Burger King Holdings Inc.

LBO Analysis

Circularity
Valuation date
Acquisition share price
Exit EV / EBITDA multiple
Exit year

6/30/2010
$24.00
9.4
5.0

Model based on 3G Capital's September 2, 2010 tender offer for all outstanding shares of Burger King Ho
Model assumes BKC pays a special dividend before the deal closes and 3G contributes 161 million in cas
Specific financing terms were unknown as of the date of this analysis.

© One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com) 9/26/2010

g shares of Burger King Holdings, Inc ("BKC").
ntributes 161 million in cash for operations.

All numbers in $mm except per share data

Sources
Equity financing
Term loan facility
Revolving credit facility
Senior unsecured notes
Existing capital leases
Total sources
Additional cash for operations

1,500.0
1,750.0
150.0
900.0
65.3
4,365.3
161.4

Deal terms
Advisory fee
Pay-out cash prior to closing
LIBOR floor
Term loan interest spread
Revolver interest spread
Revolver commitment fee
Senior notes interest

© One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com)

1%
1
1.75%
4.75%
4.75%
1%
8%

Uses

Balance sheet reconciliation
Pre LBO

BK offer price
Basic shares
Diluted shares
Acquired equity value
Net debt
Enterprise value
Advisory fees
Total uses
Dilution
Options outstanding
Weighted avg. exercise price
RSUs, deferred shares, PBRS awards
Weighted avg. exercise price
Dilution

$24.00
135.9
139.3
3,344.1
826.3
4,170.4
33.4
4,203.9

6.4
17.2
1.6
3.456

Deal metrics
Transaction value
% debt
% equity
EV / LTM EBITDA
Price / earnings
Debt / EBITDA

4,170.4
1
0
9.4
8.0
6.4

Assets excl. cash
Cash
Goodwill
Total assets
Debt
Leases
Other liabilties
Equity
Total liabilties + SE

2,528.6
31.0
2559.6
761.0
65.3
792.5
940.8
2,559.6

Post LBO
Assets excl. cash
Cash
Goodwill
Total assets

2,559.6
161.4
(31.0)
2,690

Debt
Leases
Other liabilities
Equity

2,800.0
65.3
792.5
1,500.0

Total liabilties + SE
New goodwill

5,157.8
2,467.8

All numbers in $mm except per share data

Return analysis
2008

2009

Sponsor investment
Dividends
Exit enterprise value
(-) Net debt at exit
Total Sponsor cash flow

IRR

For fiscal year ending June 30,
2010
2011
2012
2013
(1,500.0)

(1,500.0)

19.8%

Return sensitivity to exit multiple and Revolver / Term loan cost of debt
19.8%
7.0
8.0
9.0
10.0
11.0

2.00%
9.41%
14.25%
18.38%
22.01%
25.25%

2.50%
9.41%
14.25%
18.38%
22.01%
25.25%

3.00%
9.41%
14.25%
18.38%
22.01%
25.25%

3.50%
9.41%
14.25%
18.38%
22.01%
25.25%

4.00%
9.41%
14.25%
18.38%
22.01%
25.25%

4.50%
9.41%
14.25%
18.38%
22.01%
25.25%

6.50%
12.28%
15.05%
17.57%
19.89%
22.05%
24.06%
25.96%

7.00%
12.18%
14.95%
17.48%
19.81%
21.98%
24.00%
25.89%

Return sensitivty to capex requirements and cost cutting
19.8%
-3.00%
(0.0)
(0.0)
0.00%
1.00%
2.00%
3.00%

5%
12.68%
15.41%
17.91%
20.21%
22.34%
24.34%
26.21%

5.00%
12.58%
15.32%
17.82%
20.13%
22.27%
24.27%
26.15%

© One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com)

