Carrols Restaurant Group, Inc., the parent company of Carrols Corporation, today announced financial results for the second quarter ended July 3, 2011.
Highlights for the second quarter of 2011 versus the second quarter of 2010 include:
- Total revenues increased 2.6% to $209.8 million in the second quarter of 2011 compared to $204.5 million in the second quarter of 2010. Revenues for Fiesta Restaurant Group, Inc., an indirect wholly owned subsidiary of the Company that owns and operates the Pollo Tropical and Taco Cabana restaurant businesses, increased 9.2% to $121.2 million from $111.0 million in the same period last year.
- Comparable restaurant sales increased 10.7% at Pollo Tropical, increased 4.5% at Taco Cabana, and decreased 3.6% at Burger King;
- Net income for the second quarter of 2011 was $5.5 million, or $0.25 per diluted share, compared to net income of $2.4 million, or $0.11 per diluted share in the second quarter of 2010.
- Earnings in the second quarter of 2011 included certain non-recurring items which reduced earnings before taxes by $0.8 million, or $0.03 per diluted share after tax, and a favorable income tax adjustment of $0.2 million, which increased net income by $0.01 per diluted share. Earnings in the second quarter of 2010 included impairment and other lease charges totaling $3.6 million, or $0.11 per diluted share, after tax.
As of July 3, 2011, the Company owned and operated 550 restaurants, including 303 Burger King, 90 Pollo Tropical and 157 Taco Cabana restaurants, and also franchised 35 restaurants.
Alan Vituli, Chairman and Chief Executive Officer of Carrols Restaurant Group, Inc. commented, “We were pleased with results for the second quarter at our Pollo Tropical and Taco Cabana brands as each posted strong top line growth and solid earnings. These brands continue to demonstrate their strong and growing appeal. Our Burger King restaurants continued to show weakness in the quarter. However, we have begun to see signs of stabilizing trends within that business and believe that it will continue to improve as the year progresses.”
Mr. Vituli added, “While our sales increases enabled us to leverage costs on an overall basis, commodity inflation has been persistent and did have some negative impact on margins in the quarter. We have recently taken price increases at Pollo Tropical and Taco Cabana. Both brands have historically benefited from high value scores from our customers, and from their initial reaction, we believe that our customers will absorb these modest price increases with minimal effect on customer frequency.”
Second Quarter 2011 Results
Total revenues increased 2.6% to $209.8 million in the second quarter of 2011 from $204.5 million in the second quarter of 2010, with revenues from Fiesta Restaurant Group increasing 9.2% to $121.2 million from $111.0 million.
Pollo Tropical revenues increased 12.5% to $52.6 million in the second quarter of 2011 from $46.8 million in the second quarter of 2010. Pollo Tropical comparable restaurant sales increased 10.7%.
Taco Cabana revenues increased 6.9% to $68.6 million in the second quarter of 2011 from $64.2 million in the second quarter of 2010. Taco Cabana comparable restaurant sales increased 4.5%. Two Taco Cabana restaurants were opened and one Taco Cabana restaurant was closed during the period.
Burger King revenues decreased 5.2% to $88.6 million in the second quarter of 2011 from $93.5 million in the second quarter of 2010. Burger King comparable restaurant sales decreased 3.6%. The Company also added one new restaurant through the lease assumption of a non-operating Burger King restaurant and closed two Burger King restaurants during the period.
Income from operations increased to $12.0 million during the second quarter of 2011 from $8.4 million in the second quarter of 2010, and as a percentage of total revenues, increased from 4.1% to 5.7%.
Interest expense decreased to $4.6 million during the second quarter of 2011 from $4.7 million in the second quarter of 2010.
Impairment and other lease charges were $1.0 million in the second quarter of 2011 consisting primarily of lease charges related to the closing of a Taco Cabana restaurant late in the quarter and increases to lease reserves for previously closed Pollo Tropical and Taco Cabana restaurants. Other non-recurring items included a $0.3 million gain from the sale of a property previously operated as a Burger King and $0.2 million of expenses related to the planned spin-off of Fiesta Restaurant Group. In the second quarter of 2010, impairment and other lease charges totaled $3.6 million.
Net income for the second quarter of 2011 was $5.5 million, or $0.25 per diluted share, compared to net income of $2.4 million, or $0.11 per diluted share in the prior year. Earnings in the second quarter of 2011 included the non-recurring items discussed above which reduced earnings before taxes by $0.8 million, or $0.03 per diluted share after tax, and a favorable income tax adjustment which increased net income by $0.2 million, or $0.01 per diluted share. Earnings in the second quarter of 2010 included $3.6 million in impairment and other lease charges, or $0.11 per diluted share, after tax.
