BOJA Bojangles, Inc.

Bojangles’, Inc. (Bojangles’) (NASDAQ:BOJA) today announced financial results for the 13-week first fiscal quarter ended March 26, 2017. Bojangles’ also reiterated its annual guidance for the 53-week fiscal year 2017 ending on December 31, 2017.

Highlights for the First Fiscal Quarter 2017 Compared to the First Fiscal Quarter 2016

• System-wide comparable restaurant sales decreased 1.7%, while company-operated comparable restaurant sales decreased 3.5% and franchised comparable restaurant sales decreased 0.5%;
• Total revenues increased 3.0% to $131.5 million from $127.7 million;
• 13 system-wide restaurants were opened – 6 company-operated restaurants and 7 franchised restaurants;
• Net Income was $7.6 million as compared to $7.8 million in the prior year fiscal quarter;
• Diluted Net Income per Share was $0.20 as compared to $0.21 in the prior year fiscal quarter;
• Adjusted Net Income* was $7.6 million as compared to $7.9 million in the prior year fiscal quarter;
• Adjusted Diluted Net Income per Share* was $0.20 as compared to $0.21 in the prior year fiscal quarter; and
• Adjusted EBITDA* increased to $19.0 million from $18.9 million in the prior year fiscal quarter.

* Descriptions of Adjusted Net Income, Adjusted Diluted Net Income per Share, Adjusted EBITDA and other non-GAAP financial measures are provided in “Use and Definition of Non-GAAP Measures,” and reconciliations to GAAP figures are provided in the tables at the end of this release.

“Although challenges persist in our industry, we are executing our strategic plan and staying on course in the current business climate by focusing on what has made Bojangles’® an iconic brand for nearly 40 years -- great tasting, freshly-made food, at an exceptional value. We remain confident in our positioning and ability to stay in front of significant trends through innovative product offerings and investments in our people and technology to ensure operational excellence,” said Bojangles’ President and CEO Clifton Rutledge.

“Bojangles’ represents a remarkable growth opportunity, and we intend to leverage our decades of experience and incredible brand equity in a measured and sustainable way. We have development agreements in place for new markets, and many of our existing franchise partners are also planning for continued growth. Although we will also open company-operated restaurants, our long-term goal is for franchising to ultimately lead our expansion efforts,” Mr. Rutledge added.

“Our ‘Bojangles’ of the Future’ restaurant in Charlotte’s Historic West End is scheduled to open soon and will join our Greenville location which opened earlier this year. The feedback we will gather from these locations will enable us to fine-tune the prototype so that we offer only the highest quality experience to our customers. We also have several remodels underway that include elements of the new design concept. Our excitement for these projects is shared by our franchisees and together we will take Bojangles’ to the next phase of its growth and into an even more incredible future,” Mr. Rutledge concluded.

First Fiscal Quarter 2017 Financial ReviewSystem-wide comparable restaurant sales decreased 1.7%, consisting of a 3.5% decrease in company-operated comparable restaurant sales and a 0.5% decrease in franchised comparable restaurant sales. The comparable restaurant sales decrease at company-operated restaurants was composed of decreases in transactions and mix, partially offset by increases in price.

Total revenues increased 3.0% to $131.5 million in the first fiscal quarter of 2017 from $127.7 million in the prior year fiscal quarter. The increase was primarily due to a net additional 57 system-wide restaurants at March 26, 2017 compared to March 27, 2016, partially offset by comparable restaurant sales declines at our company-operated and franchised restaurants.

Company restaurant revenues increased 2.8% to $124.8 million in the first fiscal quarter of 2017 from $121.4 million in the prior year fiscal quarter. Franchise royalty revenues increased 5.5% to $6.5 million in the first fiscal quarter of 2017 from $6.2 million in the prior year fiscal quarter.

Restaurant contribution, a non-GAAP measure, decreased 5.1% to $20.1 million in the first fiscal quarter of 2017 from $21.1 million in the prior year fiscal quarter. As a percentage of company restaurant revenues, restaurant contribution margin, a non-GAAP measure, decreased to 16.1% in the first fiscal quarter of 2017 from 17.4% in the prior year fiscal quarter.

General and administrative expenses decreased 5.9% to $9.0 million in the first fiscal quarter of 2017 from $9.5 million in the prior year fiscal quarter. The decrease was primarily due to lower incentive compensation expense partially offset by headcount added to support our growing restaurant system.

Net Income decreased 2.9% to $7.6 million in the first fiscal quarter of 2017 compared to $7.8 million in the prior year fiscal quarter. Diluted Net Income per Share decreased 4.8% to $0.20 in the first fiscal quarter of 2017 compared to $0.21 in the prior year fiscal quarter.

