Burger King Holdings, Inc. Non-Deal Roadshow May 2010
Safe harbor statement Certain statements made in this report 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 ability to effectively manage our business for the long term to ensure the success and growth of the brand; our expectations regarding our ability to open 250 to 300 net new restaurants during fiscal 2010; our expectations regarding our fiscal 2010 fourth quarter marketing calendar and the success of the featured products and promotions; our expectations regarding our ability to drive higher check with new indulgent products; our expectations regarding our ability to successfully position the brand for when the economy recovers; our expectations regarding our ability to offer a product line-up that includes a balance of value and premium products to take full advantage of our proprietary flexible broiler; our expectations regarding the success of our enhanced breakfast platform, led by the roll-out of Seattle s Best Coffee ; our expectations regarding our ability to remain on track in both our net new restaurant openings and on our restaurant reimaging initiative; our expectations regarding our ability to continue to find new ways to run even more efficient restaurants and control overhead spending; our expectations regarding our global momentum and ability to keep moving the brand forward; our expectations regarding fourth quarter and full fiscal year 2010 worldwide system comparable sales; and other expectations regarding our future financial and operational results. These forward-looking statements are only predictions based on our current expectations and projections about future events. Important factors could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by these forwardlooking statements. These factors include those risk factors set forth in filings with the Securities and Exchange Commission, including our annual and quarterly reports, and the following: global economic or other business conditions that may affect the desire or ability of our customers to purchase our products such as inflationary pressures, higher unemployment rates, increases in gas prices, declines in median income growth, consumer confidence and consumer discretionary spending and changes in consumer preferences, and the impact of negative sales and traffic on our business, including the risk that we will be required to incur non-cash impairment or other charges that reduce our earnings; risks related to adverse weather conditions and other uncontrollable events, and the impact of such events on our operating results; our ability to compete domestically and internationally in an intensely competitive industry; our ability to successfully implement our international growth strategy and risks related to our international operations; risks arising from the significant and rapid fluctuations in the currency exchange markets and the decisions and positions that we take to hedge such volatility; risks related to continued losses in our German business, including the potential for an impairment of our long-lived assets and a valuation allowance on a portion of our deferred tax asset balance, which would have a negative impact on our future effective income tax rate, operating results and financial condition; our ability and the ability of our franchisees to manage increases in operating costs, including future mandated health care costs, if we or our franchisees choose not to pass, or cannot pass, these increased costs on to our guests; our relationship with, and the success of, our franchisees; the effectiveness of our marketing and advertising programs and franchisee support of these programs; risks related to franchisee financial distress due to issues arising with their Burger King restaurants or losses from other businesses, which could result in, among other things, restaurant closures, delayed or reduced payments to us of royalties and rents and increased exposure to third parties, such as landlords; the ability of our franchisees to refinance their business or to obtain new financing for development, restaurant remodels and equipment initiatives on acceptable terms or at all, and the strength of the financial institutions that have historically provided financing to franchisees; risks related to disruptions and catastrophic events, including disruption in the financial markets, war, terrorism and other international conflicts, public health issues such as the H1N1 flu pandemic, and natural disasters, and the impact of such events on our operating results; risks related to food safety, including foodborne illness and food tampering, and the safety of toys and other promotional items available in our restaurants; risks related to the loss of any of our major distributors, particularly in those international markets where we have a single distributor, and interruptions in the supply, or increases in the cost, of necessary products to us due to adverse weather and climate conditions or otherwise; our ability to execute