Carrols’ third-quarter net income falls on higher costs

SYRACUSE — Carrols Restaurant Group, Inc. (NASDAQ: TAST) recently reported that its net income fell to $2.8 million, or 6 cents a share, in the third quarter ending Oct. 1, from $4.5 million, or 10 cents, in the year-ago period.

Excluding one-time items such as acquisition and lease charges, Carrols posted net income of $3.5 million, or 8 cents a share, compared to adjusted net income of $5.7 million, or 13 cents, in the prior-year period.

The company cited higher beef prices and employee costs as factors in the lower profit.

Syracuse–based Carrols is the world’s largest Burger King franchisee. Carrols owned and operated 798 Burger King restaurants at the end of the third quarter.

Restaurant sales increased about 19 percent to $285.2 million from $238.9 million in the third quarter of 2016.

The figures include $59.6 million in sales from the 171 Burger King restaurants acquired from 2015 to 2017. 

Comparable restaurant sales increased 7.5 percent after “being flat” in the prior-year period. 

Adjusted EBITDA was $24.2 million, compared to $22.7 million in the year-ago quarter. EBITDA is short for earnings before interest, taxes, depreciation, and amortization.

In the first nine months of the year, Carrols acquired 60 Burger King restaurants and closed 17 eateries. The company also anticipates completing the acquisition of four restaurants in Maine in mid-November.

CEO reaction

Carrols’ “robust” top-line growth in the third quarter included a “significant” contribution from recently acquired units along with a “strong” 7.5 percent increase in comparable-restaurant sales, Daniel Accordino, CEO of Carrols, said in the earnings report.

“Sales momentum was exhibited throughout all day parts with particularly strong trends during lunch and dinner due to the popularity of the 2 for $6 whopper sandwich, our King sandwich line and the new crispy chicken sandwich offerings. Burger King’s barbell strategy of premium, value and limited-time products is clearly resonating with consumers in a competitive [quick-service restaurant] environment as reflected by both increases in customer traffic and a higher average check,” said Accordino. 

Restaurant-level EBITDA and adjusted EBITDA both increased “on an absolute basis” and the firm was able to “leverage” a number of expenses, he added. 

“However, higher beef prices lingered through much of the quarter, which along with higher promotional sales and continued wage pressures, resulted in lower operating margins compared to the prior-year period. We expect sales trends to remain firm for the balance of the year and have raised our top-line guidance but have also reduced our expectations for adjusted EBITDA to reflect year to date results,” he concluded.

SYRACUSE — Carrols Restaurant Group, Inc. (NASDAQ: TAST) recently reported that its net income fell to $2.8 million, or 6 cents a share, in the third quarter ending Oct. 1, from $4.5 million, or 10 cents, in the year-ago period.

Excluding one-time items such as acquisition and lease charges, Carrols posted net income of $3.5 million, or 8 cents a share, compared to adjusted net income of $5.7 million, or 13 cents, in the prior-year period.

The company cited higher beef prices and employee costs as factors in the lower profit.

Syracuse–based Carrols is the world’s largest Burger King franchisee. Carrols owned and operated 798 Burger King restaurants at the end of the third quarter.

Restaurant sales increased about 19 percent to $285.2 million from $238.9 million in the third quarter of 2016.

The figures include $59.6 million in sales from the 171 Burger King restaurants acquired from 2015 to 2017. 

Comparable restaurant sales increased 7.5 percent after “being flat” in the prior-year period. 

Adjusted EBITDA was $24.2 million, compared to $22.7 million in the year-ago quarter. EBITDA is short for earnings before interest, taxes, depreciation, and amortization.

In the first nine months of the year, Carrols acquired 60 Burger King restaurants and closed 17 eateries. The company also anticipates completing the acquisition of four restaurants in Maine in mid-November.

CEO reaction

Carrols’ “robust” top-line growth in the third quarter included a “significant” contribution from recently acquired units along with a “strong” 7.5 percent increase in comparable-restaurant sales, Daniel Accordino, CEO of Carrols, said in the earnings report.

“Sales momentum was exhibited throughout all day parts with particularly strong trends during lunch and dinner due to the popularity of the 2 for $6 whopper sandwich, our King sandwich line and the new crispy chicken sandwich offerings. Burger King’s barbell strategy of premium, value and limited-time products is clearly resonating with consumers in a competitive [quick-service restaurant] environment as reflected by both increases in customer traffic and a higher average check,” said Accordino. 

Restaurant-level EBITDA and adjusted EBITDA both increased “on an absolute basis” and the firm was able to “leverage” a number of expenses, he added. 

“However, higher beef prices lingered through much of the quarter, which along with higher promotional sales and continued wage pressures, resulted in lower operating margins compared to the prior-year period. We expect sales trends to remain firm for the balance of the year and have raised our top-line guidance but have also reduced our expectations for adjusted EBITDA to reflect year to date results,” he concluded.