ICR XChange Conference. January 16, 2013

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Blaise Gordon
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1 ICR XChange Conference January 16,

2 Safe Harbor Statement Certain statements made in this presentation that reflect management s expectations regarding future events and economic performance are forward-looking in nature and, accordingly, are subject to risks and uncertainties. These forward-looking statements include statements regarding our expectations regarding our ability to close the ARS gap with our peers, our expectations regarding our ability to lay the foundation for accelerated development through strategic partnerships and capitalize on future opportunities in high growth markets; our expectations regarding our ability to remain focused on our core business strategies to create a brand-focused highly cash flow generative business; our expectations regarding our ability to position ourselves for long-term growth; and our expectations and beliefs regarding the success of our newly-established joint ventures in Russia and China. These forward looking statements are only predictions based on our current expectations and projections about future events. The factors that could cause actual results to differ materially from our expectations are detailed in our filings with the Securities and Exchange Commission, such as our annual and quarterly reports and current reports on Form 8-K, including the following: risks related to the Company s ability to successfully implement its domestic and international growth strategy; risks related to global economic or other business conditions that may affect the desire or ability of customers to purchase the Company s products; risks related to the financial strength of the Company s franchisees; risks related to the Company s ability to compete domestically and internationally in an intensely competitive industry; and risks related to the effectiveness of the Company s marketing and advertising programs. These risks are not exhaustive and may not include factors which could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We do not undertake any responsibility to update any of these forward-looking statements to conform our prior statements to actual results or revised expectations. This presentation also includes non-gaap financial measures as defined in Regulation G, including Adjusted EBITDA, Adjusted EBITDA Capex, Adjusted Net Income, TTM Adjusted EBITDA and Net Debt / TTM Adjusted EBITDA ratio. The reconciliations of these non-gaap financial measures to their most comparable GAAP financial measures and other information required by Regulation G are included in the appendix to this presentation. 1

3 Agenda Company Overview and Investment Highlights 3 Business Strategy 13 Financial Overview 21 Appendix 24 2

4 Agenda Company Overview and Investment Highlights 3 Business Strategy 13 Financial Overview 21 Appendix 24 3

5 Burger King Worldwide Investment Highlights 1. Global iconic brand with presence in over 80 countries 2. Franchise business model enabling growth with minimal capex and strong EBITDA margin 3. Strong, sustainable free cash flow resulting in substantial deleveraging 4. Opportunity to close sales gap with peers domestically 5. International growth opportunities 6. Strong senior management team with impressive track record Achieving strong, sustainable free cash flow growth 4

6 1. Global Footprint 1954: One Restaurant in Miami 2012: 12,667 Restaurants Globally Worldwide US & Canada Latin America EMEA APAC Restaurants 12,667 7,453 1,280 2, % Total 100% 59% 10% 24% 7% $15.6 billion in system-wide sales (1) 95% franchised system (1) Over $800 million in owned real estate (2) 1) For trailing twelve months, as of 9/30/2012 2) Based on management estimates 5

7 2. Franchise-Focused Business Model Once the company has reached a ~100% franchise mix, BURGER KING will be one of the few pure play franchisor/real estate companies in its peer group 95% of system restaurants are franchised (1) with goal of approaching ~100% QSR Percent Franchised System Restaurants 70% 70% 90% 90% Source: Company and SEC filings 1) As of 9/30/2012, including the effect of 714 refranchising transactions in the nine months ended September 30,

WEN PNRA SBUX DPZ BKW 2010 CMG YUM THI BKW LTM 9/12 MCD DNKN Source: Capital IQ, SEC filings and BKW estimates.

8 2. EBITDA Margin Evolution Burger King already has one of the highest Adjusted EBITDA margins in the industry, and expects its margins to further increase as the company continues to implement its refranchising strategy EBITDA Margin (1) 45% 36% 29% 17% 18% 19% 19% 20% 21% 23% 12% WEN PNRA SBUX DPZ BKW 2010 CMG YUM THI BKW LTM 9/12 MCD DNKN Source: Capital IQ, SEC filings and BKW estimates. 1) Peer margins calculated as of the 12 months ended closest to September 30, 2012; BKW margin based on Adjusted EBITDA for the 12 months ended September 30, 2012 of $631 million (1) 7

9 3. Stable Cash Flow Generation Results in Substantial Deleveraging Free cash flow has increased over 70% since the 3G acquisition LTM Adj. EBITDA Capex Proforma Net Debt to LTM Adjusted EBITDA (1,2) ($ in millions) ($ in millions) $478 $503 $519 $558 $ x 6.2x 5.9x $ x $ x 4.4x 4.2x 4.1x $321 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 3G Acquisition Today 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 3G Acquisition Today 1) Net debt defined as total debt, excluding original issue discount, less cash and cash equivalents 2) All financial data assumes Senior Discount Notes (PIK Notes) were outstanding as of 12/31/2010 and is for the last twelve months as of date noted 8

