BJ’s Restaurants, Inc. — Form 10-Q Summary
Period clarification: The supplied filing is for the 13 and 26 weeks ended June 28, 2022—not 2020 Q2 as indicated in the request metadata. The filing was signed August 1, 2022. Amounts below are in U.S. dollars; financial statement amounts are converted from thousands to millions unless otherwise noted.
Business context and reporting period
BJ’s owned and operated 214 restaurants in 29 states as of August 1, 2022. Its full-service casual dining menu includes deep-dish pizza, other entrees, desserts and proprietary craft beer. The filing compares the quarter and first half of 2022 with the corresponding 2021 periods.
Key financial results
| Metric | 13 weeks ended June 28, 2022 | 13 weeks ended June 29, 2021 | 26 weeks ended June 28, 2022 | 26 weeks ended June 29, 2021 |
|---|---|---|---|---|
| Revenue | $329.7m | $290.3m | $628.4m | $513.6m |
| Operating income (loss) | $3.1m | $6.7m | ($4.5m) | ($1.5m) |
| Net income | $0.3m | $6.4m | $1.8m | $3.2m |
| Diluted EPS | $0.01 | $0.26 | $0.07 | $0.13 |
| Operating margin | 1.0% | 2.3% | (0.7%) | (0.3%) |
| Net margin | 0.1% | 2.2% | 0.3% | 0.6% |
- Sales and comparable sales: Quarterly revenue rose 13.6%; comparable restaurant sales increased 11.7%, reflecting estimated traffic growth of 7.8% and average-check growth of 3.9%. First-half revenue rose 22.4%; comparable sales increased 21.3%, with traffic up 16.1% and average check up 5.2%. Management attributed traffic gains mainly to dining-room reopening compared with restrictions in 2021; average-check changes included approximately 6% menu price increases, partly offset by mix.
- Costs and margins: Quarterly cost of sales rose to 27.6% of revenue from 26.0%, and labor and benefits rose to 37.3% from 35.9%. First-half cost of sales rose to 27.4% from 25.6%, and labor and benefits to 38.1% from 36.2%. Food inflation, higher wages, training and overtime pressured costs. Occupancy and operating expense improved as a share of sales in both periods, and G&A and depreciation also declined as a share of revenue.
- Taxes and earnings: Quarterly pretax income was $2.5m, but tax expense was $2.2m; the reported effective tax rate was 88.2%. First-half pretax loss was $6.2m and tax benefit was $8.0m, producing a reported 128.4% benefit rate. The company cited FICA tip credits and their relationship to pretax earnings as the principal reason tax rates differed from the statutory rate.
- Cash flow: First-half operating cash flow was $30.2m, down from $53.5m. Capital expenditures were $31.1m, compared with $14.3m; operating cash flow less capital expenditures was approximately negative $0.9m. Cash decreased $0.8m to $37.8m. Investing cash use was $30.6m; financing cash use was $0.4m.
- Debt and liquidity: Long-term debt was $50.0m, unchanged from year-end; this excludes substantial operating lease obligations ($475.6m current and long-term combined). The $215m revolving facility had $50.0m drawn and $17.1m in letters of credit, leaving $147.9m available. The company reported covenant compliance. Current assets were $81.5m and current liabilities $191.5m; working capital was negative $110.0m and the current ratio 0.4:1.0.
Material changes, outlook and risks
- During the first half, BJ’s opened three restaurants and closed its Pasadena restaurant. It planned to open as many as eight restaurants in fiscal 2022, with leases, land-purchase agreements or letters of intent in place for the planned locations.
- Management forecast fiscal 2022 capital expenditures of approximately $90m–$95m, including up to eight openings and several remodels. Funding was expected from cash, operating cash flow and the credit facility. Management believed current cash and equivalents would cover capital expenditure and working-capital needs for at least 12 months, based on then-current operations.
- Inflation in food, labor, energy and operating costs was pressuring profitability. Menu price increases and purchasing and productivity efforts had partly offset inflation, but management cautioned that further price increases may be constrained by competition and consumer spending, and may not fully offset costs.
- COVID-19 remained a risk: most restaurants had few restrictions, but renewed restrictions, staffing disruption and supply-chain impacts could affect results. The company also cited labor availability and wage pressure, commodity-price volatility, weather and seasonality.
- The company had suspended quarterly cash dividends during the pandemic. It made no share repurchases in the first half; $24.4m remained under its repurchase authorization. Management said capital allocation, including repurchases and dividends, would be monitored as recovery progressed.
- Ordinary-course legal claims were disclosed; management did not expect their disposition to materially affect financial position, results or liquidity, while noting future outcomes could affect a particular period. No material changes to previously reported risk factors were identified.
Important facts for investors to verify
- Whether comparable-sales growth and traffic gains continued after the reopening-related comparisons, and whether pricing affected guest frequency or sales mix.
- Whether food and labor inflation, staffing constraints and operating costs continued to compress restaurant-level profitability.
- Actual restaurant openings, capital spending and cash generation against the $90m–$95m fiscal-year capex plan, including reliance on available credit.
- The sustainability of reported earnings and tax benefits given the unusually high interim effective tax rates and thin margins.
- Current borrowing, facility availability and covenant headroom, while accounting for lease commitments and the suspended dividend.