BJ'S RESTAURANTS, INC. STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE
Certain information included in this Form 10-Q and other filings with the
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statements, and any other statements that are not historical facts, are
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended from
time to time (the "Act"). The cautionary statements made in this Form 10-Q
should be read as being applicable to all related "forward-looking" statements
wherever they appear in this Form 10-Q. These forward-looking statements are
based on information available to us as of the date any such statements are
made, and we assume no obligation to update these forward-looking statements.
These statements are subject to risks and uncertainties that could cause actual
results to differ materially from those described in the statements. These risks
and uncertainties include, but are not limited to, the risk factors described in
Item 1A of our Annual Report on Form 10-K for the fiscal year ended
GENERAL
As of
The first BJ's restaurant, which opened in 1978 in
In 1996, we introduced our own proprietary craft beers and expanded the BJ's
concept from its beginnings as a small pizzeria to a full-service, high-energy
casual dining restaurant when we opened our first large format restaurant with
our own internal brewing operations in
Our revenues are comprised of food and beverage sales from our restaurants. Revenues from restaurant sales are recognized when payment is tendered. Amounts paid with a credit card are recorded in accounts and other receivables until payment is collected from the credit card processor. We sell gift cards which do not have an expiration date, and we do not deduct non-usage fees from outstanding gift card balances. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. Based on historical redemption rates, a portion of our gift card sales are not expected to be redeemed and will be recognized as gift card "breakage" over time. Estimated gift card breakage is recorded as revenue and recognized in proportion to our historical redemption pattern, unless there is a legal obligation to remit the unredeemed gift cards to government authorities. The estimated gift card breakage is based on when the likelihood of redemption becomes remote, which has typically been 24 months after the original gift card issuance date.
Our guest loyalty program enables participants to earn points for qualifying purchases that can be redeemed for food and beverages in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points until such points are redeemed.
All of our restaurants are Company-owned. In calculating comparable restaurant sales, we include a restaurant in the comparable base once it has been open for 18 months. Guest traffic for our restaurants is estimated based on guest checks.
Cost of sales is comprised of food and beverage costs, including the cost to produce and distribute our proprietary craft beer, soda and ciders. The components of cost of sales are variable and typically fluctuate directly with sales volumes, but may be impacted by changes in commodity prices, a shift in sales mix to higher cost proteins or other higher cost items, or varying levels of promotional activities.
Labor and benefit costs include direct hourly and management wages, bonuses, payroll taxes, fringe benefits and stock-based compensation and workers' compensation expense that is directly related to restaurant level team members.
Occupancy and operating expenses include restaurant supplies, credit card fees, third-party delivery company commissions, marketing costs, fixed rent, percentage rent, common area maintenance charges, utilities, real estate taxes, repairs and maintenance and other related restaurant costs. Since fiscal 2020, occupancy and operating expense also include COVID-19 related costs such as temporary patios and safety related items.
General and administrative costs include all corporate administrative functions that support existing operations and provide infrastructure to facilitate our future growth. Components of this category include corporate management, field supervision and corporate hourly staff salaries and related team member benefits (including stock-based compensation expense and cash-based incentive compensation), travel and relocation costs, information systems, the cost to recruit and train new restaurant management team members, corporate rent, certain brand marketing-related expenses and legal, professional and consulting fees.
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Depreciation and amortization are composed primarily of depreciation of capital expenditures for restaurant and brewing equipment and leasehold improvements.
Restaurant opening expenses, which are expensed as incurred, consist of the costs of hiring and training the initial hourly work force for each new restaurant, travel, the cost of food and supplies used in training, grand opening promotional costs, the cost of the initial stock of operating supplies and other direct costs related to the opening of a restaurant, including rent during the construction and in-restaurant training period.
