Significant Improvement in Profitability during
the Second Quarter 2020 Comparable Restaurant Sales Trends Remain
Encouraging Company Currently Has Over $180 Million in Available
Liquidity
Carrols Restaurant Group, Inc. (“Carrols” or the “Company”)
(Nasdaq: TAST) today reported financial results for the second
quarter ended June 28, 2020 and provided a business update.
Highlights for the Second Quarter of 2020 versus the Second
Quarter of 2019
- Total restaurant revenue was $368.4 million compared to $365.7
million in the prior year quarter;
- Comparable restaurant sales for the Company’s Burger King®
restaurants decreased 6.4%; June comparable restaurant sales
increased 2.5%;
- Comparable restaurant sales for the Company’s Popeyes®
restaurants increased 17.1%; June comparable restaurant sales
increased 13.3%;
- Adjusted EBITDA(1) increased to $38.0 million from $24.1
million in the prior year quarter;
- Adjusted Restaurant-Level EBITDA(1) increased to $54.1 million
from $41.1 million in the prior year quarter;
- Net income was $7.8 million, or $0.13 per diluted share,
compared to net loss of $(3.7) million, or $(0.09) per diluted
share, in the prior year quarter;
- Adjusted Net Income(1) increased to $9.6 million, or $0.16 per
diluted share, from $4.6 million, or $0.08 per diluted share, in
the prior year quarter; and
- The Company generated $48.6 million of Free Cash Flow(2) during
the second quarter of 2020.
(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 and is defined as Net cash provided by operating activities
less Net cash used for investing activities adjusted to add back
cash paid for acquisitions. Refer to the definition and
reconciliation of this measure in the tables at the end of this
release.
Recent Monthly Comparable Restaurant Sales Trends
Monthly comparable restaurant sales increases / (decreases) for
the month ending March 29, 2020 through the month ending July 26,
2020 are as follows:
Q2 2020
Fiscal Month
March 2020
April 2020
May 2020
June 2020
July 2020
Burger King
(16.80)%
(21.70)%
(2.90)%
2.5 %
2.1 %
Popeyes
(2.80)%
1.6 %
20.5 %
13.3 %
13.9 %
Balance Sheet Update
The Company ended the second quarter of 2020 with cash and cash
equivalents of $46.0 million, and long-term debt (including current
portion) and finance lease liabilities of $497.1 million. As of the
end of the second quarter of 2020, the Company did not have any
outstanding revolving credit borrowings under its $145.8 million
revolving credit facility and had $9.7 million of letters of credit
issued under such facility.
During the second quarter of 2020, the Company increased its
Term Loan (as defined in the senior credit facility) borrowings in
the aggregate principal amount of $75 million through the borrowing
of an Incremental Term B-1 Loan. The proceeds of the Incremental
Term B-1 Loan were used to repay outstanding borrowings under the
Company’s revolving credit facility and general corporate purposes.
The maturity date of the Incremental Term B-1 Loan of April 30,
2026 is the same as the maturity of the Term Loan B.
Management Commentary
Daniel T. Accordino, Chairman and Chief Executive Officer of
Carrols, commented, “We believe our robust second quarter results
are demonstrative of the agility and efficacy of our business model
in providing customers great value and convenience through
drive-thru, at-the-counter take-out, and delivery options along
with our executional prowess in the face of a challenging operating
environment. Despite the ongoing pandemic, we were encouraged by
the resiliency in our comparable restaurant sales during the second
quarter as well as our ability to generate higher restaurant-level
profitability and Adjusted EBITDA in both dollar and margin terms
compared to the year-ago period on similar revenue. This was
accomplished by successfully managing food waste, optimizing labor,
and effectively controlling other restaurant-level and corporate
overhead expenses. Although volatility may persist, our underlying
trend is undeniably strengthening and absent a major setback, we
are hopeful that we can retain and possibly build further momentum
in our overall performance.”
