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 six months ended Commission File Number
JUNE 30, 1995 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 August 11, 1995
10 SHARES
PART 1 - FINANCIAL INFORMATION
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
ASSETS June 30, December 31,
1995 1994
Current assets:
Cash and cash equivalents $ 2,259,000 $ 1,710,000
Trade and other receivables 543,000
532,000
Inventories 2,745,000
2,254,000
Prepaid real estate taxes 331,000
384,000
Prepaid expenses and other current assets 469,000
459,000
Total current assets 6,347,000
5,339,000
Property and equipment, at cost:
Land 6,787,000
6,543,000
Buildings and improvements 13,939,000
14,260,000
Leasehold improvements 35,436,000
34,813,000
Equipment 41,824,000
40,141,000
Capital leases 15,367,000
15,558,000
Construction in progress 384,000
41,000
113,737,000
111,356,000
Less accumulated depreciation
and amortization (57,262,000)
(53,969,000)
Net property and equipment 56,475,000
57,387,000
Franchise rights, at cost (less accumulated
amortization of $18,748,000 at June 30, 1995 and
$17,548,000 at December 31, 1994).
45,273,000
46,042,000
Beneficial leases, at cost (less
accumulated amortization of $7,596,000 at June 30,
1995 and $7,433,000 at December
31, 1994). 8,035,000
8,405,000
Excess of cost over fair value of assets acquired
(less accumulated amortiztion of
$491,000 at June 30, 1995 and $462,000 at December
31, 1994). 1,820,000
1,849,000
Other assets 7,740,000
5,666,000
$125,690,000
$124,688,000
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT'D)
JUNE 30, 1995 AND DECEMBER 31, 1994
LIABILITIES AND STOCKHOLDER'S (DEFICIT)
June 30, December 31,
1995 1994
Current liabilities:
Current portion of long-term debt $ 258,000 $ 258,000
Current portion of capital lease 615,000 615,000
obigations
Accounts payable 5,975,000 6,915,000
Accrued liabilities:
Payroll and employee benefits 3,261,000 3,748,000
Taxes - income and other 1,512,000 1,525,000
Other 3,455,000 3,835,000
Interest 4,842,000 4,899,000
Total current liabilities 19,918,000 21,795,000
Long-term debt, net of current portion 123,301,000 120,680,000
Capital lease obligations net of current portion
3,667,000 3,966,000
Deferred income - sale/leaseback of real estate
1,830,000 1,888,000
Accrued postretirement benefits 1,389,000 1,354,000
Other liabilities 2,075,000 2,213,000
Total liabilities 152,180,000 151,896,000
Stockholder's (deficit):
Common stock, par value $1; authorized
1,000 shares, issued and outstanding -
10 shares 10 10
Additional paid-in capital 1,040,990
1,474,990
Accumulated deficit (27,531,000)
(28,683,000)
Total stockholder's (deficit) (26,490,000)
(27,208,000)
$125,690,000
$124,688,000
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 AND 1994
June 30, June 30,
1995 1994
(13 weeks) (13 weeks)
Revenues:
Sales $58,779,000 $50,194,000
Other income 39,000 63,000
58,818,000 50,257,000
Costs and expenses:
Cost of sales 16,926,000 14,157,000
Restaurant wages & related expenses 16,570,000 14,445,000
Other restaurant operating expenses 11,461,000 9,985,000
Depreciation and amortization 2,741,000 2,714,000
Administrative expenses 2,625,000 2,316,000
Advertising expenses 2,603,000 2,231,000
Interest expense 3,667,000 3,585,000
56,593,000 49,433,000
Income before taxes 2,225,000 824,000
Provision for taxes 50,000 100,000
NET INCOME $2,175,000 $ 724,000
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
______________________
June 30, June 30,
1995 1994
(26 weeks) (26 weeks)
Revenues:
Sales $110,205,000 $ 92,911,000
Other income 74,000 109,000
110,279,000 93,020,000
Costs and expenses:
Cost of sales 31,735,000 26,924,000
Restaurant wages & related expenses 32,388,000 27,999,000
Other restaurant operating expenses 22,225,000 19,497,000
Depreciation and amortization 5,491,000 5,426,000
Administrative expenses 5,153,000 4,309,000
Advertising expenses 4,778,000 4,148,000
Interest expense 7,323,000 7,107,000
109,093,000 95,410,000
Income (loss) before taxes and
extraordinary item 1,186,000 (2,390,000)
Provision for taxes 100,000 100,000
Income (loss) before extradorinary item 1,086,000 (2,490,000)
Extraordinary item - gain on purchase of
senior notes 65,000
NET INCOME (LOSS) $1,151,000 $(2,490,000)
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Increase (Decrease) in Cash and Cash Equivalents
June 30, June 30,
1995 1994
(26 weeks) (26 weeks)
Cash flows from operating activities:
Net income (loss) $ 1,151,000 $(2,490,000)
Adjustments to reconcile net income (loss)
to cash provided by operating
activities:
Depreciation and amortization 5,491,000 5,427,000
Non-cash extraordinary gain (65,000)
Change in assets and liabilities:
Trade and other receivables (11,000) 40,000