5.50%
12.48%
15.23%
17.74%
20.05%
22.20%
24.20%
26.08%

6.00%
12.38%
15.14%
17.65%
19.97%
22.12%
24.13%
26.02%

e 30,
2014

2015

5,329.3
(1,625.5)
3,703.8

5.00%
9.41%
14.25%
18.38%
22.01%
25.25%

5.50%
9.41%
14.25%
18.38%
22.01%
25.25%

7.50%
12.07%
14.86%
17.40%
19.74%
21.90%
23.93%
25.83%

8.00%
11.97%
14.77%
17.31%
19.66%
21.83%
23.86%
25.76%

Exit multiple
Term loan spread

9.4
4.75%

SG&A cost cutting in 2011
Capex % of sales

0.00%
7.00%

Operating and debt paydow

© One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com)

and debt paydown model

All numbers in $mm except per share data

Inputs
2009

For fiscal year ending June 30,
2010
2011

0
0
113.5

()
0
113.7

0
0
113.7

0
0
0

0
0
0

0
0
0

0
0
24.07%

0
1
-0.6

0
1
1.9

0
1
-0.7

0%
0
1
0

0
5

0
8.8

0
8.7
0.10

7%
8.9
10%

0.1
0.1
0.0
0.2
98.9
0.1
0.0
0.1
0.1
0.0

0.1
0.1
0.0
0.3
104.2
0.1
0.0
0.1
0.1
0.0

5.5%
5.5%
1.0%
25.0%
104.2
7.0%
2.8%
8.0%
13.8%
2.7%
0.0
0.0

0.3
0.4

0.3
0.4

35.50%
0.4

2008
Revenue assumptions
Company restaurant growth
Franchise growth
Property ($ amount)
COGS assumptions
Food, paper, and product costs % sales
Payroll and employee benefits % sales
Occupancy and other costs % sales
Other income statement assumptions
SG&A cost cutting as a % of sales
SG&A as a % of sales
Property expenses % of property revenue
Other operating expenses (income)
Fixed asset assumptions
Capex % of sales
Intangible asset amortization
Depreciation % of beg. PP&E

Balance sheet assumptions
Receivables % of sales
Prepaids and other current assets % of COGS
Deferred income taxes % of sales
Investment in franchisee property % of franchisee revenue
Other assets
Accounts payable % of COGS
Accrued advertising % of sales
Other accrued liabilities % of sales
Other liabilties % of sales
Deferred income taxes % of sales
Share issues / (repurchases)
Dividends
Tax assumptions
Effective tax rate
Marginal tax rate
Debt assumptions
Cash floor
Cash sweep
LIBOR

0.4
0.4

50
100%

Credit facility interest rate
Credit facility commitment fee
Term loan interst rate
Senior notes interest rate
Capital lease interest rate
Principal repayments
Interest on cash

© One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com)

