Luby's Reports Third Quarter Fiscal 2010 Results

~ Sequential Same-Store Sales Improve & Reports Income from Continuing Operations of $1.3 Million ~

Jun 09, 2010, 16:50 ET from Luby's, Inc.

HOUSTON, June 9 /PRNewswire-FirstCall/ -- Luby’s, Inc. (NYSE: LUB) (“Luby’s”) today announced its unaudited financial results for the third quarter fiscal 2010, a twelve-week period, which ended on May 5, 2010.  As a result of the Company’s Cash Flow Improvement and Capital Redeployment Plan (“2010 Business Plan”) announced on October 15, 2009, which included the closure of 25 underperforming stores, the entire fiscal activity of the applicable closed locations has been reclassified in discontinued operations for current and prior periods.

Third Quarter Review

  • Restaurant sales were $53.9 million, a decrease of $3.5 million compared to the same quarter last year.  Same-store sales, from a total of 96 restaurants, decreased approximately 4.8% compared to the same quarter last year. Same-store sales improved sequentially in the third quarter compared to last quarter. During the 2010 third fiscal quarter, year-over-year customer traffic trend improved slightly compared to last quarter’s results due to increased guest frequency, improving consumer confidence and positive guest response to Luby’s limited time offers. The increase in year-over-year customer traffic was more than offset by a decline in average customer spending, resulting from lower prices on menu items and increased promotional activity.
  • Revenue from Culinary Contract Services rose 9.9% to $3.3 million in the third quarter fiscal 2010 compared to $3.0 million generated in the third quarter fiscal 2009. Culinary Contract Services operated 17 facilities as of May 5, 2010 versus 13 facilities at the end of the third fiscal quarter last year.
  • Store level profit, defined as restaurant sales less food costs, payroll and related costs, and other operating expenses, was up 9.5% to $9.7 million in the third quarter of fiscal 2010, or 18.0% of restaurant sales, compared to $8.9 million in the third quarter of fiscal 2009, or 15.5% of restaurant sales. Although food costs were up as a percentage of restaurant sales, the Company effectively managed its payroll and other expenses, with both declining as a percentage of restaurant sales.  
  • In the third quarter fiscal 2010, Luby’s reported income from continuing operations of $1.3 million, or $0.05 per share, compared to a loss of $0.4 million in the same quarter last year.  Income from continuing operations in the third quarter fiscal 2010 included a pre-tax net gain of $237,000 on the sale of one of the Company’s properties held for sale and a pre-tax gain of $475,000 associated with an insurance recovery of lost profits related to Hurricane Ike.  Last year’s results included a pre-tax expense of $664,000 resulting from the decrease in fair value of its investment in auction rate securities and a pre-tax gain of $485,000 from insurance proceeds associated with an insurance settlement related to property and equipment damages related to Hurricane Ike.

Q1FY10

Q2FY10

Q3FY10

YTD

Same-Store Sales (95 stores):

*96 stores in Q3FY10

(13.3%)

(12.5%)

(4.8%)*

(10.2%)

Chris Pappas, President and CEO, made the following remarks: “We are cautiously optimistic that our customers are returning more often to our restaurants as customer traffic improves. Our local market promotions are generating encouraging results.  Our customers know we are listening to their needs and they are responding positively. Additionally, these promotions have allowed us to reduce our advertising and marketing expenses, relying instead on local initiatives.”

“During the third quarter we generated income from continuing operations.  This is an important validation of our Cash Flow Improvement and Capital Redeployment Plan, which was put in place at the beginning of this fiscal year. Although we feel better about the direction of our sales, our customers are still feeling the weakness in the economy and until consumer confidence and the unemployment rate improve, we will remain cautious and refrain from giving sales and earnings guidance.”

In concluding his remarks, Pappas said, “We continue to market our properties held for sale as well as those in discontinued assets. This quarter we sold one of our locations, generating a pre-tax gain of approximately $237,000. A few weeks ago we also announced that the Financial Industry Regulatory Authority ordered Credit Suisse Securities (USA) LLC to buy back the auction rate securities we purchased through them. We received $7.1 million par value of those securities and accrued interest. We also generated a pre-tax gain of approximately $1.8 million, net of expenses, on the sale of investments which will be reflected in our fourth quarter results.  As always, we continue to focus on maintaining a strong balance sheet. We ended the third quarter with no debt on our balance sheet, $7.7 million in cash and $18.4 million in availability under our credit facility.”

