Carrols reports wider net loss in Q2 on debt-refinancing charge

SYRACUSE, N.Y. — Carrols Restaurant Group, Inc. (NASDAQ: TAST), the world’s largest Burger King franchisee, reported a net loss of $5 million in the second quarter.

The net loss reflects a $12.6 million charge for costs associated with the refinancing of the company’s debt in April, Syracuse–based Carrols said in a Tuesday news release.

In comparison, Carrols reported a net loss of $1.9 million in the second quarter of 2014, which included a $1.2 million income-tax benefit.

Carrols didn’t record a benefit from income taxes in 2015, since the firm has recorded a valuation allowance against its net deferred income-tax assets, it said.

Restaurant-level EBITDA at Carrols increased 80.5 percent to $35.6 million compared to $19.7 million in the prior-year period and restaurant-level EBITDA margin increased over 450 basis points to 16.2 percent. EBITDA is short for earnings before interest, taxes, depreciation, and amortization.

Adjusted EBITDA more than doubled to $23.3 million from $11.5 million in the prior-year period.

Carrols also reported that income from operations jumped to $12.4 million in the second quarter of 2015, up from $1.6 million in the prior-year period. Income from operations included $700,000 in impairment and other lease charges in this year’s second quarter.

Income from operations in the prior-year period included $400,000 in impairment and other lease charges and $200,000 in acquisition expenses, the company said.

Carrols generated revenue of more than $219 million in the second quarter, up 30 percent compared to the more than $168 million generated in the second quarter of 2014.

The revenue figure of more than $219 million included nearly $39 million in sales from 127 Burger King restaurants that the company acquired in 2014 and 2015.

Carrols owned and operated 657 Burger King restaurants at the end of the second quarter on June 28, the company said.

 

CEO reaction

Carrols was “quite pleased” with its “outstanding” results in the second quarter, Daniel Accordino, the company’s CEO, said in the news release.

He pointed to a “robust” comparable-restaurant sales increase and a “substantial” increase in restaurant-level EBITDA, adjusted EBITDA, and income from operations that “characterized” the quarter.

“Burger King’s marketing and promotional activity was highly effective in driving sales and customer traffic during the quarter, and we were very successful in leveraging those top-line gains into higher profitability from improved restaurant-level margins. Our overall financial results also reflect the impact of improved operating performance at restaurants we’ve acquired over the last few years, as well as moderating commodity costs. We are excited with how the year is shaping up as our performance to date has enabled us to meaningfully raise our operating and profitability targets for the full year.”

Adjusted outlook

Carrols also raised its guidance and expectations for 2015, which is a 53-week fiscal period, the company said in its news release.

It expects total restaurant sales of between $830 million and $845 million, which is up from the previous expectation of between $815 million and $830 million.

The firm also anticipates a comparable-restaurant sales increase of 5 percent to 7 percent on a comparable 52-week basis. It had previously anticipated an increase of between 3 percent and 5 percent.

Carrols also expects a commodity-cost decrease of between 1.5 percent and 2.5 percent, primarily due to more “benign” beef-cost expectations for the remainder of the year. The company had previously expected an overall commodity-cost increase of between 1 percent and 2 percent.

The firm also anticipates general and administrative expenses (excluding stock-compensation costs) of between $47 million and $49 million, increasing primarily due to higher bonus expense. Carrols had previously anticipated an expense range of between $44 million and $46 million, according to its news release.

It also expects adjusted EBITDA of between $60 million and $65 million, up from the previous expectation of $48 million to $52 million.

Carrols also expects capital expenditures of between $50 million and $55 million, which includes remodeling a total of between 90 and 95 restaurants and the “scrape and rebuild” of four restaurants. The firm had previously expected a capital-expenditure range of $45 million to $50 million, which included remodeling 80 to 90 restaurants.

The company anticipates up to 25 restaurant closings, which is “generally unchanged” from previous estimates. Of that figure, Carrols has closed 20 restaurants through the end of the second quarter of 2015, it said.

 

Contact Reinhardt at ereinhardt@cnybj.com