0

0

6.50%
1.00%
6.50%
8%
0
0
1%

scal year ending June 30,
2012

2013

2014

2015

0
0
113.7

0
0
113.7

0
0
113.7

0
0
113.7

0
29.92%
24.07%

0
29.92%
24.07%

0
29.92%
24.07%

0
29.92%
24.07%

1%
0
1
0

0%
0
1
0

0%
0
1
0

0%
0
1
0

7%
8.8
10%

7%
8.8
10%

7%
8.6
10%

7%
8.2
10%

5.5%
5.5%
1.0%
25.0%
104.2
7.0%
2.8%
8.0%
13.8%
2.7%
0.0
0.0

5.5%
5.5%
1.0%
25.0%
104.2
7.0%
2.8%
8.0%
13.8%
2.7%
0.0
0.0

5.5%
5.5%
1.0%
25.0%
104.2
7.0%
2.8%
8.0%
13.8%
2.7%
0.0
0.0

5.5%
5.5%
1.0%
25.0%
104.2
7.0%
2.8%
8.0%
13.8%
2.7%
0.0
0.0

35.50%
0.4

35.50%
0.4

35.50%
0.4

35.50%
0.4

50
100%

50
100%

50
100%

50
100%

Growth assumption

1 Conservative

Operating leverage benefit

2 Moderate
Restaurant costs as a %

6.50%
1.00%
6.50%
8%
0
0
1%

6.50%
1.00%
6.50%
8%
15.47%
0
1%

6.50%
1.00%
6.50%
8%
15.47%
0
1%

6.50%
1.00%
6.50%
8%
15.47%
0
1%

Conservative

Restaurant costs as a % of restaurant sales changes by 3%

All numbers in $mm except per share data

Income statement
For fiscal year ending June 30,
2010
2011

2008

2009

2,454.7
1,538.0
916.7
501.0
62.1
(0.6)
354.2

2,537.4
1,643.7
893.7
494.3
58.1
1.9
339.4

2,502.2
1,614.8
887.4
495.8
59.4
(0.7)
332.9

2,554.6
1,598.9
955.7
506.2
58.6

Depreciation & amortization
EBITDA

95.6
449.8

98.1
437.5

111.7
444.6

110.3
501.3

Interest expense, net
Profit before taxes

61.2
293.0

54.6
284.8

48.6
284.3

391.0

Tax expense
Net Income

103.4
189.6

84.7
200.1

97.5
186.8

138.8
252.2

34.2

34.1

34.2

0

135.1
137.2
$1.40
0.25
0.25

134.8
136.8
$1.48
0.25
0.25

135.4
137.6
$1.38
0.25
0.25

135.4
137.6
$1.86
1.83

Revenue
Restaurant expenses
Gross margin (1)
SGA
Property expenses
Other operating expenses (income)
EBIT

Dividends
WASO - basic
WASO - diluted
EPS - basic
EPS - diluted
Dividends per share

© One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com)

391.0

iscal year ending June 30,
2012
2013

2014

2015

2,608.3
1,639.2
969.1
490.7
58.6

2,663.3
1,680.5
982.8
501.1
58.6

2,719.5
1,722.9
996.7
511.7
58.6

2,777.1
1,766.3
1,010.8
522.5
58.6

419.8

423.1

426.4

429.8

118.0
537.8

125.3
548.4

132.1
558.5

138.4
568.1

419.8

423.1

426.4

429.8

149.0
270.8

150.2
272.9

151.4
275.1

152.6
277.2

0

0

0

0

135.4
137.6
$2.00
1.97

135.4
137.6
$2.02
1.98

135.4
137.6
$2.03
2.00

135.4
137.6
$2.05
2.01

All numbers in $mm except per share data

Balance sheet
2008
Cash and cash equivalents
Receivables
Prepaids and other current assets
Deferred income taxes
Total current assets
PP&E, net
Intangible assets, net
Goodwill
Investment in property leased to franchisees
Other assets
Total assets
Accounts payable
Accrued advertising
Other accrued liabilities
Current portion of LT debt and leases
Total current liabilities
LT debt
Capital leases
Other liabilties
Deferred income taxes
Total liabilities
Common stock
APIC, net
Retained earnings
AOCI
Total SE
Total SE + liabiltiies
Balance check

© One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com)

