QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive office) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | ☐ | ☒ | ||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
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Item 6 |
April 2, 2023 | January 1, 2023 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Trade and other receivables | |||||||||||
Inventories | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net of accumulated depreciation of $ | |||||||||||
Franchise rights, net of accumulated amortization of $ | |||||||||||
Goodwill (Note 3) | |||||||||||
Franchise agreements, at cost less accumulated amortization of $ | |||||||||||
Operating right-of-use assets, net (Note 6) | |||||||||||
Other assets (Note 7) | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Current portion of long-term debt and finance lease liabilities (Notes 6 and 7) | $ | $ | |||||||||
Current portion of operating lease liabilities (Note 6) | |||||||||||
Accounts payable | |||||||||||
Accrued interest | |||||||||||
Accrued payroll, related taxes and benefits | |||||||||||
Accrued real estate taxes | |||||||||||
Other liabilities | |||||||||||
Total current liabilities | |||||||||||
Long-term debt and finance lease liabilities, net of current portion (Notes 6 and 7) | |||||||||||
Operating lease liabilities (Note 6) | |||||||||||
Deferred income taxes, net (Note 8) | |||||||||||
Other liabilities (Note 5) | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 10) | |||||||||||
Stockholders' equity (Note 12): | |||||||||||
Preferred stock, par value $ | |||||||||||
Voting common stock, par value $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Accumulated other comprehensive income | |||||||||||
Treasury stock, at cost | ( | ( | |||||||||
Total stockholders' equity | |||||||||||
Total liabilities and stockholders' equity | $ | $ |
Three Months Ended | |||||||||||
April 2, 2023 | April 3, 2022 | ||||||||||
Restaurant sales | $ | $ | |||||||||
Operating expenses: | |||||||||||
Food, beverage and packaging costs | |||||||||||
Restaurant wages and related expenses | |||||||||||
Restaurant rent expense (Note 6) | |||||||||||
Other restaurant operating expenses | |||||||||||
Advertising expense | |||||||||||
General and administrative expenses (including stock-based compensation of $ | |||||||||||
Depreciation and amortization | |||||||||||
Impairment and other lease charges (Note 4) | |||||||||||
Other (income) expense, net (Note 14) | ( | ||||||||||
Total operating expenses | |||||||||||
Income (loss) from operations | ( | ||||||||||
Interest expense | |||||||||||
Income (loss) before income taxes | ( | ||||||||||
Provision (benefit) from income taxes (Note 8) | ( | ||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Basic and diluted net income (loss) per share (Note 13) | $ | $ | ( | ||||||||
Shares used in computing net income (loss) per share: | |||||||||||
Weighted average common shares outstanding: | |||||||||||
Basic weighted average common shares outstanding | |||||||||||
Diluted weighted average common shares outstanding | |||||||||||
Comprehensive income (loss), net of tax: | |||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Change in valuation of interest rate swap (Note 7) | ( | ||||||||||
Comprehensive loss | $ | ( | $ | ( |
Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional | Other | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Preferred Stock | Paid-In | Accumulated | Comprehensive | Treasury Stock | Stockholders' | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Income | Shares | Amount | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Vesting of non-vested shares and RSUs | — | — | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury stock | — | — | — | — | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Change in valuation of interest rate swap, net of income taxes of $ | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance, April 2, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 2, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Vesting of non-vested shares and RSUs | — | — | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury stock | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Change in valuation of interest rate swap, net of income taxes of $ | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, April 3, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | |||||||||||
April 2, 2023 | April 3, 2022 | ||||||||||
Cash flows provided by (used in) operating activities: | |||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
(Gain) loss on disposals of property and equipment, including sale-leasebacks | ( | ||||||||||
Stock-based compensation | |||||||||||
Impairment and other lease charges | |||||||||||
Depreciation and amortization | |||||||||||
Amortization of deferred financing costs | |||||||||||
Amortization of discount on debt | |||||||||||
Deferred income taxes | ( | ||||||||||
Changes in other operating assets and liabilities | ( | ( | |||||||||
Net cash provided by (used in) operating activities | ( | ||||||||||
Cash flows used for investing activities: | |||||||||||
Capital expenditures: | |||||||||||
New restaurant development | ( | ( | |||||||||
Restaurant remodeling | ( | ( | |||||||||
Other restaurant capital expenditures | ( | ( | |||||||||
Corporate and restaurant information systems | ( | ( | |||||||||
Total capital expenditures | ( | ( | |||||||||
Proceeds from sale of other assets | |||||||||||
Proceeds from insurance recoveries | |||||||||||
Net cash used for investing activities | ( | ( | |||||||||
Cash flows (used in) provided by financing activities: | |||||||||||
Principal payments on Term B Loans | ( | ( | |||||||||
Borrowings under revolving credit facility | |||||||||||
Repayments under revolving credit facility | ( | ( | |||||||||
Principal payments on finance lease liabilities | ( | ( | |||||||||
Purchase of treasury shares | ( | ||||||||||
Net cash (used in) provided by financing activities | ( | ||||||||||
Net decrease in cash and cash equivalents | ( | ( | |||||||||
Cash and cash equivalents, beginning of period | |||||||||||
Cash and cash equivalents, end of period | $ | $ | |||||||||
Supplemental disclosures: | |||||||||||
Interest paid on long-term debt | $ | $ | |||||||||
Interest paid on lease financing obligations | |||||||||||
Interest paid on finance leases | |||||||||||
Accruals for capital expenditures | |||||||||||
Finance lease obligations incurred | |||||||||||
Gain (loss) on sale-leaseback transactions | ( | ||||||||||
Operating lease assets and liabilities resulting from lease modifications and new leases | |||||||||||
Operating cash flows related to operating leases | |||||||||||
April 2, 2023 | January 1, 2023 | ||||||||||
Accrued occupancy costs | $ | $ | |||||||||
Accrued workers' compensation and general liability claims | |||||||||||
Deferred compensation | |||||||||||
Accrued post retirement benefits | |||||||||||
Other | |||||||||||
$ | $ |
Three Months Ended | ||||||||||||||||||||
Lease cost | Classification | April 2, 2023 | April 3, 2022 | |||||||||||||||||
Operating lease cost(1) | Restaurant rent expense | $ | $ | |||||||||||||||||
Operating lease cost(2) | General and administrative | |||||||||||||||||||
Variable lease cost | Restaurant rent expense | |||||||||||||||||||
Finance lease cost: | ||||||||||||||||||||
Amortization of right-of-use assets | Depreciation and amortization | |||||||||||||||||||
Interest on lease liabilities | Interest expense | |||||||||||||||||||
Total lease cost | $ | $ |
April 2, 2023 | January 1, 2023 | ||||||||||
Senior Credit Facility: | |||||||||||
Term B Loans | $ | $ | |||||||||
Revolving credit borrowings | |||||||||||
Senior Notes Due 2029 | |||||||||||
Finance lease liabilities | |||||||||||
Total Funded debt | |||||||||||
Less: current portion of long-term debt and finance lease liabilities | ( | ( | |||||||||
Less: unamortized debt issuance costs | ( | ( | |||||||||
Less: unamortized original issue discount | ( | ( | |||||||||
Total Long-term debt | $ | $ |
Three Months Ended | |||||||||||
April 2, 2023 | April 3, 2022 | ||||||||||
Current | $ | $ | |||||||||
Deferred | ( | ||||||||||
Change in valuation allowance | ( | ||||||||||
Provision (benefit) for income taxes | $ | $ | ( |
Shares | Weighted Average Grant Date Price | ||||||||||
Non-vested at January 1, 2023 | $ | ||||||||||
Granted | $ | ||||||||||
Vested | ( | $ | |||||||||
Forfeited | ( | $ | |||||||||
Non-vested at April 2, 2023 | $ |
Options | Weighted Average Exercise Price | Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value(1) | |||||||||||
Options outstanding at January 1, 2023 | ||||||||||||||
Forfeited | $ | |||||||||||||
Options Outstanding at April 2, 2023 | $ | $ | ||||||||||||
Vested or expected to vest at April 2, 2023 | $ | $ | ||||||||||||
Options exercisable at April 2, 2023 | $ | $ |
Units | |||||
Non-vested at January 1, 2023 | |||||
Vested | ( | ||||
Non-vested at April 2, 2023 |
Three Months Ended | |||||||||||
April 2, 2023 | April 3, 2022 | ||||||||||
Basic net income (loss) per share: | |||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Less: Income attributable to non-vested shares | ( | ||||||||||
Less: Income attributable to preferred stock | ( | ||||||||||
Net income (loss) available to common stockholders | $ | $ | ( | ||||||||
Weighted average common shares outstanding | |||||||||||
Basic net income (loss) per share | $ | $ | ( | ||||||||
Diluted net income (loss) per share: | |||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Shares used in computing diluted net income (loss) per share | |||||||||||
Dilutive effect of preferred stock and non-vested shares | |||||||||||
Shares used in computing diluted net income (loss) per share | |||||||||||
Diluted net income (loss) per share | $ | $ | ( | ||||||||
Shares excluded from diluted net income (loss) per share computations(1) |
Three Months Ended | |||||||||||
April 2, 2023 | April 3, 2022 | ||||||||||
Restaurant Sales | $ | 445,162 | $ | 399,476 | |||||||
Burger King | 421,937 | 377,828 | |||||||||
Popeyes | 23,225 | 21,648 | |||||||||
Change in Comparable Restaurant Sales(a) | 11.6 | % | 1.7 | % | |||||||
