Carrols Restaurant Group, Inc. Reports Financial Results for the Second Quarter 2021
Highlights for the Second Quarter of 2021 versus the Second Quarter of 2020 Include:
- Total restaurant sales increased 15.2% to
$424.5 million compared to$368.4 million in the second quarter of 2020; - Comparable restaurant sales for the Company's Burger King® restaurants increased 12.6%;
- Comparable restaurant sales for the Company’s Popeyes® restaurants decreased 5.3%;
- Adjusted EBITDA(1) decreased to
$29.3 million from$38.0 million in the prior year quarter; - Adjusted Restaurant-Level EBITDA(1) decreased to
$47.9 million from$54.1 million in the prior year quarter; - Net Loss was
$(9.6) million , or$(0.19) per diluted share, and includes a non-cash extinguishment of debt charge of$8.5 million , compared to Net Income of$7.8 million , or$0.13 per diluted share, in the prior year quarter; - Adjusted Net Income(1) was
$16,000 , or$0.00 per diluted share, compared to Adjusted Net Income of$9.6 million , or$0.16 per diluted share, in the prior year quarter; - Free Cash Flow(2) of
$4.2 million compared to$48.6 million in the prior year quarter; and - Adjusted Leverage Ratio which compares Total Net Debt of the Company, including Unsecured Senior Notes, to Covenant EBITDA (as defined under the senior credit facility) improved to 3.82 times compared to 4.18 times a year ago.
(1)Adjusted EBITDA, Adjusted 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 (loss) from operations in the tables at the end of this release.
(2)Free Cash flow is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure in the tables at the end of this release.
Management Commentary
Accordino continued, “Inflationary challenges weighed on our Adjusted Restaurant-Level EBITDA margins during the second quarter as we faced unprecedented cost pressures across nearly all inputs in May and June as the economy shifted into high gear in a very short time period. In particular, labor cost margins reverted to just below second quarter 2019 levels as operating hours normalized and team member average hourly wages increased nearly 12% compared to the same period in 2020 due to market-driven labor constraints. Commodity costs in most categories other than beef also were elevated during the quarter. To help offset these unexpected headwinds, we increased menu prices by about 2% in late July and plan to implement other price increases through the remainder of the year as we deem necessary.”
Accordino concluded, “We remain confident in our business model and its profitability prospects despite the evolving and unpredictable course of the pandemic. We are committed to allocating capital in a disciplined manner, while maintaining substantial liquidity and keeping leverage in check. We therefore view our announcement of a
Second Quarter 2021 Financial Results
Total restaurant revenue increased 15.2% to
Adjusted Restaurant-Level EBITDA(1) decreased to
General and administrative expenses increased to
Adjusted EBITDA(1) decreased to
Income from operations decreased to
Interest expense increased to
Net Loss was
Balance Sheet Update
The Company ended the second quarter of 2021 with cash and cash equivalents of
Acquisition of 19 BURGER KING® Restaurants
In
The Board of Directors declared a
Extension of Stock Repurchase Program
During the second quarter of 2021, the Company did not repurchase any shares of its common stock due to a limited trading window as a result of the private debt offering.
