10-Q 1 bjri-20240402.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended April 2, 2024

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________ to ______

Commission file number 0-21423

BJ’S RESTAURANTS, INC.

(Exact name of registrant as specified in its charter)

 

California

33-0485615

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

7755 Center Avenue, Suite 300

Huntington Beach, California 92647

(714) 500-2400

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

 

Trading

Symbol

 

Name of each exchange on which registered

Common Stock, No Par Value

 

BJRI

 

NASDAQ Global Select Market

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

 

Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

 

As of May 3, 2024, there were 23,383,119 shares of Common Stock of the Registrant outstanding.


 

BJ’S RESTAURANTS, INC.

TABLE OF CONTENTS

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

Consolidated Financial Statements

1

 

Consolidated Balance Sheets –
April 2, 2024 (Unaudited) and January 2, 2024

1

 

Unaudited Consolidated Statements of Operations –
Thirteen Weeks Ended April 2, 2024 and April 4, 2023

2

 

Unaudited Consolidated Statements of Shareholders’ Equity –
Thirteen Weeks Ended April 2, 2024 and April 4, 2023

3

 

Unaudited Consolidated Statements of Cash Flows –
Thirteen Weeks Ended April 2, 2024 and April 4, 2023

4

 

Notes to Unaudited Consolidated Financial Statements

6

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

11

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

16

 

Item 4.

Controls and Procedures

17

 

Item 5.

 

Other Information

17

 

PART II.

 

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

17

 

Item 1A.

Risk Factors

17

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

17

 

Item 6.

Exhibits

19

 

 

SIGNATURES

20

 

 


 

PART I. FINANCIAL INFORMATION

 

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

 

BJ’S RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

April 2, 2024

 

 

January 2, 2024

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,820

 

 

$

29,070

 

Accounts and other receivables, net

 

 

15,165

 

 

 

19,469

 

Inventories, net

 

 

13,543

 

 

 

13,245

 

Prepaid expenses and other current assets

 

 

18,117

 

 

 

21,237

 

Total current assets

 

 

65,645

 

 

 

83,021

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

528,105

 

 

 

525,190

 

Operating lease assets

 

 

348,932

 

 

 

350,091

 

Goodwill

 

 

4,673

 

 

 

4,673

 

Equity method investment

 

 

4,623

 

 

 

4,770

 

Deferred income taxes, net

 

 

50,802

 

 

 

50,147

 

Other assets, net

 

 

42,142

 

 

 

40,562

 

Total assets

 

$

1,044,922

 

 

$

1,058,454

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

52,439

 

 

$

60,641

 

Accrued expenses

 

 

102,178

 

 

 

101,295

 

Current operating lease obligations

 

 

31,937

 

 

 

37,389

 

Total current liabilities

 

 

186,554

 

 

 

199,325

 

 

 

 

 

 

 

 

Long-term operating lease obligations

 

 

411,952

 

 

 

414,114

 

Long-term debt

 

 

58,000

 

 

 

68,000

 

Other liabilities

 

 

13,064

 

 

 

11,254

 

Total liabilities

 

 

669,570

 

 

 

692,693

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Preferred stock, 5,000 shares authorized, none issued or outstanding

 

 

 

 

 

 

Common stock, no par value, 125,000 shares authorized and 23,369 and 23,184 shares issued and outstanding as of April 2, 2024 and January 2, 2024, respectively

 

 

 

 

 

 

Capital surplus

 

 

70,213

 

 

 

77,036

 

Retained earnings

 

 

305,139

 

 

 

288,725

 

Total shareholders’ equity

 

 

375,352

 

 

 

365,761

 

Total liabilities and shareholders’ equity

 

$

1,044,922

 

 

$

1,058,454

 

 

See accompanying notes to unaudited consolidated financial statements.

1


 

BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

 

 

For the Thirteen Weeks Ended

 

 

 

April 2, 2024

 

 

April 4, 2023

 

Revenues

 

$

337,334

 

 

$

341,280

 

Restaurant operating costs (excluding depreciation and amortization):

 

 

 

 

 

 

Cost of sales

 

 

84,953

 

 

 

90,877

 

Labor and benefits

 

 

125,021

 

 

 

128,333

 

Occupancy and operating

 

 

76,858

 

 

 

79,146

 

General and administrative

 

 

22,997

 

 

 

19,706

 

Depreciation and amortization

 

 

17,873

 

 

 

17,612

 

Restaurant opening

 

 

590

 

 

 

844

 

Loss on disposal and impairment of assets, net

 

 

784

 

 

 

2,146

 

Total costs and expenses

 

 

329,076

 

 

 

338,664

 

Income from operations

 

 

8,258

 

 

 

2,616

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

Interest expense, net

 

 

(1,411

)

 

 

(1,121

)

Other income, net (1)

 

 

696

 

 

 

196

 

Total other expense

 

 

(715

)

 

 

(925

)

Income before income taxes

 

 

7,543

 

 

 

1,691

 

 

 

 

 

 

 

 

Income tax benefit

 

 

(180

)

 

 

(1,790

)

Net income

 

$

7,723

 

 

$

3,481

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

Basic

 

$

0.33

 

 

$

0.15

 

Diluted

 

$

0.32

 

 

$

0.15

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

Basic

 

 

23,318

 

 

 

23,481

 

Diluted

 

 

23,965

 

 

 

23,926

 

 

 

 

 

 

 

 

 

(1)
For the thirteen weeks ended April 2, 2024 and April 4, 2023, related party costs included in other income, net was an equity method investment loss of $147,000 and $40,000, respectively. See Note 10 for further information.

See accompanying notes to unaudited consolidated financial statements.

