Carrols Restaurant Group, Inc. Reports Financial Results For the First Quarter 2019
Raises Guidance for Cambridge Merger
Highlights for the First Quarter of 2019 versus the First Quarter of 2018 Include:
-
Restaurant sales increased 7.1% to
$290.8 million from$271.6 million in the prior year quarter; - Comparable restaurant sales increased 2.4% compared to a 6.2% increase in the prior year quarter;
-
Adjusted EBITDA(1) was
$13.1 million compared to$18.9 million in the prior year quarter; -
Net loss was
$11.5 million , or$0.32 per diluted share, compared to net loss of$3.1 million , or$0.09 per diluted share, in the prior year quarter; and -
Adjusted net loss(1) was
$10.4 million , or$0.29 per diluted share, compared to adjusted net loss of$2.8 million , or$0.08 per diluted share, in the prior year quarter.
(1)Adjusted EBITDA, 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 from operations in the tables at the end of this release.
Accordino continued, “Despite solid top line growth, restaurant level profitability was negatively affected on a year over year basis in the first quarter by promotional activity that accelerated during the second half of last year, and by continued labor cost pressures. Although discounting was much higher relative to the first quarter of 2018, these elevated levels began to taper off mid-way through the first quarter this year resulting in a modestly lower impact sequentially from the fourth quarter of 2018. We expect the impact from this discounting to subside as we move further into the year.”
Accordino concluded, “We are excited to have completed our
transformational merger with Cambridge and to welcome
First Quarter 2019 Financial Results
Restaurant sales increased 7.1% to
Restaurant-level EBITDA(1) was
General and administrative expenses were
Adjusted EBITDA(1) was
Loss from operations was
Interest expense held at
The net loss was
Adjusted net loss(1) in the first quarter of 2019 was
The Company adopted ASC 842, Leases, effective as of the
beginning of fiscal 2019, primarily resulting in changes to how leases
are presented on the Company’s balance sheet. As a result, the Company
has recorded right-of-use assets and lease liabilities representing the
Company’s obligation to make payments in exchange for that right of use
on its consolidated balance sheet. Following the adoption of ASC 842,
total leased assets totaled approximately
Updated Full Year 2019 Outlook
-
For the trailing twelve months, Cambridge’s financial results,
adjusted for the pro forma effect of acquisitions completed by
Cambridge during the preceding year, are estimated to include
restaurant sales of approximately
$300 million and Restaurant-level EBITDA of approximately$40 million . Adjusted EBITDA, including anticipated synergies after the integration of Cambridge’s corporate functions expected to be completed by the end of 2019, is estimated to be$25 million to $30 million ; -
Excluding Cambridge, total restaurant sales are expected to be
$1.25 billion to $1.28 billion including comparable restaurant sales growth of 2.0% to 3.5%. With Cambridge included for approximately eight months in 2019, total restaurant sales are expected to be$1.45 billion to $1.48 billion ; Carrols expects recent increases in beef and pork prices brought about by the breakout of hog fever inChina , among other things, to continue for the foreseeable future. This has caused the Company to revise its expected increase in commodity costs to 2% to 3% (from 1% to 2% previously) with beef costs increasing 5% to 6% (from 2% to 3% previously);-
General and administrative expenses, excluding Cambridge, are still
expected to be
$62 million to $64 million , excluding stock compensation expense and acquisition or integration costs.Carrols expects that for the eight months that Cambridge will be included in its 2019 results that achieved synergies will be minimal and estimates incremental general and administrative expense attributable to Cambridge to be$11 million to $12 million in 2019. The Company expects to fully integrate the Cambridge corporate functions by the end of the year; -
Adjusted EBITDA, including Cambridge results for approximately eight
months, is expected to be
$114 million to $121 million including$14 million to $16 million for Cambridge; -
Capital expenditures are expected to be
$120 million to $130 million , including$50 million to $60 million for construction of 20 to 25 new Burger King® and 8 to 10 new Popeyes® restaurants, and$35 million to$40 million for remodels and upgrades; -
Proceeds from sale/leasebacks are expected to be approximately
$15 million to $25 million (previously$10 million to $15 million ); -
As previously disclosed,
Carrols completed a refinancing of both its existing debt and Cambridge’s debt in conjunction with the merger. This financing has lowered the Company’s effective cost of funds from 8% to under 6% and expanded its capital available to fund its expansion strategy moving forward; and lastly - The Company expects to close 10 to 15 Burger King® restaurants, of which six have already closed during the first quarter of 2019. Restaurant closings related to the Cambridge business are not contemplated at this time.