Accordino concluded, “In February, and pre-COVID-19 in the US,
we expressed our intention to generate up to $25 million in free
cash flow in 2020 and reduce our outstanding debt level by year
end. Through the second quarter, we have generated $22.9 million of
Free Cash Flow. We also now have in excess of $180 million in
available liquidity (cash and borrowing availability under our
revolving credit facility) which we believe gives us the ability to
weather just about any adverse economic situation. For the
remainder of 2020, our intention is to remain nimble in our
operations, focus on improving profitability within our existing
restaurant portfolio, manage capital expenditures, and continue to
generate positive Free Cash Flow to reduce our leverage. Longer
term, we currently expect to expend approximately $40 million to
$50 million annually in capital expenditures over the next three
years mainly for maintenance, approximately 25 restaurant remodels
per year and system-wide upgrades and initiatives. We also intend
to continue our pause on acquisitions and to only develop
build-to-suit new restaurants with attractive ROI potential until
our adjusted leverage ratio (as defined in our senior credit
facility) drops below four times.”
Second Quarter 2020 Financial Results
Total restaurant revenue was $368.4 million in the second
quarter of 2020 compared to $365.7 million in the second quarter of
2019. Comparable restaurant sales for the Company’s Burger King
restaurants decreased 6.4%. Comparable restaurant sales for the
Company’s Popeyes restaurants increased 17.1%.
Adjusted Restaurant-level EBITDA(1) increased to $54.1 million
in the second quarter of 2020 from $41.1 million in the prior year
period. Adjusted Restaurant-level EBITDA margin was 14.7% of
restaurant sales and increased 350 basis points from the second
quarter of 2019, reflecting lower cost of sales despite higher beef
prices, wage and related expenses, and other restaurant operating
expenses. The Company demonstrated its ability to rationalize all
ongoing expenses, and where possible, reduced food waste, optimized
restaurant labor to reflect revised restaurant hours and
accessibility, and thoughtfully managed other operating
expenses.
General and administrative expenses declined to $18.6 million in
the second quarter of 2020, including $1.4 million in certain
expenses primarily for development abandonment charges and
acquisition and integration costs, compared to $20.6 million in the
prior year period, which included $2.3 million of primarily
acquisition and integration costs. The second quarter 2020 total
includes the impact of many corporate cost efficiency initiatives
such as streamlining of the Company’s regional management
structure, re-engineering of the training process and a 10%
temporary reduction in non-restaurant wages. The reduction in
non-restaurant wages have since been restored as of the start of
the third quarter of 2020.
Adjusted EBITDA(1) increased to $38.0 million in the second
quarter of 2020 from $24.1 million in the second quarter of 2019.
Adjusted EBITDA margin was 10.3% of total restaurant sales and
increased 380 basis points from the second quarter of 2019 due to
the factors discussed above.
Income from operations increased to $14.3 million in the second
quarter of 2020 compared to $2.1 million in the prior year
quarter.
Interest expense decreased to $6.4 million in the second quarter
of 2020 from $6.9 million in the second quarter of 2019, reflecting
the Company’s lower cost of indebtedness.
Net income was $7.8 million in the second quarter of 2020, or
$0.13 per diluted share, compared to net loss of $(3.7) million, or
$(0.09) per diluted share, in the prior year quarter. Net income in
the second quarter of 2020 included $2.9 million of impairment and
other lease charges, $0.3 million of acquisition and integration
costs, $0.9 million in abandoned development costs, and a $2.2
million in gains related to property damage recoveries and gains on
sale leaseback transactions. Net loss in the second quarter of 2019
included a $7.4 million loss on extinguishment of debt due to the
2019 refinancing and write-off of previously deferred financing
costs, $0.4 million in impairment and other lease charges, and $2.6
million of acquisition and integration costs.
Adjusted net income(1) was $9.6 million, or $0.16 per diluted
share, compared to adjusted net income of $4.6 million, or $0.08
per diluted share, in the prior year quarter.
