8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549 

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 Date of Report (Date of earliest event reported): February 3, 2020 

Luby's, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-8308	74-1335253
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification Number)

	13111 Northwest Freeway, Suite 600 Houston, Texas 77040
(Address of principal executive offices, including zip code)

	(713) 329-6800
(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions. 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class	Trading Symbol(s)	Name of each exchange at which registered
Common Stock ($0.32 par value per share)	LUB	New York Stock Exchange
Common Stock Purchase Rights	N/A	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.¨

Item 2.02. Results of Operations and Financial Condition.

On February 3, 2020, the Company released a press release announcing the results of the first quarter ended December 18, 2019. A copy of that release is attached as Exhibit 99.1. The information and exhibit furnished under Item 2.02 of this Current Report on Form 8-K shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

Item 7.01. Regulation FD Disclosure.

On February 3, 2020, Luby’s, Inc. (the “Company”) held an investor conference call regarding its first quarter fiscal 2020 financial results. A copy of the prepared remarks used during the conference call is attached hereto as Exhibit 99.2 and incorporated by reference herein.

The information provided pursuant to this Item 7.01, including Exhibit 99.2 in Item 9.01, is “furnished” and shall not be deemed to be “filed” with the Securities and Exchange Commission or incorporated by reference in any filing under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in any such filings. The furnishing of the remarks is not intended to constitute a representation that such furnishing is required by Regulation FD or that the remarks include material investor information that is not otherwise publicly available. In addition, the Company does not assume any obligation to update such information in the future. The attached prepared remarks contain “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.

Item 9.01. Financial Statements and Exhibits.

Exhibit 99.1	Luby’s Press Release dated February 3, 2020
Exhibit 99.2	Prepared Remarks dated February 3, 2020

SIGNATURES

Pursuant to 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 hereunto duly authorized.

		LUBY'S, INC.
		(Registrant)
Date:	February 3, 2020	By:	/s/Christopher J. Pappas
			Christopher J. Pappas
			President and Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Luby’s Press Release dated February 3, 2020
99.2	Prepared Remarks dated February 3, 2020

EX-99.1

	For additional information contact:
FOR IMMEDIATE RELEASE	Dennard-Lascar Associates
	Rick Black / Ken Dennard
	Investor Relations
	713-529-6600

Luby’s Reports First Quarter Fiscal 2020 Results

HOUSTON, TX - February 3, 2020- Luby’s, Inc. (NYSE: LUB) (“Luby’s”) today announced unaudited financial results for its sixteen-week first quarter fiscal 2020 referred to as “first quarter.” Comparisons in this earnings release are for the first quarter compared to the sixteen-week first quarter fiscal 2019.

Same-Store Sales Year-Over-Year Comparison

	Q1 2020	Q1 2019
Luby's Cafeterias	1.7%	(3.0	)%
Fuddruckers	0.1%	(11.2	)%
Combo locations (1)	6.6%	(11.1	)%
Cheeseburger in Paradise	(1.0)%	(0.6	)%
Total same-store sales (2)	1.7%	(5.5	)%

(1) Combo locations consist of a side-by-side Luby’s Cafeteria and Fuddruckers Restaurant at one property location.

(2) Luby’s includes a restaurant’s sales results into the same-store sales calculation in the quarter after that store has been open for six complete consecutive quarters. In the first quarter, there were 72 Luby’s Cafeterias locations, 34 Fuddruckers locations, all six Combo locations, and one Cheeseburger in Paradise location that met the definition of same-stores.

First Quarter Restaurant Sales:

($ thousands)

Restaurant Brand	Q1 2020		Q1 2019		Change ($)			Change (%)
Luby’s Cafeterias	$	60,785	$	62,643	$	(1,858	)	(3.0	)%
Combo locations	6,359		5,964		395			6.6	%
Luby's cafeteria segment	67,144		68,607		(1,463		)	(2.1	)%
Fuddruckers restaurants segment	15,569		21,533		(5,964		)	(27.7	)%
Cheeseburger in Paradise segment	845		959		(114		)	(11.9	)%
Total Restaurant Sales	$	83,558	$	91,099	$	(7,541	)	(8.3	)%

Note: Luby's Cafeterias store count reduced from 78 at Q1 2019 start to 72 at Q1 2020 end; Fuddruckers store count reduced from 54 at Q1 2019

start to 34 at Q1 2020 end; Combo location count at six (12 restaurants) at Q1 2019 start and at Q1 2020 end; Cheeseburger in Paradise store count reduced from two at Q1 2019 start to one at Q1 2020 end.

