BJ’s Restaurants, Inc. — Form 10-Q Summary
Business context and reporting period
The filing covers the 13 weeks ended April 3, 2012, compared with the 13 weeks ended March 29, 2011. This does not match the request metadata of “2010 Q1”; the filing itself reports first-quarter 2012. BJ’s operated 119 restaurants as of May 7, 2012.
Financial results
Amounts are in millions except per-share data. The balance-sheet comparison is with January 3, 2012.
| Metric | Q1 2012 | Comparable period / change |
|---|---|---|
| Revenue | $167.6 | $144.9; up 15.7% |
| Operating income | $11.8 | $10.1; operating margin 7.1% vs. 7.0% |
| Net income | $8.6 | $7.2; net margin 5.2% vs. 5.0% |
| Diluted EPS | $0.30 | $0.25 |
| Operating cash flow | $22.2 | $7.8 |
| Capital expenditures | $18.7 | $15.2 |
| Cash and cash equivalents | $22.9 | $22.4 at Jan. 3, 2012 |
| Marketable securities | $32.0 | $30.7 at Jan. 3, 2012 |
| Current liabilities / current ratio | $69.0 / 1.2:1 | $74.2 / 1.2:1 at Jan. 3, 2012 |
No borrowings were outstanding on the $75 million revolving credit facility; $8.9 million of letters of credit were outstanding. The company reported $15.0 million of net working capital. It had no material funded debt disclosed in the supplied filing text.
Changes and operating performance
- Revenue growth included approximately $18.1 million from restaurants outside the comparable-sales base and $4.6 million, or 3.3%, in comparable restaurant sales. Comparable sales reflected an estimated 3.0% menu-price benefit, 0.2% traffic benefit, and 0.1% from purchase incidence and mix.
- Cost of sales was 24.6% of revenue versus 24.7%; labor and benefits were 34.9% versus 34.8%; occupancy and operating costs were 20.7% versus 20.2%. G&A improved to 6.4% from 6.8%, while depreciation and amortization rose to 5.7% from 5.5%.
- Management attributed much of the cost growth to 13 restaurants opened since the year-earlier quarter. Two restaurants opened during the quarter; a third opened April 23, after quarter-end.
- Operating cash flow increased year over year, which management attributed partly to higher net income and depreciation and the timing of payments and receipts, including the prior fiscal year’s extra week.
Outlook, risks, and contingencies
- Management expected approximately 3% annualized menu-price increases in fiscal 2012 and an effective tax rate of approximately 29%–30%.
- The company targeted low-double-digit growth in restaurant operating weeks in each of fiscal 2012 and 2013, planned up to 16 restaurant openings in fiscal 2012 including one relocation, and forecast fiscal 2012 capital expenditures of approximately $90–$95 million, net of expected landlord allowances. It expected $11–$12 million in tenant-improvement allowances.
- Management said cash, investments, operating cash flow, expected landlord allowances, and the credit facility should fund planned activity through the next 12 months, while noting that expansion depends on operating cash generation, landlord payments, financing access, and construction costs.
- Risks include food and commodity inflation, labor and benefit costs, consumer spending and traffic, acceptance of menu-price increases, competition, weather and seasonality, new-restaurant execution, and reliance on contract brewers. Many leases are operating leases and therefore not recorded as balance-sheet debt under the accounting applied in this filing.
- The company disclosed routine claims and two California labor-related class actions seeking court approval of settlements; it said the settlement terms were not material. A separate dispute involved a $1.2 million unpaid tenant-improvement allowance; the company had filed suit and was negotiating with the landlord, and said it did not expect a material liquidity effect.
- Unrecognized tax benefits were approximately $0.9 million; management anticipated a $0.6 million decrease in the liability within 12 months. No dividends or stock repurchases were planned.
Key facts for investors to verify
- Confirm the period: the filing is Q1 2012, notwithstanding the request metadata stating 2010 Q1.
- Track comparable sales, traffic, pricing, and whether customers accept further price increases amid inflation.
- Monitor restaurant openings, capital spending, cash generation, and receipt of expected landlord allowances.
- Assess commodity, labor, occupancy, and contract-brewing cost trends and their effects on margins.
- Review the $1.2 million landlord allowance dispute, labor settlements, and any subsequent developments in tax matters.