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, 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 August 12, 1994.
10 shares
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PART 1 - FINANCIAL INFORMATION
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1994 AND DECEMBER 31, 1993
<CAPTION>
ASSETS June 30, December 31,
1994 1993
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,350,000 $ 1,172,000
Trade and other receivables 592,000 632,000
Inventories 2,064,000 2,051,000
Prepaid expenses and other current assets 731,000 760,000
_________ _________
Total current assets 5,737,000 4,615,000
Property and equipment, at cost:
Land 6,206,000 6,431,000
Buildings and improvements 13,883,000 14,341,000
Leasehold improvements 34,788,000 34,025,000
Equipment 35,583,000 35,012,000
Capital leases 15,689,000 15,689,000
Construction in progress 131,000 100,000
___________ ___________
107,280,000 105,598,000
Less accumulated depreciation
and amortization (50,676,000) (47,254,000)
___________ ___________
Net property and equipment 56,604,000 58,344,000
Franchise rights, at cost (less accumulated
amortization of $16,291,000 at June 30, 1994
and $15,146,000 at December 31, 1993). 40,375,000 39,566,000
Beneficial leases, at cost (less accumulated
amortization of $7,322,000 at June 30, 1994
and $6,921,000 at December 31,1993). 8,831,000 9,233,000
Excess of cost over fair value of assets
acquired (less accumulated amortization of
$433,000 at June 30, 1994 and $404,000 at
December 31, 1993). 1,878,000 1,907,000
Other assets 6,215,000 6,070,000
____________ ____________
$119,640,000 $119,735,000
============ ============
FN></TABLE
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CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT'D)
JUNE 30, 1994 AND DECEMBER 31, 1993
<CAPTION>
LIABILITIES AND STOCKHOLDER'S (DEFICIT)
June 30, December 31,
1994 1993
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 258,000 $ 283,000
Current portion of capital lease obligations 583,000 584,000
Accounts payable 6,424,000 5,845,000
Accrued liabilities:
Payroll and employee benefits 2,579,000 2,340,000
Taxes - income and other 1,319,000 1,073,000
Other 3,129,000 3,432,000
Interest 4,849,000 4,864,000
__________ __________
Total current liabilities 19,141,000 18,421,000
Long-term debt, net of current portion 118,519,000 114,197,000
Capital lease obligations,
net of current portion 4,318,000 4,603,000
Deferred income - sale/leaseback of real estate 1,936,000 1,998,000
Accrued postretirement benefits 1,363,000 1,288,000
Deposits and other noncurrent liabilities 1,830,000 1,632,000
___________ ___________
Total liabilities 147,107,000 142,139,000
Stockholder's (deficit):
Common stock, par value $1; authorized 1,000
shares, issued and outstanding - 10 shares 10 10
Additional paid-in capital 1,874,990 4,447,990
Accumulated deficit (29,342,000) (26,852,000)
__________ __________
Total stockholder's (deficit) (27,467,000) (22,404,000)
___________ ___________
$119,640,000 $119,735,000
=========== ===========
FN></TABLE
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CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1994 AND 1993
<CAPTION>
June 30, June 30,
1994 1993
(13 weeks) (13 weeks)
<S> <C> <C>
Revenues:
Sales $ 50,194,000 $ 41,774,000
Other income 63,000 222,000
___________ ___________
50,257,000 41,996,000
Costs and expenses:
Cost of sales 14,157,000 11,917,000
Restaurant wages & related expenses 14,445,000 12,416,000
Other restaurant operating expenses 10,085,000 8,202,000
Depreciation and amortization 2,714,000 2,823,000
Administrative and advertising expenses 4,547,000 3,884,000
Interest expense 3,585,000 2,833,000
___________ ___________
49,533,000 42,075,000
___________ ___________
Net income (loss) $ 724,000 $ (79,000)
=========== ===========
<FN>
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CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1994 AND 1993
<CAPTION>
June 30, June 30,
1994 1993
(26 weeks) (26 weeks)
<S> <C> <C>
Revenues:
Sales $ 92,911,000 $ 78,144,000
Other income 109,000 272,000
___________ ___________
93,020,000 78,416,000
Costs and expenses:
Cost of sales 26,924,000 22,002,000
Restaurant wages & related expenses 27,999,000 24,395,000
Other restaurant operating expenses 19,597,000 16,059,000
Depreciation and amortization 5,426,000 5,681,000
Administrative and advertising expenses 8,457,000 7,593,000
