OAKVILLE, ON, April 24,
2018 /CNW/ - Restaurant Brands International Inc. (TSX/NYSE: QSR,
TSX: QSP) today 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 today 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
US$ millions)
|
|
|
|
|
|
|
TH
|
$
|
1,607.7
|
|
$
|
1,514.0
|
|
BK
|
$
|
5,148.9
|
|
$
|
4,477.0
|
|
PLK
|
$
|
903.7
|
|
$
|
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.
|
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 US$ millions,
except per share data)
|
2018
|
|
2018
|
|
2017
|
|
New
Standard
|
|
Previous
Standards
|
|
Previous
Standards
|
|
(Unaudited)
|
Total
Revenues
|
$
|
1,253.8
|
|
$
|
1,071.8
|
|
$
|
1,000.6
|
Net Income
Attributable to Common Shareholders
|
$
|
147.8
|
|
$
|
151.0
|
|
$
|
50.2
|
Net Income
Attributable to Common Shareholders and Noncontrolling
Interests
|
$
|
278.6
|
|
$
|
284.7
|
|
$
|
98.7
|
Diluted Earnings per
Share
|
$
|
0.59
|
|
$
|
0.60
|
|
$
|
0.21
|
|
|
|
|
TH Adjusted
EBITDA(1)
|
$
|
245.2
|
|
$
|
250.5
|
|
$
|
256.2
|
BK Adjusted
EBITDA(1)
|
$
|
214.1
|
|
$
|
215.0
|
|
$
|
187.1
|
PLK Adjusted
EBITDA(1)
|
$
|
38.5
|
|
$
|
40.8
|
|
N/A
|
Adjusted
EBITDA(2)
|
$
|
497.8
|
|
$
|
506.3
|
|
$
|
443.3
|
|
|
|
|
Adjusted Net
Income(2)
|
$
|
313.3
|
|
$
|
319.4
|
|
$
|
170.6
|
Adjusted Diluted
Earnings per Share(2)
|
$
|
0.66
|
|
$
|
0.67
|
|
$
|
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.
|
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% 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
|
Three Months Ended
March 31,
|
(in US$
millions)
|
2018
|
|
2017
|
|
New
Standard
|
|
Previous
Standards
|
|
(Unaudited)
|
System-wide Sales
Growth
|
|
2.1%
|
|
|
3.3%
|
System-wide
Sales
|
$
|
1,607.7
|
|
$
|
1,514.0
|
Comparable
Sales
|
|
(0.3)%
|
|
|
(0.1)%
|
|
|
|
|
|
Net Restaurant
Growth
|
|
2.8%
|
|
|
4.6%
|
System Restaurant
Count at Period End
|
|
4,774
|
|
|
4,644
|
|
|
|
|
|
|
Sales
|
$
|
508.3
|
|
$
|
527.4
|
Franchise and
Property Revenues
|
$
|
255.2
|
|
$
|
206.2
|
Total
Revenues
|
$
|
763.5
|
|
$
|
733.6
|
|
|
|
|
|
|
Cost of
Sales
|
$
|
395.9
|
|
$
|
402.5
|
Franchise and
Property Expenses
|
$
|
69.5
|
|
$
|
77.7
|
Segment
SG&A
|
$
|
82.3
|
|
$
|
25.1
|
Segment Depreciation
and Amortization
|
$
|
26.3
|
|
$
|
25.1
|
Adjusted
EBITDA(1)(3)
|
$
|
245.2
|
|
$
|
256.2
|
|
|
(3)
|
TH Adjusted EBITDA
includes $3.1 million and $2.8 million of cash distributions
received from equity method investments for the three months ended
March 31, 2018 and 2017, respectively.
|
For the first quarter of 2018, system-wide sales growth was
primarily driven by net restaurant growth of 2.8%. Comparable sales
of (0.3)% was primarily driven by relatively flat Canada comparable sales.
Under Previous Standards, Total Revenues for the quarter
declined (3.0)% ((6.8)% excluding the impact of FX movements)
versus prior year, primarily reflecting a decrease in supply chain
related revenues, partially offset by a favorable impact of FX
movements.
Under Previous Standards, Adjusted EBITDA for the quarter
declined (2.2)% ((6.1)% excluding the impact of FX movements)
versus prior year, primarily as a result of a decrease in Total
Revenues, partially offset by a favorable impact of FX
movements.
