Call Start: 16:32
Call End: 17:22
Carrols Restaurant Group, Inc. (TAST)
Q1 2012 Earnings Call
May 8, 2012 04:30 pm ET
Dan Accordino – Chief Executive Officer, Carrols Restaurant Group
Tim Taft – Chief Executive Officer, Fiesta Restaurant Group
Paul Flanders – Chief Executive Officer
Karen Eltrich – Goldman Sachs
Andrew Gadlin – CJS Securities
Bryan Hunt – Wells Fargo Securities
Todd Cohen – MTC Advisors
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Good day, ladies and gentlemen; thank you for standing by. Welcome to the Carrols Restaurant Group Q1 2012 Earnings Conference Call. (Operator instructions.) This conference is being recorded today, Tuesday May 8, 2012. And now I’d like to turn the conference over to Paul Flanders, Carrols’ Chief Financial Officer. Please go ahead, sir.
Good afternoon, everyone. By now you’ve had access to the announcement that was released earlier which can also be found on the website at
under the Investor Relations Section. Before we begin our remarks I want to remind everyone that our discussion today will include forward-looking statements and comments regarding our strategies, intentions or plans. 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 financial results. I also want to point you to certain fillings with the SEC that have either been made today or that we intend to make over the next few days. Fiesta Restaurant Group will file a Form 8(k) today which will include the Q1 financial results on a standalone basis for Fiesta. This filing also includes certain pro forma information regarding lease accounting changes occurring upon the spinoff.
We plan to file Q1 10(q)s for both Carrols and Fiesta in the next couple of days. Carrols will also file a Form 8(k) later this week for the spinoff of Fiesta which was completed yesterday. This filing will include the pro forma Carrols financial statements recast to reflect Fiesta as a discontinued operation. Because the spinoff did not occur until the current quarter our actual Q1 financial statements for Carrols will still include the Fiesta results.
Lastly, we will discuss the Carrols’ pending acquisition of the 278 Burger King restaurants in a moment. We anticipate that we will file a Form 8(k) which will include certain financial information for the acquired restaurants and pro forma financial information that gives effect to the acquisition. We hope to file this sometime next week. I encourage you to refer to all these filings to better understand the standalone results of operations and financial conditions for each of Carrols and Fiesta, including implications with regard to their respective financial statements after giving effect to the spinoff and effect of the pending acquisition.
Finally, on the call with me today is Dan Accordino, CEO of Carrols Restaurant Group, and Tim Taft, CEO of Fiesta Restaurant Group. I’ll now turn the call over to Dan.
Thanks, Paul, and good afternoon everyone. Having just completed the spinoff of Fiesta yesterday I want to start by wishing our colleagues at Fiesta success as they begin life as a separate public company. I will use my time today to discuss Carrols’ future as Burger King’s largest franchisee. Tim will provide an update on the Fiesta business and Paul will cover the Q1 financial results.
Having spent most of my professional career at Carrols I can say that I’ve never been more excited about Carrols’ future, and it’s clear to me that my enthusiasm and optimism is shared throughout the organization. As a singularly-focused company we will now be directing our full attention and resources to our Burger King operations and playing our part in the transformation and revitalization of the Burger King brand, which I will speak about in greater detail momentarily.
We are excited to be moving forward with our objective of growing within the Burger King system, something that we first began discussing when we announced our intention to spin off Fiesta. We believe that our size and scale as Burger King’s largest franchisee affords us the ability to grow within the system and to create long-term value for our shareholders.
As you are likely aware, in late March we announced that we entered into a purchase agreement with Burger King Corporation to acquire 278 of their restaurants in markets generally contiguous to our own Burger King footprint. Well the absolute size of this transaction is by itself integral to our long-term growth strategy, equally important is the structure of the transaction. Burger King Corporation has reinforced its strategic relationship with Carrols by agreeing to take an approximate 29% equity stake in our company as a significant component of consideration for the acquisition. In addition, Burger King will be assigning a right of first refusal to us for franchisee-to-franchisee restaurant sales in a 20-state region. This is an important aspect of the transaction from our perspective since future acquisitions are an important component of our long-term growth strategy.
Near-term we are focused on three things: first, to close the acquisition which includes completing our financing to fund the transaction and to provide capital for the restaurant remodeling plan that we have agreed to; next, integrate these restaurants with our information and operational systems. We have already begun to focus on this and we believe there are significant opportunities to improve operational and financial performance for the acquired restaurants. While maybe a bit premature to discuss specifics I will note that restaurant (inaudible) of 278 units is about a third of that for our existing restaurants on volumes that are only about 8% to 10% lower.