J. Alexander's Holdings, Inc. Reports Results for Second Quarter Ended July 4, 2021

Sales for the Quarter Exceed 2019 Levels by Nearly 10%

Alexander’s Holdings, Inc. (NYSE: JAX) owner and operator of J. Alexander’s, Redlands Grill, Stoney River Steakhouse and Grill and other restaurants, today provided a business update and reported results for the second quarter ended July 4, 2021.

Mark A. Parkey, Chief Executive Officer of the Company, stated, “Our sales momentum in 2021 continues to be impressive, with sales for the second quarter of 2021 representing nearly 110% of sales in the second quarter of 2019. Further, our profit margins continue to be solid despite recent pressure on input costs. We’re optimistic at this point that we’ve managed through the worst of the supply chain uncertainty and continue to expect strong demand for the dining experience that we provide daily to our loyal guests.”

Second Quarter 2021 Highlights Compared To The Second Quarter Of 2020

  • Cash provided by operating activities for the first half of 2021 was $15,280,000 as compared to cash used in operating activities in the first half of 2020 of $3,764,000.
  • Average weekly same store sales per restaurant(1) for the second quarter of 2021 were $121,600 for the J. Alexander’s/Grill restaurants, up 135.7% as compared to $51,600 for the second quarter of 2020. For the Stoney River restaurants average weekly same store sales per restaurant were $88,000 for the second quarter of 2021 as compared to $34,300 for the second quarter of 2020, for an increase of 156.6%.
  • Net sales for the second quarter of 2021 were $68,101,000, up from $27,602,000 reported in the second quarter of 2020. The second quarter of 2020 saw the COVID-19 pandemic at its peak, and dining room closures and capacity restrictions were pervasive throughout the Company’s restaurants. In the second quarter of 2021, the majority of the Company’s locations were operating at full capacity for the entire quarter, while a limited number of locations (primarily those in Michigan and Illinois) continued to have some level of capacity restrictions into late June 2021. However, all restaurants were fully reopened as of the end of the second quarter of 2021.
  • Income from continuing operations before income taxes totaled $2,232,000 for the second quarter of 2021. This compares to a loss from continuing operations before income taxes of $11,352,000 in the second quarter of 2020, which included the impact of approximately $1,100,000 in expenses related to emergency and other vacation and sick leave benefits related to the COVID-19 pandemic and approximately $321,000 related to severance and other restaurant closing costs. The second quarter of 2021 was impacted by approximately $1,888,000 of transaction costs related to the Company’s evaluation of strategic alternatives and the merger agreement entered into on July 2, 2021, as further discussed below.
  • Results for the second quarter of 2021 included income tax benefit of $24,000 compared to an income tax benefit of $4,419,000 in the second quarter of 2020.
  • Net income for the second quarter of 2021 totaled $2,253,000 compared to a net loss of $6,988,000 in the second quarter of 2020.
  • Basic and diluted earnings per share were $0.15 for the second quarter of 2021 compared to basic and diluted loss per share of $0.48 for the second quarter of 2020.
  • Adjusted EBITDA (2) was $7,788,000 in the second quarter of 2021 compared to $(7,363,000) in the second quarter of 2020.
  • Restaurant Operating Profit (Loss) Margin (3) was 14.2% in the second quarter of 2021 compared to (25.4)% for the second quarter of 2020.
  • Food and beverage costs as a percentage of net sales in the second quarter of 2021 were 33.6% compared to 37.9% in the second quarter of 2020.

The Company has seen positive trends in its sales recovery throughout 2021. Net sales in April, May and June 2021 reached approximately 106%, 107% and 115%, respectively, of sales experienced in the comparable periods of 2019, which was partially due to the new restaurant opening in La Cantera at the end of March 2021. On a 2-year comparative basis, average weekly same store sales were up 6.2% for the J. Alexander’s / Grills restaurants and up 10.6% for the Stoney River restaurants for the second quarter of 2021 as compared to the second quarter of 2019. Off-premise net sales for the second quarter of 2021 represented approximately 10.5% of total net sales for the quarter. Sales results for the second quarter of 2021 were aided by a price increase of approximately 3% taken during June 2021, as well as the continuing benefit of the price increase and packaging fee that were implemented in the second half of 2020.

Chief Executive Officer’s Comments

“We continue to be extremely encouraged by the resilience and pace of recovery of our restaurants as they each returned to full operating capacity over the course of the first half of 2021,” stated Parkey. “Further, our newest restaurant in the La Cantera Heights development in San Antonio has performed well above our original expectations during its first full quarter of operations, generating $105,800 in average weekly sales for the quarter. While the second quarter presented us with challenges on both the commodity cost front as well as from a labor sourcing and retention standpoint, we were able to navigate through those challenges and turn in strong operating results for the quarter.”