2


 

BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

 

 

 

For the Thirteen Weeks Ended

 

 

 

Common Stock

 

 

Capital

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Surplus

 

 

Earnings

 

 

Total

 

Balance, January 3, 2023

 

 

23,392

 

 

$

 

 

$

74,459

 

 

$

271,056

 

 

$

345,515

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of restricted stock units

 

 

137

 

 

 

5,661

 

 

 

(6,159

)

 

 

 

 

 

(498

)

Repurchase, retirement and reclassification of common stock

 

 

 

 

 

(5,661

)

 

 

 

 

 

5,661

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,735

 

 

 

 

 

 

2,735

 

Adjustment to dividends previously accrued

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Net income

 

 

 

 

 

 

 

 

 

 

 

3,481

 

 

 

3,481

 

Balance, April 4, 2023

 

 

23,529

 

 

$

 

 

$

71,035

 

 

$

280,199

 

 

$

351,234

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 2, 2024

 

 

23,184

 

 

$

 

 

$

77,036

 

 

$

288,725

 

 

$

365,761

 

Exercise of stock options

 

 

5

 

 

 

251

 

 

 

(83

)

 

 

 

 

 

168

 

Issuance of restricted stock units

 

 

180

 

 

 

8,440

 

 

 

(9,301

)

 

 

 

 

 

(861

)

Repurchase, retirement and reclassification of common stock

 

 

 

 

 

(8,691

)

 

 

 

 

 

8,691

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,561

 

 

 

 

 

 

2,561

 

Net income

 

 

 

 

 

 

 

 

 

 

 

7,723

 

 

 

7,723

 

Balance, April 2, 2024

 

 

23,369

 

 

$

 

 

$

70,213

 

 

$

305,139

 

 

$

375,352

 

 

See accompanying notes to unaudited consolidated financial statements.

3


 

BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

For the Thirteen Weeks Ended

 

 

 

April 2, 2024

 

 

April 4, 2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

7,723

 

 

$

3,481

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

17,873

 

 

 

17,612

 

Non-cash lease expense

 

 

7,855

 

 

 

8,196

 

Amortization of financing costs

 

 

54

 

 

 

54

 

Deferred income taxes

 

 

(655

)

 

 

(758

)

Stock-based compensation expense

 

 

2,477

 

 

 

2,642

 

Loss on disposal and impairment of assets, net

 

 

784

 

 

 

2,146

 

Equity method investment

 

 

147

 

 

 

40

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts and other receivables

 

 

4,654

 

 

 

8,744

 

Inventories, net

 

 

(138

)

 

 

(152

)

Prepaid expenses and other current assets

 

 

1,637

 

 

 

933

 

Other assets, net

 

 

(2,287

)

 

 

280

 

Accounts payable

 

 

(5,832

)

 

 

(3,982

)

Accrued expenses

 

 

888

 

 

 

8,833

 

Operating lease obligations

 

 

(14,660

)

 

 

(15,262

)

Other liabilities

 

 

1,810

 

 

 

(908

)

Net cash provided by operating activities

 

 

22,330

 

 

 

31,899

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(21,882

)

 

 

(26,966

)

Proceeds from sale of assets

 

 

 

 

 

4

 

Net cash used in investing activities

 

 

(21,882

)

 

 

(26,962

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings on line of credit

 

 

234,400

 

 

 

185,000

 

Payments on line of credit

 

 

(244,400

)

 

 

(185,000

)

Taxes paid on vested stock units under employee plans

 

 

(861

)

 

 

(498

)

Proceeds from exercise of stock options

 

 

168

 

 

 

 

Cash dividends accrued under stock compensation plans

 

 

(5

)

 

 

(14

)

Net cash used in financing activities

 

 

(10,698

)

 

 

(512

)

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(10,250

)

 

 

4,425

 

Cash and cash equivalents, beginning of period

 

 

29,070

 

 

 

24,873

 

Cash and cash equivalents, end of period

 

$

18,820

 

 

$

29,298

 

 

See accompanying notes to unaudited consolidated financial statements.

4


 

BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

For the Thirteen Weeks Ended

 

 

 

April 2, 2024

 

 

April 4, 2023

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for income taxes

 

$

1,437

 

 

$

2

 

Cash paid for interest, net of capitalized interest

 

$

1,204

 

 

$

858

 

Cash paid for operating lease obligations

 

$

15,537

 

 

$

16,378

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

Operating lease assets obtained in exchange for operating lease obligations

 

$

7,046

 

 

$

7,931

 

Property and equipment acquired and included in accounts payable

 

$

7,544

 

 

$

10,818

 

Stock-based compensation capitalized

 

$

84

 

 

$

93

 

 

See accompanying notes to unaudited consolidated financial statements.

5


 

BJ’S RESTAURANTS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the accounts of BJ’s Restaurants, Inc. (referred to herein as the “Company,” “we,” “us” and “our”) and our wholly owned subsidiaries. The consolidated financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of our financial condition, results of operations, shareholders’ equity and cash flows for the periods presented. Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and footnote disclosures normally included in consolidated financial statements in accordance with U.S. GAAP have been omitted pursuant to the U.S. Securities and Exchange Commission (“SEC”) rules.

The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ from these estimates. Our operating results for the thirteen weeks ended April 2, 2024 may not be indicative of operating results for the entire year.

A description of our accounting policies and other financial information is included in our audited consolidated financial statements filed with the SEC on Form 10-K for the fiscal year ended January 2, 2024. The disclosures included in our accompanying interim consolidated financial statements and footnotes should be read in conjunction with our consolidated financial statements and notes thereto included in the Annual Report on Form 10-K and our other reports filed from time to time with the Securities and Exchange Commission.

 

2. REVENUE RECOGNITION

Our revenues are comprised of food and beverage sales from our restaurants, including takeout, delivery and catering sales. 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.” 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.

Our “BJ’s Premier Rewards Plus” 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, less expected expirations, until such points are redeemed.

