Previous Statements by TAST
» Carrols Restaurant Group's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Carrols Restaurant Group's CEO Discusses Q4 2011 Results - Earnings Call Transcript
» Carrols Restaurant Group Presents at 14th Annual ICR XChange Conference (Transcript)
» Carrols Restaurant Group's CEO Discusses Q3 2011 Results - Earnings Call Transcript
I’ll now turn the call over to the President and CEO of Carrols Restaurant Group, Dan Accordino.Daniel T. Accordino Thanks, Paul, and good morning everyone. Let me begin with an update on our recent acquisition before moving on to more general brand initiatives, a brief discussion of our quarterly performance. As you’re likely aware we closed on our acquisition of 278 restaurants from Burger King Corporation on May 30th, and in doing so became the largest franchisee within the Burger King system. Total consideration to Burger King Corporation included a 28.9% equity interest in Carrols as well as cash payments of approximately $17 million. The $17 million included $9.4 million in refranchising fees, $3.7 million for inventory and cash, and the remaining balance to be paid over a 5 years in conjunction with the assignment of Burger King’s right of first refusal and on franchisee sales of restaurants in 20 states. We do this transaction as a very important step in Carrols evolution as we increased our operating scale and establish a foundation for significant growth in the future. Also BKC’s President in North America, Steve Wiborg and CFO, Daniel Schwartz were appointed to our Board of Directors on final completion of the transaction. Concurrent with the acquisition, we completed a financing in which we raised funds to refinance our existing debt to fund the cash consideration for the acquisition and to undertake the remodeling and transformation of over 450 restaurants over the next 3.5 years. The refinancing included the sale of a $150 million of 11.25% senior secured second lien notes, due in 2018 along with the new $20 million revolving senior credit facility. The acquisition has nearly doubled the scope of our Burger King operations, added a number of new markets to our existing footprint and strategically positions us for future expansion. We now have 574 restaurants in our portfolio, up from 297 at the end of the first quarter and have substantially expanded our presence in States, such as Indiana, Virginia and North Carolina.
Our near-term focus is on integrating the acquired restaurants improving their operating and financial performance, a longer term we intend to capitalize on the consolidation opportunities that we believe are present within the Burger King system. To put this opportunity in perspective, there are more than 2,000 restaurants operated by other franchisees in the markets covered by our right of first refusal.To be sure, we will have our hands full for some time absorbing the recently acquired restaurant and with the remodeling that I don’t want to signal that you should expect any large scale acquisitions any time soon, although we may pursue some smaller transactions as opportunities present themselves. As we’ve outlined in our SEC filings, there are substantial differences between the profitability of the acquired restaurants and our legacy Carrols restaurants. With restaurant level profitability about a third of our legacy units, narrowing these differences should provide significant upside to profitability as we improve operations, implement our inventory and labor management systems and impose our cost management disciplines. Additionally, we see opportunities to raise sales and profitability at all of our restaurants as Burger King’s strategic brand initiatives stake hold, including the new products and products enhancements, the new advertising and marketing campaigns, and finally from image upgrades from the 2020 restaurant remodeling program. Turning to the brand, Burger King introduced more than a dozen new menu items in early April, which marked the broadest menu expansion on the brands history. The new menu items range from Garden Fresh Salads, Snack Wraps and Crispy Chicken Strips to Real Fruit Smoothies and Frappes. These new products have addressed gaps in the menu on a number of day parts and are appealing to a broader consumer audience including women, children and seniors. In the future, we anticipate the introduction of additional new products as Burger King takes advantage of the investments that have been made a new equipment to support the various menu platforms. Read the rest of this transcript for free on seekingalpha.com