Liquidity and Business Update

As of July 4, 2021, the Company’s cash and cash equivalents totaled $22,611,000, and total outstanding indebtedness was $12,917,000, including $10,000,000 outstanding on the Company’s lines of credit facilities. On April 30, 2021, the Company repaid $6,000,000 on its outstanding lines of credit and on July 1, 2021, the Company borrowed $5,000,000 on its lines of credit. As of August 15, 2021, the Company has available capacity under its various revolving lines of credit totaling $26,000,000. The Company was in compliance with all required debt covenants as of July 4, 2021, and expects to be in compliance with its financial covenants for at least the next twelve months and to continue to meet conditions required to access its lines of credit.

As of August 15, 2021, the Company had cash on hand of approximately $22,060,000. The Company anticipates that, based on current business levels, it will have adequate liquidity for fiscal 2021 from operating cash flows and available borrowings.

Restaurant Development

Earlier in fiscal 2021, the Company began construction of a new J. Alexander’s Restaurant in Madison, AL, which is expected to open early in the first quarter of fiscal 2022.

Announced Agreement and Plan of Merger with SPB Hospitality, LLC

On July 2, 2021, the Company announced it entered into a merger agreement under which SPB Hospitality, LLC will acquire the Company in an all cash transaction valued at approximately $220 million, with shareholders receiving $14.00 in cash per share of common stock. The transaction is subject to customary closing conditions and is expected to be completed early in the fourth quarter of 2021.

2021 Outlook

The Company is not providing guidance for fiscal 2021 in light of the pending merger transaction and the continuing uncertainty surrounding governmental restrictions on restaurant capacity.

About J. Alexander’s Holdings, Inc.

J. Alexander’s Holdings, Inc. is a collection of restaurants that focus on providing high-quality food, outstanding professional service and an attractive ambiance. The Company presently operates 47 restaurants in 16 states. The Company has its headquarters in Nashville, TN.

J. Alexander’s Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited in thousands, except per share amounts)
    Quarter Ended   Six Months Ended
    July 4,   June 28,   July 4,   June 28,
   

2021

 

2020

 

2021

 

2020

                 
Net sales  

$ 68,101

 

$

27,602

 

$

125,476

 

$

84,574

Costs and expenses:                
Food and beverage costs  

22,899

 

10,471

 

39,986

 

29,038

Restaurant labor and related costs  

19,046

 

12,554

 

35,721

 

32,892

Depreciation and amortization of restaurant                
property and equipment  

2,988

 

3,060

 

5,871

 

6,154

Other operating expenses  

13,479

 

8,536

 

25,201

 

20,490

Total restaurant operating expenses  

58,412

 

34,621

 

106,779

 

88,574

Transaction expenses  

1,888

 

(66

)

 

1,934

 

623

General and administrative expenses  

5,442

 

4,095

 

10,595

 

8,835

Goodwill impairment charge  

 

 

 

15,737

Long-lived asset impairment charges and restaurant closing costs

(1

)

 

178

 

2

 

867

Pre-opening expense  

71

 

72

 

516

 

91

Total operating expenses  

65,812

 

38,900

 

119,826

 

114,727

Operating income (loss)  

2,289

 

(11,298

)

 

5,650

 

(30,153

)

Other income (expense):                
Interest expense  

(141

)

 

(189

)

 

(294

)

 

(305

)

Other, net  

84

 

135

 

38

 

127

Total other expense  

(57

)

 

(54

)

 

(256

)

 

(178

)

Income (loss) from continuing operations                
before income taxes  

2,232

 

(11,352

)

 

5,394

 

(30,331

)

Income tax benefit (expense)  

24

 

4,419

 

(343

)

 

5,806

(Loss) income from discontinued operations, net  

(3

)

 

(55

)

 

592

 

(107

)

Net income (loss)  

$ 2,253

 

$

(6,988

)

 

$

5,643

 

$

(24,632

)

                 
Basic earnings (loss) per share:                
Income (loss) from continuing operations, net of tax

$ 0.15

 

$

(0.47

)

 

$

0.34

 

$

(1.67

)

Income (loss) from discontinued operations, net  

(0.00

)

 

(0.00

)

 

0.04

 

(0.01

)

Basic earnings (loss) per share  

$ 0.15

 

$

(0.48

)

 

$

0.38

 

$

(1.68

)

