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Ignite Restaurant Group Inc. (NASDAQ:IRG)

Q1 2014 Earnings Call

April 30, 2014 05:00 PM ET


Michael Dixon – President and CFO

Ray Blanchette – CEO


Chris O’Cull – KeyBanc

David Tarantino – Robert W. Baird

Josh Long – Piper Jaffray

Michael Gallo – CL King


Good afternoon, and welcome to the Ignite Restaurant Group First Quarter 2014 Earnings Conference Call. Today’s call is being recorded. A replay will be available today for those who cannot attend this live event.

Before turning the call over to management, I would like to note for you that portions of this call deal with forward-looking information. These statements reflect management’s expectations for the future. The company’s actual results may differ materially from these expectations. Management refers you to today’s press release and the company’s recent filings with the SEC for a more detailed discussion of the risks that could impact the future operations and the company’s financial conditions.

During this conference, management will also be presenting non-GAAP financial information. Information concerning non-GAAP financial information appears in the company’s earnings release for the quarter and related current report on Form 8-K filed earlier today with SEC.

On the call today, we have Ray Blanchette, Chief Executive Officer of the company, and Michael Dixon, President and Chief Financial Officer. At this time, I would like to turn the call over to Michael Dixon. Please go ahead, sir.

Michael Dixon

Thank you, operator. Good afternoon and thank you for joining us today. By now, everyone should have access to our press release, which we issued this afternoon. The release which covers our first quarter can also be found on our website under the Investor Relations section.

Additionally, I would encourage everyone to review our related 8-K filed and 10-Q filings with the SEC for greater detail on the information included in our press release and on today’s conference call.

Our agenda for the call will be as follows; Ray will provide an overview of our business, and then I will discuss the financial results. We will have time at the end for questions. We’d like to finish up in about 30 minutes to 45 minutes. With that, I'll turn the call over to Ray Blanchette, our Chief Executive Officer.

Ray Blanchette

Thanks, Mike and thanks everyone for joining us today. All things considered, the pretty good quarter for Ignite Restaurant Group, we continue to make nice progress at Macaroni Grill. Joe's delivered reasonable margin performance despite soft sales as a result of the worst winner in quite some time and we saw a significant comparable storage sales growth at Brick House.

Macaroni Grill has now been part of Ignite for about a year. Progress made by David Catalano in upgrading leadership and improving store execution is paying off and the first quarter Romano's Macaroni Grill comp sales came in at negative 4.1%, which was substantially ahead of last quarter negative 9%.

Our analysis suggests that about 2% to 3% of negative comp store sales in the quarter from Mac Grill were attributable to the severe weather. Second quarter to-date results of continue to sequential improvement with comp sales running slightly positive now to last year.

Far too early to declare victory, but when we compare the sales trends at Mac Grill to the Joe's recovery in 2007 and 2008, we feel like we're on track with Macaroni Grill. As we mentioned in our last call, we are fortunate to have John Gilbert join the Ignite team as Macaroni Grill's, President under his stewardship, I believe we'll see meaningful revenue in margin growth.

John and his team are actively refining the message in building the pipeline of product news that we believe will take Mac Grill backed to its historic leadership position in the casual dining landscape. Joe's Crab Shack posted negative comparable sales of 6%.

As we discussed on last quarter's call. Joe's has more sales volatility driven by weather both positive and negative than most of the concepts. We estimate that adverse weather combined with a late Easter effected comp sales as much as 5% to 6%.

Early second quarter results have improved with comp sales slightly negative. Really it's not where we want them to be but, definitely making improvements. As we head into warmer weather, I'm confident our spring and summer product offerings like the summer beach bakes, supported with appropriate television spots will keep Joe's on track for positive comparable sales growth over the remainder of the year.

Once again Brick House Tavern + Tap posted very strong comps with a 10% increase in the first quarter and continued strong performance in the second quarter with comp sales now in the mid-to-high single digits. Menu innovation, food quality, service and atmosphere all working together allowing Brick House to capture market share from traditional casual dining options.

