Burger King's earnings receive international boost

Burger King Holdings Inc. released results for its third quarter 2011 that included a system-wide comparable sales increase of 1.6 percent driven by its international performance.

In Latin America, comparable sales grew by 10.5 percent and in Europe, Middle East, Africa and Asia Pacific (EMEA/APAC), sales were up by 3.0 percent.

In the U.S. and Canada, comparable sales were relatively flat.

The company's global net restaurant count increased by 59 restaurants. International operating segments accounted for more than 90 percent of the net restaurant increase. The company also completed the refranchising of 35 company restaurants in the U.S. and Canada during the third quarter.

Other highlights from the report include:

  • Third quarter adjusted EBITDA increased by 39 percent when compared to adjusted EBITDA of $116.0 million in the same quarter of 2010. This was positively impacted by strong international results and improved U.S. performance.
  • The adjusted net income of $56.5 million for the quarter is compared to adjusted net income of $49.4 million for the same quarter 2010.
  • The net income of $48.1 million for the quarter is compared to net income of $63.4 million for Q3 2012, primarily due to a significant increase in interest expense as a result of the company's debt structure. In addition, the company realized benefits from the sale of its Netherlands entity which positively impacted net income in the prior year.

Also, revenues were up to $608.1 million, compared to $600 million for Q3 2012. This was due to a comparable sales growth of 1.6 percent and the opening of 189 net restaurants throughout the past year.

"We are pleased with our global comparable sales performance and continued growth in adjusted EBITDA. This quarter marks our strongest growth in adjusted EBITDA since the acquisition in October 2010," said Daniel Schwartz, chief financial officer.

Domestic game plan

In the U.S., Burger King remains focused on four objectives – an enhanced menu, improved restaurant image, streamlined operations and revamped marketing communications to appeal to a broader consumer base.

The third quarter's soft serve launch helped yield an improvement in comp sales, Schwartz said. The company anticipates other recent rollouts, such as the Stacker Line and the Premium Chef's Choice burgers, to attract a wider demographic.

"Our soft serve dessert program launched in September and hit a peak of 200 units a day, which well exceeded our expectations. We're very happy with the launch," said Steve Wiborg, president. "Our new Chef's Choice was launched a couple of weeks ago and is exceeding expectations, so we've made it a permanent item."

Domestically, the company continues to focus on improving restaurants and operations.

For the reduced cost remodeling program, Schwartz said there is "substantial interest" from franchisees to participate. The program is scheduled to accelerate in 2012, costing an average of $250,000 per unit. Burger King expects about 1,000 remodeled units throughout the next 12 months.

To help achieve the goal of having better operations, Burger King launched a field optimization restructuring program in September, expanding its U.S. field operations team to better support the franchise system. Currently, there are 160 sales and operations coaches helping franchisees identify strategies to improve their business.

"This is all in response to focus on improving our guest service, while delivering high quality food. We're a restaurant company and we're aiming to be the best restaurant company out there," Schwartz said.

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