Interest expense 7,107,000 5,703,000
___________ ___________
95,510,000 81,433,000
___________ ___________
Net (loss) $ (2,490,000) $ (3,017,000)
=========== ===========
<FN>
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<TABLE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1994 AND 1993
Increase (Decrease) in Cash and Cash Equivalents
<CAPTION>
June 30, June 30,
1994 1993
(26 weeks) (26 weeks)
<S> <C> <C>
Cash flows from
operating activities:
Net loss $(2,490,000) $(3,017,000)
Adjustments to reconcile net loss
to cash provided by operating
activities:
Depreciation and amortization 5,426,000 5,681,000
Change in assets and liabilities:
Trade and other receivables 40,000 (259,000)
Inventories (13,000) (148,000)
Prepaid expenses and
other current assets 40,000 105,000
Other assets (319,000) 194,000
Accounts payable 579,000 1,819,000
Accrued interest (15,000) 222,000
Accrued taxes - income and other 246,000 4,000
Accrued payroll and employee benefits 239,000 (143,000)
Deposits and other reserves 198,000 (4,000)
Other accrued liabilities 197,000 472,000
Other 12,000 25,000
_________ _________
Cash provided by operating activities 4,140,000 4,951,000
_________ _________
Cash flows from investing activities:
Capital expenditures:
Property and equipment (1,514,000) (586,000)
New restaurants (325,000) (505,000)
Acquisition of restaurants (2,595,000) (13,000)
Franchise rights (30,000) (40,000)
Payments received on notes, mortgages
and capital subleases receivable 63,000 43,000
Disposal of property, equipment
and franchise rights 502,000 181,000
__________ __________
Net cash used for investing activities (3,899,000) (920,000)
__________ __________
FN
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<TABLE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
SIX MONTHS ENDED JUNE 30, 1994 AND 1993
Increase (Decrease) in Cash and Cash Equivalents
<CAPTION>
June 30, June 30,
1994 1993
(26 weeks) (26 weeks)
<S> <C> <C>
Cash flows from financing activities:
Proceeds from long-term debt $4,509,000 $ 509,000
Principal payments on long-term debt (138,000) (4,045,000)
Principal payments on capital leases (286,000) (282,000)
Retirement of long-term debt (75,000)
Dividends paid (3,073,000) (400,000)
___________ __________
Net cash provided by (used for)
financing activities 937,000 (4,218,000)
___________ __________
Increase (decrease) in cash
and cash equivalents 1,178,000 (187,000)
Cash and cash equivalents,
beginning of period 1,172,000 1,189,000
___________ __________
CASH AND CASH EQUIVALENTS,
END OF PERIOD $2,350,000 $1,002,000
=========== ==========
Supplemental disclosures:
Interest paid on debt $7,122,000 $5,481,000
<FN>
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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, 1994 and December 31, 1993, the results of operations for the
three and six months ended June 30, 1994 and 1993 and cash flows for the six
months ended June 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 six months ended
June 30, 1994 and 1993, are not necessarily indicative of the results to be
expected for the full year.
3. Inventories at June 30, 1994 and December 31, 1993, consisted of:
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
Raw material (food and
paper products) $ 1,228,000 $ 1,205,000
Supplies and promotional
materials 836,000 846,000
$ 2,064,000 $ 2,051,000
<FN>
/TABLE
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
THREE MONTHS ENDED JUNE 30, 1994 VERSUS THREE MONTHS ENDED JUNE 30, 1993:
Sales for the three months ended June 30, 1994 increased $8.4 million, or
20.2%, as compared to the three months ended June 30, 1993. The Company
operated an average of 201 Burger King restaurants for the second quarter of
1994 as compared to an average of 177 for the second quarter of 1993. Average
restaurant unit sales increased 6.0% in the second quarter of 1994 as compared
to 1993. Sales at comparable restaurants, the 172 restaurants operating for the
entirety of the compared periods, increased $1.7 million, or 4.1%. Net
restaurant selling prices decreased approximately 2.5% resulting from a 10.4 %
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 June 30,
1994 increased in dollars due to higher sales. Cost of sales as a percentage
of sales decreased 0.3% 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 29.7% of sales to
28.8% of sales when comparing the three months ended June 30, 1993 to 1994.
