Carrols Restaurant Group, Inc. (“Carrols” or the “Company”)
(Nasdaq: TAST) today reported its financial results for the second
quarter ended July 4, 2021
Highlights for the Second Quarter of
2021 versus the Second Quarter of 2020 Include:
- Total restaurant
sales increased 15.2% to $424.5 million compared to $368.4 million
in the second quarter of 2020;
- Comparable
restaurant sales for the Company's Burger King® restaurants
increased 12.6%;
- Comparable
restaurant sales for the Company’s Popeyes® restaurants decreased
5.3%;
-
Adjusted EBITDA(1) decreased to $29.3 million from $38.0 million in
the prior year quarter;
-
Adjusted Restaurant-Level EBITDA(1) decreased to $47.9 million from
$54.1 million in the prior year quarter;
-
Net Loss was $(9.6) million, or $(0.19) per diluted share, and
includes a non-cash extinguishment of debt charge of $8.5 million,
compared to Net Income of $7.8 million, or $0.13 per diluted share,
in the prior year quarter;
-
Adjusted Net Income(1) was $16,000, or $0.00 per diluted share,
compared to Adjusted Net Income of $9.6 million, or $0.16 per
diluted share, in the prior year quarter;
-
Free Cash Flow(2) of $4.2 million compared to $48.6 million in the
prior year quarter; and
- Adjusted Leverage
Ratio which compares Total Net Debt of the Company, including
Unsecured Senior Notes, to Covenant EBITDA (as defined under the
senior credit facility) improved to 3.82 times compared to 4.18
times a year ago.
(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.(2)Free Cash flow is a non-GAAP financial measure. Refer to
the definition and reconciliation of this measure in the tables at
the end of this release.
Management Commentary
Daniel T. Accordino, Chairman and Chief
Executive Officer of Carrols, commented, “Our revenue growth of
15.2% reflects comparable Burger King restaurant sales growth of
12.6% as well as growth from increased contributions from our
Burger King restaurants that were temporarily closed last year due
to the COVID-19 pandemic. As compared to the same respective weeks
of 2019, our Burger King comparable sales in the second quarter of
2021 increased 7.8% driven by 20.9% higher average checks which
were partially offset by traffic remaining at 89% of 2019 levels.
While all of our Burger King restaurant dayparts improved in the
second quarter of 2021 and our delivery sales mix reached 5.0% in
June, trends slowed sequentially as we began to lap tougher
comparisons from last year. The customer response to Burger King’s
new chicken sandwich, which was officially launched in June, was
positive, doubling our crispy chicken sandwich daily unit sales
compared to year-earlier levels. Sales of the new chicken sandwich
have been stronger in our Northeast and Midwest regions than in our
Southcentral and Southeast regions, which we believe is due to the
concentration of entrenched chicken QSR brands in southern
markets.”
Accordino continued, “Inflationary challenges
weighed on our Adjusted Restaurant-Level EBITDA margins during the
second quarter as we faced unprecedented cost pressures across
nearly all inputs in May and June as the economy shifted into high
gear in a very short time period. In particular, labor cost margins
reverted to just below second quarter 2019 levels as operating
hours normalized and team member average hourly wages increased
nearly 12% compared to the same period in 2020 due to market-driven
labor constraints. Commodity costs in most categories other than
beef also were elevated during the quarter. To help offset these
unexpected headwinds, we increased menu prices by about 2% in late
July and plan to implement other price increases through the
remainder of the year as we deem necessary.”
Accordino concluded, “We remain confident in our
business model and its profitability prospects despite the evolving
and unpredictable course of the pandemic. We are committed to
allocating capital in a disciplined manner, while maintaining
substantial liquidity and keeping leverage in check. We therefore
view our announcement of a $0.41 per share special cash dividend as
representing a tangible action we are taking to enhance shareholder
value. We expect that any additional free cash flow generated this
year beyond what we will be returning to stockholders through the
special cash dividend will be used to reduce our net debt and
improve our liquidity.”
