Burger King suffers 1Q net loss on lower sales
May 13, 2011
by Meat&Poultry Staff
MIAMI – Burger King Holdings Inc. announced a 2011 first quarter net loss of $6.8 million for the quarter compared to net income of $41.0 million for the same period in the prior year, primarily due to a significant increase in interest expense as a result of debt incurred in connection with the sale of the company to an affiliate of 3G Capital in October 2010; $13.0 million of costs from the sale of the company and global restructuring; a $19.6 million loss on early extinguishment of debt associated with the refinancing of its senior secured debt and negative comparable sales growth.
Revenues of $552.0 million for the first quarter of 2011 were down 8 percent from the same quarter last year, due to refranchising activity over the past 12 months and negative comparable sales growth. Company restaurant margins declined by 240 bps, as the benefits from a shift in product mix away from lower-margin value menu items, selective price increases and improved labor margins were more than offset by increased commodity costs, increased depreciation and amortization resulting from acquisition accounting and the deleveraging effect of negative comparable sales growth on our fixed costs.
Adjusted EBITDA of $121.1 million compared to $106.2 million in the same quarter of 2010, a 14 percent improvement driven by reductions in general and administrative expenses following a global restructuring and the implementation of a zero-based budgeting program.
The company increased global restaurant count by 50 net new restaurants in the first quarter. As previously disclosed, system-wide comparable sales growth was negative 2.8 percent, with the U.S. and Canada down 6.0 percent, EMEA/APAC up 1.7 percent and Latin America up 4.0 percent.
“Our comparable sales growth performance and improvements to our company restaurant margins remain our top priority, particularly in North America, where we are focused on executing on the four priorities of our plan, which include operations, marketing, menu and image.”
"Continued disciplined expense management allowed us to improve our Adjusted EBITDA and Adjusted EBITDA margin at the fastest pace in 10 quarters, despite negative comparable sales growth in North America and commodity price pressures,” said Daniel Schwartz, chief financial officer.
The company added new value to its menu with the $1, $2, $3 BK Stacker line and added the Jalapeño & Cheddar BK Stuffed Steakhouse burger to its line-up during the first quarter as part of its strategy to improve restaurant margins and menu options. It also launched its new Chicken Tenders at the end of March, which was supported by a marketing message targeting a broader audience.
Burger King is the second-largest fast-food hamburger chain in the world. Its system operates more than 12,300 locations serving more than 11 million guests daily in 76 countries and territories worldwide.