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LRI Holdings, Inc., the Parent Company of Logan's Roadhouse, Inc., Announces Financial Results for the Fourth Quarter and Fiscal Year 2012

NASHVILLE, Tenn., Oct. 23, 2012 /PRNewswire/ -- LRI Holdings, Inc., the parent company of Logan's Roadhouse, Inc., today announced financial results for the fourth quarter and fiscal year ended July 29, 2012.



Successor

Predecessor


(In thousands)


Thirteen weeks ended July 29, 2012

Thirteen weeks ended July 31, 2011


Fifty-two weeks ended July 29, 2012

Period from October 4, 2010 to July 31, 2011

Period from August 2, 2010 to October 3, 2010

Combined fifty-two weeks ended July 31, 2011 (Non-GAAP)










Net sales


$         159,753

$         150,988


$      629,987

$      497,170

$             93,762

$      590,932

Restaurant operating profit


19,620

23,063


88,992

80,582

12,488

93,070

Restaurant operating margin


12.3%

15.3%


14.1%

16.2%

13.3%

15.7%

Net (loss) income


(52,096)

1,674


(46,528)

580

(224)

356

Adjusted EBITDA


$           16,336

$           19,951


$        75,218

$        71,816

$               8,567

$        80,383

Selected Highlights for the Fourth Quarter 2012 Compared to the Fourth Quarter 2011:

  • Net sales increased 5.8% to $159.8 million from $151.0 million.
  • Comparable restaurant sales declined 1.9%, average check increased by 3.1%, and customer traffic decreased by 4.9%.
  • Restaurant operating profit decreased 14.9% to $19.6 million from $23.1 million.
  • Net loss of $52.1 million compared to net income of $1.7 million.  Included in the fourth quarter 2012 results was a non-cash goodwill impairment charge of $48.5 million and non-cash restaurant impairment charges of $4.3 million. Excluding these non-cash impairment charges, adjusted net income for the fourth quarter of fiscal year 2012 was $0.8 million.   
  • Adjusted EBITDA decreased 18.1% to $16.3 million from $20.0 million.

Selected Highlights for Fiscal Year 2012 Compared to the Combined Fiscal Year 2011:

  • Opened 19 new company-owned Logan's Roadhouse® restaurants.
  • Net sales increased 6.6% to $630.0 million from $590.9 million.
  • Comparable restaurant sales declined 1.2%, average check increased by 3.7%, and customer traffic decreased by 4.7%.
  • Restaurant operating profit decreased 4.4% to $89.0 million from $93.1 million.
  • Net loss was $46.5 million compared to net income of $0.4 million.  Included in the fiscal year 2012 results was a non-cash goodwill impairment charge of $48.5 million and non-cash restaurant impairment charges of $4.4 million. Excluding these non-cash impairment charges, adjusted net income for the fiscal year 2012 was $6.4 million.   
  • Adjusted EBITDA decreased 6.4% to $75.2 million compared to $80.4 million

Please see reconciliation tables of the non-GAAP measures of restaurant operating profit and margin and Adjusted EBITDA, to the most directly comparable GAAP measures included at the end of this release.

Additional discussion and analysis of the Company's financial condition and results of operations can be found in its Annual Report on Form 10-K for the fiscal year ended July 29, 2012.  It is available at www.logansroadhouse.com under the investor relations section.

Thomas Vogel, President, Chairman, and Chief Executive Officer of Logan's Roadhouse, Inc., stated, "Our fourth quarter and fiscal year results reflect a challenging economic and competitive environment, as well as the operational challenges we face with commodity inflation and sales deleveraging.  Traffic growth remains our top priority and we have focused our efforts on operational execution, menu innovation, traffic building messages, and refreshing our bars where we are encouraged to have gained traction in driving increased alcohol sales."

