Asset Impairment, Estimated Lease Termination and Other Closing Costs
The following is a summary of the asset impairment, estimated lease termination and other closings costs we incurred for the periods presented:
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Three Months Ended
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Six Months Ended
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(dollars in thousands)
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June 30, 2019
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July 1, 2018
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June 30, 2019
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July 1, 2018
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Asset impairments, net
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$
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2
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$
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2
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$
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350
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$
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152
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Lease termination charges (income) and related costs
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71
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90
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91
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(343)
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Restaurant closure expenses
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24
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124
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63
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303
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Asset impairment, estimated lease termination charges and other closing costs
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$
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97
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$
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216
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$
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504
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$
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112
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During the six months ended June 30, 2019, we recognized an impairment charge on the lease right-of-use asset for a restaurant that is expected to close during fiscal 2019 of approximately $344,000. Asset impairments, net are expenses incurred for other charges related to closing restaurants, as well as ongoing expenses incurred after a restaurant is fully closed.
Income Tax Expense
Income tax expense for the three months ended June 30, 2019 was approximately $182,000, or 14.9% of our pretax income. Income tax expense for the three months ended July 1, 2018 was approximately $420,000, or 23.2% of our pretax income. Income tax expense for the six months ended June 30, 2019 was approximately $199,000, or 15.1% of our pretax income. Income tax expense for the six months ended July 1, 2018 was approximately $741,000, or 23.7% of our pretax income.
Basic and Diluted Net Income (Loss) per Common Share
Net income for the three months ended June 30, 2019 was approximately $1.0 million, or $0.11 per basic and diluted share. The basic and diluted weighted-average number of common shares outstanding for the three months ended June 30, 2019 was approximately 9,093,000 and 9,278,000, respectively. Net income for the three months ended July 1, 2018 was approximately $1.4 million, or $0.16 per basic and diluted share. The basic and diluted weighted-average number of common shares outstanding for the three months ended July 1, 2018 was approximately 8,809,000 and 8,835,000, respectively.
Net income for the six months ended June 30, 2019 was approximately $1.1 million, or $0.12 per basic and diluted share. The basic and diluted weighted-average number of common shares outstanding for the six months ended June 30, 2019 was approximately 9,089,000 and 9,191,000, respectively. Net income for the six months ended July 1, 2018 was approximately $2.4 million, or $0.29 per basic and diluted share. The basic and diluted weighted-average number of common shares outstanding for the six months ended July 1, 2018 was approximately 8,108,000 and 8,131,000, respectively.
Financial Condition, Liquidity and Capital Resources
Our balance of unrestricted cash and cash equivalents was approximately $8.2 million and $11.6 million as of
June 30, 2019
and December 30, 2018, respectively.
We used cash to purchase five stores in Colorado, six stores in the Michigan, Wisconsin, and Ohio markets, and one store in Iowa.
We expect to utilize cash on hand to reinvest into our brand, including refreshing current corporate stores, repurchasing select franchisee owned stores, and developing a new concept. In July 2018, we made a loan in the original principal amount of $1.4 million to Mercury BBQ, LLC, the proceeds of which will be used for the build-out of a barbeque restaurant branded as Clark Crew BBQ.
On June 20, 2019 we entered into a loan agreement with our lender, Choice Financial Group. The loan agreement provides for a term loan in the principal amount of up to $24.0 million. The term loan has a maturity date of June 20, 2025. The first year of the term loan provides for payments of interest only, with the remaining five years requiring payments of interest and principal based on a 60 month amortization period. Interest will be payable in an amount equal to the Wall Street Journal Prime Rate, but in no circumstances will the rate of interest be less than 5.00%. The term loan may be prepaid, partially or in full, at any time and for no prepayment penalty.
Proceeds from the term loan were used to repay our previous real estate loan, dated December 2, 2016, which outstanding balance as of June 20, 2019 was approximately $2.6 million.