Carrols posts $27 million Q4 loss due to charge

SYRACUSE, N.Y. — Carrols Restaurant Group, Inc. (NASDAQ: TAST) lost $27 million in the fourth quarter of 2014, following a $24.3 million non-cash charge to establish a valuation allowance against net deferred tax assets.

That’s according to the earnings news release the firm issued today. Syracuse–based Carrols is the world’s largest Burger King franchisee.

The assets include federal net operating loss carryforwards (NOLs), which do not begin to expire until 2033.

Carrols said it believes it is “likely” to utilize these NOLs in the future, although it’s not able to provide any assurance.

However, the firm said the valuation allowance was required “based on the relevant accounting literature which does not permit the company to consider its projection of future taxable income as more persuasive evidence than its recent operating losses when assessing recoverability,” according to the news release.

The company’s loss from operations totaled $3 million in the fourth quarter, compared to a loss of $1 million during the same quarter in 2013.

Carrols’ adjusted EBITDA was $10.1 million in the fourth quarter compared to $10.4 million in the prior year period.

EBITDA is short for earnings before interest, taxes, depreciation, and amortization.

The firm’s restaurants generated revenue of nearly $193 million during the quarter, up 16.5 percent from the more than $165 million produced in the same quarter in 2013.

The fourth-quarter revenue figure includes more than $25 million in sales from 123 Burger King restaurants that Carrols acquired in 2014, the company said.

Comparable restaurant sales increased 3.6 percent compared to a 1.7 percent rise in the prior-year period.

For the entire year, Carrols’ adjusted EBITDA increased $1.7 million to $36 million from $34.3 million in 2013.

Carrols reported a $7.6 million loss from operations for 2014, compared to a loss of $5.1 million in 2013, according to its news release.

The loss from operations included $1.9 million of acquisition and integration costs and $3.5 million of impairment and other lease charges in 2014.

Carrols’ restaurants generated sales of nearly $693 million in 2014, up 4.4 percent from $663.5 million in 2013.

The revenue figure includes $34 million in sales from 123 Burger King restaurants that the company acquired in 2014.

Comparable-restaurant sales increased 0.6 percent in 2014 compared to a 1 percent increase in the prior year, the company said.

Sales trends were “solid” throughout the second half of 2014 and improved in the fourth quarter with a 3.6 percent, comparable-restaurant sales increase, Daniel Accordino, CEO of Carrols, said in the news release.

Accordino contends “significantly higher” ground-beef costs and, “to a lesser extent,” the impact from the restaurants acquired late in the year “negatively impacted” restaurant-level EBITDA and restaurant-level EBITDA margin.

Improved financial performance at the restaurants Carrols acquired in 2012 “largely offset” the effect of the higher beef costs, enabling Carrols to hold restaurant-level EBITDA margin “essentially unchanged” for the full year, Accordino said.

Guidance

In its guidance for 2015, which the company said is a 53-week fiscal period, Carrols expects total-restaurant sales of between $810 million and $830 million, including a comparable-restaurant sales increase of 2 percent to 4 percent (on a comparable 52-week basis), the company said.

The firm also expects a commodity-cost increase of about 2 percent to 3 percent, primarily due to higher beef costs, in the first half of the year.

Carrols also anticipates capital expenditures of between $37 million and $44 million, including $25 million to $30 million for remodeling a total of between 60 and 70 restaurants and final expenditures on certain 2014 remodels.

The company may also consider further expansion of these remodeling plans if Carrols completes a possible refinancing of its debt, the firm said.

In addition, Carrols anticipates closing between 15 and 20 restaurant locations in 2015, it added.

Carrols Restaurant Group, Inc. operates 674 restaurants as of Dec. 28, 2014. It has operated Burger King restaurants since 1976, it said.