Mr. Vogel concluded, "In view of the current environment, we are taking a conservative approach to managing our business and capital structure.  We have already proactively amended our credit agreement so that we can maintain adequate cushions in our financial covenants and we have also limited restaurant development to approximately 15 restaurants in fiscal year 2013 compared to 19 openings in fiscal year 2012.  We intend to continue funding our growth through operating cash flows and lease financing to protect our balance sheet and ensure that we can meet all of our financial obligations.  And while we are certainly disappointed to have incurred goodwill and restaurant impairment charges during the fourth quarter, these non-cash charges in no way affect our day to day operations, cash balances, or operating cash flows."

Conference Call

The Company will host a conference call on Tuesday, October 30, 2012 at 4:00 p.m. ET to discuss its financial results for the fourth quarter and fiscal year 2012.  The conference call will be hosted by Thomas Vogel, President and Chief Executive Officer, and Amy Bertauski, Chief Financial Officer. 

The domestic dial-in number for the call is 888-661-5140, and the international dial-in number is 913-312-0866.  Please call approximately 10 minutes in advance to ensure that you are connected prior to the presentation.  A telephone replay may be accessed by using the domestic replay number 877-870-5176 or the international replay number 858-384-5517; the passcode is 7604115.

About Logan's Roadhouse

Logan's opened its first restaurant in 1991 in Lexington, KY, and has grown as an affordable, full-service restaurant chain to 225 company-owned and 26 franchised Logan's Roadhouse restaurants in 23 states. The Company's mission is to recreate the traditional American roadhouse by offering consumers value-oriented, high quality, "craveable" meals for lunch and dinner served in the hospitable tradition and distinctive atmosphere reminiscent of an American roadhouse of the 1930's and 1940's.  Logan's menu features specially seasoned aged steaks, fresh ground steak burgers, fresh chicken dishes and salads, fall-off-the-bone ribs, distinctive fresh-baked yeast rolls and bottomless buckets of peanuts.  LRI Holdings, Inc. is the parent company of Logan's Roadhouse.

Contact
Investor Relations
InvestorRelations@logansroadhouse.com
(855) 255-2789

LRI HOLDINGS, INC CONSOLIDATED STATEMENTS OF OPERATIONS





Successor

Predecessor


(In thousands)

Thirteen weeks ended July 29, 2012

Thirteen weeks ended July 31, 2011


Fifty-two weeks ended July 29, 2012

Period from October 4, 2010 to July 31, 2011

Period from August 2, 2010 to October 3, 2010

Combined fifty-two weeks ended July 31, 2011 (Non-GAAP)


(unaudited)

(unaudited)






Revenues:








Net sales 

$         159,753

$         150,988


$      629,987

$      497,170

$             93,762

$      590,932

Franchise fees and royalties 

565

548


2,186

1,793

348

2,141

Total revenues 

160,318

151,536


632,173

498,963

94,110

593,073

Costs and expenses:








Restaurant operating costs:








Cost of goods sold 

53,098

49,838


207,225

162,805

29,172

191,977

Labor and other related expenses 

46,533

44,269


184,310

145,258

28,578

173,836

Occupancy costs 

12,570

11,484


48,780

36,817

8,046

44,863

Other restaurant operating expenses 

27,932

22,334


100,680

71,708

15,478

87,186

Depreciation and amortization 

5,355

4,569


20,309

14,588

3,112

17,700

Pre-opening expenses 

720

542


4,808

2,984

783

3,767

General and administrative 

6,789

6,076


25,373

30,460

14,440

44,900

Goodwill and intangible asset impairment

48,526

-


48,526

-

-

-

Store impairment and closing charges 

4,330

25


4,438

25

-

25

Total costs and expenses 

205,853

139,137


644,449

464,645

99,609

564,254

Operating (loss) income

(45,535)

12,399


(12,276)

34,318

(5,499)

28,819

Interest expense, net 

10,134

10,237


39,748

33,823

3,147

36,970

Other income, net 

-

-


-

(15)

(182)

(197)

(Loss) income before income taxes 

(55,669)

2,162


(52,024)

510

(8,464)

(7,954)

Income tax (benefit) expense

(3,573)

488


(5,496)

(70)

(8,240)