Second Quarter 2021 Financial
Results
Total restaurant revenue increased 15.2% to
$424.5 million in the second quarter of 2021, compared to $368.4
million in the second quarter of 2020. Comparable restaurant sales
for the Company’s Burger King restaurants increased 12.6% compared
to a 6.4% decrease in the prior year quarter. On a calendar basis,
the Company’s second quarter 2021 Burger King same store sales
increased 14.2% compared to the Burger King U.S. system comparable
sales increase of 13.0%, extending the Company’s record of
out-performing the U.S. Burger King system to 20 of the last 22
quarters. The Company’s Popeyes restaurants, which represented 5.2%
of total restaurant sales in the second quarter, decreased on a
comparable restaurant sales basis by 5.3% compared to a 17.1%
increase in the second quarter of 2020.
Adjusted Restaurant-Level EBITDA(1) decreased to
$47.9 million in the second quarter of 2021 from $54.1 million in
the prior year period. Adjusted Restaurant-Level EBITDA margin
declined to 11.3% of restaurant sales from 14.7% in the second
quarter of 2020, reflecting higher food, beverage and packaging
costs, higher wage and related expenses, and higher other
restaurant operating expenses as the Company went from focusing on
cost containment in the second quarter of 2020 to a more normal
operating environment in the second quarter of 2021. The hourly
cost and availability of labor remains a challenge for the
restaurant industry. While the Company believes labor shortages had
only a minimal adverse impact on second quarter 2021 sales, in
order to re-open its restaurants quickly and take advantage of the
strengthening economy it necessitated raising wages and utilizing
overtime to achieve regular operating hours and maintain staffing
levels. The Company believes that over time, labor and commodity
costs should begin to normalize, although visibility as to when is
impossible to predict at this time given the constantly evolving
post-COVID recovery.
General and administrative expenses increased to
$20.7 million in the second quarter of 2021 from $18.6 million in
the prior year period. The increase was due to short-term pay and
travel reductions experienced last year.
Adjusted EBITDA(1) decreased to $29.3 million in
the second quarter of 2021 from $38.0 million in the second quarter
of 2020. Adjusted EBITDA margin decreased to 6.9% of total
restaurant sales from 10.3% due to the factors discussed above.
Second quarter 2021 Adjusted EBITDA exceeded second quarter 2019
Adjusted EBITDA of $24.1 million by $5.2 million.
Income from operations decreased to $5.9 million
in the second quarter of 2021 from $14.3 million in the prior year
quarter.
Interest expense increased to $6.9 million in
the second quarter of 2021 from $6.4 million in the second quarter
of 2020.
Net Loss was $(9.6) million in the second
quarter of 2021, or $(0.19) per diluted share, compared to Net
Income of $7.8 million, or $0.13 per diluted share, in the prior
year quarter. Net Loss in the second quarter of 2021 included,
among other items, $8.5 million of loss on extinguishment of debt,
$0.7 million of other expense, net and pre-tax impairment and other
lease charges of $0.1 million. Net Income in the second quarter of
2020 included, among other items, $2.9 million of impairment and
other lease charges, $0.9 million in abandoned development costs,
and $2.0 million in gains related to property damage recoveries and
gains on sale leaseback transactions. Adjusted Net Income(1) was
$16,000, or $0.00 per diluted share, compared to an Adjusted Net
Income of $9.6 million, or $0.16 per diluted share, in the prior
year quarter.
Balance Sheet Update
The Company ended the second quarter of 2021
with cash and cash equivalents of $56.2 million, and long-term debt
(including current portion) and finance lease liabilities of $521.5
million. This total includes $46.0 million of outstanding revolving
credit borrowings under its $175.0 million revolving credit
facility. There are also $9.0 million of letters of credit issued
under such facility leaving $120.0 million of availability under
its revolving credit facility. Including our cash balance, the
Company had $176.2 million of available liquidity at the end of the
second quarter of 2021. The Company’s Adjusted Leverage Ratio,
which compares Total Net Debt of the Company, including Unsecured
Senior Notes, to Covenant EBITDA (as defined under the senior
credit facility), improved to 3.82 times at the end of the second
quarter of 2021 compared to 4.18 times a year ago. The Company’s
First Lien Adjusted Leverage ratio improved to 1.36 times as a
result of the reduction in secured debt of $273.3 million between
the end of 2020 and the end of the second quarter of 2021, due to
the private offering of $300 million of 5.875% Senior Notes due
2029 completed in June 2021.