on our reimaging program in the U.S. and Canada to increase sales and profitability and our ability to successfully execute our portfolio management strategy; our ability to implement our growth strategy and strategic initiatives given restrictions imposed by our senior credit facility; risks related to the ability of counterparties to our secured credit facility, interest rate swaps and foreign currency forward contracts to fulfill their commitments and/or obligations; risks related to interruptions or security breaches of our computer systems and risks related to the lack of integration of our worldwide technology systems; our ability to continue to extend our hours of operation, at least in the U.S. and Canada, to capture a larger share of both the breakfast and late night dayparts; changes in consumer perceptions of dietary health and food safety and negative publicity relating to our products; our ability to retain or replace executive officers and key members of management with qualified personnel; risks related to changes in the mix of earnings in countries with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities and continued losses in certain international Company restaurant markets that could trigger a valuation allowance or negatively impact our ability to utilize foreign tax credits to offset our U.S. income taxes; risks related to the reasonableness of our tax estimates, including sales, excise, GST, VAT and other taxes; our ability to realize our expected tax benefits from the realignment of our European and Asian businesses; our ability to manage changing labor conditions in the U.S. and internationally; adverse legal judgments, settlements or pressure tactics; and adverse legislation or regulation. 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 our 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. 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 (see slides 41-45) posted on our website at www.bk.com. 2
John Chidsey Chairman and CEO
Strong global presence Worldwide (WW) # of restaurants 12,115 12% Company / 88% franchise U.S. & Canada Latin America EMEA / APAC # of restaurants 7,557 14% Company / 86% franchise # of restaurants 1,109 9% Company / 91% franchise # of restaurants 3,449 10% Company / 90% franchise Note: Restaurant count as of March 31, 2010. 4 4
Where we are today Worldwide net restaurant growth rate is among the highest in the industry Strong operating cash flow generation Significant progress in restaurant level initiatives, equipment and tools, aimed at enhancing profitability Product innovation flexing both ends of barbell menu focus on daypart expansion Consistently delivering on our True North Plan s four pillars: Profitably growing the brand Running great restaurants Investing wisely Focusing on our people 5
The future in focus: True North Plan Our Directional Plan for Success Grow the Brand Deliver a consistent Brand image Increase ARS and net restaurant growth in existing and new markets Continue product innovation leadership Leverage barbell menu strategy Drive breakfast, late-nite, snacking dayparts Provide the best value for the money Run Great Restaurants Deliver a consistently excellent experience to guest, every time Leverage flame-broiled cooking platform Equipment innovation to drive efficiencies and cost management Invest Wisely Focus on investments that produce the best returns Upgrade restaurant image with attractive cash-on-cash returns Effectively manage costs and improve controls at the restaurant level Roll-out new equipment Focus on People Aligning our people to our business strategy Strong focus on succession planning Cultivate relations with our #1 customer, our franchisees Continue to engage and develop our people while upholding our Pay for Performance culture We remain committed and focused on the success and growth of our brand by effectively managing our business for the long term 6
Current challenges and opportunities Main challenge High levels of unemployment and underemployment Company focus Cost containment Development Improving comparable sales and traffic Opportunities Continued deployment of equipment and tools aimed at improving restaurant level performance Lower real estate and construction costs in the U.S. Combination of affordable and indulgent products 7
Robust product pipeline Past Now and future Affordable Offerings Indulgent Offerings We are tactically flexing both ends of our Barbell Menu Strategy aimed at driving average check and traffic 8
Marketing overview Food Brand and Social Brand Movie tie-ins, digital media, concerts, games and much more Whopper Freakout & Whopper Virgins Flame TM body spray 1980 s NIKE 1990 s BUDWEISER 2000 s BURGER KING X-BOX Social Networking We are repositioning our marketing efforts from one of brand stature to one of brand strength 9
