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 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 continue to capitalize on the Burger King brand by growing globally; our expectations and belief regarding our ability to execute on our Four Pillar strategy in the U.S. and Canada; our expectations and belief regarding our ability to complete our refranchising initiative in LAC by closing on our previously announced refranchising transaction in Mexico; our expectation and belief regarding our ability to deliver sustainable long-term growth; our expectations regarding our ability to lay the foundation for accelerated development through strategic partnerships and capitalize on future opportunities in high growth markets; and our expectations regarding our ability to remain focused on our core business strategies to create a brand-focused highly cash flow generative business. 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 EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, TTM Adjusted EBITDA, Net Debt-to-TTM Adjusted EBITDA ratio, and Organic revenue and Organic Adjusted EBITDA. 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
Agenda Highlights Business Strategy Performance Update Financial Results Summary Q&A 2
Full Year Highlights Increased system-wide comparable sales by 3.2%, driven by 3.5% growth in U.S. and Canada Achieved global net restaurant growth of 485, growing system units +3.9% y/y Increased Adjusted diluted EPS by 34%, and organic Adjusted EBITDA by 17% Accelerated international growth, signing new development agreements in key markets Successfully refranchised 871 restaurants, bringing the system to 97% franchised Declared quarterly cash dividend of $0.04 per share in Q4 and raised dividend 25% to $0.05 per share in Q1 2013 3
Growth Highlights 2012 Growth Highlights System-wide Comparable Sales Growth (1) 3.2% Net Restaurant Growth 485 +3.9% System-wide Sales Growth (1) 5.9% (0.5%) 2011 2012 261 +2.1% 2011 2012 1.7% 2011 2012 1) In constant currency 4
Profitability Highlights 2012 Profitability Highlights Adjusted EBITDA 652 Adjusted EBITDA Margin 33.2% Adjusted Diluted EPS 0.69 585 25.0% 0.51 2011 2012 2011 2012 2011 2012 5
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 under-penetration of BURGER KING Global Refranchising Create a brand-focused highly cash flow generative business 6
Business Strategy: 4 Pillars Menu Enhance Core Menu Items Address Menu Gaps Platforms to Build on New & Improved Platforms Fourth Quarter New Product Offerings 7
Business Strategy: 4 Pillars Marketing Focused marketing message with food-centric advertisements to appeal to all demographics using new tagline: TASTE IS KING Balanced marketing approach with barbell strategy: Promotions support ongoing awareness of new menu platforms and drive traffic with target demographics Premium LTOs support the BURGER KING brand and customer check to increase franchise profitability Value Promotions + Premium LTOs = A balanced approach to driving positive profitable traffic Value: Drive Traffic Premium: Build Brand and Check 8
Business Strategy: 4 Pillars Image Goal to have 40% of U.S. and Canada system units on a modern image by 2015 2015 Reimage Target 40% Approximately 600 units re-imaged in 2012, and strong outlook for 2013 U.S. and Canada system ended 2012 with 19% of units on a modern image, up from 11% at the end of 2011 11% 19% 2011 2012 2015 Target Average re-imaging costs are approximately $300,000 per restaurant New 20/20 Restaurant Reimage Re-imaged restaurants continue to experience an average sales uplift of 10-15% 9
