VAUGHAN, ON, March 3, 2022
/CNW/ - Recipe Unlimited Corporation reported financial results
today for the 13 and 52 weeks ended December 26, 2021.
- Total System Sales(1) increased 29.3% to
$790.4 million in Q4 2021 and 12.3%
to $2.7 billion for the year
despite 42.7% of operating weeks impacted by government
mandated restrictions or closures in the quarter and 64.9% for the
year
- E-Commerce System Sales(1) increased 13.2% to
$173.5 million in Q4 2021 and 34.5%
to $674.9 million for the year,
driven by strong consumer demand through e-commerce channels
- Operating Income increased from $1.0
million in Q4 2020 to $5.0
million in Q4 2021 and from an Operating Loss of
$27.4 million in 2020 to a positive
Operating Income of $65.3 million in
2021, reflecting the resilience of our brands and franchise
partners
- Adjusted EBITDA(2) increased 12.3% to
$39.3 million in Q4 2021 and 26.5% to
$144.0 million for the year, despite
the ongoing effects of the COVID-19 pandemic and significant
reductions in government subsidies in Q4
- Long term debt repayments of $65.2
million in Q4 and $95.2
million for the year as a result of strong financial
performance and prudent cash management
- Recognized as both a Great Place to Work and one of the Best
Workplaces for Hybrid Work in Canada
(1) This is a supplementary
financial measure. Please refer to the "Supplementary Financial
Measures" section of this press release.
|
(2) This
is a non-GAAP financial measure. Please refer to the "Non-GAAP
Measures" section of this press release.
|
"During the past 24 months, we have made significant steps to
strengthen our overall business. Some of the initiatives include
investing to solidify our 100% ownership of Burger's Priest and
Fresh and divesting of under-performing restaurants and non-core
brands.
During the pandemic, we opened 51 new restaurants, renovated an
additional 59 restaurants and invested in our digital platforms
which helped us to become one of Canada's largest e-commerce businesses. The
company issued its inaugural Corporate Social Responsibility
platform and in Q4 Swiss Chalet won the prestigious PAC Global
award for its sustainability and packaging design.
We have invested over $50 million
in our franchise partners and front line teammates. In Q4, we were
recognized as both a Great Place to Work and also as one of the
Best Workplaces for Hybrid Work in Canada.
Our agility to quickly pivot to changing conditions and
customer's preferences and the strategic steps we have made have
enabled us to generate positive free cash flows, repay $95.2 million of debt in 2021 and enhance the
strength of our balance sheet. All of these steps have placed us in
a strong position to grow and compete as we emerge from the
pandemic."
– Frank Hennessey, CEO
Highlights for the 13 and 52 weeks ended December 26,
2021:
- Total System Sales(1) for the 13 weeks ended
December 26, 2021 was $790.4 million, compared to $611.3 million in 2020 and $895.8 million in 2019, representing an increase
from 2020 of 29.3% and a decrease from 2019 of 11.8%. The decrease
from 2019 was impacted by complete and partial restaurant closures,
which affected 42.7% of operating weeks during the fourth quarter.
System Sales(1) for the 52 weeks ended December 26, 2021 was $2,723.9 million, compared to $2,424.7 million in 2020 and $3,486.9 million in 2019. Decreases in restaurant
System Sales(1) compared to 2019 were partially offset
by sales increases in the Retail and Catering segment.
- Gross revenue for the 13 weeks ended December 26, 2021 was $299.3 million, compared to $210.9 million in 2020 and $327.0 million in 2019, representing an increase
from 2020 of 41.9% and a decrease from 2019 of 8.5%. Gross revenue
for the 52 weeks ended December 26,
2021 was $1,009.1 million,
compared to $864.6 million in 2020
and $1,252.5 million in 2019,
representing an increase from 2020 of 16.7% and a decrease from
2019 of 19.4%. The increase in 2020 for the quarter and
year-to-date was related to higher System Sales(1) in
both our corporate and franchise locations. The decrease from 2019
was driven by the effects of government mandated closures and
restrictions in 2021 as a result of COVID-19.
- E-Commerce System Sales(1) for the 13 weeks ended
December 26, 2021 was $173.5 million, compared to $153.3 million in 2020 and $92.9 million in 2019, representing increases
from 2020 and 2019 of 13.2% and 86.8% respectively. E-Commerce
System Sales(1) for the 52 weeks ended December 26, 2021 were $674.9 million, compared to $501.9 million in 2020 and $340.1 million in 2019, representing increases
from 2020 and 2019 of 34.5% and 98.4% respectively. Consumer demand
through e-commerce channels remained strong even as dining rooms
reopened in the third and fourth quarters of 2021. The Company
continues to build on its omni-channel business model through its
established IT platform infrastructure, which makes it convenient
for Guests to enjoy their experience in whatever manner they
choose.
- System Sales(1) for Retail and Catering for the 13
weeks ended December 26, 2021 was
$99.0 million compared to
$92.6 million in 2020 and
$92.3 million in 2019, representing
increases from 2020 and 2019 of 6.9% and 7.3% respectively. System
Sales(1) for Retail and Catering for the 52 weeks ended
December 26, 2021 was $367.2 million compared to $337.9 million in 2020 and $316.4 million in 2019, representing increases
from 2020 and 2019 of 8.7% and 16.1% respectively. The increases
were driven by increased sales to retail grocery customers and
modest sales recovery of the catering segment in the fourth quarter
of 2021.
