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Chuy's Holdings, Inc. Announces Third Quarter 2017 Financial Results

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Announces Authorization of $30 million Share Repurchase Program

Chuy's Holdings, Inc. (NASDAQ:CHUY) today announced financial results
for the third quarter ended September 24, 2017.

Highlights for the third quarter ended September 24, 2017 were as
follows:

  • Revenue increased 7.7% to $92.2 million from $85.6 million in the
    third quarter of 2016. The Company estimates the recent Hurricanes
    Harvey and Irma had a negative effect on revenue of approximately $1.2
    million during the third quarter of 2017.
  • Comparable restaurant sales decreased 2.1% as compared to the same
    period in 2016. Comparable restaurant sales were negatively impacted
    by approximately 90 basis points from the hurricanes.
  • Net income was $3.2 million, or $0.19 per diluted share, compared
    to $4.6 million, or $0.27 per diluted share, in the third quarter
    of 2016. The Company estimates third quarter 2017 earnings per diluted
    share was negatively impacted by approximately $0.03, as a result of
    hurricane activity. Third quarter 2016 results included a charge of
    approximately $0.02 per diluted share related to the closure of one
    restaurant.
  • Restaurant-level operating profit(1) was $14.7 million
    compared to $16.3 million in the third quarter of 2016.
  • Two restaurants opened during the third quarter of 2017.

(1)

  Restaurant-level operating profit is a non-GAAP measure. For a
reconciliation of restaurant-level operating profit to the most
directly comparable GAAP measure see the accompanying financial
tables. For a discussion of why we consider restaurant-level
operating profit useful, see "Non-GAAP Measures" below.

Steve Hislop, President and Chief Executive Officer of Chuy's Holdings,
Inc. stated, "Our third quarter results were negatively impacted by the
loss of approximately $1.2 million in sales and incremental costs
related to the distractions associated with Hurricanes Harvey and Irma.
We estimate the lost sales impacted our operating margin by
approximately $0.03 per diluted share. Despite the hurricane disruption,
we saw underlying sales improvement in our business during September.
This improvement continued to evidence itself in comparable restaurant
sales that are slightly positive to date through the month of October."

Hislop continued, "While the environment remains challenging, we
continue to focus on taking care of our customers, growing our business
thoughtfully and growing shareholder value. Our service standards, our
made from scratch offerings and the unique atmosphere of our restaurants
are our most valuable assets and we'll continue to manage our business
for long-term health."

Hislop concluded, "We opened two new restaurants during the quarter and
have added two more to date in the fourth quarter. We expect to open a
total of eleven this year and have a solid pipeline of eight to twelve
quality sites on deck for 2018. In addition, subsequent to the end of
the quarter our board of directors approved the initiation of a $30
million share repurchase program. We believe this authorization is
indicative of the confidence we have in our core business; our ability
to continue growing the Chuy's brand; and our commitment to enhancing
long-term returns for our shareholders."

Third Quarter 2017 Financial Results

Revenue increased $6.6 million, or 7.7%, to $92.2 million in the third
quarter of 2017 compared to the third quarter of 2016. The increase was
driven by $11.3 million in incremental revenue from an additional 136
operating weeks provided by 12 new restaurants which opened during and
subsequent to the third quarter of 2016. This increase was partially
offset by a $1.2 million decrease in revenue related to hurricanes
Harvey and Irma, the loss of six operating weeks due to the closing of
the Charlotte, NC location during the third quarter of 2016, and our
non-comparable restaurants that are not included in the incremental
revenue discussed above. Revenue for 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 2.1% in the third quarter of 2017
as compared to the same period in 2016. The decrease in comparable sales
was driven by a 3.7% decrease in average weekly customers offset by a
1.6% increase in average check. Comparable restaurant sales were
negatively impacted by 90 basis points related to hurricanes Harvey and
Irma. The comparable restaurant base consisted of 67 restaurants at the
end of the third quarter of 2017.

Total restaurant operating costs as a percentage of revenue increased to
84.1% in the third quarter of 2017 from 81% in the third quarter of
2016. In addition to decreased sales due to the hurricanes, the increase
in operating costs as a percentage of revenue was primarily driven by
higher labor costs due to hourly labor rate inflation; higher operating
costs due to increases in repairs and maintenance and insurance costs;
and higher cost of sales driven by unfavorable commodity pricing. The
Company also incurred increased occupancy costs as a result of higher
rental expense on certain newly opened restaurants as a result of
continued expansion into larger markets.

Net income was $3.2 million, or $0.19 per diluted share, compared
to $4.6 million, or $0.27 per diluted share, in the third quarter
of 2016. We estimate third quarter 2017 earnings per diluted share was
negatively impacted by approximately $0.03 as a result of hurricane
activity. During the third quarter of 2016, the Company incurred $0.4
million of closure costs or approximately $0.02 per diluted share,
related to the closing of a restaurant in Charlotte, North Carolina,
which was relocated by the end of 2016.

Development Update

During the third quarter, two new Chuy's restaurants were opened in
Warrenville, Illinois and Jacksonville, Florida. Subsequent to the end
of the third quarter, two additional Chuy's restaurants were opened in
Pasadena, Texas and Schaumburg, Illinois.

