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Burger King Worldwide, Inc. Reports Second Quarter 2012 Results

Stocks in this article: BKW

(Unaudited)

To supplement its condensed consolidated financial statements presented on a U.S. Generally Accepted Accounting Principles (“GAAP”) basis, the Company reports the following non-GAAP financial measures: EBITDA, adjusted EBITDA, adjusted net income, adjusted income before income taxes, adjusted income tax expense, net debt, TTM adjusted EBITDA, net debt to TTM adjusted EBITDA ratio, Organic revenue growth and Organic Adjusted EBITDA growth.

EBITDA is defined as earnings (net income or loss) before interest, taxes, depreciation and amortization, and is used by management to measure operating performance of the business.

Adjusted EBITDA is defined as EBITDA excluding the impact of share-based compensation, other operating (income) expenses, net, and all other specifically identified costs associated with non-recurring projects, including Transaction costs, global restructuring and related professional fees, global portfolio realignment project costs and Business Combination Agreement expenses. Adjusted EBITDA is used by management to measure operating performance of the business, excluding specifically identified items that management believes do not directly reflect our core operations, and represents our measure of segment income.

Adjusted net income is used by management to evaluate and forecast earnings from ongoing operations excluding the impact of unusual items. This measure is used by management to evaluate and forecast earnings from ongoing operations, as further defined in the non-GAAP reconciliations. Adjusted Diluted EPS is calculated by dividing Adjusted Net Income by the number of diluted shares of the Company during the reporting period. Net debt to TTM adjusted EBITDA ratio is used by management to evaluate the Company’s current and prospective financial position.

Organic revenue growth and Organic Adjusted EBITDA growth are non-GAAP measures that exclude both FX Impact and refranchisings.

   

Non-GAAP Financial Measures

Reconciliation of EBITDA and Adjusted EBITDA to Net Income

 
Three Months Ended Six Months Ended
June 30, June 30,
2012   2011 2012 2011
EBITDA and adjusted EBITDA:
U.S. and Canada $ 128.5 $ 122.0 $ 241.4 $ 224.8
EMEA 42.8 35.3 75.6 62.0
LAC 17.1 14.5 33.0 29.7
APAC 11.0 6.7 18.8 13.0
Unallocated Management G&A   (27.4 )   (28.6 )   (53.6 )   (59.6 )
Adjusted EBITDA 172.0 149.9 315.2 269.9
Share-based compensation (1) 0.3 0.4 1.7 0.6
2010 Transaction costs (2) - 0.3 - 1.1
Global restructuring and related professional fees (3) - 10.0 - 22.2
Field optimization project costs (4) - 1.7 - 1.7
Global portfolio realignment project (5) 9.4 - 13.1 -
Business combination agreement expenses (6) 18.1 - 25.1 -
Other operating (income) expense, net   (17.1 )   4.7     (4.1 )   12.5  
EBITDA 161.3 132.8 279.4 231.8
Depreciation and amortization   33.4     33.8     67.4     68.8  
Income from operations 127.9 99.0 212.0 163.0
Interest expense, net 57.2 56.1 116.3 106.3
Loss on early extinguishment of debt 7.7 - 11.2 19.6
Income tax expense   14.8     12.7     22.0     12.8  
Net income $ 48.2   $ 30.2   $ 62.5   $ 24.3  
 
  Twelve Months Ended
June 30,   December 31,
2012 2011
EBITDA and adjusted EBITDA:
U.S. and Canada $ 472.8 $ 456.2
EMEA 159.6 146.0
LAC 67.2 63.9
APAC 32.5 26.7
Unallocated Management G&A   (101.8 )   (107.8 )
Adjusted EBITDA 630.3 585.0
Share-based compensation (1) 7.5 6.4
2010 Transaction costs (2) 2.6 3.7
Global restructuring and related professional fees (3) 24.3 46.5
Field optimization project costs (4) 8.9 10.6
Global portfolio realignment project (5) 20.7 7.6
Business combination agreement expenses (6) 25.1 -
Other operating (income) expense, net   (5.3 )   11.3  
EBITDA 546.5 498.9
Depreciation and amortization   135.0     136.4  
Income from operations 411.5 362.5
Interest expense, net 236.7 226.7
Loss on early extinguishment of debt 12.7 21.1
Income tax expense   35.8     26.6  
Net income $ 126.3   $ 88.1  
 

