Delaware | 001-33174 | 16-1287774 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
968 James Street Syracuse, New York | 13203 | |
(Address of principal executive office) | (Zip Code) | |
Registrant’s telephone number, including area code (315) 424-0513 | ||
N/A | ||
(Former name or former address, if changed since last report.) |
By: | /s/ Paul R. Flanders |
Name: | Paul R. Flanders |
Title: | Vice President, Chief Financial Officer and Treasurer |
• | Restaurant sales increased 9.7% to $238.9 million from $217.7 million in the third quarter of 2015, including $62.7 million in sales from the 207 BURGER KING® restaurants acquired from 2014 to 2016(1); |
• | Comparable restaurant sales were flat compared to an increase of 6.5% in the prior year period; |
• | Adjusted EBITDA(2) increased 3.2% to $22.7 million from $22.0 million in the prior year period; |
• | Net income was $4.5 million, or $0.10 per diluted share, compared to net income of $7.2 million, or $0.16 per diluted share, in the prior year period; and |
• | Adjusted net income(2) was $5.6 million, or $0.13 per diluted share, compared to adjusted net income of $7.7 million, or $0.17 per diluted share, in the prior year period. Net income and Adjusted net income were lower largely reflecting a $2.7 million increase in depreciation and amortization expense from remodeling and acquisitions over the past year. |
(1) | “Acquired restaurants” refer to those restaurants acquired from 2014 through 2016. “Legacy restaurants” include all of the Company’s other restaurants including restaurants acquired before 2014. |
(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 (loss) or to income from operations in the tables at the end of this release. |
• | Total restaurant sales of $940 million to $950 million (previously $945 million to $960 million) including a comparable restaurant sales increase of 1.5% to 2% (previously 2% to 4%). Comparable restaurant sales are on a comparable 52 week basis; |
• | Commodity cost decrease of approximately 3% (previously 2% to 3%) including a 13% to 14% decrease in beef costs (previously a 10% to 12% decrease); |
• | General and administrative expenses (excluding stock compensation costs) of $51 million to $53 million; |
• | Adjusted EBITDA of $88 million to $92 million (previously $90 million to $95 million); |
• | Capital expenditures of $90 million to $95 million (previously $85 million to $90 million) which includes remodeling approximately 85 restaurants, the rebuilding of four restaurants and the construction of six new restaurants (all of which are relocations of existing restaurants); and |
• | The sale/leaseback of owned restaurant properties for net proceeds of $47 million to $51 million (previously $27 million to $32 million) including $18 million to $22 million in the fourth quarter. The Company received $29.4 million from sale/leaseback transactions completed through the end of the third quarter of 2016. |
(unaudited) | (unaudited) | ||||||||||||||
Three Months Ended (a) | Nine Months Ended (a) | ||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
Restaurant sales | $ | 238,870 | $ | 217,676 | $ | 702,757 | $ | 629,948 | |||||||
Costs and expenses: | |||||||||||||||
Cost of sales | 63,844 | 60,676 | 184,981 | 178,022 | |||||||||||
Restaurant wages and related expenses | 75,678 | 67,116 | 221,306 | 197,135 | |||||||||||
Restaurant rent expense | 16,081 | 14,106 | 48,077 | 43,101 | |||||||||||
Other restaurant operating expenses | 37,606 | 34,261 | 110,611 | 100,407 | |||||||||||
Advertising expense | 10,857 | 8,188 | 30,755 | 23,551 | |||||||||||
General and administrative expenses (b) (c) | 13,000 | 11,764 | 40,561 | 36,263 | |||||||||||
Depreciation and amortization | 12,070 | 9,418 | 34,613 | 29,216 | |||||||||||
Impairment and other lease charges | 685 | 396 | 1,193 | 2,732 | |||||||||||
Other expense (income) | — | — | 1,035 | (126 | ) | ||||||||||
Total costs and expenses | 229,821 | 205,925 | 673,132 | 610,301 | |||||||||||
Income from operations | 9,049 | 11,751 | 29,625 | 19,647 | |||||||||||
Interest expense | 4,560 | 4,512 | 13,615 | 14,026 | |||||||||||
Loss on extinguishment of debt | — | — | — | 12,635 | |||||||||||
Income (loss) before income taxes | 4,489 | 7,239 | 16,010 | (7,014 | ) | ||||||||||
