Carrols Restaurant Group, Inc. Reports Financial Results for the Second Quarter of 2013 Business Wire SYRACUSE, N.Y. -- August 6, 2013 Carrols Restaurant Group, Inc. ("Carrols" or the “Company”) (Nasdaq: TAST) today announced financial results for the second quarter ended June30, 2013. The Company also updated its prior annual guidance for 2013. Highlights for the second quarter of 2013 versus the second quarter of 2012 include: *Restaurant sales increased 42.1% to $173.5 million including $78.2 million in sales from the BURGER KING® restaurants that were acquired on May 30, 2012; *Comparable restaurant sales at legacy restaurants increased 1.4% compared to an 8.8% increase in the prior year period, marking eight consecutive quarters of positive comparable restaurant sales; *Net loss from continuing operations was $3.5 million, or $0.15 per diluted share, compared to a net loss from continuing operations of $779,000, or $0.03 per diluted share, in the prior year period; *Net loss from continuing operations included a charge of $2.2 million ($0.06 per diluted share after tax) related to impairment and other lease charges (largely attributable to restaurant closings during the period). Net loss from continuing operations in the second quarter of 2012 included a loss on extinguishment of debt of $1.5 million ($0.04 per diluted share after tax), costs related to the Company's now settled EEOC litigation of $0.7 million ($0.02 per diluted share after tax) and acquisition-related expenses of $0.8 million ($0.02 per diluted share after tax); and *Adjusted EBITDA, a non-GAAP measure, was $10.4 million compared to $8.6 million in the prior year period. (Please refer to the reconciliation of Adjusted EBITDA to net loss from continuing operations in the tables at the end of this release). As of June30, 2013, Carrols owned and operated 566 BURGER KING® restaurants. Daniel T. Accordino, Chief Executive Officer of Carrols Restaurant Group, Inc. said, “We continued our trend of comparable restaurant sales gains with a 1.4% increase for the quarter at our legacy restaurants which we view as a solid accomplishment in the face of lapping an 8.8% comparison from 2012 and a somewhat heightened competitive environment. Restaurant-level profitability and margins also improved at our legacy restaurants as we effectively leveraged the higher sales, while also benefiting from favorable mix changes and higher check averages brought about by the brand initiatives over the past year.” Accordino continued, “We also made additional progress on a number of fronts with the Burger King restaurants that we acquired last year as we increased average weekly sales, continued to improve operations, and expanded both restaurant-level profitability and margins. On a sequential basis, operating margins increased 438 basis points at the acquired restaurants from the first quarter of 2013, and the overall difference compared to our legacy restaurants narrowed by 112 basis points in the quarter. We expect to make continual progress in improving the profitability at these restaurants in the future.” Accordino concluded, “On a macro level, it appears that there has recently been a modest pullback in consumer spending. And, while our July 2013 comparable sales were approximately 1% negative, this was against a strong 8.7% comparable sales increase in July 2012. Overall, we believe that Burger King's product pipeline and balanced promotional activity position the brand well as we move through the balance of the year.” Second Quarter 2013 Financial Results Restaurant sales grew 42.1% to $173.5 million in the second quarter of 2013, including $78.2 million of sales from the acquired restaurants, compared to $122.1 million in the second quarter of 2012. From the period of May 30, 2012 to July1, 2012, the acquired BURGER KING® restaurants generated sales of $27.5 million. Comparable restaurant sales at the legacy restaurants increased 1.4% including an increase in average check of 1.0% and a 0.4% increase in customer traffic. In the second quarter of 2012, comparable restaurant sales at legacy restaurants increased 8.8%. Average weekly sales for the acquired