Change in comparable Burger King restaurant sales(a) | 11.7 | % | 1.6 | % | |||||||
Change in comparable Popeyes restaurant sales(a) | 9.5 | % | 2.2 | % | |||||||
Burger King Restaurants operating at beginning of period: | 1,022 | 1,026 | |||||||||
New restaurants opened, including relocations(b) | — | 2 | |||||||||
Restaurants closed, including relocations(b) | (3) | (2) | |||||||||
Burger King restaurants at end of period | 1,019 | 1,026 | |||||||||
Average number of operating Burger King restaurants | 1,021.8 | 1,023.7 | |||||||||
Popeyes Restaurants operating at beginning and end of period: | 65 | 65 | |||||||||
Average number of operating Popeyes restaurants | 64.9 | 65.0 |
Three Months Ended (13 weeks) | |||||||||||
April 2, 2023 | April 3, 2022 | ||||||||||
Costs and expenses (all restaurants): | |||||||||||
Food, beverage and packaging costs | 28.2 | % | 30.8 | % | |||||||
Restaurant wages and related expenses | 32.9 | % | 35.5 | % | |||||||
Restaurant rent expense | 7.2 | % | 7.8 | % | |||||||
Other restaurant operating expenses | 15.5 | % | 16.4 | % | |||||||
Advertising expense | 4.0 | % | 4.0 | % | |||||||
General and administrative | 5.8 | % | 5.5 | % |
Three Months Ended | |||||||||||
Reconciliation of EBITDA and Adjusted EBITDA: | April 2, 2023 | April 3, 2022 | |||||||||
Net Income (loss) | $ | 864 | $ | (21,269) | |||||||
Provision (benefit) from income taxes | 1,142 | (6,009) | |||||||||
Interest expense | 8,233 | 7,436 | |||||||||
Depreciation and amortization | 18,718 | 19,542 | |||||||||
EBITDA | 28,957 | (300) | |||||||||
Impairment and other lease charges | 1,340 | 496 | |||||||||
Stock-based compensation expense | 1,097 | 1,941 | |||||||||
Pre-opening costs(1) | — | 45 | |||||||||
Executive transition, litigation and other professional expenses(2) | 798 | 1,918 | |||||||||
Other (income) expense, net(3)(4) | (1,506) | 202 | |||||||||
Adjusted EBITDA | $ | 30,686 | $ | 4,302 |
Reconciliation of Adjusted Restaurant-Level EBITDA: | |||||||||||
Income (loss) from operations | $ | 10,239 | $ | (19,842) | |||||||
Add: | |||||||||||
General and administrative expenses | 25,740 | 22,017 | |||||||||
Pre-opening costs(1) | — | 45 | |||||||||
Depreciation and amortization | 18,718 | 19,542 | |||||||||
Impairment and other lease charges | 1,340 | 496 | |||||||||
Other (income) expense, net(3)(4) | (1,506) | 202 | |||||||||
Adjusted Restaurant-Level EBITDA | $ | 54,531 | $ | 22,460 |
Reconciliation of Adjusted Net Income (Loss): | |||||||||||
Net Income (loss) | $ | 864 | $ | (21,269) | |||||||
Add: | |||||||||||
Impairment and other lease charges | 1,340 | 496 | |||||||||
Pre-opening costs(1) | — | 45 | |||||||||
Executive transition, litigation and other professional expenses(2) | 798 | 1,918 | |||||||||
Other (income) expense, net(3)(4) | (1,506) | 202 | |||||||||
Income tax effect on above adjustments(5) | (158) | (665) | |||||||||
Valuation allowance for deferred taxes(6) | (1,331) | 2,207 | |||||||||
Adjusted Net Income (Loss) | $ | 7 | $ | (17,066) | |||||||
Adjusted diluted net income (loss) per share(7) | $ | — | $ | (0.34) | |||||||
Diluted weighted average common shares outstanding | 61,420 | 50,460 |
Three Months Ended | ||||||||||||||
April 2, 2023 | April 3, 2022 | |||||||||||||
New restaurant development | $ | 858 | $ | 2,622 | ||||||||||
Restaurant remodeling | 2,035 | 5,319 | ||||||||||||
Other restaurant capital expenditures | 3,774 | 4,151 | ||||||||||||
Corporate and restaurant information systems | 1,322 | 1,097 | ||||||||||||
Total capital expenditures | $ | 7,989 | $ | 13,189 | ||||||||||
Number of new restaurant openings, including relocations | — | 2 |
Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||
January | Purchased January 2, 2023 to February 5, 2023 | 138,591 | $ | 2.04 | — | $ | 10,983,543 | ||||||||||
February | Purchased February 6, 2023 to March 5, 2023 | — | — | — | $ | 10,983,543 | |||||||||||
March | Purchased March 6, 2023 to April 2, 2023 | 5,843 | $ | 2.22 | — | $ | 10,983,543 | ||||||||||
Total | 144,434 | — |
Exhibit No. | ||||||||
10.1 | ||||||||
19.1 | ||||||||
31.1 | ||||||||
31.2 | ||||||||
32.1 | ||||||||
32.2 | ||||||||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
CARROLS RESTAURANT GROUP, INC. | |||||
Date: May 11, 2023 | /s/ Deborah M. Derby | ||||
(Signature) | |||||
Deborah M. Derby President and Chief Executive Officer | |||||
Date: May 11, 2023 | /s/ Anthony E. Hull | ||||
(Signature) | |||||
Anthony E. Hull Vice President, Chief Financial Officer and Treasurer |
Performance Level | Organic Adjusted EBITDA Achievement | Payout (% of Target PSUs) | ||||||
Below Threshold | <$75,000,000 | None | ||||||
Threshold | $75,000,000 | 25% | ||||||
Intermediate | $79,100,000 | 50% | ||||||
Target | $83,600,000 | 100% | ||||||
Maximum | $114,000,000 | 200% |
CARROLS RESTAURANT GROUP, INC. | |||||||||||||||||
By: | |||||||||||||||||
Name: | |||||||||||||||||
Title: | |||||||||||||||||
CARROLS CORPORATION | |||||||||||||||||
By: | |||||||||||||||||
Name: | |||||||||||||||||
Title: | |||||||||||||||||
DEBORAH M. DERBY | |||||||||||||||||
Subject: MANAGEMENT INSIDER TRADING POLICY | Instruction No: 330 Effective | |||||||||||||
Date: 12/14/06 | ||||||||||||||
Revised: 06/01/07 | ||||||||||||||
Revised: 04/08/13 | ||||||||||||||
Revised: 03/31/21 | ||||||||||||||
Affects: Covered Individuals | Approved by: Jared L. Landaw | |||||||||||||
Title: Vice President, General | ||||||||||||||
Counsel, and Chief Ethics and | ||||||||||||||
Compliance Officer |
Date: May 11, 2023 | /s/ DEBORAH M. DERBY | |||||||
Deborah M. Derby President and Chief Executive Officer |
Date: May 11, 2023 | /s/ ANTHONY E. HULL | |||||||
Anthony E. Hull Vice President, Chief Financial Officer and Treasurer |
/s/ DEBORAH M. DERBY | ||
Deborah M. Derby | ||
President and Chief Executive Officer |
/s/ ANTHONY E. HULL | ||
Anthony E. Hull | ||
Vice President, Chief Financial Officer and Treasurer |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Apr. 02, 2023 |
Jan. 01, 2023 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Property and equipment, accumulated depreciation | $ 546,308 | $ 535,359 |
Franchise rights, accumulated amortization | 164,295 | 161,426 |
Franchise agreements, accumulated amortization | $ 17,670 | $ 16,975 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 100 | 100 |
Preferred stock, shares outstanding | 100 | 100 |
Voting common stock, par value | $ 0.01 | $ 0.01 |
Voting common stock, shares authorized | 100,000,000 | 100,000,000 |
Voting common stock, shares issued | 56,316,888 | 54,928,225 |
Common stock, shares, outstanding | 51,526,036 | 50,903,111 |
Consolidated Statements Of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 02, 2023 |
Apr. 03, 2022 |
|
Stock-based compensation | $ 1,097 | $ 1,941 |
Consolidated Statements of Changes in Stockholder's Equity Parentheticals - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 02, 2023 |
Apr. 03, 2022 |
|
Statement of Stockholders' Equity [Abstract] | ||
Other comprehensive income, tax | $ 260 | $ 1,268 |
Stockholders' Equity Attributable to Parent | $ 151,371 | $ 199,178 |
Basis Of Presentation (Notes) |
3 Months Ended |
---|---|
Apr. 02, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis Of Presentation | Business DescriptionAt April 2, 2023, Carrols Restaurant Group, Inc. ("Carrols Restaurant Group") operated, as franchisee, 1,019 Burger King® restaurants in 23 Northeastern, Midwestern, Southcentral and Southeastern states and 65 Popeyes® restaurants in seven Southeastern states. Carrols Restaurant Group, Inc. is a holding company and conducts all of its operations through its direct and indirect wholly-owned subsidiaries Carrols Corporation and New CFH, LLC and their wholly-owned subsidiaries. Carrols Corporation's material wholly-owned subsidiary is Carrols LLC, a Delaware limited liability company. New CFH LLC's material direct and indirect wholly-owned subsidiaries include Frayser Quality, LLC and Nashville Quality, LLC (and together with New CFH, LLC's immaterial direct and indirect subsidiaries, collectively, "New CFH"). Unless the context otherwise requires, Carrols Restaurant Group and its direct and indirect wholly-owned subsidiaries are collectively referred to as the "Company." |
Significant Accounting Policies |
3 Months Ended |
---|---|
Apr. 02, 2023 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Basis of Consolidation. The accompanying condensed consolidated financial statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries. All intercompany transactions have been eliminated in consolidation. Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The three months ended April 2, 2023 and April 3, 2022 each contained thirteen weeks. The 2023 fiscal year will end December 31, 2023 and will contain 52 weeks. Basis of Presentation. The unaudited condensed consolidated financial statements as of and for the three months ended April 2, 2023 and April 3, 2022 have been prepared without an audit pursuant to the rules and regulations of the Securities and Exchange Commission and do not include certain of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of such unaudited condensed consolidated financial statements have been included. The results of operations for the three months ended April 2, 2023 are not necessarily indicative of the results to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the year ended January 1, 2023. The January 1, 2023 consolidated balance sheet data is derived from those audited consolidated financial statements. Use of Estimates. The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates include accrued occupancy costs, insurance liabilities, lease accounting matters, the valuation of acquired assets and liabilities, interest rate swap valuation, the valuation of deferred income tax assets and liabilities, and the evaluation for impairment of goodwill, long-lived assets and franchise rights. Actual results could differ from those estimates. Segment Information. Operating segments are components of an entity for which discrete financial information is available and is regularly reviewed by the chief operating decision maker in order to allocate resources and assess performance. The Company's chief operating decision-maker, our President and Chief Executive Officer ("CEO"), currently evaluates the Company's operations from a number of different operational perspectives; however, resource allocation decisions are determined based on the chief operating decision-maker's evaluation of the total Company operations. The Company derives all significant revenues from a single operating segment, its restaurant business. Accordingly, the Company views the operating results of its restaurants as one reportable segment. Cash and Cash Equivalents. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. At both April 2, 2023 and January 1, 2023, the Company did not have any cash invested in money market funds classified as cash equivalents on the condensed consolidated balance sheets. Food, Beverage and Packaging Costs. The Company includes food, beverage and packaging costs and delivery charges, net of any vendor purchase discounts and rebates, in food, beverage, and packaging costs. Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In determining fair value, the accounting standards establish a three-level hierarchy for inputs used in measuring fair value as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities; and Level 3 inputs are unobservable and reflect the Company's own assumptions. Financial instruments include cash and cash equivalents, trade and other receivables, accounts payable and long-term debt. The carrying amounts of cash and cash equivalents, trade and other receivables and accounts payable approximate fair value because of the short-term nature of these financial instruments. Borrowings under the Company's Senior Credit Facilities (including its term B loans) accrue interest at a floating rate tied to a standard short-term borrowing index selected at the Company's option, plus an applicable margin. The Company's liability for its Senior Credit Facilities and 5.875% Senior Notes due 2029 are carried at historical cost in the accompanying balance sheets. The fair value of our term B loans and 5.875% Senior Notes due 2029 is based on recent trading activity, which are Level 2 inputs in the fair value hierarchy. As of April 2, 2023, the term B loans traded at 91.9% of par value and the 5.875% Senior Notes due 2029 traded at 80.5% of par value. The Company recognizes its derivative arrangements on the balance sheet at fair value, which is considered a Level 2 input. The Company's only derivative is an interest rate swap (the "Swap") which is designated as a cash flow hedge. Accordingly, the entire change in the fair value of the cash flow hedges included in the assessment of hedge effectiveness is recognized in accumulated other comprehensive income. The amounts recorded in other comprehensive income will subsequently be reclassified to earnings as an increase or decrease to interest expense as realized through receipts or payments. The Company classifies cash inflows and outflows from derivatives within operating activities on the condensed consolidated statements of cash flows. The Swap was valued at $7.2 million as of April 2, 2023 and it is classified as Level 2 within the fair value hierarchy. Fair value measurements of non-financial assets and non-financial liabilities are primarily used in the impairment analysis of long-lived assets, goodwill and intangible assets. Long-lived assets and definite-lived intangible assets are measured at fair value on a nonrecurring basis using Level 3 inputs. As described in Note 4, the Company recorded long-lived asset impairment charges of $0.1 million during the three months ended April 2, 2023 and $0.2 million during the three months ended April 3, 2022. Recently Issued Accounting Pronouncements. In the normal course of business, the Company evaluates all new Accounting Standards Updates ("ASU") and other accounting pronouncements issued by the Financial Accounting Standards Board ("FASB"), Securities and Exchange Commission ("SEC"), or other authoritative accounting bodies to determine the potential impact they may have on its Consolidated Financial Statements. The Company does not expect any of the recently issued accounting pronouncements, which have not already been adopted, to have a material impact on its Consolidated Financial Statements. Subsequent Events.
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Intangible Assets (Notes) |
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Apr. 02, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible Assets Franchise Rights. Amounts allocated to franchise rights for each acquisition of Burger King and Popeyes restaurants are amortized using the straight-line method over the average remaining term of the acquired franchise agreements plus one -year renewal period. The Company assesses the potential impairment of franchise rights whenever events or changes in circumstances indicate that the carrying value may not be recoverable, including as a result of closures of restaurants that were part of an acquisition, a shortfall in undiscounted operating cash flows over the projected remaining life of the franchise rights to the carrying value of such franchise rights for each acquisition group, or other indicators of impairment. If an indicator of impairment exists, an estimate of the aggregate undiscounted cash flows from the acquired restaurants is compared to the respective carrying value of franchise rights for each acquisition. If an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. No impairment charges were recorded related to the Company's franchise rights for three months ended April 2, 2023 and April 3, 2022. The change in franchise rights for the three months ended April 2, 2023 was from amortization expense during the period. Amortization expense related to franchise rights was $3.5 million for each of the three months ended April 2, 2023 and April 3, 2022, respectively. The Company expects annual amortization expense to be $13.9 million in fiscal 2023 through fiscal 2028. Goodwill. The Company is required to review goodwill for impairment annually, or more frequently when events and circumstances indicate that the carrying amount may be impaired. If the determined fair value of the reporting unit is less than the related carrying amount, an impairment loss is recognized. The Company performs its annual impairment assessment as of the end of the eighth month of its fiscal year. As part of this goodwill impairment assessment, the Company considers certain qualitative factors, such as the Company's performance, business forecasts and expansion plans, a discount rate approximating the Company's weighted average cost of capital, general economic conditions, and evaluation of peer company multiples, among other factors. Given the nature of the qualitative and quantitative factors considered, there is a degree of uncertainty associated with these judgments and estimates. Notably, the business forecasts and market conditions considered within the Company's annual goodwill impairment test reflect the Company's long-standing history of operating restaurants in various business cycles. The forecasts reflect a normalization of commodity costs and restaurant labor margins, that we have addressed through recent pricing and promotional discounting changes, and reflect continued normalization of these costs over time. Using both the income approach and the market approach, the Company compares the fair value of its Burger King reporting unit to its carrying value. The Company assessed events and circumstances from the date of its annual goodwill impairment test through April 2, 2023 and there were no indicators representing a triggering event. There were no goodwill impairment losses recorded during the three months ended April 2, 2023 and April 3, 2022.
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Impairment Of Long-Lived Assets And Other Lease Charges (Notes) |
3 Months Ended |
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Apr. 02, 2023 | |
Asset Impairment Charges [Abstract] | |
Asset Impairment Charges [Text Block] | Impairment of Long-Lived Assets and Other Lease Charges The Company reviews its long-lived assets, principally property and equipment, for impairment at the restaurant level. If an indicator of impairment exists for any of its assets, an estimate of the undiscounted future cash flows over the life of the primary asset for each restaurant is compared to that long-lived asset's carrying value. If the carrying value is greater than the undiscounted cash flow, the Company then determines the fair value of the asset and if an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. For closed restaurant locations, the Company reviews the future minimum lease payments and related ancillary costs from the date of the restaurant closure to the end of the remaining lease term and records a lease charge for any right-of-use ("ROU") lease asset impairment or lease-related costs during the remaining term, net of any estimated sublease recoveries. The Company determined the fair value of restaurant equipment, for those restaurants reviewed for impairment, based on current economic conditions. The Company determines the fair value of ROU lease assets based on an assessment of market rents and a discounted future cash flow model. These fair value asset measurements rely on significant unobservable inputs and are considered Level 3 in the fair value hierarchy. During the three months ended April 2, 2023, the Company recorded impairment and other lease charges of $1.3 million consisting of capital expenditures at previously impaired restaurants of $0.1 million and $1.2 million of other lease charges related to three restaurants closed during the first quarter. During the three months ended April 3, 2022, the Company recorded impairment and other lease charges of $0.5 million consisting of $0.1 million of initial impairment charges for one underperforming restaurant, capital expenditures at previously impaired restaurants of $0.1 million and $0.3 million of other lease charges related to a restaurant closed during the first quarter.