BK Segment Results
|
Three Months Ended
March 31,
|
(in US$
millions)
|
2018
|
|
2017
|
|
New
Standard
|
|
Previous
Standards
|
|
(Unaudited)
|
System-wide Sales
Growth
|
|
11.3%
|
|
|
6.2%
|
System-wide
Sales
|
$
|
5,148.9
|
|
$
|
4,477.0
|
Comparable
Sales
|
|
3.8%
|
|
|
(0.1)%
|
|
|
|
|
|
Net Restaurant
Growth
|
|
6.9%
|
|
|
5.1%
|
System Restaurant
Count at Period End
|
|
16,859
|
|
|
15,768
|
|
|
|
|
|
Sales
|
$
|
18.7
|
|
$
|
23.0
|
Franchise and
Property Revenues
|
$
|
371.2
|
|
$
|
244.0
|
Total
Revenues
|
$
|
389.9
|
|
$
|
267.0
|
|
|
|
|
|
|
Cost of
Sales
|
$
|
16.4
|
|
$
|
20.9
|
Franchise and
Property Expenses
|
$
|
32.5
|
|
$
|
33.3
|
Segment
SG&A
|
$
|
140.3
|
|
$
|
38.2
|
Segment Depreciation
and Amortization
|
$
|
12.2
|
|
$
|
12.5
|
Adjusted
EBITDA(1)(4)
|
$
|
214.1
|
|
$
|
187.1
|
|
|
(4)
|
BK Adjusted EBITDA
includes $1.2 million of cash distributions received from equity
method investments for the three months ended March 31,
2018.
|
For the first quarter of 2018, system-wide sales growth was
driven by net restaurant growth of 6.9% and comparable sales of
3.8%, which was primarily driven by US comparable sales of
4.2%.
Under Previous Standards, Total Revenues for the quarter grew
9.7% (6.6% excluding the impact of FX movements) versus prior year,
reflecting growth in system-wide sales.
Under Previous Standards, Adjusted EBITDA for the quarter grew
14.9% (11.5% excluding the impact of FX movements) versus prior
year, primarily as a result of an increase in Total Revenues.
PLK Segment Results
|
Three Months Ended
March 31,
|
(in US$
millions)
|
2018
|
|
2017
|
|
New
Standard
|
|
Previous
Standard
|
|
(Unaudited)
|
System-wide Sales
Growth
|
|
10.9%
|
|
|
6.1%
|
System-wide
Sales
|
$
|
903.7
|
|
$
|
835.8
|
Comparable
Sales
|
|
3.2%
|
|
|
(0.2)%
|
|
|
|
|
Net Restaurant
Growth
|
|
6.7%
|
|
|
5.8%
|
System Restaurant
Count at Period End
|
|
2,926
|
|
|
2,743
|
|
|
|
|
Sales
|
$
|
20.8
|
|
|
N/A
|
Franchise and
Property Revenues
|
$
|
79.6
|
|
|
N/A
|
Total
Revenues
|
$
|
100.4
|
|
|
N/A
|
|
|
|
|
Cost of
Sales
|
$
|
16.8
|
|
|
N/A
|
Franchise and
Property Expenses
|
$
|
2.4
|
|
|
N/A
|
Segment
SG&A
|
$
|
45.4
|
|
|
N/A
|
Segment Depreciation
and Amortization
|
$
|
2.7
|
|
|
N/A
|
Adjusted
EBITDA(1)
|
$
|
38.5
|
|
|
N/A
|
For the first quarter of 2018, system-wide sales growth was
driven by net restaurant growth of 6.7% and comparable sales of
3.2%, which was primarily driven by US comparable sales of
2.3%.
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 $12.3 billion, and net debt (total debt less cash
and cash equivalents of $0.9 billion)
was $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 $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.
Investor Conference Call
We will host an investor conference call and webcast at
8:30 a.m. Eastern Time on Tuesday,
April 24, 2018, to review financial results for the first
quarter ended March 31, 2018. The earnings call will be
broadcast live via our investor relations website
at http://investor.rbi.com and a replay will be available
for 30 days following the release. The dial-in number is (877)
317-6711 for U.S. callers, (866) 450-4696 for Canadian callers, and
(412) 317-5475 for callers from other countries.
About Restaurant Brands International Inc.
Restaurant Brands International Inc. ("RBI") is one of the
world's largest quick service restaurant companies with more than
$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. To learn more about RBI, please visit the company's
website at www.rbi.com.
Forward-Looking Statements
This press release contains certain forward-looking
statements and information, which reflect management's current
beliefs and expectations regarding future events and operating
performance and speak only as of the date hereof. These
forward-looking statements are not guarantees of future performance
and involve a number of risks and uncertainties. These
forward-looking statements include statements about our
expectations regarding our high conviction that our "Winning
Together" plan unveiled this morning will improve guest experience
and drive sales and profitability for our Tim Hortons restaurant owners; our expectations
regarding the growth potential for each of our three brands; and
our expectations and belief that through our focus on enhancing
guest satisfaction and franchisee profitability, we will create
value for all of our stakeholders for many years to come. The
factors that could cause actual results to differ materially from
RBI's expectations are detailed in filings of RBI with the
Securities and Exchange Commission and applicable Canadian
securities regulatory authorities, such as its annual and quarterly
reports and current reports on Form 8-K, and include the following:
risks related to RBI's ability to successfully implement its
domestic and international growth strategy; and risks related to
RBI's ability to compete domestically and internationally in an
intensely competitive industry. Other than as required under U.S.
federal securities laws or Canadian securities laws, we do not
assume a duty to update these forward-looking statements, whether
as a result of new information, subsequent events or circumstances,
change in expectations or otherwise.
