Burger King Comparable Restaurant Sales
Increase 0.8%, up 720 Basis Points Compared to the Second
Quarter
Reaffirms Expectation of $40 million to $50
million Per Year in Capital Expenditures for the Next Three
Years
Announces Participation in Three Upcoming
Investor Conferences
Carrols Restaurant Group, Inc. (“Carrols” or the “Company”)
(Nasdaq: TAST) today reported financial results for the third
quarter ended September 27, 2020.
Highlights for the Third Quarter of 2020 versus the Third
Quarter of 2019
- Total restaurant sales increased 2.2% to $407.0 million
compared to $398.4 million in the prior year quarter;
- Comparable restaurant sales for the Company's Burger King®
restaurants increased 0.8%;
- Comparable restaurant sales for the Company’s Popeyes®
restaurants increased 5.5%;
- Adjusted EBITDA(1) increased to $34.1 million from $25.7
million in the prior year quarter;
- Adjusted Restaurant-Level EBITDA(1) increased to $52.8 million
from $43.0 million in the prior year quarter;
- Net income was $3.5 million, or $0.06 per diluted share,
compared to net loss of $(6.8) million, or $(0.15) per diluted
share, in the prior year quarter;
- Adjusted Net Income(1) was $5.7 million, or $0.09 per diluted
share, compared to adjusted net loss of $(3.9) million, or $(0.08)
per diluted share, in the prior year quarter; and
- The Company generated $23.3 million of Free Cash Flow(2) during
the third quarter of 2020 and $46.7 million on a year-to-date
basis.
(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 July 26, 2020 through the month ending November 1,
2020 are as follows:
Third Quarter 2020
Fiscal Month
July 2020
August 2020
September 2020
October 2020
Burger King
2.1%
1.2%
(0.8) %
(3.2) %
Popeyes
13.9 %
(4.0) %
11.2 %
1.9 %
Management Commentary
Daniel T. Accordino, Chairman and Chief Executive Officer of
Carrols, commented, “The sequential quarterly improvement in
comparable restaurant sales of 720 basis points at our Burger King
restaurants is demonstrative of Carrols’ resiliency in the face of
the unprecedented current environment. We believe our business
model is well-suited to meet the needs of customers seeking great
value and convenience and we have been able to serve them
effectively and efficiently through our drive-thru, at-the-counter
for take-out, and delivery channels. Over the past two months, we
have seen modest softening in comparable sales at our Burger King
restaurants driven primarily, we believe, by a strain on consumer
spending due to a weakening ‘Main Street’ economy. Despite this
year’s challenges, we have been extremely adept in managing food
costs, optimizing labor hours despite higher wage rates, and
controlling other restaurant-level and corporate overhead expenses.
Third quarter results reflect the strength of our positioning and
operational acuity as we once again delivered improved
restaurant-level profitability and increased Adjusted EBITDA
compared to the prior year period.”
Accordino continued, “We generated $46.7 million in Free Cash
Flow through the first three quarters of 2020 ($23.3 million in the
third quarter) and our available liquidity, including cash and
borrowing availability under our revolving credit facility, is now
approximately $205 million. Given the strength of these metrics,
our intention is to build upon what we have accomplished during the
pandemic and further drive improvement in our overall performance
for the remainder of 2020 and into 2021.”
“More importantly, looking further into the future, we are
poised to re-engage in strong but balanced organic and non-organic
growth strategies beginning later in 2021 while keeping our
leverage in check. In terms of organic growth, we are in the
process of negotiating a restructuring of our Burger King area
development agreement with our franchisor. The remodel and new
restaurant build commitments that required elevated levels of
capital spending on our part under the current agreement are
expected to be significantly reduced under the new agreement. Also,
we anticipate that we would give up our right-of-first-refusal
provision which we believe has diminished value in the current QSR
business environment. Under this new arrangement, we believe we
will have added flexibility to grow our business as we believe best
optimizes our profit growth potential while generating consistent
and enhanced free cash flow. It is important to note that while we
believe such new agreement will be entered into, it is still being
negotiated and there is no assurance that such new agreement will
be entered into on such terms or at all."
