SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the nine months ended Commission File Number
September 30, 1994 1-6553
CARROLS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 16-0958146
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
968 James Street
Syracuse, New York 13203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (315) 424-0513
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Common stock, par value $1.00, outstanding at November 14, 1994.
10 shares
PART 1 - FINANCIAL INFORMATION
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1994 AND DECEMBER 31, 1993
ASSETS September 30, December 31,
1994 1993
Current assets:
Cash and cash equivalents $ 1,936,000 $ 1,172,000
Trade and other receivables 701,000 632,000
Inventories 2,018,000 2,051,000
Prepaid expenses and other current assets 825,000 760,000
_________ _________
Total current assets 5,480,000 4,615,000
Property and equipment, at cost:
Land 6,383,000 6,431,000
Buildings and improvements 13,514,000 14,341,000
Leasehold improvements 34,317,000 34,025,000
Equipment 39,033,000 35,012,000
Capital leases 15,558,000 15,689,000
Construction in progress 215,000 100,000
___________ ___________
109,020,000 105,598,000
Less accumulated depreciation
and amortization (52,317,000) (47,254,000)
___________ ___________
Net property and equipment 56,703,000 58,344,000
Franchise rights, at cost (less accumulated
amortization of $16,942,000 at September 30,
1994 and $15,146,000 at December 31, 1993). 46,588,000 39,566,000
Beneficial leases, at cost (less accumulated
amortization of $7,245,000 at September 30,
1994 and $6,921,000 at December 31,1993). 8,593,000 9,233,000
Excess of cost over fair value of assets
acquired (less accumulated amortization of
$448,000 at September 30, 1994 and $404,000
at December 31, 1993). 1,863,000 1,907,000
Other assets 6,104,000 6,070,000
____________ ____________
$125,331,000 $119,735,000
============ ============
FN></TABLE
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT'D)
SEPTEMBER 30, 1994 AND DECEMBER 31, 1993
LIABILITIES AND STOCKHOLDER'S (DEFICIT)
September 30, December 31,
1994 1993
Current liabilities:
Current portion of long-term debt $ 258,000 $ 283,000
Current portion of capital lease obligations 552,000 584,000
Accounts payable 3,743,000 5,845,000
Accrued liabilities:
Payroll and employee benefits 2,988,000 2,340,000
Taxes - income and other 1,280,000 1,073,000
Other 3,026,000 3,432,000
Interest 1,747,000 4,864,000
__________ __________
Total current liabilities 13,594,000 18,421,000
Long-term debt, net of current portion 129,761,000 114,197,000
Capital lease obligations,
net of current portion 4,163,000 4,603,000
Deferred income - sale/leaseback of real estate 1,919,000 1,998,000
Accrued postretirement benefits 1,354,000 1,288,000
Deposits and other noncurrent liabilities 1,909,000 1,632,000
___________ ___________
Total liabilities 152,700,000 142,139,000
Stockholder's (deficit):
Common stock, par value $1; authorized 1,000
shares, issued and outstanding - 10 shares 10 10
Additional paid-in capital 1,674,990 4,447,990
Accumulated deficit (29,044,000) (26,852,000)
__________ __________
Total stockholder's (deficit) (27,369,000) (22,404,000)
___________ ___________
$125,331,000 $119,735,000
============ ===========
FN></TABLE
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
September 30, September 30,
1994 1993
(13 weeks) (13 weeks)
Revenues:
Sales $ 55,811,000 $ 48,254,000
Other income 65,000 52,000
___________ ___________
55,876,000 48,306,000
Costs and expenses:
Cost of sales 15,507,000 13,838,000
Restaurant wages & related expenses 15,800,000 14,007,000
Other restaurant operating expenses 11,295,000 9,688,000
Depreciation and amortization 2,882,000 2,840,000
Administrative and advertising expenses 4,623,000 4,337,000
Interest expense 3,671,000 3,344,000
Loss on closing restaurants and other 1,800,000 -
___________ ___________
55,578,000 48,054,000
___________ ___________
Income from operations before
extraordinary item 298,000 252,000
Extraordinary item-loss on extinguishment
of debt - (4,883,000)
___________ ___________
Net income (loss) $ 298,000 $ (4,631,000)
=========== ===========