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Other Liabilities, Long-Term (Notes) |
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Other Liabilities, Noncurrent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Text Block] | Other Liabilities, Long-Term Other liabilities, long-term, at April 2, 2023 and January 1, 2023 consisted of the following:
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Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases The Company utilizes land and buildings in its operations under various lease agreements. The Company does not consider any one of these individual leases material to the Company's operations. Initial lease terms are generally for twenty years and provide for renewal options with rent escalations. The exercise of such renewal options is generally at the Company's sole discretion. The Company evaluates renewal options at lease commencement and upon any lease amendments or remodeling activity to determine if such options are reasonably certain to be exercised based on economic factors. Certain leases also require variable rent, determined as a percentage of sales as defined by the terms of the applicable lease agreement. For most locations, the Company is obligated for occupancy-related costs including payment of property taxes, insurance and utilities. Right-of-use lease assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make payments in exchange for that right of use. As the rate implicit within our leases is not readily determinable, the Company uses market and term-specific incremental borrowing rates which consider the rate of interest it expects to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. ROU assets are also reduced by lease incentives, increased by initial direct costs and adjusted by favorable lease assets and unfavorable lease liabilities. Variable lease components represent amounts that are contractually fixed as a percentage of sales and are recognized in expense as incurred. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets and are recognized as lease expense on a straight-line basis over the lease term. The Company does not account for lease components (e.g., fixed payments including rent) separately from non-lease components (e.g. common area maintenance). The Company also utilizes certain restaurant equipment under various finance lease agreements with initial terms of generally to eight years. The Company does not consider any one of these individual leases material to the Company's operations. For certain leases where rent escalates based upon a change in a financial index, such as the Consumer Price Index, the difference between the index at lease inception and the subsequent fluctuations in that index are included in variable lease costs. Additionally, because the Company has elected to not separate lease and non-lease components, in limited instances variable costs also include payments to the landlord for common area maintenance, real estate taxes, insurance and other operating expenses. Lease expense is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those costs are incurred. Lease Cost The components and classification of lease expense for the three months ended April 2, 2023 and April 3, 2022 are as follows:
(1)Includes short-term leases which are not material. (2)Represents operating lease costs for property and equipment not directly related to restaurant operations.
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Leases | Leases The Company utilizes land and buildings in its operations under various lease agreements. The Company does not consider any one of these individual leases material to the Company's operations. Initial lease terms are generally for twenty years and provide for renewal options with rent escalations. The exercise of such renewal options is generally at the Company's sole discretion. The Company evaluates renewal options at lease commencement and upon any lease amendments or remodeling activity to determine if such options are reasonably certain to be exercised based on economic factors. Certain leases also require variable rent, determined as a percentage of sales as defined by the terms of the applicable lease agreement. For most locations, the Company is obligated for occupancy-related costs including payment of property taxes, insurance and utilities. Right-of-use lease assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make payments in exchange for that right of use. As the rate implicit within our leases is not readily determinable, the Company uses market and term-specific incremental borrowing rates which consider the rate of interest it expects to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. ROU assets are also reduced by lease incentives, increased by initial direct costs and adjusted by favorable lease assets and unfavorable lease liabilities. Variable lease components represent amounts that are contractually fixed as a percentage of sales and are recognized in expense as incurred. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets and are recognized as lease expense on a straight-line basis over the lease term. The Company does not account for lease components (e.g., fixed payments including rent) separately from non-lease components (e.g. common area maintenance). The Company also utilizes certain restaurant equipment under various finance lease agreements with initial terms of generally to eight years. The Company does not consider any one of these individual leases material to the Company's operations. For certain leases where rent escalates based upon a change in a financial index, such as the Consumer Price Index, the difference between the index at lease inception and the subsequent fluctuations in that index are included in variable lease costs. Additionally, because the Company has elected to not separate lease and non-lease components, in limited instances variable costs also include payments to the landlord for common area maintenance, real estate taxes, insurance and other operating expenses. Lease expense is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those costs are incurred. Lease Cost The components and classification of lease expense for the three months ended April 2, 2023 and April 3, 2022 are as follows:
(1)Includes short-term leases which are not material. (2)Represents operating lease costs for property and equipment not directly related to restaurant operations.
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Long-Term Debt (Notes) |
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Long-Term Debt, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | Long-term Debt Long-term debt at April 2, 2023 and January 1, 2023 consisted of the following:
Senior Credit Facilities. On April 30, 2019, the Company entered into senior secured credit facilities in an aggregate principal amount of $550.0 million, consisting of (i) a Term Loan B Facility in an aggregate principal amount of $425.0 million (the "Term Loan B Facility") maturing on April 30, 2026 and (ii) a revolving credit facility (including a sub-facility of $35.0 million for standby letters of credit) in an aggregate principal amount of $125.0 million maturing on April 30, 2024 (the "Revolving Credit Facility" and, together with the Term Loan B Facility, the "Senior Credit Facilities"). As of April 2, 2023, the Senior Credit Facilities, as amended, provide for an aggregate maximum commitment available for borrowings under the Revolving Credit Facility of $215.0 million. The Revolving Credit Facility matures on January 29, 2026. The Company's obligations under the Senior Credit Facilities are guaranteed by its subsidiaries and are secured by first priority liens on substantially all of the assets of the Company and its subsidiaries, including a pledge of all of the capital stock and equity interests of its subsidiaries. Under the Senior Credit Facilities, the Company is required to make mandatory prepayments of borrowings in the event of dispositions of assets, debt issuances and insurance and condemnation proceeds (all subject to certain exceptions). The Senior Credit Facilities contain certain covenants, including, without limitation, those limiting the Company's and its subsidiaries' ability to, among other things, incur indebtedness, incur liens, sell or acquire assets or businesses, change the character of its business in all material respects, engage in transactions with related parties, make certain investments, make certain restricted payments or pay dividends. In addition, the Senior Credit Facilities require the Company to meet a First Lien Leverage Ratio (as defined in the Senior Credit Facilities) under certain circumstances. The Company is only required to maintain a First Lien Leverage Ratio (as defined in the Senior Credit Facilities) of not greater than 5.75 to 1.00 (as measured on a most recent four quarter basis) if, and only if, on the last day of any fiscal quarter, the sum of the aggregate principal amount of outstanding revolving credit borrowings under the Revolving Credit Facility and the aggregate face amount of letters of credit issued under the Revolving Credit Facility (excluding undrawn letters of credit in an aggregate face amount up to $12.0 million) exceed 35% of the aggregate borrowing capacity under the Revolving Credit Facility. The Senior Credit Facilities contain customary default provisions, including that the lenders may terminate their obligation to advance and may declare the unpaid balance of borrowings, or any part thereof, immediately due and payable upon the occurrence and during the continuance of customary events of default which include, without limitation, payment default, covenant default, bankruptcy default, cross-default on other indebtedness, judgment default and the occurrence of a change of control. As of April 2, 2023, there were no revolving credit borrowings outstanding and $10.5 million of letters of credit issued under the Revolving Credit Facility. After reserving for issued letters of credit and outstanding revolving credit borrowings, $204.5 million was available for revolving credit borrowings under the Senior Credit Facilities at April 2, 2023. The Term Loan B Facility requires quarterly installment payments, which began on September 30, 2019. Amounts outstanding at April 2, 2023 are due and payable as follows: (i) twelve remaining quarterly installments of $1.1 million; (ii) one final payment of $153.8 million on April 30, 2026. At April 2, 2023, borrowings under the Revolving Credit Facility and Term Loan B Facility each bore interest at a rate per annum equal to (a) the Alternate Base Rate (as defined in the Senior Credit Facilities) plus 2.25% or (b) Adjusted Term SOFR (as defined in the Senior Credit Facilities) plus 3.25% (subject to the interest rate swap as described below). The weighted average interest rate for borrowings on long-term debt balances was 5.8% for three months ended April 2, 2023, and 4.9% for the three months ended April 3, 2022. Senior Notes due 2029. On June 28, 2021, the Company issued $300.0 million principal amount of 5.875% Senior Notes due 2029 (the "Notes") in a private placement. The proceeds of the offering, together with $46.0 million of revolving credit borrowings under the Senior Credit Facilities, were used to (i) repay $74.4 million of outstanding term B-1 loans and $243.6 million of outstanding term B loans under the Senior Credit Facilities (which included scheduled principal payments), (ii) to pay fees and expenses related to the offering of the Notes and the Seventh Amendment and (iii) for working capital and general corporate purposes. Carrols Restaurant Group and certain of its subsidiaries (the "Guarantors") entered into the Indenture (the "Indenture") dated as of June 28, 2021 with the Bank of New York Mellon Trust Company governing the Notes. The Indenture provides that the Notes will mature on July 1, 2029 and will bear interest at the rate of 5.875% per annum, payable semi-annually on July 1 and January 1 of each year, beginning on January 1, 2022. The entire principal amount of the Notes will be due and payable in full on the maturity date. The Indenture further provides that the Company (i) may redeem some or all of the Notes at any time after July 1, 2024 at the redemption prices described therein, (ii) may redeem up to 40% of the Notes using the proceeds of certain equity offerings completed before July 1, 2024 and (iii) must offer to purchase the Notes if it sells certain of its assets or if specific kinds of changes in control occur, all as set forth in the Indenture. The Notes are senior unsecured obligations of Carrols Restaurant Group and are guaranteed on an unsecured basis by the Guarantors. The Indenture contains certain covenants that limit the ability of Carrols Restaurant Group and the Guarantors to, among other things: incur indebtedness or issue preferred stock; incur liens; pay dividends or make distributions in respect of capital stock or make certain other restricted payments or investments; sell assets; agree to payment restrictions affecting Restricted Subsidiaries (as defined in the Indenture); enter into transactions with affiliates; or merge, consolidate or sell substantially all of the assets. Such restrictions are subject to certain exceptions and qualifications all as set forth in the Indenture. The Company was in compliance with all such covenants as of April 2, 2023. Interest Rate Swap. In March 2020, the Company entered into an interest rate swap agreement with certain of its lenders under the Senior Credit Facilities to mitigate the risk of increases in the variable interest rate related to term loan borrowings under the Senior Credit Facilities. The interest rate swap originally fixed the interest rate on 50% of outstanding borrowings under the Senior Credit Facility at 0.915% plus the applicable margin in its Senior Credit Facilities with the differences settled monthly. The agreement matures on February 28, 2025 and originally had a notional amount of $220.0 million, which was reduced to a notional amount of $120.0 million in 2021. In 2022, the Company modified its interest rate swap to transition from LIBOR to SOFR as the benchmark rate, which also changed the fixed rate of interest from 0.915% plus the applicable margin to 0.847% plus the applicable margin. The Company received $1.1 million to settle the interest rate swap of during the three months ended April 2, 2023 and made additional interest payments of $0.2 million to settle the interest rate swap during the three months ended April 3, 2022. The fair value of the Company's interest rate swap agreement was an asset of $7.2 million as of April 2, 2023 which is included in other assets in the accompanying condensed consolidated balance sheets. Changes in the fair value of the cash flow hedges included in the assessment of hedge effectiveness is recognized in accumulated other comprehensive income. The amounts recorded in other comprehensive income will subsequently be reclassified to earnings as an increase or decrease to interest expense as realized through receipts or payments. The Company expects to recognize net gains totaling $4.7 million into earnings in the next twelve months. The Company's counterparties under this arrangement provided the Company with quarterly statements of the market values of these instruments based on significant inputs that were observable or could be derived principally from, or corroborated by, observable market data for substantially the full term of the asset or liability. The Company classified this within Level 2 of the valuation hierarchy described in Note 2. The impact on the derivative liabilities for the Company and the counterparties' non-performance risk to the derivative trades was considered when measuring the fair value of derivative liabilities.