Business Strategy: 4 Pillars Operations Successfully implemented Sales, Profit and Operations Coaches who work shoulder-toshoulder with restaurant team, with last team rolled out in December Ops Performance Index ( OPI ) Metric Description We have further enhanced our evaluation tools with the introduction of an Operations Performance Index ( OPI ) Began ranking franchisees to increase transparency and promote healthy competition to improve operations system-wide GUEST TRAC Score Guest Relations Coach Program Guest satisfaction survey results; last 3 months Negative contacts; via telephone or web Most recent Coach visit score Launched BK Guru online training program for restaurant employees Speed of Service Drive-thru window service time 10
Business Strategy: International Development Since 2011, we successfully entered into international development and joint venture agreements, laying the foundation for sustainable long-term unit development : New Master Franchise Joint Venture : New Development Agreement 11
Business Strategy: Global Refranchising Refranchised 181 restaurants in the fourth quarter and 871 during 2012, bringing the system to approximately 97% franchised as of December 31, 2012 329 restaurants remain to be refranchised in Germany, Spain, Canada and Mexico BKW typically receives cash and 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 Q4 Transaction Highlights Percentage of Franchise Restaurants 101 restaurants in Massachusetts, Connecticut, and New Hampshire 42 restaurants in Atlanta, GA 94% 95% 97% ~100% 33 restaurants in Broward, FL 90% 90% Received commitments to re-image over 150 restaurants and develop over 30 new units Dec 2011 Mar 2012 Jun 2012 Sep 2012 Dec 2012 2013E 12
Performance Update U.S. and Canada Q4 Highlights Fourth consecutive quarter of positive comparable sales growth, at +3.7% Sales driven by WHOPPER Sandwich 55 th Anniversary promotion, LTO chicken sandwiches, and our holiday sweets menu, including $1 Cinnabon Minibon Rolls, sweet potato curly fries, and gingerbread desserts Refranchised 180 restaurants in Q4. During Q1 2013 we refranchised additional restaurants, and currently only 53 company-owned units remain in the U.S. and 96 in Canada Q4 Key Performance Indicators Q4 2012 Q4 2011 Comparable Sales +3.7% (2.0%) System Sales Growth +3.1% (2.0%) Net Restaurant Growth +23 (23) CRM 8.3% 13.5% Adj. EBITDA $116 mn $114 mn Adj. EBITDA % Margin 50% 30% 13
Performance Update EMEA Q4 Highlights Eighth consecutive quarter of positive comparable sales growth, at +1.6% Strength in UK, Germany and Turkey was a major driver of comparable sales growth Germany continues to be value-oriented, and our successful King of the Month deal has resonated with consumers Spain and Italy decelerated to due weak macroeconomic environment Accelerated NRG to +127 restaurants driven by development in Turkey, Russia, the Middle East, and Spain Q4 Key Performance Indicators Q4 2012 Q4 2011 Comparable Sales +1.6% +7.3% System Sales Growth +10.5% +9.3% Net Restaurant Growth 127 47 CRM 15.8% 13.8% Adj. EBITDA $48 mn $40 mn Adj. EBITDA % Margin 40% 30% 14
Performance Update LAC Q4 Highlights Ninth consecutive quarter of positive comparable sales growth, at +0.7% Emphasizing value, particularly in Mexico Comparable sales in Brazil were flat in the quarter due to heightened competitive activity and challenging macroeconomic environment Accelerated NRG to +110 restaurants driven by development in Brazil, Mexico, and Central America Q4 Key Performance Indicators Q4 2012 Q4 2011 Comparable Sales +0.7% +9.7% System Sales Growth +11.2% +8.2% Net Restaurant Growth 110 46 CRM 17.6% 19.0% Adj. EBITDA $23 mn $18 mn Adj. EBITDA % Margin 60% 56% 15
Performance Update APAC Q4 Highlights Returned to positive comparable sales growth of +0.8% during Q4 Comparable sales growth driven by improvement in Australia and South Korea Improvement in Australia comparable sales driven by stronger promotions such as Penny Pinchers Introduction of vouchers helped drive sales in both Australia and South Korea NRG of +70 driven by accelerated growth in China, Japan, Vietnam, and Indonesia Q4 Key Performance Indicators Q4 2012 Q4 2011 Comparable Sales +0.8% (1.2%) System Sales Growth +13.6% 4.0% Net Restaurant Growth 70 47 Adj. EBITDA $12 mn $6 mn Adj. EBITDA % Margin 86% 20% 16
