Carrols Restaurant Group, Inc. Reports Financial Results for the Third Quarter of 2012

  Carrols Restaurant Group, Inc. Reports Financial Results for the Third
  Quarter of 2012

Business Wire

SYRACUSE, N.Y. -- November 06, 2012

Carrols Restaurant Group, Inc. ("Carrols" or the “Company”) (Nasdaq: TAST)
today announced financial results for the third quarter ended September 30,
2012. The Company also updated its guidance for 2012.

Highlights for the third quarter of 2012 versus the third quarter of 2011
include:

  *Restaurant sales increased 87.1% to $169.5 million including $75.1 million
    in sales from the 278 BURGER KING® restaurants that were acquired on May
    30, 2012;
  *Comparable restaurant sales at legacy restaurants were strong and
    increased 6.2%, including customer traffic growth of 3.6%;
  *Net loss from continuing operations was $6.7 million, or $0.29 per diluted
    share, compared to net income from continuing operations of $0.4 million,
    or $0.02 per diluted share, in the prior year period;
  *Net loss from continuing operations included certain charges, including
    integration costs related to the acquisition and costs related to the
    Company's EEOC litigation, which in total were approximately $5.3 million
    or $0.14 per diluted share after tax. The net loss also included a $1.4
    million charge ($0.06 per diluted share) to tax expense for a valuation
    allowance against certain deferred tax assets. Net income from continuing
    operations in the prior year period included a loss on refinancing of $1.2
    million, or $0.03 per diluted share after tax;
  *Adjusted EBITDA, a non-GAAP measure, was $7.1 million compared to $8.4
    million in the prior year period. (Adjusted EBITDA is before $3.4 million
    of integration costs but includes a $1.9 million charge related to the
    EEOC litigation. Refer to the reconciliation of Adjusted EBITDA to net
    income (loss) from continuing operations in the tables at the end of this
    release).

As of September 30, 2012, Carrols owned and operated 572 BURGER KING®
restaurants.

Daniel T. Accordino, Chief Executive Officer of Carrols Restaurant Group, Inc.
said, “Comparable restaurant sales at our legacy restaurants continued to be
strong increasing 6.2%, the fifth consecutive quarter of positive trends, and
improved sequentially on a two-year basis. We believe that the BURGER KING®
strategy of innovation and targeted promotions is proving very effective in
attracting new customers, increasing traffic and raising our average check.
Profitability and restaurant operating margins at our legacy restaurants also
continued to improve as we leveraged these sales increases."

Accordino continued, "We continue to aggressively remodel our restaurants to
the 20/20 design which we believe is beginning to provide additional positive
momentum. Through the third quarter, we had completed approximately 30
upgrades with plans to complete more than 80 remodels in total for the year."

Accordino added, “However, our overall results were impacted by performance at
the acquired restaurants and by integration costs. We are working diligently
to address the performance opportunities that exist in the acquired
restaurants when compared to our legacy restaurants. Our primary focus in the
quarter was to begin improving the overall operation of these restaurants in
order to improve sales trends. As a consequence, we overinvested in labor, as
well as management recruitment and training. We also incurred unusually high
repair costs as we addressed deferred maintenance at these restaurants.
Although we continue to focus on training and staffing into the fourth
quarter, much of the initial integration and related costs are behind us. We
have filled most of the management vacancies that existed at the time of the
acquisition and completed the implementation of our labor scheduling, labor
control and inventory management systems late in the third quarter."

Accordino concluded, “Our legacy business remains strong and we continue to
experience positive traction from the Burger King brand initiatives. Although
our overall results were distorted from the integration of the acquired
restaurants, we believe that the performance at our legacy restaurants
demonstrates the success that we are experiencing from the transformation of
the Burger King brand. We have made much progress integrating the acquired
restaurants and continue to believe that improved operations and effective
cost management at the acquired restaurants should, over time, result in
operating results that are significantly improved and more in line with the
performance of our legacy restaurants.”

