Carrols Restaurant Group, Inc. Reports Financial Results for the Fourth Quarter and Full Year 2009

Carrols Restaurant Group, Inc. (Nasdaq: TAST), the parent company of Carrols Corporation, today announced financial results for the fourth quarter and full year ended January 3, 2010.

Highlights for the 14-week fourth quarter of 2009 versus the 13-week fourth quarter of 2008 include:

* Net income of $4.1 million, or $0.19 per diluted share (after impairment charges of $0.07 per diluted share, after tax), compared to net income of $4.4 million, or $0.20 per diluted share (including non-recurring gains and impairment charges, which in the aggregate reduced earnings by approximately $0.02 per diluted share, after tax);

* Total revenues increased 4.4% to $209.7 million from $200.8 million, including a 5.8% increase for the Company's Hispanic Brands;

* Comparable restaurant sales (on a comparable 13 week basis) increased 0.3% at Pollo Tropical®, decreased 4.5% at Taco Cabana® and decreased 3.0% at Burger King®;

Highlights for the 53-week full year 2009 versus the 52-week full year 2008 include:

* Net income of $21.8 million, or $1.00 per diluted share, (including non-recurring gains and impairment charges, which in the aggregate reduced earnings by approximately $0.06 per diluted share, after tax), compared to net income of $12.8 million, or $0.59 per diluted share (including non-recurring gains and impairment charges, which in the aggregate reduced earnings by approximately $0.02 per diluted share, after tax);

* Total revenues were $816.1 million compared to $816.3 million, including a 1.7% increase for the Company's Hispanic Brands;

* Comparable restaurant sales (on a comparable 52 week basis) decreased 1.3% at Pollo Tropical, decreased 3.7% at Taco Cabana and decreased 2.6% at Burger King;

* Total outstanding indebtedness was reduced $33.1 million for the full year to $283.1 million as of January 3, 2010.

As of January 3, 2010, the Company owned and operated 559 restaurants, including 312 Burger King, 91 Pollo Tropical and 156 Taco Cabana restaurants.

Alan Vituli, Chairman and Chief Executive Officer of Carrols Restaurant Group, Inc. commented, “We were able to significantly increase earnings in 2009 despite ongoing challenges to top-line growth caused by the difficult consumer environment. The 2009 earnings improvements were brought about by our effective management of controllable expenses, favorable commodity and utility costs, and a decrease in interest expense, all of which more than offset fixed cost deleveraging caused by the decline in comparable restaurant sales. The increase in net income, combined with relatively modest capital expenditures, enabled the Company to reduce outstanding indebtedness by $33.1 million in 2009 which further improved our leverage ratios.”

Vituli continued, “Looking ahead, strengthening our top-line is our greatest opportunity but remains a challenge in the current environment. To stimulate guest traffic at our Hispanic Brands, we continue to focus on our pipeline of new products and compelling promotional offers, supported through television, radio and direct mail advertising. We continue to emphasize the attributes that most differentiate our brands within the quick-casual segment: freshly-made food, distinct flavor profiles and a strong value proposition for the consumer. The Burger King system, on the other hand, has increasingly focused on the customers’ need for extreme affordability with very aggressive price-pointed promotional activities. We remain cautious about sales expectations for our Burger King restaurants in light of recent trends, the competitive environment and continuing pressures on consumer spending.”

Fourth Quarter 2009 Results

Total revenues increased 4.4% to $209.7 million from $200.8 million during the fourth quarter of 2009 compared to the fourth quarter of 2008, while revenues from the Company’s Hispanic Brands increased 5.8% to $109.8 million from $103.8 million. These year-over-year increases were mostly due to one additional week in the fourth quarter of 2009.

Pollo Tropical revenues increased 7.4% to $45.1 million during the fourth quarter of 2009 compared to $42.0 million in the fourth quarter of 2008, mostly due to the additional week in 2009. Pollo Tropical comparable restaurant sales (on a comparable 13 week basis) increased 0.3%.

Taco Cabana revenues increased 4.7% to $64.7 million during the fourth quarter of 2009 compared to $61.8 million in the fourth quarter of 2008 due to the additional week in 2009. Taco Cabana comparable restaurant sales (on a comparable 13 week basis) decreased 4.5%. The Company opened one Taco Cabana restaurant in the fourth quarter of 2009.

Burger King revenues increased 2.9% to $99.9 million during the fourth quarter of 2009 compared to $97.0 million in the fourth quarter of 2008 due to the additional week in the fiscal period. Burger King comparable restaurant sales (on a comparable 13 week basis) decreased 3.0%. The Company opened one Burger King restaurant (a relocation of an existing unit) and closed three restaurants in the fourth quarter of 2009 (including the unit closed in conjunction with the relocation).