Acquisition of 19 BURGER KING®
Restaurants
In June 2021, the Company completed two Burger
King restaurant acquisitions of 14 restaurants located in Indiana
and five restaurants located in Michigan, for a total purchase
price of $30.8 million. This increased the Company’s restaurant
store count in two large Midwestern states where the Company
already has a significant market presence. The Company intends to
enter into sale leaseback transactions prior to the end of the
third quarter of 2021 for 12 of these restaurants with total
expected proceeds to the Company of approximately $20.1 million.
There can be no assurance that these sale leaseback transactions
will close in this timeframe or generate such proceeds.
$25 million Special Cash
Dividend
The Board of Directors declared a $25 million
special cash dividend amounting to $0.41 per share on all issued
and outstanding shares of common stock, including common stock
issuable on the conversion of our Series B Convertible Preferred
Stock. The special cash dividend will be paid on October 5, 2021 to
shareholders of record as of the close of business on August 25,
2021. The Company’s preliminary assessment is that the special cash
dividend will be treated as a tax-free return of capital causing a
reduction in a holder’s adjusted tax basis in Carrols Restaurant
Group, Inc. common stock. If a holder’s basis is reduced to zero,
any remaining portion of the special cash dividend would be taxed
as capital gains. Final determination of the tax treatment will be
based on Form 1099s that will be sent to holders in 2022. Holders
should consult with their tax advisors to determine tax treatment
of the special cash dividend.
Extension of Stock Repurchase
Program
During the second quarter of 2021, the Company
did not repurchase any shares of its common stock due to a limited
trading window as a result of the private debt offering.
The Board of Directors has approved an extension
of the Company’s 2019 stock repurchase program, which was set to
expire on August 2, 2021 and has approximately $11 million of its
original $25 million in capacity remaining. The Company’s stock
repurchase program will expire August 2, 2023, unless terminated
earlier by the Board of Directors.
Conference Call Today
Daniel T. Accordino, the Company’s Chairman and
Chief Executive Officer, and Anthony E. Hull, the Company’s Chief
Financial Officer, will host a conference call to discuss second
quarter 2021 financial results and provide a business update today
at 8:30 AM ET.
The conference call can be accessed live over
the telephone 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 13721214. The replay will be
available until Thursday, August 19, 2021. Investors and interested
parties may listen to a webcast of this conference call by visiting
the Investor Relations page of the Company’s website located at
www.carrols.com. The press release and related presentation slides
will be accessible via the same website page prior to the scheduled
call.
About the Company
Carrols is one of the largest restaurant
franchisees in North America. It is the largest BURGER KING®
franchisee in the United States, currently operating 1,027 BURGER
KING® restaurants in 23 states as well as 65 POPEYES® restaurants
in seven states. Carrols has operated BURGER KING® restaurants
since 1976 and POPEYES® restaurants since 2019. For more
information, 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, including without limitation the impact of COVID-19
on Carrols’ business, 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) |
|
|
Three Months Ended (a) |
|
Six Months Ended (a) |
|
|
July 4, 2021 |
|
June 28, 2020 |
|
July 4, 2021 |
|
June 28, 2020 |
Restaurant sales |
|
424,541 |
|
|
368,418 |
|
|
814,534 |
|
|
