Industry News | April 27, 2007

Burger King Reports Solid Growth

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Burger King Holdings Inc. (NYSE:BKC) delivered strong results for the third quarter of its 2007 fiscal year. The company posted robust revenue growth, driven by positive comparable sales in all reporting business segments and the acceleration of new restaurant openings. Company restaurant margins, net income and earnings per share also improved substantially over the prior year period.

system-wide comparable sales were up 3.2 percent, making this the 13th consecutive quarter of positive comparable sales increases. In the United States and Canada, comparable sales were up 2.6 percent, the 12th consecutive quarter of positive comparable sales increases.

“In the U.S., featured premium burger offerings and their related promotional campaigns including the Texas DOUBLE WHOPPER® sandwich, the BK™ Stacker, and the Angus Cheesy Bacon sandwich fueled comp sales and helped us deliver strong results this quarter,” said Burger King CEO John Chidsey. “During the quarter, we also introduced the BK™ Breakfast Value Menu and launched its national advertising campaign in March, and early results are encouraging.

“We are also pleased by the strong 5.3 percent increase in comp sales in the EMEA/APAC segment. Robust U.K. comp sales drove this increase, the result of last quarter’s strategic investments including the introduction of the premium Aberdeen Angus burger supported by marketing efforts targeted at our core consumer and ongoing operational improvements.”

Positive comparable sales in every region worldwide and an increase in new restaurant openings drove revenues for the third quarter of fiscal year 2007 to $539 million – an increase of 9 percent from the same period last year of $495 million.

Company restaurant margins increased for a fourth consecutive quarter – up 110 basis points to 14 percent from 12.9 percent the same period last year. Better margins were again driven primarily by lower food costs and higher revenues at company-owned restaurants.

Net income increased to $34 million from a loss of $12 million during the same period last year. Adjusted net income rose 70 percent to $34 million from $20 million during the same period last year, which was impacted by $40 million in unusual items in the prior year on a pre-tax basis, including the $34 million compensatory make-whole payment made in February 2006 and $8 million in unusual tax expense primarily related to tax contingencies and valuation allowances. The company’s third quarter fiscal 2007 tax rate of 24.4% was positively impacted by tax benefits realized from the operational realignment of its European and Asian businesses in fiscal 2006 and from the reduction in tax accruals.

Earnings per share increased to $0.25 from a loss of $0.11 during the same period last year. Adjusted earnings per share rose 67 percent to $0.25 per share from $0.15 during the same period last year.

System-wide average restaurant sales (ARS) increased 6 percent, to $284,000 during the third quarter of fiscal 2007, as compared to $269,000 in the same quarter last year. System-wide trailing 12-month ARS reached a record high of $1.17 million for the period, as compared to $1.12 million for the same period in the prior year.

“We continue to progressively improve our ARS,” Chidsey said. “In the United States, we have climbed from a U.S. system-wide low trailing 12-month ARS of $963,000 in February 2004 to $1.17 million today, a $207,000 improvement in just 3 years. We are well on our way to meeting our $1.3 million interim ARS goal by delivering on our strategic initiatives, including a profitable combination of premium and value product innovations, attaining all-time high levels of operational excellence and extending hours of operation.”