Accordino concluded, “Although we still are firming up specific
new construction and remodel plans for 2021 and beyond, we are
committed to executing on our message last quarter of spending $40
million to $50 million annually in capital expenditures over the
next three years. We expect that this spending will be sufficient
to address restaurant maintenance and upgrade needs, remodel 20 to
25 restaurants per year and develop eight to twelve new restaurants
per year, many of which will be financed using third party capital.
We have previously discussed that we will not pursue acquisitions
until our Adjusted Leverage Ratio (as defined in our senior credit
facility) drops to below four times. We currently expect that to
occur early next year. We should then be positioned to pursue
opportunistic bolt-on transactions as long as we remain below our
four times Adjusted Leverage Ratio target on a pro forma
basis.”
Third Quarter 2020 Financial Results
Total restaurant revenue increased 2.2% to $407.0 million in the
third quarter of 2020 compared to $398.4 million in the third
quarter of 2019. Comparable restaurant sales for the Company’s
Burger King restaurants increased 0.8% compared to a 4.5% increase
in the prior year quarter. Comparable restaurant sales for the
Company’s Popeyes restaurants increased 5.5% compared to a 5.8%
increase in the prior year quarter.
Adjusted Restaurant-level EBITDA(1) increased to $52.8 million
in the third quarter of 2020 from $43.0 million in the prior year
period. Adjusted Restaurant-level EBITDA margin was 13.0% of
restaurant sales and increased 230 basis points from the third
quarter of 2019, reflecting lower cost of sales, wage and related
expenses, and other restaurant operating expenses. The Company
demonstrated its ability to continue to rationalize ongoing
expenses where possible, through reduced food waste, optimized
restaurant labor, and managing other restaurant-related operating
expenses.
General and administrative expenses decreased to $20.4 million
in the third quarter of 2020 (which includes $2.0 million higher
bonus expense due to improved operational performance compared to
last year) from $21.4 million in the prior year period, which
included $2.9 million of certain expenses primarily relating to
acquisition and integration costs. The third quarter 2020 total
includes the impact of many corporate cost efficiency initiatives
such as streamlining of the Company’s regional management structure
and a re-engineering of the training process that were completed
earlier this year that should carry-over into 2021.
Adjusted EBITDA(1) increased to $34.1 million in the third
quarter of 2020 from $25.7 million in the third quarter of 2019.
Adjusted EBITDA margin was 8.4% of total restaurant sales and
increased 200 basis points from the third quarter of 2019 due to
the factors discussed above.
Income from operations increased to $10.2 million in the third
quarter of 2020 compared to a loss from operations of $(1.1)
million in the prior year quarter.
Interest expense decreased to $6.6 million in the third quarter
of 2020 from $7.6 million in the third quarter of 2019.
Net income was $3.5 million in the third quarter of 2020, or
$0.06 per diluted share, compared to net loss of $(6.8) million, or
$(0.15) per diluted share, in the prior year quarter. Net income in
the third quarter of 2020 included $2.9 million of impairment and
other lease charges. Net loss in the third quarter of 2019 included
$0.5 million of impairment charges and other lease charges.
Adjusted net income(1) was $5.7 million, or $0.09 per diluted
share, compared to adjusted net loss of $(3.9) million, or $(0.08)
per diluted share, in the prior year quarter.
Balance Sheet Update
The Company ended the third quarter of 2020 with cash and cash
equivalents of $67.8 million, and long-term debt (including current
portion) and finance lease liabilities of $495.7 million. As of the
end of the third 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.
As a reminder, the full year 2020 is a 53-week fiscal period
ending on January 3, 2021.
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 third 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
13711230. The replay will be available until Thursday, November 12,
2020. Investors and interested parties may listen to a webcast of
this conference call and review an investor presentation related to
the third quarter 2020 financial results by visiting
www.carrols.com under the tab “Investor Relations”.
Investor Conferences Participation
Carrols will be participating in three upcoming (virtual)
investor conferences.
