Carrols Restaurant Group, Inc.
) reported second quarter 2012 adjusted earnings of 10 cents per
share which surpassed the Zacks Consensus Estimate of loss of a
cent per share. However, on a GAAP basis, the company reported a
loss of 4 cents, which includes after-tax charges of 6 cents per
share related to the extinguishment of debt and acquisition costs,
compared with earnings of a cent in the year-ago quarter.
Restaurant sales jumped 37.8% year over year to $122.1 million,
owing to the 278 restaurants acquired from Burger King Corporation
on May 30, 2012. However, total revenue lagged the Zacks Consensus
Estimate of $145 million.
Comparable restaurant sales crept up 8.8%, aided by increased
traffic of 4.9% and average check of 3.9%, including an effective
price increase of 2.3%. This marks the third consecutive quarter of
Adjusted EBITDA, inched up 2.6% to $7.9 million in the quarter
compared to $7.7 million in the prior-year, but adjusted EBITDA
margin slipped 220 basis points (bps) to 6.5%.
In the reported quarter, cost of sales rose 120 bps, attributed
to higher commodity costs and discounting. General and
administrative expenses jumped 65.3% year over year to $8.1 million
including the acquisition expenses related to Burger King
Restaurants, increased field and corporate overhead costs for the
acquired restaurants, higher bonus expenses and legal charges
related to litigation. As a percentage of sales, general and
administrative expenses spiked 110 bps to 6.6%.
Operating income plummeted 86.4% to $0.4 million in
second-quarter 2012. Interest expenses increased 13% to $2.6
million compared to the prior year.
During the quarter, one restaurant was closed and 278
restaurants were acquired. As of July 1, 2012, Carrols owned and
operated 574 Burger King Units versus 303 in the prior-year
For full year 2012, management expects same-store sales to
increase in the range of 4%-6%. Commodity expenses are projected to
increase in the range of 3%-4%. Capital expenditure is anticipated
to be in the range of $40 million to $45 million including $28
million to $33 million for remodeling more than 80 restaurants.
We expect the company to continue to drive traffic by
introducing new products and products enhancement, new advertising
and marketing campaigns and a remodeling program.
However, fierce discounting wars among restaurant operators,
lower consumer confidence and higher input costs remain areas of
Carrols, which competes with
), currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. We are maintaining our long-term Neutral
recommendation on the stock.
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