Carrols Restaurant (TAST) 8-K Carrols Restaurant Group, Inc. Announces Offering of Senior Notes

EXHIBIT 99.2

EXCERPTS FROM THE CARROLS RESTAURANT GROUP, INC.

CONFIDENTIAL PRELIMINARY OFFERING MEMORANDUM DATED JUNE 23, 2021

The inclusion of the information presented below should not be viewed as a determination that such information is material.

USE OF NON-GAAP FINANCIAL MEASURES

EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted net income (loss) are non-GAAP financial measures. EBITDA represents net income or loss before income taxes, interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA adjusted to exclude impairment and other lease charges, acquisition and integration costs, stock-based compensation expense, abandoned development costs, restaurant pre-opening costs, non-recurring litigation and other professional expenses, gain on bargain purchase, loss on extinguishment of debt and other income and expense. Adjusted Restaurant-Level EBITDA represents income or loss from operations as adjusted to exclude general and administrative expenses, depreciation and amortization, impairment and other lease charges, restaurant-level integration costs, pre-opening costs and other income and expense. Adjusted net income (loss) represents net income or loss as adjusted to exclude loss on extinguishment of debt, impairment and other lease charges, acquisition and integration costs, abandoned development costs, pre-opening expense, gain on bargain purchase, non-recurring litigation and other professional expenses and other income or expense, the related income tax effect of these adjustments and the establishment or reversal of a valuation allowance on our net deferred income tax assets.

We are presenting Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted net income (loss) because we believe that they provide a more meaningful comparison than EBITDA and net income (loss) of our core business operating results, as well as with those of other similar companies. Additionally, we present Adjusted Restaurant-Level EBITDA because it excludes the impact of general and administrative expenses such as salaries and expenses associated with corporate and administrative functions that support the development and operations of our restaurants, legal, auditing and other professional fees, as well as restaurant integration costs related to acquisitions, restaurant pre-opening costs, and other income and expense. Although these costs are not directly related to restaurant-level operations, these costs are necessary for the profitability of our restaurants. Management believes that Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted net income (loss), when viewed with our results of operations in accordance with GAAP and the accompanying reconciliations, provide useful information about operating performance and period-over-period growth, and provide additional information that is useful for evaluating the operating performance of our core business without regard to potential distortions. Additionally, management believes that Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted net income (loss) permit investors to gain an understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made and debt is serviced.

However, EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted net income (loss) are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income (loss), income from operations or cash flow from operating activities as indicators of operating performance or liquidity. EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA, and Adjusted net income (loss) have important limitations as analytical tools. These limitations include the following:

•EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA, and Adjusted net income (loss) do not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments to purchase capital equipment;

•EBITDA, Adjusted EBITDA and Adjusted Restaurant-Level EBITDA do not reflect the interest expense or the cash requirements necessary to service principal or interest payments on our debt;

•although depreciation and amortization are non-cash charges, the assets that we currently depreciate and amortize will likely have to be replaced in the future, and EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA, and Adjusted net income (loss) do not reflect the cash required to fund such replacements; and

•EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted net income (loss) do not reflect the effect of earnings or charges resulting from matters that our management does not consider to be indicative of our ongoing operations. However, some of these charges (such as impairment and other lease charges and acquisition costs) have recurred and may reoccur.

See “Summary — Summary Historical and Selected Unaudited Financial and Operating Data” for a quantitative reconciliation of EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted net income (loss) to the most directly comparable GAAP financial performance measure, which we believe is net income (loss) for EBITDA and Adjusted EBITDA, income (loss) from operations for Adjusted Restaurant-Level EBITDA, and net income (loss) for Adjusted net income (loss).

Summary Historical and Selected Unaudited

Financial and Operating Data

The following table sets forth our summary historical and selected unaudited financial and operating information for the periods presented. The summary historical financial information has been derived from our audited consolidated financial statements prepared in accordance with GAAP for each of the fiscal years ended December 30, 2018, December 29, 2019 and January 3, 2021. Our fiscal years ended December 30, 2018 and December 29, 2019 each contained 52 weeks. Our fiscal year ended January 3, 2021 contained 53 weeks.

The summary unaudited consolidated financial statements for the three months ended April 4, 2021 and March 29, 2020 include all adjustments, consisting of normal recurring which, in our opinion, are necessary for a fair presentation of the financial position and results of operation for these periods. The summary unaudited consolidated financial information has been prepared on a basis consistent with our audited consolidated financial statements. The results of operations for the three months ended April 4, 2021 and March 29, 2020 are not necessarily indicative of the results to be expected for the full year.

