Carrols Restaurant Group, Inc. Reports Financial Results for the Third Quarter of 2012
Highlights for the third quarter of 2012 versus the third quarter of 2011 include:
-
Restaurant sales increased 87.1% to
$169.5 million including$75.1 million in sales from the 278 BURGER KING® restaurants that were acquired onMay 30, 2012 ; - Comparable restaurant sales at legacy restaurants were strong and increased 6.2%, including customer traffic growth of 3.6%;
-
Net loss from continuing operations was
$6.7 million , or$0.29 per diluted share, compared to net income from continuing operations of$0.4 million , or$0.02 per diluted share, in the prior year period; -
Net loss from continuing operations included certain charges,
including integration costs related to the acquisition and costs
related to the Company's EEOC litigation, which in total were
approximately
$5.3 million or$0.14 per diluted share after tax. The net loss also included a$1.4 million charge ($0.06 per diluted share) to tax expense for a valuation allowance against certain deferred tax assets. Net income from continuing operations in the prior year period included a loss on refinancing of$1.2 million , or$0.03 per diluted share after tax; -
Adjusted EBITDA, a non-GAAP measure, was
$7.1 million compared to$8.4 million in the prior year period. (Adjusted EBITDA is before$3.4 million of integration costs but includes a$1.9 million charge related to the EEOC litigation. Refer to the reconciliation of Adjusted EBITDA to net income (loss) from continuing operations in the tables at the end of this release).
As of
Accordino continued, "We continue to aggressively remodel our restaurants to the 20/20 design which we believe is beginning to provide additional positive momentum. Through the third quarter, we had completed approximately 30 upgrades with plans to complete more than 80 remodels in total for the year."
Accordino added, "However, our overall results were impacted by performance at the acquired restaurants and by integration costs. We are working diligently to address the performance opportunities that exist in the acquired restaurants when compared to our legacy restaurants. Our primary focus in the quarter was to begin improving the overall operation of these restaurants in order to improve sales trends. As a consequence, we overinvested in labor, as well as management recruitment and training. We also incurred unusually high repair costs as we addressed deferred maintenance at these restaurants. Although we continue to focus on training and staffing into the fourth quarter, much of the initial integration and related costs are behind us. We have filled most of the management vacancies that existed at the time of the acquisition and completed the implementation of our labor scheduling, labor control and inventory management systems late in the third quarter."
Accordino concluded, "Our legacy business remains strong and we continue to experience positive traction from the Burger King brand initiatives. Although our overall results were distorted from the integration of the acquired restaurants, we believe that the performance at our legacy restaurants demonstrates the success that we are experiencing from the transformation of the Burger King brand. We have made much progress integrating the acquired restaurants and continue to believe that improved operations and effective cost management at the acquired restaurants should, over time, result in operating results that are significantly improved and more in line with the performance of our legacy restaurants."
Third Quarter 2012 Financial Results
Restaurant sales grew 87.1% to
Adjusted EBITDA was
General and administrative expenses were
Loss from operations was
Interest expense increased to
Net loss from continuing operations was
2012 Guidance
For 2012, the Company is providing the following updated guidance:
- Annual comparable restaurant sales for legacy restaurants are now expected to increase 6% to 7%;
- Commodity costs are expected to increase 3% to 4%;
-
General and administrative expenses are expected to be approximately
$8.0 million to $9.0 million in the fourth quarter excluding any additional legal costs that may be incurred in conjunction with the EEOC litigation during the fourth quarter; - Annual effective income tax rate (before any discrete items and the valuation allowance recorded in the third quarter) is expected to be 41% to 43%; and
-
Capital expenditures are expected to be approximately
$38 million to$42 million , including$24 million to $26 million for remodeling more than 80 restaurants.