Share Repurchase Program

Subsequent to the end of the third quarter, the Company's Board of
Directors, as part of the Company's focus on shareholder returns,
approved a share repurchase program under which it authorized the
Company, at its discretion, to repurchase up to $30 million of its
common stock outstanding through December 31, 2019. Repurchases of the
Company's outstanding common stock will be made in accordance with
applicable securities laws and may be made at management's discretion
from time to time in the open market, through privately negotiated
transactions or otherwise, including pursuant to Rule 10b5-1 trading
plans. There is no guarantee as to the exact number of shares to be
repurchased by the Company. The timing and extent of repurchases will
depend upon several factors, including market and business conditions,
regulatory requirements and other corporate considerations, and
repurchases may be discontinued at any time.

2017 Outlook

The Company has revised its fiscal year 2017 guidance and now expects
its diluted earnings per share to range from $0.96 to $1.00 versus a
previous range of $1.04 to $1.08. The diluted earnings per share
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 (1.5%) to 0.0% versus a previous
    range of (1.5%) to 0.5% (on a 52-week comparable basis);
  • Restaurant pre-opening expenses of $5.5 million to $5.9 million versus
    a previous range of $6.0 million to $6.5 million;
  • General and administrative expense of $18.8 million to $19.1 million
    versus a previous range of $19.5 million to $20.0 million;
  • An effective tax rate of 26% to 28% versus a previous range of 28% to
    30%;
  • The opening of 11 new restaurants versus 12 due to hurricane damages
    in Florida;
  • 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
    $36.0 million to $41.0 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 third quarter of 2017 today at 4:30 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
800-946-0783 or for international callers by dialing 719-457-2734. 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 5412602. The replay will be available until Thursday,
November 9, 2017. The conference call will also be webcast live from the
Company's website at www.chuys.com
under the investors section. An archive of the webcast will be available
through our website shortly after the call has concluded.

About Chuy's

Founded in Austin, Texas in 1982, Chuy's owns and operates 88
full-service restaurants across 19 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, the methods used to effect repurchases and the
timing and extent of the repurchases of stock, are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 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 timing of holidays, weather,
natural disasters, acts of war or terrorism, disease outbreaks,
epidemics or pandemics impacting the Company's customers or food
supplies, the timing and amount of repurchases of our common stock, if
any, changes to the Company's expected liquidity position, the
possibility that the repurchase program may be suspended or discontinued
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 and restaurant-level operating margin. Restaurant-level operating
profit represents income (loss) from operations plus the sum of general
and administrative expenses, restaurant pre-opening 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. Although we incur
pre-opening costs on an ongoing basis as we continue to open new
restaurants, the pre-opening 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.

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 exclusively as supplements to, and not
substitutes for, net income or income from operations computed in
accordance with GAAP. As a supplemental disclosure, restaurant-level
operating profit should not be considered as an alternative to net
income or income from operations as an indicator of our performance or
as alternatives to any other measure determined in accordance with GAAP.

 

Chuy's Holdings, Inc.
Unaudited Condensed
Consolidated Income Statements

(In thousands, except
share and per share data)

 
    Thirteen Weeks Ended   Thirty-Nine Weeks Ended

September 24,
2017

 

September 25,
2016

September 24,
2017

 

September 25,
2016

Revenue $ 92,193 $ 85,597 $ 273,570 $ 251,560
 
Costs and expenses:
Cost of sales 24,659 22,528 70,933 64,923
Labor 32,423 28,469 93,855 82,857
Operating 13,201 12,003 38,396 34,593
Occupancy 6,483 5,695 18,928 16,637
General and administrative 4,814 4,132 14,390 13,535
Marketing 699 641 2,043 1,916
Restaurant pre-opening 1,244 1,178 4,068 4,145
Closure costs 390 390
Depreciation and amortization 4,483   3,821   12,951   11,005
Total costs and expenses 88,006   78,857   255,564   230,001
Income from operations 4,187 6,740 18,006 21,559
Interest expense, net 16   16   48   47
Income before income taxes 4,171 6,724 17,958 21,512
Income tax expense 976   2,125   4,884   6,601
Net income $ 3,195   $ 4,599   $ 13,074   $ 14,911
 
Net income per common share: Basic $ 0.19   $ 0.27   $ 0.77   $ 0.90
Net income per common share: Diluted $ 0.19   $ 0.27   $ 0.77   $ 0.88
 
Weighted-average shares outstanding: Basic 16,905,705   16,803,188   16,886,743   16,625,008
Weighted-average shares outstanding: Diluted 16,986,794   16,953,093   16,998,313   16,861,667
 

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

 
Thirteen Weeks Ended Thirty-Nine Weeks Ended

September 24,
2017

September 25,
2016

September 24,
2017

September 25,
2016

 
Income from operations as reported $ 4,187 $ 6,740 $ 18,006 $ 21,559
General and administrative 4,814 4,132 14,390 13,535
Restaurant pre-opening 1,244 1,178 4,068 4,145
Closing costs 390 390
Depreciation and amortization 4,483   3,821   12,951   11,005  
Restaurant-level operating profit $ 14,728   $ 16,261   $ 49,415   $ 50,634  
 
Restaurant-level operating margin (1) 16.0 % 19.0 % 18.1 % 20.1 %
 

(1) Restaurant-level operating margin is calculated by
dividing restaurant-level operating profit by revenue.

 

Chuy's Holdings, Inc.
Unaudited Selected Balance
Sheet Data

(In thousands)

 
        September 24, 2017   December 25, 2016
Cash and cash equivalents $ 17,401 $ 13,694
Total assets 263,394 240,728
Long-term debt
Total stockholders' equity 172,067 157,065
 

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