RESTAURANT BRANDS INTERNATIONAL INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Operations
(In millions of U.S. dollars, except per share data)
(Unaudited)
|
Three Months Ended
March 31,
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
New
Standard
|
|
Total
Adjustments
|
|
Previous
Standards
|
|
Previous
Standards
|
Revenues:
|
|
|
Sales
|
$
|
547.8
|
|
$
|
—
|
|
$
|
547.8
|
|
$
|
550.4
|
|
Franchise and
property revenues
|
|
706.0
|
|
|
(182.0)
|
|
|
524.0
|
|
|
450.2
|
|
|
Total
revenues
|
|
1,253.8
|
|
|
(182.0)
|
|
|
1,071.8
|
|
|
1,000.6
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
429.1
|
|
|
—
|
|
|
429.1
|
|
|
423.4
|
|
Franchise and
property expenses
|
|
104.4
|
|
|
(0.2)
|
|
|
104.2
|
|
|
111.0
|
|
Selling, general and
administrative expenses
|
|
301.3
|
|
|
(190.5)
|
|
|
110.8
|
|
|
121.9
|
|
(Income) loss from
equity method investments
|
|
(14.3)
|
|
|
—
|
|
|
(14.3)
|
|
|
(5.7)
|
|
Other operating
expenses (income), net
|
|
12.7
|
|
|
—
|
|
|
12.7
|
|
|
13.8
|
|
|
Total operating costs
and expenses
|
|
833.2
|
|
|
(190.7)
|
|
|
642.5
|
|
|
664.4
|
Income from
operations
|
|
420.6
|
|
|
8.7
|
|
|
429.3
|
|
|
336.2
|
Interest expense,
net
|
|
140.1
|
|
|
0.5
|
|
|
140.6
|
|
|
111.4
|
Loss on early
extinguishment of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20.4
|
Income before income
taxes
|
|
280.5
|
|
|
8.2
|
|
|
288.7
|
|
|
204.4
|
|
Income tax
expense
|
|
1.7
|
|
|
2.1
|
|
|
3.8
|
|
|
37.8
|
Net income
|
|
278.8
|
|
|
6.1
|
|
|
284.9
|
|
|
166.6
|
|
Net income
attributable to noncontrolling interests
|
|
131.0
|
|
|
2.9
|
|
|
133.9
|
|
|
48.9
|
|
Preferred share
dividends
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67.5
|
Net income
attributable to common shareholders
|
$
|
147.8
|
|
$
|
3.2
|
|
$
|
151.0
|
|
$
|
50.2
|
Earnings per common
share
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.60
|
|
$
|
0.01
|
|
$
|
0.61
|
|
$
|
0.21
|
|
Diluted
|
$
|
0.59
|
|
$
|
0.01
|
|
$
|
0.60
|
|
$
|
0.21
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
245.9
|
|
|
—
|
|
|
245.9
|
|
|
234.7
|
|
Diluted
|
|
473.9
|
|
|
—
|
|
|
473.9
|
|
|
476.5
|
Cash dividends
declared per common share
|
$
|
0.45
|
|
$
|
|
|
|
0.45
|
|
$
|
0.18
|
RESTAURANT BRANDS INTERNATIONAL INC. AND
SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions of U.S. dollars, except share data)
(Unaudited)
|
As
of
|
|
March 31,
2018
|
|
December 31,
2017
|
|
New
Standard
|
|
Previous
Standards
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
|
852.4
|
|
$
|
1,097.4
|
|
Accounts and notes
receivable, net of allowance of $19.5 and $16.4,
respectively
|
|
467.6
|
|
|
488.8
|
|
Inventories,
net
|
|
74.6
|
|
|
78.0
|
|
Prepaids and other
current assets
|
|
87.8
|
|
|
85.4
|
|
|
Total current
assets
|
|
1,482.4
|
|
|
1,749.6
|
Property and
equipment, net of accumulated depreciation and amortization of
$651.7 and $623.3, respectively
|
|
2,072.7
|
|
|
2,133.3
|
Intangible assets,
net
|
|
10,904.6
|
|
|
11,062.2
|
Goodwill
|
|
5,693.5
|
|
|
5,782.3
|
Net investment in
property leased to franchisees
|
|
66.9
|
|
|
71.3
|
Other assets,
net
|
|
539.4
|
|
|
424.8
|
|
|
Total
assets
|
$
|
20,759.5
|
|
$
|
21,223.5
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts and drafts
payable
|
$
|
416.4
|
|
$
|
496.2
|
|
Other accrued
liabilities
|
|
636.6
|
|
|
865.7
|
|
Gift card
liability
|
|
107.3
|
|
|
214.9
|
|
Current portion of
long term debt and capital leases
|
|
78.8
|
|
|
78.2
|
|
|
Total current
liabilities
|
|
1,239.1
|
|
|
1,655.0
|
Term debt, net of
current portion
|
|
11,788.1
|
|
|
11,800.9
|
Capital leases, net
of current portion
|
|
236.6
|
|
|
243.8
|
Other liabilities,
net
|
|
1,820.4
|
|
|
1,455.1
|
Deferred income
taxes, net
|
|
1,432.9
|
|
|
1,508.1
|
|
|
Total
liabilities
|
|
16,517.1
|
|
|
16,662.9
|
Shareholders'
equity:
|
|
|
|
|