General and administrative expenses were $13.2 million in the fourth quarter of 2009 compared to $13.1 million in the fourth quarter of 2008, and as a percentage of total revenues, decreased to 6.3% from 6.5%.

Income from operations increased to $11.2 million in the fourth quarter of 2009 from $9.5 million in the fourth quarter of 2008, and as a percentage of total revenues, improved to 5.4% from 4.7%. Impairment charges and non-recurring losses (gains), in the net, reduced income from operations by $2.5 million in 2009 and $4.9 million in 2008. The effect of one additional week in the fourth quarter of 2009 contributed approximately $2.9 million to income from operations.

Interest expense was $4.7 million in the fourth quarter of 2009 and $1.9 million lower than the fourth quarter of 2008 due to debt reductions and lower interest rates. During the fourth quarter of 2009, the Company reduced its outstanding indebtedness by $8.1 million to $283.1 million.

Net income for the fourth quarter of 2009 was $4.1 million, or $0.19 per diluted share, compared to net income for the fourth quarter of 2008 of $4.4 million, or $0.20 per diluted share. The fourth quarter of 2009 included impairment charges of approximately $2.4 million, or $0.07 per diluted share, after tax. The Company estimates that the additional week in 2009 increased earnings by approximately $0.07 per diluted share, after tax. The fourth quarter of 2008 included non-recurring gains and impairment charges, which in the aggregate reduced earnings by approximately $0.02 per diluted share, after tax.

Full-Year 2009 Results

For the year ended January 3, 2010 (which contained 53 weeks), total revenues were essentially flat at $816.1 million compared to $816.3 million in fiscal 2008 (which contained 52 weeks). Income from operations increased to $54.1 million from $44.0 million, and as a percentage of total revenues, improved to 6.6% from 5.4%. Net income increased to $21.8 million in 2009, or $1.00 per diluted share, from $12.8 million in 2008, or $0.59 per diluted share. The full year 2009 results included non-recurring gains and impairment charges, which in the aggregate reduced earnings by approximately $0.06 per diluted share, after tax. The full year 2008 results also included non-recurring gains and impairment charges, which in the aggregate reduced earnings by approximately $0.02 per diluted share, after tax.

Outlook

The Company is not providing specific earnings guidance for 2010 given the continuing uncertainties with regard to the overall economy and consumer spending, and in particular, a lack of visibility regarding the key drivers of comparable sales for its Burger King restaurants. The Company does expect to see continuing improvement in sales trends for its Hispanic Brands. However, uncertainty regarding the impact of Burger King new product introductions and its promotional and discounting tactics make predicting sales and earnings difficult in the current environment.

The Company is providing the following information for 2010:

* The 2010 fiscal year has one less week than 2009, the effect of which is estimated to negatively impact revenues by approximately $13.6 million and earnings by $0.07 per diluted share compared to 2009;

* Comparable restaurant sales for Pollo Tropical are expected to increase 0% to 3%. Taco Cabana comparable restaurant sales are expected to be somewhat soft early in the year, improving as the year progresses and to be flat or slightly positive for the full year;

* Commodity costs are expected to decrease 1% to 2% for Pollo Tropical, to be flat to down 1% for Taco Cabana and to increase 3% to 4% for Burger King;

* Amortization of unearned purchase discounts, which are recognized as a reduction of cost of sales, will decrease $2.2 million for our Burger King restaurants in 2010 since the funds received in 2000 from the Coca-Cola Company and Dr. Pepper/Seven-Up, Inc. became fully amortized at the end of 2009;

* The Company anticipates the opening of four to six new Hispanic Brand restaurants, the net closing of seven Burger King restaurants and the closing of two Taco Cabana restaurants;

* Total capital expenditures are expected to be $40 million to $45 million, increasing from 2009 due to some additional remodeling at the Hispanic Brands;

* Depreciation expense is expected to increase approximately 5% reflecting 2009 capital equipment additions, 2010 new units and increases in reimaging expenditures;

* General and administrative expense is expected to increase 2% to 3%; and

* The Company’s estimated annual effective tax rate is expected to be 37.0% to 37.5%.

Vituli concluded, “All things considered, 2009 results were solid recognizing that earnings growth was driven mainly by lower costs. Earnings in 2010 will be more challenging as improvements in sales will be critical. There remains considerable uncertainty, though, regarding the timing of the economic recovery and improvements in consumer spending. We believe that our Hispanic Brands are well-positioned, resilient and have attractive long-term growth potential. Nonetheless, we have limited new unit growth in the near-term to continue to maximize free cash flow and pay down debt. We would anticipate more aggressive expansion of our Hispanic Brands beyond 2010 as the economy improves. Because we have far less control of the sales at our Burger King restaurants, we remain cautious at this time regarding their 2010 results.”


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