- On November 18, 2020, the Company will host investor meetings
and participate in a fireside chat at the Stephens Annual Investor
Conference.
- On November 19, 2020, the Company will host investor meetings
at the Deutsche Bank 2020 Gaming, Lodging, Leisure &
Restaurants Conference.
- On December 10, 2020, the Company will host investor meetings
at the Truist Securities 2020 Gaming, Lodging, Leisure &
Restaurants Summit.
About the Company
Carrols is one of the largest restaurant franchisees in the
United States, and currently operates approximately 1,088
restaurants. It is the largest BURGER KING® franchisee in the
United States currently operating 1,023 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)
Nine Months Ended (a)
September 27, 2020
September 29, 2019
September 27, 2020
September 29, 2019
Revenue:
Restaurant sales
$
407,036
$
398,414
$
1,126,972
$
1,054,877
Other revenue
—
3,931
—
6,816
Total revenue
407,036
402,345
1,126,972
1,061,693
Costs and expenses:
Cost of sales
121,228
121,283
328,858
313,015
Restaurant wages and related expenses
126,040
131,070
362,503
352,402
Restaurant rent expense
30,536
29,300
88,974
77,906
Other restaurant operating expenses
60,486
62,710
172,774
164,623
Advertising expense
15,989
16,052
44,281
42,601
General and administrative expenses (b)
(c)
20,440
21,365
59,808
61,709
Depreciation and amortization
19,620
21,200
60,947
53,613
Impairment and other lease charges
1,954
500
7,776
1,777
Other expense (income), net (d)
515
(20)
(1,432)
(1,773)
Total costs and expenses
396,808
403,460
1,124,489
1,065,873
Income (loss) from operations
10,228
(1,115)
2,483
(4,180)
Interest expense
6,649
7,578
20,159
20,425
Loss on extinguishment of debt
—
—
—
7,443
Income (loss) before income taxes
3,579
(8,693)
(17,676)
(32,048)
Provision (benefit) for income taxes
48
(1,881)
(6,840)
(10,035)
Net income (loss)
$
3,531
$
(6,812)
$
(10,836)
$
(22,013)
Basic and diluted net income (loss) per
share (e)(f)
$
0.06
$
(0.15)
$
(0.21)
$
(0.54)
Basic weighted average common shares
outstanding
50,924
45,947
50,887
41,015
Diluted weighted average common shares
outstanding
60,543
45,947
50,887
41,015
(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 September 27, 2020 and September 29, 2019 each
included thirteen and thirty-nine weeks, respectively.
(b)
General and administrative expenses
include acquisition and integration costs of $2.2 million for the
three months ended September 29, 2019 and $0.4 million and $7.0
million for the nine months ended September 27, 2020 and September
29, 2019, respectively.
(c)
General and administrative expenses
include stock-based compensation expense of $1.3 million and $1.7
million for the three months ended September 27, 2020 and September
29, 2019, respectively and $3.5 million and $4.5 million for the
nine months ended September 27, 2020 and September 29, 2019,
respectively.
