Consolidated Results of Operations
The following table summarizes key components of our results of operations for the periods indicated as a percentage of our total revenue, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant sales.
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|
|
|
|
|
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|
|
Twelve Weeks Ended
|
|
Twenty-eight Weeks Ended
|
|
|
July 10,
2017
|
|
July 11,
2016
|
|
July 10,
2017
|
|
July 11,
2016
|
Revenue:
|
|
|
|
|
|
|
|
|
Restaurant sales
|
|
99.9
|
%
|
|
99.9
|
%
|
|
99.9
|
%
|
|
99.9
|
%
|
Royalty fees
|
|
0.1
|
%
|
|
0.1
|
%
|
|
0.1
|
%
|
|
0.1
|
%
|
Total revenue
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Operating expenses
(1)
:
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|
|
|
|
|
|
|
|
Restaurant operating costs (excluding depreciation and amortization)
(1)
:
|
Cost of sales
|
|
29.3
|
%
|
|
30.2
|
%
|
|
29.3
|
%
|
|
30.0
|
%
|
Labor
|
|
29.8
|
%
|
|
28.4
|
%
|
|
29.8
|
%
|
|
28.7
|
%
|
Store operating expenses
|
|
21.9
|
%
|
|
19.7
|
%
|
|
21.4
|
%
|
|
19.4
|
%
|
General and administrative expenses
|
|
9.6
|
%
|
|
11.0
|
%
|
|
10.4
|
%
|
|
11.4
|
%
|
Depreciation
|
|
5.6
|
%
|
|
5.0
|
%
|
|
5.6
|
%
|
|
5.0
|
%
|
Amortization
|
|
0.5
|
%
|
|
0.6
|
%
|
|
0.5
|
%
|
|
0.6
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%
|
Pre-opening costs
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|
0.9
|
%
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|
0.8
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%
|
|
0.8
|
%
|
|
0.9
|
%
|
Loss from disposal of equipment
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|
1.0
|
%
|
|
0.2
|
%
|
|
0.6
|
%
|
|
0.2
|
%
|
Total operating expenses
|
|
98.5
|
%
|
|
95.8
|
%
|
|
98.3
|
%
|
|
96.2
|
%
|
Income from operations
|
|
1.5
|
%
|
|
4.2
|
%
|
|
1.7
|
%
|
|
3.8
|
%
|
Other income and expenses:
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|
|
|
|
|
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|
Interest expense, net
|
|
1.4
|
%
|
|
1.3
|
%
|
|
1.4
|
%
|
|
1.4
|
%
|
Other income
|
|
(0.0
|
)%
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|
(0.0
|
)%
|
|
(0.0
|
)%
|
|
(0.0
|
)%
|
Total other income and expenses
|
|
1.3
|
%
|
|
1.3
|
%
|
|
1.4
|
%
|
|
1.3
|
%
|
Income before provision for income taxes
|
|
0.1
|
%
|
|
3.0
|
%
|
|
0.3
|
%
|
|
2.5
|
%
|
Provision (benefit) for income taxes
|
|
(0.6
|
)%
|
|
1.2
|
%
|
|
(0.1)
|
%
|
|
0.8
|
%
|
Net income
|
|
0.8
|
%
|
|
1.8
|
%
|
|
0.4
|
%
|
|
1.8
|
%
|
|
|
|
|
|
|
|
|
|
(1) As a percentage of restaurant sales.
