Worldwide Comparable Sales and Profitability Momentum Continues
MIAMI--(BUSINESS WIRE)--Nov. 5, 2007--Burger King Holdings, Inc. (NYSE:BKC):
First quarter fiscal 2008 highlights:
* 15th consecutive quarter of worldwide positive comparable sales; 5.9 percent
* 14th consecutive quarter of United States and Canada positive comparable sales; 6.6 percent
* Revenues up 10 percent, to $602 million
* Income from operations up 17 percent, to $96 million
* Diluted earnings per share improve by 17 percent, to $0.35
Burger King Holdings, Inc. posted solid results for the first quarter of fiscal 2008 across all financial metrics. Revenues, income from operations and earnings per share improved substantially over the prior year period. Positive worldwide comparable sales and an intense focus on execution of the company's strategic growth opportunities drove performance.
Worldwide comparable sales were up 5.9 percent, making this the 15th consecutive quarter of positive comparable sales growth. In the United States and Canada, comparable sales were up 6.6 percent, the 14th consecutive quarter of positive comparable sales growth. As a result, the company posted strong first quarter revenues of $602 million, up 10 percent from $546 million in the same quarter last year.
"Our business momentum continues, as evidenced by strong worldwide quarter over quarter growth. Our evolving menu architecture and the worldwide strength of our marketing alliances drove significant revenue increases," said John Chidsey, chief executive officer. "Our Tendercrisp(R) chicken sandwich limited time offerings appealed to guests seeking indulgence and the new Spicy Chick'N Crisp(TM) sandwich appealed to guests seeking value menu options across multiple markets.
"In addition, we boosted traffic worldwide by leveraging our Simpsons(TM) and Transformers(TM) marketing promotions. In the U.S., our tie-in with The Simpsons(TM) Movie drove sales of the Ultimate Double Whopper(R) sandwich. We also continued to promote our BK(TM) Breakfast Value Menu and Late Night hours, producing the expected improvement in these dayparts. Furthermore, consumers continued to respond favorably to our U.K. brand revitalization efforts. High quality product innovation, including the launch of our BK Fusions(TM) Real Dairy Ice Cream offerings, drove strong sales performance."
System-wide trailing 12-month average restaurant sales (ARS) reached a record high. The system exceeded the $1.2 million ARS threshold for the first time, reporting a 7 percent increase to $1.22 million compared to $1.14 million for the same period in the prior year. System-wide first quarter fiscal 2008 ARS increased 9 percent to $327,000 compared to $300,000 in the same quarter last year.
Company restaurant margin in the United States and Canada increased 50 basis points over the prior year period. Despite higher commodity costs, robust comparable sales enabled company margins to expand. Company restaurants also benefited from the first full quarter of the flexible batch broiler, realizing the forecasted energy savings.
Income from operations of $96 million improved 17 percent over the $82 million reported in the same quarter last year.
Chidsey said: "We continue to effectively leverage our highly franchised business model and our G&A, successfully growing our earnings at a much higher pace than our overall revenues." Diluted earnings per share were up 17 percent to $0.35 compared to diluted earnings per share of $0.30 in the same quarter last year driven by robust top-line and bottom-line expansion.
Uses of Cash
During the first quarter, the company declared and paid a cash dividend of $0.0625 per share, and purchased 252,000 shares through its previously announced share repurchase program. The company also retired an additional $25 million in debt using cash flow generated from operations.
"Our balance sheet continues to offer us the flexibility to return value to shareholders, and maximize returns via strategic initiatives including investing in our restaurant portfolio," said Ben Wells, chief financial officer. "We have solidified our capital spending plan for the 2008 fiscal year and expect to continue to ramp up our company restaurant remodeling and rebuilding efforts in the second half of the year."
Future Growth
The company continued its worldwide restaurant expansion. In the last 12 months, the company and its franchisees opened 440 new Burger King(R) restaurants including 90 in the U.S. and Canada, 260 in the Europe, Middle East, Africa and Asia Pacific segment (EMEA/APAC), and 90 in Latin America. The company increased its net restaurant count by 146 restaurants during that period, bringing the system-wide total to 11,290 on September 30, 2007.
Chidsey said: "In our U.S. and Canada segment, we anticipate net restaurant growth in fiscal 2008 - the first time in six years. Our pipeline in the U.S. is growing as potential and current franchisees recognize the success of our business model and seek development opportunities. I am even more excited about our international growth plans. Opening restaurants in existing and new strategic markets continues to be a top priority and focus of the entire Burger King(R) team worldwide."
