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RBI: Reports Full Year and Q4 2016 Results

Oakville / CA. (rbi) Restaurant Brands International Inc. (RBI) reported financial results for the full year and fourth quarter ended December 31, 2016. Daniel Schwartz, Chief Executive Officer of Restaurant Brands International Inc. (RBI), commented, «We are pleased to report another year of solid results, with strong financial performance in the fourth quarter. Our continued focus on guest satisfaction and value creation for all of our stakeholders has resulted in accelerated restaurant development and continued system-wide sales growth at both of our iconic brands, Tim Hortons (TH) and Burger King (BK). We are excited about our progress this year and are committed to building on these results to achieve long-term sustainable growth».

Full Year 2016 Highlights

  • RBI Total Revenues of 4’145.8 million USD versus 4’052.2 million USD in prior year
  • RBI Net Income Attributable to Common Shareholders of 345.6 million USD versus 103.9 million USD in prior year
  • RBI Diluted EPS of 1.45 USD versus 0.50 USD in prior year
  • Tim Hortons (TH) comparable sales increased 2.5 percent and Burger King (BK) comparable sales increased 2.3 percent in constant currency
  • Restaurant count increased 4.5 percent at TH and 4.9 percent at BK year-over-year
  • System-wide sales grew 5.2 percent at TH and 7.8 percent at BK in constant currency
  • RBI Adjusted Ebitda of 1’888.2 million USD was up 16.4 percent on an organic basis versus prior year results
  • RBI Adjusted Diluted EPS of 1.58 USD was up 45.0 percent versus prior year results
  • RBI declared dividends of 0.62 USD per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership in 2016, up 40.9 percent versus prior year declared dividends

Fourth Quarter 2016 Highlights

  • RBI Total Revenues of 1’111.4 million USD versus 1’057.0 million USD in prior year period
  • RBI Net Income Attributable to Common Shareholders of 118.4 million USD versus 51.7 million USD in prior year period
  • RBI Diluted EPS of 0.50 USD versus 0.25 USD in prior year period
  • TH comparable sales increased 0.2 percent and BK comparable sales increased 2.8 percent in constant currency
  • System-wide sales grew 2.4 percent at TH and 8.5 percent at BK in constant currency
  • RBI Adjusted Ebitda of 512.4 million USD was up 16.4 percent on an organic basis versus prior year results
  • RBI Adjusted Diluted EPS of 0.44 USD was up 37.5 percent versus prior year results

Consolidated Operational Highlights

Three Months Ended December 31, Twelve Months Ended December 31,
2016 2015 2016 2015
(unaudited) (unaudited)
Comparable Sales Growth(1)
TH 0.2% 6.3% 2.5% 5.6%
BK 2.8% 3.9% 2.3% 5.4%
System Net Restaurant Growth (NRG)
TH 121 69 200 155
BK 495 334 735 631
System-wide Sales Growth(1)
TH 2.4% 12.4% 5.2% 9.3%
BK 8.5% 8.8% 7.8% 10.3%
System-wide Sales (2)(in million USD)
TH USD 1’622.2 USD 1’632.7 USD 6’405.2 USD 6’349.8
BK USD 4’651.6 USD 4’353.2 USD 18’209.2 USD 17’303.7

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(1) Comparable sales growth and system-wide sales growth are calculated on a constant currency basis and include sales at franchise restaurants and company-owned restaurants.
(2) System-wide sales are driven by sales at franchised restaurants, as approximately 100% of current restaurants are franchised. We do not record franchise sales as revenues; however, our franchise revenues include royalties based on a%age of franchise sales.

