Carrols Restaurant Group, Inc. Reports Financial Results for the Fourth Quarter and Full Year 2010; Announces its Intention to Separate its Hispanic Brand and Burger King Restaurant Businesses Into Two Public Companies
Carrols also announced its intention to pursue the splitting of the
Company's business into two separate, publicly traded companies through
the tax-free spin-off of its Hispanic Brands to the Company's
stockholders. The company to be spun-off will own and operate the Pollo
Tropical® and Taco Cabana® businesses which had combined revenues of
The Company currently plans to refinance its existing debt and to
separately finance the Burger King and Hispanic Brand businesses to
facilitate the contemplated separation. The Company is also developing
detailed plans for the proposed spin-off. The separation plan, including
transaction structure, timing, composition of senior management and the
Boards of Directors, capital structure and other matters, will be
subject to approval by the Company's Board of Directors, customary
regulatory and other approvals and the receipt of a favorable
Highlights for the 13-week fourth quarter of 2010 versus the 14-week fourth quarter of 2009 include:
-
Total revenues were
$194.9 million in the fourth quarter of 2010 compared to$209.7 million . One extra week in the 2009 fiscal year contributed$13.6 million in revenues; - Comparable restaurant sales (on a comparable 13 week basis) increased 10.7% at Pollo Tropical, increased 2.3% at Taco Cabana, but decreased 6.1% at Burger King; and
-
Net income for the fourth quarter of 2010 was
$2.6 million , or$0.12 per diluted share, compared to net income of$4.1 million , or$0.19 per diluted share in the prior year. Earnings in the fourth quarter of 2010 were after impairment and other lease charges of$3.2 million , or$0.10 per diluted share after tax, and favorable adjustments to the Company's tax provision of$0.6 million , or$0.03 per diluted share. Earnings in the fourth quarter of 2009 included impairment and other lease charges of$2.4 million , or$0.07 per diluted share after tax. The extra week in 2009 contributed net income of$0.07 per diluted share.
Highlights for the 52-week full year 2010 versus the 53-week full year 2009 include:
-
Total revenues were
$796.1 million in 2010 compared to$816.1 million ; - Comparable restaurant sales (on a comparable 52 week basis) increased 7.4% at Pollo Tropical, increased 0.3% at Taco Cabana, but decreased 4.3% at Burger King;
-
Net income for 2010 was
$11.9 million , or$0.55 per diluted share, compared to net income of$21.8 million , or$1.00 per diluted share in 2009. Both years included non-recurring gains and impairment and other lease charges, which in the aggregate reduced earnings by$0.21 per diluted share in 2010 and$0.06 per diluted share in 2009; and -
Total outstanding indebtedness was reduced
$19.6 million to $263.5 million as ofJanuary 2, 2011 .
As of
Mr. Vituli commented, "We were pleased with the continued momentum at both Pollo Tropical and Taco Cabana during the fourth quarter. We are clearly benefitting from the success of new menu additions along with our promotional activity. We are also gaining traction from the remodeling and elevation of more than 40 Hispanic Brand restaurants in certain markets. Our actions better align our dining experience with our food quality and have broadened our customer base. We believe that our initiatives to improve the positioning of Pollo Tropical and Taco Cabana will provide a solid foundation for sustainable long-term growth."
