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 second quarter
ended July 3, 2022.
Highlights for the Second Quarter of 2022 versus the Second
Quarter of 2021 include:
- Total restaurant sales increased
4.1% to $441.9 million compared to $424.5 million in the second
quarter of 2021;
- Comparable restaurant sales for the
Company’s Burger King® restaurants increased 2.8%;
- Comparable restaurant sales for the
Company’s Popeyes® restaurants increased 2.0%;
- Adjusted EBITDA(1) totaled $15.1
million compared to $29.3 million in the prior year quarter;
- Adjusted Restaurant-Level EBITDA(1)
totaled $34.6 million compared to $47.9 million in the prior year
quarter;
- Net Loss of $26.5 million, or $0.52
per diluted share, which included an impairment charge of $18.2
million that was primarily due to the elimination of the value of
the goodwill related to the 2019 acquisition of Popeyes
restaurants, compared to Net Loss of $9.6 million, or $0.19 per
diluted share, in the prior year quarter; and
- Adjusted Net Loss(1) of $8.9
million, or $0.18 per diluted share, compared to Adjusted Net
Income of $16,000, or $0.00 per diluted share, 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.
Management Commentary
Paulo A. Pena, President and Chief Executive
Officer of Carrols, commented, “Over the past few months, our
leadership team has focused aggressively on a number of
initiatives, including: (1) raising the bar on operational
excellence, especially as it relates to the guest experience; (2)
improving productivity and stemming turnover by motivating and
engaging our restaurant team members; and (3) moving quickly to
turn around our most challenged locations using proven best
practices that are already in place at a majority of our
restaurants. I am pleased to say that we are already achieving
considerable traction with each of these action items and expect
that our progress will be reflected in our financial results in
future quarters.”
Pena continued, “During the second quarter,
comparable restaurant sales at our Burger King restaurants
increased 2.8% against a robust 12.6% comparison from the prior
year period. The monthly sales trend demonstrated building
momentum, with negative comparable restaurant sales in April as we
lapped the end of the stimulus payments benefit, followed by
mid-single digit growth in both May and June which has extended
into July. On a calendar comparison basis, we exceeded the Burger
King U.S. system by approximately 230 basis points during the
second quarter, further extending our long track record of
outperforming the system.”
Pena added, “Although inflationary challenges
continue to meaningfully affect our profitability, commodity costs
and team member average hourly wages are stabilizing at these
elevated levels while beef costs are beginning to trend downwards.
In addition to ongoing menu and promotional optimization, we have
an additional price increase slated for September at our Burger
King restaurants that we do not believe will negatively impact
traffic. We also appreciate the importance of adapting and evolving
operations to maximize profitably in this higher cost environment.
This is why I am formulating a go-forward operating strategy to be
shared in greater detail at a later point. The Carrols team
possesses considerable operational expertise and I know that we can
successfully address these industry challenges.”
Pena concluded, “We continue to prioritize
disciplined capital allocation while maintaining substantial
liquidity. Our third quarter adjusted EBITDA contribution, coupled
with seasonally favorable working capital movements, should enable
us to deploy free cash flow to pay down a significant portion of
the $27 million outstanding balance of our revolving credit
facility by quarter-end. Beyond that, as the year progresses, we
intend to further reduce indebtedness through further repayment of
our revolving credit facility and making required mandatory
amortization payments under our senior credit facility. Our net
capex spending on critical maintenance needs, holdover remodeling
projects, and new construction that primarily began last year is
now projected to be approximately $40 million in 2022, compared to
$50 million previously.”
Second Quarter 2022 Financial
Results
Total restaurant sales increased 4.1% to $441.9
million in the second quarter of 2022 compared to $424.5 million in
the second quarter of 2021. Comparable restaurant sales for the
Company’s Burger King restaurants increased 2.8%. Average check at
our Burger King restaurants grew 9.8%, inclusive of 9.5% of menu
price increases and lower promotional activity, which was partially
offset by a traffic decline of 6.4%.