Conference Call Today
The conference call can be accessed live over the phone by dialing
888-846-5003 or for international callers by dialing 480-629-9856. A
replay will be available one hour after the call and can be accessed by
dialing 800-406-7325 or for international callers by dialing
303-590-3030; the passcode is 4571766. The replay will be available
until
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
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Consolidated Statements of Operations | ||||||||||||||||||||
(in thousands except per share amounts) | ||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||
Three Months Ended (a) | Nine Months Ended (a) | |||||||||||||||||||
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October 2, | |||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||||
Restaurant sales | $ | 169,471 | $ | 90,599 | $ | 377,025 | $ | 260,816 | ||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of sales | 54,456 | 26,868 | 119,455 | 77,336 | ||||||||||||||||
Restaurant wages and related expenses (c) | 53,494 | 27,616 | 118,808 | 82,003 | ||||||||||||||||
Restaurant rent expense | 12,348 | 5,749 | 26,010 | 17,151 | ||||||||||||||||
Other restaurant operating expenses (c) | 28,820 | 13,686 | 60,684 | 40,162 | ||||||||||||||||
Advertising expense | 7,837 | 3,802 | 15,137 | 10,884 | ||||||||||||||||
General and administrative expenses (b) (c) | 9,331 | 4,778 | 23,610 | 14,753 | ||||||||||||||||
Depreciation and amortization | 8,176 | 3,924 | 19,215 | 11,712 | ||||||||||||||||
Impairment and other lease charges | 125 | 57 | 252 | 1,028 | ||||||||||||||||
Other income | (236 | ) | (2 | ) | (236 | ) | (450 | ) | ||||||||||||
Total costs and expenses | 174,351 | 86,478 | 382,935 | 254,579 | ||||||||||||||||
Income (loss) from operations | (4,880 | ) | 4,121 | (5,910 | ) | 6,237 | ||||||||||||||
Interest expense | 4,475 | 1,696 | 8,030 | 6,385 | ||||||||||||||||
Loss on extinguishment of debt | - | 1,233 | 1,509 | 1,233 | ||||||||||||||||
Income (loss) from continuing operations before income taxes | (9,355 | ) | 1,192 | (15,449 | ) | (1,381 | ) | |||||||||||||
Provision (benefit) for income taxes | (2,663 | ) | 835 | (4,936 | ) | (1,206 | ) | |||||||||||||
Net income (loss) from continuing operations | (6,692 | ) | 357 | (10,513 | ) | (175 | ) | |||||||||||||
Income (loss) from discontinued operations, net of tax | (2 | ) | 3,048 | 42 | 11,334 | |||||||||||||||
Net income (loss) | $ | (6,694 | ) | $ | 3,405 | $ | (10,471 | ) | $ | 11,159 | ||||||||||
Diluted net income (loss) per share: | ||||||||||||||||||||
Continuing operations | $ | (0.29 | ) | $ | 0.02 | $ | (0.47 | ) | $ | (0.01 | ) | |||||||||
Discontinued operations | (0.00 | ) | 0.14 | 0.00 | 0.52 | |||||||||||||||
Diluted weighted average common shares outstanding | 22,747 | 22,233 | 22,525 | 21,666 | ||||||||||||||||
(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 stock-based compensation
expense of |
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(c) |
Results for the three months ended |
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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) | Nine Months Ended (a) | |||||||||||||||||||
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October 2, | |||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||||
Restaurant Sales: (a) | ||||||||||||||||||||
Legacy restaurants | $ | 94,405 | $ | 90,599 | $ | 274,489 | $ | 260,816 | ||||||||||||
Acquired restaurants | 75,066 | - | 102,536 | - | ||||||||||||||||
Total sales | $ | 169,471 | $ | 90,599 | $ | 377,025 | $ | 260,816 | ||||||||||||
Change in Comparable Restaurant Sales (b) | 6.2 | % | 1.6 | % | 7.0 | % | -2.3 | % | ||||||||||||
Adjusted EBITDA (c) | 7,130 | 8,375 | 18,792 | 19,772 | ||||||||||||||||
Adjusted EBITDA margin (c) | 4.2 | % | 9.2 | % | 5.0 | % | 7.6 | % | ||||||||||||
Average Weekly Sales per Restaurant: (d) | ||||||||||||||||||||
Legacy restaurants | 24,833 | 23,247 | 23,919 | 22,183 | ||||||||||||||||
Acquired restaurants | 20,804 | 21,061 | ||||||||||||||||||
Expenses - |
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Cost of sales | 30.0 | % | 29.7 | % | 30.6 | % | 29.7 | % | ||||||||||||
Restaurant wages and related expenses | 29.5 | % | 30.5 | % | 30.7 | % | 31.4 | % | ||||||||||||
Restaurant rent expense | 6.2 | % | 6.3 | % | 6.3 | % | 6.6 | % | ||||||||||||