RESULTS OF OPERATIONS
The following table provides, for the periods indicated, our unaudited
Consolidated Statements of Operations expressed as percentages of total
revenues. The results of operations for the thirteen weeks ended
For the Thirteen Weeks Ended
March 29, 2022 March 30, 2021
Revenues 100.0 % 100.0 %
Restaurant operating costs (excluding
depreciation and amortization):
Cost of sales 27.3 25.1
Labor and benefits 38.9 36.6
Occupancy and operating 24.0 26.8
General and administrative 6.1 6.8
Depreciation and amortization 6.0 8.2
Restaurant opening 0.2 0.1
Loss on disposal and impairment of assets 0.1 0.1
Total costs and expenses 102.6 103.7
Loss from operations (2.6 ) (3.7 )
Other (expense) income:
Interest expense, net (0.2 ) (0.6 )
Other (expense) income, net (0.1 ) 0.1
Total other expense (0.3 ) (0.5 )
Loss before income taxes (2.9 ) (4.2 )
Income tax benefit (3.4 ) (2.8 )
Net income (loss) 0.5 % (1.4 )%
Thirteen Weeks Ended
Revenues. Total revenues increased by
Cost of Sales. Cost of sales increased by
Labor and Benefits. Labor and benefit costs for our restaurants increased by
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primarily due to increased team members and higher training and overtime costs
due to the re-opening of our dining rooms, which were closed or had restricted
operations during the same period in 2021, and expenses related to the three new
restaurants opened and one restaurant re-opened since the thirteen weeks ended
Occupancy and Operating. Occupancy and operating expenses increased by
General and Administrative. General and administrative expenses increased by
Depreciation and Amortization. Depreciation and amortization decreased by
Restaurant Opening. Restaurant opening expense increased by
Loss on Disposal and Impairment of Assets. Loss on disposal and impairment of
assets was
Interest Expense, Net. Interest expense, net, decreased by
Other (Expense) Income, Net. Other (expense) income, net, decreased by
Income Tax Benefit. Our effective income tax rate for the thirteen weeks ended
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LIQUIDITY AND MATERIAL CASH REQUIREMENTS
The following table provides, for the periods indicated, a summary of our key liquidity measurements (dollars in thousands):
March 29, 2022 December 28, 2021
Cash and cash equivalents $ 27,201 $ 38,527
Net working capital $ (112,099 ) $ (109,619 )
Current ratio 0.4:1.0 0.5:1.0
As a result of uncertainties in the near-term outlook for our business caused by the COVID-19 pandemic, we continue to focus on cash flow generation. Currently, we have no intention to repurchase shares or pay dividends until it is determined by our Board of Directors that it is in the best interest of the Company and its shareholders. We will review and, when appropriate, adjust our overall approach to capital allocation as we know more about the ultimate duration of the COVID-19 pandemic and how the post-pandemic recovery will unfold and affect our cash flow from operating activities.
We are taking what we believe to be reasonably necessary and appropriate measures to control costs and maximize liquidity. Based on the current level of operations, we believe that our current cash and cash equivalents will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months. Our future operating performance will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.
Similar to many restaurant chains, we typically utilize operating lease
arrangements (principally ground leases) for the majority of our restaurant
locations. We believe our operating lease arrangements provide appropriate
leverage for our capital structure in a financially efficient manner. However,
we are not limited to the use of lease arrangements as our only method of
opening new restaurants and from time to time have purchased the underlying land
for new restaurants. We typically lease our restaurant locations for periods of
10 to 20 years under operating lease arrangements. Our rent structures vary from
lease to lease, but generally provide for the payment of both minimum and
contingent (percentage) rent based on sales, as well as other expenses related
to the leases (for example, our pro-rata share of common area maintenance,
property tax and insurance expenses). Many of our lease arrangements include the
opportunity to secure tenant improvement allowances to partially offset the cost
of developing and opening the related restaurants. Generally, landlords recover
the cost of such allowances from increased minimum rents. There can be no
assurance that such allowances will be available to us on each project. From
time to time, we may also decide to purchase the underlying land for a new
restaurant if that is the only way to secure a highly desirable site. Currently,
we own the underlying land for one of our restaurants that will be opened in
fiscal 2022 and our
CASH FLOWS
The following tables set forth, for the periods indicated, our cash flows from operating, investing, and financing activities (in thousands):
For the Thirteen Weeks Ended
March 29, 2022 March 30, 2021
Net cash provided by operating activities $ 609 $ 14,212
Net cash used in investing activities (11,530 ) (6,877 )
Net cash (used in) provided by financing
activities (405 ) 31,248
Net (decrease) increase in cash and cash
equivalents $ (11,326 ) $ 38,583
Operating Cash Flows
Net cash provided by operating activities was
Investing Cash Flows
Net cash used in investing activities was
