BJ'S RESTAURANTS, INC.
The following Management's Discussion and Analysis ("MD&A") of Financial
Condition and Results of Operations is intended to help you understand our
Company, our operations and our current operating environment. For an
understanding of the significant factors that influenced our performance, the
MD&A should be read in conjunction with the Consolidated Financial Statements
and related Notes to Consolidated Financial Statements included in Part II, Item
8 - Financial Statements and Supplementary Data of our Annual Report. Our MD&A
consists of the following sections:
•
Overview - a brief description of our business, financial highlights, key performance indicators, known and anticipated trends • Results of Operations - an analysis of our Consolidated Statements of Operations for fiscal year 2022 compared to fiscal year 2021 • Liquidity and Capital Resources - an analysis of cash flows, including capital expenditures, share issuance and repurchase activity, dividends, contractual obligations and commitments, and known trends that may impact liquidity • Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates, including new accounting standards
OVERVIEW
As ofFebruary 27, 2023 , we owned and operated 216 restaurants located in 30 states as described in Item 2 - Properties - "Restaurant Locations" in this Form 10-K. Our restaurants are typically open every day of the year except forThanksgiving and Christmas. All of our restaurants currently offer take-out and delivery services. Additionally, all of our restaurants offer a call-ahead or online wait list, on-line ordering for dine-in, guest pick-up or curbside delivery and reservations for large parties. Our menu features BJ's awardwinning, signature deep-dish pizza, our proprietary craft and other beers, as well as a wide selection of appetizers, entrées, pastas, sandwiches, specialty salads and desserts, including our Pizookie® dessert. Our proprietary craft beer is produced at several of our locations, ourTexas brewpub locations and by independent third-party brewers using our proprietary recipes.
Financial Highlights for Fiscal 2022
Notable fiscal 2022 financial highlights compared to fiscal 2021 include:
•
Total revenues increased 18.1% to$1.3 billion (53 weeks vs. 52 weeks) • Total restaurant operating weeks increased 3.1% (53 weeks vs. 52 weeks) • Comparable restaurant sales increased 14.0% (53 weeks vs. 53 weeks) • Net income of$4.1 million compared to net loss of$3.6 million (53 weeks vs. 52 weeks) • Diluted net income per share of$0.17 compared to diluted net loss per share of$0.16 (53 weeks vs. 52 weeks)
Key Performance Indicators and Non-GAAP Financial Measures
Key measures that we use in evaluating our restaurants and assessing our business include the following:
Comparable Restaurant Sales. In calculating comparable restaurant sales, we
include a restaurant in the comparable base once it has been open for 18 months.
This measure highlights the performance of existing restaurants, while excluding
the impact of new restaurant openings and closures. Comparable restaurant sales
increased 14.0% for fiscal 2022 on a 53 week basis.
Restaurant Level Operating Margin. This non-GAAP financial measure is equal to
the revenues generated by our restaurants, less their direct operating costs
which consist of cost of sales, labor and benefits, and occupancy and operating
costs. This performance measure primarily includes the costs that restaurant
level managers can directly control and excludes other operating costs that are
essential to conduct the Company's business. We, similar to most of our
competitors, use restaurant level operating margin as a supplemental measure of
restaurant performance and believe restaurant level operating margin is useful
to investors in that it highlights trends in our core business that may not
otherwise be apparent to investors when relying solely on GAAP financial
measures. Because other companies may calculate restaurant level operating
margin differently than we do, our restaurant level operating margin calculation
may not be comparable to similarly titled measures reported by other companies.
