TAX 8-K
Cambria Tax Aware ETF (TAX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Item 2.02. | Results of Operations and Financial Condition. |
On August 4, 2022, Franchise Group, Inc. (the “Company”) issued a press release regarding its financial results for the second quarter ended June 25, 2022. A copy of the release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on August 4, 2022 at 4:30 p.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 ending December 31, 2022.
The information in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished to the Securities and Exchange Commission (the “SEC”) pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any of the Company’s filings with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
| 99.1 | Press Release dated August 4, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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 4, 2022 | By: | /s/ Eric Seeton |
| Eric Seeton | ||
| Chief Financial Officer | ||
EXHIBIT 99.1
Franchise Group, Inc. Announces Fiscal 2022 Second Quarter Financial Results
DELAWARE, Ohio, Aug. 04, 2022 (GLOBE NEWSWIRE) -- Franchise Group, Inc. (NASDAQ: FRG) (“Franchise Group,” “FRG” or the “Company”) today announced the financial results of its fiscal 2022 second quarter. For the second quarter of fiscal 2022, total reported revenue for Franchise Group was $1.1 billion, net income from continuing operations was $41.0 million or $0.94 per fully diluted share, Adjusted EBITDA was $103.4 million and Non-GAAP EPS was $1.19 per share. On June 25, 2022, total cash on hand was approximately $95.0 million and outstanding term debt was approximately $1.1 billion.
“Core to FRG is an intentional model of operational and end market diversification that is serving us well during the recent supply and demand turbulence. Accelerating franchising and continued profitable growth in pet, health & wellness, and education services are countering reduced top and bottom-line performance in our home furnishings businesses. Currently, we are seeing signs that inflation is cresting and even reversing in the areas of freight and home furnishing product costs. We believe that market forces will continue to shift in our favor over the balance of the year and begin to restore our home furnishings unit volumes and profit margins to historical levels next year,” stated Brian Kahn, Franchise Group’s President and CEO.
The Company has six reportable segments: American Freight; The Vitamin Shoppe; Pet Supplies Plus; Buddy’s; Sylvan; and Badcock. The following table summarizes Revenue, Adjusted EBITDA, and Net Income/(Loss) for each of these segments. Reconciliations of Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP EPS to their respective most comparable GAAP measures, are included below under “Non-GAAP Financial Measures and Key Metrics.”
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||
| June 25, 2022 | June 25, 2022 | |||||||||||||||||||||
| Adjusted | Net | Adjusted | Net | |||||||||||||||||||
| Revenue | EBITDA | Income/(Loss) | Revenue | EBITDA | Income/(Loss) | |||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||
| American Freight | $ | 226,428 | $ | 7,443 | $ | 2,236 | $ | 467,843 | $ | 23,325 | $ | 803 | ||||||||||
| Vitamin Shoppe | 306,897 | 38,414 | 18,332 | 617,851 | 78,908 | 39,737 | ||||||||||||||||
| Pet Supplies Plus | 302,733 | 27,244 | 11,298 | 603,946 | 51,465 | 19,423 | ||||||||||||||||
| Buddy's | 14,129 | 4,093 | 1,883 | 29,713 | 9,328 | 4,448 | ||||||||||||||||
| Sylvan Learning | 11,512 | 3,887 | 408 | 21,556 | 6,715 | 574 | ||||||||||||||||
| Badcock | 233,299 | 26,163 | 14,422 | 489,558 | 52,273 | 11,563 | ||||||||||||||||
| Corporate | - | (3,825 | ) | (7,596 | ) | - | (6,255 | ) | (23,247 | ) | ||||||||||||
| Total | $ | 1,094,998 | $ | 103,418 | $ | 40,983 | $ | 2,230,467 | $ | 215,759 | $ | 53,301 | ||||||||||
Outlook
Franchise Group is updating its previously announced financial outlook for fiscal year 2022 to revenue of approximately $4.3 billion from $4.45 billion, Adjusted EBITDA to approximately $390 million from $450 million and Non-GAAP EPS to approximately $4.00 per share from $5.00 per share. In calculating EPS, the Company is using approximately 41.0 million weighted average shares outstanding. Non-GAAP EPS is calculated by adding the tax effected impact of adjustments to EBITDA to net income on a per share basis. In calculating GAAP and Non-GAAP EPS, the Company is currently using an effective tax rate of approximately 27%.