10 4. US & Canada: Closing the Gap We believe the Four Pillars Plan will enable BURGER KING to close the ARS gap with peers LTM North America Average Restaurant Sales (1) ($ in millions) $2.52 Near-Term Opportunities Increase traffic of women, parties with kids, and seniors through broader message and offerings +56% +25% Closing half the gap to MCD $1.18 $1.49 Increase sales at snacking, dinner, and breakfast day parts by filling menu gaps Remodel driven sales uplifts Source: Company and SEC filings 1) Average restaurant sales figures are LTM as of 9/30/2012. Metrics computed based on LTM company or system sales divided by average restaurant counts for US or North America region, as per SEC filings. 9

11 5. International Development Opportunities Burger King has identified the potential to more than double its current international presence EMEA Today: 2,994 restaurants Potential: 2x (1) APAC Today: 940 restaurant Potential: 3x (1) LatAm Today: 1,280 restaurants Potential: 2x (1) 1) As of 9/30/2012; Potential based on management assessment of opportunity 10

12 6. Senior Management Team BKW s management team consists of 3G Capital partners, former InBev/AmBev executives, internally promoted team members, and a former Burger King franchisee All four Zone Presidents have extensive QSR industry experience Bernardo Hees (3G Partner) Chief Executive Officer Daniel Schwartz (3G Partner) EVP & Chief Financial Officer Flavia Faugeres (Former Anheuser Bush InBev) EVP & Global Chief Marketing Officer Heitor Goncalves (Former Anheuser Bush InBev) EVP & Chief Information and Performance Officer Steve Wiborg (Former CEO of Heartland, BKW s 3rd Largest U.S. Franchisee) EVP & President, North America José Cil (Former BK and Walmart Executive) EVP & President, EMEA José Tomas (Internal Promote) EVP, President Latin America and Chief HR & Communications Officer Elías Díaz Sesé (Internal Promote) EVP & President, APAC 11

13 6. Progress Under New Management Substantial financial progress under new management team since 3G acquisition LTM Adjusted EBITDA (1) 3G Acquisition $631 $585 $500 $456 $461 6/30/2009 6/30/2010 6/30/ /31/2011 9/30/2012 Source: Company filings 1) Adjusted EBITDA is a non-gaap number. See appendix for reconciliation. 12

14 Agenda Company Overview and Investment Highlights 3 Business Strategy 13 Financial Overview 21 Appendix 24 13

15 Business Strategy STRATEGY U.S. & Canada Increase average unit sales with Four Pillars Plan Menu Image INITIATIVES Marketing Communications Operations International Accelerate NRG and continued SSS growth Accelerate NRG by creating Master Franchise JVs and Development Agreements Capitalize on emerging middle class consumer spending and underpenetration of BURGER KING Global Refranchising Create a brand-focused highly cash flow generative business 14

16 Business Strategy: 4 Pillars Menu Enhance Core Menu Items Address Menu Gaps Platforms to Build on New & Improved Platforms Winter New Product Offerings 15

17 Business Strategy: 4 Pillars Marketing Broaden Marketing Message New Advertising New marketing campaign launched in April 2012 to re-engage our guests Marketing to all demographics males too narrow of a target market Focus on bringing back women, parties with children and seniors Continued progress in 2H12 on driving traffic in target demographics Food centric ads with new TASTE IS KING tagline appeal to all demographics Promotions support ongoing awareness of new menu platforms and drive traffic with target demographic Premium LTOs also support new platforms while up-selling customers and enhancing system profitability Value Promotions + Premium LTOs = a balanced approach to driving positive profitable traffic 16

18 Business Strategy: 4 Pillars Image Goal to have 40% of U.S. and Canada system units on a modern image by 2015, up from 11% at the end of 2011 Average re-imaging costs are approximately $300,000 per restaurant Re-imaged restaurants continue to experience an average sales uplift of 10-15% Legacy Restaurant Image New 20/20 Restaurant Image 17

19 Business Strategy: 4 Pillars Operations We have further enhanced our evaluation tools with the introduction of an Operations Performance Index ( OPI ) Reflects both guest view and BKW internal metrics like coach visit scores and speed of service New field structure with Sales, Profit and Operations Coach who works shoulder-toshoulder with restaurant team Investing further resources to strengthen field teams and increase touch points with system restaurants Ops Performance Index ( OPI ) Metric GUEST TRAC Net Score Guest Relations Coach Program Description Guest satisfaction survey results; last 3 months Negative contacts; via telephone or web Most recent Coach visit score Working to standardize restaurant crew training and improve new product roll-out Speed of Service Drive-thru window service time 18

