Carrols Restaurant Group, Inc. Reports Financial Results for the Second Quarter 2018
Raises Full Year 2018 Outlook
Highlights for second quarter of 2018 versus second quarter of 2017 include:
- Restaurant sales increased 8.4% to
$303.0 million from$279.5 million in the second quarter of 2017; - Comparable restaurant sales increased a solid 5.0% compared to a 4.6% increase in the prior year quarter;
- Adjusted EBITDA(1) increased 19.4% to
$32.8 million from$27.5 million in the prior year quarter; - Net income was
$7.8 million , or$0.17 per diluted share, compared to$6.0 million , or$0.13 per diluted share, in the prior year quarter; and - Adjusted net income(1) increased 51% to
$10.0 million , or$0.22 per diluted share, from$6.6 million , or$0.14 per diluted share, in the prior year quarter.
(1) |
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 second quarter of 2018,
Accordino added, “Our acquisition pipeline is active and we are currently working on several transactions. We recently exercised our right of first refusal for the purchase of 31 BURGER KING® restaurants in
Accordino concluded, “Given our performance year-to-date and expectations for the remainder of the year, we are raising our overall outlook for 2018. While we remain cautiously optimistic regarding comparable restaurant sales trends as we lap our very strong performance in the second half of last year, we expect Adjusted EBITDA to now grow to
Second Quarter 2018 Financial Results
Restaurant sales increased 8.4% to
Restaurant-level EBITDA(1) was
General and administrative expenses were
Adjusted EBITDA(1) increased 19.4% to
Income from operations was
Interest expense increased to
Net income was
Adjusted net income in the second quarter of 2018 was
Recent Events
In late July,
Full Year 2018 Outlook
The Company is revising its guidance for 2018 which includes the anticipated acquisition of 37 BURGER KING® restaurants (discussed above) that it expects to be completed in the third quarter of 2018:
- Total restaurant sales are expected to be
$1.16 billion to $1.18 billion (previously$1.15 billion to $1.17 billion ), including a comparable restaurant sales increase of 3% to 4% (which has been narrowed from 3% to 5% previously); - Commodity costs are expected to be flat (previously a 1% to 2% increase) including a 1% to 2% decrease in beef costs (previously a 2% to 3% increase);
- General and administrative expenses are still expected to be
$58 million to $60 million , excluding stock compensation expense and acquisition-related costs; - Adjusted EBITDA is expected to be
$100 million to $105 million (previously$95 million to $102 million ); - The effective income tax rate is expected to be 0% to 5%;
- Capital expenditures before discretionary growth-related expenditures (i.e., new restaurant development and acquisitions) are expected to be
$58 million to $62 million (previously$50 million to $60 million ). In addition, capital expenditures for the construction of 13 to 15 new units and remaining costs from 2017 construction are expected to be$20 million to $25 million (previously$15 million to $25 million for 10 to 15 new units); - Expenditures for the acquisition of 37 restaurants included in the Company's guidance are expected to be
$30 million to $32 million ; - Proceeds from sale/leasebacks are still expected to be
$10 million to$15 million ; and - The Company expects to close 15 to 20 existing restaurants (previously 20 to 25 restaurants) of which five have already closed.
