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Chuy's Holdings, Inc. Announces Fourth Quarter and Fiscal Year 2016 Financial Results

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Chuy's Holdings, Inc. (NASDAQ:CHUY) today announced financial results
for the 13-week and 52-week periods ended December 25, 2016.

Highlights for the fourth quarter ended December 25,
2016
were as follows:

  • Revenue increased 11.4% to $79.1 million from $71.0 million in the
    fourth quarter of 2015.
  • Comparable restaurant sales decreased 1.1% as compared to the same
    period in 2015.
  • GAAP net income was $2.3 million, or $0.14 per diluted share, compared
    to GAAP net income of $0.2 million, or $0.01 per diluted share, in the
    fourth quarter of 2015. Fourth quarter 2016 results included closure
    costs of $1.1 million pre-tax related to one restaurant and fourth
    quarter 2015 results included a $4.4 million pre-tax loss on asset
    impairment related to three restaurants.
  • Adjusted net income(1), which excludes impairment and
    closure costs (net of tax), increased 5.2% to $3.1 million, or $0.18
    per diluted share compared to $3.0 million, or $0.18 per diluted share
    in the same period in 2015.
  • Restaurant-level operating profit(1) increased to $13.2
    million from $13.0 million in the fourth quarter of 2015.
  • Three new restaurants opened during the fourth quarter of 2016.

Highlights for the fiscal year ended December 25, 2016
were as follows:

  • Revenue increased 15.2% to $330.6 million from $287.1 million in the
    2015 fiscal year.
  • Comparable restaurant sales increased 0.8% as compared to the same
    period in 2015.
  • GAAP net income was $17.2 million, or $1.02 per diluted share,
    compared to $12.9 million, or $0.77 per diluted share during the
    fiscal year 2015. Fiscal year 2016 results included closure costs of
    $1.5 million pre-tax related to one restaurant and 2015 results
    included a $4.4 million pre-tax loss on asset impairment related to
    three restaurants.
  • Adjusted net income(1), which excludes impairment and
    closure costs (net of tax), increased 17.0% to $18.3 million, or $1.08
    per diluted share compared to $15.6 million, or $0.93 per diluted
    share during the fiscal year 2015.
  • Restaurant-level operating profit(1) increased to $63.8
    million from $56.5 million during the 2015 fiscal year.
  • A total of twelve new restaurants opened during 2016.
(1)   Adjusted net income and restaurant-level operating profit are
non-GAAP measures. For reconciliations of adjusted net income and
restaurant-level operating profit to the most directly comparable
GAAP measure see the accompanying financial tables. For a discussion
of why we consider them useful, see "Non-GAAP Measures" below.
 

Steve Hislop, President and Chief Executive Officer of Chuy's Holdings,
Inc. commented, "We grew our revenue over 15% during 2016, drove
positive comparable store sales for the seventh year in a row and
produced adjusted net income growth of 17%. We also successfully opened
12 new Chuy's restaurants during the year, a 17% increase in our store
base and a key driver of our growth. We have now opened 72 restaurants
in 15 states in the last 106 months bringing our total count to 80
restaurants as of December 25, 2016."

Hislop added, "For 2017, we are on track to open 12 to 14 new
restaurants, including a healthy blend of new and existing markets. This
year will include our first restaurants in Denver, Chicago and Miami. We
continue to believe we have a huge runway for growth ahead of us and
remain excited about the long-term prospects of the Chuy's brand."

Fourth Quarter 2016 Financial Results

Revenue increased 11.4% to $79.1 million in the fourth quarter of 2016
compared to $71.0 million in the fourth quarter of 2015. The increase
was primarily driven by $10.9 million in incremental revenue from an
additional 162 operating weeks provided by 16 new restaurants opened
during and subsequent to the fourth quarter of 2015. This increase was
partially offset by a decrease in revenue related to our non-comparable
restaurants that are not included in the incremental revenue discussed
above. Revenue for these non-comparable restaurants is historically
lower as the restaurants transition out of the 'honeymoon' period that
follows a restaurant's initial opening.

Comparable restaurant sales decreased 1.1% during the fourth quarter of
2016 as compared to the fourth quarter of 2015. The decrease in
comparable sales was driven by a 1.3% increase in average check and a
2.4% decrease in average weekly customers. Comparable restaurant sales
and average weekly customers were negatively affected by approximately
100 to 120 basis points during the fourth quarter of 2016 due to
unfavorable weather and Christmas shifting from Friday to Sunday. The
comparable restaurant base consisted of 61 restaurants during the fourth
quarter of 2016.