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Restaurant Counts:

	August 28, 2019	FY20 Q1 Openings	FY20 Q1 Closings		December 18, 2019
Luby’s Cafeterias(1)	79	—	(1	)	78
Fuddruckers Restaurants(1)	44	—	(4	)	40
Cheeseburger in Paradise	1	—	—		1
Total	124	—	(5	)	119

(1) Includes 6 restaurants that are part of Combo locations

Conference Call

Luby’s will host a conference call on February 3, 2020 at 10:00 a.m. Central Time to discuss further its first quarter fiscal 2020 results. To access the call live, dial (412) 902-0030 and use the access code 13697984#

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 February 10, 2020 and may be accessed by calling (201) 612-7415 and using the access code 13697984#. Also, an archive of the webcast will be available after the call for a period of 90 days on the "Investors" section of the Company's website.

About Luby’s

Luby’s, Inc. (NYSE: LUB) operates 119 restaurants nationally as of December 18, 2019: 78 Luby’s Cafeterias, 40 Fuddruckers, one Cheeseburger in Paradise restaurants. Luby's is the franchisor for 97Fuddruckers franchise locations across the United States (including Puerto Rico), Canada, Mexico, Colombia, and Panama. Luby's Culinary Contract Services provides food service management to 33 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.

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Luby’s, Inc.

Consolidated Statements of Operations (unaudited)

(In thousands, except per share data)

	Quarter Ended
	December 18, 2019			December 19, 2018
	(16 weeks)			(16 weeks)
SALES:
Restaurant sales	$	83,558		$	91,099
Culinary contract services	9,774			9,496
Franchise revenue	1,707			2,224
Vending revenue	110			99
TOTAL SALES	95,149			102,918
COSTS AND EXPENSES:
Cost of food	23,942			25,083
Payroll and related costs	32,134			34,513
Other operating expenses	14,794			16,502
Occupancy costs	4,990			5,875
Opening costs	12			33
Cost of culinary contract services	8,948			8,815
Cost of franchise operations	565			273
Depreciation and amortization	3,762			4,903
Selling, general and administrative expenses	10,158			10,010
Other charges	1,238			1,214
Provision for asset impairments and restaurant closings	1,110			1,227
Net loss on disposition of property and equipment	30			149
Total costs and expenses	101,683			108,597
LOSS FROM OPERATIONS	(6,534		)	(5,679		)
Interest income	23			—
Interest expense	(1,962		)	(1,713		)
Other income, net	240			30
Loss before income taxes and discontinued operations	(8,233		)	(7,362		)
Provision for income taxes	94			121
Loss from continuing operations	(8,327		)	(7,483		)
Loss from discontinued operations, net of income taxes	(11		)	(6		)
NET LOSS	$	(8,338	)	$	(7,489	)
Loss per share from continuing operations:
Basic	$	(0.28	)	$	(0.25	)
Assuming dilution	$	(0.28	)	$	(0.25	)
Loss per share from discontinued operations:
Basic	$	(0.00	)	$	(0.00	)
Assuming dilution	$	(0.00	)	$	(0.00	)
Net loss per share:
Basic	$	(0.28	)	$	(0.25	)
Assuming dilution	$	(0.28	)	$	(0.25	)
Weighted average shares outstanding:
Basic	30,054			30,059
Assuming dilution	30,054			30,059

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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.

	Quarter Ended
	December 18, 2019		December 19, 2018
	(16 weeks)		(16 weeks)
Restaurant sales	87.8	%	88.5	%
Culinary contract services	10.3	%	9.2	%
Franchise revenue	1.8	%	2.2	%
Vending revenue	0.1	%	0.1	%
TOTAL SALES	100.0	%	100.0	%
COSTS AND EXPENSES:
(As a percentage of restaurant sales)
Cost of food	28.7	%	27.5	%
Payroll and related costs	38.5	%	37.9	%
Other operating expenses	17.7	%	18.1	%
Occupancy costs	6.0	%	6.4	%
Vending revenue	(0.1	)%	(0.1	)%
Store level profit	9.3	%	10.1	%
(As a percentage of total sales)
General and administrative expenses	9.0	%	8.8	%
Marketing and advertising expenses	1.7	%	0.9	%
Selling, general and administrative expenses	10.7	%	9.7	%

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Luby’s, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