The following table provides, for the periods indicated, the components of capital expenditures (in thousands):
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For the Thirteen Weeks Ended
March 29, 2022 March 30, 2021
New restaurants $ 7,865 $ 4,676
Restaurant maintenance and key productivity
initiatives 3,870 1,649
Restaurant and corporate systems 361 552
Total capital expenditures $ 12,096 $ 6,877
As of
We currently anticipate our total capital expenditures for fiscal 2022 to be
approximately
Financing Cash Flows
Net cash used in financing activities was
OFF-BALANCE SHEET ARRANGEMENTS
We do not participate in transactions that generate relationships with
unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or variable interest entities ("VIEs"), which
would have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow limited purposes. As of
IMPACT OF INFLATION
Inflation on food, labor, energy and occupancy costs can significantly affect the profitability of our restaurant operations. Our profitability is dependent, among other things, on our ability to anticipate and react to changes in the cost of key operating resources, including food and other raw materials, labor, energy and other supplies and services. Substantial increases in costs and expenses could impact our operating results to the extent that such increases cannot be passed along to our restaurant customers. While we have taken steps to enter into agreements for some of the commodities used in our restaurant operations, there can be no assurance that future supplies and costs for such commodities will not fluctuate due to weather or other market conditions outside of our control. We are currently unable to contract for certain commodities, such as fluid dairy, fresh meat or seafood, and most fresh produce items, for long periods of time. Consequently, such commodities can be subject to unforeseen supply and cost fluctuations. While we have not had material disruptions in our supply chain, we have experienced some product shortages and higher costs and inflationary pressures, which have affected our average per-guest check.
A general shortage in the availability of qualified restaurant managers and hourly workers in certain geographic areas in which we operate, which has been exacerbated by continuing effects of the COVID-19 pandemic on the labor market, has caused increases in the costs of recruiting and compensating such team members. Many of our restaurant team members are paid hourly rates subject to federal, state or local minimum wage requirements. Numerous state and local governments have their own minimum wage and other regulatory requirements for team members that are generally greater than the federal minimum wage and are subject to annual increases based on changes in their local consumer price indices. Additionally, certain operating and other costs, including health benefits in compliance with the Patient Protection and Affordable Care Act, taxes, insurance, COVID-19 pandemic related benefits, and other outside services continue to increase with the general level of inflation and may also be subject to other cost and supply fluctuations outside of our control.
While we have been able to partially offset inflation and other changes in the costs of key operating resources by gradually increasing prices of our menu items, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future. From time to time, competitive conditions will limit our menu pricing flexibility. In addition, macroeconomic conditions that impact consumer discretionary spending for food away from home could make additional menu price increases imprudent. There can be no assurance that all of our future cost increases can
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be offset by higher menu prices or that higher menu prices will be accepted by our restaurant customers without any resulting changes in their visit frequencies or purchasing patterns. Many of the leases for our restaurants provide for contingent rent obligations based on a percentage of sales. As a result, rent expense will absorb a proportionate share of any menu price increases in our restaurants. There can be no assurance that we will continue to generate increases in comparable restaurant sales in amounts sufficient to offset inflationary or other cost pressures.
SEASONALITY AND ADVERSE WEATHER
Our business is impacted by weather and other seasonal factors that typically impact other restaurant operations. Holidays (and shifts in the holiday calendar) and severe weather including hurricanes, tornados, thunderstorms, snow and ice storms, prolonged extreme temperatures and similar conditions may impact restaurant sales volumes in some of the markets where we operate. Many of our restaurants are located in or near shopping centers and malls that typically experience seasonal fluctuations in sales. Quarterly results have been and will continue to be significantly impacted by the timing of new restaurant openings and their associated restaurant opening expenses. As a result of these and other factors, our financial results for any given quarter may not be indicative of the results that may be achieved for a full fiscal year.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in accordance with
A summary of our other critical accounting policies is included in Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in our Annual Report on Form 10-K for the fiscal year ended
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