Carrols Restaurant Group, Inc. (“Carrols” or the “Company”)
(Nasdaq: TAST), the largest BURGER KING® franchisee in the United
States, today reported its financial results for the third quarter
ended October 3, 2021.
Highlights for the Third Quarter of 2021
versus the Third Quarter of 2020 Include:
- Total restaurant sales increased 3.6% to $421.7 million
compared to $407.0 million in the prior year quarter;
- Comparable restaurant sales for the Company's Burger King®
restaurants increased 2.7%;
- Comparable restaurant sales for the Company’s Popeyes®
restaurants decreased 3.2%;
- Adjusted EBITDA(1) totaled $18.6 million compared to $34.1
million in the prior year quarter;
- Adjusted Restaurant-Level EBITDA(1) totaled $35.4 million
compared to $52.8 million in the prior year quarter;
- Net Loss was $9.9 million, or $0.20 per diluted share, compared
to Net Income of $3.5 million, or $0.06 per diluted share, in the
prior year quarter;
- Adjusted Net Loss(1) was $7.8 million, or $0.16 per diluted
share, compared to Adjusted Net Income of $5.7 million, or $0.09
per diluted share, in the prior year quarter; and
- Free Cash Flow(2) of $13.5 million compared to $23.8 million in
the prior year quarter.
(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, “Similar to others in the
quick service and casual dining business, our third quarter
performance was challenged on a number of fronts due to the
volatility caused by the ever-evolving and unpredictable course of
the COVID-19 pandemic. We therefore moved quickly to increase our
menu prices to mitigate unprecedented labor and commodity cost
pressures. Our comparable Burger King restaurant sales grew by 2.7%
with monthly trends improving sequentially through the third
quarter. October comparable sales increased 5.0%. Due in part to
our efforts to maintain normal operating hours in the face of
severe labor constraints, we extended our track record of
outperforming the domestic Burger King U.S. system to 21 of the
last 23 consecutive quarters by exceeding the system’s comparable
restaurant sales growth by 430 basis points in the third quarter of
2021. Although our Burger King traffic was roughly 95% of 2020
levels, we more than offset the decline through higher pricing and
reduced promotional activity, which, together with a nearly 5%
delivery sales mix, raised our average check by approximately 7.8%.
We also estimate that ongoing staffing issues resulted in
approximately $3.5 million in lost sales and impacted our
comparable Burger King restaurant sales by approximately 1.0%.”
Accordino continued, “Inflationary challenges
continued to weigh heavily on our profitability metrics. These
include beef prices, which increased 15.5% compared to the same
period last year, and team member average hourly wage costs, which
rose 13.3% relative to the same period last year. On top of the two
pricing actions completed in the third quarter, we have since taken
additional pricing in October to help manage these and other cost
pressures. While the near-term cost headwinds affecting our
business model are certainly clear, as we move into next year, we
believe that we will be able to claw back a portion of the margin
erosion we are now experiencing. We believe this will be achieved
through menu price actions taken to date and in the future combined
with continued menu and promotional activity optimization as well
as potentially easing cost pressures on a year-over-year basis,
particularly in the back half of 2022.”
Accordino concluded, “As we navigate this
challenging business environment, we place great importance on
disciplined capital allocation and maintaining substantial
liquidity. We are pleased to have recently paid a special cash
dividend, which represents a tangible action we have taken to
enhance shareholder value and will use all other free cash flow
generated this year to reduce our net indebtedness. While we had
previously targeted net capital expenditures of approximately $60
million this year, they are now likely to be closer to $50 million
due to construction delays that have pushed some projects into
2022.”
Third Quarter 2021 Financial
Results
Total restaurant sales increased 3.6% to $421.7
million in the third quarter of 2021, compared to $407.0 million in
the third quarter of 2020. Comparable restaurant sales for the
Company’s Burger King restaurants increased 2.7% compared to 0.8%
increase in the prior year quarter. Restaurant sales for the
Company’s Popeyes restaurants, which represented 4.8% of total
restaurant sales in the third quarter, decreased on a comparable
restaurant sales basis by 3.2% compared to a 5.5% increase in the
third quarter of 2020. Staffing challenges during the evening hours
of operation this past quarter were particularly impactful to
Popeyes comparable sales. The Company outperformed the Popeyes U.S.
system change in comparable sales in the third quarter of 2021 by
140 basis points.