We continue to push the menu forward replacing about 10% of the menu at least twice a year. New additions in the April menu launch included Barbecue, pizza, our hickory house smoked salmon and we've expanded the brunch menu again. Now adding Filet Mignon Benedict.

Our development real estate management strategy remains unchanged from when we last spoken early March. We closed two underperforming Mac Grill's in the first quarter with expiring leases and closed one earlier this month for a conversion to Brick House Tavern + Tap. Until we see a marked increase in Mac Grill sales. We have a mix blessing of target rich environment for conversions and incredible source of quality real estate for Brick House and to a lesser extent Joe's.

As previously discussed, converting underperforming units is not the only strategic option available to us because of the high quality of the real estate. We've received considerable outside interest in acquiring leasehold rights and clearly we didn't acquire Mac Grill to solve real estate problems for other retailers and restaurants.

However, as we continue to look for opportunities to maximize the value of Ignite through real estate optimization. The strategic sale of underperforming leases has become an interesting and potentially profitable option. Lastly, our franchising efforts continue to gain momentum. Three new international Macaroni Grills have opened year-to-date. One is the first quarter and two so far in the second.

We also have two signed domestic Brick House agreements for the total of seven units and expect to sign our first Joe's international development agreement later this quarter. While we don't expect any of this to be material in the near term. We expect growth in franchising to pay consistent long-term benefits.

So in summary, I want to reiterate our primary areas of focus. I've mentioned this before, but I think they're worth repeating. Number one, while profitable at the restaurant level for second consecutive quarter. Mac Grill still has a way to go to be accretive to Ignite's earnings and we will continue our passionate focus expanding both same restaurant sales and of course margins.

Our Joe's and Brick House businesses have been steady comp sales growers. We'll continue to focus on new ways of driving sales of these existing restaurants. Number three, the success and potential of the Brick House business allows us to continue solid growth. We are doing this by maximizing the quality real estate; we already have under control and conversion of underperforming restaurants in our portfolio.

And number four, the Joe's business continues to be the core of Ignite will continue to grow this brand in a disciple manner. The focus is on type of locations that have proven successful in the past. In addition, we will continue to experiment with our remodeling program to optimize the scope of work that makes sense for a nationwide rollout.

So I'm excited about the future and the progress made in all three brands. We still have some very real work to do, to get net income up where it belong, but we are making progress and I expect to wait, it will worth it. With that, I'll turn it over to Mike to walk through the financials. Mike?

Michael Dixon

Thanks, Ray. So let's jump right into the details. For the first quarter ended March 31, 2014 we posted total revenues of $215 million. This is $97 million on 82% increase over the comparable period to the prior year, as to primarily to $92 million associated with Macaroni Grill and strong comps in Brick House are partially offset by the negative weather and holiday shifts impacting sales at Joe's Crab Shack.

Sales of Joe's decreased $1.3 million to $105.3 million versus $106.6 million in the comparable period to the prior year. This reduction is driven primarily by the previously mentioned 6% decrease in comparable restaurant sales.

There was also some impact from the honeymoon effect, we waited restaurants opened more than a year, but not yet in the comparable restaurant store base. However, it is typical to separate from the honeymoon effect. The comparable sales increased reflect 0.1% increase in pricing, a 1.4% increase in mix and 7.5% decrease in discount.

Despite the disproportion of weather impact in the Northeast where the majority of our newer units are located. The sales volumes of the newer units continue to be strong with trailing 12 month average unit volumes of 4.1% for non-comparable units opened at least one year.

The Brick House's revenue increased $6.2 million in the first quarter of 2014 to $17.8 million versus $11.6 million in the first quarter of 2013. This increase reflects the 10% increase in comparable store sales and the addition of five new locations in 2013.

The comparable sales increase is comprised with 2.6% benefit from price and 7.4% benefit from traffic in mix. Macaroni Grill sales were $91.8 million, this included $722,000 in royalty income. Comparable restaurant sales of Mac Grill decreased 4.1% that's comprised to 7.5% decreased in discount partially offset by 0.8% increase in price and 2.6% increase in mix benefit.

