01—Abstract
Summary
Summary of the 10-K filed February 26, 2016. Cited figures are marked; the original filing is the authoritative source.
Restaurant Brands International Inc. (QSR) reported fiscal 2015 results in its first full year as a combined company following the December 12, 2014 Transactions, in which Burger King Worldwide and Tim Hortons became indirect subsidiaries.
The company operated 19,416 system-wide restaurants in approximately 100 countries and U.S. territories as of December 31, 2015, with Tim Hortons at 4,413 restaurants and Burger King at 15,003. Approximately 100% of restaurants are franchised. Total revenues rose to $4.05 billiona in 2015 from $1.20 billion in 2014, and net income attributable to the company was $511.7 million, compared with a net loss of $269.3 million in 2014, which included $155.4 million of debt extinguishment losses and $290.9 million of net losses on derivatives.
Leverage remains the central investor consideration. Total debt and capital lease obligations were $8,721.8 millionb at year-end 2015, and the company also has $3,297.0 million of redeemable preferred shares carrying a 9.0% cumulative dividend, with quarterly preferred dividends of $67.5 million. Cash and cash equivalents fell to $757.8 million from $1,803.2 million, and net cash provided by operating activities was $1,204.8 million.
The company repaid $1,550.0 millionc of its term loan using proceeds from $1,250.0 million of 4.625% first lien senior secured notes and cash on hand. Adjusted EBITDA was $1,666.2 million, with Tim Hortons contributing $906.7 million and Burger King $759.5 million. The filing also highlights concentrated ownership and structural considerations.
3G Restaurant Brands Holdings LP owns approximately 43.1% of combined voting power, and holders of Partnership exchangeable units held approximately 50.9% of Partnership common equity at year-end. The company declared a quarterly common dividend of $0.14d per share on February 16, 2016, and management noted it is not in compliance with certain Canadian corporate governance best practices. Tim Hortons also faces exposure to the Canadian business and Canadian dollar, as the substantial majority of its revenues and operating income in 2015 came from Canada.
02—Key points
Key Highlights
- Total revenues of $4.05 billion in 2015, up from $1.20 billion in 2014, reflecting a full year of Tim Hortons consolidation (TH total revenues of $2,956.9 million in 2015).
- Net income of $511.7 million in 2015 versus a net loss of $269.3 million in 2014; income from operations rose to $1,192.2 million from $181.1 million.
- Adjusted EBITDA of $1,666.2 million in 2015, with Tim Hortons segment income of $906.7 million and Burger King segment income of $759.5 million.
- Total debt and capital lease obligations of $8,721.8 million at December 31, 2015, plus $3,297.0 million of redeemable preferred shares paying a 9.0% cumulative dividend.
- Cash flow from operations of $1,204.8 million in 2015, with cash and cash equivalents of $757.8 million at year-end.
- Burger King system-wide sales growth of 10.3% and comparable sales growth of 5.4% in 2015; Tim Hortons system-wide sales growth of 9.3% and comparable sales growth of 5.6%.
- 3G Restaurant Brands Holdings LP controls approximately 43.1% of combined voting power, giving it significant influence over corporate decisions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Restaurant Brands International kept $0.03.
- Revenue$4.05B100.0%
- Cost of revenue−$1.81B44.7%
- Gross profit$2.24B55.3%
- Operating costs−$1.05B25.9%
- Operating income$1.19B29.4%
- Interest, other & tax−$1.09B26.9%
- Net income$103.9M2.6%
Where FY2015 revenue went
$4.05B- Cost of revenue: $1.81B, 45% of revenue
- Interest, other & tax: $1.09B, 27% of revenue
- Other operating costs: $612.8M, 15% of revenue
- Net income: $103.9M, 2.6% of revenue
- SG&A: $437.7M, 11% of revenue
Kept 2.6% as net incomeNet income $103.9M · 2.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 26, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $4.05B$1.20B | +238.0% |
| Cost of Revenue | $1.81B$156.40M | +1057.0% |
| Gross Profit | $2.24B$826.50M | +171.3% |
| SG&A Expenses | $437.70M$345.40M | +26.7% |
| Operating Expenses | $2.86B$1.02B | +181.0% |
| Operating Income | $1.19B$181.10M | +558.3% |
| Net Income | $103.90M$158.00M | −34.2% |
| EPS (Basic) | $0.51$-1.16 | +144.0% |
| EPS (Diluted) | $0.50$-2.32 | +121.6% |
| Shares Outstanding (Basic) | 203.50M343.70M | −40.8% |
| Shares Outstanding (Diluted) | 476.00M358.20M | +32.9% |
05—Questions
Frequently Asked Questions
How much debt does the company carry and what are its main obligations?
Total debt and capital lease obligations were $8,721.8 million at December 31, 2015. This includes a senior secured term loan facility of $5,097.7 million, $1,250.0 million of 4.625% first lien senior secured notes due 2022, and $2,250.0 million of 6.00% second lien senior secured notes due 2022. The company also has $3,297.0 million of redeemable preferred shares with a 9.0% cumulative dividend, with quarterly preferred dividend payments of $67.5 million.
Why did the company report a net loss in 2014 but net income in 2015?
The 2014 net loss of $269.3 million was driven by Transactions-related items, including $290.9 million of net losses on derivatives, $125.0 million of Tim Hortons transaction and restructuring costs, a $155.4 million loss on early extinguishment of debt, and a $546.4 million accretion of preferred shares, which affects net income attributable to common shareholders. In 2015, net income was $511.7 million, reflecting a full year of Tim Hortons results and lower other operating expenses of $105.5 million compared with $327.4 million in 2014.
How is the company's business model structured?
Both Tim Hortons and Burger King operate on a fully franchised model, with approximately 100% of system-wide restaurants franchised. Revenue comes from franchise royalties, property rents from leased or subleased restaurant sites, and, for Tim Hortons, supply chain sales to franchisees. Franchisees fund substantially all of the advertising programs through contributions of 3.5% to 5.0% of gross sales.
What are the key risks related to ownership and governance?
3G Restaurant Brands Holdings LP owns approximately 43.1% of combined voting power, and its interests may differ from other shareholders. The company is also not in compliance with certain Canadian governance best practices, as the chairman is not independent and the nominating and compensation committees are not fully independent. Additionally, the preferred shares include change of control provisions that could delay or prevent an acquisition.
What are the company's dividend and capital return plans?
On February 16, 2016, the board declared a cash dividend of $0.14 per common share, payable April 4, 2016. The board also declared a $0.98 per share dividend on the Preferred Shares, totaling $67.5 million, payable April 1, 2016. In 2015, the company repurchased 8,150,003 Partnership exchangeable units for approximately $293.7 million in cash. The company states it does not have a formal dividend policy, and future common dividends depend on earnings, debt covenants and the terms of the preferred shares.
06—Continue