Operations excellence: Running great restaurants Clean and safe Playgrounds Our focus: Hot and fresh Great burger strategy Friendly and fast Have It Your Way service Teach and coach Global training consistency Cost and controls Profitability walk-thru Progressive improvements: Operations excellence Expansion of our footprint: Worldwide operations excellence scores GuestTrac SM Speed of service Lower employee turnover Competitive hours New broiler rolled out to 70% of the system worldwide New POS rolled out to 59% of the system worldwide Note: Broiler roll out percentage consists of ordered or installed equipment as of March 31, 2010. 10
Worldwide development: Growing the brand Net restaurant growth by segment - percentage of total U.S. and Canada Latin America EMEA/APAC Percentage restaurant count distribution At IPO, Now 1 and 5 year projection At IPO U.S. & Canada International 360 73% 305 32% 68% 282 71% Now 1 56% 38% 62% 35% 9% 6% 21% 11% 18% 5 year projection FY2008 FY2009 TTM Q3 FY2010 50% 50% Portfolio diversification International segments represented 32% of our total restaurant count at the time of IPO, now they represent 38% 1 Based on restaurant count as of March 31, 2010. 11
New restaurants Exterior Note: First row from left to right: Franchise restaurants located in Ridgeland, Mississippi and Anderson, South Carolina, respectively. Second row from left to right: Franchise restaurants located in North Port, Florida and Houston, Texas, respectively. 12
New restaurants Interior Note: First row from left to right: Company restaurants located in High Point, North Carolina and Charlotte, North Carolina, respectively. Second row from left to right: Franchise restaurants located in Houston, Texas. 13
Investing to drive future growth 20/20 restaurant image Whopper TM Bar Note: First row: Company restaurant located in Singapore. Second row: Company and Franchise restaurants located in Clarke Quay, Singapore and Malaga, Spain, respectively. 14
Company restaurant Remodel BEFORE AFTER Remodels continue to generate solid sales lifts Note: Photo of a Company restaurant located in Bricktown, New Jersey. 15
Company restaurant Scrape and rebuild BEFORE AFTER Our upgraded image is enhancing the guest experience Note: Photo of a Company restaurant located in Greensboro, North Carolina. 16
Reflags and Conversions KFC & Pizza Hut Reflag Starbucks Conversion Taking advantage of current deflationary commercial real estate environment Note: Franchise restaurants located in Chicago, Illinois and La Mirada, California, respectively. 17
Benefit of worldwide ARS growth on EBITDA Worldwide franchise restaurant impact 1 Worldwide Company restaurant impact 1 10,657 franchise restaurants X $100,000 increase in ARS = $1,066M increased franchise system sales X Avg. royalty rate of 4.06% 2 = Potential EBITDA 3 upside of $43M 1,458 Company restaurants X $100,000 increase in ARS = $146M increased company system sales X 35% flow through rate = Potential EBITDA 3 upside of $51M Every $100K increase in worldwide ARS could drive an increase of approximately $94M in EBITDA 3 and $0.44 in EPS 1 Worldwide restaurant count as of March 31, 2010. 2 The blended worldwide royalty rate for Q3 FY2010 was 4.09% and included approximately $1.2 million of deferred royalty payments in EMEA. Net of the deferred royalty payments, the blended worldwide royalty rate was 4.06%. 3 EBITDA is a non-gaap financial measure; see appendix for why management believes this is a meaningful measure. 18
Benefit of net restaurant growth on EBITDA Worldwide franchise restaurant impact 1 Worldwide Company restaurant impact 1 248 franchise restaurants X $1.3M ARS = $322M increased franchise system sales X Avg. royalty rate of 4.06% 2 = Potential EBITDA 3 upside of $13M 27 Company restaurants X $1.3M ARS = $35M increased company system sales X Company restaurant margin 4 = Potential EBITDA 3 upside of $6M Net restaurant growth target could drive an increase of approximately $19M in EBITDA 3 and $0.09 in EPS 1 Assumes average of 250-300 net new restaurant growth as per guidance provided during Q3 FY2010 earnings call on April 29, 2010. 2 The blended worldwide royalty rate for Q3 FY2010 was 4.09% and included approximately $1.2 million of deferred royalty payments in EMEA. Net of the deferred royalty payments, the blended worldwide royalty rate was 4.06%. 3 EBITDA is a non-gaap financial measure; see appendix for why management believes this is a meaningful measure. 4 Based on company restaurant margins for TTM Q2 FY2010 for restaurants in the $1.3M - $1.5M ARS sales band. 19
Worldwide net restaurant growth and SSS Net restaurant growth Same store sales 360 305 5.6% 5.4% 282 3.4% 154 1.0% 1.9% 1.2% 25 FY2006 FY2007 FY2008 FY2009 TTM Q3 FY2010-2.9% FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 Q1 - Q3 FY2010 Our net restaurant growth rate is among the highest in the industry and we continue to develop innovative products that support both ends of our barbell menu strategy 20