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Twelve Weeks Ended
July 10, 2017
compared to
Twelve Weeks Ended
July 11, 2016
The following table presents selected consolidated comparative results of operations from our unaudited condensed consolidated financial statements for the
twelve weeks ended
July 10, 2017
compared to the
twelve weeks ended
July 11, 2016
:
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|
|
|
|
|
|
|
|
|
|
|
Twelve Weeks Ended
|
|
|
|
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|
July 10,
2017
|
|
July 11,
2016
|
|
Increase / (Decrease)
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|
|
|
Dollars
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
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|
(Dollars in thousands)
|
Consolidated Statement of Operations Data:
|
|
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|
|
|
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|
Revenue:
|
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|
|
|
|
|
|
|
Restaurant sales
|
|
$
|
74,261
|
|
|
$
|
66,222
|
|
|
$
|
8,039
|
|
|
12.1
|
%
|
Royalty fees
|
|
44
|
|
|
51
|
|
|
(7
|
)
|
|
(13.7
|
)%
|
Total revenue
|
|
74,305
|
|
|
66,273
|
|
|
8,032
|
|
|
12.1
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Restaurant operating costs (excluding depreciation and amortization):
|
Cost of sales
|
|
21,791
|
|
|
19,995
|
|
|
1,796
|
|
|
9.0
|
%
|
Labor
|
|
22,113
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|
|
18,810
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|
3,303
|
|
|
17.6
|
%
|
Store operating expenses
|
|
16,242
|
|
|
13,075
|
|
|
3,167
|
|
|
24.2
|
%
|
General and administrative expenses
|
|
7,124
|
|
|
7,270
|
|
|
(146
|
)
|
|
(2.0
|
)%
|
Depreciation
|
|
4,161
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|
|
3,292
|
|
|
869
|
|
|
26.4
|
%
|
Amortization
|
|
350
|
|
|
373
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|
|
(23
|
)
|
|
(6.2
|
)%
|
Pre-opening costs
|
|
679
|
|
|
552
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|
|
127
|
|
|
23.0
|
%
|
Loss from disposal of equipment
|
|
748
|
|
|
100
|
|
|
648
|
|
|
648.0
|
%
|
Total operating expenses
|
|
73,208
|
|
|
63,467
|
|
|
9,741
|
|
|
15.3
|
%
|
Income from operations
|
|
1,097
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|
|
2,806
|
|
|
(1,709
|
)
|
|
(60.9
|
)%
|
Other income and expenses:
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
1,018
|
|
|
861
|
|
|
157
|
|
|
18.2
|
%
|
Other income
|
|
(20
|
)
|
|
(20
|
)
|
|
—
|
|
|
—
|
%
|
Total other income and expenses
|
|
998
|
|
|
841
|
|
|
157
|
|
|
18.7
|
%
|
Income before provision for income taxes
|
|
99
|
|
|
1,965
|
|
|
(1,866
|
)
|
|
(95.0
|
)%
|
Provision (benefit) for income taxes
|
|
(480
|
)
|
|
764
|
|
|
(1,244
|
)
|
|
(162.8
|
)%
|
Net income
|
|
$
|
579
|
|
|
$
|
1,201
|
|
|
$
|
(622
|
)
|
|
(51.8
|
)%
|
Restaurant sales.
The following table summarizes the growth in restaurant sales from the
twelve weeks ended
July 11, 2016
to the
twelve weeks ended
July 10, 2017
(dollars in thousands):
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Net Sales
|
Restaurant sales for twelve weeks ended July 11, 2016
|
|
$
|
66,222
|
|
Incremental restaurant sales increase due to:
|
|
|
Comparable restaurant sales
|
|
(2,385
|
)
|
Restaurants not in comparable restaurant base
|
|
10,424
|
|
Restaurant sales for the twelve weeks ended July 10, 2017
|
|
$
|
74,261
|
|
Restaurant sales increased by
$8.0 million
, or
12.1%
, in the
twelve weeks ended
July 10, 2017
compared to the
twelve weeks ended
July 11, 2016
. Restaurants not in the comparable restaurant base and other sales accounted for
$10.4 million
of this increase. Comparable restaurant sales decreased
$2.4 million
, or
3.8%
, in the
twelve weeks ended
July 10, 2017
, comprised primarily of a
5.0%
decrease in transactions and product mix offset by a
1.2%
increase in price.
Royalty fees.
Royalty fees remained flat in the
twelve weeks ended
July 10, 2017
compared to the
twelve weeks ended
July 11, 2016
.