719,936 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Food, beverage and packaging costs |
|
126,424 |
|
|
104,703 |
|
|
240,214 |
|
|
207,630 |
|
Restaurant wages and related expenses |
|
137,592 |
|
|
111,888 |
|
|
267,238 |
|
|
236,463 |
|
Restaurant rent expense |
|
30,591 |
|
|
28,984 |
|
|
60,905 |
|
|
58,438 |
|
Other restaurant operating expenses |
|
65,128 |
|
|
54,310 |
|
|
126,547 |
|
|
112,288 |
|
Advertising expense |
|
16,939 |
|
|
14,416 |
|
|
32,308 |
|
|
28,292 |
|
General and administrative expenses (b) (c) |
|
20,698 |
|
|
18,581 |
|
|
42,067 |
|
|
39,368 |
|
Depreciation and amortization |
|
20,421 |
|
|
20,296 |
|
|
41,030 |
|
|
41,327 |
|
Impairment and other lease charges |
|
144 |
|
|
2,941 |
|
|
497 |
|
|
5,822 |
|
Other expense (income), net (d) |
|
715 |
|
|
(2,003 |
) |
|
942 |
|
|
(1,947 |
) |
Total costs and expenses |
|
418,652 |
|
|
354,116 |
|
|
811,748 |
|
|
727,681 |
|
Income (loss) from
operations |
|
5,889 |
|
|
14,302 |
|
|
2,786 |
|
|
(7,745 |
) |
Interest expense |
|
6,942 |
|
|
6,370 |
|
|
13,668 |
|
|
13,510 |
|
Loss on extinguishment of
debt |
|
8,538 |
|
|
— |
|
|
8,538 |
|
|
— |
|
Income (loss) before income
taxes |
|
(9,591 |
) |
|
7,932 |
|
|
(19,420 |
) |
|
(21,255 |
) |
Provision (benefit) from
income taxes |
|
(32 |
) |
|
90 |
|
|
(2,693 |
) |
|
(6,888 |
) |
Net income (loss) |
|
$ |
(9,559 |
) |
|
$ |
7,842 |
|
|
$ |
(16,727 |
) |
|
$ |
(14,367 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted net income
(loss) per share (e)(f) |
|
$ |
(0.19 |
) |
|
$ |
0.13 |
|
|
$ |
(0.34 |
) |
|
$ |
(0.28 |
) |
Basic weighted average common
shares outstanding |
|
49,917 |
|
|
50,917 |
|
|
49,871 |
|
|
50,869 |
|
Diluted weighted average
common shares outstanding |
|
49,917 |
|
|
60,332 |
|
|
49,871 |
|
|
50,869 |
|
(a) |
The Company uses a 52 or 53 week fiscal year that ends on the
Sunday closest to December 31. The three and six months ended
July 4, 2021 and June 28, 2020 each included thirteen and
twenty-six weeks, respectively. |
(b) |
General and administrative expenses include acquisition costs of
$0.3 million for each of the three months ended July 4, 2021
and June 28, 2020 and $0.3 million and $0.4 million for the
six months ended July 4, 2021 and June 28, 2020,
respectively. |
(c) |
General and administrative expenses include stock-based
compensation expense of $1.6 million and $1.1 million for the three
months ended July 4, 2021 and June 28, 2020, respectively
and $3.1 million and $2.2 million for the six months ended and
June 28, 2020, respectively. |
(d) |
Other expense (income), net, for the three and six months ended
July 4, 2021 included a loss on disposal of assets of $0.7
million and $0.9 million, respectively. Other expense (income),
net, for the three months ended June 28, 2020 included a gain
of $1.3 million from insurance recoveries related to property
damage at four of the Company's restaurants, a gain on three
sale-leaseback transactions of $0.8 million and a loss on disposal
of assets of $0.1 million. Other expense (income), net, for the six
months ended June 28, 2020 included a gain of $1.6 million
from insurance recoveries related to property damage at four of the
Company's restaurants, a net gain on ten sale-leaseback
transactions of $0.6 million, and loss on disposal of assets of
$0.2 million. |
(e) |
Basic net income (loss) per share was computed without attributing
any loss to preferred stock and non-vested restricted shares as
losses are not allocated to participating securities under the
two-class method. |
(f) |
Diluted net income (loss) per share was computed including 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) |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
July 4, 2021 |
|
June 28, 2020 |
|
July 4, 2021 |
|
June 28, 2020 |
Revenue: |
|
