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Bojangles', Inc. Reports Financial Results for its Third Fiscal Quarter 2015

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CHARLOTTE, N.C., Nov. 4, 2015 (GLOBE NEWSWIRE) -- Bojangles', Inc. (Bojangles') (NASDAQ: BOJA) today announced financial results for the third fiscal quarter 2015, which was a 13-week period ending on September 27, 2015. Bojangles' also raised its annual guidance for the fiscal year 2015, which is a 52-week period ending on December 27, 2015.

Financial Highlights for the Third Fiscal Quarter 2015 Compared to the Third Fiscal Quarter 2014

  • System-wide comparable restaurant sales increased 4.1%;
  • Total revenues increased 12.7% to $124.3 million from $110.3 million;
  • 18 system-wide restaurants were opened -- seven company-operated restaurants and 11 franchised restaurants;
  • Net Income increased to $8.9 million from $7.0 million;
  • Pro Forma Net Income* increased 49.2% to $8.5 million from $5.7 million;
  • Pro Forma Diluted Net Income per Share* increased 53.3% to $0.23 compared to $0.15; and
  • Adjusted EBITDA* increased 20.0% to $20.5 million from $17.1 million.

* Pro Forma Net Income, Pro Forma Diluted Net Income per Share and Adjusted EBITDA are non-GAAP measures. Please see "Use and Definition of Non-GAAP Measures" and the reconciliation tables accompanying this release.

"We continue to be pleased with the financial results of our iconic Bojangles'® brand. The 4.1% increase in system-wide comparable restaurant sales during the third fiscal quarter 2015 was on top of a 5.3% increase in the prior year fiscal quarter and has enabled us to extend our track record of comparable restaurant sales growth to 22 consecutive quarters. Total revenues rose 12.7% while Adjusted EBITDA and Pro Forma Net Income expanded at even higher rates of 20.0% and 49.2%, respectively. We are once again very pleased to be raising our annual outlook for revenues and profitability," said Bojangles' President and CEO Clifton Rutledge.

"We are actively and diligently working on a number of important initiatives that will strengthen Bojangles' and prepare us for an even brighter future. These include investing in our people so we can better uphold our commitment to Bo-Size Service and build-out our menu development capabilities, enhancing our technological infrastructure, improving our supply chain through a new partnership, and expanding our footprint through greater scale in adjacent areas within the Southeast and infilling our core North and South Carolina markets. The Bojangles' system is expected to grow approximately 8% in net unit count this year, demonstrating the considerable and untapped demand for our high-quality, craveable food and Legendary Iced Tea®," he concluded.

Third Fiscal Quarter 2015 Financial Review

System-wide comparable restaurant sales increased 4.1%, consisting of both company-operated and franchised comparable restaurant sales growth of 4.1%. Comparable restaurant sales growth at company-operated restaurants was composed of increases in price and mix.

Total revenues increased 12.7% to $124.3 million in the third fiscal quarter of 2015 from $110.3 million in the prior year quarter. The increase was primarily due to an additional net 46 system-wide restaurants at September 27, 2015 compared to September 28, 2014, and comparable restaurant sales growth at our company-operated and franchised restaurants.

Company restaurant revenues increased 12.8% to $117.5 million in the third fiscal quarter of 2015 from $104.2 million in the prior year quarter. Franchise royalty revenues increased 10.7% to $6.4 million in the third fiscal quarter of 2015 from $5.8 million in the prior year quarter.

Restaurant contribution, a non-GAAP measure, increased 17.5% to $21.9 million in the third fiscal quarter of 2015 from $18.7 million in the prior year quarter. As a percentage of company restaurant revenues, restaurant contribution margin, a non-GAAP measure, increased to 18.7% in the third fiscal quarter of 2015 from 17.9% in the prior year quarter.

