Miami, Apr. 29 - Burger King Holdings, Inc. has posted its Q3 2009 results.
Highlights:
* 21st consecutive quarter of worldwide positive comparable sales; up 1.0% despite a 1 point negative calendar shift as 3Q F’08 included an extra day due to leap year.
* 20th consecutive quarter of U.S. and Canada positive comparable sales, up 1.6% despite a 1 point negative calendar shift as 3Q F’08 included an extra day due to leap year.
* Trailing twelve-month net restaurant count increased by 355; on target to meet annual development guidance – among the highest growth rates in the industry.
Comparable sales were driven by a combination of indulgent and value offerings, including the successful multi-market promotion of the Angry Whopper® sandwich in January and the U.S. launch of BK Burger Shots® and BK Breakfast ShotsTM in February. During the quarter, the company also benefited from a significant sales increase in the late night daypart as a result of the North America competitive hours initiative. Worldwide comparable sales rapidly decelerated in the month of March, driven by the current sales environment and the shift of the Easter holiday to the fourth quarter of 2009, with Germany and Mexico markets most affected.
The company opened 53 net new restaurants in the third quarter of its 2009 fiscal year. As a result, trailing 12-month net restaurant count increased 355 over the prior 12-month period. The company is on target to meet its full fiscal year development plan, representing a worldwide net restaurant growth rate of 3% to 3.5%.
Revenues for the quarter were $600 million, up 1% over the same quarter last year. Revenues were unfavorably impacted by $44 million due to fluctuations in currency exchange rates. Worldwide trailing 12-month average restaurants sales were $1.29 million, including a negative exchange rate impact of $35,000, up from $1.27 million in the prior year period.
“We continue to post top-line growth even in this challenging macroeconomic environment,” said John Chidsey, chairman and chief executive officer, Burger King Corp. “We delivered our 21st consecutive quarter of worldwide positive comp sales, our annual net restaurant growth remains on track and our cash flow generation remains strong.
“While we performed well in January and February, the unexpected decline in March traffic across many of the countries in which we operate, particularly the Germany and Mexico markets, adversely affected our results. Although disappointed in our company restaurant margins, we are pleased to have been able to offset the earnings impact with continued revenue growth, general and administrative (G&A) cost reductions, lower interest expense and tax savings. I am also pleased with how the team rapidly readjusted our marketing efforts toward more value focused promotions and menu offerings.”
Worldwide company restaurant margins for the quarter were 11.7% as compared to 13.2% in the prior year period. Worldwide company restaurant margins were negatively impacted by labor inefficiencies as the result of rapid traffic declines in March, increased German labor costs resulting from the previously announced statutory wage increase and new labor contracts, and increases in food, paper and product costs worldwide due to inflation and the impact of cross border commodity purchases. These declines were partially offset by improvements in occupancy and other operating costs primarily due to the lapping of prior year accelerated depreciation expense in conjunction with the company’s reimaging program in the U.S. and Canada.
The company reduced G&A costs by $11 million or 11% to $93 million as compared to the same period last year. As a percentage of revenue, G&A improved 200 basis points year-over-year. Improvements in G&A were primarily the result of the favorable impact from the movement of currency exchange rates on expenses and ongoing cost containment initiatives.
Interest expense improved over the prior year period primarily due to lower average interest rates. The company also paid down $40 million in debt during the quarter and an additional $30 million in April, bringing total debt paid down since after the company’s IPO in May 2006 to $245 million.
The company realized $1 million of other income as compared to the prior year’s other income of $6 million. The main driver of the differential, equal to $0.02 per share, was the gain from the re-franchising of Germany company restaurants last year.
Currency exchange rate fluctuations negatively impacted earnings per share by $0.03, within the expected range for the quarter.
The third quarter tax rate of 25.4% was significantly less than the prior year’s third quarter tax rate of 36.9%. As a result, earnings per share were positively impacted by $0.05. This quarter’s tax rate benefited from the resolution of tax audits.
For the quarter, the company reported earnings per share of $0.34 compared to $0.30 in the same quarter last year.
Capital and Development
“Our disciplined deployment of capital and strong cash flow from operations enable us to invest in the brand for the long-term,” said Ben Wells, chief financial officer, Burger King Corp. “During the first four months of the calendar year, we paid down $70 million in debt, continued to refurbish our company restaurant portfolio, paid a quarterly dividend and maintained a solid cash balance.”