Third Quarter 2012 Financial Results

Restaurant sales grew 87.1% to $169.5 million in the third quarter of 2012,
including $75.1 million of sales from the acquired restaurants, compared to
$90.6 million in the third quarter of 2011. Comparable restaurant sales at our
legacy restaurants increased 6.2% as customer traffic grew 3.6% and average
check rose 2.6%, including an effective price increase of 1.9%. Average weekly
sales for our legacy restaurants increased 6.8% to $24,833 from $23,247 in the
same period last year. Average weekly sales for the acquired restaurants were
$20,804.

Adjusted EBITDA was $7.1 million in the third quarter of 2012, or 4.2% of
restaurant sales, compared to $8.4 million in the third quarter of 2011, or
9.2% of restaurant sales. Our legacy restaurants contributed positively to
Adjusted EBITDA and Adjusted EBITDA Margin, as most restaurant-level expenses
were leveraged on the comparable restaurant sales increase. However, operating
performance at the acquired restaurants impacted both Adjusted EBITDA and
Adjusted EBITDA Margin. Adjusted EBITDA was also impacted by higher general
and administrative expenses including $1.9 million in costs related to the
Company's outstanding litigation with the EEOC. (Adjusted EBITDA and Adjusted
EBITDA Margin are non-GAAP financial measures. See reconciliation of Adjusted
EBITDA to net income (loss) from continuing operations at the end of this
release. Adjusted EBITDA excludes the acquisition and integration expenses
discussed below.)

General and administrative expenses were $9.3 million in the third quarter of
2012 compared to $4.8 million in the third quarter of 2011, and as a
percentage of sales, increased to 5.5% from 5.3%. Included in general and
administrative expenses were $1.9 million in costs related to recent activity
regarding the Company’s outstanding litigation with the EEOC and $0.5 million
in integration costs discussed below.

Loss from operations was $4.9 million in the third quarter of 2012 compared to
income from operations of $4.1 million in the third quarter of 2011.

Interest expense increased to $4.5 million during the third quarter of 2012
from $1.7 million in the third quarter of 2011 as a result of higher
outstanding indebtedness and higher interest rates on indebtedness as a result
of the refinancing completed on May 30, 2012.

Net loss from continuing operations was $6.7 million, or $0.29 per diluted
share, compared to net income from continuing operations of $0.4 million, or
$0.02 per diluted share, in the same period last year. The net loss from
continuing operations in 2012 included $3.4 million in integration costs with
respect to the acquired restaurants ($0.09 per diluted share after tax). These
integration costs primarily consisted of an over-investment in restaurant
labor of $1.8 million, $1.1 million in above-normal repairs and maintenance
costs, and $0.5 million in above-normal costs for training, recruiting and
employee relocation expenses. Also included in the net loss from continuing
operations were $1.9 million in costs related to litigation with the EEOC
($0.05 per diluted share after tax) and a $1.4 million charge ($0.06 per
diluted share) to tax expense for a valuation allowance against certain
deferred tax assets.

2012 Guidance

For 2012, the Company is providing the following updated guidance:

  *Annual comparable restaurant sales for legacy restaurants are now expected
    to increase 6% to 7%;
  *Commodity costs are expected to increase 3% to 4%;
  *General and administrative expenses are expected to be approximately $8.0
    million to $9.0 million in the fourth quarter excluding any additional
    legal costs that may be incurred in conjunction with the EEOC litigation
    during the fourth quarter;
  *Annual effective income tax rate (before any discrete items and the
    valuation allowance recorded in the third quarter) is expected to be 41%
    to 43%; and
  *Capital expenditures are expected to be approximately $38 million to $42
    million, including $24 million to $26 million for remodeling more than 80
    restaurants.

Conference Call Today

Daniel T. Accordino, Chief Executive Officer, and Paul Flanders, Chief
Financial Officer, will host a conference call to discuss third quarter 2012
financial results today at 9:00 AM ET.

