BJ’s Restaurants, Inc. — Form 10-Q Summary
Period clarification: The filing is for the 13 weeks ended March 29, 2022, not 2020 Q1 as stated in the request metadata. The comparable period ended March 30, 2021. Figures below are in U.S. dollars; financial statement amounts are in millions unless noted.
Business context and reporting period
BJ’s owned and operated 213 restaurants in 29 states as of May 2, 2022. The company operates casual-dining restaurants featuring a broad menu and proprietary craft beer. The interim statements are unaudited; management cautions that quarterly results may not indicate full-year performance.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $298.7 | $223.3 |
| Operating loss | ($7.7) | ($8.2) |
| Net income (loss) | $1.5 | ($3.1) |
| Diluted earnings (loss) per share | $0.06 | ($0.14) |
| Net cash from operating activities | $0.6 | $14.2 |
| Capital expenditures | $12.1 | $6.9 |
Revenue increased 33.8%, including comparable restaurant sales growth of 33.9%. Comparable sales reflected guest traffic growth of approximately 26.4% and average-check growth of approximately 7.5%. The filing attributes much of the traffic increase to dining-room reopenings compared with restrictions in the prior-year period.
Operating loss improved by $0.5 million, but cost pressures remained: cost of sales rose to 27.3% of revenue from 25.1%, and labor and benefits rose to 38.9% from 36.6%. Occupancy and operating costs fell to 24.0% of revenue from 26.8%; general and administrative costs fell to 6.1% from 6.8%. Net income included a $10.2 million income tax benefit; the effective tax benefit rate was 116.8%, primarily affected by FICA tip credits and their relationship to pretax earnings.
Cash and cash equivalents were $27.2 million at March 29, 2022, down from $38.5 million at December 28, 2021. Net working capital was negative $112.1 million and the current ratio was 0.4:1. The company reported $50.0 million of long-term debt under a $215 million revolving facility, with $147.8 million available after letters of credit. It was in compliance with its credit covenants. Operating lease obligations totaled $470.9 million, including current and long-term amounts.
Changes versus the prior comparable period
- Higher sales reflected reopened dining rooms, traffic recovery, higher average checks, and sales from new or reopened restaurants.
- Food-cost inflation and higher wages, training, and overtime increased cost of sales and labor as shares of revenue.
- Higher revenue helped leverage occupancy, operating, general and administrative, and depreciation costs as percentages of sales.
- Operating cash flow declined $13.6 million, primarily due to payment timing for accounts payable and accrued expenses, partly offset by receivable collections and higher net income.
- Investing cash use increased as capital spending rose, particularly for new restaurants and remodels. The prior-year period included $29.0 million of net proceeds from a common-stock issuance; no such proceeds were reported in Q1 2022.
Outlook, risks, and unusual items
Management expected fiscal 2022 capital expenditures of approximately $90 million to $95 million, excluding anticipated tenant-improvement allowances and sale-leaseback proceeds. The plan included up to eight restaurant openings and several remodels. As of May 2, two restaurants had opened in fiscal 2022 and the Pasadena restaurant had closed. The company said it expected available cash to meet capital expenditure and working-capital needs for at least 12 months, based on current operations, and expected to fund net capital spending with cash, operating cash flow, and its credit facility.
Management cited continuing risks from COVID-19 outbreaks or renewed restrictions, staffing shortages, wage competition, commodity and supply-cost inflation, and uncertainty about passing cost increases through menu pricing without affecting guest demand. The company had experienced product shortages and higher costs. It noted potential supply-chain disruption, seasonal and severe-weather effects, and sensitivity to floating interest rates; a hypothetical 1% change in facility rates was estimated to affect annual net income by approximately $0.4 million at the reported borrowing level.
Share repurchases and quarterly cash dividends remained suspended. No shares were repurchased during the quarter. Management reported no material changes to previously disclosed risk factors, no off-balance-sheet arrangements, and no material adverse effect expected from ordinary-course legal proceedings, while noting that outcomes could affect a particular period.
Important facts for investors to verify
- Confirm the intended reporting period: the supplied filing is Q1 2022, despite the request’s 2020 Q1 label.
- Assess how much comparable-sales growth reflects reopening and recovery effects versus durable traffic and pricing trends.
- Monitor food and labor inflation, menu-price actions, and their effect on margins and guest demand.
- Evaluate the sustainability of positive net income given the large tax benefit and the quarter’s low operating cash flow.
- Track liquidity, capital spending, restaurant-opening execution, and credit-facility usage alongside substantial operating lease obligations.