Carrols Restaurant Group, Inc. (“Carrols” or the “Company”)
(Nasdaq: TAST) today reported financial results for the first
quarter ended March 29, 2020 and provided a business update.
Highlights for the First Quarter of 2020 versus the First
Quarter of 2019 Include:
- Total revenue increased 20.9% to $351.5 million (including
$67.4 million in restaurant sales from restaurants acquired in the
Cambridge acquisition completed in the second quarter of 2019) from
$290.8 million in the prior year quarter;
- Comparable restaurant sales for the Company’s Burger King®
restaurants decreased 5.7% compared to a 2.4% increase in the prior
year quarter, and during the last month of the quarter comparable
restaurant sales decreased 16.8%;
- Comparable restaurant sales for the Company’s Popeyes®
restaurants increased 3.2% compared to comparable restaurant sales
under previous ownership in the prior year quarter, and during the
last month of the quarter comparable restaurant sales decreased
2.8%;
- Adjusted EBITDA(1) was $4.0 million compared to $13.3 million
in the prior year quarter;
- Adjusted Restaurant-Level EBITDA(1) was $22.8 million compared
to $28.7 million in the prior year quarter;
- Net loss was $22.2 million, or $0.44 per diluted share,
compared to net loss of $11.5 million, or $0.32 per diluted share,
in the prior year quarter; and
- Adjusted Net Loss(1) was $19.3 million, or $0.38 per diluted
share, compared to Adjusted Net Loss of $10.2 million, or $0.28 per
diluted share, in the prior year quarter.
(1) Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and
Adjusted Net 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.
Business Update
Since the onset of the COVID-19 pandemic, we have taken numerous
steps to adapt our business to the current environment as well as
to better position the Company for the future. These steps
include:
- Continuing to serve drive-thru and, at certain locations, at
the counter for take-out as we prioritize the health and safety of
our employees and customers. Take-out and drive-thru orders
comprised approximately 75% of restaurant sales in 2019;
- Keeping our restaurants stocked with hand sanitizers, masks,
gloves, and thermometers;
- Launching delivery services to the majority of our Burger King
and Popeyes restaurants, ahead of our original timetable. Delivery
sales are now approximately $800,000 per week (approximately 3% of
total restaurant sales);
- Modifying restaurant operating hours based on day-part sales
trends and local ordinances while making adjustments to have the
appropriate amount of labor for all operating day parts;
- Rationalizing all ongoing expenses, and where possible,
reducing corporate and regional overhead and restaurant labor, cost
of sales, and operating expense levels. These adjustments include
reducing regional and corporate overhead by $5 million to $7
million on an annualized basis, achieved by streamlining our
regional management structure, a 10% reduction in non-restaurant
wages, instituting a company-wide hiring freeze, and adjusting
restaurant labor costs to reflect revised restaurant hours and
accessibility;
- Working closely with our landlords to negotiate reduced or
deferred cash rent obligations and optimizing payment terms with
key vendors and suppliers;
- Revaluating all capital expenditures and delaying all projects
that have not yet commenced other than critical restaurant
maintenance issues. Approximately $25 million of capital
expenditure spending was incurred during the first quarter, the
majority of which was carryover spend from projects commenced in
2019. Full year estimated range of capital expenditure spending is
$35 million to $40 million, net of sale lease-back proceeds;
- Suspending any acquisition activity and our stock repurchase
program;
- Temporarily closing 46 locations in March, 2020, including 42
Burger King and four Popeyes restaurants that were geographically
close to other Company restaurants;
- Opening five Burger King restaurants to date in 2020 that
commenced construction in 2019 and closing 11 restaurants
year-to-date that were EBITDA negative; and
- Enhancing our sources of liquidity by increasing our revolver
borrowing capacity by $30.8 million to a total of $145.8 million on
April 8, 2020. As of May 5, 2020, we had $111.8 million of
outstanding borrowings and $9.7 million of letters of credit issued
under our revolving credit facility. In terms of liquidity, as of
May 5, 2020 the Company had $77.8 million of available funds
consisting of $24.4 million available to be drawn on the Company’s
revolving credit facility and approximately $53.4 million in cash
deposits.
Recent Weekly Comparable Restaurant Sales Trends
Comparable restaurant sales for our Burger King restaurants have
improved over the past several weeks from a low of (33.8%) during
the last week of March to (6.4%) over the past week, while our
Popeyes restaurants improved from (19.0%) to 14.5%, respectively.
At this revenue trajectory combined with the operational actions
taken, we currently estimate that the Company is on a path to
generating positive free cash flow during the second quarter of
2020.
