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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.

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.