Carrols Restaurant Group, Inc. and Carrols Corporation Report Financial Results for the Third Quarter 2008

Carrols Restaurant Group, Inc. (Nasdaq: TAST), the parent company of Carrols Corporation, today announced financial results for the third quarter ended September 28, 2008.

Highlights for the third quarter of 2008 versus the third quarter of 2007 include:

• Total revenues increased 2.7% to $209.1 million from $203.5 million, including a 3.6% increase for the Company's Hispanic Brands,

• Comparable restaurant sales increased 3.5% at Burger King(R), decreased 1.9% at Pollo Tropical(R), and decreased 0.9% at Taco Cabana(R),

• Income from operations was $12.7 million compared to $14.3 million, the third quarter of 2007 included a $1.7 million impairment charge for an underperforming Pollo Tropical restaurant, and

• Net income was $3.7 million, or $0.17 per diluted share, compared to net income of $4.9 million, or $0.23 per diluted share (which included the aforementioned impairment charge of $0.05 per diluted share after-tax).

As of September 28, 2008, the Company owned and operated a total of 559 restaurants, including 317 Burger King, 89 Pollo Tropical and 153 Taco Cabana restaurants.

Alan Vituli, Chairman and Chief Executive Officer of Carrols Restaurant Group, Inc., commented, 'We are operating in a difficult environment and our third quarter results reflect these broad economic challenges. Our Caribbean Hispanic Brand, Pollo Tropical, has been challenged by the economy in Florida where all but three of our 89 Pollo Tropical restaurants are located. While comparable restaurant sales at Taco Cabana, our Tex Mex brand, have been somewhat flat, they have held up reasonably well against the onslaught of increased competitive activity. Revenues at Taco Cabana, however, reflected the loss of approximately 150 total restaurant operating days in the third quarter from restaurant closures in the Houston market caused by Hurricane Ike. Last but not least, our Burger King business has been very stable and continues to perform well as evidenced by the solid comparable sales increase over a formidable comparison from 2007.'

'Earnings and operating margins have also been under continued pressure from higher commodity and utility costs. Our focus right now is to effectively manage what we can control and make decisions that we believe are best for both our Company's short-term and long-term success. We are addressing top-line growth with targeted promotions, new products and strong execution. Due to our planned reduction in new restaurant openings we are reducing administrative support costs which we believe will further improve bottom line results.'

Third Quarter 2008 Results

Total revenues for the third quarter of 2008 increased 2.7% to $209.1 million from $203.5 million in the third quarter of 2007. During the third quarter of 2008, the Company opened one new Pollo Tropical restaurant, three new Taco Cabana restaurants and one new Burger King restaurant. The Company also closed three Burger King restaurants.

Revenues from the Company's Hispanic Brands increased 3.6% to $107.5 million in the third quarter of 2008 from $103.8 million in the same period last year. Pollo Tropical revenues increased 1.9% to $43.4 million during the third quarter of 2008 compared to $42.6 million in the third quarter of 2007. This was due primarily to the opening of 10 new Pollo Tropical restaurants since the beginning of the same period in 2007. Comparable restaurant sales at Pollo Tropical decreased 1.9% in the third quarter of 2008.

Taco Cabana revenues increased 4.7% to $64.1 million during the third quarter of 2008 compared to $61.3 million in the third quarter of 2007. This was due primarily to the opening of 13 new Taco Cabana restaurants since the beginning of the same period in 2007. Comparable restaurant sales at Taco Cabana decreased 0.9% in the third quarter of 2008.

Burger King revenues increased 1.9% to $101.5 million during the third quarter of 2008 compared to $99.7 million in the third quarter of 2007, despite the closing of 11 Burger King restaurants, excluding relocated restaurants, since the beginning of the same period in 2007. Comparable restaurant sales at Burger King increased 3.5% in the third quarter of 2008.

General and administrative expenses were $12.9 million in the third quarter of 2008, or 6.2% of total revenues, compared to $12.3 million, or 6.1% of total revenues, in the third quarter of 2007.

Income from operations was $12.7 million in the third quarter of 2008, or 6.1% of total revenues, compared to $14.3 million, or 7.1% of total revenues, in the third quarter of 2007.

Net income for the third quarter of 2008 was $3.7 million, or $0.17 per diluted share, compared to net income for the third quarter of 2007 of $4.9 million, or $0.23 per diluted share. The third quarter of 2007 included a $1.7 million impairment charge ($0.05 per diluted share after-tax) related to an underperforming Pollo Tropical restaurant that was subsequently closed.

Nine Month Results

For the nine months ended September 28, 2008, total revenues increased 3.9% to $615.5 million from $592.2 million in the same period last year. Net income was $8.4 million, or $0.39 per diluted share, compared to net income of $11.5 million, or $0.54 per diluted share, for the nine months ended September 30, 2007. Net income in 2007 included an after-tax non-recurring charge related to the refinancing of the Company's senior credit facility of $0.04 per diluted share in the first quarter, as well as an after-tax impairment charge of $0.05 per diluted share in the third quarter.

Outlook

The Company also provided the following guidance:

• A total revenue increase in 2008 of approximately 3.4% to 3.6% including comparable restaurant sales in the fourth quarter of 2008 as follows: an increase of 2.5% to 3.0% for its Burger King restaurants, a decrease of 3.0% to 4.0% for Pollo Tropical and flat for Taco Cabana,

• New unit openings in the fourth quarter of 2008 of three Pollo Tropical restaurants in the Northeast, three or four Taco Cabana restaurants and two Burger King restaurants, one of which is a relocation of an existing unit. The Company also plans to close three Burger King restaurants in the fourth quarter including the one being relocated,

• Total capital expenditures of $65 million to $70 million in 2008 which we believe will likely be in the lower end of the range,

• Total capital expenditures in 2009 of $20 million to $30 million,

• An estimated annual effective tax rate of 36.7% in 2008, and

• Diluted earnings per share ranging from $0.50 to $0.53 in 2008.

Additional information will be available when the Company releases financial results for the fourth quarter ended December 28, 2008 in early March 2009.

Mr. Vituli concluded, 'We have an experienced management team with a long history of successfully managing a leveraged balance sheet. It is apparent, though, that in the current economic environment we must slow new unit growth, maximize free cash flow and reduce financial leverage. We have lowered capital expenditures in 2008 from what was planned earlier in the year and will further limit discretionary capital spending in 2009. We are confident that these actions to reduce debt, combined with our ability to significantly reduce our lease financing obligations, ensure that we will maintain an acceptable margin of safety with respect to the financial covenants in our loans. We further believe that our diversified business model provides stability, helping to moderate risk during these uncertain times. Above all, our brands are well positioned to sustain themselves and to capitalize on longer-term demographic trends that transcend the current economic challenges.'

Reader Comments:

Be the first to leave a comment for this article