Carrols Restaurant Group, Inc. Reports Financial Results for the Fourth Quarter and Full Year 2016
Provides Outlook for Full Year 2017
Company to Present at the
Highlights for the 13-week fourth quarter of 2016 versus the 14-week fourth quarter of 2015 include:
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Restaurant sales increased 5.1% to
$240.8 million from$229.1 million in the fourth quarter of 2015, including$66.5 million in sales from the 234 BURGER KING® restaurants acquired from 2014 to 2016(1). One additional operating week in 2015 contributed approximately$16.0 million to restaurant sales in the prior year period. On a comparable 13 week basis, total restaurant sales increased 13.0%; - Comparable restaurant sales (on a comparable 13-week basis) increased 3.2% compared to a 5.1% increase in the prior year period;
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Adjusted EBITDA(2) was
$20.4 million compared to$23.7 million in the prior year period. The Company estimates that the additional operating week in 2015 contributed approximately$4.0 million to Adjusted EBITDA; -
Net income was
$29.5 million , or$0.65 per diluted share, compared to net income of$7.0 million , or$0.16 per diluted share, in the prior year period. The significant increase in net income largely reflected a$30.4 million reversal of the valuation allowance previously established against net deferred income tax assets; -
Adjusted net income(2) was
$2.0 million , or$0.04 per diluted share, compared to adjusted net income of$6.5 million , or$0.14 per diluted share, in the prior year period which included the additional operating week ($2.5 million , or$0.06 per diluted share, after taxes).
Highlights for the 52-week full year 2016 versus the 53-week full year 2015 include:
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Restaurant sales increased 9.8% to
$943.6 million from$859.0 million , including$243.1 million in sales from BURGER KING® restaurants acquired from 2014 to 2016(1). The additional operating week in 2015 contributed approximately$16.0 million in restaurant sales; - Comparable restaurant sales increased 2.3% (on a comparable 52-week basis) compared to a 7.4% increase in the prior year;
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Adjusted EBITDA(2) increased 16.6% to
$89.5 million from$76.7 million in the prior year period. The Company estimates that the additional operating week in 2015 contributed approximately$4.0 million to Adjusted EBITDA; -
Net income was
$45.5 million , or$1.01 per diluted share, compared to net income of$4,000 , or$0.00 per diluted share, in the prior year period. Net income in 2016 included a$30.4 million benefit from the reversal of the valuation allowance previously established against net deferred income tax assets, and net income in 2015 included a charge of$12.6 million related to the refinancing of the Company's debt; -
Adjusted net income(2) was
$17.9 million , or$0.40 per diluted share, compared to adjusted net income of$13.4 million , or$0.30 per diluted share, in the prior year period which included the additional operating week ($2.5 million , or$0.06 per diluted share, after taxes).
(1) |
"Acquired restaurants" refer to those restaurants acquired from 2014 through 2016. "Legacy restaurants" include all of the Company's other restaurants including restaurants acquired before 2014. |
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(2) |
Adjusted EBITDA, Restaurant-level EBITDA and Adjusted net income are non-GAAP financial measures. Refer to the definitions and reconciliation of these measures to net income or to income from operations in the tables at the end of this release. |
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At the end of the fourth quarter of 2016,
Accordino continued, "We posted a solid 3.2% comparable restaurant sales increase for the fourth quarter on top of the prior year period increase of 5.1%. Burger King's promotional strategy continued to effectively focus on products that appeal to premium and value-driven customers while driving increases in both customer traffic and average check. Adjusted EBITDA margin, however, decreased in the fourth quarter largely due to the deleveraging of certain fixed costs due to one less operating week compared to the fourth quarter of 2015, along with the impact of ongoing labor cost pressures and higher advertising expense."
Accordino concluded, "2016 marked another productive year as we
continued to expand our footprint through accretive acquisitions and
enhanced the quality of our asset base by continuing to execute our
multi-year remodeling program. In 2016, we acquired 56 BURGER KING®
restaurants and announced a 43-unit acquisition in December which we
recently completed on
Fourth Quarter 2016 Financial Results
Restaurant sales increased 5.1% to
The comparable restaurant sales increase included a 3.1% increase at legacy restaurants and a 3.9% increase at comparable acquired restaurants (primarily the 2014 acquisitions). Average check increased 3.0% while customer traffic increased 0.2% from the prior year period.