The Company does not provide a quantitative reconciliation of forward-looking, Non-GAAP financial measures such as forecasted Adjusted EBITDA or Non-GAAP EPS to the most directly comparable GAAP financial measures 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. Estimates exclude potential acquisitions, divestitures or refranchising activities. See “Non-GAAP Financial Measures and Key Metrics.”
Conference Call Information
Franchise Group will conduct a conference call on August 4th at 4:30 P.M. ET to discuss its business, review financial results for its fiscal 2022 first and discuss its outlook for the balance of fiscal year 2022. A real-time webcast of the conference call will be available on the Events page of Franchise Group’s website at www.franchisegrp.com. Dial in access is also accessible through the link on the website. Please register 5-10 minutes prior to the scheduled start time.
About Franchise Group, Inc.
Franchise Group is an owner and operator of franchised and franchisable businesses that continually looks to grow its portfolio of brands while utilizing its operating and capital allocation philosophy to generate strong cash flow for its shareholders. Franchise Group’s business lines include Pet Supplies Plus, American Freight, The Vitamin Shoppe, Badcock Home Furniture & more, Buddy’s Home Furnishings and Sylvan Learning. On a combined basis, Franchise Group currently operates over 3,000 locations predominantly located in the U.S. that are either Company-run or operated pursuant to franchising and dealer agreements.
| FRANCHISE GROUP, INC. AND SUBSIDIARIES | ||||||
| Consolidated Balance Sheets | ||||||
| (In thousands, except share count and per share data) | June 25, 2022 | December 25, 2021 | ||||
| Assets | (Unaudited) | (Unaudited) | ||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 95,038 | $ | 292,714 | ||
| Current receivables, net | 178,687 | 118,698 | ||||
| Current securitized receivables, net | 322,028 | 369,567 | ||||
| Inventories, net | 825,393 | 673,170 | ||||
| Current assets held for sale | 27,999 | - | ||||
| Other current assets | 26,389 | 24,063 | ||||
| Total current assets | 1,475,534 | 1,478,212 | ||||
| Property, plant, and equipment, net | 226,771 | 449,886 | ||||
| Non-current receivables, net | 10,402 | 11,755 | ||||
| Non-current securitized receivables, net | 40,820 | 47,252 | ||||
| Goodwill | 806,653 | 806,536 | ||||
| Intangible assets, net | 122,347 | 127,951 | ||||
| Tradenames | 222,703 | 222,687 | ||||
| Operating lease right-of-use assets | 866,226 | 714,741 | ||||
| Investment in equity securities | 24,394 | 35,249 | ||||
| Other non-current assets | 19,151 | 18,902 | ||||
| Total assets | $ | 3,815,001 | $ | 3,913,171 | ||
| Liabilities and Stockholders' Equity | ||||||
| Current liabilities: | ||||||
| Current installments of long-term obligations | $ | 322,363 | $ | 486,170 | ||
| Current operating lease liabilities | 178,278 | 173,101 | ||||
| Accounts payable and accrued expenses | 425,728 | 410,552 | ||||
| Other current liabilities | 41,671 | 50,833 | ||||
| Total current liabilities | 968,040 | 1,120,656 | ||||
| Long-term obligations, excluding current installments | 1,281,530 | 1,383,725 | ||||
| Non-current operating lease liabilities | 701,185 | 557,071 | ||||
| Other non-current liabilities | 95,392 | 88,888 | ||||
| Total liabilities | 3,046,147 | 3,150,340 | ||||
| Stockholders' equity: | ||||||
| Common stock, $0.01 par value per share, 180,000,000 shares authorized, 40,358,754 and 40,296,688 shares issued and outstanding at June 25, 2022 and December 25, 2021, respectively. | 404 | 403 | ||||
