Net Sales Increase 3.5% Over Same Quarter A
Year Ago
J. Alexander’s Holdings, Inc. (NYSE: JAX) (the Company), owner
and operator of a collection of restaurants which includes J.
Alexander’s, Redlands Grill, Stoney River Steakhouse and Grill and
selected other restaurants, today reported financial results for
the first quarter ended April 1, 2018.
First Quarter 2018 Highlights Compared to the First Quarter
Of 2017
- Net sales were $61,909,000, an
improvement of 3.5% from $59,822,000 recorded in the first quarter
of 2017.
- For the J. Alexander’s/Grill
restaurants, average weekly same store sales per restaurant (1)
were $120,100, a gain of 0.3% from $119,800 reported in the first
quarter of 2017. For the Stoney River Steakhouse and Grill
restaurants, average weekly same store sales reached $83,700, an
increase of 6.2% from $78,800 reported in the corresponding quarter
of 2017.
- Income from continuing operations
before income taxes was $1,842,000 for the first quarter of 2018
compared to income from continuing operations before income taxes
of $3,641,000 for the first quarter of 2017. Among the primary
factors impacting income from continuing operations before income
taxes for the most recent quarter was the quarterly valuation of
the Black Knight Advisory Services, LLC (“Black Knight”) profits
interest grant, which resulted in a profits interest expense of
$1,907,000. This compared to income of $39,000 in the same quarter
a year ago. The Black Knight profits interest grant was issued in
October 2015 and requires a quarterly valuation. The non-cash
expense (income) associated with this grant is being recognized
over a three‐year vesting period which runs through October 6,
2018. It is calculated each quarter based upon the most recent
valuation performed using the Black‐Scholes valuation model, with
any cumulative change associated with the most recent valuation
impacting the most recent quarter. Primarily due to the $11.45 per
share closing price of the Company’s stock at the end of the most
recent quarter, the grant’s valuation increased from $4,876,000 at
December 31, 2017 to $6,684,000 at April 1, 2018. The Company also
incurred consulting fees of $244,000 under its management agreement
with Black Knight for the most recent quarter. This compares to
consulting fees of $265,000 in the first quarter of 2017.
- During the first quarter of 2018, the
Company’s income from continuing operations before income taxes was
also impacted by transaction expenses of $926,000 related primarily
to the proposed acquisition of the Ninety Nine Restaurant and Pub
concept originally announced in August 2017. On February 1, 2018,
the Company announced that it did not receive the required number
of disinterested shareholder votes to approve the proposed
acquisition, and the merger agreement was thereafter terminated.
The transaction expenses were primarily related to professional
fees for work performed during the first quarter of 2018.
- Net income for the first quarter of
2018 was $1,593,000, down from net income of $2,684,000 achieved in
the comparable quarter of 2017. Results for the most recent quarter
include an income tax provision of $138,000 compared to an income
tax provision of $844,000 in the same quarter of 2017, with the
decrease being primarily attributable to the impact of the decrease
in the federal tax rate as a result of the passage of the Tax Cuts
and Jobs Act of 2017.
- Basic and diluted earnings per share
totaled $0.11 for the first quarter of 2018 compared to $0.18
recorded in the first quarter of 2017.
- Adjusted EBITDA(2) improved 7.2% from
$7,601,000 in the first quarter of 2017 to $8,151,000 in the first
quarter of 2018.
- Restaurant Operating Profit Margin (3)
as a percent of net sales was 15.9% in both the first quarter of
2018 as well as the first quarter of 2017.
- Cost of sales as a percentage of net
sales in the first quarter of 2018 was 31.1% compared to 30.8% in
the corresponding quarter of 2017.
(1)Average weekly same store sales per restaurant is computed by
dividing total restaurant same store sales for the period by the
total number of days all same store restaurants were open for the
period to obtain a daily sales average. The daily same store sales
average is then multiplied by seven to arrive at average weekly
same store sales per restaurant. Days on which restaurants are
closed for business for any reason other than scheduled closures on
Thanksgiving and Christmas are excluded from this calculation.