	December 18, 2019			August 28, 2019
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	3,734		$	3,640
Restricted cash and cash equivalents	9,646			9,116
Trade accounts and other receivables, net	10,471			8,852
Food and supply inventories	2,556			3,432
Prepaid expenses	1,350			2,355
Total current assets	27,757			27,395
Property held for sale	16,488			16,488
Assets related to discontinued operations	1,813			1,813
Property and equipment, net	119,202			121,743
Intangible assets, net	16,349			16,781
Goodwill	514			514
Operating lease right-of-use assets	24,781			—
Other assets	1,002			1,266
Total assets	$	207,906		$	186,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	7,553		$	8,465
Liabilities related to discontinued operations	25			14
Current portion of credit facility debt	3,399			—
Operating lease liabilities-current	5,921			—
Accrued expenses and other liabilities	26,251			24,475
Total current liabilities	43,149			32,954
Credit facility debt	45,629			45,439
Operating lease liabilities-noncurrent	24,235			—
Other liabilities	844			6,577
Total liabilities	$	113,857		$	84,970
Commitments and Contingencies
SHAREHOLDERS’ EQUITY
Common stock, $0.32 par value; 100,000,000 shares authorized; shares issued were 30,646,588 and 30,478,972, respectively; shares outstanding were 30,146,588 and 29,978,972, at December 18, 2019 and August 28, 2019 respectively	9,807			9,753
Paid-in capital	35,146			34,870
Retained earnings	53,871			61,182
Less cost of treasury stock, 500,000 shares	(4,775		)	(4,775		)
Total shareholders’ equity	94,049			101,030
Total liabilities and shareholders’ equity	$	207,906		$	186,000

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Luby’s, Inc.

Consolidated Statements of Cash Flows (unaudited)

(In thousands)

	Quarter Ended
	December 18, 2019				December 19, 2018
	(16 weeks)				(16 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(8,338	)		$	(7,489	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for asset impairments and net losses on property sales	1,140				1,376
Depreciation and amortization	3,762			8.126	4,903
Amortization of debt issuance cost	339				449
Share-based compensation expense	366				439
Cash used in operating activities before changes in operating assets and liabilities	(2,731		)		(322		)
Changes in operating assets and liabilities:
Decrease (increase) in trade accounts and other receivables	(1,549		)		733
Decrease (increase) in food and supply inventories	369				(123		)
Decrease in prepaid expenses and other assets	804				1,881
Decrease in operating lease assets	1,922				—
Decrease in operating lease liabilities	(2,313		)		—
Increase (decrease) in accounts payable, accrued expenses and other liabilities	1,367				(912		)
Net cash provided by (used in) operating activities	(2,131		)		1,257
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of assets and property held for sale	149				171
Purchases of property and equipment	(694		)		(1,119		)
Net cash used in investing activities	(545		)		(948		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolver borrowings	3,300				18,506
Revolver repayments	—				(38,500		)
Proceeds from term loan	—				58,400
Term loan repayments	—				(19,506		)
Debt issuance costs	—				(3,155		)
Taxes paid on equity withheld	—				(8		)
Net cash provided by financing activities	3,300				15,737
Net increase in cash and cash equivalents and restricted cash	624				16,046
Cash and cash equivalents and restricted cash at beginning of period	12,756				3,722
Cash and cash equivalents and restricted cash at end of period	$	13,380			$	19,768
Cash paid for:
Income taxes, net of (refunds)	$	(17	)		$	29
Interest	1,302				1,637

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Store Level Profit

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

($ thousands)	Quarter Ended
	December 18, 2019			December 19, 2018
	(16 weeks)			(16 weeks)
Store level profit	$	7,808		$	9,225
Plus:
Sales from culinary contract services	9,774			9,496
Sales from franchise operations	1,707			2,224
Less:
Opening costs	12			33
Cost of culinary contract services	8,948			8,815
Cost of franchise operations	565			273
Depreciation and amortization	3,762			4,903
Selling, general and administrative expenses	10,158			10,010
Other charges	1,238			1,214
Provision for asset impairments and restaurant closings	1,110			1,227
Net loss on disposition of property and equipment	30			149
Interest income	(23		)	—
Interest expense	1,962			1,713
Other income, net	(240		)	(30		)
Provision for income taxes	94			121
Loss from continuing operations	$	(8,327	)	$	(7,483	)

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Adjusted EBITDA

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

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

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

($ thousands)	Quarter Ended
	December 18, 2019			December 19, 2018
	(16 weeks)			(16 weeks)
Loss from continuing operations	$	(8,327	)	$	(7,483	)
Depreciation and amortization	3,762			4,903
Provision for income taxes	94			121
Interest expense	1,962			1,713
Interest income	(23		)	—
Other charges	1,238			1,214
Net loss on disposition of property and equipment	30			149
Provision for asset impairments and restaurant closings	1,110			1,227
Non-cash compensation expense	366			425
Franchise taxes	55			67
Increase in fair value of derivative	—			88
Adjusted EBITDA	$	267		$	2,424

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EX-99.2

LUB Q1 FY2020 Conference Call

Monday, February 3^rd 

Steve Goodweather - VP Planning and Investor Relations

Thank you. And, again, welcome everyone to Luby's 2020 fiscal first-quarter earnings conference call. This call also being webcast and can be accessed through the audio link on Luby's website, lubysinc.com. Information recorded on this call speaks only as of today, February 3, 2020.