2009

For fiscal year ending June 30,
2010
2011

121.7
130.0
86.4
32.5
370.6

0.0
142.9
88.4
15.1
246.4

50.0
137.6
88.8
25.0
301.5

1013.2
1062.7
26.4
135.3
98.9
2707.1

1014.1
1025.4
31.0
138.5
104.2
2559.6

1091.5
1016.5
2467.8
138.8
104.2
5120.3

127.0
67.8
220.0
67.5
482.3

106.9
71.9
200.9
93.3
473.0

113.0
70.1
200.2
0.0
383.3

755.6
65.8
354.5
74.1
1732.3

667.7
65.3
344.6
68.2
1618.8

2506.6
65.3
345.3
67.6
3368.1

1.4
577.5
455.4
-59.5
974.8

1.4 580.3 420.4
-61.3
940.8

1752.2
0.0
1752.2

2707.1

2559.6

5120.3

0.00

0.00

0.00

scal year ending June 30,
2012
2013

2014

2015

50.0
140.5
87.9
25.5
304.0

50.0
143.5
90.2
26.1
309.7

50.0
146.5
92.4
26.6
315.5

50.0
149.6
94.8
27.2
321.5

1164.9
1007.7
2467.8
140.4
104.2
5189.0

1234.9
998.9
2467.8
141.9
104.2
5257.4

1301.8
990.3
2467.8
143.5
104.2
5323.1

1366.0
982.1
2467.8
145.1
104.2
5386.7

111.9
71.5
204.4
0.0
387.8

114.7
73.0
208.7
0.0
396.4

117.6
74.6
213.1
0.0
405.3

120.6
76.1
217.6
0.0
414.3

2291.4
65.3
352.5
69.0
3166.0

2069.4
65.3
359.9
70.4
2961.5

1842.1
65.3
367.5
71.9
2752.1

1610.2
65.3
375.3
73.4
2538.5

-

-

-

-

2023.0
0.0
2023.0

2295.9
0.0
2295.9

2570.9
0.0
2570.9

2848.1
0.0
2848.1

5189.0

5257.4

5323.1

5386.7

0.00

0.00

0.00

0.00

All numbers in $mm except per share data

Cash flow statement
2008

2009

For fiscal year ending June 30,
2010
2011

Cash flow from operating activities
Net income
Depreciation and amortization
Change in receivables
Change in prepaids and other current assets
Change in deferred income taxes
Change in other assets
Change in accounts payable
Change in accrued advertising
Change in other accrued liabilities
Change in other liabilties
Change in deferred income taxes
Operating cash flow

252.2
110.3
5.3
(0.4)
(9.9)
6.1
(1.8)
(0.7)
0.7
(0.6)
361.1

Cash flow from investing activities
Capex
Change in investment in property leased to franchisees
Investing cash flow

(178.8)
(0.3)
(179.2)

Cash flow from financing activities
Dividends
Share issues / (repurchases)
Cash flow available for debt repayment

181.9

Change in LT debt
Change in capital leases
Financing cash flow

(293.4)

Net change in cash

(111.4)

Cash balance

© One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com)

(293.4)

161.4

50.0

iscal year ending June 30,
2012
2013

2014

2015

270.8
118.0
(2.9)
0.9
(0.5)

272.9
125.3
(3.0)
(2.2)
(0.5)

275.1
132.1
(3.0)
(2.3)
(0.5)

277.2
138.4
(3.1)
(2.3)
(0.6)

(1.1)
1.5
4.2
7.2
1.4
399.4

2.8
1.5
4.3
7.4
1.4
410.0

2.9
1.5
4.4
7.6
1.5
419.2

3.0
1.6
4.5
7.8
1.5
427.9

(182.6)
(1.5)
(184.1)

(186.4)
(1.6)
(188.0)

(190.4)
(1.6)
(191.9)

(194.4)
(1.6)
(196.0)

215.3

222.0

227.2

231.9

(215.3)

(222.0)

(227.2)

(231.9)

(215.3)

(222.0)

(227.2)

(231.9)

0.0

(0.0)

50.0

50.0

50.0

50.0

All numbers in $mm except per share data

Debt
2008

2009

For fiscal year ending June 30,
2010
2011

Beginning cash
Cash floor
Cash flow available for debt service

161.4
50.0
181.9

Cash available for debt repayment

293.4

Revolving credit facility
Beginning balance
Issuance / (repayment)
Ending balance
Interest expense
Commitment fee

150.0
(150.0)
150.0
4.9
0.8

Cash available for debt repayment
Term loan facility
Beginning balance
Issuance / (repayment)
Ending balance
Interest expense

143.4

1,750.0

1,750.0
(143.4)
1,606.6
109.1

Cash available for debt repayment
Senior unsecured notes
Beginning balance
Issuance / (repayment)
Ending balance
Interest expense

900.0
900.0

900.0
72.0

Cash available for debt repayment
Capital leases
Beginning balance
Issuance / (repayment)
Ending balance
Interest expense
Debt summary
Revolving credit facility
Term loan facility
Senior unsecured notes
Capital leases
Total

65.3
65.3

150.0
1,750.0
900.0
65.3
2,865.3

65.3
10.1

1,606.6
900.0
65.3
2,571.9

Interest expense
Revolving credit facility
Term loan facility
Senior unsecured notes
Capital leases
Total
Cash balance
Cash interest income
Interest expense, net

© One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com)

