Restaurant Brands International Inc. Reports First Quarter 2019 Results

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Restaurant Brands International Inc. Reports First Quarter 2019 Results

Canada NewsWire

BURGER KING® and POPEYES® deliver strong system-wide sales growth and continue expanding global restaurant footprint
TIM HORTONS® continues to deliver on Winning Together Plan, launches loyalty program with strong engagement

TORONTO, April 29, 2019 /CNW/ - Restaurant Brands International Inc. (TSX/NYSE: QSR, TSX: QSP) today reported financial results for the first quarter ended March 31, 2019.

Restaurant Brands International (CNW Group/Restaurant Brands International Inc.)

Jose Cil, Chief Executive Officer of Restaurant Brands International Inc. ("RBI") commented, "At BURGER KING® and POPEYES®, we saw strong system-wide sales growth driven by net restaurant growth, reflecting the strength of our brands and business model around the world. Underlying fundamentals at TIM HORTONS® remain strong and we are excited about our first three restaurants in China.  Overall, we are confident in the long-term growth prospects for each of our three iconic brands, and remain focused on providing a great guest experience while driving franchisee profitability."

Consolidated Operational Highlights

Three Months Ended March 31,


2019


2018


(Unaudited)

System-wide Sales Growth






TH


0.5

%



2.1

%

BK


8.2

%



11.3

%

PLK


6.8

%



10.9

%

Consolidated


6.4

%



9.2

%

System-wide Sales (in US$ millions)






TH

$

1,547


$

1,608

BK

$

5,289


$

5,149

PLK

$

955


$

903

Consolidated

$

7,791


$

7,660

Net Restaurant Growth






TH


1.9

%



2.8

%

BK


5.7

%



6.9

%

PLK


6.6

%



6.7

%

Consolidated


5.1

%



6.1

%

System Restaurant Count at Period End






TH


4,866



4,774

BK


17,823



16,859

PLK


3,120



2,926

Consolidated


25,809



24,559

Comparable Sales






TH


(0.6)

%



(0.3)

%

BK


2.2

%



3.8

%

PLK


0.6

%



3.2

%


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 franchise 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.

 

Consolidated Financial Highlights


Three Months Ended March 31,

(in US$ millions, except per share data)

2019


2018


(Unaudited)

Total Revenues

$

1,266


$

1,254

Net Income Attributable to
Common Shareholders and
Noncontrolling Interests

$

246


$

279

Diluted Earnings per Share

$

0.53


$

0.59


TH Adjusted EBITDA(1)

$

237


$

245

BK Adjusted EBITDA(1)

$

222


$

214

PLK Adjusted EBITDA(1)

$

41


$

39

Adjusted EBITDA(2)

$

500


$

498


Adjusted Net Income(2)

$

255


$

314

Adjusted Diluted Earnings per Share(2)

$

0.55


$

0.66



As of March 31,


2019


2018


(Unaudited)

LTM Free Cash Flow(2)

$

1,346


$

951

Net Debt

$

11,364


$

11,415

Net Leverage(2)


5.1x



5.2x



(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, LTM Free Cash Flow, and Net Leverage are non-GAAP financial measures. Please refer to "Non-GAAP Financial Measures" for further detail.

 

Effective January 1, 2019, we adopted the new lease accounting standard ("New Standard"). Our consolidated financial statements for 2019 reflect the application of the New Standard, while our consolidated financial statements for 2018 were prepared under the guidance of the previously applicable lease accounting standard ("Previous Standard").

The most significant changes of this adoption that affect comparability of our results of operations between 2019 and 2018 are summarized as follows:

  • Under the Previous Standard, we did not reflect reimbursements of property tax and maintenance costs from lessees and sublessees or related costs in our Consolidated Statement of Operations or segment results.  Under the New Standard, property tax and maintenance costs and related reimbursements from lessees and sublessees are reported on a gross basis in our Consolidated Statement of Operations and segment results. Although there is no net impact to Net Income Attributable to Common Shareholders and Noncontrolling Interests or Adjusted EBITDA from this change, the presentation resulted in a total increase of $34 million in franchise and property revenues and franchise and property expenses.
  • Additionally, the New Standard requires the reclassification of favorable lease assets and unfavorable lease liabilities to the right-of-use asset recorded for the underlying lease.  As a result, the amortization period for certain lease assets and liabilities was reduced, resulting in a year-over-year increase of approximately $2 million in non-cash amortization in the three months ended March 31, and expect a full year increase of approximately $10 million in 2019 compared to 2018. Amortization of favorable and unfavorable leases is classified as depreciation and amortization and is excluded from segment income. This impact is expected to decrease significantly over the following few years as leases tied to the increased amortization are renewed or expire.  The estimated impact is based on our existing lease portfolio as of December 31, 2018.