The conference call can be accessed live over the phone by dialing
888-846-5003 or for international callers by dialing 480-629-9856. A replay
will be available one hour after the call and can be accessed by dialing
800-406-7325 or for international callers by dialing 303-590-3030; the
passcode is 4571766. The replay will be available until Tuesday, November 13,
2012. The call will also be webcast live from www.carrols.com under the
investor relations section.

About the Company

Carrols Restaurant Group, Inc. is Burger King Corporation's largest
franchisee, globally, with 572 BURGER KING® restaurants as of September 30,
2012 and has operated BURGER KING® restaurants since 1976. For more
information on Carrols, please visit the company's website at www.carrols.com.

Forward-Looking Statements

Except for the historical information contained in this news release, the
matters addressed are forward-looking statements. Forward-looking statements,
written, oral or otherwise made, represent Carrols' expectation or belief
concerning future events. Without limiting the foregoing, these statements are
often identified by the words "may," "might," "believes," "thinks,"
"anticipates," "plans," "expects", "intends" or similar expressions. In
addition, expressions of our strategies, intentions or plans are also
forward-looking statements. Such statements reflect management's current views
with respect to future events and are subject to risks and uncertainties, both
known and unknown. You are cautioned not to place undue reliance on these
forward-looking statements as there are important factors that could cause
actual results to differ materially from those in forward-looking statements,
many of which are beyond our control. Investors are referred to the full
discussion of risks and uncertainties as included in Carrols' filings with the
Securities and Exchange Commission.

                                                           
Carrols Restaurant Group, Inc.
Consolidated Statements of Operations
(in thousands except per share amounts)
                                                                   
                    (unaudited)                    (unaudited)
                    Three Months Ended (a)         Nine Months Ended (a)
                    September 30,   October 2,     September       October 2,
                                                   30,
                    2012            2011           2012            2011
Restaurant          $ 169,471       $ 90,599       $ 377,025       $ 260,816
sales
Costs and
expenses:
Cost of sales         54,456          26,868         119,455         77,336
Restaurant
wages and             53,494          27,616         118,808         82,003
related
expenses (c)
Restaurant rent       12,348          5,749          26,010          17,151
expense
Other
restaurant            28,820          13,686         60,684          40,162
operating
expenses (c)
Advertising           7,837           3,802          15,137          10,884
expense
General and
administrative        9,331           4,778          23,610          14,753
expenses (b)
(c)
Depreciation
and                   8,176           3,924          19,215          11,712
amortization
Impairment and
other lease           125             57             252             1,028
charges
Other income         (236    )      (2     )      (236    )      (450    )
Total costs and      174,351       86,478       382,935       254,579 
expenses
Income (loss)         (4,880  )       4,121          (5,910  )       6,237
from operations
Interest              4,475           1,696          8,030           6,385
expense
Loss on
extinguishment       -             1,233        1,509         1,233   
of debt
Income (loss)
from continuing
operations            (9,355  )       1,192          (15,449 )       (1,381  )
before income
taxes
Provision
(benefit) for        (2,663  )      835          (4,936  )      (1,206  )
income taxes
Net income
(loss) from           (6,692  )       357            (10,513 )       (175    )
continuing
operations
Income (loss)
from
discontinued         (2      )      3,048        42            11,334  
operations, net
of tax
Net income          $ (6,694  )     $ 3,405       $ (10,471 )     $ 11,159  
(loss)
                                                                   
Diluted net
income (loss)
per share:
Continuing          $ (0.29   )     $ 0.02         $ (0.47   )     $ (0.01   )
operations
Discontinued          (0.00   )       0.14           0.00            0.52
operations
                                                                   
Diluted
weighted
average common        22,747          22,233         22,525          21,666
shares
outstanding
                                                         

      The Company uses a 52 or 53 week fiscal year that ends on the Sunday
(a)  closest to December 31. The three and nine months ended September 30,
      2012 and October 2, 2011 each included 13 and 39 weeks, respectively.
      