The Board of Directors has approved an extension of the Company’s 2019 stock repurchase program, which was set to expire on
Conference Call Today
The conference call can be accessed live over the telephone by dialing 201-493-6725. A replay will be available one hour after the call and can be accessed by dialing 412-317-6671; the passcode is 13721214. The replay will be available until
About the Company
Carrols is one of the largest restaurant franchisees in
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, including without limitation the impact of COVID-19 on Carrols’ business, as included in Carrols' filings with the
Consolidated Statements of Operations
(In thousands, except per share amounts)
| (unaudited) | ||||||||||||||||
| Three Months Ended (a) | Six Months Ended (a) | |||||||||||||||
| Restaurant sales | 424,541 | 368,418 | 814,534 | 719,936 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Food, beverage and packaging costs | 126,424 | 104,703 | 240,214 | 207,630 | ||||||||||||
| Restaurant wages and related expenses | 137,592 | 111,888 | 267,238 | 236,463 | ||||||||||||
| Restaurant rent expense | 30,591 | 28,984 | 60,905 | 58,438 | ||||||||||||
| Other restaurant operating expenses | 65,128 | 54,310 | 126,547 | 112,288 | ||||||||||||
| Advertising expense | 16,939 | 14,416 | 32,308 | 28,292 | ||||||||||||
| General and administrative expenses (b) (c) | 20,698 | 18,581 | 42,067 | 39,368 | ||||||||||||
| Depreciation and amortization | 20,421 | 20,296 | 41,030 | 41,327 | ||||||||||||
| Impairment and other lease charges | 144 | 2,941 | 497 | 5,822 | ||||||||||||
| Other expense (income), net (d) | 715 | (2,003 | ) | 942 | (1,947 | ) | ||||||||||
| Total costs and expenses | 418,652 | 354,116 | 811,748 | 727,681 | ||||||||||||
| Income (loss) from operations | 5,889 | 14,302 | 2,786 | (7,745 | ) | |||||||||||
| Interest expense | 6,942 | 6,370 | 13,668 | 13,510 | ||||||||||||
| Loss on extinguishment of debt | 8,538 | — | 8,538 | — | ||||||||||||
| Income (loss) before income taxes | (9,591 | ) | 7,932 | (19,420 | ) | (21,255 | ) | |||||||||
| Provision (benefit) from income taxes | (32 | ) | 90 | (2,693 | ) | (6,888 | ) | |||||||||
| Net income (loss) | $ | (9,559 | ) | $ | 7,842 | $ | (16,727 | ) | $ | (14,367 | ) | |||||
| Basic and diluted net income (loss) per share (e)(f) | $ | (0.19 | ) | $ | 0.13 | $ | (0.34 | ) | $ | (0.28 | ) | |||||
| Basic weighted average common shares outstanding | 49,917 | 50,917 | 49,871 | 50,869 | ||||||||||||
| Diluted weighted average common shares outstanding | 49,917 | 60,332 | 49,871 | 50,869 | ||||||||||||
| (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 expense (income), net, for the three and six months ended |
| (e) | Basic net income (loss) per share was computed without attributing any loss to preferred stock and non-vested restricted shares as losses are not allocated to participating securities under the two-class method. |
| (f) | Diluted net income (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. |
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) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| Revenue: | ||||||||||||||||
| Burger King restaurant sales | $ | 402,659 | $ | 345,649 | $ | 771,147 | $ | 675,286 | ||||||||
| 21,882 | 22,769 | 43,387 | 44,650 | |||||||||||||
| Total revenue | $ | 424,541 | $ | 368,418 | $ | 814,534 | $ | 719,936 | ||||||||
| Change in Comparable Burger King Restaurant Sales (a) | 12.6 | % | (6.4 | )% | 13.6 | % | (6.0 | )% | ||||||||
| Change in Comparable Popeyes Restaurant Sales (a) | (5.3 | )% | 17.1 | % | (2.5 | )% | 17.1 | % | ||||||||
| Average Weekly Sales per |
$ | 30,701 | $ | 26,777 | $ | 29,398 | $ | 25,675 | ||||||||
| Average Weekly Sales per |