<FN>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
September 30, September 30,
1994 1993
(39 weeks) (39 weeks)
Revenues:
Sales $148,722,000 $126,398,000
Other income 174,000 324,000
___________ ___________
148,896,000 126,722,000
Costs and expenses:
Cost of sales 42,431,000 35,840,000
Restaurant wages & related expenses 43,798,000 38,402,000
Other restaurant operating expenses 30,893,000 25,747,000
Depreciation and amortization 8,308,000 8,521,000
Administrative and advertising expenses 13,080,000 11,930,000
Interest expense 10,778,000 9,047,000
Loss on closing restaurants and other 1,800,000 -
__________ __________
151,088,000 129,487,000
Loss from operations before
extraordinary item (2,192,000) (2,765,000)
Extraordinary item-loss on extinguishment
of debt - (4,883,000)
___________ ___________
Net (loss) $ (2,192,000) $ (7,648,000)
=========== ===========
<FN>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
Increase (Decrease) in Cash and Cash Equivalents
September 30, September 30,
1994 1993
(39 weeks) (39 weeks)
Cash flows from
operating activities:
Net loss $(2,192,000) $(7,648,000)
Adjustments to reconcile net loss
to cash provided by operating
activities:
Non-cash charges included in loss on
closing restaurants and other 1,800,000 -
Non-cash charges included in
extraordinary loss - 4,883,000
Depreciation and amortization 8,308,000 8,521,000
Change in assets and liabilities:
Trade and other receivables (69,000) (514,000)
Inventories 33,000 (103,000)
Prepaid expenses and other
current assets (61,000) 121,000
Other assets (305,000) 232,000
Accounts payable (2,102,000) 707,000
Accrued interest (3,117,000) 846,000
Accrued taxes - income and other 207,000 (254,000)
Accrued payroll and employee benefits 648,000 261,000
Deposits and other reserves 40,000 (4,262,000)
Other accrued liabilities (172,000) 610,000
Other (29,000) 25,000
_________ _________
Cash provided by operating activities 2,989,000 3,425,000
_________ _________
Cash flows from investing activities:
Capital expenditures:
Property and equipment (2,799,000) (1,133,000)
New restaurants (817,000) (1,174,000)
Acquisition of restaurants (11,588,000) (10,398,000)
Franchise rights (123,000) (149,000)
Issuance of notes and mortgages - (821,000)
Payments received on notes, mortgages
and capital subleases receivable 75,000 69,000
Disposal of property, equipment
and franchise rights 517,000 1.220,000
__________ __________
Net cash used for investing activities (14,735,000) (12,386,000)
__________ __________
FN></TABLE
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
Increase (Decrease) in Cash and Cash Equivalents
September 30, September 30,
1994 1993
(39 weeks) (39 weeks)
Cash flows from financing activities:
Proceeds from long-term debt $15,815,000 $121,039,000
Principal payments on long-term debt (202,000) (4,116,000)
Principal payments on capital leases (427,000) (429,000)
Retirement of long-term debt (75,000) (106,728,000)
Proceeds from sale-leaseback transactions 672,000 -
Dividends paid (3,273,000) (600,000)
___________ ___________
Net cash provided by
financing activities 12,510,000 9,166,000
___________ ___________
Increase in cash
and cash equivalents 764,000 205,000
Cash and cash equivalents,
beginning of period 1,172,000 1,189,000
___________ __________
CASH AND CASH EQUIVALENTS,
END OF PERIOD $1,936,000 $1,394,000
=========== ==========
Supplemental disclosures:
Interest paid on debt $13,894,000 $8,201,000
<FN>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
___________________________
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of normal and
recurring accruals) necessary to present fairly the Company's financial position
as of September 30, 1994 and December 31, 1993, the results of operations for
the three and nine months ended September 30, 1994 and 1993 and cash flows for
the nine months ended September 30, 1994 and 1993. These financial statements
should be read in conjunction with the Company's annual report on Form 10K for
the period ended December 31, 1993.
2. The results of operations for the three months and nine months ended
September 30, 1994 and 1993, are not necessarily indicative of the results to
be expected for the full year.
