Quarterly Report (10-q)

Date : 11/08/2019 @ 6:40PM
Source : Edgar (US Regulatory)
Stock : J Alexanders Holdings Inc (JAX)
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Quarterly Report (10-q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 29, 2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________.

Commission file number: 1-37473

 

J. Alexander’s Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

Tennessee

 

47-1608715

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

3401 West End Avenue, Suite 260

P.O. Box 24300

 

 

Nashville, Tennessee

 

37202

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (615) 269-1900

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, $0.001 par value

JAX

New York Stock Exchange

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No

As of November 7, 2019, 14,959,176 shares of the registrant’s common stock, $0.001 par value, were outstanding.  

 

 


TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

3

 

 

 

Item 1. Financial Statements (Unaudited)

 

3

 

 

 

Condensed Consolidated Balance Sheets

 

3

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

 

4

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

5

 

 

 

Condensed Consolidated Statements of Cash Flows

 

6

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

32

 

 

 

Item 4. Controls and Procedures

 

32

 

 

 

PART II. OTHER INFORMATION

 

33

 

 

 

Item 1. Legal Proceedings

 

33

 

 

 

Item 1A. Risk Factors

 

33

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

33

 

 

 

Item 3. Defaults Upon Senior Securities

 

33

 

 

 

Item 4. Mine Safety Disclosures

 

33

 

 

 

Item 5. Other Information

 

33

 

 

 

Item 6. Exhibits

 

34

 

 

 

Signatures

 

35

 

 

 

 

 

 


PART I.  FINANCIAL INFORMATION

 

 

Item 1.  Financial Statements

J. Alexander’s Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited in thousands, except share amounts)

 

 

September 29,

 

 

December 30,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,865

 

 

$

8,783

 

Accounts and other receivables

 

 

2,068

 

 

 

1,749

 

Inventories

 

 

2,628

 

 

 

3,134

 

Prepaid expenses and other current assets

 

 

1,839

 

 

 

3,799

 

Total current assets

 

 

14,400

 

 

 

17,465

 

Other assets

 

 

5,521

 

 

 

5,557

 

Property and equipment, at cost, less accumulated depreciation and amortization of $62,159 and $53,821 as of September 29, 2019 and December 30, 2018, respectively

 

 

109,798

 

 

 

109,332

 

Right-of-use lease assets, net

 

 

71,344

 

 

 

-

 

Goodwill

 

 

15,737

 

 

 

15,737

 

Tradename and other indefinite-lived assets

 

 

25,648

 

 

 

25,647

 

Deferred income taxes, net

 

 

1,971

 

 

 

539

 

Deferred charges, less accumulated amortization of $327 and $285 as of September 29, 2019 and December 30, 2018, respectively

 

 

244

 

 

 

272

 

Total assets

 

$

244,663

 

 

$

174,549

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,679

 

 

$

6,135

 

Accrued expenses and other current liabilities

 

 

8,717

 

 

 

14,697

 

Unearned revenue

 

 

2,347

 

 

 

3,946

 

Current portion of long-term debt

 

 

7,888

 

 

 

9,000

 

Current portion of lease liabilities

 

 

4,163

 

 

 

-

 

Total current liabilities

 

 

29,794

 

 

 

33,778

 

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

 

 

3,250

 

 

 

5,866

 

Long-term lease liabilities

 

 

76,954

 

 

 

-

 

Deferred compensation obligations

 

 

6,297

 

 

 

6,251

 

Other long-term liabilities

 

 

149

 

 

 

6,995

 

Total liabilities

 

 

116,444

 

 

 

52,890

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, par value $0.001 per share: authorized 30,000,000 shares; issued and outstanding 14,959,176 and 14,695,176 shares as of September 29, 2019 and December 30, 2018, respectively

 

 

15

 

 

 

15

 

Preferred stock, par value $0.001 per share: authorized 10,000,000 shares; no shares issued and outstanding as of September 29, 2019 or December 30, 2018

 

 

-

 

 

 

-

 

Additional paid-in capital

 

 

103,588

 

 

 

96,272

 

Retained earnings

 

 

23,058

 

 

 

17,528

 

Total stockholders' equity attributable to J. Alexander's Holdings, Inc.