| Preferred stock, $0.01 par value per share, 20,000,000 shares authorized, and 4,541,125 issued and outstanding at June 25, 2022 and December 25, 2021, respectively. | 45 | 45 | ||||
| Additional paid-in capital | 486,059 | 475,396 | ||||
| Retained earnings | 282,346 | 286,987 | ||||
| Total equity | 768,854 | 762,831 | ||||
| Total liabilities and equity | $ | 3,815,001 | $ | 3,913,171 | ||
| FRANCHISE GROUP, INC. AND SUBSIDIARIES | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| (In thousands, except share count and per share data) | June 25, 2022 | June 26, 2021 | June 25, 2022 | June 26, 2021 | ||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenues: | ||||||||||||||||
| Product | $ | 952,009 | $ | 805,768 | $ | 1,931,173 | $ | 1,389,585 | ||||||||
| Service and other | 135,648 | 48,193 | 283,929 | 76,768 | ||||||||||||
| Rental | 7,341 | 8,797 | 15,365 | 17,750 | ||||||||||||
| Total revenues | 1,094,998 | 862,758 | 2,230,467 | 1,484,103 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of revenue: | ||||||||||||||||
| Product | 600,780 | 522,576 | 1,217,364 | 861,991 | ||||||||||||
| Service and other | 8,732 | 934 | 17,395 | 1,339 | ||||||||||||
| Rental | 2,741 | 2,935 | 5,603 | 5,940 | ||||||||||||
| Total cost of revenue | 612,253 | 526,445 | 1,240,362 | 869,270 | ||||||||||||
| Selling, general, and administrative expenses | 405,639 | 278,157 | 782,633 | 503,702 | ||||||||||||
| Total operating expenses | 1,017,892 | 804,602 | 2,022,995 | 1,372,972 | ||||||||||||
| Income from operations | 77,106 | 58,156 | 207,472 | 111,131 | ||||||||||||
| Other expense: | ||||||||||||||||
| Bargain purchase gain | 3,581 | - | 3,514 | - | ||||||||||||
| Gain on sale-leaseback transactions, net | 49,854 | - | 49,854 | - | ||||||||||||
| Other | 12,853 | - | (9,122) | (36,726 | ) | |||||||||||
| Interest expense, net | (88,839 | ) | (22,865 | ) | (181,167 | ) | (70,300 | ) | ||||||||
| Income from continuing operations before income taxes | 54,555 | 35,291 | 70,551 | 4,105 | ||||||||||||
| Income tax expense (benefit) | 13,572 | 2,770 | 17,250 | (81 | ) | |||||||||||
| Income from continuing operations | 40,983 | 32,521 | 53,301 | 4,186 | ||||||||||||
| Income from discontinued operations, net of tax | - | 6,215 | - | 48,363 | ||||||||||||
| Net income attributable to Franchise Group, Inc. | $ | 40,983 | $ | 38,736 | $ | 53,301 | $ | 52,549 | ||||||||
| Income per share from continuing operations: | ||||||||||||||||
| Basic | $ | 0.96 | $ | 0.76 | $ | 1.22 | $ | - | ||||||||
| Diluted | 0.94 | 0.74 | 1.19 | - | ||||||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | 0.96 | $ | 0.91 | $ | 1.22 | $ | 1.20 | ||||||||
| Diluted | 0.94 | 0.89 | 1.19 | 1.20 | ||||||||||||
| Weighted-average shares outstanding: | ||||||||||||||||
| Basic | 40,356,299 | 40,175,058 | 40,331,855 | 40,142,571 | ||||||||||||
| Diluted | 41,126,605 | 40,905,567 | 41,148,668 | 40,142,571 | ||||||||||||
| FRANCHISE GROUP, INC. AND SUBSIDIARIES | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| Six Months Ended | ||||||||
| (In thousands) | June 25, 2022 | June 26, 2021 | ||||||
| (Unaudited) | (Unaudited) | |||||||
| Operating Activities | ||||||||
| Net income | $ | 53,301 | $ | 52,549 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Provision for doubtful accounts | 56,840 | 1,910 | ||||||
| Depreciation, amortization, and impairment charges | 42,236 | 31,157 | ||||||
| Amortization of deferred financing costs and prepayment penalties | 12,032 | 69,923 | ||||||
| Amortization of securitized debt discount | 128,208 | - | ||||||
| Stock-based compensation expense | 10,853 | 5,478 | ||||||
| Change in fair value of investment | 10,855 | - | ||||||
