KURA SUSHI USA, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited financial statements and the related notes and with the audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year endedAugust 31, 2020 (the "Annual Report"). In addition to historical information, the following discussion and analysis contains forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations, and intentions set forth in the "Special Note Regarding Forward-Looking Statements" and "Risk Factors" sections of the Annual Report. You should review those sections in our Annual Report for a discussion of important factors, including the continuing development of our business and other factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
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Overview
Kura Sushi USA, Inc. is a technology-enabled Japanese restaurant concept that provides guests with a distinctive dining experience by serving authentic Japanese cuisine through an engaging revolving sushi service model, which we refer to as the "Kura Experience". We encourage healthy lifestyles by serving freshly prepared Japanese cuisine using high-quality ingredients that are free from artificial seasonings, sweeteners, colorings, and preservatives. We aim to make quality Japanese cuisine accessible to our guests acrossthe United States through affordable prices and an inviting atmosphere.
Business Trends; Effects of COVID-19 on Our Business
InMarch 2020 , theWorld Health Organization declared the novel strain of coronavirus COVID-19 a global pandemic. This contagious virus, which has continued to spread, has adversely affected workforces, customers, economies and financial markets globally. In response to this outbreak, many state and local authorities mandated the temporary closure of non-essential businesses and dine-in restaurant activity. COVID-19 and the government measures taken to control it have caused a significant disruption to our business operation. As ofNovember 30, 2020 , we had 27 of our 28 restaurants open in some capacity: indoor dining, outdoor dining or takeout only. Subsequent toNovember 30, 2020 , we opened one new restaurant inAventura, Florida and as of the filing date of this Quarterly Report on Form 10-Q, we had all 29 restaurants open, with 16 of them inCalifornia andWashington DC only providing takeout, one restaurant inIllinois providing outdoor dining only and the remaining 12 restaurants operating at reduced indoor capacities of 25% to 75% depending on local requirements. In response to the ongoing COVID-19 pandemic, we have prioritized taking steps to protect the health and safety of our employees and customers. We have increased cleaning and sanitizing protocols of our restaurants and have implemented additional training and operational manuals for our restaurant employees, as well as increased handwashing procedures. We have also provided each restaurant employee with face masks and gloves, and require each employee to pass a health screening process, which includes a temperature check, before the start of each shift. The reduced capacities at open restaurants and temporary closure of one restaurant have caused a substantial decline in our sales in the most recent fiscal quarter compared to the same quarter last year. In response to the challenges posed by the COVID-19 pandemic, we have focused on maximizing our in-restaurant dining capacity as permitted by the jurisdictions where we operate, mobile ordering and takeout, continuing to provide a safe environment for our employees and customers, maintaining our operational efficiencies as much as possible and preserving our liquidity. In line with our long-term growth strategy, we expect to continue to open new restaurants at locations where we believe the restaurants have the potential to achieve profitability. The future sales levels of our restaurants and our ability to implement our growth strategy, however, remain highly uncertain, as the full impact and duration of the COVID-19 pandemic continues to evolve as of the filing date of this Quarterly Report on Form 10-Q.
Recent Events Concerning Our Financial Position
OnApril 10, 2020 , we and Kura Japan, entered into a Revolving Credit Agreement (the "Revolving Credit Agreement") establishing a$20 million revolving credit line for us. OnSeptember 2, 2020 , we and Kura Japan entered into a First Amendment to Revolving Credit Agreement (the "First Amendment") to (i) increase the maximum credit amount under the credit line from$20 million to$35 million , (ii) extend the maturity date for each advance from 12 months to 60 months from the date of disbursement and (iii) extend the last day of the period of availability for the advances under the credit line fromMarch 31, 2024 toApril 10, 2025 . In connection with the First Amendment, the Revolving Credit Note under the Revolving Credit Agreement was also amended by incorporating the same amendments as provided under the First Amendment. InNovember 2020 , we borrowed$3.0 million under the Revolving Credit Agreement. Subsequent toNovember 30, 2020 and as of the filing date of this Quarterly Report on Form 10-Q, we borrowed an additional$6.0 million under the Revolving Credit Agreement. See "Note 4. Related Party Transactions" and "Note 6. Debt" in the Notes to Condensed Financial Statements for further discussion. 13 --------------------------------------------------------------------------------
We have received rent concessions from our landlords for certain of our
restaurants in the form of rent abatements and rent deferrals which were
immaterial for the three months ended
Due to the impact of COVID-19, we assessed our long-lived assets for potential impairment which resulted in no impairment charges recorded as ofNovember 30, 2020 . Key Financial Definitions Sales. Sales represent sales of food and beverages in restaurants. Restaurant sales in a given period are directly impacted by the number of restaurants we operate and comparable restaurant sales growth. Food and beverage costs. Food and beverage costs are variable in nature, change with sales volume and are influenced by menu mix and subject to increases or decreases based on fluctuations in commodity costs. Other important factors causing fluctuations in food and beverage costs include seasonality and restaurant-level management of food waste. Food and beverage costs are a substantial expense and are expected to grow proportionally as our sales grows. Labor and related expenses. Labor and related expenses include all restaurant-level management and hourly labor costs, including wages, employee benefits and payroll taxes. Similar to the food and beverage costs that we incur, labor and related expenses are expected to grow proportionally as our sales grows. Factors that influence fluctuations in our labor and related expenses include minimum wage and payroll tax legislation, the frequency and severity of workers' compensation claims, healthcare costs and the performance of our restaurants.