General and administrative expenses increased $2.1 million to $10.1 million in the third fiscal quarter of 2015 from $7.9 million in the prior year quarter. The increase was due primarily to additional positions added to support an increased number of restaurants in our system, additional costs as a result of operating as a public company, $0.2 million in legal and other expenses incurred in connection with the transition to a new distributor and a $0.5 million accrual pursuant to an employment agreement.

Adjusted EBITDA increased 20.0% to $20.5 million in the third fiscal quarter of 2015 from $17.1 million in the prior year quarter.  

Net Income was $8.9 million in the third fiscal quarter of 2015 compared to $7.0 million in the prior year quarter.

Pro Forma Net Income was $8.5 million in the third fiscal quarter of 2015 compared to $5.7 million in the prior year quarter. Pro Forma Diluted Net Income per Share was $0.23 in the third fiscal quarter of 2015 compared to $0.15 in the prior year quarter.

Fiscal Year 2015 Guidance

Bojangles' raised its annual guidance for 52-week period ending on December 27, 2015 to the following:

  • Total revenues of $486.0 million to $488.0 million (previously $483.5 million to $487.5 million);
  • System-wide comparable restaurant sales growth of low to mid-single digits;
  • The opening of 62 to 64 system-wide restaurants (previously 59 to 63 system-wide restaurants);
    • 28 to 29  company-operated restaurants which includes two restaurants we will re-open that a franchisee previously closed;
    • 34 to 35  franchised restaurants;
  • Net increase of 48 to 50 system-wide restaurants (previously 49 to 53 system-wide restaurants);
    • 27 to 28 net increase of company-operated restaurants which includes the addition of one restaurant refranchised to the company;
    • 21 to 22 net increase of franchised restaurants which includes the reduction of one restaurant refranchised to the company;
  • Restaurant contribution margin of 17.7% to 18.0% (previously 17.3% to 17.7%);
  • General and administrative expenses between $42.8 million and $43.3 million (previously $41.5 million and $42.5 million), inclusive of costs associated with our initial public offering and other non-recurring expenses. This range also includes approximately $0.2 million in the third fiscal quarter of 2015 and $0.5 million expected in the fourth fiscal quarter of 2015 related to our change in third party distributors;
  • Pro Forma Diluted Net Income per Share of $0.79 to $0.81 (previously $0.75 to $0.78); and
  • Adjusted EBITDA of $76.0 million to $77.5 million (previously $74.0 million to $76.0 million).

Conference Call and Webcast Today

We will host a conference call and webcast to discuss the third fiscal quarter 2015 results and fiscal year 2015 guidance today at 5:15 p.m. Eastern Time. The conference call dial-in numbers are 1-877-705-6003 for domestic toll-free calls and 1-201-493-6725 for international. A telephone replay will be available through December 4, 2015 and may be accessed by dialing 1-877-870-5176 for domestic toll-free calls and 1-858-384-5517 for international. The conference ID is 13620534.

The conference call will also be webcast live and later archived on the Investor Relations section of our website at www.bojangles.com.

About Bojangles', Inc.

Bojangles', Inc. is a highly differentiated and growing restaurant operator and franchisor dedicated to serving customers high-quality, craveable food made from our Southern recipes. Founded in 1977 in Charlotte, NC, Bojangles' serves menu items such as delicious, famous chicken, made-from-scratch buttermilk biscuits, flavorful fixin's and Legendary Iced Tea®. At September 27, 2015, Bojangles' had 657 system-wide restaurants, of which 274 were company-operated and 383 were franchised restaurants, primarily located in the Southeastern United States.  For more information, visit www.bojangles.com or follow Bojangles' on Facebook and Twitter.

Use and Definition of Non-GAAP Measures

We utilize certain non-GAAP measures when assessing the operational strength and the performance of our business.  Bojangles' cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, reported GAAP results.  

Comparable restaurant sales reflects the change in year-over-year sales for the comparable restaurant base (as applicable, system-wide, franchised or company-operated restaurants). A restaurant enters our comparable restaurant base the first full day of the month after being open for 15 months using a mid-month convention.

