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

Carrols Restaurant Group, Inc. (Nasdaq: TAST), the parent company of Carrols Corporation, today announced financial results for the third quarter ended October 3, 2010.

Highlights for the third quarter of 2010 versus the third quarter of 2009 include:

• Net income of $4.6 million, or $0.21 per diluted share (including a pre-tax insurance gain of $0.4 million, or $0.01 per diluted share after tax), compared to net income of $5.6 million, or $0.26 per diluted share (including a pre-tax gain on the sale of excess property of $0.2 million, or $0.01 per diluted share after tax);
• Total revenues increased to $201.6 million from $201.2 million, with a 4.0% increase in revenues for the Company's Hispanic Brands; and
• Comparable restaurant sales increased 8.8% at Pollo Tropical®, increased 1.0% at Taco Cabana® and decreased 3.2% at Burger King®;

As of October 3, 2010, the Company owned and operated 552 restaurants, including 306 Burger King, 90 Pollo Tropical and 156 Taco Cabana restaurants, and franchised 33 restaurants.

Alan Vituli, Chairman and Chief Executive Officer of Carrols Restaurant Group, Inc. commented, “Comparable restaurant sales increased at both our Hispanic Brands from continued momentum in customer traffic. Pollo Tropical’s sales trends were exceptionally strong as the brand continues to expand market share through its distinct products, effective marketing and promotions. The combination of higher sales and margins substantially increased Pollo Tropical’s contribution to profitability. Our Burger King restaurants, however, continued to weigh negatively on our overall performance. Comparable restaurant sales remained under pressure at our Burger Kings and profitability was further impacted by aggressive value-oriented promotions and higher commodity costs.”

Third Quarter 2010 Results

Total revenues increased 0.2% to $201.6 million in the third quarter of 2010 from $201.2 million in the third quarter of 2009, while revenues from the Company’s Hispanic Brands increased 4.0% to $111.3 million from $107.0 million.

Pollo Tropical revenues increased 8.1% to $47.6 million during the third quarter of 2010 compared to $44.0 million in the third quarter of 2009. Pollo Tropical comparable restaurant sales increased 8.8%.

Taco Cabana revenues increased 1.1% to $63.7 million during the third quarter of 2010 compared to $63.0 million in the third quarter of 2009. Taco Cabana comparable restaurant sales increased 1.0%.

Burger King revenues decreased 4.0% to $90.4 million during the third quarter of 2010 compared to $94.1 million in the third quarter of 2009. Burger King comparable restaurant sales decreased 3.2%. The Company has closed eight Burger King restaurants, excluding two relocated restaurants, since the beginning of the third quarter of 2009.

General and administrative expenses decreased to $12.0 million in the third quarter of 2010 from $12.8 million in the third quarter of 2009, and as a percentage of total revenues, declined from 6.3% to 6.0%.

Income from operations decreased to $12.1 million in the third quarter of 2010 from $13.5 million in the third quarter of 2009, and as a percentage of total revenues, declined from 6.7% to 6.0%.

Interest expense decreased to $4.7 million in the third quarter of 2010 compared to $4.8 million in the third quarter of 2009 due to debt reductions over the past year and lower interest rates on the Company’s LIBOR based borrowings.

Net income in the third quarter of 2010 was $4.6 million, or $0.21 per diluted share, compared to net income in the third quarter of 2009 of $5.6 million, or $0.26 per diluted share. The third quarter of 2010 included a $0.4 million pre-tax insurance gain ($0.01 per diluted share, after tax) and the third quarter of 2009 included a $0.2 million pre-tax gain on the sale of excess property ($0.01 per diluted share, after tax).

Nine Months Results

For the nine months ended September 30, 2010, total revenues decreased 0.9% to $601.2 million from $606.4 million in the same period last year. Net income was $9.3 million, or $0.43 per diluted share, compared to $17.7 million, or $0.81 per diluted share, for the nine months ended September 30, 2009.

2010 Outlook

Based upon year-to-date results and expectations for the fourth quarter of 2010, the Company is providing the following updated outlook for the full year:

• The 2010 fiscal year and the fourth quarter of 2010 have 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;
• Comparable restaurant sales for Pollo Tropical are expected to increase approximately 6%, Taco Cabana comparable restaurant sales are expected to be flat, and Burger King comparable restaurant sales are expected to decrease approximately 3% to 4%;
• 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 full year, the Company anticipates the opening of three Hispanic Brand restaurants, as well as the closing of one Pollo Tropical, one Taco Cabana and seven Burger King restaurants (net of one relocation);
• General and administrative expense is expected to decrease 3% to 4% compared to 2009;
• Total capital expenditures are now expected to be at the lower end of the Company's $40 to $45 million estimated range;
• Debt reduction is anticipated to be between $8 million and $12 million; and,
• The Company's estimated annual effective tax rate is expected to be approximately 37%.

Mr. Vituli concluded, “We were pleased with the performance of our Hispanic Brands, particularly in light of the slow economic and consumer recovery. We remain focused on evolving these brands and to further differentiate them from conventional quick-service restaurants with our initiatives to enhance guest service models and with the remodeling of restaurants in certain of our markets. We are encouraged by initial results and are hopefully laying the groundwork for sustainable long-term growth as we enter new markets. Finally, given the recent ownership and leadership changes at Burger King Corporation, we anxiously await a review of the brand’s marketing and promotional strategy, but remain cautious with respect to a near-term turnaround.”

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