UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 3, 2012
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 0-21423
BJS RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
California | 33-0485615 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
7755 Center Avenue
Suite 300
Huntington Beach, California 92647
(714) 500-2400
(Address, including zip code, and telephone number, including
area code, of registrants principal executive offices)
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 þ No ¨.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
þ Large accelerated filer |
¨ Accelerated filer | |
¨ Non-accelerated filer (do not check if smaller reporting company) |
¨ Smaller reporting company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ.
As of August 6, 2012, there were 27,990,805 shares of Common Stock of the Registrant outstanding.
Form 10-Q
For the thirteen weeks ended July 3, 2012
Page | ||||||
PART I. |
FINANCIAL INFORMATION | |||||
Item 1. |
Consolidated Financial Statements | |||||
Consolidated Balance Sheets |
1 | |||||
2 | ||||||
3 | ||||||
4 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations | 9 | ||||
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 23 | ||||
Item 4. |
Controls and Procedures | 23 | ||||
PART II. |
OTHER INFORMATION | |||||
Item 1. |
Legal Proceedings | 24 | ||||
Item 1A. |
Risk Factors | 25 | ||||
Item 6. |
Exhibits | 25 | ||||
SIGNATURES | 26 |
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
BJS RESTAURANTS, INC.
(In thousands)
July 3, 2012 (Unaudited) |
January 3, 2012 (Audited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$10,952 | $22,391 | ||||||
Marketable securities |
22,507 | 23,005 | ||||||
Accounts and other receivables |
14,632 | 14,539 | ||||||
Inventories |
5,995 | 5,963 | ||||||
Prepaids and other current assets |
6,228 | 7,902 | ||||||
Deferred income taxes |
14,184 | 13,199 | ||||||
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Total current assets |
74,498 | 86,999 | ||||||
Property and equipment, net |
420,246 | 390,591 | ||||||
Long-term marketable securities |
12,167 | 7,739 | ||||||
Goodwill |
4,673 | 4,673 | ||||||
Notes receivable |
280 | 334 | ||||||
Other assets, net |
13,314 | 11,743 | ||||||
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Total assets |
$525,178 | $502,079 | ||||||
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Liabilities and Shareholders Equity |
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Current liabilities: |
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Accounts payable |
$19,012 | $23,757 | ||||||
Accrued expenses |
47,156 | 50,411 | ||||||
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Total current liabilities |
66,168 | 74,168 | ||||||
Deferred income taxes |
36,033 | 31,561 | ||||||
Deferred rent |
16,562 | 15,219 | ||||||
Deferred lease incentives |
49,246 | 45,928 | ||||||
Other liabilities |
3,250 | 2,754 | ||||||
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Total liabilities |
171,259 | 169,630 | ||||||
Commitments and contingencies |
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Shareholders equity: |
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Preferred stock, 5,000 shares authorized, none issued or outstanding |
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Common stock, no par value, 125,000 shares authorized and 27,984 and 27,749 shares issued and outstanding as of July 3, 2012 and January 3, 2012, respectively |
180,016 | 179,054 | ||||||
Capital surplus |
35,648 | 32,722 | ||||||
Retained earnings |
138,255 | 120,673 | ||||||
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Total shareholders equity |
353,919 | 332,449 | ||||||
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Total liabilities and shareholders equity |
$525,178 | $502,079 | ||||||
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See accompanying notes to unaudited consolidated financial statements.
1
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
For The Thirteen Weeks Ended |
For The Twenty-Six Weeks Ended |
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July 3, 2012 |
June 28, 2011 |
July 3, 2012 |
June 28, 2011 |
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Revenues |
$180,696 | $152,887 | $348,300 | $297,749 | ||||||||||||
Costs and expenses: |
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Cost of sales |
45,049 | 37,886 | 86,240 | 73,606 | ||||||||||||
Labor and benefits |
61,846 | 52,315 | 120,362 | 102,780 | ||||||||||||
Occupancy and operating |
36,972 | 31,045 | 71,734 | 60,361 | ||||||||||||
General and administrative |
11,181 | 9,794 | 21,894 | 19,712 | ||||||||||||
Depreciation and amortization |
10,060 | 8,256 | 19,586 | 16,203 | ||||||||||||
Restaurant opening |
2,568 | 1,685 | 3,647 | 2,686 | ||||||||||||
Loss on disposal of assets |
397 | 283 | 451 | 668 | ||||||||||||
Legal settlements |
350 | 1,020 | 350 | 1,020 | ||||||||||||
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Total costs and expenses |
168,423 | 142,284 | 324,264 | 277,036 | ||||||||||||
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Income from operations |
12,273 | 10,603 | 24,036 | 20,713 | ||||||||||||
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Other income (expense): |
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Interest income |
79 | 56 | 148 | 88 | ||||||||||||
Interest expense |
(10) | (27) | (34) | (55) | ||||||||||||
Gain on investment settlement |
289 | 614 | 289 | 614 | ||||||||||||
Other income, net |
97 | 96 | 430 | 334 | ||||||||||||
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Total other income |
455 | 739 | 833 | 981 | ||||||||||||
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Income before income taxes |
12,728 | 11,342 | 24,869 | 21,694 | ||||||||||||
Income tax expense |
3,761 | 3,174 | 7,287 | 6,331 | ||||||||||||
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Net income |
$8,967 | $8,168 | $17,582 | $15,363 | ||||||||||||
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Net income per share: |
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Basic |
$0.32 | $0.30 | $0.63 | $0.56 | ||||||||||||
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Diluted |
$0.31 | $0.28 | $0.61 | $0.53 | ||||||||||||
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Weighted average number of shares outstanding: |
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Basic |
27,981 | 27,644 | 27,947 | 27,537 | ||||||||||||
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Diluted |
28,983 | 29,161 | 28,994 | 29,021 | ||||||||||||
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See accompanying notes to unaudited consolidated financial statements.
2
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For The Twenty-Six Weeks Ended | ||||||||
July 3, 2012 |
June 28, 2011 |
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Cash flows from operating activities: |
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Net income |
$17,582 | $15,363 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
19,586 | 16,203 | ||||||
Deferred income taxes |
3,487 | 2,870 | ||||||
Stock-based compensation expense |
2,114 | 2,139 | ||||||
Loss on disposal of assets |
451 | 668 | ||||||
Gain on investment settlement |
(289) | (614) | ||||||
Changes in assets and liabilities: |
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Accounts and other receivables |
1,357 | 1,418 | ||||||
Inventories |
(32) | (1,817) | ||||||
Prepaids and other current assets |
1,674 | 1,764 | ||||||
Other assets, net |
(1,784) | (752) | ||||||
Accounts payable |
1,767 | 3,413 | ||||||
Accrued expenses |
(3,255) | (1,335) | ||||||
Deferred rent |
1,343 | 1,200 | ||||||
Deferred lease incentives |
3,318 | 2,006 | ||||||
Other liabilities |
496 | 525 | ||||||
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Net cash provided by operating activities |
47,815 | 43,051 | ||||||
Cash flows from investing activities: |
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Purchases of property and equipment |
(56,092) | (41,387) | ||||||
Proceeds from marketable securities sold |
21,929 | 13,952 | ||||||
Purchases of marketable securities |
(25,371) | (18,973) | ||||||
Collection of notes receivable |
54 | 51 | ||||||
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Net cash used in investing activities |
(59,480) | (46,357) | ||||||
Cash flows from financing activities: |
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Excess tax benefit from stock-based compensation |
729 | 1,313 | ||||||
Taxes paid on vested stock units under employee plans |
(15) | - | ||||||
Proceeds from exercise of stock options |
962 | 4,263 | ||||||
Landlord contribution for tenant improvements, net |
(1,450) | (1,878) | ||||||
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Net cash provided by financing activities |
226 | 3,698 | ||||||
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Net (decrease) increase in cash and cash equivalents |
(11,439) | 392 | ||||||
Cash and cash equivalents, beginning of period |
22,391 | 31,518 | ||||||
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Cash and cash equivalents, end of period |
$10,952 | $31,910 | ||||||
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Supplemental disclosure of cash flow information: |
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Cash paid for interest, net of capitalized interest |
$- | $- | ||||||
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Cash paid for income taxes |
$1,273 | $1,686 | ||||||
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Supplemental disclosure of non-cash investing and financing activities: |
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Fixed assets acquired by accounts payable |
$1,506 | $1,098 | ||||||
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Stock-based compensation capitalized |
$99 | $91 | ||||||
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See accompanying notes to unaudited consolidated financial statements.
3
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the accounts of BJs Restaurants, Inc. (referred to herein as the Company or in the first person notations we, us and our) and our wholly owned subsidiaries. The financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the period. Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The preparation of financial statements in accordance with U.S. GAAP requires us to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ from these estimates.
Certain information and footnote disclosures normally included in consolidated financial statements in accordance with U.S. GAAP have been omitted pursuant to requirements of the U.S. Securities and Exchange Commission (SEC). A description of our accounting policies and other financial information is included in our audited consolidated financial statements as filed with the SEC on Form 10-K for the year ended January 3, 2012. We believe that the disclosures included in our accompanying interim financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with our consolidated financial statements and notes thereto included in the Annual Report on Form 10-K. The accompanying consolidated balance sheet as of January 3, 2012, has been derived from our audited consolidated financial statements.
Reclassifications
Certain reclassifications of prior periods financial statement amounts have been made to conform to the current periods format.
2. MARKETABLE SECURITIES
Our investment policy restricts the investment of our excess cash balances to instruments with historically minimal volatility, such as money market funds, U.S. Treasury and direct agency obligations, municipal and bank securities, and investment-grade corporate debt securities. All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents and included with cash and cash equivalents on our Consolidated Balance Sheet. Marketable securities, which we have the intent and ability to hold until maturity, are classified as held-to-maturity securities and reported at amortized cost, which approximates fair value. We determine the appropriate classification of our marketable securities at the time of purchase and reevaluate the held-to-maturity designation as of each balance sheet date. Marketable securities are classified as either short-term or long-term based on each instruments underlying contractual maturity date. Marketable securities with maturities of 12 months or less are classified as short-term and marketable securities with maturities greater than 12 months are classified as long-term. Gains or losses are determined on the specific identification cost method and recorded as a charge to earnings, when realized.
Investments in marketable securities consist of the following (in thousands):
July 3, 2012 | January 3, 2012 | |||||||||||||||||||
Amortized Cost |
Average Maturity (1) |
Amortized Cost |
Average Maturity (1) |
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Short-term marketable securities: |
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Municipal securities, U.S. Treasury and direct agency obligations |
$20,447 | 7 months | $22,005 | 8 months | ||||||||||||||||
Domestic corporate obligations |
2,060 | 10 months | 1,000 | 2 months | ||||||||||||||||
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$22,507 | $23,005 | |||||||||||||||||||
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Long-term marketable securities: |
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Municipal securities and direct agency obligations |
$10,067 | 17 months | $5,643 | 17 months | ||||||||||||||||
Domestic corporate obligations |
2,100 | 14 months | 2,096 | 16 months | ||||||||||||||||
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$12,167 | $7,739 | |||||||||||||||||||
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4
(1) | Average maturity is determined from the respective balance sheet dates as reported in the table as the lesser of the original maturity date or the expected put date for each investment type. |
The domestic corporate obligations included as long-term marketable securities are issued under the Temporary Loan Guaranty Program of the U.S. Government and are fully insured by the Federal Deposit Insurance Corporation.
3. FAIR VALUE MEASUREMENT
In accordance with U.S. GAAP, a framework for using fair value to measure assets and liabilities was established by defining a three-tier fair value hierarchy, which prioritizes the inputs used to measure fair value. These tiers include:
| Level 1: Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: Defined as pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. |
| Level 3: Defined as pricing inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in managements best estimate of fair value. |
For assets that are measured using quoted market prices in active markets, fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs or, as described above, effectively Level 1. At July 3, 2012, we had approximately $45.6 million of cash and cash equivalents and marketable securities. Our marketable securities are held by institutional brokers, classified as held-to-maturity securities and reported at amortized cost, which approximates fair value. We have placed a majority of our temporary excess cash with major financial institutions and institutional brokers that, in turn, invest in instruments with historically minimal volatility, such as money market funds, U.S. Treasury and direct agency obligations, municipal and bank securities, and investment-grade corporate debt securities. Our investment policy limits the amount of exposure to any one institution or investment. We have not experienced any losses on these marketable securities to date, and we believe that we are not exposed to significant risk of loss on these marketable securities.
4. LONG-TERM DEBT
Line of Credit
On February 17, 2012, we entered into a $75 million unsecured revolving line of credit (Line of Credit) with a major financial institution. The Line of Credit expires on January 31, 2017, and may be used for working capital and other general corporate purposes. We utilize the Line of Credit principally for letters of credit that are required to support certain of our self-insurance programs and for working capital and construction requirements as needed. As of July 3, 2012, there were no funded borrowings outstanding under the Line of Credit and there were outstanding letters of credit totaling approximately $8.9 million. The Line of Credit bears interest at either LIBOR plus a percentage not to exceed 1.50%, or at a rate ranging from the financial institutions prime rate to 0.75% below the financial institutions prime rate based on a Lease Adjusted Leverage Ratio as defined in the Line of Credit agreement. The Line of Credit agreement requires compliance with a Fixed Charge Coverage Ratio, a Lease Adjusted Leverage Ratio and certain non-financial covenants. As of July 3, 2012, we were in compliance with these covenants.
5. NET INCOME PER SHARE
5
Basic net income per share is computed by dividing the net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share reflects the potential dilution that could occur if stock options issued by us to sell common stock at set prices were exercised and if restrictions on restricted stock units issued by us were to lapse. The consolidated financial statements present basic and diluted net income per share. Common share equivalents included in the diluted computation represent shares to be issued upon assumed exercises of outstanding stock options and the assumed lapsing of the restrictions on restricted stock units using the treasury stock method.
The following table presents a reconciliation of basic and diluted net income per share computations and the number of dilutive securities (stock options and restricted stock units) that were included in the dilutive net income per share computation (in thousands).
For The Thirteen Weeks Ended |
For The Twenty-Six Weeks Ended |
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July 3, 2012 |
June 28, 2011 |
July 3, 2012 |
June 28, 2011 |
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Numerator: |
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Net income for basic and diluted net income per share |
$8,967 | $8,168 | $17,582 | $15,363 | ||||||||||||
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Denominator: |
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Weighted average shares outstanding basic |
27,981 | 27,644 | 27,947 | 27,537 | ||||||||||||
Effect of dilutive common stock equivalents |
1,002 | 1,517 | 1,047 | 1,484 | ||||||||||||
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Weighted average shares outstanding diluted |
28,983 | 29,161 | 28,994 | 29,021 | ||||||||||||
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For the thirteen weeks ended July 3, 2012 and June 28, 2011, there were approximately 0.3 million and 0.1 million shares of common stock equivalents, respectively, that have been excluded from the calculation of diluted net income per share because they are anti-dilutive. For the twenty-six weeks ended July 3, 2012 and June 28, 2011, there were approximately 0.2 million and 0.1 million shares of common stock equivalents, respectively, that have been excluded from the calculation of diluted net income per share because they are anti-dilutive.
6. RELATED PARTY
As of July 3, 2012, we believe that Jacmar Companies and their affiliates (collectively referred to herein as Jacmar) owned approximately 11.5% of our outstanding common stock. Jacmar, through its affiliation with Distribution Market Advantage, Inc. (DMA), a national foodservice distribution consortium whose participants are prominent regional foodservice distributors, is currently our largest supplier of food, beverage, paper products and supplies. We began using DMA for our national foodservice distribution in July 2006 after an extensive competitive bidding process. We are currently in the process of finalizing a new five-year agreement with DMA, after conducting another extensive competitive bidding process, which will be deemed effective in July 2012. Jacmar services our restaurants in California and Nevada, while other DMA distributors service our restaurants in all other states. We also understand that Jacmar and its affiliates are the controlling shareholders of the Shakeys pizza parlor chain. We believe that Jacmar sells products to us at prices comparable to those offered by unrelated third parties based on our competitive bidding process. Jacmar supplied us with $39.2 million and $32.7 million of food, beverage, paper products and supplies for the twenty-six weeks ended July 3, 2012 and June 28, 2011, respectively, which represents 24.8% and 24.4% of our total costs of sales and operating and occupancy costs, respectively. We had trade payables related to these products of $3.8 million and $4.4 million, at July 3, 2012 and June 28, 2011, respectively. Jacmar does not provide us with any produce, liquor, wine or beer products, all of which are provided by other vendors and included in total cost of sales.
