Carrols Restaurant Group, Inc. Reports Financial Results for the Fourth Quarter and Full Year 2017
Restaurant Sales Cross
Highlights for fourth quarter of 2017 versus fourth quarter of 2016 include:
- Restaurant sales increased 17.9% to
$284.0 million from$240.8 million in the fourth quarter of 2016, including$59.6 million in sales from the 175 BURGER KING® restaurants acquired from 2015 through 2017(1); - Comparable restaurant sales were robust and increased 8.9% compared to a 3.2% increase in the prior year quarter;
- Adjusted EBITDA(2) increased 26.5% to
$25.8 million from$20.4 million in the prior year quarter; - Net income was
$3.9 million , or$0.09 per diluted share, compared to net income of$29.5 million , or$0.65 per diluted share, in the prior year quarter. Among other things, 2016 net income included$30.4 million from the reversal of a valuation allowance against net deferred tax assets ($0.68 per diluted share); and - Adjusted net income(2) was
$3.8 million , or$0.08 per diluted share, compared to adjusted net income of$2.0 million , or$0.04 per diluted share, in the prior year quarter.
Highlights for full year of 2017 versus full year of 2016 include:
- Restaurant sales increased 15.4% to
$1.09 billion from$943.6 million in 2016, including$210.3 million in sales from the 175 BURGER KING® restaurants acquired from 2015 through 2017(1); - Comparable restaurant sales increased 5.2% compared to a 2.3% increase in 2016;
- Adjusted EBITDA(2) was
$91.4 million compared to$89.5 million in 2016; - Net income was
$7.2 million , or$0.16 per diluted share, compared to net income of$45.5 million , or$1.01 per diluted share, in 2016 which included a$30.4 million reversal of a valuation allowance against net deferred tax assets ($0.68 per diluted share); and - Adjusted net income(2) was
$9.0 million , or$0.20 per diluted share, compared to adjusted net income of$17.9 million , or$0.40 per diluted share, in 2016.
(1)“Acquired restaurants” refer to those restaurants acquired from 2015 through 2017. “Legacy restaurants” include all of the Company’s other restaurants including restaurants acquired before 2015.
(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.
At the end of the fourth quarter of 2017,
Accordino concluded, “In 2017, we crossed a major milestone as our total restaurant sales exceeded the
Fourth Quarter 2017 Financial Results
Restaurant sales increased 17.9% to
The comparable restaurant sales increase included an 8.7% increase at legacy restaurants and a 10.5% increase at acquired restaurants. For all comparable restaurants, average check increased 5.1% and customer traffic increased 3.8% from the prior year period.
Restaurant-level EBITDA was
General and administrative expenses were
Adjusted EBITDA increased 26.5% to
Income from operations was
Interest expense increased to
Net income was
Net income in the fourth quarter of 2017 included
Adjusted net income in the fourth quarter of 2017 was
Full Year 2018 Outlook
The Company is providing the following guidance for 2018. As a reminder, while the Company may acquire additional BURGER KING® restaurants, this guidance does not include any impact from such potential future acquisitions:
- Total restaurant sales are expected to be
$1.14 billion to $1.17 billion (previously estimated to be$1.12 billion to $1.15 billion ), including a comparable restaurant sales increase of 3% to 5%; - Commodity costs are expected to increase 2% to 3% including a 3% to 5% increase in beef costs;
- General and administrative expenses are expected to be
$58 million to$60 million , excluding stock compensation expense and acquisition-related costs; - Adjusted EBITDA is expected to be
$93 million (previously$90 million ) to$100 million ; - Capital expenditures before discretionary growth-related expenditures (i.e., new restaurant development and acquisitions) are expected to be
$45 million to $50 million . In addition, capital expenditures for the construction of 10 to 15 new units and remaining costs from 2017 construction late in the year are expected to be$15 million to $25 million ; - Proceeds from sale/leasebacks are expected to be
$10 million to $15 million ; - The Company expects to close 20 to 25 existing restaurants; and
- The effective income tax rate is expected to be 0% to 5%.
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.