Cost of sales.
Cost of sales
increased
$1.8 million
in the
twelve weeks ended
July 10, 2017
compared to the
twelve weeks ended
July 11, 2016
, due primarily to the increase in restaurant sales. As a percentage of restaurant sales, cost of sales decreased from
30.2%
in the
twelve weeks ended
July 11, 2016
to
29.3%
in the
twelve weeks ended
July 10, 2017
. This decrease was primarily driven by lower costs in poultry, paper products and beef, offset by higher costs in seafood.
Labor.
Labor
increased
by
$3.3 million
in the
twelve weeks ended
July 10, 2017
compared to the
twelve weeks ended
July 11, 2016
, due primarily to opening
41
new Company-owned restaurants. As a percentage of restaurant sales, labor increased from
28.4%
in the
twelve weeks ended
July 11, 2016
to
29.8%
in the
twelve weeks ended
July 10, 2017
. The increase was primarily driven by the dilutive effect on margins from our newest restaurants which, on average, initially operate at less than system-wide average sales volumes as well as an increase in wage rates.
Store operating expenses.
Store operating expenses
increased
by
$3.2 million
in the
twelve weeks ended
July 10, 2017
compared to the
twelve weeks ended
July 11, 2016
, due primarily to opening
41
new Company-owned restaurants. As a percentage of restaurant sales, store operating expense increased from
19.7%
in the
twelve weeks ended
July 11, 2016
to
21.9%
in the
twelve weeks ended
July 10, 2017
. This increase was primarily attributable to the dilutive effect on margins from our newest restaurants, which, on average, initially operate at less than system-wide average sales volumes as well as increased costs related to in-store technology investments and marketing.
General and administrative expenses.
General and administrative expenses
decreased
by
$0.1 million
in the
twelve weeks ended
July 10, 2017
compared to the
twelve weeks ended
July 11, 2016
. As a percentage of revenue, general and administrative expenses decreased from
11.0%
in the
twelve weeks ended
July 11, 2016
to
9.6%
in the
twelve weeks ended
July 10, 2017
. The decrease was primarily driven by lower consulting fees related to a variety of one-time projects from the prior year and lower variable incentive compensation.
Depreciation.
Depreciation
increased
by
$0.9 million
in the
twelve weeks ended
July 10, 2017
compared to the
twelve weeks ended
July 11, 2016
, due primarily to opening
41
new Company-owned restaurants. As a percentage of revenue, depreciation increased from
5.0%
in the
twelve weeks ended
July 11, 2016
to
5.6%
in the
twelve weeks ended
July 10, 2017
primarily due to corporate and in-store technology investments which typically have shorter useful lives.
Amortization.
Amortization remained flat in the
twelve weeks ended
July 10, 2017
compared to the
twelve weeks ended
July 11, 2016
.
Pre-opening costs.
Pre-opening costs
increased
by
$0.1 million
in the
twelve weeks ended
July 10, 2017
compared to the
twelve weeks ended
July 11, 2016
. As a percent of revenue, pre-opening costs increased from
0.8%
in the
twelve weeks ended
July 11, 2016
to
0.9%
in the
twelve weeks ended
July 10, 2017
.
Interest expense.
Interest expense
increased
by
$0.2 million
in the
twelve weeks ended
July 10, 2017
compared to the
twelve weeks ended
July 11, 2016
, due primarily to increased interest from deemed landlord financing.
Provision (benefit) for income taxes.
Benefit for income taxes was
$0.5 million
for the
twelve weeks ended
July 10, 2017
compared to provision for income taxes of
$0.8 million
for the
twelve weeks ended
July 11, 2016
. Our tax expense for the year typically remains relatively constant as it primarily reflects the accrual of income tax expense related to a valuation allowance in connection with the tax amortization of the Company’s goodwill that was not available to offset existing deferred tax assets. Due to the uncertain timing of the reversal of this temporary difference, it cannot be considered as a source of future taxable income for purposes of determining a valuation allowance; therefore the deferred tax liability cannot offset deferred tax assets. The comparison of our effective tax rate between periods is significantly impacted by the level of pre-tax income earned and projected for the year.