Provision (benefit) for income taxes | — | — | — | — | |||||||||||
Net income (loss) | $ | 4,489 | $ | 7,239 | $ | 16,010 | $ | (7,014 | ) | ||||||
Basic and diluted net income (loss) per share (d)(e) | $ | 0.10 | $ | 0.16 | $ | 0.35 | $ | (0.20 | ) | ||||||
Diluted weighted average common shares outstanding | 44,856 | 44,679 | 44,892 | 34,930 |
(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 October 2, 2016 and September 27, 2015 each included thirteen and thirty-nine weeks, respectively. |
(b) | General and administrative expenses include acquisition costs of $453 and $79 for the three months ended October 2, 2016 and September 27, 2015, respectively, and $1,091 and $339 for the nine months ended October 2, 2016 and September 27, 2015, respectively. |
(c) | General and administrative expenses include stock-based compensation expense of $456 and $367 for the three months ended October 2, 2016 and September 27, 2015, respectively, and $1,627 and $1,071 for the nine months ended October 2, 2016 and September 27, 2015, respectively. |
(d) | Basic net income (loss) per share was computed excluding income attributable to preferred stock and non-vested restricted shares. |
(e) | Diluted net income (loss) per share was computed including shares issuable for convertible preferred stock and non-vested restricted stock unless their effect would have been anti-dilutive for the periods presented. Due to the calculation of basic net income (loss) per share for the periods presented including the allocation of earnings to participating securities, basic net income (loss) per share is lower than diluted net income (loss) per share calculated under the treasury-stock method. |
(unaudited) | (unaudited) | ||||||||||||||
Three Months Ended (a) | Nine Months Ended (a) | ||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
Restaurant Sales: (a) | |||||||||||||||
Legacy restaurants | $ | 176,215 | $ | 178,243 | $ | 526,183 | $ | 519,138 | |||||||
Acquired restaurants | 62,655 | 39,433 | 176,574 | 110,810 | |||||||||||
Total restaurant sales | $ | 238,870 | $ | 217,676 | $ | 702,757 | $ | 629,948 | |||||||
Change in Comparable Restaurant Sales (b) | 0.0 | % | 6.5 | % | 2.0 | % | 8.4 | % | |||||||
Average Weekly Sales per Restaurant: (c) | |||||||||||||||
Legacy restaurants | $ | 26,058 | $ | 25,974 | $ | 25,856 | $ | 25,170 | |||||||
Acquired restaurants | 24,175 | 23,347 | 23,840 | 22,686 | |||||||||||
Restaurant-Level EBITDA: (d) | |||||||||||||||
Legacy restaurants | $ | 27,277 | $ | 28,765 | $ | 84,877 | $ | 76,464 | |||||||
Acquired restaurants | 7,527 | 4,564 | 22,150 | 11,268 | |||||||||||
Total Restaurant-Level EBITDA | $ | 34,804 | $ | 33,329 | $ | 107,027 | $ | 87,732 | |||||||
Restaurant-Level EBITDA margin: (d) | |||||||||||||||
Legacy restaurants | 15.5 | % | 16.1 | % | 16.1 | % | 14.7 | % | |||||||
Acquired restaurants | 12.0 | % | 11.6 | % | 12.5 | % | 10.2 | % | |||||||
All restaurants | 14.6 | % | 15.3 | % | 15.2 | % | 13.9 | % | |||||||
Adjusted EBITDA (d) | $ | 22,713 | $ | 22,011 | $ | 69,093 | $ | 53,005 | |||||||
Adjusted EBITDA margin (d) | 9.5 | % | 10.1 | % | 9.8 | % | 8.4 | % | |||||||
Adjusted net income (d) | $ | 5,627 | $ | 7,714 | $ | 19,238 | $ | 8,692 | |||||||
Adjusted diluted net earnings per share (d) | $ | 0.13 | $ | 0.17 | $ | 0.43 | $ | 0.19 | |||||||
Number of Restaurants: | |||||||||||||||
Restaurants at beginning of period | 723 | 657 | 705 | 674 | |||||||||||
New restaurants | 1 | — | 3 | — | |||||||||||
Restaurants acquired | 11 | 5 | 29 | 9 | |||||||||||
Restaurants closed | (1) | (2) | (3) | (22) | |||||||||||
Restaurants sold | — | — | — | (1) | |||||||||||
Restaurants at end of period | 734 | 660 | 734 | 660 |
At October 2, 2016 | At 1/3/2016 | ||||||
Long-term debt (e) | $ | 219,099 | $ | 209,209 | |||
Cash | 10,137 | 22,274 |
(a) | Acquired restaurants represent the 207 restaurants acquired in 17 acquisitions from 2014 through 2016. Legacy restaurants represent all other restaurants including restaurants acquired before 2014. |
(b) | Restaurants are generally included in comparable restaurant sales after they have been open or acquired for 12 months. The calculation of changes in comparable restaurant sales is based on the comparable 13-week or 26-week period, respectively. |
(c) | 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. |
