Carrols Restaurant Group, Inc. Reports Financial Results for the Third Quarter 2018
Highlights for the Third Quarter of 2018 versus the Third Quarter of 2017 Include:
-
Restaurant sales increased 4.1% to
$296.9 million from$285.2 million in the third quarter of 2017; - Comparable restaurant sales increased 1.6% (inclusive of an approximate 0.5% negative impact from Hurricane Florence) compared to a 7.5% increase in the prior year quarter;
-
Adjusted EBITDA(1) increased 8.7% to
$26.3 million from$24.2 million in the prior year quarter; -
Net income increased 29.2% to
$3.6 million , or$0.08 per diluted share, from$2.8 million , or$0.06 per diluted share, in the prior year quarter; and -
Adjusted net income(1) increased 15.0% to
$4.0 million , or$0.09 per diluted share, from$3.5 million , or$0.08 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. |
|
At the end of the third quarter of 2018,
Accordino added, “We continue to expand
Third Quarter 2018 Financial Results
Restaurant sales increased 4.1% to
Restaurant-level EBITDA(1) was
General and administrative expenses were
Adjusted EBITDA(1) increased 8.7% to
Income from operations rose to
Interest expense held at
Net income was
Adjusted net income(1) in the third quarter of 2018 was
Recent Acquisition Activity
-
On
August 21, 2018 , the Company completed the acquisition of two BURGER KING® restaurants inDetroit, MI ; -
On
September 5, 2018 ,Carrols completed the acquisition of 31 BURGER KING® restaurants inVirginia (30 restaurants) and inWest Virginia (1 restaurant); and -
On
October 2, 2018 (in the Company’s fourth quarter), the Company completed the acquisition of 10 BURGER KING® restaurants inSouth Carolina (8 restaurants) and inGeorgia (2 restaurants).
The Company continues to evaluate opportunities for additional acquisitions although there can be no assurance with respect to the likelihood or timing of any future transactions.
Full Year 2018 Outlook
-
Total restaurant sales are expected to be
$1.17 billion to $1.18 billion , including a comparable restaurant sales increase of 3.2% to 3.8% with an increase of 0% to 2% in the fourth quarter (previously$1.16 billion to $1.18 billion and a comparable restaurant sales increase of 3% to 4%); - Commodity costs are now expected to be down approximately 1% including a 3% to 4% decrease in beef costs (previously commodity costs were expected to be flat with a 1% to 2% decrease 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 still expected to be
$100 million to $105 million ; - The effective income tax rate is expected to be 0% to 5%;
-
Capital expenditures (excluding acquisitions) are expected to be
$80 million to $85 million , including$22 million to $25 million for construction of 12 to 13 new units and remaining costs from 2017 construction. Previously, capital expenditures were estimated to be$78 million to $87 million ; -
Expenditures for the 44 restaurants that the Company has acquired
through October, are expected to total
$39 million to $41 million ; -
Proceeds from sale/leasebacks are expected to be approximately
$8 million to $10 million (previously$10 million to $15 million ); and - The Company expects to close 10 to 15 existing restaurants (15 to 20 previously) of which nine have been closed through the end of the third quarter.
