Burger King Worldwide — Debt Investor Presentation (September 2012)
43 slides from Burger King Worldwide's debt investor presentation, Sep 7, 2012
Slide 1: Lenders' Presentation
Lenders’ Presentation September 7, 2012
Slide 2: Special Notice for Public Investors
SPECIAL NOTICE FOR PUBLIC INVESTORS SPECIAL NOTICE FOR PUBLIC-SIDERS THE BORROWER HAS REPRESENTED AND WARRANTED TO THE ARRANGER THAT: (i) Neither the Transaction nor the information in the Evaluation Material constitutes or contains material non-public information with respect to the Borrower or any
Slide 3: Safe Harbor Statement
SAFE HARBOR STATEMENT This document may contain “forward-looking statements” which are often identified by the words “may”, “might”, “believes”, “thinks”, “anticipates”, “plans”, “expects”, “intends” or similar expressions. Forward-looking statements may be affected by risks and uncertainties in the
Slide 4: Management Attendees
MANAGEMENT ATTENDEES Name Title Bernardo Hees Chief Executive Officer Daniel Schwartz Chief Financial Officer Josh Kobza Director, Investor Relations 4
Slide 5: Agenda
AGENDA Transaction overview 5 Company Overview and Investment Highlights 11 Business Strategy 25 Historical Financial Overview 37 Appendix 41 5
Slide 6: The Transaction
THE TRANSACTION Transaction Overview • Burger King, a leading global QSR, is the second largest fast food hamburger restaurant (“FFHR”) brand in the world • 12,604 restaurants worldwide • Approximately 94% of restaurants are franchised • 3G is a multi-billion dollar global investment firm focused on
Slide 7: Sources and Uses and Pro Forma Capitalization
SOURCES AND USES AND PRO FORMA CAPITALIZATION Sources ($ millions) Uses ($ millions) New Credit Facilities $1,725.0 Repay existing term loan debt $1,727.7 Cash from balance sheet 14.7 Estimated fees, expenses and OID 12.0 Total Sources $1,739.7 Total Uses $1,739.7 Pro Forma Capitalization ($ million
Slide 8: Summary of Terms
SUMMARY OF TERMS Summary of terms Borrower Burger King Corporation (“the Company”) Burger King Worldwide, Inc. (“BKW”),* Burger King Holdings, Inc. (“Holdings”) and each of the Guarantors Borrower’s direct and indirect, existing and future, domestic material wholly-owned subsidiaries. Use of proceed
Slide 9: Pro Forma Organizational Structure
PRO FORMA ORGANIZATIONAL STRUCTURE Burger King Guarantor of 2019 Senior Worldwide, Unsecured Discount Notes, 2018 Inc. (NYSE: BKW) Notes and Credit Facilities Justice Holdco LLC Burger King Capital $685 million 2019 Senior Holdings, LLC Unsecured Discount Notes Guarantor of Credit $685 million 2019
Slide 10: Transaction Timeline
BURGER KING WORLDWIDE Transaction timeline September S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Note: Highlighted date denotes transaction date Date Details September 7th Lender meeting September 21st Loan commitments due 10
Slide 11: Agenda
AGENDA Transaction overview 5 Company Overview and Investment Highlights 11 Business Strategy 25 Historical Financial Overview 37 Appendix 41 11
Slide 12: Burger King Worldwide Investment Highlights
BURGER KING WORLDWIDE INVESTMENT HIGHLIGHTS 1. Global iconic brand with presence in over 80 countries 2. Franchise business model enabling growth with minimal capex and strong EBITDA margin 3. Strong, sustainable free cash flow resulting in substantial deleveraging 4. Opportunity to close sales gap