The implementation of the New Standard also impacted our Consolidated Balance Sheets, the most significant of which was the recognition of approximately $1.1 billion of operating lease liabilities and related right-of-use assets on January 1, 2019.  Additionally, "capital leases" have been renamed as "finance leases" under the New Standard, with no material changes in accounting.

The year-over-year change in Total Revenues on a GAAP basis was primarily driven by FX movements. On an organic basis, the year-over-year change in Total Revenues was primarily driven by system-wide sales growth.

The decrease in Net Income Attributable to Common Shareholders and Noncontrolling Interests for the first quarter was primarily driven by an increase in income tax expense resulting from a reduced tax benefit of equity based compensation as compared to the prior year.

The year-over year change in Adjusted EBITDA on an organic basis was primarily driven by system-wide sales growth, partially offset by timing of advertising revenues and expenses.

TH Segment Results 


Three Months Ended March 31,

(in US$ millions)

2019


2018



(Unaudited)

System-wide Sales Growth


0.5%



2.1 %

System-wide Sales

$

1,547


$

1,608

Comparable Sales


(0.6)%



(0.3)%







Net Restaurant Growth


1.9%



2.8%

System Restaurant Count at Period End


4,866



4,774







Sales

$

483


$

508

Franchise and Property Revenues

$

266


$

255

Total Revenues

$

749


$

763







Cost of Sales

$

372


$

396

Franchise and Property Expenses

$

87


$

70

Segment SG&A

$

82


$

82

Segment Depreciation and Amortization

$

26


$

26

Adjusted EBITDA(1)(3)

$

237


$

245



(3)

TH Adjusted EBITDA includes $3 million of cash distributions received from equity method investments for the three months ended March 31, 2019 and 2018.

 

For the first quarter of 2019, system-wide sales growth was primarily driven by net restaurant growth of 1.9%. Comparable sales were (0.6)%, including Canada comparable sales of (0.4)%.

The year-over-year change in GAAP Total Revenues was primarily driven by FX movements. On an organic basis, the year-over-year change in Total Revenues was primarily driven by a decrease in company restaurant revenues (VIE deconsolidation and refranchisings), partially offset by system-wide sales growth.

The year-over-year change in Adjusted EBITDA was primarily driven by FX movements, however, on an organic basis Adjusted EBITDA was primarily driven by system-wide sales growth, partially offset by timing of advertising revenues and expenses.

BK Segment Results


Three Months Ended March 31,

(in US$ millions)

2019


2018


(Unaudited)

System-wide Sales Growth


8.2%



11.3%

System-wide Sales

$

5,289


$

5,149

Comparable Sales


2.2%



3.8%







Net Restaurant Growth


5.7%



6.9%

System Restaurant Count at Period End


17,823



16,859







Sales

$

19


$

19

Franchise and Property Revenues

$

392


$

371

Total Revenues

$

411


$

390







Cost of Sales

$

18


$

16

Franchise and Property Expenses

$

43


$

32

Segment SG&A

$

141


$

140

Segment Depreciation and Amortization

$

13


$

12

Adjusted EBITDA(1)(4)

$

222


$

214


(4)

BK Adjusted EBITDA includes $1 million of cash distributions received from equity method investments for the three months ended March 31, 2019 and 2018.

 

For the first quarter of 2019, system-wide sales growth was driven by net restaurant growth of 5.7% as well as comparable sales of 2.2%, including US comparable sales of 0.4%.

The year-over-year change in Total Revenues on a GAAP and on an organic basis was primarily driven by system-wide sales growth. This is partially offset by FX movements on a GAAP basis.

The year-over-year change in Adjusted EBITDA and Adjusted EBITDA on an organic basis was primarily driven by system-wide sales growth.