 

The liability related to our gift card and loyalty program, included in “Accrued expenses” on our Consolidated Balance Sheets is as follows (in thousands):

 

 

 

April 2, 2024

 

 

January 2, 2024

 

Gift card liability

 

$

10,615

 

 

$

14,380

 

Deferred loyalty revenue

 

$

2,723

 

 

$

2,510

 

 

Revenue recognized for the redemption of gift cards and loyalty rewards deferred at the beginning of each respective fiscal year is as follows (in thousands):

 

 

 

For the Thirteen Weeks Ended

 

 

 

April 2, 2024

 

 

April 4, 2023

 

Revenue recognized from gift card liability

 

$

5,863

 

 

$

6,245

 

Revenue recognized from guest loyalty program

 

$

4,318

 

 

$

4,083

 

 

3. LEASES

We determine if a contract contains a lease at inception. Our material operating leases consist of restaurant locations and office space. U.S. GAAP requires that our leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date, and the lease term used in the evaluation includes the non-cancellable period for which we have the right to use the underlying asset, together with renewal option periods when the exercise of the renewal

6


 

option is reasonably certain and failure to exercise such option would result in an economic penalty. All of our restaurant and office space leases are classified as operating leases. We have elected to account for lease and non-lease components as a single lease component for office and beverage gas equipment. We do not have any finance leases.

Lease costs included in “Occupancy and operating” on the Consolidated Statements of Operations consisted of the following (in thousands):

 

 

 

For the Thirteen Weeks Ended

 

 

 

April 2, 2024

 

 

April 4, 2023

 

Lease cost

 

$

14,389

 

 

$

14,896

 

Variable lease cost

 

 

795

 

 

 

989

 

Total lease costs

 

$

15,184

 

 

$

15,885

 

 

4. LONG-TERM DEBT

 

Line of Credit

On November 3, 2021, we entered into a Fourth Amended and Restated Credit Agreement (“Credit Facility”) with Bank of America, N.A. (“BofA”), JPMorgan Chase Bank, N.A., and certain other parties to amend and restate our revolving line of credit (the “Line of Credit”) to improve the pricing, extend the maturity date, change the interest reference rate, eliminate certain financial covenants and conditions, and reset other financial covenants starting with the fourth quarter of 2021.

Our Credit Facility matures on November 3, 2026, and provides us with revolving loan commitments totaling $215 million, which may be increased up to $315 million, of which $50 million may be used for the issuance of letters of credit. Availability under the Credit Facility is reduced by outstanding letters of credit, which are used to support our self-insurance programs. On April 2, 2024, there were borrowings of $58.0 million and letters of credit of $17.2 million outstanding, leaving $139.8 million available to borrow.

Borrowings under the Line of Credit bear interest at an annual rate equal to either (a) the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus a percentage not to exceed 2.00% (with a floor on BSBY of 0.00%), or (b) a percentage not to exceed 1.00% above a Base Rate equal to the highest of (i) the Federal Funds Rate plus 1/2 of 1.00%, (ii) BofA’s Prime Rate, (iii) the BSBY rate plus 1.00%, and (iv) 1.00%, in either case depending on the level of lease and debt obligations of the Company as compared to EBITDA plus lease expenses. The weighted average interest rate during the thirteen weeks ended April 2, 2024 and April 4, 2023 was approximately 6.9% and 6.4%, respectively.

The Credit Facility is secured by the Company’s assets and contains provisions requiring us to maintain compliance with certain covenants, including a Fixed Charge Coverage Ratio and a Lease Adjusted Leverage Ratio. On April 2, 2024, we were in compliance with these covenants.

Pursuant to the Line of Credit, we are required to pay certain customary fees and expenses associated with maintenance and use of the Line of Credit, including letter of credit issuance fees, unused commitment fees and interest, which are payable monthly. Interest expense and commitment fees under the Credit Facility were approximately $1.4 million and $1.1 million, for the thirteen weeks ended April 2, 2024 and April 4, 2023, respectively. We also capitalized approximately $0.1 million of interest expense related to new restaurant construction during each of the thirteen weeks ended April 2, 2024 and April 4, 2023.

 

5. NET INCOME PER SHARE

Basic and diluted net income per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. The number of diluted shares reflects the potential dilution that could occur if holders of in-the-money options and warrants were to exercise their right to convert these instruments into common stock and the restrictions on restricted stock units (“RSUs”) were to lapse. Additionally, performance-based RSUs are considered contingent shares; therefore, at each reporting date we determine the probable number of shares that will vest and include these contingently issuable shares in our diluted share calculation unless they are anti-dilutive. Once these performance-based RSUs vest, they are included in our basic net income per share calculation.

7


 

The following table presents a reconciliation of basic and diluted net income per share, including the number of dilutive equity awards included in the dilutive net income per share computation (in thousands):

 

 

 

For the Thirteen Weeks Ended

 

 

 

April 2, 2024

 

 

April 4, 2023

 

Numerator:

 

 

 

 

 

 

Net income

 

$

7,723

 

 

$

3,481

 

Denominator:

 

 

 

 

 

 

Weighted-average shares outstanding – basic

 

 

23,318

 

 

 

23,481

 

Dilutive effect of equity awards

 

 

647

 

 

 

445

 

Weighted-average shares outstanding – diluted

 

 

23,965

 

 

 

23,926

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

Basic

 

$

0.33

 

 

$

0.15

 

Diluted

 

$

0.32

 

 

$

0.15

 

 

For each of the thirteen weeks ended April 2, 2024 and April 4, 2023, there were approximately 0.9 million of equity awards that were excluded from the calculation of diluted net income per share because they are anti-dilutive.

 

6. STOCK-BASED COMPENSATION

Our current shareholder approved stock-based compensation plan is the BJ’s Restaurants, Inc. Equity Incentive Plan, (as amended from time to time, “the Plan”). Under the Plan, we may issue shares of our common stock to team members, officers, directors and consultants. We have historically granted incentive stock options, non-qualified stock options, and service- and performance-based RSUs. In Fiscal 2024, we also granted market-based RSUs. Stock options are charged against the Plan share reserve on the basis of one share for each share of common stock issuable upon exercise of options granted. All options granted under the Plan expire within 10 years of their date of grant. Grants of restricted stock, RSUs, performance shares and performance units, if any, are currently charged against the Plan share reserve on the basis of 1.5 shares for each share granted. The Plan also contains other limits on the terms of incentive grants such as the maximum number that can be granted to a team member during any fiscal year.