Sales and sales days used in this calculation and amounts of other
“same store” figures in this release include only those for
restaurants in operation at the end of the period which have been
open for more than 18 months. Revenue associated with reduction in
liabilities for gift cards, which is recognized in proportion to
guest redemptions based on historical redemption rates and commonly
referred to as gift card breakage, is not included in the
calculation of average weekly same store sales per restaurant.
Average weekly same store sales is computed from sales amounts that
have been determined in accordance with U.S. generally accepted
accounting principles (GAAP).
(2)Please refer to the financial information accompanying this
release for our definition of and a reconciliation of the non‐GAAP
financial measure Adjusted EBITDA to net income. Management uses
Adjusted EBITDA to evaluate operating performance and the
effectiveness of its business strategies.
(3)“Restaurant Operating Profit Margin” is the ratio of
Restaurant Operating Profit, a non‐GAAP financial measure, to net
sales. Please refer to the financial information accompanying this
release for our definition of and a reconciliation of the non‐GAAP
financial measure Restaurant Operating Profit to Operating Income.
Management uses Restaurant Operating Profit to measure operating
performance at the restaurant level.
For the first quarter of 2018, the Company’s restaurant labor
and related costs as a percentage of net sales were 29.4% as
compared to 30.0% of net sales in the first quarter of 2017. Other
restaurant operating expenses were 19.4% of net sales in the first
quarter of 2018 as compared to 19.3% of net sales in the same
quarter of 2017.
The Company’s operating income for the first quarter of 2018 was
$2,058,000 compared to operating income of $3,794,000 posted in the
first quarter of 2017.
The average weekly guest counts within the same store base of
the Company’s J. Alexander’s/Grills collection were down 2.0% in
the first quarter of 2018 compared to the first quarter a year
earlier. Guest counts within the same store base at the Company’s
Stoney River Steakhouse and Grill restaurants were up 8.3% for the
first quarter of 2018 compared to the first quarter of 2017. With
respect to average guest checks, which include alcoholic beverage
sales, the average guest check within the J. Alexander’s/Grills
same store base of restaurants during the first quarter of 2018 was
$31.86, up 2.5% from $31.08 during the first quarter of 2017. The
average guest check within the same store base of Stoney River
Steakhouse and Grill restaurants totaled $42.87 during the first
quarter of 2018, down 1.7% from $43.63 recorded in the same quarter
of 2017.
On a consolidated basis, average weekly guest counts within the
Company’s J. Alexander’s/Grills locations in the first quarter of
2018 were down 2.5% from the first quarter of 2017 while average
weekly guest counts within the Company’s Stoney River Steakhouse
and Grill locations advanced 8.7% for the first quarter of 2018
compared to the first quarter of 2017. Average guest checks for the
combined J. Alexander’s/Grills concepts rose 2.5% from $31.12 in
the first quarter of 2017 to $31.89 for the first quarter of 2018.
Average guest checks for the Stoney River Steakhouse and Grill
restaurants decreased 2.2% from $43.60 in the first quarter of 2017
to $42.66 in the first quarter of 2018.
The effect of menu pricing for the first quarter of 2018 was
estimated to be a 1.8% increase for the J. Alexander’s/Grills
restaurants and a 0.2% increase for the Stoney River Steakhouse and
Grill restaurants compared to the corresponding quarter of 2017.
Inflation in food costs for the first quarter of 2018 was estimated
to total 2.9% for the J. Alexander’s/Grills restaurants, with beef
costs increasing by an estimated 2.7% compared to the first quarter
of 2017. For the Stoney River Steakhouse and Grill restaurants,
inflation for the first quarter of 2018 was estimated to total
2.8%, with beef costs up by approximately 3.0% over the first
quarter of 2017.