|
|
|
|
|
|
|
Burger King restaurant sales |
|
$ |
402,659 |
|
|
$ |
345,649 |
|
|
$ |
771,147 |
|
|
$ |
675,286 |
|
Popeyes restaurant sales |
|
21,882 |
|
|
22,769 |
|
|
43,387 |
|
|
44,650 |
|
Total revenue |
|
$ |
424,541 |
|
|
$ |
368,418 |
|
|
$ |
814,534 |
|
|
$ |
719,936 |
|
Change in Comparable Burger
King Restaurant Sales (a) |
|
12.6 |
% |
|
(6.4 |
)% |
|
13.6 |
% |
|
(6.0 |
)% |
Change in Comparable Popeyes
Restaurant Sales (a) |
|
(5.3 |
)% |
|
17.1 |
% |
|
(2.5 |
)% |
|
17.1 |
% |
|
|
|
|
|
|
|
|
|
Average Weekly Sales per
Burger King Restaurant (b) |
|
$ |
30,701 |
|
|
$ |
26,777 |
|
|
$ |
29,398 |
|
|
$ |
25,675 |
|
Average Weekly Sales per
Popeyes Restaurant (b) |
|
$ |
25,896 |
|
|
$ |
27,509 |
|
|
$ |
25,673 |
|
|
$ |
26,737 |
|
|
|
|
|
|
|
|
|
|
Adjusted Restaurant-Level
EBITDA (c) |
|
$ |
47,867 |
|
|
$ |
54,127 |
|
|
$ |
87,351 |
|
|
$ |
76,924 |
|
Adjusted Restaurant-Level
EBITDA margin (c) |
|
11.3 |
% |
|
14.7 |
% |
|
10.7 |
% |
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (c) |
|
$ |
29,307 |
|
|
$ |
38,017 |
|
|
$ |
49,173 |
|
|
$ |
41,989 |
|
Adjusted EBITDA margin
(c) |
|
6.9 |
% |
|
10.3 |
% |
|
6.0 |
% |
|
5.8 |
% |
|
|
|
|
|
|
|
|
|
Adjusted Net Income (Loss)
(c) |
|
$ |
16 |
|
|
$ |
9,574 |
|
|
$ |
(6,484 |
) |
|
$ |
(9,743 |
) |
Adjusted Diluted Net Income
(Loss) per share (c) |
|
$ |
— |
|
|
$ |
0.16 |
|
|
$ |
(0.13 |
) |
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
|
Number of Burger King
restaurants: |
|
|
|
|
|
|
|
|
Restaurants at beginning of period |
|
1,010 |
|
|
1,028 |
|
|
1,009 |
|
|
1,036 |
|
New restaurants (including offsets) |
|
— |
|
|
3 |
|
|
2 |
|
|
6 |
|
Restaurants acquired |
|
19 |
|
|
— |
|
|
19 |
|
|
— |
|
Restaurants closed (including offsets) |
|
(2 |
) |
|
(4 |
) |
|
(3 |
) |
|
(15 |
) |
Restaurants at end of period |
|
1,027 |
|
|
1,027 |
|
|
1,027 |
|
|
1,027 |
|
Average Number of operating Burger King restaurants |
|
1,008.9 |
|
|
993.0 |
|
|
1,009.0 |
|
|
1,011.6 |
|
|
|
|
|
|
|
|
|
|
Number of Popeyes
restaurants: |
|
|
|
|
|
|
|
|
Restaurants at beginning and end of period |
|
65 |
|
|
65 |
|
|
65 |
|
|
65 |
|
Average Number of operating Popeyes restaurants |
|
65.0 |
|
|
63.7 |
|
|
65.0 |
|
|
64.2 |
|
(a) |
Restaurants are generally included in comparable restaurant sales
12 months after their acquisition. Sales from newly developed
restaurants are included in comparable restaurant sales after they
have been open for 15 months. The calculation of changes in
comparable restaurant sales is based on a 52-week look back to the
comparable thirteen or twenty-six week period. |
(b) |
Average weekly sales per restaurant are derived by dividing
restaurant sales for the thirteen or twenty-six 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,
Adjusted Net Income (Loss) and Adjusted Diluted Net Income (Loss)
per share 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 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. |
|
|
Carrols Restaurant Group,
Inc.Reconciliation of Non-GAAP
Measures(In thousands)
|
|
(unaudited) |
|
|
Three Months Ended (a) |
|
Six Months Ended (a) |
|
|
July 4, 2021 |
|
June 28, 2020 |
|
July 4, 2021 |
|
June 28, 2020 |
Reconciliation of
EBITDA and Adjusted EBITDA: (b) |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(9,559 |
) |
|
$ |
7,842 |
|
|
$ |
(16,727 |
) |
|
$ |
(14,367 |
) |
Provision (benefit) for income taxes |
|
(32 |
) |
|
90 |
|
|
(2,693 |
) |
|
(6,888 |
) |
Interest expense |
|
6,942 |
|
|
6,370 |
|
|
13,668 |
|
|
13,510 |
|
Depreciation and amortization |
|
20,421 |
|
|
20,296 |
|
|
41,030 |
|
|
41,327 |
|
EBITDA |
|
17,772 |
|
|
34,598 |
|
|
35,278 |
|
|
33,582 |
|
Impairment and other lease charges |
|
144 |
|
|
2,941 |
|
|
497 |
|
|
5,822 |
|
Acquisition costs (c) |
|
292 |
|
|
274 |
|