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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. |
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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) | Twelve Months Ended (a) | |||||||||||||||
December 31, 2017 | January 1, 2017 | December 31, 2017 | January 1, 2017 | |||||||||||||
Restaurant sales | $ | 283,967 | $ | 240,826 | $ | 1,088,532 | $ | 943,583 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales | 79,783 | 65,131 | 304,593 | 250,112 | ||||||||||||
Restaurant wages and related expenses | 89,495 | 76,460 | 350,054 | 297,766 | ||||||||||||
Restaurant rent expense | 19,885 | 16,737 | 75,948 | 64,814 | ||||||||||||
Other restaurant operating expenses | 42,797 | 38,335 | 166,786 | 148,946 | ||||||||||||
Advertising expense | 11,652 | 10,544 | 44,677 | 41,299 | ||||||||||||
General and administrative expenses (b) (c) | 15,662 | 14,395 | 60,348 | 54,956 | ||||||||||||
Depreciation and amortization | 13,987 | 12,682 | 54,159 | 47,295 | ||||||||||||
Impairment and other lease charges | 825 | 1,162 | 2,827 | 2,355 | ||||||||||||
Other expense (income) | 21 | (697 | ) | (333 | ) | 338 | ||||||||||
Total costs and expenses | 274,107 | 234,749 | 1,059,059 | 907,881 | ||||||||||||
Income from operations | 9,860 | 6,077 | 29,473 | 35,702 | ||||||||||||
Interest expense | 5,943 | 4,700 | 21,710 | 18,315 | ||||||||||||
Income before income taxes | 3,917 | 1,377 | 7,763 | 17,387 | ||||||||||||
Provision (benefit) for income taxes | (4 | ) | (28,085 | ) | 604 | (28,085 | ) | |||||||||
Net income | $ | 3,921 | $ | 29,462 | $ | 7,159 | $ | 45,472 | ||||||||
Basic and diluted net income per share (d) (e): | $ | 0.09 | $ | 0.65 | $ | 0.16 | $ | 1.01 | ||||||||
Basic weighted average common shares outstanding | 35,435 | 35,257 | 35,417 | 35,178 | ||||||||||||
Diluted weighted average common shares outstanding | 45,007 | 44,850 | 44,977 | 44,851 |
(a) |
The Company uses a 52 or 53 week fiscal year that ends on the Sunday closest to December 31. The three and twelve months ended December 31, 2017 and January 1, 2017 each included thirteen and 52 weeks, respectively. |
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(b) |
General and administrative expenses include acquisition costs of $125 and $762 for the three months ended December 31, 2017 and January 1, 2017, respectively, and $1,793 and $1,853 for the twelve months ended December 31, 2017 and January 1, 2017, respectively. |
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(c) |
General and administrative expenses include stock-based compensation expense of $1,009 and $426 for the three months ended December 31, 2017 and January 1, 2017, respectively, and $3,518 and $2,053 for the twelve months ended December 31, 2017 and January 1, 2017, respectively. |
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(d) |
Basic net income per share was computed excluding income attributable to preferred stock and non-vested restricted shares. |
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(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. |
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) | Twelve Months Ended (a) | |||||||||||||||
December 31, 2017 | January 1, 2017 | December 31, 2017 | January 1, 2017 | |||||||||||||
Restaurant Sales: (a) | ||||||||||||||||
Legacy restaurants | $ | 224,320 | $ | 210,148 | $ | 878,230 | $ | 844,580 | ||||||||
Acquired restaurants | 59,647 | 30,678 | 210,302 | 99,003 | ||||||||||||
Total Restaurant Sales | $ | 283,967 | $ | 240,826 | 1,088,532 | $ | 943,583 | |||||||||
Change in Comparable Restaurant Sales (b) | 8.9 | % | 3.2 | % | 5.2 | % | 2.3 | % | ||||||||
Average Weekly Sales per Restaurant: (c) | ||||||||||||||||
Legacy restaurants | $ | 27,608 | $ | 25,021 | $ | 26,801 | $ | 25,235 | ||||||||
Acquired restaurants | $ | 27,444 | 24,436 | 26,233 | 25,104 | |||||||||||
Restaurant-Level EBITDA (d) | ||||||||||||||||
Legacy restaurants | $ | 32,708 | $ | 30,167 | $ | 121,487 | $ | 127,539 | ||||||||
Acquired restaurants | 7,647 | 3,452 | 24,987 | 13,107 | ||||||||||||