During the quarter, the company re-franchised 19 restaurants in Des Moines, Iowa to a new franchisee. The transaction, part of the company’s proactive portfolio management, is aimed at driving financial performance and development.
Looking ahead
The company’s fiscal 2009 fourth quarter marketing calendar includes promotional movie tie-ins with the highly-anticipated summer releases of expected blockbusters Star Trek and TransformersTM. Superfamily promotions include a $0.99 BK® Kids Meal deal in conjunction with SpongeBob SquarePantsTM and PokemonTM. The company will also continue to promote late night, capitalizing on the daypart’s continued positive momentum. Product launches are also anticipated to drive results, including the Tendercrisp® Bacon Cheddar Ranch limited time offer chicken sandwich and the roll-out of the Steakhouse XTTM, an extra thick juicy burger, to approximately 40% of U.S. designated marketing areas which have installed the new batch broiler.
The company’s results are expected to benefit from its extensive marketing calendar, value-focused marketing initiatives, net restaurant openings and lower food and energy costs in the U.S. However, the company is forecasting continued earnings pressures in its fiscal fourth quarter due to persisting macroeconomic uncertainties and an increased competitive landscape.
“We continue to grow our top-line in this challenging economic environment with positive April comps and are tactically responding to ever-changing market dynamics. However, due to ongoing market challenges and unknown potential effects of the Swine Flu situation, we are taking a more conservative outlook to our fourth quarter fiscal year 2009 earnings estimate,” Chidsey said.
The company anticipates its fourth quarter fiscal year 2009 earnings per share to be in the range of $0.34 to $0.37. As a result, the company now expects its 2009 full fiscal year adjusted earnings per share to be in the range of $1.39 to $1.42; which includes a $0.10 per share negative impact due to movements in currency exchange rates. This forecast is based on information available today and is subject to change based on the impact of the evolving Swine Flu situation on the company’s worldwide business.
“Our cash flows remain strong and we continue to invest - building new restaurants and re-imaging existing ones, introducing new products and extending hours of operations. Going forward, we believe that improving commodity costs and our disciplined focus on driving G&A efficiencies will contribute to overall earnings improvement. Our commitment to grow profitably over the long-term by executing on our strategic growth pillars of marketing, products, development and operations remains on course,” Chidsey concluded.
|
Burger King Holdings, Inc. and Subsidiaries |
|
Condensed Consolidated Statements of Income |
|
(Dollars and shares in millions, except for per share data) |
| |
|
|
|
|
|
|
Increase /(Decrease) |
| Three Months Ended March 31, |
|
2009 |
|
2008 |
|
|
$ |
|
|
% |
|
| Revenues: |
|
|
|
|
|
|
|
|
| Company restaurant revenues |
|
$ |
449 |
|
|
$ |
436 |
|
|
$ |
13 |
|
|
3 |
% |
| Franchise revenues |
|
|
125 |
|
|
|
129 |
|
|
|
(4 |
) |
|
(3 |
)% |
| Property revenues |
|
|
26 |
|
|
|
29 |
|
|
|
(3 |
) |
|
(10 |
)% |
| Total revenues |
|
|
600 |
|
|
|
594 |
|
|
|
6 |
|
|
1 |
% |