Slide 13: Global Footprint
1. GLOBAL FOOTPRINT Worldwide US & Canada Latin America EMEA1 APAC1 Restaurants 12,604 7,469 1,255 2,961 919 Breakdown 100% 59% 10% 24% 7% • $13.7 billion in franchise sales2,3 and $1.6 billion in company restaurant sales2 • 94% franchised system4 • Over $800 million in owned real estate 1954: One R
Slide 14: Strength and Highlights of BKW Franchise Model
2. STRENGTH AND HIGHLIGHTS OF BKW FRANCHISE MODEL • Franchised Business Model: • Revenue based on fixed percentage of sales by our franchisees • Generates stable, predictable cash flow and high profit margin • Advertising and Capex are funded primarily by franchisees • Highlights of BKW Franchise Mo
Slide 15: Franchise-Focused Business Model
2. FRANCHISE-FOCUSED BUSINESS MODEL Once the company has reached a ~100% franchise mix, BURGER KING® will be one of the few pure play franchisor/real estate companies in its peer group Percentage of Franchised Restaurants ≤70% 70%–90% 90% Source: Company and SEC filings 15
Slide 16: EBITDA Margin Comparison
3. EBITDA MARGIN COMPARISON BURGER KING® already has one of the highest Adjusted EBITDA margins in the industry and expects its margins to further increase as the company continues to implement its refranchising strategy EBITDA Margin1 45% 42% 40% 36% 35% 30% 27% 25% 24% 20% 21% 20% 19% 19% 17% 17%
Slide 17: Stable Cash Flow Generation Results in Substantial Deleveraging
3. STABLE CASH FLOW GENERATION RESULTS IN SUBSTANTIAL DELEVERAGING LTM Adj. EBITDA–Capex Proforma Net Debt to LTM Adjusted EBITDA1,2 ($ in millions) $600 7.0 $558 6.6x 6.5 $550 6.2x $519 $503 6.0 5.9x $500 $478 5.5 $450 $432 5.0x 5.0 4.6x $400 4.5 4.4x 4.2x $352 4.0 $350 $320 3.5 $300 3.0 $250 2.5 $
Slide 18: US & Canada: Closing the Gap
4. US & CANADA: CLOSING THE GAP We believe the Four Pillars Plan will enable BURGER KING® to close the ARS gap with peers 2011 N.A. Average Restaurant Sales Near – Term Opportunities USD million • Increase traffic of women, parties with 2.43 kids, and seniors through broader message and offerings +5
Slide 19: International Development Opportunities
5. INTERNATIONAL DEVELOPMENT OPPORTUNITIES EMEA Today: 2,961 restaurants Potential: 2x1 APAC Today: 919 restaurant Potential: 3x1 LatAm Today: 1,255 restaurants Potential: 2x1 The company believes that it has the potential to more than double its current international presence 1) As of 06/30/2012; P
Slide 20: International Development Opportunities
5. INTERNATIONAL DEVELOPMENT OPPORTUNITIES REGION SELECTED GROWTH OPPORTUNITY COUNTRIES Brazil Argentina Venezuela 616 194 138 LATAM 160 62 56 BKW MCD BKW MCD BKW MCD Russia Nordics1 South Africa 275 467 614 EMEA 139 144 57 0 BKW MCD KFC BKW MCD BKW MCD China Indonesia Thailand 3,244 396 410 APAC 1,
Slide 21: Senior Management Team
6. SENIOR MANAGEMENT TEAM BKW’s management team consists of 3G Capital partners, former InBev/AmBev executives, internally promoted team members, and a former Burger King franchisee All four Zone Presidents have extensive QSR industry experience Bernardo Hees (3G Partner) Chief Executive Officer Dan
Slide 22: Progress Under New Management
6. PROGRESS UNDER NEW MANAGEMENT Substantial financial progress under new management team since 3G acquisition LTM Adjusted EBITDA 3G Acquisition $630 $585 $502 $461 $456 6/30/2009 6/30/2010 CY 2010 6/30/2011 12/31/2011 6/30/2012 Source: Company filings 22
