Carrols Restaurant Group, Inc. (





Annual ICR XChange Conference (Transcript)

January 11, 2012 1:35 PM ET


Bryan Elliott – Restaurant Analyst, Raymond James

Paul Flanders – VP and CFO

Tim Taft – CEO, Fiesta Restaurant Group, Inc.


[No Q&A session for this event]


Bryan Elliott

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Good afternoon. Bryan Elliott, I’m the Restaurant Analyst at Raymond James and I’m pleased to be able to introduce Carrols Restaurant Group, which is at a very interesting stage in its history; we’re getting ready to split the company into two pieces. A Burger King Franchise operation will be spun out and the Hispanic brands, which have been tweaked and modified and actually performing very, very well here in the last few quarters will be owned under the Fiesta Restaurant Group brand and that will trade as a separate equity in the stock market. So we’re very anxious to see that happen and I think it’s a very interesting situation.

Representing the company, CEO, recently named CEO of Fiesta Restaurant Group, Tim Taft and leading off the presentation, Chief Financial Officer Paul Flanders.

Paul Flanders

Thank you, Bryan. As Bryan said, Tim will follow me. I'm going to give a little overview here on the business, some of the financial information and Tim’s going to talk in more detail about Fiesta Restaurant Group.

We operate three brands in the quick serve and fast-casual segments. The company has about 551 restaurants. We’re located in 17 states. LTM revenue’s about $814 million.

Fiesta Restaurant Group, which consists of Pollo Tropical and Taco Cabana brands consists of about 250 company operated restaurants which we run in about six different states. We also have 35 franchised units, most of those are located outside the country, Puerto Rico is probably the biggest one of our franchisees.

Both these concepts are very well positioned for growth. Tim will touch on the average unit volumes that both these concepts generate, but they’ve got very strong unit economics which provides opportunities to grow as well as track of returns on invested capital.

We’re also the largest Burger King operator with some 300 restaurants located in 12 states. Historically, since we bought Pollo in 1998, we really haven’t invested particularly heavy in the Burger King brand. It’s more because we’ve used – looked at it mores as a cash cow to fund growth of the – our Hispanic brand concepts.

As I said, both these brands are very well positioned for growth, long-term development will continue in their core markets plan and we’ve begun to expand outside of those markets with some new units that Tim will touch on as well as we’ve focused or refocused in our international expansion through franchising within the last couple of years.

Obviously, we benefit from being a franchisee of the Burger King system, you know, given the size and scope of that brand.

I don’t have to tell anyone here, there’s obviously – we’ve obviously been through a pretty serious recession here in the last two years. I think the fact is, we came through this pretty well, all things considered. And I think we really credit the fact that we’ve got diversification in brands, commodities, the geographies with which we operate in enhance stability in what was a pretty challenging environment. And through that period, we’ve actually approved capital ratios and reduced our financial leverage.

As Bryan said, we’re in the process of us doing a spinoff of Fiesta. The intention is to separate those two businesses into two publically traded companies with the spinoff of Fiesta; we announced this early in 2011. It’s a pretty natural revolution for us, I think, because they’re really two different businesses. Burger King, obviously a more mature brand, Fiesta is more a growth oriented company and we believe that the spinoff will well serve the shareholders of both companies since we’ll position each of these companies to pursue their individual business plans and growth strategies.

In the case of Fiesta, that’s obviously new unit expansion. In the case of Burger King, I think we have the opportunity to expand through acquisition.

We’ve been working on this spinoff all year long, people keep asking when’s it going to be done. We were hoping to get it done by the end of 2011. Right now it looks like it’s going to be the first quarter. Basically, we’ve done the financings – the financing and the capital structure’s in place. We’re waiting for a tax ruling from the IRS on the spinoff. It’s just taking a lot longer than we anticipated, not necessarily because of any problems, but just it’s taking time to get through the process. We think we’ll get that pretty quickly. We’re in registration with the Fiesta shares so we’re already in the process of turning and responding to some of the SEC comments.

So I think – we’re hoping to get this done by middle of February. Our financials do go stale around that time, so if for some reason we get delayed a little bit, it could slip into March, but right now we’re hoping to get this done by February.

As I said, we’ve already done the financing and put the capital structure in place so that’s – we’re all set in that regard.

On the Fiesta side, we did a – sold a $200 million secured notes in a 144A placement and also with a – we have a $25 million drawn revolver. And on the Carrols LLC side, which is the Burger King operating subsidiary, we did a bank credit facility of about $85 million, $65 million of that’s in term loans and at the closing, the undrawn $25 million revolver.

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