Operating Expense Review

Food costs decreased approximately $0.7 million in the third quarter fiscal 2010 compared to the same quarter last year, due primarily to a reduction in sales volume. Food costs as a percentage of restaurant sales rose to 27.4% in the third quarter fiscal 2010 from 26.9% in the comparable quarter last year primarily due to lower menu prices and increased promotional activity.

Payroll and related costs decreased $1.5 million in the third quarter fiscal 2010 compared to the same quarter last year. As a percentage of restaurant sales, payroll and related costs declined to 35.1% in the third quarter fiscal 2010 from 35.6% in the same quarter last year primarily due to a reduction in management costs, lower crew overtime and increased efficiencies in crew scheduling, partially offset by higher average wages paid to crew employees.

Other operating expenses primarily include restaurant-related expenses for utilities, repairs and maintenance, advertising, insurance, supplies, services, and occupancy costs. Other operating expenses decreased by approximately $2.1 million compared to the same quarter last year, due primarily to a $0.7 million reduction in marketing and advertising expense, a $0.5 million decline in utilities expense, a $0.3 million reduction in repairs and maintenance, and $0.5 million impact of business interruption insurance recovery associated with Hurricane Ike. As a percentage of restaurant sales, other operating expenses decreased to 19.4% compared to 22.0% in the same quarter last year.

Depreciation and amortization expense declined approximately $0.2 million in the third quarter fiscal 2010 compared to the same quarter last year, due to a slightly lower depreciable asset base reflecting reduced capital spending and certain assets reaching the end of their depreciable lives.

General and administrative expenses include corporate salaries and benefits-related costs, including restaurant area leaders, share-based compensation, professional fees, travel and recruiting expenses and other office expenses.  General and administrative expenses decreased by approximately $0.8 million in the third quarter of fiscal 2010 compared to the same quarter last year primarily due to a decrease in corporate salary and benefit expense as a result of reductions in corporate support headcount and bonus accruals.  

Fiscal Year-to-Date Review

Same-store sales declined 10.2%.

  • Total sales declined 10.9% to $162.9 million in the first three quarters of fiscal 2010, compared to $182.8 million in the comparable period of fiscal 2009.
  • Luby’s Culinary Contract Services business, included in total sales, generated $9.5 million in sales during the first three quarters of fiscal 2010 compared to $9.0 million in sales during the comparable period of fiscal 2009, a 5.7% increase.
  • Loss from continuing operations for the first three quarters of fiscal 2010 was $1.5 million, compared to a loss of $0.6 million in fiscal 2009.  
  • Store level profit as a percentage of restaurant sales decreased to 14.9% in the first three quarters of fiscal 2010 compared to 15.3% in the comparable period of fiscal 2009.

Outlook

The Company remains cautious regarding the outlook for comprehensive economic recovery.  It continues to anticipate that any improvement in restaurant sales will lag behind the broader economic recovery.  For Luby’s to see any material improvements in its same store sales, it will take improved employment levels and a substantial uptick in consumer confidence in its areas of operation.  Luby’s will continue to offer customers competitive price points to promote customer frequency; however, it does not anticipate that significant profit improvements are probable without significant guest traffic increases in fiscal 2010 at most retail units.  Thus a net loss from continuing operations is expected in 2010 at this time.

Conference Call

The Company will host a conference call today at 4:00 p.m., Central Time, to discuss further its 2010 fiscal third quarter results. To access the call live, dial (480) 629-9723 and ask for the Luby’s conference call at least 10 minutes prior to the start time, or listen live over the Internet by visiting the events page in the investor relations section of www.lubys.com.  For those who cannot listen to the live call, a telephonic replay will be available through June 16, 2010 and may be accessed by calling (303) 590-3030 and using the pass code 4303475#. Also, an archive of the webcast will be available after the call for a period of 90 days on the "Investors" section of the Company's website.

About Luby’s

Luby’s operates 96 restaurants in Austin, Dallas, Houston, San Antonio, the Rio Grande Valley and other locations throughout Texas and other states.  Luby’s provides its customers with quality home-style food, value pricing, and outstanding customer service.  Luby’s Culinary Contract Services provides food service management to 17 sites consisting of healthcare, higher education and corporate dining locations.