| Gain on sale-leaseback, bargain purchases, and sales of Company-owned stores | (55,883 | ) | (731 | ) | ||||
| Other non-cash items | (2,182 | ) | 645 | |||||
| Changes in other assets and liabilities | (206,572 | ) | (55,305 | ) | ||||
| Net cash provided by operating activities | 49,688 | 105,626 | ||||||
| Investing Activities | ||||||||
| Purchases of property, plant, and equipment | (21,809 | ) | (25,028 | ) | ||||
| Proceeds from sale of property, plant, and equipment | 240,558 | 293 | ||||||
| Acquisition of business, net of cash and restricted cash acquired | (3,754 | ) | (462,821 | ) | ||||
| Issuance of operating loans to franchisees | - | (17,612 | ) | |||||
| Payments received on operating loans to franchisees | 1,000 | 23,013 | ||||||
| Net cash (used in) investing activities | 215,995 | (482,155 | ) | |||||
| Financing Activities | ||||||||
| Dividends paid | (54,665 | ) | (32,808 | ) | ||||
| Issuance of long-term debt and other obligations | 219,056 | 1,306,724 | ||||||
| Repayment of long-term debt and other obligations | (625,746 | ) | (856,385 | ) | ||||
| Issuance of common stock | 49 | - | ||||||
| Issuance of preferred stock | - | 79,542 | ||||||
| Principal payments of finance lease obligations | (1,383 | ) | - | |||||
| Payment for debt issue costs and prepayment penalty on extinguishment | (431 | ) | (87,502 | ) | ||||
| Other stock compensation transactions | (239 | ) | (18 | ) | ||||
| Net cash provided by (used in) financing activities | (463,359 | ) | 409,553 | |||||
| Effect of exchange rate changes on cash, net | - | 142 | ||||||
| Net increase (decrease) in cash equivalents and restricted cash | (197,676 | ) | 33,166 | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 292,714 | 151,502 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 95,038 | $ | 184,668 | ||||
| Supplemental Cash Flow Disclosure | ||||||||
| Cash paid for taxes, net of refunds | $ | 17,842 | $ | 1,284 | ||||
| Cash paid for interest | 42,013 | 61,249 | ||||||
| Accrued capital expenditures | 2,751 | 3,406 | ||||||
| Tax receivable agreement included in other long-term liabilities | - | 1,211 | ||||||
Non-GAAP Financial Measures and Key Metrics
Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP EPS are financial measures that are not prepared in accordance with GAAP. Management believes the presentation of these measures is useful to investors as supplemental measures in evaluating the aggregate performance of the Company’s operating businesses and in comparing its results from period to period because they exclude items that the Company does not believe are reflective of its core or ongoing operating results. These measures are used by management to evaluate the Company’s performance and make resource allocation decisions each period. These metrics are also used in the determination of executive management's compensation. Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP EPS 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 these non-GAAP measures may not be comparable to similarly titled measures used by other companies.
Management defines and calculates Adjusted EBITDA as net income (loss) from continuing operations before interest, income taxes, depreciation and amortization adjusted for certain non-core or non-operational items related to executive severance and related costs, stock-based compensation, shareholder litigation costs, corporate governance costs, accrued judgments and settlements, net of estimated revenue, store closures, rebranding costs, acquisition costs, inventory fair value step up amortization and prepayment penalty on early debt repayment. Adjusted EBITDA is a financial measure that is not prepared in accordance with GAAP.