Occupancy and related expenses. Occupancy and related expenses include rent for all restaurant locations and related taxes.
Depreciation and amortization expenses. Depreciation and amortization expenses are periodic non-cash charges that consist of depreciation and amortization of fixed assets, including equipment and capitalized leasehold improvements. Depreciation and amortization are determined using the straight-line method over the assets' estimated useful lives, ranging from three to 20 years.
Other costs. Other costs include utilities, repairs and maintenance, credit card fees, royalty payments to Kura Japan, stock-based compensation expenses for restaurant-level employees and other restaurant-level expenses.
General and administrative expenses. General and administrative expenses include expenses associated with corporate and regional supervision functions that support the operations of existing restaurants and development of new restaurants, including compensation and benefits, travel expenses, stock-based compensation expenses for corporate-level employees, legal and professional fees, marketing costs, information systems, corporate office rent and other related corporate costs. General and administrative expenses are expected to grow as our unit base grows, including incremental legal, accounting, insurance and other expenses.
Interest expense. Interest expense includes cash and non-cash charges related to our line of credit and finance lease obligations.
Interest income. Interest income includes income earned on our investments.
Income tax expense (benefit). Provision for income taxes represents federal, state and local current and deferred income tax expense.
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--------------------------------------------------------------------------------Results of Operations
The following tables present selected comparative results of operations for the three months endedNovember 30, 2020 andNovember 30, 2019 . Our financial results for these periods are not necessarily indicative of the financial results that we will achieve in future periods. Certain totals for the table below may not sum to 100% due to rounding. Three Months Ended November 30, Increase / (Decrease) 2020 2019 2020 vs 2019 (dollar amounts in thousands) Sales $ 9,414$ 17,440 $ (8,026 ) (46.0 ) % Restaurant operating costs: Food and beverage costs 3,053 5,693 (2,640 ) (46.4 ) Labor and related costs 4,360 5,641 (1,281 ) (22.7 ) Occupancy and related expenses 1,690 1,439 251 17.4 Depreciation and amortization expenses 927 663 264 39.8 Other costs 2,079 2,047 32 1.6 Total restaurant operating costs 12,109 15,483 (3,374 ) (21.8 ) General and administrative expenses 3,521 3,326 195 5.9 Depreciation and amortization expenses 75 22 53 240.9 Total operating expenses 15,705 18,831 (3,126 ) (16.6 ) Operating loss (6,291 ) (1,391 ) (4,900 ) (352.3 ) Other expense (income): Interest expense 34 34 - - Interest income (4 ) (197 ) 193 (98.0 ) Loss before income taxes (6,321 ) (1,228 ) (5,093 ) (414.7 ) Income tax expense (benefit) 29 (4 ) 33 825.0 Net loss$ (6,350 ) $ (1,224 ) $ (5,126 ) (418.8 ) % Three Months Ended November 30, 2020 2019 (as a percentage of sales) Sales 100.0 % 100.0 %
Restaurant operating costs:
Food and beverage costs 32.4
32.6
Labor and related costs 46.3
32.3
Occupancy and related expenses 18.0
8.3
Depreciation and amortization expenses 9.8
3.8
Other costs 22.1
11.7
Total restaurant operating costs 128.6
88.7
General and administrative expenses 37.4
19.1
Depreciation and amortization expenses 0.8 0.1
Total operating expenses 166.8 107.9
Operating loss (66.8 ) (7.9 )
Other expense (income):
Interest expense 0.4 0.2
Interest income - (1.1 )
Loss before income taxes (67.2 ) (7.0 )
Income tax expense (benefit) 0.3 -
Net loss (67.5 ) % (7.0 ) %
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Three Months Ended
Sales. Sales were$9.4 million for the three months endedNovember 30, 2020 compared to$17.4 million for the three months endedNovember 30, 2019 , representing a decrease of approximately$8.0 million or 46.0%. The decrease in sales was primarily driven by reduced level of operating capacities of our restaurants due to local government restrictions in response to the COVID-19 pandemic during the three months endedNovember 30, 2020 , partially offset by sales from the opening of five new restaurants subsequent toNovember 30, 2019 . Food and beverage costs. Food and beverage costs were$3.1 million for the three months endedNovember 30, 2020 compared to$5.7 million for the three months endedNovember 30, 2019 , representing a decrease of approximately$2.6 million or 46.4%. The decrease in food and beverage costs was primarily driven by reduced level of operating capacities of our restaurants due to local government