Q2 2020 Carrols Restaurant Group Inc Earnings Call
[music].
Welcome to the Congress restaurant group Inc. second quarter 2020, <unk> earnings Conference call.
At this time all participants are in listen only mode. Following the presentation will be conducted question and also session and instructions will be given at that time should you require operator assistance. Please press star zero on your telephone keypad.
Back to remind everyone that this conference call is being recorded today Thursday August 620, 28, 30, a young eastern time I would be available for replay.
I'll now turn the conference over to Tony Hall, Chief Financial Officer. Please go ahead Sir.
Hey, good morning, and good morning, everyone by now you should have access to our earnings announcement and earnings review presentation, it or both.
Released early this morning and are available on our website at Www Dot carols dot com under the Investor Relations section.
Before we begin our remarks I would like to remind everyone that are discussion will include forward looking to looking statements.
Which may consistent comments regarding our strategies intentions or plans. These statements are not guarantees of future performance and therefore undue reliance should not be placed on them.
We also if you refer you to our filings with the FCC for more details, especially the risks that could impact our business results, including the impact of Cobot 19.
During today's call will discuss certain non-GAAP measures that we believe can be useful in evaluating our performance.
The presentation of this additional information should not be considered in isolation or they show up as a substitute for results prepared in accordance with generally accepted accounting principles reconciliation to comparable GAAP measures as available with our earnings release.
With that I'll now turn the call over to our chairman and CEO, Dan Ackroyd Dino Dan.
Oh, Thanks, Tony and good morning, everyone I would like to begin today by today's call by thanking me every one of our employees for their tireless effort and dedication to safely serve our gas during over 19.
Since the onset of the pandemic, we have a nimble on adjusting our operations to the realities of the marketplace and I referenced have certainly paid off in fact, our very solid results during the second quarter, clearly demonstrate our ability to do well and that's ever changing it I predictable environment. Despite the operating challenges that we face.
Well that mine that we'd like to summarize where we stand today.
Our restaurant performance is stabilized and continues to adapt.
It's driving both sales and profitability improvement, we are generating significant free cash flow that we believe will strengthen our balance sheet and enhance our already ample liquidity position and we believe we are prudently managing our capital expenditures, which should enable us to continue generating positive free cash flow for them.
But she about future.
Let me briefly discuss each of these points.
Restaurant performance, our strong business model is built upon limited and no contact channels, such as drive through which today comprises about 91% of our restaurant sales and to a lesser extent at the counter takeout and a recently implemented delivery business.
We believe that these service models provide customers.
The convenience that they need and ideally situate us to navigate the current called <unk> environment.
Our geographically diverse restaurant portfolio 123 states. It's also about an operational advantage for Carol during this period.
Shifting impact of the pandemic a region to region as limited any revenue short term staffing or supply issues, we encountered only a few restaurants at any one time.
We mentioned on last quarter's call that we had temporarily shuttered 46 restaurants at this time 35 of both restaurants have reopened.
Year to date, we have opened six new restaurants and permanently closed 15 underperforming restaurants, we plan to opened two new restaurants over the remainder of 2020 and expect to close an additional seven for a total of 22 closures this year.
For the fourth quarter comparable restaurant sales for our Burger King restaurants decreased 6.4% and increased 17.1% for our popeye's restaurant.
However in June comparable sales for Burger, King and <unk> eyes were positive up 2.5% and 13.3% respectively.
We are similarly pleased to see that positive results have continued into July and the first week of August.
In terms of delivery, we have partnered with several service providers, including door to ask overreach Postmates and more recently grubhub for approximately 800 of our Burger King restaurants.
During the quarter delivery made up approximately 3% total Burger King restaurants sales with an average order size of $16.77. This is approximately twice the order size through the drive through or a counter we continue to improve our systems integration with our delivery partner, which we believe will strengthen this.
Profitable distribution channel overtime.
[noise] not surprisingly all of these off premise consumption channels have proven to be a resilient sales platforms and given the ever changing cobot related state and local guidelines for opening dining rooms, or your maximum allowed capacity, we have decided to not reopened dining rooms, and the majority of our restaurants.
Even in the roughly 20% of restaurants, where our dining rooms are now open for dine in the overwhelming majority of customers are still opting for drive through or ethnic counter takeout ordering this hasn't turned enabled us to reduce our costs related to operating dining rooms. Other cost reduction efforts have also included.
Modified operating hours based on Daypart sales trends and a realization of lower food waste as we have adjusted our supply chain needs because of the shift away from breakfast and late night.
On the labor front in particular, our team size per Burger King restaurants averaged 19 employees during the quarter compared to 24, and a year ago period, well neighbor efficiencies we have.
Implemented during the recent period have been stable over several months. However, more recently certain elements of labor are normalizing, depending on geography, and local conditions. We would expect some modest increases to watch staffing levels why don't you at restaurants expand hours of operation and use of dining rooms increase.
As an update on Cambridge integration, we are seeing meaningful sequential improvement in cost of sales and labor comparing the fourth quarter of 2019 to the second quarter of 2020 cost of sales as a percentage of net sales improved by about 100 basis points and labor costs as a percentage of net sales.
Improved by more than 400 basis points.
A portion of this improvement is cobot related is also reflects the successful execution of our integration process.
In addition to favorable restaurant level expense trends, we also reduced regional and corporate overhead by streamlining our regional management structure, improving our training process and instituting a.
Temporary 10% reduction and non restaurant wages for the second quarter note that we restored non restaurant wages levels on July onest.
In the aggregate, we increased our restaurant level adjusted EBITDA margin.
However, given the ongoing volatility and uncertainty because of the pandemic, let me be clear that we do not expect the same level of margin outperformance in the range of 350 to 380 basis points that we generated in the second quarter itself.
Turning to our balance sheet and liquidity I'm pleased to say that we are in a very strong position financially. We ended the quarter with $46 million in cash and cash equivalents and 136 million of borrowing availability under our revolving credit facility. We also believe we have a very manageable debt level of 497 million.
With no near term maturities and we currently have no outstanding borrowings under our revolving credit facility for the second quarter. We were not required to report our debt leverage ratio to our revolving credit facility lenders and will not be required to resume SEC reporting.
If if our revolver borrowings only if our revolver borrowings exceed 51 million.
In terms of Capex, we remain committed to keeping our expenditures inject during the second quarter, we manage sets just spending mainly to necessary restaurant maintenance issues for the full year, we continue to expect operational capital expenditures.
Total about $40 million net of sale lease back proceeds.
Looking over a longer horizon as our current expectation that we will remodeled 25 restaurants per year commencing in 2021 for the subsequent three years, we believe that this combined with our maintenance capex and other system wide upgrades and initiatives should keep our capex spend that approximately $40 million to $50 million per year.
For the next three years.
With regard to Newbuilds, we expect to begin to selectively seek built to suit opportunities with attractive ROI for the end of this year as it relates to acquisitions, we are holding off on these until our adjusted leverage ratio as defined in our credit agreement drops to under four times.
To summarize we believe our second quarter results demonstrate the strength of our business model and our ability to adapt which is enabling us to weather. The pandemic now and should also help us drive thereafter.
We also have shored up our liquidity and expect to manage our capital expenditures for the foreseeable future at a level that will allow us, but that will allow us to reduce leverage near term and invest in growth longer term.
As we look ahead, we're going to stay the course, continuing to capitalize on operational opportunities relating to our Cambridge acquisition growing our topline sales through our drive to carry out and delivery channels with only minimal reliance on our dining rooms, and improving margins within our current restaurant portfolio through the steps we have.
Taken to control costs, if we are able to continued to execute on these goals as we expect we will we should be able to generate significant consistent and eventually a growing level of free cash flow with that let me turn the call over to Tony to review our financials.
Thanks, Dan.
For the second quarter restaurant revenue improved to $368.4 million compared to the prior year period of $365.7 million.
Burger King comparable restaurant sales decreased 6.4%.
This calculation includes in the prior year period, the 165, Cambridge Burger King restaurants acquired on April 29 to 2019 from that date forward Henry only Cambridge Burger King restaurants from the beginning of the second quarter of 2019, our Burger King restaurants comparable sales would have been would have decreased 70.6% in the quarter.
This outpaced the us Burger King system by 230 basis points in the quarter.
Hi, guys comparable restaurant sales increased 12.5% on that same basis, which underperformed the system average by 16 percentage points. This underperformance was due to the timing of promotional offers to our guests last year and some new restaurant openings.
Adjusted EBITDA increased $13.9 million in the quarter to $38 million from $24.1 million in the second quarter last year.
Adjusted EBITDA margins decreased 380 basis points, 10.3% of restaurant sales.
Adjusted restaurant level, EBITDA increased $13 million to $64.1 million in the quarter from $41.1 million in the second quarter last year restaurant level. Adjusted EBITDA margin was 14.7% of restaurant sales and increased 350 basis points compared to the prior year period.
The improvement in margins was mainly due to lower cost of sales and labor as a percentage of revenue cost of sales improved approximately 120 basis points as a percentage net revenue compared to the year ago period, due primarily to less food waste as Dan explained earlier, however, ground beef averaged two at $2.35 per pound in the second quarter of 2020 an increase.
8.3%.
From the year ago period, we expect beef costs to be volatile, but only slightly elevated.
Overall for the remainder of 2020.
We believe the favorable cost of sales trends, we saw the second quarter, we'll continue to some degree in the third and fourth quarters, especially given the impact of operational improvements we are seeing at the Cambridge restaurants for the full year. However, we expect that cost of sales percentage of net sales will be consistent with 2019 levels.
Restaurant labor expense decreased 250 basis points, the percentage of sales compared to the prior year quarter. Despite a 5.3% increase in the hourly wage rate in our legacy Burger King restaurants.
This is because we have been able to to adjust our labor requirements in hours based upon operating day part sales trends and have also reduce our costs across most of our restaurants that are not operating dining rooms.
Our outlook on labor is somewhat uncertain at this point as it has impacted by many factors that are out of our control.
In what we do control and our ability to make adjustments quickly in response to changes in revenue trajectory is we do believe that restaurant labor as a percentage sales should continue to contribute to overall margin improvement this year.
Restaurant rent expense increased 60 basis points as a percentage of sales compared to the prior year period, primarily due to the higher rents as a percentage of sales on restaurants, we acquired in 2019 as well as the impact of fixed costs on a lower level of legacy restaurant sales.
Other restaurant operating expenses decreased 50 basis points as a percentage of sales compared to the prior year period due to lower utility repair and maintenance and other operating costs that benefit from done enclosures.
Operating expenses in the second quarter include $1.4 million encoded related supplies, including face masks denominators, Steve's guards and Sanitizers.
General and administrative expenses on adjusted basis were $17.2 million in second quarter of 2020, and exclude $1.4 million of cost primarily from abandoned development charges and acquisition and integration costs.
As a percentage of net revenues adjusted general and administrative expenses were 4.7% in the second quarter of 2020, we expect to remain at that approximately that level for the remainder of the year.
Our net income was $7.8 million in the quarter and second quarter 2020, or 13 cents per diluted share on an adjusted basis, excluding certain non operating items second quarter net income was $9.6 million or 16 cents per diluted share.
Free cash flow generation has been strong this year, we generated 48.6 million of free cash flow in second quarter, bringing year to date free cash flow to $22.9 million.
Given the use of free cash flow to repay debt our adjusted leverage ratio came in at 4.18 times at June 28, compared to five times at the end of the first quarter.
Finally, as we've previously announced we have withdrawn our 2020 earnings guidance, although in the.
Most of our formal remarks today, we have provided you some guidelines for this year.
Note that the 2020 fiscal year also has one additional operating week compared to 2019.
That concludes our prepared remarks, so with that operator, let's go ahead and open the line for questions.
Thank you we will now be conducting a question and also say since you from like to ask a question. Please press Star then one comes from key Pat.
Second Mason tone would indicate your line is in the question. Keith You May press talk to people like to remove your question from the Q4 participants using speaker keeping that could meet you may be necessity to pick up your handset before pressing the star Keith one moment, please and why we pull for questions.
First question is from Jake Bartlett from Tunius Securities. Please go ahead.
Great. Thanks, Thanks for taking the questions.
My first since you asked on the on the same store sales trends on the monthly basis and I believe now we're lapping the discounting.
Snafu or air from last year, which which hurt same store sales I think its suppressed July last year. So.
As well as June to some extent, so I guess in the context of kind of the easy compares.
How.
Why you or how do you think or what's your assessment of the momentum into in the business right now where we're at July was a slight deceleration from June.
In factoring in those easy compares.
We might not be seen much and acceleration if you can comment on that item and appreciate.
I mean, it's all in the mix.
So it's hard we're pretty pleased with.
The the June numbers and the July numbers August.
We have sort of a week and a half of August under our belts and.
It's it's showing strength, it's a little bit stronger than actually we saw.
In June and July so.
Maybe some of that is due to the.
Lapping of the of the double discounting issue last year, but and it's also seems to be due to some very successful promotions at Burger King's put in place in at the beginning of the month so.
Where we're feeling pretty good about the trajectory on on comp sales in this environment.
Okay, Great and you know and as we look forward.
Can you frame some of the drivers of what might help on these trends sustain or potentially accelerating.
Yes, I'm wondering about how much.
Opportunity is still there to expand operating hours back to normal.
What impact opening dining rooms might have on on same store sales.
And then also as part of that is is it.
I would likely that that more marketing in the back half of the year will will be an incremental driver I know some other concepts have talked about really kind of under spending in the second quarter kind of holding advertising dollars back to be spent in the back half of the year, which which could be an incremental driver.
This is Dan.
Work work very confident in the marketing calendar for the balance at year end Burger King just in the last couple of weeks transition from a tool for six to the two for five.
With a lot cheaper in the Lcs being the primary drivers and we're seeing significant response to that.
And there are other marketing initiatives that they have in the in the plan for the balance of the year. So we're we're bullish on the marketing calendar and the marketing spend.
In terms of operating hours.
Weve Ics work from a breakfast standpoint, we're back to where we were pretty cold that in terms of one we're opening restaurants.
The late night hours are not as robust as they were before we had some restaurants that were doing 24 hours. There now closing at midnight and I would expect that that will be the case for some period of time.
In terms of reopening dining rooms, we have about 20% of our restaurants, where you can sit in the dining room, if you choose.
We're now seeing very many customers avail themselves of that opportunity.
There's still more comfortable going to drive through delivery or takeout.
Got it and my last question is just on the sustainability of the margin savings you're getting obviously margins were were great. This this quarter. Despite the negative same store sales how much of that on is sustainable or I mean, I met with do you expect to kind of go back to the same number of employees per store north.
There any other learnings or operational changes.
Both at the store level as well as the is the is the corporate level debt that you should benefit from in years to come.
Well I don't know about years to come but I can tell you that certainly for the balance of 2020.
Cost of sales is that to a large degree a function of whatever is going to happen with beef with Tony gave you our assessment of that from a labor standpoint, we will continue to.
Margins that are.
More attractive than they were in Q1.
But less attractive than they were in Q2 as had answers your question.
Yeah.
Got it okay. Thank you very much appreciate it.
Thanks, Jim.
The next question is from came through in a foreigner from Stephens Inc. Please go ahead.
Hey, congratulations on the strong quarter here I wanted to start off with Cambridge portfolio, and just just get that bid on sort of the integration process, there as well as what profitability improvements you're seeing with those units specifically.
Cambridge, we've made the progress that we assumed that we would make.
We've reduced the cost of sales as we said in our.
Narrative.
Over 100 basis points at the Burger Kings.
Buys we've still got some work to do on the cost of sales and from a of.
Labor standpoint.
We've reduced labor in the in the Burger King's by a couple of hundred basis points in the popeye's actually from where we were last fall we have reduced the labor expense by over 600 basis points, because they didnt have a.
A labor formula that they were managing to at all so I will add any sales gap between the legacy stores into Cambridge doors have narrowed its now widened a little bit because of that's where the call that spike seem to be occurring which is primarily in.
Tennessee.
And.
Mississippi, So we're seeing some up some headwinds there.
Happened in the past month or so.
Because of the the influx of the of the virus in those markets, but were wherever I had a schedule in terms of what we committed we would do in terms of Cambridge.
Okay excellent and then a follow up to the last question on on wage controls I understand you're running a smaller crude today and that will a portion of that will likely into maybe all of that will normalize once coated.
Headwinds.
Abate.
Just curious on the actual wage front, whether you expect to see some moderation in those wage headwinds given the unemployment rate is the question. We asked with nearly every restaurant Lin curious your perspective on that.
I would expect other than where you have a minimum wage mandates, which we have a fair number of states where.
There are mandates some of which take effect mid year and most of which take effect in January so right now where it at 5.3% over the prior year in terms of our wage rates I would expect that that number on a year over year basis will be lower.
Got it.
Okay and my final question just on drive through time, given so much more volume is going to drive through.
What you've been able to do in terms of drive through kind of surface level improvement that's material to how you're running your restaurant today.
We've always focused on the drive thru and what we're interested in is throughput.
You measure the drive shown two factors one is window of time and one is the time from the menu board to the time you leave the drive through window.
Drive through a window of time has improved.
The time from the menu board to the window has stayed roughly the same have the challenges.
We could end up with 16 to 20 cars in the dry through so even before you get to drive through menu Board.
We've got guests it could be in the drive through for 20 minutes.
Got it okay. Thank you very much.
Yes.
Any further questions. Please press Star then one the next question is from Jeremy Hamblin from Craig Hallum. Please go ahead.
Thanks, and congratulations guys on.
On managing well through this environment.
I wanted to see if I could clarify yeah. The ground beef prices what are the price on a price per pound basis, what have you been seen the last couple of weeks.
It started it I mean, it's been on a bit of a rollercoaster I guess I mean stood at the beginning of coded you Didnt ask question about take hold back a little bit at the beginning of cobot it spiked to like $3 and then dropped about $2.
Subsequent four weeks or so.
And we saw him in the last few weeks, we've seen sort of many one of those which it went to one too late to 50 to 55 announce back down to 240.
Over the last two weeks so.
It seems to be.
The referrals are getting less violent I guess in it seems to be stabilizing.
In this sort of 230 to 35 range I'd say.
Okay and.
And then let me switch gears to talking about delivery.
Thank you said, it's 3% sale.
At this point.
In terms of the trends that you're seeing at delivery, whether the use as maybe the virus.
Calms down do you see the usage of that.
Methodology.
Has it been trending up or trending down you don't have all of your restaurants. I think you said 800 at this point are you going up are there plans to get all the restaurants on delivery.
And then I also wanted to just get a sense of delivery is a mix for popeye's.
That's where a lot of questions there so.
We were doing about.
825 to about a 50 850000 a week.
From kind of early June when we spoke to last or we put out a release last two.
To a couple of weeks ago. We then raised we were able to raise put technology or is it allowed us to raise the.
Prices on delivery versus in store.
And we saw.
The weekly average go too.
If you include Popeye's would just at about $1 million per week at this point.
So.
It content and stone has 800 restaurants, so it continues to be.
A powerful.
New channels for revenue for us really meaningful from a revenue and profitability standpoint. So.
I think the remaining.
A couple of hundred restaurants.
Well obviously.
There's not really we don't have it there because there is no third party delivery surface that is.
Allowing us to deliver our product at that point, so as those as those companies come in.
Well, obviously put the restaurants on.
I think the most important thing is that the systems integration was.
Definitely put in incredibly quickly and not as you know.
Robustly as we could help like to have it we're getting towards real robust have full systems integration.
With the four outsource providers of that delivery and.
You know by by September we should have all of them up and running on an integrated basin. So it's just it's just become a very important and very profitable channel for us and we're just going to continue to improve it in hone it.
Jeremy from a from April till July we went from $0 a week to a million dollars per week.
That's a nice addition.
So as as you've you've put through the price increases.
In terms of.
It doesn't seem like that had a negative impact.
On your sales.
Let me maybe a positive one what does it done for your margins.
If you could maybe site the change since you've done that.
On a on a basis points since you put in those those price yeah minutes.
The margins this is really incremental business from a on a rent in the operating expense basis. We don't have additional those that were leveraging those.
And.
Labor is minimal.
And it's really cost of sales against it which includes a delivery fee, but still that's kind of a headwind a bit of a headwind on cost sales, but we'll take it at these these at these average tickets a 16 $17. It's it's a it's a very proud business. We haven't got into the details, but you can run the numbers and you can see at that.
End of ticket level, it's incredibly profitable so.
And with the increase we put in it obviously improve that profitability.
If you recall, Jeremy I was not a big fan and delivery, but I kept running the delivery models at.
10, or $11 average tickets that we did not expect $17 average check.
Hi, I remember and I am glad that at site that it's exceeded expectations.
Okay. So wanted to just come back to Cambridge for a second so you noted that theres been a 100 basis point improvement since Q4 on the cost of sales line item.
How much further do you think you have to go on that to get to you or your standard of your legacy.
Okay.
You have another we are big points at least of that another 50 bips.
Yes, Popeye's is still to come we Haven, that's really a for a third quarter initiative to get the cost of sales.
We haven't really seen the cost sales improvement by so far just because we haven't had the systems integration and that's just going on right now.
Okay, and then last one for me is really focused on.
The free cash flow and the debt levels.
You know you've noted you want to get down to four times, a you know leverage in terms of but you have been paying down pretty rapidly the total level the absolute level of your debt.
Is there a target that you're looking to get too I mean is you're generating just substantial free cash flow.
You know is that going to be applied to.
Or the uses of that cash if your capex is going to be 40 to 50 million for the next several years would you.
Did you buyback stock is is there an absolute level on on debt that you want to get down to 400 million or can you just talk about those the uses of that substantial free cash flow moving forward.
There is not a target.
Of absolute debt level.
And.
If we were to pay down debt at this point it would be reducing the term loan b.
And you can never get that back. So if you reduce the term loan b amount you don't get it back so you loose capacity so.
In this uncertain environment, we are not going to reduce our access to capital by paying down turn lumpy because again, it's a permanent thing.
We've already paid the revolver, we pay down to zero. So thats you know that one goes up and down but term loan B goes when it goes down it goes down.
So there is no plan right now to start to eat into that that term loan b and I think.
You know, where we where we go with that.
We have suspended our share repurchase plan at this point so.
Well, we'll have a better sense of the year progresses, 70 see within that ratios going and what you know what the environment looks like.
We will make will make decisions on capital allocation later in the year, we'll talk about them early next year with you.
Great. Thanks for taking all my questions guys best of luck here moving forward.
Thanks, Jim.
The next question is from Brian Vaccaro from Raymond James. Please go ahead.
Hi, Thanks, and good morning, I was hoping to circle back to the store margins and I guess given that the seismic shifts that you saw on the business and the industry. It seem to the second quarter. I was wondering if you could give us a little more color on where store margins were in say p. six or in July maybe compared to say piece for him.
Just to give us a better sense of of margins in the current environment.
Well, that's a great question I mean, they were obviously in P. six if it gets thats it thats industry Lingo for June.
Yeah.
Yeah.
You know we gave you an estimate the beginning of June.
That when we knew May in April.
And we obviously blew past that and the reason we blew past that is because revenue in June came in $10 million higher than we thought so at the time, we give the estimate and big chunk of that as my Mdna person.
Constant reminds me a big chunk of that fell to the bottom line. So.
The margins were very attractive and that month.
And I don't have July at this point, but you know definitely.
The margins margins are pretty good but.
14.7.
You know from my understanding from talking to folks 14.7, as you know its restaurant margins have been size 15, plus.
So for 2.7 is you know as a number that could be sustained but again I think wanted to be really clear that we just given the uncertainty of the world. We don't know where those margins are going to go in the future. We just we obviously great. We've proven we can react very quickly to any new challenge that come our way.
And the result, usually is good but sometimes it puts a lot of stress on the restaurants, we got to ease that's dressing and is not sustainable and we're very cognizant of that it's much more of an art. The Dan is the best artist in the business and.
Then a science I think so.
Alright, thank you.
And on the Capex side of things the 40 to 50 million.
Could you break that down a little bit for us just on kind of remind us where the maintenance capex stand what the expected expenditure on the Remodels.
He is going forward and any other color you can provide on the capex outlook.
Them and maintenance Capex is 15 million a remodels at 25, Remodels would be about 15 million.
And the balance of it will be spent on various other initiatives in terms of new store development.
We're looking to purchase the land which means.
We can either do a sale lease back or in some cases, we may look at build to suits.
That's a that's that's why the Capex numbers came from.
Okay. Thank you and on that front to just be the system wide upgrades, you mentioned, where does the Decaf tomorrow initiatives stand at this point.
We've got 85% of our restaurants remodeled and.
To the extent that we have we're going to remodeled 25 per year, which is what weve.
Indicated.
That's an additional 75 remodels and I think beyond that we've got the handful maybe 50 more remodels that we have to do.
Okay. Thank you and then last one for me just thinking about that reconciled the cash flow statement I understand the balance sheet a little bit.
The rent deferral piece can you remind us what but what the rent that balances at the end of Q2 and whats the timeline on repaying that rent.
Well the.
The part with our major landlord, which everyone knows who that is.
We that was about seven plus million dollars and we repaid that.
In July so that ones that one's done.
The other rent deferrals were about 7 million six 7 million and.
Those are those get repaid so I'm on the income statement, obviously, we're charging the full rent amount as accrued but on a cash flow basis, those will get repaid and 21 and 22.
And then you know the other kind of working capital benefit we got of about $7 million in the quarter and should be about 17 million for the year is.
We can differ our FICA repayments so.
At 17 million will get repaid in December of 2021 for 50% and then December of 2022 for 50%. So those are very long term long tail.
Deferrals of working capital so.
Hey, that's kind of the picture of the deferrals in the in the quarter.
Great. That's very helpful. Thank you.
Thanks, Brian.
We have a follow up question from Jake Bartlett from Tunius Securities. Please go ahead.
Great. Thanks for taking the follow up you. My question was on on regional trends and you mentioned it in touching on on Cambridge the trends in Tennessee for instance have decelerated as co bid has spiked.
Have you seen then other large markets in the south.
As well just for your legacy business I'm wondering whether there's a deceleration for instance in places like Georgia.
As as as cases spiked if it if you can make any comment on that I appreciate it.
Well, we've only got a couple of restaurants in Georgia, So it's irrelevant.
But in North and South Carolina.
The trends of state we reasonably stable.
The biggest a fall off has been in Tennessee.
Mississippi, Louisiana, and those markets and the acceleration in the trend which is different now what it was in Q2 was in the northeast so.
At the beginning of what I'll call. It the northeast restaurants were soft and now that the that.
Virus seems to be better under control those trends are very strong in the northeast and.
The southeast is as I said is.
In some markets is reasonably stable and other markets they'd decelerate.
Okay, Great and then one quick question on the under 20% of the stores that you have on reopened with dine in how does how did the.
How did the margins look at those stores is that just you is that an indication of what on the system might eventually look like or or is it are you not.
Fully staffing or or something like that Im just wondering.
What what how the model and the margins change one kind of the remodel once the dining opens across the system.
We've got even in the dining rooms that weve reopened Jake there might be three or four cables that are opened so at this point, there's been no no no modifications in the margins at all.
Got it great I appreciate it.
Well thank you.
Oh no further questions at this time I will turn the floor back over to the management for closing comments.
Thank you all for joining us we really appreciate it and we will look forward to speaking to one on one end.
Next quarter on a more broad basis. Thanks Bye bye.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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