What changed in this filing

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Item 1A. Risk Factors

2020-06-02 compared with 2020-02-25 · 53 added, 3 removed, 12 unchanged (82% of the section changed)

Except as otherwise described herein (and as previously included in our Quarterly Report on Form 10-Q for the quarter ended November 1, 2019), there have been no material changes in the risk factors previously disclosed in “Item 1A.

Except as otherwise described herein (and as previously included in our Quarterly Report on Form 10-Q for the quarter ended January 31, 2020), there have been no material changes in the risk factors previously disclosed in “Item 1A.

Risk Factors” of our 2019 Form 10-K.

The novel coronavirus (“COVID-19”) pandemic has had and is expected to continue to have a material adverse effect on our business, financial condition, results of operations, and our ability to make distributions to our shareholders for an extended period of time.

In March 2020, the World Health Organization declared COVID-19 to be a pandemic.

In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States, have imposed unprecedented restrictions on travel, group gatherings and non-essential activities, including orders and guidance issued by U.S.

federal, state and local governmental authorities, such as “social distancing” guidance, shelter-in-place orders and limitations on or full prohibitions of dine-in services.

There have also been significant business closures and a substantial reduction in economic activity in the United States as a result of the COVID-19 pandemic.

Significant uncertainty remains as to the potential impact of the COVID-19 pandemic on the U.S.

economy as a whole, as well as on the restaurant industry and our business, in particular.

In response to the COVID-19 pandemic and the orders and guidance from U.S.

federal and applicable state and local governmental authorities, in March 2020 we temporarily closed the dining rooms in all of our restaurants and operated with pick-up or delivery only.

As state and municipal authorities begin to lift or modify existing restrictions on dine-in restaurant operations in certain jurisdictions, we have been able to resume dine-in operations at a limited number of our restaurants;

however, our dine-in operations have been and will continue to be limited to occupancy levels well below capacity, and some are yet to open at all.

In addition, both our off-premise and resumed dine-in operations are being conducted under additional health and safety procedures and practices that are intended to ensure the safety and comfort of our employees and guests, and these additional measures have had and will continue to have adverse effects on our operating costs.

We cannot predict how quickly or whether consumer demand for our business will return to pre-pandemic levels, which may be a function of continued concerns over safety and/or depressed consumer sentiment due to adverse economic conditions and uncertainty, including as a result of job losses and lower discretionary income.

As a result of these factors, the COVID-19 pandemic, the resulting public health response and diminished economic activity have had and will continue to have a material adverse effect on our guest traffic, sales and operating costs, and we cannot predict the duration of the pandemic or what other government responses or economic effects may occur.

The impacts of the COVID-19 pandemic have adversely affected our cash flows which could impact our ability to meet our obligations over the next twelve months.

We have taken a number of actions to preserve liquidity during the COVID-19 pandemic.

In mid-March 2020, we borrowed the remaining available amount under our 2019 Revolving Credit Facility so that as of May 1, 2020, a total of approximately $947 million (including $6.7 million of standby letters of credit) was currently outstanding under our 2019 Revolving Credit Facility.

In addition, we deferred payment of the dividend that was declared on March 3, 2020, which was scheduled for May 5, 2020 to shareholders of record on April 17, 2020, until a later payment date of September 2, 2020 to shareholders of record on August 14, 2020, and we suspended all further dividend payments under our historical dividend program until further notice.

We also temporarily suspended all further share repurchases under our previously announced $25.0 million share repurchase program.

Depending on the duration of the COVID-19 pandemic and the associated business interruptions, we may continue to seek other sources of liquidity and other ways of preserving liquidity.

No assurance can be made that sources of additional liquidity will be readily available or that we will be successful in obtaining additional liquidity or preserving liquidity.

Further, no assurance can be made that sources of additional liquidity will be available on terms that are favorable to us.

To preserve available cash during the COVID-19 pandemic, we have modified work hours, furloughed employees, eliminated positions at all levels of the Company, and reduced compensation payable to our corporate officers and cash retainers payable to our Board of Directors.

We have also instituted inventory management measures, negotiated and continue to negotiate revised payment terms with our landlords and vendors, and undertaken other cost saving measures throughout our operations, which have resulted in certain cost savings and benefits and deferral of various payables.

We may continue to initiate additional cost saving measures if the COVID-19 pandemic continues, but we cannot assure you that similar results or cost savings will be achieved.

The COVID-19 pandemic has also adversely affected our ability to open new restaurants and remodel existing restaurants.

Due to the uncertainty in the economy and to preserve liquidity, we have paused nearly all construction of new restaurants and certain capital expenditures at existing restaurants.

These changes may have a material adverse effect on our ability to grow our business, particularly if these construction pauses are in place for a significant amount of time.

Moreover, these deferrals of planned construction of new restaurants may subject us to additional costs and other adverse effects both during the pendency of any delays as well as upon any resumption of deferred construction projects.