We use the Black-Scholes option-pricing model to determine the fair value of our stock options, and we use the Monte Carlo simulation model to determine the fair value of our market-based RSUs. Both models require assumptions to be made regarding our stock price volatility, the expected life of the award, risk-free interest rate and expected dividend rates. The fair value of service-based and performance-based RSUs granted is equal to the fair value of our common stock at market close on the date of grant or the last trading day prior to the date of grant when grants take place on a day when the market is closed. The grant date fair value of each stock option, market-based and service-based RSU is expensed over the vesting period (e.g., one, three or five years) and the fair value of each performance-based RSU is expensed based on the estimated quantity that is expected to vest corresponding with management's current estimate of the level that the performance goal will be achieved.

The following table presents the stock-based compensation recognized within our consolidated financial statements (in thousands):

 

 

 

For the Thirteen Weeks Ended

 

 

 

April 2, 2024

 

 

April 4, 2023

 

Labor and benefits

 

$

508

 

 

$

866

 

General and administrative

 

$

1,969

 

 

$

1,776

 

Capitalized (1)

 

$

84

 

 

$

93

 

Total stock-based compensation

 

$

2,561

 

 

$

2,735

 

 

(1)
Capitalized stock-based compensation relates to our restaurant development personnel and is included in “Property and equipment, net” on the Consolidated Balance Sheets.

Stock Options

The fair value of each stock option was estimated on the grant date using the Black‑Scholes option-pricing model with the following weighted average assumptions:

 

8


 

 

 

For the Thirteen Weeks Ended

 

 

 

April 2, 2024

 

 

April 4, 2023

 

Volatility

 

 

67.5

%

 

 

66.9

%

Risk-free interest rate

 

 

3.9

%

 

 

3.5

%

Expected life (years)

 

5

 

 

5

 

Expected dividend yield

 

 

%

 

 

%

Fair value of options granted

 

$

18.86

 

 

$

18.32

 

Under our stock-based compensation plan, the exercise price of a stock option is required to equal or exceed the fair value of our common stock at market close on the option grant date or the last trading day prior to the date of grant when grants take place on a day when the market is closed. The following table presents stock option activity:

 

 

 

Options Outstanding

 

 

Options Exercisable

 

 

 

Shares
(in thousands)

 

 

Weighted
Average
Exercise
Price

 

 

Shares
(in thousands)

 

 

Weighted
Average
Exercise
Price

 

Outstanding at January 2, 2024

 

 

867

 

 

$

39.70

 

 

 

648

 

 

$

41.65

 

Granted

 

 

121

 

 

 

31.86

 

 

 

 

 

 

 

Exercised

 

 

(5

)

 

 

31.54

 

 

 

 

 

 

 

Forfeited

 

 

(6

)

 

 

37.69

 

 

 

 

 

 

 

Outstanding at April 2, 2024

 

 

977

 

 

$

38.79

 

 

 

727

 

 

$

41.03

 

 

As of April 2, 2024, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $3.6 million, which is expected to be recognized over the next three years.

Restricted Stock Units

Service-Based Restricted Stock Units

The following table presents service-based restricted stock unit activity:

 

 

 

Shares
(in thousands)

 

 

Weighted
Average
Fair Value

 

Outstanding at January 2, 2024

 

 

822

 

 

$

31.46

 

Granted

 

 

165

 

 

 

31.96

 

Released

 

 

(141

)

 

 

38.25

 

Forfeited

 

 

(26

)

 

 

30.02

 

Outstanding at April 2, 2024

 

 

820

 

 

$

30.44

 

 

As of April 2, 2024, total unrecognized stock-based compensation expense related to non-vested RSUs was approximately $14.0 million, which is expected to be recognized over the next three to five years.

Market-Based and Performance-Based Restricted Stock Units

The following table presents market-based and performance-based restricted stock unit activity:

 

 

 

Shares
(in thousands)

 

 

Weighted
Average
Fair Value

 

Outstanding at January 2, 2024

 

 

128

 

 

$

36.24

 

Awarded

 

 

79

 

 

 

39.09

 

Released

 

 

(65

)

 

 

46.91

 

Forfeited

 

 

(1

)

 

 

38.23

 

Outstanding at April 2, 2024

 

 

141

 

 

$

32.87

 

 

The fair value of market-based RSUs was estimated on the grant date using the Monte Carlo simulation model with the following weighted average assumptions:

9


 

 

 

 

For the Thirteen Weeks Ended

 

 

April 2, 2024

 

 

April 4, 2023

Volatility

 

 

49.8

%

 

n/a

Risk-free interest rate

 

 

3.8

%

 

n/a

Expected life (years)

 

3

 

 

n/a

Expected dividend yield

 

 

%

 

n/a

Fair value of market-based awards granted

 

$

34.79

 

 

n/a

 

As of April 2, 2024, the total unrecognized stock-based compensation expense related to non-vested market-based and performance-based RSUs was approximately $2.6 million, which is expected to be recognized over the next three years.

 

7. INCOME TAXES

We calculate our interim income tax provision in accordance with ASC Topic 270, “Interim Reporting” and ASC Topic 740, “Accounting for Income Taxes.” The related tax expense or benefit is recognized in the interim period in which it occurs. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain significant estimates and judgment including the expected operating income for the year, permanent and temporary differences because of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year. The accounting estimates used to compute income tax expense may change as new events occur, additional information is obtained or the tax environment changes.

Our effective income tax rate for the thirteen weeks ended April 2, 2024 was a benefit of 2.4% compared to a benefit rate of 105.9% for the comparable thirteen week period of 2023. The effective tax rate benefit for the thirteen weeks ended April 2, 2024 and April 4, 2023, was different from the statutory tax rate primarily as a result of significant Federal Insurance Contributions Act (“FICA”) tax tip credits.

