J. Alexander’s Corporation Reports Results for Fourth Quarter and 2009 Fiscal Year
Net sales increased 11.0% to $38,996,000 from $35,141,000. The extra week in the 2009 quarter included the New Years holiday period and contributed $3,337,000 of net sales, which increased net sales for the quarter by 9.5%.
J. Alexander’s Corporation (NASDAQ: JAX) today reported operating results for the fourth quarter and year ended January 3, 2010. The 2009 fiscal year included 53 weeks compared to 52 weeks in the prior year while the fourth quarter of 2009 included 14 weeks compared to 13 weeks in the final quarter a year earlier.
“As previously noted, J. Alexander’s Corporation’s results have been pressured by the lingering recession, which has adversely affected our average guest counts”A summary of the fourth quarter of 2009 compared to the fourth quarter of 2008 follows:
- Net sales increased 11.0% to $38,996,000 from $35,141,000. The extra week in the 2009 quarter included the New Year’s holiday period and contributed $3,337,000 of net sales, which increased net sales for the quarter by 9.5%.
- Average weekly same store sales per restaurant increased by 1.0%, but decreased by 0.5% excluding the last week of the 2009 quarter.
- Based on an asset impairment analysis required by U.S. Generally Accepted Accounting Principles (GAAP) the Company determined in the fourth quarter of 2009 that certain of its restaurant assets were impaired and recorded non-cash asset impairment charges of $3,889,000 for two underperforming restaurants which remain in operation.
- The loss before income taxes and the impairment charges (1) was $755,000 and compared to a loss before income taxes of $1,373,000 in the 2008 quarter. There was no pre-opening expense in the fourth quarter of 2009 compared to $421,000 in the fourth quarter of 2008.
- During the fourth quarter of 2009, the Company determined that a valuation allowance for substantially all of its net deferred tax assets was necessary in order to reflect the Company’s assessment of its ability to realize the benefits of those assets. As a result, the Company recorded an increase in the Company’s beginning of the year valuation allowance for deferred tax assets which increased the income tax provision for the quarter by $7,405,000, or $1.25 per share.
- The net loss on a GAAP basis was $13,675,000, or $2.30 per share, compared to a net loss of $699,000, or $.10 per share, in 2008.
- The net loss excluding the asset impairment charges and beginning of the year tax valuation allowance adjustment (1) was $2,381,000, or $.40 per share.
- The Company’s cash position increased to $5,613,000 at the end of 2009 compared to $2,505,000 at the end of 2008. Net debt (1) decreased to $17,804,000 at the end of 2009 from $18,844,000 at the end of 2008.
- Net sales increased 3.2% to $144,194,000 from $139,755,000. The increase included net sales of $3,337,000 during the additional week included in the 2009 fiscal year, which increased net sales for the year by 2.4%.
- Average weekly same store sales per restaurant decreased by 4.3%. Excluding the effect of the additional week included in 2009 the decrease was 4.7%.
- The loss before income taxes excluding the asset impairment charges (1) noted above was $4,347,000 compared to a loss before income taxes of $912,000 in 2008. There was no pre-opening expense in 2009 compared to pre-opening expense of $1,626,000 in 2008.
- The net loss on a GAAP basis was $15,338,000 compared to net income of $105,000 in 2008, and the loss per share was $2.45 compared to earnings per diluted share of $.02 in 2008. The net loss for 2009 included income tax expense of $7,102,000 including the effect of the tax asset valuation allowance adjustment noted above. A tax benefit of $1,017,000 was recorded in 2008.
- The net loss excluding the asset impairment charges and the beginning of the year tax valuation allowance adjustment (1) noted above was $4,044,000, or $.65 per share.
“We are encouraged, however, that our same store sales trend line improved in the fourth quarter,” Stout said, “and has further strengthened in the first quarter of 2010. Same store sales were up approximately 3% for the first ten weeks of 2010 compared to the comparable weeks of 2009 after excluding the effect of the New Year’s holidays from the previous year’s sales, and have significantly exceeded that level for the last few weeks. Average weekly same store sales per restaurant, including the effect of the New Year’s holiday period in 2009, increased by approximately 1.4% for the first ten weeks of 2010 compared to the first ten weeks of fiscal 2009.”
