UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): | December 13, 2011 |
CKE Restaurants, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)
Delaware | 1-11313 and 333-169977 | 33-0602639 |
_____________________ (State or other jurisdiction |
_____________ (Commission |
______________ (I.R.S. Employer |
of incorporation) | File Number) | Identification No.) |
6307 Carpinteria Ave., Ste. A, Carpinteria, California | 93013 | |
_________________________________ (Address of principal executive offices) |
___________ (Zip Code) |
Registrants telephone number, including area code: | (805) 745-7500 |
Not Applicable
______________________________________________
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On December 13, 2011, CKE Restaurants, Inc. (the "Company") issued a press release announcing the Company's results for the third fiscal quarter ended November 7, 2011. The press release is attached as Exhibit 99.1 hereto.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release, dated December 13, 2011, issued by CKE Restaurants, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CKE Restaurants, Inc. | ||||
December 14, 2011 | By: |
/s/ Theodore Abajian
|
||
|
||||
Name: Theodore Abajian | ||||
Title: Executive Vice President and Chief Financial Officer |
Exhibit Index
Exhibit No. | Description | |
|
|
|
99.1
|
Press release, dated December 13, 2011, issued by CKE Restaurants, Inc. |
CKE RESTAURANTS, INC. REPORTS THIRD QUARTER FISCAL 2012 RESULTS
CARPINTERIA, Calif. December 13, 2011 CKE Restaurants, Inc. (CKE) announced today its third fiscal quarter financial results for the twelve weeks ended November 7, 2011. The Company expects to file its Quarterly Report on Form 10-Q with the Securities and Exchange Commission (SEC) on Wednesday, December 14, 2011 after the close of the financial markets.
Company-Operated Same-Store Sales and Average Unit Volumes
Blended same-store sales increased 1.9% in the third quarter of fiscal 2012. Carls Jr.® same-store sales increased 2.0% and Hardees® same-store sales increased 1.8%.
Third Quarter | Year to Date | |||||||
Brand
|
FY12 | FY11 | FY12 | FY11 | ||||
Carls Jr.
|
2.0% | -5.0% | 2.0% | -6.2% | ||||
Hardees
|
1.8% | 8.3% | 5.0% | 4.0% | ||||
Blended
|
1.9% | 0.9% | 3.4% | -1.7% |
At the end of the third quarter, the blended fifty-two week average unit volume for Carls Jr. and Hardees was $1,246,000. The fifty-two week average unit volumes for Carls Jr. and Hardees were $1,405,000 and $1,102,000, respectively.
To date, the Companys blended same-store sales for the fourth quarter of fiscal 2012 are positive in the low single digit range.
Third Quarter Results
The Company reported total revenue of $292.6 million for the fiscal 2012 third quarter, an increase of $7.8 million, or 2.8%, compared to the fiscal 2011 third quarter.
Hardees continued to generate positive same-store sales results during the third quarter. Including period ten and the third quarter, Hardees has now had twenty-two consecutive periods and six consecutive quarters of positive same-store sales. Carls Jr. also performed well, posting its third consecutive quarter of positive same-store sales, said Andrew F. Puzder, Chief Executive Officer.
For the fiscal 2012 third quarter, company-operated restaurant-level adjusted EBITDA margin was 16.9%, a 30 basis point decrease compared to the prior year quarter. Food and packaging costs increased 110 basis points, primarily as a result of higher commodity costs for beef, oil and cheese products. Advertising increased 20 basis points. These increases were offset by a 50 basis point decrease in labor costs and a 50 basis point decrease in occupancy and other expense, excluding depreciation and amortization. Refer to the further discussion of company-operated restaurant-level adjusted EBITDA margin under the heading Non-GAAP Measures below.
Adjusted EBITDA was $37.9 million in the third quarter of fiscal 2012, $0.6 million lower than the prior year quarter. Refer to the further discussion of Adjusted EBITDA under the heading Non-GAAP Measures below, which includes a reconciliation of net (loss) income to Adjusted EBITDA.
As of November 7, 2011, cash and cash equivalents were $61.1 million and the Company had $68.5 million available under its credit facility with no borrowings outstanding.
During the third quarter of fiscal 2012, the Company purchased $8.2 million of the principal amount of its outstanding 11.375% Senior Secured Second Lien Notes due 2018 (the Notes) at par value in an open market transaction and paid the associated accrued and unpaid interest on these purchased Notes of $0.2 million. The Company recognized a loss of $0.3 million on the early extinguishment of these Notes. Subsequent to the purchase, and as of November 7, 2011, the aggregate principal amount of the Notes outstanding was $551.8 million.
