Company to Substantially Reduce Capital
Expenditures in 2020 Compared to 2019 and Focus on Free Cash Flow
Generation of Current Restaurant Portfolio
Carrols Restaurant Group, Inc. (“Carrols” or the “Company”)
(Nasdaq: TAST) today reported financial results for the fourth
quarter and full year ended December 29, 2019.
Highlights for the Fourth Quarter of 2019 versus the Fourth
Quarter of 2018 Include:
- Total revenue increased 30.3% to $401.1 million (including
$73.6 million in restaurant sales and $3.4 million in other revenue
from the Cambridge acquisition completed in the second quarter of
2019) from $307.8 million in the prior year quarter;
- Comparable restaurant sales for the Company’s Burger King
restaurants increased 2.0% compared to a 2.7% increase in the prior
year quarter, an increase of 4.7% on a two-year stacked basis;
- Comparable restaurant sales for the Company’s Popeyes
restaurants increased 21.2% compared to comparable restaurant sales
under previous ownership in the prior year quarter;
- Promotions and discounts were 19.0% of restaurant sales for the
Company's comparable Burger King restaurants compared to 26.6% in
the prior year quarter;
- Adjusted EBITDA(1) was $22.7 million compared to $24.5 million
in the prior year quarter;
- Net loss was $9.9 million, or $0.20 per diluted share, compared
to net income of $1.8 million, or $0.04 per diluted share, in the
prior year quarter; and
- Adjusted net loss(1) was $6.2 million, or $0.12 per diluted
share, compared to adjusted net income of $2.5 million, or $0.05
per diluted share, in the prior year quarter.
Highlights for Full Year of 2019 versus Full Year of 2018
Include:
- Total revenue increased 24.0% to $1.46 billion (including
$193.1 million in restaurant sales and $10.2 million in other
revenue from the Cambridge acquisition completed in the second
quarter of 2019) from $1.18 billion in 2018;
- Comparable restaurant sales for the Company’s Burger King
restaurants increased 2.2% compared to a 3.8% increase in 2018, an
increase of 6.0% on a two-year stacked basis;
- Comparable restaurant sales for the Company’s Popeyes
restaurants increased 11.9% for our eight months of ownership
compared to comparable restaurant sales under previous ownership in
the prior year;
- Adjusted EBITDA(1) was $86.1 million compared to $103.0 million
in 2018;
- Net loss was $31.9 million, or $0.74 per diluted share,
compared to net income of $10.1 million, or $0.22 per diluted
share, in 2018; and
- Adjusted net loss(1) was $15.5 million, or $0.36 per diluted
share, compared to adjusted net income of $14.1 million, or $0.31
per diluted share, in 2018.
(1)
Adjusted EBITDA, Adjusted Restaurant-level
EBITDA and Adjusted net income (loss) are non-GAAP financial
measures. Refer to the definitions and reconciliation of these
measures to net income (loss) or to income (loss) from operations
in the tables at the end of this release.
Daniel T. Accordino, Chairman and Chief Executive Officer of
Carrols, commented, “2019 was a busy year at Carrols characterized
by significant accomplishments and challenges. We substantially
increased our restaurant sales and broadened our restaurant
portfolio from 849 restaurants in 18 states at the end of 2018 to
1,101 restaurants in 23 states at the end of 2019, mostly through
the transformative Cambridge acquisition. In addition, the
transaction added a second brand to Carrols in Popeyes, which we
believe has tremendous potential. During 2019, we also built 31 new
restaurants and remodeled 78 restaurants. However, comparable
restaurant sales growth for our Burger King restaurants was at the
low-end of our annual expectations and full year Adjusted EBITDA
relative to 2018 levels was adversely affected by several factors,
including increases in commodity and labor costs and the excess
sales discounts to certain customers over a ten week period last
summer.”
Accordino continued, “We begin 2020 with great optimism
regarding our growth trajectory for restaurant sales and Adjusted
EBITDA. Our top-line will benefit from a full year of contributions
from the restaurants we acquired, remodeled and built during 2019
and early 2020. We are projecting a 2% to 3% gain in comparable
restaurant sales in 2020 for our Burger King restaurants based upon
the brand’s marketing initiatives and product roll-out schedule,
and adding delivery capabilities by the end of the second quarter.