3. Inventories at September 30, 1994 and December 31, 1993, consisted of:
September 30, December 31,
1994 1993
Raw material (food and
paper products) $ 1,237,000 $ 1,205,000
Supplies and promotional
materials 781,000 846,000
$ 2,018,000 $ 2,051,000
4. The loss on closing restaurants and other of $1.8 million for the
three and nine months ended September 30, 1994 reflects the loss from the
anticipated closing of eight restaurants and the write down to estimated
realizable value of an unused warehouse. The eight restaurants are each
operating at a negative annual cash flow with current trends indicating no
significant future improvement. These restaurants are operating under real
estate leases that expire primarily during the next fiscal year and will not be
renewed. The warehouse, which is beneficially owned by the Company, has not
been utilized in the Company's operations for several years but until recently
has been leased. The charge includes a write down of the related operating
assets to net realizable value and accrual of estimated operating losses through
the projected dates of closing.
[FN]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
THREE MONTHS ENDED SEPTEMBER 30, 1994 VERSUS THREE MONTHS ENDED SEPTEMBER 30,
1993:
Sales for the three months ended September 30, 1994 increased $7.6 million,
or 15.7%, as compared to the three months ended September 30, 1993. The Company
operated an average of 213 Burger King restaurants for the third quarter of 1994
as compared to an average of 193 for the third quarter of 1993. Average
restaurant unit sales increased 5.4% in the third quarter of 1994 as compared
to 1993. Sales at comparable restaurants, the 175 restaurants operating for the
entirety of the compared periods, increased $1.8 million, or 4.3%. Net
restaurant selling prices decreased approximately 1.6% resulting from a 9.5 %
reduction in menu prices offset by a 7.9% increase from fewer discount
promotions in 1994.
Cost of sales (food and paper costs) for the three months ended September
30, 1994 increased in dollars due to higher sales. Cost of sales as a
percentage of sales decreased 0.9% from 1993 to 1994 as a result of lower
commodity costs, especially beef, partially offset by the increase from the
effect of lower net restaurant selling prices.
Restaurant wages and related expenses decreased from 29.0% of sales to
28.3% of sales when comparing the three months ended September 30, 1993 to 1994.
Productive labor efficiencies and the effect of higher sales on the fixed
component of restaurant wages more than offset the effects of lower restaurant
selling prices and increased wage rates.
Other restaurant operating expenses increased by $1.6 million and by 0.1%
as a percentage of sales for 1994 compared to 1993. The increase in dollars was
caused primarily by expenses associated with the operation of the additional
restaurants during the most recent three months when compared to the prior
year's three months.
Increased depreciation and amortization due to the additional restaurants
in operation during the third quarter of 1994 was almost entirely offset by the
reduction in depreciation and amortization caused by assets becoming fully
depreciated.
An increase in advertising payments to Burger King Corporation of $0.3
million (based on sales levels) was partially offset by decreases in other forms
of promotional activities ($0.2 million) when comparing the three months ended
September 30, 1994 to the three months ended September 30, 1993. An increase
in administrative expenses of $0.2 million when comparing 1994 to 1993 was
principally caused by an increase in anticipated expenses related to the
improved operations.
An increase in average loan balances outstanding was the principle cause
for interest expense to increase $0.3 million for the three months ended
September 30, 1994 compared to 1993.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (CONT.)
The loss on closing restaurants and other of $1.8 million during the three
months ended September 30, 1994 represents the loss from the anticipated closing
of eight restaurants and the write down to estimated realizable value of an
unused warehouse. The charge includes a write down of the related operating
assets to net realizable value and accrual of estimated operating losses through
the projected date of closing.
During August 1993, the Company completed a refinancing of existing debt.
In conjunction with the refinancing, the Company incurred an extraordinary
charge of $4.9 million for expenses related to the extinguishment of the then
existing debt.
NINE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30
1993:
Sales for the nine months ended September 30, 1994 increased $22.3 million,
or 17.7%, as compared to the nine months ended September 30, 1993. The Company
operated an average of 203 Burger King restaurants for the first nine months of
1994 as compared to an average of 182 for the first nine months of 1993.
Average restaurant unit sales increased 6.3% in the first nine months of 1994
as compared to 1993. Sales at comparable restaurants, the 172 restaurants
operating for the entirety of the compared periods, increased $4.7 million, or
4.0%. Net restaurant selling prices decreased approximately 2.1% resulting from
a 10.2% reduction in menu prices offset by an 8.1% increase from fewer discount
promotions in 1994.
Cost of sales (food and paper costs) for the nine months ended September
30, 1994 increased in dollars due to higher sales. Cost of sales as a
percentage of sales increased 0.1% from 1993 to 1994 as a result of the effect
of lower net restaurant selling prices, partially offset by decreases in various
commodity costs, especially beef.