This fiscal year, through November 7, 2011, the Company has entered into agreements with independent third parties under which the Company sold and leased back 29 restaurant properties. The Company received pre-tax net proceeds of $40.7 million in connection with these transactions. During the third quarter of fiscal 2012, the Company entered into 18 of these transactions, generating pre-tax net proceeds of $24.7 million.
In accordance with the indenture governing the Notes, the Company is required to make an offer to repurchase its Notes with a portion of the net proceeds received from sale-leaseback transactions. Pursuant to these requirements, on December 1, 2011, the Company commenced a tender offer to purchase up to $27.9 million of the principal amount of the Notes (Tender Offer) at a redemption price of 103%, which expires on December 29, 2011. In addition to the Tender Offer, on December 1, 2011, the holders of the Notes were notified that the Company will redeem on January 4, 2012, conditioned in part on the result of the Tender Offer, up to $20.0 million aggregate principal amount of the Notes outstanding on January 4, 2012 (Redemption) at a redemption price of 103% pursuant to the terms of the indenture governing the Notes. Pursuant to the Redemption, the Notes to be redeemed will be reduced so that the total principal amount of Notes purchased in both the Tender Offer and Redemption will not exceed $30.0 million.
Capital expenditures for the fiscal 2012 third quarter were $16.3 million, of which $6.7 million related to new store openings, dual-branding and remodeling projects. For fiscal 2012, the Company expects capital expenditures to be between $55.0 million and $60.0 million.
As of November 7, 2011, the Companys system-wide restaurant portfolio consisted of:
Carl's Jr. | Hardee's | Other | Total | |||||||||||||
Company-operated |
425 | 469 | 0 | 894 | ||||||||||||
Franchised |
692 | 1,225 | 10 | 1,927 | ||||||||||||
Licensed |
175 | 223 | 0 | 398 | ||||||||||||
Total |
1,292 | 1,917 | 10 | 3,219 | ||||||||||||
Conference Call Information
The Company will host its third quarter fiscal 2012 conference call on Wednesday, December 14, 2011, at 8:00 a.m. (PDT). The dial in information is as follows: (973) 500-2164 U.S. and international. The conference ID is 31999371.
A replay will be made available approximately two hours after the conclusion of the live event. The replay will be available for 7 days and can be accessed by calling (404) 537-3406. The conference ID is 31999371.
Company Overview
CKE Restaurants, Inc. is a privately held company headquartered in Carpinteria, Calif. As of the end of the third quarter of fiscal 2012, the Company, through its subsidiaries, had a total of 3,219 franchised, licensed or company-operated restaurants in 42 states and in 23 countries. For more information about CKE, please visit www.ckr.com.
Forward-looking Statements
Matters discussed in this press release contain forward-looking statements, including those relating to the Companys expected capital expenditures, the Tender Offer and the Redemption (including the timing and amounts expended by the Company in connection with each), the timing of the Companys earnings conference call and the filing of the Companys periodic reports with the SEC, which are based on managements current beliefs and assumptions. These statements constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that are often difficult to predict and beyond the Companys control and which may cause results to differ materially from expectations. Factors that could cause the Companys results to differ materially from those described include, but are not limited to, the Companys ability to compete with other restaurants, supermarkets and convenience stores for customers, employees, restaurant locations and franchisees; changes in consumer preferences, perceptions and spending patterns; changes in food, packaging and supply costs; the ability of the Companys key suppliers to continue to deliver premium-quality products to the Company at moderate prices; the Companys ability to successfully enter new markets, complete construction of new restaurants and complete remodels of existing restaurants; changes in general economic conditions and the geographic concentration of the Companys restaurants, which may affect the Companys business; the Companys ability to attract and retain key personnel; the Companys franchisees willingness to participate in the Companys strategy; the operational and financial success of the Companys franchisees; the willingness of the Companys vendors and service providers to supply goods and services pursuant to customary credit arrangements; risks associated with operating in international locations; the effect of the medias reports regarding food-borne illnesses, food tampering and other health-related issues on the Companys reputation and its ability to procure or sell food products; the seasonality of the Companys operations; the effect of increasing labor costs including healthcare related costs; the Companys ability to comply with existing and future health, employment, environmental and other government regulations; the Companys ability to adequately protect its intellectual property; the potentially conflicting interests of the Companys sole stockholder and the Companys creditors, the Companys substantial leverage which could limit its ability to raise capital, react to economic changes or meet obligations under its indebtedness; the effect of restrictive covenants in the Companys indenture and credit facility on the Companys business; and other factors as discussed in the Companys filings with the SEC.