      General and administrative expenses include stock-based compensation
      expense of $309 and $273 for the three months ended September 30, 2012
      and October 2, 2011, respectively, and $588 and $795 for the nine months
      ended September 30, 2012 and October 2, 2011, respectively. General and
(b)   administrative expenses also include costs related to the Company's
      litigation with the EEOC of $1,938 and $0 for the three months ended
      September 30, 2012 and October 2, 2011, respectively, and $2,707 and
      $187 for the nine months ended September 30, 2012 and October 2, 2011,
      respectively.
      
      Results for the three months ended September 30, 2012 included certain
      excess or above normal costs due to the integration of the 278 Burger
      King restaurants acquired from Burger King Corporation. These included
      approximately $1,800 in restaurant labor, $1,100 for previously deferred
(c)   repairs and maintenance, and $500 of general and administrative costs
      for above normal recruiting and management training, meeting costs and
      moving expenses. General and administrative expenses for the nine months
      ended September 30, 2012 also included legal and other professional fees
      incurred in connection with the acquisition of $1,247.
      

                                                          
Carrols Restaurant Group, Inc.
Supplemental Information
The following table sets forth certain unaudited supplemental financial and
other data for the periods indicated (in thousands, except number of
restaurants, percentages and average weekly sales per restaurant):
                                                                   
                    (unaudited)                    (unaudited)
                    Three Months Ended (a)         Nine Months Ended (a)
                    September       October 2,     September       October 2,
                    30,                            30,
                    2012            2011           2012            2011
Restaurant
Sales: (a)
Legacy              $ 94,405        $ 90,599       $ 274,489       $ 260,816
restaurants
Acquired             75,066        -            102,536       -       
restaurants
Total sales         $ 169,471      $ 90,599      $ 377,025      $ 260,816 
                                                                             
Change in
Comparable            6.2     %       1.6    %       7.0     %       -2.3    %
Restaurant
Sales (b)
                                                                             
Adjusted              7,130           8,375          18,792          19,772
EBITDA (c)
Adjusted
EBITDA margin         4.2     %       9.2    %       5.0     %       7.6     %
(c)
                                                                   
Average
Weekly Sales
per
Restaurant:
(d)
Legacy                24,833          23,247         23,919          22,183
restaurants
Acquired              20,804                         21,061
restaurants
                                                                   
Expenses -
Legacy
Restaurants:
(e)
Cost of sales         30.0    %       29.7   %       30.6    %       29.7    %
Restaurant
wages and             29.5    %       30.5   %       30.7    %       31.4    %
related
expenses
Restaurant            6.2     %       6.3    %       6.3     %       6.6     %
rent expense
Other
restaurant            14.7    %       15.1   %       15.0    %       15.4    %
operating
expenses
Advertising           4.4     %       4.2    %       3.8     %       4.2     %
expense
                                                                   
Expenses -
Acquired
Restaurants:
(e)
Cost of sales         34.8    %                      34.7    %
Restaurant
wages and             34.2    %                      33.7    %
related
expenses
Restaurant            8.7     %                      8.5     %
rent expense
Other
restaurant            19.9    %                      19.0    %
operating
expenses
Advertising           5.0     %                      4.7     %
expense
                                                                   
Number of
Company Owned
Restaurants:
Restaurants
at beginning          574             303            298             305
of period
New                   -               -              -               2
restaurants
Acquired              -               -              278             -
restaurants
Closed               (2      )      (1     )      (4      )      (5      )
restaurants
Restaurants
at end of            572           302          572           302     
period
                                                                   
                    At 9/30/12      At 1/1/12
Long-term           $ 161,873       $ 68,705
Debt (f)
Cash (g)              77,403          10,991
                                                   

      Acquired restaurants represent the Burger King restaurants acquired from
(a)  Burger King Corporation on May 30, 2012. Legacy restaurants refer to the
      Company's Burger King restaurants other than the acquired restaurants.
      
(b)   Restaurants are included in comparable restaurant sales after they have
      been open or owned for 12 months.
      
      EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP
      financial measures and may not necessarily be comparable to other
      similarly titled captions of other companies due to differences in
(c)   methods of calculation. Refer to the Company's reconciliation of EBITDA
      and Adjusted EBITDA to net income (loss) from continuing operations for
      further detail. Adjusted EBITDA Margin represents Adjusted EBITDA as a
      percentage of restaurant sales.
      
