Q4 2004 Checkers Drive-In Restaurants Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Checkers Drive-In Restaurants fourth-quarter and year-end 2004 conference call. At this time, all participants are in a listen-only mode. Following the presentation, management will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. (OPERATOR INSTRUCTIONS). I would like to remind everyone that this conference call is being recorded.

I will now turn the conference over to Mr. Brian Doster, Checkers' Vice President, Corporate Council and Secretary. Please go ahead, sir.

BRIAN DOSTER, VP, CORPORATE COUNCIL, SECRETARY, CHECKERS DRIVE-IN RESTAURANTS: Good afternoon, everyone. By now everyone should have access to our earnings announcements released this afternoon for the fiscal fourth quarter and year ended January 3, 2005. It may also be found on our website, www.Checkers.com.

Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements. Such statements are not guarantees of future performance; and therefore, undue reliance should not be put upon them. We refer all of you to our Form 10-K and 10-Q filed with the SEC for more detailed discussions of the risks that could impact our future operating results and financial condition.

With that, I would like to turn the call over to Keith Sirois, President and CEO of Checkers.

KEITH SIROIS, PRESIDENT, CEO, CHECKERS DRIVE-IN RESTAURANTS: Thank you Brian, and good afternoon everyone. Welcome to our fourth-quarter and year-end conference call. With me today are Pat Plumley, our Senior Vice President and Chief Financial Officer, and of course you heard from Brian Doster, our Vice President, Corporate Council and Secretary.

Pat and I will be available for your questions once we conclude our prepared remarks. We have a number of items we would like to share with you on today's call. After I give you a few highlights from our financials, I will discuss how we are strengthening our awareness for the brand throughout an aggressive promotional and sponsorship campaign, which help us build on our current momentum as we forge ahead in 2005. Pat will then go into more detail about our results for the fourth quarter and the full year. Then, I will provide some concluding thoughts before we go to Q&A.

We finished 2004 on a high note with strong Company and franchise same-store sales results -- made all the more noteworthy in view of the challenging comparisons we lacked from the prior year. Company-owned same-store sales during the fourth quarter grew a hefty 12.3 percent, while franchise stores reported an 8.3 percent increase. With year ago results at 9 percent and 6.2 percent respectively, it is easy to see why we are so pleased with these sales results. At the same time, we realize that maintaining same-store sales growth at these levels might be a bit unrealistic. And we therefore caution you about extrapolating into the future based on these gains.

For those of you keeping track, we have now reported positive same-store sales in 15 of the last 16 quarters, a feat virtually unmatched in an industry where even 4 consecutive quarters of positive same-store sales is considered good. Underlying our top growth was a remarkable upsurge in average unit volumes at both Company-owned and franchise stores, which we attribute to greater brand awareness in addition to the many operational initiatives we have implemented over the past year -- including our remodeling efforts and our guest-obsessed training program for crew members that focused on order, speed and accuracy.

Just as an example, there were 34 Company-owned stores with annual sales in excess of $1 million in 2004. That is 16 percent of the Company base compared to just six restaurants 3 years ago. The Company-owned average unit volume was approximately $835,000 in 2004.

On the franchise side of the business, there were 105 stores over the $1 million sales mark. That's 18 percent of the total franchise base. And this compares to a mere 63 stores 3 years ago. There was even one franchise location that reported 2004 sales of over $2 million. For franchisees, the average unit volume was 780,000 in 2004. While our average unit volumes on the surface appear smaller than other QSR chains, …