You are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date of this press release. We undertake no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise, except as required by law.
Merger
As previously reported, on July 12, 2010, CKE Holdings, Inc., an affiliate of Apollo Management VII, L.P., acquired all of the outstanding shares of the Company (the Merger). All references to Predecessor relate to CKE and its consolidated subsidiaries for periods prior to the Merger and references to Successor relate to CKE and its consolidated subsidiaries for periods subsequent to the Merger.
Contact:
Beth Mansfield
Public Relations
(805) 745-7741
bmansfield@ckr.com
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
Successor | ||||||||
Twelve | Twelve | |||||||
Weeks Ended | Weeks Ended | |||||||
November 7, 2011 | November 1, 2010 | |||||||
Revenue: |
||||||||
Company-operated restaurants |
$ | 256,976 | $ | 250,097 | ||||
Franchised and licensed restaurants and other |
35,643 | 34,690 | ||||||
Total revenue |
292,619 | 284,787 | ||||||
Operating costs and expenses: |
||||||||
Restaurant operating costs: |
||||||||
Food and packaging |
78,763 | 73,879 | ||||||
Payroll and other employee benefits |
72,485 | 71,701 | ||||||
Occupancy and other |
62,926 | 61,756 | ||||||
Restaurant operating costs |
214,174 | 207,336 | ||||||
Franchised and licensed restaurants and other |
17,907 | 16,995 | ||||||
Advertising |
15,698 | 14,880 | ||||||
General and administrative |
30,570 | 30,033 | ||||||
Facility action charges, net |
262 | 822 | ||||||
Other operating expenses(1) |
| 167 | ||||||
Total operating costs and expenses |
278,611 | 270,233 | ||||||
Operating income |
14,008 | 14,554 | ||||||
Interest expense |
(17,415 | ) | (18,055 | ) | ||||
Other (expense) income, net |
(252 | ) | 803 | |||||
Loss before income taxes |
(3,659 | ) | (2,698 | ) | ||||
Income tax benefit |
(2,142 | ) | (2,743 | ) | ||||
Net (loss) income |
$ | (1,517 | ) | $ | 45 | |||
(1) | Other operating expenses includes transaction-related costs consisting of accounting, investment banking, legal, and other costs of $167 for the twelve weeks ended November 1, 2010. |
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
Successor | Successor/ | Successor | Predecessor | |||||||||||||
Predecessor | ||||||||||||||||
Forty | Forty | Sixteen | Twenty-Four | |||||||||||||
Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | |||||||||||||
November 7, 2011 | November 1, 2010 | November 1, 2010 | July 12, 2010 | |||||||||||||
Revenue: |
||||||||||||||||
Company-operated restaurants |
$ | 871,571 | $ | 836,579 | $ | 336,048 | $ | 500,531 | ||||||||
Franchised and licensed restaurants and other |
121,360 | 197,356 | 45,768 | 151,588 | ||||||||||||
Total revenue |
992,931 | 1,033,935 | 381,816 | 652,119 | ||||||||||||
Operating costs and expenses: |
||||||||||||||||
Restaurant operating costs: |
||||||||||||||||
Food and packaging |
267,896 | 247,830 | 99,188 | 148,642 | ||||||||||||
Payroll and other employee benefits |
249,458 | 243,464 | 96,073 | 147,391 | ||||||||||||
Occupancy and other |
209,002 | 200,416 | 82,278 | 118,138 | ||||||||||||
Restaurant operating costs |
726,356 | 691,710 | 277,539 | 414,171 | ||||||||||||
Franchised and licensed restaurants and other |
62,225 | 137,377 | 22,257 | 115,120 | ||||||||||||
Advertising |
51,158 | 49,375 | 19,728 | 29,647 | ||||||||||||
General and administrative |
100,876 | 109,620 | 49,761 | 59,859 | ||||||||||||
Facility action charges, net |
703 | 1,549 | 959 | 590 | ||||||||||||
Other operating expenses, net (1)(2) |
545 | 30,077 | 19,828 | 10,249 | ||||||||||||
Total operating costs and expenses |
941,863 | 1,019,708 | 390,072 | 629,636 | ||||||||||||
Operating income (loss) |
51,068 | 14,227 | (8,256 | ) | 22,483 | |||||||||||
Interest expense |
(59,626 | ) | (32,652 | ) | (24,035 | ) | (8,617 | ) | ||||||||
Other (expense) income, net (3) |
(1,668 | ) | (12,641 | ) | 968 | (13,609 | ) | |||||||||
(Loss) income before income taxes |
(10,226 | ) | (31,066 | ) | (31,323 | ) | 257 | |||||||||
Income tax (benefit) expense |
(3,877 | ) | (708 | ) | (8,480 | ) | 7,772 | |||||||||
