RBI: Reports Third Quarter 2016 Results

Oakville / CA. (rbi) Restaurant Brands International Inc. (RBI) reported financial results for the third quarter ended September 30, 2016. Daniel Schwartz, Chief Executive Officer of Restaurant Brands International Inc. (RBI) commented, «We continued to grow our iconic brands, Tim Hortons (TH) and Burger King (BK), increasing system-wide sales through restaurant development and focus on guest satisfaction. We are encouraged with the progress this quarter and are excited by the long term growth prospects for our brands».

Third Quarter 2016 Highlights

• RBI Total Revenues of 1’075.7 million USD versus 1’019.7 million USD in prior year period
• RBI Net Income Attributable to Common Shareholders of 86.3 million USD versus 49.6 million USD in prior year period
• RBI Diluted EPS of 0.36 USD versus 0.24 USD in prior year period
• Tim Hortons (TH) comparable sales increased 2.0 percent and Burger King (BK) comparable sales increased 1.7 percent in constant currency
• Restaurant count increased 3.4 percent at TH and 3.9 percent at BK year-over-year
• System-wide sales grew 4.8 percent at TH and 7.0 percent at BK in constant currency
• RBI Adjusted Ebitda of 488.9 million USD was up 11.3 percent on an organic basis versus prior year results
• RBI Adjusted Diluted EPS of 0.43 USD was up 34.5 percent versus prior year results
• RBI declared a dividend of 0.17 USD per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for the fourth quarter of 2016

Consolidated Operational Highlights

(unaudited)		Q3/2016			Q3/2015
Comparable Sales Growth(1)
TH		2.0%			5.3%
BK		1.7%			6.2%
System Net Restaurant Growth (NRG)
TH (2)		28			22
BK		143			141
System-wide Sales Growth(1)
TH		4.8%			8.2%
BK		7.0%			11.2%
System-wide Sales (3)(in USUSD millions)
TH	USD	1’690.4		USD	1’600.0
BK	USD	4’776.7		USD	4’520.6

(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 436 and 501 limited service kiosks as of September 30, 2016 and 2015, respectively. NRG excludes limited service kiosks. 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 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.

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Consolidated Financial Highlights

(unaudited in USUSD millions, except per share data)		Q3/2016			Q3/2015
RBI Total Revenues	USD	1’075.7		USD	1’019.7
RBI Net Income Attributable to Common Shareholders	USD	86.3		USD	49.6
RBI Diluted Net Income Attributable to Common Shareholders and Noncontrolling Interests (4)	USD	170.1		USD	114.5
RBI Diluted Earnings per Share	USD	0.36		USD	0.24
TH Adjusted Ebitda (5)	USD	287.1		USD	244.0
BK Adjusted Ebitda (5)	USD	201.8		USD	196.7
RBI Adjusted Ebitda (6)	USD	488.9		USD	440.7
RBI Adjusted Net Income (6)(7)	USD	201.4		USD	151.6
RBI Adjusted Diluted Earnings per Share (6)(7)	USD	0.43		USD	0.32

(4)	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.
(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)	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 quarter were 1’075.7 million USD compared to 1’019.7 million USD in the prior year period primarily as a result of system-wide sales growth at both TH and BK. On a GAAP basis, RBI reported Net Income Attributable to Common Shareholders of 86.3 million USD in the third quarter, versus 49.6 million USD in the prior year, and Diluted Earnings per Share of 0.36 USD, compared to 0.24 USD in the prior year, primarily due to the non-recurrence of TH transaction and restructuring costs. RBI Adjusted Ebitda growth of 11.3 percent, excluding the impact of FX movements, was driven by organic growth at both brands combined with cost discipline.