Financial Results ($ in millions, except per share data) FY 2012 FY 2011 Reported Growth Organic Growth Q4 2012 Q4 2011 Reported Growth Organic Growth Revenues $1,966 $2,336 (16%) +4% $405 $581 (30%) +6% Adjusted EBITDA $652 $585 +11% +17% $175 $154 +13% +23% Adjusted Net Income $243 $179 +36% $81 $50 +61% Adjusted Diluted EPS $0.69 $0.51 +34% $0.23 $0.14 +58% 17
Financial Results Organic Revenue Organic Revenue Bridge 2012 vs. 2011 Organic Revenue Bridge 4Q12 vs. 4Q11 ($ in millions, except per share data) ($ in millions, except per share data) $2,336 $581 $75 $1,966 $404 $41 $22 $405 $196 $2 2011 Refranchising FX Organic 2012 Q4 2011 Refranchising FX Organic Q4 2012 18
Financial Results Organic Adjusted EBITDA Adj. EBITDA Bridge 2012 vs. 2011 Adj. EBITDA Bridge 4Q12 vs. 4Q11 ($ in millions, except per share data) ($ in millions, except per share data) $585 $95 $652 $154 $32 $175 $15 $13 $10 $1 2011 Refranchising FX Organic 2012 Q4 2011 Refranchising FX Organic Q4 2012 19
Financial Results Balance Sheet ($ in millions) Balance Sheet FY 2012 FY 2011 Total Gross debt $3,049 $3,139 Cash and Cash Equivalents $547 $459 Total Net Debt $2,502 $2,680 Leverage Ratios FY 2012 FY 2011 Net Debt / TTM Adj. EBITDA 3.8x 4.6x TTM Adj. EBITDA $652 $585 20
Financial Results Pro-Forma Structure Our target business model assumes that Burger King will be nearly 100% franchised (1), and below we describe what a pro-forma business would have looked like for 2012 Area Company-Operated Restaurants 2012 Pro-Forma Structure 56 restaurants with $1.4 mn ARS (2) and 13% EBITDA margin (3) Franchise ~12,650 average restaurants with $1.25 mn ARS (4) and 4.15% royalty (5) ~$40 mn franchise and development fees Property ~2,300 properties with $1.25 mn ARS (4) paying ~8% rent (6) Property EBITDA margin of ~50% Management G&A Management G&A of $213 mn in line with actual expense 1) We assume that BKW will continue to operate 53 restaurants in Miami and 3 restaurants in Singapore. 2) Actual company restaurant ARS for 56 company restaurants 3) Actual adjusted EBITDA margin for 2012 for 56 restaurants, inclusive of 4% contribution to ad fund 4) Actual franchise ARS for 2012 5) Estimated royalty rate using actual rates for existing franchise restaurants and management s estimates of royalty rates applicable to company restaurants, assuming they were franchised for the full year 6) Management s estimate of pro-forma rental income rate based on 2012 actual rate 21
Increase of Quarterly Cash Dividend On February 14, 2013, BKW s Board of Directors approved the increase of a quarterly cash dividend to $0.05 per share, a 25% increase Payable to holders of record on February 28, 2013 Demonstrates our confidence in BKW s business plan and ability to execute going forward Tangible evidence of our commitment to return capital to shareholders 22
2012 Summary 2012 was a transformational year for Burger King Disciplined execution of business strategy Investing in Four Pillar strategy to drive sustainable sales growth in the U.S. and Canada Beginning to deliver accelerated international restaurant growth Evolving to a purely franchised business Committed to delivering high quality, sustainable free cash flow growth 23
Q&A 24
Appendix 25
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 and non-cash incentive compensation expense, other operating (income) expenses, net, and all other specifically identified costs associated with non-recurring projects, including 2010 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. This measure is used by management to evaluate and forecast earnings from ongoing operations, as further defined in the non-gaap reconciliations. 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 refranchisings. Management believes that organic growth is an important metric for measuring the core operating performance of the business as it excludes the impact of our refranchising activities and foreign currency exchange rates. 26