A reconciliation of loss from operations to restaurant level operating margin
for fiscal 2022, 2021 and 2020 is set forth below:
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Fiscal Year
2022 2021 2020
Loss from operations $ (5,480 ) (0.4 )% $ (16,507 ) (1.5 )% $ (86,431 ) (11.1 )%
General and administrative 73,333 5.7 67,957 6.3 54,663 7.0
Depreciation and amortization 70,385 5.5 72,753 6.7 73,124 9.4
Restaurant opening 3,644 0.3 1,483 0.1 1,201 0.2
Loss on disposal and impairment of
assets, net 6,200 0.5 3,946 0.4 17,141 2.2
Gain on lease transactions, net (3,318 ) (0.3 )
- - (3,278 ) (0.4 )
Restaurant level operating margin
Adjusted EBITDA. This non-GAAP financial measure represents the sum of net
income (loss) adjusted for certain expenses and gains/losses detailed within the
reconciliation below. We use Adjusted EBITDA as a supplemental measure of our
operating performance and believe this measure is useful to investors in that it
highlights cash flow and trends in our business operations that may not
otherwise be apparent to investors when relying solely on GAAP financial
measures. Because other companies may calculate this measure differently than we
do, our Adjusted EBITDA calculation may not be comparable to similarly titled
measures reported by other companies. A reconciliation of net income (loss) to
adjusted EBITDA for fiscal 2022, 2021 and 2020 is set forth below:
Fiscal Year
2022 2021 2020
Net income (loss) $ 4,076 0.3 % $ (3,606 ) (0.3 )% $ (57,885 ) (7.4 )%
Interest expense, net 2,888 0.2 5,002 0.5 7,078 0.9
Income tax benefit (12,384 ) (1.0 ) (15,576 ) (1.4 ) (32,065 ) (4.1 )
Depreciation and amortization 70,385 5.5 72,753 6.7 73,124 9.4
Stock-based compensation expense 10,098 0.8 10,331 1.0 9,791 1.3
Other income, net (60 ) - (2,327 ) (0.2 ) (1,275 ) (0.2 )
Loss on disposal and impairment of
assets, net 6,200 0.5 3,946 0.4 17,141 2.2
Gain from legal settlements - - - - (2,284 ) (0.3 )
Gain on lease transactions, net (3,318 ) (0.3 ) - - (3,278 ) (0.4 )
Adjusted EBITDA $ 77,885 6.1 % $ 70,523 6.5 % $ 10,347 1.3 %
Weekly Sales Average. We calculate each restaurant's average weekly revenue to
understand and manage the business trends and expectations. Our weekly sales
average was approximately $113,000 , $99,000 and $72,000 for fiscal 2022, 2021
and 2020, respectively.
Known or Anticipated Trends
Sales Growth. While most of our established restaurants operate close to full
capacity during peak demand periods, we will continue to focus on ways to build
sales, positively impact guest traffic and grow average check and weekly sales
averages. We continue to focus on sales building initiatives to create more
guest loyalty, increase the frequency of guest visits, further build our
off-premise sales channel, better optimize our menu sales mix and develop other
incremental opportunities to allow guests to utilize BJ's. We believe that all
of these efforts combined with new restaurant openings offer significant growth
opportunities and upside for weekly sales averages and comparable restaurant
sales.
Restaurant Opening. Newly opened restaurants typically experience inefficiencies
in the form of higher cost of sales, labor and direct operating and occupancy
costs for several months after their opening relative to our more mature,
established restaurants. Accordingly, the number and timing of new restaurant
openings have had, and are expected to continue to have, an impact on restaurant
opening expenses, cost of sales, labor and occupancy and operating expenses.
Additionally, restaurant openings in new markets may experience even greater
inefficiencies for several months, if not longer, due to lower initial sales
volumes, which results from initially low consumer awareness levels, and a lack
of supply chain and other operating cost leverage until additional restaurants
can be opened in those markets.
Impacts of Inflation. During fiscal 2021 and 2022, heightened inflation had a
material impact on our operations, new restaurant construction and corresponding
return on invested capital. While we have been able to partially offset
inflation and other changes in the costs of key operating inputs by gradually
increasing menu prices, coupled with more efficient purchasing practices,
productivity improvements and greater economies of scale, there can be no
assurance that we will be able to continue to do so in the future. Increases in
inflation could have a severe impact on the United States and global economies,
which will have an adverse impact on our business, financial condition and
results of operations. From time to time, competitive conditions will limit our
menu pricing flexibility. In addition, macroeconomic conditions that impact
consumer discretionary spending for food away from home could make additional
menu price increases imprudent. There can be no assurance that all of our future
cost increases can be offset by higher menu prices or that higher menu prices
will be accepted by our restaurant
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guests without any resulting changes in their visit frequencies or purchasing
patterns. Many of the leases for our restaurants provide for contingent rent
obligations based on a percentage of sales. As a result, rent expense will
absorb a proportionate share of any menu price increases in our restaurants.
