital requirement expectations and actual or available borrowings on our line of credit; |
|
|
• |
projected revenues, operating costs, including commodities, labor and other expenses; |
14
|
|
• |
projected share repurchases or shareholder dividend frequency and amount; |
|
|
• |
expectations as to the effects of the COVID-19 pandemic and related governmental actions on our restaurant operations and financial condition; and |
|
|
• |
other statements of expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. |
These “forward-looking” statements are subject to risks and uncertainties, including financial, regulatory, consumer behavior, demographic, industry growth and trend projections, that may cause actual events or results to differ materially from those expressed or implied by the statements. Significant factors that may prevent us from achieving our stated goals include, but are not limited to:
|
|
• |
Health concerns arising from outbreaks of viruses, such as coronavirus, or other diseases, or regional or global health pandemics and any resulting government response may adversely affect our business. |
|
|
• |
Changes in off premise sales may affect our revenues, operating results and liquidity. |
|
|
• |
Regulations on restaurant operations resulting from the COVID-19 pandemic may reduce restaurant capacity and/or hours of operation, increase costs and have an adverse effect on the profitability of our restaurants. |
|
|
• |
Failure to maintain a favorable image, credibility and the value of the BJ’s brand and our reputation for offering customers a higher quality more differentiated total dining experience at a good value may adversely affect our business. |
|
|
• |
Any deterioration in general economic conditions may affect consumer spending and adversely affect our revenues, operating results and liquidity. |
|
|
• |
Any deterioration in general economic conditions, which may have a material adverse impact on our landlords or on businesses neighboring our locations, may adversely affect our revenues and results of operations. |
|
|
• |
Any inability or failure to successfully expand our restaurant operations may adversely affect our growth rate and results of operations. |
|
|
• |
Any inability to open new restaurants on schedule in accordance with our targeted capacity growth or problems associated with securing suitable restaurant locations, leases and licenses, recruiting and training qualified managers and hourly employees and other factors, some of which are beyond our control and difficult to forecast accurately may adversely affect our operations. |
|
|
• |
Any inability to access sources of capital and or to raise capital in the future may adversely affect our business. |
|
|
• |
Any failure of our existing or new restaurants to achieve expected results may have a negative impact on our consolidated financial results. |
|
|
• |
Any strain on our infrastructure and resources due to growth, which may slow our development of new restaurants may adversely affect our ability to manage our existing restaurants. |
|
|
• |
Any decision to either reduce or accelerate the pace of openings may positively or adversely affect our comparative financial performance. |
|
|
• |
Expenditures required to open new restaurants may adversely affect our future operating results. |
|
|
• |
Our corporate office is located in California and a significant number of our restaurants are located in California, Texas and Florida which makes us particularly sensitive to economic, regulatory, weather and other risk factors and conditions that are more prevalent in those states. |
|
|
• |
Any negative publicity about us, our restaurants, other restaurants, or others across the food supply chain, due to food borne illness or other reasons, whether or not accurate may adversely affect the reputation and popularity of our restaurants and our results of operations. |
|
|
• |
Any adverse changes in the supply of food, labor, brewing, energy and other expenses may adversely affect our operating results. |
|
|
• |
Any inability of our internal or independent third party brewers to timely supply our beer may adversely affect our operating results. |
|
|
• |
Periodic reviews and audits of our internal brewing, independent third party brewing and beer distribution arrangements by various federal, state and local governmental and regulatory agencies may adversely affect our operations and our operating results. |
15
|
|
• |
Government laws and regulations affecting the operation of our restaurants, including but not limited to those that apply to the acquisition and maintenance of our brewing and retail liquor licenses, minimum wages, federal or state exemption rules, health insurance coverage, or other employment benefits such as paid time off, consumer health and safety, nutritional disclosures, and employment eligibility-related documentation requirements may cause disruptions to our operations, adversely affect our operating costs and restrict our growth. |
|
|
• |
Heavy dependence of our operations, including credit card processing and our loyalty and employee engagement programs, on information technology may adversely affect our revenues and impair our ability to efficiently operate our business if there is a material failure of such technology. |
|
|
• |
Unsolicited takeover proposals, governance change proposals, proxy contests and certain proposals/actions by activist investors may create additional risks and uncertainties with respect to the Company’s financial position, operations, strategies and management, and may adversely affect our ability to attract and retain key employees. Any perceived uncertainties may affect the market price and volatility of our securities. |
|
|
• |
Any suspension of or failure to pay regular dividends or to repurchase the Company’s stock up to the maximum amounts permitted under our previously announced repurchase program, either of which may negatively impact investor perceptions of us and may affect the market price and volatility of our stock. |
For a more detailed description of these risk factors and other considerations, see Part II, Item 1A – “Risk Factors” of our 2019 Form 10-K.
GENERAL
As of November 2, 2020, we own and operate 210 restaurants located in the 29 states of Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Indiana, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia and Washington. Our proprietary craft beer is produced at several of our locations, our Temple, Texas brewpub locations and by independent third party brewers using our proprietary recipes. Due to the COVID-19 pandemic and the related restrictions, one of our 210 restaurants remains temporarily closed, 183 of our restaurants are serving guests in our dining rooms in a limited capacity, 25 of our restaurants are serving guests only on the patio or in other outdoor seating, and one of our restaurants is operating in a take-out and delivery only capacity, all while adhering to social distancing protocols. All of our currently open restaurants offer take-out and delivery. Over the next several months, national, state and local jurisdictions could begin easing their restrictions on businesses; however, there are no assurances that easing of these restrictions will result in us returning to sales and profit levels we experienced prior to the COVID-19 pandemic. Additionally, the easing of these restrictions may continue to contain certain limitations to dining room capacity, social distancing regulations, personal protective equipment requirements and associated costs, operating hour restrictions and other limitations, and other restrictions or costs on our business that may prevent us from returning to prior sales and profit levels we experienced prior to the COVID-19 pandemic. Furthermore, there is no guarantee that state and local jurisdictions will ease their restrictions prior to any vaccine or therapeutics becoming widely available, or that states or local jurisdictions that do ease their restrictions do not reverse or roll-back their restrictions.
