Carrols Restaurant Group, Inc.
Aug 4, 2015

Carrols Restaurant Group, Inc. Reports Financial Results for the Second Quarter of 2015

Company Raises 2015 Outlook

SYRACUSE, N.Y.--(BUSINESS WIRE)-- Carrols Restaurant Group, Inc. ("Carrols" or the "Company") (Nasdaq:TAST) today announced financial results for the second quarter ended June 28, 2015. The Company also raised its 2015 outlook.

Highlights for the second quarter of 2015 versus the second quarter of 2014 include:

At the end of the second quarter (June 28, 2015) Carrols owned and operated 657 BURGER KING® restaurants.

Daniel T. Accordino, the Company's Chief Executive Officer said, "We were quite pleased with our outstanding results for the second quarter which were characterized by a robust comparable restaurant sales increase and a substantial increase in Restaurant-level EBITDA, Adjusted EBITDA and income from operations. Burger King's marketing and promotional activity was highly effective in driving sales and customer traffic during the quarter, and we were very successful in leveraging those top-line gains into higher profitability from improved restaurant-level margins. Our overall financial results also reflect the impact of improved operating performance at restaurants we've acquired over the last few years, as well as moderating commodity costs. We are excited with how the year is shaping up as our performance to date has enabled us to meaningfully raise our operating and profitability targets for the full year."

Accordino concluded, "As we move forward we remain focused on the effective execution of our strategic objectives. We have already made considerable progress integrating the restaurants acquired over the past year and will continue to direct attention to those activities. Our sales trends also reflect the impact from remodeling almost 350 restaurants over the past three years and we continue to aggressively invest in these initiatives. Lastly, after completing the recent refinancing we had more than $60 million in cash at the end of the second quarter and are well positioned for continued expansion. We are reviewing a number of opportunities and expect to opportunistically pursue additional acquisitions in the future."

Second Quarter 2015 Financial Results

Restaurant sales increased 30.0% to $219.1 million in the second quarter of 2015 compared to $168.6 million in the second quarter of 2014. The growth in restaurant sales included $38.8 million in sales from the 127 BURGER KING® restaurants acquired in 2014 and 2015, along with a comparable restaurant sales increase of 10.3%. The comparable restaurant sales increase included a 9.4% increase at legacy restaurants and an 11.5% increase at the restaurants acquired in 2012. Average check was 4.9% higher and customer traffic increased 5.4% from the prior year period.

Restaurant-Level EBITDA was $35.6 million in the second quarter of 2015, which included a $4.8 million contribution from the restaurants acquired in 2014 and 2015, compared to Restaurant-Level EBITDA of $19.7 million in the second quarter of 2014. Restaurant-Level EBITDA margin increased over 450 basis points to 16.2% of restaurant sales. These improvements primarily were due to effective leveraging of the sales increases, lower cost of sales, and improved operating performance.

General and administrative expenses were $12.9 million in the second quarter of 2015 compared to $8.6 million in the second quarter of 2014 and included a $2.3 million increase in bonus expense. As a percentage of restaurant sales, general and administrative expenses were 5.9% and increased 77 basis points from the prior year period due to higher bonus expense.

Adjusted EBITDA was $23.3 million in the second quarter of 2015 compared to $11.5 million in the second quarter of 2014, and Adjusted EBITDA margin improved 379 basis points to 10.6% of restaurant sales.

Interest expense held steady at $4.7 million in the second quarter of 2015 compared to the same period last year.

Income from operations increased to $12.4 million in the second quarter of 2015 from $1.6 million in the prior year period. Income from operations included $0.7 million of impairment and other lease charges in the second quarter of 2015. Income from operations included $0.4 million of impairment and other lease charges and $0.2 million of acquisition expenses in the prior year period.

Net loss was $5.0 million in the second quarter of 2015 and included a charge of $12.6 million for loss on extinguishment of debt related to the refinancing of the Company's debt completed in April 2015. Such charge included the tender and early call premiums related to the Company's previously outstanding debt and the write-off of unamortized deferred debt issuance costs from the previous financing in 2012. In addition, the Company has not recognized any benefit from income taxes in 2015 since it has recorded a valuation allowance against all of its net deferred income tax assets. Net loss in the second quarter of 2014 was $1.9 million which included a $1.2 million income tax benefit.