7. STOCK-BASED COMPENSATION
We have two stock-based compensation plans the 2005 Equity Incentive Plan and the 1996 Stock Option Plan under which we may issue shares of our common stock to team members, officers, directors and consultants. Upon effectiveness of the 2005 Equity Incentive Plan (the Plan), the 1996 Stock Option Plan was closed for purposes of new grants. Both of these plans have been approved by our shareholders. Under the Plan, we have granted incentive stock options, non-qualified stock options, and restricted stock units (RSUs). On June 8, 2010, at our annual shareholder meeting, our shareholders approved an amended Plan which, among other things, (i) increased the number of shares available for issuance by 1.2 million shares, (ii) changed the fungible ratio on restricted stock awards from 2:1 to 1.5:1, (iii) extended the termination date of the Plan to 10 years following the date of approval by the shareholders, and (iv) made certain other administrative changes.
6
Under the Plan, we issue RSUs as a component of the annual equity grant award to officers and other team members and in connection with the BJs Gold Standard Stock Ownership Program (the GSSOP). The GSSOP is a longer-term equity incentive program that utilizes Company RSUs or stock options and is dependent on each participants extended service with us in their respective positions and their achievement of certain agreed-upon performance objectives during that service period (i.e., five years).
The fair value of the RSUs is the quoted market value of our common stock on the date of grant. The fair value of each RSU is expensed over the period during which its related restrictions are expected to lapse (i.e., generally five years). Stock options generally vest at 20% per year or cliff vest, either ratably in years three through five or 100% in year five, and expire 10 years from date of grant. RSUs generally vest at 20% per year for non-GSSOP RSU grantees and generally cliff vest either at 33% on the third anniversary and 67% on the fifth anniversary or at 100% after five years for GSSOP participants.
The following table presents information related to stock-based compensation (in thousands):
For The Thirteen Weeks Ended |
For The Twenty-Six Weeks Ended |
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July 3, 2012 |
June 28, 2011 |
July 3, 2012 |
June 28, 2011 |
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Labor and benefits stock-based compensation |
$249 | $342 | $552 | $706 | ||||||||||||
General and administrative stock-based compensation |
$789 | $753 | $1,562 | $1,433 | ||||||||||||
Capitalized stock-based compensation (1) |
$46 | $46 | $99 | $91 |
(1) Capitalized stock-based compensation is included in Property and equipment, net on the Consolidated Balance Sheets.
Stock Options
The exercise price of the stock options under the Companys stock-based compensation plans equals or exceeds 100% of the fair market value of the shares at the date of option grant. Stock options generally vest at 20% per year or cliff vest, either ratably in years three through five or 100% in year five, and expire ten years from date of grant. Stock option activity during the twenty-six weeks ended July 3, 2012, was as follows:
Options Outstanding | Options Exercisable | |||||||||||||||
Shares (in thousands) |
Weighted Average Exercise Price |
Shares (in thousands) |
Weighted Average Exercise Price | |||||||||||||
Outstanding options at January 3, 2012 |
1,791 | $18.53 | 1,113 | $16.85 | ||||||||||||
Granted |
99 | $46.22 | ||||||||||||||
Exercised |
(59) | $16.44 | ||||||||||||||
Forfeited |
(5) | $30.96 | ||||||||||||||
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Outstanding options at July 3, 2012 |
1,826 | $20.09 | 1,097 | $16.96 | ||||||||||||
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The fair value of each stock option grant issued is estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
For the Twenty-Six Weeks Ended | ||||||||||
July 3, 2012 | June 28, 2011 | |||||||||
Expected volatility |
37.7% | 39.8% | ||||||||
Risk free interest rate |
0.7% | 2.0% | ||||||||
Expected option life |
5 years | 5 years | ||||||||
Dividend yield |
0% | 0% | ||||||||
Fair value of options granted |
$15.94 | $13.29 |
7
U.S. GAAP requires us to make certain assumptions and judgments regarding the grant date fair value. These judgments include expected volatility, risk free interest rate, expected option life, dividend yield and vesting percentage. These estimations and judgments are determined by us using many different variables that, in many cases, are outside of our control. The changes in these variables or trends, including stock price volatility and risk free interest rate, may significantly impact the grant date fair value resulting in a significant impact to our financial results. As of July 3, 2012, total unrecognized stock based compensation expense related to non-vested stock options was $3.9 million, which is expected to be generally recognized over the next five years.
Restricted Stock Units
Restricted stock unit activity during the twenty-six weeks ended July 3, 2012, was as follows:
Shares (in thousands) |
Weighted Average Fair Value |
|||||||
Outstanding RSUs at January 3, 2012 |
616 | $20.48 | ||||||
Granted |
73 | $48.41 | ||||||
Vested or released |
(149 | ) | $19.48 | |||||
Forfeited |
(50 | ) | $23.93 | |||||
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Outstanding RSUs at July 3, 2012 |
490 | $24.88 | ||||||
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The fair value of the RSUs is the quoted market value of our common stock on the date of grant. The fair value of each RSU is expensed over the period during which the restrictions are expected to lapse (i.e., five years). We recorded stock-based compensation expense related to RSUs of approximately $1.0 million during the twenty-six weeks ended July 3, 2012. In addition, total unrecognized stock-based compensation expense related to non-vested RSUs was $6.5 million, which is expected to be generally recognized over the next five years.
8. INCOME TAXES
We utilize the liability method of accounting for income taxes. Deferred income taxes are recognized based on the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.
We recognize the impact of a tax position in our consolidated financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Interest and penalties related to uncertain tax positions are included in income tax expense.
As of July 3, 2012, a reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance at January 3, 2012 |
$ | 870 | ||
Increase based on tax positions taken during the current period |
20 | |||
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Balance at July 3, 2012 |
$ | 890 | ||
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If approximately $0.8 million of the unrecognized tax benefit recorded was reversed, our effective tax rate would be impacted. Additionally, we anticipate a decrease of $0.6 million to our liability for unrecognized tax benefits within the next twelve-month period due to the settlement of potential outstanding liabilities.
Our uncertain tax positions are related to tax years that remain subject to examination by tax authorities. As of July 3, 2012, the earliest tax year still subject to examination by the Internal Revenue Service is 2008. The earliest year still subject to examination by a significant state or local taxing jurisdiction is 2007.
9. DIVIDEND POLICY AND STOCK REPURCHASES
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We have not paid any dividends since our inception and have currently not allocated any funds for the payment of dividends. Rather, it is our current policy to retain earnings, if any, for expansion of our operations, remodeling and investing in our existing restaurants and other general corporate purposes. We have no plans to pay any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon our financial condition, operating results and other factors our Board of Directors deem relevant. Our credit facility contains, and debt instruments that we enter into in the future may contain, covenants that place limitations on the amount of dividends we may pay. We did not have any stock repurchases during the twenty-six weeks ended July 3, 2012, and we currently do not have any plan to repurchase our common stock.
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE
Certain information included in this Form 10-Q and other materials filed or to be filed by us with the SEC (as well as information included in oral or written statements made by us or on our behalf) may contain forward-looking statements about our current and expected performance trends, growth plans, business goals and other matters. These statements may be contained in our filings with the Securities and Exchange Commission, in our press releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers. Words or phrases such as believe, plan, will likely result, expect, intend, will continue, is anticipated, estimate, project, may, could, would, should, and similar expressions are intended to identify forward-looking statements. These statements, and any other statements that are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended from time to time (the Act). The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. Except for the historical information contained herein, the discussion in this Form 10-Q contains certain forward-looking statements that involve known and unknown risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The risks described in this Form 10-Q, as well as the risks identified in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 3, 2012, are not the only risks we face. These statements reflect our current perspectives and outlook with respect to BJs future expansion plans, key business initiatives, expected operating conditions and other factors. Moreover, we operate in a very competitive and rapidly changing environment, and new risk factors emerge from time to time. Additional risks and uncertainties that we are currently unaware of, or that we currently deem immaterial, also may become important factors that affect us. It is not possible for us to predict the impact of all of these factors on our business, financial condition or results of operation or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given the volatility of the operating environment and its associated risks and uncertainties, investors should not rely on forward-looking statements as any prediction or guarantee of actual results.
These forward-looking statements include, among others, statements concerning:
| our restaurant concept, its competitive advantages and our strategies for its continued evolution and expansion; |
| the rate and scope of our planned future restaurant development; |
| the estimated total domestic capacity for our larger-format restaurants; |
| anticipated dates on which we will commence or complete the development and opening of new restaurants; |
| expectations as to the timing and success of the planned expansion of our contract brewing strategy for our proprietary handcrafted beers and sodas; |
| expectations for consumer spending on casual dining restaurant occasions in general; |
| expectations as to the availability and costs of key commodities used in our restaurants and brewing operations; |
| expectations as to our menu price increases and their effect, if any, on revenue and results of operations; |
| expectations as to the effectiveness of our planned operational, menu, marketing and capital expenditure initiatives; |
9
| expectations as to our capital requirements and actual or available borrowings on our line of credit; |
| expectations as to our future revenues, operating costs and expenses; and |
| other statements of expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. |
These forward-looking statements are subject to risks and uncertainties, including financial, regulatory, consumer behavior, demographic, industry growth and trend projections, that could cause actual events or results to differ materially from those expressed or implied by the statements. Significant factors that could prevent us from achieving our stated goals include, but are not limited to:
| Our success depends substantially on the favorable image, credibility and value of the BJs brand and our reputation for offering guests a higher quality, more differentiated total dining experience at a good value. |
| Any deterioration in general economic conditions may affect consumer spending and may adversely affect our revenues, operating results and liquidity. |
| If we do not successfully expand our restaurant operations, our growth rate and results of operations would be adversely affected. |
| Our ability to open new restaurants on schedule in accordance with our targeted capacity growth rate may be adversely affected by delays or problems associated with securing suitable restaurant locations and leases, recruiting and training qualified managers and hourly team members to correctly operate our new restaurants and by other factors, some of which are beyond our control and the timing of which is difficult to forecast accurately. |
| Access to sources of capital and our ability to raise capital in the future may be limited, which could adversely affect our business and our expansion plans. |
| Any deterioration in general economic conditions could also have a material adverse impact on our landlords or on businesses neighboring our locations, which could adversely affect our revenues and results of operations. |
| Any failure of our existing or new restaurants to achieve expected results could have a negative impact on our consolidated revenues and financial results, including a potential impairment of the long-lived assets of certain restaurants. |
| Our growth may strain our infrastructure and resources, which could slow our development of new restaurants and adversely affect our ability to manage our existing restaurants. |
| Any decision to either reduce or accelerate the pace of openings may positively or adversely affect our comparative financial performance. |
| Our future operating results may fluctuate significantly due to our relatively small number of existing restaurants and the expenses required to open new restaurants. |
| A significant number of our restaurants are concentrated in California, Texas and Florida which make us particularly sensitive to economic, regulatory, weather and other risk factors and conditions that are more prevalent in those states. |
| Our operations are susceptible to changes in our food, labor and related employee benefits (including, but not limited to, group health insurance coverage for our team members), energy and supply costs which could adversely affect our profitability. |
| Our costs to construct new restaurants are susceptible to both material and labor cost fluctuations which could adversely affect our return on investment results for new restaurants. |
| Our increasing dependence on contract brewers could have an adverse effect on our operations if they cease to supply us with our proprietary handcrafted beer and sodas. |
| Government laws and regulations affecting the operation of our restaurants, including (but not limited to) those that apply to the acquisition and maintenance of our brewing and retail liquor licenses, minimum wages, consumer health and safety, group health insurance coverage, nutritional disclosures, and employment-related documentation requirements could increase our operating costs, cause unexpected disruptions to our operations and restrict our growth. |
| Our internal brewing, contract brewing and beer distribution arrangements are subject to periodic reviews and audits by various federal, state and local governmental and regulatory agencies and could be adversely affected either as a result of different interpretations of the laws and regulations that govern such arrangements or by new laws and regulations enacted or promulgated by such governments or agencies. |
For a more detailed description of these risk factors and other considerations, see Part II, Item 1A Risk Factors of this Form 10-Q and the risk factors identified in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 3, 2012.
10
GENERAL
As of August 6, 2012, we owned and operated 123 restaurants located in the states of California, Texas, Florida, Arizona, Nevada, Colorado, Ohio, Oregon, Oklahoma, Washington, Kentucky, Indiana, Louisiana and Kansas. Our restaurants operate under the BJs Restaurant & Brewery®, BJs Restaurant & Brewhouse®, BJs Pizza & Grill®, or BJs Grill names. Our menu features our BJs® award-winning, signature deep-dish pizza, our proprietary handcrafted beers and other beers, as well as a wide selection of appetizers, entrees, pastas, sandwiches, specialty salads and desserts, including our Pizookie® dessert. Our BJs Restaurant & Brewery® restaurants feature on-premise brewing facilities where BJs proprietary handcrafted beers are produced for some of our restaurants. Currently, three of our restaurants have active brewing operations on-premise, while the remainder of our proprietary beer requirements is provided by third-party craft brewers (contract brewers) using our proprietary recipes. Our seven BJs Pizza & Grill® restaurants are a smaller format, full-service restaurant when compared to our large format BJs Restaurant and Brewhouse® and BJs Restaurant and Brewery® locations and reflect the original format of the BJs restaurant concept that was first introduced in 1978. Our BJs Restaurant and Brewhouse® format currently represents our primary expansion vehicle. In October 2011, we opened our first BJs Grill location in Anaheim Hills, California. BJs Grill is a smaller footprint restaurant that is currently intended to serve as a live research and development restaurant, where certain food, beverage, facility, technological and operational enhancements will be tested for potential application to our larger restaurants. We have no current intention to open additional BJs Grill locations during fiscal 2012; however, we may consider opening such locations in the future.
Our revenues are comprised of food and beverage sales at our restaurants. Revenues from restaurant sales are recognized when payment is tendered at the point of sale. Revenues from our gift cards are recognized upon redemption in our restaurants. Gift card breakage is recognized as other income on our Consolidated Statements of Income. Gift card breakage is recorded when the likelihood of the redemption of the gift cards becomes remote, which is typically after 24 months from original gift card issuance.
Cost of sales is comprised of food and beverage costs. The components of cost of sales are variable and typically fluctuate directly with sales volumes. Labor and benefit costs include direct hourly and management wages, bonuses and payroll taxes and fringe benefits for restaurant employees, including stock-based compensation that is directly related to restaurant level team members.
Occupancy and operating expenses include restaurant supplies, credit card fees, marketing costs, fixed rent, percentage rent, common area maintenance charges, utilities, real estate taxes, repairs and maintenance and other related restaurant costs.
General and administrative costs include all corporate, field supervision and 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 employee benefits (including stock-based compensation expense), travel and relocation costs, information systems, the cost to recruit and train new restaurant management employees, corporate rent, and legal, professional and consulting fees.
Depreciation and amortization principally include depreciation on capital expenditures for restaurants.
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 stocking of operating supplies and other direct costs related to the opening of a restaurant, including rent during the construction and in-restaurant training period.
While we currently expect to pursue the renewal of substantially all of our expiring restaurant leases, no guarantee can be given that such leases will be renewed or, if renewed, that rents will not increase substantially. We currently plan to close our smaller format BJs Pizza & Grill® restaurant located in Boulder, Colorado upon the expiration of its lease in August 2012 and relocate this restaurant to another site in Boulder, Colorado, that can accommodate a larger-format, more productive BJs Restaurant and Brewhouse®.
In calculating comparable company-owned 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 representative values that we assign to certain menu items or individual guest tickets. In turn, these values are also utilized to calculate our estimated average guest check amount.
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our unaudited Consolidated Statements of Income expressed as percentages of total revenues. The results of operations for the thirteen and twenty-six weeks ended July 3, 2012 and June 28, 2011, are not necessarily indicative of the results to be expected for the full fiscal year.