(d)
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 its restaurants, a loss on one
sale-leaseback transaction of $0.4 million and a loss on disposal
of assets of $0.3 million. Other income, net, for the nine months
ended September 27, 2020, included a gain of $1.7 million related
to insurance recoveries from property damage at four of its
restaurants, a net gain on eleven sale-leaseback transactions of
$0.2 million, and loss on disposal of assets of $0.5 million. Other
income, net, for the nine months ended September 29, 2019 included,
among other things, 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
Nine Months Ended
September 27, 2020
September 29, 2019
September 27, 2020
September 29, 2019
Revenue:
Burger King restaurant sales
$
385,412
$
379,212
$
1,060,698
$
1,023,715
Popeyes restaurant sales
21,624
19,202
66,274
31,162
Total restaurant sales
407,036
398,414
1,126,972
1,054,877
Other revenue
—
3,931
—
6,816
Total revenue
$
407,036
$
402,345
$
1,126,972
$
1,061,693
Change in Comparable Burger King
Restaurant Sales (a)
0.8
%
4.5
%
(3.5
)%
2.3
%
Change in Comparable Popeyes Restaurant
Sales (a)
5.5
%
10.1
%
Average Weekly Sales per Burger King
Restaurant (b)
$
29,282
$
28,761
$
26,878
$
28,003
Average Weekly Sales per Popeyes
Restaurant (b)
$
25,590
$
24,781
$
26,351
$
24,674
Adjusted Restaurant-Level EBITDA (c)
$
52,762
$
43,004
$
129,686
$
113,211
Adjusted Restaurant-Level EBITDA margin
(c)
13.0
%
10.7
%
11.5
%
10.7
%
Adjusted EBITDA (c)
$
34,097
$
25,730
$
76,085
$
63,607
Adjusted EBITDA margin (c)
8.4
%
6.4
%
6.8
%
6.0
%
Adjusted Net Income (Loss) (c)
$
5,740
$
(3,859
)
$
(4,003
)
$
(9,089
)
Adjusted Diluted Net Income (Loss) per
share (c)
$
0.09
$
(0.08
)
$
(0.08
)
$
(0.22
)
Number of Burger King restaurants:
Restaurants at beginning of period
1,027
1,023
1,036
849
New restaurants (including offsets)
—
7
6
13
Restaurants acquired
—
1
—
179
Restaurants closed (including offsets)
(4
)
(3
)
(19
)
(13
)
Restaurants at end of period
1,023
1,028
1,023
1,028
Average Number of Burger King
restaurants:
1,012.5
1,014.1
1,011.6
937.3
Number of Popeyes restaurants:
Restaurants at beginning of period
65
58
65
—
New restaurants
—
2
—
5
Restaurants acquired
—
—
—
55
Restaurants at end of period
65
60
65
60
Average Number of Popeyes restaurants:
65.0
59.6
64.5
32.4
At 9/27/2020
At 12/29/2019
Long-term debt and finance lease
liabilities (d)
$
495,748
$
471,149
Cash and cash equivalents
67,762
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 39-week period.
(b)
Average weekly sales per restaurant are
derived by dividing restaurant sales for the comparable 13-week or
39-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 September 27, 2020
included $419,688 of Term Loan B borrowings under our senior credit
facility, $75,000 of Term Loan B-1 borrowings under our senior
credit facility and $1,060 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, 2019 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
Nine Months Ended
September 27, 2020
September 29, 2019
September 27, 2020
September 29, 2019
Reconciliation of EBITDA and Adjusted
EBITDA: (a)
Net income (loss)
$
3,531
$
(6,812)
$
(10,836)
$
(22,013)
Provision (benefit) for income taxes
48
(1,881)
(6,840)
(10,035)
Interest expense
6,649
7,578
20,159
20,425
Depreciation and amortization
19,620
21,200
60,947
53,613
EBITDA
29,848
20,085
63,430
41,990
Impairment and other lease charges
1,954
500
7,776
1,777
Acquisition and integration costs (b)
18
2,754
373
7,983
Abandoned development costs (c)
189
82
1,746
193
Pre-opening costs (d)
5
478
104
1,063
Litigation costs (e)
265
144
545
416
Other expense (income), net (f)(g)
515
(20)
(1,432)
(1,773)
Stock-based compensation expense
1,303
1,707
3,543
4,515
Loss on extinguishment of debt
—
—
—
7,443
Adjusted EBITDA
$
34,097
$
25,730
$
76,085
$
63,607
Reconciliation of Adjusted
Restaurant-Level EBITDA: (a)
Income (loss) from operations
$
10,228
$
(1,115)
$
2,483
$
(4,180)
Add:
General and administrative expenses
20,440
21,365
59,808
61,709
Restaurant integration costs (b)
—
596
—
1,002
Pre-opening costs (d)
5
478
104
1,063
Depreciation and amortization
19,620
21,200
60,947
53,613
Impairment and other lease charges
1,954
500
7,776
1,777
Other expense (income), net (f)(g)
515
(20)
(1,432)
(1,773)
Adjusted Restaurant-Level
EBITDA
$
52,762
$
43,004
$
129,686
$
113,211
Reconciliation of Adjusted Net Income
(Loss): (a)
Net income (loss)
$
3,531
$
(6,812)
$
(10,836)
$
(22,013)
Add:
Impairment and other lease charges
1,954
500
7,776
1,777
Acquisition and integration costs (b)
18
2,754
373
7,983
Abandoned development costs (c)
189
82
1,746
193
Pre-opening costs (d)
5
478
104
1,063
Litigation costs (e)
265
144
545
416
Other expense (income), net (f)(g)
515
(20)
(1,432)
(1,773)
Loss on extinguishment of debt
—
—
—
7,443
Income tax effect on above adjustments
(h)
(737)
(985)
(2,279)
(4,178)
Adjusted Net Income (Loss)
$
5,740
$
(3,859)
$
(4,003)
$
(9,089)
Adjusted diluted net income (loss) per
share (i)
$
0.09
$
(0.08)
$
(0.08)
$
(0.22)
Adjusted diluted weighted average common
shares outstanding
60,543
45,947
50,887
41,015
Carrols Restaurant Group, Inc.