Restaurant contribution is defined as company restaurant revenues less food and supplies costs, restaurant labor costs and operating costs. Restaurant contribution margin is defined as restaurant contribution as a percentage of company restaurant revenues. Restaurant contribution and restaurant contribution margin are supplemental measures of operating performance of our company-operated restaurants and our calculations thereof may not be comparable to those reported by other companies. Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. 

Pro Forma Net Income represents company net income before items that we do not consider representative of our ongoing operating performance, as well as an estimate of recurring incremental legal, accounting, insurance and other operating and compliance costs we expect to incur as a public company for those periods where they had not yet been incurred, both as identified in the reconciliation table below. Pro Forma Diluted Net Income per Share represents company diluted net income per share before items that we do not consider representative of our ongoing operating performance, as well as an estimate of recurring incremental legal, accounting, insurance and other operating and compliance costs we expect to incur as a public company for those periods where they had not yet been incurred, both as identified in the reconciliation table below.

EBITDA represents company net income before interest expense (net of interest income), provision for income taxes and depreciation and amortization. Adjusted EBITDA represents company net income before interest expense (net of interest income), provision for income taxes, depreciation and amortization, items that we do not consider representative of our ongoing operating performance and certain non-cash items, as identified in the reconciliation table below.

Pro Forma Net Income, Pro Forma Diluted Net Income per Share, EBITDA and Adjusted EBITDA are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. Pro Forma Net Income, Pro Forma Diluted Net Income per Share, EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with GAAP or as alternatives to cash flow from operating activities as a measure of our liquidity. In addition, in evaluating Pro Forma Net Income, Pro Forma Diluted Net Income per Share, EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses or charges such as those added back to calculate Pro Forma Net Income, Pro Forma Diluted Net Income per Share, EBITDA and Adjusted EBITDA.

Forward-Looking Statements

This release contains forward-looking statements.  All statements other than statements of historical fact included in this release are forward-looking statements.  Forward-looking statements discuss our current expectations, projections and guidance relating to our financial condition, results of operations, plans, objectives, future performance and business.  These statements may be preceded by, followed by or include the words "aim," "anticipate," "believe," "estimate," "expect," "forecast," "intend," "outlook," "plan," "potential," "project," "projection," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other words and terms of similar meaning.

Forward-looking statements are inherently subject to risks, uncertainties and assumptions; they are not guarantees of performance.  Actual results may differ materially from these expectations due to risks relating to our vulnerability to changes in consumer preferences and economic conditions; our ability to open new restaurants and expand our franchise system; our ability to generate comparable restaurant sales growth; financial or other difficulties which could cause our restaurants and our franchisees' restaurants to close; our ability to generate increased sales or profits from new menu items, advertising campaigns and restaurant designs and remodels; cancellation or delay in anticipated future restaurant openings; our reliance on, limited degree of control over and potential liability for, our franchisees; increases in the cost of chicken, pork, wheat, corn and other products; our ability to compete successfully with other quick-service and fast-casual restaurants; our vulnerability to conditions in the Southeastern United States; negative publicity, whether or not valid; concerns about food safety and quality and about food-borne illnesses, including adverse public perception due to the occurrence of avian flu, swine flu or other food-borne illnesses; and our dependence upon frequent and timely deliveries of restaurant food and other supplies. For further details and discussion of these and other risks and uncertainties, see our registration statement on Form S-1 (commission file number 333-203268), which was declared effective by the Securities and Exchange Commission on May 7, 2015, and our periodic reports, including our quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission and available at www.sec.gov. You should not place undue reliance on these statements. We have based these forward-looking statements on our current expectations and projections about future events.  Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure you that the assumptions and expectations will prove to be correct.

All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements.  In addition, all forward-looking statements speak only as of the date of this earnings release.  We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise other than as required under the federal securities laws.

