Carrols Restaurant Group, Inc. Reports Financial Results for the Third Quarter of 2014; Completes Acquisition of 64 Burger King® Restaurants
The Company also announced that on
Highlights for the third quarter of 2014 versus the third quarter of 2013 include:
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Restaurant sales increased 6.8% to
$179.8 million , including$7.8 million in sales from 29 BURGER KING® restaurants that were acquired in 2014 through the end of the third quarter, from$168.3 million in the prior year period; - Comparable restaurant sales increased 3.3% compared to a 0.4% increase in the prior year period;
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Net loss was reduced to
$1.7 million , or$0.05 per diluted share, compared to a net loss of$2.8 million , or$0.12 per diluted share, in the prior year period; -
The net loss included acquisition and integration costs in the third
quarter of 2014 as well as impairment and other lease charges in both
years. Such charges totaled
$1.2 million ($0.02 per diluted share after tax) in the third quarter of 2014 and$1.1 million ($0.03 per diluted share after tax) in the prior year period; -
Restaurant-Level EBITDA (a non-GAAP financial measure) increased
$1.9 million to$20.5 million from$18.6 million in the prior year period and Restaurant-Level EBITDA margin increased 34 basis points to 11.4%; and -
Adjusted EBITDA (a non-GAAP financial measure) increased
$1.0 million to$11.1 million from$10.1 million in the prior year period. (Please refer to the reconciliation of Adjusted EBITDA to net loss and Restaurant-Level EBITDA to income (loss) from operations in the tables at the end of this release).
As of
Accordino continued, "We have aggressively expanded our ownership of
BURGER KING® restaurants over the past few months. Inclusive of our 64
restaurant acquisition completed yesterday, we have acquired a total of
123 restaurants since the end of
Third Quarter 2014 Financial Results
Restaurant sales increased 6.8% to
Restaurant-Level EBITDA increased 10.2%, or
General and administrative expenses were
Adjusted EBITDA increased 9.9%, or
Interest expense was flat at
The net loss in the third quarter of 2014 was
Acquisition Summary
To date in 2014, the Company has acquired 123 BURGER KING® restaurants as summarized below:
-
On
April 30, 2014 ,Carrols purchased four restaurants inFort Wayne, IN ; -
On
June 30, 2014 ,Carrols purchased four restaurants in thePittsburgh, PA market; -
On
July 22, 2014 ,Carrols purchased 21 restaurants in or aroundRochester, NY and the Southern Tier region of Western New York State; -
On
October 8, 2014 ,Carrols purchased 30 restaurants inEastern North Carolina ; and -
On
November 4, 2014 ,Carrols purchased 64 restaurants located primarily in theNashville, TN ,Springfield, IL ,Terre Haute, IN andEvansville, IN markets.
As of
2014 Guidance
The Company has updated its 2014 guidance as follows:
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Total restaurant sales of
$690 million to$700 million (compared to$665 million to$675 million previously estimated); - Comparable restaurant sales increase of 0% to 1% (compared to -1% to 0% previously estimated);
- A commodity cost increase of approximately 5% which has risen primarily because of persistently high beef costs (compared to 3% to 4% previously estimated);
-
General and administrative expenses of approximately
$37 million to$39 million (unchanged and excluding stock compensation costs); -
Adjusted EBITDA of
$36 million to$38 million (compared to$36 million to$40 million previously estimated); - An effective income tax benefit of 36% to 38% excluding non-recurring 2013 WOTC adjustments recorded in the third quarter of 2014 and any WOTC for 2014 (compared to 33% to 35% previously estimated);
-
Capital expenditures, excluding acquisitions, of approximately
$55 million to$58 million (compared to$51 million to$54 million previously estimated) including$38 million to$40 million for remodeling a total of 100 to 110 restaurants and$4 million for costs to scrape and rebuild three restaurants; -
Cash expenditures totaling approximately
$50.9 million (excluding inventory) for the purchase of 123 BURGER KING® restaurants which includes approximately$14.6 million for the purchase of real estate; -
Sale/leasebacks of real estate are expected to generate approximately
$16 million to$18 million of gross proceeds (including a number of fee properties purchased as part of the Company's 2014 acquisitions); and - 12 restaurant closings in 2014 (excluding relocations) with an additional 6 to 8 restaurants scheduled to close at the beginning of 2015 (compared to 15 to 20 closings previously estimated).
Accordino concluded, "We expect overall sales trends for 2014 to be better than our previous estimates. Our updated guidance also reflects the additional restaurants that we've acquired this year along with the impact of persistently higher beef costs and increased promotional activity in the fourth quarter. We also continue to move forward with our aggressive remodeling program, and expect to complete 100 to 110 remodels in 2014. We anticipate that approximately 300 to 310 of our restaurants will have been updated to Burger King Corporation's 20/20 restaurant image by year-end."