20 Business Strategy: International Capitalizing on growth opportunities through the formation of Master Franchise Joint Ventures and Master Development Agreements with experienced local partners International master franchise agreements grant exclusive development rights to a region, align experienced local operators with strong financial partners, and define accelerated unit development commitments Brazil JV formed in 2011, with successful development to-date Signed seven master franchise development agreements in 2012 Singapore, Malaysia, Vietnam, Korea, Nordics, Repsol gas station (Spain), Colombia Signed five joint ventures in 2012 China, Russia, South Africa, Mexico, Central America (1) 1) Central America JV includes Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama 19

21 Business Strategy: Global Refranchising Refranchised 221 restaurants in 3Q12, including 182 in the U.S. and Canada Secured 356 re-imaging commitments in connection with U.S. and Canada transactions BKW typically receives cash, re-imaging and development commitments in each refranchising transaction We believe our refranchising strategy will continue to enhance our cash flow, accelerate the re-imaging initiative and strengthen relationships with key franchisees Q3 Transaction Highlights 78 restaurants in Omaha and Nashville acquired by Heartland Received commitments to re-image at least 225 restaurants BKW also facilitated Heartland s consolidation of another franchisee in the area 55 restaurants in Tampa, Florida 38 restaurants in Singapore Percentage of Franchise Restaurants ~100% 95% 89% 90% 6/30/ /31/2011 9/30/2012 Goal 20

22 Agenda Company Overview and Investment Highlights 3 Business Strategy 13 Financial Overview 21 Appendix 24 21

23 Results since 3G Acquisition Global Same Store Sales Management G&A Adjusted EBITDA (5) 3.4% % -2.3% (1) (3) (4) YTD 2012 (2) (3) (6) LTM (2) (3) (6) LTM System wide Sales Adjusted Net Income (5) Adj. EBITDA Capex (5,8) 14,826 1,740 Franchise Sales Company Restaurant Revenues 15,292 15,621 1,639 1,391 13,086 13,653 14,230 (7) (2) (3) LTM 1) For the 12 months ended 6/30/10 2) For the 12 months ended 12/31/10 3) For Fiscal ) Results from January 1 through September 30, ) Adjusted EBITDA, Adjusted EBITDA-Capex and Adjusted Net Income are non-gaap numbers LTM LTM (6) (2) (3) (6) (2) (3) (6) 6) For the 12 months ended September 30, ) Franchise sales are sales at franchise restaurants and revenues of our franchisees. Our franchise revenues are generally based on a percentage of franchise sales 8) Capex was $78 million for the 12 months ended September 30, 2012; Capex was $82 million for fiscal year 2011; Capex was $133 million for 12 months ended December 31,

24 Initiation of Quarterly Cash Dividend On October 28, 2012, BKW s Board of Directors approved the initiation of a quarterly cash dividend Initial dividend was $0.04 per share paid to holders of record on November 29, 2012 Demonstrates our confidence in BKW s business plan and ability to execute going forward Tangible evidence of our commitment to return capital to shareholders 23

25 Agenda Company Overview and Investment Highlights 3 Business Strategy 13 Financial Overview 21 Appendix 24 24

26 Use of Non-GAAP Financial Measures Below, we define the non-gaap financial measures, provide a reconciliation of each non-gaap financial measure to the most directly comparable financial measure calculated in accordance with GAAP, and discuss the reasons that we believe this information is useful to management and may be useful to investors. These measures may differ from similarly captioned measures of other companies in our industry. Non-GAAP Measures: To supplement our condensed consolidated financial statements presented on a U.S. Generally Accepted Accounting Principles ( GAAP ) basis, the Company reports the following non-gaap financial measures: EBITDA, adjusted EBITDA, adjusted net income, adjusted income before income taxes, adjusted income tax expense, adjusted diluted EPS, net debt, TTM adjusted EBITDA, net debt to TTM adjusted EBITDA ratio, Organic revenue growth and Organic Adjusted EBITDA growth. EBITDA is defined as earnings (net income or loss) before interest, taxes, depreciation and amortization, loss on early extinguishment of debt, and is used by management to measure operating performance of the business. Adjusted EBITDA is defined as EBITDA excluding the impact of share-based compensation, other operating (income) expenses, net, and all other specifically identified costs associated with non-recurring projects, including Transaction costs, global restructuring and related professional fees, field optimization project costs, global portfolio realignment project costs and Business Combination Agreement expenses. Adjusted EBITDA is used by management to measure operating performance of the business, excluding specifically identified items that management believes do not directly reflect our core operations, and represents our measure of segment income. Adjusted net income is used by management to evaluate and forecast earnings from ongoing operations excluding the impact of unusual items. Adjusted Diluted EPS is calculated by dividing adjusted net income by the number of diluted shares of the Company during the reporting period. Net debt to TTM adjusted EBITDA ratio is used by management to evaluate the Company s current and prospective financial position. Organic revenue growth and Organic adjusted EBITDA growth are non-gaap measures that exclude both FX Impact and net refranchising. Net refranchisings refer to sales of Company-owned restaurants to franchisees, net of acquisitions of franchise restaurants by the Company. 25

