TAX 8-K
Cambria Tax Aware ETF (TAX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
Form 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): August 5, 2020
Franchise Group, Inc.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 001-35588 | 27-3561876 |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| 1716 Corporate Landing Parkway, Virginia Beach, Virginia 23454 |
| (Address of Principal Executive Offices) (Zip Code) |
(757) 493-8855
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, par value $0.01 per share | FRG | Nasdaq Global Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). 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. [ ]
Item 2.02. Results of Operations and Financial Condition.
On August 5, 2020, Franchise Group, Inc. (the “Company”) issued a press release regarding its financial results for the second quarter ended June 27, 2020. A copy of the release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on August 6, 2020 at 8:30 a.m. Eastern Time, the Company will hold a teleconference for analysts, institutional investors and stockholders to discuss results for the second quarter of the fiscal year ended June 27, 2020.
The information under Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release dated August 5, 2020.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Franchise Group, Inc. | ||
| Date: August 5, 2020 | By: | /s/ Eric F. Seeton |
| Eric F. Seeton | ||
| Chief Financial Officer | ||
EXHIBIT 99.1
Franchise Group, Inc. Announces Second Quarter 2020 Financial Results
- Increases Guidance for 2020
ORLANDO, Fla., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Franchise Group, Inc. (NASDAQ: FRG) (“Franchise Group” or the “Company”) today announced the results of its second quarter ended June 27, 2020. For the second quarter of 2020, total reported revenue for Franchise Group was $512.6 million, GAAP Net Loss was $21.7 million or $0.62 per share, Proforma Adjusted EBITDA was $62.7 million and Non-GAAP EPS was $0.53 per share. In calculating GAAP EPS, the Company utilized approximately 35 million weighted average fully diluted shares of common stock outstanding for the second quarter. In calculating Non-GAAP EPS and formulating guidance, the Company utilized approximately 40 million fully diluted shares of common stock outstanding which accounts for the recent underwritten public offering of 4.8 million shares. The net proceeds from the follow-on offering closed after the end of the quarter and is not included in the end of quarter cash balance of $105.5 million. Total outstanding debt at the end of the second quarter was $740.6 million.
During the second quarter of 2020, Franchise Group priced an approximate $106 million follow-on offering of common stock, reduced debt by $70.9 million and declared another quarterly dividend of $0.25 per share. The Company’s business model was extremely resilient during the height of Covid-19 and was able to exceed its plan for the quarter due to strong revenue and continued achievement of operational efficiencies.
Brian Kahn, Franchise Group’s President and CEO stated, “Our businesses continued to benefit from the shift in consumer spending. Our associates have maintained their dedication to our businesses and have again delivered robust financial results despite difficult circumstances. Our performance through fiscal July, to begin the third quarter, continues to demonstrate resilience and is allowing us to further raise guidance for the full fiscal year.”
The Company has four reportable segments: American Freight; The Vitamin Shoppe; Liberty Tax and Buddy’s. The following table summarizes revenue, net loss and proforma adjusted EBITDA by these segments. A reconciliation of Proforma Adjusted EBITDA to the most comparable GAAP measure is included below.
| For the Three Months | ||||||||||
| Ended June 27, 2020 | ||||||||||
| Proforma | ||||||||||
| Adjusted | Net | |||||||||
| Revenue | EBITDA | Income/(Loss) | ||||||||
| (In thousands) | ||||||||||
| American Freight | $ | 234,427 | $ | 40,384 | $ | (6,747 | ) | |||
| Vitamin Shoppe | 237,735 | 16,292 | (3,961 | ) | ||||||
| Liberty Tax | 15,073 | (538 | ) | (7,322 | ) | |||||
| Buddy's | 25,392 | 7,037 | 1,522 | |||||||
| Corporate | - | (452 | ) | (5,434 | ) | |||||
| Total | $ | 512,627 | $ | 62,723 | $ | (21,942 | ) | |||
| Net income (loss) attributable to non-controlling interest | 269 | |||||||||
| Net income (loss) attributable to Franchise Group, Inc. | $ | (21,673 | ) | |||||||
Outlook (1)
For fiscal 2020, we believe we will exceed our previous guidance of $240 million of Proforma Adjusted EBITDA and $2.60 of Non-GAAP EPS and now expect Proforma Adjusted EBITDA to exceed $255 million and Non-GAAP EPS of over $2.70. Please note that our $2.70 of Non-GAAP EPS includes approximately $0.30 pro forma dilution from our recent follow-on offering and excludes any assumption for acquisitions, divestitures or refranchising activity.