Reconciliation of Non-GAAP Measures (In thousands, except per
share amounts)
(unaudited)
(unaudited)
Three Months Ended
Nine Months Ended
September 27, 2020
September 29, 2019
September 27, 2020
September 29, 2019
Reconciliation of Free Cash Flow:
(j)
Net cash provided by operating activities
(k)
$
32,386
$
24,184
$
80,778
$
35,016
Net cash used for investing activities
(9,039)
(55,490)
(34,045)
(221,802)
Add: cash paid for acquisitions
—
3,565
—
131,545
Total Free Cash Flow
$
23,347
$
(27,741)
$
46,733
$
(55,241)
(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, abandoned
site development, 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, 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, abandoned development costs, pre-opening costs,
non-recurring litigation costs, loss on extinguishment of debt 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 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, which were included in general and administrative
expense. Acquisition and integration costs for the three and nine
months ended September 29, 2019 of $2.8 million and $8.0 million,
respectively, include certain legal and professional fees;
corporate payroll, and other costs related to the integration of
the Cambridge merger and one-time repair costs which are included
in Restaurant-Level EBITDA.
(c)
Abandoned development costs for the three
and nine months ended September 27, 2020 and September 29, 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
nine months ended September 27, 2020 and September 29, 2019 include
training, labor and occupancy costs incurred during the
construction of new restaurants.
(e)
Legal costs for the three and nine months
ended September 27, 2020 and September 29, 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 expense, net for the three months
ended September 27, 2020 included a net gain related to adjustments
to insurance recoveries from previous property damage at
restaurants of $0.2 million, a loss on one sale-leaseback
transaction of $0.4 million and a loss on disposal of assets of
$0.3 million. For the nine months ended September 27, 2020 other
income, net included gains related to insurance recoveries from
property damage at four of the Company's restaurants of $1.7
million, net gain on eleven sale-leaseback transactions of $0.2
million and a loss on disposal of assets of $0.5 million.
(g)
Other income, net for the nine months
ended September 29, 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 three sale-leaseback
transactions of $0.3 million, a gain related to an insurance
recovery from property damage at one of our restaurants of $0.1
million and a loss on a disposal of restaurant equipment of $0.6
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 nine months ended September 27, 2020 and
September 29, 2019, respectively.
(i)
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.
(j)
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 September 27, 2020 and September 29,
2019 is derived from the Company's consolidated statement 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 September 27, 2020 and the
Company's consolidated statement of cash flows for the previously
reported three month periods ended June 28, 2020 and June 30, 2019,
respectively, contained in the Company’s Form 10-Q for the period
ended June 28, 2020.
(k)
Working capital changes in the three and
nine months ended September 27, 2020 include $7.2 million and $14.3
million, respectively, related to deferred payments of the employer
portion of social security taxes, which will be repaid half at the
end of 2021 and the remainder at the end of 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105005187/en/
Investor Relations: Raphael Gross 203-682-8253
investorrelations@carrols.com
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