Carrols Restaurant Group, Inc. Reports Financial Results for the Second Quarter of 2010

As of July 4, 2010, the Company owned and operated 554 restaurants, including 309 Burger King, 90 Pollo Tropical and 155 Taco Cabana restaurants, and franchised 33 restaurants.

Alan Vituli, Chairman and Chief Executive Officer of Carrols Restaurant Group, Inc. commented, “During the second quarter, comparable restaurant sales at our Hispanic Brands continued to improve reflecting the ongoing increases in customer traffic that we’ve experienced since mid-2009. Pollo Tropical comparable restaurant sales were particularly strong as our new products, promotions and advertising continued to resonate well with consumers. These sales gains, along with lower commodity costs, favorably impacted Pollo Tropical profitability. Taco Cabana revenues increased slightly, but, operating margins were negatively impacted by the effect of promotions, the timing of advertising and some expense deleveraging.”

Mr. Vituli continued, “Burger King’s comparable restaurant sales in the second quarter, while improved on a sequential basis, continued to be challenged by general economic conditions and competitive activity. The combination of negative sales trends, aggressive price-driven promotional activities, and higher beef costs, resulted in a significant reduction in profitability for our Burger King restaurants. Although customer traffic was positive, incremental sales were not sufficient to overcome the lower margins on the broad line of discounted offerings.”

Second Quarter 2010 Results

Total revenues increased 0.3% to $204.5 million from $203.9 million during the second quarter of 2010 compared to the second quarter of 2009, while revenues from the Company’s Hispanic Brands increased 2.4% to $111.0 million from $108.4 million.

Pollo Tropical revenues increased 5.0% to $46.8 million during the second quarter of 2010 compared to $44.6 million in the second quarter of 2009. Pollo Tropical comparable restaurant sales increased 6.3%.

Taco Cabana revenues increased 0.6% to $64.2 million during the second quarter of 2010 compared to $63.8 million in the second quarter of 2009. Taco Cabana comparable restaurant sales decreased 0.1%.

Burger King revenues decreased 2.2% to $93.5 million during the second quarter of 2010 compared to $95.5 million in the second quarter of 2009. Burger King comparable restaurant sales decreased 1.4%. The Company has closed seven Burger King restaurants, excluding relocated restaurants, since the beginning of the second quarter of 2009.

General and administrative expenses were $12.7 million in both the second quarter of 2010 and 2009, and as a percentage of total revenues, were similarly flat at 6.2%.

Income from operations decreased to $8.4 million in the second quarter of 2010 from $16.1 million in the second quarter of 2009, and as a percentage of total revenues, declined from 7.9% to 4.1%. Impairment charges reduced income from operations by $3.6 million in 2010 and a non-recurring insurance gain increased income from operations by $0.6 million in 2009. The 2010 impairment charge covered nine restaurants including reserve adjustments to several previously impaired or closed units. It also included $2.5 million to impair one underperforming Taco Cabana and one Pollo Tropical restaurant.

Interest expense decreased to $4.7 million in the second quarter of 2010 compared to $4.9 million in the second quarter of 2009 due to debt reductions and lower interest rates on the Company’s LIBOR based borrowings.

Net income in the second quarter of 2010 was $2.4 million, or $0.11 per diluted share, compared to net income in the second quarter of 2009 of $7.1 million, or $0.32 per diluted share. The second quarter of 2010 included impairment charges of approximately $3.6 million, or $0.11 per diluted share, after tax. The second quarter of 2009 included a non-recurring gain of $0.6 million, or $0.02 per diluted share, after tax.

Six Months Results

For the six months ended June 30, 2010, total revenues decreased 1.4% to $399.6 million from $405.3 million in the same period last year. Net income was $4.7 million, or $0.22 per diluted share (after impairment charges of $3.6 million, or $0.11 per diluted share after tax), compared to $12.1 million, or $0.56 per diluted share, for the six months ended June 30, 2009.

2010 Outlook

Once again, the Company is not providing specific earnings per share guidance for 2010, but is updating its previous commentary as follows:

• Comparable sales for Pollo Tropical are now expected to increase 3% to 5% for the full year and Taco Cabana comparable sales are expected to be flat for the full year;
• Comparable sales for Burger King, which decreased 3.9% in the first half of 2010, could improve in the second half of the year but will likely still be negative for the full year;
• Commodity costs are expected to decrease 1% to 2% for Pollo Tropical, to be flat to up 1% for Taco Cabana and to increase 4% to 5% for Burger King;
• For the year, the Company anticipates the opening of three or four new Hispanic Brand restaurants as well as the closing of one Pollo Tropical, one Taco Cabana and 8 Burger King restaurants (net of one relocation);
• General and administrative expense is expected to decrease 2% to 3% compared to 2009;
• The amount of debt reduction will depend on earnings and capital spending, but is estimated to be $5 million to $10 million; and
• The Company's estimated annual effective tax rate is now expected to be 36% to 37%.

Mr. Vituli concluded, “As we look towards the balance of 2010, we recognize that unemployment levels remain high and that the consumer recovery is likely to be slow. Despite the economic environment, we are intently focused on driving sales at our Hispanic Brands with new product introductions, effective promotions and service initiatives. We are investing in initiatives to elevate the guest service models, and enhance the facilities through restaurant remodeling as part of our efforts to further differentiate our quick-casual brands from conventional quick-service restaurants. We are encouraged by the initial results of these efforts which we believe will positively impact both our longer-term business and growth prospects. With regards to Burger King, we are more cautious with respect to our near-term outlook given the most recent outcomes of the brand’s marketing strategy.”

Logos, product and company names mentioned are the property of their respective owners.

Reader Comments:

Be the first to leave a comment for this article

Tweet