 

 

126,661

 

 

 

113,815

 

Non-controlling interests

 

 

1,558

 

 

 

7,844

 

Total stockholders' equity

 

 

128,219

 

 

 

121,659

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

244,663

 

 

$

174,549

 

See accompanying Notes to Condensed Consolidated Financial Statements.

3

 


J. Alexander’s Holdings, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited in thousands, except per share amounts)

 

 

 

 

Quarter Ended

 

 

Nine Months Ended

 

 

 

September 29,

 

 

September 30,

 

 

September 29,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales

 

$

56,867

 

 

$

56,730

 

 

$

183,830

 

 

$

179,059

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

18,110

 

 

 

17,876

 

 

 

58,441

 

 

 

56,570

 

Restaurant labor and related costs

 

 

18,835

 

 

 

18,603

 

 

 

57,542

 

 

 

55,610

 

Depreciation and amortization of restaurant property and equipment

 

 

2,968

 

 

 

2,758

 

 

 

8,847

 

 

 

8,023

 

Other operating expenses

 

 

11,916

 

 

 

11,965

 

 

 

37,028

 

 

 

35,926

 

Total restaurant operating expenses

 

 

51,829

 

 

 

51,202

 

 

 

161,858

 

 

 

156,129

 

Transaction, contested proxy and other related expenses

 

 

117

 

 

 

-

 

 

 

768

 

 

 

933

 

General and administrative expenses

 

 

4,288

 

 

 

5,876

 

 

 

13,816

 

 

 

17,123

 

Pre-opening expenses

 

 

211

 

 

 

194

 

 

 

357

 

 

 

1,024

 

Total operating expenses

 

 

56,445

 

 

 

57,272

 

 

 

176,799

 

 

 

175,209

 

Operating income (loss)

 

 

422

 

 

 

(542

)

 

 

7,031

 

 

 

3,850

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(135

)

 

 

(177

)

 

 

(490

)

 

 

(537

)

Other, net

 

 

55

 

 

 

6

 

 

 

191

 

 

 

19

 

Total other expense

 

 

(80

)

 

 

(171

)

 

 

(299

)

 

 

(518

)

Income (loss) from continuing operations before income taxes

 

 

342

 

 

 

(713

)

 

 

6,732

 

 

 

3,332

 

Income tax benefit

 

 

495

 

 

 

198

 

 

 

238

 

 

 

72

 

Loss from discontinued operations, net

 

 

(66

)

 

 

(118

)

 

 

(183

)

 

 

(339

)

Net income (loss)

 

$

771

 

 

$

(633

)

 

$

6,787

 

 

$

3,065

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

$

0.06

 

 

$

(0.04

)

 

$

0.47

 

 

$

0.23

 

Loss from discontinued operations, net

 

 

(0.00

)

 

 

(0.01

)

 

 

(0.01

)

 

 

(0.02

)

Basic earnings (loss) per share

 

$

0.05

 

 

$

(0.04

)

 

$

0.46

 

 

$

0.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

$

0.06

 

 

$

(0.04

)

 

$

0.47

 

 

$

0.23

 

Loss from discontinued operations, net

 

 

(0.00

)

 

 

(0.01

)

 

 

(0.01

)

 

 

(0.02

)

Diluted earnings (loss) per share

 

$

0.05

 

 

$

(0.04

)

 

$

0.46

 

 

$

0.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

14,695

 

 

 

14,695

 

 

 

14,695

 

 

 

14,695

 

Diluted

 

 

14,808

 

 

 

14,695

 

 

 

14,746

 

 

 

14,919

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

771

 

 

$

(633

)

 

$

6,787

 

 

$

3,065

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

Per share amounts may not sum due to rounding.