Chief Executive Officer’s Comments
“We are pleased to report another quarter of growth in same
store sales,” said Lonnie J. Stout II, President and Chief
Executive Officer of J. Alexander’s Holdings, Inc. “We are
particularly encouraged with the progress we’re seeing within our
Stoney River restaurants as we continue to expand our lunch and
brunch offerings in markets that we determine are able to support
such business. Our lunch and brunch menus typically include lower
priced entrée offerings, which by design drives down the average
guest check. However, we firmly believe that the more often our
guests visit our restaurants, the more likely it is that these
guests will become part of the foundational base upon which all of
our successful locations have historically been established.” Stout
noted that six of the Stoney River restaurants are now serving
lunch while nine of the locations offer brunch at least one day
each weekend.
“As indicated in our last earnings release, we were confronted
with extremely harsh winter weather in several of our Midwestern
and Southern markets during the first quarter of 2018. The severity
of weather conditions, particularly in January and February, forced
restaurant closings for 27 days and resulted in estimated lost
revenue of approximately $400,000 in the first quarter of 2018
across the Company. This compared to only three days of weather
related restaurant closings and estimated lost revenue of $40,000
in the first quarter of 2017.”
Stout pointed out that severe weather, primarily during January
and February, also affected restaurant guest counts in the most
recent quarter. As noted above, guest counts within the J.
Alexander’s/Grills collection same store base of restaurants were
down 2.0%, with over half of the decrease attributed to the impact
of severe winter weather on days which the J. Alexander’s/Grills
restaurants remained open for business but traffic, and thus
revenue, was adversely affected. He noted that management estimates
that an additional $600,000 in net sales were lost as a result of
severe winter weather on days where the decision was made to open
for at least a portion of the day, but added that guest counts for
this group of restaurants improved each month during the quarter
and have been slightly positive during the first few weeks of
April.
“Also during the most recent quarter,” Stout noted, “our cost of
sales reflected modest increases in beef costs, which were up 2.7%
in our J. Alexander’s/Grills collection and 3.0% in our Stoney
River Steakhouse and Grill restaurants.” The increase in input
costs in the first quarter of 2018 compares to significantly lower
beef prices incurred in the same quarter a year earlier. During the
first quarter of 2017, beef prices were down 9.8% at J.
Alexander’s/Grills restaurants and 7.6% at Stoney River Steakhouse
and Grill restaurants.
“While beef prices during the first quarter of 2018 were at
higher levels than the first quarter a year ago,” Stout said, “they
were well within our normal range and guidelines. In fact, for
certain products, we have seen pricing over the past four-to-six
weeks that is running below last year’s cost during the comparable
period. An abundance of quality beef is presently available, and we
are not having to pay premium prices to ensure that our strict
specifications are met. We anticipate that we can hold the line in
cost of sales as we look out over the remainder of 2018.”
Restaurant Development
J. Alexander’s Holdings, Inc. opened a new J. Alexander’s
restaurant in King of Prussia, PA on April 30, 2018, marking the
Company’s entry into Pennsylvania. The new J. Alexander’s
restaurant is approximately 15 miles from Philadelphia. The Company
has construction underway on a new Stoney River Steakhouse and
Grill in Troy, MI. This new restaurant is expected to open in the
fourth quarter of 2018.
Guidance For 2018
The following performance outlook is based on current
information as of May 3, 2018. The Company does not expect to
update the guidance provided as follows before next quarter’s
earnings release. However, the information on which the outlook is
based is subject to change, and the Company may update its full
business outlook or any portion thereof at any time for any
reason.
Based upon current information, the guidance for the 2018 fiscal
year is the same as reported on March 7, 2018 with the exception of
the Company’s estimated effective tax rate, which has been reduced
from the original guidance range of 10% - 16% to the current range
of 1% - 7%.
Conference Call
The Company will hold a conference call on Friday, May 4, 2018,
at 10 a.m., Central time to discuss its financial results for the
first quarter ended April 1, 2018. The conference call can be
accessed live over the phone by dialing 1‐877‐407‐0789 (Toll‐Free)
or 1‐201‐689‐8562 (Toll/International). To access the call via the
internet, go to J. Alexander’s website at http://investor.jalexandersholdings.com or
http://public.viavid.com/index.php?id=129453. A replay of the
conference call will be available shortly following the conclusion
of the call at http://investor.jalexandersholdings.com and
http://public.viavid.com/index.php?id=129453, as well as by dialing
1‐844‐512‐2921 or 1‐412‐317‐6671 and providing the access code
13679144. The replay will be accessible through May 11, 2018 via
telephone and for 30 days on the internet.
