Luby's Reports Third Quarter Fiscal 2017 Results

HOUSTON, July 12, 2017 /PRNewswire/ -- Luby's, Inc. (NYSE: LUB) ("Luby's") today announced unaudited financial results for its twelve-week third quarter fiscal 2017, which ended on June 7, 2017. Comparisons in this earnings release for the third quarter fiscal 2017 are referred to as "third quarter."

Third Quarter Key Metrics

• Same-store sales decreased 2.7% compared to third quarter fiscal 2016, which also represented an improvement sequentially compared to the second quarter fiscal 2017
• Culinary Contract Services opened three new locations contributing approximately $1.0 million of revenue in the third quarter
• Retail product sales generated approximately $0.4 million in revenue in the third quarter
• Fuddruckers opened its newest company-owned location with first self-order kiosks near The Woodlands, Texas
• Capital expenditures decreased $1.2 million in the third quarter compared to the third quarter fiscal 2016

Chris Pappas, President and CEO, commented, "In the third quarter, our team continued to exercise solid cost controls and reduce capital expenditures as previously planned, despite persistent economic and restaurant industry pressures that challenged same-store sales results. At our core brands, Luby's Cafeterias and Fuddruckers, same-store sales improved sequentially, but reported declines of 2.5% and 0.9%, respectively, for the third quarter compared to the same period last year.

During the quarter, we were pleased with the addition of three new Culinary Contact Services locations which contributed over $1.0 million in revenue for this segment. In addition, retail product sales added $0.4 million in revenue in the third quarter. We also opened a new company-operated Fudduckers location near The Woodlands, Texas, with our first self-order kiosks."

Same-Store Sales Year-Over-Year Comparison

Third Quarter Restaurant Sales:
($ thousands)

• Luby's Cafeterias sales decreased $2.1 million versus the third quarter fiscal 2016, due to the closure of three locations over the prior year and a 2.5% decrease in Luby's same-store sales. The decrease was the result of a 7.1% decrease in guest traffic partially offset by a 4.6% increase in average spend per guest primarily due to a modest price increase and reduced discounting. We made a tactical discounting decision last year to promote our brand through BOGO ("buy one get one free") offers, which we estimate increased guest traffic by approximately 2.9% in the third quarter fiscal 2016.
• Fuddruckers sales at company-owned restaurants decreased $1.1 million versus the third quarter fiscal 2016, due to five restaurant closings over the prior year and a 0.9% decrease in same-store sales, offset by the opening of one company-owned Fuddruckers location. The 0.9% decrease in same-store sales was the result of a 5.6% decrease in guest traffic offset by a 4.7% increase in average spend per guest.
• Combo location sales decreased $0.3 million and represented 6.0% of total restaurant sales in the third quarter. Approximately 70% of the decline in sales occurred at one Combo location. Two of the six Combo locations increased sales by 5.5% and 1.2%, respectively.
• Cheeseburger in Paradise sales decreased $0.5 million, or 9.8%.
• Store level profit, defined as restaurant sales plus vending revenue less cost of food, payroll and related costs, other operating expenses, and occupancy costs, was $11.6 million, or 14.0% of restaurant sales, in the third quarter compared to $13.0 million, or 15.0% of restaurant sales, during the third quarter fiscal 2016. While cost controls were more efficient in labor scheduling, food cost management and lower restaurant supplies costs, an increase in certain restaurant services costs and utilities expense with lower overall sales volumes, led to the decrease in store level profitability. Store level profit is a non-GAAP measure, and reconciliation to loss from continuing operations is presented after the financial statements.
• Culinary Contract Services revenues increased $0.6 million to $4.5 million with 25 operating locations during the third quarter. Culinary Contract Services benefited from the opening of four locations over the prior year, adding over $1.0 million in revenue in the third quarter, and from retail product sales that added $0.4 million in revenue in the third quarter. These new sources of revenue were partially offset by the closure of six locations over the prior year. Culinary Contract Services profit margin decreased to 7.1% of Culinary Contract Services sales in the third quarter compared to 9.2% in the third quarter fiscal 2016.
• Franchise revenue decreased $109 thousand, or 6.9%, in the third quarter compared to the third quarter fiscal 2016. In the third quarter, franchisees closed two locations (one in Maryland and one in the Dominican Republic). Domestic same-store Fuddruckers franchise sales decreased 4.0% in the third quarter compared to the third quarter fiscal 2016.
• Loss from continuing operations was $0.4 million, or a loss of $0.01 per diluted share, compared to a loss of $0.1 million, or a loss of $0.01 per diluted share, in the third quarter fiscal 2016. Excluding special non-cash items, loss from continuing operations was $0.7 million, or a loss of $0.02 per diluted share, in the third quarter compared to a loss of $6 thousand, or $0.00 per diluted share, in the third quarter fiscal 2016. Loss from continuing operations, excluding special items, is a non-GAAP measure, and reconciliation to loss from continuing operations is presented below.