All of the financial and operating data for the twelve months ended April 4, 2021 included herein has been derived by adding the financial and operating data for the year ended January 3, 2021, which contained 53 weeks, to the financial and operating data for the three months ended April 4, 2021 and subtracting the financial and operating data for the three months ended March 29, 2020.

The information in the tables below is only a summary and should be read together with our consolidated financial statements as of January 3, 2021 and December 29, 2019 and for the years ended January 3, 2021, December 29, 2019 and December 30, 2018 included in our Annual Report on From 10-K for the fiscal year ended January 3, 2021 and as of April 4, 2021 and for the three months ended April 4, 2021 and March 29, 2020 included in our Quarterly Report on Form 10-Q which are incorporated by reference herein.

	Fiscal Year Ended						Three Months Ended				Twelve Months Ended
	December 30, 2018		December 29, 2019		January 3, 2021		March 29, 2020		April 4, 2021		April 4, 2021
	(Dollars in thousands, other than operating data)
Statements of Operations data:
Restaurant sales	$	1,179,307	$	1,452,516	$	1,547,502	$	351,518	$	389,993	$	1,585,977
Other Revenue	—		10,249		—		—		—		—
Total Revenue	1,179,307		1,462,765		1,547,502		351,518		389,993		1,585,977
Costs and expenses:
Cost of sales	326,308		431,969		452,738		102,927		113,790		463,601
Restaurant wages and related expenses	382,829		485,278		498,127		124,575		129,646		503,198
Restaurant rent expense	81,409		107,147		118,444		29,454		30,314		119,304
Other restaurant operating expenses	178,750		227,364		236,059		57,978		61,419		239,500
Advertising expense	48,340		58,689		60,735		13,876		15,369		62,228
General and administrative(1)	66,587		84,734		84,051		20,787		21,369		84,633
Depreciation and Amortization	58,468		74,674		81,727		21,031		20,609		81,305
Impairment and other lease charges	3,685		3,564		12,778		2,881		353		10,250
Other expense (income)(2)	(424)		(1,911)		(1,271)		56		227		(1,100)
Total operating expenses	1,145,952		1,471,508		1,543,388		373,565		393,096		1,562,919
Income (loss) from operations	33,355		(8,743)		4,114		(22,047)		(3,103)		23,058
Interest expense	23,638		27,856		27,283		7,140		6,726		26,869
Loss on extinguishment of debt	—		7,443		—		—		—		—
Gain on bargain purchase	(230)		—		—		—		—		—
Income (loss) before income taxes	9,947		(44,042)		(23,169)		(29,187)		(9,829)		(3,811)
Provision (benefit) for income taxes	(157)		(12,123)		6,294		(6,978)		(2,661)		10,611
Net income (loss)	$	10,104	$	(31,919)	$	(29,463)	$	(22,209)	$	(7,168)	$	(14,422)
Other financial data:
Net cash provided by (used in) operating activities	$	80,769	$	48,708	$	103,945	$	(3,790)	$	7,036	$	114,771
Total capital expenditures	75,735		134,879		56,890		24,597		10,627		42,920
Net cash used for (provided by) investing activities	106,894		218,045		47,857		21,968		10,627		36,516
Net cash provided by (used in) financing activities	727		168,297		5,902		64,056		(1,444)		(59,598)

Operating Data:
Restaurants (at end of period)	849			1,101			1,074			1,093		1,075		1,075
Average number of operating restaurants	813.9			998.5			1,078.0			1,095.0		1,074.0		1,072.8
Average annual sales per restaurant(3)	$	1,449		$	1,455		$	1,436						$	1,478
Adjusted EBITDA(4)	102,990			86,371			107,855			3,972		19,866		123,749
Adjusted Restaurant-Level EBITDA(4)	162,133			156,131			181,562			22,797		39,484		198,249
Adjusted net income (loss)(4)	14,091			(15,323)			(3,733)			(19,317)		(6,500)		9,084
Change in comparable restaurant sales(5)	3.8		%	2.2		%	(2.7)		%	(5.7)	%	13.8	%	1.6		%