The first BJ’s restaurant, which opened in 1978 in Orange County, California, was a small sit down pizzeria that featured Chicago style deep-dish pizza with a unique California twist. Our goal then and still today is to be the best casual dining concept ever by focusing on high quality menu options at a compelling value, a dining experience that exceeds customers’ expectations for service, hospitality and enjoyment, and an atmosphere that is always welcoming and approachable.
In 1996, we introduced our own proprietary craft beers and expanded the BJ’s concept from its beginnings as a small pizzeria to a full-service, high energy casual dining restaurant when we opened our first large format restaurant including our own internal brewing operations in Brea, California. Today our restaurants feature a wide variety of menu offerings including: slow roasted entrees, such as, prime rib and tri-tip; EnLIGHTened Entrees® such as our Cherry Chipotle Glazed Salmon; our original signature deep-dish pizza; the often imitated, but never replicated world-famous Pizookie® dessert; and our award-winning BJ’s proprietary craft beers.
Our revenues are primarily comprised of food and beverage sales at our restaurants. 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” over time. 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 the relevant jurisdiction. The estimated gift card breakage is based on when the likelihood of redemption becomes remote, which has typically been 24 months after the original gift card issuance date. Our customer 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
16
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. Customer traffic for our restaurants is estimated based on customer 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 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 is directly related to restaurant level employees.
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 costs include all corporate, field supervision and 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 employee 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 employees, corporate rent, certain brand marketing-related expenses and legal, professional 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.
While we currently expect to pursue the renewal of substantially all of our expiring restaurant leases, there is no guarantee that we can obtain a new lease that is satisfactory to our landlord and us or that, if renewed, rents will not increase substantially.
17
RESULTS OF OPERATIONS
The following table provides, for the periods indicated, our unaudited Consolidated Statements of (Loss) Income expressed as percentages of total revenues. The results of operations for the thirteen and thirty-nine weeks ended September 29, 2020 and October 1, 2019, 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 Thirty-Nine Weeks Ended |
|
||||||||||
|
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||||
|
Revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
Restaurant operating costs (excluding depreciation and amortization): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
24.6 |
|
|
|
25.7 |
|
|
|
24.9 |
|
|
|
25.5 |
|
|
Labor and benefits |
|
|
37.5 |
|
|
|
37.5 |
|
|
|
39.5 |
|
|
|
36.6 |
|
|
Occupancy and operating |
|
|
28.4 |
|
|
|
23.3 |
|
|
|
28.1 |
|
|
|
21.9 |
|
|
General and administrative |
|
|
7.7 |
|
|
|
5.1 |
|
|
|
7.1 |
|
|
|
5.4 |
|
|
Depreciation and amortization |
|
|
9.1 |
|
|
|
6.5 |
|
|
|
9.4 |
|
|
|
6.2 |
|
|
Restaurant opening |
|
|
0.1 |
|
|
|
0.3 |
|
|
|
0.1 |
|
|
|
0.2 |
|
|
Loss on disposal and impairment of assets |
|
|
0.1 |
|
|
|
0.3 |
|
|
|
2.5 |
|
|
|
0.4 |
|
|
Gain on lease transactions, net |
|
|
(1.0 |
) |
|
|
— |
|
|
|
(0.3 |
) |
|
|
— |
|
|
Total costs and expenses |
|
|
106.4 |
|
|
|
98.8 |
|
|
|
111.4 |
|
|
|
96.2 |
|
|
(Loss) income from operations |
|
|
(6.4 |
) |
|
|
1.2 |
|
|
|
(11.4 |
) |
|
|
3.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(0.8 |
) |
|
|
(0.4 |
) |
|
|
(0.9 |
) |
|
|
(0.4 |
) |
|
Gain from legal settlements |
|
|
1.1 |
|
|
|
— |
|
|
|
0.4 |
|
|
|
— |
|
|
Other income, net |
|
|
0.3 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
0.2 |
|
|
Total other income (expense) |
|
|
0.6 |
|
|
|
(0.4 |
) |
|
|
(0.4 |
) |
|
|
(0.2 |
) |
|
(Loss) income before income taxes |
|
|
(5.7 |
) |
|
|
0.8 |
|
|
|
(11.7 |
) |
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense |
|
|
(2.4 |
) |
|
|
(0.5 |
) |
|
|
(4.9 |
) |
|
|
— |
|
|
Net (loss) income |
|
|
(3.3 |
)% |
|
|
1.3 |
% |
|
|
(6.8 |
)% |
|
|
3.5 |
% |
Thirteen Weeks Ended September 29, 2020 Compared to Thirteen Weeks Ended October 1, 2019
Revenues. Total revenues decreased by $79.9 million, or 28.6%, to $198.9 million during the thirteen weeks ended September 29, 2020, from $278.7 million during the comparable thirteen week period of 2019. The decrease in revenues primarily consisted of a 30.2%, or $81.5 million, decrease in comparable restaurant sales, coupled with a $1.1 million decrease related to our temporarily closed restaurant due to the COVID-19 pandemic and the closure of our smaller format restaurant in Balboa, California in November 2019, partially offset by a $0.3 million increase in sales from new restaurants not yet in our comparable restaurant sales base and $2.7 million of additional revenue related to loyalty point expirations. To allow guests to use their loyalty points at a later time, we had stopped expirations at the beginning of the COVID-19 pandemic in March 2020. During the thirteen weeks ended September 29, 2020, we resumed the expiration of loyalty points, resulting in incremental revenue. Additionally, the decrease in comparable restaurant sales was related to a decrease in customer traffic of approximately 33.1%, offset by an increase in average check of approximately 2.9%. The decrease in customer traffic is due to the COVID-19 pandemic and the curtailment of our dine-in restaurant operations, and the increase in average check is due to menu pricing, less promotional discounting and menu mix from the reintroduction of our slow roast menu.