| (1) | The Company does not provide quantitative reconciliation of forward-looking, non-GAAP financial measures such as forecasted 2020 Proforma Adjusted EBITDA or non-GAAP EPS to the most directly comparable GAAP financial measure because it is difficult to reliably predict or estimate the relevant components without unreasonable effort due to future uncertainties that may potentially have significant impact on such calculations, and providing them may imply a degree of precision that would be confusing or potentially misleading. Proforma adjustments represent realized and unrealized synergies consistent with the Company’s credit agreement. Estimates exclude potential acquisitions, divestitures or refranchising activities. |
Conference Call Information
Franchise Group will conduct a conference call on August 6th at 8:30 A.M. ET to discuss its business, review financial results for the second quarter of 2020 and provide an update on its expected outlook for the rest of 2020. A real-time webcast of the conference call will be available on the Events page of Franchise Group’s website at www.franchisegrp.com. The conference call can also be accessed live via telephone at (800) 697-5978. The passcode is 6075494. Please dial in 5-10 minutes prior to the scheduled start time.
About Franchise Group, Inc.
Franchise Group, Inc. (NASDAQ: FRG) is an operator of franchised and franchisable businesses and uses its operating expertise to drive cost efficiencies and grow its brands. Franchise Group’s business lines include Liberty Tax Service, Buddy’s Home Furnishings, American Freight and The Vitamin Shoppe. On a combined basis, Franchise Group currently operates over 4,100 locations predominantly located in the U.S. and Canada that are either Company-run or operated pursuant to franchising agreements.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, projections, predictions, expectations, or beliefs about future events or results and are not statements of historical fact. Such statements may include statements regarding the Company’s results of operation and financial condition, performance during the COVID-19 pandemic, and its strategy and outlook for the remainder of fiscal 2020. Such forward-looking statements are based on various assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are often accompanied by words that convey projected future events or outcomes such as “expect,” “believe,” “estimate,” “plan,” “project,” “anticipate,” “intend,” “will,” “may,” “view,” “opportunity,” “potential,” or words of similar meaning or other statements concerning opinions or judgment of the Company or its management about future events. Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from any projected future results, performance or achievements expressed or implied by such forward-looking statements. Actual future results, performance or achievements may differ materially from historical results or those anticipated depending on a variety of factors, many of which are beyond the control of the Company. We refer you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Transition Report on Form 10-K/T for the transition period ended December 28, 2019, and comparable sections of the Company’s Quarterly Reports on Form 10-Q and other filings, which have been filed with the SEC and are available on the SEC’s website at www.sec.gov. All of the forward-looking statements made in this press release are expressly qualified by the cautionary statements contained or referred to herein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or its business or operations. Readers are cautioned not to rely on the forward-looking statements contained in this press release. Forward-looking statements speak only as of the date they are made and the Company does not undertake any obligation to update, revise or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.