                 
Diluted earnings (loss) per share:                
Income (loss) from continuing operations, net of tax

$ 0.15

 

$

(0.47

)

 

$

0.34

 

$

(1.67

)

Income (loss) from discontinued operations, net  

(0.00

)

 

(0.00

)

 

0.04

 

(0.01

)

Diluted earnings (loss) per share  

$ 0.15

 

$

(0.48

)

 

$

0.37

 

$

(1.68

)

                 
Weighted average common shares outstanding:                
Basic  

14,757

 

14,695

 

14,757

 

14,695

Diluted  

15,285

 

14,695

 

15,073

 

14,695

                 
Note: Per share amounts may not sum due to rounding.              
J. Alexander’s Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Data
as a Percentage of Net Sales (Unaudited)
    Quarter Ended   Six Months Ended
    July 4,   June 28,   July 4,   June 28,
   

2021

 

2020

 

2021

 

2020

Net sales  

100.0

%

 

100.0

%

100.0

%

 

100.0

%

Costs and expenses:                
Food and beverage costs  

33.6

 

37.9

 

31.9

 

34.3

Restaurant labor and related costs  

28.0

 

45.5

 

28.5

 

38.9

Depreciation and amortization of restaurant                
property and equipment  

4.4

 

11.1

 

4.7

 

7.3

Other operating expenses  

19.8

 

30.9

 

20.1

 

24.2

Total restaurant operating expenses  

85.8

 

125.4

 

85.1

 

104.7

Transaction expenses  

2.8

 

(0.2

)

 

1.5

 

0.7

General and administrative expenses  

8.0

 

14.8

 

8.4

 

10.4

Goodwill impairment charge  

 

 

 

18.6

Long-lived asset impairment charges and restaurant closing costs

(0.0

)

 

0.6

 

0.0

 

1.0

Pre-opening expense  

0.1

 

0.3

 

0.4

 

0.1

Total operating expenses  

96.6

 

140.9

 

95.5

 

135.7

Operating income (loss)  

3.4

 

(40.9

)

 

4.5

 

(35.7

)

Other income (expense):                
Interest expense  

(0.2

)

 

(0.7

)

 

(0.2

)

 

(0.4

)

Other, net  

0.1

 

0.5

 

0.0

 

0.2

Total other expense  

(0.1

)

 

(0.2

)

 

(0.2

)

 

(0.2

)

Income (loss) from continuing operations                
before income taxes  

3.3

 

(41.1

)

 

4.3

 

(35.9

)

Income tax benefit (expense)  

0.0

 

16.0

 

(0.3

)

 

6.9

(Loss) income from discontinued operations, net  

(0.0

)

 

(0.2

)

 

0.5

 

(0.1

)

Net income (loss)  

3.3

%

 

(25.3

)%

 

4.5

%

 

(29.1

)%

                 
Note: Certain percentage totals do not sum due to rounding.                
J. Alexander’s Holdings, Inc. and Subsidiaries
Other Financial and Performance Data (Unaudited)
                         
            Quarter Ended   Six Months Ended
            July 4,   June 28,   July 4,   June 28,
           

2021

 

2020

 

2021

 

2020

Other Financial and Performance Data:                
                         
Adjusted EBITDA(1) (in thousands)  

$

7,788

 

$

(7,363

)

 

$

14,980

 

$

(5,399

)

As a % of net sales  

11.4

%

 

-26.7

%

 

11.9

%

 

-6.4

%

                         
All Stores Basis Operating Metrics:
Average weekly sales per restaurant:                
                         
J. Alexander’s / Grill Restaurants  

$

120,200

 

$

51,000

 

$

112,800

 

$

76,600

Percent change  

135.7

%

     

47.3

%

   
                         
Stoney River Steakhouse and Grill  

$

88,000

 

$

34,300

 

$

81,700

 

$

53,400

Percent change  

156.6

%

     

53.0

%

   
                         
Average weekly guest counts:                
J. Alexander’s / Grill Restaurants  

86.4

%

 

(49.6

)%

 

27.4

%

 

(32.1

)%

Stoney River Steakhouse and Grill  

103.9

%

 

(50.3

)%

 

34.7

%

 

(31.4

)%

                         
Average guest check per restaurant (including alcoholic beverages):                
                         
J. Alexander’s / Grill Restaurants  

$

36.32

 

$

28.66

 

$

36.31

 

$

31.42

Percent change  

26.7

%

     

15.6

%

   
                         
Stoney River Steakhouse and Grill  

$

45.28

 

$

35.89

 

$

45.14

 

$

39.69

Percent change  

26.2

%

     