This press release contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  All statements contained in this press release, other than statements of historical fact, are “forward-looking statements” for purposes of these provisions, including the statements under the caption “Outlook” and any other statements regarding scheduled closures of units, sales of assets, expected proceeds from the sale of assets, expected levels of capital expenditures, anticipated financial results in future periods and expectations of industry conditions.

The Company cautions readers that various factors could cause its actual financial and operational results to differ materially from those indicated by forward-looking statements made from time to time in news releases, reports, proxy statements, registration statements, and other written communications, as well as oral statements made from time to time by representatives of the Company.  The following factors, as well as any other cautionary language included in this press release, provide examples of risks, uncertainties and events that may cause the Company's actual results to differ materially from the expectations the Company describes in its “forward-looking statements”: general business and economic conditions; the impact of competition; our operating initiatives; fluctuations in the costs of commodities, including beef, poultry, seafood, dairy, cheese and produce; increases in utility costs, including the costs of natural gas and other energy supplies; changes in the availability and cost of labor; the seasonality of the Company’s business; changes in governmental regulations, including changes in minimum wages; the effects of inflation; the availability of credit; unfavorable publicity relating to operations, including publicity concerning food quality, illness or other health concerns or labor relations; the continued service of key management personnel; and other risks and uncertainties disclosed in the Company’s annual reports on Form 10-K and quarterly reports on Form 10-Q.

For additional information contact:

DRG&E / 713-529-6600

Ken Dennard / Sheila Stuewe

Investor Relations

Luby's, Inc.

Consolidated Statements of Operations (unaudited)

(In thousands except per share data)

Quarter Ended

Three Quarters Ended

May 5, 2010

May 6, 2009

May 5, 2010

May 6, 2009

(12 weeks)

(12 weeks)

(36 weeks)

(36 weeks)

SALES:

Restaurant sales

$  53,947

$  57,470

$  153,399

$  173,830

Culinary contract services

3,262

2,968

9,514

9,001

TOTAL SALES

57,209

60,438

162,913

182,831

COSTS AND EXPENSES:

Cost of food

14,796

15,484

41,781

47,452

Payroll and related costs

18,932

20,468

55,587

61,762

Other operating expenses

10,482

12,619

33,208

37,969

Opening costs

31

32

183

127

Cost of culinary contract services

2,945

2,866

8,660

8,207

Depreciation and amortization

3,443

3,656

10,461

10,985

General and administrative expenses

5,163

5,955

15,648

17,702

Provision for asset impairments, net

32

233

Net gain on disposition of property and equipment

(237)

(485)

(965)

(720)

Total costs and expenses

55,555

60,595

164,595

183,717

INCOME (LOSS) FROM OPERATIONS

1,654

(157)

(1,682)

(886)

Interest income

7

22

23

181

Interest expense

(127)

(66)

(300)

(208)

Gain on sales and redemptions (impairment in fair value) of investments

(664)

(438)

(794)

Other income, net

204

263

617

754

Income (loss) before income taxes and discontinued operations

1,738

(602)

(1,780)

(953)

Provision (benefit) for income taxes

462

(244)

(240)

(338)

Income (loss) from continuing operations

1,276

(358)

(1,540)

(615)

Loss from discontinued operations, net of income taxes

(546)

(695)

(1,869)

(2,484)

NET INCOME (LOSS)

$  730

$  (1,053)

$  (3,409)

$  (3,099)

Income (loss) per share from continuing operations:

Basic

$  0.05

$  (0.01)

$  (0.05)

$  (0.02)

Assuming dilution

0.05

(0.01)

(0.05)

(0.02)

Loss per share from discontinued operations:

Basic

$  (0.02)

$  (0.03)

$  (0.07)

$  (0.09)

Assuming dilution

(0.02)

(0.03)

(0.07)

(0.09)

Net income (loss) per share:

Basic

$  0.03

$  (0.04)

$  (0.12)

$  (0.11)

Assuming dilution

0.03

(0.04)

(0.12)

(0.11)

Weighted average shares outstanding:

Basic

28,145

28,061

28,125

28,078

Assuming dilution

28,151

28,061

28,125

28,078

The following table contains information derived from the Company's Consolidated Statements of Operations expressed as a percentage of sales.  Percentages may not add due to rounding.