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 second 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 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
13706708. The replay will be available until Thursday, August 13,
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 1,092
restaurants. It is the largest BURGER KING® franchisee in the
United States currently operating 1,027 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)
(unaudited)
Three Months Ended (a)
Six Months Ended (a)
June 28, 2020
June 30, 2019
June 28, 2020
June 30, 2019
Revenue:
Restaurant sales
$
368,418
$
365,674
$
719,936
$
656,463
Other revenue
—
2,885
—
2,885
Total revenue
368,418
368,559
719,936
659,348
Costs and expenses:
Cost of sales
104,703
109,157
207,630
191,732
Restaurant wages and related expenses
111,888
121,140
236,463
221,332
Restaurant rent expense
28,984
26,690
58,438
48,606
Other restaurant operating expenses
54,310
56,308
112,288
101,913
Advertising expense
14,416
14,677
28,292
26,549
General and administrative expenses (b)
(c)
18,581
20,620
39,368
40,344
Depreciation and amortization
20,296
17,121
41,327
32,413
Impairment and other lease charges
2,941
367
5,822
1,277
Other expense (income), net (d)
(2,003
)
376
(1,947
)
(1,753
)
Total costs and expenses
354,116
366,456
727,681
662,413
Income (loss) from operations
14,302
2,103
(7,745
)
(3,065
)
Interest expense
6,370
6,900
13,510
12,847
Loss on extinguishment of debt
—
7,443
—
7,443
Income (loss) before income taxes
7,932
(12,240
)
(21,255
)
(23,355
)
Provision (benefit) for income taxes
90
(8,508
)
(6,888
)
(8,154
)
Net income (loss)
$
7,842
$
(3,732
)
$
(14,367
)
$
(15,201
)
Basic and diluted net income (loss) per
share (e)(f)
$
0.13
$
(0.09
)
$
(0.28
)
$
(0.39
)
Basic weighted average common shares
outstanding
50,917
41,051
50,869
38,548
Diluted weighted average common shares
outstanding
60,332
41,051
50,869
38,548
(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 June 28, 2020 and June 30, 2019 each included
thirteen and twenty-six weeks, respectively.
(b)
General and administrative expenses
include acquisition and integration costs of $0.3 million and $2.2
million for the three months ended June 28, 2020 and June 30, 2019
respectively and of $0.4 million and $4.8 million for the six
months ended June 28, 2020 and June 30, 2019, respectively.
(c)
General and administrative expenses
include stock-based compensation expense of $1.1 million and $1.3
million for the three months ended June 28, 2020 and June 30, 2019,
respectively and $2.2 million and $2.8 million for the six months
ended June 28, 2020 and June 30, 2019, respectively.
(d)
Other expense (income), net, for the three
months ended June 28, 2020, included a gain of $1.3 million due to
property damage of the Company's restaurants, a gain on three
sale-leaseback transactions of $0.8 million and a loss on disposal
of assets of $0.1 million. Other expense (income), net, for the six
months ended June 28, 2020, included a gain of $1.6 million due to
property damage at four of the Company's restaurants, a net gain on
ten sale-leaseback transactions of $0.6 million, and loss on
disposal of assets of $0.2 million. Other expense (income), net,
for the six months ended June 30, 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 income (loss) per share was
computed excluding income (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 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)
(unaudited)
Three Months Ended
Six Months Ended (a)
June 28, 2020
June 30, 2019
June 28, 2020
June 30, 2019
Revenue:
Burger King restaurant sales
$
345,649
$
353,714
$
675,286
$
644,503
Popeyes restaurant sales
22,769
11,960
44,650
11,960
Total restaurant sales
368,418
365,674
719,936
656,463
Other revenue
—
2,885
—
2,885
Total revenue
$
368,418
$
368,559
$
719,936
$
659,348
Change in Comparable Burger King
Restaurant Sales (a)
(6.4
)%
0.1
%
(6.0
)%
1.2
%
Change in Comparable Popeyes Restaurant
Sales (a)
17.1
%
17.1
%
Average Weekly Sales per Burger King
Restaurant (b)