Reconciliation of loss from continuing operations to loss from continuing operations, before special items ^(1,2):

Balance Sheet and Capital Expenditures

We ended the third quarter with a debt balance outstanding of $40.4 million, up from $37.0 million at the end of fiscal 2016. During the third quarter, our capital expenditures decreased to $2.2 million compared to $3.4 million in the third quarter fiscal 2016. At the end of the third quarter, we had $1.3 million in cash and $147.8 million in total shareholders' equity.

Restaurant Counts:

Conference Call

Luby's will host a conference call on July 13, 2017 at 10:00 a.m. Central Time to discuss further its third quarter fiscal 2017 results. To access the call live, dial (412) 902-0030 and use the access code 13664737# 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.lubysinc.com. For those who cannot listen to the live call, a telephonic replay will be available through July 20, 2017 and may be accessed by calling (201) 612-7415 and using the access code 13664737#.  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, Inc. (NYSE: LUB) operates 169 restaurants nationally as of July 12, 2017: 89 Luby's Cafeterias, 71 Fuddruckers, eight Cheeseburger in Paradise and one Bob Luby's Seafood Grill. Luby's is the franchisor for 113 Fuddruckers franchise locations across the United States (including Puerto Rico), Canada, Mexico, Italy, the Dominican Republic, Panama, and Colombia. Additionally, a licensee operates 34 restaurants with the exclusive right to use the Fuddruckers proprietary marks, trade dress, and system in certain countries in the Middle East. The Company does not receive revenue or royalties from these Middle East restaurants. Luby's Culinary Contract Services provides food service management to 25 sites consisting of healthcare 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 openings of units, scheduled closures of units, sales of assets, expected proceeds from the sale of assets, expected levels of capital expenditures, effects of food commodity costs, anticipated financial results in future periods and expectations of industry conditions.

Luby's 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 Luby's. 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 Luby's actual results to differ materially from the expectations Luby's describes in such 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 Luby'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 Luby's annual reports on Form 10-K and quarterly reports on Form 10-Q.

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

Although store level profit, defined as restaurant sales plus vending revenue, less cost of food, payroll and related costs, other operating expenses, and occupancy costs is a non-GAAP measure, we believe its presentation is useful because it explicitly shows the results of our most significant reportable segment.   The following table reconciles between store level profit, a non-GAAP measure to loss from continuing operations, a GAAP measure:

Adjusted EBITDA

Adjusted EBITDA is defined as income (loss) from continuing operations before interest, provision (benefit) for income taxes and depreciation and amortization and excluding net gain (loss) on disposing of property and equipment, provision for asset impairments and restaurant closings, non-cash compensation expense, franchise taxes, and decrease / (increase) in fair value of derivatives.

Adjusted EBITDA is intended as a supplemental measure of our performance that is not required by, or presented in accordance with GAAP. We believe Adjusted EBITDA  provides useful information to management and investors in valuing the Company and evaluating ongoing operating results and trends and in comparing our results to other competitors. Our management uses Adjusted EBITDA in evaluating management's performance when determining incentive compensation.

Adjusted EBITDA, as defined, may not be comparable to other similarly titled measures as computed by other companies. These measures should be considered supplemental and not a substitute or superior to other GAAP performance measures.

For additional information contact:

Dennard-Lascar Associates
Rick Black / Ken Dennard
Investor Relations
713-529-6600

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SOURCE Luby's, Inc.