For The Thirteen Weeks Ended |
For The Twenty-Six Weeks Ended |
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July 3, 2012 |
June 28, 2011 |
July 3, 2012 |
June 28, 2011 |
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Revenues |
100.0% | 100.0% | 100.0% | 100.0% | ||||||||||||
Costs and expenses: |
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Cost of sales |
24.9 | 24.8 | 24.8 | 24.7 | ||||||||||||
Labor and benefits |
34.2 | 34.2 | 34.6 | 34.5 | ||||||||||||
Occupancy and operating |
20.5 | 20.3 | 20.6 | 20.3 | ||||||||||||
General and administrative |
6.2 | 6.4 | 6.3 | 6.6 | ||||||||||||
Depreciation and amortization |
5.6 | 5.4 | 5.6 | 5.4 | ||||||||||||
Restaurant opening |
1.4 | 1.1 | 1.0 | 0.9 | ||||||||||||
Loss on disposal of fixed assets |
0.2 | 0.2 | 0.1 | 0.2 | ||||||||||||
Legal settlements |
0.2 | 0.7 | 0.1 | 0.3 | ||||||||||||
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Total costs and expenses |
93.2 | 93.1 | 93.1 | 93.0 | ||||||||||||
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Income from operations |
6.8 | 6.9 | 6.9 | 7.0 | ||||||||||||
Other income (expense): |
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Interest income |
- | - | - | - | ||||||||||||
Interest expense |
- | - | - | - | ||||||||||||
Gain on investment settlement |
0.2 | 0.4 | 0.1 | 0.2 | ||||||||||||
Other income, net |
0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||
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Total other income |
0.3 | 0.5 | 0.2 | 0.3 | ||||||||||||
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Income before income taxes |
7.0 | 7.4 | 7.1 | 7.3 | ||||||||||||
Income tax expense |
2.1 | 2.1 | 2.1 | 2.1 | ||||||||||||
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Net income |
5.0% | 5.3% | 5.0% | 5.2% | ||||||||||||
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Thirteen Weeks Ended July 3, 2012 (second quarter of 2012) Compared to Thirteen Weeks Ended June 28, 2011 (second quarter of 2011).
Revenues. Total revenues increased by $27.8 million, or 18.2%, to $180.7 million during the thirteen weeks ended July 3, 2012, from $152.9 million during the comparable thirteen week period of 2011. The increase in revenues consisted of an increase of approximately $22.2 million in sales from new restaurants not yet in our comparable sales base and an approximate 4.4% increase in comparable restaurant sales. The increase in comparable restaurant sales resulted from an estimated effective menu price increase factor of approximately 3.2%, coupled with an estimated 0.8% benefit from increased guest traffic and an estimated net benefit of approximately 0.4% from guest purchase incidence rates and menu mix shifts. We estimate that comparable sales amounts for the full second quarter of 2012 benefited approximately 0.3% from the calendar shift of the July 4th holiday from a Monday in the prior years quarter to a Wednesday for the current years quarter. Accordingly, this calendar shift will unfavorably impact our comparable restaurant sales comparisons for the third quarter of 2012.
Our restaurants, like most in casual dining, are impacted by inflationary pressures for the costs of certain commodities, labor and other operating expenses. We attempt to offset the impact of inflation on our cost structure with purchasing economies of scale, productivity and efficiency improvements, menu merchandising and menu price increases. If our guests do not accept our menu price increases, either by reducing their visits to our restaurants or by changing their purchasing patterns at our restaurants, the expected benefit of any menu price increase could be negated and our operating margins could be adversely impacted. We currently expect our estimated effective menu price increase for fiscal 2012 to be in the 3% range on an annualized basis. However, depending on inflationary pressures, costs for key inputs and general economic conditions for consumer discretionary spending, our actual menu pricing for fiscal 2012 may be greater or less than our current expectations. Additionally, to help protect guest traffic and to respond to the actions of our competitors, we may consider the promotion of selective menu offerings or introduce new menu offerings at reduced or lower price points which could have the effect of further reducing any benefit from menu price increases. As a relatively small casual dining restaurant chain, we do not have the financial resources to match the marketing and advertising spending levels of our larger casual dining competitors. Accordingly, increased marketing and advertising spending by our larger competitors may also adversely impact general levels of guest traffic in our restaurants. Furthermore, we believe that our guest traffic levels will also be dependent upon consumer confidence, discretionary consumer spending and other economic conditions including energy prices, commodity inflation and overall employment.
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All potential menu price increases must be carefully considered in light of their ultimate acceptability by our restaurant guests. Additionally, other factors outside of our control, such as inclement weather, shifts in the holiday calendar, competitive restaurant intrusions into our trade areas, heavy promotional and discounting activities by our competitors, general economic and competitive conditions and other factors, as described in the Risk Factors section in Part I, Item 1A of our Annual Report on Form 10-K for the year ended January 3, 2012, can impact comparable sales.
Cost of Sales. Cost of sales increased by $7.2 million, or 18.9%, to $45.0 million during the thirteen weeks ended July 3, 2012, from $37.9 million during the comparable thirteen week period of 2011. This increase was primarily due to the opening of 15 new restaurants since the thirteen weeks ended June 28, 2011. As a percentage of revenues, cost of sales increased slightly to 24.9% for the current thirteen week period from 24.8% for the prior year comparable thirteen week period. This slight percentage increase was primarily due to increased commodity costs and planned shifts in our menu mix toward the sale of more higher priced menu items, including steaks and seafood entrees, that also have higher food cost percentages, partially offset by increased revenues from our estimated effective menu price increases.
We do anticipate that cost of sales in our new restaurants will typically be higher during the first several months of operations than in our mature restaurants, as our restaurant management teams become accustomed to optimally predicting, managing and servicing sales volumes at our new restaurants. Accordingly, a comparatively large number of new restaurant openings in any single quarter may significantly impact total cost of sales comparisons for our entire business. Additionally, restaurants opened in new markets may initially experience higher commodity costs than our established restaurants, where we have greater market penetration that generally results in greater purchasing and distribution economies of scale.
We provide our customers a large variety of menu items and, as a result, we are not overly dependent on a single group of commodities. However, based on current trends and expectations, we believe the overall cost environment for food commodities will likely be subject to upward pressure during 2012 and into 2013, primarily due to domestic and worldwide agricultural, supply/demand and other macroeconomic factors that are outside of our control, including the severe drought conditions in key domestic grain producing regions. While we continue to work with our suppliers to control food costs, and while we have taken steps to enter into longer-term agreements for some of the commodities used in our restaurant operations, there can be no assurance that future supplies and costs for such commodities will not significantly increase due to weather and other market conditions outside of our control. Additionally, there are some commodities that we are unable to contract for long periods of time, such as fluid dairy items, fresh seafood and many produce items, or where we have currently chosen not to contract for long periods of time such as our grand beef. There are also certain commodity items, such as certain produce items and certain seafood items, in which the contracts principally consist of collar agreements whereby the costs are subject to floors and ceilings. It is our current intention to attempt to offset our expected commodity cost increases through certain cost savings and productivity/efficiency initiatives and menu mix shifts, coupled with selective menu price increases. However, there can be no assurance that we will be entirely successful in this respect.
The cost to produce and distribute our proprietary handcrafted beer is included in our cost of sales. We currently have qualified three contract brewers to produce our high-quality handcrafted beer. During fiscal 2012, we currently anticipate that our qualified contract brewers will produce approximately 70 to 75% of our estimated requirement of approximately 70,000 barrels of our proprietary handcrafted beer. Our longer-term objective is to have large contract brewers produce substantially all of our larger-volume beers. We currently expect to continue to create and brew our smaller-volume seasonal and specialty beers; however, we may eventually decide to also move the majority of this production to contract brewers as we continue to grow our restaurant base and therefore increase our demand for our proprietary handcrafted beer. We believe the larger-scale contract brewers have greater economies of scale, stronger quality control systems and more effective, leverageable supply chain relationships than we have as a relatively small restaurant company. Additionally, this allows our brewery department to focus on creating and developing distinctive and unique beer flavors for us as opposed to focusing on the production and logistics of large scale brewing. As a result, over the next several years, we expect that the production cost of our larger-volume proprietary handcrafted beers can be gradually reduced, while simultaneously providing an improvement in the overall consistency of our beer. However, freight costs from our contract brewing locations will likely absorb a large portion of those production cost savings for a period of time until we can further increase the number of restaurants we operate and negotiate more favorable terms with our transportation vendors. Contract brewers also produce substantially all of our handcrafted soda and cider products, the costs of which are also included in our cost of sales.
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Labor and Benefits. Labor and benefit costs for our restaurants increased by $9.5 million, or 18.2%, to $61.8 million during the thirteen weeks ended July 3, 2012, from $52.3 million during the comparable thirteen week period of 2011. This increase was primarily due to the opening of 15 new restaurants since the thirteen weeks ended June 28, 2011. As a percentage of revenues, labor and benefit costs remained at 34.2% for both the current thirteen week period and for the prior year comparable thirteen week period. Included in labor and benefits for the thirteen weeks ended July 3, 2012 and June 28, 2011 was approximately $0.2 million and $0.3 million, or 0.1% and 0.2% of revenues, respectively, of stock-based compensation expense related to restricted stock units granted in accordance with our Gold Standard Stock Ownership Program for certain restaurant management team members.
Our restaurants can be affected by increases in federal and state minimum wages and state unemployment insurance taxes. Additionally, some states have annual minimum wage increases correlated with either state or federal increases in the consumer price index. In the past, we have been able to react to changes in our key operating costs, including minimum wage increases, by gradually increasing our menu prices and improving our productivity in our restaurants. However, we cannot guarantee that all or any future cost increases can be offset by increased menu prices or that increased menu prices will be accepted by our restaurant guests without any resulting changes in their visit frequencies or purchasing patterns.
For new restaurants, labor expenses will typically be higher than normal during the first several months of operations, if not longer in some cases, until our restaurant management team at each new restaurant becomes more accustomed to optimally predicting, managing and servicing the sales volumes expected at our new restaurants. Accordingly, a comparatively large number of new restaurant openings in any single quarter may significantly impact labor cost comparisons for the entire Company.
Occupancy and Operating. Occupancy and operating expenses increased by $5.9 million, or 19.1%, to $37.0 million during the thirteen weeks ended July 3, 2012, from $31.0 million during the comparable thirteen week period of 2011. This increase was primarily due to the opening of 15 new restaurants since the thirteen weeks ended June 28, 2011. As a percentage of revenues, occupancy and operating expenses increased to 20.5% for the current thirteen week period from 20.3% for the prior year comparable thirteen week period. This percentage increase was principally due to higher marketing costs offset by our ability to leverage the fixed component of these expenses over a higher revenue base as a result of comparable sales increases.
General and Administrative. General and administrative expenses increased by $1.4 million, or 14.2%, to $11.2 million during the thirteen weeks ended July 3, 2012, from $9.8 million during the comparable thirteen week period of 2011. The increase in general and administrative costs was primarily due to higher field supervision and support costs. Also included in general and administrative costs in each of the thirteen weeks ended July 3, 2012 and June 28, 2011, was $0.8 million of stock-based compensation expense. As a percentage of revenues, general and administrative expenses decreased to 6.2% for the current thirteen week period from 6.4% for the prior year comparable thirteen week period. This percentage decrease was primarily due to our ability to leverage the fixed component of these expenses over a higher revenue base.
Depreciation and Amortization. Depreciation and amortization increased by $1.8 million, or 21.9%, to $10.1 million during the thirteen weeks ended July 3, 2012, from $8.3 million during the comparable thirteen week period of 2011. As a percentage of revenues, depreciation and amortization increased to 5.6% for the current thirteen week period from 5.4% for the prior year period. This percentage increase was principally a result of increased construction costs for new restaurants and depreciation on our new operating toolsets, restaurant remodels and initiatives.
Restaurant Opening. Restaurant opening expense increased by $0.9 million, or 52.4%, to $2.6 million during the thirteen weeks ended July 3, 2012, from $1.7 million during the comparable thirteen week period of 2011. This increase is primarily due to opening costs related to five restaurant openings during the thirteen weeks ended July 3, 2012, and one opening shortly thereafter as compared to three restaurant openings during the thirteen weeks ended June 28, 2011, and one restaurant opening shortly thereafter. Our opening costs will fluctuate from period to period, depending upon, but not limited to, the number of restaurant openings, the size and concept of the restaurants being opened, the location of the restaurants and the complexity of the staff hiring and training process.
Loss on Disposal of Assets. Loss on disposal of assets increased by $0.1 million, or 40.3%, to $0.4 million during the thirteen weeks ended July 3, 2012, from $0.3 million during the comparable thirteen week period of 2011. For the thirteen weeks ended July 3, 2012, these costs related to the write off of the remaining net book value of assets due to the upcoming closure and relocation of our small-format restaurant in Boulder, Colorado, coupled with the disposal of certain unproductive restaurant assets in connection with our ongoing productivity/efficiency initiatives and facility image enhancement activities.
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Legal Settlements. Legal settlement expenses of approximately $0.4 million, or 0.2% of revenues, during the thirteen weeks ended July 3, 2012, relates to the settlement of a trademark infringement civil action as compared to legal settlement expenses of approximately $1.0 million, or 0.7% of revenues, during the thirteen weeks ended June 28, 2011, which related to the settlements of certain California employment practices lawsuits that had been outstanding since 2009 and 2010. See Part II Other Information; Item 1 Legal Proceedings of this Form 10-Q for additional information regarding pending and recently settled legal proceedings.
Interest Income. Interest income increased by $0.02 million, or 41.1%, to $0.08 million during the thirteen weeks ended July 3, 2012, from $0.06 million during the comparable thirteen week period of 2011. This increase was primarily due to slightly higher interest rates and investment balances compared to last year.
Interest Expense. Interest expense was $0.01 million during the thirteen weeks ended July 3, 2012, compared to $0.03 million during the comparable thirteen week period of 2011.
Gain on Investment Settlement. Gain on investment settlement of approximately $0.3 million and $0.6 million for the thirteen weeks ended July 3, 2012, and the comparable thirteen week period of 2011, respectively, relate to the settlement agreement reached in December 2009 with our former broker-dealer for the full liquidation of our auction rate securities investment portfolio. Under the terms of the settlement agreement, we are entitled to potential future recoveries of our loss on that portfolio based on the performance of those auction rate securities through December 2012. In connection with this settlement, during the thirteen weeks ended July 3, 2012, and the comparable thirteen week period of 2011, certain of these aforementioned securities were redeemed at par, resulting in additional cash recoveries.
Other Income, Net. Other income, net, remained at $0.1 million for the thirteen weeks ended July 3, 2012, and for the comparable thirteen week period of 2011.
Income Tax Expense. Our effective income tax rate for the thirteen weeks ended July 3, 2012, was 29.5% compared to 28.0% for the comparable thirteen week period of 2011. The effective income tax rate for the thirteen weeks ended July 3, 2012, differed from the statutory income tax rate primarily due to tax credits. We currently estimate our effective tax rate to be in the approximate range of 29% to 30% for fiscal 2012. However, our actual effective tax rate for fiscal 2012 may be different than our current estimate due to actual revenues, pre-tax income and tax credits achieved during the year and the deductibility of any subsequent disqualified dispositions related to incentive stock options.
Twenty-Six Weeks Ended July 3, 2012 (second quarter to date of 2012) Compared to Twenty-Six Weeks Ended June 28, 2011 (second quarter to date of 2011).
Revenues. Total revenues increased by $50.6 million, or 17.0%, to $348.3 million during the twenty-six weeks ended July 3, 2012, from $297.7 million during the comparable twenty-six week period of 2011. The increase in revenues consisted of an increase of approximately $40.3 million in sales from new restaurants not yet in our comparable sales base and an approximate 3.9% increase in comparable restaurant sales. The increase in comparable restaurant sales resulted from an estimated effective menu price increase factor of approximately 3.1%, coupled with an estimated 0.8% benefit from increased guest traffic.
Cost of Sales. Cost of sales increased by $12.6 million, or 17.2%, to $86.2 million during the twenty-six weeks ended July 3, 2012, from $73.6 million during the comparable twenty-six week period of 2011. This increase was primarily due to the opening of 15 new restaurants since the twenty-six weeks ended June 28, 2011. As a percentage of revenues, cost of sales increased to 24.8% for the current twenty-six week period from 24.7% for the prior year comparable twenty-six week period. This slight percentage increase was primarily due to increased commodity costs and planned shifts in our menu mix toward the sale of more higher priced menu items, including steaks and seafood entrees, that also have higher food cost percentages, partially offset by increased revenues from our estimated effective menu price increases.