 

4

 


J. Alexander’s Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited in thousands, except share amounts)

 

 

 

Outstanding

shares

 

 

Common

stock

 

 

Additional

paid-in capital

 

 

Retained

earnings

 

 

Non-controlling

interests

 

 

Total

 

Balances at December 30, 2018

 

 

14,695,176

 

 

$

15

 

 

$

96,272

 

 

$

17,528

 

 

$

7,844

 

 

$

121,659

 

Cumulative effect of change in accounting policy (Note 10)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,257

)

 

 

-

 

 

 

(1,257

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

296

 

 

 

-

 

 

 

-

 

 

 

296

 

Cancellation of subsidiary Class B Units (Note 2 (g))

 

 

-

 

 

 

-

 

 

 

6,286

 

 

 

-

 

 

 

(6,286

)

 

 

-

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,848

 

 

 

-

 

 

 

3,848

 

Balances at March 31, 2019

 

 

14,695,176

 

 

 

15

 

 

 

102,854

 

 

 

20,119

 

 

 

1,558

 

 

 

124,546

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

296

 

 

 

-

 

 

 

-

 

 

 

296

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,168

 

 

 

-

 

 

 

2,168

 

Balances at June 30, 2019

 

 

14,695,176

 

 

 

15

 

 

 

103,150

 

 

 

22,287

 

 

 

1,558

 

 

 

127,010

 

Share-based compensation

 

 

264,000

 

 

 

-

 

 

 

438

 

 

 

-

 

 

 

-

 

 

 

438

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

771

 

 

 

-

 

 

 

771

 

Balances at September 29, 2019

 

 

14,959,176

 

 

$

15

 

 

$

103,588

 

 

$

23,058

 

 

$

1,558

 

 

$

128,219

 

 

 

 

Outstanding

shares

 

 

Common

stock

 

 

Additional

paid-in capital

 

 

Retained

earnings

 

 

Non-controlling

interests

 

 

Total

 

Balances at December 31, 2017

 

 

14,695,176

 

 

$

15

 

 

$

95,151

 

 

$

13,495

 

 

$

5,200

 

 

$

113,861

 

Cumulative effect of change in accounting policy (Note 9)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

34

 

 

 

-

 

 

 

34

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

233

 

 

 

-

 

 

 

1,907

 

 

 

2,140

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,593

 

 

 

-

 

 

 

1,593

 

Balances at April 1, 2018

 

 

14,695,176

 

 

 

15

 

 

 

95,384

 

 

 

15,122

 

 

 

7,107

 

 

 

117,628

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

296

 

 

 

-

 

 

 

(53

)

 

 

243

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,105

 

 

 

-

 

 

 

2,105

 

Balances at July 1, 2018

 

 

14,695,176

 

 

 

15

 

 

 

95,680

 

 

 

17,227

 

 

 

7,054

 

 

 

119,976

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

296

 

 

 

-

 

 

 

1,240

 

 

 

1,536

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(633

)

 

 

-

 

 

 

(633

)

Balances at September 30, 2018

 

 

14,695,176

 

 

$

15

 

 

$

95,976

 

 

$

16,594

 

 

$

8,294

 

 

$

120,879

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

5

 


J. Alexander’s Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited in thousands)

 

 

 

Nine Months Ended

 

 

 

September 29,

 

 

September 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

6,787

 

 

$

3,065

 

Adjustments to reconcile net income to net cash provided by operating

   activities:

 

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

 

9,034

 

 

 

8,244

 

Share-based compensation expense

 

 

1,030

 

 

 

3,919

 

Other, net

 

 

(783

)

 

 

(225

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and other receivables

 

 

(319

)

 

 

(177

)

Prepaid expenses and other current assets

 

 

1,960

 

 

 

1,894

 

Accounts payable

 

 

(1,306

)

 

 

(188

)

Accrued expenses and other current liabilities

 

 

(5,980

)

 

 

(1,249

)

Lease right-of-use assets and liabilities

 

 

1,242

 

 

 

-

 

Other assets and liabilities, net

 

 

(911

)

 

 

(478

)

Net cash provided by operating activities

 

 

10,754

 

 

 

14,805

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(7,757

)

 

 

(15,230

)

Other investing activities

 

 

(122

)

 

 

(493

)

Net cash used in investing activities

 

 

(7,879

)

 

 

(15,723

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments on long-term debt

 

 

(3,750

)

 

 

(3,750

)

Other financing activities

 

 

(43

)

 

 

-

 

Net cash used in financing activities

 

 

(3,793

)

 

 

(3,750

)

Decrease in cash and cash equivalents

 

 

(918

)

 

 

(4,668

)

Cash and cash equivalents at beginning of period

 

 

8,783

 

 

 

10,711

 

Cash and cash equivalents at end of period

 

$

7,865

 

 

$

6,043

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Property and equipment obligations accrued at beginning of period

 

$

819

 

 

$

1,854

 

Property and equipment obligations accrued at end of period

 

 

2,669

 

 

 

1,656

 

Cash paid for interest

 

 

467

 

 

 

606

 

Cash paid for income taxes

 

 

718

 

 

 

644

 

See accompanying Notes to Condensed Consolidated Financial Statements.