Conference Call Today
The conference call can be accessed live over the phone by dialing
888-401-4669 or for international callers by dialing 719-457-2661. A
replay will be available one hour after the call and can be accessed by
dialing 888-203-1112 or for international callers by dialing
719-457-0820; the passcode is 1875322. The replay will be available
until
About the Company
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
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Consolidated Statements of Operations |
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(in thousands except per share amounts) |
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(unaudited) | (unaudited) | |||||||||||||||
Three Months Ended (a) | Nine Months Ended (a) | |||||||||||||||
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Restaurant sales | $ | 179,822 | $ | 168,312 | $ | 499,858 | $ | 497,969 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales | 55,169 | 51,125 | 148,606 | 152,626 | ||||||||||||
Restaurant wages and related expenses | 56,023 | 52,395 | 159,764 | 156,727 | ||||||||||||
Restaurant rent expense | 12,205 | 11,779 | 35,269 | 35,357 | ||||||||||||
Other restaurant operating expenses | 29,179 | 26,973 | 82,264 | 80,756 | ||||||||||||
Advertising expense | 6,794 | 7,476 | 20,621 | 22,496 | ||||||||||||
General and administrative expenses (b) | 10,031 | 8,740 | 28,923 | 27,342 | ||||||||||||
Depreciation and amortization | 9,318 | 8,536 | 27,121 | 24,990 | ||||||||||||
Impairment and other lease charges | 773 | 1,079 | 1,822 | 3,907 | ||||||||||||
Other income | — | — | 25 | (185 | ) | |||||||||||
Total costs and expenses | 179,492 | 168,103 | 504,415 | 504,016 | ||||||||||||
Income (loss) from operations | 330 | 209 | (4,557 | ) | (6,047 | ) | ||||||||||
Interest expense | 4,683 | 4,708 | 14,080 | 14,130 | ||||||||||||
Loss before income taxes | (4,353 | ) | (4,499 | ) | (18,637 | ) | (20,177 | ) | ||||||||
Benefit for income taxes | (2,632 | ) | (1,737 | ) | (7,555 | ) | (8,720 | ) | ||||||||
Net loss | $ | (1,721 | ) | $ | (2,762 | ) | $ | (11,082 | ) | $ | (11,457 | ) | ||||
Basic and diluted net loss per share | $ | (0.05 | ) | $ | (0.12 | ) | $ | (0.37 | ) | $ | (0.50 | ) | ||||
Basic and diluted weighted average common shares outstanding (c) | 34,797 | 23,021 | 29,572 | 22,930 |
(a) |
The Company uses a 52 or 53 week fiscal year that ends on the
Sunday closest to |
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(b) |
General and administrative expenses include stock-based
compensation expense of |
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(c) |
Shares issuable for convertible preferred stock and non-vested restricted stock were not included in the computation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented. |
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 (a) | Nine Months Ended (a) | ||||||||||||||||||
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Restaurant Sales: (a) | |||||||||||||||||||
Legacy restaurants | $ | 96,861 | $ | 94,307 | $ | 274,394 | $ | 275,383 | |||||||||||
Restaurants acquired in 2012 | 75,180 | 74,005 | 216,880 | 222,586 | |||||||||||||||
Restaurants acquired in 2014 | 7,781 | — | 8,584 | — | |||||||||||||||
Total restaurant sales | $ | 179,822 | $ | 168,312 | $ | 499,858 | $ | 497,969 | |||||||||||
Change in Comparable Restaurant Sales (b) | 3.3 | % | 0.4 | % | (0.4 | )% | 0.7 | % | |||||||||||
Average Weekly Sales per Restaurant: (c) | |||||||||||||||||||
Legacy restaurants | 25,799 | 25,069 | 24,317 | 24,222 | |||||||||||||||
Restaurants acquired in 2012 | 22,039 | 21,008 | 20,989 | 20,901 | |||||||||||||||
Restaurants acquired in 2014 | 26,695 | — | 26,502 | — | |||||||||||||||
Restaurant-Level EBITDA: (d) | |||||||||||||||||||
Legacy restaurants | 13,630 | 14,295 | 36,356 | 38,692 | |||||||||||||||
Restaurants acquired in 2012 | 6,014 | 4,269 | 16,136 | 11,315 | |||||||||||||||
Restaurants acquired in 2014 | 808 | — | 842 | — | |||||||||||||||
Total restaurant-Level EBITDA | 20,452 | 18,564 | 53,334 | 50,007 | |||||||||||||||
Restaurant-Level EBITDA margin: (d) | |||||||||||||||||||
Legacy restaurants | 14.1 | % | 15.2 | % | 13.2 | % | 14.1 | % | |||||||||||
Restaurants acquired in 2012 | 8.0 | % | 5.8 | % | 7.4 | % | 5.1 | % | |||||||||||
Restaurants acquired in 2014 | 10.4 | % | 9.8 | % | |||||||||||||||
Restaurant-Level EBITDA Margin | 11.4 | % | 11.0 | % | 10.7 | % | 10.0 | % | |||||||||||
Adjusted EBITDA (d) | 11,129 | 10,126 | 25,955 | 23,834 | |||||||||||||||
Adjusted EBITDA margin (d) | 6.2 | % | 6.0 | % | 5.2 | % | 4.8 | % | |||||||||||
Number of |
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Restaurants at beginning of period | 560 | 566 | 564 | 572 | |||||||||||||||
New restaurants | — | — | 1 | — | |||||||||||||||
Acquired restaurants | 25 | — | 29 | — | |||||||||||||||
Closed restaurants | (4 |
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(2 |