Cost of sales for the fourth quarter of 2009 was 32.5% of net sales, down from 32.8% of net sales in the fourth period a year earlier. Restaurant labor and related costs as a percentage of net sales rose to 34.6% in the fourth period just ended from 34.4% in the comparable quarter of the prior year. General and administrative expenses for the fourth quarter of 2009 were 6.4% of net sales, down from 7.6% recorded in the final period of 2008.
For the fourth quarter of 2009, J. Alexander’s Corporation’s restaurant operating margin (net sales minus total restaurant operating expenses divided by net sales) was 5.8% as compared to 6.1% in the corresponding quarter of the previous year.
J. Alexander’s Corporation posted average weekly same store sales per restaurant of $86,700 in the fourth quarter of 2009, an increase from $85,800 in the fourth quarter of 2008. The Company’s average weekly sales per restaurant for the fourth quarter of 2009 were $84,100, up from $84,000 achieved in the comparable period of 2008. Same store sales calculations are based on 30 restaurants open for more than 18 months.
J. Alexander’s Corporation had a decline of 0.4% in average weekly guest counts on a same store basis from the corresponding quarter of 2008. The average guest check, including alcoholic beverage sales for the quarter, was approximately $24.74 and did not change notably from the prior year comparable quarter. The effect of menu price increases for the fourth quarter was approximately .9% compared to the fourth quarter of 2008.
“As previously noted, J. Alexander’s Corporation’s results have been pressured by the lingering recession, which has adversely affected our average guest counts,” Stout said. “Our five newest restaurants have been particularly impacted. We believe casual dining guests have cut back dining occasions at their favorite restaurants. It has become extremely challenging to encourage these guests to try newer restaurants when they are not going to their favorite dining establishments.”
J. Alexander’s Corporation had weekly average same store sales per restaurant of $84,900 for 2009, down from $88,700 recorded in 2008. The Company’s average weekly sales per restaurant for 2009 were $82,300, down 6.3% from $87,800 achieved in 2008.
The Company’s average weekly guest counts for 2009 declined approximately 4.6% on a same store basis from 2008. The average guest check, including alcoholic beverage sales increased slightly to an estimated $24.64. The effect of menu price increases for 2009 was approximately 1% compared to 2008.
Cost of sales for 2009 was 31.7%, down from 32.2% in 2008. Restaurant labor and related costs for 2009 rose to 35.2% of net sales from 33.3% of net sales in the previous year. Labor costs and operating expenses as a percentage of net sales were higher for 2009 due principally to the effect of lower weekly average sales and the effect of low sales volumes in newer restaurants. The Company’s labor costs were also impacted in 2009 by higher minimum cash wage rates required to be paid to tipped employees in several states where it operates restaurants. For 2009, J. Alexander’s Corporation had restaurant operating margin of 5.3%, down from 8.8% in 2008.
In looking ahead, Stout said that “even though we now appear to be in some type of halting recovery, there is a great unevenness in the U.S. economy. Unemployment remains high and consumer confidence is low in several of the states where we have a concentration of restaurants.”
Stout noted, however, that the recent improvement in same store sales trends has given J. Alexander's Corporation increased optimism for improved performance in 2010. He said that based on the sales trends in the fourth quarter of 2009 and in early 2010, the Company expects that its same store sales will be positive for the year and that earnings for the first quarter of 2010 will be up substantially from the first quarter of 2009.
“We have developed a plan for 2010 that calls for improved restaurant performance based on several assumptions,” Stout continued. “These assumptions are dependent on an improving economy in some of our markets. Second, we have not been aggressive with price increases during the past two years, but believe we will have some price increasing opportunities in 2010. Third, we also are assuming that our input costs, including those for beef, will continue to remain relatively low. Finally, now that our newer restaurants have some maturity, we believe that they can be operated more efficiently.
“Our outlook is positive, but we remain very concerned about how the U.S. consumer will behave,” Stout observed. “In the 19 years we have been in this business, we have believed operational excellence and hard work will build same store sales. We still believe that and remain convinced that we will execute the strengths of our concept.”