Restaurant-Level EBITDA was
General and administrative expenses were
Adjusted EBITDA was
Income from operations was
Interest expense increased slightly to
Net income was
Adjusted net income was
Excluding the
Full Year 2017 Outlook
The Company is providing the following guidance for 2017. In addition,
while the Company may acquire additional BURGER KING® restaurants in
2017, this guidance does not include any impact from such potential
transactions other than the recently completed acquisition of 43
restaurants in the
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Total restaurant sales of
$1.02 billion to$1.07 billion , including a comparable restaurant sales increase of 2% to 4%; - Commodity cost increase of 0% to 2% including a modest decrease in beef costs;
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General and administrative expenses (excluding stock compensation and
potential acquisition costs) of
$54 million to$56 million ; -
Adjusted EBITDA of
$90 million to$100 million ; -
Capital expenditures of approximately
$55 million to$75 million which includes remodeling a total of 20 to 25 restaurants, the rebuilding of 5 to 7 restaurants and the construction of 7 to 15 new restaurants (including 2 to 3 relocations of existing restaurants). Capital expenditures also include$10 million to$12 million for non-recurring investments in new kitchen production and product holding systems, new training systems and certain POS system upgrades; - The opening of 7 to 15 new restaurants (including 2 relocations) and the closing of 20 to 25 existing restaurants; and
- An effective income tax rate of 20% to 25%.
The Company has not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because it does not provide guidance for net income or for the various reconciling items. The Company is unable to provide guidance for these reconciling items since certain items that impact net income are outside of the Company's control or cannot be reasonably predicted.
Conference Call Today
The conference call can be accessed live over the phone by dialing
888-337-8169 or for international callers by dialing 719-457-2702. 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
1-719-457-0820; the passcode is 8328119. The replay will be available
until
Investor Conference Participation
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
Consolidated Statements of Operations (in thousands except per share amounts) |
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(unaudited) | (unaudited) | |||||||||||||||||||
Three Months Ended (a) | Twelve Months Ended (a) | |||||||||||||||||||
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Restaurant sales | $ | 240,826 | $ | 229,056 | $ | 943,583 | $ | 859,004 | ||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of sales | 65,131 | 62,300 | 250,112 | 240,322 | ||||||||||||||||
Restaurant wages and related expenses | 76,460 | 70,815 | 297,766 | 267,950 | ||||||||||||||||
Restaurant rent expense | 16,737 | 14,995 | 64,814 | 58,096 | ||||||||||||||||
Other restaurant operating expenses | 38,335 | 35,467 | 148,946 | 135,874 | ||||||||||||||||
Advertising expense | 10,544 | 8,691 | 41,299 | 32,242 | ||||||||||||||||
General and administrative expenses (b) (c) | 14,395 | 14,252 | 54,956 | 50,515 | ||||||||||||||||
Depreciation and amortization | 12,682 | 10,629 | 47,295 | 39,845 | ||||||||||||||||
Impairment and other lease charges | 1,162 | 346 | 2,355 | 3,078 | ||||||||||||||||
Other expense (income) | (697 | ) | — | 338 | (126 | ) | ||||||||||||||
Total costs and expenses | 234,749 | 217,495 | 907,881 | 827,796 | ||||||||||||||||
Income from operations | 6,077 | 11,561 | 35,702 | 31,208 | ||||||||||||||||
Interest expense | 4,700 | 4,543 | 18,315 | 18,569 | ||||||||||||||||
Loss on extinguishment of debt | — | — | — | 12,635 | ||||||||||||||||
Income before income taxes | 1,377 | 7,018 | 17,387 | 4 | ||||||||||||||||
Benefit for income taxes | (28,085 | ) | — | (28,085 | ) | — | ||||||||||||||
Net income | $ | 29,462 | $ | 7,018 | $ | 45,472 | $ | 4 | ||||||||||||
Basic and diluted net income per share (d) (e): | $ | 0.65 | $ | 0.16 | $ | 1.01 | $ | — | ||||||||||||
Basic weighted average common shares outstanding | 35,257 | 35,038 | 35,178 | 34,959 | ||||||||||||||||
Diluted weighted average common shares outstanding | 44,850 | 44,698 | 44,851 | 44,623 | ||||||||||||||||
(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 acquisition costs of
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(c) |
General and administrative expenses include stock-based compensation
expense of |
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(d) | Basic net income per share was computed excluding income attributable to preferred stock and non-vested restricted shares. | |