Net restaurant growth: Growing the brand Top restaurant count markets - vast development opportunities Restaurants as of 3/31/2010 % of total MCD restaurant 1 count % of total U.S. Germany UK Spain Mexico Australia Canada 7,263 681 507 494 416 337 294 60% 6% 4% 4% 3% 3% 2% 13,954 1,364 1,194 406 382 808 1,427 43% 4% 4% 1% 1% 3% 4% Subtotal 9,992 82% 19,535 60% Rest of world 2,123 18% 12,953 40% Total 12,115 100% 32,488 100% Since the IPO, we have entered into 11 new countries and have opened more than 1,000 net new restaurants Note: Restaurant count as of March 31, 2010. 1 McDonald s restaurant count is as of March 31, 2010 as reported in McDonald s Form 8-K filed on April 21, 2010. 21
The results - Our Scorecard OUR PROGRESS CONTINUES: FY2006 FY2007 FY2008 FY2009 Q1 Q3 FY2010 Increased restaurant count 11,129 11,283 11,565 11,925 12,115 Worldwide comp sales (in constant currencies) 1 1.9% 3.4% 5.4% 1.2% (2.9)% TTM worldwide average restaurant sales (ARS) $1.13M $1.19M $1.30M $1.26M $1.24M 2 Company restaurant margin (CRM) 14.5% 15.0% 14.3% 12.6% 12.7% Royalty rate 3.68% 3.79% 3.98% 4.05% 4.04% Solid capital structure (net debt to TTM adjusted EBITDA) 3 2.5x 2.1x 1.8x 1.9x 1.7x We continue to find ways to run even more efficient restaurants and control our overhead spending 1 Comp sales are analyzed on a constant currency basis, which means they are calculated by using the average exchange rate of the prior year period for both periods under comparison to remove the effects of currency fluctuation from this trend analysis. 2 The worldwide ARS shown above includes the unfavorable impact from the movement of currency exchange rates of $6,000 for TTM Q3 FY2010. 3 EBITDA, adjusted EBITDA, TTM adjusted EBITDA, net debt, and net debt to TTM adjusted EBITDA are non-gaap financial measures; see appendix for reconciliations to GAAP measures and why management believes these are meaningful measures. TTM adjusted EBITDA is adjusted EBITDA for the trailing twelve month (TTM) period. 22
The results strong worldwide performance Strong revenue growth (in $ millions) Solid profitability adjusted EBITDA 2 (in $ millions) $1,940 $2,048 CAGR 1 = 7% $2,455 $2,234 $2,537 $2,509 $346 CAGR 1 = 10% $387 $450 $441 $443 $302 FY2005 FY2006 FY2007 FY2008 FY2009 TTM Q3 FY2010 Adjusted earnings per share consistent EPS growth 2 $0.85 CAGR 1 = 20% $1.11 $1.38 FY2006 FY2007 FY2008 FY2009 FY2005 FY2006 FY2007 FY2008 FY2009 TTM Q3 FY2010 $1.48 FY2009 EPS results include a negative impact due to the effect of currency translation of $0.10 per share 3 1 Compounded annual growth rate (CAGR) based on full years only. BKC was not a public company in FY2005, therefore EPS was not applicable. 2 Adjusted EBITDA and adjusted EPS are non-gaap financial measures; see appendix for reconciliations to GAAP measures and why management believes these are meaningful measures. 3 Management reviews and analyzes business results excluding the effect of currency translation believing this better represents the company's underlying business trends. Results excluding the effect of currency translation are calculated by translating current year results at prior year average exchange rates. 23
Balance sheet and uses of cash In $ millions Capital structure In $ millions Uses of cash: $1,000 $500 $- FY2006 FY2007 FY2008 FY2009 Mar. 2010 Total cash $258.8 $169.5 $166.0 $121.7 $158.1 1 Total debt $1,064.5 $942.5 $947.4 $888.9 $842.8 2 Total net debt $855.7 $823.0 $831.4 $817.2 $734.7 Net debt / TTM adjusted 2.5x 2.1x 1.8x 1.9x 1.7x 3 EBITDA Uses of Cash Q1- Q3 FY2010 Q1-Q3 FY2009 Capex $90.1 $124.6 Term debt and capital lease obligations 50.7 3.8 Dividends 25.6 25.4 Share repurchases 2.4 20.0 Acquisitions 13.6 67.5 Drawing on revolver, net 0 10.0 Total $182.4 $251.3 We believe our ability to generate solid cash flow is a fundamental benefit of our highly franchised business model 1 Total debt includes short-term debt and capital leases, long-term debt and long-term capital leases. 2 Total net debt is debt minus cash in excess of $50 million. 3 EBITDA, adjusted EBITDA, net debt, and net debt/ TTM adjusted EBITDA are non-gaap financial measures; see appendix for reconciliations to GAAP measures and why management believes these are meaningful measures. 24
Long-term financial targets The company expects to achieve over the long-term: 1 Average annual worldwide comp sales growth of 2 to 3% 2 Average annual net restaurant growth of 3 to 4% Average annual revenue growth of 6 to 7% Average annual EBITDA growth of 10 to 12% 3 Average annual EPS growth of 15% We remain committed to our long-term plan for creating significant value for our stakeholders 1 Long-term targets assume no material impact from currency translation. As reported in our Q4 FY2009 earnings release filed on August 25, 2009. 2 Comp sales are analyzed on a constant currency basis, which means they are calculated by using the average exchange rate of the prior year period for both periods under comparison to remove the effects of currency fluctuation from this trend analysis. 3 EBITDA (earnings before interest, taxes, depreciation and amortization) is a non-gaap financial measure; see appendix for why management believes this is a meaningful measure. 25
Appendix