BOJANGLES', INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
     
Assets December 28,
2014
September 27,
2015
Current assets:    
Cash and cash equivalents  $ 13,201 15,050 
Accounts and vendor receivables, net 4,285  3,676 
Accounts receivable, related parties, net 736  432 
Inventories, net  2,743  2,683 
Other current assets 2,669  4,225 
Total current assets 23,634  26,066 
Property and equipment, net 42,478  52,092 
Goodwill 161,140  161,140 
Brand 290,500  290,500 
Franchise rights, net 26,438  25,615 
Favorable leases, net 1,908  1,494 
Deferred debt issuance costs, net 2,726  2,658 
Other noncurrent assets 3,819  3,010 
Total assets  $ 552,643 562,575 
Liabilities and Stockholders' Equity    
Current liabilities:    
Accounts payable  $ 15,639 14,536 
Accrued expenses 18,479  22,700 
Current maturities of long-term debt —  — 
Current maturities of capital lease obligations 4,365  5,319 
Other current liabilities 1,655  6,411 
Total current liabilities 40,138  48,966 
Long-term debt, less current maturities 228,249  209,194 
Deferred income taxes 116,589  113,083 
Capital lease obligations, less current maturities 20,144  21,819 
Other noncurrent liabilities 9,771  11,406 
Total liabilities 414,891  404,468 
Stockholders' equity:    
Preferred stock 172,691  — 
Common stock —  360 
Additional paid-in capital (56,220)  118,339 
Retained earnings 21,135  39,817 
Accumulated other comprehensive income (loss) 146  (409) 
Total stockholders' equity 137,752  158,107 
Total liabilities and stockholders' equity  $ 552,643 562,575 
 
 
BOJANGLES', INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
         
  Thirteen Weeks Ended Thirty-Nine Weeks Ended
  September 28,
2014
September 27,
2015
September 28,
2014
September 27,
2015
Revenues:        
Company restaurant revenues  $ 104,192 117,536 295,589 339,914
Franchise royalty revenues 5,813 6,436 16,687 18,740
Other franchise revenues 300 287 748 768
Total revenues 110,305 124,259 313,024 359,422
Company restaurant operating expenses:        
Food and supplies costs 33,026 37,223 96,586 110,508
Restaurant labor costs 29,151 32,429 82,625 94,075
Operating costs 23,336 25,936 65,568 74,120
Depreciation and amortization 2,452 2,990 7,145 8,378
Total Company restaurant operating expenses 87,965 98,578 251,924 287,081
Operating income before other operating expenses 22,340 25,681 61,100 72,341
Other operating expenses:        
General and administrative 7,921 10,064 22,773 32,694
Depreciation and amortization 597 725 1,723 2,075
Impairment 193 208
Loss on disposal of property and equipment 33 220 30 232
Total other operating expenses 8,551 11,202 24,526 35,209
Operating income 13,789 14,479 36,574 37,132
Amortization of deferred debt issuance costs (187) (208) (548) (622)
Interest income 1 6
Interest expense (2,430) (2,001) (6,844) (6,394)
Income before income taxes 11,172 12,270 29,183 30,122
Income taxes 4,186 3,360 10,974 11,440
Net income  $ 6,986 8,910 18,209 18,682
         
Net income per share:        
Basic  $ -- 0.25 0.99
Diluted  $ 0.19 0.24 0.49 0.50
         
Weighted average shares used in computing net income per share:        
Basic 35,951 18,830
Diluted 37,325 37,526 37,267 37,471
 