Before we continue, I'd like to remind you that the statements in this discussion, may include forward-looking statements.

Such statements include risks and uncertainties, including but not limited to general business conditions, the impact of competition, success of operating initiatives, changes in commodity costs, and supply of food and labor, as well as seasonality of the Company's business, taxes, inflation, governmental regulations, and availability of credit, as well as other risks and uncertainties disclosed in the Company's periodic reports on Forms 10-K and Forms 10-Q.

With that, I would now like to turn the call over to Luby's President and CEO, Chris Pappas. Chris …

Chris Pappas - Luby's Inc. - President & CEO

Good morning, thank you Steve and thank you everyone for joining us on today’s conference call. While our management team is focusing on initiatives that we have discussed on previous conference calls, I’m going to provide you with a brief update on the status of company during the first quarter.

Our financial results in the first quarter were far below the levels we need to stabilize the company. These results are NOT acceptable. While the first quarter typically always represents our lowest sales quarter seasonally, we still must further “right-size” our cost structure to fit our smaller store base, end the losses and reduce our debt.

A year ago, we spoke about changes we needed to make, including management leadership and board refreshment and improvement in guest traffic and sales and a significant reduction in our G&A expenses. These have all been priorities. Since then, we have changed out our COO, and added a new VP of Information Technology, and a new VP of Marketing, in addition to many new restaurant and corporate level positions. At the Board level, in the past 12 months, three new independent directors were added, and three directors retired. The Board also appointed a new independent Chairman. And, the board of directors formed a new Special Committee comprised of six independent directors to evaluate strategic alternatives to maximize shareholder value. The Committee has engaged financial advisors to assist with this evaluation and is conducting a thorough strategic review process.

In the first quarter, guest traffic increased at both brands, with Luby’s, up 2.0% and Fudds, up 2.7%. This increase in traffic led to growth in same-store sales also. Our total same-store sales increased 1.7%. However, at the restaurant level, despite improving guest traffic and same-store sales, commodity and labor cost increases offset the benefits of traffic and sales growth. The cost of food commodities rose dramatically (contributing to a food cost increase of 1.2% of restaurant sales), and labor costs have gone up at the highest pace we have seen in years.

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In regard to SG&A, we are transitioning portions of our accounting, payroll, operational reporting, and other back-office functions to a leading multi-unit restaurant outsourcing firm. We expect to complete that process by the end of the March. After the implementation costs, we expect to realize cost savings and enhanced capabilities in future quarters.

Overall, SG&A expenses increased slightly in the quarter by 148 thousand dollars, compared to the last year. However, included in this increase is an approximate 700 hundred thousand dollar increase in marketing and advertising spend reflecting our increased investments for various digital media advertising, increased advertising support leading into Thanksgiving, and other efforts to reach our guests in an effective manner, as compared to the first quarter last year when marketing and advertising efforts were reduced while new approaches were developed; Also, the first quarter last year quarter included an approximate three hundred thousand dollar derecognition of a bonus accrual. So, if you strip out those two items, our core general and administrative expenses (that is all the salaries and benefits expense, outside professional service fees, travel, occupancy, and other general overhead costs) actually decreased about 800 thousand dollars.

During the first quarter, our capital expenditures decreased to 700 hundred thousand dollars compared to 1.1 million dollars in the same quarter last year. While working to return to profitability, we expect CapEx to remain at recent low levels. We ended the first quarter on December 18, 2019 with net debt of 38.6 million dollars; we continue to manage our debt levels through asset sales.

We reported a Loss from continuing operations in the first quarter of 8.3 million dollars compared to a loss of 7.5 million dollars in the first quarter last year.

However, we are managing the business to improve cash flow. On a cash flow basis, we used approximately 2.1 million in cash from operating activities. Of that amount, approximately 2 million dollars was used for restructuring expenses and other changes in working capital. We also spent another 700 thousand for capital expenditures to maintain the restaurants. So, in the quarter we had a net cash outflow of about 3 million dollars and borrowings of about the same magnitude. It is this measure where we are keeping a real tight focus.

We continue to focus on the initiatives we began late last year including a restaurant focus on delivering a compelling everyday value proposition to guests at both Luby’s and Fuddruckers. By clarifying each brand’s value offering in the marketplace, we intend to drive guest traffic and sales. Before ending the call today, I’d like to mention that while stabilizing the operation and financial performance of the company is difficult - we recognize the outstanding loyalty, hard work and dedication of our entire organization from top to bottom giving their all to improve the company. 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 likewise, our corporate employees are tirelessly working to implement cost saving measures and efficiencies. I believe we have the right team and leadership in place to continue to make progress on our plans to improve results.

We will be hosting our annual shareholder meeting on February 5th and we look forward to seeing many of you at that meeting. Thank you for joining us for today’s call.

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