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 three months ended Commission File Number
MARCH 31, 1996 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 May 15, 1996
10 SHARES
PART 1 - FINANCIAL INFORMATION
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
___________________
ASSETS March 31, December 31,
1996 _ 1995 _
Current assets:
Cash and cash equivalents $ 1,823,000 $ 1,463,000
Trade and other receivables 234,000
688,000
Inventories 2,135,000
2,292,000
Prepaid real estate taxes 825,000
664,000
Deferred income taxes 3,856,000
3,641,000
Prepaid expenses and other current assets 669,000
830,000
459,000
Total current assets 9,542,000
9,578,000
5,339,000
Property and equipment, at cost:
Land 6,929,000
6,888,000
6,543,000
Buildings and improvements 14,051,000
15,049,000
Leasehold improvements 36,289,000
36,132,000
34,813,000
Equipment 43,383,000
42,361,000
40,141,000
Capital leases 14,893,000
15,352,000
15,558,000
Construction in progress 694,000
128,000
41,000
116,239,000
115,910,000
111,356,000
Less accumulated depreciation
and amortization (60,833,000)
(59,631,000)
(53,969,000)
Net property and equipment 55,406,000
56,279,000
Franchise rights, at cost (less accumulated amortization
of $20,281,000 at March 31, 1996 and $19,648,000 at
December 31, 1995). 43,964,000 44,582,000
Beneficial leases, at cost (less accumulated amortization
of $7,601,000 at March 31, 1996 and $7,655,000 at
December 31, 1995). 7,542,000 7,705,000
Excess of cost over fair value of assets acquired
(less accumulated amortization of
$534,000 at March 31, 1996 and $520,000 at December 31,
1995). 1,777,000
1,791,000
Deferred income taxes 6,420,000 6,420,000
Other assets 7,335,000
8,709,000
$131,986,000
$135,064,000
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT'D)
MARCH 31, 1996 AND DECEMBER 31, 1995
___________________
LIABILITIES AND STOCKHOLDER'S (DEFICIT)
March 31, December 31,
1996 1995
Current liabilities:
Current portion of long-term debt $ 258,000 $ 258,000
Current portion of capital lease obligations 588,000 644,000
Accounts payable 8,892,000 8,909,000
Accrued liabilities:
Payroll and employee benefits 2,847,000 4,000,000
Taxes - income and other 1,314,000 1,426,000
Other 2,562,000 3,134,000
Interest 1,692,000 4,809,000
Total current liabilities 18,153,000 23,180,000
Long-term debt, net of current portion 119,020,000 116,375,000
Capital lease obligations,
net of current portion 3,171,000 3,301,000
Deferred income - sale/leaseback of real
estate 2,067,000 1,773,000
Accrued postretirement benefits 1,441,000 1,424,000
Other liabilities 1,889,000 1,927,000
Total liabilities 145,741,000 147,980,000
Stockholder's (deficit):
Common stock, par value $1; authorized 1,000 shares,
issued and outstanding 10 shares 10 10
Additional paid-in capital 429,990 840,990
Accumulated deficit (14,185,000) (13,757,000)
Total stockholder's (deficit) (13,755,000) (12,916,000)
$131,986,000 $135,064,000
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
March 31, March 31,
1996 _ 1995 _
(13 weeks) (13 weeks)
Revenues:
Sales $ 54,362,000 $ 51,426,000
Other income 49,000 35,000
54,411,000 51,461,000
Costs and expenses:
Cost of sales 15,556,000 14,809,000
Restaurant wages & related expenses 16,603,000 15,818,000
Other restaurant operating expenses 11,675,000 10,699,000
Depreciation and amortization 2,663,000 2,750,000
Administrative expenses 2,476,000 2,528,000
Advertising expense 2,432,000 2,175,000
Interest expense 3,549,000 3,656,000
54,954,000 52,435,000
Loss before taxes (543,000) (974,000)
(Provision) benefit for taxes 115,000 _ (50,000)
NET LOSS $ (428,000) $ (1,024,000)
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Increase (Decrease) in Cash and Cash Equivalents
March 31, March 31,
1996 1995
(13 weeks) (13 weeks)
Cash flows from operating activities:
Net income (loss) $ (428,000) $(1,024,000)
Adjustments to reconcile net loss
to cash provided by operating activities:
Depreciation and amortization 2,663,000 2,750,000
Deferred income taxes (215,000)
Change in assets and liabilities:
Trade and other receivables 454,000 135,000
Inventories 160,000 155,000
Prepaid expenses and other current assets 17,000 (214,000)
Other assets (35,000) (110,000)
Accounts payable (17,000) (3,023,000)
Accrued interest (3,117,000) (3,097,000)
Accrued taxes - income and other (112,000) 59,000
