Carrols Restaurant Group, Inc. (
Q3 2011 Earnings Call
November 7, 2011 4:30 PM ET
Paul Flanders – VP and CFO
Alan Vituli – Chairman and CEO
Tim Taft – CEO, Fiesta Restaurant Group, Inc.
Dan Accordino – President and COO
Jeff Omohundro – Wells Fargo Securities
Bryan Hunt – Wells Fargo Securities
Paul Simonour – JP Morgan Chase
Bryan Elliott – Raymond James
Ken Bann – Jefferies & Co
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Good day, ladies and gentlemen, and thank you for standing by. Welcome to Carrols Restaurant Group Third Quarter 2011 Earnings Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Monday, November 7th, of 2011. I would now like to turn the conference over to my host for today, Mr. Paul Flanders, Carrols’ Chief Financial Officer, for opening remarks.
Please go ahead, sir.
Good afternoon, everyone. By now you should have accessed the announcement released earlier, which can also be found 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 spin-out transaction of Fiesta Restaurant Group. 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 risk that could impact our business and our financial results.
With that, I’ll now turn the call over to Alan Vituli, Carrols’ Chairman and Chief Executive Officer.
Thanks, Paul, and good afternoon, everyone. I’m pleased to report that we delivered solid results despite our – during the quarter despite inflationary pressures and the economic uncertainty and market volatilities that we’re facing. Overall revenues increased 5%, including an 8.9% increase at our Fiesta brands. Pollo Tropical’s performance remains strong, with a 7.9% increase in comp restaurant sales. Taco Cabana continued to build momentum, with comp restaurant sales increases of 5.3%. Our Burger King comp restaurant sales increased 1.6%, reflecting the progress being made by that brand during the quarter. We also expanded operating margins and excluding non-recurring items, grew diluted earnings per share by almost 20%. Given the current environment, I’m proud of these accomplishments.
The – during the quarter, we expanded Fiesta with the opening of two new Pollo Tropical restaurants. We opened our first unit in the Atlanta, Georgia market followed by the opening of a new unit in the Jacksonville market. The Atlanta restaurant has gotten off to a great start, with average weekly sales currently in the $65,000 to $70,000 range.
The Jacksonville restaurant, which is our second location in that market, also opened very well with sales currently running more than $60,000 a week. We’ve seen little impact from the opening of this new unit on the restaurant that we opened last year in Jacksonville. Its weekly sales continued to hold at around $65,000. These results continue to build our confidence in the expansion of the Pollo Tropical brand to the general market.
We’ve also opened a new Taco Cabana restaurant in the Dallas market, bringing our Taco Cabana openings to four for this year. The latest unit, which opened mid September is initially running about $55,000 a week. Collectively, the four Taco Cabana openings in this year are running about 15% higher than the system-wide average, reflecting the changes that we made with the brand.
With regard to the spin-off, having completed the refinancing of our debt, we continue to move forward with the separation of Fiesta, yes, this is the parent company of Pollo Tropical and Taco Cabana and that separation is from our Burger King business. We’re still waiting the private letter ruling from the Internal Revenue Service, and we’ve taken the steps necessary to register the Fiesta shares with the Securities and Exchange Commission. At this point we’re aiming to complete the spin-off early in the first quarter of 2012.
As announced last week, I will be retiring from Carrols Restaurant Group affective December 31, 2011 as its CEO, and shortly thereafter as its Chairman while continuing with Fiesta Restaurant Group as the Chairman of its Board. I leave Carrols and our Burger King business in the capable hands of Dan Accordino, who has worked with me as Carrols’ President and Chief Operating Officer for many years. Dan has a deep understanding of the Burger King business and is well suited for his new role as CEO. Dan will provide you with a strategy for the Burger King business going forward. I also look forward to working with Tim Taft in my role as Chairman of Fiesta, as he takes the Pollo Tropical and Taco Cabana brands to the next level.
With that, I’d like to introduce you to Tim Taft, who will give you an update on the Fiesta business. As you know or may recall, Tim joined Fiesta as CEO in August and has been tasked to accelerate the unit growth of our Pollo Tropical and Taco Cabana businesses. After Tim reviews the Fiesta business then we’ll update you on our Burger King business and then Paul will review our third quarter financial results.