RBI: Reports First Quarter 2018 Results

Oakville / CA. (rbi) Restaurant Brands International Inc. (RBI) reported financial results for the first quarter ended March 31, 2018.

Daniel Schwartz, Chief Executive Officer of Restaurant Brands International Inc. (RBI) commented, «During the first quarter, we continued to grow system-wide sales for each of our three iconic brands, and we have developed strong plans with our partners to further accelerate growth for the long term. At «Tim Hortons», though results were soft, we have high conviction that our ‘Winning Together’ plan unveiled now will improve guest experience and drive sales and profitability for our restaurant owners. For «Burger King», we built upon our recent sales momentum and further accelerated our net restaurant growth. At «Popeyes», we improved comparable sales in the US, and announced our first international development agreement for the brand in Brazil. We continue to see a lot of growth potential for each of our three brands, and through our focus on enhancing guest satisfaction and franchisee profitability, we believe that we will create value for all of our stakeholders for many years to come.»

Consolidated Operational Highlights

Three Months Ended March 31,
2018 2017
(Unaudited)
System-wide Sales Growth
TH 2.1% 3.3%
BK 11.3% 6.2%
PLK 10.9% 6.1%
System-wide sales (in USD millions)
TH USD 1’607.7 USD 1’514.0
BK USD 5’148.9 USD 4’477.0
PLK USD 903.7 USD 835.8
Comparable Sales
TH (0.3)% (0.1)%
BK 3.8% (0.1)%
PLK 3.2% (0.2)%
Net Restaurant Growth
TH 2.8% 4.6%
BK 6.9% 5.1%
PLK 6.7% 5.8%
System Restaurant Count at Period End
TH 4’774 4’644
BK 16’859 15’768
PLK 2’926 2’743
Note: System-wide sales growth and comparable sales are calculated on a constant currency basis and include sales at franchise restaurants and company-owned restaurants. 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 percentage of franchise sales. For 2017, PLK figures are shown for informational purposes only.

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Revenue Recognition Update

Effective January 1, 2018, we adopted the new revenue recognition accounting standard («New Standard»). Our consolidated financial statements for 2018 reflect the application of the New Standard, while our consolidated financial statements for 2017 were prepared under the guidance of previously applicable accounting standards («Previous Standards»). Our results presented herein indicate which revenue recognition methodology applies in each respective period.

The most significant changes of this adoption that affect comparability of our results of operations between 2018 and 2017 include a change in the timing of franchise fee revenue recognition and the reflection of advertising fund contributions and expenses. Under Previous Standards, we recognized franchise fees when we performed all material obligations and services, which generally occurred when franchised restaurants opened. Under the New Standard, we defer initial and renewal franchise fees and recognize this revenue over the term of the related franchise agreement. Under Previous Standards, we did not reflect advertising fund contributions or advertising fund expenditures in our Consolidated Statement of Operations, and temporary net differences between contributions and expenses were reflected as prepaid assets or accrued liabilities on our consolidated balance sheet. Under the New Standard, advertising fund contributions and expenditures for funds that we manage are reported on a gross basis in our Consolidated Statement of Operations.

The implementation of the New Standard also impacted our year-over-year results on a consolidated basis and for each segment as follows:

  • Total Revenues increased as a result of the inclusion of advertising fund contributions, partially offset by a reduction in franchise fee revenues
  • Selling, General, and Administrative Expenses increased as a result of the inclusion of advertising fund expenditures

Additionally, for the first quarter, year-over-year results were impacted by the inclusion of Popeyes in our 2018 results.

For year-over-year comparability purposes, we have included a reconciliation of 2018 results under Previous Standards and are calculating organic growth under Previous Standards for both periods presented. Additional details can be found in our Form 10-Q.