There can be no assurance that we will continue to generate increases in
comparable restaurant sales in amounts sufficient to offset inflationary or
other cost pressures.
Accounting Terms and Characteristics
Revenues. Our revenues are comprised of food and beverage sales from our restaurants. Revenues from restaurant sales are recognized when payment is tendered. Amounts paid with a credit card are recorded in accounts and other receivables until payment is collected from the credit card processor. We sell gift cards which do not have an expiration date, and we do not deduct non-usage fees from outstanding gift card balances. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. Based on historical redemption rates, a portion of our gift card sales are not expected to be redeemed and will be recognized as gift card "breakage." Estimated gift card breakage is recorded as revenue and recognized in proportion to our historical redemption pattern, unless there is a legal obligation to remit the unredeemed gift cards to government authorities. Guest Loyalty Program. Our program enables participants to earn points for qualifying purchases that can be redeemed for food and beverages in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points until such points are redeemed.
Comparable Sales and Guest Traffic. All of our restaurants are Company-owned. In calculating comparable restaurant sales, we include a restaurant in the comparable base once it has been open for 18 months. Guest traffic for our restaurants is estimated based on the number of guest checks.
Cost of Sales. Cost of sales is comprised of food and beverage costs, including the cost to produce and distribute our proprietary craft beer, soda and ciders. The components of cost of sales are variable and typically fluctuate directly with sales volumes, but may be impacted by changes in commodity prices, a shift in sales mix to higher cost proteins or other higher cost items, or varying levels of promotional activities. Labor and Benefits. Labor and benefit costs include direct hourly and management wages, bonuses, payroll taxes, fringe benefits and stock-based compensation and workers' compensation expense that is directly related to restaurant level team members. Occupancy and Operating. Occupancy and operating expenses include restaurant supplies, credit card fees, third-party delivery company commissions, marketing costs, fixed rent, percentage rent, common area maintenance charges, utilities, real estate taxes, repairs and maintenance and other related restaurant costs. During fiscal 2020 and 2021, occupancy and operating expense also include COVID-19 related costs such as temporary patios and safety related items. General and Administrative. General and administrative costs include all corporate administrative functions that support existing operations and provide infrastructure to facilitate our future growth. Components of this category include corporate management, field supervision and corporate hourly staff salaries and related team member benefits (including stock-based compensation expense and cash-based incentive compensation), travel and relocation costs, information systems, the cost to recruit and train new restaurant management team members, corporate rent, certain brand marketing-related expenses and legal, professional and consulting fees.
Depreciation and Amortization. Depreciation and amortization are composed primarily of depreciation of capital expenditures for restaurant and brewing equipment and leasehold improvements.
Restaurant Opening. Restaurant opening expenses, which are expensed as incurred,
consist of the costs of hiring and training the initial hourly work force for
each new restaurant, travel, the cost of food and supplies used in training,
grand opening promotional costs, the cost of the initial stock of operating
supplies and other direct costs related to the opening of a restaurant,
including rent during the construction and in-restaurant training period.
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The following table sets forth, for the years indicated, our Consolidated
Statements of Operations both in dollars and as percentages of total revenues.
All fiscal years presented consist of 52 weeks with the exception of fiscal year
2022, which consists of 53 weeks. Percentages below may not reconcile due to
rounding.