Total Restaurant-Level EBITDA | $ | 40,355 | $ | 33,619 | $ | 146,474 | $ | 140,646 | ||||||||
Restaurant-Level EBITDA margin (d) | ||||||||||||||||
Legacy restaurants | 14.6 | % | 14.4 | % | 13.8 | % | 15.1 | % | ||||||||
Acquired restaurants | 12.8 | % | 11.3 | % | 11.9 | % | 13.2 | % | ||||||||
All restaurants | 14.2 | % | 14.0 | % | 13.5 | % | 14.9 | % | ||||||||
Adjusted EBITDA (d) | $ | 25,827 | $ | 20,412 | $ | 91,408 | $ | 89,505 | ||||||||
Adjusted EBITDA margin (d) | 9.1 | % | 8.5 | % | 8.4 | % | 9.5 | % | ||||||||
Adjusted net income (d) | $ | 3,761 | $ | 2,024 | $ | 9,037 | $ | 17,860 | ||||||||
Adjusted diluted net income per share | $ | 0.08 | $ | 0.04 | $ | 0.20 | $ | 0.40 | ||||||||
Number of Restaurants: | ||||||||||||||||
Restaurants at beginning of period | 798 | 734 | 753 | 705 | ||||||||||||
New restaurants | 9 | 1 | 11 | 4 | ||||||||||||
Acquired restaurants | 4 | 27 | 64 | 56 | ||||||||||||
Closed restaurants | (4 | ) | (9 | ) | (21 | ) | (12 | ) | ||||||||
Restaurants at end of period | 807 | 753 | 807 | 753 | ||||||||||||
At 12/31/17 |
At 1/1/17 |
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Long-term Debt (e) |
$ 281,884 |
$ 223,559 |
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Cash |
29,412 |
2,002 |
(a) |
Acquired restaurants represent the 175 restaurants acquired in 18 acquisitions from 2015 through 2017. |
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(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 December 31, 2017 the changes in comparable restaurant sales are calculated on a thirteen week and fifty-two week basis, respectively. |
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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. |
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(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 income per share is calculated based on Adjusted net income. |
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(e) |
Long-term debt (including current portion and excluding deferred financing costs and bond premium) at December 31, 2017 included $275,000 of the Company's 8.0% Senior Secured Second Lien Notes, $1,203 of lease financing obligations and $5,681 of capital lease obligations. Long-term debt (including current portion and excluding deferred financing costs) at January 1, 2017 included $200,000 of the Company's 8.0% Senior Secured Second Lien Notes, $13,500 of revolving credit borrowings, $3,020 of lease financing obligations and $7,039 of capital lease obligations. |
Carrols Restaurant Group, Inc. |
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Reconciliation of Non-GAAP Measures |
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(in thousands, except per share data) |
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(unaudited) | (unaudited) | ||||||||||||||
Three Months Ended (a) | Twelve Months Ended (a) | |||||||||||||||
December 31, 2017 | January 1, 2017 | December 31, 2017 | January 1, 2017 | |||||||||||||
Reconciliation of EBITDA and Adjusted EBITDA: (a) | ||||||||||||||||
Net income | $ | 3,921 | $ | 29,462 | $ | 7,159 | $ | 45,472 | ||||||||
Provision (benefit) for income taxes | (4 | ) | (28,085 | ) | 604 | (28,085 | ) | |||||||||
Interest expense | 5,943 | 4,700 | 21,710 | 18,315 | ||||||||||||
Depreciation and amortization | 13,987 | 12,682 | 54,159 | 47,295 | ||||||||||||
EBITDA | 23,847 | 18,759 | 83,632 | 82,997 | ||||||||||||
Impairment and other lease charges | 825 | 1,162 | 2,827 | 2,355 | ||||||||||||
Acquisition costs (b) | 125 | 762 | 1,793 | 1,853 | ||||||||||||
Gain on insurance proceeds from fire and partial condemnation (c) | 21 | (697 | ) | (362 | ) | (1,603 | ) | |||||||||
Litigation settlement (d) | — | — | — | 1,850 | ||||||||||||
Stock compensation expense | 1,009 | 426 | 3,518 | 2,053 | ||||||||||||
Adjusted EBITDA |
$ | 25,827 | $ | 20,412 | $ | 91,408 | $ |
89,505 |
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Reconciliation of Restaurant-Level EBITDA: (a) |
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Income from operations | $ | 9,860 | $ | 6,077 | $ | 29,473 | $ | 35,702 | ||||||||