restaurants were $21,950 and increased 0.7% from the second quarter of 2012. This increase was net of an approximate 2% decline at the acquired restaurants from our elimination of 24 hour operations in a large number of such restaurants in the third quarter last year. Adjusted EBITDA was $10.4 million in the second quarter of 2013, or 6.0% of restaurant sales, compared to $8.6 million in the second quarter of 2012, or 7.1% of restaurant sales. Although both the legacy and acquired restaurants contributed positively to Adjusted EBITDA, Adjusted EBITDA margin was lower compared to the prior year period due to inclusion of the acquired restaurants for the entire quarter in 2013. The acquired restaurants also demonstrated a sequential improvement from the first quarter of 2013 in both Adjusted EBITDA and Adjusted EBITDA margin. General and administrative expenses were $9.5 million in the second quarter of 2013 compared to $8.1 million in the second quarter of 2012 but decreased, as a percentage of sales, from 6.6% to 5.5%. Included in the second quarter 2013 results were impairment and other lease charges of $2.2 million. This included impairment charges of $0.6 million for certain underperforming restaurants and a $1.6 million reserve for future rental payments and lease related costs due to the closing of four of the acquired restaurants. These four restaurants had negative restaurant-level cash flow of approximately $0.74 million for the prior twelve month period. Interest expense increased to $4.7 million from $2.6 million in the second quarter of 2012 from higher outstanding indebtedness and higher interest rates from the refinancing completed on May 30, 2012. Net loss from continuing operations was $3.5 million, or $0.15 per diluted share, compared to a net loss from continuing operations of $779,000, or $0.03 per diluted share, in the prior year period. Net loss from continuing operations included a charge of $2.2 million ($0.06 per diluted share after tax) related to impairment and other lease charges. Net loss from continuing operations in the second quarter of 2012 included certain charges, including a loss on extinguishment of debt of $1.5 million ($0.04 per diluted share after tax), costs related to the Company's EEOC litigation settled in the first quarter of 2013 of $0.7 million ($0.02 per diluted share after tax), and acquisition related expenses of $0.8 million ($0.02 per diluted share after tax). 2013 Guidance Based upon the Company's year-to-date performance and expectations for the remainder of the year, the Company has refined its prior annual guidance: *Total restaurant sales of $660 million to $680 million including a comparable restaurant sales increase at legacy restaurants of 1.5% to 3.5%; *A commodity cost increase of 1% to 2%; *General and administrative expenses of approximately $35 million to $36 million (excluding stock compensation costs); *An effective income tax benefit of 42% to 45% including the carryover benefit for 2012 WOTC credits; *Capital expenditures of approximately $45 million to $50 million, including $35 million to $40 million for remodeling 100 to 110 restaurants, of which 71 were completed in the first half of 2013. Estimated remodeling expenditures include $6.5 million for the relocation of two restaurants to new sites and for costs to scrape and completely rebuild four restaurants; and *Eight to ten restaurant closures for the year (excluding the two restaurants to be relocated). Conference Call Today Daniel T. Accordino, Chief Executive Officer, and Paul Flanders, Chief Financial Officer, will host a conference call to discuss second quarter 2013 financial results today at 8:30 AM ET. The conference call can be accessed live over the phone by dialing 877-941-4774 or for international callers by dialing 480-629-9760. 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 4629724. The replay will be available until Tuesday, August 13, 2013. The call will also be webcast live from www.carrols.com under the investor relations section. About the Company Carrols Restaurant Group, Inc. is Burger King Corporation's largest franchisee, globally, with 566 BURGER KING® restaurants as of June30, 2013 and has operated BURGER KING® restaurants since 1976. For more information on Carrols, please visit the company's website at www.carrols.com. 