Earnings
Carrols Restaurant Group, Inc. Reports Financial Results for the Second Quarter of 2011
August 9, 2011 · 0 Comments
SYRACUSE, N.Y.–(www.hospitalitybusinesnews.com)–Carrols Restaurant Group, Inc. (Nasdaq: TAST), the parent company of Carrols Corporation, today announced financial results for the second quarter ended July 3, 2011.
Highlights for the second quarter of 2011 versus the second quarter of 2010 include:
- Total revenues increased 2.6% to $209.8 million in the second quarter of 2011 compared to $204.5 million in the second quarter of 2010. Revenues for Fiesta Restaurant Group, Inc., an indirect wholly owned subsidiary of the Company that owns and operates the Pollo Tropical and Taco Cabana restaurant businesses, increased 9.2% to $121.2 million from $111.0 million in the same period last year.
- Comparable restaurant sales increased 10.7% at Pollo Tropical, increased 4.5% at Taco Cabana, and decreased 3.6% at Burger King;
- Net income for the second quarter of 2011 was $5.5 million, or $0.25 per diluted share, compared to net income of $2.4 million, or $0.11 per diluted share in the second quarter of 2010.
- Earnings in the second quarter of 2011 included certain non-recurring items which reduced earnings before taxes by $0.8 million, or $0.03 per diluted share after tax, and a favorable income tax adjustment of $0.2 million, which increased net income by $0.01 per diluted share. Earnings in the second quarter of 2010 included impairment and other lease charges totaling $3.6 million, or $0.11 per diluted share, after tax.
As of July 3, 2011, the Company owned and operated 550 restaurants, including 303 Burger King, 90 Pollo Tropical and 157 Taco Cabana restaurants, and also franchised 35 restaurants.
Alan Vituli, Chairman and Chief Executive Officer of Carrols Restaurant Group, Inc. commented, “We were pleased with results for the second quarter at our Pollo Tropical and Taco Cabana brands as each posted strong top line growth and solid earnings. These brands continue to demonstrate their strong and growing appeal. Our Burger King restaurants continued to show weakness in the quarter. However, we have begun to see signs of stabilizing trends within that business and believe that it will continue to improve as the year progresses.”
Mr. Vituli added, “While our sales increases enabled us to leverage costs on an overall basis, commodity inflation has been persistent and did have some negative impact on margins in the quarter. We have recently taken price increases at Pollo Tropical and Taco Cabana. Both brands have historically benefited from high value scores from our customers, and from their initial reaction, we believe that our customers will absorb these modest price increases with minimal effect on customer frequency.”
Second Quarter 2011 Results
Total revenues increased 2.6% to $209.8 million in the second quarter of 2011 from $204.5 million in the second quarter of 2010, with revenues from Fiesta Restaurant Group increasing 9.2% to $121.2 million from $111.0 million.
Pollo Tropical revenues increased 12.5% to $52.6 million in the second quarter of 2011 from $46.8 million in the second quarter of 2010. Pollo Tropical comparable restaurant sales increased 10.7%.
Taco Cabana revenues increased 6.9% to $68.6 million in the second quarter of 2011 from $64.2 million in the second quarter of 2010. Taco Cabana comparable restaurant sales increased 4.5%. Two Taco Cabana restaurants were opened and one Taco Cabana restaurant was closed during the period.
Burger King revenues decreased 5.2% to $88.6 million in the second quarter of 2011 from $93.5 million in the second quarter of 2010. Burger King comparable restaurant sales decreased 3.6%. The Company also added one new restaurant through the lease assumption of a non-operating Burger King restaurant and closed two Burger King restaurants during the period.
Income from operations increased to $12.0 million during the second quarter of 2011 from $8.4 million in the second quarter of 2010, and as a percentage of total revenues, increased from 4.1% to 5.7%.
Interest expense decreased to $4.6 million during the second quarter of 2011 from $4.7 million in the second quarter of 2010.
Impairment and other lease charges were $1.0 million in the second quarter of 2011 consisting primarily of lease charges related to the closing of a Taco Cabana restaurant late in the quarter and increases to lease reserves for previously closed Pollo Tropical and Taco Cabana restaurants. Other non-recurring items included a $0.3 million gain from the sale of a property previously operated as a Burger King and $0.2 million of expenses related to the planned spin-off of Fiesta Restaurant Group. In the second quarter of 2010, impairment and other lease charges totaled $3.6 million.
Net income for the second quarter of 2011 was $5.5 million, or $0.25 per diluted share, compared to net income of $2.4 million, or $0.11 per diluted share in the prior year. Earnings in the second quarter of 2011 included the non-recurring items discussed above which reduced earnings before taxes by $0.8 million, or $0.03 per diluted share after tax, and a favorable income tax adjustment which increased net income by $0.2 million, or $0.01 per diluted share. Earnings in the second quarter of 2010 included $3.6 million in impairment and other lease charges, or $0.11 per diluted share, after tax.
Six Months Results
For the six months ended June 30, 2011, total revenues increased 1.9% to $407.1 million from $399.6 million in the same period last year and revenues for Fiesta Restaurant Group increased 8.4% to $236.9 million from $218.5 million in the six months ended June 30, 2010. Net income was $7.8 million, or $0.35 per diluted share, compared to $4.7 million, or $0.22 per diluted share, for the six months ended June 30, 2010.
Refinancing
On August 5, 2011, the Company completed a refinancing of its existing indebtedness. Carrols LLC (a wholly owned subsidiary of Carrols Corporation that operates the Company’s Burger King restaurants) and Fiesta Restaurant Group each entered into new and independent financing arrangements. The proceeds from these financings were or will be used to repay amounts outstanding under the Company’s senior credit facility and its 9% senior subordinated notes, as well as to pay all related fees and expenses. Excess cash from the financings is expected to be approximately $10 million to $11 million.
Fiesta Restaurant Group sold $200 million of 8.875% senior secured second lien notes due 2016 and entered into a $25 million secured revolving credit facility which was undrawn at closing. Carrols LLC entered into an $85 million secured credit facility including term loan borrowings of $65 million and an undrawn $20 million revolving credit facility. Proceeds from these borrowings were used to repay approximately $80.2 million outstanding under Carrols Corporation’s senior credit facility, to repurchase $118.4 million of the 9% senior subordinated notes tendered pursuant to a cash tender offer (such tender offer is not yet complete), to pay accrued interest and to pay related fees and expenses. In addition, the $46.6 million of 9% senior subordinated notes not yet tendered will be repurchased upon completion of the cash tender offer or redeemed subsequent to its expiration along with payment for accrued interest and fees related to the tender offer.
2011 Outlook
The Company is not providing specific earnings guidance for 2011. However, the Company is providing the following updated information which does not include any impact from the planned spin-off of Fiesta Restaurant Group or any loss on extinguishment of debt related to the refinancing completed in the third quarter of 2011:
- Comparable restaurant sales are now expected to increase approximately 7% to 9% for Pollo Tropical (compared to 6% to 8% announced previously) and to increase approximately 3% to 5% for Taco Cabana (compared to 2% to 3% annou
nced previously). Burger King comparable restaurant sales are expected to improve in the second half of the year and to be approximately 1% to 3% negative for the full year; - Commodity costs are now expected to increase 5% to 6% for Pollo Tropical, 8% to 9% for Taco Cabana and 5% to 6% for Burger King;
- In 2011, the Company plans to open five to seven new Hispanic Brand restaurants, one new Burger King restaurant and to relocate one Burger King restaurant. The Company also plans to close two Pollo Tropical, one Taco Cabana and five Burger King restaurants (excluding the relocated restaurant);
- Total capital expenditures are now estimated to be in the $45 million to $50 million range;
- Total interest expense is anticipated to increase approximately $2.0 million to $2.5 million in the second half of 2011 as a result of the recently completed refinancing of the Company’s debt; and
- The Company’s annual effective tax rate is now estimated to be 28% to 30%.
Mr. Vituli concluded, “Our plan to spin-off Fiesta Restaurant Group to our shareholders is moving forward and we believe that we are on track to create an independent publicly-owned company containing our Pollo Tropical and Taco Cabana brands by year-end. The effect of the spin-off would leave Carrols Restaurant Group with its Burger King restaurant business. A critical step in this process, separate debt financings for each of these two companies, has been completed. We also recently named industry veteran Tim Taft as Fiesta’s new CEO effective August 15, 2011 while I will remain as Chairman of the Board for Fiesta. Tim is a proven marketer and operator, and he brings considerable experience to continue building the Pollo Tropical and Taco Cabana brands. We also expect that Dan Accordino will be appointed CEO of Carrols Restaurant Group at the time of the spin-off. His deep understanding of our Burger King operations and the overall Burger King system make him well-suited for this role.”
| Carrols Restaurant Group, Inc. | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| (in thousands except per share amounts) | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, (a) | June 30, (a) | |||||||||||||||
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2011 |
2010 |
2011 |
2010 |
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| Revenues: | ||||||||||||||||
| Restaurant sales | $ | 209,343 | $ | 204,141 | $ | 406,216 | $ | 398,808 | ||||||||
| Franchise royalty revenues and fees | 501 | 335 | 866 | 812 | ||||||||||||
| Total revenues | 209,844 | 204,476 | 407,082 | 399,620 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of sales | 66,172 | 62,969 | 126,487 | 122,167 | ||||||||||||
| Restaurant wages and related expenses (b) | 60,232 | 59,611 |   ; |
118,800 | 118,745 | |||||||||||
| Restaurant rent expense | 12,208 | 12,232 | 24,262 | 24,588 | ||||||||||||
| Other restaurant operating expenses | 29,039 | 29,105 | 56,963 | 57,337 | ||||||||||||
| Advertising expense | 7,472 | 7,758 | 14,975 | 14,604 | ||||||||||||
| General and administrative expenses (b) | 13,749 | 12,677 | 27,605 | 25,174 | ||||||||||||
| Depreciation and amortization | 8,389 | 8,113 | 16,497 | 16,235 | ||||||||||||
| Impairment and other lease charges | 975 | 3,631 | 2,055 | 3,901 | ||||||||||||
| Other income | (342 | ) | - | (448 | ) | - | ||||||||||
| Total costs and expenses | 197,894 | 196,096 | 387,196 | 382,751 | ||||||||||||
| Income from operations | 11,950 | 8,380 | 19,886 | 16,869 | ||||||||||||
| Interest expense | 4,579 | 4,708 | 9,192 | 9,451 | ||||||||||||
| Income before income taxes | 7,371 | 3,672 | 10,694 | 7,418 | ||||||||||||
| Provision for income taxes | 1,863 | 1,237 | 2,940 | 2,669 | ||||||||||||
| Net income (c) | $ | 5,508 | s="bwpadl0 bwnowrap bwpadr0 bwvertalignb bwalignr bwdoublebottom">$ | 2,435 | $ | 7,754 | $ | 4,749 | ||||||||
| Basic net income per share | $ | 0.25 | $ | 0.11 | $ | 0.35 | $ | 0.22 | ||||||||
| Diluted net income per share | $ | 0.25 | $ | 0.11 | $ | 0.35 | $ | 0.22 | ||||||||
| Basic weighted average common shares outstanding |
21,663 |
21,619 |
21,653 |
21,616 |
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| Diluted weighted average common shares outstanding |
22,161 |
21,844 |
22,114 |
21,841 |
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(a) |
The Company uses a 52 or 53 week fiscal year that ends on the Sunday closest to December 31. For convenience, all references to the three and six months ended July 3, 2011 and July 4, 2010 are referred to as the three and six months ended June 30, 2011 and June 30, 2010, respectively. The three and six months ended June 30, 2011 and 2010 each included 13 and 26 weeks, respectively. |
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(b) |
Restaurant wages and related expenses include stock-based compensation expense of $10 and $14 for the three months ended June 30, 2011 and 2010, respectively, and $20 and $28 for the six months ended June 30, 2011 and 2010, respectively. General and administrative expenses include stock-based compensation expense of $713 and $402 for the three months ended June 30, 2011 and 2010, respectively, and $1,378 and $781 for the six months ended June 30, 2011 and 2010, respectively. |
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(c) |
The consolidated financial results for Carrols Corporation, the sole operating subsidiary of Carrols Restaurant Group, Inc., differ from the above by a slight difference in rent expense. Consolidated net income for Carrols Corporation for the three months ended June 30, 2011 and 2010 was $5,509 and $2,436, respectively, and $7,757 and $4,752 for the six months ended June 30, 2011 and 2010, respectively. |
| Carrols Restaurant Group, Inc. | ||||||||||||||||||
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The following table sets forth certain unaudited supplemental financial and other restaurant data for the |
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| (unaudited) | (unaudited) | |||||||||||||||||
| Three Months Ended | olspan="7">Six Months Ended | |||||||||||||||||
| June 30, | June 30, (a) | |||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||
| Segment revenues: | ||||||||||||||||||
| Burger King | $ | 88,595 | $ | 93,456 | $ | 170,217 | $ | 181,075 | ||||||||||
| Pollo Tropical | 52,642 | 46,813 | 104,877 | 92,306 | ||||||||||||||
| Taco Cabana | 68,607 | 64,207 | 131,988 | 126,239 | ||||||||||||||
| Total revenues | $ | 209,844 | $ | 204,476 | $ | 407,082 | $ | 399,620 | ||||||||||
| Change in comparable restaurant sales: (a) | ||||||||||||||||||
| Burger King | (3.6 | )% | (1.4 | )% | (4.3 | )% | (3.9 | )% | ||||||||||
| Pollo Tropical | 10.7 | % | 6.3 | % | 12.0 | % | 5.0 | % | ||||||||||
| Taco Cabana | 4.5 | % | (0.1 | )% | 3.3 | % | (1.0 | )% | ||||||||||
| Adjusted Segment EBITDA: (b) | ||||||||||||||||||
| Burger King | $ | 5,111 | $ | 5,522 | $ | 6,252 | $ | 9,308 | ||||||||||
| Pollo Tropical | 9,581 | 8,145 | 19,640 | 14,872 | ||||||||||||||
| Taco Cabana | 7,003 | 6,873 | 13,496 | 13,634 | ||||||||||||||
| Average sales per restaurant: (c) | ||||||||||||||||||
| Burger King | $ | 294 | $ | 302 | $ | 563 | $ | 584 | ||||||||||
| Pollo Tropical | 580 | 515 | 1,157 | 1,011 | ||||||||||||||
| Taco Cabana | 435 | 412 | 844 | 810 | ||||||||||||||
| New restaurant openings: | ||||||||||||||||||
| Burger King | 1 | 1 | 2 | 1 | ||||||||||||||
| Pollo Tropical | - | - | - | - | ||||||||||||||
| Taco Cabana | 2 | - | 3 | - | ||||||||||||||
| Total new restaurant openings | 3 | 1 | 5 | 1 | ||||||||||||||
| Restaurant closings: | ||||||||||||||||||
| Burger King | (2 | ) | (3 | ) | (4 | ) | (4 | ) > | ||||||||||
| Pollo Tropical | - | (1 | ) | (1 | ) | (1 | ) | |||||||||||
| Taco Cabana | (1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||||
| Net new restaurants | - | (4 | ) | (1 | ) | (5 | ) | |||||||||||
| Number of company owned restaurants: | ||||||||||||||||||
| Burger King | 303 | 309 | ||||||||||||||||
| Pollo Tropical | 90 | 90 | ||||||||||||||||
| Taco Cabana | 157 | 155 | ||||||||||||||||
| Total company owned restaurants | 550 | 554 | ||||||||||||||||
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At 7/3/11 |
At 1/2/11 |
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| Long-term debt (d) | $ | 258,182 | $ | 263,513 | ||||||||||||||
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(a) |
Restaurants are included in comparable restaurant sales after they have been open for 12 months for Burger King restaurants and 18 months for Pollo Tropical and Taco Cabana restaurants. |
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(b) |
Adjusted Segment EBITDA is defined as earnings attributable to the applicable segment before interest, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense, other income and expense and gains or losses on extinguishment of debt. Adjusted Segment EBITDA is used because it is the measure of segment profit or loss reported to our chief operating decision maker for purposes of allocating resources to the segments and assessing each segment’s performance. This may not be necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. Adjusted Segment EBITDA for our Burger King restaurants includes general and administrative expenses related directly to the Burger King segment as well as the expenses associated with administrat |
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(c) |
Average sales for company-owned or operated restaurants are derived by dividing restaurant sales for such period for the applicable segment by the average number of restaurants for the applicable segment for such period. |
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(d) |
Long-term debt (including current portion) at July 3, 2011 included $165,000 of the Company’s 9% senior subordinated notes, $80,214 of outstanding borrowings under its senior credit facility, $11,799 of lease financing obligations and $1,170 of capital lease obligations. Long-term debt at January 2, 2011 (including current portion) included $165,000 of the Company’s 9% senior subordinated notes, $87,250 of outstanding borrowings under its senior credit facility, $10,061 of lease financing obligations and $1,202 of capital lease obligations. |
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