We also foresee higher Adjusted EBITDA and margin improvement
compared to 2019. We believe this will be driven by expected
improvements at our Cambridge restaurants as we continue to
implement our operational best practices, improve operating
controls over sales, and optimize food and labor expenditures.
Coupled with executing on a near term plan to drive efficiencies in
our business, our goal is to meaningfully expand margins over
time.”
Accordino concluded, “In terms of our 2020 plans, in
consultation with our board of directors we have reset our strategy
to prioritize organic sales and margin growth within our current
restaurant portfolio and to aggressively reduce our capital
spending compared to 2019. We anticipate that projected net capital
expenditures in 2020 will be approximately $55 million to $65
million, considerably lower than our approximately $98 million of
net capital expenditures in 2019. We are laser-focused on capital
allocation and will only invest capital in the highest return
projects. Our franchisor is in full agreement with our 2020 planned
reduction in restaurant remodel and build levels. This year our
objective is to generate positive free cash flow through higher
EBITDA and reduced net capital investment which we plan to deploy
to reduce both our outstanding debt on an absolute basis and debt
leverage ratio by year end.”
Fourth Quarter 2019 Financial Results
Total revenue increased 30.3% to $401.1 million in the fourth
quarter of 2019, including $73.6 million in restaurant sales from
Cambridge, compared to $307.8 million in the fourth quarter of
2018. Comparable restaurant sales for the Company’s Burger King
restaurants (which excludes restaurants acquired in 2019) increased
2.0%, consisting of a higher average check partially offset by a
decrease in customer traffic. This dynamic was a function of
substantially lower promotions and discounts as a percentage of
restaurant sales for the Company’s comparable Burger King
restaurants. Comparable restaurant sales for the Company’s Popeyes
restaurants increased 21.2% compared to comparable restaurant sales
under previous ownership in the prior year quarter.
Adjusted Restaurant-level EBITDA(1) was $42.9 million in the
fourth quarter of 2019 compared to $39.5 million in the prior year
period. Adjusted Restaurant-level EBITDA margin was 10.8% of
restaurant sales and decreased 200 basis points from the fourth
quarter of 2018, reflecting higher wage and related expenses at our
legacy restaurants and the inclusion of rent and other operating
expenses from the lower margin Cambridge restaurants.
General and administrative expenses were $23.0 million in the
fourth quarter of 2019, including $1.5 million in Cambridge
acquisition and integration costs, compared to $16.8 million in the
prior year period, which included $0.4 million in acquisition and
integration costs. Excluding acquisition and integration costs in
both periods, general and administrative expenses increased
modestly to 5.4% as a percentage of total revenues from 5.3% in the
prior year quarter and reflects the costs attributed to a larger
initial scope of required oversight due to the expanded restaurant
base.
Adjusted EBITDA(1) was $22.7 million in the fourth quarter of
2019 compared to $24.5 million in the fourth quarter of 2018.
Adjusted EBITDA margin was 5.7% of total restaurant sales and
decreased 220 basis points from the fourth quarter of 2018 due to
the factors discussed above.
Loss from operations was $4.6 million in the fourth quarter of
2019 compared to income from operations of $7.2 million in the
prior year quarter.
Interest expense increased to $7.4 million in the fourth quarter
of 2019 from $5.9 million in the fourth quarter of 2018, reflecting
the Company’s higher outstanding indebtedness.
Net loss was $9.9 million in the fourth quarter of 2019, or
$0.20 per diluted share, compared to net income of $1.8 million, or
$0.04 per diluted share, in the prior year quarter. Net loss in the
fourth quarter of 2019 included $1.8 million of impairment and
other lease charges compared to $0.3 million in the fourth quarter
of 2018.
Adjusted net loss(1) was $6.2 million, or $0.12 per diluted
share, compared to adjusted net income of $2.5 million, or $0.05
per diluted share, in the prior year quarter.
Carrols repurchased 270,043 shares of its outstanding common
stock in open market transactions during the fourth quarter of 2019
at a cost of approximately $2.0 million. Under the $25 million
stock repurchase program that was approved by the Board of
Directors in August 2019, the Company has repurchased a total of
553,112 shares for a total cost of approximately $4.0 million. The
Company has no obligation to repurchase stock under this program,
and the timing, actual number and value of shares purchased will
depend on the stock price, trading volume, general market and
economic conditions, and other factors.