(e) | Diluted net income 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. | |
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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) | Twelve Months Ended (a) | |||||||||||||||||||
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Restaurant Sales: (a) | ||||||||||||||||||||
Legacy restaurants | $ | 174,349 | $ | 182,316 | $ | 700,532 | $ | 701,454 | ||||||||||||
Acquired restaurants | 66,477 | 46,740 | 243,051 | 157,550 | ||||||||||||||||
Total Restaurant Sales | $ | 240,826 | 229,056 | 943,583 | $ | 859,004 | ||||||||||||||
Change in Comparable Restaurant Sales (b) | 3.2 | % | 5.1 | % | 2.3 | % | 7.4 | % | ||||||||||||
Average Weekly Sales per Restaurant: (c) | ||||||||||||||||||||
Legacy restaurants | $ | 25,523 | $ | 24,757 | $ | 25,772 | $ | 25,068 | ||||||||||||
Acquired restaurants | 23,545 | 22,248 | 23,759 | 22,561 | ||||||||||||||||
Restaurant-Level EBITDA (d) | ||||||||||||||||||||
Legacy restaurants | $ | 26,313 | $ | 30,629 | $ | 111,189 | $ | 107,093 | ||||||||||||
Acquired restaurants | 7,306 | 6,159 | 29,457 | 17,427 | ||||||||||||||||
Total Restaurant-Level EBITDA | $ | 33,619 | $ | 36,788 | $ | 140,646 | $ | 124,520 | ||||||||||||
Restaurant-Level EBITDA margin (d) | ||||||||||||||||||||
Legacy restaurants | 15.1 | % | 16.8 | % | 15.9 | % | 15.3 | % | ||||||||||||
Acquired restaurants | 11.0 | % | 13.2 | % | 12.1 | % | 11.1 | % | ||||||||||||
All restaurants | 14.0 | % | 16.1 | % | 14.9 | % | 14.5 | % | ||||||||||||
Adjusted EBITDA (d) | $ | 20,412 | $ | 23,732 | $ | 89,505 | $ | 76,737 | ||||||||||||
Adjusted EBITDA margin (d) | 8.5 | % | 10.4 | % | 9.5 | % | 8.9 | % | ||||||||||||
Adjusted net income (d) | $ | 2,024 | $ | 6,495 | $ | 17,860 | $ | 13,429 | ||||||||||||
Adjusted diluted net earnings per share | $ | 0.04 | $ | 0.14 | $ | 0.40 | $ | 0.30 | ||||||||||||
Number of Restaurants: | ||||||||||||||||||||
Restaurants at beginning of period | 734 | 660 | 705 | 674 | ||||||||||||||||
New restaurants | 1 | — | 4 | — | ||||||||||||||||
Acquired restaurants | 27 | 46 | 56 | 55 | ||||||||||||||||
Closed restaurants | (9 | ) | (1 | ) | (12 | ) | (23 | ) | ||||||||||||
Sold restaurants | — | — | — | (1 | ) | |||||||||||||||
Restaurants at end of period | 753 | 705 | 753 | 705 | ||||||||||||||||
At |
At |
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Long-term Debt (e) |
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Cash |
2,002 |
22,274 |
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(a) | Acquired restaurants represent the 234 restaurants acquired in 20 acquisitions from 2014 through 2016. | |
(b) |
Restaurants are generally included in comparable restaurant sales
after they have been open or acquired for 12 months. For the three
and twelve months ended |
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(c) | Average weekly restaurant sales are derived by dividing restaurant sales for the comparable 13-week or 52-week period by the average number of restaurants operating during such period. | |
(d) | EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Restaurant-Level EBITDA, Restaurant-Level EBITDA margin and Adjusted net income 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, Adjusted EBITDA and Adjusted net income to net income, and to the Company's reconciliation of Restaurant-Level EBITDA to income 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. Adjusted diluted net earnings per share is calculated based on Adjusted net income. | |
(e) |
Long-term debt (including current portion and excluding deferred
financing costs) at |
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Reconciliation of Non-GAAP Measures (in thousands, except per share data) |
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(unaudited) | (unaudited) | |||||||||||||||||||
Three Months Ended (a) | Twelve Months Ended (a) | |||||||||||||||||||
2017 |
2016 |
2017 |
2016 |
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Reconciliation of EBITDA and Adjusted EBITDA: (a) | ||||||||||||||||||||
Net income | $ | 29,462 | $ | 7,018 | $ | 45,472 | $ | 4 | ||||||||||||
Benefit for income taxes | (28,085 | ) | — | (28,085 | ) | — | ||||||||||||||
Interest expense | 4,700 | 4,543 | 18,315 | 18,569 | ||||||||||||||||
Depreciation and amortization | 12,682 | 10,629 | 47,295 | 39,845 | ||||||||||||||||
EBITDA | 18,759 | 22,190 | 82,997 | 58,418 | ||||||||||||||||
Impairment and other lease charges | 1,162 | 346 | 2,355 | 3,078 | ||||||||||||||||
Acquisition costs (b) | 762 | 829 | 1,853 | 1,168 | ||||||||||||||||
Gains on partial condemnation and fires (c) | (697 | ) | — | (1,603 | ) | — | ||||||||||||||
Litigation settlement (d) | — | — | 1,850 | — | ||||||||||||||||