As of April 2, 2024, we had unrecognized tax benefits of approximately $1.0 million, of which approximately $0.9 million, if reversed, would impact our effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is the following (in thousands):

 

 

 

For the Thirteen Weeks Ended

 

 

 

April 2, 2024

 

 

April 4, 2023

 

Beginning gross unrecognized tax benefits

 

$

967

 

 

$

1,249

 

Increases for tax positions taken in prior years

 

 

 

 

 

18

 

Increases for tax positions taken in the current year

 

 

26

 

 

 

 

Decreases due to lapse of statute of limitations

 

 

 

 

 

(236

)

Ending gross unrecognized tax benefits

 

$

993

 

 

$

1,031

 

 

Our uncertain tax positions are related to tax years that remain subject to examination by tax agencies. As of April 2, 2024, the earliest tax year still subject to examination by the Internal Revenue Service is 2020, although 2015 is still open due to amendments related to a net operating loss carryback. The earliest year still subject to examination by a significant state or local taxing authority is 2019.

 

8. LEGAL PROCEEDINGS

We are subject to lawsuits, administrative proceedings and demands that arise in the ordinary course of our business and which typically involve claims from guests, team members and others related to operational, employment, real estate and intellectual property issues common to the foodservice industry. A number of these claims may exist at any given time. We are self-insured for a portion of our general liability, team member workers’ compensation and employment practice liability insurance requirements. We maintain coverage with a third-party insurer to limit our total exposure. We believe that most of our claims will be covered by our insurance, subject to coverage limits and the portion of such claims that are self-insured; however, punitive damages awards are not covered by our insurance. To date, we have not been ordered to pay punitive damages with respect to any claims, but there can be no assurance that punitive damages will not be awarded with respect to any future claims. We could be affected by adverse publicity resulting from allegations in lawsuits, claims and proceedings, regardless of whether these allegations are valid or whether we are ultimately determined to be liable. We currently believe that the final disposition of these types of lawsuits, proceedings and claims will not have a material adverse effect on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, proceedings or claims.

10


 

 

9. SHAREHOLDERS’ EQUITY

Stock Repurchases

During the thirteen weeks ended April 2, 2024, we did not repurchase shares of common stock. In February 2024, our Board of Directors approved an increase in our share repurchase program by $50 million. We currently have approximately $61.1 million available under our authorized $550 million share repurchase program as of April 2, 2024. Repurchases may be made at any time.

Cash Dividends

We currently do not pay any cash dividends. Any payment of quarterly cash dividends will be subject to our Board of Directors determining that the payment of dividends is in the best interest of the Company and its shareholders.

 

10. RELATED PARTY TRANSACTIONS

Equity Method Investment

During fiscal 2022, we contributed assets valued at $5.0 million to a company, in which our recently retired Chief Executive Officer and current Board member has a less than 1% interest. We recorded this non-cash contribution, in exchange for a 20% ownership of the company, as an investment within “Equity method investment” on our Consolidated Balance Sheets, and the related gain within “Loss on disposal and impairment of assets, net” on our Consolidated Statements of Operations. For the thirteen weeks ended April 2, 2024 and April 4, 2023, we recorded a net loss related to the investment of $147,000 and $40,000, respectively, within “Other income, net,” and accordingly adjusted the investment carrying amount on our Consolidated Balance Sheets.

 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE

Certain information included in this Form 10-Q and other filings with the Securities and Exchange Commission, in our press releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers may contain “forward-looking” statements about our current and expected performance trends, growth plans, business goals and other matters. Words or phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is anticipated,” “estimate,” “project,” “may,” “could,” “would,” “should,” and similar expressions are intended to identify “forward-looking” statements. These 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 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 January 2, 2024, as updated in our Form 10-Q for the thirteen weeks ended April 2, 2024, and in other reports filed subsequently with the SEC.

GENERAL

BJ’s Restaurants is a leading casual dining restaurant brand differentiated by a high-quality, varied menu with compelling value, and a dining experience that offers our customers (referred to as “guests”) best-in-class service, hospitality and enjoyment, in a high-energy, welcoming and approachable atmosphere. BJ’s is a national restaurant chain that, as of May 6, 2024, owns and operates 217 restaurants located in 31 states.

The first BJ’s restaurant opened in 1978 in Orange County, California, and was a small sit-down pizzeria that featured Chicago style deep-dish pizza with a unique California twist. In 1996, we introduced our proprietary craft beers and expanded the BJ’s concept to a full-service, high-energy casual dining restaurant when we opened our first large format restaurant with an on-site brewing operation in Brea, California. Today our restaurants feature a broad menu with approximately 100 menu items designed to offer something for everyone including: slow roasted entrees such as prime rib, EnLIGHTened Entrees® such as our Cherry Chipotle Glazed Salmon, our original signature deep-dish pizza, and the world-famous Pizookie® dessert. We also offer our award-winning BJ’s craft beers, which are produced at four in-house brewing facilities, two standalone brewpubs and by independent third-party brewers using our proprietary recipes, alongside a full bar featuring innovative cocktails.

Our revenues are comprised of food and beverage sales from our restaurants, including takeout, delivery and catering sales. 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

11


 

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.” 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.

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 the number of 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 also 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 are 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.

General and administrative expenses include costs for our 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 and consulting fees.

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.

12


 

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 April 2, 2024 and April 4, 2023, are not necessarily indicative of the results to be expected for the full fiscal year. Percentages below may not reconcile due to rounding.

 

 

 

For the Thirteen Weeks Ended

 

 

 

April 2, 2024

 

 

April 4, 2023

 

Revenues

 

 

100.0

%

 

 

100.0

%

Restaurant operating costs (excluding depreciation and amortization):

 

 

 

 

 

 

Cost of sales

 

 

25.2

 

 

 

26.6

 

Labor and benefits

 

 

37.1

 

 

 

37.6

 

Occupancy and operating

 

 

22.8

 

 

 

23.2

 

General and administrative

 

 

6.8

 

 

 

5.8

 

Depreciation and amortization

 

 

5.3

 

 

 

5.2

 

Restaurant opening

 

 

0.2

 

 

 

0.2

 

Loss on disposal and impairment of assets, net

 

 

0.2

 

 

 

0.6

 

Total costs and expenses

 

 

97.6

 

 

 

99.2

 

Income from operations

 

 

2.4

 

 

 

0.8

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

Interest expense, net

 

 

(0.4

)

 

 

(0.3

)

Other income, net

 

 

0.2

 

 

 

0.1

 

Total other expense

 

 

(0.2

)

 

 

(0.3

)