restrictions in response to the COVID-19 pandemic during the three months endedNovember 30, 2020 , partially offset by the costs associated with sales from the opening of five new restaurants subsequent toNovember 30, 2019 . As a percentage of sales, food and beverage costs was 32.4% in the three months endedNovember 30, 2020 , compared to 32.6% in the three months endedNovember 30, 2019 . Labor and related costs. Labor and related costs were$4.4 million for the three months endedNovember 30, 2020 compared to$5.6 million for the three months endedNovember 30, 2019 , representing a decrease of approximately$1.2 million , or 22.7%. Labor and related costs decreased as a result of reduced level of operating capacities of our restaurants due to local government restrictions in response to the COVID-19 pandemic during the three months endedNovember 30, 2020 , partially offset by additional labor costs incurred from the opening of five new restaurants subsequent toNovember 30, 2019 . As a percentage of sales, labor and related costs increased to 46.3% in the three months endedNovember 30, 2020 , compared to 32.3% in the three months endedNovember 30, 2019 . The increase in labor and related costs as a percentage of sales was primarily due to minimum staffing requirements to operate the restaurants, particularly at reduced operating capacities. Occupancy and related expenses. Occupancy and related expenses were$1.7 million for the three months endedNovember 30, 2020 compared to$1.4 million for the three months endedNovember 30, 2019 , representing an increase of approximately$0.3 million , or 17.4%. The increase was primarily a result of additional lease expense incurred with respect to the opening of five new restaurants subsequent toNovember 30, 2019 . As a percentage of sales, occupancy and other operating expenses increased to 18.0% in the three months endedNovember 30, 2020 , compared to 8.3% in the three months endedNovember 30, 2019 . The increase as a percentage of sales was primarily driven by the decrease in sales due to the reduced level of operating capacities of our restaurants due to local government restrictions in response to the COVID-19 pandemic during the three months endedNovember 30, 2020 . Depreciation and amortization expenses. Depreciation and amortization expenses incurred as part of restaurant operating costs were$0.9 million for the three months endedNovember 30, 2020 compared to$0.7 million for the three months endedNovember 30, 2019 , representing an increase of approximately$0.2 million , or 39.8%. The increase was primarily due to depreciation of property and equipment related to the opening of five new restaurants subsequent toNovember 30, 2019 . As a percentage of sales, depreciation and amortization expenses at the restaurant-level increased to 9.8% in the three months endedNovember 30, 2020 as compared to 3.8% in the three months endedNovember 30, 2019 . The increase as a percentage of sales is primarily due to the decrease in sales due to the reduced level of operating capacities of our restaurants due to local government restrictions in response to the COVID-19 pandemic during the three months endedNovember 30, 2020 . Depreciation and amortization expenses incurred at the corporate-level were immaterial for the three months endedNovember 30, 2020 andNovember 30, 2019 , and as a percentage of sales were 0.8% and 0.1%, respectively. Other costs. Other costs were$2.1 million for the three months endedNovember 30, 2020 compared to$2.0 million for the three months endedNovember 30, 2019 , representing an increase of approximately$32 thousand , or 1.6%. The increase was primarily due to the opening of five new restaurants subsequent toNovember 30, 2019 . As a percentage of sales, other costs increased to 22.1% in the three months endedNovember 30, 2020 from 11.7% in the three months endedNovember 30, 2019 primarily due to costs that are not directly variable with the decrease in sales such as maintenance services, utilities and business insurance, as well as smallware for three new restaurants that opened within the quarter and supplies related to incremental takeout orders. General and administrative expenses. General and administrative expenses were$3.5 million for the three months endedNovember 30, 2020 compared to$3.3 million for the three months endedNovember 30, 2019 , representing an increase of approximately$0.2 million , or 5.9%. This increase in general and administrative expenses was primarily due to$0.4 million in executive transition costs,$0.2 million in compensation-related expenses and$0.1 million of various other costs, partially offset by$0.5 million in reduced legal and audit fees. As a percentage of sales, general and administrative expenses increased to 37.4% in the three months endedNovember 30, 2020 from 19.1% in three months endedNovember 30, 2019 , primarily due to the decrease in sales from the reduced level of operating capacities of our restaurants due to local government restrictions in response to the COVID-19 pandemic during the three months endedNovember 30, 2020 . 16 --------------------------------------------------------------------------------