Total restaurant operating costs as a percentage of revenue increased to
83.3% in the fourth quarter of 2016 from 81.7% in the fourth quarter of
2015. This increase was primarily driven by higher labor costs as a
percentage of revenue due to new store labor inefficiencies and hourly
labor rate inflation. The increase was partially offset by a decrease in
food costs.

During the fourth quarter of 2016, the Company incurred $1.1 million of
pre-tax closure costs related to the closing and relocation of one
restaurant in Charlotte, North Carolina. During the fourth quarter of
2015, the Company incurred a $4.4 million pre-tax loss on asset
impairment related to three restaurants.

GAAP net income in the fourth quarter of 2016 increased to $2.3 million,
or $0.14 per diluted share, compared to GAAP net income of $0.2 million,
or $0.01 per diluted share in the fourth quarter of 2015.

Adjusted net income increased 5.2% to $3.1 million, or $0.18 per diluted
share compared to $3.0 million, or $0.18 per diluted share in the same
period in 2015. Please see the reconciliation from GAAP net income to
adjusted net income in the accompanying financial tables.

Fiscal Year 2016 Financial Results

Revenue increased 15.2% to $330.6 million in fiscal 2016 compared to
$287.1 million in fiscal 2015. The increase was primarily driven by
$47.0 million in incremental revenue from an additional 596 operating
weeks provided by 22 new restaurants opened during and subsequent to
fiscal 2015. This increase was partially offset by a decrease in revenue
related to our non-comparable restaurants that are not included in the
incremental revenue discussed above. Revenue for these non-comparable
restaurants is historically lower as the restaurants transition out of
the 'honeymoon' period that follows a restaurant's initial opening.

Comparable restaurant sales increased 0.8% during fiscal 2016 as
compared to fiscal 2015. The increase in comparable sales was driven by
a 1.5% increase in average check and a 0.7% decrease in average weekly
customers. Comparable restaurant sales and average weekly customers were
negatively affected by approximately 20 to 40 basis points during fiscal
2016 primarily due to unfavorable weather and Christmas shifting from
Friday to Sunday.

Total restaurant operating costs as a percentage of revenue increased to
80.7% in fiscal 2016 from 80.3% in fiscal 2015. This increase was
primarily driven by higher labor costs as a percentage of revenue due to
new store labor inefficiencies and hourly labor rate inflation. The
increase was partially offset by a decrease in food costs.

During fiscal 2016, the Company incurred $1.5 million of pre-tax closure
costs related to the closing and relocation of one restaurant in
Charlotte, North Carolina. During fiscal 2015, the Company incurred a
$4.4 million pre-tax loss on asset impairment related to three
restaurants.

GAAP net income in fiscal 2016 increased to $17.2 million, or $1.02 per
diluted share, compared to GAAP net income of $12.9 million, or $0.77
per diluted share in fiscal 2015.

Adjusted net income increased 17.0% to $18.3 million, or $1.08 per
diluted share compared to $15.6 million, or $0.93 per diluted share in
the same period in 2015. Please see the reconciliation from GAAP net
income to adjusted net income in the accompanying financial tables.

Development Update

During the fourth quarter, three new Chuy's restaurants were opened in
Rockville, Maryland, Corpus Christi, Texas and Charlotte, North
Carolina. There were 80 Chuy's restaurants in operation as of the end of
the fourth quarter of 2016.

Subsequent to the end of the fourth quarter, two additional Chuy's
restaurants were opened in Cedar Park, Texas and Cumberland, Georgia.

2017 Outlook

The Company currently expects 2017 diluted net income per share of $1.11
to $1.15. This compares to diluted adjusted net income per share of
$1.08 in 2016. The net income guidance for fiscal year 2017 includes an
estimated $0.05 per share positive impact due to the fourth quarter of
2017 containing 14 weeks versus 13 weeks in fiscal 2016 and is further
based, in part, on the following annual assumptions:

  • Comparable restaurant sales growth of 1.0% to 2.0% (on a 52-week
    comparable basis);
  • Restaurant pre-opening expenses of $6.0 million to $6.5 million;
  • General and administrative expense of $20.6 million to $21.1 million;
  • An effective tax rate of 29% to 31%;
  • The opening of 12 to 14 new restaurants;
  • Annual weighted average diluted shares outstanding of 17.0 million to
    17.1 million shares; and
  • Net capital expenditures (net of tenant improvement allowances) of
    $39.0 million to $44.0 million.

The following definitions apply to these terms as used in this
release:

Comparable restaurant sales reflect changes in sales for the
comparable group of restaurants over a specified period of time. We
consider a restaurant to be comparable in the first full quarter
following the 18th month of operations. Changes in comparable sales
reflect changes in customer count trends as well as changes in average
check.