2015 Outlook

The Company provided the following updated guidance and expectations for 2015, which is a 53-week fiscal period:

Conference Call Today

Daniel T. Accordino, Chief Executive Officer, and Paul R. Flanders, Chief Financial Officer, will host a conference call to discuss second quarter of 2015 financial results today at 8:30 AM ET.

The conference call can be accessed live over the phone by dialing 888-556-4997 or for international callers by dialing 719-325-2329. 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 3839106. The replay will be available until Tuesday, August 11, 2015. 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 Restaurant Group, Inc. is the largest BURGER KING® franchisee in the United States with 657 restaurants as of June 28, 2015 and 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 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, 2015   June 29, 2014 June 28, 2015   June 29, 2014
Restaurant sales $ 219,102 $ 168,583 $ 412,272 $ 320,036
Costs and expenses:
Cost of sales 60,496 50,088 117,346 93,437
Restaurant wages and related expenses 66,707 52,804 130,019 103,741
Restaurant rent expense 14,571 11,626 28,995 23,064
Other restaurant operating expenses 33,654 27,060 66,146 53,085
Advertising expense 8,080 7,284 15,363 13,827
General and administrative expenses (b) (c) 12,903 8,625 24,499 18,892
Depreciation and amortization 9,793 9,045 19,798 17,803
Impairment and other lease charges 706 429 2,336 1,049
Other expense (income) (166 ) 25   (126 ) 25  
Total costs and expenses 206,744   166,986   404,376   324,923  
Income (loss) from operations 12,358 1,597 7,896 (4,887 )
Interest expense 4,700 4,694 9,514 9,397
Loss on extinguishment of debt 12,635     12,635    
Loss before income taxes (4,977 ) (3,097 ) (14,253 ) (14,284 )
Benefit for income taxes   (1,165 )   (4,923 )
Net loss $ (4,977 ) $ (1,932 ) $ (14,253 ) $ (9,361 )
 
Basic and diluted net loss per share $ (0.14 ) $ (0.06 ) $ (0.41 ) $ (0.35 )
Basic and diluted weighted average common shares outstanding (d) 34,899 30,767 34,891 26,959

(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, 2015 and June 29, 2014 each included thirteen and twenty-six weeks, respectively.

(b)

Acquisition and integration expenses of $49 and $152 were included in general and administrative expenses for the three months ended June 28, 2015 and June 29, 2014, respectively, and $260 and $274 for the six months ended June 28, 2015 and June 29, 2014, respectively.

(c)

General and administrative expenses include stock-based compensation expense of $363 and $291 for the three months ended June 28, 2015 and June 29, 2014, respectively, and $704 and $587 for the six months ended June 28, 2015 and June 29, 2014, respectively.

(d)

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.

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 (a) Six Months Ended (a)

 

June 28, 2015   June 29, 2014 June 28, 2015   June 29, 2014
Restaurant Sales: (a)
Legacy restaurants $ 100,519 $ 93,621 $ 188,693 $ 177,533

Restaurants acquired in 2012

79,746 74,159 152,202 141,700
Restaurants acquired in 2014 and 2015 38,837   803   71,377   803  
Total restaurant sales $ 219,102   $ 168,583   $ 412,272   $ 320,036  
Change in Comparable Restaurant Sales (b) 10.3 % (2.0 )% 9.4 % (2.2 )%
 
Average Weekly Sales per Restaurant: (c)
Legacy restaurants $ 27,616 $ 24,971 $ 25,726 $ 23,578
Restaurants acquired in 2012 24,608 21,594 23,109 20,473
Restaurants acquired in 2014 and 2015 23,648 23,487 22,056 23,487
 
Restaurant-Level EBITDA: (d)

Legacy restaurants

$ 18,112 $ 13,439 28,288 22,726
Restaurants acquired in 2012 12,646 6,249 19,411 10,123
Restaurants acquired in 2014 and 2015 4,836   33   6,704   33  
Total Restaurant-Level EBITDA $ 35,594 $ 19,721 54,403 32,882
 