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Consolidated Financial Highlights

Three Months Ended December 31, Twelve Months Ended December 31,
(in million USD, except per share data) 2016 2015 2016 2015
(unaudited) (unaudited)
RBI Total Revenues USD 1’111.4 USD 1’057.0 USD 4’145.8 USD 4’052.2
RBI Net Income Attributable to Common Shareholders USD 118.4 USD 51.7 USD 345.6 USD 103.9
RBI Diluted Net Income Attributable to Common Shareholders and Noncontrolling Interests (3) USD 233.2 USD 116.5 USD 682.4 USD 237.1
RBI Diluted Earnings per Share USD 0.50 USD 0.25 USD 1.45 USD 0.50
TH Adjusted Ebitda (4) USD 278.4 USD 243.4 USD 1’072.3 USD 906.7
BK Adjusted Ebitda (4) USD 234.0 USD 199.2 USD 815.9 USD 759.5
RBI Adjusted Ebitda (5) USD 512.4 USD 442.6 USD 1’888.2 USD 1’666.2
RBI Adjusted Net Income (5)(6) USD 208.3 USD 152.5 USD 744.2 USD 519.0
RBI Adjusted Diluted Earnings per Share (5)(6) USD 0.44 USD 0.32 USD 1.58 USD 1.09

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(3) Includes net income available to common shareholders and net income attributable to noncontrolling interests related to the Class B exchangeable limited partnership units of Restaurant Brands International Limited Partnership.
(4) TH Adjusted Ebitda and BK Adjusted Ebitda are our measures of segment profitability.
(5) RBI Adjusted Ebitda, RBI Adjusted Net Income, and RBI Adjusted Diluted Earnings per Share are non-GAAP financial measures. Please refer to “Non-GAAP Financial Measures” for further details.
(6) Commencing in the first quarter of 2016, we revised our presentation of Adjusted Net Income and Adjusted Diluted Earnings per Share to include share-based compensation and non-cash incentive compensation expense, with the revision applied retrospectively to the earliest period presented to provide period-to-period comparability.

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RBI Total Revenues for the year and fourth quarter grew primarily as a result of system-wide sales growth at both TH and BK, partially offset by unfavorable FX movements. For the year and fourth quarter, growth in RBI Net Income Attributable to Common Shareholders and Diluted Earnings per Share was primarily due to segment income growth in both of our brands and the non-recurrence of TH transaction and restructuring costs.

RBI Adjusted Ebitda for both the year and the fourth quarter grew 16.4 percent, excluding the impact of FX movements, driven by revenue growth and cost discipline at both brands.

TH Segment Results

Three Months Ended December 31, Twelve Months Ended December 31,
(in million USD) 2016 2015 2016 2015
(unaudited) (unaudited)
Comparable Sales Growth (1) 0.2% 6.3% 2.5% 5.6%
System-wide Sales Growth (1) 2.4% 12.4% 5.2% 9.3%
System-wide Sales (2) USD 1’622.2 USD 1’632.7 USD 6’405.2 USD 6’349.8
System Net Restaurant Growth (NRG) 121 69 200 155
System Restaurant Count at Period End 4’613 4’413 4’613 4’413
Sales USD 546.3 USD 533.1 USD 2’112.1 USD 2’074.3
Franchise and Property Revenues USD 247.6 USD 238.4 USD 889.3 USD 882.6
TH Total Revenues USD 793.9 USD 771.5 USD 3’001.4 USD 2’956.9
Cost of Sales USD 421.0 USD 435.3 USD 1’647.4 USD 1’728.1
Franchise and Property Expenses USD 92.3 USD 100.0 USD 317.1 USD 360.7
Segment SG+A (7) USD 30.6 USD 24.6 USD 78.9 USD 93.2
Segment Depreciation and Amortization (8) USD 25.2 USD 28.2 USD 102.1 USD 117.7
TH Adjusted Ebitda (4) (9) USD 278.4 USD 243.4 USD 1’072.3 USD 906.7

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(7) Segment selling, general and administrative expenses consists of segment selling expenses and segment management general and administrative expenses.
(8) Segment depreciation and amortization consists of depreciation and amortization included in cost of sales and franchise and property expenses.
(9) TH Adjusted Ebitda for the three and twelve months ended December 31, 2016 includes 3.2 million USD and 12.2 million USD, respectively, of cash distributions received from equity method investments. TH Adjusted Ebitda for the three months ended December 31, 2015 includes 3.6 million USD of cash distributions received from equity method investments. TH Adjusted Ebitda for the year ended December 31, 2015 excludes 0.5 million USD of acquisition accounting impact on cost of sales and includes 13.6 million USD of cash distributions received from equity method investments.