(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 net income (loss) 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 for the respective group of restaurants. Adjusted diluted net earnings per share is calculated based on Adjusted net income and reflects the dilutive impact of shares based on Adjusted net income. |
(e) | Long-term debt (including current portion and excluding deferred financing costs) at October 2, 2016 included $200,000 of the Company's 8% Senior Secured Second Lien Notes, $10,500 of outstanding revolving borrowings under the Company's senior credit facility, $1,203 of lease financing obligations and $7,396 of capital lease obligations. Long-term debt (including current portion and excluding deferred financing costs) at January 3, 2016 included $200,000 of the Company's 8% Senior Secured Second Lien Notes, $1,203 of lease financing obligations and $8,006 of capital lease obligations. |
(unaudited) | (unaudited) | ||||||||||||||
Three Months Ended (a) | Nine Months Ended (a) | ||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
Reconciliation of EBITDA and Adjusted EBITDA: (a) | |||||||||||||||
Net income (loss) | $ | 4,489 | $ | 7,239 | $ | 16,010 | $ | (7,014 | ) | ||||||
Provision (benefit) for income taxes | — | — | — | — | |||||||||||
Interest expense | 4,560 | 4,512 | 13,615 | 14,026 | |||||||||||
Depreciation and amortization | 12,070 | 9,418 | 34,613 | 29,216 | |||||||||||
EBITDA | 21,119 | 21,169 | 64,238 | 36,228 | |||||||||||
Impairment and other lease charges | 685 | 396 | 1,193 | 2,732 | |||||||||||
Acquisition costs | 453 | 79 | 1,091 | 339 | |||||||||||
Gain on partial condemnation and insurance proceeds from fire (b) | — | — | (906 | ) | — | ||||||||||
Litigation settlement (c) | — | — | 1,850 | — | |||||||||||
Stock-based compensation expense | 456 | 367 | 1,627 | 1,071 | |||||||||||
Loss on extinguishment of debt | — | — | — | 12,635 | |||||||||||
Adjusted EBITDA | $ | 22,713 | $ | 22,011 | $ | 69,093 | $ | 53,005 | |||||||
Reconciliation of Restaurant-Level EBITDA: (a) | |||||||||||||||
Income from operations | $ | 9,049 | $ | 11,751 | $ | 29,625 | $ | 19,647 | |||||||
Add: | |||||||||||||||
General and administrative expenses | 13,000 | 11,764 | 40,561 | 36,263 | |||||||||||
Depreciation and amortization | 12,070 | 9,418 | 34,613 | 29,216 | |||||||||||
Impairment and other lease charges | 685 | 396 | 1,193 | 2,732 | |||||||||||
Other expense (income) | — | — | 1,035 | (126 | ) | ||||||||||
Restaurant-Level EBITDA | $ | 34,804 | $ | 33,329 | $ | 107,027 | $ | 87,732 | |||||||
Reconciliation of Adjusted net income: (a) | |||||||||||||||
Net income (loss) | $ | 4,489 | $ | 7,239 | $ | 16,010 | $ | (7,014 | ) | ||||||
Add: | |||||||||||||||
Loss on extinguishment of debt | — | — | — | 12,635 | |||||||||||
Impairment and other lease charges | 685 | 396 | 1,193 | 2,732 | |||||||||||
Gain on partial condemnation and insurance proceeds from fire (b) | — | — | (906 | ) | — | ||||||||||
Litigation settlement (c) | — | — | 1,850 | — | |||||||||||
Acquisition costs | 453 | 79 | 1,091 | 339 | |||||||||||
Adjusted net income | $ | 5,627 | $ | 7,714 | $ | 19,238 | $ | 8,692 | |||||||
Adjusted diluted net earnings per share | $ | 0.13 | $ | 0.17 | $ | 0.43 | $ | 0.19 |
(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 (loss) before provision (benefit) for income taxes, interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted to exclude loss on extinguishment of debt, impairment and other lease charges, acquisition costs, stock-based compensation expense 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 income. Adjusted net income represents net income (loss) as adjusted to exclude loss on extinguishment of debt, impairment and other lease charges, acquisition costs and other non-recurring income or expense. |
(b) | Other income (expense) for the nine months ended October 2, 2016 includes a gain of $0.5 million related to an insurance recovery from a fire at one of our restaurants and a gain of $0.5 million related to a settlement for a partial condemnation on one of our operating restaurant properties. |
(c) | Other income (expense) for the nine months ended October 2, 2016 includes expense of $1.85 million related to the settlement and resolution of litigation with our former Chairman and CEO. |