(8,310)

Net (loss) income

(52,096)

1,674


(46,528)

580

(224)

356

Undeclared preferred dividend 

-

-


-

-

(2,270)

(2,270)

Net (loss) income attributable to common stockholders 

$         (52,096)

$             1,674


$       (46,528)

$             580

$             (2,494)

$        (1,914)

 

LRI HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS



(In thousands, except share data)

July 29, 2012 (Successor)

July 31, 2011 (Successor)

ASSETS



Current assets:



  Cash and cash equivalents 

$         21,732

$           19,103

  Receivables 

8,288

9,960

  Inventories 

12,349

11,370

  Prepaid expenses and other current assets 

4,294

3,367

  Income taxes receivable 

3,911

3,688

  Deferred income taxes 

2,046

2,207

     Total current assets 

52,620

49,695

Property and equipment, net 

239,553

232,940

Other assets 

18,527

19,492

Goodwill 

284,078

331,788

Tradename 

71,694

71,694

Other intangible assets, net 

21,354

23,215

     Total assets 

$       687,826

$         728,824

LIABILITIES AND STOCKHOLDER'S EQUITY



Current liabilities:



  Accounts payable 

$         21,193

$           17,573

  Payable to RHI

50

802

  Other current liabilities and accrued expenses 

55,268

52,315

     Total current liabilities 

76,511

70,690

Long-term debt 

355,000

355,000

Deferred income taxes 

32,561

37,746

Other long-term obligations 

39,702

34,808

     Total liabilities 

503,774

498,244

Commitments and contingencies 

-

-

Stockholder's equity:



  Common stock ($0.01 par value; 100 shares authorized; 1 share issued and outstanding)

-

-

  Additional paid-in capital 

230,000

230,000

  Retained (deficit) earnings 

(45,948)

580

     Total stockholder's equity 

184,052

230,580

     Total liabilities and stockholder's equity 

$       687,826

$         728,824




 

LRI HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Fiscal year 2012 (Successor)

Period from
October 4, 2010 to July 31, 2011
(Successor)

Period from August 2,
2010 to
October 3, 2010
(Predecessor)
 

Cash flows from operating activities:




Net (loss) income

$          (46,528)

$                 580

$                   (224)

Adjustments to reconcile net (loss) income to net cash provided by operating activities:




Depreciation and amortization 

20,309

14,588

3,112

Other amortization 

1,289

4,502

241

Unrealized gain on interest rate swap 

-

-

(182)

Loss on sale/disposal of property and equipment 

3,467

765

203

Amortization of deferred gain on sale and leaseback transactions

(23)

(3)

(18)

Impairment charges for long-lived assets 

4,438

25

-

Goodwill impairment

48,526

-

-

Share-based compensation expense 

746

821

-

Tax benefit upon cancellation/exercise of Predecessor stock options

-

-

6,431

Deferred income taxes 

(5,024)

(1,103)

(10,701)

Changes in operating assets and liabilities:




Receivables 

1,672

(113)

126

Inventories 

(979)

(1,114)

(205)

Prepaid expenses and other current assets 

(927)

5,158

1,668

Other non-current assets and intangibles 

(2,009)

(651)

(179)

Accounts payable 

3,459

238

413

Payable to RHI

(48)

(19)

-

Income taxes payable/receivable 

(223)

849

(3,985)

Other current liabilities and accrued expenses 

2,898

(12,389)

4,942

Other long-term obligations 

5,445

4,415

1,022

Net cash provided by operating activities 

36,488

16,549

2,664

Cash flows from investing activities:




Acquisition of LRI Holdings, net of cash acquired 

-

(311,633)

-

Loan to parent for repurchase of shares

(1,450)

-

-

Purchase of property and equipment 

(48,609)

(32,998)

(7,036)

Proceeds from sale and leaseback transactions, net of expenses 

16,200

1,793

1,656

Net cash used in investing activities 

(33,859)

(342,838)

(5,380)

Cash flows from financing activities:




Proceeds from issuance of Senior Secured Notes 

-

355,000

-

Payments for debt issuance costs

-

(19,207)

-

Contribution from parent 

-

230,000

-

Repayment of Predecessor's senior secured credit facility 

-

(132,825)

-

Repayment of Predecessor's senior subordinated unsecured mezzanine term notes, including prepayment premium 

-

(87,576)

-

Payments on revolving credit facility 

(18,400)

-

-

Borrowings on revolving credit facility 

18,400

-

-

Net cash (used in) provided by financing activities 

-

345,392

-

Increase (decrease) in cash and cash equivalents 

2,629

19,103

(2,716)

Cash and cash equivalents, beginning of period 

19,103

-

52,211

Cash and cash equivalents, end of period 

$            21,732

$            19,103

$                49,495





Forward-Looking Statements
This press release contains statements about future events and expectations that constitute forward-looking statements.  These forward-looking statements can generally be identified by the use of forward-looking terminology such as "may," "plan," "seek," "will," "expect," "intend," "estimate," "anticipate," "believe" or the negative thereof or similar terminology.  These statements are based on management's beliefs, assumptions and expectations of our future financial and operating performance and growth plans, taking into account the information currently available.  These statements are not statements of historical fact.  Examples of forward-looking statements in this press release include our targets for future new unit growth.  Forward-looking statements involve risks and uncertainties that may cause the Company's actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements and you should not place undue reliance on such statements.  Please refer to our Annual Report on Form 10-K for the fiscal year ended July 29, 2012, and subsequent periodic reports that we have filed with the Securities and Exchange Commission, for a discussion of risk factors that may contribute to these differences.  Any forward-looking information presented herein is made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events or otherwise.

Non-GAAP Financial Measures
This press release also contains non-GAAP financial measures such as Restaurant Operating Margin, EBITDA, Adjusted EBITDA, Adjusted EBITDAR, and the Combined presentation of the Predecessor and Successor periods of fiscal year 2011.  The Company believes that these measures, together with reconciliations to the most comparable GAAP measure, are helpful to both management and investors in understanding and analyzing financial performance.  However, the Company's non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures used by other companies.  These non-GAAP measures and the Combined presentation for fiscal year 2011 have limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP financial measures.

To the extent we discuss any non-GAAP financial measures on the earnings call, a reconciliation of each measure to the most directly comparable GAAP measure is available in this press release. In addition, the Current Report on Form 8-K furnished to the SEC concurrent with the issuance of this press release includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.

Restaurant Operating Margin
Restaurant operating margin represents net sales less (a) cost of goods sold, (b) labor and other related expenses, (c) occupancy costs and (d) other restaurant operating expenses, divided by net sales.   The following table sets forth a reconciliation of net sales to restaurant operating margin:


Successor

Predecessor


(In thousands)

Thirteen weeks ended July 29, 2012

Thirteen weeks ended July 31, 2011


Fifty-two weeks ended July 29, 2012

Period from October 4, 2010 to July 31, 2011

Period from August 2, 2010 to October 3, 2010

Combined fifty-two weeks ended July 31, 2011 (Non-GAAP)

Net sales (A)

$      159,753

$         150,988


$      629,987

$      497,170

$             93,762

$        590,932

Restaurant operating expenses:








Cost of goods sold

53,098

49,838


207,225

162,805

29,172

191,977

Labor and other related expenses

46,533

44,269


184,310

145,258

28,578

173,836

Occupancy costs

12,570

11,484


48,780

36,817

8,046

44,863

Other restaurant operating expenses

27,932

22,334


100,680

71,708

15,478

87,186

Restaurant operating profit (B)

$        19,620

$           23,063


$        88,992

$        80,582

$             12,488

$          93,070

Restaurant operating margin (B / A)

12.3%

15.3%


14.1%

16.2%

13.3%

15.7%


EBITDA and Adjusted EBITDA
The following table sets forth a reconciliation of net (loss) income, the most directly comparable GAAP financial measure, to EBITDA, Adjusted EBITDA and Adjusted EBITDAR.