Cost of Sales. Cost of sales decreased by $22.6 million, or 31.6%, to $48.9 million during the thirteen weeks ended September 29, 2020, from $71.6 million during the comparable thirteen week period of 2019. This decrease was primarily due to the reduction in sales as a result of the COVID-19 pandemic, partially offset by costs related to the three new restaurants opened since the thirteen weeks ended October 1, 2019. As a percentage of revenues, cost of sales decreased to 24.6% for the current thirteen week period from 25.7% for the prior year comparable period. This percentage decrease is primarily due to lower produce costs, menu pricing and less promotional activity, partially offset by lower alcohol sales resulting from the COVID-19 pandemic and additional revenue related to the expiration of loyalty points.
Labor and Benefits. Labor and benefit costs for our restaurants decreased by $30.1 million, or 28.7%, to $74.6 million during the thirteen weeks ended September 29, 2020, from $104.7 million during the comparable thirteen week period of 2019. This decrease
18
was primarily due to a reduction in labor hours and benefits resulting from our dining room closures and limitations, partially offset by expenses related to the three new restaurants opened since the thirteen weeks ended October 1, 2019. As a percentage of revenues, labor and benefit costs were 37.5% for both the current thirteen week period and for the prior year comparable period. Labor and benefits remained consistent as a percentage of revenues as lower hourly labor from our reduced menu, efficiencies from driving sales in the off-premise channel and additional revenue related to the expiration of loyalty points was partially offset by the deleveraging of certain fixed labor costs, including manager salaries, resulting from a lower overall revenue base from the COVID-19 pandemic. Included in labor and benefits for the thirteen weeks ended September 29, 2020 and October 1, 2019, was approximately $0.7 million, or 0.4% and 0.2% 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. This increase, as a percentage of revenues, is primarily due to a lower revenue base.
Occupancy and Operating. Occupancy and operating expenses decreased by $8.5 million, or 13.1%, to $56.4 million during the thirteen weeks ended September 29, 2020, from $64.9 million during the comparable thirteen week period of 2019. This decrease was primarily due to cost savings measures related to the COVID-19 pandemic, coupled with less corporate marketing expenses, lower merchant credit card fees and percentage rent due to lower revenue, partially offset by higher commissions to third party delivery companies as a result of increased off-premise sales, increased costs related to temporary patios, personal protective equipment and additional cleaning supplies, and expenses related to the three new restaurants opened since the thirteen weeks ended October 1, 2019. As a percentage of revenues, occupancy and operating expenses increased to 28.4% for the current thirteen week period from 23.3% for the prior year comparable period. This increase, as a percentage of revenues, was primarily due to the deleveraging of certain fixed operating and occupancy costs over a lower revenue base as a result of the COVID-19 pandemic.
General and Administrative. General and administrative expenses increased by $1.0 million, or 6.9%, to $15.3 million during the thirteen weeks ended September 29, 2020, from $14.3 million during the comparable thirteen week period of 2019. This increase was primarily due to the special equity grants to our restaurant support center team members to compensate them for the salary reductions they incurred as a result of the COVID-19 pandemic, coupled with an increase in deferred compensation expense related to gains in the equity markets during the quarter, offset by lower costs related to restaurant support center salaries, meeting and related and travel costs and cost savings measures related to the COVID-19 pandemic. This deferred compensation expense increase is offset by higher other income included in “Other income (expense), net” on our Unaudited Consolidated Statements of (Loss) Income related to an increase in the cash surrender value of our life insurance policies under our deferred compensation plan. Included in general and administrative costs for the thirteen weeks ended September 29, 2020 and October 1, 2019, was approximately $2.3 million and $1.5 million, respectively, or 1.2% and 0.5% of revenues, respectively, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses increased to 7.7% for the current thirteen week period from 5.1% for the prior year comparable period. This percentage increase was primarily due to deleveraging from a lower revenue base as a result of the COVID-19 pandemic.
Depreciation and Amortization. Depreciation and amortization decreased by $0.1 million, or 0.7%, to $18.0 million during the thirteen weeks ended September 29, 2020, compared to $18.2 million during the comparable thirteen week period of 2019. This slight decrease is primarily due to the impairment and reduction of carrying value for four restaurants earlier this year, offset by depreciation expense related to the three new restaurants opened since the thirteen weeks ended October 1, 2019. As a percentage of revenues, depreciation and amortization increased to 9.1% for the current thirteen week period from 6.5% for the prior year comparable period. This increase is primarily due to a lower revenue base as a result of the COVID-19 pandemic.
Restaurant Opening. Restaurant opening expense decreased by $0.8 million, or 86.8%, to $0.1 million during the thirteen weeks ended September 29, 2020, compared to $1.0 million during the comparable thirteen week period of 2019. This decrease is primarily due to the timing of our restaurant openings during the period. We did not open any restaurants during the thirteen weeks ended September 29, 2020, compared to two restaurant openings during the thirteen weeks ended October 1, 2019.
Loss on Disposal and Impairment of Assets. Loss on disposal and impairment of assets was $0.2 million during the thirteen weeks ended September 29, 2020, and $0.9 million during the comparable thirteen week period of 2019. These costs were primarily related to the disposals of assets in conjunction with initiatives to keep our restaurants up to date, coupled with disposal of certain unproductive restaurant assets.
Gain on Lease Transactions, net. Gain on lease transactions, net, of $1.9 million during the thirteen weeks ended September 29, 2020, related to a sale-leaseback transaction.
Interest Expense, Net. Interest expense, net, increased by $0.5 million to $1.6 million during the thirteen weeks ended September 29, 2020, compared to $1.2 million during the comparable thirteen week period of 2019. This increase was primarily due to a higher average debt balance during the thirteen weeks ended September 29, 2020, compared to the comparable thirteen week period of 2019.
Gain from Legal Settlements. Gain from legal settlements, of $2.3 million during the thirteen weeks ended September 29, 2020, related to a settlement with credit card providers pertaining to interchange fees and a settlement related to the repair of handheld tablets.
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Other Income (Expense), Net. Other income, net, increased by $0.5 million to $0.6 million of income during the thirteen weeks ended September 29, 2020, compared to $0.1 million of income during the comparable thirteen week period of 2019. This increase was primarily due to the increase in the cash surrender value of certain life insurance policies under our deferred compensation plan. This increase offsets the related deferred compensation expense impact included in “General and administrative” expenses on our Unaudited Consolidated Statements of (Loss) Income.