Inventories (491,000) (13,000)
Prepaid expenses and
other current assets 39,000 40,000
Other assets (142,000) (319,000)
Accounts payable (940,000) 579,000
Accrued interest (57,000) (15,000)
Accrued taxes - income and other (13,000) 246,000
Accrued payroll and employee
benefits (487,000) 239,000
Other accrued liabilities (380,000) 197,000
Other (152,000) 209,000
Cash provided by operating activities 3,943,000 4,140,000
Cash flows from investing activities:
Capital expenditures:
Property and equipment (2,355,000) (1,514,000)
Construction of new restaurants (1,119,000) (325,000)
Acquisition of restaurants (525,000) (2,595,000)
Franchise rights (86,000) (30,000)
Payments received on notes, mortgages
and capital subleases receivable 16,000 63,000
Disposal of property, equipment
and franchise rights 502,000
Other investments (2,188,000)
Net cash used for investing activities (6,257,000) (3,899,000)
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Increase (Decrease) in Cash and Cash Equivalents
June 30, June 30,
1995 1994
(26 weeks) (26 weeks)
Cash flows from financing activities:
Proceeds from long-term debt $ 4,250,000 $ 4,509,000
Principal payments on long-term debt (129,000) (138,000)
Principal payments on capital leases (299,000) (286,000)
Purchase of senior notes (1,387,000)
Retirement of long-term debt (75,000)
Proceeds from sale-leaseback transactions 861,000
Dividends paid (433,000) (3,073,000)
Net cash provided by
financing activities 2,863,000 937,000
Increase in cash
and cash equivalents 549,000 1,178,000
Cash and cash equivalents,
begining of period 1,710,000 1,172,000
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 2,259,000 $ 2,350,000
Supplemental disclosures:
Interest paid on debt $ 7,380,000 $ 7,122,000
Taxes paid $ 73,000 $ 100,000
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 June 30, 1995 and December 31,
1994, the results of operations for the three and six months ended June
30, 1995 and 1994 and cash flows for the six months ended June 30, 1995
and 1994. These financial statements should be read in conjunction with
the Company's annual report on Form 10-K for the period ended December
31, 1994.
2. The results of operations for the three months and six months
ended June 30, 1995 and 1994, are not necessarily indicative of the
results to be expected for the full year.
3. Inventories at June 30, 1995 and December 31, 1994, consisted
of:
June 30, December 31,
1995 1994
Raw materials (food and
paper products) $1,222,000 $1,415,000
Supplies 1,523,000 839,000
$2,745,000 $2,254,000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
________________________
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 VERSUS THREE MONTHS
ENDED JUNE 30, 1994.
Sales for the three months ended June 30, 1995 increased $8.6
million, or 17.1%, as compared to the three months ended June 30, 1994.
The Company operated an average of 219 Burger King restaurants for the
1995 quarter as compared to an average of 200 for the second quarter of
1994. Average restaurant unit sales increased 7.2% in the second quarter
of 1995 as compared to 1994. Sales at comparable restaurants, the 193
restaurants operating for the entirety of the compared periods, increased
$2.9 million, or 6.0%. Net restaurant selling prices remained relatively
stable as compared to the prior year due to a 1.6% increase in menu
prices offset by a 1.9% decrease from higher discount promotions in 1995.
The higher discount promotions were attributable to a $.99
Whopper<reg-trade-mark> sandwich promotion for two weeks in the 1995
quarter with no comparable promotion in 1994.
Cost of sales (food and paper costs) for the three months ended June
30, 1995 increased in dollars due to higher sales. Cost of sales as a
percentage of sales increased from 28.2% in 1994 to 28.8% in 1995
primarily as a result of the higher discount promotions in 1995 and net
increased commodity costs, mainly due to a temporary increase in the cost
of lettuce during April and May 1995.
Restaurant wages and related expenses decreased from 28.8% of sales
to 28.2% of sales when comparing 1994 to 1995. Productive labor
efficiencies, lower workers compensation costs, lower health insurance
costs and the effect of higher sales on the fixed element of restaurant
wages more than offset increased wage rates.
Other restaurant operating expenses increased by approximately $1.5
million but decreased by 0.4% as a percentage of sales for 1995 compared
to 1994. 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.
The decrease in the percentage is attributed to the effect of higher
sales on the fixed elements of certain costs like utilities, insurance
and real estate taxes.