- Operating Income for the 13 weeks ended December 26, 2021 was $5.0
million compared to $1.0
million in 2020, an increase of $4.0
million for the quarter. Adjusted EBITDA(2) for
the 13 weeks ended December 26, 2021
was $39.3 million compared to
$35.0 million in 2020, an increase of
$4.3 million for the quarter. The
Operating Income and Adjusted EBITDA(2) increases for
the quarter were driven by increased System Sales(1),
partially offset by a decrease of $15.2
million in federal government subsidies and an increase in
food costs.
- Operating Income for the 52 weeks ended December 26, 2021 was $65.3 million compared to a loss of $27.4 million in 2020, representing an increase
of $92.7 million. Adjusted
EBITDA(2) for the 52 weeks ended December 26, 2021 increased to $144.0 million compared to $113.8 million in 2020, representing an increase
of $30.2 million. The Operating
Income and Adjusted EBITDA(2) increases were driven by
increased System Sales(1), partially offset by lower
government subsidies and an increase in food costs.
- On November 1, 2021, the Company
completed the acquisition of Plant Powered Ventures Ltd., which
developed and operates the original five Fresh branded restaurants
in Ontario, as well as the
remaining 15% minority interest of Fresh Since 1999. Subsequent to
this transaction, the Company has full control and ownership of all
Fresh branded locations ("Fresh"). Fresh is a modern plant-based
full service restaurant brand that offers accelerated restaurant
growth potential and is on-point to meet the increasing consumer
demand for great tasting vegan and vegetarian plant-based food and
beverages.
- Through prudent cash management and strategic measures, the
Company generated cash flows from operations for the 13 weeks ended
December 26, 2021 of $70.8 million and $191.7
million year to date. This enabled the Company to repay
$65.2 million of long-term debt in
the quarter and $95.2 million for the
year and strengthen its balance sheet.
- Cash flows from operating activities for the 13 weeks ended
December 26, 2021 was $70.8 million, compared to $50.4 million in 2020, representing an increase
of $20.4 million. Cash flow from
operating activities for the 52 weeks ended December 26, 2021 was $191.7 million, compared to $113.4 million in 2020, representing an increase
of $78.3 million.
- Free Cash Flow(2) for the 13 weeks ended
December 26, 2021 was $40.5 million, compared to $11.0 million in 2020 and $49.3 million in 2019. Free Cash
Flow(2) for the 52 weeks ended December 26, 2021 was $83.5 million, compared to ($7.7) million in 2020 and $44.9 million in 2019.
- Net losses for the 13 weeks ended December 26, 2021 were $2.8 million, compared to net earnings of
$23.6 million in 2020, representing a
decrease of $26.4 million for the
quarter. The $26.4 million decrease
was primarily driven by a decrease in the fair value of
Exchangeable Partnership and KRIF units of $18.7 million, an increase in the fair value of
non-controlling interest liability of $8.0
million, and an increase in current and deferred taxes of
$3.2 million, partially offset by an
increase in Adjusted EBITDA(2) of $4.3 million.
- Net earnings for the 52 weeks ended December 26, 2021 were $42.7 million, compared to net losses of
$53.0 million in 2020, representing
an increase of $95.7 million. The
$95.7 million increase for the year
was primarily driven by an increase in Adjusted
EBITDA(2) of $30.2
million, a decrease in net asset impairment charges of
$53.4 million, a decrease in net
interest expense of $4.5 million and
an increase in the fair value of Exchangeable Partnership and KRIF
units of $36.0 million, partially
offset by an increase in the fair value of non-controlling interest
liability of $8.5 million and an
increase in current and deferred taxes of $29.3 million.
- The Company's continued commitment to its teammates was
recognized in 2021 and Recipe was recently certified as a Great
Place to Work and recognized as one of the Best Workplaces for
Hybrid Work in Canada.
- The Company continues to execute its restaurant network
improvement strategy plan, which included the planned closures of
restaurants that no longer fit its long-term strategic plan and the
addition of new locations with high growth potential. For the 52
weeks ended December 26, 2021, the
Company successfully closed and exited 61 restaurants, including 7
corporate, 2 joint venture and 52 franchise locations and added 19
restaurants, including 7 corporate and 12 franchise locations.