The hourly cost and availability of labor remain
a challenge for the restaurant industry and the Company. Supply
chain cost pressures also continue to adversely impact the
Company’s margins, although such costs appear to have stabilized
over the past six weeks.
Adjusted Restaurant-Level EBITDA(1) was $35.4
million in the third quarter of 2021 compared to $52.8 million in
the prior year period. Adjusted Restaurant-Level EBITDA margin
declined to 8.4% of restaurant sales from 13.0% in the third
quarter of 2020, reflecting higher food, beverage and packaging
costs, higher wage and related expenses, and higher other
restaurant operating expenses.
General and administrative expenses decreased to
$19.2 million in the third quarter of 2021 from $20.4 million in
the prior year period.
Adjusted EBITDA(1) was $18.6 million in the
third quarter of 2021 compared to $34.1 million in the third
quarter of 2020. Adjusted EBITDA margin decreased to 4.4% of total
restaurant sales from 8.4% due to the factors discussed above.
Loss from operations was $3.6 million in the
third quarter of 2021 compared to income from of operations of
$10.2 million in the prior year quarter.
Interest expense increased to $7.7 million in
the third quarter of 2021 from $6.6 million in the third quarter of
2020.
Net Loss was $9.9 million in the third quarter
of 2021, or $0.20 per diluted share, compared to Net Income of $3.5
million, or $0.06 per diluted share, in the prior year quarter. Net
Loss in the third quarter of 2021 includes, among other items, a
$1.1 million gain from insurance recoveries related to property
damage at two restaurants, $0.8 million of impairment and other
lease charges and a tax valuation allowance charge of $1.6 million.
Net Income in the third quarter of 2020 included, among other
items, $2.0 million of impairment and other lease charges.
Adjusted Net Loss(1) was $7.8 million, or $0.16
per diluted share, compared to an Adjusted Net Income of $5.7
million, or $0.09 per diluted share, in the prior year quarter.
Balance Sheet Update
The Company ended the third quarter of 2021 with
cash and cash equivalents of $89.4 million, and long-term debt
(including current portion) and finance lease liabilities of $523.3
million. This total included $47.1 million of outstanding revolving
credit borrowings under the Company’s $215.0 million revolving
credit facility. There were also $9.0 million of letters of credit
issued under such facility leaving $158.9 million of availability
under its revolving credit facility as of October 3, 2021.
Including the cash balance, the Company had $248.3 million of
available liquidity at the end of the third quarter of 2021. On
October 5, 2021, $24.9 million of cash was used to pay the
previously announced special cash dividend.
Stock Repurchase Program
During the third quarter of 2021, the Company
did not repurchase shares of its common stock. There remains
approximately $11 million of capacity as part of the Company’s $25
million stock repurchase program. The Company’s stock repurchase
program will expire August 2, 2023, unless terminated earlier by
the Board of Directors.
Lead Independent Director
On November 9, 2021, the Board of Directors
appointed David S. Harris as Lead Independent Director. Mr. Harris
has been a director of the Company since 2012. The duties of the
Lead Independent Director are set forth in the Company’s newly
enacted Corporate Governance Guidelines, a copy of which is
available on the Investor Relations page of the Company’s website
located at www.carrols.com.
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 third
quarter 2021 financial results and provide a business update today
at 8:00 a.m. (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 13723214. The replay will be
available until Wednesday, November 17, 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.
Investor Conferences
Participation
Carrols will be participating in three upcoming
investor conferences.
- On November 22, 2021, the Company will host investor meetings
at the Deutsche Bank 2021 Gaming, Lodging, Leisure &
Restaurants Conference (virtual).
- On December 1, 2021, the Company will host investor meetings at
the Stephens Annual Investor Conference.
