Delaware | 001-33174 | 83-3804854 |
(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.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $.01 per share | TAST | The NASDAQ Global Market |
By: | /s/ Paul R. Flanders |
Name: | Paul R. Flanders |
Title: | Vice President, Chief Financial Officer and Treasurer |
• | Restaurant sales increased 7.1% to $290.8 million from $271.6 million in the prior year quarter; |
• | Comparable restaurant sales increased 2.4% compared to a 6.2% increase in the prior year quarter; |
• | Adjusted EBITDA(1) was $13.1 million compared to $18.9 million in the prior year quarter; |
• | Net loss was $11.5 million, or $0.32 per diluted share, compared to net loss of $3.1 million, or $0.09 per diluted share, in the prior year quarter; and |
• | Adjusted net loss(1) was $10.4 million, or $0.29 per diluted share, compared to adjusted net loss of $2.8 million, or $0.08 per diluted share, in the prior year quarter. |
(1) | Adjusted EBITDA, 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 from operations in the tables at the end of this release. |
• | For the trailing twelve months, Cambridge’s financial results, adjusted for the pro forma effect of acquisitions completed by Cambridge during the preceding year, are estimated to include restaurant sales of approximately $300 million and Restaurant-level EBITDA of approximately $40 million. Adjusted EBITDA, including anticipated synergies after the integration of Cambridge’s corporate functions expected to be completed by the end of 2019, is estimated to be $25 million to $30 million; |
• | Excluding Cambridge, total restaurant sales are expected to be $1.25 billion to $1.28 billion including comparable restaurant sales growth of 2.0% to 3.5%. With Cambridge included for approximately eight months in 2019, total restaurant sales are expected to be $1.45 billion to $1.48 billion; |
• | Carrols expects recent increases in beef and pork prices brought about by the breakout of hog fever in China, among other things, to continue for the foreseeable future. This has caused the Company to revise its expected increase in commodity costs to 2% to 3% (from 1% to 2% previously) with beef costs increasing 5% to 6% (from 2% to 3% previously); |
• | General and administrative expenses, excluding Cambridge, are still expected to be $62 million to $64 million, excluding stock compensation expense and acquisition or integration costs. Carrols expects that for the eight months that Cambridge will be included in its 2019 results that achieved synergies will be minimal and estimates incremental general and administrative expense attributable to Cambridge to be $11 million to $12 million in 2019. The Company expects to fully integrate the Cambridge corporate functions by the end of the year; |
• | Adjusted EBITDA, including Cambridge results for approximately eight months, is expected to be $114 million to $121 million including $14 million to $16 million for Cambridge; |
• | Capital expenditures are expected to be $120 million to $130 million, including $50 million to $60 million for construction of 20 to 25 new Burger King® and 8 to 10 new Popeyes® restaurants, and $35 million to $40 million for remodels and upgrades; |
• | Proceeds from sale/leasebacks are expected to be approximately $15 million to $25 million (previously $10 million to $15 million); |
• | As previously disclosed, Carrols completed a refinancing of both its existing debt and Cambridge’s debt in conjunction with the merger. This financing has lowered the Company’s effective cost of funds from 8% to under 6% and expanded its capital available to fund its expansion strategy moving forward; and lastly |
• | The Company expects to close 10 to 15 Burger King® restaurants, of which six have already closed during the first quarter of 2019. Restaurant closings related to the Cambridge business are not contemplated at this time. |
(unaudited) | |||||||
Three Months Ended (a) | |||||||
