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 5.1% to $240.8 million from $229.1 million in the fourth quarter of 2015, including $66.5 million in sales from the 234 BURGER KING® restaurants acquired from 2014 to 2016(1). One additional operating week in 2015 contributed approximately $16.0 million to restaurant sales in the prior year period. On a comparable 13 week basis, total restaurant sales increased 13.0%; |
• | Comparable restaurant sales (on a comparable 13-week basis) increased 3.2% compared to a 5.1% increase in the prior year period; |
• | Adjusted EBITDA(2) was $20.4 million compared to $23.7 million in the prior year period. The Company estimates that the additional operating week in 2015 contributed approximately $4.0 million to Adjusted EBITDA; |
• | Net income was $29.5 million, or $0.65 per diluted share, compared to net income of $7.0 million, or $0.16 per diluted share, in the prior year period. The significant increase in net income largely reflected a $30.4 million reversal of the valuation allowance previously established against net deferred income tax assets; |
• | Adjusted net income(2) was $2.0 million, or $0.04 per diluted share, compared to adjusted net income of $6.5 million, or $0.14 per diluted share, in the prior year period which included the additional operating week ($2.5 million, or $0.06 per diluted share, after taxes). |
• | Restaurant sales increased 9.8% to $943.6 million from $859.0 million, including $243.1 million in sales from BURGER KING® restaurants acquired from 2014 to 2016(1). The additional operating week in 2015 contributed approximately $16.0 million in restaurant sales; |
• | Comparable restaurant sales increased 2.3% (on a comparable 52-week basis) compared to a 7.4% increase in the prior year; |
• | Adjusted EBITDA(2) increased 16.6% to $89.5 million from $76.7 million in the prior year period. The Company estimates that the additional operating week in 2015 contributed approximately $4.0 million to Adjusted EBITDA; |
• | Net income was $45.5 million, or $1.01 per diluted share, compared to net income of $4,000, or $0.00 per diluted share, in the prior year period. Net income in 2016 included a $30.4 million benefit from the reversal of the valuation allowance previously established against net deferred income tax assets, and net income in 2015 included a charge of $12.6 million related to the refinancing of the Company’s debt; |
• | Adjusted net income(2) was $17.9 million, or $0.40 per diluted share, compared to adjusted net income of $13.4 million, or $0.30 per diluted share, in the prior year period which included the additional operating week ($2.5 million, or $0.06 per diluted share, after taxes). |
(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 or to income from operations in the tables at the end of this release. |
• | Total restaurant sales of $1.02 billion to $1.07 billion, including a comparable restaurant sales increase of 2% to 4%; |
• | Commodity cost increase of 0% to 2% including a modest decrease in beef costs; |
• | General and administrative expenses (excluding stock compensation and potential acquisition costs) of $54 million to $56 million; |
• | Adjusted EBITDA of $90 million to $100 million; |
• | Capital expenditures of approximately $55 million to $75 million which includes remodeling a total of 20 to 25 restaurants, the rebuilding of 5 to 7 restaurants and the construction of 7 to 15 new restaurants (including 2 to 3 relocations of existing restaurants). Capital expenditures also include $10 million to $12 million for non-recurring investments in new kitchen production and product holding systems, new training systems and certain POS system upgrades; |
• | The opening of 7 to 15 new restaurants (including 2 relocations) and the closing of 20 to 25 existing restaurants; and |