	December 30, 2018		December 29, 2019		January 3, 2021		March 29, 2020		April 4, 2021
	(Dollars in thousands)
Balance sheet data (at end of period):
Cash and cash equivalents	$	4,014	$	2,974	$	64,964	$	41,272	$	59,929
Total assets	600,251		1,751,460		1,757,085		1,778,134		1,745,190
Working capital	(47,461)		(109,540)		(44,396)		(64,583)		(45,637)
Debt:
Senior secured second lien notes	$	275,000	$	422,875	$	—	$	—	$	—
Senior credit facility term loan B borrowings	—		—		419,375		421,813		418,312
Senior credit facility term loan B-1 borrowings	—		—		73,875		—		73,688
Senior credit facility revolving credit borrowings	—		45,750		—		111,750		—
Senior Unsecured Notes	—		—		—		—		—
Finance leases	3,941		2,524		908		1,958		1,315
Total debt	$	278,941	$	471,149	$	494,158	$	535,521	$	493,315
Stockholders’ equity	$	185,540	$	309,462	$	271,532	$	283,122	$	268,935

	Fiscal Year Ended						Three Months Ended				Twelve Months Ended
	December 30, 2018		December 29, 2019		January 3, 2021		March 29, 2020		April 4, 2021		April 4, 2021
	(Dollars in thousands)
Reconciliation of EBITDA and Adjusted EBITDA:
Net income (loss)	$	10,104	$	(31,919)	$	(29,463)	$	(22,209)	$	(7,168)	$	(14,422)
Provision (benefit) for income taxes	(157)		(12,123)		6,294		(6,978)		(2,661)		10,611
Interest expense	23,638		27,856		27,283		7,140		6,726		26,869
Depreciation and amortization	58,468		74,674		81,727		21,031		20,609		81,305
EBITDA	92,053		58,488		85,841		(1,016)		17,506		104,363
Impairment and other lease charges	3,685		3,564		12,778		2,881		353		10,250
Acquisition & integration costs(6)	1,445		10,827		273		81		—		192
Abandoned development costs(7)	—		256		3,464		688		—		2,776
Pre-opening costs(8)	462		1,449		163		89		29		103
Other (income) and expense, net(9)	(424)		(1,911)		(1,271)		56		227		(1,100)
Litigation and other professional expenses(10)	187		502		1,384		61		282		1,605
Stock compensation expense(1)	5,812		5,753		5,223		1,132		1,469		5,560
Gain on bargain purchase	(230)		—		—		—		—		—
Loss on extinguishment of debt	—		7,443		—		—		—		—
Adjusted EBITDA	$	102,990	$	86,371	$	107,855	$	3,972	$	19,866	$	123,749
COVID-19 other supplies expense											2,871
Travel restructuring savings											143
Training restructuring savings											575
Proforma EBITDA from stores closed											525
Lost earnings due to First Data outage											250
Cash payments previously included in impairment											(657)
Covenant Adjusted EBITDA											$	127,456

	Fiscal Year Ended						Three Months Ended				Twelve Months Ended
	December 30, 2018		December 29, 2019		January 3, 2021		March 29, 2020		April 4, 2021		April 4, 2021
	(Dollars in thousands)
Reconciliation of Adjusted Restaurant-Level EBITDA
Income (loss) from operations	$	33,355	$	(8,743)	$	4,114	$	(22,047)	$	(3,103)	$	23,058
Add:
General and administrative expenses	66,587		84,734		84,051		20,787		21,369		84,633
Restaurant integration costs	—		2,364		—		—		—		—
Pre-opening costs(8)	462		1,449		163		89		29		103
Depreciation and amortization	58,468		74,674		81,727		21,031		20,609		81,305
Impairment and other lease charges	3,685		3,564		12,778		2,881		353		10,250
Other (income) and expense, net(9)	(424)		(1,911)		(1,271)		56		227		(1,100)
Adjusted Restaurant-Level EBITDA	$	162,133	$	156,131	$	181,562	$	22,797	$	39,484	$	198,249
Reconciliation of Adjusted net income (loss)
Net income (loss)	10,104		(31,919)		(29,463)		(22,209)		(7,168)		(14,422)
Add:
Impairment and other lease charges	3,685		3,564		12,778		2,881		353		10,250
Acquisition & integration costs(6)	1,445		10,827		273		81		—		192
Abandoned development costs(7)	—		256		3,464		688		—		2,776
Pre-opening costs(8)	462		1,449		163		89		29		103
Other (income) and expense, net(9)	(424)		(1,911)		(1,271)		56		227		(1,100)
Litigation and other professional expenses(10)	187		502		1,384		61		282		1,605
Gain on bargain purchase	(230)		—		—		—		—		—
Loss on extinguishment of debt	—		7,443		—		—		—		—
Income tax effect on above adjustments(11)	(1,138)		(5,534)		(4,199)		(964)		(223)		(3,458)
Adjustments to income tax benefit(12)	—		—		13,138		—		—		13,138
Adjusted net income (loss)	$	14,091	$	(15,323)	$	(3,733)	$	(19,317)	$	(6,500)	9,084