Common shares, no par
value; unlimited shares authorized at March 31, 2018 and December
31, 2017;
249,101,633 shares issued and outstanding at March 31, 2018;
243,899,476 shares issued and outstanding
at December 31, 2017
|
|
2,096.6
|
|
|
2,051.5
|
|
Retained
earnings
|
|
553.9
|
|
|
650.6
|
|
Accumulated other
comprehensive income (loss)
|
|
(572.5)
|
|
|
(475.7)
|
|
|
Total Restaurant
Brands International Inc. shareholders' equity
|
|
2,078.0
|
|
|
2,226.4
|
|
|
Noncontrolling
interests
|
|
2,164.4
|
|
|
2,334.2
|
|
|
Total shareholders'
equity
|
|
4,242.4
|
|
|
4,560.6
|
|
|
Total liabilities and
shareholders' equity
|
$
|
20,759.5
|
|
$
|
21,223.5
|
RESTAURANT BRANDS INTERNATIONAL INC. AND
SUBSIDIARIES
Condensed Consolidated Statements of Cash
Flows
(In millions of U.S. dollars)
(Unaudited)
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
|
New
Standard
|
|
Previous
Standards
|
Cash flows from
operating activities:
|
|
|
|
|
Net income
|
$
|
278.8
|
|
$
|
166.6
|
|
Adjustments to
reconcile net income to net cash (used for) provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
47.0
|
|
43.4
|
|
|
Premiums paid and
non-cash loss on early extinguishment of debt
|
—
|
|
17.9
|
|
|
Amortization of
deferred financing costs and debt issuance discount
|
7.2
|
|
8.5
|
|
|
(Income) loss from
equity method investments
|
(14.3)
|
|
(5.7)
|
|
|
Loss (gain) on
remeasurement of foreign denominated transactions
|
16.4
|
|
10.4
|
|
|
Net losses on
derivatives
|
1.9
|
|
5.8
|
|
|
Share-based
compensation expense
|
13.3
|
|
16.5
|
|
|
Deferred income
taxes
|
(19.0)
|
|
15.3
|
|
|
Other
|
3.7
|
|
3.6
|
|
Changes in current
assets and liabilities, excluding acquisitions and
dispositions:
|
|
|
|
|
|
Accounts and notes
receivable
|
15.4
|
|
47.8
|
|
|
Inventories and
prepaids and other current assets
|
(7.0)
|
|
7.8
|
|
|
Accounts and drafts
payable
|
(72.8)
|
|
38.9
|
|
|
Other accrued
liabilities and gift card liability
|
(374.7)
|
|
(82.6)
|
|
Other long-term
assets and liabilities
|
(6.9)
|
|
(5.3)
|
|
|
|
Net cash (used for)
provided by operating activities
|
(111.0)
|
|
288.9
|
Cash flows from
investing activities:
|
|
|
|
|
Payments for property
and equipment
|
(7.0)
|
|
(4.1)
|
|
Proceeds from
disposal of assets, restaurant closures, and
refranchisings
|
1.6
|
|
6.8
|
|
Net payment for
purchase of Popeyes, net of cash acquired
|
—
|
|
(1,635.9)
|
|
Return of investment
on direct financing leases
|
4.2
|
|
4.1
|
|
Settlement/sale of
derivatives, net
|
3.0
|
|
5.2
|
|
Other investing
activities, net
|
0.1
|
|
(0.8)
|
|
|
|
Net cash provided by
(used for) investing activities
|
1.9
|
|
(1,624.7)
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from
issuance of long-term debt
|
—
|
|
1,300.0
|
|
Repayments of
long-term debt and capital leases
|
(21.7)
|
|
(319.9)
|
|
Payment of financing
costs
|
—
|
|
(31.8)
|
|
Payment of dividends
on common and preferred shares and distributions on Partnership
exchangeable units
|
(96.9)
|
|
(145.9)
|
|
Payments in
connection with redemption of preferred shares
|
(33.6)
|
|
—
|
|
Proceeds from stock
option exercises
|
25.2
|
|
8.0
|
|
Other financing
activities, net
|
(0.6)
|
|
(1.1)
|
|
|
|
Net cash (used for)
provided by financing activities
|
(127.6)
|
|
809.3
|
|
Effect of exchange
rates on cash and cash equivalents
|
(8.3)
|
|
3.3
|
|
Increase (decrease)
in cash and cash equivalents
|
(245.0)
|
|
(523.2)
|
|
Cash and cash
equivalents at beginning of period
|
1,097.4
|
|
1,475.8
|
|
Cash and cash
equivalents at end of period
|
$
|
852.4
|
|
$
|
952.6
|
Supplemental cash
flow disclosures:
|
|
|
|
|
Interest
paid
|
$
|
128.9
|
|
$
|
80.1
|
|
Income taxes
paid
|
$
|
304.0
|
|
$
|
24.1
|
RESTAURANT BRANDS INTERNATIONAL INC. AND
SUBSIDIARIES
Key Operating Metrics
We evaluate our restaurants and assess our business based on the
following operating metrics.