Restaurant sales for the Company’s Popeyes
restaurants, which represented 5.0% of total restaurant sales in
the second quarter of 2022, increased on a comparable restaurant
sales basis by 2.0% compared to a 5.3% decrease in the second
quarter of 2021. On a calendar comparison basis, the Company
outperformed the Popeyes U.S. system in comparable restaurant sales
in the second quarter of 2022 by approximately 170 basis
points.
Adjusted Restaurant-Level EBITDA(1) was $34.6
million in the second quarter of 2022 compared to $47.9 million in
the prior year period. Adjusted Restaurant-Level EBITDA margin
declined to 7.8% of restaurant sales from 11.3% in the second
quarter of 2021, reflecting substantially higher food, beverage and
packaging costs, higher wage and related expenses, and higher other
restaurant operating expenses. While the hourly cost and
availability of labor remain challenges for us and the restaurant
industry, we are seeing improved application flow compared to
levels experienced in the first quarter of 2022 and the back half
of last year and sequential moderation in hourly wage rate
increases. Elevated commodity supply chain cost pressures also
continue to adversely impact margins, although we are beginning to
see stabilization and, with certain commodities, reductions in
cost, so far this quarter.
General and administrative expenses increased
slightly to $20.8 million in the second quarter of 2022 from $20.7
million in the prior year period but declined 20 basis points to
4.7% of restaurant sales.
Adjusted EBITDA(1) was $15.1 million in the
second quarter of 2022 compared to $29.3 million in the second
quarter of 2021. Adjusted EBITDA margin decreased to 3.4% of
restaurant sales from 6.9% in the prior year quarter.
Loss from operations was $25.0 million in the
second quarter of 2022 compared to income from operations of $5.9
million in the prior year quarter.
Interest expense increased to $7.6 million in
the second quarter of 2022 from $6.9 million in the second quarter
of 2021.
Net Loss was $26.5 million in the second quarter
of 2022, or $0.52 per diluted share, compared to Net Loss of $9.6
million, or $0.19 per diluted share, in the prior year quarter. Net
Loss in the second quarter of 2022 included, among other items,
$18.2 million of impairment and other lease charges, $0.4 million
of executive transition, litigation and other professional
expenses, $0.4 million of other expense, net and a $3.3 million
increase in the valuation allowance for deferred taxes. The
impairment charge includes a write-down of $16.7 million, before
tax, related to the elimination of goodwill assigned to the Popeyes
restaurants at the time of their acquisition as part of our
Cambridge transaction in May of 2019. The write-down was due to an
evaluation of the Company’s performance at each of its reporting
units, business forecasts, capital expenditures and other market
conditions. 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 impairment and other lease
charges of $0.1 million.
Adjusted Net Loss(1) was $8.9 million, or $0.18
per diluted share in the second quarter of 2022, compared to
Adjusted Net Income of $16,000, or $0.00 per diluted share, in the
prior year quarter.
Free Cash Flow, a non-GAAP financial measure,
for the second quarter of 2022 was a use of $5.7 million compared
to a source of $4.2 million in the prior year period. The outflow
in this year’s second quarter was due to reduced earnings relative
to the same period last year and the second six-month interest
payment on the senior notes we issued in June 2021 of $8.8 million.
We expect that the absence of the bond interest payment and certain
seasonally strong working capital attributes in the third quarter
of 2022 will be beneficial to free cash flow generation in the back
half of the year. Refer to the definition and reconciliation of
Free Cash Flow in the tables at the end of this release.
Balance Sheet Update
We ended the second quarter of 2022 with cash
and cash equivalents of $8.1 million and long-term debt (including
current portion) and finance lease liabilities of $510.6 million.