|
292 |
|
|
355 |
|
Stock-based compensation expense |
|
1,614 |
|
|
1,109 |
|
|
3,083 |
|
|
2,241 |
|
Abandoned development costs (d) |
|
— |
|
|
869 |
|
|
— |
|
|
1,557 |
|
Pre-opening costs (e) |
|
— |
|
|
10 |
|
|
29 |
|
|
99 |
|
Litigation and other professional expenses (f) |
|
232 |
|
|
219 |
|
|
514 |
|
|
280 |
|
Loss on extinguishment of debt |
|
8,538 |
|
|
— |
|
|
8,538 |
|
|
— |
|
Other expense (income), net (g)(h) |
|
715 |
|
|
(2,003 |
) |
|
942 |
|
|
(1,947 |
) |
Adjusted
EBITDA |
|
$ |
29,307 |
|
|
$ |
38,017 |
|
|
$ |
49,173 |
|
|
$ |
41,989 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Restaurant-Level EBITDA: (b) |
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
$ |
5,889 |
|
|
$ |
14,302 |
|
|
$ |
2,786 |
|
|
$ |
(7,745 |
) |
Add: |
|
|
|
|
|
|
|
|
General and administrative expenses |
|
20,698 |
|
|
18,581 |
|
|
42,067 |
|
|
39,368 |
|
Pre-opening costs (e) |
|
— |
|
|
10 |
|
|
29 |
|
|
99 |
|
Depreciation and amortization |
|
20,421 |
|
|
20,296 |
|
|
41,030 |
|
|
41,327 |
|
Impairment and other lease charges |
|
144 |
|
|
2,941 |
|
|
497 |
|
|
5,822 |
|
Other expense (income), net (g)(h) |
|
715 |
|
|
(2,003 |
) |
|
942 |
|
|
(1,947 |
) |
Adjusted
Restaurant-Level EBITDA |
|
$ |
47,867 |
|
|
$ |
54,127 |
|
|
$ |
87,351 |
|
|
$ |
76,924 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Net Income (Loss): (b) |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(9,559 |
) |
|
$ |
7,842 |
|
|
$ |
(16,727 |
) |
|
$ |
(14,367 |
) |
Add: |
|
|
|
|
|
|
|
|
Impairment and other lease charges |
|
144 |
|
|
2,941 |
|
|
497 |
|
|
5,822 |
|
Acquisition costs (c) |
|
292 |
|
|
274 |
|
|
292 |
|
|
355 |
|
Abandoned development costs (d) |
|
— |
|
|
869 |
|
|
— |
|
|
1,557 |
|
Pre-opening costs (e) |
|
— |
|
|
10 |
|
|
29 |
|
|
99 |
|
Litigation and other professional expenses (f) |
|
232 |
|
|
219 |
|
|
514 |
|
|
280 |
|
Other expense (income), net (g)(h) |
|
715 |
|
|
(2,003 |
) |
|
942 |
|
|
(1,947 |
) |
Income tax effect on above adjustments (i) |
|
(346 |
) |
|
(578 |
) |
|
(569 |
) |
|
(1,542 |
) |
Loss on extinguishment of debt |
|
8,538 |
|
|
— |
|
|
8,538 |
|
|
— |
|
Adjusted Net Income
(Loss) |
|
$ |
16 |
|
|
$ |
9,574 |
|
|
$ |
(6,484 |
) |
|
$ |
(9,743 |
) |
Adjusted diluted net income
(loss) per share (j) |
|
$ |
— |
|
|
$ |
0.16 |
|
|
$ |
(0.13 |
) |
|
$ |
(0.19 |
) |
Adjusted diluted weighted
average common shares outstanding |
|
59,431 |
|
|
60,332 |
|
|
49,871 |
|
|
50,869 |
|
(a) |
The Company uses a 52 or 53 week fiscal year that ends the Sunday
closest to December 31. The three and six months ended July 4,
2021 and June 28, 2020 both included thirteen and twenty-six
weeks, respectively. |
(b) |
Within this 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
costs, stock-based compensation expense, abandoned development
costs, restaurant pre-opening costs, non-recurring litigation and
other professional expenses, loss on extinguishment of debt and
other income and 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, pre-opening costs, and other
income and expense. Adjusted Net Income (Loss) represents net
income (loss) as adjusted, net of tax, to exclude impairment and
other lease charges, acquisition costs, abandoned development
costs, pre-opening costs, non-recurring litigation and other
professional expenses, other income and expense and loss on
extinguishment of debt. |
|
Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted Net
Income (Loss) are presented because the Company believes that they
provide a more meaningful comparison than EBITDA and net income
(loss) of its core business operating results, as well as with
those of other similar companies. Additionally, Adjusted
Restaurant-Level EBITDA is presented because it excludes restaurant
