Burger King Holdings, Inc. Reports First Quarter Fiscal 2009 Results

Highlights:

• Revenues up 12 percent to $674 million

• 19th consecutive quarter of worldwide positive comparable sales, 3.6 percent

• 18th consecutive quarter of United States and Canada positive comparable sales, 3.0 percent

• Trailing 12-month (TTM) average restaurant sales (ARS) up 8 percent, to $1.32 million - a new record high

• TTM net restaurant count increases by 342 - on target to meet annual guidance

Burger King Holdings, Inc. delivered robust revenue growth led by an increased number of company restaurants, positive worldwide comparable sales in all segments and significant worldwide net restaurant expansion.

Comparable sales were up 3.6 percent, marking the 19th consecutive quarter of worldwide same-store-sales growth. In the United States and Canada, comparable sales were up 3.0 percent, the 18th consecutive quarter of same-store-sales growth. Additionally, the system opened 67 net new restaurants, the highest number of first quarter net restaurant openings in seven years.

As a result, the company posted strong revenues for the first quarter of $674 million, up 12 percent from $602 million in the same quarter last year.

'The global strength of our business is evidenced by our solid top-line expansion,' said John Chidsey, chairman and chief executive officer. 'We delivered strong revenues even with mounting economic and consumer uncertainties by successfully executing on our multiple growth strategies, including net restaurant growth, product innovation, marketing leadership, longer competitive hours and operational excellence.'

Comparable sales worldwide were fueled primarily by the implementation of strategic pricing as well as a strong mix of high demand indulgent and value product offerings and promotional tie-ins. Results were also aided by regionally based offerings such as the successful introduction of an innovative and healthy kids meal, which includes BKTM Fresh Apple Fries and nutritionally fortified Kraft(R) Macaroni and Cheese in the U.S. and Whopper(R) sandwich limited time offers in both Europe and Latin America. Also contributing to sales were family promotions used throughout many markets including PokemonTM, CrayolaTM and Neopets(R).

'We significantly expanded our revenue as we leveraged our global footprint and broad-based consumer appeal. Our guests continue to seek our affordable pricing, elevated quality and convenience. We believe our brand is positioned to perform well in spite of the current economic slowdown as proven by our track record of continued sales increases,' Chidsey added.

Worldwide trailing 12-month ARS reached a record high - posting an 8 percent increase to $1.32 million compared to $1.22 million in the same period last year. Worldwide first quarter fiscal 2009 ARS increased 5 percent to $343,000 compared to $327,000 in the same quarter last year.

'We are very pleased with our top-line performance, however, we recognize company restaurant margins were significantly pressured by record high commodity costs, expenses related to our U.S. and Canada reimaging program and acquisition start-up costs,' Chidsey said.

The company's earnings were also impacted by an incremental $9 million of expenses recorded in Other Income and Expense as compared to the same period last year. Five million (equaling $0.02 of EPS) of the increase consisted of primarily non-cash expenses resulting from volatility in foreign currencies and interest rate markets.

Chidsey continued: 'Going forward, we expect earnings will benefit from already moderating food and energy costs, expected sales lifts from the newly reimaged company restaurants and the elimination of acquisition expenses.'

For the quarter, the company reported earnings per share of $0.36 compared to $0.35 in the same quarter last year. Adjusted earnings per share, excluding $3 million of adjustments, increased 9% percent to $0.38 compared to $0.35 in the year ago period. These adjustments consisted of expenses related to the previously announced acquisition of 72 franchise restaurants, specifically settlement charges and start-up costs.

Development

In the first quarter, the company increased its worldwide net restaurant count by 67, led by its international markets in Europe and the Middle East. During the last 12 months, the company opened a total of 342 net new restaurants.

'The momentum of our global development pipeline is confirmed by our solid quarterly and trailing 12-month net restaurant growth,' Chidsey said. 'Given our strong development activity and our first quarter net restaurant growth, we expect to achieve our planned 350 to 400 net new restaurants in fiscal 2009 as we expand our brand in North America and around the world.'

Uses of Cash

During the first quarter, the company generated $52 million of cash flow from operations, which was used for key strategic purposes targeted at enhancing shareholder value. The company declared and paid a cash dividend totaling $8 million and opportunistically repurchased $18 million of its shares. The company also invested $4 million on its U.S. and Canada reimaging program which is expected to generate attractive returns.

'Even amidst the current economic slowdown, our ability to generate solid cash flow is a fundamental benefit of our highly franchised business model,' said Ben Wells, chief financial officer. 'And our strong balance sheet uniquely positions us to invest in the brand, driving future growth.'

Future growth

The product and promotional calendar for the second quarter is structured to continue the company's multi-year positive comparable sales trend. Scheduled marketing initiatives include a soon-to-be announced interactive gaming promotion. Other campaigns slated to increase SuperFamily sales include iDogTM and The SimpsonsTM. In addition, the company will strategically focus on expanding the breakfast and late-night dayparts with competitive hours advertising and will continue to build upon its successful barbell menu strategy.

Chidsey concluded: 'Our business fundamentals remain strong and we believe that our brand is well positioned to drive future profitability as we continue to execute on our proven strategies: expanding our global footprint, accelerating our company restaurant reimaging program, providing our guests with an exceptional dining experience, and maintaining our industry-leading marketing. Our strategies remain on course, therefore, we are reaffirming our full-year EPS forecast of $1.54 to $1.59 for 12 to 15 percent EPS growth based on our outlook for continued positive comparable sales, significant restaurant development and increased income from operations.'

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