- On December 9, 2021, the Company will host investor meetings at
the Truist Securities 2021 Gaming, Lodging, Leisure &
Restaurants Summit (virtual).
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 1,028 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) |
|
Nine Months Ended (a) |
|
October 3,2021 |
|
September 27,2020 |
|
October 3,2021 |
|
September 27,2020 |
Restaurant sales |
421,703 |
|
|
407,036 |
|
|
1,236,237 |
|
|
1,126,972 |
|
Costs and expenses: |
|
|
|
|
|
|
|
Food, beverage and packaging costs |
131,103 |
|
|
121,228 |
|
|
371,317 |
|
|
328,858 |
|
Restaurant wages and related expenses |
141,303 |
|
|
126,040 |
|
|
408,541 |
|
|
362,503 |
|
Restaurant rent expense |
30,551 |
|
|
30,536 |
|
|
91,456 |
|
|
88,974 |
|
Other restaurant operating expenses |
66,733 |
|
|
60,486 |
|
|
193,280 |
|
|
172,774 |
|
Advertising expense |
16,619 |
|
|
15,989 |
|
|
48,927 |
|
|
44,281 |
|
General and administrative expenses (b) (c) |
19,209 |
|
|
20,440 |
|
|
61,276 |
|
|
59,808 |
|
Depreciation and amortization |
20,101 |
|
|
19,620 |
|
|
61,131 |
|
|
60,947 |
|
Impairment and other lease charges |
784 |
|
|
1,954 |
|
|
1,281 |
|
|
7,776 |
|
Other expense (income), net (d) |
(1,053 |
) |
|
515 |
|
|
(111 |
) |
|
(1,432 |
) |
Total costs and expenses |
425,350 |
|
|
396,808 |
|
|
1,237,098 |
|
|
1,124,489 |
|
Income (loss) from
operations |
(3,647 |
) |
|
10,228 |
|
|
(861 |
) |
|
2,483 |
|
Interest expense |
7,724 |
|
|
6,649 |
|
|
21,392 |
|
|
20,159 |
|
Loss on extinguishment of
debt |
— |
|
|
— |
|
|
8,538 |
|
|
— |
|
Income (loss) before income
taxes |
(11,371 |
) |
|
3,579 |
|
|
(30,791 |
) |
|
(17,676 |
) |
Provision (benefit) from
income taxes |
(1,469 |
) |
|
48 |
|
|
(4,162 |
) |
|
(6,840 |
) |
Net income (loss) |
$ |
(9,902 |
) |
|
$ |
3,531 |
|
|
$ |
(26,629 |
) |
|
$ |
(10,836 |
) |
|
|
|
|
|
|
|
|
Basic and diluted net income
(loss) per share (e)(f) |
$ |
(0.20 |
) |
|
$ |
0.06 |
|
|
$ |
(0.53 |
) |
|
$ |
(0.21 |
) |
Basic weighted average common
shares outstanding |
49,928 |
|
|
50,924 |
|
|
49,890 |
|
|
50,887 |
|
Diluted weighted average
common shares outstanding |
49,928 |
|
|
60,543 |
|
|
49,890 |
|
|
50,887 |
|
(a) |
The Company uses a 52 or 53 week fiscal year that ends on the
Sunday closest to December 31. The three and nine months ended
October 3, 2021 and September 27, 2020 each included
thirteen and thirty-nine weeks, respectively. |
(b) |
General and administrative expenses include acquisition costs of
$0.1 million for the three months ended October 3, 2021 and
$0.4 million for each of the nine months ended October 3, 2021
and September 27, 2020. |
(c) |
General and administrative expenses include stock-based
compensation expense of $1.5 million and $1.3 million for the three
months ended October 3, 2021 and September 27, 2020,
respectively and $4.5 million and $3.5 million for the nine months
ended October 3, 2021 and September 27, 2020,
respectively. |
(d) |
Other expense (income), net, for the three and nine months ended
October 3, 2021 included a gain from insurance recoveries of
$1.1 million related to property damage at two of the Company's
restaurants. Other expense (income), net, for the nine months ended
October 3, 2021 also included a loss on disposal of assets of