• | An effective income tax rate of 20% to 25%. |
(unaudited) | (unaudited) | ||||||||||||||
Three Months Ended (a) | Twelve Months Ended (a) | ||||||||||||||
January 1, 2017 | January 3, 2016 | January 1, 2017 | January 3, 2016 | ||||||||||||
Restaurant sales | $ | 240,826 | $ | 229,056 | $ | 943,583 | $ | 859,004 | |||||||
Costs and expenses: | |||||||||||||||
Cost of sales | 65,131 | 62,300 | 250,112 | 240,322 | |||||||||||
Restaurant wages and related expenses | 76,460 | 70,815 | 297,766 | 267,950 | |||||||||||
Restaurant rent expense | 16,737 | 14,995 | 64,814 | 58,096 | |||||||||||
Other restaurant operating expenses | 38,335 | 35,467 | 148,946 | 135,874 | |||||||||||
Advertising expense | 10,544 | 8,691 | 41,299 | 32,242 | |||||||||||
General and administrative expenses (b) (c) | 14,395 | 14,252 | 54,956 | 50,515 | |||||||||||
Depreciation and amortization | 12,682 | 10,629 | 47,295 | 39,845 | |||||||||||
Impairment and other lease charges | 1,162 | 346 | 2,355 | 3,078 | |||||||||||
Other expense (income) | (697 | ) | — | 338 | (126 | ) | |||||||||
Total costs and expenses | 234,749 | 217,495 | 907,881 | 827,796 | |||||||||||
Income from operations | 6,077 | 11,561 | 35,702 | 31,208 | |||||||||||
Interest expense | 4,700 | 4,543 | 18,315 | 18,569 | |||||||||||
Loss on extinguishment of debt | — | — | — | 12,635 | |||||||||||
Income before income taxes | 1,377 | 7,018 | 17,387 | 4 | |||||||||||
Benefit for income taxes | (28,085 | ) | — | (28,085 | ) | — | |||||||||
Net income | $ | 29,462 | $ | 7,018 | $ | 45,472 | $ | 4 | |||||||
Basic and diluted net income per share (d) (e): | $ | 0.65 | $ | 0.16 | $ | 1.01 | $ | — | |||||||
Basic weighted average common shares outstanding | 35,257 | 35,038 | 35,178 | 34,959 | |||||||||||
Diluted weighted average common shares outstanding | 44,850 | 44,698 | 44,851 | 44,623 |
(a) | The Company uses a 52 or 53 week fiscal year that ends on the Sunday closest to December 31. The three and twelve months ended January 1, 2017 included thirteen and 52 weeks, respectively. The three and twelve months ended January 3, 2016 included fourteen and 53 weeks, respectively. |
(b) | General and administrative expenses include acquisition costs of $762 and $829 for the three months ended January 1, 2017 and January 3, 2016, respectively, and $1,853 and $1,168 for the twelve months ended January 1, 2017 and January 3, 2016, respectively. |
(c) | General and administrative expenses include stock-based compensation expense of $426 and $367 for the three months ended January 1, 2017 and January 3, 2016, respectively, and $2,053 and $1,438 for the twelve months ended January 1, 2017 and January 3, 2016, respectively. |
(d) | Basic net income per share was computed excluding income attributable to preferred stock and non-vested restricted shares. |
(e) | Diluted net income 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) | (unaudited) | ||||||||||||||
Three Months Ended (a) | Twelve Months Ended (a) | ||||||||||||||
January 1, 2017 | January 3, 2016 | January 1, 2017 | January 3, 2016 | ||||||||||||
Restaurant Sales: (a) | |||||||||||||||
Legacy restaurants | $ | 174,349 | $ | 182,316 | $ | 700,532 | $ | 701,454 | |||||||
Acquired restaurants | 66,477 | 46,740 | 243,051 | 157,550 | |||||||||||
Total Restaurant Sales | $ | 240,826 | 229,056 | 943,583 | $ | 859,004 | |||||||||
Change in Comparable Restaurant Sales (b) | 3.2 | % | 5.1 | % | 2.3 | % | 7.4 | % | |||||||
Average Weekly Sales per Restaurant: (c) | |||||||||||||||
Legacy restaurants | $ | 25,523 | $ | 24,757 | $ | 25,772 | $ | 25,068 | |||||||
Acquired restaurants | 23,545 | 22,248 | 23,759 | 22,561 | |||||||||||
Restaurant-Level EBITDA (d) | |||||||||||||||
Legacy restaurants | $ | 26,313 | $ | 30,629 | $ | 111,189 | $ | 107,093 | |||||||
