MIAMI - Feb. 15, 2013 - (BUSINESS WIRE) - Burger King Worldwide, Inc. (NYSE: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.”
Consolidated Financial Highlights:
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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%.
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.
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.
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.
Founded in 1954, BURGER KING® (NYSE: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.
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.
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BURGER KING WORLDWIDE, INC. AND SUBSIDIARIES
We evaluate our restaurants and assess our business based on the following operating metrics.
System sales growth refers to the change in sales at all company-owned and franchise restaurants in one period from the same period in the prior year. Comparable sales growth refers to the change in restaurant sales in one period from the same prior year period for restaurants that have been open for thirteen months or longer. Company-owned restaurants refranchised during a quarterly period are included with franchise restaurants for the purpose of calculating comparable sales growth for the quarter. Comparable sales and sales growth are measured on a constant currency basis, which means that results exclude the effect of foreign currency translation and are calculated by translating current year results at prior year exchange rates. We analyze key operating metrics on a constant currency basis as this helps identify underlying business trends, without distortion from the effects of currency movements (“FX Impact”).
Franchise sales represent sales at all franchise restaurants and are revenues to our franchisees. We do not record franchise sales as revenues; however, our franchise revenues include royalties based on a percentage of franchise sales. Average restaurant sales refer to the total sales divided by total store months for all company-owned and franchise restaurants open during the period. Net refranchisings refer to sales of company-owned restaurants to franchisees, net of acquisitions of franchise restaurants by us.
Tabular amounts in millions of dollars unless noted otherwise.
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BURGER KING WORLDWIDE, INC. AND SUBSIDIARIES
(Unaudited)
To supplement its condensed consolidated financial statements presented on a U.S. Generally Accepted Accounting Principles (“GAAP”) basis, the Company reports the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, Adjusted Net Income, adjusted income before income taxes, adjusted income tax expense, net debt, TTM Adjusted EBITDA, net debt to TTM Adjusted EBITDA ratio, Organic revenue growth and Organic Adjusted EBITDA growth.
EBITDA is defined as earnings (net income or loss) before interest, taxes, depreciation and amortization, and is used by management to measure operating performance of the business.
Adjusted EBITDA is defined as EBITDA excluding the impact of share-based compensation, other operating (income) expenses, net, and all other specifically identified costs associated with non-recurring projects, including Transaction costs, global restructuring and related professional fees, field optimization project costs, global portfolio realignment project costs and Business Combination Agreement expenses. Adjusted EBITDA is used by management to measure operating performance of the business, excluding specifically identified items that management believes do not directly reflect our core operations, and represents our measure of segment income.
Adjusted net income is defined as net income excluding the impact of those same items excluded from Adjusted EBITDA. Adjusted Diluted EPS is calculated by dividing Adjusted Net Income by the number of diluted shares of the Company during the reporting period. Adjusted net income and Adjusted Diluted EPS are used by management to evaluate the core operating performance. Net debt to TTM Adjusted EBITDA ratio is used by management to evaluate the Company’s current and prospective financial position.
Organic revenue growth and Organic Adjusted EBITDA growth are non-GAAP measures that exclude both FX Impact and net refranchisings. Management believes that organic growth is an important metric for measuring the core operating performance of the business as it excludes the impact of our refranchising activities and foreign currency exchange rates.
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(1) Represents share-based compensation expense associated with employee stock options, and for the twelve months ended December 31, 2012 and December 31, 2011, also includes the portion of annual non-cash incentive compensation that eligible employees elected to receive as common equity in lieu of their 2012 and 2011 cash bonus, respectively.
(2) Represents expenses incurred related to 3G’s acquisition of Burger King Holdings, Inc., the Company’s indirect wholly-owned subsidiary, in October 2010.
(3) Represents severance benefits, other severance-related costs incurred in connection with the Company’s global restructuring efforts, the voluntary resignation severance program offered for a limited time to eligible employees based at its Miami headquarters and additional reductions in corporate and field positions in the U.S. This restructuring plan was completed in 2011.
(4) Represents severance-related costs, compensation costs for overlap staffing, travel expenses, consulting and training costs incurred in connection with the Company’s efforts to expand and enhance its U.S. field organization. This project was completed in 2011.
(5) Represents costs associated with an ongoing project to realign the Company’s global restaurant portfolio by refranchising Company-owned restaurants and establishing strategic partners and joint ventures to accelerate development. These costs primarily include severance related costs and fees for professional services.
(6) Represents share-based compensation expense related to awards granted during the three and twelve months ended December 31, 2012 resulting from the increase in equity value of Burger King Worldwide Holdings, Inc. implied by the business combination agreement and professional fees and other transaction costs associated with the business combination agreement.
(7) Adjusted income tax expense for the three and twelve months ended December 31, 2012 and 2011 is calculated using the Company’s statutory tax rate in the jurisdiction in which the costs were incurred.
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Founded in 1954, the Burger King® brand is the second largest fast food hamburger chain in the world.