BJ’s Restaurants, Inc. — Form 10-Q summary
Reporting period: The filing covers the 13 and 39 weeks ended September 29, 2020, compared with periods ended October 1, 2019. This differs from the request metadata’s “2018 Q3”; the source filing is for 2020 Q3. Financial statements are unaudited. Amounts below are in millions unless otherwise noted.
Business context
BJ’s operated 210 company-owned restaurants across 29 states. COVID-19 restrictions sharply curtailed dine-in service and shifted sales toward takeout and delivery. As of November 2, 2020, 183 locations offered limited-capacity dining, 25 outdoor-only service, one takeout/delivery-only service, and one remained temporarily closed. All open locations offered takeout and delivery.
Financial results and liquidity
| Metric | Q3 2020 | Q3 2019 | 39 weeks 2020 | 39 weeks 2019 |
|---|---|---|---|---|
| Revenue | $198.9 | $278.7 | $581.5 | $870.4 |
| Operating income (loss) | $(12.7) | $3.3 | $(66.1) | $32.8 |
| Net income (loss) | $(6.6) | $3.7 | $(39.8) | $30.7 |
| Diluted EPS | $(0.30) | $0.18 | $(1.92) | $1.47 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $36.2 | $77.7 |
| Capital expenditures | Not provided for quarter | Not provided for quarter | $32.0 | $65.5 |
- Q3 revenue declined 28.6%; comparable restaurant sales fell 30.2%, with traffic down approximately 33.1% and average check up 2.9%. For the 39-week period, revenue fell 33.2% and comparable sales declined 34.5%.
- Q3 operating margin was approximately negative 6.4% versus positive 1.2% a year earlier; net margin was approximately negative 3.3% versus positive 1.3%. Year-to-date operating margin was negative 11.4% versus positive 3.8%.
- At September 29, cash was $64.9, long-term debt was $126.8, and revolving-credit availability was $90.1. The $235 million secured credit facility matures November 18, 2022; $18.1 million of letters of credit were outstanding. Total operating lease obligations were $488.8, including current obligations.
- Current assets were $93.4 and current liabilities $163.5; working capital was negative $70.1 and the current ratio was 0.6. Management said available cash and credit, together with spending controls, were expected to cover capital expenditure and working-capital needs for at least 12 months, based on current operations.
- Cash increased $42.5 over the 39 weeks. Financing cash flow included $67.4 net proceeds from the private stock placement; operating cash flow fell from $77.7 to $36.2 year over year.
Material changes and unusual items
- COVID-19 drove dining-room closures, capacity restrictions, lower traffic, temporarily closed locations, and cost and liquidity actions. The company temporarily laid off approximately 16,000 hourly employees; approximately 10,000 had returned by November 2.
- The company recorded $14.5 of year-to-date asset disposal and impairment charges, including a $12.0 impairment related to four restaurants and a $1.2 reserve for beer spoilage. It warned further impairments could occur if conditions worsen.
- Q3 included a $1.9 gain on lease transactions from a sale-leaseback and a $2.3 gain from legal settlements. These items benefited reported results and are not necessarily recurring.
- In May, the company sold 3.5 million shares for $70.0 gross proceeds and issued Act III a five-year warrant for 875,000 shares at $27 per share. The placement generated approximately $67.4 net proceeds and increased outstanding shares.
- The credit facility was amended, including temporary covenant changes and a minimum-liquidity requirement. The company reported covenant compliance at quarter-end. The scheduled financial-ratio tests were to resume in fiscal Q4 2020.
- Quarterly dividends and share repurchases were suspended. The company also suspended 401(k) matching contributions and deferred rent payments; rent payments resumed in July after negotiating concessions. A $1.9 million Q3 legal-settlement gain and stock grants to employees were among other period-specific items.
- The prior food-distribution agreement with DMA expired June 30, 2020; US Foods became the distributor under an agreement extending to July 2023.
Outlook, commentary, and risks
No specific revenue or earnings guidance was provided. Management said the duration and effects of the pandemic, government restrictions, consumer behavior, and the pace of recovery remained uncertain; easing restrictions might not restore pre-pandemic sales or profits, and restrictions could be reinstated. The company delayed or canceled most fiscal 2020 openings, opened two restaurants during the fiscal year by November 2, and anticipated a modest increase in new restaurants in fiscal 2021. It also anticipated another sale-leaseback of approximately $3.8 million in Q4, following completed transactions totaling $8.0 million.
Key risks include continued pandemic disruption, limited dining capacity, changes in off-premise demand and third-party delivery commissions, liquidity and credit-market access, food and labor cost inflation, and potential additional restaurant or goodwill impairment. Management’s liquidity assessment is conditional on current operating levels and planned spending controls.
Investor facts to verify
- Confirm the correct period: the supplied filing is a 2020 Q3 10-Q, not a 2018 Q3 filing.
- Track comparable-sales and traffic trends, restaurant capacity and the mix and profitability of takeout and delivery.
- Monitor cash burn, revolver availability, covenant tests, liquidity requirements, and the impact of lease obligations.
- Assess whether impairments, pandemic-related costs, legal gains, sale-leaseback gains, and CARES Act tax benefits affect comparability of results.
- Verify the timing of dividend and repurchase resumption, planned restaurant openings, and completion of the anticipated Q4 sale-leaseback.