Luby's Inc (NYSE: LUB) (Luby's) today announced unaudited financial results for its twelve-week third quarter fiscal 2020 ended June 3 2020 referred to as third quarter  Comparisons in this earnings release are for the third quarter compared to the twelve-week third quarter fiscal 2019

Luby's restaurant sales were significantly impacted (like all restaurant operators) by the unprecedented nature of the COVID-19 pandemic and sate and local governments' responses which resulted in temporary store closures and limited service at operating stores

As of the date of this release Luby's is operating 43 stand-alone Luby's Cafeterias 3 Combo locations and  17 Fuddruckers Restaurants   The remaining locations (included in the restaurant counts as of June 3 2020 above) were classified as temporarily closed

Previously announced results of strategic review process conducted by Luby's Board of Directors

On June 3 2020 we announced that our Board of Directors approved a course of action whereby we will immediately pursue the sale of our operating divisions and assets including real estate assets or the sale of the Company in its entirety and distribute the net proceeds to our stockholders after payment of debt and other obligations During the sale process many of our restaurants will remain open

Comments related to our operations in the context of COVID-19

Beginning in May 2020 we began to gradually reopen the dining rooms with state-mandated limits on guest capacity at the 28 Luby's Cafeterias  locations and 3  Fuddruckers locations that had been previously operating with food-to-go service only We also began to reopen restaurants that were temporarily closed As of June 3 2020 there were 31 Luby's Cafeteria's and Combo locations and 8 Fuddruckers restaurants operating all of which had their dining rooms open at limited capacity  There were 59 franchise locations in operation as of June 3 2020 We are continuing a gradual reopening of our restaurants and as of the date of this release there were 46 stand-alone Luby's Cafeteria's and Combo locations and 17 Fuddruckers Restaurants operating with dining rooms open at limited capacity and there were 64 franchise locations in operation By the end of the fiscal third quarter for the stores that were in operation we were achieving weekly sales levels in excess of 80% of prior year levels at our cafeteria brand and in excess of 70% at our Fuddruckers brand Approximately 40% of our restaurant sales were for off-premise dining (food-to-go and delivery)  At these sales levels and with a re-defined operating model we are generating positive store level profit in the aggregate at these 46 cafeteria and 18 Fuddruckers locations Within our Culinary Contract Services segment we continue operations at each of our clients' hospital locations  In addition we experienced increased demand for our Luby's-branded frozen packaged good products that are sold through HEB our third-party grocery retail partner in Texas

In response to the changed operating environment as a result of  the COVID-19 pandemic we took the following actions:

• We revamped restaurant operations to generate cost efficiencies resulting in higher restaurant operating margins even while sales levels have not returned to pre-COVID-19 pandemic levels As the restaurants adapted to the new operating environment a lower labor cost model was deployed food costs declined as menu offerings were concentrated among the historically top selling items and various restaurant service and supplier costs were reevaluated As a result of these changes we achieved store level profit of approximately $10 million in the last month of our fiscal third quarter at the restaurants that were operational
  
  
• We began restructuring corporate overhead earlier in calendar 2020 prior to the COVID-19 pandemic including a transition to a 3rd party provider for certain accounting and payroll functions Significant further restructuring took place in April May and June of 2020 as we reviewed all corporate service providers information technology needs and personnel requirements to support a reduced level of operations going forward  As a result of these restructuring efforts that began earlier in calendar 2020 and accelerated as a result of the pandemic we have reduced our general and administrative expense by over 50%
  
  
• In addition to the approximate $72 million proceeds in property sales achieved in fiscal 2020 through the third quarter we generated an additional $107 million in in June 2020 and anticipate an additional $92 million proceeds from property sales before the end of fiscal 2020 in August

As of this release the uncertainty regarding the spread of the COVID-19 pandemic and the timing of the economic recovery could continue to materially impact our results of operations and cash flows

About Luby's

Luby's Inc (NYSE: LUB) operates two core restaurant brands: Luby's Cafeterias and Fuddruckers Luby's is also the franchisor for the Fuddruckers restaurant brand In addition through its Luby's Culinary Contract Services business segment Luby's provides food service management to sites consisting of healthcare corporate dining locations sports stadiums and sales through retail grocery stores

This press release contains statements that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended All statements contained in this press release other than statements of historical fact are forward-looking statements for purposes of these provisions including the statements under the caption Outlook and any other statements regarding scheduled openings of units scheduled closures of units sales of assets expected proceeds from the sale of assets expected levels of capital expenditures effects of food commodity costs anticipated financial results in future periods and expectations of industry conditions

Luby's cautions readers that various factors could cause its actual financial and operational results to differ materially from those indicated by forward-looking statements made from time-to-time in news releases reports proxy statements registration statements and other written communications as well as oral statements made from time to time by representatives of Luby's The following factors as well as any other cautionary language included in this press release provide examples of risks uncertainties and events that may cause Luby's actual results to differ materially from the expectations Luby's describes in such forward-looking statements: general business and economic conditions; the impact of competition; our operating initiatives; fluctuations in the costs of commodities including beef poultry seafood dairy cheese and produce; increases in utility costs including the costs of natural gas and other energy supplies; changes in the availability and cost of labor; the seasonality of Luby's business; changes in governmental regulations including changes in minimum wages; the effects of inflation; the availability of credit; unfavorable publicity relating to operations including publicity concerning food quality illness or other health concerns or labor relations; disruptions to our business from the COVID-19 pandemic including the duration of government mandated and voluntary shut-down of our operations the speed with which the Company's restaurants can safely be reopened the level of guest demand following reopening and the impacts on our financial resources and liquidity; the continued service of key management personnel; and other risks and uncertainties disclosed in Luby's annual reports on Form 10-K quarterly reports on Form 10-Q and current reports on Form 8-k

The following table contains information derived from the Company's Consolidated Statements of Operations expressed as a percentage of sales Percentages may not total due to rounding

Store Level Profit

Although store level profit defined as restaurant sales plus vending revenue less cost of food payroll and related costs other operating expenses and occupancy costs is a non-GAAP measure we believe its presentation is useful because it explicitly shows the results of our most significant reportable segments   The following table reconciles between store level profit a non-GAAP measure to loss from continuing operations a GAAP measure:

Adjusted EBITDA

Adjusted EBITDA is defined as income (loss) from continuing operations before interest provision (benefit) for income taxes and depreciation and amortization and excluding net loss (gain) on disposing of property and equipment provision for asset impairments and restaurant closings other charges  non-cash compensation expense franchise taxes and decrease / (increase) in fair value of derivatives

Adjusted EBITDA is intended as a supplemental measure of our performance that is not required by or presented in accordance with GAAP We believe Adjusted EBITDA  provides useful information to management and investors in valuing the Company and evaluating ongoing operating results and trends and in comparing our results to other competitors Our management uses Adjusted EBITDA in evaluating management's performance when determining incentive compensation

Adjusted EBITDA as defined may not be comparable to other similarly titled measures as computed by other companies These measures should be considered supplemental and not a substitute or superior to other GAAP performance measures