About J. Alexander’s Holdings, Inc.
J. Alexander’s Holdings, Inc. is a collection of restaurants
that focus on providing high quality food, outstanding professional
service and an attractive ambiance.
The Company presently operates 45 restaurants in 16 states. The
Company has its headquarters in Nashville, TN. For additional
information, visit www.jalexandersholdings.com.
Forward‐Looking Statements
This press release issued by J. Alexander’s Holdings, Inc.
contains forward-looking statements, which include all statements
that do not relate solely to historical or current facts, such as
statements regarding our expectations, intentions or strategies
regarding the future. These forward‐looking statements are based on
management's beliefs, as well as assumptions made by, and
information currently available to, management. Because such
statements are based on expectations as to future financial and
operating results and are not statements of fact, actual results
may differ materially from those projected and are subject to a
number of known and unknown risks and uncertainties, including the
Company’s ability to maintain satisfactory guest count levels and
maintain or increase sales and operating margins in its restaurants
under varying economic conditions; the effect of higher commodity
prices, unemployment and other economic factors on consumer demand;
increases in food input costs or product shortages and the
Company’s response to them; the number and timing of new restaurant
openings and the Company’s ability to operate them profitably;
competition within the casual dining industry and within the
markets in which our restaurants are located; adverse weather
conditions in regions in which the Company’s restaurants are
located; factors that are under the control of third parties,
including government agencies; as well as other risks and
uncertainties described under the headings "Forward‐Looking
Statements," "Risk Factors" and other sections of the Company’s
Annual Report on Form 10‐K filed with the Securities and Exchange
Commission on March 15, 2018 and subsequent filings. The Company
undertakes no obligation to update any forward-looking statements,
whether as a result of new information, future events or
otherwise.
J. Alexander's Holdings, Inc. and
Subsidiaries Condensed Consolidated Statements of Income
(Unaudited in thousands, except per share amounts)
Quarter Ended April 1 April 2 2018
2017 Net sales
$ 61,909 $ 59,822 Costs
and expenses: Cost of sales
19,261 18,431 Restaurant labor
and related costs
18,226 17,945
Depreciation and amortization of
restaurant property and equipment
2,569 2,378 Other operating expenses
12,018
11,570 Total restaurant operating expenses
52,074 50,324 Transaction and integration expenses
926 - General and administrative expenses
6,525 4,828
Pre-opening expenses
326 876
Total operating expenses
59,851 56,028
Operating income
2,058 3,794 Other income (expense):
Interest expense
(174 ) (174 ) Other, net
(42 ) 21 Total other expense
(216 ) (153 )
Income from continuing operations before
income taxes
1,842 3,641 Income tax expense
(138 ) (844 )
Loss from discontinued operations, net
(111 )
(113 ) Net income
$ 1,593 $ 2,684
Basic earnings per share: Income from continuing
operations, net of tax
$ 0.12 $ 0.19 Loss from
discontinued operations, net
(0.01 )
(0.01 ) Basic earnings per share
$ 0.11 $ 0.18
Diluted earnings per share: Income from continuing
operations, net of tax
$ 0.11 $ 0.19 Loss from
discontinued operations, net
(0.01 )
(0.01 ) Diluted earnings per share
$ 0.11 $
0.18 Weighted average common shares outstanding:
Basic
14,695 14,695 Diluted
14,838 14,695
Note: Per share amounts may not sum due to rounding.
