x

Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2003

or

o

Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

Commission File Number

0-25629

Delaware

16-0958146

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer 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

Yes   x

No   o

Yes   o

No   x

March 31,
2003

December 31,
2002

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

2,620

$

2,538

Trade and other receivables, net of reserves of $128 at each date

1,728

1,306

Inventories

4,838

5,240

Prepaid rent

2,268

2,227

Prepaid expenses and other current assets

4,978

4,382

Refundable income taxes

481

1,253

Deferred income taxes

9,454

9,454

Total current assets

26,367

26,400

Property and equipment, at cost less accumulated depreciation of  $151,029 and $146,782, respectively

221,183

223,790

Franchise rights, at cost less accumulated amortization of $48,297 and $47,109, respectively

89,492

90,620

Intangible assets, at cost less accumulated amortization of $10,074 and $10,062, respectively (Note 2)

122,364

122,378

Other assets

9,619

10,389

Total assets

$

469,025

$

473,577

March 31,
2003

December 31,
2002

(unaudited)

LIABILITIES and STOCKHOLDER’S EQUITY

Current liabilities:

Accounts payable

$

16,296

$

16,099

Accrued interest

6,161

1,415

Accrued payroll, related taxes and benefits

11,953

15,130

Other liabilities

13,900

14,415

Current portion of long-term debt

12,151

12,299

Total current liabilities

60,461

59,358

Long-term debt, net of current portion

343,784

348,615

Deferred income – sale/leaseback of real estate

6,374

5,887

Accrued postretirement benefits

2,686

2,585

Deferred income taxes

326

901

Other liabilities (Note 4)

29,670

29,572

Total liabilities

443,301

446,918

Stockholder’s equity:

Common stock, par value $1; authorized 1,000 shares, issued and outstanding – 10 shares

—  

—  

Additional paid-in capital

24,485

24,485

Accumulated earnings

1,239

2,174

Total stockholder’s equity

25,724

26,659

Total liabilities and stockholder’s equity

$

469,025

$

473,577

2003

2002

(unaudited)

Revenues:

Restaurant sales

$

151,902

$

157,437

Franchise royalty revenues and fees

338

370

Total revenues

152,240

157,807

Costs and expenses:

Cost of sales

42,434

43,853

Restaurant wages and related expenses

47,044

47,588

Other restaurant operating expenses

31,434

31,736

Advertising expense

7,269

6,888

General and administrative

9,274

9,601

Depreciation and amortization

9,767

9,919

Total operating expenses

147,222

149,585

Income from operations

5,018

8,222

Interest expense

6,525

7,031

Income (loss) before income taxes

(1,507

)

1,191

Provision (benefit) for income taxes

(572

)

455

Net income (loss)

$

(935

)

$

736

2003

2002

(unaudited)

Cash flows provided from operating activities:

Net income (loss)

$

(935

)

$

736

Adjustments to reconcile net income (loss) to net cash provided from operating activities:

Loss on disposal of property and equipment

—  

32

Depreciation and amortization

9,767

9,919

Deferred income taxes

(575

)

733

Change in operating assets and liabilities

947

(2,502

)

Net cash provided from operating activities

9,204

8,918

Cash flows used for investing activities:

Capital expenditures:

New restaurant development

(6,774

)

(3,939

)

Restaurant remodeling

(1,278

)

(2,554

)

Other restaurant expenditures

(2,206

)

(1,586

)

Corporate and restaurant information systems

(761

)

(251

)

Total capital expenditures

(11,019

)

(8,330

)

Properties purchased for sale-leaseback

—  

(929

)

Proceeds from sales of non-operating properties

1,964

—  

Net cash used for investing activities

(9,055

)

(9,259

)

Cash flows provided from (used for) financing activities:

Payments (proceeds) on revolving credit facility, net

(4,600

)

1,900

Principal payments on term loans

—  

(2,125

)

Payments on other notes payable

(258

)

(237

)

Principal payments on capital leases

(121

)

(144

)

Proceeds from sale-leaseback transactions

4,912

1,093

Net cash provided from  (used for) financing activities

(67

)

487

Increase in cash and cash equivalents

82

146

Cash and cash equivalents, beginning of period

2,538

2,405

Cash and cash equivalents, end of period

$

2,620

$

2,551

1.

Statement of Management

The accompanying unaudited consolidated financial statements for the three months ended March 31, 2003 and 2002 have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and do not include all of the information and the footnotes required by accounting principles generally accepted in the United States of America for complete statements.  In the opinion of management, all normal and recurring adjustments necessary for a fair presentation of such financial statements have been included.

The results of operations for the three months ended March 31, 2003 and 2002 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

The condensed consolidated financial statements include the accounts of Carrols Corporation and its majority owned subsidiaries (“Carrols” or the “Company”).  All material intercompany balances, transactions and profits have been eliminated.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2002 contained in our 2002 Annual Report on Form 10-K.  The December 31, 2002 balance sheet data is derived from these audited financial statements.

2.

Intangible Assets

Intangible assets, net of accumulated amortization, consisted of the following:

March 31,
2003

December 31,
2002

Goodwill, net of accumulated amortization of $9,902 and $9,902, respectively

$

121,344

$

121,344

Trademarks, net of accumulated amortization of $36 and $36, respectively

226

228

Other, net of accumulated amortization of $135 and $123, respectively

794

806

$

122,364

$

122,378

Intangible assets at March 31, 2003 and December 31, 2002, for Burger King were $1,510 and $1,523, respectively, for Pollo Tropical were $57,381 and $57,383, respectively, and for Taco Cabana were $63,472 and $63,472, respectively.

Amortization expense of intangible assets for the periods ended March 31, 2003 and 2002 was $15 and $9, respectively.

3.

Income Taxes

The income tax provision (benefit) for the three months ended March 31, 2003 and 2002 was comprised of the following:

2003

2002

Current

$

(1,147

)

$

(278

)

Deferred

575

733

$

(572

)

$