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
334-323-0522. A replay will be available one hour after the call and can
be accessed by dialing 719-457-0820; the passcode is 3806532. 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
Carrols Restaurant Group, Inc. |
|||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||
Three Months Ended (a) | Nine Months Ended (a) | ||||||||||||||||
September 30, |
October 1, |
September 30, |
October 1, |
||||||||||||||
Restaurant sales | $ | 296,917 | $ | 285,235 | $ | 871,553 | $ | 804,565 | |||||||||
Costs and expenses: | |||||||||||||||||
Cost of sales | 82,082 | 81,850 | 237,004 | 224,810 | |||||||||||||
Restaurant wages and related expenses | 95,391 | 91,540 | 283,489 | 260,559 | |||||||||||||
Restaurant rent expense | 20,259 | 19,574 | 60,112 | 56,063 | |||||||||||||
Other restaurant operating expenses | 45,510 | 42,884 | 132,938 | 123,989 | |||||||||||||
Advertising expense | 12,120 | 11,693 | 35,741 | 33,025 | |||||||||||||
General and administrative expenses (b) (c) | 17,602 | 14,699 | 49,758 | 44,686 | |||||||||||||
Depreciation and amortization | 14,555 | 13,655 | 43,426 | 40,172 | |||||||||||||
Impairment and other lease charges (d) | 164 | 1,039 | 3,354 | 2,002 | |||||||||||||
Other income, net | (434 | ) | (383 | ) | (434 | ) | (354 | ) | |||||||||
Total costs and expenses | 287,249 | 276,551 | 845,388 | 784,952 | |||||||||||||
Income from operations | 9,668 | 8,684 | 26,165 | 19,613 | |||||||||||||
Gain on bargain purchase | — | — | (230 | ) | — | ||||||||||||
Interest expense | 5,909 | 5,937 | 17,752 | 15,767 | |||||||||||||
Income before income taxes | 3,759 | 2,747 | 8,643 | 3,846 | |||||||||||||
Provision (benefit) for income taxes | 148 | (48 | ) | 346 | 608 | ||||||||||||
Net income | $ | 3,611 | $ | 2,795 | $ | 8,297 | $ | 3,238 | |||||||||
Basic and diluted net income per share (e)(f) | $ | 0.08 | $ | 0.06 | $ | 0.18 | $ | 0.07 | |||||||||
Basic weighted average common shares outstanding | 35,736 | 35,432 | 35,707 | 35,410 | |||||||||||||
Diluted weighted average common shares outstanding | 45,411 | 44,938 | 45,293 | 44,966 |
(a) | The Company uses a 52 or 53 week fiscal year that ends on the Sunday closest to December 31. The three and nine months ended September 30, 2018 and October 1, 2017 each included thirteen and thirty-nine weeks, respectively. | |
(b) | General and administrative expenses include acquisition costs of $842 and $502 for the three months ended September 30, 2018 and October 1, 2017, respectively and $1,036 and $1,668 for the nine months ended September 30, 2018 and October 1, 2017, respectively. | |
(c) | General and administrative expenses include stock-based compensation expense of $1,531 and $723 for the three months ended September 30, 2018 and October 1, 2017, respectively and $4,501 and $2,509 for the nine months ended September 30, 2018 and October 1, 2017, respectively. | |
(d) | Impairment and other lease charges for the nine months ended September 30, 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. | |
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) | ||||||||||||||||
September 30, |
October 1, |
September 30, |
October 1, |
||||||||||||||
Total Restaurant Sales | $ | 296,917 | $ | 285,235 | $ | 871,553 | $ | 804,565 | |||||||||
Change in Comparable Restaurant Sales (a) | 1.6 | % | 7.5 | % | 4.2 | % | 3.9 | % | |||||||||
Average Weekly Sales per Restaurant (b) | 28,217 | 27,718 | 27,733 | 26,391 | |||||||||||||
Restaurant-Level EBITDA (c) | $ | 41,555 | $ | 37,694 | $ | 122,269 | $ | 106,119 | |||||||||
Restaurant-Level EBITDA margin (c) | 14.0 | % | 13.2 | % | 14.0 | % | 13.2 | % | |||||||||
Adjusted EBITDA (c) | $ | 26,326 | $ | 24,220 | $ | 78,048 | $ | 65,581 | |||||||||
Adjusted EBITDA margin (c) | 8.9 | % | 8.5 | % | 9.0 | % | 8.2 | % | |||||||||
Adjusted net income (c) | $ | 4,040 | $ | 3,513 | $ | 11,218 | $ | 5,276 | |||||||||
Adjusted diluted net income per share (c) | $ | 0.09 | $ | 0.08 | $ | 0.25 | $ | 0.12 | |||||||||
Number of Restaurants: | |||||||||||||||||
Restaurants at beginning of period | 807 | 799 | 807 | 753 | |||||||||||||
New restaurants | 2 | 0 | 6 | 2 | |||||||||||||
Restaurants acquired | 33 | 0 | 34 | 60 | |||||||||||||
Restaurants closed | (4 | ) | (1 | ) | (9 | ) | (17 | ) | |||||||||
Restaurants at end of period | 838 | 798 | 838 | 798 | |||||||||||||