As Ray mentioned, through the first five weeks of 2014 second quarter comparable sales are slightly negative at Joe's slightly positive in Mac Grill and positive in the mid-to-high single digits for Brick House.

Though far this year, we've closed three Mac Grill's; two in the first quarter and one to-date in the second quarter. One of those will be reopened to the Brick House Tavern + Tap. Since we've acquired Mac Grill, we've closed 10 units; seven with expiring leases, two units converted to Brick House in 2013 and one conversion in progress and expected to open in the third quarter of 2014.

On the margin front, cost of sales decreased to 29.5% of revenues versus 30.7% in the prior year. Due primarily to the included Mac Grill business. We expect to see some inflationary pressure on crab and lobster this year likely in the range of 5% to 8%. Shrimp cost remain high, but and the good news there has been some moderation of rates.

As always, we've worked to offset this cost inflation with innovative new products that deliver the Joe's experience while protecting the bottom line, finding increased deficiencies elsewhere in the P&L and to a lesser extent in pricing, but we will continue to remain cautious in pricing given Joe's relatively high average check.

Labor increase to 31.1% of revenues versus the prior year's 27%. This largely reflects the impact of the Mac Grill business. We made significant improvements in this area since the acquisition of Mac Grill and we will continue to find tuned labor moving forward, but with the low Mac Grill AUV's we will continue to target increased unit level sales as a key driver of labor improvement.

Occupancy expenses increased to 9.1% of revenue in 2014 versus 7.2% in 2013. Again due primarily to deleveraging from Mac Grill's lower average volume across its 177 units. Other operating expenses increased to 20.5% of revenues from 18.4% also as a result of Mac Grill deleveraging. So it is partially offset by reduction in Joe's marketing expense, as we ship in some of the marketing expense out of the first quarter.

G&A decreased to 5.7% of revenue from 8.7% in the prior year. After adjusting for the $1 million of transaction expenses included in 2013 number. G&A is the percentage of revenues decreased approximately 210 basis points to 5.7% from 7.8% in the prior year.

This improvement really reflects the leverage in G&A from the increased revenues. Depreciation and amortization cost decreased as a percent of revenues to 3.8% in 2014 from 4.1% to prior year. Primarily as a result of that in Mac Grill locations with a lower average asset base.

Pre-opening expenses decreased to $0.2 million from $1.1 million in the prior year. Now we didn't open any units in this first quarter, but we did incur expenses in the quarter related to units. They will open later in the year. Last year's first quarter included two units opened.

As I mentioned last couple of quarter, our SEC filings to Forms 10-Q and 10-K now reporting segment data by brand including income from operations. Please note that income from operations includes the restaurants operating cost and expenses, directly allocable G&A, depreciation and amortization and other income and expense items directly associated with the brand.

The operating margin for the Joe's brand is 7.4% for the current quarter compared to 10.4% in the prior year. This higher COGS and deleveraging from negative sales impacted Joe's profitability and is only partially offset by the reduced marketing spend and reduction and pre-opening expense.

At Brick House, operating margin to 10.1% from 5.7% in the prior year. As increased sales from five new units and positive comps flowed through the business at a healthy rate. Macaroni Grills delivered a loss from operations at $1.6 million for an operating margin of negative 1.7%. while still negative, the sequential improvement is notable up $2.3 million from fourth quarter's $3.9 million loss and up $8.6 million from the $10.2 million in the third quarter of 2013.

This quarter, we realize enough restaurants level profits to cover the directly allocated G&A, but not quite enough to cover the depreciation charges and about $1 million in cost related to restaurant closures. Interest expense increased to $1.9 million in 2014 from $0.4 million in 2013.

The increased results from approximately $80 million high average debt balance and higher interest rates compared to the first quarter of 2013 and finally our effective income tax rate for the quarter was 89.7% benefit versus an expense of 30.7% in the prior year.