Twenty-eight Weeks Ended
July 10, 2017
compared to
Twenty-eight Weeks Ended
July 11, 2016
The following table presents selected consolidated comparative results of operations from our unaudited condensed consolidated financial statements for the
twenty-eight weeks ended
July 10, 2017
compared to the
twenty-eight weeks ended
July 11, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-eight Weeks Ended
|
|
|
|
|
|
July 10,
2017
|
|
July 11,
2016
|
|
Increase / (Decrease)
|
|
|
|
Dollars
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Restaurant sales
|
|
$
|
164,765
|
|
|
$
|
146,570
|
|
|
$
|
18,195
|
|
|
12.4
|
%
|
Royalty fees
|
|
101
|
|
|
114
|
|
|
(13
|
)
|
|
(11.4
|
)%
|
Total revenue
|
|
164,866
|
|
|
146,684
|
|
|
18,182
|
|
|
12.4
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Restaurant operating costs (excluding depreciation and amortization):
|
Cost of sales
|
|
48,287
|
|
|
43,984
|
|
|
4,303
|
|
|
9.8
|
%
|
Labor
|
|
49,065
|
|
|
42,109
|
|
|
6,956
|
|
|
16.5
|
%
|
Store operating expenses
|
|
35,291
|
|
|
28,448
|
|
|
6,843
|
|
|
24.1
|
%
|
General and administrative expenses
|
|
17,109
|
|
|
16,715
|
|
|
394
|
|
|
2.4
|
%
|
Depreciation
|
|
9,213
|
|
|
7,284
|
|
|
1,929
|
|
|
26.5
|
%
|
Amortization
|
|
839
|
|
|
873
|
|
|
(34
|
)
|
|
(3.9
|
)%
|
Pre-opening costs
|
|
1,246
|
|
|
1,292
|
|
|
(46
|
)
|
|
(3.6
|
)%
|
Loss from disposal of equipment
|
|
1,007
|
|
|
337
|
|
|
670
|
|
|
198.8
|
%
|
Total operating expenses
|
|
162,057
|
|
|
141,042
|
|
|
21,015
|
|
|
14.9
|
%
|
Income from operations
|
|
2,809
|
|
|
5,642
|
|
|
(2,833
|
)
|
|
(50.2
|
)%
|
Other income and expenses:
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
2,386
|
|
|
1,983
|
|
|
403
|
|
|
20.3
|
%
|
Other income
|
|
(49
|
)
|
|
(47
|
)
|
|
(2
|
)
|
|
4.3
|
%
|
Total other income and expenses
|
|
2,337
|
|
|
1,936
|
|
|
401
|
|
|
20.7
|
%
|
Income before provision for income taxes
|
|
472
|
|
|
3,706
|
|
|
(3,234
|
)
|
|
(87.3
|
)%
|
Provision (benefit) for income taxes
|
|
(126
|
)
|
|
1,109
|
|
|
(1,235
|
)
|
|
(111.4
|
)%
|
Net income
|
|
$
|
598
|
|
|
$
|
2,597
|
|
|
$
|
(1,999
|
)
|
|
(77.0
|
)%
|
Restaurant sales.