The Company ended the fourth quarter of 2019 with cash of $3.0
million, and long-term debt, finance lease liabilities and lease
financing obligations of $472.3 million, and availability under its
revolving credit facility of $57.6 million. Carrols’ First Lien Net
Leverage Ratio, as defined in the Company’s Senior Credit Facility,
was approximately 4.11x at December 29, 2019 compared to a maximum
permitted of 5.75x. On February 24, 2020, $70.8 million of
borrowings were outstanding on the Company’s $115 million revolving
credit facility and $11.7 million of letters of credit were
outstanding. This represents an elevated level of borrowing as
during the first two months of the year we funded carryover capital
expenditures and working capital payables from 2019 while we
typically generate the lowest level of revenue and earnings during
this time of the year. We expect revolver borrowing levels to
decline during the second and third quarters of 2020.
2020 Growth and Capital Allocation Strategy
In consultation with our Board of Directors, we have reset the
Company’s growth and capital allocation strategy. In 2020, Carrols
will prioritize organic sales and margin improvement within our
current restaurant portfolio and aggressively reduce capital
spending compared to 2019 levels. These measures are designed to
generate free cash flow and reduce our debt in absolute dollars as
well as our debt leverage ratios.
We will accomplish our objectives through the following
steps:
- Slowing down the pace of acquisition activity;
- Limiting new restaurant development in 2020 to six new Burger
King restaurants with attractive expected returns on capital. We
also are completing the new build of six Burger King restaurants
during the first quarter of 2020 that were started in late 2019. In
total, we will be opening 12 new Burger King restaurants in 2020
(by comparison we opened 21 Burger King restaurants and 10 Popeyes
restaurants in 2019);
- Reducing our remodeling activity in 2020 to just 12 Burger King
restaurants with high returns on capital (by comparison, we
remodeled 74 Burger King restaurants and 4 Popeyes restaurants in
2019); and
- Taking a renewed look at operating expenses across the expanded
business with the goal of creating greater efficiencies and
improved margins over time.
Based upon our full year 2020 outlook detailed below, we expect
to generate up to $25 million in free cash flow this year assuming
neutral working capital changes.
Full Year 2020 Outlook
The Company is providing the following guidance for 2020 which
is a 53-week fiscal period:
- We expect total restaurant sales of $1.64 billion to $1.69
billion;
- Comparable restaurant sales growth for our Burger King
restaurants owned for more than 12 months as of December 29, 2019
is expected to be 2% to 3%. Please note that the Cambridge Burger
King restaurants will enter the comparable base on May 1st;
- Commodity costs are expected to increase 2% to 3%, with beef
costs expected to increase 9%;
- General and administrative expenses are expected to be $80
million to $85 million, excluding stock compensation expense,
reflecting the full year impact of overhead costs required to
support our enlarged restaurant base;
- Adjusted EBITDA is expected to be $100 million to $110
million;
- Interest expense is expected to be approximately $30 million
based on our debt pricing and expected stable LIBOR levels;
- Gross capital expenditures are expected to be $70 million to
$75 million, including approximately 35% for maintenance, 15% for
remodeling; and 40% for construction of new restaurants. Of that
total, approximately $25 million will be expended in the first
quarter of 2020 primarily relating to the completion of new
restaurants and remodels that commenced in 2019; and
- Proceeds from sale/leasebacks are expected to be approximately
$10 million to $15 million; resulting in net capital expenditures
of $55 million to $65 million.
Carrols has not reconciled guidance for Adjusted EBITDA to the
corresponding GAAP financial measure because the Company does not
provide guidance for net income or for the various reconciling
items. The Company is unable to provide guidance for these
reconciling items since certain items that impact net income are
outside of Carrols’ control or cannot be reasonably predicted.
Conference Call Today
Daniel T. Accordino, Chairman and Chief Executive Officer, and
Anthony E. Hull, Chief Financial Officer, will host a conference
call to discuss fourth quarter and full year 2019 financial results
today at 8:30 AM ET.