The 2014 tax rate is result of our loss in the quarter coupled with the additional benefits from the FICA Tip Tax Credit received from Mac Grill. On a change from the guidance, we gave last call. Income taxes for the quarter were estimated using the discrete method which is based on actual year-to-date loss and estimated tax credits.

We believe that the discrete method will yield a more reliable income tax calculation for the interim period in fiscal 2014. The standard method of using an estimated annual effective tax rate is not really reasonable for us to use this year due to sensitivity to small changes in forecasted annual earnings before income taxes.

Debt outstanding with $127 million at quarter end. We expect the balance to drop as reduce the balance in working capital act to the source of cash in the second and third quarters. We are in compliance with the debt covenants.

So let's shift gears to what we expect for the balance of 2014. Our guidance is relatively unchanged. Despite the rough start to 2014, we still expect to see sales in the $880 million range with companywide comp sales of flat positive 1.5%.

We still expect full year restaurant level profit margins between 10% and 12%. Overall G&A expenses should still be in the $49 million to $52 million. Depreciation expense is still planned approximately 4% in total revenue and pre-opening expenses should be around $3 million.

We expect interest expense in 2014 of about $6.5 million. Effective tax rate for the full year will be a benefit of approximately 115%. As mentioned earlier, we will continue to apply the discrete method in applying income taxes on a quarterly basis.

On a development front, we still expect to open as many as three new Joe's locations. All three of these will be in the Northeast with the openings planned for the third quarter. we also plan to open as many as five Brick House's one of which is already started construction.

At this point, the remaining four Brick House's will likely open in the fourth quarter. We will continue to strategically close in the performing Mac Grill locations through lease expiration, conversion and where it makes sense favorably sold interest.

As I mentioned earlier, we withdrawn $127 million on a credit facility at quarter-end. Net of letters of credit supported by the facility and term loan amortization about $13 million of the facilities available for draw.

We believe we have sufficient capital to meet our objectives for 2014. With that, I'll turn it back over to Ray.

Ray Blanchette

Thanks, Mike. To wrap this up, despite the weather and holiday challenges in the first quarter. Joe's is on solid ground with learn to grow Brick House's taking market share from the more established cash bank brands in the long-term investment pieces with Mac Grill is gaining traction on both the revenue and operating income lines.

So at this time, we would like to open the call up to questions. Operator?

Question-and-Answer Session


(Operator Instructions) and we will first go to Chris O’Cull from KeyBanc.

Chris O’Cull – KeyBanc

Mike, can you provide a little bit of color in terms of where the Mac Grill margin improvement is coming from?

Michael Dixon

Well I think across the board. I think we've seen nice movement and really all the things we've talked about before, the COGS has continued to accrue. I think the most dramatic is probably in labor, just to a better labor management. I think as Ray mentioned, a lot of the program as David Catalano put in place throughout last year really taking hold and we are seeing, this really strong labor management.

I think really those two lines are the biggest movers.

Chris O’Cull – KeyBanc

Do you think, we'll be able to get to breakeven at the EBIT level for Mac Grill still in the third quarter without any meaningful change, I mean with relatively similar sales volumes that you're seeing right now?

Michael Dixon

Well, that's still our target and I think Chris. If you look at this quarter, we had some restaurant closer charges that hit us up to about [$1 million]. If you back those up, we are really pretty close in this quarter, so I think excluding some of those – I'll say unusual charges not necessarily unusual to close some of these restaurants.

I still believe will be the right third quarter.

Chris O’Cull – KeyBanc

Okay and then how much is check average expected to increase at Joe's and Mac Grill during the second quarter and maybe to the rest of the year.

Michael Dixon

I think it's pretty modest expectation. We don't have a whole lot of price flowing through the menu, no reason to see any dramatic mixed changes, well I don't anticipate a whole lot of check movement.

Chris O’Cull – KeyBanc

How much and then one last one, how much are the Brick House conversions from Mac Grill running in terms of investment?

