Miami, Feb 5 - Burger King Holdings, Inc. delivered its 20th consecutive quarter of worldwide positive comparable sales in the second quarter of its 2009 fiscal year, achieving its best positive comparable sales trend in three decades.
Highlights:
* 20th consecutive quarter of worldwide positive comparable sales; up 2.9 percent
* 19th consecutive quarter of United States and Canada positive comparable sales; up 1.9 percent
* Net restaurant count increased by 125 during the quarter; up 19%
* Trailing 12-month net restaurant count increased by 362; on target to meet annual development guidance
Comparable sales were up 2.9 percent, marking five straight years of worldwide same-store-sales growth. In the U.S. and Canada, comparable sales were up 1.9%, the 19th consecutive quarter of same-store-sales growth. Comparable sales were driven by strong performances in key international markets including the U.K., Spain, Canada and Central and South America. In the U.S., strategic pricing, a mix of value and indulgent products, and the continued social relevance of the Burger King® brand fueled positive comparable sales.
The company also posted its best quarterly development growth rate in eight years, opening 125 net new restaurants compared to 105 in the same quarter last year, up 19 percent. As a result, the company is on target to meet its full fiscal year development plan to increase net new restaurant count by 350 to 400.
Revenues for the quarter were $634 million, up three percent over the same quarter last year. Worldwide trailing 12-month average restaurant sales increased to $1.31 million from $1.25 million in the prior year period, a five percent increase.
"Our core business remains strong," said John Chidsey, chairman and chief executive officer. "Even in this uncertain economic environment, we posted positive comparable sales and accelerated our net restaurant openings. We remain focused on profitably growing the brand by increasing our global footprint, providing our guests with an exceptional value for the money dining experience, and continuing to strengthen market awareness as a socially relevant brand.
“In fact, as evidence of our social relevance, Ad Week magazine in December 2008 named our company one of the top three industry-changing advertisers in the last three decades along with NIKE® and Budweiser,” Chidsey added.
Contributing to positive comparable sales for the U.S. and Canada within the quarter were SuperFamily promotions such as iDog™, and a Nintendo™ giveaway promotional tie-in with the BK® Crown Card aimed at driving holiday sales. Advertising campaigns including the “world’s purest taste test – the Whopper® Virgins” and the promotion of the Flame™ Body Spray showcased the brand’s creativity and market leadership while generating significant consumer response. Internationally, sales were driven by limited time Whopper® sandwich offerings, regional products and extensions of the U.S. SuperFamily promotions. In addition, during the quarter, the company realized an increase in its North American competitive hours initiative with 114 company restaurants open 24 hours and it expects 200 company restaurants to be open 24 hours by the end of its 2009 fiscal year.
"Despite significant fluctuations in currency exchange rates, we are extremely pleased with our top-line performance and the continuing strength of our core business. We saw sequential improvement in our company restaurant margins as the quarter progressed as a result of declining commodity costs. The complexity and rapidity in currency fluctuations during our second fiscal quarter, created by uncertainties in the currency markets, was difficult to forecast and anticipate,” Chidsey said.
“Going forward, we expect earnings to continue to benefit from easing food and energy costs, expected sales lifts from new and recently reimaged restaurants, net restaurant openings, product launches, and industry-leading marketing promotions; however, continuing uncertainties in the currency markets may continue to adversely impact earnings."
For the quarter, the company reported earnings per share of $0.33 which includes a negative impact to earnings of $0.05 per share due to currency exchange rate fluctuations as compared to $0.36 in the same quarter last year.
Development and Re-imaging Update
The company saw significant net restaurant expansion in the second quarter in all segments with international markets leading the way as expected. EMEA/APAC opened 87 net new restaurants, Latin America opened 30 net new restaurants and U.S. and Canada opened eight net new restaurants. In October, the company announced a business venture with its Taiwan franchisee, part of its development initiative of seeding international growth.
The company continued its U.S. and Canada reimaging plan in the second quarter adding 14 restaurants to the program. Since the program’s inception, 60 restaurants have been reimaged to date. Remodeled and rebuilt restaurants are generating on average a 12 to 30 percent lift in sales, respectively, making this an attractive investment in the brand.