Net loss |
$ | (6,349 | ) | $ | (30,358 | ) | $ | (22,843 | ) | $ | (7,515 | ) | ||||
(1) | Other operating expenses, net includes transaction-related costs consisting of accounting, investment banking, legal, and other costs of $545, $33,519, $19,828, and $13,691 for the forty weeks ended November 7, 2011 (Successor), forty weeks ended November 1, 2010 (Successor/Predecessor), sixteen weeks ended November 1, 2010 (Successor) and twenty-four weeks ended July 12, 2010 (Predecessor), respectively. |
(2) | The forty weeks ended November 1, 2010 (Successor/Predecessor) and twenty-four weeks ended July 12, 2010 (Predecessor) also include a $3,442 gain on the sale of the distribution center assets. |
(3) | Other (expense) income, net includes transaction-related costs, related to the termination of a prior merger agreement, of $14,283 for both the forty weeks ended November 1, 2010 (Successor/Predecessor) and twenty-four weeks ended July 12, 2010 (Predecessor). |
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and par values)
(Unaudited)
Successor | ||||||||
November 7, | January 31, | |||||||
2011 | 2011 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 61,075 | $ | 42,586 | ||||
Accounts receivable, net of allowance for doubtful accounts of $72 as of November 7,
2011 and $92 as of January 31, 2011 |
27,059 | 27,533 | ||||||
Related party trade receivables |
150 | 216 | ||||||
Inventories |
16,733 | 14,526 | ||||||
Prepaid expenses |
14,246 | 14,219 | ||||||
Assets held for sale |
| 196 | ||||||
Advertising fund assets, restricted |
17,481 | 18,464 | ||||||
Deferred income tax assets, net |
16,503 | 17,079 | ||||||
Other current assets |
3,824 | 4,065 | ||||||
Total current assets |
157,071 | 138,884 | ||||||
Notes receivable, net |
| 172 | ||||||
Property and equipment, net of accumulated depreciation and amortization of $90,792 as of
November 7, 2011 and $36,342 as of January 31, 2011 |
625,971 | 640,194 | ||||||
Property under capital leases, net of accumulated amortization of $8,397 as of November
7, 2011 and $3,638 as of January 31, 2011 |
33,200 | 36,156 | ||||||
Goodwill |
208,885 | 207,817 | ||||||
Intangible assets, net |
436,874 | 448,499 | ||||||
Other assets, net |
21,509 | 24,444 | ||||||
Total assets |
$ | 1,483,510 | $ | 1,496,166 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of bank indebtedness and other long-term debt |
$ | 3 | $ | 29 | ||||
Current portion of capital lease obligations |
8,220 | 7,434 | ||||||
Accounts payable |
38,805 | 41,442 | ||||||
Advertising fund liabilities |
17,481 | 18,464 | ||||||
Other current liabilities |
105,311 | 81,958 | ||||||
Total current liabilities |
169,820 | 149,327 | ||||||
Bank indebtedness and other long-term debt, less current portion |
542,799 | 589,987 | ||||||
Capital lease obligations, less current portion |
36,626 | 41,082 | ||||||
Deferred income tax liabilities, net |
151,101 | 151,828 | ||||||
Other long-term liabilities |
169,575 | 139,173 | ||||||
Total liabilities |
1,069,921 | 1,071,397 | ||||||
Stockholders equity: |
||||||||
Common stock, $0.01 par value; 100 shares authorized, issued and outstanding as of
November 7, 2011 and January 31, 2011 |
| | ||||||
Additional paid-in capital |
456,190 | 452,659 | ||||||
Investment in Parent Notes |
(8,362 | ) | | |||||
Accumulated deficit |
(34,239) | ) | (27,890 | ) | ||||
Total stockholders equity |
413,589 | 424,769 | ||||||
Total liabilities and stockholders equity |
$ | 1,483,510 | $ | 1,496,166 | ||||
Non-GAAP Measures
Adjusted EBITDA and Adjusted EBITDAR
Adjusted EBITDA represents income (loss) before income taxes, interest income and expense, asset impairments, facility action charges, depreciation and amortization, management fees, pro-forma cost savings as a result of becoming privately held, the effects of acquisition accounting adjustments, and certain non-cash and unusual items. The Company calculates Adjusted EBITDAR by adjusting Adjusted EBITDA to exclude the Companys aggregate cash rent expense, less rental income from franchisees and third parties, subject to certain adjustments and exclusions.