Fiscal Year
2022 2021 2020
Revenues $ 1,283,926 100.0 % $ 1,087,038 100.0 % $ 778,510 100.0 %
Restaurant operating costs (excluding
depreciation and amortization):
Cost of sales 349,645 27.2 288,110 26.5 195,573 25.1
Labor and benefits 483,367 37.6 401,408 36.9 305,628 39.3
Occupancy and operating 306,150 23.8 267,888 24.6 220,889 28.4
General and administrative 73,333 5.7 67,957 6.3 54,663 7.0
Depreciation and amortization 70,385 5.5 72,753 6.7 73,124 9.4
Restaurant opening 3,644 0.3 1,483 0.1 1,201 0.2
Loss on disposal and impairment of
assets, net 6,200 0.5 3,946 0.4 17,141 2.2
Gain on lease transactions, net (3,318 ) (0.3 ) - - (3,278 ) (0.4 )
Total costs and expenses 1,289,406 100.4 1,103,545 101.5 864,941 111.1
Loss from operations (5,480 ) (0.4 ) (16,507 ) (1.5 ) (86,431 ) (11.1 )
Other (expense) income: Interest expense, net (2,888 ) (0.2 ) (5,002 ) (0.5 ) (7,078 ) (0.9 ) Gain from legal settlements - - - - 2,284 0.3 Other income, net 60 - 2,327 0.2 1,275 0.2 Total other expense (2,828 ) (0.2 ) (2,675 ) (0.2 ) (3,519 ) (0.5 ) Loss before income taxes (8,308 ) (0.6 ) (19,182 ) (1.8 ) (89,950 ) (11.6 ) Income tax benefit (12,384 ) (1.0 ) (15,576 ) (1.4 ) (32,065 ) (4.1 ) Net income (loss)$ 4,076 0.3 %$ (3,606 ) (0.3 )%$ (57,885 ) (7.4 )%
53 WEEKS ENDED
Revenues. Total revenues increased by$197.0 million , or 18.1%, to$1.3 billion during fiscal 2022, compared to$1.1 billion during fiscal 2021. The increase in revenues primarily consisted of a$172.8 million increase in sales from our restaurants in our comparable sales base, and a$21.0 million increase in sales from new restaurants not yet in our comparable restaurant sales base. This increase was partially offset by$3.4 million related to the closure of two restaurants in fiscal 2022. The effect of the 53rd week in fiscal 2022 was$26.5 million in additional revenues. On a 53 week basis, comparable restaurant sales increased 14.0%. This increase in comparable restaurant sales was the result of an increase in guest traffic of approximately 9.3% and an increase in average check of approximately 4.7%, due to menu price increases partially offset by changes in mix. The increase in guest traffic was primarily due to the re-opening of our dining rooms, which were closed or restricted in operation during portions of the same period in 2021. Cost of Sales. Cost of sales increased by$61.5 million , or 21.4%, to$349.6 million during fiscal 2022, compared to$288.1 million during fiscal 2021. This increase was primarily due to the increase in revenue, commodity cost increases and costs related to our six new restaurants opened during fiscal 2022, coupled with the impact of the 53rd week. As a percentage of revenues, cost of sales increased to 27.2% for fiscal 2022 from 26.5% for the prior fiscal year. This increase was primarily due to inflationary pressure on food costs, partially mitigated by menu price increases. Labor and Benefits. Labor and benefit costs for our restaurants increased by$82.0 million , or 20.4%, to$483.4 million during fiscal 2022, compared to$401.4 million during fiscal 2021. This increase was primarily due to an increase in the number of team members,$64.4 million related to higher wages,$14.4 million related to taxes and benefits, and$3.7 million related to higher training costs due to the re-opening of our dining rooms, which were closed or had restricted operations during a portion of the same period in 2021, offset by lower workers compensation related costs. These increases include the impact related to the six new restaurants opened during fiscal 2022, and the 53rd week. Increases in labor and benefit costs were offset in part by the closure of two restaurants during fiscal 2022. As a percentage of revenues, labor and benefit costs increased to 37.6% for fiscal 2022 from 36.9% for the prior fiscal year. This increase was primarily due to higher wages, training and overtime hours due to increased hiring activities, the deleveraging impact from the COVID-19 Omicron variant wave, which severely 30 -------------------------------------------------------------------------------- impacted sales inJanuary 2022 , and the benefit from our Employee Retention Tax Credit recognized during fiscal 2021. Included in labor and benefits for fiscal 2022 and 2021 was approximately$2.9 million and$2.7 million , respectively, or 0.2% and 0.3%, of revenues, respectively, of stock-based compensation expense related to equity awards granted in accordance with our Gold Standard Stock Ownership Program for certain restaurant management team members. Occupancy and Operating. Occupancy and operating expenses increased by$38.3 million , or 14.3%, to$306.1 million during fiscal 2022, compared to$267.9 million during fiscal 