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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
Carrols Restaurant Group, Inc. Consolidated Statements of Operations (in thousands, except per share amounts) |
|||||||
(unaudited) | |||||||
Three Months Ended (a) | |||||||
March 31, 2019 | April 1, 2018 | ||||||
Restaurant sales | $ | 290,789 | $ | 271,586 | |||
Costs and expenses: | |||||||
Cost of sales | 82,575 | 73,005 | |||||
Restaurant wages and related expenses | 100,192 | 91,144 | |||||
Restaurant rent expense | 21,916 | 19,974 | |||||
Other restaurant operating expenses | 45,605 | 42,839 | |||||
Advertising expense | 11,872 | 11,265 | |||||
General and administrative expenses (b) (c) | 19,724 | 16,136 | |||||
Depreciation and amortization | 15,292 | 14,250 | |||||
Impairment and other lease charges | 910 | 309 | |||||
Other income, net (d) | (2,129 | ) | — | ||||
Total costs and expenses |
295,957 | 268,922 | |||||
Income (loss) from operations | (5,168 | ) | 2,664 | ||||
Interest expense | 5,947 | 5,926 | |||||
Gain on bargain purchase | — | (22 | ) | ||||
Loss before income taxes | (11,115 | ) | (3,240 | ) | |||
Provision (benefit) for income taxes | 354 | (138 | ) | ||||
Net loss | $ | (11,469 | ) | $ | (3,102 | ) | |
Basic and diluted net loss per share (e)(f) | $ | (0.32 | ) | $ | (0.09 | ) | |
Basic and diluted weighted average common shares outstanding | 36,045 | 35,666 |
(a) The Company uses a 52 or 53 week fiscal year that ends on the Sunday
closest to
(b) General and administrative expenses include acquisition costs of
(c) General and administrative expenses include stock-based compensation
expense of
(d) Other income, net, for the three months ended
(e) Basic net loss per share was computed excluding loss attributable to preferred stock and non-vested restricted shares unless the effect would have been anti-dilutive for the periods presented.
(f) Diluted net loss per share was computed including shares issuable for convertible preferred stock and non-vested restricted shares unless their effect would have been anti-dilutive for the periods presented.
Carrols Restaurant Group, Inc. Supplemental Information |
||||||
The following table sets forth certain unaudited supplemental
financial and other data for the periods indicated |
||||||
(unaudited) | ||||||
Three Months Ended | ||||||
March 31, 2019 | April 1, 2018 | |||||
Total Restaurant Sales | $ | 290,789 | $ | 271,586 | ||
Change in Comparable Restaurant Sales (a) | 2.4% | 6.2% | ||||
Average Weekly Sales per Restaurant (b) | 26,529 | 25,983 | ||||
Restaurant-Level EBITDA (c) | $ | 28,629 | $ | 33,359 | ||
Restaurant-Level EBITDA margin (c) | 9.8% | 12.3% | ||||
Adjusted EBITDA (c) | $ | 13,087 | $ | 18,913 | ||
Adjusted EBITDA margin (c) | 4.5% | 7.0% | ||||
Adjusted net loss (c) | $ | (10,391) | $ | (2,792) | ||
Adjusted diluted net loss per share (c) | $ | (0.29) | $ | (0.08) | ||
Number of Restaurants: | ||||||
Restaurants at beginning of period | 849 | 807 | ||||
New restaurants | 2 | 2 | ||||
Restaurants acquired | — | 1 | ||||
Restaurants closed | (6) | (3) | ||||
Restaurants at end of period | 845 | 807 | ||||
Average Number of Restaurants: | 843.2 | 804.2 |
At 3/31/19 | At 12/30/2018 | |||||
Long-term debt and finance lease liabilities (d) | $ | 285,915 | $ | 280,144 | ||
Cash and cash equivalents | 1,668 | 4,014 |
(a) Restaurants are generally included in comparable restaurant sales after they have been operated by us for 12 months. The calculation of changes in comparable restaurant sales is based on the comparable 13-week period.
(b) Average weekly sales per restaurant are derived by dividing restaurant sales for the comparable 13-week period by the average number of restaurants operating during such period.
(c) EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Restaurant-Level EBITDA, Restaurant-Level EBITDA margin and Adjusted net loss are non-GAAP financial measures and may not necessarily be comparable to other similarly titled captions of other companies due to differences in methods of calculation. Refer to the Company's reconciliation of net loss to EBITDA, Adjusted EBITDA and Adjusted net loss, and to the Company's reconciliation of loss from operations to Restaurant-Level EBITDA for further detail. Both Adjusted EBITDA margin and Restaurant-Level EBITDA margin are calculated as a percentage of restaurant sales. Adjusted diluted net loss per share is calculated based on Adjusted net loss and reflects the dilutive impact of shares, where applicable, based on Adjusted net loss.