Management uses Adjusted EBITDA and Adjusted EBITDAR because it believes that they are important measures of operating performance. In particular, management considers Adjusted EBITDA and Adjusted EBITDAR to be useful financial measures that highlight trends in the Companys business and provide a comparable measure of profitability of similar enterprises. In addition, management believes that Adjusted EBITDA and Adjusted EBITDAR are effective, when used in conjunction with net loss or loss before income taxes, in evaluating asset performance, and differentiating efficient operators in the industry. Furthermore, management believes that Adjusted EBITDA and Adjusted EBITDAR provide useful information to potential investors and analysts because these measures provide insight into managements evaluation of the Companys results of operations. The calculations of Adjusted EBITDA and Adjusted EBITDAR may not be consistent with EBITDA and EBITDAR for the purpose of the covenants in the agreements governing the Companys indebtedness.
Adjusted EBITDA and Adjusted EBITDAR are not measures of financial performance under U.S. GAAP, are not intended to represent cash flows from operations under U.S. GAAP and should not be used as alternatives to net loss, or loss before income taxes, as indicators of operating performance, or as alternatives to cash flow from operating, investing or financing activities as a measure of liquidity. Management compensates for the limitations of using Adjusted EBITDA and Adjusted EBITDAR by using them only to supplement the Companys U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the Companys business. Adjusted EBITDA and Adjusted EBITDAR have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of the Companys results as reported under U.S. GAAP.
Some of the limitations of Adjusted EBITDA and Adjusted EBITDAR are:
| Adjusted EBITDA and Adjusted EBITDAR do not reflect cash used for capital expenditures; |
| Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and Adjusted EBITDA and Adjusted EBITDAR do not reflect the cash requirements for such replacements; |
| Adjusted EBITDA and Adjusted EBITDAR do not reflect changes in, or cash requirements for, the Companys working capital requirements; |
| Adjusted EBITDA and Adjusted EBITDAR do not reflect the cash necessary to make payments of interest or principal on the Companys indebtedness; and |
| Adjusted EBITDAR does not reflect the cash necessary to make payments of rent under the Companys lease obligations. |
While Adjusted EBITDA and Adjusted EBITDAR are frequently used as measures of operations and the ability to meet indebtedness service requirements, these measures as calculated by the Company are not necessarily directly comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation.
CKE RESTAURANTS, INC. | ||||||||||||||||
ADJUSTED EBITDA AND ADJUSTED EBITDAR | ||||||||||||||||
(In thousands) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Successor/ | ||||||||||||||||
Successor | Successor | Successor | Predecessor | |||||||||||||
Twelve | Twelve | Forty | Forty | |||||||||||||
Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | |||||||||||||
7-Nov-11 | 1-Nov-10 | 7-Nov-11 | 1-Nov-10 | |||||||||||||
Net (loss) income |
$ | (1,517 | ) | $ | 45 | $ | (6,349 | ) | $ | (30,358 | ) | |||||
Interest expense |
17,415 | 18,055 | 59,626 | 32,652 | ||||||||||||
Income tax benefit |
(2,142 | ) | (2,743 | ) | (3,877 | ) | (708 | ) | ||||||||
Depreciation and amortization |
19,030 | 17,796 | 62,873 | 57,421 | ||||||||||||
Facility action charges, net |
262 | 822 | 703 | 1,549 | ||||||||||||
Gain on sale of distribution center assets |
| | | (3,442 | ) | |||||||||||
Transaction-related costs (1) |
| 167 | 545 | 47,802 | ||||||||||||
Management fees (2) |
574 | 575 | 1,916 | 637 | ||||||||||||
Share-based compensation expense |
1,063 | 1,291 | 3,531 | 16,762 | ||||||||||||
Losses on asset and other disposals |
343 | 350 | 1,339 | 2,531 | ||||||||||||
Difference between U.S. GAAP rent and
cash rent |
570 | 1,317 | 1,847 | 2,221 | ||||||||||||
Cost savings (3) |
| | | 970 | ||||||||||||
Other, net (4) |
2,256 | 812 | 8,071 | (171 | ) | |||||||||||
Adjusted EBITDA |
$ | 37,854 | $ | 38,487 | $ | 130,225 | $ | 127,866 | ||||||||
Net Rent (5) |