Weekly comparable restaurant sales increases/(decreases) for the
week ending March 22, 2020 through the week ending May 3, 2020 are
as follows:
Fiscal Month
March 2020
April 2020
May 2020
Week Ended
Mar 22
Mar 29
Apr 5
Apr 12
Apr 19
Apr 26
May 3
Burger King
(27.30)%
(33.80)%
(30.60)%
(29.40)%
(12.80)%
(13.70)%
(6.40)%
Popeyes
(9.20)%
(19.00)%
(15.10)%
(10.10)%
13.8%
21.4%
14.5%
Management Commentary
Daniel T. Accordino, Chairman and Chief Executive Officer of
Carrols, commented, “While we began 2020 with renewed optimism, we
and our fellow citizens were faced with a whole new set of
challenges beginning in March due to COVID-19. We immediately took
the necessary steps to ensure the safety and well-being of our
employees and guests and then quickly and efficiently pivoted our
business operations and improved our financial liquidity. On behalf
of the management team, I would like to personally thank each and
every one of our employees for their tremendous efforts in adapting
our restaurant operations to the current environment and for their
commitment to help feed America during this challenging time.”
Accordino concluded, “We are encouraged that our weekly trend
for comparable restaurant sales has begun to stabilize and improve
over the past few weeks and are hopeful that conditions will
further strengthen as businesses begin to reopen and we return to a
modified state of ‘normalcy’. Still, we cannot predict what the
near-term future holds with any certainty and when or the manner in
which the conditions surrounding the COVID-19 pandemic will change
but we will be ready to make additional adjustments to our business
as needed. Accordingly, we have withdrawn our full year 2020
guidance as it can no longer be relied upon.”
Balance Sheet Update
The Company ended the first quarter of 2020 with cash and cash
equivalents of $41.3 million, and long-term debt (including current
portion), finance lease liabilities and lease financing obligations
of $536.7 million, including $111.8 million drawn on its revolving
credit facility. Carrols’ First Lien Net Leverage Ratio, as defined
in the Company’s Senior Credit Facility, was 5.00 times at March
29, 2020 compared to a maximum permitted of 5.75 times. Updated
information regarding current cash balances and liquidity can be
found in the “Business Update” section above.
Withdrawal of Prior Full Year 2020 Outlook
Given the ongoing uncertainty around the magnitude and duration
of the COVID-19 pandemic, we are withdrawing our previously issued
guidance for the full year 2020.
Conference Call Today
Daniel T. Accordino, Chairman and Chief Executive Officer, and
Anthony E. Hull, Chief Financial Officer, will host a conference
call to discuss first quarter 2020 financial results and provide a
business update today at 8:30 AM ET.
The conference call can be accessed live over the phone by
dialing 412-317-6026. A replay will be available one hour after the
call and can be accessed by dialing 412-317-6671; the passcode is
10142718. The replay will be available until Thursday, May 14,
2020. Investors and interested parties may listen to a webcast of
this conference call by visiting www.carrols.com under the tab
“Investor Relations”.
About the Company
Carrols is one of the largest restaurant franchisees in the
United States, and currently operates approximately 1,095
restaurants. It is the largest BURGER KING® franchisee in the
United States currently operating 1,030 BURGER KING® restaurants
and also operating 65 POPEYES® restaurants. It has operated BURGER
KING® restaurants since 1976. For more information on Carrols,
please visit the company's website at www.carrols.com.
Forward-Looking Statements
Except for the historical information contained in this news
release, the matters addressed are forward-looking statements.
Forward-looking statements, written, oral or otherwise made,
represent Carrols' expectation or belief concerning future events.
Without limiting the foregoing, these statements are often
identified by the words "may", "might", "believes", "thinks",
"anticipates", "plans", "expects", "intends" or similar
expressions. In addition, expressions of our strategies,
intentions, plans or guidance are also forward-looking statements.
Such statements reflect management's current views with respect to
future events and are subject to risks and uncertainties, both
known and unknown. You are cautioned not to place undue reliance on
these forward-looking statements as there are important factors
that could cause actual results to differ materially from those in
forward-looking statements, many of which are beyond our control.
Investors are referred to the full discussion of risks and
uncertainties, including 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)
March 29, 2020
March 31, 2019
Revenue:
Restaurant sales
$
351,518
$
290,789
Costs and expenses:
Cost of sales
102,927
82,575
Restaurant wages and related expenses
124,575
100,192
Restaurant rent expense
29,454
21,916
Other restaurant operating expenses
57,978
45,605
Advertising expense
13,876
11,872
General and administrative expenses (b)
(c)
20,787
19,724
Depreciation and amortization
21,031
15,292
Impairment and other lease charges
2,881
910
Other expense (income), net (d)
56
(2,129
)
Total costs and expenses
373,565
295,957
Loss from operations
(22,047
)
(5,168
)
Interest expense
7,140
5,947
Loss before income taxes
(29,187
)
(11,115
)
Provision (benefit) for income taxes
(6,978
)
354
Net loss
$
(22,209
)
$
(11,469
)
Basic and diluted net loss per share
(e)(f)
$
(0.44
)
$
(0.32
)
Basic weighted average common shares
outstanding
50,821
36,045
Diluted weighted average common shares
outstanding
50,821
36,045
(a) The Company uses a 52 or 53 week fiscal
year that ends on the Sunday closest to December 31. The three
months ended March 29, 2020 and March 31, 2019 each included
thirteen weeks, respectively.