PLK Segment Results


Three Months Ended March 31,

(in US$ millions)

2019


2018


(Unaudited)

System-wide Sales Growth


6.8%



10.9%

System-wide Sales

$

955


$

903

Comparable Sales


0.6%



3.2%







Net Restaurant Growth


6.6%



6.7%

System Restaurant Count at Period End


3,120



2,926







Sales

$

20


$

21

Franchise and Property Revenues

$

86


$

80

Total Revenues

$

106


$

101







Cost of Sales

$

16


$

17

Franchise and Property Expenses

$

3


$

2

Segment SG&A

$

49


$

46

Segment Depreciation and Amortization

$

3


$

3

Adjusted EBITDA(1)

$

41


$

39

 

For the first quarter of 2019, system-wide sales growth was driven by net restaurant growth of 6.6%. Comparable sales were 0.6%, including US comparable sales of 0.4%.

The year-over-year change in Total Revenues on a GAAP and on an organic basis was primarily driven by system-wide sales growth partially offset by a decrease in company restaurant revenue (related to refranchisings).

The year-over-year change in Adjusted EBITDA and Adjusted EBITDA on an organic basis was primarily driven by system-wide sales growth.

Cash and Liquidity

As of March 31, 2019, total debt was $12.3 billion, net debt (total debt less cash and cash equivalents of $0.9 billion) was $11.4 billion, and net leverage was 5.1x. The RBI Board of Directors has declared a dividend of $0.50 per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for the second quarter of 2019. The dividend will be payable on July 3, 2019 to shareholders and unitholders of record at the close of business on June 17, 2019.

Investor Conference Call

We will host an investor conference call and webcast at 8:30 a.m. Eastern Time on Monday, April 29, 2019, to review financial results for the first quarter ended March 31, 2019. 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 25,000 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 45 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 comparable sales performance; our expectations and belief regarding the long-term growth prospects for our brands; our expectations regarding our strategic initiatives, product pipeline, and the timing and geography of new product launches; our expectations regarding our restaurant pipeline and growth prospects in key markets; our estimates regarding the impact of changes in accounting and our transition to the New Standard; and our expectations regarding the timing of capital expenditures. 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 its international operations; risks related to RBI's ability to compete domestically and internationally in an intensely competitive industry; and changes in applicable tax laws or interpretations thereof. With respect to our comparable sales performance, our month to date results may not be indicative of our full quarter results based on factors within and outside of our control, including those factors set forth or referred to above. 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,


2019


2018

Revenues:






Sales

$

522


$

548

Franchise and property revenues


744



706

Total revenues


1,266



1,254

Operating costs and expenses:






Cost of sales


406



429

Franchise and property expenses


133



104

Selling, general and administrative expenses


312



301

(Income) loss from equity method investments


(2)



(14)

Other operating expenses (income), net


(17)



13

Total operating costs and expenses


832



833

Income from operations


434



421

Interest expense, net


132



140

Income before income taxes


302



281

Income tax expense


56



2

Net income


246



279

Net income attributable to noncontrolling interests


111



131

Net income attributable to common shareholders

$

135


$

148

Earnings per common share






Basic

$

0.53


$

0.60

Diluted

$

0.53


$

0.59

Weighted average shares outstanding






Basic


252



246

Diluted


467



474

Cash dividends declared per common share

$

0.50


$

0.45

 

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions of U.S. dollars, except share data)
(Unaudited)


As of


March 31, 2019


December 31, 2018

ASSETS

Current assets:

Cash and cash equivalents

$

902


$

913

Accounts and notes receivable, net of allowance of $14 and $14, respectively


441



452

Inventories, net


74



75

Prepaids and other current assets


63



60

Total current assets


1,480



1,500

Property and equipment, net of accumulated depreciation and amortization of $645 and $704, respectively


2,011



1,996

Operating lease assets


1,148



Intangible assets, net


10,427



10,463

Goodwill


5,555



5,486

Net investment in property leased to franchisees


50



54

Other assets, net


622



642

Total assets

$

21,293


$

20,141

LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities:






Accounts and drafts payable

$

451


$

513

Other accrued liabilities


689



637

Gift card liability


112



167

Current portion of long term debt and finance leases


94



91

Total current liabilities


1,346



1,408

Term debt, net of current portion


11,747



11,823

Finance leases, net of current portion


287



226

Operating lease liabilities, net of current portion


1,046



Other liabilities, net


1,531



1,547

Deferred income taxes, net


1,563



1,519

Total liabilities


17,520



16,523

Shareholders' equity:






Common shares, no par value; unlimited shares authorized at March 31,
2019 and December 31, 2018; 253,828,112 shares issued and outstanding
at March 31, 2019; 251,532,493 shares issued and outstanding at December 31, 2018


1,812



1,737

Retained earnings


692



674

Accumulated other comprehensive income (loss)