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(13 |
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(8 |
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Restaurants at end of period | 581 | 564 | 581 | 564 |
At |
At |
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Long-term debt (e) | $ | 158,730 | $ | 160,536 | ||||||||||||||||||||||||||||||||||
Cash (including |
63,309 | 28,302 |
(a) |
Restaurants acquired in 2012 represent the restaurants acquired
from Burger King Corporation on |
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(b) |
Restaurants are generally included in comparable restaurant sales after they have been open or owned by the Company for 12 months. |
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(c) |
Average weekly restaurant sales are derived by dividing restaurant sales by the average number of restaurants operating during the period. |
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(d) |
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Restaurant-Level EBITDA, and Restaurant-Level EBITDA margin 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 EBITDA and Adjusted EBITDA to net loss and to the Company's reconciliation of Restaurant-Level EBITDA to income (loss) from operations for further detail. Both Adjusted EBITDA margin and Restaurant-Level EBITDA margin are calculated as a percentage of restaurant sales for the respective group of restaurants. |
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(e) |
Long-term debt (including current portion) at |
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Reconciliation of Non-GAAP Measures |
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(unaudited) | (unaudited) | ||||||||||||||
Three Months Ended (a) | Nine Months Ended (a) | ||||||||||||||
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Reconciliation of EBITDA and Adjusted EBITDA: (a) | |||||||||||||||
Net loss | $ | (1,721 | ) | $ | (2,762 | ) | $ | (11,082 | ) | $ | (11,457 | ) | |||
Benefit for income taxes | (2,632 | ) | (1,737 | ) | (7,555 | ) | (8,720 | ) | |||||||
Interest expense | 4,683 | 4,708 | 14,080 | 14,130 | |||||||||||
Depreciation and amortization | 9,318 | 8,536 | 27,121 | 24,990 | |||||||||||
EBITDA | 9,648 | 8,745 | 22,564 | 18,943 | |||||||||||
Impairment and other lease charges | 773 | 1,079 | 1,822 | 3,907 | |||||||||||
Acquisition and integration costs | 412 | — | 686 | — | |||||||||||
EEOC litigation and settlement costs | — | — | — | 85 | |||||||||||
Stock compensation expense | 296 | 302 | 883 | 899 | |||||||||||
Adjusted EBITDA | $ | 11,129 | $ | 10,126 | $ | 25,955 | $ | 23,834 | |||||||
Reconciliation of Restaurant-Level EBITDA: (a) | |||||||||||||||
Restaurant-Level EBITDA (a) | $ | 20,452 | $ | 18,564 | $ | 53,334 | $ | 50,007 | |||||||
Less: | |||||||||||||||
General and administrative expenses | 10,031 | 8,740 | 28,923 | 27,342 | |||||||||||
Depreciation and amortization | 9,318 | 8,536 | 27,121 | 24,990 | |||||||||||
Impairment and other lease charges | 773 | 1,079 | 1,822 | 3,907 | |||||||||||
Other expense (income) | — | — | 25 | (185 | ) | ||||||||||
Income (loss) from operations | $ | 330 | $ | 209 | $ | (4,557 | ) | $ | (6,047 | ) |
(a) |
Within our press release, we make reference to EBITDA, Adjusted EBITDA and Restaurant-Level EBITDA which are non-GAAP financial measures. EBITDA represents net income (loss) from operations, before benefit for 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, EEOC litigation and settlement costs and stock compensation expense. Restaurant-Level EBITDA represents income (loss) from operations before general and administrative expenses, depreciation and amortization, impairment and other lease charges, and other income and expense. |
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We are presenting Adjusted EBITDA and Restaurant-Level EBITDA because we believe that they provide a more meaningful comparison than EBITDA of the Company's core business operating results, as well as with those of other similar companies. Additionally, we present Restaurant-Level EBITDA because it excludes the impact of general and administrative expenses and other income and expense which are not directly related to restaurant operations. Management believes that Adjusted EBITDA and Restaurant-Level EBITDA, 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 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. |
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However, EBITDA, Adjusted EBITDA and Restaurant-Level EBITDA are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net loss, 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 loss and EBITDA and Adjusted EBITDA and between Restaurant-Level EBITDA and income (loss) from operations. |
Investor Relations:
800-348-1074, ext. 3333
investorrelations@carrols.com
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