(1) This is a supplementary financial
measure. Please refer to "Non-GAAP Measures - Supplementary
Financial Measures" section of this press release for a definition
of this measure.
|
(2) This is a non-GAAP financial
measure. Please refer to the "Non-GAAP Measures - Non-GAAP
Financial Measures" section of this press release for a definition
of this measure.
|
Impact of COVID-19
The actions taken by the Company throughout the COVID-19
disruption period have allowed the Company to generate meaningful
levels of System Sales(1) and positive Adjusted
EBITDA(2) while reducing net debt. The following table
summarizes the impact of the COVID-19 pandemic and compares the
Company's quarterly results to the pre-pandemic results of
operations in the fourth quarter of 2019:
(C$ millions
unless otherwise stated)
|
|
Q4 –
2021 Dec
26, 2021
|
|
Q3 –
2021 Sep
26, 2021
|
|
Q2 –
2021 Jun
27, 2021
|
|
Q1 –
2021 Mar
28, 2021
|
|
Q4 –
2020 Dec
27, 2020
|
|
Q4 – 2019
Dec 29,
2019
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
% of Operating Weeks
impacted by COVID-19 related restrictions
|
|
42.7 %
|
|
30.8 %
|
|
96.5 %
|
|
88.7 %
|
|
42.2 %
|
|
— %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total System Sales
(1)
|
|
$
|
790.4
|
|
$
|
834.2
|
|
$
|
561.8
|
|
$
|
537.6
|
|
$
|
611.3
|
|
$
|
895.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E-Commerce System
Sales (1)
|
|
$
|
173.5
|
|
$
|
134.1
|
|
$
|
167.1
|
|
$
|
149.8
|
|
$
|
153.3
|
|
$
|
92.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
$
|
5.0
|
|
$
|
29.3
|
|
$
|
20.5
|
|
$
|
10.5
|
|
$
|
1.0
|
|
$
|
(4.5)
|
Adjusted
EBITDA(2)
|
|
$
|
39.3
|
|
$
|
50.3
|
|
$
|
30.4
|
|
$
|
24.0
|
|
$
|
35.0
|
|
$
|
60.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Debt
(1)
|
|
$
|
354.4
|
|
$
|
424.3
|
|
$
|
472.1
|
|
$
|
457.7
|
|
$
|
451.3
|
|
$
|
435.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of restaurants
(at period end)
|
|
|
1,261
|
|
|
1,284
|
|
1,327
|
|
1,330
|
|
1,341
|
|
|
1,373
|
(1) This is a supplementary financial
measure. Please refer to "Non-GAAP Measures - Supplementary
Financial Measures" section of this press release for a definition
of this measure.
(2) This is a non-GAAP financial
measure. Please refer to the "Non-GAAP Measures - Non-GAAP
Financial Measures" section of this press release for a definition
of this measure.
|
|
|
For the 13 weeks
ended
|
|
For the 52 weeks
ended
|
(C$ millions
unless otherwise stated)
|
|
Dec
26, 2021
|
|
Dec
27, 2020
|
|
Dec
29, 2019
|
|
Dec
26, 2021
|
|
Dec
27, 2020
|
|
Dec
29, 2019
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Total System Sales
(1)(2)
|
|
$
|
790.4
|
|
$
|
611.3
|
|
$
|
895.8
|
|
$
|
2,723.9
|
|
$
|
2,424.7
|
|
$
|
3,486.9
|
System Sales Growth
(2)
|
|
29.3 %
|
|
(31.8) %
|
|
(1.1) %
|
|
12.3 %
|
|
(30.5) %
|
|
2.1 %
|
Total number of
restaurants (at period end)
|
|
1,261
|
|
1,341
|
|
1,373
|
|
1,261
|
|
1,341
|
|
1,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
$
|
5.0
|
|
$
|
1.0
|
|
$
|
(4.5)
|
|
$
|
65.3
|
|
$
|
(27.4)
|
|
$
|
79.5
|
Adjusted EBITDA
(3)
|
|
$
|
39.3
|
|
$
|
35.0
|
|
$
|
60.5
|
|
$
|
144.0
|
|
$
|
113.8
|
|
$
|
216.0
|
Adjusted EBITDA
Margin on System Sales (4)
|
|
5.0 %
|
|
5.7 %
|
|
6.8 %
|
|
5.3 %
|
|
4.7 %
|
|
6.2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate restaurant
sales
|
|
$
|
152.9
|
|
$
|
89.0
|
|
$
|
192.6
|
|
$
|
486.6
|
|
$
|
408.7
|
|
$
|
772.7
|
Number of corporate
restaurants (at period end)
|
|
219
|
|
210
|
|
202
|
|
219
|
|
210
|
|
202
|
Operating Income
from Corporate segment
|
|
$
|
6.2
|
|
$
|
1.5
|
|
$
|
19.3
|
|
$
|
29.0
|
|
$
|
0.4
|
|
$
|
75.0
|
Operating Income as a
% of corporate sales
|
|
4.1 %
|
|
1.7 %
|
|
10.0 %
|
|
6.0 %
|
|
0.1 %
|
|
9.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise restaurant
System Sales
|
|
$
|
538.6
|
|
$
|
425.7
|
|
$
|
606.1
|
|
$
|
1,861.6
|
|
$
|
1,663.0
|
|
$
|
2,380.5
|
Number of franchised
& JV restaurants
|
|
1,042
|
|
1,131
|
|
1,171
|
|
1,042
|
|
1,131
|
|
1,171
|
Operating Income
from Franchise segment
|
|
$
|
25.5
|
|
$
|
16.7
|
|
$
|
26.6
|
|
$
|
85.4
|
|
$
|
64.8
|
|
$
|
105.1
|
Operating Income as a
% of Franchise sales
|
|
4.7 %
|
