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Burger King Holdings Inc. Reports Operating Results (10-K)

August 27, 2009 | About:
Gordon Pape

Burger King Holdings Inc. (BKC) filed Annual Report for the period ended 2009-06-30.

Burger King Holdings Inc. through its subsidiaries owns and franchises fast food hamburger restaurants. The company offers various food items such as flame-broiled hamburgers chicken and other specialty sandwiches french fries and soft drinks. Approximately 90 percent of BURGER KING ? restaurants are owned and operated by independent franchisees many of them family-owned operations that have been in business for decades. Burger King Holdings has operations in the United States Canada Europe the Middle East Africa the Asia Pacific and Latin America. Burger King Holdings Inc. has a market cap of $2.43 billion; its shares were traded at around $18.06 with a P/E ratio of 12.7 and P/S ratio of 1.1. The dividend yield of Burger King Holdings Inc. stocks is 1.3%.

Highlight of Business Operations:

Burger King Holdings, Inc. (we or the Company) is a Delaware corporation formed on July 23, 2002. Our restaurant system includes restaurants owned by the Company and by franchisees. We are the worlds second largest fast food hamburger restaurant, or FFHR, chain as measured by the total number of restaurants and system-wide sales. As of June 30, 2009, we owned or franchised a total of 11,925 restaurants in 73 countries and U.S. territories, of which 1,429 restaurants were Company restaurants and 10,496 were owned by our franchisees. Of these restaurants, 7,233 or 61% were located in the United States and 4,692 or 39% were located in our international markets. Our restaurants feature flame-broiled hamburgers, chicken and other specialty sandwiches, french fries, soft drinks and other affordably-priced food items. During our more than 50 years of operating history, we have developed a scalable and cost-efficient quick service hamburger restaurant model that offers customers fast food at affordable prices.

We operate in the FFHR category of the quick service restaurant, or QSR, segment of the restaurant industry. In the United States, the QSR segment is the largest segment of the restaurant industry and has demonstrated steady growth over a long period of time. According to The NPD Group, Inc., which prepares and disseminates CREST data, QSR sales have grown at an annual rate of 3% over the past 10 years, totaling approximately $231.4 billion for the 12-month period ended June 2009. According to The NPD Group, Inc., QSR sales are projected to increase at an annual rate of 3% between 2009 and 2014. However, we have recently experienced negative comparable sales growth and significant traffic declines in many of our major markets, primarily caused by adverse economic conditions, including higher unemployment, fewer customers eating out, and heavy discounting by other restaurant chains, and QSR sales and we may continue to be adversely impacted by the current recessionary environment or sharp increases in commodity or energy prices.

We believe the QSR segment is generally less vulnerable to economic downturns than the casual dining segment, due to the value that QSRs deliver to consumers, as well as some trading to value by customers from other restaurant industry segments during adverse economic conditions, as they seek to preserve the away from home dining experience on tighter budgets. During the current recession, however, QSR traffic in the United States decreased 2% for the quarter ended in June 2009, while visits to casual dining chains decreased 3% and family dining chains decreased 6% for the same period, according to The NPD Group, Inc. Overall U.S. restaurant traffic decreased 3% for the quarter ended in May 2009, its steepest drop in 28 years, as diners with children ate out less, according to The NPD Group, Inc.

According to The NPD Group, Inc., the FFHR category is the largest category in the QSR segment, generating sales of over $62.8 billion in the United States for the 12-month period ended June 30, 2009, representing 27% of total QSR sales. The FFHR category grew at an annual rate of 3% in terms of sales during the same period and, according to The NPD Group, Inc., is expected to increase at an average rate of 4% per year over the next five years. For the 12-month period ended June 30, 2009, Burger King accounted for approximately 14% of total FFHR sales in the United States.

Restaurant Design and Image. Our restaurants consist of several different building types with various seating capacities. The traditional Burger King restaurant is free-standing, ranging in size from approximately 1,900 to 4,300 square feet, with seating capacity of 40 to 120 guests, drive-thru facilities and adjacent parking areas. Some restaurants are located in airports, shopping malls, toll road rest areas and educational and sports facilities. In fiscal 2005, we developed new, smaller restaurant designs that reduce the average building costs by approximately 20%. The seating capacity for these smaller restaurant designs is between 40 and 80 guests. We believe this seating capacity is adequate since approximately 62% of our U.S. Company restaurant sales are made at the drive-thru. We and our franchisees have opened 251 new smaller design restaurants in the United States and Canada through June 30, 2009. We have also developed the Whopper Bar, a small-scale, trendy version of our restaurant where guests can customize our signature burger with the choice of up to 22 different toppings. Our first Whopper Bar in the United States opened in March 2009 at Universal Citywalk Orlando® in Orlando, Florida.

As of June 30, 2009, we owned and operated 1,043 Company restaurants in the United States and Canada, representing 14% of total United States and Canada system-wide restaurants. We own the properties for 357 of our Company restaurants and we lease the remaining 686 properties from third-party landlords. Our Company restaurants in the United States and Canada generated $1.3 billion in revenues in fiscal 2009, or 76% of our total United States and Canada revenues and 53% of our total worldwide revenues. We use our Company restaurants to test new products and initiatives before rolling them out to the wider Burger King system.

Read the The complete ReportBKC is in the portfolios of Robert Olstein of Olstein Financial Alert Fund, Richard Aster Jr of Meridian Fund, George Soros of Soros Fund Management LLC.

Rating: 4.5/5 (2 votes)

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