Consolidated Financial Highlights

Three Months Ended March 31,
(in USD millions, except per share data) 2018 2018 2017
New Standard Previous Standards Previous Standards
(Unaudited)
Total Revenues USD 1’253.8 USD 1’071.8 USD 1’000.6
Net Income Attributable to Common Shareholders USD 147.8 USD 151.0 USD 50.2
Net Income Attributable to Common Shareholders and Noncontrolling Interests USD 278.6 USD 284.7 USD 98.7
Diluted Earnings per Share USD 0.59 USD 0.60 USD 0.21
TH Adjusted Ebitda(1) USD 245.2 USD 250.5 USD 256.2
BK Adjusted Ebitda(1) USD 214.1 USD 215.0 USD 187.1
PLK Adjusted Ebitda(1) USD 38.5 USD 40.8 N/A
Adjusted Ebitda(2) USD 497.8 USD 506.3 USD 443.3
Adjusted Net Income(2) USD 313.3 USD 319.4 USD 170.6
Adjusted Diluted Earnings per Share(2) USD 0.66 USD 0.67 USD 0.36
(1) TH Adjusted Ebitda, BK Adjusted Ebitda and PLK Adjusted Ebitda are our measures of segment profitability.
(2) Adjusted Ebitda, Adjusted Net Income, and Adjusted Diluted Earnings per Share are non-GAAP financial measures. Please refer to “Non-GAAP Financial Measures” for further detail.

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Under Previous Standards, Total Revenues for the first quarter grew primarily as a result of the inclusion of our PLK segment and system-wide sales growth at BK, as well as a favorable FX impact, partially offset by a decrease in supply chain related revenues at TH. Net Income Attributable to Common Shareholders for the quarter, under both Previous Standards and the New Standard, was driven by the inclusion of our PLK segment, growth in BK segment income, and the redemption of our preferred shares in 2017.

Under Previous Standards, Adjusted Ebitda for the quarter grew 5.0 percent on an organic basis versus prior year combined results (including Popeyes), driven primarily by an increase in revenues at BK and PLK, partially offset by a decrease in supply chain related revenues at TH.

TH Segment Results

For the first quarter of 2018, system-wide sales growth was primarily driven by net restaurant growth of 2.8 percent. Comparable sales of (0.3) percent was primarily driven by relatively flat Canada comparable sales.

Under Previous Standards, Total Revenues for the quarter declined (3.0) percent (6.8) percent excluding the impact of FX movements) versus prior year, primarily reflecting a decrease in supply chain related revenues, partially offset by a favorable impact of FX movements.

Under Previous Standards, Adjusted Ebitda for the quarter declined (2.2) percent (6.1) percent excluding the impact of FX movements) versus prior year, primarily as a result of a decrease in Total Revenues, partially offset by a favorable impact of FX movements.

BK Segment Results

For the first quarter of 2018, system-wide sales growth was driven by net restaurant growth of 6.9 percent and comparable sales of 3.8 percent, which was primarily driven by US comparable sales of 4.2 percent.

Under Previous Standards, Total Revenues for the quarter grew 9.7 percent (6.6 percent excluding the impact of FX movements) versus prior year, reflecting growth in system-wide sales.

Under Previous Standards, Adjusted Ebitda for the quarter grew 14.9 percent (11.5 percent excluding the impact of FX movements) versus prior year, primarily as a result of an increase in Total Revenues.

PLK Segment Results

For the first quarter of 2018, system-wide sales growth was driven by net restaurant growth of 6.7 percent and comparable sales of 3.2 percent, which was primarily driven by US comparable sales of 2.3 percent.

PLK revenues and segment income from the acquisition date of March 27, 2017 through March 31, 2017 were not material to our consolidated financial statements, and therefore were not included in our consolidated statement of operations for the three months ended March 31, 2017.

Cash and Liquidity

As of March 31, 2018, total debt was USD 12.3 billion, and net debt (total debt less cash and cash equivalents of USD 0.9 billion) was USD 11.4 billion. Effective January 1, 2018, we adopted new guidance related to hedge accounting, which amends hedge accounting recognition and presentation requirements. Most notably, under the new guidance for our net investment hedges, all components not related to spot remeasurements on the notional amount of these instruments are included in interest expense, net, whereas previously they were recorded in other comprehensive income. Additional details about this accounting standard can be found in our Form 10-Q.

On April 24, 2018, the RBI Board of Directors declared a dividend of USD 0.45 per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for the second quarter of 2018. The dividend will be payable on July 3, 2018 to shareholders and unitholders of record at the close of business on May 15, 2018.

About Restaurant Brands International Inc.

Restaurant Brands International Inc. (RBI) is one of the world’s largest quick service restaurant companies with more than USD 30 billion in system-wide sales and over 24’000 restaurants in more than 100 countries and U.S. territories. RBI owns three of the world’s most prominent and iconic quick service restaurant brands – «Tim Hortons», «Burger King», and «Popeyes». These independently operated brands have been serving their respective guests, franchisees and communities for over 40 years.

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