Six Months Results
For the six months ended June 30, 2011, total revenues increased 1.9% to $407.1 million from $399.6 million in the same period last year and revenues for Fiesta Restaurant Group increased 8.4% to $236.9 million from $218.5 million in the six months ended June 30, 2010. Net income was $7.8 million, or $0.35 per diluted share, compared to $4.7 million, or $0.22 per diluted share, for the six months ended June 30, 2010.
Refinancing
On August 5, 2011, the Company completed a refinancing of its existing indebtedness. Carrols LLC (a wholly owned subsidiary of Carrols Corporation that operates the Company’s Burger King restaurants) and Fiesta Restaurant Group each entered into new and independent financing arrangements. The proceeds from these financings were or will be used to repay amounts outstanding under the Company’s senior credit facility and its 9% senior subordinated notes, as well as to pay all related fees and expenses. Excess cash from the financings is expected to be approximately $10 million to $11 million.
Fiesta Restaurant Group sold $200 million of 8.875% senior secured second lien notes due 2016 and entered into a $25 million secured revolving credit facility which was undrawn at closing. Carrols LLC entered into an $85 million secured credit facility including term loan borrowings of $65 million and an undrawn $20 million revolving credit facility. Proceeds from these borrowings were used to repay approximately $80.2 million outstanding under Carrols Corporation’s senior credit facility, to repurchase $118.4 million of the 9% senior subordinated notes tendered pursuant to a cash tender offer (such tender offer is not yet complete), to pay accrued interest and to pay related fees and expenses. In addition, the $46.6 million of 9% senior subordinated notes not yet tendered will be repurchased upon completion of the cash tender offer or redeemed subsequent to its expiration along with payment for accrued interest and fees related to the tender offer.
2011 Outlook
The Company is not providing specific earnings guidance for 2011. However, the Company is providing the following updated information which does not include any impact from the planned spin-off of Fiesta Restaurant Group or any loss on extinguishment of debt related to the refinancing completed in the third quarter of 2011:
- Comparable restaurant sales are now expected to increase approximately 7% to 9% for Pollo Tropical (compared to 6% to 8% announced previously) and to increase approximately 3% to 5% for Taco Cabana (compared to 2% to 3% announced previously). Burger King comparable restaurant sales are expected to improve in the second half of the year and to be approximately 1% to 3% negative for the full year;
- Commodity costs are now expected to increase 5% to 6% for Pollo Tropical, 8% to 9% for Taco Cabana and 5% to 6% for Burger King;
- In 2011, the Company plans to open five to seven new Hispanic Brand restaurants, one new Burger King restaurant and to relocate one Burger King restaurant. The Company also plans to close two Pollo Tropical, one Taco Cabana and five Burger King restaurants (excluding the relocated restaurant);
- Total capital expenditures are now estimated to be in the $45 million to $50 million range;
- Total interest expense is anticipated to increase approximately $2.0 million to $2.5 million in the second half of 2011 as a result of the recently completed refinancing of the Company’s debt; and
- The Company’s annual effective tax rate is now estimated to be 28% to 30%.
Mr. Vituli concluded, “Our plan to spin-off Fiesta Restaurant Group to our shareholders is moving forward and we believe that we are on track to create an independent publicly-owned company containing our Pollo Tropical and Taco Cabana brands by year-end. The effect of the spin-off would leave Carrols Restaurant Group with its Burger King restaurant business. A critical step in this process, separate debt financings for each of these two companies, has been completed. We also recently named industry veteran Tim Taft as Fiesta’s new CEO effective August 15, 2011 while I will remain as Chairman of the Board for Fiesta. Tim is a proven marketer and operator, and he brings considerable experience to continue building the Pollo Tropical and Taco Cabana brands. We also expect that Dan Accordino will be appointed CEO of Carrols Restaurant Group at the time of the spin-off. His deep understanding of our Burger King operations and the overall Burger King system make him well-suited for this role.”
Carrols Restaurant Group, Inc., operating through its subsidiaries, including Carrols Corporation and Fiesta Restaurant Group, is one of the largest restaurant companies in the United States. The Company operates three restaurant brands in the quick-casual and quick-service restaurant segments with 550 company-owned and operated restaurants in 16 states as of July 3, 2011, and 35 franchised restaurants in the United States, Puerto Rico, Ecuador, Honduras, Trinidad, the Bahamas and Venezuela. Carrols Restaurant Group, through its indirect wholly-owned subsidiary Fiesta Restaurant Group, owns and operates the Pollo Tropical and Taco Cabana restaurant businesses. Carrols Restaurant Group is also the largest Burger King franchisee, based on number of restaurants, and has operated Burger King restaurants since 1976.