Income Tax Benefit. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted. Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, allowing for the carryback of net operating losses generated in 2018, 2019 and 2020, refunds of alternative minimum tax credits, temporary modifications to the limitations placed on the tax deductibility of net interest expense, and technical amendments regarding the expensing of qualified improvement property (“QIP”). As a result of the CARES Act, the Company is able to carryback losses generated in 2020 and reduce taxes payable for accelerated depreciation on qualified improvements property in 2018 and 2019.
Our effective income tax rate for the thirteen weeks ended September 29, 2020, reflected a 42.3% tax benefit rate compared to a 65.3% benefit rate for the comparable thirteen week period of 2019. The recorded tax benefit for the thirteen weeks ended September 29, 2020, was greater than the statutory income tax rate primarily due to FICA Tip Credits and the incremental benefit arising from the ability to carryback the 2020 loss to prior years when the tax rate was at 35%. The 14% rate benefit between the current tax rate of 21% versus the NOL carryback year of 35% is reflected partially in the annual effective tax rate and partially as a discrete item in the tax rate for the portion related to 2019 temporary deductible tax differences that are estimated to reverse in 2020 and become part of the 2020 loss carryback. The prior year effective tax rate was below the statutory rate primarily due to tax credits and excess tax deductions realized for share based compensation.
Thirty-Nine Weeks Ended September 29, 2020 Compared to Thirty-Nine Weeks Ended October 1, 2019
Revenues. Total revenues decreased by $288.9 million, or 33.2%, to $581.5 million during the thirty-nine weeks ended September 29, 2020, from $870.4 million during the comparable thirty-nine week period of 2019. The decrease in revenues primarily consisted of a 34.5%, or $293.0 million, decrease in comparable restaurant sales, coupled with a $5.6 million decrease related to restaurants temporarily closed due to the COVID-19 pandemic and the closure of our smaller format restaurant in Balboa, California in November 2019, partially offset by an $8.4 million increase in sales from new restaurants not yet in our comparable restaurant sales base. This decrease in comparable restaurant sales resulted from a decrease in customer traffic of approximately 35.5%, offset by an increase in average check of approximately 1.0%. The decrease in customer traffic is due to the COVID-19 pandemic and the curtailment of our dine-in restaurant operations.
Cost of Sales. Cost of sales decreased by $77.0 million, or 34.7%, to $144.7 million during the thirty-nine weeks ended September 29, 2020, from $221.7 million during the comparable thirty-nine week period of 2019. This decrease was primarily due to the reduction in sales as a result of the COVID-19 pandemic, partially offset by costs related to the three new restaurants opened since the thirty-nine weeks ended October 1, 2019. As a percentage of revenues, cost of sales decreased to 24.9% for the current thirty-nine week period from 25.5% for the prior year comparable period. This percentage decrease is primarily due to favorable menu mix related to our limited menu which focused on our deep dish pizza and our family feast offerings as a result of the COVID-19 pandemic, coupled with increased menu pricing and less promotional activity.
Labor and Benefits. Labor and benefit costs for our restaurants decreased by $88.5 million, or 27.8%, to $229.9 million during the thirty-nine weeks ended September 29, 2020, from $318.4 million during the comparable thirty-nine week period of 2019. This decrease was due to the reduction in sales as a result of the COVID-19 pandemic, coupled with the reduction in labor hours and benefits resulting from our dining room closures, partially offset by expenses related to the three new restaurants opened since the thirty-nine weeks ended October 1, 2019, and our decision to pay accrued sick, vacation and emergency paid time off to the approximately 16,000 hourly restaurant employees who were temporarily laid off in late March 2020. As a percentage of revenues, labor and benefit costs increased to 39.5% for the current thirty-nine week period from 36.6% for the prior year comparable period. This percentage increase is primarily due to the deleveraging of certain fixed labor costs, including manager salaries and benefits, resulting from a lower revenue base, partially offset by less dining room and kitchen hourly labor as the majority of our sales moved to the off-premise channel, coupled with efficiencies from our limited menu offerings. Included in labor and benefits for the thirty-nine weeks ended September 29, 2020 and October 1, 2019, was approximately $2.0 million and $1.7 million, respectively, or 0.3% and 0.2%, 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 $27.5 million, or 14.4%, to $163.5 million during the thirty-nine weeks ended September 29, 2020, from $191.0 million during the comparable thirty-nine week period of 2019. This decrease was primarily due to cost savings measures related to the COVID-19 pandemic, coupled with lower merchant credit card fees due to lower revenue, partially offset by higher commissions to third party delivery companies as a result of increased off-premise sales, increased costs related to temporary patios, personal protective equipment and additional cleaning supplies, and expenses related to the three new restaurants opened since the thirty-nine weeks ended October 1, 2019. As a percentage of revenues, occupancy and operating expenses increased to 28.1% for the current thirty-nine week period from 21.9% for the prior year comparable period. This
20
percentage increase was primarily due to the deleveraging of certain fixed operating and occupancy costs over a lower revenue base as a result of the COVID-19 pandemic.
General and Administrative. General and administrative expenses decreased by $5.8 million, or 12.3%, to $41.3 million during the thirty-nine weeks ended September 29, 2020, from $47.2 million during the comparable thirty-nine week period of 2019. This decrease was primarily due to lower restaurant support center salaries as a result of our previously announced salary reductions due to the COVID-19 pandemic, lower incentive compensation and deferred compensation expense, coupled with lower meeting and related costs due to the closure of our restaurant support center, lower travel costs, and cost savings measures related to the COVID-19 pandemic. The deferred compensation expense decrease is offset by lower other income included in “Other (expense) income, net” on our Unaudited Consolidated Statements of (Loss) Income related to a decrease in the cash surrender value of our life insurance policies under our deferred compensation plan. Included in general and administrative costs for the thirty-nine weeks ended September 29, 2020 and October 1, 2019, was approximately $4.8 million, or 0.8% and 0.6% of revenues, respectively, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses increased to 7.1% for the current thirty-nine week period from 5.4% for the prior year comparable period. This percentage increase was primarily due to deleveraging from a lower revenue base as a result of the COVID-19 pandemic.