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Income Taxes (Notes) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The provision (benefit) for income taxes for the three months ended April 2, 2023 and April 3, 2022 was comprised of the following:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. The provision for income taxes for the three months ended April 2, 2023 was derived using an estimated effective annual income tax rate for all of 2023 of 18.7%, which is inclusive of the estimated change in the Company's valuation allowance on its deferred tax assets and excludes other discrete tax adjustments. The difference compared to the statutory rate for 2023 is attributed to various nondeductible tax expenses and non-refundable business credits which are not directly related to the amount of pre-tax loss recorded in the period as well as the change in valuation allowance. Accordingly, in periods where recorded pre-tax income (loss) is relatively small, the proportional effect of these items on the effective rate may be significant. The income tax provision for the three months ended April 2, 2023 included $0.8 million of tax expense from net discrete tax adjustments. The benefit for income taxes for the three months ended April 3, 2022 was derived using an estimated effective annual income tax rate for all of 2022 of 22.0%, which is inclusive of the estimated change in the Company's valuation allowance on its deferred tax assets and excludes other discrete tax adjustments. The difference compared to the statutory rate for 2022 is attributed to various nondeductible tax expenses and non-refundable business credits which are not directly related to the amount of pre-tax loss recorded in the period as well as the valuation allowance charge. There were no discrete tax adjustments during the three months ended April 3, 2022. The Company's federal net operating loss carryforwards generated prior to December 31, 2017 expire beginning in 2035. Federal net operating losses generated subsequent to 2017 have no expiration date. As of April 3, 2022, the Company had federal net operating loss carryforwards of approximately $124.4 million, general business credits ("GBC") carryforwards of $43.9 million and approximately $170.5 million in state net operating loss carryforwards. The Company's GBC carryforwards begin to expire in 2031 and state net operating loss carryforwards begin to expire in 2023. The Company performs an assessment of positive and negative evidence regarding the realization of its deferred income tax assets as required by ASC 740. Under ASC 740, the weight given to negative and positive evidence is commensurate only to the extent that such evidence can be objectively verified. ASC 740 prescribes that objective historical evidence, in particular the Company's three-year cumulative loss position at April 2, 2023, be given greater weight than subjective evidence, including the Company's forecast of future taxable income, which include assumptions that cannot be objectively verified. In determining the likelihood of future realization of the deferred income tax assets as of April 2, 2023 and January 1, 2023 the Company considered both positive and negative evidence and weighted the effect of such evidence based upon its objectivity. At April 2, 2023 and January 1, 2023, the Company determined that a valuation allowance was needed for certain federal income tax credits and state operating loss carryforwards in the amount of $43.0 million and $44.3 million, respectively, as they may expire prior to their utilization by the Company. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as projections for growth. The Company recorded an income tax benefit of $1.3 million in the three months ended April 2, 2023 relative to this valuation reserve as pre-tax income in the period resulted in higher NOL utilization. The Company's policy is to recognize interest and/or penalties related to uncertain tax positions in income tax expense. At April 2, 2023 and January 1, 2023, the Company had no unrecognized tax benefits and no accrued interest related to uncertain tax positions. The tax years 2019 - 2022 remain open to examination by the major taxing jurisdictions to which the Company is subject. Although it is not reasonably possible to estimate the amount by which unrecognized tax benefits may increase within the next twelve months due to the uncertainties regarding the timing of examinations, the Company does not expect unrecognized tax benefits to significantly change in the next twelve months.
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Stock-Based Compensation (Notes) |
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Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based CompensationStock-based compensation expense for the three months ended April 2, 2023 and April 3, 2022 was $1.1 million and $1.9 million, respectively. The first quarter of 2022 included additional stock-based compensation expense of $0.7 million related to the accelerated vesting of certain awards upon the retirement of our former CEO. As of April 2, 2023, the total unrecognized stock-based compensation expense relating to time-vested restricted shares and stock options was approximately $5.7 million and the Company expects to record an additional $2.6 million in stock-based compensation expense related to the vesting of these awards in the remainder of 2023. The remaining weighted average vesting period for stock options and non-vested shares was 2.2 years. Time-based Non-vested Shares. During the three months ended April 2, 2023, the Company granted 1,001,915 non-vested shares of common stock to certain employees and officers of the Company and 384,807 non-vested shares of common stock to the outside directors of the Company. These shares generally vest in equal installments over their three-year service period, provided the participant has continuously remained an employee, officer or director of the Company. A summary of all non-vested common share activity for the three months ended April 2, 2023 was as follows:
The fair value of time-vested shares is based on the closing price on the date of grant. Performance-based Restricted Shares. On April 1, 2022, 600,000 performance-based restricted shares were granted to the Company's former CEO of which 450,000 shares were subsequently forfeited on December 31, 2022. The remaining shares will fully vest on the third anniversary of the grant date based on the achievement of contractually defined EBITDA and share price growth targets. The fair value of the market-based restricted shares was determined using a Monte Carlo simulation valuation model and these shares will be expensed over their three year performance-based vesting period based on the probability of the Company's attainment of the contractually defined targets. Stock Options. The Company has issued options to purchase shares of its common stock to certain employees and officers of the Company. These options become exercisable and are being expensed over their three-year vesting period. The options expire seven years from the date of the grant and were issued with an exercise price equal to the fair market value of the stock price on the date of grant, or $7.12 per share. The following is a summary of all stock option activity for the three months ended April 2, 2023:
(1)The aggregate intrinsic value is calculated using the difference between the market price of the Company's common stock at April 2, 2023 of $2.23 and the grant price for only those awards that have a grant price that is less than the market price of the Company's common stock at April 2, 2023. There were no awards having a grant price less than the market price of the Company's common stock at April 2, 2023. Restricted Stock Units. The Company has issued restricted stock units ("RSUs") on shares of the Company's common shares to certain officers of the Company. The following is a summary of all RSU activity for the three months ended April 2, 2023:
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Commitments And Contingencies (Notes) |
3 Months Ended |
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Apr. 02, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies Disclosure [Text Block] | Commitments and Contingencies Lease Guarantees. Fiesta Restaurant Group, Inc. ("Fiesta"), a former wholly-owned subsidiary of the Company, was spun-off in 2012 to the Company's stockholders. As of April 2, 2023, the Company is a guarantor under 17 leases from the time when Fiesta was its subsidiary, which have lease terms expiring on various dates through 2030. As of April 2, 2023, the guarantees include eight Fiesta restaurant property leases and nine Taco Cabana leases of which all but one Fiesta-owned restaurant is still operating. Eight of these guarantees are for leases with Pollo Operations, Inc, a wholly owned subsidiary of Fiesta, and nine of the guarantees are for leases with Texas Taco Cabana, L.P., an indirect subsidiary of Taco Cabana, Inc. (together with all direct and indirect subsidiaries, "Taco"). Taco was a wholly owned subsidiary of Fiesta until August 16, 2021 when Fiesta sold all of its outstanding capital stock of Taco Cabana, Inc. to YTC Enterprises, LLC, an affiliate of Yadav Enterprises, Inc. The Company is fully liable for all obligations under the terms of the leases in the event that a tenant fails to pay any sums due under the lease, subject to indemnification provisions of the Separation and Distribution Agreement entered into in connection with the spin-off of Fiesta. The maximum potential amount of future undiscounted rental payments the Company could be required to make under these leases at April 2, 2023 was $10.3 million. The obligations under these leases will generally continue to decrease over time as these operating leases expire, except for any execution of renewal options that exist under the original leases. No payments related to these guarantees have been made by the Company to date and none are expected to be required to be made in the future. The Company has not recorded a liability for these guarantees in accordance with ASC 460 - Guarantees as Fiesta has indemnified the Company for all such obligations and the Company did not believe it was probable it would be required to perform under any of the guarantees or direct obligations. Litigation. The Company is party to various litigation matters that arise in the ordinary course of business. The Company does not believe that the outcome of any of these matters will have a material adverse effect on its consolidated financial statements. Supplier Concentrations. The Company primarily utilizes four distributors, McLane Company Inc., Lineage Foodservice Solutions, LLC, Reinhart Food Service LLC and Performance Foodservice, to supply its Burger King restaurants with the majority of its foodstuffs. As of April 2, 2023, such distributors supplied 31%, 30%, 29% and 10%, respectively, of the Company's Burger King restaurants. Additionally, one bakery supplies the rolls used in approximately 50% of the Company's Burger King restaurants. The Company utilizes five distributors for its Popeyes restaurants, five for poultry products and two for all other products. For the Company's Popeyes restaurants, one distributor, Customized Distribution Services, supplies poultry products to 69% of its restaurants and supplies non-poultry products to 91% of its restaurants.