(b) General and administrative expenses
include acquisition and integration costs of $0.1 million and $2.7
million for the three months ended March 29, 2020 and March 31,
2019, respectively
(c) General and administrative expenses
include stock-based compensation expense of $1.1 million and $1.5
million for the three months ended March 29, 2020 and March 31,
2019 respectively
(d) Other income, net, for the three months
ended March 31, 2019 included a $1.9 million gain related to a
settlement with Burger King Corporation for the approval of new
restaurant development by other franchisees which unfavorably
impacted our restaurants.
(e) Basic net loss per share was computed
excluding loss attributable to preferred stock and non-vested
restricted shares unless the effect would have been anti-dilutive
for the periods presented
(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
(a)
March 29, 2020
March 31, 2019
Revenue:
Burger King restaurant sales
$
329,637
$
290,789
Popeyes restaurant sales
21,881
—
Total revenue
$
351,518
$
290,789
Change in Comparable Burger King
Restaurant Sales (a)
(5.7
)%
2.4
%
Average Weekly Sales per Burger King
Restaurant (b)
$
24,614
$
26,529
Average Weekly Sales per Popeyes
Restaurant (b)
$
25,978
$
—
Adjusted Restaurant-Level EBITDA (c)
$
22,797
$
28,697
Adjusted Restaurant-Level EBITDA margin
(c)
6.5
%
9.9
%
Adjusted EBITDA (c)
$
3,972
$
13,348
Adjusted EBITDA margin (c)
1.1
%
4.6
%
Adjusted Net Loss (c)
$
(19,317
)
$
(10,196
)
Adjusted diluted net loss per share
(c)
$
(0.38
)
$
(0.28
)
Number of Burger King restaurants:
Restaurants at beginning of period
1,036
849
New restaurants (including offsets)
3
2
Restaurants closed (including offsets)
(11
)
(6
)
Restaurants at end of period
1,028
845
Average Number of Restaurants:
1,030.2
843.2
Number of Popeyes restaurants:
—
—
Restaurants at beginning of period
65
—
New restaurants
—
—
Restaurants at end of period
65
—
Average Number of Restaurants:
64.8
—
At 3/29/2020
At 12/29/2019
Long-term debt and finance lease
liabilities (d)
$
536,714
$
472,343
Cash and cash equivalents
41,272
2,974
(a) Restaurants we acquire are included in comparable restaurant
sales after they have been operated by us for 12 months. Sales from
restaurants we develop are included in comparable sales after they
have been open for 15 months. The calculation of changes in
comparable restaurant sales is based on the comparable 13-week
period. (b) Average weekly sales per restaurant are derived by
dividing restaurant sales for the comparable 13-week by the average
number of restaurants operating during such period. (c) EBITDA,
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Restaurant-Level
EBITDA, Adjusted Restaurant-Level EBITDA margin and Adjusted Net
Loss are non-GAAP financial measures and may not necessarily be
comparable to other similarly titled captions of other companies
due to differences in methods of calculation. Refer to the
Company's reconciliation of net loss to EBITDA, Adjusted EBITDA and
Adjusted Net 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 Loss
and reflects the dilutive impact of shares, where applicable, based
on Adjusted Net Loss. (d) Long-term debt and finance lease
liabilities (including current portion and excluding deferred
financing costs and original issue discount) at March 29, 2020
included $421,813 of the Company's Term Loan B under our senior
credit facility, $111,750 of outstanding revolving borrowings under
the Company's senior credit facility, $1,193 of lease financing
obligations and $1,958 of finance lease liabilities. Long-term debt
and finance lease liabilities (including current portion and
excluding deferred financing costs and original issue discount) at
December 29, 2020 included $422,875 of the Company's Term Loan B
under our senior credit facility, $45,750 of outstanding revolving
borrowings under the Company's senior credit facility, $1,194 of
lease financing obligations and $2,524 of finance lease
liabilities.
