Q1 2020 Earnings Call

Greetings and welcome to the Lubys fiscal 2021st quarter earnings Conference call.

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As a reminder, this conference is being recorded it's now my pleasure to introduce your host Steve Goodweather, Vice President of financial planning and Investor Relations. Thank you Mr. Good weather you may begin.

Thank you and again welcome everyone to let me just 2020 fiscal first quarter earnings Conference call. This call is also being webcast can be accessed to the audio link on the these website <unk> dot com.

Permission recorded on this call speaks only as of today February three 2020.

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

Such statements include best uncertainties, but including but not limited to general business conditions the impact of competition.

Sets of operating initiatives changes in commodity costs and supply food and labor as well seasonality the company's business taxes inflation coming out of regulations and availability of credit Suisse. Other risks and uncertainties disclosed in the company's periodic reports on forms 10-K and forms 10-Q.

With that I would now let's turn the call over to lead this president and CEO.

Good morning, Thank you Steve.

Everyone and thank you for joining us today on today's conference call.

Well our management team is spoken seen on initiatives that we've discussed on previous conference calls I'm going to provide you with a brief update on the status of company the company during the first core.

Financial results in the first quarter far below levels, we need to stabilize the company. These results are not acceptable well the first quarter typically.

Oh, which represents our Lewis.

See I sales quarter seasonally you still must further rightsizing, our cost structure to set our smaller store base and the losses and reduce our debt and into losses, a year ago. We spoke about changes we needed to make including management leadership work refreshment and improvement.

Yes traffic and sales and a significant reduction NRG M&A expenses. These have all been priorities. Since then weve change out our COO added a new vps, the information technology and a new VP of marketing in addition to many restaurants and corporate level positions.

At the board level in the past 12 months three new independent directors were added three directors retard. The board also appointed a new independent chairman.

And the board of directors formed and 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 its conducting a thorough strategic review process.

In the first quarter.

Guest traffic increased at both brands with Lubys up 2% and phage up 2.7%.

The increase in traffic led to growth in same store sales also.

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 much of the benefit of traffic and sales growth the cost of food commodities rose dramatically contributing to food cost increase of about 1.2% restaurant sales and labor costs have gone up at the high space we've seen in years.

In regard to ask DNA.

Transitioning portions of our county payroll operational reporting and other back office functions to a leading multi unit restaurant outsourcing for.

We expect to complete that process by the end of March.

After the implementation costs, we expect to realize cost savings and enhanced capabilities in future quarters.

Overall, SGN <unk> expenses increased slightly in the quarter $548000 compared to last year. However, this included an increase of approximately $700000 in marketing and advertising spend.

But in our increased investment for various digital media advertising increased advertising support leading into Thanksgiving and other effort to reach our guest in an effective manner as compared to the first quarter last year, when marketing and advertising efforts.

Dues 12, new approaches were developed also.

First quarter last year quarter, including an approximate 300000 dollar D recognition of a bonus accrual. So if you strip out those two items, our core general and administrative expenses that is the salaries and benefits outside.

Professional fees and service fees and travel and occupancy and other general overhead costs actually decreased by about $800000.

During the first quarter, our capital expenditures decreased to $700000 compared to 1.1 million 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 18th 2009 chain with net debt of approximately $38.6 million, we continue to manage our debt levels through asset sales.

Reported a loss from continuing operation in the first quarter of 8.3 million compared to a loss of $7.5 billion in the first quarter last year. However, we are managed the business to improve cash flow on a cash flow basis, we used approximately 2.1 million in cash from operating.

Activities.

Adam Mount approximately $2 million, which used for restructuring expenses and other changes in working capital.

Also spend another $700000 for capital expenditures to maintain the restaurants. So in the quarter, we had a net cash flow of about $3 million and borrowing of about the same magnitude.

This measure.

Keeping our real tight focus on.

We continue to focus on initiatives that we began last year, including this restaurant focus on delivering a compelling everyday value proposition to guess at both Lubys and fuddruckers with less discounting.

Clarifying each brand's value offerings in the market place.

Tend to drive guest traffic in sales.

Before handing the call today I'd like to mention that while stabilized in the operations and financial performance as a company has been difficult we recognize the outstanding bolting hardware and dedication of our entire organization from top to bottom, giving their all to improve the company at the restaurant level managers in restaurants.

Team members are working hard to maintain and build value.

Consistently delivering great guest experiences they are one of our greatest brand assets and I applaud their hard work.

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'll be hosting our annual shareholder meeting on February 5th.

And we look forward to seeing many of you at that meeting I'd like to thank you for joining us today on the call.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.