Carrols Restaurant Group, Inc. Reports Financial Results for the Third Quarter 2018
SYRACUSE, N.Y.--(BUSINESS WIRE)--Nov 6, 2018--Carrols Restaurant Group, Inc. (“Carrols” or the “Company”) (Nasdaq:TAST) today announced financial results for the third quarter ended September 30, 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.
At the end of the third quarter of 2018, Carrols owned and operated 838 BURGER KING® restaurants. It acquired 10 additional BURGER KING® restaurants on October 2, 2018 following the end of the quarter.
Daniel T. Accordino, the Company’s Chief Executive Officer said, “We view our 1.6% increase in third quarter comparable restaurant sales positively considering the approximate 0.5% negative impact from Hurricane Florence and the formidable 7.5% comparison from the prior year. Product promotions included heightened value offerings such as the $3.49 King’s Meal deal, $1.69 chicken nuggets and $0.79 sausage biscuit, balanced by premium items such as the 2 for $6 mix and match, the Brewhouse KING™ and our Sourdough sandwiches. We were further encouraged that Adjusted EBITDA growth of 8.7% and Adjusted net income growth of 15.0%, respectively, outpaced top line growth of 4.1%.”
Accordino added, “We continue to expand Carrols through both opportunistic acquisitions and organic growth. So far this year, we have purchased 44 BURGER KING® restaurants and opened six new locations. We are now working diligently to instill operational best practices into our newest additions to our portfolio while also continuing to evaluate opportunities for future acquisitions and development.”
Third Quarter 2018 Financial Results
Restaurant sales increased 4.1% to $296.9 million in the third quarter of 2018 compared to $285.2 million in the third quarter of 2017. Comparable restaurant sales increased 1.6%, including an average check increase of 2.1% that was offset by a customer traffic decrease of 0.5%. The Company estimates that Hurricane Florence resulted in an approximately 0.5% negative impact to comparable restaurant sales.
Restaurant-level EBITDA (1) was $41.6 million in the third quarter of 2018 and increased 10.2% from $37.7 million in the prior year period. Restaurant-Level EBITDA margin was 14.0% of restaurant sales and increased 78 basis points from the third quarter of 2017. The Company benefitted from a 10.2% reduction in ground beef costs compared to the prior year quarter which contributed to a 105 basis point decline in cost of sales. This was offset in part by deleveraging of other restaurant operating expenses as a percentage of restaurant sales.
General and administrative expenses were $17.6 million in the third quarter of 2018 compared to $14.7 million in the prior year period. As a percentage of restaurant sales, general and administrative expenses increased 71 basis points to 5.9% compared to the prior year period reflecting higher stock compensation and acquisition-related costs.
Adjusted EBITDA (1) increased 8.7% to $26.3 million in the third quarter of 2018 compared to $24.2 million in the third quarter of 2017. Adjusted EBITDA margin increased 38 basis points to 8.9% of restaurant sales.
Income from operations rose to $9.7 million in the third quarter of 2018 compared to $8.7 million in the prior year period.
Interest expense held at $5.9 million in the third quarters of 2018 and 2017. Cash balances totaled $19.6 million at the end of the third quarter of 2018.
Net income was $3.6 million for the third quarter of 2018, or $0.08 per diluted share, compared to net income of $2.8 million, or $0.06 per diluted share, in the prior year period.
Adjusted net income (1) in the third quarter of 2018 was $4.0 million, or $0.09 per diluted share, compared to adjusted net income of $3.5 million, or $0.08 per diluted share, in the third quarter of 2017.
Recent Acquisition Activity
Carrols previously announced on October 8, 2018 that it had recently completed the acquisition of 43 BURGER KING® restaurants:On August 21, 2018, the Company completed the acquisition of two BURGER KING® restaurants in Detroit, MI; On September 5, 2018, Carrols completed the acquisition of 31 BURGER KING® restaurants in Virginia (30 restaurants) and in West Virginia (1 restaurant); and On October 2, 2018 (in the Company’s fourth quarter), the Company completed the acquisition of 10 BURGER KING® restaurants in South Carolina (8 restaurants) and in Georgia (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
Carrols is providing the following updated guidance for 2018: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
Daniel T. Accordino, Chief Executive Officer, and Paul R. Flanders, Chief Financial Officer, will host a conference call to discuss third quarter 2018 financial results today at 8:30 AM ET.
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 Tuesday, November 13, 2018. Investors and interested parties may listen to a webcast of this conference call by visiting www.carrols.com under the tab “Investor Relations”.
About the Company
Carrols is the largest BURGER KING® franchisee in the United States with 848 restaurants as of October 5, 2018 and has operated BURGER KING® restaurants since 1976. For more information on Carrols, please visit the company’s website at www.carrols.com.
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, plans or guidance 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. 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):
View source version on businesswire.com:https://www.businesswire.com/news/home/20181106005238/en/
CONTACT: Investor Relations:
Carrols Restaurant Group, Inc.
800-348-1074, ext. 3333
KEYWORD: UNITED STATES NORTH AMERICA NEW YORK
INDUSTRY KEYWORD: RESTAURANT/BAR RETAIL FOOD/BEVERAGE
SOURCE: Carrols Restaurant Group, Inc.
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PUB: 11/06/2018 07:00 AM/DISC: 11/06/2018 07:01 AM