Accrued payroll and employee benefits (1,153,000) (725,000)
Other accrued liabilities (572,000) (768,000)
Other (57,000) (251,000)
Cash used by operating activities (2,412,000) (6,113,000)
Cash flows from investing activities:
Capital expenditures:
Property and equipment (2,060,000) (1,046,000)
Construction of new restaurants (183,000) (54,000)
Acquisition of restaurants (17,000)
Franchise rights (5,000) (40,000)
Payments received on notes, and mortgages 9,000 8,000
Other investments 1,295,000
Net cash used for investing activities $ (961,000)
$(1,132,000)
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Increase (Decrease) in Cash and Cash Equivalents
March 31, March 31,
1996 _ 1995 _
(13 weeks) (13 weeks)
Cash flows from financing activities:
Proceeds from long-term debt $2,707,000 $9,314,000
Principal payments on long-term debt (64,000) (65,000)
Principal payments on capital leases (158,000) (149,000)
Purchase of senior notes (1,387,000)
Proceeds from sale-leaseback transactions 1,659,000 872,000
Dividends paid (411,000) (200,000)
Net cash provided by
financing activities 3,733,000 8,385,000
Increase in cash
and cash equivalents 360,000 1,140,000
Cash and cash equivalents,
beginning of period 1,463,000 1,710,000
CASH AND CASH EQUIVALENTS,
END OF PERIOD $1,823,000 $2,850,000
Supplemental disclosures:
Interest paid on debt $6,666,000 $6,753,000
Taxes paid $ 47,000 $ 41,000
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 March 31, 1996 and December 31, 1995, the results of
operations for the three months ended March 31, 1996 and 1995 and cash flows
for the three months ended March 31, 1996 and 1995. These financial statements
should be read in conjunction with the Company's annual report on Form 10-K for
the period ended December 31, 1995 and the Form 8-K filed on April 10, 1996.
2. The results of operations for the three months ended March 31, 1996
and 1995, are not necessarily indicative of the results to be expected for the
full year.
3. Inventories at March 31, 1996 and December 31, 1995, consisted of:
March 31, December 31,
1996 1995 _
Raw materials (food and
paper products) $1,213,000 $1,458,000
Supplies 922,000 834,000
$2,135,000 $2,292,000
4. The income tax (provision) benefit was comprised of the following:
March 31, March 31,
1996 1995
Current $ (100,000) $ (50,000)
Deferred 215,000
$ 115,000 $ (50,000)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
________________________
RESULTS OF OPERATIONS
SALES. Sales for the three months ended March 31, 1996 increased $2.9
million, or 5.7%, as compared to the three months ended March 31, 1995. The
Company operated an average of 219 Burger King restaurants for the first
quarter of 1996 as compared to 217 for 1995. Average restaurant unit sales
increased 4.8% when comparing 1996 to 1995. Sales at comparable restaurants,
the 211 units operating for the entirety of the compared periods, increased
$2.0 million, or 3.9%. Net restaurant selling prices remained relatively stable
for the compared periods of 1996 and 1995.
COST OF SALES. Cost of sales (food and paper costs) for the three months
ended March 31, 1996 increased in dollars due to higher sales. Cost of sales
as a percentage of sales decreased 0.2% from 1995 to 1996 primarily due to
decreases in some commodity costs, especially beef, partially offset by
increases in other commodity costs.
RESTAURANT WAGES AND RELATED EXPENSES. Restaurant wages and related
expenses decreased from 30.8% of sales to 30.5% of sales when comparing the
three months ended March 31, 1995 to 1996. The effect of lower workers'
compensation costs, partially offset by increased wage rates was the primary
reason for the decrease.
OTHER RESTAURANT OPERATING EXPENSES. Other restaurant operating expenses
increased in dollars due to higher sales and more restaurants and increased as
a percentage of sales from 20.8% in 1995 to 21.5% in 1996 as a result of
increased operating costs, mainly snowplowing, associated with the harsh
weather conditions in the Northeast during the winter of 1996 as compared to
the milder winter of 1995.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization remained
relatively equal to the three months ended March 31, 1995. Additional
depreciation and amortization from new and acquired restaurants were offset by
assets becoming fully depreciated.