System-wide sales growth refers to the percentage change in
sales at all franchise and company-owned restaurants in one period
from the same period in the prior year. Comparable sales refers to
the percentage change in restaurant sales in one period from the
same prior year period for restaurants that have been open for 13
months or longer for TH and BK and 17 months or longer for PLK.
System-wide sales growth and comparable sales are measured on a
constant currency basis, which means that results exclude the
effect of foreign currency translation and are calculated by
translating prior year results at current year monthly average
exchange rates. We analyze key operating metrics on a constant
currency basis as this helps identify underlying business trends,
without distortion from the effects of currency movements.
System-wide sales represent sales at all franchise restaurants
and company-owned restaurants. We do not record franchise sales as
revenues; however, our franchise revenues include royalties based
on a percentage of franchise sales.
For 2017, PLK comparable sales, system-wide sales growth and
system-wide sales are for the period from December 26, 2016 through March 27, 2017. Comparable sales and system-wide
sales growth are calculated using the same period in the prior year
(December 26, 2015 through
March 27, 2016). For 2018, PLK net
restaurant growth is for the period from March 27, 2017 through March 31, 2018. PLK restaurant count is as of
March 31, 2018 for the current
period, and as of March 27, 2017 for
the comparative period, inclusive of temporary closures. For 2017,
PLK figures are shown for informational purposes only and are
consistent with PLK's former fiscal calendar. Consequently, PLK
results for 2018 may not be comparable to those of 2017.
|
Three Months Ended
March 31,
|
Comparable Sales
by Largest Market
|
2018
|
|
2017
|
TH -
Canada
|
0.1%
|
|
(0.2)%
|
BK - US
|
4.2%
|
|
(2.2)%
|
PLK - US
|
2.3%
|
|
(0.4)%
|
RESTAURANT BRANDS INTERNATIONAL INC. AND
SUBSIDIARIES
Supplemental Disclosure
(Unaudited)
Selling, General and Administrative Expenses
|
|
Three Months Ended
March 31,
|
(in US$
millions)
|
|
2018
|
|
2017
|
|
|
New
Standard
|
|
Previous
Standards
|
Segment SG&A
TH(1)
|
|
$
|
82.3
|
|
$
|
25.1
|
Segment SG&A
BK(1)
|
|
|
140.3
|
|
|
38.2
|
Segment SG&A
PLK(1)
|
|
|
45.4
|
|
|
—
|
Share-based
compensation and non-cash incentive compensation
expense
|
|
|
15.3
|
|
|
18.5
|
Depreciation and
amortization(2)
|
|
|
5.8
|
|
|
5.7
|
PLK Transaction
costs
|
|
|
5.1
|
|
|
34.4
|
Corporate
restructuring and tax advisory fees
|
|
|
7.1
|
|
|
—
|
|
Selling, general and
administrative expenses
|
|
$
|
301.3
|
|
$
|
121.9
|
|
|
(1)
|
Segment SG&A
includes segment selling expenses, including advertising fund
expenses, and segment general and administrative expenses and
excludes share-based compensation and non-cash incentive
compensation expense, depreciation and amortization, PLK
transaction costs, and corporate restructuring and tax advisory
fees.
|
(2)
|
Segment depreciation
and amortization reflects depreciation and amortization included in
the respective segment cost of sales and the respective segment
franchise and property expenses. Depreciation and amortization
included in selling, general and administrative expenses reflects
all other depreciation and amortization.
|
Other Operating Expenses (Income), net
|
Three Months Ended
March 31,
|
(in US$
millions)
|
2018
|
|
2017
|
|
New
Standard
|
|
Previous
Standards
|
Net losses (gains) on
disposal of assets, restaurant closures, and
refranchisings(3)
|
$
|
1.7
|
|
$
|
2.9
|
Litigation
settlements (gains) and reserves, net(4)
|
|
(6.1)
|
—
|
Net losses (gains) on
foreign exchange(5)
|
|
16.4
|
10.4
|
Other, net
|
|
0.7
|
|
|
0.5
|
Other operating
expenses (income), net
|
$
|
12.7
|
|
$
|
13.8
|
|
|
(3)
|
Net losses (gains) on
disposal of assets, restaurant closures, and refranchisings
represent sales of properties and other costs related to restaurant
closures and refranchisings. Gains and losses recognized in the
current period may reflect certain costs related to closures and
refranchisings that occurred in previous periods.
|
(4)
|
Litigation
settlements (gains) and reserves, net in the current period
primarily reflects proceeds received from the successful resolution
of a legacy BK litigation.
