Carrols Restaurant Group, Inc (
Q1 2011 Earnings Call Transcript
May 10, 2011, 8:30 am ET
Paul Flanders - VP, CFO and Treasurer
Daniel Accordino - President, COO
Alan Vituli - Chairman, CEO
Jeff Omohundro - Wells Fargo
Carla Casella - JPMorgan
Kevin McClure - Wells Fargo Securities
Howard Penney - Hedgeye Risk Management
Art Roelick - Numara
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Welcome to Carrols Restaurant Group Inc first quarter 2011 earnings conference call on May 10, 2011. Throughout today's presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. (Operator Instructions). I will now hand the conference over to Mr. Paul Flanders. Please go ahead, sir.
Good morning, everyone. By now you should have access to the announcement released this morning, which you can also find on our website at www.carrols.com under the investor relations section. Before we begin our formal remarks I want to remind everyone that our discussion today may include forward-looking statements.
These forward-looking statements may include comments regarding our strategies, intentions or plans including, without limitation, our planned refinancing and spinoff transaction. These statements are not guarantees of future performance and therefore undue reliance should not be placed on them.
We also refer you to our filings with the SEC for a more detailed discussion of the risks that could impact our business and our results.
On the call with me today is Alan Vituli, our Chairman and CEO, and Dan Accordino, our President and Chief Operating Officer. Alan and Dan will provide some comments on the business and then I’ll walk through the financial results for the first quarter and provide some commentary regarding 2011. We will then be happy to address any questions that you might have.
With that, I'll turn the all over to Alan.
Thanks, Paul, and good morning. Dan and Paul will cover our first quarter performance in a minute. But before that I would like to briefly update you on the planned tax-free spinoff of our Hispanic and the status of our refinancing.
As we indicated on the last call, we're planning to split the company into to separate publicly traded companies with a spinoff of our Pollo Tropical and Taco Cabana business into a new entity by way of a dividend to Carrols' shareholders.
We believe that this will offer each company the ability to pursue its own business plan and its own growth strategies and offer better potential for improving the shareholder value for each company and that of keeping them together.
Pollo Tropical and Taco Cabana are both well positioned for new unit growth and good expansion. We believe that as a [stepford] company, our franchise Burger King business will have better growth potential, including acquisitions within the Burger King system.
We have been primarily focused on completely a refinancing to put the capital structure in place for each of the companies in anticipation of the spinoff. We currently contemplate that the refinancing would be comprised term loan borrowings under a senior secured bank credit facility for our Burger King business and the issuance of senior secured notes for our Hispanic brands.
We are well into the process and anticipate that this will be completed by the end of June or early July at the latest. Currently, we've been working on a number of the details regarding the spinoff itself and continue to make progress as we move through this process.
At this time, our plan is to complete the spinoff by the end of calendar year 2011. With that, I'll turn the call to Dan to give you an overview of our first quarter results. Dan?
Thanks, Alan. We're pleased to have started 2011 with a strong performance from our Hispanic brands. That is, total revenues for these two brands increased 7.5% for the quarter. Both Pollo Tropical and Taco Cabana posted positive comparable unit sales with results at Pollo particularly impressive.
We believe these sales gains are reflective of our successful efforts to gain new customers and to increase customer frequency with our newer menu items, effective promotion and our brand elevation initiatives.
At the same time, we also experienced continued softness at our Burger King restaurants. While sales were certainly impacted by the unusually severe winter weather, our first quarter results mostly reflected the negative sales trends that have persisted for some time now at Burger King.
If the brand is in its early stage of repositioning and refocusing its marketing efforts, we believe that we will begin to see stabilizing trends in the second half of this year. With that said, I will now discuss our three brands in greater detail.
At Pollo Tropical, comparable restaurant sales increased to solid 13.5% including a 13.3% increase in customer traffic. This marked the sixth consecutive quarter of positive comparable unit sales for Pollo Tropical.
Segment EBITDA improved significantly to $10.1 million from $6.7 million last year and segment EBITDA margin expanded by 447 basis points to 19.26%, which is reflective of the strong operating leverage we achieved on higher sales.
With regards to promotional initiatives, we were on TV promoting our $4.99 combos and in the West Palm Beach market our Create Your Own TropiChop as we move towards providing the customer more menu customization options.
During Lent, our promotions featured a grilled trim quesadilla wrap combo for $4.99 and a grilled shrimp quesadilla salad for $6.99. In terms of development, we plan to build on our recent success in Jacksonville with a second new unit to be open later this year in that market. Also, we are currently under construction with our first unit in the Atlanta market, which is slated to open in the third quarter.