ADMINISTRATIVE EXPENSES. The reduction in administrative expenses from
1995 to 1996 was due mainly to the elimination of costs incurred in 1995
related to the future expansion of new restaurant concepts.
ADVERTISING EXPENSE. An increase in advertising payments to Burger King
Corporation of $0.1 million (based on sales levels)and additional promotional
activities of $0.1 million were the principal causes of the increase in
advertising expense when comparing 1996 to 1995.
INTEREST EXPENSE. A reduction in average loan balances from 1995 to 1996
was the principal cause for the reduction in interest expense of $0.1 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
________________________
(PROVISION) BENEFIT FOR TAXES. The income tax benefit reflected during
the three months ended March 31, 1996 resulted from the losses generated during
the period which are expected to be offset by income in subsequent periods.
Prior to September of 1995, a valuation allowance was carried against such
deferred income tax assets, but was eliminated after a review of current and
expected future pre-tax earnings led to the conclusion that it is more likely
than not that the Company would realize the entire benefit of the net deferred
income tax asset.
LIQUIDITY AND CAPITAL RESOURCES
The operating activities of the Company used $2.4 million of cash for the
three months ended March 31, 1996 which included $6.3 million for the semi-
annual payment of accrued interest on the Company's 11-1/2% Senior Notes (the
"Senior Notes"). Capital spending for property, equipment and franchise rights
was $2.3 million which included the construction of one new restaurant, the
remodeling of several existing restaurants and capital maintenance projects.
Dividends of $0.4 million were paid to Carrols Holdings Corporation
("Holdings") for the payment by Holdings of two quarterly dividends on the
preferred stock of Holdings that were in arrears.
During the three months ended March 31, 1996, $2.7 million was drawn down
under the Company's revolving line of credit. Net proceeds of $1.7 million
were received from the sale and leaseback of three properties during the
period.
At March 31, 1996 the Company had $19.2 million available under its Senior
Secured Credit Facility after reserving $1.4 million for a letter of credit
guaranteed under the Senior Secured Credit Facility. While interest is accrued
monthly, payments of approximately $6.2 million for interest on the Senior
Notes are made each February 15th and August 15th thus creating semi-annual
cash needs. 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, fund restaurant remodeling
required under the Franchise Agreements and meet required payments in respect
of Holdings' Preferred Stock (subject to the terms of the Senior Note indenture
and the Senior Secured Credit Facility) for at least the next twelve months.
The balance will provide funds for future acquisitions.
The Senior Note indenture imposes limitations on certain payments, which
include dividends. Such limitations do not permit payment of the dividend on
Holdings preferred stock due as of March 31, 1996 until the amount available
for such restricted payments is restored through either earnings or new capital
investment. The effect of the failure to pay dividends on a current basis is
that the normal dividend rate increases
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
________________________
LIQUIDITY AND CAPITAL RESOURCES - continued
from 10% to a potential maximum rate of 14% until the dividends are current.
Consummation of the transaction described in Item 1 of the Company's
current report on Form 8-K filed April 10, 1996 constituted a "change of
control" under the indenture governing the Company's Senior Notes.
Accordingly, each holder of Senior Notes had the right to require the Company
(which right terminated on May 6, 1996) to repurchase all or any part of such
holder's Senior Notes at a repurchase price in cash equal to 101% of the
principal amount of the Senior Notes being repurchased (plus accrued and unpaid
interest, if any). Holders of $838,000 principal amount of Senior Notes
elected to have their notes repurchased.
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
Holders of $838,000 principal amount of Senior Notes elected to have their
notes repurchased pursuant to the Senior Note indenture.
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits on Form 8-K are filed with this report
(b) During the quarter ended March 31, 1996, the Company filed a current
report on Form 8-K dated March 21, 1996 reporting Item 5, "Other Events". The
Company reported entering into agreements with Atlantic Restaurants, Inc. that,
upon consummation, would lead to a "change of control" of the Company and
Holdings pursuant to the Senior Note indenture.
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)
May 15, 1996 (ALAN VITULI)
Date (Signature)
Alan Vituli
Chairman and Chief
Executive Officer
May 15, 1996 (RICHARD V. CROSS)
Date (Signature)
Richard V. Cross
Executive Vice President -
Finance and Treasurer
EXHIBIT INDEX
Number Description
27 Financial Data Schedule