Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
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001-36432
(Commission
File Number)
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27-2349094
(IRS Employer
Identification No.)
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EXHIBIT NUMBER
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DESCRIPTION OF EXHIBITS
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PAPA MURPHY’S HOLDINGS, INC.
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By:
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/s/ Nik Rupp
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Name:
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Nik Rupp
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Title:
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Chief Financial Officer
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•
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Revenue was
$30.8 million
compared to
$36.1 million
in the
second
quarter of
2017
.
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•
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Comparable store sales decreased
2.4%
compared to the
second
quarter of
2017
, including a
2.2%
decrease at global franchise-owned stores and a
4.6%
decrease at Company-owned stores.
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•
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Selling, general and administrative expense was
$11.4 million
, compared to
$10.8 million
in the second quarter of 2017.
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•
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Reported Net
Income
was
$1.4 million
, or
$0.08
per diluted share, compared to a Reported Net
Loss
of
$(6.1) million
, or
$(0.36)
per diluted share in the prior year
second
quarter.
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•
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Pro-Forma Net
Income
(2)
in the quarter was
$1.0 million
, or
$0.06
per diluted share, compared to Pro-Forma Net
Income
of
$1.2 million
, or
$0.07
per diluted share, in the prior year
second
quarter.
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•
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Adjusted EBITDA
(2)
was
$4.6 million
, compared to Adjusted EBITDA of
$8.0 million
in the prior year
second
quarter. Prior year second quarter Adjusted EBITDA included a benefit from the Brand Marketing Fund of approximately $2.8 million driven by a combination of an additional Brand Marketing Fund contribution of 0.85% of sales during 2017 and the timing of marketing expenses that were heavily weighted to the first quarter of the prior year.
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•
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Franchise-owners opened
two
new stores in the quarter, all in the US market.
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(1)
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Please note that results reflect the first quarter adoption by the Company of two new accounting standards (ASC topic 606 – Revenue from contracts with customers, and ASC topic 842 – Leases). 2017 financial results have been adjusted to reflect the implementation of these standards.
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(2)
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Pro-Forma Net Income and Adjusted EBITDA are non-GAAP measures. For a reconciliation of Pro-Forma Net Income and Adjusted EBITDA to GAAP net income (loss) and discussion of why the Company considers Pro-Forma Net Income and Adjusted EBITDA to be useful measures, see the financial tables accompanying this release and the paragraph below entitled “Non-GAAP Financial Measures.”
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Three Months Ended
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July 2, 2018
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July 3, 2017
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unaudited
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as adjusted*
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Comparable store sales:
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Franchised stores
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(2.2
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)%
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(4.0
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)%
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Company-owned stores
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(4.6
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)%
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(6.6
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)%
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Combined
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(2.4
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)%
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(4.2
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)%
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System-wide sales ($’s in 000s)
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$
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196,141
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$
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204,536
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Adjusted EBITDA ($’s in 000s)
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$
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4,581
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$
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8,030
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Store Count
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Franchised
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1,355
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1,401
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Company-owned
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122
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149
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System-wide
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1,477
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1,550
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•
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Full-year system-wide comparable store sales are expected to decline low single digits compared to previous guidance of about flat for the year;
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•
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We expect domestic franchise new store openings of approximately 10 units;
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•
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We expect full-year Selling, general and administrative expenses of approximately $49 million, a reduction of $1 million compared to previous guidance. These expenses include approximately $24 million of expenditures from the Brand Funds, and exclude certain non-recurring costs totaling around $4 million;
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•
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We expect Adjusted EBITDA of at least $20 million, flat to prior quarter guidance, after adjusting for the second quarter refranchising activities;
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•
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We expect Net cash provided by operating activities of around $12.3 million, excluding expected legal settlements totaling approximately $6.7 million, and Net cash provided by investing activities of approximately $6.0 million (which includes $7.0 million of net proceeds from refranchising activities less approximately $1.0 million in capital expenditures);
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•
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We expect a full-year effective book tax rate of approximately 27.8%; and
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•
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We expect a diluted share-count of approximately 17.0 million.
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Three Months Ended
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July 2, 2018
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July 3, 2017
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unaudited and
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unaudited
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as adjusted*
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Revenues
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Franchise related
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$
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14,814
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$
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17,392
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Company-owned stores
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15,979
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18,715
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Total revenues
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30,793
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36,107
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Costs and Expenses
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Store operating costs:
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Cost of food and packaging
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5,315
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6,303
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Compensation and benefits
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5,211
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5,924
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Advertising
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1,301
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1,739
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Occupancy and other store operating costs
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3,102
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3,541
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Selling, general, and administrative
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11,423
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10,823
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Depreciation and amortization
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1,874
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2,906
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(Gain) loss on disposal or impairment of property and equipment
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(715
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)
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11,568
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Total costs and expenses
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27,511
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42,804
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Operating Income (Loss)
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3,282
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(6,697
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)
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Interest expense, net
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1,296
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1,286
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Other expense, net
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52
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49
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Income (Loss) Before Income Taxes
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1,934
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(8,032
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)
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Provision for (benefit from) income taxes
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548
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(1,947
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)
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Net Income (Loss)
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$
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1,386
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$
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(6,085
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)
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Earnings (Loss) per share of common stock
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Basic
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$
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0.08
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$
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(0.36
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)
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Diluted
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$
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0.08
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$
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(0.36
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)
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Weighted average common stock outstanding
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Basic
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16,921,597
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16,867,929
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Diluted
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16,960,265
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16,867,929
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July 2, 2018
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January 1, 2018
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unaudited and
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unaudited
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as adjusted*
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Cash and cash equivalents
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$
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1,689
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$
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2,174
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Total current assets
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7,080
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8,962
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Total assets
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246,446
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262,115
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Total current liabilities
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21,092
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31,117
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Long-term debt, net of current portion
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81,454
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86,994
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Total stockholders’ equity
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97,555
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94,142
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Three Months Ended
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July 2, 2018
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July 3, 2017
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unaudited and
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unaudited
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as adjusted*
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Net Income (Loss)
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$
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1,386
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$
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(6,085
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)
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Depreciation and amortization
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1,874
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2,906
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Provision for (benefit from) income taxes
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548
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(1,947
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)
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Interest expense, net
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1,296
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1,286
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EBITDA
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$
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5,104
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$
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(3,840
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)
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Expenses not indicative of future operations:
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CEO transition & restructuring
(a)
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119
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131
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E-commerce impairment and transition costs
(b)
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(8
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)
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9,124
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Store divestitures, closures, and impairment
(c)
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(723
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)
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2,615
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Litigation settlements and reserves
(d)
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89
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—
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Adjusted EBITDA
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$
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4,581
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$
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8,030
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Adjusted EBITDA margin
(e)
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14.9
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%
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22.2
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%
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(a)
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Represents non-recurring management transition and restructuring costs in connection with the recruitment of a new Chief Executive Officer and other executive positions.
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(b)
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Represents impairment charges on the write-down of our e-commerce platform based on the decision to move to a third-party developed and hosted solution and non-recurring costs incurred to complete the transition.
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(c)
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In 2018, this represents primarily gains on the refranchising of Company-owned stores. In 2017, this represents primarily non-cash charges associated with the impairment and disposal of store assets upon the decision to close stores.
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(d)
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Accruals made for franchisee litigation settlements.
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(e)
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Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by total revenues.
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Three Months Ended
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July 2, 2018
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July 3, 2017
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unaudited and
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unaudited
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as adjusted*
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Net Income (Loss) As Reported
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$
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1,386
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$
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(6,085
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)
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Expenses not indicative of future operations:
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CEO transition & restructuring
(a)
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119
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131
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E-commerce transition costs
(b)
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(8
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)
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9,124
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Store divestitures, closures, and impairment
(c)
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(723
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)
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2,615
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Litigation settlement and reserves
(d)
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89
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—
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Income tax expense on adjustments
(e)
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133
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(4,571
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)
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Pro Forma Net Income
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$
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996
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$
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1,214
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Earnings per share - pro forma:
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Basic
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$
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0.06
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$
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0.07
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Diluted
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$
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0.06
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$
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0.07
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Weighted average shares outstanding - pro forma:
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Basic
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16,921,597
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16,770,579
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Diluted
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16,960,265
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16,788,481
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(a)
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Represents non-recurring management transition and restructuring costs in connection with the recruitment of a new Chief Executive Officer and other executive positions.
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(b)
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Represents impairment charges on the write-down of our e-commerce platform based on the decision to move to a third-party developed and hosted solution and non-recurring costs incurred to complete the transition.
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(c)
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In 2018, this represents primarily gains on the refranchising of Company-owned stores. In 2017, this represents primarily non-cash charges associated with the impairment and disposal of store assets upon the decision to close stores.
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(d)
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Accruals made for franchisee litigation settlements.
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(e)
|
Reflects the tax expense associated with above adjustments at a normalized tax rate of 25.5% (2018) and 38.5% (2017), which represents the estimated long-term effective tax rate in effect in the respective quarter.
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