$
26,777
$
28,499
$
25,675
$
27,575
Average Weekly Sales per Popeyes
Restaurant (b)
$
27,509
$
24,505
$
26,737
$
24,505
Adjusted Restaurant-Level EBITDA (c)
$
54,127
$
41,114
$
76,924
$
69,811
Adjusted Restaurant-Level EBITDA margin
(c)
14.7
%
11.2
%
10.7
%
10.6
%
Adjusted EBITDA (c)
$
38,017
$
24,133
$
41,989
$
37,481
Adjusted EBITDA margin (c)
10.3
%
6.5
%
5.8
%
5.7
%
Adjusted Net Income (Loss) (c)
$
9,574
$
4,570
$
(9,743
)
$
(5,626
)
Adjusted diluted net income (loss) per
share (c)
$
0.16
$
0.08
$
(0.19
)
$
(0.15
)
Number of Burger King restaurants:
Restaurants at beginning of period
1,028
845
1,036
849
New restaurants (including offsets)
3
4
6
6
Restaurants acquired
—
178
—
178
Restaurants closed (including offsets)
(4
)
(4
)
(15
)
(10
)
Restaurants at end of period
1,027
1,023
1,027
1,023
Average Number of Burger King
restaurants:
993.0
954.7
1,011.6
899.0
Number of Popeyes restaurants:
Restaurants at beginning of period
65
—
65
—
New restaurants
—
3
—
3
Restaurants acquired
—
55
—
55
Restaurants at end of period
65
58
65
58
Average Number of Popeyes restaurants:
63.7
37.6
64.2
18.8
At 6/28/2020
At 12/29/2019
Long-term debt and finance lease
liabilities (d)
$
497,140
$
471,149
Cash and cash equivalents
45,978
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 or 26-week period.
(b)
Average weekly sales per restaurant are
derived by dividing restaurant sales for the comparable 13-week or
26-week period by the average number of restaurants operating
during such period.
(c)
EBITDA, Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted Restaurant-Level EBITDA, Adjusted Restaurant-Level
EBITDA margin and Adjusted Net Income (Loss) are non-GAAP financial
measures and may not necessarily be comparable to other similarly
titled captions of other companies due to differences in methods of
calculation. Refer to the Company's reconciliation of net income
(loss) to EBITDA, Adjusted EBITDA and Adjusted Net Income (Loss),
and to the Company's reconciliation of income (loss) from
operations to Adjusted Restaurant-Level EBITDA for further detail.
Both Adjusted EBITDA margin and Adjusted Restaurant-Level EBITDA
margin are calculated as a percentage of restaurant sales. Adjusted
diluted net income (loss) per share is calculated based on Adjusted
Net Income (Loss) and reflects the dilutive impact of shares, where
applicable, based on Adjusted Net Income (Loss).
(d)
Long-term debt and finance lease
liabilities (including current portion and excluding deferred
financing costs and original issue discount) at June 28, 2020
included $420,750 of Term Loan B borrowings under our senior credit
facility, $75,000 of Term Loan B-1 borrowings under our senior
credit facility and $1,390 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 Term Loan B under our senior
credit facility, $45,750 of outstanding revolving borrowings under
our senior credit facility and $2,524 of finance lease
liabilities.
Carrols Restaurant Group, Inc.
Reconciliation of Non-GAAP
Measures
(In thousands, except per share
amounts)
(unaudited)
(unaudited)
Three Months Ended
Six Months Ended
June 28, 2020
June 30, 2019
June 28, 2020
June 30, 2019
Reconciliation of EBITDA and Adjusted
EBITDA: (a)
Net income (loss)
$
7,842
$
(3,732
)
$
(14,367
)
$
(15,201
)
Provision (benefit) for income taxes
90
(8,508
)
(6,888
)
(8,154
)
Interest expense
6,370
6,900
13,510
12,847
Depreciation and amortization
20,296
17,121
41,327
32,413
EBITDA
34,598
11,781
33,582
21,905
Impairment and other lease charges
2,941
367
5,822
1,277
Acquisition and integration costs (b)
274
2,573
355
5,229
Abandoned development costs (c)
869
54
1,557
111
Pre-opening costs (d)
10
121
99
189
Litigation costs (e)
219
136
280
272
Other expense (income), net (f)(g)
(2,003
)
376
(1,947
)
(1,753
)
Stock-based compensation expense
1,109
1,282
2,241
2,808
Loss on extinguishment of debt
—
7,443
—
7,443
Adjusted EBITDA
$
38,017
$
24,133
$
41,989
$
37,481
Reconciliation of Adjusted
Restaurant-Level EBITDA: (a)
Income (loss) from operations
$
14,302
$
2,103