|
3.9 %
|
|
4.4 %
|
|
4.6 %
|
|
3.9 %
|
|
4.4 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail and Catering
sales
|
|
$
|
99.0
|
|
$
|
92.6
|
|
$
|
92.3
|
|
$
|
367.2
|
|
$
|
337.9
|
|
$
|
316.4
|
Operating Income
from Retail and Catering
|
|
$
|
8.0
|
|
$
|
13.1
|
|
$
|
13.1
|
|
$
|
30.6
|
|
$
|
48.4
|
|
$
|
36.5
|
Operating Income as a
% of Retail & Catering sales
|
|
8.1 %
|
|
14.2 %
|
|
14.2 %
|
|
8.3 %
|
|
14.3 %
|
|
11.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(3) from Central segment
|
|
$
|
(0.4)
|
|
$
|
3.7
|
|
$
|
1.5
|
|
$
|
(1.1)
|
|
$
|
0.2
|
|
$
|
(0.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross
revenue
|
|
$
|
299.3
|
|
$
|
210.9
|
|
$
|
327.0
|
|
$
|
1,009.1
|
|
$
|
864.6
|
|
$
|
1,252.5
|
Earnings (loss)
before income taxes
|
|
$
|
0.7
|
|
$
|
23.9
|
|
$
|
(6.0)
|
|
$
|
55.8
|
|
$
|
(69.2)
|
|
$
|
60.8
|
Net earnings
(loss)
|
|
$
|
(2.8)
|
|
$
|
23.6
|
|
$
|
(1.9)
|
|
$
|
42.7
|
|
$
|
(53.0)
|
|
$
|
43.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS attributable to
common shareholders of the Company (in dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS (in
dollars)
|
|
$
|
(0.05)
|
|
$
|
0.43
|
|
$
|
(0.03)
|
|
$
|
0.75
|
|
$
|
(0.92)
|
|
$
|
0.74
|
Diluted EPS (in
dollars)
|
|
$
|
(0.05)
|
|
$
|
0.42
|
|
$
|
(0.03)
|
|
$
|
0.74
|
|
$
|
(0.92)
|
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operations
|
|
$
|
70.8
|
|
$
|
50.4
|
|
$
|
89.3
|
|
$
|
191.7
|
|
$
|
113.4
|
|
$
|
227.0
|
Free Cash
Flow(3)
|
|
$
|
40.5
|
|
$
|
11.0
|
|
$
|
49.3
|
|
$
|
83.4
|
|
$
|
(7.6)
|
|
$
|
44.9
|
Free cash flow Per
Share - Basic (in dollars)
|
|
$
|
0.69
|
|
$
|
0.20
|
|
$
|
0.87
|
|
$
|
1.68
|
|
$
|
0.45
|
|
$
|
0.75
|
Free cash flow Per
Share - Diluted (in dollars)
|
|
$
|
0.69
|
|
$
|
0.19
|
|
$
|
0.85
|
|
$
|
1.67
|
|
$
|
0.45
|
|
$
|
0.73
|
|
(1) Results from East Side Mario's
restaurants in the United States are excluded in the System Sales
totals and number of restaurants.
|
(2) This is a supplementary financial
measure. Please refer to "Non-GAAP Measures - Supplementary
Financial Measures" section of this press release for a definition
of this measure.
|
(3) This is a non-GAAP financial
measure. Please refer to the "Non-GAAP Measures - Non-GAAP
Financial Measures" section of this press release for a definition
of this measure.
|
(4) This is a non-GAAP ratio. Please
refer to the "Non-GAAP Measures - Non-GAAP Ratios" section of this
press release for a definition of this measure.
|
Outlook
The restaurant and food services industry continues to
experience disruptions as a result of the COVID-19 pandemic. Near
the end of the fourth quarter, Canada began to experience a surge in new
COVID-19 infections driven by the omicron variant. As a result,
restaurants in certain provinces were mandated to limit their
capacity in December 2021 and dining
rooms in Ontario and Quebec were subsequently mandated to
temporarily close in January
2022.
The actions we have taken to strengthen our overall business
during the COVID-19 pandemic (including streamlining menus,
improving our digital platform, testing and introducing higher
efficiency kitchen equipment, investing in our people and
franchisees, as well as the strategic changes made to our brand
portfolio mix and restaurant network) will also allow us to recover
from the effects of the pandemic. The Company's restaurants are
predominantly situated in non-urban locations and its recovery is
not dependent on the recovery in urban city-center areas, where the
effects of the COVID-19 pandemic were the most significant due to
offices being closed and the reduction in business travel. However,
after nearly two years of negative media towards the safety of
dine-in restaurants, management anticipates that it may take time,
once restaurants are fully reopened, for consumer confidence to be
restored to pre-pandemic levels. We are committed to the health and
safety of our guests, associates and franchise partners, and with
the continuation of the Company's Social Safely program, we will
continue to focus on delivering best in class experiences while
operating safe and clean restaurants across all of our
locations.