 
BOJANGLES', INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
     
  Thirty-Nine Weeks Ended
  September 28,
2014
September 27,
2015
Cash flows from operating activities:    
Net income  $ 18,209 18,682 
Adjustments to reconcile net income to net cash provided by operating activities:    
Deferred income tax benefit (44)  (3,356) 
Depreciation and amortization 8,868  10,453 
Amortization of deferred debt issuance costs 548  622 
Impairment —  208 
Loss on disposal of property and equipment 30  232 
Provision for doubtful accounts 33  53 
(Benefit) provision for inventory spoilage (8) 
Provision (benefit) for closed stores 101  (50) 
Stock-based compensation 1,084  1,711 
Excess tax benefit from stock-based compensation (49)  (421) 
Changes in operating assets and liabilities 535  4,945 
Net cash provided by operating activities 29,307  33,088 
Cash flows from investing activities:    
Purchases of franchisee's assets (3,187)  (186) 
Purchases of property and equipment (4,964)  (8,591) 
Proceeds from disposition of property and equipment 36 
Net cash used in investing activities (8,148)  (8,741) 
Cash flows from financing activities:    
Proceeds from borrowings on long-term debt 50,000  — 
Principal payments on long-term debt (13,468)  (19,055) 
Debt issuance costs (720)  (555) 
Distribution to stockholders (50,000)  — 
Stock option settlement (172)  — 
Stock option exercise —  96 
Excess tax benefit from stock-based compensation 49  421 
Principal payments on capital lease obligations (2,974)  (3,405) 
Net cash used in financing activities (17,285)  (22,498) 
Net increase in cash and cash equivalents 3,874  1,849 
Cash and cash equivalents balance, beginning of period 8,456  13,201 
Cash and cash equivalents balance, end of period  $ 12,330 15,050 
 
 
BOJANGLES', INC. AND SUBSIDIARIES
Unaudited Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(in thousands)
         
  Thirteen Weeks Ended Thirty-Nine Weeks Ended
  September 28,
2014
September 27,
2015
September 28,
2014
September 27,
2015
Net income  $ 6,986 8,910 18,209 18,682
Income taxes 4,186 3,360 10,974 11,440
Interest expense, net 2,430 2,001 6,843 6,388
Depreciation and amortization (a) 3,236 3,923 9,416 11,075
EBITDA 16,838 18,194 45,442 47,585
Non-cash rent (b) 374 389 1,142 1,168
Stock-based compensation (c) 342 309 1,084 1,728
Preopening expenses (d) 642 326 985 1,064
Sponsor and board member fees and expenses (e) 244 762 166
Certain professional, transaction and other costs (f) 100 160 571 5,041
Employee contract expense (g) 507 507
Distributor transition costs (h) 217 217
Impairment and dispositions (i) 33 421 33 476
Gain from termination of a vendor contract (j) (1,476) (1,476)
Adjusted EBITDA  $ 17,097 20,523 48,543 57,952
 
(a) Includes amortization of deferred debt issuance costs.
(b) Includes deferred rent, which represents the extent to which our rent expense has been above or below our cash rent payments, amortization of favorable (unfavorable) leases and closed store reserves for rent net of cash payments.
(c) Includes non-cash, stock-based compensation, as well as employer payroll taxes associated with stock option exercises related to stock options that were outstanding prior to our initial public offering.
(d) Includes expenses directly associated with the opening of new company-operated restaurants and incurred prior to the opening of a new company-operated restaurant.
(e) Includes reimbursement of expenses to our sponsor prior to our initial public offering, compensation and expense reimbursement to members of our board prior to our initial public offering and certain non-recurring executive search firm fees incurred on behalf of our board. 
(f) Includes certain professional fees and transaction costs related to financing transactions, acquisitions and initial public offering expenses, third-party consultants for one-time projects and certain executive relocation costs.
(g) Represents a payment liability pursuant to an employment agreement.
(h) Includes legal and other expenses incurred in connection with the transition to our new distributor.
(i) Includes loss on disposal of property and equipment, impairment and cash proceeds on disposals from disposition of property and equipment.
(j) Represents the elimination of a gain from the termination of a contract with a beverage vendor.
 