The following table summarizes the growth in restaurant sales from the
twenty-eight weeks ended
July 11, 2016
to the
twenty-eight weeks ended
July 10, 2017
(dollars in thousands):
|
|
|
|
|
|
|
|
Net Sales
|
Restaurant sales for the twenty-eight weeks ended July 11, 2016
|
|
$
|
146,570
|
|
Incremental restaurant sales increase due to:
|
|
|
Comparable restaurant sales
|
|
(4,918
|
)
|
Restaurants not in comparable restaurant base
|
|
23,113
|
|
Restaurant sales for the twenty-eight weeks ended July 10, 2017
|
|
$
|
164,765
|
|
Restaurant sales increased by
$18.2 million
, or
12.4%
, in the
twenty-eight weeks ended
July 10, 2017
compared to the
twenty-eight weeks ended
July 11, 2016
. Restaurants not in the comparable restaurant base and other sales accounted for
$23.1 million
of this increase. Comparable restaurant sales decreased
$4.9 million
, or
3.6%
, in the
twenty-eight weeks ended
July 10, 2017
, comprised primarily of a
4.8%
decrease in transactions and product mix offset by a
1.2%
increase in price.
Royalty fees.
Royalty fees remained flat in the
twenty-eight weeks ended
July 10, 2017
compared to the
twenty-eight weeks ended
July 11, 2016
.
Cost of sales.
Cost of sales
increased
$4.3 million
in the
twenty-eight weeks ended
July 10, 2017
compared to the
twenty-eight weeks ended
July 11, 2016
, due primarily to the increase in restaurant sales. As a percentage of restaurant sales, cost of sales decreased from
30.0%
in the
twenty-eight weeks ended
July 11, 2016
to
29.3%
in the
twenty-eight weeks ended
July 10, 2017
. This decrease was primarily driven by lower costs in beef, poultry, paper products and produce, offset by higher costs in seafood.
Labor.
Labor
increased
by
$7.0 million
in the
twenty-eight weeks ended
July 10, 2017
compared to the
twenty-eight weeks ended
July 11, 2016
, due primarily to opening
41
new Company-owned restaurants. As a percentage of restaurant sales, labor increased from
28.7%
in the
twenty-eight weeks ended
July 11, 2016
to
29.8%
in the
twenty-eight weeks ended
July 10, 2017
. The increase was primarily driven by the dilutive effect on margins from our newest restaurants which, on average, initially operate at less than system-wide average sales volumes as well as an increase in wage rates.
Store operating expenses.
Store operating expenses
increased
by
$6.8 million
in the
twenty-eight weeks ended
July 10, 2017
compared to the
twenty-eight weeks ended
July 11, 2016
, due primarily to opening
41
new Company-owned restaurants. As a percentage of restaurant sales, store operating expense increased from
19.4%
in the
twenty-eight weeks ended
July 11, 2016
to
21.4%
in the
twenty-eight weeks ended
July 10, 2017
. This increase was primarily attributable to the dilutive effect on margins from our newest restaurants, which, on average, initially operate at less than system-wide average sales volumes as well as increased costs related to in-store technology investments and marketing.
General and administrative expenses.
General and administrative expenses
increased
by
$0.4 million
in the
twenty-eight weeks ended
July 10, 2017
compared to the
twenty-eight weeks ended
July 11, 2016
. As a percentage of revenue, general and administrative expenses decreased from
11.4%
in the
twenty-eight weeks ended
July 11, 2016
to
10.4%
in the
twenty-eight weeks ended
July 10, 2017
. The decrease was primarily driven by lower consulting fees related to a variety of one-time projects from the prior year and lower variable incentive compensation.
Depreciation.
Depreciation
increased
by
$1.9 million
in the
twenty-eight weeks ended
July 10, 2017
compared to the
twenty-eight weeks ended
July 11, 2016
, due primarily to opening
41
new Company-owned restaurants. As a percentage of revenue, depreciation increased from
5.0%
in the
twenty-eight weeks ended
July 11, 2016
to
5.6%
in the
twenty-eight weeks ended
July 10, 2017
primarily due to corporate and in-store technology investments which typically have shorter useful lives.
Amortization.
Amortization remained flat in the
twenty-eight weeks ended
July 10, 2017
compared to the
twenty-eight weeks ended
July 11, 2016
.
Pre-opening costs.