Depreciation and Amortization. Depreciation and amortization increased by $1.1 million, or 2.0%, to $54.7 million during the thirty-nine weeks ended September 29, 2020, compared to $53.6 million during the comparable thirty-nine week period of 2019. This increase was primarily due to depreciation expense related to the three new restaurants opened since the thirty-nine weeks ended October 1, 2019, offset by the impairment and reduction of carrying value for four restaurants earlier this year. As a percentage of revenues, depreciation and amortization increased to 9.4% for the current thirty-nine week period from 6.2% for the prior year comparable period. This increase is primarily due to a lower revenue base as a result of the COVID-19 pandemic.
Restaurant Opening. Restaurant opening expense decreased by $1.2 million, or 59.4%, to $0.8 million during the thirty-nine weeks ended September 29, 2020, compared to $2.0 million during the comparable thirty-nine week period of 2019. This decrease is primarily due to the delay or cancelation of our restaurant openings for fiscal 2020. We opened one restaurant during the thirty-nine weeks ended September 29, 2020, compared to five restaurants during the thirty-nine weeks ended October 1, 2019.
Loss on Disposal and Impairment of Assets. Loss on disposal and impairment of assets was $14.5 million during the thirty-nine weeks ended September 29, 2020, and $3.6 million during the comparable thirty-nine week period of 2019. For the thirty-nine weeks ended September 29, 2020, these costs primarily related to the impairment and reduction in the carrying value of the long-lived and operating lease assets related to four of our restaurants, coupled with a charge to reserve for beer spoilage due to the sudden decrease in draft beer sales as a result of the COVID-19 pandemic. Our reduced cash flow projections due to the COVID-19 pandemic triggered an impairment analysis for the four restaurants. As a result of this analysis, we determined that the carrying value of the assets exceeded fair value and, therefore, we recorded a charge in the amount of $12.0 million to reduce the carrying value of these restaurants. Additionally, we recorded a $1.2 million charge to reserve for beer that will expire prior to being sold. Due to the uncertainty of when our restaurant dining rooms will re-open and at what sales and cash flow levels, we may incur additional impairment charges for our restaurants and our goodwill. For the comparable thirty-nine week period of 2019, these costs were primarily related to the disposals of assets in conjunction with initiatives to keep our restaurants up to date.
Gain on Lease Transactions, net. Gain on lease transactions, net, of $1.9 million during the thirty-nine weeks ended September 29, 2020, related to a sale-leaseback transaction.
Interest Expense, Net. Interest expense, net, increased by $1.7 million to $5.1 million during the thirty-nine weeks ended September 29, 2020, compared to $3.3 million during the comparable thirty-nine week period of 2019. This increase was primarily due to a higher average debt balance during the thirty-nine weeks ended September 29, 2020, compared to the comparable thirty-nine week period of 2019.
Gain from Legal Settlements. Gain from legal settlements of $2.3 million during the thirty-nine weeks ended September 29, 2020, related to a settlement with credit card providers pertaining to interchange fees and a settlement related to the repair of handheld tablets.
Other Income (Expense), Net. Other income (expense), net, decreased by $0.8 million to $0.6 million of expense during the thirty-nine weeks ended September 29, 2020, compared to $1.4 million of income during the comparable thirty-nine week period of 2019. This decrease was primarily due to the decrease in the cash surrender value of certain life insurance policies under our deferred compensation plan. This decrease offsets the related deferred compensation expense impact included in “General and administrative” expenses on our Unaudited Consolidated Statements of (Loss) Income.
Income Tax Benefit. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted. Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, allowing for the carryback of net operating losses generated in 2018, 2019 and 2020, refunds of alternative minimum tax credits, temporary modifications to the limitations placed on the tax deductibility of net interest expense, and technical amendments regarding
21
the expensing of qualified improvement property (“QIP”). As a result of the CARES Act, the Company is able to carryback losses generated in 2020 and reduce taxes payable for accelerated depreciation on qualified improvements property in 2018 and 2019.
Our effective income tax rate for the thirty-nine weeks ended September 29, 2020, reflected a 41.7% tax benefit rate compared to a 0.4% expense rate for the comparable thirty-nine week period of 2019. The recorded tax benefit for the thirty-nine weeks ended September 29, 2020 was greater than the statutory income tax rate primarily due to FICA Tip Credits and the incremental benefit arising from the ability to carryback the 2020 loss to prior years when the tax rate was at 35%. The 14% rate benefit between the current tax rate of 21% versus the NOL carryback year of 35% is reflected partially in the annual effective tax rate and partially as a discrete item in the tax rate for the portion related to 2019 temporary deductible tax differences that are estimated to reverse in 2020 and become part of the 2020 loss carryback. The prior year effective tax rate was below the statutory rate primarily due to tax credits and excess tax deductions realized for share based compensation.
LIQUIDITY AND CAPITAL RESOURCES
The following table provides, for the periods indicated, a summary of our key liquidity measurements (dollars in thousands):
|
|
|
September 29, 2020 |
|
|
December 31, 2019 |
|
||
|
Cash and cash equivalents |
|
$ |
64,924 |
|
|
$ |
22,394 |
|
|
Net working capital |
|
$ |
(70,130 |
) |
|
$ |
(93,826 |
) |
|
Current ratio |
|
0.6:1.0 |
|
|
0.4:1.0 |
|
||
As a result of uncertainties in the near-term outlook for our business caused by the COVID-19 pandemic, we have reevaluated all aspects of our spending and continue to focus on cash flow generation. We opened our second and final new restaurant in fiscal 2020 in October and have delayed or canceled all other fiscal 2020 restaurant openings. Currently, we have no intention to repurchase shares or pay dividends during the remainder of fiscal 2020, or until it is determined that it is in the best interest of the Company and its shareholders and that it is permitted under our Credit Facility. We will review and, when appropriate, adjust our overall approach to capital allocation as we know more about the length and severity of the COVID-19 pandemic and how the post-pandemic recovery will unfold.