Quarter Ended

Three Quarters Ended

May 5,

May 6,

May 5,

May 6,

2010

2009

2010

2009

(12 weeks)

(12 weeks)

(36 weeks)

(36 weeks)

Restaurant sales

94.3

%

95.1

%

94.2

%

95.1

%

Culinary contract services

5.7

%

4.9

%

5.8

%

4.9

%

TOTAL SALES

100

%

100

%

100

%

100

%

COSTS AND EXPENSES:

(As a percentage of restaurant sales)

Cost of food

27.4

%

26.9

%

27.2

%

27.3

%

Payroll and related costs

35.1

%

35.6

%

36.2

%

35.5

%

Other operating expenses

19.4

%

22.0

%

21.6

%

21.8

%

Store level profit

18.1

%

15.5

%

14.9

%

15.3

%

(As a percentage of total sales)

General and administrative expenses

9.0

%

9.9

%

9.6

%

9.7

%

INCOME (LOSS) FROM OPERATIONS

2.4

%

(0.3)

%

(1.0)

%

(0.5)

%

Luby's, Inc.

Consolidated Balance Sheets

(In thousands, except share data)

May 5, 2010

August 26, 2009

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$  7,698

$  882

Trade accounts and other receivables, net

1,495

1,463

Short-term investments

5,725

Food and supply inventories

2,770

2,814

Prepaid expenses

612

661

Assets related to discontinued operations

90

372

Deferred income taxes

26

192

Total current assets

18,416

6,384

Property and equipment, net

136,908

147,345

Long-term investments

6,903

Deferred incomes taxes

6,017

5,082

Property held for sale

2,075

3,870

Assets related to discontinued operations

23,919

24,705

Other assets

397

223

Total assets

$  187,732

$  194,512

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$  8,913

$  11,595

Liabilities related to discontinued operations

695

1,816

Accrued expenses and other liabilities

12,855

14,063

Total current liabilities

22,463

27,474

Credit facility debt

Liabilities related to discontinued operations

971

382

Other liabilities

3,241

3,524

Total liabilities

26,675

31,380

Commitments and Contingencies

SHAREHOLDERS' EQUITY

Common stock, $0.32 par value; 100,000,000 shares authorized; shares issued were 28,552,577 and 28,494,511, respectively; shares outstanding were 28,052,577 and 27,994,511, respectively

9,137

9,118

Paid-in capital

22,859

21,989

Retained earnings

133,391

136,800

Accumulated other comprehensive income

445

Less cost of treasury stock, 500,000 shares

(4,775)

(4,775)

Total shareholders' equity

161,057

163,132

Total liabilities and shareholders' equity

$  187,732

$  194,512

Luby's, Inc.

Consolidated Statements of Cash Flows (unaudited)

(In thousands)

Three Quarters Ended

May 5, 2010

May 6, 2009

(36 weeks)

(36 weeks)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$  (3,409)

$  (3,099)

Adjustments to reconcile net loss to net cash provided by operating activities:

Net (gains) and losses on property sales and provision for asset impairments

(2,501)

(859)

Depreciation and amortization

10,732

13,051

Impairment charge for decrease in fair value of investments, net of gains

438

794

Amortization of debt issuance cost

187

60

Non-cash compensation expense

198

195

Share-based compensation expense

691

906

Deferred tax benefit

(1,317)

(1,816)

Cash provided by operating activities before changes in operating assets and liabilities

5,019

9,232

Changes in operating assets and liabilities:

Decrease (increase) in trade accounts and other receivables, net

(17)

176

Decrease (increase) in food and supply inventories

261

(205)

Decrease in prepaid expenses and other assets

80

286

Decrease in accounts payable, accrued expenses and other liabilities

(5,099)

(6,094)

Net cash provided by operating activities

244

3,395

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale and redemption of long-term investments

1,414

525

Proceeds from disposal of assets and property held for sale

7,802

2,244

Purchases of property and equipment

(2,266)

(10,335)

Net cash provided by (used in) investing activities

6,950

(7,566)

CASH FLOWS FROM FINANCING ACTIVITIES:

Credit facility borrowings

21,300

14,000

Credit facility repayments

(21,300)

(12,000)

Debt issuance costs

(378)

Net cash provided by (used in) financing activities

(378)

2,000

Net increase (decrease) in cash and cash equivalents

6,816

(2,171)

Cash and cash equivalents at beginning of period

882

4,566

Cash and cash equivalents at end of period

$  7,698

$  2,395

Cash paid for:

Income taxes

$  —

$  —

Interest

94

135

SOURCE Luby's, Inc.



RELATED LINKS

http://www.lubys.com