Pre-opening costs remained flat in the
twenty-eight weeks ended
July 10, 2017
compared to the
twenty-eight weeks ended
July 11, 2016
. As a percent of revenue, pre-opening costs decreased from
0.9%
in the
twenty-eight weeks ended
July 11, 2016
to
0.8%
in the
twenty-eight weeks ended
July 10, 2017
. The decrease was driven by improved project management and better control of pre-opening expenses.
Interest expense.
Interest expense
increased
by
$0.4 million
in the
twenty-eight weeks ended
July 10, 2017
compared to the
twenty-eight weeks ended
July 11, 2016
, due primarily to increased interest from deemed landlord financing.
Provision (benefit) for income taxes.
Benefit for income taxes was
$0.1 million
for the
twenty-eight weeks ended
July 10, 2017
compared to provision for income taxes of
$1.1 million
for the
twenty-eight weeks ended
July 11, 2016
. Our tax expense for the year typically remains relatively constant as it primarily reflects the accrual of income tax expense related to a valuation allowance in connection with the tax amortization of the Company’s goodwill that was not available to offset existing deferred tax assets. Due to the uncertain timing of the reversal of this temporary difference, it cannot be considered as a source of future taxable income for purposes of determining a valuation allowance; therefore the deferred tax liability cannot offset deferred tax assets. The comparison of our effective tax rate between periods is significantly impacted by the level of pre-tax income earned and projected for the year.
Non-GAAP Financial Measures
To supplement its unaudited condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses the following non-GAAP financial measures: restaurant contribution, EBITDA and adjusted EBITDA(collectively, the "non-GAAP financial measures"). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP measures used by the Company may be different from the methods used by other companies.
Restaurant Contribution
Restaurant contribution is defined as restaurant sales less restaurant operating costs, which are cost of sales, labor and store operating expenses. Restaurant contribution margin is restaurant contribution as a percentage of restaurant sales. When used in conjunction with GAAP financial measures, restaurant contribution and restaurant contribution margin are supplemental measures that we believe are useful in evaluating operating performance and profitability of our restaurants. Additionally, restaurant contribution and restaurant contribution margin are key metrics used internally by our management to develop budgets and forecast, as well as assess the performance of our restaurants relative to budget and against prior periods. We believe the supplemental presentation of restaurant and restaurant contribution margin provides investors with a meaningful view of our operating performance as these measures depict the operating results that are directly impacted by our restaurants and exclude items that may not be indicative of, or are unrelated to, the ongoing operations of our restaurants. It may also assist investors to evaluate our performance relative to peers of various sizes and maturities and provide greater transparency to how our management evaluates our business as well as our financial and operational decision making.
Our management does not consider restaurant contribution or restaurant contribution margin in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of restaurant contribution and restaurant contribution margin is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. Restaurant contribution excludes general and administrative expenses and pre-opening costs, which are considered normal, recurring cash operating expenses and are essential to support the operation and development of our restaurants. Therefore, this measure may not provide a complete understanding of the operating results of our Company as a whole.
We compensate for this limitation by relying primarily on our GAAP results and using restaurant contribution and restaurant contribution margin only supplementally. You should review the reconciliation of income from operations to restaurant contribution and restaurant contribution margin below and not rely on any single financial measure to evaluate our business.