Slide 23: Performance Against Key Operating Initiatives
6. PERFORMANCE AGAINST SEVERAL KEY OPERATING INITIATIVES HAS SIGNIFICANTLY OUTPERFORMED EXPECTATIONS Actual vs. Presented¹: G&A Reduction Presented Range¹: Actual performance Low High LTM Base $400 $400 % of G&A 5.0% 10.0% Implied Cost Reduction $20 $40 _____________________ _____________________ __
Slide 24: 3G Principals' Strong Track Record
6. 3G PRINCIPALS’ STRONG TRACK RECORD • 3G is a global investment firm, with offices in New York and Rio de Janeiro • NOT a “typical” private equity fund: Main focus is to help drive meaningful improvement in operations through deep partner involvement and implementation of “3G Culture” • 3G Special
Slide 25: Agenda
AGENDA Transaction overview 5 Company Overview and Investment Highlights 11 Business Strategy 25 Historical Financial Overview 37 Appendix 41 25
Slide 26: Business Strategy
BUSINESS STRATEGY STRATEGY INITIATIVES Marketing Menu US & CANADA Communications Increase average unit sales with Four Pillars Plan Image Operations Accelerate NRG by creating master franchise/JVs INTERNATIONAL (Brazil, Russia, China) Accelerate NRG and continued SSS growth Capitalize on emerging mi
Slide 27: Significant Progress in the First 18 Months
SIGNIFICANT PROGRESS IN THE FIRST 18 MONTHS Then1 Now2 Global SSS1 2H 10: -2.7% Q2 12: +4.4% International SSS 2H 10: +0.9% Q2 12: +4.4% US & Canada SSS 2H 10: -5.0% Q2 12: +4.4% Adj. EBITDA3, Margin $461 million, 19% $630 million, 27% Adj. EBITDA – Capex3,4, Margin $311 million, 13% $558 million, 2
Slide 28: U.S. Strategy and Recent Progress
U.S. STRATEGY AND RECENT PROGRESS Over the past 18 months, we have worked closely with our franchisees to position Burger King for long term growth. We are already seeing the results Then Now •Holistic strategy based on Four Pillars: • Primarily focused on narrow subset of Marketing Communications,
Slide 29: 4 Pillars: Menu
4 PILLARS: MENU New Platforms Improved Platforms Market Size Main Target Rationale • Female • Increase chicken incidence in BK $6.0 Billion • 50+ menu • High Income • Appeal to females and parties with kids • Female • 18 - 25 $1.4 Billion • Snack occasion • Expand coffee platform • Close beverage in
Slide 30: 4 Pillars: Marketing
4 PILLARS: MARKETING • New marketing campaign launched in April to re-engage our guests Broaden • Marketing to all demographics Marketing • 18-35 males too narrow of a target- Message market • Focus on bringing back women, parties with children, and seniors • Food centric ads which appeal to all dem
Slide 31: 4 Pillars: Image
4 PILLARS: IMAGE Our goal is to have over 40% of our U.S. system restaurants reimaged within the next 4 years Today Goal 89% Legacy Image 11% New 20/20 Image1 4 years 40% We already have more than 1,500 binding reimage commitments from franchisees 1) Includes remodels made in the last 5 years with t
Slide 32: 4 Pillars: Operations
4 PILLARS: OPERATIONS New Field Management Structure In-store Operating Metrics Focus • Introduced new field structure with “Sales, Profit, • Launched standardized, simplified metrics to and Operations Coach” who works shoulder-to- evaluate restaurants that focus on core operational shoulder with re
Slide 33: US & Canada: Recent Results