Restaurant-Level EBITDA margin: (d)
Legacy restaurants 18.0 % 14.4 % 15.0 % 12.8 %
Restaurants acquired in 2012 15.9 % 8.4 % 12.8 % 7.1 %
Restaurants acquired in 2014 and 2015 12.5 % 4.1 % 9.4 % 4.1 %
All restaurants 16.2 % 11.7 % 13.2 % 10.3 %
 
Adjusted EBITDA (d) $ 23,269 $ 11,514 30,994 14,826
Adjusted EBITDA margin (d) 10.6 % 6.8 % 7.5 % 4.6 %
 
Number of Restaurants:
Restaurants at beginning of period 659 560 674 564
New restaurants 1
Acquired restaurants 4 4 4 4
Closed restaurants (5 ) (4 ) (20 ) (9 )
Sold restaurants (1 )   (1 )  
Restaurants at end of period 657   560   657   560  
    At 6/28/15   At 12/28/2014
Long-term debt (e) $ 209,249 $ 159,896
Cash 61,004 21,221

(a)

 

Restaurants acquired in 2012 represent the restaurants acquired from Burger King Corporation on May 30, 2012. Legacy restaurants refer to the Company's Burger King restaurants owned prior to 2012. Restaurants acquired in 2014 and 2015 represent the 127 restaurants acquired in six acquisitions in 2014 and 2015.

(b)

Restaurants are generally included in comparable restaurant sales after they have been open or owned for 12 months.

(c)

Average weekly restaurant sales are derived by dividing restaurant sales by the average number of restaurants operating during the period.

(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.

(e)

Long-term debt (including current portion) at June 28, 2015 included $200,000 of the Company's 8.0% Senior Secured Second Lien Notes due 2022, $1,203 of lease financing obligations and $8,046 of capital lease obligations. Long-term debt (including current portion) at December 28, 2014 included $150,000 of the Company's 11.25% Senior Secured Second Lien Notes due 2018, $1,202 of lease financing obligations and $8,694 of capital lease obligations.

Carrols Restaurant Group, Inc.

Reconciliation of Non-GAAP Measures

 
(unaudited) (unaudited)
Three Months Ended (a) Six Months Ended (a)
June 28, 2015   June 29, 2014 June 28, 2015   June 29, 2014
Reconciliation of EBITDA and Adjusted EBITDA: (a)
Net loss $ (4,977 ) $ (1,932 ) $ (14,253 ) $ (9,361 )
Benefit for income taxes (1,165 ) (4,923 )
Interest expense 4,700 4,694 9,514 9,397
Depreciation and amortization 9,793   9,045   19,798   17,803  
EBITDA 9,516 10,642 15,059 12,916
Impairment and other lease charges 706 429 2,336 1,049
Acquisition and integration costs 49 152 260 274
Stock compensation expense 363 291 704 587
Loss on extinguishment of debt 12,635     12,635    
Adjusted EBITDA $ 23,269   $ 11,514   $ 30,994   $ 14,826  
 
Reconciliation of Restaurant-Level EBITDA: (a)
Restaurant-Level EBITDA (a) $ 35,594 $ 19,721 $ 54,403 $ 32,882
Less:
General and administrative expenses 12,903 8,625 24,499 18,892
Depreciation and amortization 9,793 9,045 19,798 17,803
Impairment and other lease charges 706 429 2,336 1,049
Other expense (income) (166 ) 25   (126 ) 25  
Income (loss) from operations $ 12,358   $ 1,597   $ 7,896   $ (4,887 )

(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, stock compensation expense and loss on extinguishment of debt. 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.

 
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 income and other 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.
 
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 income (loss) and EBITDA and Adjusted EBITDA and between Restaurant-Level EBITDA and income (loss) from operations.

Carrols Restaurant Group, Inc.
Investor Relations:
800-348-1074, ext. 3333
investorrelations@carrols.com

Source: Carrols Restaurant Group, Inc.

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