pre-opening costs, other income and expense, and 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. Although these costs are not directly
related to restaurant-level operations, these expenses are
necessary for the profitability of our restaurants. 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 U.S. 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. |
(c) |
Acquisition costs for the three and six months ended July 4,
2021 mostly include integration, travel, legal and professional
fees incurred in connection with restaurant acquisitions during the
second quarter in 2021, which were included in general and
administrative expenses. Acquisition costs for the three and six
months ended June 28, 2020 mostly include legal and
professional fees incurred in connection with the acquisition of
165 Burger King and 55 Popeyes restaurants from Cambridge Franchise
Holdings, LLC in 2019 which were included in general and
administrative expense. |
(d) |
Abandoned development costs for the three and six months ended
June 28, 2020 represents the write-off of capitalized costs
due to the abandoned development in 2020 of previously planned new
restaurant locations. |
(e) |
Pre-opening costs for the three and six months ended July 4,
2021 and June 28, 2020 include training, labor and occupancy
costs incurred during the construction of new restaurants. |
(f) |
Litigation and other professional expenses for the three and six
months ended July 4, 2021 and June 28, 2020 include costs
pertaining to an ongoing lawsuit with one of the Company's former
vendors, as well as other non-recurring professional service
expenses. |
(g) |
Other expense (income), net, for the three and six months ended
July 4, 2021, included a loss on disposal of assets of $0.7
million and $0.9 million, respectively. |
(h) |
Other expense (income), net, for the three months ended
June 28, 2020, included gains related to insurance recoveries
from property damage at four of the Company's restaurants of $1.3
million, a net gain on three sale-leaseback transactions of $0.8
million and a loss on disposal of assets of $0.1 million. Other
expense (income), net, for the six months ended June 28, 2020
included gains related to insurance recoveries from property damage
at four of the Company's restaurants of $1.6 million, net gain on
ten sale-leaseback transactions of $0.6 million and a loss on
disposal of assets of $0.2 million. |
(i) |
The income tax effect related to the adjustments to Adjusted Net
Income (Loss) other than loss on extinguishment of debt was
calculated using an incremental income tax rate of 25% for the
three and six months ended July 4, 2021 and June 28,
2020. The loss on extinguishment of debt is not adjusted for tax as
its benefit was offset by a valuation allowance charge in the three
and six months ended July 4, 2021. |
(j) |
Adjusted diluted net income (loss) per share is calculated based on
Adjusted Net Income (Loss) and the dilutive weighted average common
shares outstanding for the respective periods, where
applicable. |
|
|
|
|
(unaudited) |
|
|
Three Months Ended (a) |
|
Six Months Ended (a) |
|
|
July 4, 2021 |
|
June 28, 2020 |
|
July 4, 2021 |
|
June 28, 2020 |
Reconciliation of Free
Cash Flow: (b) |
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
$ |
19,579 |
|
|
$ |
51,682 |
|
|
$ |
26,615 |
|
|
$ |
47,892 |
|
Net cash used for investing
activities |
|
(46,167 |
) |
|
(3,038 |
) |
|
(56,794 |
) |
|
(25,006 |
) |
Add: cash paid for
acquisitions |
|
30,819 |
|
|
— |
|
|
30,819 |
|
|
— |
|
Total Free Cash
Flow |
|
$ |
4,231 |
|
|
$ |
48,644 |
|
|
$ |
640 |
|
|
$ |
22,886 |
|
|
|
At 7/4/2021 |
|
At 1/3/2021 |
|
At 6/28/2020 |
Long-term debt and finance lease liabilities (c) |
|
$ |
521,451 |
|
|
$ |
494,158 |
|
|
$ |
497,140 |
|
Cash and cash equivalents |