Appendix Data Page U.S. and Canada highlights 28 Europe, the Middle East and Africa (EMEA) highlights 29 Asia Pacific (APAC) highlights 30 Latin America highlights 31 Key revenue performance measures 32 Comp sales 33 U.S. competitive hours of operation 34 U.S. and Canada Reimaging Program 35 U.S. and Canada average restaurant sales 36 U.S. company restaurant margin 37 Company restaurant expenses as a percentage of revenues 38 Income statement 39 Share count 40 27
U.S. and Canada highlights 22% increase in U.S. and Canada system ARS to $1.22M 1 from $1.0M in FY2004 On target to complete three consecutive years of positive net restaurant growth Reimaging program yielding solid ROI Ongoing portfolio management Continuous improvement across operations metrics Cost saving and revenue driving initiatives: New broiler rolled out to 98% of segment system as of 3/31/2010 2 New POS hardware rolled out to 63% of segment system as of 3/31/2010 1 ARS as of TTM March 31, 2010. 2 Broiler roll out percentage consists of ordered or installed equipment. Note: U.S. and Canada system restaurants include both Company-owned and franchise restaurants. 28
Europe, the Middle East and Africa (EMEA) highlights Second largest geographic area behind the U.S. EMEA Entered new markets in Central and Eastern Europe, Middle East and Africa over the past two years including Russia and Czech Republic In FY2009, the region posted record openings for the fifth consecutive year, representing over half of the company s worldwide net restaurant growth Continued net restaurant growth via contiguous expansion Central and Eastern Europe Middle East and Africa Upgrading our restaurant image to match our premium product positioning Highest ARS restaurant worldwide is located in Schiphol airport, Amsterdam, with $13M 1 1 Based on TTM ended March 31, 2010. 29
Asia Pacific (APAC) highlights Today leveraging the power of the brand and our flame-broiled cooking platform APAC In FY2009, the region opened more restaurants than during the last four years combined Launched global Operations Excellence Platforms Focus on value Whopper sandwich extensions Investing in restaurant image and décor Significant opportunity to grow the brand in existing and new markets: Re-entered Japan Entered Indonesia Continued development in China Development agreement in Hong Kong Projecting brand presence via gateway airport locations Seeding development in Taiwan and China via joint ventures Opened first company restaurant in Singapore in July 2009 30
Latin America highlights 15 years of positive comp sales growth Latin America Strong net restaurant growth continues Brazil market entry four years later 78 restaurants Those opened for 12 months have a TTM ARS of $1.8M 1 Plans to open approximately 140 restaurants over the next five years Central America and Caribbean market leadership with best-in-class franchisees Puerto Rico total of 175 restaurants with a $1.6M 1 ARS South America vast expansion opportunities 1 Based on TTM ended March 31, 2010. Note: FZ refers to franchisee(s). 31
Key revenue performance measures Comp sales, sales growth and ARS Comp sales 2010 2009 FY2010 FY2009 (In constant currencies) (In constant currencies) United States and Canada -6.1% 1.6% -4.6% 2.2% EMEA / APAC 1.1% -0.6% 1.0% 3.1% Latin America -1.6% 1.3% -3.0% 3.6% Total worldwide -3.7% 1.0% -2.9% 2.5% Sales growth Quarters ended March 31, (In constant currencies) Q1 - Q3 (In constant currencies) United States and Canada -5.5% 2.8% -3.9% 3.0% EMEA / APAC 7.3% 6.3% 8.2% 9.6% Latin America 3.0% 7.2% 0.9% 11.2% Total worldwide -1.5% 4.1% -0.1% 5.5% (In actual currencies) (In actual currencies) Worldwide average restaurant sales (in $ thousands) 1 $ 294 $ 294 $ 935 $ 949 Restaurant count As of March 31, 2010 2009 Inc/ (Dec) Number of Company restaurants United States and Canada 1,030 1,054 (24) EMEA / APAC 333 296 37 Latin America 95 88 7 Total 1,458 1,438 20 Number of franchise restaurants United States and Canada 6,527 6,468 59 EMEA / APAC 3,116 2,936 180 Latin America 1,014 968 46 Total 10,657 10,372 285 Total worldwide restaurant count 12,115 11,810 305 1 ARS for Q3 FY2010 and FY2010 year-to-date includes the favorable impact from the movement of currency exchange rates of $12,000 and $14,000, respectively. 32
Comp sales Worldwide comp sales growth 1 U.S. and Canada system comp sales growth 1 5.9% 5.8% 5.3% 6.6% 3.2% 4.4% 4.5% 3.6% 2.9% 1.0% 5.4% 5.5% 4.8% 4.2% 2.6% 3.0% 1.9% 1.6% 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 (2.0% ) 5.6% 5.4% (2.4% ) (2.9% ) (3.7% ) 6.6% 5.4% (4.5% )(4.6% ) (3.3% ) (6.1% ) 3.4% 3.6% 1.0% 1.9% 1.2% (2.9% ) (0.5% ) 2.5% 0.4% (4.6% ) FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 Q1 - Q3 FY2010 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 Q1 - Q3 FY2010 1 Comp sales are analyzed on a constant currency basis, which means they are calculated by using the average exchange rate of the prior year period for both periods under comparison to remove the effects of currency fluctuation from this trend analysis. 33