(775)



(800)

Total Restaurant Brands International Inc. shareholders' equity


1,729



1,611

Noncontrolling interests


2,044



2,007

Total shareholders' equity


3,773



3,618

Total liabilities and shareholders' equity

$

21,293


$

20,141

 

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In millions of U.S. dollars)
(Unaudited)






Three Months Ended March 31,







2019


2018

Cash flows from operating activities:





















Net income





$

246


$

279

Adjustments to reconcile net income to net cash provided by (used for) operating activities:










Depreciation and amortization






47



47

Amortization of deferred financing costs and debt issuance discount






7



7

(Income) loss from equity method investments






(2)



(14)

Loss (gain) on remeasurement of foreign denominated transactions






(15)



16

Net (gains) losses on derivatives






(20)



2

Share-based compensation expense






22



13

Deferred income taxes






38



(19)

Other






3



4

Changes in current assets and liabilities, excluding acquisitions and dispositions:




















Accounts and notes receivable






14



15

Inventories and prepaids and other current assets






(13)



(7)

Accounts and drafts payable






(69)



(73)

Other accrued liabilities and gift card liability






(126)



(374)

Tenant inducements paid to franchisees








(2)

Other long-term assets and liabilities






22



(5)

Net cash provided by (used for) operating activities






154



(111)

Cash flows from investing activities:










Payments for property and equipment






(5)



(7)

Net proceeds from disposal of assets, restaurant closures, and refranchisings






4



2

Settlement/sale of derivatives, net






11



3

Other investing activities, net






1



4

Net cash provided by (used for) investing activities






11



2

Cash flows from financing activities:










Repayments of long-term debt and finance leases






(23)



(22)

Payment of dividends on common shares and distributions on Partnership exchangeable units






(207)



(97)

Payments in connection with redemption of preferred shares








(34)

Proceeds from stock option exercises






42



25

Other financing activities, net






6



Net cash (used for) provided by financing activities






(182)



(128)

Effect of exchange rates on cash and cash equivalents






6



(8)

Increase (decrease) in cash and cash equivalents






(11)



(245)

Cash and cash equivalents at beginning of period






913



1,097

Cash and cash equivalents at end of period





$

902


$

852

Supplemental cash flow disclosures:










Interest paid





$

140


$

129

Income taxes paid





$

45


$

304

 

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.

Net restaurant growth refers to the net increase in restaurant count (openings, net of closures) over a trailing twelve month period, divided by the restaurant count at the beginning of the trailing twelve month period.



Three Months Ended March 31,

KPIs by Market

2019


2018

System-wide Sales Growth






TH - Canada


0.5

%



2.3

%

TH - Rest of World


0.9

%



0.9

%

TH - Global


0.5

%



2.1

%







BK - US


1.6

%



5.9

%

BK - Rest of World


14.3

%



16.1

%

BK - Global


8.2

%



11.3

%







PLK - US


5.5

%



8.7

%

PLK - Rest of World


15.7

%



26.7

%

PLK - Global


6.8

%



10.9

%







System-wide Sales (in US$ millions)






TH - Canada

$

1,342


$

1,404

TH - Rest of World

$

205


$

204

TH - Global

$

1,547


$

1,608







BK - US

$

2,381


$

2,344

BK - Rest of World

$

2,908


$

2,805

BK - Global

$

5,289


$

5,149







PLK - US

$

823


$

780

PLK - Rest of World

$

132


$

123

PLK - Global

$

955


$

903







Comparable Sales






TH - Canada


(0.4)

%



0.1

%

TH - Rest of World


(2.4)

%



(3.0)

%

TH - Global


(0.6)

%



(0.3)

%







BK - US


0.4

%



4.2

%

BK - Rest of World


3.8

%



3.4

%

BK - Global


2.2

%



3.8

%







PLK - US


0.4

%



2.3

%

PLK - Rest of World


2.0

%



10.7

%

PLK - Global


0.6

%



3.2

%











 








As of March 31,

KPIs by Market







2019


2018

Net Restaurant Growth










TH - Canada







1.2

%


2.5

%

TH - Rest of World







5.3

%


4.2

%

TH - Global







1.9

%


2.8

%











BK - US







0.8

%


1.3

%

BK - Rest of World







9.4

%


11.5

%

BK - Global







5.7

%


6.9

%











PLK - US







5.4

%


5.9

%

PLK - Rest of World







10.6

%


9.2

%

PLK - Global







6.6

%


6.7

%











Restaurant Count










TH - Canada







3,971


3,924

TH - Rest of World







895


850

TH - Global







4,866


4,774











BK - US







7,280


7,225

BK - Rest of World







10,543


9,634

BK - Global







17,823


16,859











PLK - US







2,357


2,236

PLK - Rest of World







763


690

PLK - Global







3,120


2,926

 