TH Segment Results

(unaudited in USUSD millions)		Q3/2016			Q3/2015
Comparable Sales Growth (1)		2.0%			5.3%
System-wide Sales Growth (1)		4.8%			8.2%
System-wide Sales (3)	USD	1’690.4		USD	1’600.0
System Net Restaurant Growth (NRG) (2)		28			22
System Restaurant Count at Period End (2)		4’492			4’344
Sales	USD	563.0		USD	522.1
Franchise and Property Revenues	USD	226.9		USD	215.6
TH Total Revenues	USD	789.9		USD	737.7
Cost of Sales	USD	434.6		USD	426.7
Franchise + Property Expenses	USD	79.8		USD	79.2
Segment SG+A (8)	USD	17.0		USD	18.5
Segment Depreciation and Amortization (9)	USD	25.7		USD	27.3
TH Adjusted Ebitda (5) (10)	USD	287.1		USD	244.0

(8)	Segment selling, general and administrative expenses consists of segment selling expenses and segment management general and administrative expenses.
(9)	Segment depreciation and amortization consists of depreciation and amortization included in cost of sales and franchise and property expenses.
(10)	TH Adjusted Ebitda for the three months ended September 30, 2016 includes 2.9 million USD of cash distributions received from equity method investments. TH Adjusted Ebitda for the three months ended September 30, 2015 excludes (0.3) million USD of acquisition accounting impact on cost of sales and includes 3.7 million USD of cash distributions received from equity method investments.

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At TH, comparable sales growth of 2.0 percent and year-over-year restaurant count growth of 3.4 percent resulted in system-wide sales growth of 4.8 percent in constant currency. New product launches drove favorable comparable sales at TH. TH opened 28 net new restaurants during the period, and ended the quarter with 4’492 restaurants.

Compared to prior year results, TH Total Revenues of 789.9 million USD grew 7.1 percent (7.0 percent excluding the impact of FX movements), primarily driven by system-wide sales growth. TH Adjusted Ebitda of 287.1 million USD grew 17.7 percent (17.1 percent excluding the impact of FX movements), primarily driven by organic growth and cost discipline.

BK Segment Results

(unaudited in USD millions)		Q3/2016			Q3/2015
Comparable Sales Growth (1)		1.7%			6.2%
System-wide Sales Growth (1)		7.0%			11.2%
System-wide Sales(3)	USD	4’776.7		USD	4’520.6
System Net Restaurant Growth (NRG)		143			141
System Restaurant Count at Period End		15’243			14’669
Sales	USD	23.4		USD	23.8
Franchise and Property Revenues	USD	262.4		USD	258.2
BK Total Revenues	USD	285.8		USD	282.0
Cost of Sales	USD	20.4		USD	19.9
Franchise + Property Expenses	USD	32.1		USD	35.2
Segment SG+A (8)	USD	43.5		USD	42.0
Segment Depreciation and Amortization (9)	USD	12.0		USD	11.8
BK Adjusted Ebitda (5)	USD	201.8		USD	196.7

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System-wide sales at BK grew 7.0 percent year-over-year in constant currency. Continued strength in Asia Pacific (APAC) and Latin America and the Caribbean (LAC), along with strength in Europe, the Middle East, and Africa (EMEA), partially offset by softness in the U.S. and Canada (US+C), contributed to comparable sales growth of 1.7 percent at BK. BK added 143 net new restaurants during the quarter, growing restaurant count by 3.9 percent year-over-year, ending the quarter with 15’243 restaurants.

BK Total Revenues of 285.8 million USD grew 1.3 percent (2.7 percent excluding the impact of FX movements), compared to prior year results, driven by system-wide sales growth. BK Adjusted Ebitda of 201.8 million USD grew 2.6 percent (4.2 percent excluding the impact of FX movements), primarily driven by organic growth.

Cash and Liquidity

As of September 30, 2016, total debt was 8.9 billion USD, and net debt (total debt less cash and cash equivalents of 1.3 billion USD) was 7.7 billion USD. On October 24, 2016, the RBI Board of Directors declared a dividend of 0.17 USD per common share and Class B exchangeable partnership unit of Restaurant Brands International Limited Partnership for the fourth quarter of 2016. The dividend will be payable onJanuary 4, 2017 to shareholders and unitholders of record at the close of business on December 8, 2016.