Interest expense. Interest expense was insignificant in both the three months
ended
Interest income. Interest income was
Income tax expense. Income tax expense was$29 thousand for the three months endedNovember 30, 2020 compared to a tax benefit of$4 thousand for the three months endedNovember 30, 2019 . For further discussion of our income taxes, see "Note 9. Income Taxes" in the Notes to Condensed Financial Statements.
Key Performance Indicators
In assessing the performance of our business, we consider a variety of financial and performance measures. The key measures for determining how our business is performing include sales, EBITDA, Adjusted EBITDA, Restaurant-level Operating Profit, Restaurant-level Operating Profit margin, comparable restaurant sales performance, and number of restaurant openings.
Sales
Sales represents sales of food and beverages in restaurants, as shown on our
statements of operations. Several factors affect our restaurant sales in any
given period including the number of restaurants in operation, guest traffic and
average check.
EBITDA and Adjusted EBITDA
EBITDA is defined as net income (loss) before interest, income taxes and
depreciation and amortization expenses. Adjusted EBITDA is defined as EBITDA
plus stock-based compensation expense, non-cash lease expense and asset
disposals, closure costs and restaurant impairments, as well as certain items,
such as certain executive transition costs, that are not indicative of core
operating results. EBITDA and Adjusted EBITDA are non-GAAP measures which are
intended as supplemental measures of our performance and are neither required
by, nor presented in accordance with, GAAP. We believe that EBITDA and Adjusted
EBITDA provide useful information to management and investors regarding certain
financial and business trends relating to our financial condition and operating
results. However, these measures may not provide a complete understanding of the
operating results of the Company as a whole and such measures should be reviewed
in conjunction with our GAAP financial results.
We believe that the use of EBITDA and Adjusted EBITDA provides an additional
tool for investors to use in evaluating ongoing operating results and trends and
in comparing the Company's financial measures with those of comparable
companies, which may present similar non-GAAP financial measures to investors.
However, you should be aware when evaluating EBITDA and Adjusted EBITDA that in
the future we may incur expenses similar to those excluded when calculating
these measures. In addition, our presentation of these measures should not be
construed as an inference that our future results will be unaffected by unusual
or non-recurring items. Our computation of Adjusted EBITDA may not be comparable
to other similarly titled measures computed by other companies, because all
companies may not calculate Adjusted EBITDA in the same fashion.
Because of these limitations, EBITDA and Adjusted EBITDA should not be
considered in isolation or as a substitute for performance measures calculated
in accordance with GAAP. We compensate for these limitations by relying
primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a
supplemental basis. You should review the reconciliation of net income to EBITDA
and Adjusted EBITDA below and not rely on any single financial measure to
evaluate our business.
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The following table reconciles net income to EBITDA and Adjusted EBITDA for the
three months ended
Three Months Ended November 30,
2020 2019
(amounts in thousands)
Net loss $ (6,350 ) $ (1,224 )
Interest expense (income), net 30 (163 )
Income tax expense (benefit) 29
(4 )
Depreciation and amortization expenses 1,002
685
EBITDA (5,289 )
(706 )
Stock-based compensation expense(a) 266
121
Non-cash lease expense(b) 576
243
Executive transition costs(c) 390 - Adjusted EBITDA (4,057 ) (342 ) Adjusted EBITDA margin (43.1 )% (2.0 )%
(a) Stock-based compensation expense includes non-cash stock-based compensation,
which is comprised of restaurant-level stock-based compensation included in
other costs in the statements of operations and of corporate-level
stock-based compensation included in general and administrative expenses in
the statements of operations. For further details of stock-based
compensation, see "Note 5. Stock-based Compensation" to the financial
statements included in this Quarterly Report on Form 10-Q.