Chidsey concluded: "We have multiple growth drivers that fuel results. We powered comparable sales in the first quarter with world class marketing promotions and menu management. In the second quarter, I am excited about our ability to leverage product innovation to drive traffic across all dayparts. Our new Homestyle Melts, out this month, is a product with both breakfast and lunch versions. For Halloween, SuperFans everywhere talked about our King costumes sold via our on-line store and at various retailers, creating even more brand relevance. We are also encouraging family fun at our restaurants with SpongeBob SquarePants(TM) and Viva Pinata(TM) movie tie-ins.
"We are thriving in a challenging economic environment as consumers take advantage of our value and convenience. I am confident in our ability to execute on our strategic growth opportunities and our ability to continue to deliver top of the industry financial performance."
About Burger King Holdings Inc.
The Burger King(R) system operates more than 11,200 restaurants in all 50 states and 69 countries and U.S. territories worldwide. Approximately 90 percent of Burger King(R) restaurants are owned and operated by independent franchisees, many of which are family-owned operations that have been in business for decades. To learn more about Burger King Holdings Inc., please visit the company's Web site at www.bk.com.
Related Communications
Burger King Holdings Inc. (NYSE:BKC) will hold its first quarter earnings call for fiscal year 2008 on Monday, Nov. 5, at 10 a.m. (Eastern time) following the release of its first quarter results before the stock market opens on the same day. During the call, Chief Executive Officer John Chidsey, Chief Financial Officer Ben Wells and Senior Vice President of Investor Relations and Global Communications Amy Wagner will discuss the company's first quarter results.
This call is being webcast and may be accessed at the company's website at www.bk.com through the Investor Relations link.
The webcast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors may listen to the call at www.fulldisclosure.com. Institutional investors may access the call via Thomson's password-protected event management site at www.streetevents.com.
U.S. participants may also access the earnings call by dialing (888) 713-4205; participants outside the United States may access the call by dialing (617) 213-4862. The participant passcode is 60673711. The call will be available for replay by dialing (888) 286-8010 within the United States or (617) 801-6888 from outside the United States. The audio replay passcode is 11250759. The audio replay will be available through Dec. 5, 2007.
Participants may also pre-register for the conference call at: https://www.theconferencingservice.com/prereg/key.process?key=PEDRGJWB 9. (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.)
Forward-Looking Statements
Certain statements made in this report that reflect management's expectations regarding future events and economic performance are forward-looking in nature and, accordingly, are subject to risks and uncertainties. These forward looking statements include statements regarding the Company's ability to continue to effectively leverage its highly franchised business model and G&A; the Company's expectations regarding worldwide restaurant growth, including its pipeline, its ability to achieve net restaurant growth in the U.S. and Canada segment in fiscal 2008 and development in existing and new strategic markets; the Company's expectations regarding its U.K. revitalization efforts; the Company's beliefs regarding its ability to leverage product innovation to drive traffic across all dayparts during the second quarter of fiscal 2008; management's beliefs regarding the Company's balance sheet and its ability to return value to the Company's shareholders and maximize returns via strategic initiatives; the Company's expectations regarding its Company restaurant remodeling and rebuilding efforts in the second half of fiscal 2008; the Company's beliefs regarding its ability to execute on its strategic growth opportunities and continue to deliver top of industry financial performance and other expectations regarding the Company's future financial and operational results. These forward-looking statements are only predictions based on our current expectations and projections about future events. Important factors could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements.
These factors include those risk factors set forth in filings with the Securities and Exchange Commission, including our annual and quarterly reports, and the following:
-- Our ability to compete domestically and internationally in an intensely competitive industry;
-- Our ability to successfully implement our international growth strategy;
-- Risks related to our international operations;
-- Our continued relationship with, and the success of, our franchisees;
-- Our continued ability, and the ability of our franchisees, to obtain suitable locations and financing for new restaurant development;
-- Increases in our operating costs, including food and paper products, energy costs and labor costs;
-- Risks related to our business in the United Kingdom, which may continue to experience operating losses, restaurant closures and franchisee financial distress;
-- Risks related to the loss of any of our major distributors, particularly in those international markets where we have a single distributor, and interruptions in the supply of necessary products to us;
-- Changes in consumer preferences and consumer discretionary spending;
-- The effectiveness of our marketing and advertising programs and franchisee support of these programs;
-- Risks related to franchisee financial distress which could result in, among other things, restaurants closures, delayed or reduced payments to us of royalties and rents and increased exposure to third parties;
-- Risks related to the renewal of franchise agreements by our franchisees;
-- Changes in consumer perceptions of dietary health and food safety and negative publicity relating to our products;
-- Our ability to retain or replace executive officers and key members of management with qualified personnel;
-- Our ability to utilize foreign tax credits to offset our U.S. income taxes due to continuing or increasing losses in the U.K. and other factors and risks related to the impact of changes in statutory tax rates in foreign jurisdictions on our deferred taxes;
-- Our ability to realize our expected tax benefits from the realignment of our European and Asian businesses;
-- Fluctuations in international currency exchange and interest rates;
-- Changes in demographic patterns of current restaurant locations;
-- Our ability to adequately protect our intellectual property;
-- Adverse legal judgments, settlements or pressure tactics; and
-- Adverse legislation or regulation.