Average check is calculated by dividing revenue by total entrées
sold for a given time period. Average check reflects menu price
influences as well as changes in menu mix.

Average weekly customers is measured by the number of entrées
sold per week. Our management team uses this metric to measure changes
in customer traffic.

Total restaurant operating costs includes cost of sales, labor,
operating, occupancy and marketing costs.

Conference Call

The Company will host a conference call to discuss financial results for
the fourth quarter of 2016 today at 5:00 p.m. Eastern Time. Steve
Hislop, President and Chief Executive Officer, and Jon Howie, Vice
President and Chief Financial Officer, will host the call.

The conference call can be accessed live over the phone by dialing
877-741-4239 or for international callers by dialing 719-325-4758. A
replay will be available after the call and can be accessed by dialing
844-512-2921 or for international callers by dialing 412-317-6671; the
passcode is 4116813. The replay will be available until Tuesday, March
7, 2017.

The conference call will also be webcast live from the Company's
corporate website at www.chuys.com
under the investors section. An archive of the webcast will be available
through the corporate website shortly after the call has concluded.

About Chuy's

Founded in Austin, Texas in 1982, Chuy's owns and operates 82
full-service restaurants across 16 states serving a distinct menu of
authentic, made from scratch Tex-Mex inspired dishes. Chuy's highly
flavorful and freshly prepared fare is served in a fun, eclectic and
irreverent atmosphere, while each location offers a unique, "unchained"
look and feel, as expressed by the concept's motto "If you've seen one
Chuy's, you've seen one Chuy's!" For further information about Chuy's,
including the nearest location, visit the Chuy's website at www.chuys.com.

Forward-Looking Statements

Certain statements in this release that are not historical facts,
including, without limitation, those relating to our anticipated
financial performance, are forward-looking statements that involve risks
and uncertainties. Such statements are based upon the current beliefs
and expectations of the management of the Company. Actual results may
vary materially from those contained in forward-looking statements based
on a number of factors including, without limitation, the actual number
of restaurant openings, the sales at the Company's restaurants, changes
in restaurant development or operating costs, such as food and labor,
the Company's ability to leverage its existing management and
infrastructure, changes in restaurant pre-opening expense, general and
administrative expenses, capital expenditures, or our effective tax
rate, changes in the number of diluted shares outstanding, strength of
consumer spending, conditions beyond the Company's control such as
weather, natural disasters, disease outbreaks, epidemics or pandemics
impacting the Company's customers or food supplies, acts of war or
terrorism and other factors disclosed from time to time in the Company's
filings with the U.S. Securities and Exchange Commission. Investors
should take such risks into account when making investment decisions.
Stockholders and other readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date on
which they are made. The Company undertakes no obligation to update any
forward-looking statements, except as required by law
.

Non-GAAP Measures

We prepare our financial statements in accordance with GAAP. Within our
press release, we make reference to non-GAAP restaurant-level operating
profit, restaurant-level operating margin, and adjusted net income.
Restaurant-level operating profit represents income (loss) from
operations plus the sum of general and administrative expenses,
restaurant pre-opening costs, impairment and closure costs and
depreciation and amortization. Restaurant-level operating profit is
presented because: (i) we believe it is a useful measure for investors
to assess the operating performance of our restaurants without the
effect of non-cash depreciation and amortization expenses; and (ii) we
use restaurant-level operating profit internally as a benchmark to
evaluate our restaurant operating performance and to compare our
performance to that of our competitors. Additionally, we present
restaurant-level operating profit because it excludes the impact of
general and administrative expenses, which are not incurred at the
restaurant level, and restaurant pre-opening costs and impairment and
closure costs. Although we incur pre-opening costs on an ongoing basis
as we continue to open new restaurants, the pre-opening costs and
impairment and closure costs are not a component of a restaurant's
ongoing operating expenses. The use of restaurant-level operating profit
thereby enables us and our investors to compare operating performance
between periods and to compare our operating performance to the
performance of our competitors. The measure is also widely used within
the restaurant industry to evaluate restaurant-level productivity,
efficiency and performance. The use of restaurant-level operating profit
as a performance measure permits a comparative assessment of our
operating performance relative to our performance based on our GAAP
results, while isolating the effects of some items that vary from period
to period without any correlation to core operating performance or that
vary widely among similar companies. We present restaurant-level
operating margin for the same reasons we present restaurant-level
operating profit.

Adjusted net income represents our net income plus impairment and
closure costs and the related tax impacts. We believe the use of
adjusted net income provides additional information to enable us and our
investors to facilitate year-over-year performance comparison and a
comparison to the performance of our peers.