Add: | ||||||||||||||||
General and administrative expenses | 15,662 | 14,395 | 60,348 | 54,956 | ||||||||||||
Depreciation and amortization | 13,987 | 12,682 | 54,159 | 47,295 | ||||||||||||
Impairment and other lease charges | 825 | 1,162 | 2,827 | 2,355 | ||||||||||||
Other expense (income) | 21 | (697 | ) | (333 | ) | 338 | ||||||||||
Restaurant-Level EBITDA | $ | 40,355 | $ | 33,619 | $ | 146,474 | $ | 140,646 | ||||||||
Reconciliation of Adjusted Net Income: (a) |
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Net income | $ | 3,921 | $ | 29,462 | $ | 7,159 | $ | 45,472 | ||||||||
Add: | ||||||||||||||||
Impairment and other lease charges | 825 | 1,162 | 2,827 | 2,355 | ||||||||||||
Acquisition costs (b) | 125 | 762 | 1,793 | 1,853 | ||||||||||||
Gain on insurance proceeds from fire and partial condemnation (c) | 21 | (697 | ) | (362 | ) | (1,603 | ) | |||||||||
Litigation settlement (d) | — | — | — | 1,850 | ||||||||||||
Income tax effect of above adjustments (e) | (369 | ) | (466 | ) | (1,618 | ) | (1,693 | ) | ||||||||
Adjust income tax benefit from deferred tax adjustments (f) | (762 | ) | (28,199 | ) | (762 | ) | (30,374 | ) | ||||||||
Adjusted net income | $ | 3,761 | $ | 2,024 | $ | 9,037 | $ | 17,860 | ||||||||
Adjusted diluted net income per share (g) | $ | 0.08 | $ | 0.04 | $ | 0.20 | $ | 0.40 |
(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. |
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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 included in general and administrative expense primarily include legal and professional fees incurred in connection with restaurant acquisitions, and in 2017, certain payroll and other costs associated with the wind-down of the corporate headquarters from the acquisition of Republic Foods, Inc. |
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(c) |
Other expense (income) for the twelve months ended December 31, 2017 includes a gain of $0.4 million related to an insurance recovery from a fire at one restaurant. In the three and twelve months ended January 1, 2017, other expense (income) includes gains of $0.7 million and $1.2 million, respectively, related to insurance recoveries from fires at two restaurants and, for the twelve months ended January 1, 2017, a gain of $0.5 million related to a settlement for a partial condemnation of one of our operating restaurant properties. |
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(d) |
Other expense (income), net for the year ended January 1, 2017 includes expense of $1.85 million related to a litigation settlement. |
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(e) |
The income tax effect related to the adjustments (other than the deferred income tax adjustment) during the periods presented was calculated using an effective income tax rate of 38%. |
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(f) |
The provision (benefit) for income taxes in 2017 includes a $0.8 million discrete tax benefit recorded in the fourth quarter to remeasure net deferred taxes due to the lowering of the Federal income tax rate to 21% under the Tax Cuts and Jobs Act ("Tax Act") signed into law in the fourth quarter of 2017. The benefit for income taxes in 2016 reflects a $30.4 million income tax benefit recorded in the fourth quarter of 2016 to reverse the previously recorded valuation allowance on net deferred income tax assets as well as the full year deferred income tax provision of $2.3 million which was recorded in the fourth quarter of 2016. For comparability, when presenting 2016 Adjusted net income, the provision (benefit) for income taxes for each respective period is adjusted as if such valuation allowance had been reversed prior to 2016, and does not reflect the change in income tax rate related to the Tax Act signed in 2017. |
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(g) |
Adjusted diluted net income 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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Source:
Carrols Restaurant Group, Inc.
Investor Relations:
800-348-1074, ext. 3333
investorrelations@carrols.com