Labor and Benefits. Labor and benefit costs for our restaurants increased by $17.6 million, or 17.1%, to $120.4 million during the twenty-six weeks ended July 3, 2012, from $102.8 million during the comparable twenty-six week period of 2011. This increase was primarily due to the opening of 15 new restaurants since the twenty-six weeks ended June 28, 2011. As a percentage of revenues, labor and benefit costs slightly increased to 34.6% for the current twenty-six week period from 34.5% for the prior year comparable twenty-six week period. This slight percentage increase was primarily related to higher hourly kitchen and training labor due to the intensiveness and complexity of our new menu offerings, partially offset by our ability to leverage our fixed and semi-fixed labor costs over a higher revenue base as a result of comparable sales increases. Included in labor and benefits for the twenty-six weeks ended July 3, 2012 and June 28, 2011 was approximately $0.6 million and $0.7 million or 0.2% of revenues for each year, of stock-based compensation expense related to restricted stock units granted in accordance with our Gold Standard Stock Ownership Program for certain restaurant management team members.
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Occupancy and Operating. Occupancy and operating expenses increased by $11.4 million, or 18.8%, to $71.7 million during the twenty-six weeks ended July 3, 2012, from $60.4 million during the comparable twenty-six week period of 2011. This increase was primarily due to the opening of 15 new restaurants since the twenty-six weeks ended June 28, 2011. As a percentage of revenues, occupancy and operating expenses increased to 20.6% for the current twenty-six week period from 20.3% for the prior year comparable twenty-six week period. This percentage increase was principally due to higher marketing, property and general liability insurance costs, partially offset by our ability to leverage the fixed component of these expenses over a higher revenue base as a result of comparable sales increases.
General and Administrative. General and administrative expenses increased by $2.2 million, or 11.1%, to $21.9 million during the twenty-six weeks ended July 3, 2012, from $19.7 million during the comparable twenty-six week period of 2011. The increase in general and administrative costs was primarily due to higher field supervision and support costs. Also included in general and administrative costs for the twenty-six weeks ended July 3, 2012 and June 28, 2011, was $1.6 million and $1.4 million, respectively, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses decreased to 6.3% for the current twenty-six week period from 6.6% for the prior year comparable twenty-six week period. This percentage decrease was primarily due to our ability to leverage the fixed component of these expenses over a higher revenue base.
Depreciation and Amortization. Depreciation and amortization increased by $3.4 million, or 20.9%, to $19.6 million during the twenty-six weeks ended July 3, 2012, from $16.2 million during the comparable twenty-six week period of 2011. As a percentage of revenues, depreciation and amortization increased to 5.6% for the current twenty-six week period from 5.4% for the prior year period. This percentage increase was principally a result of increased construction costs for new restaurants and depreciation on our new operating toolsets, restaurant remodels and initiatives.
Restaurant Opening. Restaurant opening expense increased by $1.0 million, or 35.8%, to $3.6 million during the twenty-six weeks ended July 3, 2012, from $2.7 million during the comparable twenty-six week period of 2011. This increase is primarily due to opening costs related to seven restaurant openings during the twenty-six weeks ended July 3, 2012, and one opening shortly thereafter as compared to five restaurant openings during the twenty-six weeks ended June 28, 2011, and one restaurant opening shortly thereafter. Restaurant opening expenses for any given quarter will typically include expenses associated with restaurants opened during the quarter as well as expenses related to restaurants opened towards the end of the prior quarter and restaurants opening in subsequent quarters.
Loss on Disposal of Assets. Loss on disposal of assets decreased by $0.2 million, or 32.5%, to $0.5 million during the twenty-six weeks ended July 3, 2012, from $0.7 million during the comparable twenty-six week period of 2011. For the twenty-six weeks ended July 3, 2012, these costs were primarily related to the write off of the remaining net book value of assets related to the upcoming closure and relocation of our small-format restaurant in Boulder, Colorado, coupled with the disposal of certain unproductive restaurant assets in connection with our ongoing productivity/efficiency initiatives and facility image enhancement activities.
Legal Settlements. Legal settlement expenses of approximately $0.4 million, or 0.1% of revenues, during the twenty-six weeks ended July 3, 2012, relates to the settlement of a trademark infringement civil action as compared to legal settlements of approximately $1.0 million, or 0.3% of revenues, during the twenty-six weeks ended June 28, 2011, which related to the settlements of certain California employment practices lawsuits that had been outstanding since 2009 and 2010. See Part II Other Information; Item 1 Legal Proceedings of this Form 10-Q for additional information regarding pending and recently settled legal proceedings.
Interest Income. Interest income increased by $0.06 million, or 68.2%, to $0.1 million during the twenty-six weeks ended July 3, 2012, from $0.09 million during the comparable twenty-six week period of 2011. This increase was primarily due to slightly higher interest rates and investment balances compared to last year.
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Interest Expense. Interest expense was $0.03 million during the twenty-six weeks ended July 3, 2012, compared to $0.06 million during the comparable twenty-six week period of 2011.
Gain on Investment Settlement. Gain on investment settlement of approximately $0.3 million and $0.6 million for the twenty-six weeks ended July 3, 2012, and the comparable twenty-six week period of 2011, respectively, relate to the settlement agreement reached in December 2009 with our former broker-dealer for the full liquidation of our auction rate securities investment portfolio. Under the terms of the settlement agreement, we are entitled to potential future recoveries of our loss on that portfolio based on the performance of those auction rate securities through December 2012. In connection with this settlement, during the twenty-six weeks ended July 3, 2012, and the comparable twenty-six week period of 2011, certain of these aforementioned securities were redeemed at par, resulting in additional cash recoveries.
Other Income, Net. Other income, net, increased by $0.1 million, or 28.4%, to $0.4 million during the twenty-six weeks ended July 3, 2012, from $0.3 million during the comparable twenty-six week period of 2011. This increase is primarily due to greater gift card breakage income. Based on an analysis of our gift card program since its inception, we determined that at 24 months after issuance date, the likelihood of gift card redemption is remote.
Income Tax Expense. Our effective income tax rate for the twenty-six weeks ended July 3, 2012, was 29.3% compared to 29.2% for the comparable twenty-six week period of 2011. The effective income tax rate for the twenty-six weeks ended July 3, 2012, differed from the statutory income tax rate primarily due to tax credits. We currently estimate our effective tax rate to be in the approximate range of 29% to 30% for fiscal 2012. However, our actual effective tax rate for fiscal 2012 may be different than our current estimate due to actual revenues, pre-tax income and tax credits achieved during the year and the deductibility of any subsequent disqualified dispositions related to incentive stock options.
LIQUIDITY AND CAPITAL RESOURCES
The following tables set forth, for the periods indicated, a summary of our key liquidity measurements (dollar amounts in thousands):
July 3, 2012 | January 3, 2012 | |||||||
Cash and cash equivalents |
$10,952 | $22,391 | ||||||
Total marketable securities |
$34,674 | $30,744 | ||||||
Net working capital |
$8,330 | $12,831 | ||||||
Current ratio |
1.1:1.0 | 1.2:1.0 | ||||||
For The Twenty-Six Weeks Ended | ||||||||
July 3, 2012 | June 28, 2011 | |||||||
Cash provided by operating activities |
$47,815 | $43,051 | ||||||
Capital expenditures |
$56,092 | $41,387 |
Our fundamental corporate finance philosophy is to maintain a conservative balance sheet in order to support our long-term restaurant expansion plan with sufficient financial flexibility, to provide the financial resources necessary to protect and enhance the competitiveness of our restaurant and brewing operations, to provide our restaurant landlords with confidence as to our intent and ability to honor all of our financial obligations under our restaurant leases, and to provide a prudent level of financial capacity to manage the risks and uncertainties of conducting our business operations on a larger scale. We obtain capital resources from our ongoing operations, employee stock option exercises and tenant improvement allowances from our landlords. Additionally, in the past we have obtained capital resources from public stock offerings. As an additional source of liquidity, we have a $75 million credit facility in place that expires on January 31, 2017.
Our capital requirements are principally related to our restaurant expansion plans and restaurant enhancements and initiatives. While our ability to achieve our growth plans is dependent on a variety of factors, some of which are outside of our control, our primary growth objective for each of fiscal 2012 and 2013 is to achieve a low double-digit increase in total restaurant operating weeks from the development and opening of new restaurants, coupled with the carryover impact of partial-year 2011 and 2012 openings, respectively. Depending on the expected level of future new restaurant development and expected tenant improvement allowances that we receive from our landlords, as well as our other planned capital investments including ongoing maintenance capital expenditures, our base of
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established restaurant operations may not yet be large enough to generate enough cash flow from operations to totally fund our planned expansion over the longer run. We currently estimate the total domestic capacity for our brewhouse restaurant format to be at least 425 large-format restaurants. Accordingly, we will continue to actively monitor overall conditions in the capital markets with respect to the potential sources and timing of additional financing for our planned future expansion. However, there can be no assurance that such financing will be available when required or available on terms acceptable to us. If we are unable to secure additional capital resources, we may be required to reduce our longer-term planned rate of expansion.
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 continue to 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. While our operating lease obligations are not currently required to be reflected as indebtedness on our Consolidated Balance Sheets, the minimum rents and other related lease obligations, such as common area expenses, under our lease agreements must be satisfied by cash flows from our ongoing operations. Accordingly, our lease arrangements reduce, to some extent, our capacity to utilize funded indebtedness in our capital structure.
We also require capital resources to evolve, maintain and to increase the productive capacity of our existing base of restaurants and brewery operations and to further expand and strengthen the capabilities of our corporate and information technology infrastructures. Our requirement for working capital is not significant since our restaurant guests pay for their food and beverage purchases in cash or credit cards at the time of the sale. Thus, we are able to sell many of our inventory items before we have to pay our suppliers for such items.
We typically seek to lease our restaurant locations for primary periods of 15 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). In addition, 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. We currently expect to secure approximately $10 to $13 million of committed tenant improvement allowances from our planned new restaurant openings during fiscal 2012. However, in light of current conditions in the credit and real estate development markets, there can be no assurance that such allowances will continue to be available to us. 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 land that underlies five of our restaurants. We may also decide to sell and then lease back the land that we own, depending on conditions in the sale/leaseback market and other factors. We disburse cash for certain site-related work, buildings, leasehold improvements, furnishings, fixtures and equipment to build out 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.
Our cash flows from operating activities, as detailed in the Consolidated Statements of Cash Flows, provided $47.8 million of net cash from operations during the twenty-six weeks ended July 3, 2012, representing a $4.7 million increase from the $43.1 million provided by during the twenty-six week period of 2011. The increase in cash from operating activities for the twenty-six weeks ended July 3, 2012, in comparison to twenty-six weeks ended June 28, 2011, is primarily due to the increase in net income and higher depreciation expense as a result of more restaurants in operation, offset by the timing of accrued expenses and accounts payable payments.
For the twenty-six weeks ended July 3, 2012, total capital expenditures were approximately $56.1 million, of which expenditures for the acquisition of restaurant and brewery equipment and leasehold improvements to construct new restaurants were $41.0 million. These expenditures were primarily related to the construction of our seven new restaurants that opened during the twenty-six weeks ended July 3, 2012, as well as expenditures related to five additional restaurants expected to open in the third quarter of fiscal 2012. In addition, total capital expenditures related to the maintenance and key productivity initiatives of existing restaurants and expenditures for restaurant and corporate systems were $10.0 million and $5.1 million, respectively.
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We filed a shelf registration statement on Form S-3 with the U.S. Securities and Exchange Commission (SEC) on January 7, 2010 with respect to various types of securities not to exceed an aggregate value of $75 million. We do not have any immediate intentions or commitments to sell securities and will be required to file a post-effective amendment or file a new registration statement in the event we desire to publicly sell securities. The terms of any future offering of securities would be established at the time of such offering subject to market conditions. In addition, the Form S-3 also included the registration of 3,801,730 shares of common stock previously acquired by certain shareholders from the Company in various transactions several years ago. We registered those shares to fulfill our contractual obligations under a registration rights agreement with those shareholders.
We have a $75 million unsecured revolving line of credit (Line of Credit) that expires on January 31, 2017, and may be used for working capital and other general corporate purposes. We utilize the Line of Credit principally for letters of credit that are required to support certain of our self-insurance programs and for working capital and construction requirements as needed. Borrowings under the Line of Credit will bear interest at either LIBOR plus a percentage not to exceed 1.50%, or at a rate ranging from the financial institutions prime rate to 0.75% below the financial institutions prime rate based on a Lease Adjusted Leverage Ratio as defined in the Line of Credit agreement. The Line of Credit agreement also requires compliance with a Fixed Charge Coverage Ratio, a Lease Adjusted Leverage Ratio and certain non-financial covenants. While we have the Line of Credit in place and it can be currently drawn upon, it is possible that creditors could place limitations or restrictions on our ability to borrow from the Line of Credit.
Our capital expenditures during fiscal 2012 will continue to be significant as we currently plan to open as many as 16 new restaurants, including one relocation of an existing restaurant during the year, in addition to our necessary maintenance and key initiative-related capital expenditures. As of August 6, 2012, we have entered into fifteen signed leases for restaurants to be opened this year and fiscal 2013. Additionally, we expect to enter into several more leases during fiscal 2012 for future restaurants. We currently anticipate our total capital expenditure for fiscal 2012, including all expenditure categories, to be approximately $100 to $105 million. We expect to fund our anticipated capital expenditures for fiscal 2012 with current cash and investment balances on hand, expected cash flow from operations and expected tenant improvement allowances of approximately $10 to $13 million. 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.
We significantly depend on our expected cash flow from operations, coupled with agreed-upon landlord tenant improvement allowances, to fund the majority of our planned capital expenditures for 2012 and 2013. If our business does not generate enough cash flow from operations as expected, or if our landlords are unable to honor their agreements with us, and replacement funding sources are not otherwise available to us from borrowings under our credit facility or other alternatives, we may not be able to expand our operations at the pace currently planned.
As of August 6, 2012, we had an uncollected outstanding tenant improvement allowance from one landlord in the amount of $1.2 million for one of our restaurants which opened in fiscal 2008. We do not believe that this uncollected allowance will have a material impact on our overall liquidity. Our lease with the landlord allows us to reduce our rent payable and thereby collect certain penalties as provided in our lease in the event that our tenant improvement allowances cannot be collected. In August 2011, we filed a lawsuit against the landlord for breach of contract and fraud. Concurrently, we are attempting to negotiate an amendment to the lease with the landlord in an effort to resolve the outstanding litigation.
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 July 3, 2012, we are not involved in any off-balance sheet arrangements.
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IMPACT OF INFLATION
Our profitability is dependent, among other things, on our ability to anticipate and react to changes in the costs of key operating resources, including food and other raw materials, labor, energy and other supplies and services. Substantial increases in costs and expenses could impact our operating results to the extent that such increases cannot be passed along to our restaurant guests. While we have taken steps to enter into agreements for some of the commodities used in our restaurant operations, there can be no assurance that future supplies and costs for such commodities will not fluctuate due to weather (including the ongoing severe drought conditions in key domestic grain producing regions) and other market conditions outside of our control. We are currently unable to contract for certain commodities, such as fluid dairy, fresh seafood and most fresh produce items, for long periods of time. Consequently, such commodities can be subject to unforeseen supply and cost fluctuations. The impact of inflation on food, labor, energy and occupancy costs can significantly affect the profitability of our restaurant operations.
Many of our restaurant team members are paid hourly rates related to the federal or state minimum wage. In addition, numerous state and local governments have their own minimum wage requirements that are generally greater than the federal minimum wage and are subject to annual increases based on changes in their local consumer price indices. Additionally, a general shortage in the availability of qualified restaurant management and hourly workers in certain geographical areas in which we operate has caused related increases in the costs of recruiting and compensating such team members. Certain operating and other costs, such as health benefits, taxes, insurance and other outside services, continue to increase with the general level of inflation and may also be subject to other cost and supply fluctuations outside of our control.
While we have been able to partially offset inflation and other changes in the costs of key operating resources by gradually increasing prices for our menu items, 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. From time to time, competitive conditions could 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 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.
SEASONALITY AND ADVERSE WEATHER
Our business is subject to seasonal fluctuations. Our results of operations have historically been impacted by seasonality, which directly impacts tourism at our coastal California locations. The summer months (June through August) have traditionally been higher volume periods than other periods of the year. Additionally, our restaurants in the Midwest and Eastern states, including Florida will be impacted by weather and other seasonal factors that typically impact other restaurant operations in those regions. Holidays (and shifts in the holiday calendar), severe winter weather, hurricanes, tornados, thunderstorms and similar conditions may impact restaurant sales volumes seasonally in some of the markets where we operate. Many of our restaurants are located in or near shopping centers and malls that typically experience seasonal fluctuations in sales. Quarterly results have been and will continue to be significantly impacted by the timing of new restaurant openings and their associated restaurant opening expenses. As a result of these and other factors, our financial results for any given quarter may not be indicative of the results that may be achieved for a full fiscal year.