The following table reconciles income from operations, which is a GAAP financial measure, to restaurant contribution and restaurant contribution margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Weeks Ended
|
|
Twenty-eight Weeks Ended
|
|
|
July 10,
2017
|
|
July 11,
2016
|
|
July 10,
2017
|
|
July 11,
2016
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Restaurant Contribution:
|
Income from operations
|
|
$
|
1,097
|
|
|
$
|
2,806
|
|
|
$
|
2,809
|
|
|
$
|
5,642
|
|
Less:
|
|
|
|
|
|
|
|
|
Royalty fees
|
|
44
|
|
|
51
|
|
|
101
|
|
|
114
|
|
Add:
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
7,124
|
|
|
7,270
|
|
|
17,109
|
|
|
16,715
|
|
Depreciation and amortization
|
|
4,511
|
|
|
3,665
|
|
|
10,052
|
|
|
8,157
|
|
Pre-opening costs
(1)
|
|
679
|
|
|
552
|
|
|
1,246
|
|
|
1,292
|
|
Loss from disposal of equipment
|
|
748
|
|
|
100
|
|
|
1,007
|
|
|
337
|
|
Restaurant Contribution
|
|
$
|
14,115
|
|
|
$
|
14,342
|
|
|
$
|
32,122
|
|
|
$
|
32,029
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
74,305
|
|
|
$
|
66,273
|
|
|
$
|
164,866
|
|
|
$
|
146,684
|
|
Less: Royalty fees
|
|
44
|
|
|
51
|
|
|
101
|
|
|
114
|
|
Restaurant sales
|
|
$
|
74,261
|
|
|
$
|
66,222
|
|
|
$
|
164,765
|
|
|
$
|
146,570
|
|
|
|
|
|
|
|
|
|
|
Restaurant contribution margin
|
|
19.0
|
%
|
|
21.7
|
%
|
|
19.5
|
%
|
|
21.9
|
%
|
|
|
|
|
|
|
|
|
|
(1) Represent expenses directly associated with the opening of new restaurants that are incurred prior to opening, including pre-opening rent.
|
Adjusted EBITDA
EBITDA is defined as net income before interest, income taxes and depreciation and amortization.
We define Adjusted EBITDA as EBITDA plus loss from disposal of equipment and pre-opening costs. EBITDA and Adjusted EBITDA are intended as a supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. We believe that EBITDA and Adjusted EBITDA provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results. Our management uses EBITDA and Adjusted EBITDA (i) as a factor in evaluating management's performance when determining incentive compensation and (ii) to evaluate the effectiveness of our business strategies.
We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company's financial measures with other fast casual restaurants, which may present similar non-GAAP financial measures to investors. In addition, you should be aware when evaluating EBITDA and Adjusted EBITDA that in the future we may incur expenses similar to those excluded when calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate Adjusted EBITDA in the same fashion.
Our management does not consider EBITDA or Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of EBITDA and Adjusted EBITDA is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. Some of these limitations are:
|
|
•
|
Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
|
|
|
•
|
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
|
|
|
•
|
Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
|
|
|
•
|
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;
|
|
|
•
|
Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and
|
|
|
•
|
other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
|
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only supplementally. You should review the reconciliation of net income to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.
The following table reconciles net income to EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Weeks Ended
|
|
Twenty-eight Weeks Ended
|
|
|
July 10,
2017
|
|
July 11,
2016
|
|
July 10,
2017
|
|
July 11,
2016
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
Net income, as reported
|
|
$
|
579
|
|
|
$
|
1,201
|
|
|
$
|
598
|
|
|
$
|
2,597
|
|
Depreciation and amortization
|
|
4,511
|
|
|
3,665
|
|
|
10,052
|
|
|
8,157
|
|
Interest expense, net
|
|
1,018
|
|
|
861
|
|
|
2,386
|
|
|
1,983
|
|
Provision (benefit) for income taxes
|
|
(480
|
)
|
|
764
|
|
|
(126
|
)
|
|
1,109
|
|
EBITDA
|
|
5,628
|
|
|
6,491
|
|
|
12,910
|
|
|
13,846
|
|
Pre-opening costs
(1)
|
|
679
|
|
|
552
|
|
|
1,246
|
|
|
1,292
|
|
Loss from disposal of equipment
|
|
748
|
|
|
100
|
|
|
1,007
|
|
|
337
|
|
Adjusted EBITDA
|
|
$
|
7,055
|
|
|
$
|
7,143
|
|
|
$
|
15,163
|
|
|
$
|
15,475
|
|
|
|
|
|
|
|
|
|
|
(1) Represents expenses directly associated with the opening of new restaurants that are incurred prior to opening, including pre-opening rent.
|
Liquidity and Capital Resources
Summary of Cash Flows
Our primary sources of liquidity and cash flows are operating cash flows and available borrowings under our 2015 Credit Facility. We are using these sources to fund capital expenditures for new Company-owned restaurant openings, reinvest in our existing restaurants, repurchase restaurants from our franchisees, invest in infrastructure and information technology and maintain working capital. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have at least 20 days to pay our vendors.