Adjusted Net Income, a non-GAAP measure, decreased 3.5% to $7.6 million in the first fiscal quarter of 2017 compared to $7.9 million in the prior year fiscal quarter.

Adjusted EBITDA, a non-GAAP measure, increased 0.8% to $19.0 million in the first fiscal quarter of 2017 from $18.9 million in the prior year fiscal quarter.

Fiscal Year 2017 GuidanceBojangles’ has reiterated its annual outlook for the 53-week period ending on December 31, 2017:

• Total revenues of $560.0 million to $569.0 million, which includes the impact of our refranchising of five company-operated restaurants, which took place on April 24, 2017;• System-wide comparable restaurant sales of negative low-single digits to flat;• The opening of 57 to 62 system-wide restaurants;

• 27 to 28 company-operated restaurants;
• 30 to 34 franchised restaurants;

• Net increase of 49 to 54 system-wide restaurants;

• Net increase of 19 to 20 company-operated restaurants, which includes the impact of our refranchising of five company-operated restaurants, which took place on April 24, 2017;
• Net increase of 30 to 34 franchised restaurants, which includes the impact of our refranchising of five company-operated restaurants, which took place on April 24, 2017;

• Restaurant contribution margin of 17.0% to 17.5%;• General and administrative expenses of $40.5 million to $41.5 million;• Adjusted Diluted Net Income per Share of $0.87 to $0.93; and• Adjusted EBITDA of $84.0 million to $89.0 million.

We have not reconciled guidance for Adjusted Diluted Net Income per Share or Adjusted EBITDA to the corresponding GAAP financial measures because we do not provide guidance for the various reconciling items. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted due to the fact that these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measures are not available without unreasonable effort.

Conference Call and Webcast TodayBojangles’ will host a conference call and webcast to discuss the first fiscal quarter 2017 results as well as fiscal year 2017 guidance today at 5:00 p.m. Eastern Time. The conference call dial-in number is 201-493-6725. A telephone replay will be available through Friday, June 2, 2017 and may be accessed by dialing 201-493-6730. The conference ID is 13658656.

The conference call will also be webcast live and later archived on the Investors 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, N.C., Bojangles’ serves menu items such as delicious, famous chicken, made-from-scratch buttermilk biscuits, flavorful fixin’s and Legendary Iced Tea®. At March 26, 2017, Bojangles’ had 728 system-wide restaurants, of which 314 were company-operated and 414 were franchised restaurants, primarily located in the Southeastern United States. For more information, visit www.bojangles.com or follow Bojangles’ on Facebook and Twitter.

Note Regarding Comparable Restaurant SalesComparable 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. If a company-operated restaurant is temporarily closed for a full calendar week due to items such as a remodel, scrape and rebuild, casualty event, severe weather conditions or any other short-term closure, it is removed from the comparable restaurant sales calculations for such period it is temporarily closed. If a franchised restaurant is temporarily closed for a full calendar week due to items such as a remodel, scrape and rebuild, casualty event, severe weather conditions or any other short-term closure, it is removed from the comparable restaurant sales calculations for the entire month(s) impacted by the temporary closure.

Use and Definition of Non-GAAP MeasuresWe utilize certain non-GAAP measures when assessing the operational strength and the performance of our business. We believe these non-GAAP measures assist our board of directors, management and investors in comparing our operating performance, on a consistent basis from period to period, by isolating the effects of certain items that vary from period to period without any correlation to core operating performance or that vary significantly among similar companies. Bojangles’ cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, reported GAAP results.

Restaurant contribution is defined as company restaurant revenues less food and supplies costs, restaurant labor costs and operating costs, as identified by the reconciliation table below. 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.

Adjusted Net Income represents company net income before items that we do not consider representative of our ongoing operating performance as identified in the reconciliation table below. Adjusted 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 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.

Adjusted Net Income, Adjusted 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. Adjusted Net Income, Adjusted 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. Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as substitutes for analysis of our results as reported under GAAP. In addition, in evaluating Adjusted Net Income, Adjusted 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 Adjusted Net Income, Adjusted Diluted Net Income per Share, EBITDA and Adjusted EBITDA.