|
(5)
|
Net losses (gains) on
foreign exchange is primarily related to revaluation of foreign
denominated assets and liabilities.
|
RESTAURANT BRANDS INTERNATIONAL INC. AND
SUBSIDIARIES
Non-GAAP Financial Measures
(Unaudited)
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
U.S. Generally Accepted Accounting Principles ("GAAP"), and discuss
the reasons why we believe this information is useful to management
and may be useful to investors. These measures do not have
standardized meanings under GAAP and 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 GAAP basis, RBI reports the following non-GAAP
financial measures: EBITDA, Adjusted EBITDA, Adjusted Net Income,
Adjusted Diluted Earnings per Share ("Adjusted Diluted EPS"),
Combined Total Revenues, Combined Adjusted EBITDA, Organic revenue
growth and Organic Adjusted EBITDA growth. We believe that these
non-GAAP measures are useful to investors in assessing our
operating performance, as it provides them with the same tools that
management uses to evaluate our performance and is responsive to
questions we receive from both investors and analysts. By
disclosing these non-GAAP measures, we intend to provide investors
with a consistent comparison of our operating results and trends
for the periods presented.
EBITDA is defined as earnings (net income or loss) before
interest expense, net, (gain) loss on early extinguishment of debt,
income tax (benefit) expense, and depreciation and amortization and
is used by management to measure operating performance of the
business.
Adjusted EBITDA is defined as EBITDA excluding the non-cash
impact of share-based compensation and non-cash incentive
compensation expense and (income) loss from equity method
investments, net of cash distributions received from equity method
investments, as well as other operating expenses (income), net.
Other specifically identified costs associated with non-recurring
projects are also excluded from Adjusted EBITDA, including PLK
transaction costs associated with the acquisition of Popeyes and
corporate restructuring and tax advisory fees. Adjusted EBITDA is
used by management to measure operating performance of the
business, excluding these non-cash and other specifically
identified items that management believes are not relevant to
management's assessment of operating performance or the performance
of an acquired business. Adjusted EBITDA, as defined above, also
represents our measure of segment income for each of our three
operating segments. 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.
Combined Total Revenues and Combined Adjusted EBITDA include
results of PLK prior to the acquisition.
Adjusted Net Income is defined as net income excluding (i)
franchise agreement amortization, which is a non-cash expense
arising as a result of acquisition accounting that may hinder the
comparability of our operating results to our industry peers, (ii)
amortization of deferred financing costs and debt issuance
discount, a non-cash component of interest expense, and (gains)
losses on early extinguishment of debt, which are non-cash charges
that vary by the timing, terms and size of debt financing
transactions, (iii) (income) loss from equity method investments,
net of cash distributions received from equity method investments,
(iv) other operating expenses (income), net, and (v) other
specifically identified costs associated with non-recurring
projects. Adjusted Net Income includes preferred share dividends
through December 2017.
Adjusted Diluted EPS is calculated by dividing Adjusted Net
Income by the number of diluted shares of RBI during the reporting
period. Adjusted Net Income and Adjusted Diluted EPS are used by
management to evaluate the operating performance of the business,
excluding certain non-cash and other specifically identified items
that management believes are not relevant to management's
assessment of operating performance or the performance of an
acquired business.
Revenue growth and Adjusted EBITDA growth, on an organic basis,
are non-GAAP measures that exclude the impact of FX movements.
Management believes that organic growth is an important metric for
measuring the operating performance of our business as it helps
identify underlying business trends, without distortion from the
effects of FX movements. We calculate the impact of FX movements by
translating prior year results at current year monthly average
exchange rates. In addition, for organic growth comparative
purposes, we are presenting PLK pre- and post-combination results,
including Popeyes' pre-combination Adjusted EBITDA determined in
accordance with RBI's methodology as reflected in the
reconciliation table. Additionally, for comparability purposes, we
are calculating organic growth under Previous Standards for both
periods presented.