The conference call can be accessed live over the phone by
dialing 201-493-6725. A replay will be available one hour after the
call and can be accessed by dialing 412-317-6671; the passcode is
13698631. The replay will be available until Tuesday, March 3,
2020. Investors and interested parties may listen to a webcast of
this conference call by visiting www.carrols.com under the tab
“Investor Relations”.
About the Company
Carrols is one of largest restaurant franchisees in the United
States, and currently operates 1,099 restaurants. It is the largest
BURGER KING® franchisee in the United States currently operating
1,034 BURGER KING® restaurants and also operating 65 POPEYES®
restaurants. It has operated BURGER KING® restaurants since 1976.
For more information on Carrols, please visit the Company's website
at www.carrols.com.
Forward-Looking Statements
Except for the historical information contained in this news
release, the matters addressed are forward-looking statements.
Forward-looking statements, written, oral or otherwise made,
represent Carrols' expectation or belief concerning future events.
Without limiting the foregoing, these statements are often
identified by the words "may", "might", "believes", "thinks",
"anticipates", "plans", "expects", "intends" or similar
expressions. In addition, expressions of our strategies,
intentions, plans or guidance are also forward-looking statements.
Such statements reflect management's current views with respect to
future events and are subject to risks and uncertainties, both
known and unknown. You are cautioned not to place undue reliance on
these forward-looking statements as there are important factors
that could cause actual results to differ materially from those in
forward-looking statements, many of which are beyond our control.
Investors are referred to the full discussion of risks and
uncertainties as included in Carrols' filings with the Securities
and Exchange Commission.
Carrols Restaurant Group,
Inc.
Consolidated Statements of
Operations
(In thousands, except per share
amounts)
(unaudited)
(unaudited)
Three Months Ended (a)
Twelve Months Ended (a)
December 29, 2019
December 30, 2018
December 29, 2019
December 30, 2018
Revenue:
Restaurant sales
$
397,639
$
307,754
$
1,452,516
$
1,179,307
Other revenue
3,433
—
10,249
—
Total revenue
$
401,072
$
307,754
$
1,462,765
$
1,179,307
Operating expenses:
Cost of sales
118,954
89,304
431,969
326,308
Restaurant wages and related expenses
132,876
99,340
485,278
382,829
Restaurant rent expense
29,241
21,297
107,147
81,409
Other restaurant operating expenses
(b)
62,741
45,812
227,364
178,750
Advertising expense
16,088
12,599
58,689
48,340
General and administrative expenses (c)
(d)
23,025
16,829
84,734
66,587
Depreciation and amortization
21,061
15,042
74,674
58,468
Impairment and other lease charges
1,787
331
3,564
3,685
Other expense (income), net (e)
(138
)
10
(1,911
)
(424
)
Total operating expenses
405,635
300,564
1,471,508
1,145,952
Income (loss) from operations
(4,563
)
7,190
(8,743
)
33,355
Interest expense
7,431
5,886
27,856
23,638
Loss on extinguishment of debt
—
—
7,443
—
Gain on bargain purchase
—
—
—
(230
)
Income (loss) before income taxes
(11,994
)
1,304
(44,042
)
9,947
Provision (benefit) for income taxes
(2,088
)
(503
)
(12,123
)
(157
)
Net income (loss)
$
(9,906
)
$
1,807
$
(31,919
)
$
10,104
Basic and diluted net income (loss) per
share (f)(g)
$
(0.20
)
$
0.04
$
(0.74
)
$
0.22
Basic weighted average common shares
outstanding
50,643
35,742
43,422
35,715
Diluted weighted average common shares
outstanding
50,643
45,403
43,422
45,320
(a)
The Company uses a 52 or 53 week fiscal
year that ends on the Sunday closest to December 31. The three and
twelve months ended December 29, 2019 and December 30, 2018 each
included thirteen and fifty-two weeks, respectively.
(b)
Other restaurant operating expenses
include one-time repair and other operating costs of $1.4 million
and $2.4 million for the three and twelve months ended December 29,
2019, respectively.
(c)
General and administrative expenses
include acquisition and integration costs of $1.5 million and $0.4
million for the three months ended December 29, 2019 and December
30, 2018, respectively and $8.5 million and $1.4 million for the
twelve months ended December 29, 2019 and December 30, 2018,
respectively.