$
(7,745
)
$
(3,065
)
Add:
General and administrative expenses
18,581
20,620
39,368
40,344
Restaurant integration costs (b)
—
406
—
406
Pre-opening costs (d)
10
121
99
189
Depreciation and amortization
20,296
17,121
41,327
32,413
Impairment and other lease charges
2,941
367
5,822
1,277
Other expense (income), net (f)(g)
(2,003
)
376
(1,947
)
(1,753
)
Adjusted Restaurant-Level
EBITDA
$
54,127
$
41,114
$
76,924
$
69,811
Reconciliation of Adjusted Net Income
(Loss): (a)
Net income (loss)
$
7,842
$
(3,732
)
$
(14,367
)
$
(15,201
)
Add:
Impairment and other lease charges
2,941
367
5,822
1,277
Acquisition and integration costs (b)
274
2,573
355
5,229
Abandoned development costs (c)
869
54
1,557
111
Pre-opening costs (d)
10
121
99
189
Litigation costs (e)
219
136
280
272
Other expense (income), net (f)(g)
(2,003
)
376
(1,947
)
(1,753
)
Loss on extinguishment of debt
—
7,443
—
7,443
Income tax effect on above adjustments
(h)
(578
)
(2,768
)
(1,542
)
(3,193
)
Adjusted Net Income (Loss)
$
9,574
$
4,570
$
(9,743
)
$
(5,626
)
Adjusted diluted net income (loss) per
share
$
0.16
$
0.08
$
(0.19
)
$
(0.15
)
Adjusted diluted weighted average common
shares outstanding
60,332
58,208
50,869
38,548
Carrols Restaurant Group,
Inc.
Reconciliation of Non-GAAP
Measures
(In thousands, except per share
amounts)
(unaudited)
(unaudited)
Three Months Ended
Six Months Ended
June 28, 2020
June 30, 2019
June 28, 2020
June 30, 2019
Reconciliation of Free Cash Flow:
(i)
Net cash provided by operating
activities
$
51,682
$
2,844
$
47,892
$
10,832
Net cash used for investing activities
(3,038
)
(150,562
)
(25,006
)
(166,312
)
Add: cash paid for acquisitions
—
127,980
—
127,980
Total Free Cash Flow
$
48,644
$
(19,738
)
$
22,886
$
(27,500
)
(a)
Within our press release, we make
reference to EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level
EBITDA and Adjusted Net Income (Loss) which are non-GAAP financial
measures. EBITDA represents net income (loss) before income taxes,
interest expense and depreciation and amortization. Adjusted EBITDA
represents EBITDA as adjusted to exclude impairment and other lease
charges, acquisition and integration costs, stock-based
compensation expense, loss on extinguishment of debt, restaurant
pre-opening costs, non-recurring litigation costs and other
non-recurring income or expense. Adjusted Restaurant-Level EBITDA
represents income (loss) from operations as adjusted to exclude
general and administrative expenses, depreciation and amortization,
impairment and other lease charges, restaurant-level integration
costs, pre-opening costs, loss on extinguishment of debt, and other
non-recurring income or expense. Adjusted Net Income (Loss)
represents net income (loss) as adjusted, net of tax, to exclude
impairment and other lease charges, acquisition costs and
integration costs, gain on bargain purchase, pre-opening costs,
non-recurring litigation costs and other non-recurring income or
expense.
We are presenting Adjusted EBITDA,
Adjusted Restaurant-Level EBITDA and Adjusted Net Income (Loss)
because we believe that they provide a more meaningful comparison
than EBITDA and net income (loss) of the Company's core business
operating results, as well as with those of other similar
companies. Additionally, we present Adjusted Restaurant-Level
EBITDA because it excludes the impact of general and administrative
expenses such as salaries and expenses associated with corporate
and administrative functions that support the development and
operations of our restaurants, legal, auditing and other
professional fees, acquisition costs, 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 Income
(loss), when viewed with the Company's results of operations in
accordance with GAAP and the accompanying reconciliations in the
table above, provide useful information about operating performance
and period-over-period growth, and provide additional information
that is useful for evaluating the operating performance of the
Company's core business without regard to potential distortions.