6

 


J. Alexander’s Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited, dollars in thousands except per share data)

 

Note 1 – Organization and Business

J. Alexander’s Holdings, Inc. (the “Company”) was incorporated on August 15, 2014 in the state of Tennessee and is a holding company which is the sole managing member of and owns all of the outstanding Class A Units of J. Alexander’s Holdings, LLC, the parent company of all of the Company’s operating subsidiaries. The Company became a publicly-traded company, with its stock listed on the New York Stock Exchange under the symbol “JAX”, effective in September of 2015 as a result of the “Spin-off” distribution (the “Spin-off”) by the Company’s former parent, Fidelity National Financial, Inc. (“FNF”) of all shares of the Company’s common stock owned by FNF to holders of shares of FNF’s Fidelity National Financial Ventures, LLC (“FNFV”)  Group common stock, as it was known at the time of the Spin-off. FNFV is now conducting business independently as Cannae Holdings, Inc. 

The Company, through J. Alexander’s Holdings, LLC and its subsidiaries, owns and operates full service, upscale restaurants including J. Alexander’s, Redlands Grill, Lyndhurst Grill, Overland Park Grill and Stoney River Steakhouse and Grill (“Stoney River”).  At both September 29, 2019 and December 30, 2018, the Company operated 46 restaurants in 16 states.  The Company’s restaurants are concentrated primarily in the East, Southeast, and Midwest regions of the United States.  The Company does not have any restaurants operating under franchise agreements.

Note 2 – Basis of Presentation

 

(a)

Interim Financial Statements

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and rules of the United States Securities and Exchange Commission (“SEC”).  Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  Operating results for the quarter and nine-month period ended September 29, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2019.  For further information, refer to the Consolidated Financial Statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2018, filed with the SEC on March 14, 2019, as amended on April 29, 2019 (the “2018 Annual Report”).

Total comprehensive income (loss) is comprised solely of net income (loss) for all periods presented.  There have been no material changes in our significant accounting policies, other than the adoption of accounting pronouncements described in Note 7 below, as compared to the significant accounting policies described in our 2018 Annual Report.

(b)   Principles of Consolidation

The unaudited Condensed Consolidated Financial Statements include the accounts of the Company as well as the accounts of its majority-owned subsidiaries.  All intercompany profits, transactions, and balances between the Company and its subsidiaries have been eliminated.  It is the Company’s policy to reclassify prior year amounts to conform to the current year’s presentation for comparative purposes, if such a reclassification is warranted.

The Company is a holding company with no direct operations and that holds as its sole asset an equity interest in J. Alexander’s Holdings, LLC and, as a result, relies on J. Alexander’s Holdings, LLC to provide it with funds necessary to meet its financial obligations.

 

(c)

Fiscal Year

The Company’s fiscal year ends on the Sunday closest to December 31, and each quarter typically consists of 13 weeks.  The quarters and nine-month periods ended September 29, 2019 and September 30, 2018 each included 13 and 39 weeks of operations, respectively.  Fiscal years 2019 and 2018 each include 52 weeks of operations.

7

 


 

(d)

Discontinued Operations and Restaurant Closures

The Company remains party to a lease agreement for a location that was closed in 2013 and is accounted for as a discontinued operation.  The $66 and $118 losses from discontinued operations included in the quarters ended September 29, 2019 and September 30, 2018, respectively, and losses of $183 and $339 for the nine-month periods ended September 29, 2019 and September 30, 2018, respectively, consist solely of exit and disposal costs for this location.

 

(e)

Transaction, Contested Proxy and Other Related Expenses

Transaction, contested proxy and other related expenses totaled $117 and $768 for the quarter and nine-month period ended September 29, 2019, respectively. These expenses included legal, proxy solicitor, and other professional and consulting fees along with printing and postage costs and other miscellaneous costs associated with both soliciting shareholder proxies for the Company’s 2019 annual meeting of shareholders and the ongoing evaluation of strategic alternatives.

