Burger King Reports Strong Results Despite FX Headwinds

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On October 29, 2012, Burger King Worldwide Inc (NYSE:BKW) reported Q3 2012 Adjusted EBITDA of $162 mn (flat versus prior year) on revenues of $451.1 million (-25.8% versus $607.7 mn), resulting in an EBITDA margin of 35.9% (+940bps vs 26.5%). Of importance, results this quarter were negatively impacted by re franchising and FX headwinds. The company reported EPS of $0.17, compared to forecasts of $0.15.

Excluding FX and re franchising impact, BKW’s EBITDA would have increased by 6.3% while revenues would have increased by 0.2%. It looks like the company’s largest shareholder Bill Ackman, is making progress in turning around Burger King. The company went public through a “reverse-merger” in which Justice Holdings, a traded shell company absorbed Burger King. Justice Holdings was co-founded by Bill Ackman. Bill Ackman holds approximately 12% of the third-largest U.S. hamburger chain. The largest U.S. hamburger chains are McDonald’s Corporation (NYSE:MCD) and The Wendy’s Company (NASDAQ:WEN)

Looking to system-wide comparable sales, U.S. & Canada reported 1.6% growth as results benefited from new product launches and enhanced marketing efforts. Same stores sales growth in EMEA was +1.8%, while in Latin America was +2.7%. On the flip side, APAC Same stores sales declined by 2.2%. Results were hurt in APAC by weak performance in Australia, Korea and New Zealand. The company declared a quarterly cash dividend of $0.04 per share.

Burger King Worldwide Inc (NYSE:BKW) CEO Bernardo Hees states, “We completed our first full quarter as a public company with continued positive momentum despite the challenging global economic environment. BKW is fortunate to have one of the most widely recognized and resilient brands in the global QSR industry and we are proud of the hard work and dedication of our employees and franchisees who are striving to deliver a strong finish to a critical year for the BURGER KING® system. In the U.S. and Canada, we are executing on our four pillar strategy, while internationally we completed additional refranchisings and development agreements that we believe will accelerate restaurant growth in the years to come.”

Burger King had its initial public offering in late June of this year.

Burger King Worldwide Inc (NYSE:BKW) ended the quarter with LTM Adjusted EBITDA of approximately $631.3 million and interest expense of $211.1 million. Using Restricted Group debt balance of $2.67 bn, Restricted Group leverage was 4.2x and coverage was 3.0x. Factoring in cash balance of $482.8 million, net leverage (RG) was 3.5x. Taking into account the 11% Sr Discount Notes 2019, issued at the non-guarantor subsidiary, total debt for the company was $3.06 billion, putting leverage at 4.8x.

Disclosure: No position


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