Our $70 million private placement of common stock completed in May and our recently completed $8.0 million sale-leaseback and lease restructurings have strengthened our financial position. Additionally, we anticipate closing another sale-leaseback transaction in the fourth quarter for approximately $3.8 million. Based on the current level of operations, the reduction of new restaurant openings, and other capital expenditure initiatives, we believe that our current cash and cash equivalents will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months. As of September 29, 2020, we have approximately $64.9 million of cash on our balance sheet, with an additional $90.1 million of borrowings available under our Credit Facility, and we are taking what we believe to be necessary and appropriate measures to control costs and maximize liquidity. 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 the majority of 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. However, 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 and one of our existing restaurants. We also own two 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.
22
CASH FLOWS
The following tables set forth, for the periods indicated, our cash flows from operating, investing, and financing activities (in thousands):
|
|
|
For the Thirty-Nine Weeks Ended |
|
|||||
|
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||
|
Net cash provided by operating activities |
|
$ |
36,222 |
|
|
$ |
77,667 |
|
|
Net cash used in investing activities |
|
|
(28,175 |
) |
|
|
(65,526 |
) |
|
Net cash provided by (used in) financing activities |
|
|
34,483 |
|
|
|
(16,992 |
) |
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
42,530 |
|
|
$ |
(4,851 |
) |
Operating Cash Flows
Net cash provided by operating activities was $36.2 million during the thirty-nine weeks ended September 29, 2020, representing a $41.4 million decrease from the $77.7 million provided during the thirty-nine weeks ended October 1, 2019. The decrease over the prior year is primarily due to our net loss as compared to net income, coupled with the timing of accounts and other receivables collections, offset by the timing of payments related to accrued expenses and accounts payable.
Investing Cash Flows
Net cash used in investing activities was $28.2 million during the thirty-nine weeks ended September 29, 2020, representing a $37.4 million decrease from the $65.5 million used during the thirty-nine weeks ended October 1, 2019. The decrease over prior year is primarily due to the delay or cancelation of new restaurant openings, coupled with the suspension of unessential capital expenditures due to the COVID-19 pandemic.
The following table provides, for the periods indicated, the components of capital expenditures (in thousands):
|
|
|
For the Thirty-Nine Weeks Ended |
|
|||||
|
|
|
September 29, 2020 |
|
|
October 1, 2019 |
|
||
|
New restaurants |
|
$ |
15,825 |
|
|
$ |
41,292 |
|
|
Restaurant maintenance and key productivity initiatives |
|
|
14,021 |
|
|
|
23,711 |
|
|
Restaurant and corporate systems |
|
|
2,139 |
|
|
|
523 |
|
|
Total capital expenditures |
|
$ |
31,985 |
|
|
$ |
65,526 |
|
As of November 2, 2020, we have opened two new restaurants during fiscal 2020. While we reduced capital expenditures for existing restaurants and we delayed or canceled the remainder of our new restaurant openings for fiscal 2020, we had incurred construction costs prior to the COVID-19 pandemic for additional restaurant locations. We expect to announce a modest increase in the number of new restaurants in fiscal 2021.
Financing Cash Flows
Net cash provided by financing activities was $34.5 million during the thirty-nine weeks ended September 29, 2020, representing a $51.5 million increase from the $17.0 million used during the thirty-nine weeks ended September 29, 2019. This increase is primarily due to net proceeds from the sale of our common stock through a private placement in May 2020 and lower repurchases of common stock. See Note 10 of Notes to Unaudited Consolidated Financial Statements in Part I, Item I of this report for further information regarding our private placement.
See Note 4 of Notes to Unaudited Consolidated Financial Statements in Part I, Item 1 of this report for further information on our Credit Facility. Prior to amending and restating our Credit Facility and subsequently modifying it, in an abundance of caution and as a result of the current circumstances with the COVID-19 pandemic, we drew down all remaining amounts under our Line of Credit in late March 2020 before repaying back a portion of it. We have also been taking all necessary and appropriate steps to maximize our liquidity as we manage our business through the current environment. In addition to drawing down on our line, we sold $70 million of our common stock on May 5, 2020, eliminated all capital and non-essential spending, including delaying or cancelling our new restaurant openings for fiscal 2020, and have suspended future quarterly dividends and the repurchase of shares, as well as 401(k) plan employer matching contributions. While we believe we have sufficient liquidity with our current capital position for the next twelve months, we will continue to monitor and evaluate all financing alternatives as these unprecedented events evolve.
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
23
facilitating off-balance sheet arrangements or other contractually narrow limited purposes. As of September 29, 2020, we are not involved in any off-balance sheet arrangements.
IMPACT OF INFLATION
Inflation on food, labor, energy and occupancy costs can significantly affect the profitability of our restaurant operations. Our profitability is dependent, among other things, on our ability to anticipate and react to changes in the cost of key operating resources, including food and other raw materials, labor, energy and other supplies and services. Substantial increases in costs and expenses could impact our operating results to the extent that such increases cannot be passed along to our restaurant customers. While we have taken steps to enter into agreements for some of the commodities used in our restaurant operations, there can be no assurance that future supplies and costs for such commodities will not fluctuate due to weather or other market conditions outside of our control. We are currently unable to contract for certain commodities, such as fluid dairy, fresh meat or seafood, and most fresh produce items for long periods of time. Consequently, such commodities can be subject to unforeseen supply and cost fluctuations.
A general shortage in the availability of qualified restaurant managers and hourly workers in certain geographic areas in which we operate has caused increases in the costs of recruiting and compensating such employees. Many of our restaurant employees are paid hourly rates subject to the federal, state or local minimum wage requirements. Numerous state and local governments have their own minimum wage and other regulatory requirements for employees that are generally greater than the federal minimum wage and are subject to annual increases based on changes in their local consumer price indices. Additionally, certain operating and other costs, including health benefits in compliance with the Patient Protection and Affordable Care Act, taxes, insurance and other outside services continue to increase with the general level of inflation and may also be subject to other cost and supply fluctuations outside of our control.