Michael Dixon

Our target is always been somewhere in the $2 million to $2.5 million. I think they're probably closer to the $2.5 million.


Our next question comes from David Tarantino from Robert W. Baird.

David Tarantino – Robert W. Baird

Maybe, first question on the Macaroni Grill there was some inflection in the sales trend. I guess it's pretty encouraging, you're running slightly positive comps quarter-to-date. I just wanted to maybe get some context on that, whether you think that's a real improvement or more of a function of the comparisons.

I know there is probably some ways around Easter shift, so maybe can you give some thoughts on the improvement that you're seeing?

Ray Blanchette

And it was really a sequential improvement through the course of the first quarter leading into the second quarter. I mean, it's not just an Easter anomaly which would only have affected period four, we were up in period three. So – and it's tough to say that it’s predicated on easy compares because that logic would have applied for the last six years. All right and so I would like to believe, it's something to do with the work that's being done.

Clearly, you saw some good movement in some of the consumer attribute scores and favorability ratings around the brand under our stewardship. So we feel like we are making some progress, but frankly I mean there's a lot of work for us to do with the brand. We still see a lot of opportunity to unlock sales building potential on the business that we haven't really begun yet.

I mean the work is being done and John is working feverously on things that he believe that are important now with regards to, how we are going to approach sales building in the brand. I think the best news David is that, we are not fighting multiple buyers here. I mean the margin in the business is now a stable sort of predictable level.

And so we get to focus our efforts just on sales building and sort of maintain that margin. The majority of margin growth is going to come from flow through of incremental sales.

David Tarantino – Robert W. Baird

Got it, it makes sense and then how do you encourage us to think about the rest of the quarter and then the Q3 for the comps on that business? I think last year you, once you acquired the business you had a pretty aggressive push on labor maybe some promotional activity that might not repeat this year.

So do you think you can hurdle all of that activity with positive comps or do you – are you assuming something more conservative?

Ray Blanchette

At this point, I expect that we're going to continue to build momentum in the business. I mean, that's clearly how I'm thinking about it but we know we are up against some pretty aggressive promotional activity in Q3. I mean, Q3 from a same store sales perspective in Macaroni Grill last year was actually pretty decent performance given relative to the industry.

In a lot that we know, we went out and bought and paid for, so we are hoping is that the constant pressure that we are putting on the business and the execution that we are putting into the guest experience is going to continue to create momentum. So we are not really calling anything different that what we've already sort of said we intend to do with this year.

I think, we have called cops for the year minus 1% to flatter minus 2% somewhat that, and I think that's still a reasonable expectation.

Michael Dixon

And I think David to raise point, we put ourselves in a lot of margin pressure last year in Q2 and Q3. Labor in Q2 and the promotions in Q3, so I think the opportunities for significant. We've got a margin performances there. There may be some challenges and comps in Q3, but to raise point our goal is to just keep this trend going in right direction.

David Tarantino – Robert W. Baird

Great, make sense and then Mike. I think you mentioned the tax benefit of 115% today, did I hear that correctly?

Michael Dixon


David Tarantino – Robert W. Baird

And I think last quarter it was 30%, so maybe could you walk us through what the change is in the tax rate guidance.

Michael Dixon

Yes, I think it's I'll give you a sort of modeling tool to think about, but the reality is when your full year performance is within split in just of breakeven than the tax rate can move dramatically, especially when you always like in Tip Credits, but I would think that for you to think about from a modeling perspective each quarter, the best way to I'd approach is this, whatever your EBIT number is, you should be applying about 40% sort of marginal tax rate and then adding back, our FICA Tip Credits which are averaging about $1.4 million per quarter.

So as you model it out, that's a best way to think about it and that's what kind of get you to that 115% full year effective tax rate.

David Tarantino – Robert W. Baird

Great, that's very helpful. Thank you.