CRITICAL ACCOUNTING POLICIES
Critical accounting policies require the greatest amount of subjective or complex judgments by management and are important to portraying our financial condition and results of operations. 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.
Fair Value of Marketable Securities and Cash Equivalents
We measure the fair value of our marketable securities using quoted market prices in active markets. All of our marketable securities are currently classified as held-to-maturity, included as short-term and long-term marketable securities in the Consolidated Balance Sheets and reported at amortized cost with related gains and losses reflected in earnings once realized in accordance with U.S. GAAP. We believe that the fair value of our marketable securities equaled the quoted market price of our marketable securities at July 3, 2012.
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We believe the carrying value of cash equivalents approximates fair value because of the short-term nature of those instruments.
Property and Equipment
We record all property and equipment at cost. Property and equipment accounting requires estimates of the useful lives for the assets for depreciation purposes and selection of depreciation methods. We believe the useful lives reflect the actual economic life of the underlying assets. We have elected to use the straight-line method of depreciation over the estimated useful life of an asset or the primary lease term of the respective lease, whichever is shorter. Renewals and betterments that materially extend the useful life of an asset are capitalized while maintenance and repair costs are charged to operations as incurred. Judgment is often required in the decision to distinguish between an asset which qualifies for capitalization versus an expenditure which is for maintenance and repairs. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation and amortization accounts are relieved, and any gain or loss is included in earnings. Additionally, any interest capitalized for new restaurant construction would be included in Property and equipment, net on the Consolidated Balance Sheets.
Impairment of Long-Lived Assets
We assess potential impairments 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 in total as well as on a restaurant by restaurant basis. Factors considered include, but are not limited to, significant underperformance by the restaurant relative to expected historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for the overall business, and significant negative industry or economic trends. The recoverability is assessed in most cases by comparing the carrying value of the asset to the undiscounted cash flows expected to be generated by the asset. This assessment process requires the use of estimates and assumptions regarding future restaurant cash flows and estimated useful lives, which are subject to a significant degree of judgment. If these assumptions change in the future, we may be required to record impairment charges for these assets or for the entire restaurant.
Self-Insurance Liability
We are self-insured for a portion of our general liability insurance and our employee workers compensation programs. We maintain coverage with a third party insurer to limit our total exposure for these programs. The accrued liability associated with these programs is based on our estimate of the ultimate costs to settle known claims as well as claims incurred but not yet reported to us (IBNR claims) as of the balance sheet date. Our estimated liability is based on information provided by our insurance broker and a third party actuary, combined with our judgments regarding a number of assumptions and factors, including the frequency and severity of claims, our claims development history, case jurisdiction, related legislation, and our claims settlement practice. Significant judgment is required to estimate IBNR claims as parties have yet to assert such claims. If actual claims trends, including the severity or frequency of claims, differ from our estimates, our financial results could be significantly impacted.
Income Taxes
We provide for income taxes based on our estimate of federal and state tax liabilities. Our estimates include, but are not limited to, effective state and local income tax rates, allowable tax credits for items such as FICA taxes paid on reported tip income and estimates related to depreciation expense allowable for tax purposes. We usually file our income tax returns several months after our fiscal year-end. We file our tax returns with the advice and compilation of tax consultants. All tax returns are subject to audit by federal and state governments, usually years after the returns are filed, and could be subject to differing interpretation of the tax laws.
Deferred tax accounting requires that we evaluate net deferred tax assets to determine if these assets will more likely than not be realized in the foreseeable future. This test requires projection of our taxable income into future years to determine if there will be taxable income sufficient to realize the tax assets (future tax deductions and FICA tax credit carryforwards). The preparation of the projections requires considerable judgment and is subject to change to reflect future events and changes in the tax laws.
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The accounting for uncertainty in tax positions requires that we recognize the impact of a tax position in our consolidated financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. We recognize interest and penalties related to uncertain tax positions in income tax expense. As of July 3, 2012, unrecognized tax benefits recorded was approximately $0.9 million.
Leases
We lease the majority of our restaurant locations. We account for our leases in accordance with U.S. GAAP, which require that our leases be evaluated and classified as operating or capital leases for financial reporting purposes. The term used for this evaluation includes renewal option periods only in instances in which the exercise of the renewal option can be reasonably assured and failure to exercise such option would result in an economic penalty. All of our restaurant leases are classified as operating leases. We disburse cash for leasehold improvements, furniture and fixtures and equipment to build out and equip our leased premises. Tenant improvement allowance incentives may be available to partially offset the cost of developing and opening the related restaurants, pursuant to agreed-upon terms in our leases. Tenant improvement allowances can take the form of cash payments upon the opening of the related restaurants, full or partial credits against minimum or percentage rents otherwise payable by us or a combination thereof. All tenant improvement allowances received by us are recorded as a deferred rent obligation and amortized over the term of the lease. The related cash received from the landlord is reflected as Landlord contribution for tenant improvements, net within financing activities of our Consolidated Statements of Cash Flows.
The lease term used for straight-line rent expense is calculated from the date we obtain possession of the leased premises through the lease termination date. We expense rent from possession date through restaurant open date as preopening expense. Once a restaurant opens for business, we record straight-line rent over the lease term plus contingent rent to the extent it exceeded the minimum rent obligation per the lease agreement.
There is potential for variability in the rent holiday period, which begins on the possession date and ends on the restaurant open date, during which no cash rent payments are typically due under the terms of the lease. Factors that may affect the length of the rent holiday period generally relate to construction related delays. Extension of the rent holiday period due to delays in restaurant opening will result in greater preopening rent expense recognized during the rent holiday period and lesser occupancy expense during the rest of the lease term (post-opening).
For leases that contain rent escalations in which the amount of the future rent is certain or can be reasonably calculated, we record the total rent payable during the lease term, as determined above, on the straight-line basis over the term of the lease (including the rent holiday period beginning upon our possession of the premises), and record the difference between the minimum rents paid and the straight-line rent as a lease obligation. Certain leases contain provisions that require additional rental payments based upon restaurant sales volume (contingent rentals). Contingent rentals are accrued each period as the liabilities are incurred, in addition to the straight-line rent expense noted above. This results in some variability in occupancy expense as a percentage of revenues over the term of the lease in restaurants where we pay contingent rent.
Management makes judgments regarding the probable term for each restaurant property lease, which can impact the classification and accounting for a lease as capital or operating, the rent holiday and/or escalations in payments that are taken into consideration when calculating straight-line rent and the term over which leasehold improvements for each restaurant are amortized. These judgments may produce materially different amounts of depreciation, amortization and rent expense than would be reported if different assumed lease terms were used.
In an exposure draft issued in 2010, the FASB, together with the International Accounting Standards Board, has proposed a comprehensive set of changes in accounting for leases. While the Exposure Draft addresses new financial accounting rules for both lessors and lessees, the primary focus will likely be on changes affecting lessees. The lease accounting model contemplated by the new standard is a right of use model that assumes that each lease creates an asset (the lessees right to use the leased asset) and a liability (the future rental payment obligations) which should be reflected on a lessees balance sheet to fairly represent the lease transaction and the lessees related financial obligations. Currently, all of our restaurant leases and our home office lease are accounted for as operating leases, with no related assets and liabilities on our balance sheet. The FASB has reopened the Exposure Draft for comments and has therefore not identified a proposed effective date for the issuance of the final standard. Changes in these accounting rules or their interpretation, or changes in underlying assumptions, estimates or judgments by us could significantly change our reported or expected financial performance. See Item 1A, Risk Factors, Future changes in financial accounting standards may significantly change our reported results of operations in this Form 10-Q.
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Stock-Based Compensation
Under shareholder approved stock-based compensation plans, we have granted incentive stock options, non-qualified stock options, and restricted stock units that generally vest over five years and expire ten years from the date of grant. Stock-based compensation is measured in accordance with U.S. GAAP based on the underlying fair value of the awards granted. In valuing stock options, we are required to make certain assumptions and judgments regarding the grant date fair value utilizing the Black-Scholes option-pricing model. These judgments include expected volatility, risk free interest rate, expected option life, dividend yield and vesting percentage. These estimations and judgments are determined by us using many different variables that, in many cases, are outside of our control. The changes in these variables or trends, including stock price volatility and risk free interest rate, may significantly impact the grant date fair value resulting in a significant impact to our financial results. The cash flow tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) are required to be classified as financing cash flows.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion of market risks contains forward-looking statements. Actual results may differ materially from the following discussion based on general conditions in the financial and commodity markets.
Our market risk exposures are related to cash and cash equivalents and marketable securities. We invest our excess cash in highly liquid short-term marketable securities with maturities of two years or less as of the date of purchase. These investments are not held for trading or other speculative purposes. Changes in interest rates affect the investment income we earn on our marketable securities and, therefore, impact our cash flows and results of operations. For the twenty-six weeks ended July 3, 2012, the average interest rate earned on cash and cash equivalents and marketable securities was approximately 0.7%. As of July 3, 2012, our cash and cash equivalents and marketable securities consisted of money market funds, treasury bills, agency bonds, municipal and bank securities and domestic corporate obligations with a cost or fair value of approximately $45.6 million. Cash may be in excess of FDIC insurance limits. The majority of our marketable securities, both short-term and long-term, are AAA-rated and directly or indirectly guaranteed by the U.S. Government. We believe we are not exposed to significant risk on cash and cash equivalents and marketable securities. The fair market value of our marketable securities is subject to interest rate risk and would decline in value if market interest rates increased. If market interest rates were to increase immediately and uniformly by 10% from the levels existing as of July 3, 2012, the decline in the fair value of the portfolio would not be material to our financial position, results of operations and cash flows.
We purchase food and other commodities for use in our operations based upon market prices established with our suppliers. Many of the commodities purchased by us can be subject to volatility due to market supply and demand factors outside of our control, whether contracted for or not. To manage this risk in part, we attempt to enter into fixed-price purchase commitments, with terms typically up to one year, for some of our commodity requirements. However, it may not be possible for us to enter into fixed-price contracts for certain commodities or we may choose not to enter into fixed-price contracts for certain commodities. Dairy costs can also fluctuate due to government regulation. We believe that substantially all of our food and supplies are available from several sources, which helps to diversify our overall commodity cost risk. We also believe that we have some flexibility and ability to increase certain menu prices, or vary certain menu items offered, in response to food commodity price increases. Some of our commodity purchase arrangements may contain contractual features that limit the price paid by establishing certain price floors or caps. We do not use financial instruments to hedge commodity prices, since our purchase arrangements with suppliers, to the extent that we can enter into such arrangements, help control the ultimate cost that we pay.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 promulgated under the Securities Exchange Act of 1934 as amended, as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of July 3, 2012, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
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Changes in Internal Control Over Financial Reporting
There has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our second fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
We are subject to private lawsuits, administrative proceedings and demands that arise in the ordinary course of our business and which typically involve claims from guests, employees and others related to operational, employment, real estate and intellectual property issues common to the foodservice industry. A number of these claims may exist at any given time. We believe that most of our guest claims will be covered by our general liability insurance, subject to certain deductibles and coverage limits. Punitive damages awards and employee unfair practice claims, however, are not covered by our general liability insurance. To date, we have not been ordered to pay punitive damages with respect to any claims, but there can be no assurance that punitive damages will not be awarded with respect to any future claims. We could be affected by adverse publicity resulting from allegations in lawsuits, claims and proceedings, regardless of whether these allegations are valid or whether we are ultimately determined to be liable. We currently believe that the final disposition of these types of lawsuits, proceedings and claims will not have a material adverse effect on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, proceedings or claims.
The following paragraphs describe certain legal actions recently settled or pending:
Labor Related Matters
On February 4, 2009, a former team member filed a putative class action complaint in the Superior Court for the County of Fresno, California on behalf of himself and other current and former servers working in the Companys California restaurants. The complaint alleged causes of action for failure to pay wages for on-call time in violation of the California Labor Code, unfair competition in violation of the California Business and Professions Code, and associated penalties for failure to pay wages in a timely manner. The complaint sought unspecified damages, a constructive trust, restitution, injunctive relief, interest, attorneys fees and costs. On August 14, 2009, a first amended complaint was filed, in which two other former team members joined the action as plaintiffs. The Company answered the operative complaint denying the allegations. The parties reached a settlement in principle of this action in September 2011, and the settlement agreement was fully executed in May 2012. The parties are currently seeking court approval of the settlement. The terms of this settlement are not considered by the Company to be material to its consolidated financial position. The Company recognized a legal settlement expense and related liability in the third quarter of fiscal 2011 for this matter.
On August 25, 2009, a former team member filed a putative class action in the Superior Court for the County of Los Angeles, California on behalf of himself and other current and former restaurant managers in California. The complaint, as amended, alleged that the Companys California kitchen managers were misclassified as exempt from overtime and other California wage-and-hour requirements. It alleged causes of action for failure to pay overtime wages, failure to provide meal and rest periods, failure to pay wages in a timely manner, failure to provide accurate wage statements, failure to keep accurate payroll records, penalties associated with these claims, and failure to reimburse class members for business expenses in violation of the California Labor Code and unfair competition in violation of the California Business and Professions Code. The complaint sought unspecified damages, restitution, injunctive relief, interest, attorneys fees and costs. In January 2010, on the Companys motion, the Court ordered the venue of the case transferred to Orange County. The Company responded to the third amended complaint, the operative complaint, denying the allegations. The parties reached a settlement in principle of this action in July 2011, which was executed fully in February 2012. The parties are currently seeking court approval of the settlement.
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The terms of this settlement are not considered by the Company to be material to its consolidated financial position. The Company recognized a legal settlement expense and related liability in the second quarter of fiscal 2011 for this matter.
On March 24, 2011, Baroness Small Estates, Inc. filed a civil action against BJs in the United States District Court for the Central District of California, alleging the Company infringed one of its trademarks. After mediation, the parties resolved the matter and a legal settlement expense of $0.4 million was recorded in the second quarter of fiscal 2012 for this matter. The terms of this settlement are not considered by the Company to be material to its consolidated financial position.
PART II
A discussion of the significant risks associated with investments in our securities, as well as other matters, is set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 3, 2012. There have been no material changes in the risks related to us from those disclosed in such Annual Report. These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the SEC. The risks described in this Form 10-Q are not the only risks we face. New risks and uncertainties arise from time to time and we cannot predict those events or how they may affect us. There may be other risks and uncertainties that are not currently known or that are currently deemed by us to be immaterial; however, they may ultimately adversely affect our business, financial condition and/or operating results.
Exhibit |
Description | |
3.1 |
Amended and Restated Articles of Incorporation of the Company, as amended, incorporated by reference to Exhibit 3.1 to the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on June 28, 1996, as amended by the Companys Registration Statement on Form SB-2/A filed with the Commission on August 1, 1996, and the Companys Registration Statement on Form SB-2A filed with the Commission on August 22, 1996, (File No. 3335182-LA) (as amended, the Registration Statement). | |
3.2 |
Amended and Restated Bylaws of the Company, incorporated by reference to Exhibits 3.1 of the Form 8-K filed on June 4, 2007. | |
3.3 |
Certificate of Amendment of Articles of Incorporation, incorporated by reference to Exhibit 3.3 of the Annual Report on Form 10-K for fiscal 2004. | |
3.4 |
Certificate of Amendment of Articles of Incorporation, incorporated by reference to Exhibit 3.4 of the Annual Report on Form 10-K for fiscal 2010. | |
4.1 |
Specimen Common Stock Certificate of the Company, incorporated by reference to Exhibit 4.1 of the Registration Statement. | |
10.1 |
BJs Restaurants, Inc. 2005 Equity Incentive Plan, as amended. | |
31 |
Section 302 Certifications of Chief Executive Officer and Chief Financial Officer. | |
32 |
Section 906 Certification of Chief Executive Officer and Chief Financial Officer. | |
101 |
The following materials from BJs Restaurants, Inc.s Quarterly Report on Form 10-Q for the quarter ended July 3, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Unaudited Consolidated Statements of Income; (iii) Unaudited Consolidated Statements of Cash Flows; and (iv) Notes to Unaudited Consolidated Financial Statements. |
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In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BJS RESTAURANTS, INC.