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Supplemental Disclosure
(Unaudited)

Selling, General and Administrative Expenses


Three Months Ended March 31,

(in US$ millions)

2019


2018

Segment SG&A TH(1)

$

82


$

82

Segment SG&A BK(1)


141



140

Segment SG&A PLK(1)


49



46

Share-based compensation and non-cash incentive compensation expense


25



15

Depreciation and amortization(2)


5



6

PLK Transaction costs




5

Corporate restructuring and tax advisory fees


6



7

Office centralization and relocation costs


4



Selling, general and administrative expenses

$

312


$

301



(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, corporate restructuring and tax advisory fees, and office centralization and relocation costs.

(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)

2019


2018


Net losses (gains) on disposal of assets, restaurant closures, and refranchisings(3)

$

3


$

2

Litigation settlements (gains) and reserves, net




(6)

Net losses (gains) on foreign exchange(4)


(15)



16

Other, net(5)


(5)



1

Other operating expenses (income), net

$

(17)


$

13



(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)

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, LTM Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted Earnings per Share ("Adjusted Diluted EPS"), Organic revenue growth, Organic Adjusted EBITDA growth, Free Cash Flow and Net Leverage. We believe that these non-GAAP measures are useful to investors in assessing our operating performance or liquidity, 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, corporate restructuring and tax advisory fees, and office centralization and relocation costs. 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.

LTM Adjusted EBITDA is defined as Adjusted EBITDA for the last twelve month period to the date reported. LTM Adjusted EBITDA as of March 31, 2019 is the sum of the Adjusted EBITDA for the quarters ended March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018, while LTM Adjusted EBITDA as of March 31, 2018 is the sum of the Adjusted EBITDA for the quarters ended March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017.  A reconciliation of Adjusted EBITDA for each of those quarters were included in our press release attached as Exhibit 99 to our Form 8-Ks filed with the SEC on February 11, 2019, October 23, 2018, August 1, 2018, and April 24, 2018.

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 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.

Net Leverage is defined as net debt (total debt less cash and cash equivalents) divided by Adjusted EBITDA. Net Leverage is a performance measure that we believe provides investors a more complete understanding of our leverage position and borrowing capacity after factoring in cash and cash equivalents that eventually could be used to repay outstanding debt.

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. Additionally, for comparability purposes, we are calculating organic growth under Previous Standards for both periods presented.

Free Cash Flow is the total of Cash Flow for Operations minus Payments for Property and Equipment. Free Cash Flow is a liquidity measure used by management as one factor in determining the amount of cash that is available for working capital needs or other uses of cash, however, it does not represent residual cash flows available for discretionary expenditures. Commencing in the first quarter of 2019, we changed our calculation of Free Cash Flow to be defined as Cash Flow for Operations minus Payments for Property and Equipment, as management believes that the other components of Cash Flow from Investing that were previously included in the definition (such as restaurant closures/refranchisings and settlement of derivatives) are not core to the business and are subject to significant quarterly fluctuations.

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
Organic Growth in Revenue and Adjusted EBITDA
Three Months Ended March 31, 2019
(Unaudited)














Actual


Q1 '19 vs. Q1 '18


Impact of

New Standard


Impact of FX 

Movements


Organic Growth

(in US$ millions)


Q1 '19


Q1 '18


$


%


$


$


$


%

Revenue






















TH


$

749


$

763


$

(14)


(1.8)%


$

21


$

(33)


$

(2)


(0.3)%

BK


$

411


$

390


$

21


5.3%


$

13


$

(12)


$

20


5.5%

PLK


$

106


$

101


$

5


5.1%


$


$


$

5


5.1%

Total Revenues


$

1,266


$

1,254


$

12


1.0%


$

34


$

(45)


$

23


2.0%

Adjusted EBITDA



TH


$

237


$

245


$

(8)


(3.3)%


$


$

(11)


$

3


1.1%

BK


$

222


$

214


$

8


3.9%


$


$

(11)


$

19


9.6%

PLK


$

41


$

39


$

2


5.4%


$


$


$

2


6.3%

Adjusted EBITDA


$

500


$

498


$

2


0.5%


$


$

(22)