These risks are not exhaustive and may not include factors which could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We do not undertake any responsibility to update any of these forward-looking statements to conform our prior statements to actual results or revised expectations.
Burger King Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(Dollars and shares in millions except for per share data)
Increase /
(Decrease)
------------
Three Months Ended September 30, 2007 2006 $ %
------- ------- ------ -----
Revenues:
Company restaurant revenues $ 441 $ 405 $ 36 9%
Franchise revenues 131 113 18 16%
Property revenues 30 28 2 7%
------- ------- ------
Total revenues 602 546 56 10%
Company restaurant expenses 373 343 30 9%
Selling, general and administrative
expenses 119 112 7 6%
Property expenses 14 16 (2) (13)%
Other operating (income) expense, net - (7) 7 NM
------- ------- ------
Total operating costs and expenses 506 464 42 9%
------- ------- ------
Income from operations 96 82 14 17%
Interest expense 18 19 (1) (5)%
Interest income (2) (2) - 0%
------- ------- ------
Interest expense, net 16 17 (1) (6)%
Loss on early extinguishment of debt - 1 (1) NM
------- ------- ------
Income before income taxes 80 64 16 25%
Income tax expense 31 24 7 29%
------- ------- ------
Net income $ 49 $ 40 $ 9 23%
======= ======= ======
Earnings per share - basic (1) $ 0.36 $ 0.30 $0.06 20%
Earnings per share - diluted (1) $ 0.35 $ 0.30 $0.05 17%
Weighted average shares - basic 135.2 133.1
Weighted average shares - diluted 137.7 135.9
(1) Earnings per share is calculated using
whole dollars and shares.
NM - Not meaningful
Use of Non-GAAP Financial Measures
Non-GAAP Reconciliations
(Unaudited)
(In millions except per share data)
A reconciliation for net income to EBITDA is as follows:
Three Months Ended
September 30,
2007 2006
-------- ---------
EBITDA
Net income $ 49 $ 40
Interest expense, net 16 17
Loss on early extinguishment of debt - 1
Income tax expense 31 24
Depreciation and amortization 21 22
-------- ---------
EBITDA $ 117 $ 104
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THE FOLLOWING DEFINITIONS APPLY TO THESE TERMS AS USED THROUGHOUT THIS
RELEASE
Comparable sales growth Refers to the change in restaurant sales in
one period from a comparable period for
restaurants that have been open for thirteen
months or longer, excluding the impact of
foreign currency translation.
Sales growth Refers to the change in restaurant sales from
one period to another, excluding the impact
of foreign currency translation.
Average restaurant sales Refers to the average restaurant sales for
the defined period. It is calculated as the
total sales averaged over total store months
for all restaurants open during that period.
Worldwide Refers to measures for all geographic
locations on a combined basis.
System or system-wide Refers to measures for both Company-owned and
franchise restaurants. Unless otherwise
stated, sales growth, comparable sales
growth and average restaurant sales are
presented on a system-wide basis.
Franchise sales Refers to sales at all franchise restaurants.
Although the Company does not record
franchise sales as revenues, royalty
revenues are based on a percentage of sales
from franchise restaurants and are reported
as franchise revenues by the Company.
Company restaurant Consists of sales from Company-owned
revenues restaurants.
Franchise revenues Consists primarily of royalties and franchise
fees.
Property revenues Includes property income from restaurants
that the Company leases and subleases to
franchisees.
Company restaurant Consists of all costs necessary to manage and
expenses operate Company-owned restaurants including
(a) food, paper and product costs, (b)
payroll and employee benefits, and (c)
occupancy and other operating expenses which
include rent, utility costs, insurance,
repair and maintenance costs, depreciation
for restaurant property and other costs to
operate Company-owned restaurants.
Company restaurant Represents Company restaurant revenues less
margin Company restaurant expenses.
Property expenses Includes rent and depreciation expense
related to properties leased or subleased to
franchisees and the cost of building and
equipment leased to franchisees.
Selling, general and Comprises (a) selling expenses, which include
administrative expenses advertising and bad debt expense, (b)
(SG&A) general and administrative expenses, which
include costs of field management for
Company-owned and franchise restaurants and
corporate overhead, including corporate
salaries and facilities, and (c)
amortization of intangible assets.
Other operating (income) Includes (income) and expenses that are not
expense, net directly derived from the Company's primary
business and the impact of foreign currency
transaction gains and losses. Expenses also
include write-offs associated with Company
restaurant closures and other asset write-
offs.