(d)
General and administrative expenses
include stock-based compensation expense of $1.2 million and $1.3
million for the three months ended December 29, 2019 and December
30, 2018, respectively and $5.8 million for both the twelve months
ended December 29, 2019 and December 30, 2018, respectively.
(e)
Other income, net, for the twelve months
ended December 29, 2019, included, among other things, a $1.9
million gain related to a settlement with Burger King Corporation
for the approval of new restaurant development by other franchisees
which unfavorably impacted our restaurants. Other income, net, for
the three and twelve months ended December 30, 2018 included a $0.4
million gain related to an insurance recovery from a restaurant
fire.
(f)
Basic net income (loss) per share was
computed excluding loss attributable to preferred stock and
non-vested restricted shares unless the effect would have been
anti-dilutive for the periods presented.
(g)
Diluted net income (loss) per share was
computed including common shares issuable for convertible preferred
stock and non-vested restricted shares unless their effect would
have been anti-dilutive for the periods presented.
Carrols Restaurant Group, Inc. Supplemental
Information
The following table sets forth certain unaudited supplemental
financial and other data for the periods indicated (in thousands,
except number of restaurants, percentages and average weekly sales
per restaurant):
(unaudited)
(unaudited)
Three Months Ended
Twelve Months Ended (a)
December 29, 2019
December 30, 2018
December 29, 2019
December 30, 2018
Revenue:
Burger King restaurant sales
$
374,945
$
307,754
$
1,398,660
$
1,179,307
Popeyes restaurant sales
22,694
—
53,856
—
Total restaurant sales
397,639
307,754
1,452,516
1,179,307
Other revenue
3,433
—
10,249
—
Total revenue
$
401,072
$
307,754
$
1,462,765
$
1,179,307
Change in Comparable Burger King
Restaurant Sales (a)
2.0
%
2.7
%
2.2
%
3.8
%
Average Weekly Sales per Burger King
Restaurant (b)
$
28,232
$
28,226
$
28,065
$
27,865
Average Weekly Sales per Popeyes
Restaurant (b)
$
28,431
$
—
$
26,458
$
—
Adjusted Restaurant-Level EBITDA (c)
$
42,920
$
39,520
$
156,131
$
162,133
Adjusted Restaurant-Level EBITDA margin
(c)
10.8
%
12.8
%
10.7
%
13.7
%
Adjusted EBITDA (c)
$
22,701
$
24,461
$
86,115
$
102,990
Adjusted EBITDA margin (c)
5.7
%
7.9
%
5.9
%
8.7
%
Adjusted net income (loss) (c)
$
(6,182
)
$
2,495
$
(15,514
)
$
14,091
Adjusted diluted net income (loss) per
share (c)
$
(0.12
)
$
0.05
$
(0.36
)
$
0.31
Number of Burger King restaurants:
Restaurants at beginning of period
1,028
838
849
807
New restaurants (including offsets)
8
2
21
8
Restaurants acquired
—
10
179
44
Restaurants closed (including offsets)
—
(1
)
(13
)
(10
)
Restaurants at end of period
1,036
849
1,036
849
Average Number of Restaurants:
1,021.6
838.7
958.4
813.9
Number of Popeyes restaurants:
Restaurants at beginning of period
60
—
—
—
Restaurants acquired
—
—
55
—
New restaurants
5
—
10
—
Restaurants at end of period
65
—
65
—
Average Number of Restaurants:
61.4
—
58.9
—
At 12/29/19
At 12/30/18
Long-term debt and finance lease
liabilities (d)
$
472,343
$
280,144
Cash and cash equivalents
$
2,974
$
4,014
(a)
Restaurants we acquire are included in
comparable restaurant sales after they have been operated by us for
12 months. Sales from restaurants we develop are included in
comparable sales after they have been open for 15 months. The
calculation of changes in comparable restaurant sales is based on
the comparable 13-week or 52-week period.
(b)
Average weekly sales per restaurant are
derived by dividing restaurant sales for the comparable 13-week or
52-week period by the average number of restaurants operating
during such period.