(Registrant)
August 6, 2012 |
By: /s/ GERALD W. DEITCHLE |
Gerald W. Deitchle
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ GREGORY S. LEVIN
Gregory S. Levin
Executive Vice President,
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
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Exhibit 10.1
BJS RESTAURANTS, INC.
2005 EQUITY INCENTIVE PLAN
(As Amended June 5, 2012)
PART I.
PURPOSE, ADMINISTRATION AND RESERVATION OF SHARES
SECTION 1. PURPOSE OF THE PLAN. The purposes of this Plan are (a) to promote the growth and success of the Companys business, and (b) to attract and retain the most talented Employees, Officers, Directors and Consultants available, (i) by aligning the long-term interests of Employees, Officers, Directors and Consultants with those of the shareholders by providing an opportunity to acquire an equity interest in the Company and (ii) by providing both rewards for exceptional performance and long term incentives for future contributions to the success of the Company and its Subsidiaries.
The Plan permits the grant of Incentive Stock Options, Nonqualified Stock Options, Restricted Stock, Restricted Stock Units, SARs, and Performance Compensation Awards (Shares and Units) at the discretion of the Committee and as reflected in the terms of the Award Agreement. Each Award will be subject to conditions specified in the Plan, such as continued employment or satisfaction of performance criteria.
The Committee may elect to establish sub-plans or procedures governing the grants to Employees, Officers Directors and Consultants and this Plan will serve as the framework for any such sub-plans. The awards granted under the Former Plan shall continue to be administered under the Former Plan until such time as those options are exercised, expire or become unexercisable for any reason.
SECTION 2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) ACTIVE STATUS shall mean (i) for Employees, the absence of any interruption or termination of service as an Employee; provided, that the Board or Committee, in its sole discretion, may determine that Active Status may continue if an Employee becomes a Consultant immediately following termination of or interruption of service as an Employee, in which case Active Status shall thereafter be determined in accordance with clause (iii) below, (ii) for Directors, that the Director has not been removed from the Board for Misconduct and the Director has not failed to be reelected by the shareholders following a Board determination of Misconduct by such Director, and (iii) for Consultants, the absence of any interruption, expiration, or termination of such persons consulting or advisory relationship with the Company or any Subsidiary or the occurrence of any termination event as set forth in such persons Award Agreement. Active Status shall not be considered interrupted (A) for an Employee in the case of sick leave, maternity leave, infant care leave, medical emergency leave, military leave, or any other leave of absence properly taken in accordance with the policies of the Company or
any applicable Subsidiary as may be in effect from time to time, and (B) for a Consultant, in the case of any temporary interruption in such persons availability to provide services to the Company or any Subsidiary which has been granted in writing by an authorized Officer of the Company. Whenever a mandatory severance period applies under applicable law with respect to a termination of service as an Employee, Active Status shall be considered terminated upon such Employees receipt of notice of termination in whatever form prescribed by applicable law.
(b) AWARD shall mean any award or benefits granted under the Plan, including Options, Restricted Stock, Restricted Stock Units, SARs, Performance Shares and Performance Units.
(c) AWARD AGREEMENT shall mean a written or electronic agreement between the Company and the Participant setting forth the terms of the Award.
(d) BENEFICIAL OWNERSHIP shall have the meaning set forth in Rule 13d-3 promulgated under the Exchange Act.
(e) BOARD shall mean the Board of Directors of the Company.
(f) CHANGE OF CONTROL shall mean the first day that any one or more of the following conditions shall have been satisfied:
(i) the sale, liquidation or other disposition of all or substantially all of the Companys assets in one or a series of related transactions;
(ii) an acquisition (other than directly from the Company) of any outstanding voting securities by any person, after which such person (as the term is used for purposes of Section 13(d) or 14(d) of the Exchange Act) has Beneficial Ownership of fifty percent (50%) or more of the then outstanding voting securities of the Company, other than a Board-approved transaction;
(iii) during any 36-consecutive month period, the individuals who, at the beginning of such period, constitute the Board (Incumbent Directors) cease for any reason other than death to constitute at least a majority of the members of the Board; provided however that except as set forth in this Section 2(f)(iii), an individual who becomes a member of the Board subsequent to the beginning of the 36-month period, shall be deemed to have satisfied such 36-month requirement and shall be deemed an Incumbent Director if such Director was elected by or on the recommendation of or with the approval of at least two-thirds of the Directors who then qualified as Incumbent Directors either actually (because they were Directors at the beginning of such period) or by operation of the provisions of this section; if any such individual initially assumes office as a result of or in connection with either an actual or threatened solicitation with respect to the election of Directors (as such terms are used in Rule 14a-12(c) of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitations of proxies or consents by or on behalf of a person other than the Board, then such individual shall not be considered an Incumbent Director; or
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(iv) a merger, consolidation or reorganization of the Company, as a result of which the shareholders of the Company immediately prior to such merger, consolidation or reorganization own directly or indirectly immediately following such merger, consolidation or reorganization less than fifty percent (50%) of the combined voting power of the outstanding voting securities of the entity resulting from such merger, consolidation or reorganization.
(g) CODE shall mean the Internal Revenue Code of 1986, as amended.
(h) COMMITTEE shall mean the Compensation Committee appointed by the Board.
(i) COMMON STOCK shall mean the common stock of the Company, no par value per share.
(j) COMPANY shall mean BJs Restaurants, Inc., a California corporation, and any successor thereto.
(k) CONSULTANT shall mean any person, except an Employee, engaged by the Company or any Subsidiary of the Company, to render personal services to such entity, including as an advisor, pursuant to the terms of a written agreement.
(l) DIRECTOR shall mean a member of the Board.
(m) DISABILITY shall mean (i) in the case of a Participant whose employment with the Company or a Subsidiary is subject to the terms of an employment or consulting agreement that includes a definition of Disability as used in this Plan shall have the meaning set forth in such employment or consulting agreement during the period that such employment or consulting agreement remains in effect; and (ii) in all other cases, the term Disability as used in this Plan shall have the same meaning as set forth under the Companys long-term disability plan applicable to the Participant as may be amended from time to time, and in the event the Company does not maintain any such plan with respect to a Participant, a physical or mental condition resulting from bodily injury, disease or mental disorder which renders the Participant incapable of continuing his or her usual and customary employment with the Company or a Subsidiary, as the case may be, for a period of not less than 120 days or such other period as may be required by applicable law.
(n) EFFECTIVE DATE shall mean the date on which the Companys shareholders have first approved this Plan in accordance with applicable Nasdaq rules.
(o) EMPLOYEE shall mean any person, including an Executive Officer or Officer, who is a common law employee of, receives remuneration for personal services to, is reflected on the official human resources database as an employee of, and is on the payroll of the Company or any Subsidiary of the Company. A person is on the payroll if he or she is paid from or at the direction of the payroll department of the Company, or any Subsidiary of the Company. Persons providing services to the Company, or to any Subsidiary of the Company, pursuant to an agreement with a staff leasing organization,
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temporary workers engaged through or employed by temporary or leasing agencies, and workers who hold themselves out to the Company, or a Subsidiary to which they are providing services as being independent contractors, or as being employed by or engaged through another company while providing the services, and persons covered by a collective bargaining agreement (unless the collective bargaining agreement applicable to the person specifically provides for participation in this Plan) are not Employees for purposes of this Plan and do not and cannot participate in this Plan, whether or not such persons are, or may be reclassified by the courts, the Internal Revenue Service, the U.S. Department of Labor, or other person or entity as, common law employees of the Company, or any Subsidiary, either solely or jointly with another person or entity.
(p) EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as amended.
(q) EXECUTIVE OFFICERS shall mean the officers of the Company as such term is defined in Rule 16a-1 under the Exchange Act.
(r) FAIR MARKET VALUE shall mean the closing price per share of the Common Stock on Nasdaq as to the date specified (or the previous trading day if the date specified is a day on which no trading occurred), or if Nasdaq shall cease to be the principal exchange or quotation system upon which the shares of Common Stock are listed or quoted, then such exchange or quotation system as the Company elects to list or quote its shares of Common Stock and that the Committee designates as the Companys principal exchange or quotation system, or at the discretion of the Committee in the case that the Company ceases to be publicly traded.
(s) FASB 123(R) shall mean Statements of Financial Accounting Standards No. 123, Stock-Based Payments, as promulgated by the Financial Accounting Standards Board.
(t) FORMER PLAN shall mean the BJs Restaurants, Inc. Amended and Restated 1996 Stock Option Plan, as amended.
(u) GOVERNANCE AND NOMINATION COMMITTEE shall mean the Governance and Nomination Committee appointed by the Board.
(v) INCENTIVE STOCK OPTION shall mean any Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
(w) INDEPENDENT DIRECTOR shall mean a Director who: (1) meets the independence requirements of Nasdaq, or if Nasdaq shall cease to be the principal exchange or quotation system upon which the shares of Common Stock are listed or quoted, then such exchange or quotation system as the Company elects to list or quote its shares of Common Stock and that the Committee designates as the Companys principal exchange or quotation system; (2) qualifies as an outside director under Section 162(m) of the Code; (3) qualifies as a non-employee director under Rule 16b-3 promulgated under the Exchange Act; and (4) satisfies independence criteria under any other applicable laws or regulations relating to the issuance of Shares to Employees.
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(x) MAXIMUM ANNUAL PARTICIPANT AWARD shall have the meaning set forth in Section 6(b).
(y) MISCONDUCT shall mean any of the following; provided, however, that with respect to Non-Employee Directors Misconduct shall mean subsection (viii) only:
(i) any material breach of an agreement between the Participant and the Company or any Subsidiary;
(ii) willful unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary by the Participant;
(iii) the Participants continued willful and intentional failure to satisfactorily perform Participants essential responsibilities;
(iv) material failure of the Participant to comply with rules, policies or procedures of the Company or any Subsidiary as they may be amended from time to time, including, without limitation, failure to comply with (1) the Companys Code of Ethics and Code of Conduct, (2) policies and procedures of the Company relating to use and maintenance of facilities and equipment, or (3) policies and procedures of the Company relating to the occurrence, reporting or investigation of any harassment or discrimination allegations or complaints;
(v) Participants dishonesty, fraud or gross negligence related to the business or property of the Company or any Subsidiary;
(vi) personal conduct that is materially detrimental to the business of the Company or any Subsidiary;
(vii) conviction of or plea of nolo contendere to a felony;
(viii) in the case of Non-Employee Directors, (1) the removal from the Board for cause in accordance with the provisions of Section 302 of the California Corporations Code, (2) the removal from the Board as a result of a shareholder suit in accordance with the provisions of Section 304 of the California Corporations Code, (3) the determination by at least a majority of the disinterested members of the Board that such Non-Employee Director has materially breached his or her fiduciary duties or duties of loyalty to the Company or has grossly abused such Non-Employee Directors authority with respect to the Company, (4) the determination by at least a majority of the disinterested members of the Board that such Non-Employee Director has committed fraudulent or dishonest acts which have or could reasonably be expected to have a material adverse effect on the Company, or (5) the determination by at least a majority of the disinterested members of the Board that such Non-Employee Director has materially failed to comply with rules, policies or procedures of the Company applicable to Non-Employee Directors, as they may be amended from time to time;
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(ix) intentional or negligent acts or omissions that cause the Company or any Subsidiary to be subject to a fine, citation, shut down, or other disciplinary action by any federal, state or local governmental agency, including, without limitation, any agency regulating health, occupational safety, alcoholic beverage control or immigration;
(x) Participants inducing any customer or supplier to break or terminate any contract with the Company or any Subsidiary;
(xi) Participants inducing any principal for whom the Company or any Subsidiary acts as an agent to terminate such agency relationship;
(xii) causes a fire, explosion or other catastrophic event involving the facilities or equipment of the Company or any Subsidiary that could have been reasonably avoided by following the established policies of the Company or any Subsidiary;
(xiii) Participants solicitation of any of the Companys agents or employees to provide services to any other business or entity; or
(xiv) with respect to any Participant whose employment with the Company or a Subsidiary is subject to the terms of an effective employment or consulting agreement that includes a definition of Cause, conduct by Participant that constitutes Cause.
(z) NASDAQ shall mean The Nasdaq Stock Market, Inc.
(aa) NON-EMPLOYEE DIRECTOR shall mean a Director who is not an Employee.
(bb) NONQUALIFIED STOCK OPTION shall mean an Option that does not qualify or is not intended to qualify as an Incentive Stock Option.
(cc) OFFICER shall mean any Executive Officer of the Company as well as any president, vice president, secretary or treasurer duly appointed by the Board, or any other person designated as an officer by the Board or by the Bylaws of the Company.
(dd) OPTION shall mean a stock option granted pursuant to Section 10 of the Plan, including a Nonqualified Stock Option and an Incentive Stock Option.
(ee) OPTIONEE shall mean a Participant who has been granted an Option.
(ff) PARENT shall mean a parent corporation, whether now or hereafter existing, as defined in Section 424(e) of the Code.
(gg) PARTICIPANT shall mean an Employee, Officer, Director or Consultant granted an Award.
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(hh) PERFORMANCE COMPENSATION AWARD means any Awards designated by the Committee as a Performance Compensation Award pursuant to Section 13 of the Plan, including Performance Shares and Performance Units.
(ii) PERFORMANCE CRITERIA shall mean one or more of the following (as selected by the Committee) criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any Award under the Plan: (i) cash flow; (ii) earnings per share, including as adjusted (A) to exclude the impact of any (1) significant acquisitions or dispositions of businesses by the Company, (2) one-time, non-operating charges, or (3) accounting changes (including the early adoption of any accounting change mandated by any governing body, organization or authority); and (B) for any stock split, stock dividend or other recapitalization; (iii) earnings before interest, taxes, and amortization; (iv) return on equity; (v) total shareholder return; (vi) share price performance; (vii) return on capital; (viii) return on assets or net assets; (ix) revenue; (x) income; (xi) operating income; (xii) operating profit; (xiii) profit margin; (xiv) return on operating revenue; (xv) return on invested capital; (xvi) market price; (xvii) brand recognition/acceptance; (xviii) customer satisfaction; (xix) productivity; or (xx) sales growth and volume.
(jj) PERFORMANCE FORMULA means, for a Performance Period, one or more objective formulas or standards established by the Committee for purposes of determining whether or the extent to which a Performance Compensation Award has been earned based on the level of performance attained or to be attained with respect to one or more Performance Goals. Performance Formulae may vary from Performance Period to Performance Period and from Participant to Participant and may be established on a stand-alone basis, in tandem or in the alternative.
(kk) PERFORMANCE GOAL means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based on the Performance Criteria. Performance Goals may be established based on Performance Criteria with respect to the Company or any of its Subsidiaries, divisions or operational units, or any composition thereof.
(ll) PERFORMANCE PERIOD means one or more periods of time as the Committee may designate, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participants rights in respect of a Performance Compensation Award.
(mm) PERFORMANCE SHARE means a Performance Compensation Award granted pursuant to Section 13 of the Plan that is denominated in a specified number of Shares, which Shares or their future cash equivalent (or a combination of both) may be paid to the Participant upon achievement of applicable Performance Goals during the relevant Performance Period as the Committee shall establish.
(nn) PERFORMANCE UNIT means a Performance Compensation Award granted pursuant to Section 13 of the Plan that has a dollar value set by the Committee (or that is determined by reference to a Performance Formula), which value may be paid
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to the Participant in cash, in Shares, or such combination of cash and Shares as the Committee may determine in its sole discretion, upon achievement of applicable Performance Goals during the relevant Performance Period as the Committee shall establish.
(oo) PLAN shall mean this BJs Restaurants, Inc. 2005 Equity Incentive Plan, including any amendments thereto.
(pp) REPRICE shall mean (i) the adjustment or amendment of the exercise price of Options or SARs previously awarded whether through amendment, cancellation, replacement of grants or any other means, or (ii) the repurchase of outstanding Options for cash at a time when the exercise price of the repurchased Options is above the Fair Market Value of the underlying Common Stock.
