BJ’s Restaurants, Inc. — Form 10-K Summary
Period clarification: The supplied filing is for the fiscal year ended December 28, 2021, not 2019 Q4. Fiscal 2021, 2020, and 2019 each comprised 52 weeks. The filing does not provide a standalone 2019 Q4 summary.
Business context and reporting period
BJ’s operates company-owned casual dining restaurants featuring a broad menu, deep-dish pizza, proprietary craft beer, dine-in service, takeout, and delivery. It reported 212 restaurants at fiscal year-end; after closing its Pasadena location on December 30, 2021, it reported 211 restaurants across 29 states as of February 24, 2022.
Financial performance
| Metric | FY2021 | FY2020 | FY2019 |
|---|---|---|---|
| Revenue | $1,087.0 million | $778.5 million | $1,161.5 million |
| Operating income (loss) | $(16.5) million | $(86.4) million | $49.1 million |
| Net income (loss) | $(3.6) million | $(57.9) million | $45.2 million |
| Diluted EPS | $(0.16) | $(2.74) | $2.20 |
| Restaurant-level operating margin (non-GAAP) | 11.9% | 7.2% | 16.0% |
| Adjusted EBITDA (non-GAAP) | $70.5 million | $10.3 million | $129.2 million |
| Cash provided by operating activities | $64.3 million | $40.5 million | $116.0 million |
FY2021 revenue rose 39.6% year over year. Comparable restaurant sales increased 38.3%, reflecting approximately 25.0% higher guest traffic and 13.3% higher average check, largely as dining rooms reopened from pandemic-related restrictions. Average weekly sales were about $99,000, compared with $72,000 in 2020 and $109,000 in 2019.
Cost of sales was 26.5% of revenue, up from 25.1% in 2020, driven primarily by sales mix and higher meat and seafood costs. Labor and benefits improved to 36.9% of revenue from 39.3%; occupancy and operating costs improved to 24.6% from 28.4%, reflecting improved sales leverage. The operating loss narrowed substantially from 2020, but the company remained unprofitable.
Cash, debt, and liquidity
- Cash and cash equivalents were $38.5 million at year-end, down from $51.7 million. Working capital was negative $109.6 million and the current ratio was 0.5:1.
- Operating cash flow was $64.3 million; capital expenditures were $42.2 million, implying approximately $22.1 million of operating cash flow after capital expenditures.
- Long-term debt was $50.0 million under a $215 million revolving credit facility, with $147.8 million of additional borrowing availability after outstanding letters of credit. The facility matures November 3, 2026; the company reported compliance with its covenants.
- Operating lease obligations totaled $475.3 million on the balance sheet; undiscounted scheduled lease payments were $607.3 million. The company also disclosed $17.2 million of standby letters of credit.
- Quarterly cash dividends and share repurchases remained suspended. The company raised $30 million before fees through an at-the-market stock offering in January 2021.
Changes, outlook, and risks
Performance improved from the pandemic-affected 2020 comparison, but FY2021 revenue and operating results remained below FY2019. The company recorded a $3.9 million loss on asset disposals and impairment in 2021, including a $2.2 million impairment of the Pasadena restaurant, which closed after year-end. FY2020 included $17.1 million of disposal and impairment losses, a $3.3 million gain on land-sale lease transactions, and a $2.3 million legal settlement gain.
Management expected to open as many as eight restaurants in fiscal 2022, with capital expenditures of approximately $80–$90 million. It anticipated challenging sales and staffing conditions in the first half of 2022, with a more favorable operating environment toward the latter half. The company expected 2022 marketing expenditures of 1.5%–2.0% of revenue. It stated that available cash and credit were expected to meet capital expenditure and working capital needs for at least the next 12 months, subject to operating and economic conditions.
Key risks include renewed COVID-19 disruptions, staffing shortages and wage inflation, food and commodity cost volatility, supply interruptions, competition, consumer spending and traffic changes, the ability to pass costs through menu pricing, and the high fixed obligations associated with restaurant leases. Further risks include food safety, alcohol licensing and regulation, litigation, cybersecurity incidents, and insurance exposure. Management cited no pandemic business-interruption insurance coverage.
The company reported effective internal controls over financial reporting; KPMG issued unqualified opinions on the 2021 financial statements and internal controls. Its independent auditor identified long-lived asset impairment assessment and workers’ compensation/general liability accrual estimation as critical audit matters.
Investor verification priorities
- Confirm the intended reporting period: this filing covers FY2021, not 2019 Q4.
- Assess whether sales and margins can recover toward pre-pandemic levels, given FY2021 revenue remained below FY2019.
- Review restaurant labor availability, wage and commodity inflation, and the sustainability of menu price increases.
- Check liquidity and covenant headroom against planned capital spending, lease commitments, and $50 million of debt.
- Evaluate the economics and execution risks of up to eight planned 2022 openings, and the Pasadena closure and asset sale.
- Consider share dilution from the 2021 ATM issuance and the continued suspension of dividends and repurchases.