(d) Long-term debt and finance lease liabilities (including current
portion and excluding deferred financing costs) at
Carrols Restaurant Group, Inc. Reconciliation of Non-GAAP Measures (In thousands, except per share amounts) |
|||||||||||
(unaudited) | |||||||||||
Three Months Ended | |||||||||||
March 31, 2019 | April 1, 2018 | ||||||||||
Reconciliation of EBITDA and Adjusted EBITDA: (a) | |||||||||||
Net loss | $ | (11,469 | ) | $ | (3,102 | ) | |||||
Provision (benefit) for income taxes | 354 | (138 | ) | ||||||||
Interest expense | 5,947 | 5,926 | |||||||||
Depreciation and amortization | 15,292 | 14,250 | |||||||||
EBITDA | 10,124 | 16,936 | |||||||||
Impairment and other lease charges | 910 | 309 | |||||||||
Acquisition costs (b) | 2,656 | 105 | |||||||||
Other income, net (c) | (2,129 | ) | — | ||||||||
Gain on bargain purchase | — | (22 | ) | ||||||||
Stock-based compensation expense | 1,526 | 1,585 | |||||||||
Adjusted EBITDA | $ | 13,087 | $ | 18,913 | |||||||
Reconciliation of Restaurant-Level EBITDA: (a) | |||||||||||
Income (loss) from operations | $ | (5,168 | ) | $ | 2,664 | ||||||
Add: | |||||||||||
General and administrative expenses | 19,724 | 16,136 | |||||||||
Depreciation and amortization | 15,292 | 14,250 | |||||||||
Impairment and other lease charges | 910 | 309 | |||||||||
Other income, net (c) | (2,129 | ) | — | ||||||||
Restaurant-Level EBITDA | $ | 28,629 | $ | 33,359 | |||||||
Reconciliation of Adjusted net loss: (a) | |||||||||||
Net loss | $ | (11,469 | ) | $ | (3,102 | ) | |||||
Add: | |||||||||||
Impairment and other lease charges | 910 | 309 | |||||||||
Acquisition costs (b) | 2,656 | 105 | |||||||||
Other income, net (c) | (2,129 | ) | — | ||||||||
Gain on bargain purchase | — | (22 | ) | ||||||||
Income tax effect on above adjustments (d) | (359 | ) | (82 | ) | |||||||
Adjusted net loss | $ | (10,391 | ) | $ | (2,792 | ) | |||||
Adjusted diluted net loss per share | $ | (0.29 | ) | $ | (0.08 | ) |
(a) Within our press release, we make reference to EBITDA, Adjusted EBITDA, Restaurant-Level EBITDA and Adjusted net loss which are non-GAAP financial measures. EBITDA represents net loss before income taxes, interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted to exclude impairment and other lease charges, acquisition costs, stock-based compensation expense, and other non-recurring income or expense. Restaurant-Level EBITDA represents loss from operations as adjusted to exclude general and administrative expenses, depreciation and amortization, impairment and other lease charges and other non-recurring income or expense. Adjusted net loss represents net loss as adjusted to exclude impairment and other lease charges, acquisition costs, gain on bargain purchase, and other non-recurring income or expense.
We are presenting Adjusted EBITDA, Restaurant-Level EBITDA and Adjusted net loss because we believe that they provide a more meaningful comparison than EBITDA and net loss of the Company's core business operating results, as well as with those of other similar companies. Additionally, we present Restaurant-Level EBITDA because it excludes the impact of general and administrative expenses and other expense, all of which are non-recurring at the restaurant level. Management believes that Adjusted EBITDA, Restaurant-Level EBITDA and Adjusted net loss, when viewed with the Company's results of operations in accordance with GAAP and the accompanying reconciliations in the table above, provide useful information about operating performance and period-over-period growth, and provide additional information that is useful for evaluating the operating performance of the Company's core business without regard to potential distortions. Additionally, management believes that Adjusted EBITDA and 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, Restaurant-Level EBITDA and Adjusted net loss are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net 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, Adjusted EBITDA and Adjusted net loss and between loss from operations and Restaurant-Level EBITDA.
(b) Acquisition costs for the three months ended
(c) Other income, net for the three months ended March 31, 2019 include
a
(d) The income tax effect related to the adjustments for impairment and
other lease charges, gain on bargain purchase, acquisition costs, and
other non-recurring income during the periods presented was calculated
using an effective income tax rate of 25% for the three months ended
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Source:
Carrols Restaurant Group, Inc.
Investor Relations:
800-348-1074,
ext. 3333
investorrelations@carrols.com