Successor

Predecessor


(In thousands)

Thirteen weeks ended July 29, 2012

Thirteen weeks ended July 31, 2011


Fifty-two weeks ended July 29, 2012

Period from October 4, 2010 to July 31, 2011

Period from August 2, 2010 to October 3, 2010

Combined fifty-two weeks ended July 31, 2011 (Non-GAAP)

Net (loss) income

$         (52,096)

$             1,674


$     (46,528)

$             580

$                (224)

$               356

Interest expense, net 

10,134

10,237


39,748

33,823

3,147

36,970

Income tax (benefit) expense

(3,573)

488


(5,496)

(70)

(8,240)

(8,310)

Depreciation and amortization 

5,355

4,569


20,309

14,588

3,112

17,700

      EBITDA 

(40,180)

16,968


8,033

48,921

(2,205)

46,716

Adjustments








Sponsor management fees(a) 

250

188


1,000

795

205

1,000

Non-cash asset write-offs:








Goodwill impairment(b) 

48,526

-


48,526

-

-

-

Restaurant impairment(c) 

4,330

25


4,438

25

-

25

Loss on disposal of property and equipment(d) 

1,256

318


3,341

741

164

905

Restructuring costs(e) 

12

-


442

-

-

-

Pre-opening expenses (excluding rent)(f) 

545

270


3,882

2,296

598

2,894

Hedging gain(g) 

-

-


-

-

(182)

(182)

Losses on sales of property(h) 

117

9


125

23

39

62

Non-cash rent adjustment(i) 

1,257

1,083


4,610

4,478

(334)

4,144

Costs related to the Transactions(j) 

-

802


43

13,671

10,272

23,943

Non-cash stock-based compensation(k) 

216

252


746

821

-

821

Other adjustments(l) 

7

36


32

45

10

55

Adjusted EBITDA 

16,336

19,951


75,218

71,816

8,567

80,383

Cash rent expense(m) 

9,238

8,653


36,626

26,877

7,128

34,005

Adjusted EBITDAR 

$           25,574

$           28,604


$     111,844

$        98,693

$             15,695

$        114,388

(a)  Prior to the completion of the Transactions, sponsor management fees consisted of fees paid to our Predecessor owners under a management and consulting services agreement, which was terminated in connection with the Transactions. Following the completion of the Transactions, sponsor management fees consist of fees paid to the Kelso Affiliates under an advisory agreement.

(b)  We recorded a goodwill impairment charge in fiscal year 2012.

(c)  Restaurant impairment charges were recorded in connection with the determination that the carrying value of certain of our restaurants exceeded their estimated fair value.

(d)  Loss on disposal of property and equipment consists of the loss on disposal or retirement of assets that are not fully depreciated.

(e)  Restructuring costs include severance and other related costs.

(f)  Pre-opening expenses (excluding rent) include expenses directly associated with the opening of a new restaurant.

(g)  Hedging gain relates to fair market value changes of an interest rate swap and the related interest. The interest rate swap was terminated in connection with the Transactions.

(h)  We recognize losses in connection with the sale and leaseback of restaurants when the fair value of the property being sold is less than the undepreciated cost of the property.

(i)  Non-cash rent adjustments represent the non-cash rent expense calculated as the difference between GAAP rent expense and amounts payable in cash under the leases during such time period. In measuring our operational performance, we focus on our cash rent payments.

(j)  Costs related to the Transactions include: expenses related to business combination accounting recognized in connection with the Transactions, a one-time fee of $7.0 million paid to the Kelso Affiliates and legal, professional, and other fees incurred as a result of the Transactions.

(k)  Non-cash stock-based compensation represents compensation expense recognized for time-based stock options issued by RHI.

(l)  Other adjustments include ongoing expenses of closed restaurants, as well as inventory write-offs, employee termination buyouts and incidental charges related to restaurant closings.

(m)  Cash rent expense represents actual cash payments required under our leases.

SOURCE LRI Holdings, Inc.



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