(b) Non-cash lease expense includes lease expense from the opening date of our
restaurants that did not require cash outlay in the respective periods.
(c) Executive transition costs include severance and search fees associated with
the transition of our Chief Financial Officer.
Restaurant-level Operating Profit and Restaurant-level Operating Profit Margin
Restaurant-level Operating Profit is defined as operating income (loss) plus
depreciation and amortization expenses; stock-based compensation expense;
pre-opening costs and general and administrative expenses which are considered
normal, recurring, cash operating expenses and are essential to support the
development and operations of our restaurants; non-cash lease expense; asset
disposals, closure costs and restaurant impairments; less corporate-level
stock-based compensation expense recognized within general and administrative
expenses. Restaurant-level Operating Profit margin is defined as
Restaurant-level Operating Profit divided by sales. Restaurant-level Operating
Profit and Restaurant-level Operating Profit margin are intended as supplemental
measures of our performance and are neither required by, nor presented in
accordance with, GAAP. We believe that Restaurant-level Operating Profit and
Restaurant-level Operating Profit margin provide useful information to
management and investors regarding certain financial and business trends
relating to our financial condition and operating results. However, these
measures may not provide a complete understanding of the operating results of
the Company as a whole and such measures should be reviewed in conjunction with
our GAAP financial results. We expect Restaurant-level Operating Profit to
increase in proportion to the number of new restaurants we open and our
comparable restaurant sales growth, if any.
We present Restaurant-level Operating Profit because it excludes the impact of
general and administrative expenses, which are not incurred at the
restaurant-level. We also use Restaurant-level Operating Profit to measure
operating performance and returns from opening new restaurants. Restaurant-level
Operating Profit margin allows us to evaluate the level of Restaurant-level
Operating Profit generated from sales.
However, you should be aware that Restaurant-level Operating Profit and
Restaurant-level Operating Profit margin are financial measures, which are not
indicative of overall results for the Company, and Restaurant-level Operating
Profit and Restaurant-level Operating Profit margin do not accrue directly to
the benefit of stockholders because of corporate-level expenses excluded from
such measures.
In addition, when evaluating Restaurant-level Operating Profit and
Restaurant-level Operating Profit margin, you should be aware that in the future
we may incur expenses similar to those excluded when calculating these measures.
Our presentation of these measures should not be construed as an inference that
our future results will be unaffected by unusual or non-recurring items. Our
computation of Restaurant-level Operating Profit and Restaurant-level Operating
Profit margin may not be comparable to other similarly titled measures computed
by other companies, because all companies may not calculate Restaurant-level
Operating Profit and Restaurant-level Operating Profit margin in the same
fashion. Restaurant-level Operating Profit and Restaurant-level Operating
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Profit margin have limitations as analytical tools, and you should not consider
those measures in isolation or as a substitute for analysis of our results as
reported under GAAP.
The following table reconciles operating loss to Restaurant-level Operating
Profit and Restaurant-level Operating Profit margin for the three months ended
Three Months Ended November 30,
2020 2019
(amounts in thousands)
Operating loss $ (6,291 ) $ (1,391 )
Depreciation and amortization expenses 1,002 685
Stock-based compensation expense(a) 266 121
Pre-opening costs(b) 235 145
Non-cash lease expense(c) 576 243
General and administrative expenses 3,521 3,326
Corporate-level stock-based compensation included in General and administrative expenses (243 ) (105 ) Restaurant-level operating (loss) profit (934 )
3,024
Operating loss margin (66.8 )% (8.0 )% Restaurant-level operating (loss) profit margin (9.9 )% 17.3 %
(a) Stock-based compensation expense includes non-cash stock-based compensation,
which is comprised of restaurant-level stock-based compensation included in
other costs in the statements of operations and of corporate-level
stock-based compensation included in general and administrative expenses in
the statements of operations. For further details of stock-based
compensation, see "Note 5. Stock-based Compensation" to the financial
statements included in this Quarterly Report on Form 10-Q.