Forward-Looking StatementsThis release contains forward-looking statements. All statements other than statements of historical or current facts 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, among other risks, our vulnerability to changes in consumer preferences and economic conditions; our ability to open restaurants in new and existing markets 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, changes in discounting strategy, technology initiatives or restaurant designs and remodels; cancellation of or delay in anticipated future restaurant openings; our reliance on, limited degree of control over and potential responsibility for, our franchisees; increases in the cost of chicken, pork, dairy, 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, such as salmonella, E. coli, or others; changes in employment and labor laws; labor shortages and increases in labor costs; 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 Annual Report on Form 10-K for the fiscal year ended December 25, 2016, which was filed with the Securities and Exchange Commission on March 7, 2017, and which is 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 obligation 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								March 26,  2017		December 25,  2016
Current assets:
	Cash and cash equivalents						$	21,413		13,898
	Accounts and vendor receivables, net							5,164		5,421
	Accounts receivable, related parties, net							435		386
	Inventories, net							3,273		3,326
	Other current assets							2,053		3,033
					Total current assets			32,338		26,064
	Property and equipment, net							54,710		52,275
	Goodwill							161,140		161,140
	Brand							290,500		290,500
	Franchise rights, net							23,969		24,243
	Favorable leases, net							900		981
	Other noncurrent assets							4,118		4,569
					Total assets		$	567,675		559,772
Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable						$	11,729		16,818
	Accrued expenses							20,816		17,940
	Current maturities of long-term debt							2,132		2,132
	Current maturities of capital lease obligations							7,533		7,299
	Other current liabilities							8,189		4,390
					Total current liabilities			50,399		48,579
	Long-term debt, less current maturities and deferred debt issuance costs, net							151,616		153,630
	Deferred income taxes							111,179		111,312
	Capital lease obligations, less current maturities							22,493		22,524
	Other noncurrent liabilities							12,962		12,937
					Total liabilities			348,649		348,982
Stockholders’ equity:
	Preferred stock							—		—
	Common stock							366		365
	Additional paid-in capital							125,337		124,802
	Retained earnings							92,994		85,377
	Accumulated other comprehensive income							329		246
					Total stockholders’ equity			219,026		210,790
					Total liabilities and stockholders’ equity		$	567,675		559,772

 

BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
								Thirteen Weeks Ended
								March 26,  2017			March 27,  2016
Revenues:
	Company restaurant revenues						$	124,783			121,413
	Franchise royalty revenues							6,513			6,172
	Other franchise revenues							200			70
					Total revenues			131,496			127,655
Company restaurant operating expenses:
	Food and supplies costs							38,684			38,521
	Restaurant labor costs							36,347			33,336
	Operating costs							29,691			28,413
	Depreciation and amortization							3,208			3,083
					Total Company restaurant operating expenses			107,930			103,353
					Operating income before other operating expenses			23,566			24,302
Other operating expenses:
	General and administrative							8,953			9,511
	Depreciation and amortization							725			717
	Impairment							296			201
	Loss (gain) on disposal of property and equipment							22			(199	)
					Total other operating expenses			9,996			10,230
					Operating income			13,570			14,072
Amortization of deferred debt issuance costs								(118	)		(146	)
Interest income								1			1
Interest expense								(1,667	)		(2,024	)
					Income before income taxes			11,786			11,903
Income taxes								4,169			4,059
					Net income		$	7,617			7,844
Net income per share:
					Basic		$	0.21			0.22
					Diluted		$	0.20			0.21
Weighted average shares used in computing net income per share:
					Basic			36,568			36,023
					Diluted			38,637			37,435

 

BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
								Thirteen Weeks Ended
								March 26,  2017			March 27,  2016
Cash flows from operating activities:
	Net income						$	7,617			7,844
	Adjustments to reconcile net income to net cash provided by operating activities:
			Deferred income tax benefit					(183	)		(855	)
			Depreciation and amortization					3,933			3,800
			Amortization of deferred debt issuance costs					118			146
			Impairment					296			201
			Loss (gain) on disposal of property and equipment					22			(199	)
			Provision for doubtful accounts					153			63
			Benefit for inventory spoilage					(3	)		(1	)
			Benefit for closed stores					—			(1	)
			Stock-based compensation					374			276
			Excess tax benefit from stock-based compensation					—			(449	)
			Changes in operating assets and liabilities					1,909			1,500
					Net cash provided by operating activities			14,236			12,325
Cash flows from investing activities:
	Purchases of property and equipment							(3,015	)		(839	)
	Proceeds from disposition of property and equipment							14			9
					Net cash used in investing activities			(3,001	)		(830	)
Cash flows from financing activities:
	Principal payments on long-term debt							(2,132	)		(3,669	)
	Stock option exercises							162			271
	Excess tax benefit from stock-based compensation							—			449
	Principal payments on capital lease obligations							(1,750	)		(1,400	)
					Net cash used in financing activities			(3,720	)		(4,349	)
					Net increase in cash and cash equivalents			7,515			7,146
Cash and cash equivalents balance, beginning of fiscal period								13,898			14,263
Cash and cash equivalents balance, end of fiscal period							$	21,413			21,409

 

BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Reconciliation of Net Income to Adjusted Net Income
(in thousands)
								Thirteen Weeks Ended
								March 26,  2017			March 27,  2016
Net income							$	7,617			7,844
Certain professional and transaction costs (a)								3			33
Payroll taxes associated with stock option exercises (b)								26			20
Distributor transition costs (c)								—			65
Executive separation expenses (d)								5			—
Tax impact of adjustments (e)								(11	)		(44	)
Total adjustments								23			74
Adjusted Net Income							$	7,640			7,918
BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Reconciliation of Diluted Net Income Per Share to Adjusted Diluted Net Income Per Share
								Thirteen Weeks Ended
								March 26,  2017			March 27,  2016
Diluted net income per share							$	0.20			0.21
Certain professional and transaction costs (a)								—			—
Payroll taxes associated with stock option exercises (b)								—			—
Distributor transition costs (c)								—			—
Executive separation expenses (d)								—			—
Tax impact of adjustments (e)								—			—
Total adjustments								—			—
Adjusted Diluted Net Income per Share							$	0.20			0.21
(a)	Includes costs associated with third-party consultants for one-time projects and public offering expenses. We could incur similar expenses in future periods if we commence additional public offerings, financing transactions or other one-time projects.
(b)	Represents payroll taxes associated with stock option exercises related to stock options that were outstanding prior to our initial public offering. We expect to incur similar expenses in future periods when our directors or employees exercise stock options that were outstanding prior to our initial public offering.
(c)	Includes expenses incurred in connection with the transition to our new distributor.
(d)	Represents legal fees associated with a former executive's departure from the Company. We expect to incur similar severance and legal fees in future periods associated with another former executive’s departure from the Company, including $0.6 million during the thirteen weeks ended June 25, 2017.
(e)	Represents the income tax expense associated with the adjustments in (a) through (d) that are deductible for income tax purposes.

 

BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(in thousands)
								Thirteen Weeks Ended
								March 26,  2017		March 27,  2016
Net income							$	7,617		7,844
Income taxes								4,169		4,059
Interest expense, net								1,666		2,023
Depreciation and amortization (a)								4,051		3,946
EBITDA								17,503		17,872
Non-cash rent (b)								404		378
Stock-based compensation (c)								374		276
Payroll taxes associated with stock option exercises (d)								26		20
Preopening expenses (e)								375		218
Certain professional, transaction and other costs (f)								3		33
Distributor transition costs (g)								—		65
Executive separation expenses (h)								5		—
Impairment and dispositions (i)								332		11
Adjusted EBITDA							$	19,022		18,873
(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. We expect to continue to incur similar expenses in future periods as we record rent expense in accordance with GAAP, as well as continue to amortize favorable (unfavorable) leases and record closed store reserves.
(c)	Represents non-cash, stock-based compensation. We expect to incur similar expenses in future periods as we record stock-based compensation related to existing grants (and any potential future grants) in accordance with GAAP.
(d)	Represents payroll taxes associated with stock option exercises related to stock options that were outstanding prior to our initial public offering. We expect to incur similar expenses in future periods when our directors or employees exercise stock options that were outstanding prior to our initial public offering.
(e)	Includes expenses directly associated with the opening of company-operated restaurants and incurred prior to the opening of a company-operated restaurant. We expect to continue to incur similar expenses as we open company-operated restaurants.
(f)	Includes costs associated with third-party consultants for one-time projects and public offering expenses. We could incur similar expenses in future periods if we commence additional public offerings, financing transactions or other one-time projects.
(g)	Includes expenses incurred in connection with the transition to our new distributor.
(h)	Represents legal fees associated with a former executive's departure from the Company. We expect to incur similar severance and legal fees in future periods associated with another former executive’s departure from the Company, including $0.6 million during the thirteen weeks ended June 25, 2017.
(i)	Includes loss (gain) on disposal of property and equipment, impairment and cash proceeds on disposals from disposition of property and equipment. We could continue to record impairment expense in future periods if performance of company-operated restaurants is not sufficient to recover the carrying amount of the related long-lived assets. We may incur future losses (gains) and receive cash proceeds on disposal of property and equipment associated with retirement, replacement or write-off of fixed assets.

 

BOJANGLES’, INC. AND SUBSIDIARIES
Unaudited Reconciliation of Company Restaurant Revenues to Restaurant Contribution
(in thousands)
								Thirteen Weeks Ended
								March 26,  2017			March 27,  2016
Company restaurant revenues							$	124,783			121,413
Food and supplies costs								(38,684	)		(38,521	)
Restaurant labor costs								(36,347	)		(33,336	)
Operating costs								(29,691	)		(28,413	)
Restaurant contribution							$	20,061			21,143
Restaurant contribution margin								16.1	%		17.4	%

For Investor Relations Inquiries:
Raphael Gross of ICR
203.682.8253

For Media Inquiries:
Brian Little of Bojangles’ Restaurants, Inc.
704.519.2118