Burger King 2009 Annual Report Download - page 62

Table of Contents
In the United States and Canada, income from operations increased by $8.8 million, or 3%, to $348.2 million in fiscal 2008,
primarily as a result of a $34.3 million increase in franchise revenues, reflecting franchise comparable sales growth of 5.8% (in constant
currencies) for the period in this segment and an increase in the effective royalty rate. This increase was partially offset by higher
selling, general and administrative expenses of $316.3 million, driven primarily by increased salaries and wages, fringe benefit costs
and increased stock−based compensation expense.
Income from operations in EMEA/APAC increased by $37.9 million, or 70%, to $91.8 million in fiscal 2008, primarily as a result
of a $37.9 million increase in franchise revenues, reflecting franchise comparable sales growth of 5.6% (in constant currencies) for the
period in this segment and the net increase of 196 franchise restaurants during fiscal 2008. The favorable impact that the movement in
foreign currency exchange rates had on revenues was partially offset by the unfavorable impact on operating costs and expenses,
resulting in a $7.7 million net favorable impact on income from operations.
Income from operations in Latin America increased by $6.2 million, or 18%, to $41.4 million in fiscal 2008, primarily as a result
of an increase in franchise revenues, reflecting comparable sales growth of 4.5% (in constant currencies) for the period in this segment,
and a net increase of 92 franchise restaurants during fiscal 2008.
Our unallocated corporate expenses decreased by $6.7 million during fiscal 2008, primarily as a result of non−recurring
professional services fees incurred associated with the realignment of our European and Asian businesses during fiscal 2007.
Interest Expense, Net
Interest expense, net decreased by $5.8 million during fiscal 2008, reflecting a reduction in the amount of borrowings outstanding
due to early prepayments of our debt and a decrease in rates paid on borrowings during the period. The weighted average interest rates
for fiscal 2008 and fiscal 2007 were 6.02% and 6.91%, respectively, which included the impact of interest rate swaps on 56.0% and
57.0% of our term debt, respectively.
Income Tax Expense
Income tax expense was $103.4 million in fiscal 2008. Compared to the same period in the prior fiscal year, our effective tax rate
increased slightly by 0.6 percentage points to 35.3%.
See Note 15 to our consolidated financial statements for further information regarding our effective tax rate. See Item 1A “Risk
Factors” in Part I of this report for a discussion regarding our ability to utilize foreign tax credits and estimate deferred tax assets.
Net Income
Net income increased by $41.5 million, or 28%, to $189.6 million in fiscal 2008, primarily as a result of a net increase in
restaurants and strong comparable sales growth, which increased franchise revenues by $77.7 million, Company restaurant margin by
$9.3 million and net property revenues by $5.4 million. We also benefited from a $5.8 million decrease in interest expense. These
improvements were partially offset by a $26.0 million increase in selling, general and administrative expenses and a $28.1 million
increase in income tax expense.
Liquidity and Capital Resources
Overview
Cash provided by operations was $310.8 million in fiscal 2009, compared to $243.4 million in fiscal 2008.
Our leverage ratio, as defined by our credit agreement, was 1.8x as of June 30, 2009 and 2008. The weighted average interest rate
on our term debt for fiscal 2009 was 5.1%, which included the benefit of interest rates swaps on 70.6% of our debt.
For each of the years ended June 30, 2009 and 2008, we paid four quarterly dividends of $0.0625 per share of common stock,
resulting in $34.1 million and $34.2 million, respectively, of cash payments to shareholders of
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