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Transactions with Related Parties (Notes) |
3 Months Ended |
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Apr. 02, 2023 | |
Related Party Transactions [Abstract] | |
Related Party Transactions Disclosure [Text Block] | Transactions with Related Parties In connection with an acquisition of restaurants from Burger King Corporation ("BKC"), a subsidiary of Restaurant Brands International Inc. ("RBI"), in 2012, Carrols Restaurant Group issued to BKC 100 shares of Series A Convertible Preferred Stock, which was exchanged for 100 shares of newly issued Series B Convertible Preferred Stock ("Series B Preferred Stock") in 2018. The Series B Preferred Stock was further exchanged for 100 shares of newly issued Series D Convertible Preferred Stock in 2022. These preferred shares are convertible into 9,414,580 shares of common stock, which as of April 2, 2023 represents approximately 14.8% of the outstanding shares of the Company's common stock after giving effect to the conversion of the Series D Preferred Stock and excluding shares held in treasury. Pursuant to the Certificate of Designation of the Series D Preferred Stock (the "Certificate of Designation"), the BKC Stockholders are entitled to elect two representatives on the Company's Board of Directors. The approval of the BKC Stockholders is also required before the Company can take certain actions, including, among other things, amending the Company's certificate of incorporation or bylaws, declaring or paying a special cash dividend, amending the size of the Company's Board of Directors, or engaging in any business other than the ownership and operation of Burger King restaurants, in each case as more particularly described in the Certificate of Designation. The Company operates its Burger King restaurants under franchise agreements with BKC and its Popeyes restaurants under franchise agreements with Popeyes Louisiana Kitchen, Inc. ("PLK"), both subsidiaries of RBI. These franchise agreements generally provide for an initial term of twenty years and currently have an initial franchise fee of $50,000. With BKC's and PLK's respective approval, the Company can elect to extend franchise agreements for additional 20 year terms, provided that the restaurant meets the current restaurant image standard and the Company is not in default under terms of the franchise agreement. In addition to the initial franchise fee, the Company generally pays BKC a monthly royalty at a rate of 4.5% of Burger King restaurant sales and PLK a weekly royalty at a rate of 5.0% of Popeyes restaurant sales. Royalty expense was $19.8 million and $17.7 million in the three months ended April 2, 2023 and April 3, 2022, respectively, and is included in other restaurant operating expenses in the condensed consolidated statements of comprehensive loss. Beginning in May of 2021, the Company also pays a monthly fee to BKC for use of its digital platform, which was $0.7 million in the three months ended April 2, 2023 and $0.4 million in the three months ended April 3, 2022, respectively, and is included in other restaurant operating expenses in the condensed consolidated statements of comprehensive loss. The Company is also generally required to contribute 4.0% of restaurant sales from its restaurants to an advertising fund utilized by BKC and PLK for advertising, promotional programs and public relations activities, and additional amounts for local advertising in markets that approve such advertising. Advertising expense associated with these expenditures was $17.4 million and $15.6 million in the three months ended April 2, 2023 and April 3, 2022, respectively. As of April 2, 2023 and April 3, 2022, the Company leased 220 and 224 of its restaurant locations from BKC, respectively. As of April 2, 2023 and April 3, 2022, the terms and conditions of the leases with BKC are identical to those between BKC and their third party lessors for 93 and 95 restaurants, respectively. Aggregate rent under these BKC leases was $7.1 million for the three months ended April 2, 2023 and $6.7 million for the three months ended April 3, 2022, respectively. The Company does not believe that such lease terms have been significantly affected by the fact that the Company and BKC are deemed to be related parties. As of April 2, 2023 and January 1, 2023, the Company owed BKC and PLK $16.8 million and $16.0 million, respectively, related to the payment of advertising, royalties, digital fees, rent and real estate taxes, which is normally remitted on a monthly basis. These costs are included in accounts payable, other current liabilities, and accrued real estate taxes on the accompanying consolidated balance sheets. The Company, Carrols Corporation, Carrols LLC, and BKC entered into an Amended Area Development Agreement on January 4, 2021 (the "Amended ADA"). Under the Amended ADA, Carrols LLC has agreed to open, build and operate a total of 50 new Burger King restaurants, 80% of which must be in Kentucky, Tennessee and Indiana. This includes four Burger King restaurants by September 30, 2021 (which were completed in 2021), 10 additional Burger King restaurants by September 30, 2022 (of which six were completed in 2022), 12 additional Burger King restaurants by September 30, 2023, 12 additional Burger King restaurants by September 30, 2024 and 12 additional Burger King restaurants by September 30, 2025. There is a 90-day cure period to meet the required restaurant development each development year. The Company is in ongoing discussions with BKC regarding its development plans, and does not believe the penalties, if any, associated with not meeting these commitments will be material. In addition, pursuant to the Amended ADA, BKC granted Carrols LLC franchise pre-approval to build new Burger King restaurants or acquire Burger King restaurants from Burger King franchisees with respect to 500 Burger King restaurants in the aggregate in (i) Kentucky, Tennessee and Indiana (excluding certain geographic areas in Indiana) and (ii) (a) 16 states, which include Arkansas, Indiana, Kentucky, Louisiana, Maine, Maryland, Michigan, Mississippi, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont and Virginia (subject to certain exceptions for certain limited geographic areas within certain states) and (b) any other geographic locations that Carrols LLC enters after the commencement date of the Amended ADA pursuant to BKC procedures subject to certain limitations. In 2022, the Company entered an agreement with BKC in connection with their "Reclaim the Flame" investment plan. Pursuant to this initiative, BKC has agreed to fund $120 million in additional advertising expenditures over the period October 1, 2022 through December 31, 2024. Following the franchisor's investment period in 2023 and 2024, participating franchisees have agreed to increase their advertising fund contributions by 50 basis points through 2026 if a profitability threshold for the Burger King system is met for the full fiscal year 2024, and further through 2028 if a secondary profitability threshold is met for the full fiscal year 2026. See "Subsequent Events" footnote 15 for description of an additional agreement executed with BKC related to their "Reclaim the Flame" investment plan.
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Stockholders' Equity |
3 Months Ended |
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Apr. 02, 2023 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders' Equity Stock Repurchase Program. On August 2, 2019, the Company's Board of Directors approved a stock repurchase plan ("Repurchase Program") under which the Company may repurchase up to $25 million of its outstanding common stock. The authorization became effective August 2, 2019. On August 10, 2021, the Company's Board of Directors approved an extension of the Company's Repurchase Program with approximately $11.0 million of its original $25 million in capacity remaining. The authorization will expire on August 2, 2023, unless terminated earlier by the Board of Directors. Purchases under the Repurchase Program may be made from time to time in open market transactions at prevailing market prices or in privately negotiated transactions (including, without limitation, the use of Rule 10b5-1 plans) in compliance with applicable federal securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The Company has no obligation to repurchase stock under the Repurchase Program, and the timing, actual number and value of shares purchased will depend on the Company's stock price, trading volume, general market and economic conditions, and other factors. At April 2, 2023, $11.0 million was available to repurchase shares under the Repurchase Program. Shares repurchased are being held in treasury until they are retired at the discretion of the Board of Directors.
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Net Loss Per Share (Notes) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) Per Share | Net Income (Loss) per Share The Company applies the two-class method to calculate and present net income (loss) per share. The Company's non-vested restricted share awards and Series D Convertible Preferred Stock contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing net loss per share pursuant to the two-class method. Under the two-class method, net earnings are reduced by the amount of dividends declared (whether paid or unpaid) and the remaining undistributed earnings are then allocated to common stock and participating securities, based on their respective rights to receive dividends. As the Company incurred a net loss for the three months ended April 3, 2022, and losses are not allocated to participating securities under the two-class method, such method is not applicable for the aforementioned interim reporting period. Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding for the reporting period. Diluted net income (loss) per share reflects additional shares of common stock outstanding, where applicable, calculated using the treasury stock method or the two-class method. The following table sets forth the calculation of basic and diluted net income (loss) per share:
(1)Shares issuable upon conversion of preferred stock and non-vested shares were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive.