Acquired restaurants | 7,306 | 6,159 | 29,457 | 17,427 | |||||||||||
Total Restaurant-Level EBITDA | $ | 33,619 | $ | 36,788 | $ | 140,646 | $ | 124,520 | |||||||
Restaurant-Level EBITDA margin (d) | |||||||||||||||
Legacy restaurants | 15.1 | % | 16.8 | % | 15.9 | % | 15.3 | % | |||||||
Acquired restaurants | 11.0 | % | 13.2 | % | 12.1 | % | 11.1 | % | |||||||
All restaurants | 14.0 | % | 16.1 | % | 14.9 | % | 14.5 | % | |||||||
Adjusted EBITDA (d) | $ | 20,412 | $ | 23,732 | $ | 89,505 | $ | 76,737 | |||||||
Adjusted EBITDA margin (d) | 8.5 | % | 10.4 | % | 9.5 | % | 8.9 | % | |||||||
Adjusted net income (d) | $ | 2,024 | $ | 6,495 | $ | 17,860 | $ | 13,429 | |||||||
Adjusted diluted net earnings per share | $ | 0.04 | $ | 0.14 | $ | 0.40 | $ | 0.30 | |||||||
Number of Restaurants: | |||||||||||||||
Restaurants at beginning of period | 734 | 660 | 705 | 674 | |||||||||||
New restaurants | 1 | — | 4 | — | |||||||||||
Acquired restaurants | 27 | 46 | 56 | 55 | |||||||||||
Closed restaurants | (9 | ) | (1 | ) | (12 | ) | (23 | ) | |||||||
Sold restaurants | — | — | — | (1 | ) | ||||||||||
Restaurants at end of period | 753 | 705 | 753 | 705 |
At 1/1/17 | At 1/3/16 | ||||||
Long-term Debt (e) | $ | 223,559 | $ | 209,209 | |||
Cash | 2,002 | 22,274 |
(a) | Acquired restaurants represent the 234 restaurants acquired in 20 acquisitions from 2014 through 2016. |
(b) | Restaurants are generally included in comparable restaurant sales after they have been open or acquired for 12 months. For the three and twelve months ended January 1, 2017 the changes in comparable restaurant sales are calculated on a thirteen week and fifty-two week basis, respectively. For the three and twelve months ended January 3, 2016 the changes in comparable restaurant sales are calculated on a fourteen week and fifty-three week basis, respectively. |
(c) | Average weekly restaurant sales are derived by dividing restaurant sales for the comparable 13-week or 52-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 EBITDA, Adjusted EBITDA and Adjusted net income to net income, and to the Company's reconciliation of Restaurant-Level EBITDA to income from operations 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. |
(e) | Long-term debt (including current portion and excluding deferred financing costs) at January 1, 2017 included $200,000 of the Company's 8.0% Senior Secured Second Lien Notes, $13,500 of revolving credit borrowings, $3,020 of lease financing obligations and $7,039 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 8.0% Senior Secured Second Lien Notes, $1,203 of lease financing obligations and $8,006 of capital lease obligations. |
(unaudited) | (unaudited) | ||||||||||||||
Three Months Ended (a) | Twelve Months Ended (a) | ||||||||||||||
January 1, 2017 | January 3, 2016 | January 1, 2017 | January 3, 2016 | ||||||||||||
Reconciliation of EBITDA and Adjusted EBITDA: (a) | |||||||||||||||
Net income | $ | 29,462 | $ | 7,018 | $ | 45,472 | $ | 4 | |||||||
Benefit for income taxes | (28,085 | ) | — | (28,085 | ) | — | |||||||||
Interest expense | 4,700 | 4,543 | 18,315 | 18,569 | |||||||||||
Depreciation and amortization | 12,682 | 10,629 | 47,295 | 39,845 | |||||||||||
EBITDA | 18,759 | 22,190 | 82,997 | 58,418 | |||||||||||
Impairment and other lease charges | 1,162 | 346 | 2,355 | 3,078 | |||||||||||
Acquisition costs (b) | 762 | 829 | 1,853 | 1,168 | |||||||||||
Gains on partial condemnation and fires (c) | (697 | ) | — | (1,603 | ) | — | |||||||||
Litigation settlement (d) | — | — | 1,850 | — | |||||||||||
Stock compensation expense | 426 | 367 | 2,053 | 1,438 | |||||||||||
Loss on extinguishment of debt | — | — | — | 12,635 | |||||||||||
Adjusted EBITDA | $ | 20,412 | $ | 23,732 | $ | 89,505 | $ | 76,737 |
Reconciliation of Restaurant-Level EBITDA: (a) | |||||||||||||||