The effects of the global pandemic on supply chains will take
time to stabilize. Multiple economic sectors reopening at once have
also created a significant labour shortage in North America. Management expects that this
labour shortage may lead to short term higher labour costs due to
increased overtime hours, retention pay programs and higher
training costs as new employees are brought onboard. The recovery
and industry wide labour shortages are also negatively impacting
commodity food prices and other input and support costs until
supply and demand dynamics normalize. While management is
responding with cost saving initiatives, some sectors such as
retail, may experience temporary margin impacts until price
adjustments can be properly administered.
Management believes that Recipe is well positioned to continue
to increase its market share through its omni-channel customer
relationships and the continuation of its off-premise sales growth,
expanded and enhanced patios (including many that will operate for
three seasons). The actions taken throughout the COVID-19
disruption period have allowed the Company to generate positive
Adjusted EBITDA(2), positive operating cash flows and
enhance the strength of its balance sheet, which will enable the
Company to pursue strategic acquisitions and accelerate growth.
Focus on the short to medium term will include:
- Reopening restaurants that have been temporarily closed as a
result of the COVID-19 pandemic and providing exceptional service,
food, ambience and value that reinforces to customers what they
have been missing, while focusing on being an employer of choice in
Canada;
- Continue to practice amplified "Social Safely" safety protocols
across all of our corporate and franchise locations to protect the
health of our Guests, teammates and franchise partners. This
includes comprehensive protocols related to food safety, strict
standard operating procedures, independent third party audits and
our rigorous safety training programs;
- Continue to execute on our plans to support the expansion of
our multi-channel offerings for post-COVID success. This includes
the introduction of new restaurant layouts and designs with
separate entrances to facilitate delivery, takeout and curb-side
pick-up orders, tailored menus for dine-in and off-premise
experiences, as well as the investments in our restaurants to
comfortably extend outdoor patio season to three seasons.
- Actively negotiate early exit and permanent closure of
under-performing restaurants that were identified at the end of
2019 to strengthen each brand portfolio and improve the long term
Adjusted EBITDA(2) contribution rates of both the
Corporate and Franchise restaurant segments;
- Prepare Recipe's portfolio of brands for post-COVID success
including identifying the brands for accelerated growth, possible
brand acquisition and rationalizing under-performing brands;
and
- Continue to expand the Company's off-premise business for all
brands with digital and mobile order applications and brand
appropriate features including curb-side pick-up, preorder and pay,
as well as other payment convenience options. The Company is also
focused on the expansion of Ultimate Kitchens, our multiple brands
delivery and take-out only concept.
The foregoing description of Recipe's outlook is based on
management's current strategies and its assessment of the outlook
for the business and the Canadian restaurant industry as a whole
and may be considered to be forward–looking information for
purposes of applicable Canadian securities legislation. Readers are
cautioned that actual results may vary. See "Forward–Looking
Information" and "Risks & Uncertainties" for a description of
the risks and uncertainties that impact the Company's business and
that could cause actual results to vary.
Non–GAAP Measures
This press release makes reference to certain measures that are
not calculated in accordance with IFRS. These measures are provided
as additional information to complement IFRS measures by providing
further understanding of the Company's results of operations from
management's perspective. Accordingly, they should not be
considered in isolation nor as a substitute for analysis of the
Company's financial information reported under IFRS. The Company
uses the following non-GAAP measures to provide investors with
supplemental measures on its operating performance and thus
highlight trends in its core business that may not otherwise be
apparent when relying solely on IFRS financial measures: "System
Sales", "System Sales Growth", "E-Commerce System Sales", "Adjusted
EBITDA", "Adjusted EBITDA Margin on System Sales" and "Free Cash
Flow". The Company also believes that securities analysts,
investors and other interested parties frequently use non–GAAP
measures in the evaluation of issuers. The Company's management
also uses non–IFRS measures in order to facilitate operating
performance comparisons from period to period, to prepare annual
operating budgets, and to determine components of management
compensation. In addition, the Company believes that securities
analysts, investors and other parties frequently use non-GAAP
measures in the evaluation of issuers, including the Company.
National Instrument 52-112 Non-GAAP and Other Financial Measures
Disclosure ("NI 52-112") prescribes disclosure requirements that
apply to certain non-IFRS measures known as "specified financial
measures". This section of this Press Release provides a
description and classification of the specified financial measures
as contemplated by NI 52-112 that the Company uses in this press
release.
Non-GAAP Financial Measures
A non-GAAP financial measure is a financial measure not
disclosed in the Company's financial statements that depicts the
Company's historical or expected future financial performance,
financial positions or cash flow and, with respect to its
composition, either excludes an amount that is included in, or
includes an amount that is excluded from, the composition of the
most directly comparable financial measures disclosed in the
Company's consolidated financial statements.
"Adjusted EBITDA" is a non-GAAP financial measure and is
defined as Operating Income adjusted to remove (i) depreciation and
amortization; (ii) amortization of deferred gain; (iii) impairment,
net of reversals, of restaurant assets and lease receivables; (iv)
restructuring and other; (v) net (gain) loss on early
buyout/cancellation of equipment rental contracts; (vi)
amortization of unearned conversion fees; (vii) net (gain) loss on
disposal of property, plant and equipment and other assets; (viii)
(gain) loss on settlement of lease liabilities; (ix) stock based
compensation; * transaction costs; (xi) the Company's proportionate
share of equity accounted investment in joint ventures; (xii)
Interest income on Partnership units and KRIF; and (xiii) rent
impact.