Income before income taxes

 

 

2.2

 

 

 

0.5

 

 

 

 

 

 

 

 

Income tax benefit

 

 

(0.1

)

 

 

(0.5

)

Net income

 

 

2.3

%

 

 

1.0

%

 

Thirteen Weeks Ended April 2, 2024 Compared to Thirteen Weeks Ended April 4, 2023

Revenues. Total revenues decreased by $3.9 million, or 1.2%, to $337.3 million during the thirteen weeks ended April 2, 2024, from $341.3 million during the comparable thirteen-week period of 2023. The decrease in revenues primarily consisted of a 1.7%, or $5.5 million, decline in comparable restaurant sales, and a $5.2 million decrease related to closed restaurants, offset by a $7.1 million increase related to sales from new restaurants not yet in our comparable restaurant sales base. The decrease in comparable restaurant sales was due to a decrease in guest traffic of approximately 5.8%, offset by an increase in average check of approximately 4.1%, resulting from menu price increases and changes in mix.

Cost of Sales. Cost of sales decreased by $5.9 million, or 6.5%, to $85.0 million during the thirteen weeks ended April 2, 2024, from $90.9 million during the comparable thirteen-week period of 2023. This was primarily due to lower commodity costs and the effects of our cost savings initiatives, coupled with lower sales. As a percentage of revenues, cost of sales decreased to 25.2% for the current thirteen-week period from 26.6% for the prior year comparable period. This decrease was primarily due to lower inflationary pressure on food costs, menu price increases and the effectiveness of our cost savings initiatives.

Labor and Benefits. Labor and benefit costs for our restaurants decreased by $3.3 million, or 2.6%, to $125.0 million during the thirteen weeks ended April 2, 2024, from $128.3 million during the comparable thirteen-week period of 2023. This was primarily due to $2.9 million related to lower hourly labor, $0.7 million related to lower workers' compensation, and $0.4 million in lower stock-based compensation expense, offset by $1.0 million related to increased management compensation costs. As a percentage of revenues, labor and benefit costs decreased to 37.1% for the current thirteen-week period from 37.6% for the prior year comparable period. This decrease was primarily due improved labor efficiency and the effectiveness of our cost savings initiatives. Included in labor and benefits for the thirteen weeks ended April 2, 2024 and April 4, 2023, was approximately $0.5 million and $0.9 million, respectively, or 0.2% of revenues of stock-based compensation expense, related to equity awards granted in accordance with our Gold Standard Stock Ownership Program for certain restaurant management team members.

Occupancy and Operating. Occupancy and operating expenses decreased by $2.3 million, or 2.9%, to $76.9 million during the thirteen weeks ended April 2, 2024, from $79.1 million during the comparable thirteen-week period of 2023. This was primarily due to decreases of $1.4 million in restaurant facilities expenses, $1.0 million in utilities, and $0.4 million in third-party delivery company fees and expenses, offset by a $0.7 million increase in marketing related expenses. As a percentage of revenues, occupancy and operating expenses decreased to 22.8% for the current thirteen-week period from 23.2% for the prior year comparable period. This decrease was primarily related to improved operational efficiency and the effectiveness of our cost savings initiatives.

13


 

General and Administrative. General and administrative expenses increased by $3.3 million, or 16.7%, to $23.0 million during the thirteen weeks ended April 2, 2024, from $19.7 million during the comparable thirteen-week period of 2023. This was primarily due to increases of $1.3 million in corporate expenses related to meeting costs and software amortization, $1.2 million in legal fees, $0.6 million related to our deferred compensation liability, $0.2 million in payroll taxes and $0.2 million in stock-based compensation expense, offset by a $0.4 million decrease in incentive compensation. Certain extraordinary expenses were included in general and administrative costs for the thirteen weeks ended April 2, 2024, including $0.9 million of legal costs related to shareholder cooperation agreements and $0.3 million in severance related to personnel changes. Included in general and administrative costs for the thirteen weeks ended April 2, 2024 and April 4, 2023, was approximately $2.0 million and $1.8 million, or 0.6% and 0.5% of revenues, respectively, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses increased to 6.8% for the current thirteen-week period from 5.8% for the prior year comparable period. This increase is primarily related to increased legal and corporate expenses arising in connection with our recently announced cooperation agreements with certain investors, coupled with the deleveraging from a lower revenue base.

Depreciation and Amortization. Depreciation and amortization increased by $0.3 million, or 1.5%, to $17.9 million during the thirteen weeks ended April 2, 2024, compared to $17.6 million during the comparable thirteen-week period of 2023. This increase was primarily related to depreciation expense related to our restaurants opened since the thirteen weeks ended April 4, 2023, partially offset by the impact of impairment and disposal charges taken in the prior year, and the closure of four restaurants since the thirteen weeks ended April 4, 2023. As a percentage of revenues, depreciation and amortization increased to 5.3% for the current thirteen-week period from 5.2% for the prior year comparable period. This increase was primarily due to a lower revenue base.

Restaurant Opening. Restaurant opening expense decreased by $0.3 million, or 30.1%, to $0.6 million during the thirteen weeks ended April 2, 2024, compared to $0.8 million during the comparable thirteen-week period of 2023. This decrease was primarily due to the timing of openings.

Loss on Disposal and Impairment of Assets, Net. Loss on disposal and impairment of assets, net, was $0.8 million during the thirteen weeks ended April 2, 2024, and $2.1 million during the comparable thirteen-week period of 2023. For the thirteen weeks ended April 2, 2024, these costs primarily relate to disposals of assets in conjunction with initiatives to keep our restaurants up to date. For the thirteen weeks ended April 4, 2023, these costs primarily related to disposals of assets in conjunction with initiatives to keep our restaurants up to date, including the removal of glass partitions in our dining rooms that were installed during in the pandemic.

Interest Expense, Net. Interest expense, net, increased by $0.3 million to $1.4 million during the thirteen weeks ended April 2, 2024, compared to $1.1 million during the comparable thirteen-week period of 2023. This increase was primarily due to the increase in weighted average interest rate year over year.