In 2016, TH system-wide sales growth was driven by the following:

  • Comparable Sales Growth: growth in the breakfast, lunch, and dinner dayparts, with notable growth in the US
  • Restaurant count growth: 4.5 percent year-over-year

TH Total Revenues grew versus prior year at the following rates, primarily as a result of system-wide sales growth:

  • Full Year 2016: 1.5 percent (4.6 percent excluding the impact of FX movements)
  • Fourth Quarter 2016: 2.9 percent (2.6 percent excluding the impact of FX movements)

TH Adjusted Ebitda grew versus prior year at the following rates, primarily as a result of TH Total Revenues growth and cost discipline:

  • Full Year 2016: 18.3 percent (21.8 percent excluding the impact of FX movements)
  • Fourth Quarter 2016: 14.4 percent (14.1 percent excluding the impact of FX movements)

BK Segment Results

Three Months Ended December 31, Twelve Months Ended December 31,
(in million USD) 2016 2015 2016 2015
(unaudited) (unaudited)
Comparable Sales Growth (1) 2.8% 3.9% 2.3% 5.4%
System-wide Sales Growth (1) 8.5% 8.8% 7.8% 10.3%
System-wide Sales(2) USD 4’651.6 USD 4’353.2 USD 18’209.2 USD 17’303.7
System Net Restaurant Growth (NRG) 495 334 735 631
System Restaurant Count at Period End 15’738 15’003 15’738 15’003
Sales USD 22.9 USD 22.7 USD 92.6 USD 94.7
Franchise and Property Revenues USD 294.6 USD 262.8 USD 1’051.8 USD 1’000.6
BK Total Revenues USD 317.5 USD 285.5 USD 1’144.4 USD 1’095.3
Cost of Sales USD 20.6 USD 19.6 USD 79.9 USD 81.4
Franchise and Property Expenses USD 38.3 USD 38.0 USD 137.0 USD 142.5
Segment SG+A (7) USD 36.7 USD 40.2 USD 159.6 USD 159.0
Segment Depreciation and Amortization (8) USD 12.1 USD 11.5 USD 48.0 USD 47.1
BK Adjusted Ebitda (4) USD 234.0 USD 199.2 USD 815.9 USD 759.5

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In 2016, BK system-wide sales growth was driven by the following:

  • Comparable Sales Growth: strength in Latin America and the Caribbean (LAC) and Asia Pacific (APAC), partially offset by softness in Europe, the Middle East, and Africa (EMEA) and the U.S. and Canada (US+C)
  • Restaurant count growth: 4.9 percent year-over-year

BK Total Revenues grew versus prior year at the following rates, primarily as a result of system-wide sales growth:

  • Full Year 2016: 4.5 percent (6.5 percent excluding the impact of FX movements)
  • Fourth Quarter 2016: 11.2 percent (12.6 percent excluding the impact of FX movements)

BK Adjusted Ebitda grew versus prior year at the following rates, primarily as a result of BK Total Revenues growth and cost discipline:

  • Full Year 2016: 7.4 percent (10.1 percent excluding the impact of FX movements)
  • Fourth Quarter 2016: 17.5 percent (19.3 percent excluding the impact of FX movements)

Cash and Liquidity

As of December 31, 2016, total debt was 8.9 billion USD, and net debt (total debt less cash and cash equivalents of 1.5 billion USD) was 7.4 billion USD. On February 13, 2017, the RBI Board of Directors declared a dividend of 0.18 USD per common share and Class B exchangeable limited partnership unit of Restaurant Brands International Limited Partnership for the first quarter of 2017. The dividend will be payable on April 4, 2017 to shareholders and unitholders of record at the close of business on March 3, 2017.