Carrols posts Q3 profit, raises guidance

SYRACUSE, N.Y. — Carrols Restaurant Group, Inc. (NASDAQ: TAST), the world’s largest Burger King franchisee, reported net income of $7.2 million, or 16 cents per share, in the third quarter that ended Sept. 27.

It’s an improvement from a net loss of $1.7 million, or 5 cents per share, in the prior-year period.

With its balance sheet indicating a stronger financial performance, Carrols has also raised its earnings guidance for the full year, the Syracuse–based company said in a Tuesday news release.

 

Financials

Restaurant sales increased more than 21 percent to $217.7 million in the third quarter compared to revenue of more than $179 million in the year-ago period. Last year’s third quarter included $39.4 million in sales from 132 Burger King restaurants that Carrols acquired in 2014 and 2015.

Comparable restaurant sales (or same store sales) increased 6.5 percent in the third quarter compared to a 3.3 percent rise in the prior-year period.

Restaurant-level EBITDA increased 63 percent to $33.3 million from $20.5 million in the prior-year period and restaurant-level EBITDA margin rose over 390 basis points to 15.3 percent.

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

Adjusted EBITDA nearly doubled to $22 million from $11.1 million in the prior-year period.

Carrols was “quite pleased” with its financial performance during the third quarter, Daniel T. Accordino, the company’s CEO, said in the earnings news release.

“Our third-quarter results included double-digit growth in restaurant sales, a solid 6.5 percent increase in comparable-restaurant sales, along with substantial improvements in profitability as we successfully leveraged these top-line gains. Burger King’s effective marketing and promotional initiatives continue to drive increased sales, and when coupled with an improved commodity outlook, have helped our strong performance in 2015,” said Accordino.

The company has completed the remodeling of 54 restaurants during the first nine months of 2015 and expects to complete 90 to 95 by the end of the year, bringing the total number of remodels to almost 400 since 2012, according to Accordino.

“With regards to our expansion, we have made much progress improving the operating and financial performance of the restaurants that we have acquired, and continue to pursue additional acquisition opportunities. To date, we’ve acquired 15 restaurants in 2015 including six restaurants acquired early in the fourth quarter. We also have several transactions either under contract or in late-stage negotiations, and believe that we may complete the acquisition of as many as 40 more restaurants by the end of 2015.”

Carrols owned and operated 660 Burger King restaurants at the end of the third quarter, the company said.

Carrols’ share price fell 27 cents to $11.78 in Tuesday’s regular trading. The company reported its earnings before the open of trading.

Despite the drop, the stock is still up more than 54 percent year to date.

 

2015 guidance

Based on its financial performance through the first nine months of 2015, Carrols is boosting its guidance for 2015, a 53-week fiscal period.

The company anticipates total restaurant sales of between $840 million and $850 million, up from its prior forecast of between $830 million and $845 million.

Carrols also expects an increase in comparable-restaurant sales of between 6 percent and 7 percent on a comparable 52-week basis. The firm had previously expected a range between 5 percent and 7 percent.

It also anticipates a commodity cost decrease of between 2.5 percent and 3 percent, primarily due to lower beef costs. Carrols had previously expected a decrease of between 1.5 percent and 2.5 percent.

Carrols forecasts adjusted EBITDA of between $65 million and $70 million, up from the previous range of between $60 million and $65 million.

Carrols’ outlook also includes capital expenditures of between $50 million and $55 million, unchanged from previous estimates.

The firm still anticipates up to 25 restaurant closings, which is unchanged from previous estimates. Carrols notes that it closed 22 restaurants through the end of the third quarter of 2015.

 

Acquisition activity

Through Oct. 31, Carrols has completed the acquisition of 15 Burger King restaurants. They include four locations in Vermont, five in South Carolina, three in Ohio, two in West Virginia, and one restaurant in Michigan.

Carrols is currently negotiating a “number” of additional transactions.

It believes it may acquire as many as an additional 40 restaurants by the end of 2015, but also notes “there can be no assurance as to when or if such future transactions may close,” according to its news release.

 

Contact Reinhardt at ereinhardt@cnybj.com