U.S. competitive hours Burger King McDonald s 6 a.m. or earlier Yellow represents opportunity 1 87% 98% Later than 11 p.m. Yellow represents opportunity 1 Burger King McDonald s Wendy s 88% 82% 85% Burger King McDonald s 24 hours of operation Yellow represents opportunity 1 15% 56% Competitive hours of operation opportunity 1 Based on BKC survey completed in December 2009. 34
Reimaging program: Where we are today U.S. and Canada reimaging program 147 restaurants completed since program s inception 1 Results validated Improved criteria for selection U.S. and Canada Reimaging program Number of restaurants 1 Company remodels / scrape and rebuilds 92 BKL s remodels / scrape and rebuilds 55 Our reimaging program is delivering solid returns 1 Includes both Company restaurants and properties leased to franchisees (BKL s) Note: As of March 31, 2010. 35
Our interim ARS goal of $1.5M U.S. and Canada system restaurants ($ millions) 1 $1.5M CAGR: 5% $1.18M $1.26M $1.27M $1.22M Growing the brand $1.00M $0.96M $1.08M $1.12M Running great restaurants Investing wisely Focusing on our people FY2004 FY2005 FY2006. FY2007 FY2008 FY2009 TTM Q3 FY2010 True North - Our Directional Plan for Success ARS Goal We continue to execute against the fundamentals of our True North plan of profitably growing the brand, running great restaurants, investing wisely and focusing on our people 1 U.S. and Canada system restaurants include both Company-owned and franchise restaurants; only includes restaurants open during the period. 36
Top-line and bottom-line growth: ARS and CRM U.S. Company restaurant ARS and CRM 1,2 26.6% 17.7% 20.4% 13.2% 14.3% 4.5% Less than $1.0M $1.0M - $1.29M $1.3M - $1.49M $1.5M - $1.89M $1.9M+ Laser focus on strengthening margins comp sales, product gross profit, restaurant equipment, training, etc ¹ Excludes U.S. Company restaurants operated for less than 12 months. ² Based on TTM ended March 31, 2010. 37
Company restaurant expenses as a percentage of revenues Quarters ended March 31, Q1 - Q3 2010 2009 FY2010 FY2009 U.S. and Canada U.S. and Canada Food, paper, and product costs 32.1% 32.2% 32.3% 33.3% Payroll and employee benefits 31.4% 32.2% 31.1% 31.2% Occupancy and other operating costs 23.6% 22.9% 22.9% 22.9% Total Company restaurant expense 87.1% 87.3% 86.3% 87.4% EMEA/APAC EMEA/APAC Food, paper, and product costs 28.8% 29.6% 28.9% 28.6% Payroll and employee benefits 34.2% 34.0% 33.0% 32.7% Occupancy and other operating costs 30.9% 28.8% 28.8% 26.9% Total Company restaurant expense 93.9% 92.4% 90.7% 88.2% Latin America Latin America Food, paper, and product costs 37.8% 40.0% 39.1% 38.2% Payroll and employee benefits 12.2% 12.3% 12.4% 12.2% Occupancy and other operating costs 31.1% 27.7% 29.1% 28.8% Total Company restaurant expense 81.1% 80.0% 80.6% 79.2% Worldwide Worldwide Food, paper, and product costs 31.4% 31.8% 31.6% 32.2% Payroll and employee benefits 31.5% 32.0% 31.0% 31.0% Occupancy and other operating costs 25.8% 24.5% 24.7% 24.2% Total Company restaurant expense 88.7% 88.3% 87.3% 87.4% 38
Income statement In $ millions, except share and per share amounts Quarters ended March 31, Q1 - Q3 2010 2009 B/(W) % FY2010 FY2009 B/(W) % Revenues: Company restaurant revenues $ 439.2 $ 448.8-2% $ 1,385.2 $ 1,418.9-2% Franchise revenues 129.9 124.9 4% 408.9 404.5 1% Property revenues 27.8 26.2 6% 85.1 84.1 1% Total revenues 596.9 599.9-1% 1,879.2 1,907.5-1% Company restaurant expenses 389.5 396.5 2% 1,209.1 1,239.6 2% Selling expenses 21.6 22.5 4% 68.7 70.1 2% General and administrative expenses 96.2 93.2-3% 306.0 296.1-3% Property expenses 15.2 13.4-13% 44.7 42.1-6% Other operating (income) expense, net (4.5) (1.3) nm 0.6 7.9 nm Total operating costs and expenses 518.0 524.3 1% 1,629.1 1,655.8 2% Income from operations 78.9 75.6 4% 250.1 251.7-1% Interest expense, net 11.9 12.6 6% 36.6 42.0 13% Income before income taxes 67.0 63.0 6% 213.5 209.7 2% Income tax expense 26.0 15.9-64% 75.7 68.5-11% Net income 41.0 47.1-13% 137.8 141.2-2% Earnings per share - diluted $ 0.30 $ 0.34-12% $ 1.00 $ 1.03-3% Weighted average shares - diluted 137.2 136.7 0% 137.4 136.8 0% Memo: Company restaurant margin (CRM) United States and Canada 12.9% 12.7% 13.7% 12.6% EMEA / APAC 6.1% 7.6% 9.3% 11.8% Latin America 18.9% 20.0% 19.4% 20.8% Total 11.3% 11.7% 12.7% 12.6% 39
Share count Quarter ended March 31, Q1 - Q3 2010 2009 FY2010 FY2009 Weighted average shares outstanding - Basic EPS 135,329,631 134,603,718 135,635,839 134,753,071 Shares assumed issued on exercise of stock options and nonvested shares 4,444,756 5,278,901 4,502,672 5,313,787 Shares assumed repurchased with proceeds of stock options and nonvested shares (2,569,875) (3,189,340) (2,692,738) (3,251,642) Dilutive stock options and nonvested shares 1,874,881 2,089,561 1,809,934 2,062,145 Weighted average shares outstanding - Diluted EPS 137,204,512 136,693,280 137,445,773 136,815,216 40