RESTAURANT BRANDS INTERNATIONAL INC. AND
SUBSIDIARIES
Non-GAAP Financial Measures
Organic Growth in Revenue and Adjusted EBITDA
Three Months Ended March 31, 2018
(Unaudited)
|
|
|
|
|
|
|
|
|
Impact of
FX
|
|
|
|
|
|
Actual
|
|
Q1 '18 vs. Q1
'17
|
|
Movements
|
|
Organic
Growth
|
(in US$
millions)
|
Q1
'18
|
|
Q1
'17
|
|
$
|
|
%
|
|
$
|
|
$
|
|
%
|
|
Previous
Standards
|
|
Previous
Standards
|
|
|
|
|
|
|
|
|
|
|
Calculation:
|
|
|
A
|
|
B
|
|
|
|
C
|
|
B-C=D
|
|
D/(A+C)
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TH
|
$
|
711.8
|
|
$
|
733.6
|
|
$
|
(21.8)
|
|
(3.0)%
|
|
$
|
29.8
|
|
$
|
(51.6)
|
|
(6.8)%
|
BK
|
$
|
292.8
|
|
$
|
267.0
|
|
$
|
25.8
|
|
9.7%
|
|
$
|
7.8
|
|
$
|
18.0
|
|
6.6%
|
PLK(a)
|
$
|
67.2
|
|
$
|
64.2
|
|
$
|
3.0
|
|
4.7%
|
|
$
|
—
|
|
$
|
3.0
|
|
4.7%
|
Combined
Total
Revenues
|
$
|
1,071.8
|
|
$
|
1,064.8
|
|
$
|
7.0
|
|
0.7%
|
|
$
|
37.6
|
|
$
|
(30.6)
|
|
(2.8)%
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TH
|
$
|
250.5
|
|
$
|
256.2
|
|
$
|
(5.7)
|
|
(2.2)%
|
|
$
|
10.6
|
|
$
|
(16.3)
|
|
(6.1)%
|
BK
|
$
|
215.0
|
|
$
|
187.1
|
|
$
|
27.9
|
|
14.9%
|
|
$
|
5.8
|
|
$
|
22.1
|
|
11.5%
|
PLK(a)
|
$
|
40.8
|
|
$
|
22.6
|
|
$
|
18.2
|
|
80.5%
|
|
$
|
—
|
|
$
|
18.2
|
|
80.5%
|
Combined
Adjusted
EBITDA
|
$
|
506.3
|
|
$
|
465.9
|
|
$
|
40.4
|
|
8.7%
|
|
$
|
16.4
|
|
$
|
24.0
|
|
5.0%
|
|
(a) RBI acquired
Popeyes Louisiana Kitchen, Inc. ("Popeyes") on March 27, 2017.
Prior to its acquisition by RBI, Popeyes operated on a fiscal
period basis consisting of a 16-week first fiscal quarter and
12-week second through fourth fiscal quarters. Subsequent to its
acquisition by RBI, Popeyes commenced reporting on a calendar
quarter basis consistent with RBI. Q1'18 for PLK represents the
period from January 1, 2018 through March 31, 2018, while Q1'17 for
PLK represents the period from December 26, 2016 through March 27,
2017. Consequently, PLK results for the prior year period may not
be comparable.
|
RESTAURANT BRANDS INTERNATIONAL INC. AND
SUBSIDIARIES
Non-GAAP Financial Measures
Reconciliation of Adjusted EBITDA to Net Income
(Unaudited)
Historical Popeyes Adjusted EBITDA
|
Q1 '
17
|
(in US$
millions)
|
12/26/16
through
3/27/17(a)
|
Revenues
|
$
|
64.2
|
Reconciliation of
Net Income to Adjusted EBITDA
|
|
|
Net income
(loss)
|
$
|
(1.2)
|
Interest expense,
net
|
|
1.3
|
Income tax expense
(benefit)
|
|
(15.0)
|
Depreciation and
amortization
|
|
2.4
|
Share-based
compensation
|
|
1.4
|
Popeyes transaction
costs
|
|
33.5
|
Other operating
expenses (income), net
|
|
0.2
|
Adjusted
EBITDA
|
$
|
22.6
|
|
(a) Derived from
Popeyes internal records.
|
RESTAURANT BRANDS INTERNATIONAL INC. AND
SUBSIDIARIES
Non-GAAP Financial Measures
(Unaudited)
Reconciliation of EBITDA and Adjusted EBITDA to Net
Income
|
Three Months Ended
March 31,
|
(in US$
millions)
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
New
Standard
|
|
Total
Adjustments
|
|
Previous
Standards
|
|
Previous
Standards
|
Segment
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
TH
|
$
|
245.2
|
|
$
|
5.3
|
|
$
|
250.5
|
|
$
|
256.2
|
|
BK
|
214.1
|
|
0.9
|
|
215.0
|
|
187.1
|
|
PLK
|
38.5
|
|
2.3
|
|
40.8
|
|
—
|
|
|
Adjusted
EBITDA
|
497.8
|
|
8.5
|
|
506.3
|
|
443.3
|
Share-based
compensation and non-cash incentive compensation
expense(1)
|
15.3
|
|
—
|
|
15.3
|
|
18.5
|
PLK Transaction
costs(2)
|
5.1
|
|
—
|
|
5.1
|
|
34.4
|
Corporate
restructuring and tax advisory fees(3)
|
7.1
|
|
—
|
|
7.1
|
|
—
|
Impact of equity
method investments(4)
|
|
(10.0)
|
|
—
|
|
(10.0)
|
|
(2.9)
|
Other operating
expenses (income), net
|
|
12.7
|
|
—
|
|
12.7
|
|
13.8
|
|
|
EBITDA
|
|
467.6
|
|
8.5
|
|
476.1
|
|
379.5
|
Depreciation and
amortization
|
|
47.0
|
|
(0.2)
|
|
46.8
|
|
43.3
|
|
|
Income from
operations
|
|
420.6
|
|
8.7
|
|
429.3
|
|
336.2
|
Interest expense,
net
|
|
140.1
|
|
0.5
|
|
140.6
|
|
111.4
|
Loss on early
extinguishment of debt
|
|
—
|
|
—
|
|
—
|
|
20.4
|
Income tax
expense(5)
|
|
1.7
|