(qq) RESIGNATION (OR RESIGN) FOR GOOD REASON shall mean (i) in the case of a Participant whose employment with the Company or a Subsidiary is subject to the terms of an employment or consulting agreement that includes a definition of Resignation for Good Reason (or similar terms) as used in this Plan shall have the meaning set forth in such employment or consulting agreement during the period that such employment or consulting agreement remains in effect, or (ii) in all other cases, any voluntary termination by written resignation of the Active Status of any Officer or Employee of the Company after a Change of Control because of: (1) a material reduction in the Officers or Employees authority, responsibilities or scope of employment; (2) an assignment of duties to the Officer or Employee inconsistent with the Officers or Employees role at the Company (including its Subsidiaries) prior to the Change of Control, (3) a reduction in the Officers base salary; (4) solely with respect to an Officer, a material adverse change in such Officers reporting relationship, (5) a material reduction in the Officers or Employees benefits unless such reduction applies to all Officers or Employees of comparable rank; or (6) the relocation of the Officers or Employees primary work location more than fifty (50) miles from the Officers primary work location prior to the Change of Control; provided that the Officers or Employees written notice of voluntary resignation must be tendered within one (1) year after the Change of Control, and shall specify which of the events described in (1) through (6) resulted in the resignation.
(rr) RESTRICTED STOCK shall mean a grant of Shares pursuant to Section 11 of the Plan.
(ss) RESTRICTED STOCK UNITS shall mean a grant of the right to receive Shares in the future or their cash equivalent (or both) pursuant to Section 11 of the Plan.
(tt) RETIREMENT shall mean, with respect to any Non-Employee Director, ceasing to be a Director pursuant to election by the Companys shareholders or by voluntary resignation with the approval of the Boards Chairman (or a majority of the disinterested members of the Board) after having served continuously on the Board for at least six years.
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(tt) SAR shall mean a stock appreciation right awarded pursuant to Section 12 of the Plan.
(uu) SEC shall mean the Securities and Exchange Commission.
(vv) SHARE shall mean one share of Common Stock, as adjusted in accordance with Section 5 of the Plan.
(ww) STAND-ALONE SARS shall have the meaning set forth in Section 12(b) of the Plan.
(xx) SUBCOMMITTEE shall have the meaning set forth in Section 3(d).
(yy) SUBSIDIARY shall mean (1) in the case of an Incentive Stock Option a subsidiary corporation, whether now or hereafter existing, as defined in Section 424(f) of the Code, and (2) in the case of a Nonqualified Stock Option, Restricted Stock, a Restricted Stock Unit, SAR, Performance Shares, or Performance Units, in addition to a subsidiary corporation as defined in (1), (A) a limited liability company, partnership or other entity in which the Company controls fifty percent (50%) or more of the voting power or equity interests, or (B) an entity with respect to which the Company possesses the power, directly or indirectly, to direct or cause the direction of the management and policies of that entity, whether through the Companys ownership of voting securities, by contract or otherwise.
SECTION 3. ADMINISTRATION OF THE PLAN.
(a) AUTHORITY. The Plan shall be administered by the Committee. The Committee shall have full and exclusive power to administer the Plan on behalf of the Board, subject to such terms and conditions as the Committee may prescribe. Notwithstanding anything herein to the contrary, the Committees power to administer the Plan, and actions the Committee takes under the Plan, shall be limited by the provisions set forth in the Committees charter, as such charter may be amended from time to time, and the further limitation that certain actions may be subject to review and approval by either the full Board or a panel consisting of all of the Independent Directors of the Company.
(b) POWERS OF THE COMMITTEE. Subject to the other provisions of this Plan, the Committee shall have the authority, in its discretion:
(i) to grant Incentive Stock Options, Nonqualified Stock Options, Restricted Stock, Restricted Stock Units, SARs, Performance Shares, Performance Units and any other Awards authorized under this Plan to Participants and to determine the terms and conditions of such Awards, including the determination of the Fair Market Value of the Shares and the exercise price and unit price, and to modify or amend each Award, with the consent of the Participant when required;
(ii) to determine the Participants, to whom Awards, if any, will be granted hereunder, the timing, vesting and exercisability of such Awards, and the number of Shares to be represented by each Award;
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(iii) to construe and interpret the Plan and the Awards granted hereunder;
(iv) to prescribe, amend, and rescind rules and regulations relating to the Plan, including the form of Award Agreement, and manner of acceptance of an Award, such as correcting a defect or supplying any omission, or reconciling any inconsistency so that the Plan or any Award Agreement complies with applicable law, regulations and listing requirements and to avoid unanticipated consequences deemed by the Committee to be inconsistent with the purposes of the Plan or any Award Agreement;
(v) to establish performance criteria for Awards made pursuant to the Plan in accordance with a methodology established by the Committee, and to determine whether performance goals have been attained;
(vi) to accelerate or defer (with the consent of the Participant) the exercise or vested date of any Award;
(vii) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Award previously granted by the Committee;
(viii) to establish sub-plans, procedures or guidelines for the grant of Awards to Employees, Executive Officers, Officers, Directors, Non-Employee Directors and Consultants; and
(ix) to make all other determinations deemed necessary or advisable for the administration of the Plan;
Provided that, no consent of a Participant is necessary under clauses (i) or (vi) if a modification, amendment, acceleration, or deferral, in the reasonable judgment of the Committee confers a benefit on the Participant or is made pursuant to an adjustment in accordance with Section 5.
(c) EFFECT OF COMMITTEES DECISION. All decisions, determinations, and interpretations of the Committee shall be final and binding on all Participants, the Company (including its Subsidiaries), any shareholder and all other persons.
(d) DELEGATION. Consistent with the Committees charter, as such charter may be amended from time to time, the Committee may delegate (i) to one or more separate committees consisting of members of the Committee or other Directors who are Independent Directors (any such committee a Subcommittee), or (ii) to an Executive Officer of the Company, the ability to grant Awards and take the other actions described in Section 3(b) with respect to Participants who are not Executive Officers, and such actions shall be treated for all purposes as if taken by the Committee; provided that the grant of Awards shall be made in accordance with parameters established by the Committee. Any action by any such Subcommittee or Executive Officer within the scope of such delegation shall be deemed for all purposes to have been taken by the Committee.
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(e) ADMINISTRATION. The Committee may delegate the administration of the Plan to an Officer or Officers of the Company, and such administrator(s) may have the authority to directly, or under their supervision, execute and distribute agreements or other documents evidencing or relating to Awards granted by the Committee under this Plan, to maintain records relating to the grant, vesting, exercise, forfeiture or expiration of Awards, to process or oversee the issuance of Shares upon the exercise, vesting and/or settlement of an Award, to interpret the terms of Awards and to take such other actions as the Committee may specify. Any action by any such administrator within the scope of its delegation shall be deemed for all purposes to have been taken by the Committee and references in this Plan to the Committee shall include any such administrator, provided that the actions and interpretations of any such administrator shall be subject to review and approval, disapproval or modification by the Committee.
(f) INDEMNIFICATION. In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent allowed by applicable law, any person(s) acting as administrator(s) and each of the administrators consultants shall be indemnified by the Company against the reasonable expenses, including attorneys fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the administrator(s) or any of such administrators consultants may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by the administrator(s) or any of such administrators consultants in settlement thereof (provided that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by the administrator(s) or any of such administrators consultants in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such administrator(s) or any of such administrators consultants did not act in good faith and in a manner which such person reasonably believed to be in the best interests of the Company, and in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful; provided, however, that within sixty (60) days after institution of any such action, suit or proceeding, such administrator(s) or any of such administrators consultants shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.
SECTION 4. SHARES SUBJECT TO THE PLAN.
(a) RESERVATION OF SHARES. The shares of Common Stock reserved under this Plan will include reserved shares of Common Stock as to which an option award granted has been forfeited or terminated without exercise under the Former Plan plus an additional Four Million Seven Hundred Thousand (4,700,000) shares of Common Stock (adjusted, proportionately, in the event of any stock split or stock dividend with respect to the Shares), all of which may be granted as Incentive Stock Options under the Plan. The aggregate number of Shares available for issuance under the Plan will be reduced by one Share for each Share delivered in settlement of an Option and by one and one-half (1.5) Shares for each Share delivered in settlement of any Award of Restricted Stock, Restricted Stock Units, SARs, or Performance Shares or Performance Units unless
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a greater reduction is specified by the Committee with respect to a specific Award grant. If an Award expires, is forfeited or becomes unexercisable for any reason without having been exercised in full, the undelivered Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future Awards under the Plan. Shares available for issuance under the Plan shall be increased by any shares of Common Stock subject to outstanding awards under the Former Plan on the Effective Date that later cease to be subject to such awards for any reason other than such awards having been exercised, subject to adjustment from time to time as provided in Section 5, which shares of Common Stock shall, as of the date such shares cease to be subject to such awards, cease to be available for grant and issuance under the Former Plan, but shall be available for issuance under the Plan. The Shares may be authorized but unissued, or reacquired shares of Common Stock. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.
(b) TIME OF GRANTING AWARDS. The date of grant of an Award shall, for all purposes, be the date on which the Company completes the corporate action relating to the grant of such Award and all conditions to the grant have been satisfied, provided that conditions to the exercise of an Award shall not defer the date of grant. Notice of a grant shall be given to each Participant to whom an Award is so granted within a reasonable time after the determination has been made.
(c) SECURITIES LAW COMPLIANCE. Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated under either such Act, and the requirements of any stock exchange or quotation system upon which the Shares may then be listed or quoted, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
(d) SUBSTITUTIONS AND ASSUMPTIONS. The Board or the Committee shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code applies, provided such substitutions and assumptions are permitted by Section 424 of the Code and the regulations promulgated thereunder. The number of Shares reserved pursuant to Section 4(a) may be increased by the corresponding number of Awards assumed and, in the case of a substitution, by the net increase in the number of Shares subject to Awards before and after the substitution.
SECTION 5. ADJUSTMENTS TO SHARES SUBJECT TO THE PLAN. If any change is made to the Shares by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Shares as a class without the Companys receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities and/or the price per Share covered by outstanding Awards under the Plan and (iii) the Maximum Annual Participant
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Award. The Committee may also make adjustments described in (i)-(iii) of the previous sentence in the event of any distribution of assets to shareholders other than a normal cash dividend, if any. In determining adjustments to be made under this Section 5, the Committee may take into account such factors as it deems appropriate, including the restrictions of applicable law and the potential tax consequences of an adjustment, and in light of such factors may make adjustments that are not uniform or proportionate among outstanding Awards. Adjustments, if any, and any determinations or interpretations, including any determination of whether a distribution is other than a normal cash dividend, made by the Committee shall be final, binding and conclusive. For purposes of this Section 5, conversion of any convertible securities of the Company shall not be deemed to have been effected without receipt of consideration.
Except as expressly provided herein, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award.
PART II.
TERMS APPLICABLE TO ALL AWARDS
SECTION 6. GENERAL ELIGIBILITY.
(a) AWARDS. Awards may be granted to Participants who are Employees, Directors or Consultants; provided however that Incentive Stock Options may only be granted to Employees.
(b) MAXIMUM ANNUAL PARTICIPANT AWARD. The aggregate number of Shares with respect to which an Award or Awards may be granted to any one Participant in any one taxable year of the Company (the Maximum Annual Participant Award) shall not exceed 500,000 shares of Common Stock (increased, proportionately, in the event of any stock split or stock dividend with respect to the Shares).
(c) NO EMPLOYMENT/SERVICE RIGHTS. Nothing in the Plan shall confer upon any Participant the right to an Award or to continue in service as an Employee or Consultant for any period of specific duration, or interfere with or otherwise restrict in any way the rights of the Company (or any Subsidiary employing or retaining such person), or of any Participant, which rights are hereby expressly reserved by each, to terminate such persons services at any time for any reason, with or without cause. ).
(d) AWARDS TO NON-EMPLOYEE DIRECTORS; CONTINUATION OF AUTOMATIC GRANTS. The aggregate number of Shares with respect to which Awards may be granted to Non-Employee Directors under the Plan shall be 1,500,000 shares of Common Stock (increased proportionately in the event of any stock split or stock dividend with respect to the Shares). Unless and until amended or terminated by the Board, the Committee or the Governance and Nomination Committee thereof, (i) upon initially joining the Board, each Non-Employee Director shall receive an Option to
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acquire an aggregate of 25,000 shares of Common Stock (adjusted proportionately in the event of any stock split or stock dividend on the Common Stock) at an exercise price equal to Fair Market Value on the date of grant (the Initial Director Grant), and (ii) on January 15 of each year, each Non-Employee Director the serving on the Board shall receive an annual grant of Stock Options valued at $40,000 (using such valuation methodology as the Board or the Committee shall determine) (the Annual Director Grant). Unless and until otherwise determined by the Board, the Committee or the Governance and Nomination Committee thereof, and subject to the accelerated vesting provisions in Section 10(d) (i) the Initial Director Grant shall vest one-half per year on each of the first and second year anniversary of the grant date, and (ii) the Annual Director Grant shall vest one-third per year on each of the first three yearly anniversaries following the grant date. Unless otherwise determined by the Board or the Committee, all Non-Employee Directors shall be eligible to receive the automatic Award grants contemplated by this Section 6(d). The Board, the Committee or the Governance and Nomination Committee reserves the right to periodically evaluate and change the amount or type of automatic Award grants made to Non-Employee Directors pursuant to this Section 6(d).
(e) COMPLIANCE WITH SECTION 409A. It is the intention of this Plan that any Awards granted hereunder shall satisfy the additional conditions applicable to nonqualified deferred compensation under Section 409A of the Code. No Award shall provide for deferral of compensation that does not comply with Section 409A of the Code, unless the Board or Committee, at the time of grant, specifically provides that the Award is not intended to comply with Section 409A of the Code. In the event that an Award is determined to constitute nonqualified deferred compensation that would be subject to the additional tax under Section 409A(a)(1)(B) of the Code (or any successor provisions), the Committee shall have the authority to impose such additional conditions as it deems necessary to avoid the imposition of the additional tax. Notwithstanding anything to the contrary set forth in this Plan, the Company shall have no liability to any Participant or any other person (i) if an Award does not satisfy the additional conditions applicable to nonqualified deferred compensation under Section 409A of the Code or (ii) for any other unexpected tax consequence affecting any Participant or other person due to the receipt or settlement of any Award granted hereunder.
SECTION 7. PROCEDURE FOR EXERCISE OF AWARDS; RIGHTS AS A SHAREHOLDER.
(a) PROCEDURE. An Award shall be exercised when written, electronic or verbal notice of exercise has been given to the Company, or the brokerage firm or firms approved by the Company to facilitate exercises and sales under this Plan, in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised has been received by the Company or the brokerage firm or firms, as applicable. The notification to the brokerage firm shall be made in accordance with procedures of such brokerage firm approved by the Company. Full payment may, as authorized by the Committee, consist of any consideration and method of payment allowable under Section 7(b) of the Plan. The Company shall issue (or cause to be issued) such share certificate promptly upon
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exercise of the Award. In the event that the exercise of an Award is treated in part as the exercise of an Incentive Stock Option and in part as the exercise of a Nonqualified Stock Option pursuant to Section 10(a), the Company shall issue a share certificate evidencing the Shares treated as acquired upon the exercise of an Incentive Stock Option and a separate share certificate evidencing the Shares treated as acquired upon the exercise of a Nonqualified Stock Option, and shall identify each such certificate accordingly in its share transfer records. No adjustment will be made for a dividend or other right for which the record date is prior to the date the share certificate is issued, except as provided in Section 5 of the Plan.
(b) METHOD OF PAYMENT. The consideration to be paid for any Shares to be issued upon exercise or other required settlement of an Award, including the method of payment, shall be determined by the Committee at the time of settlement and which forms may include: (i) with respect to an Option and subject to any restrictions or limitations imposed under applicable law, a request that the Company or the designated brokerage firm conduct a cashless exercise of the Option; (ii) cash; and (iii) tender of shares of Common Stock owned by the Participant in accordance with rules established by the Committee from time to time. Shares used to pay the exercise price shall be valued at their Fair Market Value on the exercise date. Payment of the aggregate exercise price by means of tendering previously-owned shares of Common Stock shall not be permitted when the same may, in the reasonable opinion of the Company, cause the Company to record a loss or expense as a result thereof.
(c) WITHHOLDING OBLIGATIONS. To the extent required by applicable federal, state, local or foreign law, the Committee may and/or a Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise with respect to any Incentive Stock Option, Nonqualified Stock Option, SAR, Restricted Stock or Restricted Stock Units, Performance Shares, Performance Units or any sale of Shares. The Company shall not be required to issue Shares or to recognize the disposition of such Shares until such obligations are satisfied. These obligations may be satisfied by having the Company withhold a portion of the Shares that otherwise would be issued to a Participant under such Award or by tendering Shares previously acquired by the Participant in accordance with rules established by the Committee from time to time.