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Other Expense (Income) (Notes) |
3 Months Ended |
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Apr. 02, 2023 | |
Other Income and Expenses [Abstract] | |
Other Expense (Income) | Other (Income) Expense, netThe three months ended April 2, 2023 included other income, net, of $1.5 million, which was comprised of net gains from insurance recoveries of $0.9 million, a gain of $0.8 million from the derecognition of a lease financing obligation associated with a prior sale leaseback transaction and a loss on disposal of assets of $0.2 million. The three months ended April 3, 2022 included other expense, net, of $0.2 million, which was comprised of a loss on disposal of assets of $0.3 million and net gains on previous sale-leaseback transactions of $0.1 million. |
Subsequent Events (Notes) |
3 Months Ended |
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Apr. 02, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsOn April 11, 2023, the Board of Directors (the "Board") of Carrols Restaurant Group, Inc. appointed Deborah M. Derby as President and Chief Executive Officer of the Company, effective May 1, 2023 (the "Effective Date"). Ms. Derby succeeded Paulo A. Pena, the Company's former President and CEO who passed away unexpectedly on December 31, 2022, and Anthony Hull, the Company's interim President and Chief Executive Officer, who continues to serve as the Company's Vice President, Chief Financial Officer and Treasurer of the Company after the Effective Date. Ms. Derby, who has served as an independent member of the Company's Board of Directors since June 2018, will continue to serve as a director of the Company, but as of April 11, 2023 Ms. Derby no longer serves as a Chair or a member of any of the Board's committees.In May 2023, certain subsidiaries of the Company entered into an agreement and related documentation with BKC related to its Royal Reset program. Pursuant to this program, BKC will provide the Company with the use of certain restaurant technology equipment worth approximately $12.2 million in 2023, conditioned upon the Company completing certain repairs, replacements and improvements with respect to its restaurant assets at a cost of approximately $12.2 million by March 31, 2024. |
Significant Accounting Policies (Policies) |
3 Months Ended |
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Apr. 02, 2023 | |
Accounting Policies [Abstract] | |
Consolidation, Policy [Policy Text Block] | Basis of Consolidation. The accompanying condensed consolidated financial statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries. All intercompany transactions have been eliminated in consolidation. |
Fiscal Period, Policy [Policy Text Block] | Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The three months ended April 2, 2023 and April 3, 2022 each contained thirteen weeks. The 2023 fiscal year will end December 31, 2023 and will contain 52 weeks. |
Basis of Presentation, Policy [Policy Text Block] | Basis of Presentation. The unaudited condensed consolidated financial statements as of and for the three months ended April 2, 2023 and April 3, 2022 have been prepared without an audit pursuant to the rules and regulations of the Securities and Exchange Commission and do not include certain of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of such unaudited condensed consolidated financial statements have been included. The results of operations for the three months ended April 2, 2023 are not necessarily indicative of the results to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the year ended January 1, 2023. The January 1, 2023 consolidated balance sheet data is derived from those audited consolidated financial statements.
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Use of Estimates, Policy [Policy Text Block] | Use of Estimates. The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates include accrued occupancy costs, insurance liabilities, lease accounting matters, the valuation of acquired assets and liabilities, interest rate swap valuation, the valuation of deferred income tax assets and liabilities, and the evaluation for impairment of goodwill, long-lived assets and franchise rights. Actual results could differ from those estimates. |
Segment Reporting, Policy [Policy Text Block] | Segment Information. Operating segments are components of an entity for which discrete financial information is available and is regularly reviewed by the chief operating decision maker in order to allocate resources and assess performance. The Company's chief operating decision-maker, our President and Chief Executive Officer ("CEO"), currently evaluates the Company's operations from a number of different operational perspectives; however, resource allocation decisions are determined based on the chief operating decision-maker's evaluation of the total Company operations. The Company derives all significant revenues from a single operating segment, its restaurant business. Accordingly, the Company views the operating results of its restaurants as one reportable segment. |
Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and Cash Equivalents. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. At both April 2, 2023 and January 1, 2023, the Company did not have any cash invested in money market funds classified as cash equivalents on the condensed consolidated balance sheets. |
Food, Beverage And Packaging Costs | Food, Beverage and Packaging Costs. The Company includes food, beverage and packaging costs and delivery charges, net of any vendor purchase discounts and rebates, in food, beverage, and packaging costs. |
Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In determining fair value, the accounting standards establish a three-level hierarchy for inputs used in measuring fair value as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities; and Level 3 inputs are unobservable and reflect the Company's own assumptions. Financial instruments include cash and cash equivalents, trade and other receivables, accounts payable and long-term debt. The carrying amounts of cash and cash equivalents, trade and other receivables and accounts payable approximate fair value because of the short-term nature of these financial instruments. Borrowings under the Company's Senior Credit Facilities (including its term B loans) accrue interest at a floating rate tied to a standard short-term borrowing index selected at the Company's option, plus an applicable margin. The Company's liability for its Senior Credit Facilities and 5.875% Senior Notes due 2029 are carried at historical cost in the accompanying balance sheets. The fair value of our term B loans and 5.875% Senior Notes due 2029 is based on recent trading activity, which are Level 2 inputs in the fair value hierarchy. As of April 2, 2023, the term B loans traded at 91.9% of par value and the 5.875% Senior Notes due 2029 traded at 80.5% of par value. The Company recognizes its derivative arrangements on the balance sheet at fair value, which is considered a Level 2 input. The Company's only derivative is an interest rate swap (the "Swap") which is designated as a cash flow hedge. Accordingly, the entire change in the fair value of the cash flow hedges included in the assessment of hedge effectiveness is recognized in accumulated other comprehensive income. The amounts recorded in other comprehensive income will subsequently be reclassified to earnings as an increase or decrease to interest expense as realized through receipts or payments. The Company classifies cash inflows and outflows from derivatives within operating activities on the condensed consolidated statements of cash flows. The Swap was valued at $7.2 million as of April 2, 2023 and it is classified as Level 2 within the fair value hierarchy. Fair value measurements of non-financial assets and non-financial liabilities are primarily used in the impairment analysis of long-lived assets, goodwill and intangible assets. Long-lived assets and definite-lived intangible assets are measured at fair value on a nonrecurring basis using Level 3 inputs. As described in Note 4, the Company recorded long-lived asset impairment charges of $0.1 million during the three months ended April 2, 2023 and $0.2 million during the three months ended April 3, 2022.
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New Accounting Pronouncements, Policy [Policy Text Block] | Recently Issued Accounting Pronouncements. In the normal course of business, the Company evaluates all new Accounting Standards Updates ("ASU") and other accounting pronouncements issued by the Financial Accounting Standards Board ("FASB"), Securities and Exchange Commission ("SEC"), or other authoritative accounting bodies to determine the potential impact they may have on its Consolidated Financial Statements. The Company does not expect any of the recently issued accounting pronouncements, which have not already been adopted, to have a material impact on its Consolidated Financial Statements. |
Subsequent Events, Policy [Policy Text Block] | Subsequent Events. |
Intangible Assets (Policies) |
3 Months Ended |
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Apr. 02, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block] | Franchise Rights. Amounts allocated to franchise rights for each acquisition of Burger King and Popeyes restaurants are amortized using the straight-line method over the average remaining term of the acquired franchise agreements plus one -year renewal period. |
Impairment Of Long-Lived Assets And Other Lease Charges (Policies) |
3 Months Ended |
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Apr. 02, 2023 | |
Asset Impairment Charges [Abstract] | |
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | The Company reviews its long-lived assets, principally property and equipment, for impairment at the restaurant level. If an indicator of impairment exists for any of its assets, an estimate of the undiscounted future cash flows over the life of the primary asset for each restaurant is compared to that long-lived asset's carrying value. If the carrying value is greater than the undiscounted cash flow, the Company then determines the fair value of the asset and if an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. For closed restaurant locations, the Company reviews the future minimum lease payments and related ancillary costs from the date of the restaurant closure to the end of the remaining lease term and records a lease charge for any right-of-use ("ROU") lease asset impairment or lease-related costs during the remaining term, net of any estimated sublease recoveries. The Company determined the fair value of restaurant equipment, for those restaurants reviewed for impairment, based on current economic conditions. The Company determines the fair value of ROU lease assets based on an assessment of market rents and a discounted future cash flow model. These fair value asset measurements rely on significant unobservable inputs and are considered Level 3 in the fair value hierarchy.
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Stock-Based Compensation Policies (Policies) |
3 Months Ended |
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Apr. 02, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation Costs, Policy [Policy Text Block] | The fair value of time-vested shares is based on the closing price on the date of grant. |
Net Loss Per Share (Policies) |
3 Months Ended |
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Apr. 02, 2023 | |
Earnings Per Share [Abstract] | |
Earnings Per Share, Policy [Policy Text Block] | The Company applies the two-class method to calculate and present net income (loss) per share. The Company's non-vested restricted share awards and Series D Convertible Preferred Stock contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing net loss per share pursuant to the two-class method. Under the two-class method, net earnings are reduced by the amount of dividends declared (whether paid or unpaid) and the remaining undistributed earnings are then allocated to common stock and participating securities, based on their respective rights to receive dividends. As the Company incurred a net loss for the three months ended April 3, 2022, and losses are not allocated to participating securities under the two-class method, such method is not applicable for the aforementioned interim reporting period. Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding for the reporting period. Diluted net income (loss) per share reflects additional shares of common stock outstanding, where applicable, calculated using the treasury stock method or the two-class method.
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Other Liabilities, Long-Term (Tables) |
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Other Liabilities, Noncurrent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Assets and Other Liabilities [Table Text Block] | Other liabilities, long-term, at April 2, 2023 and January 1, 2023 consisted of the following:
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Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, Cost [Table Text Block] | The components and classification of lease expense for the three months ended April 2, 2023 and April 3, 2022 are as follows:
(1)Includes short-term leases which are not material. (2)Represents operating lease costs for property and equipment not directly related to restaurant operations.