Mr. Vituli continued, "During the fourth quarter, Burger King was
negatively impacted by aggressive competition, discounting, harsh winter
weather conditions, and higher beef costs, which led to both lower sales
and restaurant-level profitability compared to last year. In 2011,
Fourth Quarter 2010 Results
Total revenues decreased 7.1% to
Pollo Tropical revenues increased 5.1% to
Taco Cabana revenues decreased 4.5% to
Burger King revenues decreased 14.2% to
General and administrative expenses increased to
Income from operations decreased to
Interest expense held steady at
Impairment and other lease charges were
Net income in the fourth quarter of 2010 was
Full Year 2010 Results
For 2010 (which included 52 weeks), total revenues decreased 2.5% to
Full Year 2011 Outlook
The Company is not providing specific earnings guidance for 2011. However, the Company is providing the following information which does not include any impact from the potential spin-off transaction or refinancing:
- For the Company's Hispanic Brands, comparable restaurant sales are expected to increase approximately 3% to 5% for Pollo Tropical and to increase approximately 1% to 2% for Taco Cabana. While there is less visibility with regards to Burger King, comparable sales are expected in improve from the 2010 levels;
- Commodity costs are expected to increase 2.5% to 3.0% for the Hispanic Brands and to increase 5% to 6% for Burger King;
- The Company plans to open five to ten new Hispanic Brand restaurants and to relocate one Burger King restaurant. It also anticipates the closing of one Pollo Tropical, one Taco Cabana and ten Burger King restaurants (excluding the relocated restaurant);
-
Total capital expenditures are estimated in the
$45 million to $55 million range; and - The Company's annual effective tax rate is estimated to be 35% to 36%.
Mr. Vituli added, "Separating Carrols Restaurant Group into two public companies is compelling despite some of the complexities which will be encountered. We believe that Pollo Tropical and Taco Cabana are well positioned for unit growth and expansion. Both brands have broad consumer appeal, serve differentiated food, offer an attractive value proposition and can win new customers from both conventional quick-serve and casual dining restaurants."
"Carrols' franchised Burger King restaurant business has the potential
for higher sales and improved profitability as
Mr. Vituli concluded, "Our management team and our employees throughout the Company have all been instrumental in our success to this point and in helping shape the long-term strategic direction of our company. Day to day operations should not be affected by the spin-off nor do we expect such transaction to result in any work force reductions."
Conference Call Today
The Company will host a conference call to discuss the fourth quarter
and full year 2010 financial results today at
The conference call can be accessed live over the phone by dialing
877-941-8418 or for international callers by dialing 480-629-9809. A
replay will be available one hour after the call and can be accessed by
dialing 800-406-7325 or for international callers by dialing
303-590-3030; the passcode is 4414672. The replay will be available
until
About the Company
Forward-Looking Statements
Except for the historical information contained in this news release,
the matters addressed are forward-looking statements. Forward-looking
statements, written, oral or otherwise made, represent the Company's
expectation or belief concerning future events. Without limiting the
foregoing, these statements are often identified by the words "may,"
"might," "believes," "thinks," "anticipates," "plans," "expects",
"intends" or similar expressions. In addition, expressions of our
strategies, intentions or plans, (including, without limitation, the
Company's consideration of a potential spin-off transaction) are also
forward-looking statements. Such statements reflect management's current
views with respect to future events and are subject to risks and
uncertainties, both known and unknown. You are cautioned not to place
undue reliance on these forward-looking statements as there are
important factors that could cause actual results to differ materially
from those in forward-looking statements, many of which are beyond our
control. Investors are referred to the full discussion of risks and
uncertainties as included in the Company's and Carrols Corporation's
filings with the
The Company currently does not intend to discuss further developments with respect to the potential separation of its Burger King and Hispanic Brand businesses unless and until a specific spin-off plan is further developed or circumstances warrant such disclosure.