|
2.1
|
|
3.8
|
|
37.8
|
|
|
Net income
|
$
|
278.8
|
|
$
|
6.1
|
|
$
|
284.9
|
|
$
|
166.6
|
Reconciliation of Net Income to Adjusted Net Income and
Adjusted Diluted EPS
|
Three Months Ended
March 31,
|
(in US$ millions,
except per share data)
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
New
Standard
|
|
Total
Adjustments
|
|
Previous
Standards
|
|
Previous
Standards
|
Net income
|
$
|
278.8
|
|
$
|
6.1
|
|
$
|
284.9
|
|
$
|
166.6
|
|
Income tax
expense(5)
|
|
1.7
|
|
|
2.1
|
|
|
3.8
|
|
|
37.8
|
Income before
income taxes
|
|
280.5
|
|
|
8.2
|
|
|
288.7
|
|
|
204.4
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Franchise agreement
amortization
|
|
7.8
|
|
|
—
|
|
|
7.8
|
|
|
6.9
|
|
Amortization of
deferred financing costs and debt issuance
discount
|
|
7.2
|
|
|
—
|
|
|
7.2
|
|
|
8.5
|
|
Interest expense and
loss on extinguished
debt(6)
|
|
3.1
|
|
|
—
|
|
|
3.1
|
|
|
23.5
|
|
PLK Transaction
costs(2)
|
|
5.1
|
|
|
—
|
|
|
5.1
|
|
|
34.4
|
|
Corporate
restructuring and tax advisory fees(3)
|
|
7.1
|
|
|
—
|
|
|
7.1
|
|
|
—
|
|
Impact of equity
method investments(4)
|
|
(10.0)
|
|
|
—
|
|
|
(10.0)
|
|
|
(2.9)
|
|
Other operating
expenses (income), net
|
|
12.7
|
|
|
—
|
|
|
12.7
|
|
|
13.8
|
|
Total
adjustments
|
|
33.0
|
|
|
—
|
|
|
33.0
|
|
|
84.2
|
Adjusted income
before income taxes
|
|
313.5
|
|
|
8.2
|
|
|
321.7
|
|
|
288.6
|
|
Adjusted income tax
(benefit) expense(5)(7)
|
|
0.2
|
|
|
2.1
|
|
|
2.3
|
|
|
50.5
|
Adjusted net income
before preferred share dividends
|
|
313.3
|
|
|
6.1
|
|
|
319.4
|
|
|
238.1
|
|
Preferred share
dividends
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67.5
|
Adjusted net income
|
$
|
313.3
|
|
$
|
6.1
|
|
$
|
319.4
|
|
$
|
170.6
|
Adjusted diluted earnings per
share
|
$
|
0.66
|
|
$
|
0.01
|
|
$
|
0.67
|
|
$
|
0.36
|
Weighted average
diluted shares outstanding
|
|
473.9
|
|
|
—
|
|
|
473.9
|
|
|
476.5
|
Non-GAAP Financial Measures
Footnotes
to Reconciliation Tables
(1)
|
Represents
share-based compensation expense associated with equity awards for
the periods indicated; also includes the portion of annual non-cash
incentive compensation expense that eligible employees elected to
receive or are expected to elect to receive as common equity in
lieu of their 2017 and 2018 cash bonus, respectively.
|
|
|
(2)
|
In connection with
the acquisition of Popeyes Louisiana Kitchen, Inc., we incurred
certain non-recurring selling, general and administrative expenses
during the three months ended March 31, 2018, respectively,
primarily consisting of professional fees and compensation related
expenses.
|
|
|
(3)
|
Costs associated with
corporate restructuring initiatives and professional advisory and
consulting services related to the interpretation of the Tax Cuts
and Jobs Act, which was enacted on December 22, 2017.
|
|
|
(4)
|
Represents (i)
(income) loss from equity method investments and (ii) cash
distributions received from our equity method investments. Cash
distributions received from our equity method investments are
included in segment income.
|
|
|
(5)
|
As a result of the
accounting standard related to the tax impact of equity based
compensation, our effective tax rate was reduced by 22.7% and 3.9%
for the three months ended March 31, 2018 and 2017, respectively,
and our adjusted effective tax rate was reduced by 20.3% and 2.7%
for the three months ended March 31, 2018 and 2017,
respectively.
|
|
|
(6)
|
Represents loss on
early extinguishment of debt and non-cash interest expense related
to losses reclassified from accumulated other comprehensive income
(loss) into interest expense in connection with interest rate swaps
settled in May 2015.
|
|
|
(7)
|
Adjusted income tax
expense includes the tax impact of the non-GAAP adjustments and is
calculated using our statutory tax rate in the jurisdiction in
which the costs were incurred.
|
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SOURCE Restaurant Brands International Inc.