Adjusted EBITDA is used by management as a key measure to assess
the performance of its Corporate, Franchise, Retail and Catering
and Central segments and to make decisions on the allocation of
resources. Management believes that investors use this measure to
evaluate the health and profitability of each segment. This measure
is not a standardized measure prescribed by IFRS and therefore is
unlikely to be comparable to similar measures presented by other
companies. The most directly comparable IFRS financial measure is
Operating Income.
The following table provides reconciliations of Operating Income
and Adjusted EBITDA:
|
|
13 weeks
ended
|
|
52 weeks
ended
|
|
Dec 26,
2021
|
|
Dec 27,
2020
|
|
Dec
29, 2019
|
|
Dec 26,
2021
|
|
Dec 27,
2020
|
|
Dec 29,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
$
|
5.0
|
|
$
|
1.0
|
|
$
|
(4.5)
|
|
$
|
65.3
|
|
$
|
(27.4)
|
|
$
|
79.5
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
25.0
|
|
26.4
|
|
29.9
|
|
97.3
|
|
107.1
|
|
116.4
|
Amortization of
deferred gain
|
|
(0.5)
|
|
(0.4)
|
|
(0.4)
|
|
(1.8)
|
|
(1.8)
|
|
(1.7)
|
Transaction costs
(1)
|
|
0.1
|
|
1.8
|
|
1.8
|
|
0.5
|
|
2.3
|
|
2.3
|
Impairment, net of
reversals, of restaurant assets and lease receivables
|
|
19.9
|
|
17.7
|
|
47.6
|
|
25.8
|
|
79.2
|
|
57.2
|
Restructuring and
other
|
|
—
|
|
(0.6)
|
|
3.6
|
|
5.0
|
|
5.6
|
|
6.6
|
Amortization of
unearned conversion fees
|
|
—
|
|
—
|
|
—
|
|
(0.1)
|
|
(0.2)
|
|
0.1
|
Loss (gain) on early
buyout/cancellation of equipment rental contracts
|
|
(0.7)
|
|
—
|
|
1.5
|
|
0.3
|
|
(0.4)
|
|
3.0
|
(Gain) loss on
disposal of property, plant and equipment and other
assets
|
|
(0.3)
|
|
(1.4)
|
|
(1.5)
|
|
(1.6)
|
|
(5.0)
|
|
(1.2)
|
(Gain) loss on
settlement of lease liabilities
|
|
(1.1)
|
|
0.8
|
|
(1.4)
|
|
(2.6)
|
|
1.1
|
|
(1.4)
|
Stock based
compensation
|
|
1.0
|
|
0.4
|
|
(5.4)
|
|
1.5
|
|
1.3
|
|
(0.3)
|
Proportionate share of
joint venture results (2)
|
|
0.6
|
|
0.3
|
|
0.7
|
|
0.7
|
|
(0.2)
|
|
1.6
|
Interest income on
Partnership units and KRIF
|
|
3.0
|
|
2.1
|
|
2.8
|
|
9.5
|
|
8.3
|
|
11.1
|
Lease Expenses for
corporate restaurants and head office locations
(3)
|
|
(12.7)
|
|
(13.1)
|
|
(14.1)
|
|
(55.9)
|
|
(56.3)
|
|
(57.2)
|
Total
adjustments
|
|
$
|
34.3
|
|
$
|
34.0
|
|
$
|
65.1
|
|
$
|
78.6
|
|
$
|
141.0
|
|
$
|
136.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(4)
|
|
$
|
39.3
|
|
$
|
35.0
|
|
$
|
60.5
|
|
$
|
144.0
|
|
$
|
113.8
|
|
$
|
216.0
|
|
(1)
Transaction costs represent acquisition related
expenses.
|
(2) The
Company has equity investments in certain restaurants at varying
ownership interests. This adjustment represents the increase or
decrease of the proportionate share of the income (loss) earned on
the Company's investment in these joint ventures.
|
(3) In
connection with the adoption of IFRS 16 "Leases", lease expenses
are now recorded in depreciation and interest expense. This
adjustment includes lease expenses in Adjusted EBITDA as management
views lease expense as an important component when evaluating the
profitability of the business.
|
(4)
Figures may not total due to rounding.
|
"Free Cash Flow" is a non-GAAP financial measure and is
defined as Cash flows from operating activities less (i) purchase
of property, plant and equipment; (ii) interest paid on long-term
debt and note payable; (iii) net lease payments; (iv) proceeds on
disposal of property, plant and equipment; (v) dividends paid on
subordinate and multiple voting common shares; and (vi) shares
repurchased under the Normal Course Issuer Bid ("NCIB").
