Carrols Restaurant Group, Inc.
), reported first quarter 2012 adjusted earnings of 16 cents per
share compared with 14 cents per share in the year-earlier quarter.
However, the company reported GAAP loss of 16 cents, which includes
after-tax charges of 32 cents per share, compared with GAAP
earnings of 10 cents in year-earlier quarter.
This included impairment charges, lease charges and spin-off
related expenses. Reported earnings beat the Zacks Consensus
Estimate by a penny.
The company reported a 7.3% year-over-year increase in total
revenue to $211.6 million. Total revenue beat the Zacks Consensus
Estimate of $210 million.
Subsequent to the quarter end, Carrols announced the spin-off of
its Fiesta Restaurants Group into an independent public company.
The segment operates two brands namely Pollo Tropical and Taco
Cabana. However, the reported quarter includes the financials
related to the Fiesta Restaurants Group.
Burger King revenues jumped 4.7% year over year to $85.5
million. Same-store sales at Burger King upped 5.9% compared to a
5.0% decrease in year-earlier quarter driven by restaurant level
Revenue for Fiesta Restaurants Group jumped 9.1% year over year
to $126.1 million. Brand wise, revenue for Pollo Tropical climbed
10.7% to $57.8 million, while same-store sales grew 9.4%. Revenue
for Taco Cabana upped 7.8% to $68.3 million, while same-store sales
In the reported quarter, general and administrative expenses
jumped 25.2% year over year to $17.4 million and includes expenses
related to the spin-off of Fiesta Restaurant Group, conversion of
employee stock options to restricted stock and acquisition expenses
related to Burger King Restaurants.
Operating income plummeted 83.5% year over year to $1.3 million
in first quarter 2012. Interest expenses increased 37% to $6.3
million compared to the prior year.
Acquisitions and Dispositions
On March 26, 2012, Carrols entered into an agreement with the
Burger King Corp. (BKC) to acquire 278 company-owned restaurants in
the Ohio, Indiana, Kentucky, Pennsylvania, North Carolina, South
Carolina, and Virginia markets.
The transaction amount was around $15.8 million, of which $3.8
million is payable within 5 years. As a part of the transaction,
the company will remodel 450 Burger Kings Restaurants over the next
three and a half years, while BKC will hold a 28.9% equity
ownership in Carrols.
During the quarter, seven restaurants were closed, including one
Burger King, restaurants, five Pollo Tropical Restaurants and one
Taco Cabana restaurant. As of April 1, 2012, Carrols owned and
operated 297 Burger King restaurants and 38 franchised restaurants.
Fiesta Restaurants Group owns and operates 86 Pollo Tropical and
157 Taco Cabana restaurants.
In 2012, management expects to close two Carrols restaurants and
six Fiesta restaurants. However, 10-12 new Fiesta restaurants are
projected to be opened in Fiesta in 2012.
For full year 2012, management expects same-store sales for
Carrols to increase in the range of 3%-5%. Commodity expenses are
projected to increase in the range of 3%-4%. Capital expenditure is
anticipated to be in the range of $30-$35 million.
Same-store sales are expected to increase in the range of 6%-7%
for Polo Tropical and 4%-5% for Taco Cabana in 2012. Commodity cost
in expected to increase 1%-2% for Pollo Tropical and 2.5%-3.5% for
Taco Cabana. Capital expenditure is expected to be in the range of
$42-$46 million for 2012.
We expect that company's decision of acquiring Burger King may
initially increase costs due to the remodeling program, but will
drive same-store sales and overall revenue in the long run. We also
see growth prospects in Fiesta Restaurants group as the segment has
Carrols has Zacks #3 Rank, representing a short term Hold
rating. We have a long term Neutral recommendation on the stock.
Carrols competes with
Kona Grill Inc.
), which currently retains a Zacks #1 Rank (short-term Strong Buy
rating) and a long-term Outperform recommendation.
KONA GRILL INC (KONA): Free Stock Analysis
CARROLS RESTRNT (TAST): Free Stock Analysis
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