$ | 25,896 | $ | 27,509 | $ | 25,673 | $ | 26,737 | ||||||||
| Adjusted Restaurant-Level EBITDA (c) | $ | 47,867 | $ | 54,127 | $ | 87,351 | $ | 76,924 | ||||||||
| Adjusted Restaurant-Level EBITDA margin (c) | 11.3 | % | 14.7 | % | 10.7 | % | 10.7 | % | ||||||||
| Adjusted EBITDA (c) | $ | 29,307 | $ | 38,017 | $ | 49,173 | $ | 41,989 | ||||||||
| Adjusted EBITDA margin (c) | 6.9 | % | 10.3 | % | 6.0 | % | 5.8 | % | ||||||||
| Adjusted Net Income (Loss) (c) | $ | 16 | $ | 9,574 | $ | (6,484 | ) | $ | (9,743 | ) | ||||||
| Adjusted Diluted Net Income (Loss) per share (c) | $ | — | $ | 0.16 | $ | (0.13 | ) | $ | (0.19 | ) | ||||||
| Number of Burger King restaurants: | ||||||||||||||||
| Restaurants at beginning of period | 1,010 | 1,028 | 1,009 | 1,036 | ||||||||||||
| New restaurants (including offsets) | — | 3 | 2 | 6 | ||||||||||||
| Restaurants acquired | 19 | — | 19 | — | ||||||||||||
| Restaurants closed (including offsets) | (2 | ) | (4 | ) | (3 | ) | (15 | ) | ||||||||
| Restaurants at end of period | 1,027 | 1,027 | 1,027 | 1,027 | ||||||||||||
| Average Number of operating Burger King restaurants | 1,008.9 | 993.0 | 1,009.0 | 1,011.6 | ||||||||||||
| Number of |
||||||||||||||||
| Restaurants at beginning and end of period | 65 | 65 | 65 | 65 | ||||||||||||
| Average Number of operating |
65.0 | 63.7 | 65.0 | 64.2 | ||||||||||||
| (a) | Restaurants are generally included in comparable restaurant sales 12 months after their acquisition. Sales from newly developed restaurants are included in comparable restaurant sales after they have been open for 15 months. The calculation of changes in comparable restaurant sales is based on a 52-week look back to the comparable thirteen or twenty-six week period. |
| (b) | Average weekly sales per restaurant are derived by dividing restaurant sales for the thirteen or twenty-six week period by the average number of restaurants operating during such period. |
| (c) | EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Restaurant-Level EBITDA, Adjusted Restaurant-Level EBITDA margin, Adjusted Net Income (Loss) and Adjusted Diluted Net Income (Loss) per share 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 income (loss) to EBITDA, Adjusted EBITDA and Adjusted Net Income (Loss), and to the Company's reconciliation of income (loss) from operations to Adjusted Restaurant-Level EBITDA for further detail. Both Adjusted EBITDA margin and Adjusted Restaurant-Level EBITDA margin are calculated as a percentage of restaurant sales. Adjusted diluted net income (loss) per share is calculated based on Adjusted Net Income (Loss) and reflects the dilutive impact of shares, where applicable. |
Reconciliation of Non-GAAP Measures
(In thousands)
| (unaudited) | ||||||||||||||||
| Three Months Ended (a) | Six Months Ended (a) | |||||||||||||||
| Reconciliation of EBITDA and Adjusted EBITDA: (b) | ||||||||||||||||
| Net income (loss) | $ | (9,559 | ) | $ | 7,842 | $ | (16,727 | ) | $ | (14,367 | ) | |||||
| Provision (benefit) for income taxes | (32 | ) | 90 | (2,693 | ) | (6,888 | ) | |||||||||
| Interest expense | 6,942 | 6,370 | 13,668 | 13,510 | ||||||||||||
| Depreciation and amortization | 20,421 | 20,296 | 41,030 | 41,327 | ||||||||||||
| EBITDA | 17,772 | 34,598 | 35,278 | 33,582 | ||||||||||||
| Impairment and other lease charges | 144 | 2,941 | 497 | 5,822 | ||||||||||||
| Acquisition costs (c) | 292 | 274 | 292 | 355 | ||||||||||||
| Stock-based compensation expense | 1,614 | 1,109 | 3,083 | 2,241 | ||||||||||||
| Abandoned development costs (d) | — | 869 | — | 1,557 | ||||||||||||
| Pre-opening costs (e) | — | 10 | 29 | 99 | ||||||||||||
| Litigation and other professional expenses (f) | 232 | 219 | 514 | 280 | ||||||||||||