| FRANCHISE GROUP, INC. AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (In thousands, except share count and per share data) | June 27, 2020 | December 28, 2019 | ||||||
| Assets | (Unaudited) | (Audited) | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 105,473 | $ | 39,581 | ||||
| Current receivables, net | 111,857 | 79,693 | ||||||
| Inventories, net | 315,078 | 300,312 | ||||||
| Other current assets | 24,298 | 20,267 | ||||||
| Total current assets | 556,706 | 439,853 | ||||||
| Property, equipment, and software, net | 152,520 | 150,147 | ||||||
| Non-current receivables, net | 15,105 | 18,638 | ||||||
| Goodwill | 468,088 | 134,301 | ||||||
| Intangible assets, net | 145,887 | 77,590 | ||||||
| Operating lease right-of-use assets | 529,891 | 462,610 | ||||||
| Other non-current assets | 15,434 | 15,406 | ||||||
| Total assets | $ | 1,883,631 | $ | 1,298,545 | ||||
| Liabilities and Stockholders Equity | ||||||||
| Current liabilities: | ||||||||
| Current installments of long-term obligations | $ | 203,490 | $ | 218,384 | ||||
| Current operating lease liabilities | 130,307 | 107,680 | ||||||
| Accounts payable and accrued expenses | 222,461 | 158,995 | ||||||
| Other current liabilities | 38,008 | 16,409 | ||||||
| Total current liabilities | 594,266 | 501,468 | ||||||
| Long-term obligations, excluding current installments | 537,148 | 245,236 | ||||||
| Non-current operating lease liabilities | 426,255 | 394,307 | ||||||
| Other non-current liabilities | 35,253 | 5,773 | ||||||
| Total liabilities | 1,592,922 | 1,146,784 | ||||||
| Stockholders equity: | ||||||||
| Common stock, $0.01 par value per share, 180,000,000 and 180,000,000 shares authorized, 35,185,710 and 18,250,225 shares issued and outstanding at June 27, 2020 and December 28, 2019, respectively | 352 | 183 | ||||||
| Preferred stock, $0.01 par value per share, 20,000,000 and 20,000,000 shares authorized, 0 and 1,886,667 shares issued and outstanding at June 27, 2020 and December 28, 2019, respectively | - | 19 | ||||||
| Additional paid-in capital | 249,525 | 108,339 | ||||||
| Accumulated other comprehensive loss, net of taxes | (2,103 | ) | (1,538 | ) | ||||
| Retained earnings | 42,935 | 18,388 | ||||||
| Total equity attributable to Franchise Group, Inc. | 290,709 | 125,391 | ||||||
| Non-controlling interest | - | 26,370 | ||||||
| Total equity | 290,709 | 151,761 | ||||||
| Total liabilities and equity | $ | 1,883,631 | $ | 1,298,545 | ||||
| FRANCHISE GROUP, INC. AND SUBSIDIARIES | ||||||||||||||||
| Condensed Consolidated Statements of Operations (Unaudited) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| (In thousands, except share count and per share data) | June 27, 2020 | June 30, 2019 | June 27, 2020 | June 30, 2019 | ||||||||||||
| Revenues: | ||||||||||||||||
| Product | $ | 466,709 | $ | - | $ | 940,214 | $ | - | ||||||||
| Service and other | 28,742 | 23,820 | 131,383 | 119,658 | ||||||||||||
| Rental | 17,176 | - | 33,596 | - | ||||||||||||
| Total revenues | 512,627 | 23,820 | 1,105,193 | 119,658 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of revenue: | ||||||||||||||||
| Product | 277,582 | - | 565,400 | - | ||||||||||||
| Service and other | 701 | - | 1,456 | - | ||||||||||||
| Rental | 5,508 | - | 11,450 | - | ||||||||||||
| Total cost of revenue | 283,791 | - | 578,306 | - | ||||||||||||
| Selling, general, and administrative expenses | 217,264 | 29,482 | 469,476 | 70,447 | ||||||||||||
| Total operating expenses | 501,055 | 29,482 | 1,047,782 | 70,447 | ||||||||||||
| Income (loss) from operations | 11,572 | (5,662 | ) | 57,411 | 49,211 | |||||||||||
| Other expense: | ||||||||||||||||
| Other | (6 | ) | (106 | ) | (4,064 | ) | (99 | ) | ||||||||
| Interest expense, net | (31,626 | ) | (415 | ) | (57,378 | ) | (1,470 | ) | ||||||||
| Income (loss) before income taxes | (20,060 | ) | (6,183 | ) | (4,031 | ) | 47,642 | |||||||||
| Income tax expense (benefit) | 1,882 | (928 | ) | (43,987 | ) | 14,706 | ||||||||||
| Net income (loss) | (21,942 | ) | (5,255 | ) | 39,956 | 32,936 | ||||||||||
| Less: Net (income) loss attributable to non-controlling interest | 269 | - | (2,090 | ) | - | |||||||||||
| Net income (loss) attributable to Franchise Group, Inc. | $ | (21,673 | ) | $ | (5,255 | ) | $ | 37,866 | $ | 32,936 | ||||||
| Net income (loss) per share of common stock: | ||||||||||||||||
| Basic | $ | (0.62 | ) | $ | (0.37 | ) | $ | 1.30 | $ | 2.34 | ||||||
| Diluted | (0.62 | ) | (0.37 | ) | 1.29 | 2.33 | ||||||||||
| Weighted-average shares outstanding: | ||||||||||||||||
| Basic | 34,972,364 | 14,062,766 | 29,173,172 | 14,059,279 | ||||||||||||
| Diluted | 34,972,364 | 14,062,766 | 29,335,633 | 14,124,104 | ||||||||||||
| FRANCHISE GROUP, INC. AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||