Productive labor efficiencies and the effect of higher sales on the fixed
componet of restaurant wages more than offset the effects of lower restaurant
selling prices and increased wage rates.
Other restaurant operating expenses increased by $1.9 million and by 0.5%
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 second quarter of 1994 was more than 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 ($0.1 million) when comparing the three months ended
June 30, 1994 to the three months ended June 30, 1993. The increase in
administrative expenses of $0.4 million when comparing 1994 to 1993 was
principally caused by an increase in anticipated expenses related to the
improved operations.
An increase in average interest rates and an increase in average loan
balances outstanding caused interest expense to increase $0.8 million for the
three months ended June 30, 1994 compared to 1993.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (CONT')
SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO SIX MONTHS ENDED JUNE 30 1993:
Sales for the six months ended June 30, 1994 increased $14.8 million, or 18.9%,
as compared to the six months ended June 30, 1993. The Company operated an
average of 198 Burger King restaurants for the first six months of 1994 as
compared to an average of 177 for the first six months of 1993. Average
restaurant unit sales increased 6.3% in the first six months of 1994 as compared
to 1993. Sales at comparable restaurants, the 172 restaurants operating for the
entirety of the compared periods, increased $2.9 million, or 3.8%. Net
restaurant selling prices decreased approximately 5.2% resulting from a 10.5%
reduction in menu prices offset by a 5.3% increase from fewer discount
promotions in 1994.
Cost of sales (food and paper costs) for the six months ended June 30, 1994
increased in dollars due to higher sales. Cost of sales as a percentage of
sales increased 0.8% 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 31.2% of sales to 30.1% of
sales when comparing the six months ended June 30, 1993 to 1994. Productive
labor efficiencies and the effect of higher sales on the fixed componet of
restaurant wages more than offset the effects of lower restaurant selling prices
and increased wage rates.
Other restaurant operating expenses increased by $3.5 million and by 0.5% 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 six months when compared to the prior year's
six months.
Increased depreciation and amortization due to the additional restaurants in
operation during the first six months of 1994 was more than offset by the
reduction in depreciation and amortization caused by assets becoming fully
depreciated.
An increase in advertising payments to Burger King Corporation of $0.6 million
(based on sales levels) was partially offset by decreases in other forms of
promotional activities ($0.1 million) when comparing the six months ended June
30, 1994 to the six months ended June 30, 1993. The increase in administrative
expenses of $0.4 million when comparing 1994 to 1993 was principally caused by
an increase in anticipated expenses related to the improved operations.
An increase in average interest rates and an increase in average loan balances
outstanding caused interest expense to increase $1.4 million for the six months
ended June 30, 1994 compared to 1993.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (CONT'D)
Liquidity and Capital Resources
The operating activities of the Company provided $4.1 million of cash for
the six months ended June 30, 1994. Capital spending for property, equipment
and franchise rights was $4.5 million, which included the acquisition of three
restauants in North Carolina, three restaurants in New York and the construction
of one new restaurant during the first six months of 1994. Dividends of $3.1
million were paid to Carrols Holdings Corp (the Company's parent) for the
payment by Holdings of $.4 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. $4.5 million was borrowed under the Company's Senior Secured
Credit Facility during the six months ended June 30, 1994.
At June 30, 1994, the Company had $15.5 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 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.
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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
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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 12, 1994 (Alan Vituli)
Date (Signature)
Alan Vituli
Chairman and Chief Executive
Officer
August 12, 1994 (Richard V. Cross)
Date (Signature)
Richard V. Cross
Executive Vice President -
Finance and Treasurer