Our restaurant operations could be further disrupted if large numbers of our employees are diagnosed with COVID-19.

If a significant percentage of our workforce is unable to work, whether because of illness, quarantine, fear of contracting COVID-19, limitations on travel or other government restrictions in connection with COVID-19, our operations may be negatively impacted, potentially having a material adverse effect on our liquidity, financial condition or results of operations.

In addition, we have furloughed certain employees and may need to implement additional furloughs.

Those staff members might seek and find other employment during the furlough, which could materially adversely affect our ability to properly staff and reopen our dining rooms with experienced staff members when the business interruptions caused by COVID-19 abate or end.

As a result of the COVID-19 pandemic, including related governmental guidance or requirements, we also have recently closed our corporate offices in Lebanon, Tennessee and have implemented a work-from-home policy for many of our corporate employees.

This policy may negatively impact productivity and cause other disruptions to our business.

Our suppliers have been and could continue to be adversely impacted by the COVID-19 pandemic.

If our suppliers’ employees are unable to work, whether because of illness, quarantine, fear of contracting COVID-19, limitations on travel or other government restrictions in connection with COVID-19, we could face shortages of food items or other supplies at our restaurants, and our operations and sales could be adversely impacted by such supply interruptions.

Although we have not experienced material adverse impacts to date, additional or prolonged closures of meat processing facilities that have occurred due to the effects of COVID-19 could adversely impact our supply chain and the products that we offer.

Similarly, many of the products sold in our retail operations are sourced from international suppliers, including from China, and have experienced, and will likely continue to experience, disruptions, temporary closures and worker shortages that may result in an inability to fulfill our orders timely or, in some cases, at all, which could have an adverse impact on our retail sales and margins.

The COVID-19 pandemic has also resulted in significant financial market volatility and uncertainty, including material declines in the market price of our common stock.

A continuation or worsening of the levels of market disruption and volatility seen during the first and second calendar quarters of 2020 could have a further adverse effect on the market price of our common stock.

Should the market price of our common stock decline further, we may incur additional impairment charges to other assets, such as goodwill or other intangible or long-lived assets, which could have a further material adverse effect on our financial condition and results of operations.

The performance of our business as affected by the COVID-19 pandemic and the level of our indebtedness could prevent us from meeting the obligations under our 2019 Revolving Credit Facility, maintaining sufficient liquidity to operate our business or servicing our debt obligations.

Our 2019 Revolving Credit Facility contains covenants requiring us to maintain a maximum consolidated total leverage ratio and a minimum consolidated interest coverage ratio .

Given the significant uncertainty relating to the potential impacts of the COVID-19 pandemic on our business going forward, there are potential scenarios under which we could fail to comply with these covenants, which would result in an event of default that, if not waived, could have a material adverse effect on our financial condition, results of operations or ability to continue to service our debt obligations.

If there are prolonged or worsening effects of the COVID-19 pandemic, such as continued long-term closures of our restaurants, we could be unable to generate revenues and cash flows sufficient to conduct our business, service our outstanding debt and comply with the covenants under the 2019 Revolving Credit Facility.

This could, among other things, exhaust our available liquidity (and ability to access liquidity sources) and/or result in an acceleration of the maturity of a significant portion or all of our then-outstanding debt obligations, which we may be unable to repay or refinance.

Our non-controlling interest in PBS, our acquisition of MSBC, as well as other strategic investments or initiatives that the Company may pursue now or in the future, may not yield their expected benefits, resulting in a loss of some or all of the Company’s investment.

In 2019, the Company purchased a non-controlling interest in PBS.

The non-controlling interest requires the Company to participate in its respective share of profits or losses from the PBS business and provide growth capital for brand expansion.

Due to the growth-oriented nature of the PBS business, future outcomes of PBS’s financial results and operating condition may present a risk of loss of the Company’s initial investment and any on-going capital contributions, as well as have an adverse impact on our business, financial condition and results of operations.

Due to the impact of the COVID-19 pandemic, PBS’s wholly-owned operating subsidiary, PBS BrandCo, LLC (“Brandco”), suspended all operations at each of its 19 locations and laid off substantially all restaurant and corporate employees.

On March 20, 2020, the primary lender under Brandco’s secured credit facility provided notice to PBS and Brandco declaring a default under Brandco’s secured credit facility and stating the lender’s intention to foreclose on its collateral interest in the equity of Brandco and substantially all of Brandco’s assets.

In keeping with our strategy to concentrate resources on our core business and preserve liquidity during the COVID-19 pandemic, we made the decision not to prevent foreclosures or otherwise provide additional capital to PBS and recorded a non-cash impairment charge of approximately $132.9 million.

Our investment in PBS and resulting impairment charge has negatively impacted, and may continue to negatively impact, our financial condition and results of operations.

As of May 20, 2020, none of the PBS locations is under operation.

In 2020, the Company acquired 100% ownership of MSBC.

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors