Burger King Worldwide, Inc. Reports Fourth Quarter and Full Year 2012 Results

Burger King Worldwide, Inc. Reports Fourth Quarter and Full Year 2012 Results

Burger King Worldwide completes 2012 with fourth quarter adjusted diluted EPS up 58%, driven by U.S. and Canada comparable sales growth of 3.7% and 330 net new restaurants globally

MIAMI--(BUSINESS WIRE)-- Burger King Worldwide, Inc. (NYS: BKW) today reported financial results for the fourth quarter and year ended December 31, 2012.


"We had a strong finish to the year and made significant progress on key strategic initiatives," said Bernardo Hees, Chief Executive Officer, Burger King Worldwide, Inc. "We continue to capitalize on our brand by growing globally, adding 485 net new restaurants and growing comparable sales 3.2% for the full year 2012. Our results are evidence that the Four Pillar strategy in the U.S. and Canada and initiatives to accelerate international unit growth are working. During 2012, we made significant progress on our re-imaging initiative, added international master franchise joint venture and development agreements, and refranchised 871 restaurants. We are proud of the hard work and dedication of our employees and franchisees that enabled us to deliver an excellent finish to a critical year for the company. We continue to execute on our strategy, and believe the company is well positioned to deliver sustainable long-term growth."

Full Year 2012 Highlights:

  • System-wide comparable sales increased 3.2% and system-wide sales increased 5.9% on a constant currency basis
  • Adjusted Diluted EPS increased 34.0% to $0.69
  • Adjusted EBITDA increased 16.6% on an organic basis to $652.1 million
  • Adjusted EBITDA margin increased 820 bps to 33.2%
  • Net restaurant growth of 485, growing restaurants by +3.9%
  • Successfully refranchised 871 restaurants, bringing the system to approximately 97% franchised
  • Re-imaged approximately 600 restaurants in the U.S. and Canada, increasing units on a modern image to 19% of the region
  • Launched the largest menu update in the U.S. and Canada in the history of the brand
  • Accelerated international growth, announcing five master franchise joint ventures and seven new development agreements in key growth markets
  • Refinanced $1.9 billion of debt, lowering annualized cash interest costs by approximately $25 million
  • Declared a cash dividend of $0.04 per share in the fourth quarter

Fourth Quarter 2012 Highlights:

  • System-wide comparable sales increased 2.7% and system-wide sales increased 6.7% on a constant currency basis
  • Adjusted Diluted EPS increased 57.8% to $0.23
  • Adjusted EBITDA increased 22.5% on an organic basis to $174.9 million
  • Adjusted EBITDA margin increased 1,670 bps to 43.2%
  • Increased cash dividend 25% to $0.05 per share from previous dividend

Consolidated Financial Highlights:

  Three Months Ended December 31,   Twelve Months Ended December 31,
  2012       2011     2012       2011  
($ in millions, except per share data)
 
System-wide Comparable Sales Growth1   2.7 %   1.2 %   3.2 %   (0.5 %)
System-wide Sales Growth1 6.7 % 2.2 % 5.9 % 1.7 %
 
Net Restaurant Growth 330 117 485 261
 
Total Revenues

 

$404.5

 

$580.6

 

$1,966.3

 

$2,335.7

Adjusted EBITDA2

 

$174.9

 

$154.1

 

652.1

 

$585.0

Adjusted EBITDA Margin2 43.2 %

26.5

% 33.2 % 25.0 %
Adjusted Net Income2

 

$81.2

 

$50.3

 

$243.4

 

$178.6

Adjusted Diluted Earnings Per Share2

 

$0.23

 

$0.14

 

$0.69

 

$0.51

Net Income

$48.6

$25.0

$117.7

$88.1

Diluted Earnings Per Share

$0.14

$0.07

$0.33

$0.25

 

(1) System-wide comparable sales growth and system-wide sales growth are calculated on a constant currency basis and include sales at franchise restaurants and company-owned restaurants.

 

(2) Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Diluted Earnings Per Share are non-GAAP financial measures. Please refer to "Non-GAAP Reconciliations" for further detail.

 

Key Performance Indicators:

Three Months Ended December 31, Twelve Months Ended December 31,
  2012     2011     2012     2011  
System Comparable Sales Growth
U.S. & Canada 3.7 % (2.0 %) 3.5 % (3.4 %)
EMEA 1.6 % 7.3 % 3.2 % 4.3 %
LAC 0.7 % 9.7 % 5.7 % 7.9 %
APAC   0.8 %   (1.2 %)   (0.5 %)   (0.4 %)
Total   2.7 %   1.2 %   3.2 %   (0.5 %)
 
System Net Restaurant Growth
U.S. & Canada 23 (23 ) (24 ) (50 )
EMEA 127 47 239 154
LAC 110 46 168 82
APAC   70     47     102     75  
Total   330     117     485     261  
 
System Ending Restaurant Count
U.S. & Canada 7,476 7,500
EMEA 3,121 2,882
LAC 1,390 1,222
APAC   1,010     908  
Total   12,997     12,512  
 

System-wide sales growth of 6.7%, excluding the impact of FX, in the fourth quarter was primarily attributable to comparable sales growth in the U.S. and Canada and net restaurant growth internationally.

In the fourth quarter, organic revenues grew 5.6%, excluding the impact of refranchising and FX headwinds. On a reported basis, total revenues decreased 30.3% to $404.5 million, compared to $580.6 million in the prior year period due to global refranchising transactions as well as unfavorable FX impact, partially offset by comparable sales growth and net restaurant growth.

Organic Adjusted EBITDA grew 22.5%, excluding the impact of refranchising and FX headwinds. On a reported basis, Adjusted EBITDA increased 13.5% to $174.9 million, compared to $154.1 million in the prior year period. Organic growth was driven by comparable sales and net restaurant growth, as well as G&A cost control. On a reported basis, growth was lower due to significant progress on our global refranchising initiative and FX headwinds. For the full year 2012, organic Adjusted EBITDA grew 16.6%.

Adjusted Net Income and Adjusted Diluted EPS increased 61% and 58%, respectively, compared to the prior year, primarily due to an increase in Adjusted EBITDA, lower Depreciation and Amortization and lower interest expense. For the full year 2012, Adjusted Net Income increased 36% and Adjusted Diluted EPS grew 34%.

Operational and Segment Highlights

U.S. and Canada comparable sales gains in the fourth quarter were driven by continued execution of our Four Pillars strategy. Successful new menu additions such as the Chicken Parmesan sandwich, Cinnabon® Minibon® Rolls, and our holiday sweets menu, including sweet potato curly fries and gingerbread desserts, helped drive comparable sales growth. Additionally, compelling limited-time offer promotions, such as our 55th anniversary WHOPPER® sandwich promotion, helped drive traffic.

Europe, the Middle East and Africa ("EMEA") delivered comparable sales growth of 1.6% in the fourth quarter, driven by the success of Chili Cheese promotions in the United Kingdom, strong performance in the company's expanding Russian market, and the continued success of "King of the Month" deals in Germany. Performance in southern Europe was softer, with the company's key Spain market decelerating as economic conditions deteriorated during the quarter. Net restaurant growth accelerated 170% to 127 units in the quarter, driven by strong development in Turkey, Russia, and the Middle East.

Latin America and the Caribbean ("LAC") delivered comparable sales growth of 0.7%, despite challenging prior year comparisons in each of the company's key markets. The company implemented new value initiatives in Brazil and Mexico in October to balance its menu options and complement premium offerings such as the Picanha burger in Brazil. Net restaurant growth accelerated 139% to 110 units in the fourth quarter, driven by strong development in Brazil, Mexico, and Central America.

Asia Pacific ("APAC") comparable sales increased by 0.8%, driven by better results in Australia and Korea. Net restaurant growth accelerated in APAC in the fourth quarter, up 49% to 70 units, driven by new unit development in China, Japan, Vietnam, and Indonesia.

As part of BKW's global refranchising strategy, the company refranchised 181 company-owned restaurants during the quarter, primarily in the U.S. and Canada. In connection with this quarter's refranchising transactions, BKW received cash proceeds of $34.9 million, development commitments and re-imaging commitments. Including completion of the previously announced refranchising of the company's restaurants in Mexico and the sale of restaurants in the U.S. which closed in the first quarter of 2013, BKW will have completed its refranchising initiative in the U.S., LAC, and APAC.

As part of BKW's international expansion strategy, in the fourth quarter, the company entered into master franchise and development agreements for South Korea and the Nordics (Sweden, Denmark, and Norway), an exclusive development agreement for Colombia and master franchise joint venture agreements for Central America and South Africa. Additionally, the company announced a master franchise joint venture agreement with Alsea S.A.B. de C.V., its largest franchisee in Mexico, which is expected to close in 2013.

Cash and Liquidity

At quarter end, total debt was $3.0 billion and net debt was $2.5 billion. Due to the improvement in net debt and in trailing twelve month Adjusted EBITDA, the net debt to Adjusted EBITDA ratio improved to 3.8x at December 31, 2012 from 4.6x at December 31, 2011.

On February 14, 2013 the company's Board of Directors declared a cash dividend of $0.05 per share, a 25% increase from the previous dividend of $0.04 per share. The dividend will be paid on March 15, 2013 to shareholders of record at the close of business on February 28, 2013. Future dividends will be determined at the discretion of the Board of Directors.

Investor Conference Call

The company will host an investor conference call and webcast at 8:30 a.m. ET, Friday, February 15, 2013, to review financial results for the quarter and fiscal year ended December 31, 2012. The earnings call will be broadcast live via the company's investor relations website at http://investor.bk.com and will be available for replay. The dial-in number is 877.317.6776 for U.S. callers and 412.317.6776 for international callers.

About Burger King Worldwide

Founded in 1954, BURGER KING® (NYS: BKW) is the second largest fast food hamburger chain in the world. The original HOME OF THE WHOPPER®, the BURGER KING® system operates in over 12,900 locations serving over 11 million guests daily in 86 countries and territories worldwide. Approximately 97 percent of BURGER KING® restaurants are owned and operated by independent franchisees, many of them family-owned operations that have been in business for decades. To learn more about Burger King Worldwide, please visit the company's website at www.bk.com or follow us on Facebook and Twitter.

Forward-Looking Statements

This press release contains certain forward-looking statements, which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. These forward-looking statements include statements about the company's expectations and belief regarding its ability to continue to capitalize on the Burger King® brand by growing globally; its expectations and belief regarding its ability to execute on its four pillar strategy in the U.S. and Canada and accelerate restaurant growth internationally; its expectations and belief regarding its ability to complete its refranchising initiative in LAC by closing on its previously-announced refranchising transaction in Mexico; and its expectations and belief regarding its ability to deliver sustainable long-term growth. The factors that could cause actual results to differ materially from the company's expectations are detailed in the company's filings with the Securities and Exchange Commission, such as its annual and quarterly reports and current reports on Form 8-K, including the following: risks related to the company's ability to successfully implement its domestic and international growth strategy; risks related to global economic or other business conditions that may affect the desire or ability of customers to purchase the company's products; risks related to the financial strength of the company's franchisees; risks related to the company's substantial indebtedness; risks related to the company's ability to compete domestically and internationally in an intensely competitive industry; and risks related to the effectiveness of the company's marketing and advertising programs.

BURGER KING WORLDWIDE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
 
  Three Months Ended  
December 31,   Increase / (Decrease)
  2012   2011   $   %
(In millions, except per share data)
Revenues:
Company restaurant revenues $ 182.3 $ 404.4 $ (222.1 ) (54.9 )%
Franchise and property revenues   222.2   176.2   46.0   26.1 %
Total revenues 404.5 580.6 (176.1 ) (30.3 )%
Company restaurant expenses:
Food, paper and product costs 57.5 127.4 (69.9 ) (54.9 )%
Payroll and employee benefits 53.5 116.7 (63.2 ) (54.2 )%
Occupancy and other operating costs   50.2   107.2   (57.0 ) (53.2 )%
Total Company restaurant expenses 161.2 351.3 (190.1 ) (54.1 )%
Franchise and property expenses 25.1 25.5 (0.4 ) (1.6 )%
Selling, general and administrative expenses 79.2 114.4 (35.2 ) (30.8 )%
Other operating (income) expense, net   27.1   1.5   25.6   NM  
Total operating costs and expenses   292.6   492.7   (200.1 ) (40.6 )%
Income from operations 111.9 87.9 24.0 27.3 %
Total interest expense, net 50.2 61.0 (10.8 ) (17.7 )%
Loss on early extinguishment of debt   -   1.5   (1.5 ) NM  
Income before income taxes 61.7 25.4 36.3 142.9 %
Income tax expense   13.1   0.4   12.7   3175.0 %
Net income $ 48.6 $ 25.0 $ 23.6   94.4 %
 
Earnings per share:
Basic $ 0.14 $ 0.07 $ 0.07   93.3 %
Diluted $ 0.14 $ 0.07 $ 0.06   90.0 %
Weighted average shares outstanding
Basic   350.2   348.2   1.9   0.6 %

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