$

24


5.1%

 

RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
Reconciliation of EBITDA and Adjusted EBITDA to Net Income
(Unaudited)


Three Months Ended March 31,

(in US$ millions)

2019


2018

Segment income:




TH

$

237



$

245


BK

222



214


PLK

41



39


Adjusted EBITDA

500



498


Share-based compensation and non-cash incentive compensation expense(1)

25



15


PLK Transaction costs(2)



5


Corporate restructuring and tax advisory fees(3)

6



7


Office centralization and relocation costs(4)

4




Impact of equity method investments(5)

1



(10)


Other operating expenses (income), net

(17)



13


EBITDA

481



468


Depreciation and amortization

47



47


Income from operations

434



421


Interest expense, net

132



140


Income tax expense(6)

56



2


Net income

$

246



$

279


RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
Reconciliation of Net Income to Adjusted Net Income and Adjusted Diluted EPS
(Unaudited)


Three Months Ended March 31,

(in US$ millions, except per share data)

2019


2018

Net income

$

246



$

279


Income tax expense(6)

56



2


Income before income taxes

302



281


Adjustments:




Franchise agreement amortization

8



8


Amortization of deferred financing costs and debt issuance discount

7



7


Interest expense and loss on extinguished debt(7)

3



3


PLK Transaction costs(2)



5


Corporate restructuring and tax advisory fees(3)

6



7


Office centralization and relocation costs(4)

4




Impact of equity method investments(5)

1



(10)


Other operating expenses (income), net

(17)



13


Total adjustments

12



33


Adjusted income before income taxes

314



314


Adjusted income tax (benefit) expense(6)(8)

59




Adjusted net income

$

255



$

314


Adjusted diluted earnings per share

$

0.55



$

0.66


Weighted average diluted shares outstanding

467



474


RESTAURANT BRANDS INTERNATIONAL INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
Reconciliation of Net Leverage and Free Cash Flow
(Unaudited)



As of

(in US$ millions, except ratio)


March 31, 2019


March 31, 2018

Term debt, net of current portion


$

11,747



$

11,788


Finance leases, net of current portion


287



237


Current portion of long term debt and finance leases


94



79


Unamortized deferred financing costs and deferred issue discount


138



163


Total debt


12,266



12,267







Cash and cash equivalents


902



852


Net debt


11,364



11,415


LTM adjusted EBITDA


2,214



2,201


Net leverage


5.1x



5.2x




Three Months Ended March 31,


Twelve Months Ended December 31,


Twelve Months Ended March 31,

(in US$ millions)


2019


2018


2017


2018


2017


2019


2018

Calculation:


A


B


C


D


E


A + D - B


B + E - C

Net cash provided by (used for) operating activities


$

154



$

(111)



$

289



$

1,165



$

1,391



$

1,430



$

991


Payments for property and equipment


(5)



(7)



(4)



(86)



(37)



(84)



(40)


Free cash flow


$

149



$

(118)



$

285



$

1,079



$

1,354



$

1,346



$

951


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 2018 and 2019 cash bonus, respectively.
  2. n connection with the acquisition of Popeyes Louisiana Kitchen, Inc., we incurred certain non-recurring selling, general and administrative expenses primarily consisting of professional fees and compensation related expenses.
  3. Costs arising primarily from professional advisory and consulting services associated with corporate restructuring initiatives related to the interpretation and implementation of the Tax Cuts and Jobs Act, which was enacted on December 22, 2017, including Treasury regulations proposed in late 2018.
  4. In connection with the centralization and relocation of our Canadian and U.S. restaurant support centers to new offices in Toronto, Ontario, and Miami, Florida, respectively, we incurred certain non-operational expenses consisting primarily of duplicate rent expense, moving costs, and relocation-driven compensation expenses.
  5. 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 is included in segment income.
  6. Our effective tax rate was reduced by 4.1% and 22.7% for the three months ended March 31, 2019 and 2018, respectively, and our adjusted effective tax rate was reduced by 3.9% and 20.3% for the three months ended March 31, 2019 and 2018, respectively, as a result of benefits from stock option exercises.
  7. Represents 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.
  8. 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.

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/restaurant-brands-international-inc-reports-first-quarter-2019-results-300839505.html

SOURCE Restaurant Brands International Inc.

View original content to download multimedia: http://www.newswire.ca/en/releases/archive/April2019/29/c7482.html

Copyright CNW Group 2019

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