Management defines and calculates Non-GAAP Net Income and Non-GAAP EPS as net income (loss) and net income (loss) per diluted share from continuing operations adjusted for non-core or non-operational items related to executive severance and related costs, stock-based compensation, non-cash executive compensation expense, shareholder litigation costs, prepayment penalties on early debt repayment, non-cash amortization of debt issuance costs, store closures, the Badcock segment's in-house financing operations, rebranding costs, acquisition costs, inventory fair value step up amortization, and amortization of acquired intangible assets. Although amortization of acquired intangible assets is excluded from these non-GAAP measures, it is important for investors to understand that such intangible assets support revenue generation. Management excludes amortization of intangible assets because these are non-cash amounts for which the amount and frequency are significantly impacted by the timing and size of our acquisitions, which vary from period to periods and across companies. The tax effect on the related non-GAAP adjustments was calculated based on an estimated annual non-GAAP effective tax rate of 27%.
Reconciliation of Adjusted EBITDA
Below are reconciliations of Net Income/(Loss) from continuing operations to Adjusted EBITDA for the three and six months ended June 25, 2022.
| For the Three Months Ended June 25, 2022 | |||||||||||||||||||||||||||||
| ($ In thousands) | Buddy's | Pet Supplies Plus | American Freight | Vitamin Shoppe | Sylvan | Badcock | Corporate | Total | |||||||||||||||||||||
| Net income (loss) from continuing operations | $ | 1,883 | $ | 11,298 | $ | 2,236 | $ | 18,332 | $ | 408 | $ | 14,422 | $ | (7,596 | ) | $ | 40,983 | ||||||||||||
| Add back: | |||||||||||||||||||||||||||||
| Interest expense | 826 | 4,774 | 7,592 | 6,432 | 731 | 68,103 | 381 | 88,839 | |||||||||||||||||||||
| Income tax expense (benefit) | 852 | 2,582 | (4,799 | ) | 6,253 | 480 | 1,813 | 6,390 | 13,572 | ||||||||||||||||||||
| Depreciation and amortization charges | 750 | 5,607 | 2,528 | 7,082 | 2,129 | 1,459 | - | 19,554 | |||||||||||||||||||||
| Total Adjustments | 2,428 | 12,963 | 5,321 | 19,767 | 3,340 | 71,375 | 6,771 | 121,965 | |||||||||||||||||||||
| EBITDA | 4,311 | 24,261 | 7,557 | 38,099 | 3,748 | 85,797 | (825 | ) | 162,948 | ||||||||||||||||||||
| Adjustments to EBITDA | |||||||||||||||||||||||||||||
| Executive severance and related costs | - | 161 | - | - | - | - | - | 161 | |||||||||||||||||||||
| Litigation costs and settlements | (288 | ) | - | (296 | ) | 315 | - | - | - | (269 | ) | ||||||||||||||||||
| Stock-based and long term executive compensation | 70 | 2,567 | (71 | ) | - | 139 | - | 5,337 | 8,041 | ||||||||||||||||||||
| Corporate compliance costs | - | - | - | - | - | - | - | - | |||||||||||||||||||||
| Store closures | - | 173 | (20 | ) | - | - | - | - | 153 | ||||||||||||||||||||
| W.S. Badcock financing operations | - | - | - | - | - | (6,928 | ) | - | (6,928 | ) | |||||||||||||||||||
| Prepayment penalty on early debt repayment | - | - | - | - | - | - | - | - | |||||||||||||||||||||
| Right-of-use asset impairment | - | - | 273 | - | - | - | - | 273 | |||||||||||||||||||||
| Integration costs | - | 64 | - | - | - | - | - | 64 | |||||||||||||||||||||
| Divestiture costs | - | - | - | - | - | 493 | - | 493 | |||||||||||||||||||||
| Acquisition costs | - | 18 | - | - | - | 236 | 4,522 | 4,776 | |||||||||||||||||||||
| Gain on investment in equity securities | - | - | - | - | - | - | (12,859 | ) | (12,859 | ) | |||||||||||||||||||