We had negative working capital of
$9.9 million
as of
July 10, 2017
compared to negative working capital of
$6.3 million
as of
December 26, 2016
. The increase in negative working capital resulted primarily from capital expenditures related to new store openings. We believe that cash and cash equivalents, expected cash flow from operations and available borrowings on our 2015 Credit Facility in 2017 are adequate to fund our operating lease obligations, capital expenditures and working capital obligations for the next 12 months. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow from operations and our ability to manage costs and working capital successfully.
The following table summarizes consolidated cash flow data for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-eight Weeks Ended
|
|
|
July 10, 2017
|
|
July 11, 2016
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Consolidated Statement of Cash Flows Data:
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
17,029
|
|
|
$
|
14,908
|
|
Net cash used in investing activities
|
|
(28,255
|
)
|
|
(20,718
|
)
|
Net cash provided by financing activities
|
|
10,282
|
|
|
1,121
|
|
Cash Flows Provided by Operating Activities
Net cash provided by operating activities increased to
$17.0 million
for the
twenty-eight weeks ended
July 10, 2017
from
$14.9 million
for the
twenty-eight weeks ended
July 11, 2016
. Net cash provided by operating activities consists primarily of net income, adjusted for non-cash expenses such as depreciation and amortization, and the net change in operating assets and liabilities.
Net cash provided by operating activities for the
twenty-eight weeks ended
July 10, 2017
consisted primarily of net income adjusted for non-cash expenses and increases in accounts payable and deferred rent offset by an increase in prepaid expenses and other. The increase in accounts payable was primarily related to seasonality at stores and timing of corporate invoices. The increase in deferred rent is related to new store openings. The increase in prepaid expenses and other is primarily related to the timing of several annual corporate invoices and prepaid rent.
Cash Flows Used in Investing Activities
Net cash used in investing activities increased to
$28.3 million
for the
twenty-eight weeks ended
July 10, 2017
from
$20.7 million
for the
twenty-eight weeks ended
July 11, 2016
. The increase was primarily due to new store openings as well as technology investments in 2017.
Cash Flows Provided by Financing Activities
Cash flows provided by financing activities increased to
$10.3 million
for the
twenty-eight weeks ended
July 10, 2017
from
$1.1 million
for the
twenty-eight weeks ended
July 11, 2016
, primarily due to borrowings on our 2015 Credit Facility.
Credit Facility
On February 6, 2015, we entered into the 2015 Credit Facility with Wells Fargo Bank, National Association. The 2015 Credit Facility consists of a revolving loan commitment in the aggregate amount of $20.0 million, and an incremental revolving credit commitment up to an aggregate amount of $30.0 million. The 2015 Credit Facility has a five year term and matures on February 6, 2020. As of
July 10, 2017
, we had
$10.0 million
indebtedness under the 2015 Credit Facility. The proceeds are being used to fund capital expenditures and working capital obligations.
Off-Balance Sheet Arrangements
As of
July 10, 2017
, we did not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our discussion and analysis of operating results and financial condition are based upon our financial statements. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Our critical accounting policies are those that materially affect our financial statements and involve difficult, subjective or complex judgments by management. Although these estimates are based on management's best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates.
We believe our critical accounting policies are affected by significant judgments and estimates used in the preparation of our consolidated financial statements and that the judgments and estimates are reasonable. Our critical accounting polices and estimates are described in our annual consolidated financial statements and the related notes in our 2016 Form 10-K. There have been no material changes affecting our critical accounting policies and estimates for the
twelve weeks ended
July 10, 2017
.