While we have been able to partially offset inflation and other changes in the costs of key operating resources by gradually increasing prices of our menu items, coupled with 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. From time to time, competitive conditions will limit our menu pricing flexibility. In addition, macroeconomic conditions that impact consumer discretionary spending for food away from home could make additional menu price increases imprudent. There can be no assurance that all of our future cost increases can be offset by higher menu prices or that higher menu prices will be accepted by our restaurant customers without any resulting changes in their visit frequencies or purchasing patterns. Many of the leases for our restaurants provide for contingent rent obligations based on a percentage of sales. As a result, rent expense will absorb a proportionate share of any menu price increases in our restaurants. There can be no assurance that we will continue to generate increases in comparable restaurant sales in amounts sufficient to offset inflationary or other cost pressures.
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 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 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.
Impairment of Long-Lived Assets
We assess the potential impairment of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The assets are generally reviewed for impairment on a restaurant by restaurant basis, or at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. The reduced cash flow projections resulting from the COVID-19 pandemic triggered an impairment analysis by us. We used the undiscounted cash flow method and assessed the recoverability by comparing the carrying value of the asset to the undiscounted cash flows expected to be generated by the assets. We determine that a restaurant’s long-lived assets are impaired if the forecasted undiscounted cash flows is less than the carrying value of the restaurant’s assets. As a result of this analysis, we determined four of our restaurants were impaired and for the thirty-nine weeks ended September 29, 2020, we recorded a $12.0 million charge to operating income for the amount by
24
which the carrying value of the restaurant’s assets exceeded its fair value estimated using the discounted cash flow method. We are unable to predict how long these conditions will persist, what additional measures may be introduced by governments, or what effect any such additional measures may have on our business. Any measure that encourages potential customers to stay in their homes, engage in social distancing or avoid larger gatherings of people is highly likely to be harmful to the dining industry in general and, consequently, our business, which may result in additional impairment charges.
Goodwill
We perform impairment testing annually, during the fourth quarter, and more frequently if factors and circumstances indicate impairment may have occurred. We determined that the reduced cash flow projections as a result of the COVID-19 pandemic indicate that an impairment loss may have been incurred. Therefore, we qualitatively assessed whether it was more likely than not that the goodwill was impaired as of September 29, 2020. Based on our interim impairment assessment as of September 29, 2020, we have determined that our goodwill is not impaired. However, we are unable to predict how long these conditions will persist, what additional measures may be introduced by governments, or what effect any such additional measures may have on our business. Any measure that encourages potential customers to stay in their homes, engage in social distancing or avoid larger gatherings of people is highly likely to be harmful to the dining industry in general and, consequently, our business, which may result in additional impairment charges.
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 2019 Form 10-K. During the thirty-nine weeks ended September 29, 2020, 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 $235 million Credit Facility, of which $126.8 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, which is currently suspended, 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 $1.0 million annual impact on our net (loss) income.
Food and Commodity Price Risks
We purchase food and other commodities for use in our operations based upon market prices established with our suppliers. 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 September 29, 2020, 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.
25
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 third fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
26
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
See Note 9 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
A discussion of the significant risks associated with investments in our securities, as well as other matters, is set forth in Item 1A of our 2019 Form 10-K. A summary of these risks and certain related information is included under “Statement Regarding Forward-Looking Disclosure” in Part I, Item 2 of this Form 10-Q and is incorporated herein by this reference. These cautionary statements are to be used as a reference in connection with any “forward-looking” statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a “forward-looking” statement or contained in any of our subsequent filings with the SEC. The risks described in this Form 10-Q and in our Annual Report on Form 10-K are not the only risks we face. New risks and uncertainties arise from time to time, and we cannot predict those events or how they may affect us. There may be other risks and uncertainties that are not currently known or that are currently deemed by us to be immaterial; however, they may ultimately adversely affect our business, financial condition and/or operating results.
These risk factors are intended to be an update to the Risk Factors found in our 2019 Form 10-K.
Health concerns arising from outbreaks of viruses, such as the coronavirus, or other diseases, or regional or global health pandemics and any resulting government response may adversely affect our business.
In the event of a health pandemic, customers might avoid public gathering places, and local, regional or national governments might limit or ban public gatherings to halt or delay the spread of disease. The impact of a health pandemic on us might be disproportionately greater than on other casual dining concepts that have lower customer traffic and that depend less on the gathering of people. To the extent that a virus or disease is food-borne, or perceived to be food-borne, future outbreaks may adversely affect the price and availability of certain food products and cause our customers to eat less of a product.
The United States and other countries have experienced, or may experience in the future, outbreaks of viruses, such as coronavirus (“COVID-19”), norovirus, Avian Flu or “SARS,” and H1N1 or “swine flu,” or other diseases such as bovine spongiform encephalopathy, commonly known as “mad cow disease.” Due to the COVID-19 pandemic and the related restrictions, as of the date and time of this Form 10-Q, one of our 210 restaurants remains temporarily closed, 183 of our restaurants are serving guests in our dining rooms in a limited capacity, 25 of our restaurants are serving guests only on the patio or in other outdoor seating, and one of our restaurants is operating in a take-out and delivery only capacity, all while adhering to social distancing protocols. All of our currently open restaurants offer take-out and delivery. Local governmental restrictions and public perceptions of the risks associated with the COVID-19 pandemic have caused, and may continue to cause, consumers to avoid or limit gatherings in public places or social interactions, which could continue to adversely affect our business. In addition, our ability to maintain our supply chain and labor force may become challenging as a result of the COVID-19 pandemic. We cannot predict the duration or scope of the COVID-19 pandemic or when un-restricted operations will return. Additionally, due to the restrictions placed on our operations, we may temporarily close more restaurants or dining rooms until local restrictions are lifted. We expect the COVID-19 pandemic to negatively impact our financial results, and such impact could be material to our financial results, condition and prospects based on its longevity and severity.
If the business interruptions caused by COVID-19 last longer than we expect, we may need to seek other sources of liquidity. The COVID-19 pandemic is adversely affecting the availability of liquidity generally in the credit markets, and there can be no guarantee that additional liquidity will be readily available or available on favorable terms, especially the longer the COVID-19 pandemic lasts.