Income from operations | $ | 6,077 | $ | 11,561 | $ | 35,702 | $ | 31,208 | |||||||
Add: | |||||||||||||||
General and administrative expenses | 14,395 | 14,252 | 54,956 | 50,515 | |||||||||||
Depreciation and amortization | 12,682 | 10,629 | 47,295 | 39,845 | |||||||||||
Impairment and other lease charges | 1,162 | 346 | 2,355 | 3,078 | |||||||||||
Other expense (income) | (697 | ) | — | 338 | (126 | ) | |||||||||
Restaurant-Level EBITDA | $ | 33,619 | $ | 36,788 | $ | 140,646 | $ | 124,520 |
Reconciliation of Adjusted Net Income: (a) | |||||||||||||||
Net income | $ | 29,462 | $ | 7,018 | $ | 45,472 | $ | 4 | |||||||
Benefit for income taxes (e) | (28,085 | ) | — | (28,085 | ) | — | |||||||||
Income before income taxes | 1,377 | 7,018 | 17,387 | 4 | |||||||||||
Add: | |||||||||||||||
Loss on extinguishment of debt | — | — | — | 12,635 | |||||||||||
Impairment and other lease charges | 1,162 | 346 | 2,355 | 3,078 | |||||||||||
Acquisition costs (b) | 762 | 829 | 1,853 | 1,168 | |||||||||||
Gains on partial condemnation and fires (c) | (697 | ) | — | (1,603 | ) | — | |||||||||
Litigation settlement (d) | — | — | 1,850 | — | |||||||||||
Income tax effect of above adjustments (f) | (466 | ) | (447 | ) | (1,693 | ) | (6,415 | ) | |||||||
(Provision) benefit for income taxes (e) | (114 | ) | (1,251 | ) | (2,289 | ) | 2,959 | ||||||||
Adjusted net income | $ | 2,024 | $ | 6,495 | $ | 17,860 | $ | 13,429 | |||||||
Adjusted diluted net earnings per share (g) | $ | 0.04 | $ | 0.14 | $ | 0.40 | $ | 0.30 |
(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 before provision (benefit) for income taxes, interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted to exclude impairment and other lease charges, acquisition costs, stock compensation expense, loss on extinguishment of debt 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 expense (income). Adjusted net income represents net income as adjusted to exclude loss on extinguishment of debt, impairment and other lease |
(b) | Acquisition costs for the periods presented include primarily legal and professional fees incurred in connection with restaurant acquisitions, which were included in general and administrative expense. |
(c) | Includes gains of $0.7 million and $1.2 million in the three and twelve months ended January 1, 2017, respectively, related to insurance recoveries from fires at two of our restaurants and, for the twelve months ended January 1, 2017, a gain of $0.5 million related to a settlement for a partial condemnation on one of our operating restaurant properties. |
(d) | Includes an expense of $1.85 million from a litigation settlement for the year ended January 1, 2017 . |
(e) | The benefit for income taxes in 2016 reflects a $30.4 million tax benefit recorded in the fourth quarter of 2016 to reverse the previously recorded valuation allowance on net deferred income tax assets as well as the full year deferred income tax provision of $2.3 million which was recorded in the fourth quarter of 2016. For comparability, when presenting Adjusted Net Income, the (provision) benefit for income taxes reflects the deferred income tax (provision) benefit for each respective period as if the reversal of the valuation allowance on net deferred income tax assets had occurred prior to 2015. |
(f) | The income tax effect related to the adjustments for loss on extinguishment of debt, impairment and other lease charges, acquisition costs, gains on partial condemnation and fires and litigation settlement during the periods presented was calculated using an effective income tax rate of 38%. |
(g) | Adjusted diluted net earnings per share is calculated based on Adjusted net income and the diluted weighted average common shares outstanding for the respective periods. |