2021. This was primarily due to increases of$9.0 million in utilities,$7.0 million in supply costs,$6.6 million in marketing expenses,$4.6 million in merchant credit card fees,$3.5 million in janitorial services related to the re-opening of our dining rooms, and$3.8 million in rent related expenses. These increases include the impact related to the six new restaurants opened during fiscal 2022, the 53rd week, and one restaurant that was re-opened inAugust 2021 , partially offset by the closure of two restaurants during fiscal 2022. As a percentage of revenues, occupancy and operating expenses decreased to 23.8% for fiscal 2022 from 24.6% for the prior fiscal year. This decrease was primarily due to our ability to leverage certain fixed operating and occupancy costs over a higher revenue base. General and Administrative. General and administrative expenses increased by$5.4 million , or 7.9%, to$73.3 million during fiscal 2022, compared to$68.0 million during fiscal 2021. This was primarily due to increases of$4.7 million in personnel costs,$1.5 million in outside services as we returned closer to pre-pandemic operations and have invested in growth initiatives, and$1.2 million in travel expenses, offset by a$2.7 million decrease in our deferred compensation plan liability. These increases include the impact of the 53rd week. Included in general and administrative costs for fiscal 2022 and 2021 was approximately$7.2 million and$7.6 million , respectively, or 0.6% and 0.7% of revenues, respectively, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses decreased to 5.7% for fiscal 2022 from 6.3% for the prior fiscal year. This decrease was primarily due to a higher revenue base. Depreciation and Amortization. Depreciation and amortization decreased by$2.4 million , or 3.3%, to$70.4 million during fiscal 2022, compared to$72.8 million during fiscal 2021. This decrease was primarily related to impairment and disposal charges taken in fiscal 2021, including the impairment and reduction of carrying value related to the closure of one restaurant at the beginning of the current fiscal year. The decrease in depreciation and amortization was partially offset by depreciation expense related to our six new restaurants opened during fiscal 2022 and the impact of the 53rd week. As a percentage of revenues, depreciation and amortization decreased to 5.5% for fiscal 2022 from 6.7% for the prior fiscal year. This decrease was primarily due to a higher revenue base and lower depreciation and amortization. Restaurant Opening. Restaurant opening expense increased by$2.2 million , or 145.6%, to$3.6 million during fiscal 2022, compared to$1.5 million during fiscal 2021. This increase was primarily due to the timing of our openings and increased costs. We opened six new restaurants during fiscal 2022, compared to two new restaurants during fiscal 2021. Loss on Disposal and Impairment of Assets, Net. Loss on disposal and impairment of assets, net, was$6.2 million during fiscal 2022, compared to$3.9 million during fiscal 2021. In fiscal 2022, these costs primarily relate to the impairment and reduction in the carrying value of the long-lived related to eight restaurants, coupled with the disposals of assets in conjunction with initiatives to keep our restaurants up to date, offset by the$4.9 million gain on disposal of an internally developed software. In fiscal 2021, these costs were primarily related to the impairment and reduction in the carrying value of the long-lived and operating lease assets related to one of our restaurants, coupled with the disposals of assets in conjunction with initiatives to keep our restaurants up to date and the disposal of certain unproductive restaurant assets.
Gain on Lease Transactions, Net. Gain on lease transactions, net, was
Interest Expense, Net. Interest expense, net, decreased by$2.1 million to$2.9 million during fiscal 2022, compared to$5.0 million during fiscal 2021. This decrease was primarily due to lower average debt balance during fiscal 2022, compared to fiscal 2021. Income Tax (Benefit) Expense. Our effective income tax rate for fiscal 2022 reflected a 149.1% tax benefit compared to an 81.2% tax benefit for fiscal 2021. The effective tax rate benefit for fiscal 2022 and 2021 was different than the statutory tax rate primarily due to FICA tax tip credits. 31 --------------------------------------------------------------------------------
52 WEEKS ENDED
For discussion related to the results of operations and changes in financial condition for fiscal 2021 compared to fiscal 2020 refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2021 Form 10-K, which was filed with theUnited States Securities and Exchange Commission onFebruary 25, 2022 .
