Entering text into the input field will update the search result below

Carrols Restaurant Group's Earnings Leaves A Bad Taste In My Mouth

William Bias profile picture
William Bias


  • Non-organic sources such as price increases and acquisition of Burger King locations boosted revenue only slightly.
  • Customer traffic declines don’t bode well for Carrols Restaurant Group or its investors.
  • Year-to-date operating losses mean that interest expense isn’t being covered, increasing chances of default.

On Nov. 5, the world's largest Burger King (NYSE: BKW) franchisee, Carrols Restaurant Group (NASDAQ: NASDAQ:TAST), came out with its Q3 2014 quarterly statement and earnings announcement. The company's results left a bad taste in my mouth. Let's take a look to see what's going on with this company.

Year-to-date revenue increased but just barely

Carrols Restaurant Group saw its year-to-date revenue increase a mere 0.4% vs. the same time last year. Its year-to-date same -store sales decreased 0.4% year over year driven by a 5.8% decline in customer traffic. Non-organic contributions, such as price increases and acquisition of Burger King locations, put Carrols Restaurant Group's comparison into the positive. However, I don't like seeing a decline in customer traffic. A decline in customer traffic translates into lost opportunity for a sale.

Net loss and free cash flow deficit improved

Carrols Restaurant Group turned a year-to-date net loss of $11.1 million which actually represents a 3% year-over-year improvement. The price increases highlighted above as well as lower advertising costs as a percentage of revenue contributed to this net loss shrinkage. Moreover, Carrols Restaurant Group turned a year-to-date free cash flow deficit of $21.8 million which represents a 10% year-over-year improvement. Lower capital expenditures, due to less remodeling, contributed to the positive change.

Balance sheet still in lousy shape

Carrols Restaurant Group's balance sheet remains in lousy shape. Thanks to a secondary offering, Carrols Restaurant Group's cash amounts to 32% of stockholders' equity. I like to see companies with cash amounting to 20% or more of stockholders' equity to get them through tough times. However, this cash will most likely be used for the purchase of new Burger Kings and their subsequent remodeling efforts.

Carrols Restaurant Group's long-term debt amounts to a staggering 117% of stockholders' equity. Long-term debt creates interest which chokes out

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: The author is long BKW. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.