J. Alexander’s Corporation operates 33 J. Alexander’s restaurants in thirteen states: Alabama, Arizona, Colorado, Florida, Georgia, Illinois, Kansas, Kentucky, Louisiana, Michigan, Ohio, Tennessee and Texas. J. Alexander’s is an upscale, contemporary American restaurant known for its wood-fired cuisine. The Company’s menu features a wide selection of American classics, including steaks, prime rib of beef and fresh seafood, as well as a large assortment of interesting salads, sandwiches and desserts. J. Alexander’s also has a full-service bar that features an outstanding selection of wines by the glass and bottle.
J. Alexander’s Corporation is headquartered in Nashville, Tennessee.
(1) Loss before income taxes and impairment charges, net loss excluding asset impairment charges and beginning of the year tax valuation allowance adjustment, and net debt are all non-GAAP financial measures which are derived from items in the Company’s GAAP financial statements. The calculations or reconciliations of these measures to GAAP measures are presented after the financial statements at the end of this release under “Reconciliation of Non-GAAP Measures to GAAP Measures.”
| J. Alexander's Corporation and Subsidiaries Consolidated Statements of Operations (Unaudited in thousands, except per share amounts) |
||||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||||
| Jan. 3 | Dec. 28 | Jan. 3 | Dec. 28 | |||||||||||||||||||
| 2010 | 2008 | 2010 | 2008 | |||||||||||||||||||
| (14 weeks) | (13 weeks) | (53 weeks) | (52 weeks) | |||||||||||||||||||
| Net sales | $ | 38,996 | $ | 35,141 | $ | 144,194 | $ | 139,755 | ||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||
| Cost of sales | 12,668 | 11,511 | 45,743 | 45,057 | ||||||||||||||||||
| Restaurant labor and related costs | 13,484 | 12,085 | 50,738 | 46,506 | ||||||||||||||||||
| Depreciation and amortization of restaurant property and equipment | 1,755 | 1,550 | 6,716 | 5,932 | ||||||||||||||||||
| Other operating expenses | 8,832 | 7,854 | 33,379 | 29,959 | ||||||||||||||||||
| Total restaurant operating expenses | 36,739 | 33,000 | 136,576 | 127,454 | ||||||||||||||||||
| General and administrative expenses | 2,515 | 2,667 | 10,069 | 10,061 | ||||||||||||||||||
| Asset impairment charges | 3,889 | — | 3,889 | — | ||||||||||||||||||
| Pre-opening expense | — | 421 | — | 1,626 | ||||||||||||||||||
| Operating income (loss) |
(4,147 | ) | (947 | ) | (6,340 | ) | 614 | |||||||||||||||
| Other income (expense): | ||||||||||||||||||||||
| Interest expense | (522 | ) | (435 | ) | (1,969 | ) | (1,716 | ) | ||||||||||||||
| Interest income | 6 | 3 | 11 | 133 | ||||||||||||||||||
| Other, net | 19 | 6 | 62 | 57 | ||||||||||||||||||
| Total other expense | (497 | ) | (426 | ) | (1,896 | ) | (1,526 | ) | ||||||||||||||
| Loss before income taxes |
(4,644 | ) | (1,373 | ) | (8,236 | ) | (912 | ) | ||||||||||||||
| Income tax (provision) benefit |
(9,031 | ) | 674 | (7,102 | ) | 1,017 | ||||||||||||||||
| Net income (loss) |
$ | (13,675 | ) | $ | (699 | ) | $ | (15,338 | ) | $ | 105 | |||||||||||
| Earnings (loss) per share: | ||||||||||||||||||||||
| Basic earnings (loss) per share | $ | (2.30 | ) | $ | (.10 | ) | $ | (2.45 | ) | $ | .02 | |||||||||||
| Diluted earnings (loss) per share | $ | (2.30 | ) | $ | (.10 | ) | $ | (2.45 | ) | $ | .02 | |||||||||||
| Weighted average number of shares: | ||||||||||||||||||||||
| Basic earnings (loss) per share (1) | 5,947 | 6,754 | 6,260 | 6,692 | ||||||||||||||||||
| Diluted earnings (loss) per share (1) | 5,947 | 6,754 | 6,260 | 6,843 | ||||||||||||||||||
| (1) The reduction in the weighted average number of shares for the 2009 periods includes the effect of the repurchase by the Company of 808,000 shares of i | ||||||||||||||||||||||