There was $27.0 million in revolving credit borrowings outstanding
and $9.6 million of letters of credit issued under our $215.0
million revolving credit facility, leaving $178.4 million of
borrowing availability as of July 3, 2022. Including the cash
balance, we had $186.5 million of cash and unused revolver balance
at the end of the second quarter of 2022.
We currently have no covenants or other
restrictions that prohibit us from accessing the available
quarter-end balance of $178.4 million under our $215.0 million
revolving credit facility. Under our credit facility, we are only
subject to a senior secured leverage ratio covenant if our
aggregate total revolver borrowings exceed $75.3 million (including
the amount by which outstanding letters of credit exceed $12.0
million). With $27.0 million of revolving credit borrowings
outstanding (plus only $9.6 million of outstanding letters of
credit) at the end of the second quarter of 2022, we were not
governed by a senior secured leverage ratio covenant at that time.
Furthermore, we do not expect revolver borrowings to increase to
levels that would require measurement of this covenant for the
foreseeable future. Our senior secured leverage ratio was 3.51
times at the end of the second quarter of 2022 subject to a limit
of 5.75 times in our credit agreement, when applicable.
Conference Call Today
Paulo A. Pena, President and Chief Executive
Officer, and Anthony E. Hull, Chief Financial Officer, will host a
conference call to discuss second quarter 2022 financial results at
8:30 a.m. (ET) today.
The conference call can be accessed live over
the telephone by dialing 201-493-6779. A replay will be available
three hours after the call and can be accessed by dialing
412-317-6671; the passcode is 13730361. The replay will be
available until Thursday, August 18, 2022. 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 1,024 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 3, 2022 |
|
July 4, 2021 |
|
July 3, 2022 |
|
July 4, 2021 |
Restaurant sales |
|
$ |
441,945 |
|
|
$ |
424,541 |
|
|
$ |
841,421 |
|
|
$ |
814,534 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Food, beverage and packaging costs |
|
|
140,175 |
|
|
|
126,424 |
|
|
|
263,232 |
|
|
|
240,214 |
|
Restaurant wages and related expenses |
|
|
149,315 |
|
|
|
137,592 |
|
|
|
290,935 |
|
|
|
267,238 |
|
Restaurant rent expense |
|
|
31,230 |
|
|
|
30,591 |
|
|
|
62,243 |
|
|
|
60,905 |
|
Other restaurant operating expenses |
|
|
69,032 |
|
|
|
65,128 |
|
|
|
134,439 |
|
|
|
126,547 |
|
Advertising expense |
|
|
17,641 |
|
|
|
16,939 |
|
|
|
33,605 |
|
|
|
32,308 |
|
General and administrative expenses (b)(c) |
|
|
20,827 |
|
|
|
20,698 |
|
|
|
42,844 |
|
|
|
42,067 |
|
Depreciation and amortization |
|
|
20,071 |
|
|
|
20,421 |
|
|
|
39,613 |
|
|
|
41,030 |
|
Impairment and other lease charges |
|
|
18,176 |
|
|
|
144 |
|
|
|
18,672 |
|
|
|
497 |
|
Other expense, net (d) |
|
|
439 |
|
|
|
715 |
|
|
|
641 |
|
|
|
942 |
|
Total costs and expenses |
|
|
466,906 |
|
|
|
418,652 |
|
|
|
886,224 |
|
|
|
811,748 |
|
Income (loss) from
operations |
|
|
(24,961 |
) |
|
|
5,889 |
|
|
|
(44,803 |
) |
|
|
2,786 |
|
Interest expense |
|
|
7,636 |
|
|
|
6,942 |
|
|
|
15,072 |
|
|
|
13,668 |
|
Loss on extinguishment of
debt |
|
|
— |
|
|
|
8,538 |
|
|
|
— |
|
|
|