$0.9 million. Other expense (income), net, for the three months
ended September 27, 2020 included a net gain of $0.2 million
related to adjustments to insurance recoveries from previous
property damage at the Company's restaurants, a loss on one
sale-leaseback transaction of $0.4 million and a loss on disposal
of assets of $0.3 million. Other expense (income), net, for the
nine months ended September 27, 2020 included a gain of $1.7
million from insurance recoveries related to property damage at
four of the Company's restaurants, a net gain on eleven
sale-leaseback transactions of $0.2 million and loss on disposal of
assets of $0.5 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 |
|
Nine Months Ended |
|
October 3,2021 |
|
September 27,2020 |
|
October 3,2021 |
|
September 27,2020 |
Revenue: |
|
|
|
|
|
|
|
Burger King restaurant sales |
$ |
401,308 |
|
|
|
$ |
385,412 |
|
|
|
$ |
1,172,455 |
|
|
|
$ |
1,060,698 |
|
|
Popeyes restaurant sales |
20,395 |
|
|
|
21,624 |
|
|
|
63,782 |
|
|
|
66,274 |
|
|
Total revenue |
$ |
421,703 |
|
|
|
$ |
407,036 |
|
|
|
$ |
1,236,237 |
|
|
|
$ |
1,126,972 |
|
|
Change in Comparable Burger
King Restaurant Sales (a) |
2.7 |
|
% |
|
0.8 |
|
% |
|
9.6 |
|
% |
|
(3.5 |
) |
% |
Change in Comparable Popeyes
Restaurant Sales (a) |
(3.2 |
) |
% |
|
5.5 |
|
% |
|
(2.7 |
) |
% |
|
10.1 |
|
% |
|
|
|
|
|
|
|
|
Average Weekly Sales per
Burger King Restaurant (b) |
$ |
30,186 |
|
|
|
$ |
29,282 |
|
|
|
$ |
29,662 |
|
|
|
$ |
26,878 |
|
|
Average Weekly Sales per
Popeyes Restaurant (b) |
$ |
24,487 |
|
|
|
$ |
25,590 |
|
|
|
$ |
25,284 |
|
|
|
$ |
26,351 |
|
|
|
|
|
|
|
|
|
|
Adjusted Restaurant-Level
EBITDA (c) |
$ |
35,424 |
|
|
|
$ |
52,762 |
|
|
|
$ |
122,775 |
|
|
|
$ |
129,686 |
|
|
Adjusted Restaurant-Level
EBITDA margin (c) |
8.4 |
|
% |
|
13.0 |
|
% |
|
9.9 |
|
% |
|
11.5 |
|
% |
|
|
|
|
|
|
|
|
Adjusted EBITDA (c) |
$ |
18,582 |
|
|
|
$ |
34,097 |
|
|
|
$ |
67,755 |
|
|
|
$ |
76,085 |
|
|
Adjusted EBITDA margin
(c) |
4.4 |
|
% |
|
8.4 |
|
% |
|
5.5 |
|
% |
|
6.8 |
|
% |
|
|
|
|
|
|
|
|
Adjusted Net Income (Loss)
(c) |
$ |
(7,759 |
) |
|
|
$ |
5,740 |
|
|
|
$ |
(13,821 |
) |
|
|
$ |
(4,002 |
) |
|
Adjusted Diluted Net Income
(Loss) per share (c) |
$ |
(0.16 |
) |
|
|
$ |
0.09 |
|
|
|
$ |
(0.28 |
) |
|
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
Number of Burger King
restaurants: |
|
|
|
|
|
|
|
Restaurants at beginning of period |
1,027 |
|
|
|
1,027 |
|
|
|
1,009 |
|
|
|
1,036 |
|
|
New restaurants (including offsets) |
1 |
|
|
|
— |
|
|
|
3 |
|
|
|
6 |
|
|
Restaurants acquired |
— |
|
|
|
— |
|
|
|
19 |
|
|
|
— |
|
|
Restaurants closed (including offsets) |
(1 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
(19 |
) |
|
Restaurants at end of period |
1,027 |
|
|
|
1,023 |
|
|
|
1,027 |
|
|
|
1,023 |
|
|
Average Number of operating Burger King restaurants |
1,024.5 |
|
|
|
1,012.5 |
|
|
|
1,014.1 |
|
|
|
1,011.6 |
|
|
|
|
|
|
|
|
|
|
Number of Popeyes
restaurants: |
|
|
|
|
|
|
|
Restaurants at beginning and end of period |
65 |
|
|
|
65 |
|
|
|
65 |
|
|
|
65 |
|
|
Average Number of operating Popeyes restaurants |
64.2 |
|
|
|
65.0 |
|
|
|
64.7 |
|
|
|
64.5 |
|
|
(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 comparison to the
comparable thirteen or thirty-nine week period 52-weeks prior. |