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' expectation or belief concerning future events. Without limiting the foregoing, these statements are often identified by the words "may", "might", "believes", "thinks", "anticipates", "plans", "expects", "intends" or similar expressions. In addition, expressions of our strategies, intentions or plans are also forward-looking statements. Such statements reflect management's current views with respect to future events and are subject to risks and uncertainties, both known and unknown. You are cautioned not to place undue reliance on these forward-looking statements as there are important factors that could cause actual results to differ materially from those in forward-looking statements, many of which are beyond our control. Investors are referred to the full discussion of risks and uncertainties as included in Carrols' filings with the Securities and Exchange Commission. Carrols Restaurant Group, Inc. Consolidated Statements of Operations (in thousands except per share amounts) (unaudited) (unaudited) Three Months Ended (a) Six Months Ended (a) June 30, July 1, June 30, July 1, 2013 2012 2013 2012 Restaurant $ 173,518 $ 122,104 $ 329,657 207,554 sales Costs and expenses: Cost of sales 52,870 38,877 101,501 64,999 Restaurant wages and 53,665 37,446 104,332 65,314 related expenses Restaurant rent 11,869 7,932 23,578 13,615 expense Other restaurant 27,547 18,221 53,783 31,864 operating expenses Advertising 7,926 4,604 15,020 7,300 expense General and administrative 9,524 8,081 18,602 14,280 expenses (b) Depreciation and 8,391 6,149 16,454 10,842 amortization Impairment and other lease 2,198 101 2,828 127 charges Other income — — (185 ) — Total costs and 173,990 121,411 335,913 208,341 expenses Loss from (472 ) 693 (6,256 ) (787 ) operations Interest 4,711 2,646 9,422 3,561 expense Loss on extinguishment — 1,509 — 1,509 of debt Loss from continuing operations (5,183 ) (3,462 ) (15,678 ) (5,857 ) before income taxes Benefit for (1,687 ) (2,683 ) (6,983 ) (2,175 ) income taxes Income from continuing (3,496 ) (779 ) (8,695 ) (3,682 ) operations Loss from discontinued — 668 — 44 operations, net of tax Net loss $ (3,496 ) $ (111 ) $ (8,695 ) $ (3,638 ) Diluted net income (loss) per share: Continuing $ (0.15 ) $ (0.03 ) $ (0.38 ) $ (0.16 ) operations Discontinued — 0.03 — — operations Diluted weighted average common 22,899 22,742 22,884 22,413 shares outstanding (c) The Company uses a 52 or 53 week fiscal year that ends on the Sunday (a) closest to December 31. The three and six months ended June 30, 2013 and July 1, 2012 each included thirteen and twenty six weeks, respectively. General and administrative expenses include stock-based compensation expense of $296 and $177 for the three months ended June 30, 2013 and July 1, 2012, respectively, and $597 and $279 for the six months ended June 30, 2013 and July 1, 2012, respectively. General and administrative expenses for the six months ended June 30, 2013 also included $85 of (b) costs related to the Company's litigation with the EEOC that was settled in January 2013. General and administrative expenses for the three and six months ended months ended July 1, 2012 also included $836 and $1,247, respectively, of legal and professional fees incurred in connection with the acquisition, and $674 and $769, respectively of costs related to the Company's litigation with the EEOC. Shares issuable for convertible preferred stock and non-vested (c) restricted stock were not included in the computation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented. Carrols Restaurant Group, Inc. 