Carrols Restaurant Group,
Inc. Reconciliation of Non-GAAP Measures (In
thousands, except per share amounts)
(unaudited) Three Months
Ended
March 29, 2020
March 31, 2019
Reconciliation of EBITDA and Adjusted
EBITDA: (a)
Net loss
$
(22,209
)
$
(11,469
)
Provision (benefit) for income taxes
(6,978
)
354
Interest expense
7,140
5,947
Depreciation and amortization
21,031
15,292
EBITDA
(1,016
)
10,124
Impairment and other lease charges
2,881
910
Acquisition and integration costs (b)
81
2,656
Abandoned development costs (c)
688
57
Pre-opening costs (d)
89
68
Litigation costs (e)
61
136
Other expense (income), net (f)
56
(2,129
)
Stock-based compensation expense
1,132
1,526
Adjusted EBITDA
$
3,972
$
13,348
Reconciliation of Adjusted
Restaurant-Level EBITDA: (a)
Loss from operations
$
(22,047
)
$
(5,168
)
Add:
General and administrative expenses
20,787
19,724
Pre-opening costs (d)
89
68
Depreciation and amortization
21,031
15,292
Impairment and other lease charges
2,881
910
Other expense (income), net (f)
56
(2,129
)
Adjusted Restaurant-Level
EBITDA
$
22,797
$
28,697
Reconciliation of Adjusted Net Loss:
(a)
Net loss
$
(22,209
)
$
(11,469
)
Add:
Impairment and other lease charges
2,881
910
Acquisition and integration costs (b)
81
2,656
Abandoned development costs (c)
688
57
Pre-opening costs (d)
89
68
Litigation costs (e)
61
136
Other expense (income), net (f)
56
(2,129
)
Income tax effect on above adjustments
(g)
(964
)
(425
)
Adjusted Net Loss
$
(19,317
)
$
(10,196
)
Adjusted diluted net loss per share
$
(0.38
)
$
(0.28
)
Adjusted diluted weighted average common
shares outstanding
50,821
36,045
(a) Within our press release, we make
reference to EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level
EBITDA and Adjusted Net 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 and integration costs, stock-based compensation
expense, loss on extinguishment of debt, restaurant pre-opening
costs, non-recurring litigation costs and other non-recurring
income or expense. Adjusted Restaurant-Level EBITDA represents loss
from operations as adjusted to exclude general and administrative
expenses, depreciation and amortization, impairment and other lease
charges, restaurant-level integration costs, pre-opening costs,
loss on extinguishment of debt, and other non-recurring income or
expense. Adjusted Net Loss represents net loss as adjusted, net of
tax, to exclude impairment and other lease charges, acquisition
costs and integration costs, gain on bargain purchase, pre-opening
costs, non-recurring litigation costs and other non-recurring
income or expense.
We are presenting Adjusted EBITDA, Adjusted
Restaurant-Level EBITDA and Adjusted Net Loss because we believe
that they provide a more meaningful comparison than EBITDA and net
loss of the Company's core business operating results, as well as
with those of other similar companies. Additionally, we present
Adjusted Restaurant-Level EBITDA because it excludes the impact of
general and administrative expenses such as salaries and expenses
associated with corporate and administrative functions that support
the development and operations of our restaurants, legal, auditing
and other professional fees, acquisition costs, restaurant
pre-opening costs and stock-based compensation expense. Although
these costs are not directly related to restaurant-level
operations, these expenses are necessary for the profitability of
our restaurants. Additionally, this financial measure may not be
comparable to a similarly titled caption for other companies.
Management believes that Adjusted EBITDA, Adjusted Restaurant-Level
EBITDA and Adjusted net 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 Loss are not measures of
financial performance or liquidity under 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 Loss and between loss from
operations and Adjusted Restaurant-Level EBITDA.
(b) Acquisition and integration costs for the
three months ended March 31, 2019 of $2.7 million, mostly include
legal and professional fees incurred in connection with the
acquisition of 165 Burger King and 55 Popeyes restaurants from
Cambridge Holdings, LLC, which were included in general and
administrative expense.
(c) Abandoned development costs for the three
months ended March 29, 2020 and March 31, 2019 represent the write
off of capitalized costs due to the abandoned development of future
restaurant locations.
(d) Pre-opening costs for the three months
ended March 29, 2020 and March 31, 2019 include training, labor and
occupancy costs incurred during the construction of new
restaurants.
(e) Legal costs for the three months ended
March 29, 2020 include litigation expenses pertaining to an ongoing
lawsuit with one of the Company's former vendors.
(f) Other income, net for the three months
ended March 31, 2019 included a $1.9 million gain related to a
settlement with Burger King Corporation for the approval of new
restaurant development by other franchisees which unfavorably
impacted our restaurants.
(g) The income tax effect related to the
adjustments to Adjusted Net Loss during the periods presented was
calculated using an incremental income tax rate of 25% for the
three months ended March 29, 2020 and March 31, 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200507005115/en/
Investor Relations: Raphael Gross 203-682-8253
investorrelations@carrols.com
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