Carrols Restaurant Group, Inc. and Carrols Corporation Report Financial Results for the First Quarter 2009

Carrols Restaurant Group, Inc. (Nasdaq: TAST), the parent company of Carrols Corporation, today announced financial results for the first quarter ended March 29, 2009.

Highlights for the first quarter of 2009 versus the first quarter of 2008 include:

- Income from operations was $13.2 million compared to $9.7 million,
- Net income was $5.0 million, or $0.23 per diluted share, compared to net income of $1.4 million, or $0.07 per diluted share,
- Total revenues increased 2.9% to $201.3 million from $195.8 million, including a 2.2% increase for the Company’s Hispanic Brands,
- Comparable restaurant sales decreased 3.0% at Pollo Tropical®, decreased 1.6% at Taco Cabana®, and increased 5.1% at Burger King®.

As of March 29, 2009, the Company owned and operated a total of 559 restaurants, including 316 Burger King, 90 Pollo Tropical and 153 Taco Cabana restaurants.

Alan Vituli, Chairman and Chief Executive Officer of Carrols Restaurant Group, Inc. commented, “Obviously we are encouraged with the operating results of all three brands in the first quarter. Although top-line trends at our Hispanic Brands continued to reflect the significant pressures on consumer spending, we were pleased by our overall performance and strong earnings growth. Guest counts at our Pollo Tropical restaurants, while still negative, did show improvement from the fourth quarter of 2008. Our Burger King restaurants also continued to perform well and posted another quarter of solid comparable restaurant sales growth. Our profitability benefited from a more favorable cost environment for commodities and utilities, tighter labor controls, as well as from lower interest expense due to reductions in outstanding indebtedness and lower interest rates. Overall, our disciplined approach to managing through this economic cycle helped to improve both operating margins and earnings.”

Mr. Vituli added, “In the first quarter, we continued to strengthen our financial condition as debt reductions, coupled with increased earnings, resulted in an overall decrease in our financial leverage. We lowered our outstanding debt balances by another $6.4 million during the first quarter, bringing our total reduction in outstanding indebtedness to $53.1 million since the end of the first quarter of 2008. Our focus on reducing outstanding debt will continue to be a near-term priority and we hope this will provide investors with increased confidence in our ability to navigate through this difficult economic environment.”

First Quarter 2009 Results

Total revenues for the first quarter of 2009 increased 2.9% to $201.3 million from $195.8 million in the first quarter of 2008. During the first quarter of 2009, the Company opened one new Taco Cabana restaurant and one new Burger King restaurant, the latter being a relocation of a unit closed in 2008. The Company also closed one Pollo Tropical and two Taco Cabana restaurants.

Revenues from the Company’s Hispanic Brands increased 2.2% to $106.9 million in the first quarter of 2009 from $104.6 million in the same period last year. Pollo Tropical revenues were essentially flat at $44.1 million during the first quarter of 2009 compared to $44.3 million in the first quarter of 2008. This was due primarily to the net increase of six Pollo Tropical restaurants opened since the beginning of the same period in 2008. Comparable restaurant sales at Pollo Tropical decreased 3.0% in the first quarter of 2009.

Taco Cabana revenues increased 4.1% to $62.7 million during the first quarter of 2009 compared to $60.3 million in the first quarter of 2008. This was due primarily to the opening of 11 new Taco Cabana restaurants since the beginning of the same period in 2008. Comparable restaurant sales at Taco Cabana decreased 1.6% in the first quarter of 2009.

Burger King revenues increased 3.6% to $94.5 million during the first quarter of 2009 compared to $91.2 million in the first quarter of 2008, despite the net closing of six Burger King restaurants since the beginning of the same period in 2008 (excluding restaurants closed and relocated within their market areas). Comparable restaurant sales at Burger King increased 5.1% in the first quarter of 2009.

General and administrative expenses were $13.2 million in the first quarter of 2009 compared to $13.0 million in the first quarter of 2008, or 6.6% of total revenues in both periods.

Income from operations was $13.2 million in the first quarter of 2009 compared to $9.7 million in the first quarter of 2008, and as a percentage of total revenue, improved from 5.0% to 6.6%.

Interest expense was $5.2 million in the first quarter of 2009 which was approximately $2.3 million lower than in the first quarter of 2008 due to debt reductions in 2008 and 2009, and lower interest rates on the Company’s LIBOR-based borrowings. During the first quarter of 2009, the Company reduced its outstanding debt balances by $6.4 million to $309.7 million at March 29, 2009.

Net income for the first quarter of 2009 was $5.0 million, or $0.23 per diluted share, compared to net income for the first quarter of 2008 of $1.4 million, or $0.07 per diluted share.

Outlook

The Company is providing the following revised guidance for 2009 noting that 2009 is a 53-week fiscal period, whereas 2008 was a 52-week fiscal period:

- A total revenue increase of approximately 2.5% to 3.5%, including a comparable restaurant sales increase (on a 52-week basis) of 1.5% to 2.5% for its Burger King restaurants, a decrease of 1% to 2% for its Taco Cabana restaurants, and a decrease of 2% to 3% for its Pollo Tropical restaurants,
- New unit openings of two to three Pollo Tropical restaurants and three to four Taco Cabana restaurants, along with the closing of two Taco Cabana restaurants and one Pollo Tropical restaurant,
- The opening of two to three new Burger King restaurants, all of which are planned relocations of existing units, along with the closing of four Burger King restaurants in addition to the relocated units,
- Total general and administrative expenses comparable with the prior year, including an increase in bonus expense in 2009, and lower as a percentage of total revenue,
- Total capital expenditures of $33 million to $38 million which has increased for additional planned remodeling expenditures,
- Total debt reduction of $25 million to $30 million,
- An estimated annual effective tax rate of 37.5%, and,
- Diluted earnings per share of $0.90 to $0.95, which includes the 53rd week of the fiscal year and which is estimated to positively impact earnings by approximately $0.07 per diluted share. This compares to the Company’s previous guidance of diluted earnings per share of $0.75 to $0.80, inclusive of the extra fiscal week.

Mr. Vituli concluded, “Although our outlook on consumer spending remains cautious, we are raising our earnings guidance to better reflect the positive impact that cost trends, our continued focus on cost management and lower interest rates are having on profitability. We aggressively manage the market positioning of our three brands and view their inherent diversity within our multi-brand operating model as a unique strength of this Company. While we await improvements in general economic conditions, we believe we are acting responsibly and managing our business effectively for the current environment. We continue to have great confidence in the prospects for our Hispanic Brands despite our planned contraction in near-term new unit growth.”


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