Burger King 2010 Annual Report Download

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Burger King Holdings Inc ( BKC )
5505 BLUE LAGOON DRIVE
MIAMI, FL, 33126
305−378−3000
http://www.bk.com/
10−K
Annual report pursuant to section 13 and 15(d)
Filed on 8/26/2010
Filed Period 6/30/2010

Table of contents

  • Page 1
    Burger King Holdings Inc 5505 BLUE LAGOON DRIVE MIAMI, FL, 33126 305âˆ'378âˆ'3000 http://www.bk.com/ ( BKC ) 10âˆ'K Annual report pursuant to section 13 and 15(d) Filed on 8/26/2010 Filed Period 6/30/2010

  • Page 2
    ...Drive, Miami, Florida (Address of Principal Executive Offices) 33126 (Zip Code) Registrant's telephone number, including area code (305) 378âˆ'3000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Which Registered Common Stock, par value $0.01 per share New York...

  • Page 3
    Part III incorporates certain information by reference from Registrant's definitive proxy statement for the 2010 annual meeting of stockholders, which proxy will be filed no later than 120 days after the close of the Registrant's fiscal year ended June 30, 2010.

  • Page 4
    ... fiscal year ending June 30, 2011. Unless the context otherwise requires, all references to "we", "us", "our" and "Company" refer to Burger King Holdings, Inc. and its subsidiaries. In this document, we rely on and refer to information regarding the restaurant industry, the quick service restaurant...

  • Page 5
    ...dependent on franchisees to open new restaurants as part of our growth strategy. Our History Burger King Corporation, which we refer to as BKC, was founded in 1954 when James McLamore and David Edgerton opened the first Burger King restaurant in Miami, Florida. The Whopper ® sandwich was introduced...

  • Page 6
    ...world, with 12,174 restaurants operating in 76 countries and U.S. territories, of which 4,916 are located in our international markets. During fiscal 2010, our franchisees opened restaurants in two new international markets, Russia and Oman. We believe that the demand for new international franchise...

  • Page 7
    ... franchisees in each of our markets have the resources and incentives to grow. Internationally, we have developed a detailed global development plan to accelerate growth over the next five years and forecast our international restaurant count to be 50% of the total number of Burger King restaurants...

  • Page 8
    ... located in highâˆ'traffic areas. We believe our restaurants appeal to a broad spectrum of consumers, with multiple day parts appealing to different customer groups. United States and Canada United States and Canada As of June 30, 2010, we had 987 Company restaurants and 6,562 franchise restaurants...

  • Page 9
    ... locations of our franchisees' restaurants in the United States and Canada as of June 30, 2010: % of Total U.S. and Canada Franchise Restaurants 10% 7% 5% 5% 5% 5% 4% 4% 3% 3% Rank 1 2 3 4 5 6 7 8 9 10 State/Province California Texas Michigan New York Ohio Illinois Florida Pennsylvania Georgia New...

  • Page 10
    ... Burger King. We believe there is significant opportunity to grow the brand in existing and new markets in APAC. In fiscal 2010, we continued our initiative of projecting brand presence via gateway airport locations and continued to seed development in China via joint ventures. Company restaurants...

  • Page 11
    ... twelveâˆ'month basis. We currently expect to open approximately 500 restaurants in Latin America over the next five years. For the fiscal year, we opened 72 new restaurants in Latin America. The following is a list of the five largest franchisees in terms of restaurant count in Latin America as...

  • Page 12
    ... analyzes each potential new menu item, including market tests to gauge consumer taste preferences, and includes an ongoing analysis of the economics of food cost, margin and final price point. We believe new product development is critical to our longâˆ'term success. Company restaurants play a key...

  • Page 13
    ...Burger King restaurant is freeâˆ'standing, ranging in size from approximately 1,900 to 4,300 square feet, with seating capacity of 40 to 120 guests, driveâˆ'thru facilities and adjacent parking areas. In fiscal 2005, we developed new, smaller restaurant designs that reduce the average building costs...

  • Page 14
    ... strong brand equity, market position and our global franchise network which allow us to drive sales through extensive advertising and promotional programs. Our current global marketing strategy is based upon marketing campaigns and menu options that focus on our barbell menu strategy of innovative...

  • Page 15
    ... business criteria. In fiscal 2000, we entered into longâˆ'term exclusive contracts with The Cocaâˆ'Cola Company and with Dr Pepper/Seven Up, Inc. to supply Company restaurants and franchise restaurants with their products, which obligate Burger King restaurants in the United States to purchase...

  • Page 16
    ... scheduled and unscheduled inspections of Company and franchise restaurants throughout the Burger King system. Intellectual Property We own valuable intellectual property including trademarks, service marks, patents, copyrights, trade secrets and other proprietary information. As of June 30, 2010...

  • Page 17
    ...all of our executive management, finance, marketing, legal and operations support functions are conducted from our global restaurant support center in Miami, Florida. In addition, we operate restaurant support centers domestically and internationally to support both franchised operations and Company...

  • Page 18
    ... foods, particularly in the United States, the U.K. and Spain. Certain counties, states and municipalities, such as California, New York City, and King County, Washington, have approved menu labeling legislation that requires restaurant chains to provide caloric information on menu boards, and menu...