Other restaurant operating expenses | 14.7 | % | 15.1 | % | 15.0 | % | 15.4 | % | ||||||||||||
Advertising expense | 4.4 | % | 4.2 | % | 3.8 | % | 4.2 | % | ||||||||||||
Expenses - |
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Cost of sales | 34.8 | % | 34.7 | % | ||||||||||||||||
Restaurant wages and related expenses | 34.2 | % | 33.7 | % | ||||||||||||||||
Restaurant rent expense | 8.7 | % | 8.5 | % | ||||||||||||||||
Other restaurant operating expenses | 19.9 | % | 19.0 | % | ||||||||||||||||
Advertising expense | 5.0 | % | 4.7 | % | ||||||||||||||||
Number of |
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Restaurants at beginning of period | 574 | 303 | 298 | 305 | ||||||||||||||||
New restaurants | - | - | - | 2 | ||||||||||||||||
Acquired restaurants | - | - | 278 | - | ||||||||||||||||
Closed restaurants | (2 | ) | (1 | ) | (4 | ) | (5 | ) | ||||||||||||
Restaurants at end of period | 572 | 302 | 572 | 302 | ||||||||||||||||
At |
At |
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Long-term Debt (f) | $ | 161,873 | $ | 68,705 | ||||||||||||||||
Cash (g) | 77,403 | 10,991 | ||||||||||||||||||
(a) |
Acquired restaurants represent the Burger King restaurants
acquired from |
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(b) | Restaurants are included in comparable restaurant sales after they have been open or owned for 12 months. | |
(c) | EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin 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 and Adjusted EBITDA to net income (loss) from continuing operations for further detail. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of restaurant sales. | |
(d) | Average restaurant sales are derived by dividing restaurant sales for such period by the average number of restaurants operating during the period. | |
(e) | Represent restaurant expenses as a percentage of sales for the respective group of restaurants. | |
(f) |
Long-term debt (including current portion) at |
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(g) |
Cash balance includes |
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EBITDA and Adjusted EBITDA GAAP Reconciliation | |||||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||||
Three Months Ended (a) | Nine Months Ended (a) | ||||||||||||||||||
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October 2, | ||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||||
EBITDA and Adjusted EBITDA: (a) | |||||||||||||||||||
Net income (loss) from continuing operations | $ | (6,692 | ) | $ | 357 | $ | (10,513 | ) | $ | (175 | ) | ||||||||
Provision (benefit) for income taxes | (2,663 | ) | 835 | (4,936 | ) | (1,206 | ) | ||||||||||||
Interest expense | 4,475 | 1,696 | 8,030 | 6,385 | |||||||||||||||
Depreciation and amortization | 8,176 | 3,924 | 19,215 | 11,712 | |||||||||||||||
EBITDA | 3,296 | 6,812 | 11,796 | 16,716 | |||||||||||||||
Impairment and other lease charges | 125 | 57 | 252 | 1,028 | |||||||||||||||
Acquisition and integration costs | 3,400 | - | 4,647 | - | |||||||||||||||
Stock compensation expense | 309 | 273 | 588 | 795 | |||||||||||||||
Loss on extinguishment of debt | - | 1,233 | 1,509 | 1,233 | |||||||||||||||
Adjusted EBITDA | $ | 7,130 | $ | 8,375 | $ | 18,792 | $ | 19,772 | |||||||||||
(a) |
EBITDA represents net income (loss) from continuing operations, 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 and integration costs, stock compensation expense and loss on extinguishment of debt. Management excludes these items from EBITDA when evaluating the Company's operating performance and believes that Adjusted EBITDA provides a more meaningful comparison than EBITDA of the Company's core business operating results, as well as with those of other similar companies. Management believes that EBITDA and Adjusted EBITDA, when viewed with the Company's results of operations calculated in accordance with GAAP and the accompanying reconciliation, 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 EBITDA and Adjusted 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 and Adjusted EBITDA are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income (loss) 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 table above provides a reconciliation between net income (loss) from continuing operations and EBITDA and Adjusted EBITDA. |
Investor Relations:
800-348-1074,
ext. 3333
investorrelations@carrols.com
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