|
56,187 |
|
|
64,964 |
|
|
45,978 |
|
Net Debt (d) |
|
465,264 |
|
|
429,194 |
|
|
451,162 |
|
Senior Secured Net Debt
(e) |
|
165,264 |
|
|
429,194 |
|
|
451,162 |
|
Adjusted Leverage Ratio
(f) |
|
3.82x |
|
|
3.82x |
|
|
4.18x |
|
Senior Secured Net Leverage
Ratio (g) |
|
1.36x |
|
|
3.82x |
|
|
4.18x |
|
(a) |
The Company uses a 52 or 53 week fiscal year that ends the Sunday
closest to December 31. The three and six months ended July 4,
2021 and June 28, 2020 both included thirteen and twenty-six
weeks, respectively. |
(b) |
Free Cash Flow is a non-GAAP financial measure and may not
necessarily be comparable to other similarly titled captions of
other companies due to differences in methods of calculation. Free
Cash Flow is defined as cash provided by operating activities less
cash used for investing activities, adjusted to add back cash paid
for acquisitions. Management believes that Free Cash Flow, when
viewed with the Company's results of operations in accordance with
U.S. GAAP and the accompanying reconciliations in the table above,
provides useful information about the Company's cash flow for
liquidity purposes and to service the Company's debt. However, Free
Cash Flow is not a measure of liquidity under U.S GAAP, and,
accordingly should not be considered as an alternative to the
Company's consolidated statements of cash flows and net cash
provided by operating activities, net cash used for investing
activities and net cash provided by financing activities as
indicators of liquidity or cash flow. Free Cash Flow for the three
months ended July 4, 2021 and June 28, 2020 is derived
from the Company's consolidated statements of cash flows for the
respective six month periods to be presented in the Company’s
Interim Condensed Consolidated Financial Statements in its Form
10-Q for the period ended July 4, 2021 and the Company's
consolidated statements of cash flows for the previously reported
three month periods ended April 4, 2021 and March 29, 2020
contained in the Company’s Form 10-Q for the period ended April 4,
2021. |
(c) |
Long-term debt and finance lease liabilities (including current
portion and excluding deferred financing costs and original issue
discount) at July 4, 2021 included $174,000 of outstanding
term B loans and $46,000 of outstanding revolving borrowings under
the Company's senior credit facilities, $300,000 of 5.875% Senior
Notes due 2029 and $1,451 of finance lease liabilities. Long-term
debt and finance lease liabilities (including current portion and
excluding deferred financing costs and original issue discount) at
January 3, 2021 included $419,375 of Term Loan B and $73,875 of
Term Loan B-1 borrowings under the Company's senior credit
facilities and $908 of finance lease liabilities. Long-term debt
and finance lease liabilities (including current portion and
excluding deferred financing costs and original issue discount) at
June 28, 2020 included $420,750 of outstanding term B loans
and $75,000 of outstanding term B-1 loans under the Company's
senior credit facilities and $1,390 of finance lease
liabilities. |
(d) |
Net Debt represents total long-term debt and finance lease
liabilities less cash and cash equivalents. |
(e) |
Senior Secured Net Debt represents total net debt less the $300M of
unsecured 5.875% Senior Notes. |
(f) |
Adjusted Leverage Ratio represents the Company's Total Net Leverage
Ratio as calculated in accordance with its senior credit facility
for each period presented. |
(g) |
Senior Secured Net Leverage Ratio represents the Company's Net
Leverage Ratio as calculated in accordance with its senior credit
facility for each period presented. |
|
|
Investor Relations:Raphael
Gross203-682-8253investorrelations@carrols.com
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