| Company restaurant expenses |
|
|
397 |
|
|
|
378 |
|
|
|
19 |
|
|
5 |
% |
| Selling, general and administrative expenses |
|
|
115 |
|
|
|
126 |
|
|
|
(11 |
) |
|
(9 |
)% |
| Property expenses |
|
|
13 |
|
|
|
15 |
|
|
|
(2 |
) |
|
(13 |
)% |
| Other operating (income) expense, net |
|
|
(1 |
) |
|
|
(6 |
) |
|
|
5 |
|
|
NM |
|
| Total operating costs and expenses |
|
|
524 |
|
|
|
513 |
|
|
|
11 |
|
|
2 |
% |
| Income from operations |
|
|
76 |
|
|
|
81 |
|
|
|
(5 |
) |
|
(6 |
)% |
| Interest expense |
|
|
13 |
|
|
|
17 |
|
|
|
(4 |
) |
|
(24 |
)% |
| Interest income |
|
|
- |
|
|
|
(1 |
) |
|
|
1 |
|
|
NM |
|
| Interest expense, net |
|
|
13 |
|
|
|
16 |
|
|
|
(3 |
) |
|
(19 |
)% |
| Income before income taxes |
|
|
63 |
|
|
|
65 |
|
|
|
(2 |
) |
|
(3 |
)% |
| Income tax expense |
|
|
16 |
|
|
|
24 |
|
|
|
(8 |
) |
|
(33 |
)% |
| Net income |
|
$ |
47 |
|
|
$ |
41 |
|
|
$ |
6 |
|
|
15 |
% |
|
|
|
|
|
|
|
|
|
| Earnings per share - basic (1) |
|
$ |
0.35 |
|
|
$ |
0.30 |
|
|
$ |
0.05 |
|
|
17 |
% |
| Earnings per share - diluted (1) |
|
$ |
0.34 |
|
|
$ |
0.30 |
|
|
$ |
0.04 |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
| Weighted average shares - basic |
|
|
134.6 |
|
|
|
135.2 |
|
|
|
|
|
| Weighted average shares - diluted |
|
|
136.7 |
|
|
|
137.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) Calculated using whole dollars and shares. |
|
|
|
|
|
|
|
|
| NM - Not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase /(Decrease) |
| Nine Months Ended March 31, |
|
|
2009 |
|
|
|
2008 |
|
|
|
$ |
|
|
% |
|
| Revenues: |
|
|
|
|
|
|
|
|
| Company restaurant revenues |
|
$ |
1,419 |
|
|
$ |
1,325 |
|
|
$ |
94 |
|
|
7 |
% |
| Franchise revenues |
|
|
405 |
|
|
|
394 |
|
|
|
11 |
|
|
3 |
% |
| Property revenues |
|
|
84 |
|
|
|
90 |
|
|
|
(6 |
) |
|
(7 |
)% |
| Total revenues |
|
|
1,908 |
|
|
|
1,809 |
|
|
|
99 |
|
|
5 |
% |
| Company restaurant expenses |
|
|
1,240 |
|
|
|
1,129 |
|
|
|
111 |
|
|
10 |
% |
| Selling, general and administrative expenses |
|
|
360 |
|
|
|
370 |
|
|
|
(10 |
) |
|
(3 |
)% |
| Property expenses |
|
|
42 |
|
|
|
45 |
|
|
|
(3 |
) |
|
(7 |
)% |
| Other operating (income) expense, net |
|
|
14 |
|
|
|
(7 |
) |
|
|
21 |
|
|
NM |
|
| Total operating costs and expenses |
|
|
1,656 |
|
|
|
1,537 |
|
|
|
119 |
|
|
8 |
% |
| Income from operations |
|
|
252 |
|
|
|
272 |
|
|
|
(20 |
) |
|
(7 |
)% |
| Interest expense |
|
|
44 |
|
|
|
53 |
|
|
|
(9 |
) |
|
(17 |
)% |
| Interest income |
|
|
(2 |
) |
|
|
(5 |
) |
|
|
3 |
|
|
(60 |
)% |
| Interest expense, net |
|
|
42 |
|
|
|
48 |
|
|
|
(6 |
) |
|
(13 |
)% |
| Income before income taxes |
|
|
210 |
|
|
|
224 |
|
|
|
(14 |
) |
|
(6 |
)% |
| Income tax expense |
|
|
69 |
|
|
|
85 |
|
|
|
(16 |
) |
|
(19 |
)% |
| Net income |
|
$ |
141 |
|
|
$ |
139 |
|
|
$ |
2 |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
| Earnings per share - basic (1) |
|
$ |
1.05 |
|
|
$ |
1.03 |
|
|
$ |
0.02 |
|
|
2 |
% |
| Earnings per share - diluted (1) |
|
$ |
1.03 |
|
|
$ |
1.01 |
|
|
$ |
0.02 |
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
| Weighted average shares - basic |
|
|
134.8 |
|
|
|
135.2 |
|
|
|
|
|
| Weighted average shares - diluted |
|
|
136.8 |
|
|
|
137.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) Calculated using whole dollars and shares. |
|
|
|
|
|
|
|
|
| NM - Not meaningful |
|
|
|
|
|