Changes in off premise sales may affect our revenues, operating results and liquidity.
As a result of the COVID-19 pandemic, a higher portion of our sales are from the off-premise channel and are now material to our business. Delivery from our restaurants is primarily accomplished by utilizing third party delivery companies. These third party delivery companies require us to pay them a commission, which lowers our profit margin on those sales. Any negative press, whether true or not, regarding third party delivery companies or a decline in their business model may negatively impact our sales. If these third party delivery companies cease doing business with us, or cannot make their scheduled deliveries, or do not continue their relationship with us on favorable terms, it will have a negative impact on sales or result in increased third party delivery fees.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Due to the COVID-19 pandemic, our share repurchase program is currently suspended until it is in the best interest of the Company and its shareholders to resume, and is permitted by our Credit Facility. As of September 29, 2020, we have cumulatively repurchased
27
shares valued at approximately $475.6 million in accordance with our approved share repurchase plan. We repurchased shares valued at approximately $15.0 million during the thirty-nine weeks ended September 29, 2020. The share repurchases were executed through open market purchases, and future share repurchases may be completed through the combination of individually negotiated transactions, accelerated share buyback, and/or open market purchases. As of September 29, 2020, we have approximately $24.4 million available under our share repurchase plan. Our amended Credit Facility restricts our ability to pay dividends or conduct stock repurchases; therefore, we have suspended our repurchase program until it is permitted by our Credit Facility and the Board determines that resumption of repurchases is in the best interest of the Company and its shareholders.
The following table sets forth information with respect to the repurchase of common shares during the thirty-nine weeks ended September 29, 2020:
|
Period (1) |
|
Total Number of Shares Purchased |
|
|
Average Price Paid Per Share |
|
|
Total Number of Shares Purchased as Part of the Publicly Announced Plans |
|
|
Increase in Dollars for Share Repurchase Authorization |
|
|
Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
|
|||||
|
01/01/20 – 01/28/20 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
39,452,344 |
|
|
01/29/20 – 02/25/20 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
39,452,344 |
|
|
02/26/20 – 03/31/20 |
|
|
494,948 |
|
|
$ |
30.33 |
|
|
|
494,948 |
|
|
$ |
— |
|
|
$ |
24,438,776 |
|
|
04/01/20 – 04/28/20 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
24,438,776 |
|
|
04/29/20 – 05/26/20 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
24,438,776 |
|
|
05/27/20 – 06/30/20 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
24,438,776 |
|
|
07/01/20 – 07/28/20 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
24,438,776 |
|
|
07/29/20 – 08/25/20 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
24,438,776 |
|
|
08/26/20 – 09/29/20 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
24,438,776 |
|
|
Total |
|
|
494,948 |
|
|
$ |
30.33 |
|
|
|
494,948 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
Period information is presented in accordance with our fiscal months during the thirty-nine weeks ended September 29, 2020. |
28
Item 6. EXHIBITS
|
Exhibit |
|
Description |
|
3.1 |
|
|
|
|
|
|
|
3.2 |
|
|
|
|
|
|
|
3.3 |
|
|
|
|
|
|
|
3.4 |
|
|
|
|
|
|
|
4.1 |
|
|
|
|
|
|
|
31 |
|
Section 302 Certification of Chief Executive Officer and Chief Financial Officer. |
|
|
|
|
|
32 |
|
Section 906 Certification of Chief Executive Officer and Chief Financial Officer. |
|
|
|
|
|
101.INS |
|
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 |
|
Inline XBRL Taxonomy Extension Schema |
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase |
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase |
|
101.LAB |
|
Inline XBRL Taxonomy Extension Labels Linkbase |
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase |
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
29
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.
|
|
|
BJ’S RESTAURANTS, INC. |
|
|
|
|
(Registrant) |
|
|
November 2, 2020 |
|
By: |
/s/ GREGORY A. TROJAN |
|
|
|
|
|
Gregory A. Trojan |
|
|
|
|
|
Chief Executive Officer |
|
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
By: |
/s/ GREGORY S. LEVIN |
|
|
|
|
|
Gregory S. Levin |
|
|
|
|
|
President, Chief Financial Officer and Secretary |
|
|
|
|
|
(Principal Financial Officer) |
|
|
|
|
By: |
/s/ JACOB J. GUILD |
|
|
|
|
|
Jacob J. Guild |
|
|
|
|
|
Senior Vice President and Chief Accounting Officer |
|
|
|
|
|
(Principal Accounting Officer) |
|
30
Exhibit 31
BJ’S RESTAURANTS, INC.
Certification of Chief Executive Officer
I, Gregory A. Trojan, certify that:
|
|
1. |
I have reviewed this quarterly report on Form 10-Q for BJ’s Restaurants, Inc. (the “registrant”); |
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. |
Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(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 third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and,
|
|
5. |
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors: |
(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: November 2, 2020 |
|
By: |
/s/ GREGORY A. TROJAN |
|
|
|
|
|
Gregory A. Trojan |
|
|
|
|
|
Chief Executive Officer |
|
|
|
|
|
(Principal Executive Officer) |
|
Certification of Chief Financial Officer
I, Gregory S. Levin, certify that:
|
|
1. |
I have reviewed this quarterly report on Form 10-Q for BJ’s Restaurants, Inc. (the “registrant”); |
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. |
Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
4. |
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(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 third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and,
|
|
5. |
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors: |
(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: November 2, 2020 |
|
By: |
/s/ GREGORY S. LEVIN |
|
|
|
|
|
Gregory S. Levin |
|
|
|
|
|
President, Chief Financial Officer and Secretary |
|
|
|
|
|
(Principal Financial Officer) |
|
|
|
|
|
|
|
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 A. Trojan, Chief Executive Officer of the Company, and Gregory S. Levin, 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 September 29, 2020, 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 November 2, 2020.
|
/s/ GREGORY A. TROJAN |
|
/s/ GREGORY S. LEVIN |
|
Gregory A. Trojan |
|
Gregory S. Levin |
|
Chief Executive Officer |
|
President, Chief Financial Officer and Secretary |
|
(Principal Executive Officer) |
|
(Principal Financial Officer) |