We will now go to Nicole Miller Regan from Piper Jaffray

Josh Long – Piper Jaffray

Hi, thanks guys. It's actually Josh Long for Nicole. Wanted to – it sounded like with more or less maintain the guidance for the year was curious if given the start. I believe we started off this year with individual brand pieces that we've talked about last quarter on the consolidated sales and then often on the store level margin line.

We are still more or less in line with what we are expecting and it seems like, the consolidated gave more or less the same, but just wondered if any of the pieces that shifted it off?

Ray Blanchette

You know Josh, I think they may change a little bit you know the overall revenue target is there, I think that overall restaurant level profit number is still in the same range. Is there going to be a little movement maybe between Joe's and in the Brick House or vice versa and maybe Mac performing a little bit better that's possible, but our estimate on the total is still the same range.

Josh Long – Piper Jaffray

Got it and then you called out a couple specific commodities is that, might you seeing a little bit inflation here over the near term and I'm curious, if maybe you can talk about this on the basket in general what you were thinking about then, do we have any contracting or any sort of visibility here in the near term and to what kind of prices are locked down for your different brands.

Michael Dixon

Well I think, last time we spoke we didn't really give any guidance around COGS because lot of these items specifically the crab and lobster hadn't really been, hadn't come market yet for this calendar year. So now that we got a little visibility, they mentioned the crab coming in 5% to 8% increase range is more or less that we expected was included in our original guidance.

We feel pretty good about our exposure on these items from a supply standpoint. We are locked up, we've got supply in hand till I get to submit some or all these items and there is no concern around getting supply for the full year. I think lobster is not even – the fishing season for lobster is just starting, so we don't have a lot of visibility to that yet.

I want to mention the good news on tramp, while it's still high. We are starting to see some bids coming down on that. so let's move it in the right direction.

Josh Long – Piper Jaffray

Great and comfortable and then maybe circling back to the some of the branding work that's been done both at Mac Grill and then also at Joe's. Ray, could you talk about kind of the reception of that from a consumer standpoint and kind of maybe where you've been maybe impressed, surprised or just how that played out versus your expectations as you've gone to market with some of the new branding work that's out there?

Ray Blanchette

Sure. I think we're pleased with what we are learning about Macaroni Grill and feel like we have the right guy leading the charge now to get in there unlock value. It is a well-positioned, highly distinctive experience and there's really been absolutely no surprise whatsoever Josh. I mean, I think we got what we thought we were going to get with regards to that brand in the intangible elements of that brand in these states that we serve may change overtime as we continue to refine the model, but I think it's a brand that certainly has a reason for being has a lot of ways in which we can unlock value.

Joe's, we are still very committed to our positioning today. I think the Southern providence that we've taken and sort of adopted in the business, the 100% sure tagline I think works, it makes sense, intuitive. It's really opened us up to be able to create and sort of innovate new product news in a very narrow band that people seem to get excited about.

I think, we just roll it out the summer beach bakes, it’s a fun item. It's an item that's easy to tell a story around, it's one that resonates with folks and so I mean, yes I think Joe's clearly have a lot of headwinds to overcome in Q1. Quite frankly, I mean we are tired of talking about whether here in Houston.

It's been, we've been talking about it basically for five months now and we are ready to kind of put this behind us. The Joe's business is historically reacted both positively and negatively and so it's not uncommon to follow, a really tough quarter with a really strong quarter and so we are obviously hoping for that and we are obviously really focused on, how we are going to get out and talk about his summer campaign.

I think that's – hopefully that answers your question.

Josh Long – Piper Jaffray

It does, thank you, that's a helpful update. appreciate your time with that.


(Operator Instructions) We've now got a Michael Gallo from CL King

Michael Gallo – CL King

Can you hear me?

Ray Blanchette

Now, we can hear you.

Michael Gallo – CL King

My question was on Macaroni Grill, you've owned this for about 1 year now and you've looked at lot other concepts in this space filling average user volume, $1 million to $3 million obviously Macaroni Grill used to up at $4 million, is there anything you found structurally about the brand? You think what prevents you from getting back to the historical volumes and guess and Mac's variety in the food rate and the price points rate?