“We have a strong and predictable cash flow and our hedging activities largely mitigated the impact of currency exchange rate volatility on our cash position. Our debt to earnings ratio is healthy and our debt terms are very favorable,” said Ben Wells, chief financial officer. “We anticipate that our strong solid cash flow and balance sheet will enable us to continue to profitably invest in our company restaurant portfolio for the long-term, building new restaurants in high traffic locations and reimaging existing ones, both aimed at generating significant returns.”
Looking Ahead
"Our overall strategies remain on course and, as forecasted, we expect to realize earnings improvement in the second half of the fiscal year,” Chidsey said. “We are well-positioned to continue both our top and bottom-line expansion as we build on our multi-year track record of positive comparable sales, driven by global expansion, socially relevant marketing campaigns, operational excellence, product innovation and day part expansion.”
For the third and fourth quarters, the promotional and product calendar is designed to drive traffic. Scheduled marketing initiatives include the Nickelodeon Kids’ Choice Awards, The Pink Panther 2™ Super Family Sweepstakes, SpongeBob SquarePants™, Star Trek™, Transformers™ 2 and a strong focus on a value platform. In addition, the launch of the first Whopper™ Bar at Universal CityWalk in Orlando, Fla. this quarter is expected to keep the brand in the forefront. Innovative products will continue to be introduced to satisfy guests seeking indulgent well-priced sandwiches such as the U.S. national limited time offer of the Angry Whopper® sandwich (also offered internationally) and the U.S. regional roll-out of the Steakhouse XT™, an extra thick burger. And for those seeking value-priced alternatives, the company is introducing a mini-burger platform both in the U.S. and internationally. Called BK Burger Shots™ and BK Breakfast Shots™ in the U.S., the mini-burger platform will be available for all day parts.
The company updated its full-year EPS guidance to $1.44 - $1.49, which includes an estimated $0.10 per share negative impact due to movements in currency exchange rates, based on December 31, 2008 exchange rates.
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Burger King Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Dollars and shares in millions, except for per share data) |
|
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|
|
|
|
|
|
|
|
|
|
|
Increase / (Decrease) |
| Three Months Ended December 31, |
2008 |
|
2007 |
|
$ |
|
% |
| Revenues: |
|
|
|
|
|
|
|
| Company restaurant revenues |
$ |
473 |
|
|
$ |
448 |
|
|
$ |
25 |
|
|
6 |
% |
| Franchise revenues |
|
134 |
|
|
|
134 |
|
|
|
- |
|
|
0 |
% |
| Property revenues |
|
27 |
|
|
|
31 |
|
|
|
(4 |
) |
|
(13 |
)% |
| Total revenues |
|
634 |
|
|
|
613 |
|
|
|
21 |
|
|
3 |
% |
| Company restaurant expenses |
|
408 |
|
|
|
378 |
|
|
|
30 |
|
|
8 |
% |
| Selling, general and administrative expenses |
|
