RBI: Reports Second Quarter 2016 Results

Oakville / CA. (rbi) Restaurant Brands International Inc. (RBI) reported financial results for second quarter ended June 30, 2016. Chief Executive Officer Daniel Schwartz commented, «We ended the second quarter with solid system-wide sales growth at both of our iconic brands, Tim Hortons (TH) and Burger King (BK), driven by growth in our global restaurant footprint and compelling product launches. We continued to achieve strong earnings growth versus prior year results and believe that the execution of our brand-specific strategies by our franchisees and employees will drive sustainable value for years to come».

Second Quarter 2016 Highlights

• RBI Total Revenues of 1’040.2 million USD versus 1’042.2 million USD in prior year period
• RBI Net Income Attributable to Common Shareholders of 90.9 million USD versus 11.0 million USD in prior year period
• RBI Diluted EPS of 0.38 USD versus 0.05 USD in prior year period
• Tim Hortons (TH) comparable sales increased 2.7 percent and Burger King (BK) comparable sales increased 0.6 percent in constant currency
• Restaurant count increased 3.3 percent at TH and 3.9 percent at BK year-over-year
• System-wide sales grew 4.8 percent at TH and 5.9 percent at BK in constant currency
• RBI Adjusted Ebitda of 479.1 million USD was up 16.2 percent on an organic basis versus prior year results
• RBI Adjusted Diluted EPS of 0.41 USD was up 38.3 percent versus prior year results
• RBI declared a dividend of 0.16 USD per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for the third quarter of 2016

Consolidated Operational Highlights

Three Months Ended June 30,		2016			2015
(unaudited)
Comparable Sales Growth(1)
TH			2.7%			5.5%
BK			0.6%			6.7%
System Net Restaurant Growth (NRG)
TH (2)			26			23
BK			92			141
System-wide Sales Growth(1)
TH			4.8%			8.4%
BK			5.9%			11.6%
System-wide Sales (3)(in USD millions)
TH		USD	1’667.9		USD	1’657.6
BK		USD	4’544.1		USD	4’406.1

(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) Restaurant count excludes 420 and 454 limited service kiosks as of June 30, 2016 and 2015, respectively. NRG excludes limited service kiosks for the three months ended June 30, 2016 and 2015. Commencing in the fourth quarter of 2015, we revised our presentation of restaurant counts to exclude limited service kiosks, with the revision applied retrospectively to the earliest period presented to provide period-to-period comparability.
(3) System-wide sales are primarily driven by sales at franchise restaurants, as approximately 100 percent of current restaurants are franchised. We do not record franchise sales as revenue; however, our franchise revenues include royalties based on a percentage of franchise sales.

Consolidated Financial Highlights

Three Months Ended June 30,			2016			2015 (7)
(in USD millions, except per share data)			(unaudited)
RBI Total Revenues			USD	1’040.2		USD	1’042.2
RBI Net Income Attributable to
	Common Shareholders		USD	90.9		USD	11.0
RBI Dilutive Net Income Attributable to Common
	Shareholders and Noncontrolling Interests (4)		USD	179.2		USD	25.3
RBI Diluted Earnings per Share			USD	0.38		USD	0.05
TH Adjusted Ebitda (5)			USD	279.0		USD	234.9
BK Adjusted Ebitda (5)			USD	200.1		USD	192.9
RBI Adjusted Ebitda (6)			USD	479.1		USD	427.8
RBI Adjusted Net Income (6)(8)			USD	192.4		USD	141.0
RBI Adjusted Diluted Earnings per Share (6)(8)			USD	0.41		USD	0.30

(4) Includes net income available to common shareholders and net income available to noncontrolling interests related to the Class B exchangeable limited partnership units of Restaurant Brands International Limited Partnership.
(5) TH Adjusted Ebitda and BK Adjusted Ebitda are our measures of segment profitability.
(6) RBI Adjusted Ebitda, RBI Adjusted Net Income, and RBI Adjusted Diluted Earnings per Share are non-GAAP financial measures.
(7) TH results for the three months ended June 30, 2015 have been retrospectively adjusted to reflect the final purchase price allocation for Tim Hortons.
(8) 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.

RBI Total Revenues for the quarter were 1’040.2 million USD compared to 1’042.2 million USD in the prior year period primarily as a result of unfavorable FX movements, partially offset by system-wide sales growth at both TH and BK. On a GAAP basis, RBI reported Net Income Attributable to Common Shareholders of 90.9 million USD in the second quarter, versus 11.0 million USD in the prior year, and Diluted Earnings per Share of 0.38 USD, compared to 0.05 USD in the prior year, primarily due to the non-recurrence of one-time expenses arising from the 2015 debt refinancing, effective cost management, and the non-recurrence of one-time expenses arising from the Tim Hortons transaction. Adjusted Ebitda growth of 16.2 percent, excluding the impact of FX movements, was driven by organic growth at both brands combined with cost discipline.