Stock compensation expense | 426 | 367 | 2,053 | 1,438 | ||||||||||||||||
Loss on extinguishment of debt | — | — | — | 12,635 | ||||||||||||||||
Adjusted EBITDA | $ | 20,412 | $ | 23,732 | $ | 89,505 | $ | 76,737 | ||||||||||||
Reconciliation of Restaurant-Level EBITDA: (a) | ||||||||||||||||||||
Income from operations | $ | 6,077 | $ | 11,561 | $ | 35,702 | $ | 31,208 | ||||||||||||
Add: | ||||||||||||||||||||
General and administrative expenses | 14,395 | 14,252 | 54,956 | 50,515 | ||||||||||||||||
Depreciation and amortization | 12,682 | 10,629 | 47,295 | 39,845 | ||||||||||||||||
Impairment and other lease charges | 1,162 | 346 | 2,355 | 3,078 | ||||||||||||||||
Other expense (income) | (697 | ) | — | 338 | (126 | ) | ||||||||||||||
Restaurant-Level EBITDA | $ | 33,619 | $ | 36,788 | $ | 140,646 | $ | 124,520 | ||||||||||||
Reconciliation of Adjusted Net Income: (a) | ||||||||||||||||||||
Net income | $ | 29,462 | $ | 7,018 | $ | 45,472 | $ | 4 | ||||||||||||
Benefit for income taxes (e) | (28,085 | ) | — | (28,085 | ) | — | ||||||||||||||
Income before income taxes | 1,377 | 7,018 | 17,387 | 4 | ||||||||||||||||
Add: | ||||||||||||||||||||
Loss on extinguishment of debt | — | — | — | 12,635 | ||||||||||||||||
Impairment and other lease charges | 1,162 | 346 | 2,355 | 3,078 | ||||||||||||||||
Acquisition costs (b) | 762 | 829 | 1,853 | 1,168 | ||||||||||||||||
Gains on partial condemnation and fires (c) | (697 | ) | — | (1,603 | ) | — | ||||||||||||||
Litigation settlement (d) | — | — | 1,850 | — | ||||||||||||||||
Income tax effect of above adjustments (f) | (466 | ) | (447 | ) | (1,693 | ) | (6,415 | ) | ||||||||||||
(Provision) benefit for income taxes (e) | (114 | ) | (1,251 | ) | (2,289 | ) | 2,959 | |||||||||||||
Adjusted net income | $ | 2,024 | $ | 6,495 | $ | 17,860 | $ | 13,429 | ||||||||||||
Adjusted diluted net earnings per share (g) | $ | 0.04 | $ | 0.14 | $ | 0.40 | $ | 0.30 | ||||||||||||
(a) | Within our press release, we make reference to EBITDA, Adjusted EBITDA, Restaurant-Level EBITDA and Adjusted net income which are non-GAAP financial measures. EBITDA represents net income before provision (benefit) for income taxes, interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted to exclude impairment and other lease charges, acquisition costs, stock compensation expense, loss on extinguishment of debt and other non-recurring income or expense. Restaurant-Level EBITDA represents income from operations as adjusted to exclude general and administrative expenses, depreciation and amortization, impairment and other lease charges and other expense (income). Adjusted net income represents net income as adjusted to exclude loss on extinguishment of debt, impairment and other lease charges, acquisition costs, the establishment and subsequent reversal of a valuation allowance on the Company's net deferred income tax assets and other non-recurring income or expense. | |
We are presenting Adjusted EBITDA, Restaurant-Level EBITDA and Adjusted net income because we believe that they provide a more meaningful comparison than EBITDA and Net income 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 (income), all of which are non-recurring at the restaurant level. Management believes that Adjusted EBITDA, Restaurant-Level EBITDA and Adjusted net income, 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 income are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income, income 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 and EBITDA and Adjusted EBITDA, between Restaurant-Level EBITDA and income from operations, and between net income and Adjusted net income. | ||
(b) | Acquisition costs for the periods presented include primarily legal and professional fees incurred in connection with restaurant acquisitions, which were included in general and administrative expense. | |
(c) |
Includes gains of |
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(d) |
Includes an expense of |
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(e) |
The benefit for income taxes in 2016 reflects a |
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(f) | The income tax effect related to the adjustments for loss on extinguishment of debt, impairment and other lease charges, acquisition costs, gains on partial condemnation and fires and litigation settlement during the periods presented was calculated using an effective income tax rate of 38%. | |
(g) | Adjusted diluted net earnings per share is calculated based on Adjusted net income and the diluted weighted average common shares outstanding for the respective periods. |
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Investor Relations:
800-348-1074,
ext. 3333
investorrelations@carrols.com
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