(b) |
Average weekly sales per restaurant are derived by dividing
restaurant sales for the thirteen or thirty-nine week period by the
average number of restaurants operating during such period. |
(c) |
EBITDA, Adjusted Restaurant-Level EBITDA, Adjusted Restaurant-Level
EBITDA margin, Adjusted EBITDA, Adjusted 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, 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) |
|
Nine Months Ended (a) |
|
October 3,2021 |
|
September 27,2020 |
|
October 3,2021 |
|
September 27,2020 |
Reconciliation of
EBITDA and Adjusted EBITDA: (b) |
|
|
|
|
|
|
|
Net income (loss) |
$ |
(9,902 |
) |
|
$ |
3,531 |
|
|
$ |
(26,629 |
) |
|
$ |
(10,836 |
) |
Provision (benefit) for income taxes |
(1,469 |
) |
|
48 |
|
|
(4,162 |
) |
|
(6,840 |
) |
Interest expense |
7,724 |
|
|
6,649 |
|
|
21,392 |
|
|
20,159 |
|
Depreciation and amortization |
20,101 |
|
|
19,620 |
|
|
61,131 |
|
|
60,947 |
|
EBITDA |
16,454 |
|
|
29,848 |
|
|
51,732 |
|
|
63,430 |
|
Impairment and other lease charges |
784 |
|
|
1,954 |
|
|
1,281 |
|
|
7,776 |
|
Acquisition costs (c) |
108 |
|
|
18 |
|
|
400 |
|
|
373 |
|
Stock-based compensation expense |
1,458 |
|
|
1,303 |
|
|
4,541 |
|
|
3,543 |
|
Abandoned development costs (d) |
— |
|
|
189 |
|
|
— |
|
|
1,746 |
|
Pre-opening costs (e) |
30 |
|
|
5 |
|
|
59 |
|
|
104 |
|
Litigation and other professional expenses (f) |
801 |
|
|
265 |
|
|
1,315 |
|
|
545 |
|
Other expense (income), net (g)(h) |
(1,053 |
) |
|
515 |
|
|
(111 |
) |
|
(1,432 |
) |
Loss on extinguishment of debt |
— |
|
|
— |
|
|
8,538 |
|
|
— |
|
Adjusted
EBITDA |
$ |
18,582 |
|
|
$ |
34,097 |
|
|
$ |
67,755 |
|
|
$ |
76,085 |
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Restaurant-Level EBITDA: (b) |
|
|
|
|
|
|
|
Income (loss) from operations |
$ |
(3,647 |
) |
|
$ |
10,228 |
|
|
$ |
(861 |
) |
|
$ |
2,483 |
|
Add: |
|
|
|
|
|
|
|
General and administrative expenses |
19,209 |
|
|
20,440 |
|
|
61,276 |
|
|
59,808 |
|
Pre-opening costs (e) |
30 |
|
|
5 |
|
|
59 |
|
|
104 |
|
Depreciation and amortization |
20,101 |
|
|
19,620 |
|
|
61,131 |
|
|
60,947 |
|
Impairment and other lease charges |
784 |
|
|
1,954 |
|
|
1,281 |
|
|
7,776 |
|
Other expense (income), net (g)(h) |
(1,053 |
) |
|
515 |
|
|
(111 |
) |
|
(1,432 |
) |
Adjusted
Restaurant-Level EBITDA |
$ |
35,424 |
|
|
$ |
52,762 |
|
|
$ |
122,775 |
|
|
$ |
129,686 |
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Net Income (Loss): (b) |
|
|
|
|
|
|
|
Net income (loss) |
$ |
(9,902 |
) |
|
$ |
3,531 |
|
|
$ |
(26,629 |
) |
|
$ |
(10,836 |
) |
Add: |
|
|
|
|
|
|
|
Impairment and other lease charges |
784 |
|
|
1,954 |
|
|
1,281 |
|
|
7,776 |
|
Acquisition costs (c) |
108 |
|
|
18 |
|
|
400 |
|
|
373 |
|
Abandoned development costs (d) |
— |
|
|
189 |
|
|
— |
|
|
1,746 |
|
Pre-opening costs (e) |
30 |
|
|
5 |
|
|
59 |
|
|
104 |
|
Litigation and other professional expenses (f) |
801 |
|
|
265 |
|
|
1,315 |
|
|
545 |
|
Other expense (income), net (g)(h) |
(1,053 |
) |
|
515 |
|
|
(111 |
) |
|
(1,432 |
) |
Loss on extinguishment of debt |
— |
|
|
— |
|
|
8,538 |
|
|
— |
|
Income tax effect on above adjustments (i) |
(168 |
) |
|
(737 |
) |
|
(2,871 |
) |
|
(2,278 |
) |
Valuation allowance for deferred taxes (j) |
1,641 |