International Development Agreements We successfully entered into international master franchise development and joint venture agreements, laying the foundation for sustainable long-term unit development Country Type (1) Existing Units (2) Partners Date Announced Status Brazil MFJV 224 Vinci Partners Jun 2011 Completed Vietnam EDA 17 Imex Pan Pacific Group Mar 2012 Completed Russia MFJV 86 VTB Capital, BurgerRus Jun 2012 Completed China MFJV 86 Cartesian Capital, TAB Gida Jun 2012 Completed Singapore / Malaysia MFDA 84 Rancak Selera Sep 2012 Completed Colombia EDA 28 Promotora, Kinco Oct 2012 Completed South Africa MFJV 0 Grand Parade Investments Nov 2012 Completed Nordics (3) MFDA 142 King Food AS Nov 2012 Completed Korea MFDA 139 Vogo Fund Nov 2012 Completed Central America (4) MFJV 178 Belloso Dec 2012 Completed Mexico MFJV 431 Alsea Dec 2012 Expected to close in 2013 1) MFDA = Master Franchise Development Agreement; EDA = Exclusive Development Agreement; MFJV = Master Franchise Joint Venture 2) Existing system units in country as of December 31, 2012 3) Nordics includes Norway, Sweden and Denmark 4) Central America includes Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama 27
EBITDA and Adj. EBITDA to Net Income EBITDA and adjusted EBITDA: Three Months Ended Twelve Months Ended Decemebr 31, Decemebr 31, Decemebr 31, Decemebr 31, 2012 2011 2012 2011 (In millions) U.S. and Canada $ 116.1 $ 113.7 $ 471.0 $ 459.9 EMEA 47.7 40.3 166.1 146.0 LAC 23.0 18.3 73.2 63.9 APAC 12.4 5.8 41.1 26.7 Unallocated Management G&A (24.3) (24.0) (99.3) (111.5) Adjusted EBITDA 174.9 154.1 652.1 585.0 Share-based compensation and non-cash incentive compensation expense (1) 6.8 5.5 10.2 6.4 2010 Transaction costs (2) - 1.6-3.7 Global restructuring and related professional fees (3) - 13.8-46.5 Field optimization project costs (4) - 3.4-10.6 Global portfolio realignment project (5) 10.1 7.1 30.2 7.6 Business combination agreement expenses (6) 1.3-27.0 - Other operating (income) expense, net 27.1 1.5 53.3 11.3 EBITDA 129.6 121.2 531.4 498.9 Depreciation and amortization 17.7 33.3 113.7 136.4 Income from operations 111.9 87.9 417.7 362.5 Interest expense, net 50.2 61.0 223.8 226.7 Loss on early extinguishment of debt - 1.5 34.2 21.1 Income tax expense 13.1 0.4 42.0 26.6 Net income $ 48.6 $ 25.0 $ 117.7 $ 88.1 28
EBITDA and Adjusted EBITDA EBITDA and adjusted EBITDA Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2012 2011 2012 2011 (In millions) (In millions) Net income (loss) $ 48.6 $ 25.0 $ 117.7 $ 88.1 Interest expense, net 50.2 61.0 223.8 226.7 Loss on early extinguishment of debt - 1.5 34.2 21.1 Income tax expense 13.1 0.4 42.0 26.6 Depreciation and amortization 17.7 33.3 113.7 136.4 EBITDA 129.6 121.2 531.4 498.9 Adjustments: Share-based compensation and non-cash incentive compensation expense (1) 6.8 5.5 10.2 6.4 Other operating (income) expense, net 27.1 1.5 53.3 11.3 2010 Transaction costs (2) - 1.6-3.7 Global restructuring and related professional fees (3) - 13.8-46.5 Field optimization project costs (4) - 3.4-10.6 Global portfolio realignment project costs (5) 10.1 7.1 30.2 7.6 Business combination agreement expenses (6) 1.3-27.0 - Total adjustments 45.3 32.9 120.7 86.1 Adjusted EBITDA $ 174.9 $ 154.1 $ 652.1 $ 585.0 29