8,538 |
|
Loss before income taxes |
|
|
(32,597 |
) |
|
|
(9,591 |
) |
|
|
(59,875 |
) |
|
|
(19,420 |
) |
Benefit from income taxes |
|
|
(6,121 |
) |
|
|
(32 |
) |
|
|
(12,130 |
) |
|
|
(2,693 |
) |
Net loss |
|
$ |
(26,476 |
) |
|
$ |
(9,559 |
) |
|
$ |
(47,745 |
) |
|
$ |
(16,727 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per
share (e)(f) |
|
$ |
(0.52 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.94 |
) |
|
$ |
(0.34 |
) |
Basic and diluted weighted
average common shares outstanding |
|
|
50,795 |
|
|
|
49,917 |
|
|
|
50,634 |
|
|
|
49,871 |
|
|
(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 3, 2022 and July 4, 2021 each included thirteen and
twenty-six weeks, respectively.(b) General and administrative
expenses include acquisition costs of $0.3 million for both the
three and six months ended July 4, 2021.(c) General and
administrative expenses includes stock-based compensation expense
of $0.9 million and $1.6 million for the three months ended
July 3, 2022 and July 4, 2021, respectively and $2.9
million and $3.1 million for the six months ended July 3, 2022
and July 4, 2021, respectively.(d) Other expense, net, for the
three and six months ended July 3, 2022 included a loss on
disposal of assets of $0.5 million and $0.8 million, respectively.
Other expense, 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.(e) Basic net 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 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 3, 2022 |
|
July 4, 2021 |
|
July 3, 2022 |
|
July 4, 2021 |
Revenue: |
|
|
|
|
|
|
|
|
Burger King restaurant sales |
|
$ |
419,758 |
|
|
$ |
402,659 |
|
|
$ |
797,587 |
|
|
$ |
771,147 |
|
Popeyes restaurant sales |
|
|
22,187 |
|
|
|
21,882 |
|
|
|
43,834 |
|
|
|
43,387 |
|
Total revenue |
|
$ |
441,945 |
|
|
$ |
424,541 |
|
|
$ |
841,421 |
|
|
$ |
814,534 |
|
Change in Comparable Burger
King Restaurant Sales (a) |
|
|
2.8 |
% |
|
|
12.6 |
% |
|
|
2.2 |
% |
|
|
13.6 |
% |
Change in Comparable Popeyes
Restaurant Sales (a) |
|
|
2.0 |
% |
|
|
(5.3 |
)% |
|
|
2.1 |
% |
|
|
(2.5 |
)% |
|
|
|
|
|
|
|
|
|
Average Weekly Sales per
Burger King Restaurant (b) |
|
$ |
31,506 |
|
|
$ |
30,701 |
|
|
$ |
29,949 |
|
|
$ |
29,398 |
|
Average Weekly Sales per
Popeyes Restaurant (b) |
|
$ |
26,257 |
|
|
$ |
25,896 |
|
|
$ |
25,937 |
|
|
$ |
25,673 |
|
|
|
|
|
|
|
|
|
|
Adjusted Restaurant-Level
EBITDA (c) |
|
$ |
34,596 |
|
|
$ |
47,867 |
|
|
$ |
57,056 |
|
|
$ |
87,351 |
|
Adjusted Restaurant-Level
EBITDA margin (c) |
|
|
7.8 |
% |
|
|
11.3 |
% |
|
|
6.8 |
% |
|
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (c) |
|
$ |
15,108 |
|
|
$ |
29,307 |
|
|
$ |
19,410 |
|
|
$ |
49,173 |
|
Adjusted EBITDA margin
(c) |
|
|
3.4 |
% |
|
|
6.9 |
% |
|
|
2.3 |
% |
|
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
Adjusted Net Income (Loss)
(c) |
|
$ |
(8,901 |
) |
|
$ |
16 |
|
|
$ |
(25,967 |
) |
|
$ |
(6,484 |
) |
Adjusted Diluted Net Income
(Loss) per share (c) |
|
$ |
(0.18 |
) |
|
$ |
— |
|
|
$ |
(0.51 |
) |
|
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
Number of Burger King
restaurants: |
|
|
|
|
|
|
|
|
Restaurants at beginning of period |
|
|
1,026 |
|
|
|
1,010 |
|
|
|
1,026 |
|
|
|
1,009 |
|
New restaurants (including offsets) |
|
|
1 |
|
|
|
— |
|
|
|
3 |
|
|
|
2 |
|
Acquired Burger King units |
|
|
— |
|