Average Number of Restaurants: | 809.43 | 791.58 | 805.80 | 781.71 | |||||||||||||
At 9/30/18 |
At 12/31/2017 |
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Long-term debt (d) | $ | 280,555 | $ | 281,884 | |||||||||||||
Cash and cash equivalents | 19,563 | 29,412 |
(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 39-week period. | |
(b) | Average weekly sales per restaurant are derived by dividing restaurant sales for the comparable 13-week or 39-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 September 30, 2018 included $275,000 of the Company's 8% Senior Secured Second Lien Notes, $1,203 of lease financing obligations and $4,352 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) | Nine Months Ended (a) | ||||||||||||||||
September 30, |
October 1, |
September 30, |
October 1, |
||||||||||||||
Reconciliation of EBITDA and Adjusted EBITDA: (a) | |||||||||||||||||
Net income | $ | 3,611 | $ | 2,795 | $ | 8,297 | $ | 3,238 | |||||||||
Provision for income taxes | 148 | (48 | ) | 346 | 608 | ||||||||||||
Interest expense | 5,909 | 5,937 | 17,752 | 15,767 | |||||||||||||
Gain on bargain purchase | — | — | (230 | ) | — | ||||||||||||
Depreciation and amortization | 14,555 | 13,655 | 43,426 | 40,172 | |||||||||||||
EBITDA | 24,223 | 22,339 | 69,591 | 59,785 | |||||||||||||
Impairment and other lease charges | 164 | 1,039 | 3,354 | 2,002 | |||||||||||||
Acquisition costs (b) | 842 | 502 | 1,036 | 1,668 | |||||||||||||
Gain on insurance proceeds from fire, net | (434 | ) | (383 | ) | (434 | ) | (383 | ) | |||||||||
Stock-based compensation expense | 1,531 | 723 | 4,501 | 2,509 | |||||||||||||
Adjusted EBITDA | $ | 26,326 | $ | 24,220 | $ | 78,048 | $ | 65,581 | |||||||||
Reconciliation of Restaurant-Level EBITDA: (a) | |||||||||||||||||
Income from operations | $ | 9,668 | $ | 8,684 | $ | 26,165 | $ | 19,613 | |||||||||
Add: | |||||||||||||||||
General and administrative expenses | 17,602 | 14,699 | 49,758 | 44,686 | |||||||||||||
Depreciation and amortization | 14,555 | 13,655 | 43,426 | 40,172 | |||||||||||||
Impairment and other lease charges | 164 | 1,039 | 3,354 | 2,002 | |||||||||||||
Other income, net (c) | (434 | ) | (383 | ) | (434 | ) | (354 | ) | |||||||||
Restaurant-Level EBITDA | $ | 41,555 | $ | 37,694 | $ | 122,269 | $ | 106,119 | |||||||||
Reconciliation of Adjusted net income: (a) | |||||||||||||||||
Net income | $ | 3,611 | $ | 2,795 | $ | 8,297 | $ | 3,238 | |||||||||
Add: | |||||||||||||||||
Impairment and other lease charges | 164 | 1,039 | 3,354 | 2,002 | |||||||||||||
Gain on bargain purchase | — | — | (230 | ) | — | ||||||||||||
Gain on insurance proceeds from fire, net | (434 | ) | (383 | ) | (434 | ) | (383 | ) | |||||||||
Acquisition costs (b) | 842 | 502 | 1,036 | 1,668 | |||||||||||||
Income tax effect on above adjustments (d) | (143 | ) | (440 | ) | (805 | ) | (1,249 | ) | |||||||||
Adjusted net income | $ | 4,040 | $ | 3,513 | $ | 11,218 | $ | 5,276 | |||||||||
Adjusted diluted net income per share | $ | 0.09 | $ | 0.08 | $ | 0.25 | $ | 0.12 | |||||||||
(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 insurance proceeds. 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 income. Adjusted net income represents net income as adjusted to exclude impairment and other lease charges, acquisition costs, gain on bargain purchase and gain on insurance proceeds. | |
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. | ||
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 and in 2017 include certain payroll and other costs associated with the wind-down of the corporate headquarters from an acquisition in June 2017, which were included in general and administrative expense. | |
(c) | Other income, net for the three and nine months ended September 30, 2018 and October 1, 2017 each include a gain related to an insurance recovery from a fire at one of its restaurants. | |
(d) | The income tax effect related to the adjustments for impairment and other lease charges, gain on bargain purchase, gain on insurance proceeds and acquisition costs during the periods presented was calculated using an effective income tax rate of 25% and 21.6% for the three and nine months ended September 30, 2018, respectively, and 38% for the three and nine months ended October 1, 2017. | |
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Source:
Investor Relations:
Carrols Restaurant Group, Inc.
800-348-1074,
ext. 3333
investorrelations@carrols.com