Other Income, Net. Other income, net, increased by $0.5 million to $0.7 million of income during the thirteen weeks ended April 2, 2024, compared to $0.2 million during the comparable thirteen-week period of 2023. This increase was primarily related to gains associated with the cash surrender value of certain life insurance policies under our deferred compensation plan.

Income Tax Benefit. Our effective income tax rate for the thirteen weeks ended April 2, 2024, was a benefit of 2.4% compared to a benefit of 105.9% for the comparable thirteen-week period of 2023. The effective tax rate for the thirteen weeks ended April 2, 2024 and April 4, 2023 was different than the statutory rate primarily due to FICA tax tip credits.

LIQUIDITY AND MATERIAL CASH REQUIREMENTS

The following table provides, for the periods indicated, a summary of our key liquidity measurements (dollars in thousands):

 

 

 

April 2, 2024

 

 

January 2, 2024

 

Cash and cash equivalents

 

$

18,820

 

 

$

29,070

 

Net working capital

 

$

(120,909

)

 

$

(116,304

)

Current ratio

 

0.4:1.0

 

 

0.4:1.0

 

Our capital requirements are driven by our fundamental financial objective to improve total shareholder return through a balanced approach of new restaurant expansion plans, enhancements and initiatives focused on existing restaurants, and return of capital to our shareholders through our share repurchase program. In addition, we want to maintain a flexible balance sheet to provide the financial resources necessary to manage the risks and uncertainties of conducting our business operations in the restaurant industry. In order to achieve these objectives, we use a combination of operating cash flows, debt, landlord allowances and proceeds from stock option exercises.

Based on current operations, we believe that our current cash and cash equivalents, coupled with cash generated from operations and availability under our credit agreement 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.

14


 

Similar to many restaurant chains, we typically utilize operating lease arrangements (principally ground leases) for 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 our Texas brewpub locations. We also own parcels of land adjacent to two of our restaurants. It is not our current strategy to own a large number of land parcels that underlie our restaurants. Therefore, in many cases we have subsequently entered into sale-leaseback arrangements for land parcels that we previously purchased. We disburse cash for certain site-related work, buildings, leasehold improvements, furnishings, fixtures and equipment to build our leased and owned premises. We own substantially all of the equipment, furniture and trade fixtures in our restaurants and currently plan to do so in the future.

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

 

 

 

April 2, 2024

 

 

April 4, 2023

 

Net cash provided by operating activities

 

$

22,330

 

 

$

31,899

 

Net cash used in investing activities

 

 

(21,882

)

 

 

(26,962

)

Net cash used in financing activities

 

 

(10,698

)

 

 

(512

)

Net (decrease) increase in cash and cash equivalents

 

$

(10,250

)

 

$

4,425

 

 

Operating Cash Flows

Net cash provided by operating activities was $22.3 million during the thirteen weeks ended April 2, 2024, representing a $9.6 million decrease from the $31.9 million provided during the thirteen weeks ended April 4, 2023. The decrease is primarily due to the timing of payments for accrued expenses and accounts receivable receipts, offset by net income.

Investing Cash Flows

Net cash used in investing activities was $21.9 million during the thirteen weeks ended April 2, 2024, representing a $5.1 million decrease from the $27.0 million used during the thirteen weeks ended April 4, 2023. The decrease is primarily due to the timing of restaurants under construction, as well as the timing of restaurant remodel activity.

The following table provides, for the periods indicated, the components of capital expenditures (in thousands):

 

 

 

For the Thirteen Weeks Ended

 

 

 

April 2, 2024

 

 

April 4, 2023

 

New restaurants

 

$

9,197

 

 

$

10,934

 

Restaurant maintenance and remodels, and key productivity initiatives

 

 

12,150

 

 

 

15,723

 

Restaurant and corporate systems

 

 

535

 

 

 

309

 

Total capital expenditures

 

$

21,882

 

 

$

26,966

 

As of May 6, 2024, we have opened one new restaurant this year. We currently plan to open a total of three new restaurants in fiscal 2024, and we have entered into signed leases, land purchase agreements or letters of intent for all of our 2024 new restaurant locations.

We currently anticipate our total capital expenditures for fiscal 2024 to be approximately $70 million to $75 million. This estimate includes costs to open new restaurants and remodel existing locations and excludes anticipated proceeds from tenant improvement allowances. We expect to fund our net capital expenditures with our current cash balance on hand, cash flows from operations and our line of credit. Our future cash requirements will depend on many factors, including the pace of our expansion, conditions in the retail property development market, construction costs, the nature of the specific sites selected for new restaurants, and the nature of the specific leases and associated tenant improvement allowances available, if any, as negotiated with landlords.

15


 

 

Financing Cash Flows

Net cash used in financing activities was $10.7 million during the thirteen weeks ended April 2, 2024, representing a $10.2 million increase from the $0.5 million used during the thirteen weeks ended April 4, 2023. This increase was primarily due to payments on our line of credit during the thirteen weeks ended April 2, 2024.

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 April 2, 2024, we are not involved in any off-balance sheet arrangements.

IMPACT OF INFLATION

Inflation has had an impact on our operations, new restaurant construction and corresponding return on invested capital. While we have been able to partially offset inflation and other changes in the costs of key operating inputs by gradually increasing menu prices, coupled with cost savings initiatives, 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. Increases in inflation could have a severe impact on the United States and global economies, which will have an adverse impact on our business, financial condition and results of operations. In addition, macroeconomic conditions that impact consumer discretionary spending for food away from home could make additional menu price increases imprudent. Whether we are able to continue to offset the effects of inflation through menu price increases or cost savings will determine to what extent, if any, inflation affects our restaurant profitability in future periods.

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 U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenues and expenses in the reporting period. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. We continually review the estimates and underlying assumptions to ensure they are appropriate for the circumstances. Accounting assumptions and estimates are inherently uncertain and actual results may differ materially from our estimates.

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 January 2, 2024. During the thirteen weeks ended April 2, 2024, there were no significant changes in our critical accounting policies.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion of market risks contains “forward-looking” statements. Actual results may differ materially from the following discussion based on general conditions in the financial and commodity markets.