TH Segment Results

Three Months Ended June 30,		2016			2015 (7)
(in USD millions)		(unaudited)
Comparable Sales Growth (1)		2.7%			5.5%
System-wide Sales Growth (1)		4.8%			8.4%
System-wide Sales (3)		USD	1’667.9		USD	1’657.6
System Net Restaurant Growth (NRG) (2)		26			23
System Restaurant Count at Period End (2)		4’464			4’322
Sales		USD	535.5		USD	539.0
Franchise and Property Revenues		USD	224.3		USD	225.0
TH Total Revenues		USD	759.8		USD	764.0
Cost of Sales		USD	415.5		USD	449.8
Franchise and Property Expenses		USD	79.6		USD	88.6
Segment SG+A (9)		USD	15.1		USD	23.0
Segment Depreciation and Amortization (10)		USD	26.1		USD	29.6
TH Adjusted Ebitda (5) (11)		USD	279.0		USD	234.9

(9) Segment selling, general and administrative expenses consists of segment selling expenses and segment management general and administrative expenses.
(10) Segment depreciation and amortization consists of depreciation and amortization included in cost of sales and franchise and property expenses.
(11) TH Adjusted Ebitda for the three months ended June 30, 2016 includes 3.3 million USD of cash distributions received from equity method investments. TH Adjusted Ebitda for the three months ended June 30, 2015 includes (1.0) million USD of acquisition accounting impact on cost of sales and 3.7 million USD of cash distributions received from equity method investments.

At TH, year-over-year restaurant count growth of 3.3 percent combined with comparable sales growth of 2.7 percent resulted in system-wide sales growth of 4.8 percent in constant currency. Impactful new product launches drove favorable comparable sales at TH. TH ended the second quarter with 4’464 restaurants, opening 26 net new restaurants during the period.

TH experienced a 4.2 percent FX headwind to Total Revenues for the second quarter. Compared to prior year results, TH Total Revenues of 759.8 million USD declined 0.5 percent but grew 3.8 percent excluding the impact of FX movements. TH Adjusted Ebitda of 279.0 million USD grew 18.8 percent and 24.1 percent excluding the impact of FX movements, primarily driven by system-wide sales growth and cost discipline.

BK Segment Results

Three Months Ended June 30,		2016			2015
(in USD millions)		(unaudited)
Comparable Sales Growth (1)		0.6%			6.7%
System-wide Sales Growth (1)		5.9%			11.6%
System-wide Sales(3)		USD	4’544.1		USD	4’406.1
System Net Restaurant Growth (NRG)			92		141
System Restaurant Count at Period End			15’100		14’528
Sales		USD	23.1		USD	28.8
Franchise and Property Revenues		USD	257.3		USD	249.4
BK Total Revenues		USD	280.4		USD	278.2
Cost of Sales		USD	20.3		USD	25.0
Franchise and Property Expenses		USD	34.5		USD	33.1
Segment SG+A (9)		USD	37.4		USD	39.2
Segment Depreciation and Amortization (10)		USD	11.9		USD	12.0
BK Adjusted Ebitda (5)		USD	200.1		USD	192.9

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At BK, system-wide sales grew 5.9 percent year-over-year in constant currency. Strength in Asia Pacific (APAC) and Latin Americaand the Caribbean (LAC), partially offset by softness in the U.S. and Canada (US+C), contributed to comparable sales growth of 0.6 percent at BK. Year-over-year, BK achieved restaurant count growth of 3.9 percent with 92 net new restaurants added during the quarter, ending the quarter with 15’100 restaurants.

BK experienced a 2.0 percent FX headwind to Total Revenues for the second quarter. Compared to prior year results, BK Total Revenues of 280.4 million USD grew 0.8 percent and 2.8 percent excluding the impact of FX movements. BK Adjusted Ebitda of 200.1 million USD grew 3.7 percent and 6.5 percent excluding the impact of FX movements, driven by system-wide sales growth and discipline on costs.

Cash and Liquidity

As of June 30, 2016, total debt was 8.9 billion USD, and net debt, excluding total cash and cash equivalents of 1.0 billion USD, was 7.9 billion USD. On August 3, 2016, the RBI Board of Directors declared a dividend of 0.16 USD per common share and Class B exchangeable partnership unit of Restaurant Brands International Limited Partnership for the third quarter of 2016. The dividend will be payable on October 4, 2016 to shareholders and unitholders of record at the close of business on September 6, 2016.

On August 2, 2016, the RBI Board of Directors approved a share repurchase authorization whereby RBI may purchase up to 300 million USD of its common shares over the next 5 years. Repurchases under the company’s new authorization will be made in the open market or through privately negotiated transactions.