During the nine-month period ended September 30, 2018, the Company incurred transaction, contested proxy and other related expenses of $933 which were associated primarily with the terminated acquisition of the Ninety Nine Restaurant and Pub concept. Such costs consisted primarily of legal and other professional and consulting fees as well as other miscellaneous costs.  No such expenses were recorded during the quarter ended September 30, 2018.

 

(f)

Earnings (Loss) per Share

Basic earnings (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of shares outstanding for the reporting period.  Diluted earnings (loss) per share of common stock is computed similarly to basic earnings (loss) per share except the weighted average shares outstanding are increased to include potential shares outstanding resulting from share-based compensation awards and additional shares from the assumed exercise of any common stock equivalents, if dilutive.  J. Alexander’s Holdings, LLC Class B Units are considered common stock equivalents for this purpose.  The number of additional shares of common stock related to these common stock equivalents is calculated using the if-converted method, if dilutive.  The number of additional shares of common stock related to stock option awards and unvested restricted share awards subject to only a service condition is calculated using the treasury stock method, if dilutive.  Unvested restricted share awards that are subject to a performance condition are regarded as contingently issuable common shares and are only included in the denominator of the diluted earnings (loss) per share calculation using the treasury stock method as of the beginning of the period in which the performance condition has been satisfied, if dilutive.  Refer to Note 3 – Earnings (Loss) per Share for the basic and diluted earnings (loss) per share calculations and additional discussion.

 

(g)

Non-controlling Interests

Non-controlling interests presented on the Condensed Consolidated Balance Sheets represent the portion of net assets of the Company attributable to the non-controlling J. Alexander’s Holdings, LLC Class B Unit holders.  As of September 29, 2019 and December 30, 2018, the non-controlling interests presented on the Condensed Consolidated Balance Sheets were $1,558 and $7,844, respectively.  On February 28, 2019, in conjunction with the termination agreement (“Termination Agreement”) entered into in November of 2018 between J. Alexander’s Holdings, LLC and Black Knight Advisory Services, LLC (“Black Knight”), the 1,500,024 Class B Units held by Black Knight were cancelled and forfeited for no consideration. Therefore, the share-based compensation expense associated with the Black Knight grant has been reclassified to additional paid-in capital in the first nine months of 2019, and as of September 29, 2019, non-controlling interests consist solely of the non-cash compensation expense relative to the Class B Units held by management.  Non-controlling interests reported as of December 30, 2018 consisted of non-cash compensation expense associated with Class B Units held by both management and Black Knight.  The Hypothetical Liquidation at Book Value method was used as of each of September 29, 2019 and September 30, 2018 to determine allocations of non-controlling interests in respect of vested grants consistent with the terms of the Second Amended and Restated LLC Agreement of J. Alexander’s Holdings, LLC, and pursuant to those calculations, no allocation of net income was made to non-controlling interests for either of the quarters and nine-month periods ended September 29, 2019 or September 30, 2018.

 

(h)

Use of Estimates

Management has made certain estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the periods presented to prepare these unaudited Condensed Consolidated

8

 


Financial Statements in conformity with GAAP.  Significant items subject to such estimates and assumptions include those related to the accounting for gift card breakage, determination of uncertain tax positions and the valuation allowance relative to deferred tax assets, if any, estimates of useful lives of property and equipment and leasehold improvements, the carrying amount of intangible assets, fair market valuations, determination of lease terms, and accounting for impairment losses, contingencies, and litigation. Actual results could differ from these estimates.

(i)   Share Repurchase Program

On November 1, 2018, the Company’s Board of Directors authorized a share repurchase program which replaced the previous share repurchase program that expired on October 29, 2018, and allows for the repurchase of shares up to an aggregate purchase price of $15,000 over the three-year period ending November 1, 2021.  Any share repurchases under the current program are expected to be made solely from cash on hand and available operating cash flow.  Repurchases will be made in accordance with applicable securities laws and may be made from time to time in the open market.  The timing, prices and amount of repurchases will depend upon prevailing market prices, general economic and market conditions and other considerations.  The repurchase program does not obligate the Company to acquire any particular amount of stock.  There was no common stock repurchase activity under the program during the first nine months of 2019. 