11,650 | 10,783 | 38,933 | 37,090 | ||||||||||||
Adjusted EBITDAR |
$ | 49,504 | $ | 49,270 | $ | 169,158 | $ | 164,956 |
(1) | Transaction-related costs include investment banking, legal, and other costs related to the Merger, as well as costs related to the termination of a prior merger agreement. |
(2) | Represents the amounts associated with the management services agreement with Apollo Management VII, L.P. for on-going investment banking, consulting, and financial planning services, which are included in general and administrative expense. |
(3) | Cost savings reflects pro-forma cost savings amounts expected to be realized as a result of becoming a privately held company. |
(4) | Other, net includes the net impact of purchase accounting, executive retention bonus, severance costs and disposition business expense. For the forty weeks ended November 1, 2010 (Successor/Predecessor), other, net also includes adjusted EBITDA from the Companys distribution business, which it no longer owns or operates. |
(5) | Represents aggregate cash rent expense of the Company less rental income from franchisees and third parties, subject to certain adjustments and exclusions. |
Company-Operated Restaurant-Level Non-GAAP Measures
Company-operated restaurant-level adjusted EBITDA is expressed in dollars and defined as company-operated restaurants revenue less restaurant operating costs excluding depreciation and amortization expense and including advertising expense. Restaurant operating costs are the expenses incurred directly by company-operated restaurants in generating revenues and do not include advertising costs, general and administrative expenses or facility action charges. Company-operated restaurant-level adjusted EBITDA margin is expressed as a percentage and defined as company-operated restaurant-level adjusted EBITDA divided by company-operated restaurants revenue.
Company-operated restaurant-level adjusted EBITDA and company-operated restaurant-level adjusted EBITDA margin are non-GAAP measures utilized by management internally to evaluate and compare the Companys operating performance for company-operated restaurants between periods. In addition, management believes that these financial measures provide useful information to potential investors and analysts because they provide insight into managements evaluation of the Companys results of operations. These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable GAAP measures. These non-GAAP measures have certain limitations including the following:
| Because not all companies calculate these measures identically, the Companys presentation of such measures may not be comparable to similarly titled measures of other companies; |
| These measures exclude certain general and administrative and other operating costs, which should also be considered when assessing the Companys operating performance; and |
| These measures exclude depreciation and amortization, and although they are non-cash charges, the assets being depreciated or amortized will often have to be replaced and new investments made to support the operations of the Companys restaurant portfolio. |
The following is a reconciliation of company-operated restaurant-level adjusted EBITDA and company-operated restaurant-level adjusted EBITDA margin (unaudited):
Successor | Successor | Successor | Successor/ | |||||||||||||
Predecessor | ||||||||||||||||
Twelve | Twelve | Forty | Forty | |||||||||||||
Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | |||||||||||||
November 7, 2011 | November 1, 2010 | November 7, 2011 | November 1, 2010 | |||||||||||||
Company-operated restaurant-level
adjusted EBITDA: |
||||||||||||||||
Company-operated restaurants revenue |
$ | 256,976 | $ | 250,097 | $ | 871,571 | $ | 836,579 | ||||||||
Less: restaurant operating costs |
(214,174 | ) | (207,336 | ) | (726,356 | ) | (691,710 | ) | ||||||||
Add: depreciation and amortization expense |
16,376 | 15,180 | 54,363 | 50,624 | ||||||||||||
Less: advertising expense |
(15,698 | ) | (14,880 | ) | (51,158 | ) | (49,375 | ) | ||||||||
Company-operated restaurant-level
adjusted EBITDA |
$ | 43,480 | $ | 43,061 | $ | 148,420 | $ | 146,118 | ||||||||
Company-operated restaurant-level
adjusted EBITDA margin |
16.9 | % | 17.2 | % | 17.0 | % | 17.5 | % |