(d) SHAREHOLDER RIGHTS. Except as otherwise provided in this Plan, until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the share certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares subject to the Award, notwithstanding the exercise of the Award.
(e) NON-TRANSFERABILITY OF AWARDS. An Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in exchange for consideration, except that an Award may be transferred by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant; unless the Committee permits further transferability, on a general or specific basis, in which case the Committee may impose conditions and limitations on any permitted transferability.
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SECTION 8. EXPIRATION OF AWARDS.
(a) EXPIRATION, TERMINATION OR FORFEITURE OF AWARDS. Unless otherwise provided in the applicable Award Agreement or any severance agreement, vested Awards granted under this Plan shall expire, terminate, or otherwise be forfeited as follows:
(i) three (3) months after the effective date of termination of Active Status for a Participant other than a Non-Employee Director, other than in circumstances covered by (ii), (iii), or (iv) below; or six (6) months after the date a Non-Employee Director ceases to be a Director or Consultant other than in circumstances covered by (ii) and (iv) below:
(ii) immediately upon termination of a Participants Active Status for Misconduct;
(iii) twelve (12) months after the date on which a Participant other than a Non-Employee Director ceased performing services as a result of his or her total and permanent Disability; and
(iv) twelve (12) months after the date of the death of a Participant whose Active Status terminated as a result of his or her death.
(b) EXTENSION OF TERM. Notwithstanding subsection (a) above, the Committee shall have the authority to extend the expiration date of any outstanding Option, other than an Incentive Stock Option, or SAR in circumstances in which it deems such action to be appropriate (provided that no such extension shall extend the term of an Option or SAR beyond the date on which the Option or SAR would have expired if no termination of the Employees Active Status had occurred).
SECTION 9. EFFECT OF CHANGE OF CONTROL. Notwithstanding any other provision in the Plan to the contrary, the following provisions shall apply unless otherwise provided in the most recently executed agreement between the Participant and the Company, or specifically prohibited under applicable laws, or by the rules and regulations of any applicable governmental agencies or national securities exchanges or quotation systems.
(a) ACCELERATION. Awards of a Participant shall be Accelerated (as defined in Section 9(b) below) as follows:
(i) With respect to Non-Employee Directors, upon the occurrence of a Change of Control described in Section 2(f);
(ii) With respect to any Employee, upon the occurrence of a Change of Control described in Section 2(f)(i);
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(iii) With respect to any Employee who Resigns for Good Reason or whose Active Status is terminated for reasons other than Misconduct, so long as such resignation or termination occurs within one year after a Change of Control described in Section 2(f)(ii), (iii) or (iv); and
(iv) With respect to any Employee, upon the occurrence of a Change of Control described in Section 2(f)(iv) in connection with which each Award is not assumed or an equivalent award substituted by such successor entity or a parent or subsidiary of such successor entity.
(b) DEFINITION. For purposes of this Section 9, Awards of a Participant being Accelerated means, with respect to such Participant:
(i) any and all Options and SARs shall become fully vested and immediately exercisable, and shall remain exercisable for the greater of (1) the time period specified in the original Award (but subject to termination upon termination of Active Status in accordance with the terms of the original Award) or, (2) one year following the date of such acceleration;
(ii) any restriction periods and restrictions imposed on Restricted Stock or Restricted Stock Units that are not performance-based shall lapse;
(iii) any restriction periods and restrictions imposed on Restricted Stock, Restricted Stock Units, and Performance Compensation Awards that are performance-based shall lapse, unless such performance-based Awards remain outstanding after the Change of Control (or are assumed by any successor entity) and the applicable Performance Criteria can be accurately tracked following the Change of Control; and
(iv) the restrictions and deferral limitations and other conditions applicable to any other Awards shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant.
PART III.
SPECIFIC TERMS APPLICABLE TO OPTIONS, STOCK AWARDS AND SARS
SECTION 10. GRANT, TERMS AND CONDITIONS OF OPTIONS.
(a) DESIGNATION. Each Option shall be designated in an Award Agreement as either an Incentive Stock Option or a Nonqualified Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Employee during any calendar year (under all plans of the Company) exceeds $100,000, such excess Options shall be treated as Nonqualified Stock Options. Options shall be taken into account in the order in which they were granted.
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(b) TERMS OF OPTIONS. The term of each Option shall be no more than ten (10) years from the date of grant. However, in the case of an Incentive Stock Option granted to a Participant who, at the time the Option is granted, owns Shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the term of the Option shall be no more than five (5) years from the date of grant.
(c) OPTION EXERCISE PRICES.
(i) The per Share exercise price under an Incentive Stock Option shall be as follows:
(A) If granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.
(B) If granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) The per Share exercise price under a Nonqualified Stock Option or SAR shall be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(iii) In no event shall the Board or the Committee be permitted to Reprice an Option after the date of grant without shareholder approval.
(d) VESTING. Unless otherwise provided in the applicable Award Agreement, to the extent Options vest and become exercisable in increments, such Options shall cease vesting as of the date of the Optionees Disability or termination of such Optionees Active Status for reasons other than Retirement or death of a Non-Employee Director, in which cases such Options shall immediately vest in full.
(e) EXERCISE. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Committee at the time of grant, and as are permissible under the terms of the Plan. An Option may not be exercised for a fraction of a Share.
SECTION 11. GRANT, TERMS AND CONDITIONS OF STOCK AWARDS.
(a) DESIGNATION. Restricted Stock or Restricted Stock Units may be granted either alone, in addition to, or in tandem with other Awards granted under the Plan. Restricted Stock or Restricted Stock Units may include a dividend equivalent right, as permitted by Section 5. After the Committee determines that it will offer Restricted
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Stock or Restricted Stock Units, it will advise the Participant in writing or electronically, by means of an Award Agreement, of the terms, conditions and restrictions, including vesting, if any, related to the offer, including the number of Shares that the Participant shall be entitled to receive or purchase, the price to be paid, if any, and, if applicable, the time within which the Participant must accept the offer. The offer shall be accepted by execution of an Award Agreement or as otherwise directed by the Committee. Restricted Stock Units may be paid as permitted by Section 7(b). The term of each award of Restricted Stock or Restricted Stock Units shall be at the discretion of the Committee.
(b) PERFORMANCE BASED STOCK AWARDS. The Committee may elect to grant Restricted Stock and/or Restricted Stock Units that are intended to qualify as performance based compensation under Section 162(m) of the Code. Any such performance based Restricted Stock and Restricted Stock Units shall be subject to the attainment of Performance Goals relating to Performance Criteria selected by the Committee and specified at the time such Restricted Stock and/or Restricted Stock Units are granted.
(c) VESTING. Subject to the provisions of Section 9 of this Plan, unless the Board or Committee determines otherwise, the Award Agreement shall provide for the forfeiture of the non-vested Shares underlying Restricted Stock or Restricted Stock Units upon the termination of a Participants Active Status for reasons other than Retirement or death of a Non-Employee Director, in which case such Awards shall immediately vest in full; provided, however, that in no case shall any Award Agreement provide for the vesting of performance-based Restricted Stock or performance-based Restricted Stock Units prior to the expiration of one year following the applicable grant date. The Committee shall be bound to administer Awards of Restricted Stock or Restricted Stock Units that are not performance-based with a minimum vesting period of at least three years.
SECTION 12. GRANT, TERMS AND CONDITIONS OF SARS.
(a) GRANTS. The Committee shall have the full power and authority, exercisable in its sole discretion, to grant SARs to selected Participants. The terms of SARs shall be at the discretion of the Committee. In no event shall the Board or the Committee be permitted to Reprice a SAR after the date of grant without shareholder approval.
(b) STAND-ALONE SARS.
(i) A Participant may be granted stand-alone stock appreciation rights (Stand-Alone SARs) that are not tied to any underlying Option under Section 10 of the Plan. The Stand-Alone SAR shall cover a specified number of Shares and shall be exercisable upon such terms and conditions as the Committee shall establish. Upon exercise of the Stand-Alone SAR, the holder shall be entitled to receive a distribution from the Company in an amount equal to the excess of (A) the aggregate Fair Market Value (on the exercise date) of the Shares underlying the exercised right over (B) the aggregate base price in effect for those Shares.
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(ii) The number of Shares underlying each Stand-Alone SAR and the base price in effect for those Shares shall be determined by the Committee at the time the Stand-Alone SAR is granted. In no event, however, may the base price per Share be less than the Fair Market Value per underlying Share on the grant date.
(iii) The distribution with respect to an exercised Stand-Alone SAR may be made in Shares valued at Fair Market Value on the exercise date, in cash, or partly in Shares and partly in cash, as the Committee shall deem appropriate.
(c) EXERCISED SARS. The Shares issued in settlement of any SARs exercised under this Section 12 shall not be available for subsequent issuance under the Plan. In accordance with Section 4, Shares underlying any exercised SARs that were not issued in settlement of the SAR shall become available for future issuance under the Plan.
SECTION 13. | GRANT, TERMS AND CONDITIONS OF PERFORMANCE COMPENSATION AWARDS. |
(a) GRANTS. The Committee shall have the full power and authority, exercisable in its sole discretion, to grant Performance Compensation Awards in the form of Performance Units or Performance Shares to Employees (including Officers) and shall evidence such grant in an Award Agreement that is delivered to the Participant setting forth the terms and conditions of the Award. The Committee may, at the time of grant of a Performance Compensation Award, designate such Award as a Performance Compensation Award in order that such Award constitutes qualified performance-based compensation under Code Section 162(m), in which event the Committee shall have the power to grant such Performance Compensation Award upon terms and conditions that qualify it as qualified performance-based compensation within the meaning of Code Section 162(m).
(b) ELIGIBILITY. The Committee shall, in its sole discretion, designate within the first 90 days of a Performance Period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code) which Participants will be eligible to receive Performance Compensation Awards in respect of such Performance Period. However, designation of a Participant eligible to receive an Award hereunder for a Performance Period shall not in any manner entitle the Participant to receive payment in respect of any Performance Compensation Award for such Performance Period. The determination as to whether or not such Participant becomes entitled to payment in respect of any Performance Compensation Award shall be decided solely in accordance with the provisions of this Section 13. Moreover, designation of a Participant eligible to receive a Performance Compensation Award hereunder for a particular Performance Period shall not require designation of such Participant eligible to receive a Performance Compensation Award hereunder in any subsequent Performance Period and designation of one person as a Participant eligible to receive a Performance Compensation Award hereunder shall not require designation of any other person as a Participant eligible to receive a Performance Compensation Award hereunder in such period or in any other period.
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(c) DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE COMPENSATION AWARDS. With regard to a particular Performance Period, the Committee shall have full discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) that is (are) to apply, or any combination of the foregoing, and the Performance Formula. Within the first 90 days of a Performance Period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence and record the same in writing.
(d) MODIFICATION OF PERFORMANCE GOALS. The Committee is authorized at any time during the first ninety (90) days of a Performance Period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code), or any time thereafter (but only to the extent the exercise of such authority after such 90-day period (or such shorter period, if applicable) would not cause the Performance Compensation Awards granted to any participant for the Performance Period to fail to qualify as qualified performance-based compensation under Section 162(m) of the Code), in its sole discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period to the extent permitted under Section 162(m) of the Code (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development affecting the Company (to the extent applicable to such Performance Goal) or (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company (to the extent applicable to such Performance Goal), or the financial statements of the Company (to the extent applicable to such Performance Goal), or of changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles, law or business conditions.
(e) PAYMENT OF PERFORMANCE COMPENSATION AWARDS.
(i) A Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period. Notwithstanding the foregoing, in the discretion of the Committee, Performance Compensation Awards may be paid to a Participant whose Active Status as an employee has terminated after the beginning of the Performance Period for which a Performance Compensation Award is made, or to the designee or estate of a Participant who died prior to the last day of a Performance Period.
(ii) A Participant shall be eligible to receive payments in respect of a Performance Compensation Award only to the extent that (1) the Performance Goal(s) for such period are achieved and certified by the Committee in accordance with Section 13(e)(iii) and (2) the Performance Formula as applied against such Performance Goal(s) determines that all or some portion of such Participants Performance Compensation Award has been earned for the Performance Period.
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(iii) Following the completion of a Performance Period, the Committee shall meet to review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, to calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the actual size of each Participants Performance Compensation Award for the Performance Period.
(iv) [Intentionally omitted]
(v) The Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively possible following completion of the certifications required by Section 13(e)(iii), unless the Committee shall determine that any Performance Compensation Award shall be deferred.
(vi) In no event shall any discretionary authority granted to the Committee by the Plan be used to (1) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained, or (2) increase a Performance Compensation Award for any Participant at any time after the first 90 days of the Performance Period (or, if shorter, the maximum period allowed under Section 162(m)).
PART IV.
TERM OF PLAN AND SHAREHOLDER APPROVAL
SECTION 14. TERM OF PLAN. The Plan shall become effective as of the Effective Date. The Plan shall continue in effect until the (i) 10th yearly anniversary of the Effective Date; provided, however, that upon approval of the plan amendments proposed at the 2010 Annual Meeting of Shareholders, the Plan shall continue in effect until midnight on June 7, 2020, or (ii) until terminated under Section 15 of the Plan or extended by an amendment approved by the shareholders of the Company pursuant to Section 15(a).
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SECTION 15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board or the Committee may amend or terminate the Plan from time to time in such respects as the Board may deem advisable (including, but not limited to amendments which the Board deems appropriate to enhance the Companys ability to claim deductions related to stock option exercises); provided that to the extent required by the Code or the rules of Nasdaq or the SEC, shareholder approval shall be required for any amendment of the Plan. Subject to the foregoing, it is specifically intended that the Board or Committee may amend the Plan without shareholder approval to comply with legal, regulatory and listing requirements and to avoid unanticipated consequences deemed by the Committee to be inconsistent with the purpose of the Plan or any Award Agreement.
(b) PARTICIPANTS IN FOREIGN COUNTRIES. The Committee shall have the authority to adopt such modifications, procedures, and sub-plans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Subsidiaries may operate to assure the viability of the benefits from Awards granted to Participants performing services in such countries and to meet the objectives of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any amendment or termination of the Plan shall not affect Awards already granted and such Awards shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Participant and the Committee, which agreement must be in writing and signed by the Participant and the Company.
SECTION 16. SHAREHOLDER APPROVAL. The effectiveness of the Plan, or any amendment thereof requiring approval of the shareholders of the Company, is subject to approval by the shareholders of the Company in accordance with applicable Nasdaq rules.
23
Exhibit 31
BJS RESTAURANTS, INC.
Certification of Chief Executive Officer
I, Gerald W. Deitchle, certify that:
1. | I have reviewed this quarterly report on Form 10-Q for BJs Restaurants, Inc. (the registrant); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and,
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors: |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and,
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 6, 2012 | ||||||
/s/ GERALD W. DEITCHLE | ||||||
Gerald W. Deitchle | ||||||
Chairman, President and Chief Executive Officer | ||||||
(Principal Executive Officer) |
BJS RESTAURANTS, INC.
Certification of Chief Financial Officer
I, Gregory S. Levin, certify that:
1. | I have reviewed this quarterly report on Form 10-Q for BJs Restaurants, Inc. (the registrant); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and,
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors: |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and,
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 6, 2012 | ||||||
/s/ GREGORY S. LEVIN | ||||||
Gregory S. Levin | ||||||
Executive Vice President, | ||||||
Chief Financial Officer and Secretary | ||||||
(Principal Financial and Accounting Officer) |
Exhibit 32
BJS RESTAURANTS, INC.
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Gerald W. Deitchle, Chief Executive Officer and Gregory S. Levin, Chief Financial Officer of the Company, certify to their knowledge:
(1) The Quarterly Report on Form 10-Q of the Company for the quarter ended July 3, 2012, as filed with the Securities and Exchange Commission on the date hereof (the Report), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and,
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
In Witness Whereof, each of the undersigned has signed this Certification as of this August 6, 2012.
/s/ GERALD W. DEITCHLE |
/s/ GREGORY S. LEVIN |
Gerald W. Deitchle |
Gregory S. Levin |
Chairman, President and |
Executive Vice President, Chief |
Chief Executive Officer |
Financial Officer and Secretary |
(Principal Executive Officer) |
(Principal Financial and Accounting Officer) |
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