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Long-Term Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Long-Term Debt, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments [Table Text Block] | Long-term debt at April 2, 2023 and January 1, 2023 consisted of the following:
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Income Taxes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] | The provision (benefit) for income taxes for the three months ended April 2, 2023 and April 3, 2022 was comprised of the following:
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Stock-Based Compensation (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 02, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Nonvested Share Activity [Table Text Block] | A summary of all non-vested common share activity for the three months ended April 2, 2023 was as follows:
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Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block] | The following is a summary of all RSU activity for the three months ended April 2, 2023:
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Share-based Payment Arrangement, Option, Activity | The following is a summary of all stock option activity for the three months ended April 2, 2023:
(1)The aggregate intrinsic value is calculated using the difference between the market price of the Company's common stock at April 2, 2023 of $2.23 and the grant price for only those awards that have a grant price that is less than the market price of the Company's common stock at April 2, 2023. There were no awards having a grant price less than the market price of the Company's common stock at April 2, 2023.
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Net Loss Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] | The following table sets forth the calculation of basic and diluted net income (loss) per share:
(1)Shares issuable upon conversion of preferred stock and non-vested shares were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive.
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Basis Of Presentation (Details) |
Apr. 02, 2023 |
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Burger King Corporate [Member] | |
Entity Information [Line Items] | |
Number of Restaurants | 1,019 |
Number of States in which Entity Operates | 23 |
Popeyes [Member] | |
Entity Information [Line Items] | |
Number of Restaurants | 65 |
Number of States in which Entity Operates | 7 |
Significant Accounting Policies (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 02, 2023 |
Apr. 03, 2022 |
|
Debt Instrument [Line Items] | ||
Asset impairment charges | $ 0.1 | $ 0.2 |
Senior Loans | ||
Debt Instrument [Line Items] | ||
Loans traded, portion of par value, percentage | 0.805 | |
Senior Loans | Senior Unsecured Notes Due 2029 | ||
Debt Instrument [Line Items] | ||
Debt instrument, rate | 5.875% | |
Term Loan B Facility [Member] | ||
Debt Instrument [Line Items] | ||
Loans traded, portion of par value, percentage | 91.9 |
Intangible Assets (Details) |
3 Months Ended | |
---|---|---|
Apr. 02, 2023
USD ($)
period
|
Apr. 03, 2022
USD ($)
|
|
Finite-Lived Intangible Assets [Line Items] | ||
Franchise agreement, number of renewal periods | period | 1 | |
Franchise agreement, term | 20 years | |
Amortization of intangible assets, franchise rights | $ 3,500,000 | |
Goodwill, Impairment Loss | 0 | |
Franchise Rights [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Impairment of intangible assets (excluding goodwill) | 0 | $ 0 |
Second Fiscal Year | 13,900,000 | |
Next fiscal year | 13,900,000 | |
Fourth Fiscal Year | 13,900,000 | |
Fifth Fiscal Year | 13,900,000 | |
Third Fiscal Year | $ 13,900,000 |
Impairment Of Long-Lived Assets And Other Lease Charges (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 02, 2023
USD ($)
restaurant
|
Apr. 03, 2022
USD ($)
restaurant
|
|
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Impairment and other lease charges | $ 1,340 | $ 496 |
Asset impairment charges | $ 100 | $ 200 |
Asset impairment charges, number of restaurants | restaurant | 1 | |
Other Asset Impairment Charges | $ 300 | |
Closed Restaurants | ||
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Number of restaurants closed | restaurant | 3 | |
Initial Impairment Charge [Member] | ||
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Asset impairment charges | $ 100 | |
Capital Expenditures At Underperforming Restaurants [Member] | ||
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Asset impairment charges | $ 100 | |
Other Lease Charges [Member] | ||
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Asset impairment charges | $ 1,200 |
Other Liabilities, Long-Term (Details) - USD ($) $ in Thousands |
Apr. 02, 2023 |
Jan. 01, 2023 |
---|---|---|
Other Liabilities, Noncurrent [Abstract] | ||
Accrued occupancy costs | $ 1,701 | $ 1,797 |
Accrued workers' compensation and general liability claims | 3,388 | 5,239 |
Deferred compensation | 2,612 | 3,002 |
Total long-term lease liabilities | 1,333 | 1,347 |
Other | 1,051 | 2,205 |
Other Liabilities | $ 10,085 | $ 13,590 |
Leases - Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 02, 2023 |
Apr. 03, 2022 |
|
Loans and Leases Receivable Disclosure [Line Items] | ||
Variable lease cost | $ 5,471 | $ 4,409 |
Amortization of right-of-use assets | 825 | 487 |
Interest on lease liabilities | 208 | 108 |
Total lease cost | 33,172 | 31,821 |
Restaurant Rent Expense [Member] | ||
Loans and Leases Receivable Disclosure [Line Items] | ||
Operating lease cost | 26,363 | 26,604 |
General and Administrative Expense [Member] | ||
Loans and Leases Receivable Disclosure [Line Items] | ||
Operating lease cost | $ 305 | $ 213 |
Long-Term Debt Debt Balances (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Apr. 02, 2023 |
Apr. 03, 2022 |
Jan. 01, 2023 |
|
Debt Instrument [Line Items] | |||
Debt Instrument, Interest Rate During Period | 5.80% | 4.90% | |
Finance lease liabilities | $ 12,090 | $ 12,826 | |
Long-term Debt | 478,653 | 492,951 | |
Less: current portion | (7,368) | (7,341) | |
Less: deferred financing costs | (5,129) | (5,401) | |
Debt Instrument, Unamortized Discount | (421) | (453) | |
Long-term debt, net of current portion | 465,735 | 479,756 | |
Term Loan B Facility [Member] | |||
Debt Instrument [Line Items] | |||
Long-term Line of Credit | 166,563 | 167,625 | |
Revolving Credit Facility [Member] | |||
Debt Instrument [Line Items] | |||
Long-term Line of Credit | 0 | 12,500 | |
Senior Unsecured Notes Due 2029 | |||
Debt Instrument [Line Items] | |||
Long-term Debt | $ 300,000 | $ 300,000 |
Income Taxes Schedule of Components of Income Tax Expense (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Apr. 02, 2023 |
Apr. 03, 2022 |
|
Income Tax Disclosure [Abstract] | ||
Current | $ 0 | $ 0 |
Deferred | 2,473,000 | (8,216,000) |
Change in valuation allowance | (1,331,000) | 2,207,000 |
Provision (benefit) for income taxes | $ 1,142,000 | $ (6,009,000) |
Income Taxes (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Apr. 02, 2023 |
Apr. 03, 2022 |
Jan. 01, 2023 |
|
Income Tax Contingency [Line Items] | |||
Deferred Tax Assets, Valuation Allowance | $ 43,000,000 | $ 44,300,000 | |
Discrete tax expense | 18.70% | 22.00% | |
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability | $ 800,000 | $ 0 | |
Operating Loss Carryforwards | 124,400,000 | ||
Deferred Tax Assets, Tax Credit Carryforwards, General Business | 43,900,000 | ||
Change in valuation allowance | 1,300,000 | ||
Unrecognized Tax Benefits | 0 | 0 | |
Unrecognized Tax Benefits, Interest on Income Taxes Accrued | 0 | $ 0 | |
State and Local Jurisdiction | |||
Income Tax Contingency [Line Items] | |||
Operating Loss Carryforwards | $ 170,500,000 |
Stock-Based Compensation Summary of Non-Vested Stock Activity (Details) |
3 Months Ended |
---|---|
Apr. 02, 2023
$ / shares
shares
| |
Nonvested share activity [Roll Forward] | |
Nonvested, beginning of period (in shares) | shares | 1,767,811 |
Granted (in shares) | shares | 1,386,722 |
Vested (in shares) | shares | (753,818) |
Forfeited (in shares) | shares | (11,600) |
Nonvested, end of period (in shares) | shares | 2,389,115 |
Weighted Average Grant Date Price | |
Nonvested, beginning of period (in dollars per share) | $ / shares | $ 3.79 |
Granted (in dollars per share) | $ / shares | 2.04 |
Vested (in dollars per share) | $ / shares | 4.28 |
Forfeited (in dollars per share) | $ / shares | 2.48 |
Nonvested, end of period (in dollars per share) | $ / shares | $ 2.62 |
Stock-Based Compensation Summary of RSU Activity (Details) (Details) |
3 Months Ended |
---|---|
Apr. 02, 2023
shares
| |
Options | |
Vested | (753,818) |
Restricted Stock Units (RSUs) [Member] | |
Options | |
Non-vested at January 1, 2023 | 38,770 |
Vested | (19,381) |
Non-vested at April 2, 2023 | 19,389 |
Stockholders' Equity (Details) - Repurchase Program [Member] - USD ($) $ in Millions |
Apr. 02, 2023 |
Aug. 02, 2019 |
---|---|---|
Class of Stock [Line Items] | ||
Stock Repurchase Program, Authorized Amount | $ 25.0 | |
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 11.0 |
Other Expense (Income) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 02, 2023 |
Apr. 03, 2022 |
|
Other Income and Expenses [Abstract] | ||
Gain from insurance recoveries | $ (0.9) | |
Gain on previous sale-leaseback transactions | (0.8) | $ (0.1) |
Other expenses | 0.2 | |
Loss on disposal of assets | $ 0.2 | $ 0.3 |
Subsequent Events (Details) - Subsequent Event $ in Thousands |
1 Months Ended |
---|---|
May 31, 2023
USD ($)
| |
Subsequent Event [Line Items] | |
Expected cost of repairs, replacements, and improvements | $ 12,200 |
Burger King Corporate [Member] | |
Subsequent Event [Line Items] | |
Technology Equipment, Right Of Use | $ 12,200 |
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