(j)    Debt Modifications

In 2019, J. Alexander’s, LLC, a subsidiary of the Company, entered into two separate modification agreements with respect to the loan agreement (the “Loan Agreement”) with its lender. The first modification agreement (the “First Modification Agreement”) became effective on January 2, 2019, while the second modification agreement (the “Second Modification Agreement”) became effective on September 3, 2019.  The Loan Agreement previously provided that both the development line of credit and the term loan would bear interest at 30-day LIBOR plus 220 basis points and amounts borrowed under the revolving line of credit and the mortgage loan would bear interest at 30-day LIBOR plus 250 basis points.  The revolving line of credit previously had a minimum interest rate of 3.25%, and the mortgage loan had minimum and maximum interest rates of 3.25% and 6.25%, respectively. Under the terms of the First Modification Agreement, effective January 2, 2019, all of the notes under the Loan Agreement bear interest at LIBOR plus a sliding interest rate scale determined by the maximum adjusted debt to EBITDAR ratio.  For the quarter ended September 29, 2019, the interest rate was set at LIBOR plus 1.85%.  Additionally, the non-use fee payable quarterly on the development line of credit and revolving line of credit decreased as a result of the First Modification Agreement from 0.25% to a sliding rate based on the maximum adjusted debt to EBITDAR ratio. The interest rate and non-use fee rate scale is set forth as follows:

Maximum adjusted debt to EBITDAR ratio

 

Margin

 

 

Non-Use Fee Rate

 

Less than 1.25X

 

1.60%

 

 

0.15%

 

Less than 2.25X

 

1.85%

 

 

0.20%

 

Less than 3.25X

 

2.10%

 

 

0.25%

 

Greater than 3.25X

 

2.35%

 

 

0.30%

 

 

The First Modification Agreement also clarified that the lease liabilities recorded on the Company’s Condensed Consolidated Balance Sheets related to the adoption of the new lease accounting standard (see Notes 7 and 10 below) would not be considered debt for purposes of calculating the financial debt covenants previously established under the Loan Agreement.

 

The Second Modification Agreement extended the maturity dates with respect to the development line of credit, the revolving line of credit and the mortgage loan to September 3, 2021.  Prior to the Second Modification Agreement, the revolving line of credit, the development line of credit and the mortgage loan were set to mature on September 3, 2019, May 3, 2020 and September 3, 2020, respectively.  No further changes to the Loan Agreement were made as a result of the modification agreements discussed above.

9

 


Note 3 – Earnings (Loss) per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share:

 

 

Quarter Ended

 

 

 

Nine Months Ended

 

(Dollars and shares in thousands, except per share amounts)

 

September 29,

 

 

September 30,

 

 

 

September 29,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

$

837

 

 

$

(515

)

 

 

$

6,970

 

 

$

3,404

 

Loss from discontinued operations, net

 

 

(66

)

 

 

(118

)

 

 

 

(183

)

 

 

(339

)

Net income (loss)

 

$

771

 

 

$

(633

)

 

 

$

6,787

 

 

$

3,065

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares (denominator for basic earnings (loss) per share)

 

 

14,695

 

 

 

14,695

 

 

 

 

14,695

 

 

 

14,695

 

Effect of dilutive securities

 

 

113

 

 

 

-

 

 

 

 

51

 

 

 

224

 

Adjusted weighted average shares and assumed conversions

     (denominator for diluted earnings (loss) per share)

 

 

14,808

 

 

 

14,695

 

 

 

 

14,746

 

 

 

14,919

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

$

0.06

 

 

$

(0.04

)

 

 

$

0.47

 

 

$

0.23

 

Loss from discontinued operations, net

 

 

(0.00

)

 

 

(0.01

)

 

 

 

(0.01

)

 

 

(0.02

)

Basic earnings (loss) per share

 

$

0.05

 

 

$

(0.04

)

 

 

$

0.46

 

 

$

0.21

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations, net of tax

 

$

0.06

 

 

$

(0.04

)

 

 

$

0.47

 

 

$

0.23

 

Loss from discontinued operations, net

 

 

(0.00

)

 

 

(0.01

)

 

 

 

(0.01

)

 

 

(0.02

)

Diluted earnings (loss) per share

 

$

0.05