| Acquisition bargain purchase gain | - | - | - | - | - | (3,581 | ) | - | (3,581 | ) | |||||||||||||||||||
| Gain on sale-leaseback and owned properties, net | - | - | - | - | - | (49,854 | ) | - | (49,854 | ) | |||||||||||||||||||
| Total Adjustments to EBITDA | (218 | ) | 2,983 | (114 | ) | 315 | 139 | (59,634 | ) | (3,000 | ) | (59,530 | ) | ||||||||||||||||
| Adjusted EBITDA | $ | 4,093 | $ | 27,244 | $ | 7,443 | $ | 38,414 | $ | 3,887 | $ | 26,163 | $ | (3,825 | ) | $ | 103,418 | ||||||||||||
| For the Six Months Ended June 25, 2022 | ||||||||||||||||||||||||||||
| ($ In thousands) | Buddy's | Pet Supplies Plus | American Freight | Vitamin Shoppe | Sylvan | Badcock | Corporate | Total | ||||||||||||||||||||
| Net income (loss) from continuing operations | $ | 4,448 | $ | 19,423 | $ | 803 | $ | 39,737 | $ | 574 | $ | 11,563 | $ | (23,247 | ) | $ | 53,301 | |||||||||||
| Add back: | ||||||||||||||||||||||||||||
| Interest expense | 1,634 | 9,505 | 15,161 | 12,831 | 1,450 | 140,133 | 453 | 181,167 | ||||||||||||||||||||
| Income tax expense (benefit) | 1,545 | 6,747 | 279 | 13,803 | 540 | 2,806 | (8,470 | ) | 17,250 | |||||||||||||||||||
| Depreciation and amortization charges | 1,507 | 11,736 | 5,087 | 13,945 | 3,985 | 5,328 | - | 41,588 | ||||||||||||||||||||
| Total Adjustments | 4,686 | 27,988 | 20,527 | 40,579 | 5,975 | 148,267 | (8,017 | ) | 240,005 | |||||||||||||||||||
| EBITDA | 9,134 | 47,411 | 21,330 | 80,316 | 6,549 | 159,830 | (31,264 | ) | 293,306 | |||||||||||||||||||
| Adjustments to EBITDA | ||||||||||||||||||||||||||||
| Executive severance and related costs | - | 154 | - | - | - | 102 | - | 256 | ||||||||||||||||||||
| Litigation costs and settlements | 55 | - | 786 | 865 | - | - | (1,745 | ) | (39 | ) | ||||||||||||||||||
| Stock-based and long term executive compensation | 139 | 3,442 | 224 | - | 148 | - | 10,714 | 14,667 | ||||||||||||||||||||
| Corporate compliance costs | - | - | - | - | - | - | 51 | 51 | ||||||||||||||||||||
| Store closures | - | 293 | 218 | - | - | - | 575 | 1,086 | ||||||||||||||||||||
| W.S. Badcock financing operations | - | - | - | - | - | (57,799 | ) | - | (57,799 | ) | ||||||||||||||||||
| Prepayment penalty on early debt repayment | - | - | - | - | - | - | - | - | ||||||||||||||||||||
| Right-of-use asset impairment | - | - | 648 | - | - | - | - | 648 | ||||||||||||||||||||
| Integration costs | - | 108 | 105 | - | 18 | 297 | - | 528 | ||||||||||||||||||||
| Divestiture costs | - | - | - | - | - | 2,429 | - | 2,429 | ||||||||||||||||||||
| Acquisition costs | - | 57 | 14 | - | - | 782 | 4,550 | 5,403 | ||||||||||||||||||||
| Gain on investment in equity securities | - | - | - | - | - | - | 10,864 | 10,864 | ||||||||||||||||||||
| Acquisition bargain purchase gain | - | - | - | - | - | (3,514 | ) | - | (3,514 | ) | ||||||||||||||||||
| Gain on sale-leaseback and owned properties, net | - | - | - | (2,273 | ) | - | (49,854 | ) | - | (52,127 | ) | |||||||||||||||||
| Total Adjustments to EBITDA | 194 | 4,054 | 1,995 | (1,408 | ) | 166 | (107,557 | ) | 25,009 | (77,547 | ) | |||||||||||||||||
| Adjusted EBITDA | $ | 9,328 | $ | 51,465 | $ | 23,325 | $ | 78,908 | $ | 6,715 | $ | 52,273 | $ | (6,255 | ) | $ | 215,759 | |||||||||||
Reconciliation of Non-GAAP Net Income and EPS
Below are reconciliations of Net Income/(Loss) from continuing operations to Non-GAAP Net Income and Net Income/(Loss) from continuing operations per diluted share to Non-GAAP EPS for the three and six months ended June 25, 2022.