Additionally, management believes that Adjusted EBITDA and Adjusted
Restaurant-Level EBITDA permit investors to gain an understanding
of the factors and trends affecting our ongoing cash earnings, from
which capital investments are made and debt is serviced.
However, EBITDA, Adjusted EBITDA, Adjusted
Restaurant-Level EBITDA and Adjusted Net Income (Loss) are not
measures of financial performance or liquidity under GAAP and,
accordingly, should not be considered as alternatives to net income
(loss) from operations or cash flow from operating activities as
indicators of operating performance or liquidity. Also, these
measures may not be comparable to similarly titled captions of
other companies. The tables above provide reconciliations between
net income (loss) and EBITDA, Adjusted EBITDA and Adjusted Net
Income (Loss) and between income (loss) from operations and
Adjusted Restaurant-Level EBITDA.
(b)
Acquisition costs for the three and six
months ended June 28, 2020 and June 30, 2019 mostly includes legal
and professional fees incurred in connection with the acquisition
of 165 Burger King and 55 Popeyes restaurants from Cambridge
Franchise Holdings, LLC, which were included in general and
administrative expense. Integration costs were $1.2 million in the
three and six months ended June 30, 2019 and included certain
professional fees, corporate payroll, and other costs related to
the integration of this acquisition, of which $0.4 million of
one-time repairs and maintenance costs were restaurant-level
expenses and $0.8 million were recorded in general and
administrative expense.
(c)
Abandoned development costs for the three
and six months ended June 28, 2020 and June 30, 2019 represents the
write-off of capitalized costs due to the abandoned development of
future restaurant locations.
(d)
Pre-opening costs for the three and six
months ended June 28, 2020 and June 30, 2019 include training,
labor and occupancy costs incurred during the construction of new
restaurants.
(e)
Legal costs for the three and six months
ended June 28, 2020 and June 30, 2019 include litigation expenses
pertaining to an ongoing lawsuit with one of the Company's former
vendors as well as other non-recurring professional service
expenses.
(f)
Other income, net for the three months
ended June 28, 2020 included gains related to insurance recoveries
from property damage at four of its restaurants of $1.3 million, a
net gain on three sale-leaseback transactions of $0.8 million and a
loss on disposal of assets of $0.1 million. For the six months
ended June 28, 2020 other income, net included gains related to
insurance recoveries from property damage at four of its
restaurants of $1.6 million, net gain on ten sale-leaseback
transactions of $0.6 million and a loss on disposal of assets of
$0.2 million.
(g)
Other expense, net for the three months
ended June 30, 2019 included a loss on disposal of assets of $0.5
million and a gain on one sale-leaseback transaction of $0.1
million. Other income, net for the six months ended June 30, 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, a
gain on two sale-leaseback transactions of $0.1 million, and a gain
related to an insurance recovery from property damage at one of our
restaurants of $0.1 million.
(h)
The income tax effect related to the
adjustments to Adjusted Net Income (Loss) during the periods
presented was calculated using an incremental income tax rate of
25% for the three and six months ended June 28, 2020 and June 30,
2019, respectively.
(i)
Free Cash Flow is a non-GAAP financial
measure and may not necessarily be comparable to other similarly
titled captions of other companies due to differences in methods of
calculation. Free Cash Flow is defined as cash provided by
operating activities less cash used for investing activities,
adjusted to add back cash paid for acquisitions. Management
believes that Free Cash Flow, when viewed with the Company's
results of operations in accordance with 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 GAAP, and, accordingly should not be considered as
an alternative to the Company's consolidated statement 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 June 28, 2020 and June 30, 2019 is
derived from the Company's consolidated statement of cash flows for
the respective six month periods to be presented in the Company’s
Interim Condensed Consolidated Financial Statements in its Form
10-Q for the period ended June 28, 2020 and the Company's
consolidated statement of cash flows for the previously reported
three month periods ended March 29, 2020 and March 31, 2019,
respectively, contained in the Company’s Form 10-Q for the period
ended March 29, 2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806005263/en/
Investor Relations: Raphael Gross 203-682-8253
investorrelations@carrols.com
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