LIQUIDITY AND CAPITAL RESOURCES
The following table provides, for the periods indicated, a summary of our key liquidity measurements (dollar amounts in thousands):
January 3, 2023 December 28, 2021
Cash and cash equivalents $ 24,873 $ 38,527
Net working capital $ (114,600 ) $ (109,619 )
Current ratio 0.4:1.0 0.5:1.0
As a result of uncertainties in the near-term macro environment, including
supply chain challenges, and commodity and labor inflation, we continue to focus
on cash flow generation and maintaining a solid and flexible financial position
to execute our long-term strategy of investing in our business and opening new
restaurants. We continue to monitor the macro environment and will adjust our
overall approach to capital allocation, including share repurchases and
dividends, as the post-pandemic recovery unfolds.
We are taking what we believe to be reasonably necessary and appropriate
measures to control costs and maximize liquidity. Based on the current level of
operations, we believe that our current cash and cash equivalents, coupled with
cash generated from operations and availability under our credit agreement will
be adequate to meet our capital expenditure and working capital needs for at
least the next twelve months. Our future operating performance will be subject
to future economic conditions and to financial, business and other factors, many
of which are beyond our control.
Similar to many restaurant chains, we typically utilize operating lease
arrangements (principally ground leases) for the majority of our restaurant
locations. We believe our operating lease arrangements provide appropriate
leverage for our capital structure in a financially efficient manner. However,
we are not limited to the use of lease arrangements as our only method of
opening new restaurants and from time to time have purchased the underlying land
for new restaurants. We typically lease our restaurant locations for periods of
10 to 20 years under operating lease arrangements. Our rent structures vary from
lease to lease, but generally provide for the payment of both minimum and
contingent (percentage) rent based on sales, as well as other expenses related
to the leases (for example, our pro-rata share of common area maintenance,
property tax and insurance expenses). Many of our lease arrangements include the
opportunity to secure tenant improvement allowances to partially offset the cost
of developing and opening the related restaurants. Generally, landlords recover
the cost of such allowances from increased minimum rents. There can be no
assurance that such allowances will be available to us on each project. From
time to time, we may also decide to purchase the underlying land for a new
restaurant if that is the only way to secure a highly desirable site. Currently,
we own the underlying land for our Texas brewpub locations. We also own two
parcels of land adjacent to two of our restaurants. It is not our current
strategy to own a large number of land parcels that underlie our restaurants.
Therefore, in many cases we have subsequently entered into sale-leaseback
arrangements for land parcels that we previously purchased. We disburse cash for
certain site-related work, buildings, leasehold improvements, furnishings,
fixtures and equipment to build our leased and owned premises. We own
substantially all of the equipment, furniture and trade fixtures in our
restaurants and currently plan to do so in the future.
CASH FLOWS
The following tables set forth, for the years indicated, our cash flows from
operating, investing, and financing activities (dollar amounts in thousands):
Fiscal Year
2022 2021 2020
Net cash provided by operating activities
$ 40,541 Net cash used in investing activities (71,907 ) (42,168 ) (35,716 ) Net cash provided by (used in) financing activities 7,131 (35,254 )
24,445
Net (decrease) increase in cash and cash equivalents$ (13,654 ) $ (13,137 ) $ 29,270 32
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Operating Cash Flows
Net cash provided by operating activities was$51.1 million during fiscal 2022, representing a$13.2 million decrease from the$64.3 million provided during fiscal 2021. The decrease over the prior year is primarily due to the timing of payments for accrued expenses, offset by current year net income as compared to the prior year net loss. Investing Cash Flows
Net cash used in investing activities was
The following table provides, for the years indicated, the components of capital expenditures (dollar amounts in thousands):
Fiscal Year
2022 2021 2020
New restaurants $ 43,778 $ 20,167 $ 17,780
Restaurant maintenance and remodels, and key
productivity initiatives 31,471 19,539 23,219
Restaurant and corporate systems 3,357 2,483 2,326 Total capital expenditures$ 78,606 $ 42,189 $ 43,325 During fiscal 2022, we opened six new restaurants and closed two restaurants. We currently plan to open as many as five new restaurants in fiscal 2023, and we have entered into signed leases, land purchase agreements or letters of intent for all of our 2023 new restaurant locations. We currently anticipate our total capital expenditures for fiscal 2023 to be approximately$90 million to$95 million . This estimate includes costs to open five new restaurants and remodel more than 30 existing locations. Total capital expenditures exclude anticipated proceeds from tenant improvement allowances. We expect to fund our net capital expenditures with our current cash balance on hand, cash flows from operations and our line of credit. Our future cash requirements will depend on many factors, including the pace of our expansion, conditions in the retail property development market, construction costs, the nature of the specific sites selected for new restaurants, and the nature of the specific leases and associated tenant improvement allowances available, if any, as negotiated with landlords.