J. Alexander's Holdings, Inc. and
Subsidiaries Condensed Consolidated Statements of Income
Data as a Percentage of Net Sales and Other Financial and
Performance Data (Unaudited) Quarter Ended April
1 April 2 2018 2017 Net sales
100.0
% 100.0 % Costs and expenses: Cost of sales
31.1 30.8
Restaurant labor and related costs
29.4 30.0
Depreciation and amortization of
restaurant property and equipment
4.1 4.0 Other operating expenses
19.4
19.3 Total restaurant operating expenses
84.1
84.1 Transaction and integration expenses
1.5 - General and
administrative expenses
10.5 8.1 Pre-opening expense
0.5 1.5 Total operating expenses
96.7 93.7 Operating income
3.3
6.3 Other income (expense): Interest expense
(0.3 )
(0.3 ) Other, net
(0.1 ) 0.0
Total other expense
(0.3 ) (0.3 )
Income from continuing operations before
income taxes
3.0 6.1 Income tax expense
(0.2 ) (1.4 ) Loss
from discontinued operations, net
(0.2 )
(0.2 ) Net income
2.6 % 4.5 %
Note: Certain percentage totals do not sum due to rounding.
Other Financial and Performance Data: Adjusted
EBITDA(1)
$ 8,151 $ 7,601 As a % of net sales
13.2 % 12.7 %
Average weekly sales per
restaurant: J. Alexander’s Restaurant/ Grills
$
118,300 $ 118,200 Percent change
0.1 %
Stoney River Steakhouse and Grill
$ 82,700 $ 77,900
Percent change
6.2 % Average weekly same
store sales per restaurant: J. Alexander’s Restaurant/
Grills
$ 120,100 $ 119,800 Percent change
0.3
% Stoney River Steakhouse and Grill
$
83,700 $ 78,800 Percent change
6.2 %
(1) See definitions and reconciliation attached.
J. Alexander's Holdings, Inc. and
Subsidiaries Condensed Consolidated Balance Sheets
(Unaudited in thousands) April 1 December 31
2018 2017 Assets Current assets: Cash and cash
equivalents
$ 10,120 $ 10,711 Other current assets
6,192 8,019 Total current assets
16,312
18,730 Other assets
5,763 6,183 Property and
equipment, net
105,939 103,615 Goodwill
15,737 15,737
Tradename and other indefinite-lived intangibles
25,202
25,202 Deferred Charges, net
173 184
$
169,126 $ 169,651
Liabilities and Stockholders'
Equity Current liabilities
$ 27,325 $
30,027
Long term debt, net of portion classified
as current and unamortized deferred loan costs
9,552 10,781 Deferred compensation obligations
6,572
6,451 Deferred income taxes
1,420 2,075 Other long-term
liabilities
6,629 6,456 Stockholders' equity
117,628 113,861
$ 169,126 $ 169,651
J. Alexander's Holdings, Inc.
and Subsidiaries Condensed Consolidated Statements of Cash
Flows (Unaudited in thousands) Quarter Ended
April 1 April 2 2018 2017 Cash
flows from operating activities: Net income
$ 1,593 $
2,684 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization of property and
equipment
2,642 2,449 Equity-based compensation expense
2,140 278 Other, net
(156 ) (54 ) Changes in
assets and liabilities, net
621 2,411
Net cash provided by operating activities
6,840 7,768
Cash flows from investing activities: Purchase of property
and equipment
(6,177 ) (4,445 ) Other investing
activities
(4 ) 65 Net cash used
in investing activities
(6,181 ) (4,380 ) Cash
flows from financing activities: Payments on long-term debt and
obligations under capital leases
(1,250 ) (417 )
Other financing activities
- (2 ) Net
cash used in financing activities
(1,250 )
(419 ) (Decrease) Increase in cash and cash equivalents
(591 ) 2,969 Cash and cash equivalents at beginning
of period
10,711 6,632 Cash and
cash equivalents at end of period
$ 10,120 $
9,601 Supplemental disclosures: Property and
equipment obligations accrued at beginning of period
$
1,854 $ 2,587 Property and equipment obligations accrued at
end of period
701 1,420 Cash paid for interest
197
193 Cash paid for income taxes
166 189
J. Alexander's Holdings, Inc. and Subsidiaries Non-GAAP
Financial Measures and Reconciliations (Unaudited in
thousands) Non-GAAP Financial Measures
Within this press release, we present the
following non-GAAP financial measures which we believe are useful
to investors as key measures of our operating performance:
We define Adjusted Earnings Before
Interest, Taxes, Depreciation and Amortization, or “Adjusted
EBITDA”, as net income (loss) before interest expense, income tax
expense (benefit), depreciation and amortization, and adding asset
impairment charges and restaurant closing costs, loss on disposals
of fixed assets, transaction and integration costs, non-cash
compensation, loss from discontinued operations, gain on debt
extinguishment and pre-opening costs.