|
|
19 |
|
|
|
— |
|
|
|
19 |
|
Restaurants closed (including offsets) |
|
|
(4 |
) |
|
|
(2 |
) |
|
|
(6 |
) |
|
|
(3 |
) |
Restaurants at end of period |
|
|
1,023 |
|
|
|
1,027 |
|
|
|
1,023 |
|
|
|
1,027 |
|
Average Number of operating Burger King restaurants |
|
|
1,024.9 |
|
|
|
1,008.9 |
|
|
|
1,024.3 |
|
|
|
1,009.0 |
|
|
|
|
|
|
|
|
|
|
Number of Popeyes
restaurants: |
|
|
|
|
|
|
|
|
Restaurants at beginning and end of period |
|
|
65 |
|
|
|
65 |
|
|
|
65 |
|
|
|
65 |
|
Average Number of operating Popeyes restaurants |
|
|
65.0 |
|
|
|
65.0 |
|
|
|
65.0 |
|
|
|
65.0 |
|
|
(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 twenty-six week period 52-weeks prior.(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 Restaurant-Level EBITDA, Adjusted Restaurant-Level
EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted
Net Income (Loss) and Adjusted Diluted Net 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 loss to EBITDA, Adjusted EBITDA, Adjusted Net
Income (Loss) and to the Company's reconciliation of 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 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 3, 2022 |
|
July 4, 2021 |
|
July 3, 2022 |
|
July 4, 2021 |
Reconciliation of
EBITDA and Adjusted EBITDA: (b) |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(26,476 |
) |
|
$ |
(9,559 |
) |
|
$ |
(47,745 |
) |
|
$ |
(16,727 |
) |
Benefit from income taxes |
|
|
(6,121 |
) |
|
|
(32 |
) |
|
|
(12,130 |
) |
|
|
(2,693 |
) |
Interest expense |
|
|
7,636 |
|
|
|
6,942 |
|
|
|
15,072 |
|
|
|
13,668 |
|
Depreciation and amortization |
|
|
20,071 |
|
|
|
20,421 |
|
|
|
39,613 |
|
|
|
41,030 |
|
EBITDA |
|
|
(4,890 |
) |
|
|
17,772 |
|
|
|
(5,190 |
) |
|
|
35,278 |
|
Impairment and other lease charges |
|
|
18,176 |
|
|
|
144 |
|
|
|
18,672 |
|
|
|
497 |
|
Acquisition costs (c) |
|
|
— |
|
|
|
292 |
|
|
|
— |
|
|
|
292 |
|
Stock-based compensation expense |
|
|
936 |
|
|
|
1,614 |
|
|
|
2,877 |
|
|
|
3,083 |
|
Pre-opening costs (d) |
|
|
44 |
|
|
|
— |
|
|
|
89 |
|
|
|
29 |
|
Executive transition, litigation and other professional expenses
(e) |
|
|
403 |
|
|
|
232 |
|
|
|
2,321 |
|
|
|
514 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
8,538 |
|
|
|
— |
|
|
|
8,538 |
|
Other expense, net (f)(g) |
|
|
439 |
|
|
|
715 |
|
|
|
641 |
|
|
|
942 |
|
Adjusted
EBITDA |
|
$ |
15,108 |
|
|
$ |
29,307 |
|
|
$ |
19,410 |
|
|
$ |
49,173 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Restaurant-Level EBITDA: (b) |
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
$ |
(24,961 |
) |
|
$ |
5,889 |
|
|
$ |
(44,803 |
) |
|
$ |
2,786 |
|
Add: |
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
20,827 |
|
|
|
20,698 |
|
|
|
42,844 |
|
|
|
42,067 |
|
Pre-opening costs (d) |
|
|
44 |
|
|
|
— |
|
|
|
89 |
|
|
|
29 |
|
Depreciation and amortization |
|
|
20,071 |
|
|
|
20,421 |
|
|
|
39,613 |
|
|
|
41,030 |
|
Impairment and other lease charges |
|
|
18,176 |
|
|
|
144 |
|
|
|
18,672 |
|
|
|
497 |
|
Other expense, net (f)(g) |
|
|
439 |
|
|
|
715 |
|
|
|
641 |
|
|
|
942 |
|
Adjusted
Restaurant-Level EBITDA |
|
$ |
34,596 |
|
|
$ |
47,867 |
|
|
$ |
57,056 |
|
|
$ |
87,351 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Net Income (Loss): (b) |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(26,476 |
) |
|
$ |
(9,559 |
) |
|
$ |