(1)Acquisition costs of $1.4 million, $8.5 million and $0.3 million were included in general and administrative expense for the years ended December 30, 2018, December 29, 2019 and January 3, 2021, respectively and $0.1 million for the three months ended March 29, 2020. Additionally, stock-based compensation expense of $5.8 million, $5.8 million and $5.2 million were included in general and administrative expense for the years ended December 30, 2018, December 29, 2019, January 3, 2021, respectively, $1.1 million and $1.5 million for the three months ended March 29, 2020 and April 4, 2021, respectively and $5.6 million for the twelve months ended April 4, 2021.

(2)In 2020, we recorded gains related to insurance recoveries from property damage at four of the our restaurants of $2.1 million, a net gain on twelve sale-leaseback transactions of $0.2 million and a loss on disposal of assets of $1.0 million. In fiscal 2019, we recorded, among other things, a $1.9 million gain related to a settlement with BKC for the approval of new restaurant development by other franchisees which unfavorably impacted our restaurants. In fiscal 2018, we recorded a net gain of $0.4 million, primarily related to insurance recoveries from fires at two restaurants.

(3)Average annual sales per restaurant are derived by dividing restaurant sales by the average number of restaurants operating during the period. The twelve months ended January 3, 2021 and April 4, 2021 each contained 53 weeks.

(4)EBITDA, Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted net income (loss) are non-GAAP financial measures. EBITDA represents net income or loss before income taxes, interest expense and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted to exclude impairment and other lease charges, acquisition and integration costs, stock compensation expense, pre-opening costs, gain on bargain purchase, loss on extinguishment of debt and other income or expense. Adjusted Restaurant-Level EBITDA represents income or loss from operations adjusted to exclude general and administrative expenses, restaurant integration costs, pre-opening costs, depreciation and amortization, impairment and other lease charges, and other income or expense. Adjusted net income (loss) represents net income or loss as adjusted to exclude loss on extinguishment of debt, impairment and other lease charges, acquisition and integration costs, pre-opening expense gain on bargain purchase, litigation costs, legal settlement gains and other income or expense, the related income tax effect of these adjustments and the establishment or reversal of a valuation allowance on our net deferred income tax assets.

(5)Restaurants we acquire are included in comparable restaurant sales after they have been operated by us for 12 months. Sales from restaurants we develop are included in comparable sales after they have been open for 15 months. Comparable restaurant sales are on a 53-week basis for the year ended January 3, 2021.

(6)Acquisition and integration costs for the periods presented include certain legal and professional fees, corporate payroll, and other general and administrative costs related to the integration of acquisitions as well as one-time repair and other operating costs which are included in other restaurant operating expenses.

(7)Abandoned development costs for the twelve months ended January 3, 2021 and December 29, 2019 and three months ended March 29, 2020 represent the write-off of capitalized costs due to the abandoned development of future restaurant locations.

(8)Pre-opening costs for the periods presented include training, labor and occupancy costs incurred during the construction of new restaurants.

(9)The year ended January 3, 2021 included gains related to insurance recoveries from property damage at four of our restaurants of $2.1 million, a net gain on twelve sale-leaseback transactions of $0.2 million and a loss on disposal of assets of $1.0 million. The year ended December 29, 2019, includes, among other things, a gain of $1.9 million from a settlement with BKC for the approval of new restaurant development by other franchisees which unfavorably impacted our restaurants. In fiscal 2018, we recorded a net gain of $0.4 million, primarily related to insurance recoveries from fires at two restaurants.

(10)Litigation and other professional expenses in fiscal 2020 include legal costs pertaining to an ongoing lawsuit with one of our vendors, costs to settle a class action claim and other non-recurring professional service expenses. In fiscal 2019 and 2018, this included legal costs pertaining to an ongoing lawsuit with one of our vendors. Litigation and other professional expenses for the three months ended April 4, 2021 and March 29, 2020 includes litigation expenses pertaining to an ongoing lawsuit with one of the Company's former vendors and other non-recurring professional service expenses.

(11)The income tax effect related to all adjustments, other than the deferred income tax valuation allowance provision (benefit), was calculated using an incremental income tax rate of 25% in fiscal 2020 and fiscal 2019, 22.2% in fiscal 2018 and 25% for the three months ended April 4, 2021 and March 29, 2020.

(12)Fiscal 2020 includes tax expense of $13.1 million to record an incremental tax valuation allowance for certain income tax credits as they may expire prior to their utilization.