Performance indicators and use of non-gaap financial measures This presentation includes non-gaap financial measures as defined by SEC rules. As required by SEC rules, we provide a reconciliation of each non-gaap financial measure to the most comparable GAAP measure and a description of the purposes for which management uses the non-gaap financial measures. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP. Specifically, the following non-gaap financial measures are included in this presentation: Non-GAAP financial measure Comparable GAAP measure Reconciliation and additional information presented on slide titled Page EBITDA and adjusted EBITDA Net income Fiscal year EBITDA and adjusted EBITDA reconciliations 43 EBITDA, adjusted EBITDA, net debt, net debt / Net income and total debt Fiscal year net debt to EBITDA and adjusted EBITDA 44 EBITDA and net debt / adjusted EBITDA ratios reconciliations Adjusted income before taxes, adjusted income tax Income before taxes, income tax Fiscal year net debt to EBITDA and adjusted EBITDA 45 expense, adjusted net income and adjusted expense, net income and reconciliations earnings per share earnings per share 41
Performance indicators and use of non-gaap financial measures To supplement the Company s condensed consolidated financial statements presented on a U.S. Generally Accepted Accounting Principles (GAAP) basis, the Company uses three key business measures as indicators of the Company s operational performance: sales growth, comparable sales growth and average restaurant sales. These measures are important indicators of the overall direction, trends of sales and the effectiveness of the Company s advertising, marketing and operating initiatives and the impact of these on the entire Burger King system. System-wide data represent measures for both Company and franchise restaurants. Unless otherwise stated, sales growth, comparable sales growth and average restaurant sales are presented on a system-wide basis. The Company also provides certain non-gaap financial measures, including adjusted income from operations, adjusted segment income from operations, EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share, net debt, net debt to EBITDA, and net debt to adjusted EBITDA ratio. The reconciliations of these non-gaap financial measures to their most comparable GAAP measure are set forth on the following pages. Adjusted income from operations and adjusted segment income from operations measure earnings from ongoing operations excluding the impact of unusual items. These measures are used by management to evaluate and forecast earnings from ongoing operations excluding the impact of unusual items. There were no adjustments to these measures for the nine months ended March 31, 2010. However, adjusted income from operations and adjusted segment income from operations for the nine months ended March 31, 2009 excludes $1.5 million of expenses associated with the acquisition of franchise restaurants from a large franchisee in the U.S. and $2.0 million of start up expenses associated with acquired restaurants. EBITDA is defined as earnings (net income) before interest, taxes, depreciation and amortization, and is used by management to measure operating performance of the business. The Company also uses EBITDA as a measure to calculate certain incentive based compensation and certain financial covenants related to the Company's credit facility and as a factor in the Company's tangible and intangible asset impairment test. Management believes EBITDA is a useful measure as it reflects certain operating drivers of the Company s business, such as sales growth, operating costs, selling, general and administrative expenses and other operating income and expense. There were no adjustments to EBITDA for the nine months ended March 31, 2010. However, adjusted EBITDA for the nine months ended March 31, 2009 excludes $1.5 million of expenses associated with the acquisition of franchise restaurants from a large franchisee in the U.S. and $2.0 million of start up expenses associated with acquired restaurants. There were no adjustments to this measure during fiscal 2008. Adjusted EBITDA for fiscal 2007 excludes the costs associated with the termination of the Company s lease for a new headquarters facility, which the Company had proposed to build in Coral Gables, FL ( lease termination costs ). Adjusted EBITDA for fiscal 2006 excludes the effects of: (a) the compensatory make-whole payment made to holders of options and restricted stock unit awards in February 2006; (b) the fee paid to Texas Pacific Group, Bain Capital Partners and the Goldman Sachs Funds to terminate our management agreement with them upon completion of our initial public offering in May 2006; (c) our European and Asian business realignment costs; (d) quarterly management fees paid to the Sponsors under the management agreement; and (e) executive severance. There were no adjustments to net income for the nine months ended March 31, 2010. However, adjusted net income for the nine months ended March 31, 2009 excludes $1.5 million of expenses associated with the acquisition of franchise restaurants from a large franchisee in the U.S. and $2.0 million of start up expenses