| Six Months Ended | ||||||||
| (In thousands) | June 27, 2020 | June 30, 2019 | ||||||
| Operating Activities | ||||||||
| Net income | $ | 39,956 | $ | 32,936 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Provision for doubtful accounts | 3,403 | 4,770 | ||||||
| Depreciation, amortization and impairment charges | 33,792 | 7,772 | ||||||
| Amortization of deferred financing costs | 21,554 | 358 | ||||||
| Loss (gain) on disposal of fixed assets | (166 | ) | 270 | |||||
| Stock-based compensation expense - equity awards | 4,339 | 1,047 | ||||||
| Loss (gain) on bargain purchases and sales of Company-owned offices | (1,258 | ) | 424 | |||||
| Equity in loss of affiliate | 15 | 1 | ||||||
| Deferred tax expense | 7,739 | 742 | ||||||
| Change in | ||||||||
| Accounts, notes, and interest receivable | (1,784 | ) | 1,380 | |||||
| Income taxes receivable | (53,156 | ) | 13,341 | |||||
| Other assets | 1,015 | 1,870 | ||||||
| Accounts payable and accrued expenses | 134 | 222 | ||||||
| Inventory | 84,434 | - | ||||||
| Deferred revenue | 8,938 | (1,538 | ) | |||||
| Net cash provided by operating activities | 148,955 | 63,595 | ||||||
| Investing Activities | ||||||||
| Issuance of operating loans to franchisees and ADs | (28,876 | ) | (44,346 | ) | ||||
| Payments received on operating loans to franchisees and ADs | 49,612 | 66,204 | ||||||
| Purchases of Company-owned offices, AD rights, and acquired customer lists | (2,299 | ) | (404 | ) | ||||
| Proceeds from sale of Company-owned offices and AD rights | 989 | 22 | ||||||
| Acquisition of business, net of cash acquired | (353,423 | ) | - | |||||
| Purchases of property, equipment, and software | (16,212 | ) | (647 | ) | ||||
| Net cash provided by (used in) investing activities | (350,209 | ) | 20,829 | |||||
| Financing Activities | ||||||||
| Proceeds from the exercise of stock options | 187 | 153 | ||||||
| Dividends paid | (10,406 | ) | - | |||||
| Non-controlling interest distribution | (4,716 | ) | - | |||||
| Repayment of other long-term obligations | (410,798 | ) | (16,178 | ) | ||||
| Borrowings under revolving credit facility | 142,000 | 93,874 | ||||||
| Repayments under revolving credit facility | (112,760 | ) | (161,128 | ) | ||||
| Issuance of common stock | 92,082 | - | ||||||
| Payment for debt issue costs | (14,604 | ) | (2,260 | ) | ||||
| Issuance of debt | 586,000 | - | ||||||
| Cash paid for taxes on exercises/vesting of stock-based compensation | (73 | ) | (21 | ) | ||||
| Net cash provided by (used in) financing activities | 266,912 | (85,560 | ) | |||||
| Effect of exchange rate changes on cash, net | (234 | ) | 131 | |||||
| Net increase (decrease) in cash equivalents and restricted cash | 65,424 | (1,005 | ) | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 45,146 | 3,981 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 110,570 | $ | 2,976 | ||||
| Supplemental Cash Flow Disclosure | ||||||||
| Cash paid for taxes, net of refunds | $ | 493 | $ | 70 | ||||
| Cash paid for interest | $ | 26,857 | $ | 993 | ||||
| Accrued capital expenditures | $ | 2,608 | $ | - | ||||
| Deferred financing costs from issuance of common stock | $ | 31,013 | $ | - | ||||
| Tax receivable agreement included in other long-term liabilities | $ | 17,156 | $ | - | ||||
Non-GAAP Financial Measures and Key Metrics
This press release includes Adjusted EBITDA and non-GAAP earnings per share. Adjusted EBITDA represents net income before interest, income taxes, depreciation and amortization adjusted for certain non-core or non-operational items related to restructuring and related charges, early extinguishment of debt costs, litigation settlement costs, transaction-related costs, and fair value acquisition accounting adjustments related to inventory. Adjusted EBITDA is a financial measure not prepared in accordance with generally accepted accounting principles (“GAAP”). Management believes that Adjusted EBITDA is useful to investors as a supplemental measure in evaluating the aggregate performance of our operating businesses and in comparing our results from period to period because they exclude items that we do not believe are reflective of our core or ongoing operating results. Adjusted EBITDA is the measure that is used by our management, including our chief operating decision maker, to evaluate performance and make resource allocation decisions each period. Adjusted EBITDA is also the primary operating metric used in the determination of executive management's compensation. Adjusted EBITDA should not be considered in isolation or as a substitute for net income or other income statement information prepared in accordance with GAAP and our presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies.