 
BOJANGLES', INC. AND SUBSIDIARIES
Unaudited Reconciliation of Net Income to Pro Forma Net Income
(in thousands)
         
  Thirteen Weeks Ended Thirty-Nine Weeks Ended
  September 28,
2014
September 27,
2015
September 28,
2014
September 27,
2015
Net income  $ 6,986 8,910 18,209 18,682
         
Certain professional and transaction costs (a) 20 160 206 5,041
Incremental public company costs (b) (600) (104) (1,800) (898)
Stock-based compensation (c) 724
Employee contract expense (d) 507 507
Distributor transition costs (e) 217 217
Gain from termination of a vendor contract (f) (1,476) (1,476)
State income tax rate change (g) (903) (903)
Tax impact of adjustments 760 (296) 1,192 (469)
Total adjustments (1,296) (419) (1,878) 4,219
Pro Forma Net Income  $ 5,690 8,491 16,331 22,901
         
         
         
BOJANGLES', INC. AND SUBSIDIARIES
Unaudited Reconciliation of Diluted Net Income Per Share to Pro Forma Diluted Net Income Per Share
         
  Thirteen Weeks Ended Thirty-Nine Weeks Ended
  September 28,
2014
September 27,
2015
September 28,
2014
September 27,
2015
Diluted net income per share  $ 0.19 0.24 0.49 0.50
         
Certain professional and transaction costs (a) —  —  0.01 0.13
Incremental public company costs (b) (0.02) —  (0.05) (0.02)
Stock-based compensation (c) —  —  —  0.02
Employee contract expense (d) —  0.01 —  0.01
Distributor transition costs (e) —  0.01 —  0.01
Gain from termination of a vendor contract (f) (0.04) —  (0.04) — 
State income tax rate change (g) —  (0.02) —  (0.02)
Tax impact of adjustments  0.02  (0.01)  0.03  (0.02)
Total adjustments (0.04) (0.01) (0.05) 0.11
Pro Forma Diluted Net Income per Share  $ 0.15 0.23 0.44 0.61
 
(a) Includes certain professional fees and transaction costs related to financing transactions, acquisitions and initial public offering expenses and third-party consultants for one-time projects.
(b) Reflects an estimate of recurring incremental legal, accounting, insurance and other operating and compliance costs we expect to incur as a public company in addition to actual amounts incurred. By its nature, this adjustment involves risks and uncertainties, and the actual costs incurred could be different than this adjustment.
(c) Includes non-cash, stock-based compensation related to the vesting of certain performance based stock option awards, as well as employer payroll taxes associated with stock option exercises related to stock options that were outstanding prior to our initial public offering.
(d) Represents a payment liability pursuant to an employment agreement.
(e) Includes legal and other expenses incurred in connection with the transition to our new distributor.
(f) Represents the elimination of a gain from the termination of a contract with a beverage vendor.
(g) As a result of the recently enacted reduction to the North Carolina corporate income tax rate, we adjusted our deferred income taxes by applying the lower rate, which resulted in a corresponding decrease to income tax expense.
 
 
BOJANGLES', INC. AND SUBSIDIARIES
Unaudited Reconciliation of Company Restaurant Revenues to Restaurant Contribution
(in thousands)
         
  Thirteen Weeks Ended Thirty-Nine Weeks Ended
  September 28,
2014
September 27,
2015
September 28,
2014
September 27,
2015
Company restaurant revenues  $ 104,192 117,536 295,589 339,914
Food and supplies costs (33,026) (37,223) (96,586) (110,508)
Restaurant labor costs (29,151) (32,429) (82,625) (94,075)
Operating costs (23,336) (25,936) (65,568) (74,120)
Restaurant contribution  $ 18,679 21,948 50,810 61,211
Restaurant contribution margin 17.9% 18.7% 17.2% 18.0%
CONTACT: For Investor Relations Inquiries: Raphael Gross of ICR 203.682.8253 For Media Inquiries: Doug Poppen 704.940.8685

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