13.7

%

   
                         
                         
Estimated inflation:                
J. Alexander’s / Grill Restaurants (total food costs)  

15.2

%

 

3.8

%

       
J. Alexander’s / Grill Restaurants (beef costs)  

24.1

%

 

5.1

%

       
                         
Stoney River Steakhouse and Grill (total food costs)  

21.2

%

 

5.2

%

       
Stoney River Steakhouse and Grill (beef costs)  

37.0

%

 

5.8

%

       
                         
                         
Same Store Basis Operating Metrics (2):
Average weekly same store sales per restaurant:                
                         
J. Alexander’s / Grill Restaurants  

$

121,600

 

$

51,600

 

$

114,200

 

$

77,300

Percent change  

135.7

%

     

47.7

%

   
                         
                         
Average weekly same store guest counts:                
J. Alexander’s / Grill Restaurants  

86.1

%

 

(49.3

)%

 

27.6

%

 

(31.6

)%

                         
Average same store guest check per restaurant (including alcoholic beverages):                
                         
J. Alexander’s / Grill Restaurants  

$

36.16

 

$

28.62

 

$

36.20

 

$

31.35

Percent change  

26.3

%

     

15.5

%

   
               
(1) See definitions and reconciliation attached.
(2) All open locations are included in the same store base for Stoney River for the second quarter and first six months of 2021. As such, average weekly same store sales, guest counts and check averages shown above under the heading “All Stores Basis Operating Metrics” are also representative of the Same Store Basis Operating Metrics for Stoney River.
J. Alexander’s Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited in thousands)
              July 4,   January 3,
             

2021

 

2021

Assets      
Current assets:        
Cash and cash equivalents  

$

22,611

 

$

12,363

Other current assets  

14,674

 

13,399

Total current assets  

37,285

 

25,762

                   
Other assets  

6,583

 

6,195

Deferred income taxes, net  

5,738

 

4,627

Property and equipment, net  

99,422

 

102,188

Right-of-use lease assets, net  

73,030

 

72,515

Tradename and other indefinite-lived intangibles  

25,648

 

25,648

Deferred charges, net  

163

 

184

             

$

247,869

 

$

237,119

                   
Liabilities and Stockholders’ Equity      
                   
Current liabilities  

$

31,184

 

$

25,425

Long-term debt, net of portion classified as current        
and unamortized deferred loan costs  

11,000

 

12,746

Long-term lease liabilities  

78,960

 

78,968

Deferred compensation obligations  

8,255

 

7,973

Other long-term liabilities  

1,892

 

1,902

Stockholders’ equity  

116,578

 

110,105

             

$

247,869

 

$

237,119

J. Alexander’s Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited in thousands)   Six Months Ended
              July 4,   June 28,
             

2021

 

2020

       
Cash flows from operating activities:        
Net income (loss)  

$

5,643

 

$

(24,632

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Depreciation and amortization of property and equipment  

5,952

 

6,256

Equity-based compensation expense  

830

 

908

Asset impairment charges  

 

16,426

Other, net  

(968

)

 

(4,117

)

Changes in assets and liabilities, net  

3,823

 

1,395

Net cash provided by (used in) operating activities  

15,280

 

(3,764

)

                   
Cash flows from investing activities:        
Purchase of property and equipment  

(2,827

)

 

(3,030

)

Other investing activities  

(378

)

 

(236

)

Net cash used in investing activities  

(3,205

)

 

(3,266

)

                   
Cash flows from financing activities:        
Proceeds from borrowings under debt agreement  

5,000

 

32,100

Payments on long-term debt  

(6,833

)

 

(16,350

)

Other financing activities  

6

 

(208

)

Net cash (used in) provided by financing activities  

(1,827

)

 

15,542

Increase in cash and cash equivalents  

10,248

 

8,512

Cash and cash equivalents at beginning of the period  

12,363

 

8,803

Cash and cash equivalents at end of the period  

$

22,611

 

$

17,315

                   
Supplemental disclosures:        
Property and equipment obligations accrued at beginning of the period  

$

879

 

$

1,116

Property and equipment obligations accrued at end of the period  

1,278

 

860

Cash paid for interest  

277

 

109

Cash paid for income taxes  

1,272

 

83

J. Alexander’s Holdings, Inc. and Subsidiaries
Non-GAAP Financial Measures and Reconciliations
(Unaudited in thousands)
               
Non-GAAP Financial Measures
Within this press release, we present the following non-GAAP financial measures which we believe are useful to investors as key measures of our operating performance:
               

We define Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization, or “Adjusted EBITDA”, as net income (loss) before interest expense, income tax expense (benefit), depreciation and amortization, and adding asset impairment charges and restaurant closing costs, loss on disposals of fixed assets, transaction expenses, non-cash compensation, (income) loss from discontinued operations, and pre-opening expense.