      Average restaurant sales are derived by dividing restaurant sales for
(d)   such period by the average number of restaurants operating during the
      period.
      
(e)   Represent restaurant expenses as a percentage of sales for the
      respective group of restaurants.
      
      Long-term debt (including current portion) at September 30, 2012
      included $150,000 of the Company's 11.25% Senior Secured Second Lien
      Notes, $1,196 of lease financing obligations and $10,677 of capital
      lease obligations. Long-term debt (including current portion) at January
(f)   1, 2012 included $63,375 of outstanding term loan borrowings under
      Carrols LLC’s prior senior credit facility, $4,000 of outstanding
      revolving credit borrowings under Carrols LLC’s prior senior credit
      facility, $1,194 of lease financing obligations and $136 of capital
      lease obligations. Debt balances at January 1, 2012 exclude Fiesta
      Restaurant Group, Inc. debt.
      
      Cash balance includes $20 million of restricted cash at September 30,
(g)   2012 held as collateral for the Company's revolving credit facility.
      Cash balances at January 1, 2012 exclude Fiesta Restaurant Group, Inc.
      cash.
      

                                                           
Carrols Restaurant Group, Inc.
EBITDA and Adjusted EBITDA GAAP Reconciliation
                                                                    
                    (unaudited)                     (unaudited)
                    Three Months Ended (a)          Nine Months Ended (a)
                    September 30,     October       September       October 2,
                                      2,            30,
                    2012              2011          2012            2011
EBITDA and
Adjusted
EBITDA: (a)
Net income
(loss) from         $  (6,692  )      $  357        $ (10,513 )     $ (175   )
continuing
operations
Provision
(benefit) for          (2,663  )         835          (4,936  )       (1,206 )
income taxes
Interest               4,475             1,696        8,030           6,385
expense
Depreciation
and                   8,176           3,924       19,215        11,712 
amortization
EBITDA                 3,296             6,812        11,796          16,716
Impairment and
other lease            125               57           252             1,028
charges
Acquisition and
integration            3,400             -            4,647           -
costs
Stock
compensation           309               273          588             795
expense
Loss on
extinguishment        -               1,233       1,509         1,233  
of debt
Adjusted EBITDA     $  7,130         $  8,375      $ 18,792       $ 19,772 
                                                          

      EBITDA represents net income (loss) from continuing operations, before
      provision (benefit) for income taxes, interest expense and depreciation
      and amortization. Adjusted EBITDA represents EBITDA as adjusted to
      exclude impairment and other lease charges, acquisition and integration
      costs, stock compensation expense and loss on extinguishment of debt.
      Management excludes these items from EBITDA when evaluating the
      Company's operating performance and believes that Adjusted EBITDA
      provides a more meaningful comparison than EBITDA of the Company's core
      business operating results, as well as with those of other similar
      companies. Management believes that EBITDA and Adjusted EBITDA, when
      viewed with the Company's results of operations calculated in accordance
      with GAAP and the accompanying reconciliation, provide useful
(a)  information about operating performance and period-over-period growth,
      and provide additional information that is useful for evaluating the
      operating performance of the Company's core business without regard to
      potential distortions. Additionally, management believes that EBITDA and
      Adjusted EBITDA permit investors to gain an understanding of the factors
      and trends affecting our ongoing cash earnings, from which capital
      investments are made and debt is serviced. However, EBITDA and Adjusted
      EBITDA are not measures of financial performance or liquidity under GAAP
      and, accordingly, should not be considered as alternatives to net income
      (loss) or cash flow from operating activities as indicators of operating
      performance or liquidity. Also, these measures may not be comparable to
      similarly titled captions of other companies. The table above provides a
      reconciliation between net income (loss) from continuing operations and
      EBITDA and Adjusted EBITDA.

Contact:

Investor Relations:
Carrols Restaurant Group, Inc.
800-348-1074, ext. 3333
investorrelations@carrols.com
 
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