(c)
EBITDA, Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted Restaurant-Level EBITDA, Adjusted Restaurant-Level
EBITDA margin and Adjusted net income (loss) are non-GAAP financial
measures and may not necessarily be comparable to other similarly
titled captions of other companies due to differences in methods of
calculation. Refer to the Company's reconciliation of net income
(loss) to EBITDA, Adjusted EBITDA and Adjusted net income (loss),
and to the Company's reconciliation of income (loss) from
operations to Adjusted Restaurant-Level EBITDA for further detail.
Both Adjusted EBITDA margin and Adjusted Restaurant-Level EBITDA
margin are calculated as a percentage of total restaurant sales.
Adjusted diluted net income (loss) per share is calculated based on
Adjusted net income (loss) and reflects the dilutive impact of
shares, where applicable, based on Adjusted net income (loss).
(d)
Long-term debt and finance lease
liabilities (including current portion and excluding deferred
financing costs and original issue discount) at December 29, 2019
included $422,875 of the Company's Term Loan B under our senior
credit facility, $45,750 of outstanding revolving borrowings under
the Company's senior credit facility, $1,194 of lease financing
obligations and $2,524 of finance lease liabilities. Long-term debt
and finance lease liabilities (including current portion and
excluding deferred financing costs) at December 30, 2018 included
$275,000 of the Company's 8% Senior Secured Second Lien Notes,
$1,203 of lease financing obligations and $3,941 of finance lease
liabilities.
Carrols Restaurant Group,
Inc.
Reconciliation of Non-GAAP
Measures
(In thousands, except per share
amounts)
(unaudited)
(unaudited)
Three Months Ended
Twelve Months Ended
December 29, 2019
December 30, 2018
December 29, 2019
December 30, 2018
Reconciliation of EBITDA and Adjusted
EBITDA: (a)
Net income (loss)
$
(9,906
)
$
1,807
$
(31,919
)
$
10,104
Provision (benefit) for income taxes
(2,088
)
(503
)
(12,123
)
(157
)
Interest expense
7,431
5,886
27,856
23,638
Depreciation and amortization
21,061
15,042
74,674
58,468
EBITDA
16,498
22,232
58,488
92,053
Impairment and other lease charges
1,787
331
3,564
3,685
Acquisition and integration costs (b)
2,844
409
10,827
1,445
Pre-opening costs (c)
386
118
1,449
462
Litigation costs (d)
86
50
502
187
Other income, net (e)
(138
)
10
(1,911
)
(424
)
Gain on bargain purchase
—
—
—
(230
)
Stock-based compensation expense
1,238
1,311
5,753
5,812
Loss on extinguishment of debt
—
—
7,443
—
Adjusted EBITDA
$
22,701
$
24,461
$
86,115
$
102,990
Reconciliation of Adjusted
Restaurant-Level EBITDA: (a)
Income (loss) from operations
$
(4,563
)
$
7,190
$
(8,743
)
$
33,355
Add:
General and administrative expenses
23,025
16,829
84,734
66,587
Restaurant integration costs (b)
1,362
—
2,364
—
Pre-opening costs (c)
386
118
1,449
462
Depreciation and amortization
21,061
15,042
74,674
58,468
Impairment and other lease charges
1,787
331
3,564
3,685
Other income, net (e)
(138
)
10
(1,911
)
(424
)
Adjusted Restaurant-Level
EBITDA
$
42,920
$
39,520
$
156,131
$
162,133
Reconciliation of Adjusted net income
(loss): (a)
Net income (loss)
$
(9,906
)
$
1,807
$
(31,919
)
$
10,104
Add:
Impairment and other lease charges
1,787
331
3,564
3,685
Acquisition and integration costs (b)
2,844
409
10,827
1,445
Pre-opening costs (c)
386
118
1,449
462
Litigation costs (d)
86
50
502
187
Other income, net (e)
(138
)
10
(1,911
)
(424
)
Gain on bargain purchase
—
—
—
(230
)
Loss on extinguishment of debt
—
—
7,443
—
Income tax effect on above adjustments
(f)
(1,241
)
(230
)
(5,469
)
(1,138
)
Adjusted net income (loss)
$
(6,182
)
$
2,495
$
(15,514
)
$
14,091
Adjusted diluted net income (loss) per
share
$
(0.12
)
$
0.05
$
(0.36
)
$
0.31
Diluted weighted average common shares
outstanding
50,643
45,403
43,422
45,320
(a)
Within our press release, we make
reference to EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level
EBITDA and Adjusted net income (loss) which are non-GAAP financial
measures. EBITDA represents net income (loss) before income taxes,
interest expense and depreciation and amortization. Adjusted EBITDA
represents EBITDA as adjusted to exclude impairment and other lease
charges, acquisition and integration costs, stock-based
compensation expense, loss on extinguishment of debt, restaurant
pre-opening costs, non-recurring litigation costs and other
non-recurring income or expense. Adjusted Restaurant-Level EBITDA
represents income (loss) from operations as adjusted to exclude
general and administrative expenses, depreciation and amortization,
impairment and other lease charges, restaurant-level integration
costs, pre-opening costs, loss on extinguishment of debt, and other
non-recurring income or expense. Adjusted net income (loss)
represents net income (loss) as adjusted, net of tax, to exclude
impairment and other lease charges, acquisition costs and
integration costs, gain on bargain purchase, pre-opening costs,
non-recurring litigation costs and other non-recurring income or
expense.