associated with acquired restaurants. There were no adjustments to this measure during fiscal 2008. Adjusted net income for fiscal 2007 excludes the costs associated with the termination of the Company s lease for a new headquarters facility, which the Company had proposed to build in Coral Gables, FL ( lease termination costs ). Adjusted EBITDA for fiscal 2006 excludes the effects of: (a) the compensatory make-whole payment made to holders of options and restricted stock unit awards in February 2006; (b) the fee paid to Texas Pacific Group, Bain Capital Partners and the Goldman Sachs Funds to terminate our management agreement with them upon completion of our initial public offering in May 2006; (c) our European and Asian business realignment costs; (d) quarterly management fees paid to the Sponsors under the management agreement; and (e) executive severance. Adjusted earnings per share is calculated using adjusted net income divided by weighted average shares outstanding. Management believes that these non-gaap financial measures are important as they provide investors and management with additional metrics to measure comparable Company performance against prior year periods by excluding non-recurring expenses associated with material acquisitions. Net debt includes short-term debt and capital leases, long-term debt and long-term capital leases minus cash in excess of $50 million. Net debt to EBITDA and net debt to adjusted EBITDA are used by management to evaluate and forecast the Company s business performance. Further, management believes that these non-gaap measures provide both management and investors with a more complete understanding of the underlying operating results, capital structure and trends and an enhanced overall understanding of the Company s financial performance. 42
Fiscal year EBITDA and adjusted EBITDA reconciliations In $ millions TTM 3/2010 1 TTM 3/2009 1 FY2009 FY2008 FY2007 FY2006 Net income $ 196.7 $ 191.8 $ 200.1 $ 189.6 $ 148 $ 27 Reconciling items: Interest expense, net 49.2 55.2 54.6 61.2 67 72 Loss on early extinguishment of debt - - - - 1 18 Income tax expense 91.9 86.9 84.7 103.4 75 53 Depreciation and amortization 105.5 98.3 98.1 95.6 89 88 EBITDA 443.3 432.2 437.5 449.8 380 258 Adjustments: Restaurant acquisition expenses - 1.5 1.5 - - - Start up expenses for acquired restaurants - 2.0 2.0 - - - Lease termination costs - - - - 7 - Compensatory make-whole payment - - - - - 34 Management agreement termination fee - - - - - 30 European and Asian business realignment costs - - - - - 10 Management fees - - - - - 9 Executive severance - - - - - 5 Total adjustments - 3.5 3.5-7 88 Adjusted EBITDA $ 443.3 $ 435.7 $ 441.0 $ 449.8 $ 387 $ 346 1 Based on TTM ended March 31, 2010 and TTM ended March 31, 2009, respectively. 43
Fiscal year net debt to EBITDA and adjusted EBITDA reconciliations In $ millions Mar. 31,2010 1 Mar. 31,2009 1 FY2009 FY2008 FY2007 FY2006 Term debt, net of current portion $ 689.8 $ 811 $ 755.6 $ 868.8 $ 871 $ 997 Capital leases, net of current portion 66.1 66 65.8 71.2 67 63 Current portion of long term debt and capital leases 86.9 54 67.5 7.4 5 5 Total debt 842.8 931 888.9 947.4 943 1,065 Cash and cash equivalents 158.1 140 121.7 $ 166.0 170 259 Net debt excluding cash in excess of $50M 734.7 841 817.2 $ 831.4 823 856 EBITDA 443.3 432 437.5 449.8 380 258 Adjusted EBITDA 443.3 436 441.0 449.8 387 346 Net debt excluding cash in excess of $50M / EBITDA 1.7x 1.9x 1.9x 1.8x 2.2x 3.3x Net debt excluding cash in excess of $50M / adjusted EBITDA 1.7x 1.9x 1.9x 1.8x 2.1x 2.5x 1 Based on TTM ended March 31, 2010 and TTM ended March 31, 2009, respectively. 44
Adjusted earnings per share In $ millions, except share and per share amounts Fiscal years ended June 30 FY2009 FY2007 FY2006 Net income $ 200.1 $ 148 $ 27 Income tax expense 84.7 75 53 Income before taxes 284.8 223 80 Adjustments: Restaurant acquisition charges 1.5 - - Acquisition start-up charges 2.0 - - Lease termination costs - 7 - Management agreement termination fee - - 30 European and Asian business realignment costs - - 10 Executive severance - - 5 Loss on extinguishment of debt - - 18 Interest on $350 million loan paid off at IPO - - 6 Management fees - - 9 Compensatory make-whole payment - - 34 Total adjustments 3.5 7 112 Adjusted income before taxes 288.3 230 192 Adjusted income tax expense 1 86.0 78 77 Adjusted net income $ 202.3 $ 152 $ 115 Shares outstanding - diluted 136.8 136.8 114.7 Shares outstanding and IPO share count - diluted 2 136.8 136.8 135.5 Earnings per share diluted $ 1.46 $ 1.08 $ 0.24 Adjusted earnings per share - diluted $ 1.48 $ 1.11 $ 0.85 1 Adjusted income tax expense for FY2009 is calculated by using the Company s actual rate for all items of 29.7% with the exception of the adjustments listed above to which a U.S. federal and state tax rate of 36.0% has been applied. 2 The IPO share count of 135.5M diluted shares applies to FY2006, which represents the total shares outstanding at the time of the Company s initial public offering. 45