|
|
— |
|
|
4,197 |
|
|
— |
|
Adjusted Net Income
(Loss) |
$ |
(7,759 |
) |
|
$ |
5,740 |
|
|
$ |
(13,821 |
) |
|
$ |
(4,002 |
) |
Adjusted diluted net income
(loss) per share (k) |
$ |
(0.16 |
) |
|
$ |
0.09 |
|
|
$ |
(0.28 |
) |
|
$ |
(0.08 |
) |
Adjusted diluted weighted
average common shares outstanding |
49,928 |
|
|
60,543 |
|
|
49,890 |
|
|
50,887 |
|
(a) |
The Company uses a 52 or 53 week fiscal year that ends the Sunday
closest to December 31. The three and nine months ended
October 3, 2021 and September 27, 2020 both included
thirteen and thirty-nine 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, pre-opening costs,
depreciation and amortization, impairment and other lease charges
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, loss on
extinguishment of debt and valuation allowance for deferred
taxes.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 U.S. 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 nine months ended
October 3, 2021 mostly include integration, travel, legal and
professional fees incurred in connection with restaurant
acquisitions during the second quarter of 2021, which were included
in general and administrative expenses. Acquisition costs for the
three and nine months ended September 27, 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 nine months ended
September 27, 2020 represents the write-off of capitalized
costs of previously planned new restaurant locations. |
(e) |
Pre-opening costs for the three and nine months ended
October 3, 2021 and September 27, 2020 include training,
labor and occupancy costs incurred during the construction of new
restaurants. |
(f) |
Litigation and other professional expenses for the three and nine
months ended October 3, 2021 and September 27, 2020
include executive recruiting and severance costs, costs pertaining
to an ongoing lawsuit with one of the Company's former vendors and
other non-recurring professional service expenses. |
(g) |
Other expense (income), net, for the three and nine months ended
October 3, 2021 included a gain from insurance recoveries of
$1.1 million related to property damage at two of the Company's
restaurants. Other expense (income), net, for the nine months ended
October 3, 2021 also included a loss on disposal of assets of
$0.9 million. |
(h) |
Other expense (income), net, for the three months ended
September 27, 2020 included a net gain of $0.2 million related
to adjustments to insurance recoveries from previous property
damage at the Company's restaurants, a loss on one sale-leaseback
transaction of $0.4 million and a loss on disposal of assets of
$0.3 million. Other expense (income), net, for the nine months
ended September 27, 2020 included a gain of $1.7 million from
insurance recoveries related to property damage at four of the
Company's restaurants, a net gain on eleven sale-leaseback
transactions of $0.2 million and loss on disposal of assets of $0.5
million. |
(i) |
The income tax effect related to the adjustments to Adjusted Net
Income (Loss) was calculated using an incremental income tax rate
of 25% for the three and nine months ended October 3, 2021 and
September 27, 2020. |
(j) |
Reflects the removal of the income tax provision recorded for the
establishment of a valuation allowance on all our net deferred