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| ($ In thousands except share count and per share data) | June 25, 2022 | June 25, 2022 | ||||||||||||||
| Net income (loss) from continuing operations / Net income (loss) from continuing operations per diluted share | $ | 40,983 | 1.00 | $ | 53,301 | $ | 1.30 | |||||||||
| Less: Preferred dividend declared | (2,129 | ) | (0.06 | ) | (4,257 | ) | (0.11 | ) | ||||||||
| Adjusted Net Income available to Common Stockholder | 38,854 | 0.94 | 49,044 | 1.19 | ||||||||||||
| Add back: | ||||||||||||||||
| Executive severance and related costs | 161 | 0.01 | 256 | 0.01 | ||||||||||||
| Litigation costs and settlements | (269 | ) | (0.01 | ) | (39 | ) | - | |||||||||
| Stock-based and long term executive compensation | 8,041 | 0.20 | 14,667 | 0.36 | ||||||||||||
| Corporate compliance costs | - | - | 51 | - | ||||||||||||
| Store closures | 153 | - | 1,086 | 0.03 | ||||||||||||
| W.S. Badcock financing operations | (6,928 | ) | (0.17 | ) | (57,799 | ) | (1.40 | ) | ||||||||
| Prepayment penalty on early debt repayment | - | - | - | - | ||||||||||||
| Right-of-use asset impairment | 273 | 0.01 | 648 | 0.02 | ||||||||||||
| Integration costs | 64 | - | 528 | 0.01 | ||||||||||||
| Divestiture costs | 493 | 0.01 | 2,429 | 0.06 | ||||||||||||
| Acquisition costs | 4,776 | 0.12 | 5,403 | 0.13 | ||||||||||||
| Gain on investment in equity securities | (12,859 | ) | (0.31 | ) | 10,864 | 0.26 | ||||||||||
| Acquisition bargain purchase gain | (3,581 | ) | (0.09 | ) | (3,514 | ) | (0.09 | ) | ||||||||
| Gain on sale-leaseback and owned properties, net | (49,854 | ) | (1.21 | ) | (52,127 | ) | (1.27 | ) | ||||||||
| Adjustments to EBITDA | (59,530 | ) | (1.44 | ) | (77,547 | ) | (1.88 | ) | ||||||||
| Non-cash amortization of debt issuance costs | 5,653 | 0.13 | 12,032 | 0.28 | ||||||||||||
| Amortization of acquisition-related intangibles | 4,359 | 0.11 | 8,445 | 0.21 | ||||||||||||
| Securitized receivables interest expense | 62,909 | 1.53 | 128,208 | 3.12 | ||||||||||||
| Tax impact | (3,452 | ) | (0.08 | ) | (18,339 | ) | (0.45 | ) | ||||||||
| Impact of diluted share count assuming non-GAAP net income | - | - | - | - | ||||||||||||
| Total Adjustments to Net income (loss) from continuing operations | 9,939 | 0.25 | 52,798 | 1.28 | ||||||||||||
| Non-GAAP Net Income from continuing operations / Non-GAAP diluted EPS from continuing operations | $ | 48,793 | $ | 1.19 | $ | 101,842 | $ | 2.47 | ||||||||
| Basic weighted average shares | 40,356,299 | 40,331,855 | ||||||||||||||
| Non-GAAP diluted weighted average shares outstanding | 41,126,605 | 41,148,668 | ||||||||||||||
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, statements regarding product and freight costs, home furnishings unit volumes and profit margins and its outlook for fiscal 2022. 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. The Company refers you to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Form 10-K for the fiscal year ended December 25, 2021, 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.
Investor Relations Contact:
Andrew F. Kaminsky
EVP & Chief Administrative Officer
Franchise Group, Inc.
[email protected]
(914) 939-5161