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) Six Months Ended (a) June 30, 2013 July 1, 2012 June 30, July 1, 2013 2012 Restaurant Sales: (a) Legacy $ 95,311 $ 94,634 $ 181,076 $ 180,084 restaurants Acquired 78,207 27,470 148,581 27,470 restaurants Total restaurant $ 173,518 $ 122,104 $ 329,657 $ 207,554 sales Change in Comparable 1.4 % 8.8 % 1.2 % 7.4 % Restaurant Sales (b) Adjusted 10,413 8,630 13,708 12,477 EBITDA (c) Adjusted EBITDA margin 6.0 % 7.1 % 4.2 % 6.0 % (c) Average Weekly Sales per Restaurant: (d) Legacy 25,142 24,763 23,804 23,461 restaurants Acquired 21,950 21,798 20,848 21,798 restaurants Expenses - Legacy Restaurants: (e) Cost of sales 29.8 % 31.1 % 29.7 % 30.8 % Restaurant wages and 29.9 % 30.2 % 30.9 % 31.3 % related expenses Restaurant 6.0 % 6.1 % 6.4 % 6.4 % rent expense Other restaurant 14.8 % 14.5 % 15.2 % 15.2 % operating expenses Advertising 4.4 % 3.7 % 4.3 % 3.5 % expense Expenses - Acquired Restaurants: (e) Cost of sales 31.3 % 34.4 % 32.1 % 34.4 % Restaurant wages and 32.1 % 32.4 % 32.6 % 32.4 % related expenses Restaurant 7.8 % 7.8 % 8.1 % 7.8 % rent expense Other restaurant 17.2 % 16.5 % 17.6 % 16.5 % operating expenses Advertising 4.8 % 3.9 % 4.8 % 3.9 % expense Number of Restaurants: Restaurants at beginning 571 297 572 298 of period New — — — — restaurants Acquired — 278 — 278 restaurants Closed (5 ) (1 ) (6 ) (2 ) restaurants Restaurants at end of 566 574 566 574 period At At 6/30/2013 12/30/2012 Long-term $ 160,972 $ 161,492 Debt (f) Cash (including $20 million 33,129 58,290 of restricted cash) Acquired restaurants represent the Burger King restaurants acquired from (a) Burger King Corporation on May 30, 2012. Legacy restaurants refer to the Company's Burger King restaurants other than the acquired restaurants. Restaurants are generally included in comparable restaurant sales after they have been open or owned for 12 months. Sales from the acquired (b) restaurants are excluded from changes in the comparable restaurant sales in the three months ended June 30, 2013 as they were not operated by us for the entire three months ended July 1, 2012. 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 (c) methods of calculation. Refer to the Company's reconciliation of EBITDA and Adjusted EBITDA to net loss from continuing operations for further detail. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of total restaurant sales. (d) Average weekly restaurant sales are derived by dividing restaurant sales by the average number of restaurants operating during the period. (e) Represents restaurant expenses as a percentage of sales for the respective group of restaurants. Long-term debt (including current portion) at June 30, 2013 included $150,000 of the Company's 11.25% Senior Secured Second Lien Notes, $1,198 of lease financing obligations and $9,774 of capital lease (f) obligations. Long-term debt (including current portion) at December 30, 2012 included $150,000 of the Company's 11.25% Senior Secured Second Lien Notes, $1,197 of lease financing obligations and $10,295 of capital lease obligations. Carrols Restaurant Group, Inc. EBITDA and Adjusted EBITDA GAAP Reconciliation (unaudited) (unaudited) Three Months Ended (a) Six Months Ended (a) June 30, 2013 July 1, June 30, July 1, 2012 2013 2012 EBITDA and Adjusted EBITDA: (a) Net loss from continuing $ (3,496 ) $ (779 ) $ (8,695 ) $ (3,682 ) operations Benefit for (1,687 ) (2,683 ) (6,983 ) (2,175 ) income taxes Interest 4,711 2,646 9,422 3,561 expense Depreciation and 8,391 6,149 16,454 10,842 amortization EBITDA 7,919 5,333 10,198 8,546 Impairment and other lease 2,198 101 2,828 127 charges Acquisition and integration — 836 — 1,247 costs EEOC litigation and settlement — 674 85 769 costs Stock compensation 296 177 597 279 expense Loss on extinguishment — 1,509 — 1,509 of debt Adjusted EBITDA $ 10,413 $ 8,630 $ 13,708 $ 12,477 EBITDA and Adjusted EBITDA are non-GAAP financial measures. EBITDA represents net loss from continuing operations, before 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, EEOC litigation and settlement 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 in the table (a) 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 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 loss from continuing operations and EBITDA and Adjusted EBITDA. Contact: Investor Relations: Carrols Restaurant Group, Inc. 800-348-1074, ext. 3333 email@example.com
Carrols Restaurant Group, Inc. Reports Financial Results for the Second Quarter of 2013
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