27 EBITDA and Adj. EBITDA to Net Income EBITDA and adjusted EBITDA: Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, September 30, September 30, December 31, December 31, June 30, (In millions) U.S. and Canada $ $ $ $ $ $ $ $ EMEA LAC APAC Unallocated Management G&A (21.4) (27.9) (75.0) (87.5) (99.0) (111.5) (141.7) (136.6) Adjusted EBITDA Share-based compensation (1) Transaction costs (2) Global restructuring and related professional fees (3) Field optimization project costs (4) Global portfolio realignment project (5) Business combination agreement expenses (6) Other operating (income) expense, net 30.3 (2.7) (18.1) (0.7) EBITDA Depreciation and amortization Income from operations Interest expense, net Loss on early extinguishment of debt Income tax expense Net income $ 6.6 $ 38.8 $ 69.1 $ 63.1 $ 94.1 $ 88.1 $ 45.4 $

28 Reconciliation of Net Income to Adj. Net Income Adjusted net income Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, September 30, December 31, December 31, June 30, (In millions) (In millions) (In millions) Net income $ 6.6 $ 38.8 $ 69.1 $ 63.1 $ 88.1 $ 45.4 $ Income tax expense Income before income taxes Adjustments: Franchise agreement amortization Amortization of deferred financing costs and original issue discount Loss on early extinguishment of debt Other operating (income) expense, net 30.3 (2.7) (18.2) (0.7) 2010 Transaction costs (2) Global restructuring and related professional fees (3) Field optimization project costs (4) Global portfolio realignment project costs (5) Business combination agreement expenses (6) Total adjustments Adjusted income before income taxes Adjusted income tax expense (7) Adjusted net income $ 61.1 $ 54.2 $ $ $ $ $ Diluted- EPS (Adjusted Net Income) $ 0.17 $ 0.16 $ 0.46 $ 0.37 Diluted Weighted Average Shares

29 LTM EBITDA and Adjusted EBITDA EBITDA and adjusted EBITDA September 30, 2012 Twelve Months Ended December 31, 2011 (In millions) December 31, 2010 Net income $ 94.1 $ 88.1 $ 45.4 Interest expense, net Loss on early extinguishment of debt Income tax expense Depreciation and amortization EBITDA Adjustments: Share-based compensation (1) Other operating (income) expense, net (18.2) 2010 Transaction costs (2) Global restructuring and related professional fees (3) Field optimization project costs (4) Global portfolio realignment project costs (5) Business combination agreement expenses (6) Total adjustments Adjusted EBITDA $ $ $

30 Footnotes to Reconciliation Tables (1) Represents share-based compensation expense associated with employee stock options, and for the twelve months ended September 30, 2012 and December 31, 2011, also includes the portion of annual non-cash incentive compensation that eligible employees elected to receive as common equity in lieu of their 2011 cash bonus. (2) Represents expenses incurred related to 3G s acquisition of Burger King Holdings, Inc., the Company s indirect wholly-owned subsidiary, in October (3) Represents severance benefits, other severance-related costs incurred in connection with the Company s global restructuring efforts, the voluntary resignation severance program offered for a limited time to eligible employees based at its Miami headquarters and additional reductions in corporate and field positions in the U.S. This restructuring plan was completed in (4) Represents severance-related costs, compensation costs for overlap staffing, travel expenses, consulting and training costs incurred in connection with the Company s efforts to expand and enhance its U.S. field organization. This project was completed in (5) Represents costs associated with an ongoing project to realign the Company s global restaurant portfolio by refranchising Company-owned restaurants and establishing strategic partners and joint ventures to accelerate development. These costs primarily include severance related costs and fees for professional services. (6) Represents share-based compensation expense related to awards granted during the three and nine months ended September 30, 2012 resulting from the increase in equity value of Burger King Worldwide Holdings, Inc. implied by the Business Combination Agreement and professional fees and other transaction costs associated with the Business Combination Agreement. (7) Adjusted income tax expense for the three and nine months ended September 30, 2012 and 2011 is calculated using the Company s statutory tax rate in the jurisdiction in which the costs were incurred. 29

Burger King Worldwide, Inc. Fourth Quarter 2012 Earnings Conference Call. February 15, 2013

Burger King Worldwide, Inc. Fourth Quarter 2012 Earnings Conference Call February 15, 2013 0 Safe Harbor Statement Certain statements made in this presentation that reflect management s expectations regarding