Luby's Reports Fourth Quarter and Fiscal Year 2019 Results

Fourth Quarter Results

HOUSTON, Nov. 26, 2019 // PRNewswire // - Luby's, Inc. (NYSE: LUB) ("Luby's") today announced financial results for its fifty-two week fiscal year 2019 and its twelve-week fourth quarter fiscal 2019, which ended on August 28, 2019. Comparisons in this press release for the fourth quarter fiscal 2019 are referred to as "fourth quarter". Comparisons to the fourth quarter fiscal 2018 are to the twelve-week period that ended August 29, 2018.

Fiscal Fourth Quarter Summary:

• Same-store sales decreased 3.7%; total sales decreased 14.9% to $71.4 million due in large part to operating 22 fewer stores.

• Net loss was $9.1 million compared to a net loss of $1.9 million in the fourth quarter fiscal 2018 due primarily to store level profit declines and gains on the sale of assets in the prior year.

Chris Pappas, President and CEO, commented, "We are not pleased with our shareholder value, same-store sales, guest traffic results, or corporate overhead. The Special Committee of the Board continues its focus on developing shareholder value initiatives. Operationally, we made strategic personnel changes in fiscal 2019, including appointment of a new Chief Operating Officer, VP of Marketing, and VP of Information Technology.

Our whole team is working diligently and we are making progress on our turnaround efforts. Already in fiscal 2020, we have realized improved guest traffic and sales trends. Additionally, we are transitioning portions of our accounting, payroll, operational reporting, and other back-office functions to a leading multi-unit restaurant outsourcing firm.

We anticipate completing the transition in the first calendar quarter of 2020 and expect to realize additional cost savings and enhanced capabilities from this transition.

"At the restaurant level, our managers and restaurant team members are working hard to maintain and build value by consistently delivering great guest experiences. They are our greatest brand assets, and I applaud their hard work and dedication to showcasing our brand values."

Same Store Sales

Other Fiscal Fourth Quarter Results:

• Luby's Cafeterias same-store sales decreased 3.2%: guest traffic decreased 1.1% and average spend per guest decreased 2.2%.

• Fuddruckers Restaurants same-store sales decreased 5.5%: guest traffic decreased 3.8% and average spend per guest decreased 1.8%.

• Culinary Contract Services revenues increased to $7.3 million with 31 operating locations at the end of the fourth quarter compared to $6.4 million with 28 operating locations at the end of fiscal 2018.

• Franchise revenue was approximately level at $1.6 million in the fourth quarters of fiscal 2019 and fiscal 2018. We ended fiscal 2019 with a franchise network of 102 locations.

• Selling, general, and administrative expenses decreased $1.2 million, or 12.7% compared to the fourth quarter fiscal 2018, resulting from reduced headcount, partially offset by increased marketing and advertising spending.

• Loss from continuing operations was $9.1 million, or a loss of $0.30 per diluted share, in the fourth quarter compared to a loss of $1.9 million, or $0.06 per diluted share, in the fourth quarter fiscal 2018.

• 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 $4.9 million, or 7.9% of restaurant sales, in the fourth quarter compared to $8.2 million, or 10.8% of restaurant sales, during the fourth quarter fiscal 2018.

• Adjusted EBITDA was a loss of $1.5 million in the fourth quarter compared to a profit of $0.5 million in fiscal 2018.

• Capital expenditures for the fourth quarter were $1.2 million, a decrease from $1.5 million in the fourth quarter last year.

Same-Store Sales Year-Over-Year Comparison

Fourth Quarter Total Restaurant Sales: ($ thousands)

Fiscal Year Summary

Fiscal Year 2019 Summary:

• Total sales were $323.5 million, including $284.5 million in restaurant sales, compared to total sales of $365.2 million, including $332.5 million in restaurant sales, in fiscal 2018.

• Same-store sales decreased 4.2%, including a 2.9% sales decrease at Luby's Cafeterias and a 7.5% sales decrease at Fuddruckers.

• 17 underperforming company-owned restaurants were closed in fiscal 2019 and five company-owned Fuddruckers restaurants transitioned to a franchisee in fiscal 2019. These 22 restaurants accounted for $19.1 million in sales and $2.3 million in store-level loss for the portion of the year that they operated in fiscal 2019 as company-owned restaurants.

• Culinary contract services revenue increased $6.1 million, or 23.7%, to $31.9 million compared to fiscal 2018. We operated at 31 Culinary contract services locations at the end of fiscal 2019.

• Franchise revenue increased $0.3 million, or 5.1%, to $6.7 million compared to fiscal 2018. We ended fiscal 2019 with a franchise network of 102 locations.

• Loss from continuing operations was $15.2 million, or $0.51 per diluted share, in fiscal 2019, compared to a loss of $33.0 million, or $1.10 per diluted share, in fiscal 2018.

• Adjusted EBITDA was $3.7 million in fiscal 2019 compared to approximately zero in fiscal 2018.

• The company's $45.0 million asset sales program that began in fiscal 2018 has generated $35.9 million in proceeds from the sale of property through the end of fiscal 2019.

• The company incurred $4.3 million in restructuring expenses, employee severance, and proxy services in fiscal 2019. These expenses, recorded in Other charges, were included in Selling, general and administrative expenses in previously reported quarters of fiscal 2019.

• The company transitioned a total of seven company-owned Fuddruckers restaurants to franchisees since announcing its initiative to pursue a franchisee-centric business model for the Fuddruckers brand.

Balance Sheet

Balance Sheet and Capital Expenditures

We ended the fourth quarter with net debt (total debt less cash) of $35.9 million, compared to $35.8 million at the end of fiscal 2018. During the fourth quarter, our capital expenditures were $1.2 million, compared to $1.5 million in the fourth quarter fiscal 2018. For the full year, capital expenditures were $4.0 million for fiscal 2019, compared to $13.2 million for fiscal 2018. At the end of the fourth quarter, we had $3.6 million in cash and $101.0 million in total shareholders' equity.

Restaurant Counts:

Special Committee Update:

The Special Committee of the Board, as previously announced, that has been formed with the purpose of establishing a strategic review process to identify, examine, and consider a range of strategic alternatives available to the Company with the objective of maximizing shareholder value, continues its work.

Luby's will host a conference call on November 26, 2019 at 10:00 a.m. Central Time to discuss further its fourth quarter fiscal 2019 results.

To access the call live, dial (412) 902-0030 and use the access code 13695072# 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 December 6, 2019, and may be accessed by calling (201) 612-7415 and using the access code 13695072#. 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.

Luby's, Inc. (NYSE: LUB) operated 119 restaurants nationally as of November 26th: 78 Luby's Cafeterias, 40 Fuddruckers, and one Cheeseburger in Paradise restaurant. Luby's is the franchisor for 98 Fuddruckers franchise locations across the United States (including Puerto Rico), Canada, Mexico, and Panama. Luby's Culinary Contract Services provides food service management to 32 sites consisting of healthcare, corporate dining locations, sports stadiums, and sales through retail grocery stores.

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.

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, other charges, franchise taxes, and non-cash compensation expense.

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.