Financing Cash Flows
Net cash provided by financing activities was$7.1 million during fiscal 2022, representing a$42.4 million increase from the$35.3 million used in fiscal 2021. This increase was primarily due to lower payments on our line of credit, partially offset by no common stock issuances or stock option exercises and repurchases of common stock.
Contractual Obligations and Commitments
We believe we have sufficient liquidity to fund our operations and meet our short-term and long-term obligations. The following table summarizes our future estimated cash payments under existing contractual obligations as ofJanuary 3, 2023 , including estimated cash payments due by period (in thousands). Payments Due by Period Less Than After 5 Total 1 Year 2-3 Years 4-5 Years Years Contractual Obligations: Operating leases (1)$ 597,279 $ 66,032 $ 120,715 $ 110,156 $ 300,376 Purchase obligations (2) 15,104 14,769 335 - - Total$ 612,383 $ 80,801 $ 121,050 $ 110,156 $ 300,376 Other Obligations: Long-term debt$ 60,000 $ - $ -$ 60,000 $ - Interest (3) 14,635 3,803 7,616 3,216 - Standby letters of credit 16,214 - - 16,214 - Total$ 90,849 $ 3,803 $ 7,616 $ 79,430 $ - 33
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(1)
For a more detailed description of our operating leases, refer to Note 6 in the accompanying Consolidated Financial Statements.
(2)
Amounts represent non-cancelable commitments for the purchase of goods and other services.
(3)
We have assumed that$60.0 million remains outstanding under our Credit Facility until the maturity date ofNovember 3, 2026 , using the interest rate in effect onJanuary 3, 2023 , which was approximately 6.4%. Additionally, we have entered into lease agreements related to future restaurants with commencement dates subsequent toJanuary 3, 2023 . Our aggregate future commitment relating to these leases is$10.9 million and is not included in operating leases above.
Off-Balance Sheet Arrangements
We do not participate in transactions that generate relationships with
unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or variable interest entities ("VIEs"), which
would have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow limited purposes. As of January 3,
2023 , we are not involved in any off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our significant accounting policies are more fully described in Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15. Judgments or uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements.
Impairment of Long-Lived Assets
We assess the potential impairment of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The assets are generally reviewed for impairment on a restaurant level basis, and inclusive of property and equipment and lease right-of-use assets; or at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. Factors considered include, but are not limited to, significant underperformance by the restaurant relative to historical or projected future operating results; significant changes in the manner of use of the assets or the strategy for the overall business; significant negative industry or economic trends; or our expectation to dispose of long-lived assets before the end of their previously estimated useful lives. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.
Self-Insurance Liability
Our estimated liability is based on information provided by a third-party
actuary, combined with our judgments regarding a number of assumptions and
factors, including the frequency and severity of claims, our loss development
factors, loss costs, history, case jurisdiction, related legislation, and our
claims settlement practice. Significant judgment is required to estimate claims
incurred but not yet reported to us ("IBNR claims") as parties have yet to
assert such claims. Should a greater number of claims occur compared to what was
estimated, or should medical costs increase beyond what was expected, accruals
might not be sufficient, and additional expense may be recorded.
NEW ACCOUNTING STANDARDS
See Note 1 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for a discussion of recently adopted accounting standards.
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