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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(unaudited) | (unaudited) | |||||||||||||||
Three Months Ended (a) | Six Months Ended (a) | |||||||||||||||
July 1, 2018 | July 2, 2017 | July 1, 2018 | July 2, 2017 | |||||||||||||
Restaurant sales | $ | 303,050 | $ | 279,478 | $ | 574,636 | $ | 519,330 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales | 81,917 | 78,724 | 154,922 | 142,960 | ||||||||||||
Restaurant wages and related expenses | 96,954 | 87,948 | 188,098 | 169,019 | ||||||||||||
Restaurant rent expense | 19,879 | 18,892 | 39,853 | 36,489 | ||||||||||||
Other restaurant operating expenses | 44,589 | 41,910 | 87,428 | 81,105 | ||||||||||||
Advertising expense | 12,356 | 11,431 | 23,621 | 21,332 | ||||||||||||
General and administrative expenses (b) (c) | 16,020 | 14,411 | 32,156 | 29,987 | ||||||||||||
Depreciation and amortization | 14,621 | 13,366 | 28,871 | 26,517 | ||||||||||||
Impairment and other lease charges (d) | 2,881 | 432 | 3,190 | 963 | ||||||||||||
Other expense (income), net | — | 29 | — | 29 | ||||||||||||
Total costs and expenses | 289,217 | 267,143 | 558,139 | 508,401 | ||||||||||||
Income from operations | 13,833 | 12,335 | 16,497 | 10,929 | ||||||||||||
Gain on bargain purchase | (208 | ) | — | (230 | ) | — | ||||||||||
Interest expense | 5,917 | 5,029 | 11,843 | 9,830 | ||||||||||||
Income before income taxes | 8,124 | 7,306 | 4,884 | 1,099 | ||||||||||||
Provision for income taxes | 336 | 1,267 | 198 | 656 | ||||||||||||
Net income | $ | 7,788 | $ | 6,039 | $ | 4,686 | $ | 443 | ||||||||
Basic and diluted net income per share (e)(f) | $ | 0.17 | $ | 0.13 | $ | 0.10 | $ | 0.01 | ||||||||
Basic weighted average common shares outstanding | 35,720 | 35,415 | 35,693 | 35,400 | ||||||||||||
Diluted weighted average common shares outstanding | 45,201 | 44,942 | 45,235 | 44,981 |
(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 July 1, 2018 and July 2, 2017 each included thirteen and twenty-six weeks, respectively. | |
(b) | General and administrative expenses include acquisition costs of $89 and $448 for the three months ended July 1, 2018 and July 2, 2017, respectively and $194 and $1,166 for the six months ended July 1, 2018 and July 2, 2017, respectively. | |
(c) | General and administrative expenses include stock-based compensation expense of $1,385 and $903 for the three months ended July 1, 2018 and July 2, 2017, respectively and $2,970 and $1,786 for the six months ended July 1, 2018 and July 2, 2017, respectively. | |
(d) | Impairment and other lease charges for the three months ended July 1, 2018 included, among other things, a $1.9 million write down for defective restaurant equipment that was replaced in approximately 300 restaurants. The Company has commenced litigation against the equipment supplier. | |
(e) | Basic net income per share was computed excluding income attributable to preferred stock and non-vested restricted shares unless the effect would have been anti-dilutive for the periods presented. | |
(f) | 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) | Six Months Ended (a) | ||||||||||||||||
July 1, 2018 | July 2, 2017 | July 1, 2018 | July 2, 2017 | ||||||||||||||
Total Restaurant Sales | $ | 303,050 | $ | 279,478 | $ | 574,636 | $ | 519,330 | |||||||||
Change in Comparable Restaurant Sales (a) | 5.0 | % | 4.6 | % | 5.6 | % | 2.1 | % | |||||||||
Average Weekly Sales per Restaurant (b) | 28,996 | 27,239 | 27,490 | 25,715 | |||||||||||||
Restaurant-Level EBITDA (c) | $ | 47,355 | $ | 40,573 | $ | 80,714 | $ | 68,425 | |||||||||
Restaurant-Level EBITDA margin (c) | 15.6 | % | 14.5 | % | 14.0 | % | 13.2 | % | |||||||||
Adjusted EBITDA (c) | $ | 32,809 | $ | 27,484 | $ | 51,722 | $ | 41,361 | |||||||||
Adjusted EBITDA margin (c) | 10.8 | % | 9.8 | % | 9.0 | % | 8.0 | % | |||||||||
Adjusted net income (c) | $ | 9,970 | $ | 6,585 | $ | 7,178 | $ | 1,763 | |||||||||
Adjusted diluted net income per share (c) | $ | 0.22 | $ | 0.14 | $ | 0.16 | $ | 0.04 | |||||||||
Number of Restaurants: | |||||||||||||||||
Restaurants at beginning of period | 807 | 788 | 807 | 753 | |||||||||||||
New restaurants | 2 | 1 | 4 | 2 | |||||||||||||
Restaurants acquired | — | 17 | 1 | 60 | |||||||||||||
Restaurants closed | (2 | ) | (7 | ) | (5 | ) | (16 | ) | |||||||||
Restaurants at end of period | 807 | 799 | 807 | 799 | |||||||||||||
Average Number of Restaurants: | 804.0 | 789.3 | 804.0 | 776.8 | |||||||||||||
At 7/1/18 |
At 12/31/2017 |
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Long-term debt (d) |
$ |
283,536 |
$ |
281,884 |
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Cash and cash equivalents |
38,165 |
29,412 |