Restaurant-level operating profit and restaurant-level operating margin
exclude various expenses as discussed above that may materially impact
our consolidated results of operations. As a result, these measures are
not indicative of the Company's consolidated results of operations. We
present these measures as well as adjusted net income exclusively as
supplements to, and not substitutes for, net income or income (loss)
from operations computed in accordance with GAAP. As supplemental
disclosures, restaurant-level operating profit and adjusted net income
should not be considered as alternatives to net income or income (loss)
from operations as an indicator of our performance or as alternatives to
any other measure determined in accordance with GAAP.

Chuy's Holdings, Inc. and Subsidiary

Unaudited Condensed Consolidated Income Statements

(In thousands, except share and per share data)

   
Quarter Ended Year Ended

December 25,
2016

 

December 27,
2015

December 25,
2016

 

December 27,
2015

Revenue $ 79,053 $ 70,961 $ 330,613 $ 287,062
 
Costs and expenses:
Cost of sales 20,619 18,666 85,542 75,686
Labor 27,873 23,711 110,730 93,625
Operating 11,307 10,220 45,900 39,954
Occupancy 5,567 4,870 22,204 19,019
General and administrative 4,025 3,720 17,560 16,176
Marketing 474 529 2,390 2,249
Restaurant pre-opening 1,203 1,543 5,348 4,417
Impairment and closure costs 1,127 4,360 1,517 4,360
Depreciation and amortization 4,076   3,405   15,081   12,827
Total costs and expenses 76,271   71,024   306,272   268,313
Income (loss) from operations 2,782 (63 ) 24,341 18,749
Interest expense 16   17   63   110
Income (loss) before income taxes 2,766 (80 ) 24,278 18,639
Income tax expense (benefit) 433   (299 ) 7,034   5,743
Net income $ 2,333   $ 219   $ 17,244   $ 12,896
 
Net income per common share: basic $ 0.14   $ 0.01   $ 1.03   $ 0.78
Net income per common share: diluted $ 0.14   $ 0.01   $ 1.02   $ 0.77
 
Weighted-average shares outstanding: basic 16,829,266   16,484,614   16,676,073   16,470,278
Weighted-average shares outstanding: diluted 16,968,180   16,780,676   16,887,882   16,739,387
 

Reconciliation of GAAP net income and net income per share to
adjusted results:

  Quarter Ended   Year Ended

December 25,
2016

 

December 27,
2015

December 25,
2016

 

December 27,
2015

Net income as reported $ 2,333 $ 219 $ 17,244 $ 12,896
Impairment and closure costs 1,127 4,360 1,517 4,360
Income tax effect on adjustment (1) (338 ) (1,611 ) (455 ) (1,611 )
Adjusted net income $ 3,122   $ 2,968   $ 18,306   $ 15,645  
 
Adjusted net income per common share: basic $ 0.19   $ 0.18   $ 1.10   $ 0.95  
Adjusted net income per common share: diluted $ 0.18   $ 0.18   $ 1.08   $ 0.93  
 
Weighted-average shares outstanding: basic 16,829,266   16,484,614   16,676,073   16,470,278  
Weighted-average shares outstanding: diluted 16,968,180   16,780,676   16,887,882   16,739,387  
 
(1)   Reflects the income tax effect associated with the adjustment based
on the Company's estimated effective tax rate.
 

Reconciliation of GAAP income from operations to restaurant-level
operating profit:

  Quarter Ended   Year Ended

December 25,
2016

 

December 27,
2015

December 25,
2016

 

December 27,
2015

Income (loss) from operations as reported $ 2,782 $ (63 ) $ 24,341 $ 18,749
General and administrative 4,025 3,720 17,560 16,176
Restaurant pre-opening expenses 1,203 1,543 5,348 4,417
Impairment and closure costs 1,127 4,360 1,517 4,360
Depreciation and amortization 4,076   3,405   15,081   12,827  
Restaurant-level operating profit $ 13,213   $ 12,965   $ 63,847   $ 56,529  
 
Restaurant-level operating margin (1) 16.7 % 18.3 % 19.3 % 19.7 %
 
(1)   Restaurant-level operating margin is calculated by dividing
restaurant-level operating profit by revenue.
 

Chuy's Holdings, Inc. and Subsidiary

Unaudited Selected Balance Sheet Data

(In thousands)

   

December 25,
2016

December 27,
2015

Cash and cash equivalents $ 13,694 $ 8,529
Total assets 242,328 201,448
Long-term debt
Total stockholders' equity 157,065 133,057

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