Carrols Restaurant Group, Inc. |
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(unaudited) |
(unaudited) |
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2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues: | ||||||||||||||||
Restaurant sales | $ | 194,531 | $ |
209,208 |
|
$ | 794,611 | $ | 814,534 | |||||||
Franchise royalty revenues and fees | 368 | 489 | 1,533 | 1,606 | ||||||||||||
Total revenues | 194,899 | 209,697 | 796,144 | 816,140 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales | 58,375 | 62,162 | 240,635 | 237,446 | ||||||||||||
Restaurant wages and related expenses (b) | 57,303 | 62,657 | 235,075 | 239,553 | ||||||||||||
Restaurant rent expense | 11,955 | 12,492 | 48,578 | 49,709 | ||||||||||||
Other restaurant operating expenses | 27,657 | 29,220 | 114,643 | 117,761 | ||||||||||||
Advertising expense | 6,902 | 7,620 | 30,362 | 31,172 | ||||||||||||
General and administrative expenses (b) | 13,825 | 13,169 | 51,021 | 51,851 | ||||||||||||
Depreciation and amortization | 8,144 | 8,687 | 32,459 | 32,520 | ||||||||||||
Impairment and other lease charges | 3,231 | 2,371 | 7,323 | 2,771 | ||||||||||||
Other income (c) | ( 44 | ) | 79 | (444 | ) | (720 | ) | |||||||||
Total costs and expenses | 187,348 | 198,457 | 759,652 | 762,063 | ||||||||||||
Income from operations | 7,551 | 11,240 | 36,492 | 54,077 | ||||||||||||
Interest expense | 4,661 | 4,730 | 18,805 | 19,638 | ||||||||||||
Income before income taxes | 2,890 | 6,510 | 17,687 | 34,439 | ||||||||||||
Provision for income taxes | 316 | 2,363 | 5,771 | 12,604 | ||||||||||||
Net income (d) | $ | 2,574 | $ | 4,147 | $ | 11,916 | $ | 21,835 | ||||||||
Basic net income per share | $ | 0.12 | $ | 0.19 | $ | 0.55 | $ | 1.01 | ||||||||
Diluted net income per share | $ | 0.12 | $ | 0.19 | $ | 0.55 | $ | 1.00 | ||||||||
Basic weighted average common shares outstanding |
21,626 |
21,598 |
21,621 |
21,594 |
||||||||||||
Diluted weighted average common shares outstanding |
21,883 |
21,846 |
21,835 |
21,769 |
(a) | The Company uses a 52 or 53 week fiscal year that ends on the Sunday closest to December 31. The 2010 fiscal year is a 52 week fiscal period and the 2009 fiscal year was a 53 week fiscal period. For convenience, all references to the three and twelve months ended January 2, 2011 and January 3, 2010, respectively, are referred to as the three and twelve months ended December 31, 2010 and December 31, 2009, respectively. The three months ended December 31, 2010 included 13 weeks and the three months ended December 31, 2009 included 14 weeks. |
(b) | Restaurant wages and related expenses include stock-based compensation expense of $11 and $59 for the three months ended December 31, 2010 and 2009, respectively, and $50 and $215 for the twelve months ended December 31, 2010 and 2009, respectively. General and administrative expenses include stock-based compensation expense of $408 and $297 for the three months ended December 31, 2010 and 2009, respectively, and $1,601 and $1,196 for the twelve months ended December 31, 2010 and 2009, respectively. |
(c) | Other income in 2010 was due to a gain on an insurance recovery from a fire at a Burger King restaurant. Other income in 2009 included a gain of $579 from an insurance recovery for restaurants damaged during Hurricane Ike, a gain of $220 from the sale of a non-operating Taco Cabana property and a loss of $79 from the sale-leaseback of a Burger King property. |
(d) | The consolidated financial results for Carrols Corporation, the sole operating subsidiary of Carrols Restaurant Group, Inc., differ from the above by a slight difference in rent expense. Consolidated net income for Carrols Corporation for the three months ended December 31, 2010 and 2009 was $2,575 and $4,148, respectively, and $11,922 and $21,841 for the twelve months ended December 31, 2010 and 2009, respectively. |
Carrols Restaurant Group, Inc. |
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The following table sets forth certain unaudited supplemental financial and other restaurant data for the periods indicated (in thousands, except number of restaurants): |
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(unaudited) |
(unaudited) |
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2010 | 2009 | 2010 | 2009 | |||||||||||||