US & CANADA: RECENT RESULTS BKW is in the very early stage of the U.S. turnaround, but already seeing positive momentum US & Canada Same Store Sales 4.2% 4.4% -0.3% -1.5% -2.0% -4.2% -5.3% -6.1% -5.8% -6.0% 1 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Source: Burger King Internal Data 1) Incl
Slide 34: International Strategy and Recent Progress
INTERNATIONAL STRATEGY AND RECENT PROGRESS BKW has established a unique and aggressive international growth strategy to accelerate pace of net restaurant growth Then Now • Master franchises in some markets • Master franchises with well Approach and local franchisees with corporate capitalized partne
Slide 35: Business Strategy: International
BUSINESS STRATEGY: INTERNATIONAL • Capitalizing on growth opportunities through the formation of Master Franchise / Joint Ventures with experienced local partners • In Q2, BKW closed on Master Franchise JV deals in Russia and China • Master Franchise JVs key benefits: • Substantial development commi
Slide 36: Refranchising Initiative
REFRANCHISING INITIATIVE We are aggressively implementing our global refranchising strategy and moving at a record pace with the goal of approaching ~100% franchise operating base Percentage of Restaurants Franchised ~100% 5% increase in just over 18 months1 1 ~94% 90% 89% 89% 2005 Acquisition date
Slide 37: Agenda
AGENDA Transaction overview 5 Company Overview and Investment Highlights 11 Business Strategy 25 Historical Financial Overview 37 Appendix 41 37
Slide 38: Results Since 3G Acquisition
RESULTS SINCE 3G ACQUISITION Global Same Store Sales Management G&A Adjusted EBITDA4 6.0% 4.5% 400 356 700 630 4.0% 600 585 300 249 500 461 2.0% 234 400 200 0.0% 300 -0.5% 100 200 -2.0% 100 -4.0% -2.4% 0 0 20101 20112 1H 20123 20101 20112 LTM 5 20101 20112 LTM5 System wide Sales Adjusted Net Income4
Slide 39: Q2 2012 Results
Q2 2012 RESULTS Global Same Store Sales Management G&A Adjusted EBITDA1 6.0% 4.4% 65 200 63 4.0% 180 172 60 2.0% 160 150 55 0.0% 140 50 -2.0% 50 120 -2.2% -4.0% 45 100 Q2 11 Q2 12 Q2 11 Q2 12 Q2 11 Q2 12 System wide Sales Adjusted Net Income1 Adj. EBITDA – Capex1,2 Company Restaurant Revenues 80 340
Slide 40: Historical Financial Information
HISTORICAL FINANCIAL INFORMATION Total Revenues1 Capex1 in $ million in $ million Company Franchise Property $204 $2,455 $2,537 $2,502 $178 $2,336 $2,299 $150 $82 $72 2008 2009 2010 2011 LTM 2008 2009 2010 2011 LTM Operating cash flow Adj. EBITDA and Adj. EBITDA margin1, 2 (Adj. EBITDA-Capex)1, 2 in
Slide 41: Agenda
AGENDA Transaction overview 5 Company Overview and Investment Highlights 11 Business Strategy 25 Historical Financial Overview 37 Appendix 41 41
Slide 42: Reconciliation: Net Income to EBITDA & Adj. EBITDA
RECONCILIATION: NET INCOME TO EBITDA & ADJ. EBITDA QTD QTD LTM LTM LTM LTM LTM June 30, June 30, June 30, Dec. 31, June 30, June 30, June 30, 2012 2011 2012 2011 2010 2009 2008 EBITDA and Adjusted EBITDA Net income $ 48.2 $ 30.2 $ 126.3 $ 88.1 $ 186.8 $ 200.1 $ 189.6 Interest expense, net 57.2 56.1
Slide 43: Reconciliation: Net Income to Adj. Net Income
RECONCILIATION: NET INCOME TO ADJ. NET INCOME QTD QTD LTM LTM LTM June 30, June 30, June 30, Dec. 31, Dec. 31, Adjusted net income 2012 2011 2012 2011 2010 Net income $ 48.2 $ 30.2 $ 126.3 $ 88.1 $ 59.6 Income tax expense (benefit) 14.8 12.7 35.8 26.6 38.4 Income before income taxes 63.0 42.9 162.1
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