               

Adjusted EBITDA is a non-GAAP financial measure that we believe is useful to investors because it provides information regarding certain financial and business trends relating to our operating results and excludes certain items that are not indicative of our operations. Adjusted EBITDA does not fully consider the impact of investing or financing transactions as it specifically excludes depreciation and interest charges, which should also be considered in the overall evaluation of our results of operations.

               

We define “Restaurant Operating Profit” as net sales less restaurant operating costs, which are food and beverage costs, restaurant labor and related costs, depreciation and amortization of restaurant property and equipment, and other operating expenses. Restaurant Operating Profit is a non-GAAP financial measure that we believe is useful to investors because it provides a measure of profitability for evaluation that does not reflect corporate overhead and other non-operating or unusual costs. “Restaurant Operating Profit Margin” is the ratio of Restaurant Operating Profit to net sales.

               

Our management uses Adjusted EBITDA and Restaurant Operating Profit to evaluate the effectiveness of our business strategies. We caution investors that amounts presented in accordance with the above definitions of Adjusted EBITDA or Restaurant Operating Profit may not be comparable to similar measures disclosed by other companies, because not all companies calculate these non-GAAP financial measures in the same manner. Adjusted EBITDA and Restaurant Operating Profit should not be assessed in isolation from, or construed as a substitute for, net income (loss) , operating income (loss) or other measures presented in accordance with GAAP.

               
A reconciliation of these non-GAAP financial measures to the closest GAAP measure is set forth in the following tables:
              Quarter Ended   Six Months Ended
              July 4,   June 28,   July 4,   June 28,
             

2021

 

2020

2021

 

2020

                           
Net income (loss)      

$

2,253

 

$

(6,988

)

 

$

5,643

 

$

(24,632

)

                           
Income tax (benefit) expense      

(24

)

 

(4,419

)

 

343

 

(5,806

)

Interest expense      

141

 

189

 

294

 

305

Depreciation and amortization      

3,042

 

3,124

 

5,973

 

6,284

                           
EBITDA          

5,412

 

(8,094

)

 

12,253

 

(23,849

)

                           
Transaction expenses      

1,888

 

(66

)

 

1,934

 

623

Loss on disposal of fixed assets      

31

 

7

 

42

 

53

Asset impairment charges and restaurant                    
closing costs      

(1

)

 

178

 

2

 

16,604

Non-cash compensation      

447

 

485

 

888

 

972

(Income) loss from discontinued operations, net      

3

 

55

 

(592

)

 

107

Pre-opening expense      

71

 

72

 

516

 

91

Employee retention credits      

(63

)

 

 

(63

)

 

                           
Adjusted EBITDA      

$

7,788

 

$

(7,363

)

 

$

14,980

 

$

(5,399

)

J. Alexander’s Holdings, Inc. and Subsidiaries
Non-GAAP Financial Measures and Reconciliations
(Unaudited in thousands)
          Quarter Ended   Six Months Ended
          July 4,   June 28,   July 4,   June 28,
         

2021

 

2020

 

2021

 

2020

          Amount Percent of Net Sales   Amount Percent of Net Sales   Amount Percent of Net Sales   Amount Percent of Net Sales
                       
Operating income (loss)    

$

2,289

3.4

%

 

$

(11,298

)

-40.9

%

 

$

5,650

4.5

%

 

$

(30,153

)

-35.7

%

                               
General and administrative expenses    

5,442

8.0

%

 

4,095

14.8

%

 

10,595

8.4

%

 

8,835

10.4

%

Transaction expenses    

1,888

2.8

%

 

(66

)

-0.2

%

 

1,934

1.5

%

 

623

0.7

%

Goodwill impairment charge    

0.0

%

 

0.0

%

 

0.0

%

 

15,737

18.6

%

Long-lived asset impairment charges and restaurant closing costs    

(1

)

0.0

%

 

178

0.6

%

 

2

0.0

%

 

867

1.0

%

Pre-opening expense    

71

0.1

%

 

72

0.3

%

 

516

0.4

%

 

91

0.1

%

                               
Restaurant Operating Profit    

$

9,689

14.2

%

 

$

(7,019

)

-25.4

%

 

$

18,697

14.9

%

 

$

(4,000

)

-4.7

%

                               
Note: Certain percentage totals do not sum due to rounding.