Michael Dixon

No, I mean quite frankly that's one of the things that attracted us to the brand. When we look at the entire segment, we felt like Macaroni Grill was an out wire and that a majority of the reasons for it performing the way it was performing was self-inflicted, right? That it has been managed down to a level by confusing the guest with mixed messages and positions that were changing far too frequently.

So we completely agree that there are many opportunities for us to bring in incremental sales building opportunities.

Michael Gallo – CL King

Okay, great and then question I have is on Brick House. Obviously been a nice acceleration sales thereof of already pretty healthy levels. In nature with applying to the concept that seemed to be working well. I was wondering, when we should start to think about more aggressive expansion of that brand? Obviously you're doing the conversion this year, well it seemed like there is a pretty significant opportunity to franchise it to the markets that you're not to going to get to in the near term.

And so how should we think about Brick House longer terms. Well obviously you've got a humongous category and clearly it seems to be taking market share wherever you spread it? Thank you.

Ray Blanchette

Well, we love where Brick House competes. We love the segment that's emerging there. We think that's probably the most exciting place to be in casual dining today. If you don't have a completely unique value proposition getting into this [fray] in this emerging next generation Burn n Grill segment is a fun place to be.

I mean -- keeping mind in terms of growth rates, Brick House grew five new restaurants last year on a base of 15, that's really aggressive growth for brand that small and we intend to continue to be aggressive with our corporate development and I think we've already – we mentioned that we are getting into domestic franchising.

We have pre-determined areas. We are not going to franchise the entire country because we have a lot of the country that we want to build for ourselves and keep for ourselves, but [indiscernible] there are areas that we are not going to get to for a very long time and so those have been deemed franchise areas and we are out actively looking for the right partner.

Michael Gallo – CL King

Thank you. Congratulations on the improvement.

Ray Blanchette

Thank you.


It looks like we have a follow-up from Chris O’Cull from KeyBanc.

Chris O’Cull – KeyBanc

I may have missed this but how do you plan to allocate your – spend the Joe's marketing dollars to the balance of the years. I know it sounded like you pulled back in the first quarter maybe just that was a little bit of in the high plenty use it, to the balance of the year maybe, the amount that was caught up in the first quarter?

Ray Blanchette

Yes, sometimes it better to be lucky than good, right? I mean we pulled television in January obviously before we knew, there was going to be a [indiscernible] winner. So fortunately, we didn't go out and spend a bunch of money in advertising and people couldn't get to us and we have intentionally move that back into higher indexing periods to try and really juice the summer and into early fall period.

So we do have some incremental TV coming up, some incremental wait as a result of the money that we didn't spend in January. So we are not banking that money, Chris we are investing it, but we are investing it in higher indexing period, part of that out in the year.

Chris O’Cull – KeyBanc

That makes sense and then, the Easter shift. I would assume that had a bigger impact on Joe's and the other brands and how did that effect the second quarter, how should we think about the second quarter?

Michael Dixon

We gave a little update, Joe is slightly negative through April. I think we saw a little bit of pop during the Easter week but it's typical, when Eastern removes us far back in the year. It seems that it kind of spreads out the whole spring break and the weather change etc. so we don't see as big a pop, it seems when we move this far in the year, but it's past us. I think we are in the sort of normal spring traffic at this point and hopefully some normal weather and at this point as we mentioned.

Joe's is slightly negative and the other brands are both positive and Brick House is very positive.

Chris O’Cull – KeyBanc

Okay, great. Thanks guys.


And it appears there are no further questions. I'd like to turn the conference back over to management for any additional or closing remarks.

Ray Blanchette

Okay, well. Thanks again everyone for joining us. As you can see, we are attacking our work with enthusiasm. We remain excited upped the prospects for all of our brands and any opportunities they provide at shareholder value overtime. So we look forward speaking with everyone in the near future. Thank you for your time today.


This concludes today's presentation. Thank you for your participation.

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