Adjusted EBITDA is a non-GAAP financial
measure that we believe is useful to investors because it provides
information regarding certain financial and business trends
relating to our operating results and excludes certain items that
are not indicative of our operations. Adjusted EBITDA does not
fully consider the impact of investing or financing transactions as
it specifically excludes depreciation and interest charges, which
should also be considered in the overall evaluation of our results
of operations.
We define “Restaurant Operating Profit” as
net sales less restaurant operating costs, which are cost of sales,
restaurant labor and related costs, depreciation and amortization
of restaurant property and equipment, and other operating expenses.
Restaurant Operating Profit is a non-GAAP financial measure that we
believe is useful to investors because it provides a measure of
profitability for evaluation that does not reflect corporate
overhead and other non-operating or unusual costs. “Restaurant
Operating Profit Margin” is the ratio of Restaurant Operating
Profit to net sales.
Our management uses Adjusted EBITDA and
Restaurant Operating Profit to evaluate the effectiveness of our
business strategies. We caution investors that amounts presented in
accordance with the above definitions of Adjusted EBITDA or
Restaurant Operating Profit may not be comparable to similar
measures disclosed by other companies, because not all companies
calculate these non-GAAP financial measures in the same manner.
Adjusted EBITDA and Restaurant Operating Profit should not be
assessed in isolation from, or construed as a substitute for, net
income, operating income or other measures presented in accordance
with GAAP.
A reconciliation of these non-GAAP financial measures to the
closest GAAP measure is set forth in the following tables:
Quarter Ended April 1 April 2 2018
2017 Net income
$ 1,593 $ 2,684
Income tax expense
138 844 Interest expense
174 174
Depreciation and amortization
2,653
2,462 EBITDA
4,558 6,164 Transaction and
integration expenses
926 - Loss on disposal of fixed assets
58 34
Asset impairment charges and restaurant
closing costs
(2 ) 106 Non-cash compensation
2,174 308 Loss
from discontinued operations, net
111 113 Pre-opening
expenses
326 876 Adjusted EBITDA
$ 8,151 $ 7,601
Note: For purposes of computing Adjusted
EBITDA, the $1,907 and ($39) for the quarters ended April 1, 2018
and April 2, 2017, respectively, in non-cash compensation
associated with a profits interest grant issued to Black Knight
Advisory Services, LLC ("BKAS") on October 6, 2015 has been
included in "Non-cash compensation" above. Additional expenses
associated with the Company's management agreement with BKAS
totaling $244 and $265 for the quarters ended April 1, 2018 and
April 2, 2017, respectively, are included in general and
administrative expenses and have not been included in the
reconciliation set forth above.
J. Alexander's Holdings, Inc. and Subsidiaries
Non-GAAP Financial Measures and Reconciliations
(Unaudited in thousands) Quarter Ended
April 1 April 2 2018 2017
Amount
Percent of NetSales
Amount
Percent of NetSales
Operating income
$ 2,058 3.3 % $
3,794 6.3 % General and administrative expenses
6,525
10.5 % 4,828 8.1 % Transaction and integration
expenses
926 1.5 % - 0.0 % Pre-opening
expenses
326 0.5 % 876 1.5 %
Restaurant Operating Profit
$ 9,835
15.9 % $ 9,498 15.9 %
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version on businesswire.com: https://www.businesswire.com/news/home/20180503006641/en/
J. Alexander’s Holdings, Inc.Mark A. Parkey, 615-269-1900Chief
Financial Officer
J Alexanders (NYSE:JAX)
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