Three Months Ended
September 30,
-----------------------
% Increase
2007 2006 (Decrease)
------ ----- ----------
Company restaurant revenues: Unaudited
U.S. & Canada $ 290 $ 271 7 %
EMEA/APAC 135 119 13 %
Latin America 16 15 7 %
------ -----
Total Company restaurant revenues 441 405 9 %
------ -----
Franchise revenues:
U.S. & Canada 79 70 13 %
EMEA/APAC 41 33 24 %
Latin America 11 10 10 %
------ -----
Total franchise revenues 131 113 16 %
------ -----
Property revenues:
U.S. & Canada 23 21 10 %
EMEA/APAC 7 7 0 %
Latin America - - 0 %
------ -----
Total property revenues 30 28 7 %
------ -----
Total revenues:
U.S. & Canada 392 362 8 %
EMEA/APAC 183 159 15 %
Latin America 27 25 8 %
------ -----
Total revenues $ 602 $ 546 10 %
====== =====
Total Revenues
Key Revenue Performance Measures
As of September 30,
-----------------------------
Increase/
2007 2006 (Decrease)
------ ----------- ----------
Number of Company restaurants: (Unaudited)
U.S. & Canada 901 882 19
EMEA/APAC 311 296 15
Latin America 77 70 7
------ ----------- ----------
Total 1,289 1,248 41
====== =========== ==========
Number of franchise restaurants:
U.S. & Canada 6,581 6,639 (58)
EMEA/APAC 2,581 2,499 82
Latin America 839 758 81
------ ----------- ----------
Total 10,001 9,896 105
====== =========== ==========
Number of system restaurants:
U.S. & Canada 7,482 7,521 (39)
EMEA/APAC 2,892 2,795 97
Latin America 916 828 88
------ ----------- ----------
Total 11,290 11,144 146
====== =========== ==========
Three Months Ended
September 30,
--------------------
2007 2006
--------- ----------
(in constant
currencies)
Comparable sales growth:
U.S. & Canada 6.6 % 2.6 %
EMEA/APAC 4.6 % 1.1 %
Latin America 3.8 % 6.1 %
Total worldwide 5.9 % 2.4 %
Sales growth:
U.S. & Canada 6.7 % 1.9 %
EMEA/APAC 11.6 % 6.9 %
Latin America 14.4 % 15.7 %
Total worldwide 8.5 % 4.0 %
(In actual
currencies)
Worldwide average restaurant sales (In thousands) $ 327 $ 300
Three Months Ended
September 30,
-------------------------
% Increase/
2007 2006 (Decrease)
------ ------ -----------
Franchise sales: (Dollars in millions) (Unaudited)
U.S. & Canada $2,083 $1,947 7 %
EMEA/APAC 921 773 19 %
Latin America 222 194 14 %
------ ------
Total worldwide $3,226 $2,914 11 %
====== ======
Company Restaurant Margin (Dollars in millions)
Percent of
Revenues
(1) Amount
-----------------------
Three Months Ended September 30, % Increase/
(Decrease)
2007 2006 2007 2006 (1)
----- ----- ----- ----- -----------
Company restaurants: (Unaudited)
U.S. & Canada 15.3% 14.8% $ 44 $ 40 10.2%
EMEA/APAC 14.4% 15.2% $ 20 $ 18 7.7%
Latin America 23.8% 25.3% $ 4 $ 4 0.0%
----- ----- ----- -----
Total 15.3% 15.3% $ 68 $ 62 8.9%
===== ===== ===== =====
(1) Calculated using dollars expressed in hundreds of thousands.
Three Months
Ended
September 30,
--------------
Company restaurant expenses as a
percentage of revenues: (1) 2007 2006
------- ------
Food, paper and product costs 31.1% 30.1%
Payroll and employee benefits 29.7% 29.5%
Occupancy and other operating costs 23.9% 25.1%
------- ------
Total Company restaurant expenses 84.7% 84.7%
(1) Calculated using dollars expressed in the
hundreds of thousands.
Three Months Ended
September 30,
-----------------------
% Increase/
2007 2006 (Decrease)
------ ---- -----------
(Unaudited)
Selling Expenses $23 $19 21 %
General and Administrative Expenses 96 93 3 %
------ ----
Total Selling, General and Administrative
Expenses $119 $112 6 %
====== ====
Three Months Ended September 30,
---------------------------------
% Increase /
2007 2006 (Decrease)
---------- --------- ------------
(Unaudited)
U.S. & Canada $ 97 $ 87 11 %
EMEA/APAC 20 20 0 %
Latin America 9 8 13 %
Unallocated (30) (33) (9)%
---------- ---------
Total $ 96 $ 82 17 %
========== =========
Founded in 1954, the Burger King® brand is the second largest fast food hamburger chain in the world.