| Loss on extinguishment of debt | 8,538 | — | 8,538 | — | ||||||||||||
| Other expense (income), net (g)(h) | 715 | (2,003 | ) | 942 | (1,947 | ) | ||||||||||
| Adjusted EBITDA | $ | 29,307 | $ | 38,017 | $ | 49,173 | $ | 41,989 | ||||||||
| Reconciliation of Adjusted Restaurant-Level EBITDA: (b) | ||||||||||||||||
| Income (loss) from operations | $ | 5,889 | $ | 14,302 | $ | 2,786 | $ | (7,745 | ) | |||||||
| Add: | ||||||||||||||||
| General and administrative expenses | 20,698 | 18,581 | 42,067 | 39,368 | ||||||||||||
| Pre-opening costs (e) | — | 10 | 29 | 99 | ||||||||||||
| Depreciation and amortization | 20,421 | 20,296 | 41,030 | 41,327 | ||||||||||||
| Impairment and other lease charges | 144 | 2,941 | 497 | 5,822 | ||||||||||||
| Other expense (income), net (g)(h) | 715 | (2,003 | ) | 942 | (1,947 | ) | ||||||||||
| Adjusted Restaurant-Level EBITDA | $ | 47,867 | $ | 54,127 | $ | 87,351 | $ | 76,924 | ||||||||
| Reconciliation of Adjusted Net Income (Loss): (b) | ||||||||||||||||
| Net income (loss) | $ | (9,559 | ) | $ | 7,842 | $ | (16,727 | ) | $ | (14,367 | ) | |||||
| Add: | ||||||||||||||||
| Impairment and other lease charges | 144 | 2,941 | 497 | 5,822 | ||||||||||||
| Acquisition costs (c) | 292 | 274 | 292 | 355 | ||||||||||||
| Abandoned development costs (d) | — | 869 | — | 1,557 | ||||||||||||
| Pre-opening costs (e) | — | 10 | 29 | 99 | ||||||||||||
| Litigation and other professional expenses (f) | 232 | 219 | 514 | 280 | ||||||||||||
| Other expense (income), net (g)(h) | 715 | (2,003 | ) | 942 | (1,947 | ) | ||||||||||
| Income tax effect on above adjustments (i) | (346 | ) | (578 | ) | (569 | ) | (1,542 | ) | ||||||||
| Loss on extinguishment of debt | 8,538 | — | 8,538 | — | ||||||||||||
| Adjusted Net Income (Loss) | $ | 16 | $ | 9,574 | $ | (6,484 | ) | $ | (9,743 | ) | ||||||
| Adjusted diluted net income (loss) per share (j) | $ | — | $ | 0.16 | $ | (0.13 | ) | $ | (0.19 | ) | ||||||
| Adjusted diluted weighted average common shares outstanding | 59,431 | 60,332 | 49,871 | 50,869 | ||||||||||||
| (a) | The Company uses a 52 or 53 week fiscal year that ends the Sunday closest to |
| (b) | Within this press release, we make reference to EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted Net Income (Loss) which are non-GAAP financial measures. EBITDA represents net income (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, abandoned development costs, restaurant pre-opening costs, non-recurring litigation and other professional expenses, loss on extinguishment of debt and other income and expense. Adjusted Restaurant-Level EBITDA represents income (loss) from operations as adjusted to exclude general and administrative expenses, depreciation and amortization, impairment and other lease charges, pre-opening costs, and other income and expense. Adjusted Net Income (Loss) represents net income (loss) as adjusted, net of tax, to exclude impairment and other lease charges, acquisition costs, abandoned development costs, pre-opening costs, non-recurring litigation and other professional expenses, other income and expense and loss on extinguishment of debt. |
| Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted Net Income (Loss) are presented because the Company believes that they provide a more meaningful comparison than EBITDA and net income (loss) of its core business operating results, as well as with those of other similar companies. Additionally, Adjusted Restaurant-Level EBITDA is presented because it excludes restaurant pre-opening costs, other income and expense, and the impact of general and administrative expenses such as salaries and expenses associated with corporate and administrative functions that support the development and operations of our restaurants, legal, auditing and other professional fees. Although these costs are not directly related to restaurant-level operations, these expenses are necessary for the profitability of our restaurants. Management believes that Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted Net Income (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 Adjusted 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, Adjusted Restaurant-Level EBITDA and Adjusted Net Income (Loss) are not measures of financial performance or liquidity under |