(b) Pre-opening costs consist of labor costs and travel expenses for new
employees and trainers during the training period, recruitment fees, legal
fees, cash-based lease expenses incurred between the date of possession and
opening day of our restaurants, and other related pre-opening costs.
(c) Non-cash lease expense includes lease expense from the date of possession of
our restaurants that did not require cash outlay in the respective periods.
Comparable Restaurant Sales Performance
Comparable restaurant sales performance refers to the change in year-over-year sales for the comparable restaurant base. We include restaurants in the comparable restaurant base that have been in operation for at least 18 months prior to the start of the accounting period presented due to new restaurants experiencing a period of higher sales upon opening, including those temporarily closed for renovations during the year. For restaurants that were temporarily closed for renovations during the year, we make fractional adjustments to sales such that sales are annualized in the associated period. We did not make any adjustments for the temporary restaurant closures due to COVID-19 during the three months endedNovember 30, 2020 . Measuring our comparable restaurant sales performance allows us to evaluate the performance of our existing restaurant base. Various factors impact comparable restaurant sales, including:
• government restrictions on indoor dining capacity due to COVID-19;
• consumer recognition of our brand and our ability to respond to changing
consumer preferences;
• overall economic trends, particularly those related to consumer spending;
• our ability to operate restaurants effectively and efficiently to meet
consumer expectations;
• pricing;
• guest traffic;
• per-guest spend and average check;
• marketing and promotional efforts;
• local competition; and
• opening of new restaurants in the vicinity of existing locations.
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-------------------------------------------------------------------------------- Since opening new restaurants will be a significant component of our sales growth, comparable restaurant sales performance is only one measure of how we evaluate our performance. The following table shows the comparable restaurant sales performance for the three months endedNovember 30, 2020 andNovember 30, 2019 : Three Months Ended November 30, 2020 2019 Comparable restaurant sales performance (%) (50.8)% 7.9% Comparable restaurant base 20 14 Number of Restaurant Openings The number of restaurant openings reflects the number of restaurants opened during a particular reporting period. Before we open new restaurants, we incur pre-opening costs. New restaurants may not be profitable, and their sales performance may not follow historical patterns. The number and timing of restaurant openings has had, and is expected to continue to have, an impact on our results of operations. The following table shows the growth in our restaurant base for the three months endedNovember 30, 2020 andNovember 30, 2019 : Three Months Ended November 30, 2020 2019 Restaurant activity: Beginning of period 25 23 Openings 3 - End of period 28 23
Subsequent to
Liquidity and Capital Resources
Our primary uses of cash are for operational expenditures and capital investments, including new restaurants, costs incurred for restaurant remodels and restaurant fixtures. Historically, our main sources of liquidity had been cash flows from operations and the cash proceeds from our initial public offering in fiscal 2019. The impact of the COVID-19 pandemic is highly uncertain and management expects that the current restaurant sales levels and ongoing length and severity of the economic downturn will have a material adverse impact on our business, financial condition, liquidity and financial results. For further discussion, see above under "-Business Trends; Effects of COVID-19 on our Business." InNovember 2020 , we borrowed$3.0 million under the Revolving Credit Agreement. Subsequent toNovember 30, 2020 and as of the filing date of this Quarterly Report on Form 10-Q, we borrowed an additional$6.0 million and have$26 million of availability remaining under the Revolving Credit Agreement. The significant components of our working capital are liquid assets such as cash, cash equivalents and receivables, reduced by accounts payable and accrued expenses. Our working capital position benefits from the fact that we generally collect cash from sales to guests the same day or, in the case of credit or debit card transactions, within several days of the related sale, while we typically have at least 30 days to pay vendors. We believe that cash provided by operating activities, cash on hand and availability under our Revolving Credit Agreement provided by Kura Japan, will be sufficient to fund our lease obligations, capital expenditures and working capital needs for at least the next 12 months. 20 --------------------------------------------------------------------------------
Summary of Cash Flows
Our primary sources of liquidity and cash flows are operating cash flows, cash on hand and proceeds from our Revolving Credit Agreement. We use this to fund investing expenditures for new restaurant openings, reinvest in our existing restaurants, and increase our working capital. Our working capital position benefits from the fact that we generally collect cash from sales to guests the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have at least 30 days to pay our vendors.
The following table summarizes our cash flows for the periods presented:
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