News

Carrols Restaurant Group debt reduction improves bottom line

November 2, 2009

Carrols Restaurant Group Inc., the parent company of Carrols Corp., has announced financial results for the third quarter ended Sept. 27. The company operates fast casual brands Pollo Tropical and Taco Cabana and is the largest Burger King franchisee, based on number of restaurants.

Comparable restaurant sales were down 6.1 percent at its Burger King stores and down 0.1 percent at Pollo Tropical and down 4.3 percent at Taco Cabana.

Total revenues for the quarter were down 3.8 percent to $201.2 million, compared to $209.1 million in the same period last year.

Revenues from the company's Hispanic brands were down slightly to $107.0 million for the third quarter, compared to $107.5 million in the same period last year. Pollo Tropical revenues were up 1.5 percent to $44.0 million, compared to $43.4 million in the same quarter last year due to the net increase of three new Pollo Tropical restaurants opened since the beginning of the same period in 2008.

Taco Cabana revenues were down 1.7 percent to $63.0 million for the quarter, compared to $64.1 million in the same period last year, including a comps decrease of 4.3 percent. This was substantially offset by the net increase of five new Taco Cabana restaurants since the beginning of the same period in 2008. During the third quarter of 2009, the company opened one new Taco Cabana restaurant.

Year to date, total revenues were down 1.5 to $606.4 million, compared to $615.5 million last year.

Net income increased 51 percent to $5.6 million, compared $3.7 million in the same period last year, impacted by an increase in income from operations and a significant reduction in interest expense. Income from operations rose 6.3 percent to $13.5 million from $12.7 million in the same period last year, improving from 6.1 percent to 6.7 percent as a percentage of total revenues. Interest expense was down $2.0 million to $4.8 million for the quarter due to debt reductions in 2008 and 2009, and lower interest rates on the company's LIBOR-based borrowings. During the third quarter, the company reduced its outstanding debt balances by $3.7 million to $291.2 million at Sept. 27.

Year-to-date net income increased to $17.7 million, up significantly from $8.4 million last year.

"Under current economic conditions, building top-line momentum has been our greatest challenge, and we are working diligently to drive sales at all of our brands," said Alan Vituli, chairman and CEO of Carrols Restaurant Group. "We are focusing our media efforts for our Hispanic brands, including television, radio and direct mail advertising, on our new products, limited-time offers and our value positioning to stimulate guest traffic."

Outlook

Based upon the company's nine-month results and an expectation that current earnings trends will continue, the company believes that it will exceed its previously issued 2009 earnings guidance, with 2009 is a 53-week fiscal period compared to a 52-week period in 2008. The company anticipates:

A revenue increase of approximately 0 percent to 0.5 percent for the year
One additional new Taco Cabana restaurant opening in the fourth quarter, bringing new Hispanic brand restaurant openings to five for 2009, and the closing of one Burger King restaurant in the fourth quarter

In 2010, the company anticipates opening five to eight new Hispanic brand restaurants and closing approximately five Burger King restaurants.

Vituli concluded: "We expect to exceed our previously issued earnings guidance due to our strong year-to-date earnings performance and the favorable cost trends that are positively impacting our profitability. At the same time, we remain cautious regarding the consumer spending environment and our sales outlook."

A replay of the company's conference call to discuss the third quarter 2009 financial results can be accessed by dialing (800) 406-7325 or (303) 590-3030 for international callers; the passcode is 4173077. The call will be available until Nov. 9.