Restaurant wages and related expenses decreased from 30.4% of sales to
29.4% of sales when comparing the nine months ended September 30, 1993 to 1994.
Productive labor efficiencies and the effect of higher sales on the fixed
component of restaurant wages more than offset the effects of lower restaurant
selling prices and increased wage rates.
Other restaurant operating expenses increased by $5.1 million and by 0.4%
as a percentage of sales for 1994 compared to 1993. The increase in dollars was
caused primarily by expenses associated with the operation of the additional
restaurants during the most recent nine months when compared to the prior year's
nine months.
Increased depreciation and amortization due to the additional restaurants
in operation during the first nine months of 1994 was more than offset by the
reduction in depreciation and amortization caused by assets becoming fully
depreciated.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (CONT'D)
An increase in advertising payments to Burger King Corporation of $0.9
million (based on sales levels) was partially offset by decreases in other forms
of promotional activities ($0.4 million) when comparing the nine months ended
September 30, 1994 to the nine months ended September 30, 1993. The increase
in administrative expenses of $0.6 million when comparing 1994 to 1993 was
principally caused by an increase in anticipated expenses related to the
improved operations.
An increase in average loan balances outstanding was the principle cause
for interest expense to increase $1.7 million for the nine months ended
September 30, 1994 compared to 1993.
The loss on closing restaurants and other of $1.8 million during the nine
months ended September 30, 1994 represents the loss from the anticipated closing
of eight restaurants and the write down to estimated realizable value of an
unused warehouse. The charge includes a write down of the related operating
assets to net realizable value and accrual of estimated operating losses through
the projected date of closing.
During August of 1993, the Company completed a refinancing of existing
debt. In conjunction with the refinancing, the Company incurred an
extraordinary charge of $4.9 million for expenses related to the extinguishment
of the then existing debt.
Liquidity and Capital Resources
The operating activities of the Company for the nine months ended September
30, 1994 provided $3.0 million of cash after using $3.1 million because of the
difference between the accrual for and the actual payments of interest on the
Company's Senior Notes and after using cash of $2.1 million to take advantage
of a favorable change in payment terms with the Company's major supplier.
Capital spending for property, equipment and franchise rights was $15.3 million,
which included the acquisition of three restaurants in North Carolina, 19
restaurants in New York and the construction of one new restaurant during the
first nine months of 1994. Dividends of $3.3 million were paid to Carrols
Holdings Corp (the Company's parent) for the payment by Holdings of $0.6 million
of regular quarterly preferred stock dividends and $2.7 million for the
completion of the redemption and retirement of common stock and warrants that
were tendered under an offer made in October 1993 by Holdings to purchase a
limited amount of its common stock and common stock equivalents. The sale and
leaseback of one restaurant property generated $0.7 million. $15.8 million was
borrowed under the Company's Senior Secured Credit Facility during the nine
months ended September 30, 1994.
At September 30, 1994, the Company had $3.2 million available under its
Senior Secured Credit Facility, after reserving $2.5 million for a letter of
credit guaranteed by the Senior Secured Credit Facility. The Company believes
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (CONT'D)
that future cash flow from operations together with funds available under the
Senior Secured Credit Facility will be sufficient to meet all interest and
principal payments under its indebtedness, fund the maintenance of property and
equipment, fund restaurant remodeling required under the Company's franchise
agreements, and meet required payments in respect of Holding's preferred stock
(subject to the terms of the Senior Note Indenture and the Senior Secured Credit
Facility) with the balance, to the extent available, used to provide funds for
future acquisitions.
Inflation
While inflation can have a significant impact on food, paper, labor and
other operating costs, the Company has historically been able to minimize the
effect of inflation through periodic price increases, and believes it will be
able to offset future inflation with price increases, if necessary.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There were no material legal proceedings commenced by or initiated against
the Company during the reported quarter, or material developments in any
previously reported litigation.
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8K
(a) None
(b) There were no reports on Form 8K filed during the reported quarter
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARROLS CORPORATION
968 James Street
Syracuse, New York 13203
(Registrant)
November 14, 1994 (Alan Vituli)
Date (Signature)
Alan Vituli
Chairman and Chief Executive
Officer
November 14, 1994 (Richard V. Cross)
Date (Signature)
Richard V. Cross
Executive Vice President -
Finance and Treasurer