Below is a reconciliation of management’s estimate of net income to estimated Proforma Adjusted EBITDA for the three months ended June 27, 2020. In the table below, we provide an estimated range of the items we exclude from our calculation of Proforma Adjusted EBITDA.
| For the Three Months Ended June 27, 2020 | ||||||||||||||||||||||
| American | Vitamin | |||||||||||||||||||||
| Buddy's | Liberty | Freight | Shoppe | Corporate | Total | |||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||
| Net Income | $ | 1,522 | $ | (7,322 | ) | $ | (6,747 | ) | $ | (3,961 | ) | $ | (5,165 | ) | $ | (21,673 | ) | |||||
| Add back: | ||||||||||||||||||||||
| Interest Expense | 3,816 | 3,749 | 20,715 | 3,347 | - | 31,626 | ||||||||||||||||
| Income Tax benefit | - | 389 | (1,545 | ) | - | 3,037 | 1,882 | |||||||||||||||
| Depreciation, Amortization & Impairment | 1,514 | 2,379 | 1,553 | 12,419 | - | 17,865 | ||||||||||||||||
| Total Adjustments | 5,329 | 6,517 | 20,723 | 15,766 | 3,037 | 51,373 | ||||||||||||||||
| EBITDA | 6,852 | (805 | ) | 13,976 | 11,805 | (2,128 | ) | 29,700 | ||||||||||||||
| Adjustments to EBITDA: | ||||||||||||||||||||||
| Executive Severance and Related | - | - | 573 | 90 | - | 663 | ||||||||||||||||
| Stock-Based Compensation | 70 | 148 | - | - | 1,636 | 1,854 | ||||||||||||||||
| Shareholder Litigation | - | - | - | - | 156 | 156 | ||||||||||||||||
| Corporate Compliance | - | 4 | - | - | - | 4 | ||||||||||||||||
| Prepayment Penalty on Early Debt Extinguishment | - | - | - | - | - | - | ||||||||||||||||
| Accrued Judgments & Settlements | - | 115 | 2 | - | - | 117 | ||||||||||||||||
| Store Closures | 62 | - | - | 195 | - | 257 | ||||||||||||||||
| Acquisition Costs | 54 | - | 9,158 | 605 | 153 | 9,969 | ||||||||||||||||
| Inventory Fair Value Step-up Amortization | - | - | 5,932 | 1,470 | - | 7,403 | ||||||||||||||||
| Total Adjustments to EBITDA | 185 | 267 | 15,665 | 2,360 | 1,945 | 20,422 | ||||||||||||||||
| Adjusted EBITDA | 7,037 | (538 | ) | 29,641 | 14,165 | (183 | ) | 50,122 | ||||||||||||||
| Proforma Adjustments | - | - | 10,743 | 2,127 | (269 | ) | 12,601 | |||||||||||||||
| Proforma Adjusted EBITDA | $ | 7,037 | $ | (538 | ) | $ | 40,384 | $ | 16,292 | $ | (452 | ) | $ | 62,723 | ||||||||
Investor Relations Contact:
Andrew F. Kaminsky
EVP & Chief Administrative Officer
Franchise Group, Inc.
[email protected]
(914) 939-5161