Free Cash Flow is used by management to determine the Company's
cash available for debt repayments, investments in new construction
and major renovations, to pay and increase dividends to
shareholders and to repurchase the Company's subordinate voting
shares. This measure is useful to investors to determine the
Company's cash available for discretionary spending. This measure
is not a standardized measure prescribed by IFRS and therefore is
unlikely to be comparable to similar measures presented by other
companies. The most directly comparable IFRS financial measure is
Cash flows from operating activities.
The following table provides reconciliations from Cash flows
from operating activities to Free Cash Flow:
|
|
13 weeks
ended
|
|
52 weeks
ended
|
|
|
Dec 26,
2021
|
|
Dec 27,
2020
|
|
Dec 29,
2019
|
|
Dec 26,
2021
|
|
Dec 27,
2020
|
|
Dec 29,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities
|
|
$
|
70.8
|
|
$
|
50.4
|
|
$
|
89.5
|
|
$
|
191.7
|
|
$
|
113.4
|
|
$
|
228.5
|
Purchase of property,
plant and equipment
|
|
(11.0)
|
|
(3.2)
|
|
(13.9)
|
|
(28.4)
|
|
(28.3)
|
|
(49.0)
|
Interest paid on
long-term debt and note payable
|
|
(4.1)
|
|
(10.7)
|
|
(9.4)
|
|
(21.2)
|
|
(28.8)
|
|
(19.6)
|
Net lease payments
(1)
|
|
(15.4)
|
|
(25.6)
|
|
(10.8)
|
|
(60.7)
|
|
(61.9)
|
|
(53.8)
|
Proceeds on disposal
of property, plant and equipment
|
|
0.2
|
|
0.1
|
|
0.2
|
|
2.0
|
|
4.6
|
|
0.9
|
Dividends paid on
subordinate and multiple voting common shares
|
|
—
|
|
—
|
|
(6.3)
|
|
—
|
|
(6.6)
|
|
(26.9)
|
NCIB
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(35.2)
|
Free Cash
Flow(2)
|
|
$
|
40.5
|
|
$
|
11.0
|
|
$
|
49.3
|
|
$
|
83.4
|
|
$
|
(7.6)
|
|
$
|
44.9
|
|
(1) Net
lease payments consist of lease liabilities paid, net of lease
payments received.
|
(2) Figures may not total due to
rounding.
|
Non-GAAP Ratios
A non-GAAP ratio is a financial measure disclosed in the form of
a ratio, fraction, percentage or similar representation that is not
disclosed in the Company's financial statements and that has a
non-GAAP financial measure as one or more of its components.
"Adjusted EBITDA Margin on System Sales" is a non-GAAP
ratio and is defined as Adjusted EBITDA divided by
System Sales. Adjusted EBITDA Margin on System Sales is used
by management to determine profitability. This measure is used by
investors to determine the operating efficiency of the Company.
This measure is not a standardized measure prescribed by IFRS and
therefore is unlikely to be comparable to similar measures
presented by other companies.
Supplementary Financial Measures
A supplementary financial measure is a financial measure that is
not disclosed in the Company's consolidated financial statements,
and is, or is intended to be, disclosed on a periodic basis to
depict the historical or expected future financial performance,
financial position or cash flows.
The following are the supplementary financial measures used in
this MD&A:
"System Sales" represents top–line sales from restaurant
guests at both corporate owned and franchise restaurants including
take–out and delivery customer orders. System Sales includes
sales from both established restaurants as well as new restaurants.
System Sales also includes sales received from its food processing
and distribution division. System Sales is not the same as sales
under IFRS as it includes the sales from franchise restaurants
which are not recorded in the financial statements of the Company.
Management believes System Sales provides meaningful information to
investors regarding the size of Recipe's restaurant network, the
total market share of the Company's brands sold in restaurant and
grocery and the overall financial performance of its brands and
restaurant owner base, which ultimately impacts Recipe's
consolidated financial performance.
"System Sales Growth" is a metric used in the restaurant
industry to compare System Sales over a certain period of time,
such as a fiscal quarter, for the current period against System
Sales in the same period in the previous year.
"E-commerce System Sales" represent System Sales
made through the Company's web and mobile ordering platforms for
its brands or aggregators for delivery and pick up.
"Net Debt" is a composed of current and long-term
debt net of cash.
Forward-Looking Information
Certain statements in this press release may constitute
"forward-looking information" or "forward-looking statements"
within the meaning of applicable Canadian securities legislation.