(47,745 |
) |
|
$ |
(16,727 |
) |
Add: |
|
|
|
|
|
|
|
|
Impairment and other lease charges |
|
|
18,176 |
|
|
|
144 |
|
|
|
18,672 |
|
|
|
497 |
|
Acquisition costs (c) |
|
|
— |
|
|
|
292 |
|
|
|
— |
|
|
|
292 |
|
Pre-opening costs (d) |
|
|
44 |
|
|
|
— |
|
|
|
89 |
|
|
|
29 |
|
Executive transition, litigation and other professional expenses
(e) |
|
|
403 |
|
|
|
232 |
|
|
|
2,321 |
|
|
|
514 |
|
Other expense, net (f)(g) |
|
|
439 |
|
|
|
715 |
|
|
|
641 |
|
|
|
942 |
|
Income tax effect on above adjustments (h) |
|
|
(4,766 |
) |
|
|
(346 |
) |
|
|
(5,431 |
) |
|
|
(569 |
) |
Loss on extinguishment of debt |
|
|
— |
|
|
|
8,538 |
|
|
|
— |
|
|
|
8,538 |
|
Valuation allowance for deferred taxes (i) |
|
|
3,279 |
|
|
|
— |
|
|
|
5,486 |
|
|
|
— |
|
Adjusted Net Income
(Loss) |
|
$ |
(8,901 |
) |
|
$ |
16 |
|
|
$ |
(25,967 |
) |
|
$ |
(6,484 |
) |
Adjusted diluted net income
(loss) per share (j) |
|
$ |
(0.18 |
) |
|
$ |
— |
|
|
$ |
(0.51 |
) |
|
$ |
(0.13 |
) |
Adjusted diluted weighted
average common shares outstanding |
|
|
50,795 |
|
|
|
59,431 |
|
|
|
50,634 |
|
|
|
49,871 |
|
|
(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 3, 2022 and July 4, 2021 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 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, restaurant pre-opening costs, non-recurring
executive transition, litigation and other professional expenses,
loss on extinguishment of debt, and other expense, net. Adjusted
Restaurant-Level EBITDA represents loss from operations as adjusted
to exclude general and administrative expenses, acquisition costs,
pre-opening costs, depreciation and amortization, impairment and
other lease charges and other expense, net. Adjusted Net Income
(Loss) represents net loss as adjusted, net of tax, to exclude
impairment and other lease charges, acquisition costs, restaurant
pre-opening costs, non-recurring executive transition, litigation
and other professional expenses, loss on extinguishment of debt,
other expense, net and the 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 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 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
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 loss and EBITDA, Adjusted EBITDA and Adjusted Net Income (Loss)
and between loss from operations and Adjusted Restaurant-Level
EBITDA.(c) Acquisition costs for the three and six months ended
July 4, 2021 primarily 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.(d) Pre-opening costs for
the three and six months ended July 3, 2022 and July 4,
2021 include training, labor and occupancy costs incurred during
the construction of new restaurants.(e) Executive transition,
litigation and other professional expenses for the three and six
months ended July 3, 2022 and July 4, 2021 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.(f) Other expense, net,
for the three and six months ended July 3, 2022 included a
loss on disposal of assets of $0.5 million and $0.8 million,
respectively. The six months ended July 3, 2022 also included
additional gains on previous sale-leaseback transactions of $0.1
million.(g) Other expense, 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) 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 six months ended July 3, 2022 and July 4, 2021.