Segment revenues: | ||||||||||||||||
Burger King | $ | 85,642 | $ | 99,857 | $ | 357,073 | $ | 384,020 | ||||||||
Pollo Tropical | 47,420 | 45,103 | 187,293 | 177,840 | ||||||||||||
Taco Cabana | 61,837 | 64,737 | 251,778 | 254,280 | ||||||||||||
Total revenues | $ | 194,899 | $ | 209,697 | $ | 796,144 | $ | 816,140 | ||||||||
Change in comparable restaurant sales: (a) | ||||||||||||||||
Burger King | (6.1 | )% | (3.0 | )% | (4.3 | )% | (2.6 | )% | ||||||||
Pollo Tropical | 10.7 | % | 0.3 | % | 7.4 | % | (1.3 | )% | ||||||||
Taco Cabana | 2.3 | % | (4.5 | )% | 0.3 | % | (3.7 | )% | ||||||||
Adjusted Segment EBITDA: (b) | ||||||||||||||||
Burger King | $ | 4,054 | $ | 7,931 | $ | 19,755 | $ | 32,825 | ||||||||
Pollo Tropical | 7,939 | 6,702 | 30,303 | 26,228 | ||||||||||||
Taco Cabana | 7,308 | 8,100 | 27,424 | 31,006 | ||||||||||||
Average sales per restaurant: (c) | ||||||||||||||||
Burger King | $ | 282 | $ | 310 | $ | 1,162 | $ | 1,206 | ||||||||
Pollo Tropical | 517 | 459 | 2,053 | 1,911 | ||||||||||||
Taco Cabana | 397 | 388 | 1,616 | 1,607 | ||||||||||||
New restaurant openings: | ||||||||||||||||
Burger King | - | 1 | 1 | 2 | ||||||||||||
Pollo Tropical | 2 | - | 2 | 1 | ||||||||||||
Taco Cabana | - | 1 | 1 | 4 | ||||||||||||
Total new restaurant openings | 2 | 2 | 4 | 7 | ||||||||||||
Restaurant closings: | ||||||||||||||||
Burger King | (1 | ) | (3 | ) | (8 | ) | (5 | ) | ||||||||
Pollo Tropical | (1 | ) | - | (2 | ) | (1 | ) | |||||||||
Taco Cabana | (1 | ) | - | (2 | ) | (2 | ) | |||||||||
Net new restaurants | (1 | ) | (1 | ) | (8 | ) | (1 | ) | ||||||||
Number of company owned restaurants: | ||||||||||||||||
Burger King | 305 | 312 | ||||||||||||||
Pollo Tropical | 91 | 91 | ||||||||||||||
Taco Cabana | 155 | 156 | ||||||||||||||
Total company owned restaurants | 551 | 559 | ||||||||||||||
At 12/31/10 |
At 12/31/09 |
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Long-term debt (d) | $ | 263,513 | $ | 283,092 |
(a) | Restaurants are included in comparable restaurant sales after they have been open for 12 months for Burger King restaurants and 18 months for Pollo Tropical and Taco Cabana restaurants. Comparable restaurant sales are presented on a comparable 13 week basis for the quarter and 52 weeks for the year. |
(b) | Adjusted Segment EBITDA is defined as earnings attributable to the applicable segment before interest, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense, other loss (income) and gains and losses on extinguishment of debt. Adjusted Segment EBITDA is used because it is the measure of segment profit or loss reported to our chief operating decision maker for purposes of allocating resources to the segments and assessing each segment's performance. This may not be necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. Adjusted Segment EBITDA for Burger King restaurants includes general and administrative expenses related directly to the Burger King segment as well as the expenses associated with administrative support to all three of the Company's segments including executive management, information systems and certain accounting, legal and other administrative functions. |
(c) | Average sales for company-owned or operated restaurants are derived by dividing restaurant sales for such period for the applicable segment by the average number of restaurants for the applicable segment for such period. For comparative purposes, the calculation of average sales per restaurant is based on a comparable 13 week basis for the quarter and 52 weeks for the year, and in 2009 excludes restaurant sales for one extra week in the fourth quarter and the full year. |
(d) | Long-term debt (including current portion) at January 2, 2011 included $165,000 of the Company's 9% senior subordinated notes, $87,250 of outstanding borrowings under its senior credit facility, $10,061 of lease financing obligations and $1,202 of capital lease obligations. Long-term debt at January 3, 2010 (including current portion) included $165,000 of the Company's 9% senior subordinated notes, $106,900 of outstanding borrowings under its senior credit facility, $9,999 of lease financing obligations and $1,193 of capital lease obligations. |
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