March 31, 2019 | April 1, 2018 | ||||||
Restaurant sales | $ | 290,789 | $ | 271,586 | |||
Costs and expenses: | |||||||
Cost of sales | 82,575 | 73,005 | |||||
Restaurant wages and related expenses | 100,192 | 91,144 | |||||
Restaurant rent expense | 21,916 | 19,974 | |||||
Other restaurant operating expenses | 45,605 | 42,839 | |||||
Advertising expense | 11,872 | 11,265 | |||||
General and administrative expenses (b) (c) | 19,724 | 16,136 | |||||
Depreciation and amortization | 15,292 | 14,250 | |||||
Impairment and other lease charges | 910 | 309 | |||||
Other income, net (d) | (2,129 | ) | — | ||||
Total costs and expenses | 295,957 | 268,922 | |||||
Income (loss) from operations | (5,168 | ) | 2,664 | ||||
Interest expense | 5,947 | 5,926 | |||||
Gain on bargain purchase | — | (22 | ) | ||||
Loss before income taxes | (11,115 | ) | (3,240 | ) | |||
Provision (benefit) for income taxes | 354 | (138 | ) | ||||
Net loss | $ | (11,469 | ) | $ | (3,102 | ) | |
Basic and diluted net loss per share (e)(f) | $ | (0.32 | ) | $ | (0.09 | ) | |
Basic and diluted weighted average common shares outstanding | 36,045 | 35,666 |
(a) | The Company uses a 52 or 53 week fiscal year that ends on the Sunday closest to December 31. The three months ended March 31, 2019 and April 1, 2018 each included thirteen weeks. |
(b) | General and administrative expenses include acquisition costs of $2,656 and $105 for the three months ended March 31, 2019 and April 1, 2018, respectively. |
(c) | General and administrative expenses include stock-based compensation expense of $1,526 and $1,585 for the three months ended March 31, 2019 and April 1, 2018, respectively. |
(d) | Other income, net, for the three months ended March 31, 2019, included, among other things, a $1.9 million gain related to a settlement with Burger King Corporation for the approval of new restaurant development by other franchisees which unfavorably impacted our restaurants. |
(e) | Basic net loss per share was computed excluding loss attributable to preferred stock and non-vested restricted shares unless the effect would have been anti-dilutive for the periods presented. |
(f) | Diluted net 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. |
(unaudited) | |||||||
Three Months Ended | |||||||
March 31, 2019 | April 1, 2018 | ||||||
Total Restaurant Sales | $ | 290,789 | $ | 271,586 | |||
Change in Comparable Restaurant Sales (a) | 2.4 | % | 6.2 | % | |||
Average Weekly Sales per Restaurant (b) | 26,529 | 25,983 | |||||
Restaurant-Level EBITDA (c) | $ | 28,629 | $ | 33,359 | |||
Restaurant-Level EBITDA margin (c) | 9.8 | % | 12.3 | % | |||
Adjusted EBITDA (c) | $ | 13,087 | $ | 18,913 | |||
Adjusted EBITDA margin (c) | 4.5 | % | 7.0 | % | |||
Adjusted net loss (c) | $ | (10,391 | ) | $ | (2,792 | ) | |
Adjusted diluted net loss per share (c) | $ | (0.29 | ) | $ | (0.08 | ) | |
Number of Restaurants: | |||||||
Restaurants at beginning of period | 849 | 807 | |||||
New restaurants | 2 | 2 | |||||
Restaurants acquired | — | 1 | |||||
Restaurants closed | (6) | (3) | |||||
Restaurants at end of period | 845 | 807 | |||||
Average Number of Restaurants: | 843.2 | 804.2 |
At 3/31/19 | At 12/30/2018 | ||||||
Long-term debt and finance lease liabilities (d) | $ | 285,915 | $ | 280,144 | |||
Cash and cash equivalents | 1,668 | 4,014 |
(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 period. |
(b) | Average weekly sales per restaurant are derived by dividing restaurant sales for the comparable 13-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 loss 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 loss to EBITDA, Adjusted EBITDA and Adjusted net loss, and to the Company's reconciliation of loss 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 loss per share is calculated based on Adjusted net loss and reflects the dilutive impact of shares, where applicable, based on Adjusted net loss. |