income tax assets during the three and nine months ended
October 3, 2021. |
(k) |
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) |
|
|
Nine Months Ended (a) |
|
October 3,2021 |
|
September 27,2020 |
|
|
October 3,2021 |
|
September 27,2020 |
Reconciliation of Free
Cash Flow: (b) |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
$ |
23,612 |
|
|
$ |
32,886 |
|
|
|
$ |
50,227 |
|
|
$ |
80,778 |
|
Net cash provided by (used
for) investing activities |
10,091 |
|
|
(9,039 |
) |
|
|
(46,703 |
) |
|
(34,045 |
) |
Net cash paid for (proceeds
received from) acquisitions, net of related sale-leasebacks |
(20,186 |
) |
|
— |
|
|
|
10,633 |
|
|
— |
|
Total Free Cash
Flow |
$ |
13,517 |
|
|
$ |
23,847 |
|
|
|
$ |
14,157 |
|
|
$ |
46,733 |
|
|
At 10/3/2021 |
|
At 1/3/2021 |
|
At 9/27/2020 |
Long-term debt and finance lease liabilities (c) |
$ |
523,307 |
|
|
$ |
494,158 |
|
|
$ |
495,748 |
|
Cash and cash equivalents |
89,373 |
|
|
64,964 |
|
|
67,762 |
|
Net Debt (d) |
433,934 |
|
|
429,194 |
|
|
427,986 |
|
Senior Secured Net Debt
(e) |
133,934 |
|
|
429,194 |
|
|
427,986 |
|
Total Net Debt Leverage Ratio
(f) |
4.03 |
x |
|
3.82 |
x |
|
4.03 |
x |
Senior Secured Net Debt
Leverage Ratio (g) |
1.24 |
x |
|
3.82 |
x |
|
4.03 |
x |
(a) |
The Company uses a 52 or 53 week fiscal year that ends the Sunday
closest to December 31. The three and nine months ended
October 3, 2021 and September 27, 2020 both included
thirteen and thirty-nine 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 net cash
paid for acquisitions excluding proceeds from acquisition-related
sale-leaseback transactions completed in the third quarter of 2021.
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
October 3, 2021 and September 27, 2020 is derived from
the Company's consolidated statements of cash flows for the
respective nine month periods to be presented in the Company’s
Interim Condensed Consolidated Financial Statements in its Form
10-Q for the period ended October 3, 2021 and the Company's
consolidated statements of cash flows for the previously reported
six month periods ended July 4, 2021 and June 26, 2020
contained in the Company’s Form 10-Q for the period ended
July 4, 2021. |
(c) |
Long-term debt and finance lease liabilities (including current
portion and excluding deferred financing costs and original issue
discount) at October 3, 2021 included $172,938 of outstanding
term B loans and $47,063 of outstanding revolving borrowings under
the Company's senior credit facilities, $300,000 of 5.875% Senior
Notes due 2029 and $3,306 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
September 27, 2020 included $419,688 of outstanding term B
loans and $75,000 of outstanding term B-1 loans under the Company's
senior credit facilities and $1,060 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 $300
million of unsecured 5.875% Senior Notes, due 2029. |
(f) |
Total Net Debt Leverage Ratio represents the Company's Total Net
Debt Leverage Ratio as calculated in accordance with its senior
credit facility for each period presented. |
(g) |
Senior Secured Net Debt Leverage Ratio represents the Company's Net
Debt 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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