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(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 or 26-week period. | |
(b) | Average weekly sales per restaurant are derived by dividing restaurant sales for the comparable 13-week or 26-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 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 net income to EBITDA, Adjusted EBITDA and Adjusted net income, and to the Company's reconciliation of income 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 income per share is calculated based on Adjusted net income and reflects the dilutive impact of shares, where applicable, based on Adjusted net income. | |
(d) | Long-term debt (including current portion and excluding deferred financing costs) at July 1, 2018 included $275,000 of the Company's 8% Senior Secured Second Lien Notes, $3,741 of lease financing obligations and $4,795 of capital lease obligations. Long-term debt (including current portion and excluding deferred financing costs) at December 31, 2017 included $275,000 of the Company's 8% Senior Secured Second Lien Notes, $1,203 of lease financing obligations and $5,681 of capital lease obligations. | |
Carrols Restaurant Group, Inc. |
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(unaudited) | (unaudited) | ||||||||||||||||
Three Months Ended (a) | Six Months Ended (a) | ||||||||||||||||
July 1, 2018 | July 2, 2017 | July 1, 2018 | July 2, 2017 | ||||||||||||||
Reconciliation of EBITDA and Adjusted EBITDA: (a) | |||||||||||||||||
Net income | $ | 7,788 | $ | 6,039 | $ | 4,686 | $ | 443 | |||||||||
Provision for income taxes | 336 | 1,267 | 198 | 656 | |||||||||||||
Interest expense | 5,917 | 5,029 | 11,843 | 9,830 | |||||||||||||
Gain on bargain purchase | (208 | ) | — | (230 | ) | — | |||||||||||
Depreciation and amortization | 14,621 | 13,366 | 28,871 | 26,517 | |||||||||||||
EBITDA | 28,454 | 25,701 | 45,368 | 37,446 | |||||||||||||
Impairment and other lease charges | 2,881 | 432 | 3,190 | 963 | |||||||||||||
Acquisition costs (b) | 89 | 448 | 194 | 1,166 | |||||||||||||
Stock-based compensation expense | 1,385 | 903 | 2,970 | 1,786 | |||||||||||||
Adjusted EBITDA | $ | 32,809 | $ | 27,484 | $ | 51,722 | $ | 41,361 | |||||||||
Reconciliation of Restaurant-Level EBITDA: (a) | |||||||||||||||||
Income from operations | $ | 13,833 | $ | 12,335 | $ | 16,497 | $ | 10,929 | |||||||||
Add: | |||||||||||||||||
General and administrative expenses | 16,020 | 14,411 | 32,156 | 29,987 | |||||||||||||
Depreciation and amortization | 14,621 | 13,366 | 28,871 | 26,517 | |||||||||||||
Impairment and other lease charges | 2,881 | 432 | 3,190 | 963 | |||||||||||||
Other expense (income), net | — | 29 | — | 29 | |||||||||||||
Restaurant-Level EBITDA | $ | 47,355 | $ | 40,573 | $ | 80,714 | $ | 68,425 | |||||||||
Reconciliation of Adjusted net income: (a) | |||||||||||||||||
Net income | $ | 7,788 | $ | 6,039 | $ | 4,686 | $ | 443 | |||||||||
Add: | |||||||||||||||||
Impairment and other lease charges | 2,881 | 432 | 3,190 | 963 | |||||||||||||
Gain on bargain purchase | (208 | ) | — | (230 | ) | — | |||||||||||
Acquisition costs (b) | 89 | 448 | 194 | 1,166 | |||||||||||||
Income tax effect on above adjustments (c) | (580 | ) | (334 | ) | (662 | ) | (809 | ) | |||||||||
Adjusted net income | $ | 9,970 | $ | 6,585 | $ | 7,178 | $ | 1,763 | |||||||||
Adjusted diluted net income per share | $ | 0.22 | $ | 0.14 | $ | 0.16 | $ | 0.04 |
(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 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 gain on bargain purchase. 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. Adjusted net income represents net income as adjusted to exclude impairment and other lease charges, acquisition costs and gain on bargain purchase. | |
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, 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. |
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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, Adjusted EBITDA and Adjusted net income and between income from operations and Restaurant-Level EBITDA. | ||
(b) | Acquisition costs for the periods presented include legal and professional fees incurred in connection with restaurant acquisitions. | |
(c) | The income tax effect related to the adjustments for impairment and other lease charges, gain on bargain purchase, and acquisition costs during the periods presented was calculated using an effective income tax rate of 21% for the three and six months ended July 1, 2018 and 38% for the three and six months ended July 2, 2017. | |
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Source:
Investor Relations:
Carrols Restaurant Group, Inc.
800-348-1074, ext. 3333
investorrelations@carrols.com