BJ’s Restaurants, Inc. — Form 10-Q Summary
Period discrepancy: The request metadata says 2019 Q3, but the supplied filing is for the 13 and 39 weeks ended September 28, 2021. This summary reflects the filing provided.
Business context and reporting period
BJ’s operated 212 company-owned casual dining restaurants across 29 states as of November 1, 2021. The filing compares the third quarter and year-to-date 2021 with the corresponding 2020 periods. Results remain affected by the COVID-19 recovery and reopening of dining rooms.
Key financial metrics
| Metric | 13 weeks ended Sep. 28, 2021 | 13 weeks ended Sep. 29, 2020 | 39 weeks ended Sep. 28, 2021 | 39 weeks ended Sep. 29, 2020 |
|---|---|---|---|---|
| Revenue | $282.2 million | $198.9 million | $795.8 million | $581.5 million |
| Operating income (loss) | $(7.0) million | $(12.7) million | $(8.5) million | $(66.1) million |
| Net income (loss) | $(2.2) million | $(6.6) million | $1.1 million | $(39.8) million |
| Diluted EPS | $(0.09) | $(0.30) | $0.04 | $(1.92) |
| Operating cash flow | Not separately presented for the quarter | $46.2 million | $36.2 million |
- Third-quarter comparable restaurant sales increased 41.8%, with traffic up approximately 30.1% and average check up 11.7%. Year-to-date comparable sales rose 35.8%, with traffic up 22.5% and average check up 13.3%.
- Third-quarter operating margin was (2.5%), versus (6.4%) a year earlier; year-to-date it was (1.1%), versus (11.4%). Net margin was (0.8%) in the quarter and 0.1% year to date.
- Quarterly cost of sales rose to 27.2% of revenue from 24.6%, primarily reflecting menu mix and higher meat, seafood and liquor costs. Year-to-date cost of sales was 26.2%, compared with 24.9%.
- Cash and cash equivalents were $59.8 million at September 28, 2021, up from $51.7 million at December 29, 2020. Current liabilities exceeded current assets by $72.9 million; the current ratio was 0.6:1.
- Long-term debt was $71.8 million, down from $116.8 million at fiscal year-end 2020. The $215 million credit facility had $124.4 million of available borrowing and $18.8 million of letters of credit outstanding. Operating lease obligations totaled $483.4 million, current and long-term combined.
- Year-to-date investing cash use was $25.1 million, including $25.2 million of capital expenditures. Financing used $12.9 million, compared with $34.5 million provided in the prior-year period.
Material changes and unusual items
- Revenue growth reflected reopened dining rooms and stronger traffic, as well as new restaurants. The prior-year comparison was affected by pandemic-related dining restrictions.
- Despite higher food costs, labor, occupancy and operating expenses improved as a percentage of revenue, benefiting from sales leverage. Labor availability, training and overtime remained cost pressures.
- Year-to-date impairment and disposal losses declined to $3.2 million from $14.5 million. The 2020 period included impairment charges on five restaurants and beer spoilage; 2021 charges primarily related to one restaurant.
- The 2020 comparison included a $1.9 million lease-transaction gain and a $2.3 million legal-settlement gain, neither recorded in 2021.
- The year-to-date 2021 tax benefit was $12.8 million, including the effects of FICA tip credits, stock-based compensation tax deductions and the employee retention credit. The filing reports a 108.9% effective tax-benefit rate.
- The company raised $30 million gross through an at-the-market share offering in January 2021. Share repurchases and regular cash dividends remain suspended.
Outlook, risks and contingencies
- Management planned to open at least eight restaurants in fiscal 2022 and said it had signed leases, land purchase agreements or letters of intent for all planned locations. Two new restaurants opened during the first 39 weeks of 2021; the Richmond, Virginia restaurant also reopened.
- Management said existing cash and credit availability were expected to meet capital expenditure and working capital needs for at least 12 months, while noting results depend on economic conditions and factors outside its control. No revenue or earnings guidance was provided in the supplied filing.
- COVID-19 could again lead to operating restrictions and could disrupt staffing or supply. The filing also cites labor shortages and wage pressures, food and commodity inflation, supply interruptions, interest-rate exposure, and weather and seasonality risks.
- The company was in compliance with credit-facility covenants at quarter-end. The facility requires minimum liquidity through December 2021 and contains leverage, fixed-charge coverage and capital expenditure requirements. A 1% interest-rate change was estimated to affect annual net income by approximately $0.5 million.
- Management said ordinary-course legal matters were not expected to materially affect financial position, results or liquidity, while acknowledging outcomes could affect a particular quarter or year. No material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Confirm the intended filing period: the supplied report is Q3 2021, not Q3 2019.
- Track comparable sales, traffic and average check alongside food, labor and other operating cost trends.
- Monitor liquidity, covenant headroom, debt repayments and the substantial operating lease commitments.
- Assess whether planned 2022 openings proceed as expected and whether labor and commodity pressures affect margins.
- Review the suspension of dividends and repurchases, and the effect of the 2021 share issuance on dilution.