Such statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or
achievements of the Company or the industry in which they operate
to be materially different from any future results, performance or
achievements expressed or implied by such forward looking
statements. When used in this press release, such statements use
words such as "may", "will", "expect", "believe", "plan" and other
similar terminology. These statements are based on opinions,
assumptions and estimates made by the Company in light of its
experience and perception of historical trends, current conditions
and expected future developments, as well as factors that the
Company believes are appropriate and reasonable in the
circumstances, but there are no assurance that such estimates and
assumptions will prove to be correct. These statements also reflect
management's current expectations regarding future events and
operating performance and speak only as of the date of this press
release. These forward-looking statements involve a number of risks
and uncertainties, including those related to: (a) the Company's
ability to maintain profitability and manage its growth including
System Sales Growth, increases in net income, Adjusted EBITDA,
Adjusted EBITDA Margin on System Sales and Free Cash Flow; (b)
competition in the industry in which the Company operates; (c) the
general state of the economy; (d) integration of acquisitions by
the Company; and (e) risk of future legal proceedings against the
Company. These risk factors and others are discussed in detail
under the heading "Risk Factors" in the Company's Annual
Information Form dated March 25, 2022. New risk factors may arise
from time to time and it is not possible for management of the
Company to predict all of those risk factors or the extent to which
any factor or combination of factors may cause actual results,
performance or achievements of the Company to be materially
different from those contained in forward-looking statements. Given
these risks and uncertainties, investors should not place undue
reliance on forwarding-looking statements as a prediction of actual
results. Although the forward-looking statements contained in this
press release are based upon what management believes to be
reasonable assumptions, the Company cannot assure investors that
actual results will be consistent with these forward-looking
statements. These forward-looking statements are made as of the
date of this press release. The Company does not undertake to
update any forward-looking information contained herein except as
required by applicable securities laws.
The financial performance of the Company is subject to a number
of factors that affect the commercial food service industry
generally and the full–service restaurant and limited–service
restaurant segments of this industry in particular. The Canadian
restaurant industry is intensely competitive with respect to price,
value proposition, service, location and food quality. There are
many well–established competitors, including those with greater
financial and other resources than the Company. Competitors include
national and regional chains, as well as numerous individually
owned restaurants. Recently, competition has increased in the
mid–price, full–service, casual dining segment of this industry in
which many of the Company's restaurants operate. Some of the
Company's competitors may have restaurant brands with longer
operating histories or may be better established in markets where
the Company's restaurants are located or may be located. If the
Company is unable to successfully compete in the segments of the
Canadian restaurant industry in which it operates, the financial
condition and results of operations of the Company may be adversely
affected.
The Canadian restaurant industry business is also affected by
changes in demographic trends, traffic patterns, and the type,
number, locations of competing restaurants and public health
issues. In addition, factors such as inflation, increased food,
labour and benefit costs, and the availability of experienced
management and hourly employees may adversely affect the restaurant
industry in general and the Company in particular. Changing
consumer preferences and discretionary spending patterns and
factors affecting the availability of certain foodstuffs could
force the Company to modify its restaurant content and menu and
could result in a reduction of revenue. Even if the Company is able
to successfully compete with other restaurant companies, it may be
forced to make changes in one or more of its concepts in order to
respond to changes in consumer tastes or dining patterns. If the
Company changes a restaurant concept, it may lose additional
customers who do not prefer the new concept and menu, and it may
not be able to attract a sufficient new customer base to produce
the revenue needed to make the restaurant profitable. Similarly,
the Company may have different or additional competitors for its
intended customers as a result of such a concept change and may not
be able to successfully compete against such competitors. The
Company's success also depends on numerous other factors affecting
discretionary consumer spending, including general economic
conditions, disposable consumer income, consumer confidence and
consumer concerns over food safety, the genetic origin of food
products, public health issues and related matters. Adverse changes
in these factors could reduce guest traffic or impose practical
limits on pricing, either of which could reduce revenue and
operating income, which would adversely affect the Company.
The Company's audited consolidated financial statements for the
52 weeks ended December 26, 2021 and Management's Discussion
and Analysis are available under the Company's profile on SEDAR at
www.sedar.com.
Related Communications
Frank Hennessey, Chief Executive
Officer and Ken Grondin, Chief
Financial Officer, will hold a teleconference with the investment
community to discuss 2021 fourth quarter and year end results at
9:00 am Eastern Time on Friday March
4, 2022.
To access the webcast, please visit
https://produceredition.webcasts.com/starthere.jsp?ei=1527235&tp_key=f5fafc5a16.
A replay will be available via the same URL until midnight on
March 25, 2022.
To dial in by telephone, please call (416) 764-8609 or
1-888-390-0605, five to ten minutes prior to the start time. The
Conference ID is 91167377. A telephone replay of the call will be
available until midnight on March 25,
2022. To access the replay, please dial (416) 764-8677 or
1-888-390-0541 and enter passcode 167377#.
About Recipe
Founded in 1883, RECIPE Unlimited Corporation is Canada's largest full-service restaurant
company. The Company franchises and/or operates some of the most
recognized brands in the country including Swiss Chalet, Harvey's,
St-Hubert, The Keg, Montana's, Kelseys, East Side Mario's, New
York Fries, Fionn MacCool's, Bier Markt, The Landing Group of
Restaurants, Original Joe's, State & Main, Elephant &
Castle, The Burger's Priest, The Pickle Barrel, Marigolds &
Onions, Blanco Catina, Añejo, Fresh
and Ultimate Kitchens.
RECIPE's iconic brands have established the organization as a
nationally recognized franchisor of choice. As at December 26,
2021, Recipe had 21 brands and 1,261 restaurants, 83% of which are
operated by franchisees and joint venture partners, operating in
several countries including Canada, USA,
Saudi Arabia, India and the UAE. RECIPE's shares trade
on the Toronto Stock Exchange under the ticker symbol RECP. More
information about the Company is available at
www.recipeunlimited.com.
SOURCE Recipe Unlimited Corp.