Non-GAAP Financial Measures

Reconciliation of Net Income to Adjusted Net Income

 
Three Months Ended June 30,
2012     2011
Adjusted net income (In millions)
 
Net income $ 48.2 $ 30.2
Income tax expense   14.8     12.7
Income before income taxes 63.0 42.9
Adjustments:
Franchise agreement amortization 5.1 5.6
Amortization of deferred financing costs and

original issue discount

3.5 3.5
Loss on early extinguishment of debt 7.7 -
Other operating (income) expense, net (17.1 ) 4.7
2010 Transaction costs (2) - 0.3
Global restructuring and related professional fees (3) - 10.0
Field optimization project costs (4) - 1.7
Global portfolio realignment project costs (5) 9.4 -
Business combination agreement expenses (6)   18.1     -
Total adjustments 26.7 25.8
 
Adjusted income before income taxes   89.7     68.7
 
Adjusted income tax expense (7)   28.4     22.2
 
Adjusted net income $ 61.3   $ 46.5
 

Non-GAAP Financial Measures

Reconciliation of Adjusted Net Income and Net Income, Net Debt / TTM Adj. EBITDA

 
Six Months Ended June 30,
2012     2011
Adjusted net income (In millions)
 
Net income $ 62.5 $ 24.3
Income tax expense   22.0     12.8
Income before income taxes 84.5 37.1
Adjustments:
Franchise agreement amortization 10.3 11.1
Amortization of deferred financing costs and

original issue discount

7.0 6.9
Loss on early extinguishment of debt 11.2 19.6
Other operating (income) expense, net (4.1 ) 12.5
2010 Transaction costs (2) - 1.1
Global restructuring and related professional fees (3) - 22.2
Field optimization project costs (4) - 1.7
Global portfolio realignment project costs (5) 13.1 -
Business combination agreement expenses (6)   25.1     -
Total adjustments 62.6 75.1
 
Adjusted income before income taxes   147.1     112.2
 
Adjusted income tax expense (7)   46.0     38.1
 
Adjusted net income $ 101.1   $ 74.1
 
 
As of
June 30, December 31,
2012 2011
Net debt to adjusted EBITDA (In millions, except ratios)
 
Long term debt, net of current portion $ 2,911.7 $ 3,010.3
Capital leases, net of current portion 106.1 95.4
Current portion of long term debt and

capital leases

  35.9     33.5
Total Debt 3,053.7 3,139.2
 
Cash and cash equivalents 377.7 459.0
Net debt 2,676.0 2,680.2
TTM adjusted EBITDA 630.3 585.0
   
Net debt / TTM adjusted EBITDA 4.2x 4.6x
 

Non-GAAP Financial Measures

Reconciliation of Net Income to TTM Adjusted EBITDA

 
Twelve Months Ended
June 30, 2012     December 31, 2011
EBITDA and adjusted EBITDA (In millions)
 
Net income $ 126.3 $ 88.1
Interest expense, net 236.7 226.7
Loss on early extinguishment of debt 12.7 21.1
Income tax expense 35.8 26.6
Depreciation and amortization   135.0     136.4
EBITDA 546.5 498.9
Adjustments:
Share-based compensation (1) 7.5 6.4
Other operating (income) expense, net (5.3 ) 11.3
2010 Transaction costs (2) 2.6 3.7
Global restructuring and related professional fees (3) 24.3 46.5
Field optimization project costs (4) 8.9 10.6
Global portfolio realignment project costs (5) 20.7 7.6
Business combination agreement expenses (6)   25.1     -
Total adjustments   83.8     86.1
 
Adjusted EBITDA $ 630.3   $ 585.0
 

Non-GAAP Financial Measures

Footnotes to Reconciliation Tables

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