Reconciliation of Net Income to Adj. Net Income Adjusted net income December 31, December 31, December 31, December 31, 2012 2011 2012 2011 Net income $ 48.6 $ 25.0 $ 117.7 $ 88.1 Income tax expense 13.1 0.4 42.0 26.6 Income before income taxes 61.7 25.4 159.7 114.7 Adjustments: Three Months Ended (In millions) Twelve Months Ended (In millions) Franchise agreement amortization 5.2 5.4 20.6 21.8 Amortization of deferred financing costs and original issue discount 2.6 4.0 13.2 14.5 Loss on early extinguishment of debt - 1.5 34.2 21.1 Other operating (income) expense, net 27.1 1.5 53.3 11.3 2010 Transaction costs (2) - 1.6-3.7 Global restructuring and related professional fees (3) - 13.8-46.5 Field optimization project costs (4) - 3.4-10.6 Global portfolio realignment project costs (5) 10.1 7.1 30.2 7.6 Business combination agreement expenses (6) 1.3-27.0 - Total adjustments 46.3 38.3 178.5 137.1 Adjusted income before income taxes 108.0 63.7 338.2 251.8 Adjusted income tax expense (7) 26.8 13.4 94.8 73.2 Adjusted net income $ 81.2 $ 50.3 $ 243.4 $ 178.6 Diluted- EPS (Adjusted Net Income) $ 0.23 $ 0.14 $ 0.69 $ 0.51 Diluted Weighted Average Shares 356.4 348.2 354.1 348.2 30
Net Debt to Adjusted EBITDA Net debt to adjusted EBITDA As of December 31, December 31, 2012 2011 (In millions, except ratios) Long term debt, net of current portion $ 2,905.1 $ 3,010.3 Capital leases, net of current portion 88.4 95.4 Current portion of long term debt and capital leases 55.8 33.5 Total Debt 3,049.3 3,139.2 Cash and cash equivalents 546.7 459.0 Net debt 2,502.6 2,680.2 TTM adjusted EBITDA 652.1 585.0 Net debt / TTM adjusted EBITDA 3.8x 4.6x 31
Q4 2012 Organic Growth $ in millions Refran. Adjusted FX Actual Q4 '12 vs. Q4 '11 Impact Q4 '11 Impact Organic Growth Q4 '12 Q4 '11 $ % $ $ $ $ % Calculation: A B C A+C=D E B-C-E=F F/D Revenue North America $233.4 $383.1 ($149.7) (39.1%) ($160.8) $222.3 $1.1 $10.0 4.5% EMEA $118.7 $134.7 ($16.0) (11.9%) ($17.6) $117.1 ($4.1) $5.7 4.9% LAC $38.1 $32.9 $5.2 15.8% - $32.9 $0.8 $4.4 13.4% APAC $14.3 $29.9 ($15.6) (52.2%) ($17.2) $12.7 - $1.6 12.2% Consolidated $404.5 $580.6 ($176.1) (30.3%) ($195.6) $385.0 ($2.2) $21.7 5.6% Adjusted EBITDA North America $116.1 $113.7 $2.4 2.1% ($11.7) $102.0 $0.1 $14.0 13.7% EMEA $47.7 $40.3 $7.4 18.4% ($1.6) $38.7 ($1.5) $10.5 27.2% LAC $23.0 $18.3 $4.7 25.7% - $18.3 - $4.7 25.7% APAC $12.4 $5.8 $6.6 113.8% $3.1 $8.9 - $3.5 39.3% Unallocated Management G&A ($24.3) ($24.0) ($0.3) 1.2% - ($24.0) - ($0.3) 1.2% Consolidated $174.9 $154.1 $20.8 13.5% ($10.2) $143.9 ($1.4) $32.4 22.5% 32
2012 Full Year Organic Growth $ in millions Refran. Adjusted FX Actual 2012 vs. 2011 Impact 2011 Impact Organic Growth 2012 2011 $ % $ $ $ $ % Calculation: A B C A+C=D E B-C-E=F F/D Revenue North America $1,261.1 $1,569.1 ($308.0) (19.6%) ($337.6) $1,231.5 ($1.6) $31.2 2.5% EMEA $472.9 $525.6 ($52.7) (10.0%) ($42.4) $483.2 ($35.9) $25.6 5.3% LAC $134.4 $128.1 $6.3 4.9% - $128.1 ($3.7) $10.0 7.8% APAC $97.9 $112.9 ($15.0) (13.3%) ($23.5) $89.4 ($0.1) $8.6 9.6% Consolidated $1,966.3 $2,335.7 ($369.4) (15.8%) ($403.5) $1,932.2 ($41.3) $75.4 3.9% Adjusted EBITDA North America $471.0 $459.9 $11.1 2.4% ($17.0) $442.9 $0.3 $27.8 6.3% EMEA $166.1 $146.0 $20.1 13.8% ($1.6) $144.4 ($12.7) $34.4 23.8% LAC $73.2 $63.9 $9.3 14.6% - $63.9 ($0.4) $9.7 15.2% APAC $41.1 $26.7 $14.4 53.9% $3.7 $30.4 - $10.7 35.2% Unallocated Management G&A ($99.3) ($111.5) $12.2 (10.9%) - ($111.5) - $12.2 (10.9%) Consolidated $652.1 $585.0 $67.1 11.5% ($14.9) $570.1 ($12.8) $94.8 16.6% 33
Footnotes to Reconciliation Tables (1) Represents share-based compensation expense associated with employee stock options, and for the twelve months ended December 31, 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 2012 and 2011 cash bonus, respectively. (2) Represents expenses incurred related to 3G s acquisition of Burger King Holdings, Inc., the Company s indirect wholly-owned subsidiary, in October 2010. (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 2011. (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 2011. (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 twelve months ended December 31, 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 twelve months ended December 31, 2012 and 2011 is calculated using the Company s statutory tax rate in the jurisdiction in which the costs were incurred. 34