(d) | Long-term debt and finance lease liabilities (including current portion and excluding deferred financing costs) at March 31, 2019 included $275,000 of the Company's 8% Senior Secured Second Lien Notes, $6,250 of outstanding revolving borrowings under the Company's senior credit facility, $1,200 of lease financing obligations and $3,465 of finance lease liabilities. Long-term debt and finance lease liabilities (including current portion and excluding deferred financing costs) at December 30, 2018 included $275,000 of the Company's 8% Senior Secured Second Lien Notes, $1,203 of lease financing obligations and $3,941 of finance lease liabilities. |
(unaudited) | |||||||
Three Months Ended | |||||||
March 31, 2019 | April 1, 2018 | ||||||
Reconciliation of EBITDA and Adjusted EBITDA: (a) | |||||||
Net loss | $ | (11,469 | ) | $ | (3,102 | ) | |
Provision (benefit) for income taxes | 354 | (138 | ) | ||||
Interest expense | 5,947 | 5,926 | |||||
Depreciation and amortization | 15,292 | 14,250 | |||||
EBITDA | 10,124 | 16,936 | |||||
Impairment and other lease charges | 910 | 309 | |||||
Acquisition costs (b) | 2,656 | 105 | |||||
Other income, net (c) | (2,129 | ) | — | ||||
Gain on bargain purchase | — | (22 | ) | ||||
Stock-based compensation expense | 1,526 | 1,585 | |||||
Adjusted EBITDA | $ | 13,087 | $ | 18,913 | |||
Reconciliation of Restaurant-Level EBITDA: (a) | |||||||
Income (loss) from operations | $ | (5,168 | ) | $ | 2,664 | ||
Add: | |||||||
General and administrative expenses | 19,724 | 16,136 | |||||
Depreciation and amortization | 15,292 | 14,250 | |||||
Impairment and other lease charges | 910 | 309 | |||||
Other income, net (c) | (2,129 | ) | — | ||||
Restaurant-Level EBITDA | $ | 28,629 | $ | 33,359 | |||
Reconciliation of Adjusted net loss: (a) | |||||||
Net loss | $ | (11,469 | ) | $ | (3,102 | ) | |
Add: | |||||||
Impairment and other lease charges | 910 | 309 | |||||
Acquisition costs (b) | 2,656 | 105 | |||||
Other income, net (c) | (2,129 | ) | — | ||||
Gain on bargain purchase | — | (22 | ) | ||||
Income tax effect on above adjustments (d) | (359 | ) | (82 | ) | |||
Adjusted net loss | $ | (10,391 | ) | $ | (2,792 | ) | |
Adjusted diluted net loss per share | $ | (0.29 | ) | $ | (0.08 | ) |
(a) | Within our press release, we make reference to EBITDA, Adjusted EBITDA, Restaurant-Level EBITDA and Adjusted net loss which are non-GAAP financial measures. EBITDA represents net 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, and other non-recurring income or expense. Restaurant-Level EBITDA represents loss from operations as adjusted to exclude general and administrative expenses, depreciation and amortization, impairment and other lease charges and other non-recurring income or expense. Adjusted net loss represents net loss as adjusted to exclude impairment and other lease charges, acquisition costs, gain on bargain purchase, and other non-recurring income or expense. |
(b) | Acquisition costs for the three months ended March 31, 2019 mostly include legal and professional fees incurred in connection with the acquisition of 165 Burger King and 55 Popeyes restaurants from Cambridge Holdings, LLC, which were included in general and administrative expense. |
(c) | Other income, net for the three months ended March 31, 2019 include a $1.9 million gain related to a settlement with Burger King Corporation for the approval of new restaurant development by other franchisees which unfavorably impacted our restaurants, a gain on a sale-leaseback transaction of $0.1 million, and a gain related to an insurance recovery from a fire at one of our restaurants in the prior year of $0.1 million. |
(d) | The income tax effect related to the adjustments for impairment and other lease charges, gain on bargain purchase, acquisition costs, and other non-recurring income during the periods presented was calculated using an effective income tax rate of 25% for the three months ended March 31, 2019 and 21% for the three months ended April 1, 2018, respectively. |