BJ’s Restaurants, Inc. — Form 10-Q Summary
Period discrepancy: The request identifies 2019 Q2, but the supplied filing is for the thirteen and twenty-six weeks ended June 29, 2021 (filed August 2, 2021). Comparisons below are to the corresponding periods ended June 30, 2020.
Business context and reporting period
BJ’s operated 212 company-owned restaurants across 29 states as of August 2, 2021; one location remained temporarily closed and was expected to reopen later that month. The business sells restaurant food and beverages and third-party retail beer.
Financial performance and liquidity
| Metric | 13 weeks ended June 29, 2021 | 26 weeks ended June 29, 2021 |
|---|---|---|
| Revenue | $290.3 million | $513.6 million |
| Net income (loss) | $6.4 million | $3.2 million |
| Diluted EPS | $0.26 | $0.13 |
| Operating income (loss) | $6.7 million | $(1.5) million |
| Operating margin | 2.3% | (0.3)% |
| Net margin | 2.2% | 0.6% |
- Second-quarter revenue rose 126.7% year over year; comparable restaurant sales increased 121.9%, reflecting traffic growth of 90.2% and average-check growth of 31.7%. First-half revenue rose 34.2%, with comparable sales up 32.9%.
- Second-quarter cost of sales was 26.0% of revenue versus 25.0% a year earlier, reflecting menu mix and higher meat, seafood and liquor costs. Labor and benefits were 35.9% versus 40.2%; occupancy and operating costs were 23.3% versus 35.8%, benefiting from sales leverage.
- First-half operating results remained slightly negative, while net income was positive in part because of a $7.5 million income-tax benefit. The reported 176.2% year-to-date tax-benefit rate was affected by tax credits and excess tax deductions on stock compensation.
- First-half operating cash flow was $53.5 million, versus $14.6 million in the prior year; capital expenditures were $14.3 million, versus $24.9 million. Cash increased $36.3 million to $88.0 million.
- At June 29, 2021, debt was $81.8 million. The $215 million revolving facility had $114.1 million available after borrowings and letters of credit. The facility matures November 18, 2022; the company reported covenant compliance.
- Current assets were $131.6 million and current liabilities were $196.2 million; working capital was negative $64.6 million and the current ratio was 0.7. Operating lease obligations totaled $480.0 million, split between current and long-term balances.
Material changes versus the prior comparable period
- Restaurants’ recovery from pandemic-related dining restrictions drove the substantial year-over-year second-quarter sales rebound. The prior-year quarter included curtailed dine-in operations.
- Second-quarter net income compared with a $29.0 million loss; first-half net income compared with a $33.2 million loss. The prior-year periods included $11.4 million and $14.3 million, respectively, in asset disposal and impairment losses, versus $0.3 million and $0.5 million in 2021.
- First-half debt declined from $116.8 million at December 29, 2020 to $81.8 million. Cash rose from $51.7 million to $88.0 million.
- The company sold 703,399 shares through an at-the-market offering in January 2021 for $30 million before fees. Share repurchases and quarterly cash dividends remained suspended.
Outlook, risks and unusual items
- Management said current cash and expected operating resources should meet capital expenditure and working-capital needs for at least the next twelve months, based on current operations and reduced development spending. This is not formal earnings guidance.
- The company planned to open eight to ten restaurants in fiscal 2022 and had secured signed leases, land purchase agreements or letters of intent for those locations. Two restaurants opened in fiscal 2021 as of August 2, 2021.
- Management warned that COVID-19 outbreaks could again lead to capacity limits, social distancing or dining-room suspensions. Staffing shortages and illness, supplier disruption, food and supply inflation, and higher labor costs could affect operations and margins.
- Inflation in food, labor, energy and occupancy may not be fully offset by menu pricing; pricing could also affect customer visits and purchasing. A hypothetical 1% interest-rate change on current facility borrowings would affect annual net income by approximately $0.6 million.
- Ordinary-course legal claims remain outstanding; management did not expect their disposition to materially affect financial position, results or liquidity, while noting outcomes could affect a particular period. No material changes to previously disclosed risk factors were reported.
- The filing states that a one-time second-quarter adjusted earnings-before-interest, taxes, depreciation and rent covenant test was passed. Minimum fixed-charge and lease-adjusted leverage covenant testing was scheduled to resume after third-quarter 2021 results.
Important facts for investors to verify
- Confirm the intended filing period: the supplied document is 2021 Q2, not 2019 Q2.
- Track comparable sales, customer traffic and average check as pandemic-related comparisons normalize.
- Monitor food, labor and supply inflation, staffing availability, and the company’s ability to sustain margin improvement.
- Review cash generation, available revolver capacity, covenant requirements and the November 2022 credit-facility maturity.
- Assess the planned 2022 restaurant openings alongside capital spending and liquidity priorities.
- Consider dilution from the 2021 share offering and equity compensation, and whether dividends or repurchases resume.