Interest Rate Risk

We have a $215 million Credit Facility, of which $58.0 million is currently outstanding and carries interest at a floating rate. We utilize the Credit Facility principally for letters of credit that are required to support our self-insurance programs, to fund a portion of our announced share repurchase program, and for working capital and construction requirements, as needed. We are exposed to interest rate risk through fluctuations in interest rates on our obligations under the Credit Facility. Based on our current outstanding balance, a hypothetical 1% change in the interest rates under our Credit Facility would have an approximate $0.4 million annual impact on our net income.

16


 

Food, Supplies and Commodity Price Risks

We purchase food, supplies and other commodities for use in our operations based upon market prices established with our suppliers. Our business is dependent on frequent and consistent deliveries of these items. We may experience shortages, delays or interruptions due to inclement weather, natural disasters, labor issues or other operational disruptions or other conditions beyond our control such as cyber breaches or ransomware attacks at our suppliers, distributors or transportation providers. Additionally, many of the commodities purchased by us can be subject to volatility due to market supply and demand factors outside of our control, whether contracted for or not. Costs can also fluctuate due to government regulation. To manage this risk in part, we attempt to enter into fixed-price purchase commitments, with terms typically up to one year, for some of our commodity requirements. However, it may not be possible for us to enter into fixed-price contracts for certain commodities or we may choose not to enter into fixed-price contracts for certain commodities. We believe that substantially all of our food and supplies are available from several sources, which helps to diversify our overall commodity cost risk. We also believe that we have some flexibility and ability to increase certain menu prices, or vary certain menu items offered or promoted, in response to food commodity price increases. Some of our commodity purchase arrangements may contain contractual features that limit the price paid by establishing certain price floors or caps. We do not use financial instruments to hedge commodity prices, since our purchase arrangements with suppliers, to the extent that we can enter into such arrangements, help control the ultimate cost that we pay.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 promulgated under the Securities Exchange Act of 1934 as amended, as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of April 2, 2024, our disclosure controls and procedures are designed and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our first fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 5. OTHER INFORMATION

None.

 

PART II. OTHER INFORMATION

See Note 8 of Notes to Unaudited Consolidated Financial Statements in Part I, Item 1 of this report for a summary of legal proceedings.

Item 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended January 2, 2024.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not repurchase shares during the thirteen weeks ended April 2, 2024. As of April 2, 2024, we have cumulatively repurchased shares valued at approximately $488.9 million in accordance with our approved share repurchase plan since its inception in 2014. Share repurchases were executed through open market purchases, and future share repurchases may be completed through a combination of individually negotiated transactions, accelerated share buyback, and/or open market purchases. In February 2024, our Board of Directors approved an increase in our share repurchase program by $50 million. As a result, as of April 2, 2024, we had approximately $61.1 million available under our authorized $550 million share repurchase program.

The following table sets forth information with respect to the repurchase of common shares during the thirteen weeks ended April 2, 2024:

 

17


 

Period (1)

 

Total
Number
of Shares
Purchased

 

 

Average
Price
Paid Per
Share

 

 

Total
Number of
Shares
Purchased as
Part of the
Publicly
Announced
Plans

 

 

Increase in
Dollars for
Share
Repurchase
Authorization

 

 

Dollar Value
of Shares that
May Yet Be
Purchased
Under the
Plans or
Programs

 

01/03/24 - 01/30/24

 

 

 

 

$

 

 

 

 

 

$

 

 

$

11,055,206

 

01/31/24 - 02/27/24

 

 

 

 

$

 

 

 

 

 

$

50,000,000

 

 

$

61,055,206

 

02/28/24 - 04/02/24

 

 

 

 

$

 

 

 

 

 

$

 

 

$

61,055,206

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)
Period information is presented in accordance with our fiscal months during fiscal 2024.

18


 

Item 6. EXHIBITS

 

Exhibit
Number

Description

3.1

Amended and Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit 3.1 of the Annual Report on Form 10-K for fiscal 2017.

 

 

3.2

Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.1 of the Form 8-K filed on August 14, 2020.

 

 

 

3.3

Certificate of Amendment of Articles of Incorporation, incorporated by reference to Exhibit 3.3 of the Annual Report on Form 10-K for fiscal 2004.

 

 

3.4

Certificate of Amendment of Articles of Incorporation, incorporated by reference to Exhibit 3.4 of the Annual Report on Form 10-K for fiscal 2010.

 

 

4.1

Specimen Common Stock Certificate of the Company, incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form SB‑2A filed with the Securities and Exchange Commission on August 22, 1996 (File No. 3335182‑LA).

 

 

 

10.1

 

Employment Agreement dated November 15, 2022, between the Company and Putnam Shin.

 

 

 

10.2

 

Cooperation Agreement, dated March 26, 2024, between the Company and PW Partners, LLC, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on March 27, 2024.

 

 

 

10.3

 

Cooperation Agreement, dated February 27, 2024, between the Company and Fund 1 Investments, LLC, incorporated by reference to Exhibit 10.1 of the Form 8-K filed on February 28, 2024.

 

 

 

31

Section 302 Certification of Chief Executive Officer and Chief Financial Officer.

32

Section 906 Certification of Chief Executive Officer and Chief Financial Officer.

 

 

 

101.INS

 

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

 

Inline XBRL Taxonomy Extension Schema

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB

 

Inline XBRL Taxonomy Extension Labels Linkbase

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

19


 

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

BJ’S RESTAURANTS, INC.

 

 

 

(Registrant)

 

 

 

May 6, 2024

 

By:

/s/ GREGORY S. LEVIN

 

 

 

 

Gregory S. Levin

 

 

 

 

Chief Executive Officer and President

 

 

 

 

(Principal Executive Officer)

 

 

 

 

 

By:

/s/ THOMAS A. HOUDEK

 

 

 

 

Thomas A. Houdek

 

 

 

 

Senior Vice President and Chief Financial Officer

 

 

 

 

(Principal Financial Officer)

 

 

 

 

 

By:

/s/ JACOB J. GUILD

 

 

 

 

Jacob J. Guild