Carrols Restaurant Group, Inc., the parent company of Carrols Corporation, has announced financial results for the first quarter ended April 3, 2011.
Highlights for the first quarter of 2011 versus the first quarter of 2010 include:
- Total revenues increased 1.1% to $197.2 million in the first quarter of 2011 compared to $195.1 million in the first quarter of 2010.
- Comparable restaurant sales increased 13.5% at Pollo Tropical, 2.0% at Taco Cabana, but decreased 5.0% at Burger King;
- Net income for the first quarter of 2011 was $2.2 million, or $0.10 per diluted share, compared to net income of $2.3 million, or $0.11 per diluted share in the first quarter of 2010; and
- Earnings in the first quarter of 2011 were after impairment, other lease charges and other income of $1.0 million, or $0.03 per diluted share after tax. Earnings in the first quarter of 2011 also included approximately $0.3 million, or $0.01 per diluted share after tax, of costs incurred in connection with the Company’s planned spin-off of its Hispanic Brands. Earnings in the first quarter of 2010 included impairment and other lease charges of $0.3 million, or $0.01 per diluted share.
As of April 3, 2011, the Company owned and operated 550 restaurants, including 304 Burger King, 90 Pollo Tropical and 156 Taco Cabana restaurants, and also franchised 34 restaurants.
Alan Vituli, Chairman and Chief Executive Officer of Carrols Restaurant Group, Inc. commented, “The positive response to the initiatives we are taking at Pollo Tropical and Taco Cabana, measured in terms of new customers and customer frequency, we believe are a reflection of the growing appeal of these two brands. Our growth in comparable restaurant sales at our Hispanic Brands has come about substantially from increased customer counts at both lunch and dinner, as menu price increases have been minimal. While new unit growth at our Hispanic Brands had been substantially curtailed due to the uncertainty created by the recession, reestablishing a strong pipeline of new sites is a priority for these brands as we embark on a more ambitious new unit development plan going forward. With regard to Burger King, the brand continues to experience sales weakness which has weighed on our overall results.”
First Quarter 2011 Results
Total revenues increased 1.1% to $197.2 million in the first quarter of 2011 from $195.1 million in the first quarter of 2010, with revenues from the Company’s Hispanic Brands increasing 7.5% to $115.6 million from $107.5 million.
Pollo Tropical revenues increased 14.8% to $52.2 million in the first quarter of 2011 from $45.5 million in the first quarter of 2010. Pollo Tropical comparable restaurant sales increased 13.5%. One Pollo Tropical restaurant was closed during the period.
Taco Cabana revenues increased 2.2% to $63.4 million in the first quarter of 2011 from $62.0 million in the first quarter of 2010. Taco Cabana comparable restaurant sales increased 2.0%. One Taco Cabana restaurant was opened during the period.
Burger King revenues decreased 6.8% to $81.6 million in the first quarter of 2011 from $87.6 million in the first quarter of 2010. Burger King comparable restaurant sales decreased 5.0%. One Burger King restaurant was relocated within its market and another restaurant was closed during the period.
General and administrative expenses increased to $13.9 million during the first quarter of 2011 from $12.5 million in the first quarter of 2010, and, as a percentage of total revenues, increased from 6.4% to 7.0%. These expenses included $0.3 million of costs incurred in connection with various activities related to the planned spin-off of the Company’s Hispanic Brands.
Income from operations decreased to $7.9 million during the first quarter of 2011 from $8.5 million in the first quarter of 2010, and as a percentage of total revenues, decreased from 4.4% to 4.0%.
Interest expense decreased to $4.6 million during the first quarter of 2011 from $4.7 million in the first quarter of 2010.
Impairment and other lease charges were $1.1 million in the first quarter of 2011 and included impairment charges of $0.8 million relating to five Burger King restaurants and a $0.2 million lease charge due to the closure of a Pollo Tropical restaurant in the first quarter of 2011.
Net income for the first quarter of 2011 was $2.2 million, or $0.10 per diluted share, compared to net income of $2.3 million, or $0.11 per diluted share in the prior year. Earnings in the first quarter of 2011 were after impairment and other lease charges and other income of $1.0 million, or $0.03 per diluted share after tax. Earnings in the first quarter of 2011 also included approximately $0.3 million, or $0.01 per diluted share after tax, of costs incurred in connection with the Company’s planned spin-off of its Hispanic Brands. Earnings in the first quarter of 2010 included impairment and other lease charges of $0.3 million, or $0.01 per diluted share.
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 potential spin-off transaction or the planned refinancing:
- Comparable restaurant sales are now expected to increase approximately 6% to 8% for Pollo Tropical (compared to 3% to 5% announced previously) and to increase approximately 2% to 3% for Taco Cabana (compared to 1% to 2% announced previously). Burger King comparable restaurant sales are expected to be negative for the full year but improve from current trends in the second half of the year;
- Commodity costs are now expected to increase 3% to 4% for Pollo Tropical, 7% to 8% for Taco Cabana and 5% to 6% for Burger King;
- For 2011, the Company currently plans to open five to seven new Hispanic Brand restaurants and to relocate one Burger King restaurant. In 2011, the Company plans to close one Pollo Tropical and seven Burger King restaurants (excluding the relocated restaurant);
- Total capital expenditures are still estimated to be in the $45 million to $55 million range; and
- The Company’s annual effective tax rate is now estimated to be 32% to 33%.
Mr. Vituli added, “Increasing commodity inflation is beginning to pressure margins, particularly at Burger King and Taco Cabana. To offset this, we will be taking some menu price increases at all of our brands. We believe that on a relative value basis, our Hispanic Brands are particularly well positioned so that we can selectively raise menu prices and still maintain very favorable customer value scores. For Burger King, we are hopeful that the brand will begin to show improvements in sales trends and profitability in the second half of the year.”
Mr. Vituli concluded, “We are forging ahead with our plans to separate our Hispanic Brands from our Burger King business by creating two independent publicly owned companies, which would permit each company to pursue its own distinct business opportunities. This is a complex process involving a number of steps including the refinancing of our existing debt. We currently contemplate that the refinancing would be comprised of term loan borrowings under a senior secured bank credit facility for our Burger King business and the issuance of senior secured notes for our Hispanic Brands. The refinancing is expected to be completed in June or July and the spin-off by year-end. Moreover, we are building our business plans to position each separate company to improve shareholder value for each of its respective shareholder constituents.”
Carrols Restaurant Group, Inc., operating through its subsidiaries, including Carrols Corporation, 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 April 3, 2011, and 34 franchised restaurants in the United States, Puerto Rico, Ecuador, Honduras, Trinidad and the Bahamas. Carrols Restaurant Group owns and operates two Hispanic Brand restaurants, Pollo Tropical and Taco Cabana. It is also the largest Burger King franchisee, based on number of restaurants, and has operated Burger King restaurants since 1976.