Increased depreciation and amortization due to the additional
restaurants in operation during the second quarter of 1995 was mostly
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
(continued)
________________________
Administrative expenses increased $0.3 million when comparing 1995
to 1994. The supervision of additional restaurants and costs related to
future expansion were the primary cause of this increase.
An increase in advertising payments to Burger King Corporation of
$0.3 million (based on sales levels) was the principal cause of the
increase in advertising expense when comparing 1995 to 1994.
An increase in average loan balances was the principal cause for
interest expense to increase $0.1 million for 1995 as compared to 1994.
SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO SIX MONTHS
ENDED JUNE 30, 1994.
Sales for the six months ended June 30, 1995 increased $17.3
million, or 18.6%, as compared to the six months ended June 30, 1994.
The Company operated an average of 218 Burger King restaurants in the
first six months of 1995 as compared to an average of 198 in the first
six months of 1994. Average restaurant unit sales increased 7.6% in the
first six months of 1995 as compared to 1994. Sales at comparable
restaurants, the 188 restaurants operating for the entirety of the
compared periods, increased $5.6 million, or 6.2%. Net restaurant
selling prices increased approximately 2.0% resulting from an increase in
menu prices.
Cost of sales (food and paper costs) for the six months ended June
30, 1995 increased in dollars due to higher sales. Cost of sales as a
percentage of sales decreased from 29.0% in 1994 to 28.8% in 1995 as a
result of the effect of higher net restaurant selling prices and
decreases in certain commodity costs, especially beef during the latest
six months partially offset by the introduction of larger sized meat
patties in certain sandwiches.
Restaurant wages and related expenses decreased from 30.1% of sales
to 29.4% of sales when comparing 1994 to 1995. Productive labor
efficiencies, lower workers compensation costs, lower health insurance
costs and the effect of higher sales on the fixed element of restaurant
wages more than offset increased wage rates.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(continued)
Other restaurant operating expenses increased by approximately $2.7
million but decreased by 0.8% as a percentage of sales for 1995 compared
to 1994. The increase in dollars was caused primarily by expenses
associated with the operation of the additional restaurants during the
most recent six months when compared to the prior year's six months. The
decrease in the percentage is attributed to the effect of higher sales on
the fixed elements of certain costs like utilities, insurance and real
estate taxes.
Increased depreciation and amortization due to the additional
restaurants in operation during the first six months of 1995 was offset
by the reduction in depreciation and amortization caused by assets
becoming fully depreciated.
Administrative expenses for 1995 increased $0.8 million when
compared to 1994. Supervision and training related to operating
additional restaurants and costs related to future expansion were the
principal causes of this increase.
An increase in advertising payments to Burger King Corporation of
$0.7 million (based on sales levels) was the principal cause of the
increase in advertising expense when comparing 1995 to 1994.
An increase in average loan balances was the principal cause for
interest expense to increase $0.2 million for 1995 as compared to 1994.
LIQUIDITY AND CAPITAL RESOURCES
The operating activities of the Company provided $3.9 million of
cash for the six months ended June 30, 1995 after using $0.9 million to
take advantage of favorable discount terms from the Company's major
supplier. Capital spending for property, equipment and franchise rights
was $4.1 million which included the acquisition of one restaurant in
Ohio, the construction and opening of one restaurant in Michigan and the
remodeling and maintenance of various restaurants. Dividends of $0.4
million were paid to Carrols Holdings Corporation (the Company's parent)
for the payment by Holdings of its regular quarterly preferred stock
dividend. The Company used $1.4 million to purchase $1.5 million face
value of its senior notes. The sale and leaseback of one restaurant
property provided $0.9 million and net borrowings under the Senior
Secured Credit Facility provided $4.3 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(continued)
At June 30, 1995, the Company had $14.9 million available under its
Senior Secured Credit Facility, after reserving $1.6 million for a letter
of credit guaranteed under the Senior Secured Credit Facility. The
Company believes 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 and fund
restaurant remodeling required under the Company's franchise agreements,
with the balance, to the extent available, used to provide funds for
future acquisitions.
The Senior Note Indenture imposes limitations on certain restricted
payments, which include dividends. Following the dividend to be paid in
July 1995, dividends on Holdings Preferred Stock will be discontinued
until the amount available for such restricted payments is restored
through either earnings or new capital investment. The effect of the
dividend discontinuance is that the normal dividend rate increases from
10% to an ultimate maximum rate of 14% until the dividends are current.
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)
August 11, 1995 (ALAN VITULI)
Date (Signature)
Alan Vituli
Chairman and Chief Executive
Officer
August 11, 1995 (RICHARD V. CROSS)
Date (Signature)
Richard V. Cross
Executive Vice President -
Finance and Treasurer