120 |
|
|
|
125 |
|
|
|
(5 |
) |
|
(4 |
)% |
| Property expenses |
|
14 |
|
|
|
16 |
|
|
|
(2 |
) |
|
(13 |
)% |
| Other operating (income) expense, net |
|
6 |
|
|
|
(1 |
) |
|
|
7 |
|
|
NM |
|
| Total operating costs and expenses |
|
548 |
|
|
|
518 |
|
|
|
30 |
|
|
6 |
% |
| Income from operations |
|
86 |
|
|
|
95 |
|
|
|
(9 |
) |
|
(9 |
)% |
| Interest expense |
|
16 |
|
|
|
18 |
|
|
|
(2 |
) |
|
(11 |
)% |
| Interest income |
|
(1 |
) |
|
|
(2 |
) |
|
|
1 |
|
|
(50 |
)% |
| Interest expense, net |
|
15 |
|
|
|
16 |
|
|
|
(1 |
) |
|
(6 |
)% |
| Income before income taxes |
|
71 |
|
|
|
79 |
|
|
|
(8 |
) |
|
(10 |
)% |
| Income tax expense |
|
27 |
|
|
|
30 |
|
|
|
(3 |
) |
|
(10 |
)% |
| Net income |
$ |
44 |
|
|
$ |
49 |
|
|
$ |
(5 |
) |
|
(10 |
)% |
|
|
|
|
|
|
|
|
| Earnings per share - basic (1) |
$ |
0.33 |
|
|
$ |
0.36 |
|
|
$ |
(0.03 |
) |
|
(8 |
)% |
| Earnings per share - diluted (1) |
$ |
0.33 |
|
|
$ |
0.36 |
|
|
$ |
(0.03 |
) |
|
(8 |
)% |
|
|
|
|
|
|
|
|
| Weighted average shares - basic |
|
134.6 |
|
|
|
135.3 |
|
|
|
|
|
| Weighted average shares - diluted |
|
136.5 |
|
|
|
137.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) Calculated using whole dollars and shares. |
| NM - Not meaningful |
| |
|
|
|
|
|
Increase / (Decrease) |
| Six Months Ended December 31, |
2008 |
|
2007 |
|
$ |
|
% |
| Revenues: |
|
|
|
|
|
|
|
| Company restaurant revenues |
$ |
970 |
|
|
$ |
889 |
|
|
$ |
81 |
|
|
9 |
% |
| Franchise revenues |
|
280 |
|
|
|
265 |
|
|
|
15 |
|
|
6 |
% |
| Property revenues |
|
58 |
|
|
|
61 |
|
|
|
(3 |
) |
|
(5 |
)% |
| Total revenues |
|
1,308 |
|
|
|
1,215 |
|
|
|
93 |
|
|
8 |
% |
| Company restaurant expenses |
|
843 |
|
|
|
751 |
|
|
|
92 |
|
|
12 |
% |
| Selling, general and administrative expenses |
|
245 |
|
|
|
244 |
|
|
|
1 |
|
|
0 |
% |
| Property expenses |
|
29 |
|
|
|
30 |
|
|
|
(1 |
) |
|
(3 |
)% |
| Other operating (income) expense, net |
|
15 |
|
|
|
(1 |
) |
|
|
16 |
|
|
NM |
|
| Total operating costs and expenses |
|
1,132 |
|
|
|
1,024 |
|
|
|
108 |
|
|
11 |
% |
| Income from operations |
|
176 |
|
|
|
191 |
|
|
|
(15 |
) |
|
(8 |
)% |
| Interest expense |
|
31 |
|
|
|
36 |
|
|
|
(5 |
) |
|
(14 |
)% |
| Interest income |
|
(2 |
) |
|
|
(4 |
) |
|
|
2 |
|
|
(50 |
)% |
| Interest expense, net |
|
29 |
|
|
|
32 |
|
|
|
(3 |
) |
|
(9 |
)% |
| Income before income taxes |
|
147 |
|
|
|
159 |
|
|
|
(12 |
) |
|
(8 |
)% |
| Income tax expense |
|
53 |
|
|
|
61 |
|
|
|
(8 |
) |
|
(13 |
)% |
| Net income |
$ |
94 |
|
|
$ |
98 |
|
|
$ |
(4 |
) |
|
(4 |
)% |
|
|
|
|
|
|
|
|
| Earnings per share - basic (1) |
$ |
0.70 |
|
|
$ |
0.72 |
|
|
$ |
(0.02 |
) |
|
(3 |
)% |
| Earnings per share - diluted (1) |
$ |
0.69 |
|
|
$ |
0.71 |
|
|
$ |
(0.02 |
) |
|
(3 |
)% |
|
|
|
|
|
|
|
|
| Weighted average shares - basic |
|
134.8 |
|
|
|
135.2 |
|
|
|
|
|
| Weighted average shares - diluted |
|
136.9 |
|
|
|
137.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) Earnings per share is calculated using whole dollars and shares. |
| NM - Not meaningful |