|
| (c) | Acquisition costs for the three and six months ended |
| (d) | Abandoned development costs for the three and six months ended |
| (e) | Pre-opening costs for the three and six months ended |
| (f) | Litigation and other professional expenses for the three and six months ended |
| (g) | Other expense (income), net, for the three and six months ended |
| (h) | Other expense (income), net, for the three months ended |
| (i) | The income tax effect related to the adjustments to Adjusted Net Income (Loss) other than loss on extinguishment of debt was calculated using an incremental income tax rate of 25% for the three and six months ended |
| (j) | Adjusted diluted net income (loss) per share is calculated based on Adjusted Net Income (Loss) and the dilutive weighted average common shares outstanding for the respective periods, where applicable. |
| (unaudited) | ||||||||||||||||
| Three Months Ended (a) | Six Months Ended (a) | |||||||||||||||
| Reconciliation of Free Cash Flow: (b) | ||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 19,579 | $ | 51,682 | $ | 26,615 | $ | 47,892 | ||||||||
| Net cash used for investing activities | (46,167 | ) | (3,038 | ) | (56,794 | ) | (25,006 | ) | ||||||||
| Add: cash paid for acquisitions | 30,819 | — | 30,819 | — | ||||||||||||
| Total Free Cash Flow | $ | 4,231 | $ | 48,644 | $ | 640 | $ | 22,886 | ||||||||
| At |
At |
At |
||||||||||
| Long-term debt and finance lease liabilities (c) | $ | 521,451 | $ | 494,158 | $ | 497,140 | ||||||
| Cash and cash equivalents | 56,187 | 64,964 | 45,978 | |||||||||
| Net Debt (d) | 465,264 | 429,194 | 451,162 | |||||||||
| Senior Secured Net Debt (e) | 165,264 | 429,194 | 451,162 | |||||||||
| Adjusted Leverage Ratio (f) | 3.82x | 3.82x | 4.18x | |||||||||
| Senior Secured Net Leverage Ratio (g) | 1.36x | 3.82x | 4.18x | |||||||||
| (a) | The Company uses a 52 or 53 week fiscal year that ends the Sunday closest to |
| (b) | Free Cash Flow is a non-GAAP financial measure and may not necessarily be comparable to other similarly titled captions of other companies due to differences in methods of calculation. Free Cash Flow is defined as cash provided by operating activities less cash used for investing activities, adjusted to add back cash paid for acquisitions. Management believes that Free Cash Flow, when viewed with the Company's results of operations in accordance with |
| (c) | Long-term debt and finance lease liabilities (including current portion and excluding deferred financing costs and original issue discount) at |
| (d) | Net Debt represents total long-term debt and finance lease liabilities less cash and cash equivalents. |
| (e) | Senior Secured Net Debt represents total net debt less the |
| (f) | Adjusted Leverage Ratio represents the Company's Total Net Leverage Ratio as calculated in accordance with its senior credit facility for each period presented. |
| (g) | Senior Secured Net Leverage Ratio represents the Company's Net Leverage Ratio as calculated in accordance with its senior credit facility for each period presented. |
Investor Relations:
203-682-8253
investorrelations@carrols.com
Source: Carrols Restaurant Group, Inc.