5.6
109.1
72.0
10.1
196.8
161.4

50.0
1.1
195.8

iscal year ending June 30,
2012
2013

2014

2015

50.0
50.0
215.3

50.0
50.0
222.0

50.0
50.0
227.2

50.0
50.0
231.9

215.3

222.0

227.2

231.9

1.5

1.5

1.5

1.5

215.3

222.0

227.2

231.9

1,606.6
(215.3)
1,391.4
97.4

1,391.4
(222.0)
1,169.4
83.2

1,169.4
(227.2)
942.1
68.6

942.1
(231.9)
710.2
53.7

900.0

900.0

900.0

900.0

900.0
72.0

900.0
72.0

900.0
72.0

900.0
72.0

65.3

65.3

65.3

65.3

65.3
10.1

65.3
10.1

65.3
10.1

65.3
10.1

1,391.4
900.0
65.3
2,356.7

1,169.4
900.0
65.3
2,134.7

942.1
900.0
65.3
1,907.4

710.2
900.0
65.3
1,675.5

1.5
97.4
72.0
10.1
181.0

1.5
83.2
72.0
10.1
166.8

1.5
68.6
72.0
10.1
152.2

1.5
53.7
72.0
10.1
137.3

50.0
0.5

50.0
0.5

50.0
0.5

50.0
0.5

180.5

166.3

151.7

136.8

All numbers in $mm except per share data

Calculations

Beginning PP&E
Capex
Depreciation
Ending PP&E

For fiscal year ending June 30,
2010
2011

2008

2009

178.2

204.0

1,013.2
150.3

1,013.2

1,014.1

Beginning retained earnings
Net income
Dividends
Ending retained earnings

1,014.1
178.8
101.4
1,091.5
1,500.0
252.2

1,500.0

1,752.2

Revenue projection

Revenues
Company restaurant
Franchise
Property
Total

2008

2009

1,795.9
537.2
121.6
2,454.7

1,880.5
543.4
113.5
2,537.4

For fiscal year ending June 30,
2010
2011
1,839.3
549.2
113.7
2,502.2

1,885.6
555.3
113.7
2,554.6

Restaurant COGS projection

Restaurant expenses
Food, paper, and product costs
Payroll and employee benefits
Occupancy and other operating costs
Total

© One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com)

2008

2009

564.3
534.7
439.0
1,538.0

603.7
582.2
457.8
1,643.7

For fiscal year ending June 30,
2010
2011
585.0
568.7
461.1
1,614.8

580.9
564.2
453.9
1,598.9

scal year ending June 30,
2012
2013

2014

2015

1,091.5
182.6
109.2
1,164.9

1,164.9
186.4
116.5
1,234.9

1,234.9
190.4
123.5
1,301.8

1,301.8
194.4
130.2
1,366.0

1,752.2
270.8

2,023.0
272.9

2,295.9
275.1

2,570.9
277.2

2,023.0

2,295.9

2,570.9

2,848.1

scal year ending June 30,
2012
2013

2014

2015

1,981.9
567.7
113.7
2,663.3

2,031.8
574.0
113.7
2,719.5

2,083.0
580.4
113.7
2,777.1

scal year ending June 30,
2012
2013

2014

2015

625.9
607.9
489.0
1,722.9

641.7
623.2
501.4
1,766.3

1,933.2
561.5
113.7
2,608.3

595.5
578.4
465.3
1,639.2

610.5
593.0
477.0
1,680.5

All numbers in $mm except per share data

Metrics

Operating metrics
Revenue growth
EBIT margin
EBITDA margin
Profit margin
Credit metrics
Total debt
Net debt
Total debt / EBITDA
Net debt / EBITDA
Total debt / (EBITDA - Capex)
EBITDA / Interest expense

© One-Eyed Capitalist (www.oneeyedcapitalist.blogspot.com)

2008

2009

0
0
0

0
0
0
0

For fiscal year ending June 30,
2010
2011

()
0
0
0

0
0
0
0

2,571.9
2,521.9
5.1
5.0
8.4
2.5

iscal year ending June 30,
2012
2013

2014

2015

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

2,356.7
2,306.7
4.4
4.3
6.6
3.0

2,134.7
2,084.7
3.9
3.8
5.6
3.3

1,907.4
1,857.4
3.4
3.3
4.7
3.7

1,675.5
1,625.5
2.9
2.9
3.9
4.1

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