MTY Food Group Inc Q1 2019 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael W. Glen - Macquarie Research - Analyst : Eric, can you run through some of the timeline surrounding this transaction? I think the company was undergoing a strategic review, I'm just kind of interested in understanding when you guys got involved and looked at the deal?

Question: Michael W. Glen - Macquarie Research - Analyst : Okay. And so there were multiple bidders at the table for this deal?

Question: Michael W. Glen - Macquarie Research - Analyst : Okay. And just on the -- you made a reference to the management team, can you talk about any other -- is the intention to put some retention to contracts in place with the incumbent management team there? And can you talk a little bit about their background with the organization as well?

Question: Michael W. Glen - Macquarie Research - Analyst : And as you look at the company right now, the store base, the current level of organic growth, like where do you -- what do you think the right level of store count is for this organization? Do you think that they can continue to grow the store count over time?

Question: Michael W. Glen - Macquarie Research - Analyst : Okay. And your platform right now in the U.S, as you integrate this business and given where the stores are, it looks fairly broad-based throughout the U.S. Do you see any level of integration savings that you can make as you look at what you have in the U.S. and what they have in the U.S.?

Question: Elizabeth Johnston - Laurentian Bank Securities, Inc., Research Division - Analyst : So just maybe another question on the acquisition. You mentioned the potential for maybe additional store closures as the network continues to rightsize itself. What else has been going on in the last year that you can talk about that gives you -- that makes you excited about this acquisition? Whether it's other internal initiatives, something else the management team has been working on to get a sense of what they've accomplished in the last year and where they're going, going forward? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 11, 2019 / 12:30PM, MTY.TO - Q1 2019 MTY Food Group Inc Earnings Call

Question: Elizabeth Johnston - Laurentian Bank Securities, Inc., Research Division - Analyst : And when you say online ordering, I'm assuming that means mobile application as well as a website, correct?

Question: Elizabeth Johnston - Laurentian Bank Securities, Inc., Research Division - Analyst : Right. And in terms of the existing management team which are staying on, is there something that they are -- they need from MTY, whether it be capital to invest or some other source to support in order to continue to work to improve the operations? Or do you feel like they're well on their way to meeting their targets?

Question: Elizabeth Johnston - Laurentian Bank Securities, Inc., Research Division - Analyst : Okay. Great. And my next question just going back to MTY's business, which you already have gone through. In terms of same-store sales growth, we've seen fairly negative results from the international segment, I know you called out Asia among other regions. Can you give us a little more insight into what's going on internationally and what might be accounting for some of the negativity here? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 11, 2019 / 12:30PM, MTY.TO - Q1 2019 MTY Food Group Inc Earnings Call

Question: Elizabeth Johnston - Laurentian Bank Securities, Inc., Research Division - Analyst : Okay. And you mentioned that Asia being a relatively new market. Do you think, therefore, as we start to lap the introduction of those regions, I don't know if that's later in 2019, some of the comparables will get a little easier and we should see more of a normalization of growth. Do you think that's a fair statement?

Question: Michael W. Glen - Macquarie Research - Analyst : Eric, just back to the -- you talk about deleverage. Did you have any deleverage targets in mind by say, a year from now or a year after closing on this deal?

Question: Michael W. Glen - Macquarie Research - Analyst : Okay. And the all-in interest rate with your debt pro forma this acquisition, that would be -- what would be the right rate to use? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 11, 2019 / 12:30PM, MTY.TO - Q1 2019 MTY Food Group Inc Earnings Call

Question: Michael W. Glen - Macquarie Research - Analyst : Total. Okay. And the tax rate for this business would be -- it would be 21%, in and around?

Question: Michael W. Glen - Macquarie Research - Analyst : Okay. And for -- if we were trying to calculate what the D&A coming out of this deal would look like, are you able to give an indication what that might be?

Question: Michael W. Glen - Macquarie Research - Analyst : Like the amortization expense.

Question: Michael W. Glen - Macquarie Research - Analyst : Okay. And the level, you reference the capital investments. Can you indicate a level that you would be looking to put into the business? And that would go through CapEx line I guess.