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.(i) 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 six months ended July 3, 2022.(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 3, 2022 |
|
July 4, 2021 |
|
July 3, 2022 |
|
July 4, 2021 |
Reconciliation of Free
Cash Flow: (b) |
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities |
|
$ |
3,536 |
|
|
$ |
19,579 |
|
|
$ |
(23,033 |
) |
|
|
26,615 |
|
Net cash used for investing
activities |
|
$ |
(9,283 |
) |
|
|
(46,167 |
) |
|
|
(21,837 |
) |
|
|
(56,794 |
) |
Add: Net cash paid for
(proceeds received from) acquisitions, net of related
sale-leasebacks |
|
|
— |
|
|
|
30,819 |
|
|
|
— |
|
|
|
30,819 |
|
Total Free Cash
Flow |
|
$ |
(5,747 |
) |
|
$ |
4,231 |
|
|
$ |
(44,870 |
) |
|
$ |
640 |
|
|
|
At 7/3/2022 |
|
At 1/2/2022 |
|
At 7/4/2021 |
Long-term debt and finance lease liabilities (c) |
|
$ |
510,608 |
|
|
$ |
478,181 |
|
|
$ |
521,451 |
|
Cash and cash equivalents |
|
|
8,068 |
|
|
|
29,151 |
|
|
|
56,187 |
|
Net Debt (d) |
|
|
502,540 |
|
|
|
449,030 |
|
|
|
465,264 |
|
Senior Secured Net Debt
(e) |
|
|
202,540 |
|
|
|
149,030 |
|
|
|
165,264 |
|
Total Net Debt Leverage Ratio
(f) |
|
8.71x |
|
5.02x |
|
3.82x |
Senior Secured Net Debt
Leverage Ratio (g) |
|
3.51x |
|
1.67x |
|
1.36x |
|
(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 3, 2022 and July 4, 2021 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 net cash paid for acquisitions excluding
proceeds from acquisition-related sale-leaseback transactions.
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 3, 2022 and July 4, 2021 is derived from the
Company's consolidated statements of cash flows for the respective
three month periods to be presented in the Company’s Interim
Condensed Consolidated Financial Statements in its Form 10-Q for
the period ended July 3, 2022 and the Company's consolidated
statements of cash flows for the previously reported three month
periods ended April 3, 2022 and April 4, 2021 contained in the
Company’s Form 10-Q for the period ended April 3, 2022.(c)
Long-term debt and finance lease liabilities (including current
portion and excluding deferred financing costs and original issue
discount) at July 3, 2022 included $169,750 of outstanding
Term B loans and $27,000 of outstanding revolving borrowings under
the Company's senior credit facilities, $300,000 of 5.875% Senior
Notes due 2029 and $13,858 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 2, 2022 included $171,875 of outstanding Term B loans,
$300,000 of 5.875% Senior Notes due 2029 and $6,306 of finance
lease liabilities. Long-term debt and finance lease liabilities
(including current portion and excluding deferred financing costs
and original issue discount) at July 4, 2021 included $174,000
of 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.(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 facilities 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 facilities for each period
presented. |
|
Investor Relations:Raphael
Gross203-682-8253investorrelations@carrols.com
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