We are presenting Adjusted EBITDA,
Adjusted Restaurant-Level EBITDA and Adjusted net income (loss)
because we believe that they provide a more meaningful comparison
than EBITDA and net income (loss) of the Company's core business
operating results, as well as with those of other similar
companies. Additionally, we present Adjusted Restaurant-Level
EBITDA because it excludes the impact of general and administrative
expenses such as salaries and expenses associated with corporate
and administrative functions that support the development and
operations of our restaurants, legal, auditing and other
professional fees, acquisition costs, pre-opening costs and
stock-based compensation expense. Although these costs are not
directly related to restaurant-level operations, these expenses are
necessary for the profitability of our restaurants. Additionally,
this financial measure may not be comparable to a similarly titled
caption for other companies. Management believes that Adjusted
EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted net income
(loss), when viewed with the Company's results of operations in
accordance with GAAP and the accompanying reconciliations in the
table above, provide useful information about operating performance
and period-over-period growth, and provide additional information
that is useful for evaluating the operating performance of the
Company's core business without regard to potential distortions.
Additionally, management believes that Adjusted EBITDA and Adjusted
Restaurant-Level EBITDA permit investors to gain an understanding
of the factors and trends affecting our ongoing cash earnings, from
which capital investments are made and debt is serviced.
However, EBITDA, Adjusted EBITDA, Adjusted
Restaurant-Level EBITDA and Adjusted net income (loss) are not
measures of financial performance or liquidity under GAAP and,
accordingly, should not be considered as alternatives to net income
(loss) from operations or cash flow from operating activities as
indicators of operating performance or liquidity. Also, these
measures may not be comparable to similarly titled captions of
other companies. The tables above provide reconciliations between
net income (loss) and EBITDA, Adjusted EBITDA and Adjusted net
income (loss) and between income (loss) from operations and
Adjusted Restaurant-Level EBITDA.
(b)
Acquisition and integration costs for the
three and twelve months ended December 29, 2019 of $2.8 million and
$10.8 million, respectively, include certain legal and professional
fees; corporate payroll, and other costs related to the integration
of the Cambridge merger and one-time repair and other operating
costs which are included in Adjusted Restaurant-Level EBITDA.
(c)
Pre-opening costs for the three and twelve
months ended December 29, 2019 and December 30, 2018 include
training, labor and occupancy costs incurred during the
construction of new restaurants.
(d)
Legal costs for the three and twelve
months ended December 29, 2019 include litigation expenses
pertaining to an ongoing lawsuit with one of the Company's former
vendors.
(e)
Other income, net, for the twelve months
ended December 29, 2019, included, among other things, a $1.9
million gain related to a settlement with Burger King Corporation
for the approval of new restaurant development by other franchisees
which unfavorably impacted our restaurants. Other income, net, for
the three and twelve months ended December 30, 2018 included a $0.4
million gain related to an insurance recovery from a restaurant
fire.
(f)
The income tax effect related to the
adjustments to net income (loss) during the periods presented was
calculated using an incremental income tax rate of 25% for the
three and twelve months ended December 29, 2019 and 25% and 22.2%
for the three and twelve months ended December 30, 2018 ,
respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200225005307/en/
Investor Relations: Raphael Gross 203-682-8253
investorrelations@carrols.com
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