  • Page 19
    ...âˆ'7696, or by sending the request to Investor Relations, Burger King Holdings, Inc., 5505 Blue Lagoon Drive, Miami, FL 33126. The Company's Chairman and Chief Executive Officer, John W. Chidsey, certified to the New York Stock Exchange (NYSE) on December 15, 2009, pursuant to Section 303A.12 of the...

  • Page 20
    ... positions at Cendant Corporation, most recently as Chief Executive Officer of the Vehicle Services Division and the Financial Services Division. Natalia Franco has served as our Global Chief Marketing Officer, since May 2010. From August 2006 until May 2010, she was Vice President, Global Marketing...

  • Page 21
    ...message that Burger King delivers superior products and a positive guest experience; our beliefs and expectations regarding our ability to develop innovative products that support both ends of our barbell menu strategy and our expectation that our barbell menu strategy will grow our market share and...

  • Page 22
    ...Florida, North Carolina and Indiana. In EMEA/APAC, over 70% of our Company restaurants and 40% of our franchise restaurants are located in three countries, Germany, the U.K. and Spain, with these markets representing 21% of our total revenues for the fiscal year ended June 30, 2010. In Latin America...

  • Page 23
    ... the operating performance of the German restaurants, we could incur a decrease in our revenues and earnings which could negatively impact our financial condition and our future revenue growth. Our business is subject to fluctuations in foreign currency exchange and interest rates. Our international...

  • Page 24
    ... as we do not have ultimate control over the purchasing of these products in the United States or Canada. In the United States, we have established a cooperative with our franchisees to negotiate food prices on behalf of all Company and franchise restaurants. This cooperative does not utilize...

  • Page 25
    ... franchisees are independent operators and we cannot control many factors that impact the profitability of their restaurants. Pursuant to the franchise agreements and our Manual of Operating Data, we can, among other things, mandate menu items, signage, equipment, hours of operation and value menu...

  • Page 26
    ... likely to provide current or prospective franchisees necessary financing on favorable terms or at all. If we fail to successfully implement our restaurant reimaging initiative, our ability to increase our revenues and operating profits may be adversely affected. Over the past several years, we have...

  • Page 27
    ...results of operations and may not yield the longâˆ'term financial results that we expect. We believe that our future growth and profitability will depend on our ability to successfully implement our portfolio management program, including refranchising Company restaurants and closing underperforming...

  • Page 28
    ... could suffer. In addition, negative publicity about our products could materially harm our business, results of operations and financial condition. In recent years, numerous companies in the fast food industry have introduced products positioned to capitalize on the growing consumer preference for...

  • Page 29
    ...our new Global Chief Marketing Officer; Ben Wells, our Chief Financial Officer; Charles M. Fallon, Jr., our President, North America; and other key personnel who have extensive experience in the franchising and food industries. If we lose the services of any of these key personnel and fail to manage...

  • Page 30
    ... financial ratios, thereby reducing the availability of our cash flow for other purposes; • limit our ability to implement our growth strategy and strategic initiatives; or • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate...

  • Page 31
    ... enough cash flow from operations or be able to obtain enough capital to repay our indebtedness, fund the letters of credit and bonds necessary for the operation of our business or fund our planned capital expenditures. In such event, we may need to close or sell restaurants, reduce the number and...

  • Page 32
    ...such as strikes, boycotts and negative publicity from restaurant customers, franchisees, suppliers, employees and others, which could divert our financial and management resources and which may negatively impact our financial condition and results of operations. Class action lawsuits have been filed...

  • Page 33
    ... price controls, currency and repatriation controls, limitations on the import or export of commodities we use or governmentâˆ'mandated closure of our or our vendors' operations; • the impact of recent efforts to require the listing of specified nutritional information on menus and menu boards...

  • Page 34
    ... revenues, increased costs, exposure to expanded liability and requirements for us to revise the ways in which we conduct business or risk of loss of business. In addition, our results of operations, financial position and cash flows could be materially adversely affected. Our U.S. franchisees...

  • Page 35
    ...business or economic environment. Our current principal stockholders own a significant amount of our common stock and have certain contractual rights to appoint directors, which will allow them to significantly influence all matters requiring shareholder approval. The private equity funds controlled...

  • Page 36
    ... 30, 2010: Leased Building/ Land & Building 455 206 15 6 682 367 88 10 11 476 Owned(1) United States and Canada: Company restaurants Franchiseeâˆ'operated properties Nonâˆ'operating restaurant locations Offices and other(2) Total International: Company restaurants Franchiseeâˆ'operated properties...

  • Page 37
    ... and low sales prices of our common stock as reported on the New York Stock Exchange and dividends declared per share of common stock for each of the quarters in fiscal 2010 and fiscal 2009: 2010 Dollars per Share: First Quarter Second Quarter Third Quarter Fourth Quarter Issuer Purchases of Equity...

  • Page 38
    ... 2010 (amounts in thousands): (b) Weightedâˆ' Average Exercise Price of Outstanding Options, Warrants and Rights (a) Number of Securities to be Issued Upon Exercise of Outstanding Plan Category Equity Compensation Plans Approved by Security Holders: Burger King Holdings, Inc. Omnibus Incentive Plan...

  • Page 39
    ...total return of the S&P 500 Stock Index and the S&P Restaurant Index for the period from May 18, 2006 through June 30, 2010, the last trading day of the Company's fiscal year. The graph assumes an investment in the Company's common stock and the indices of $100 at May 18, 2006 and that all dividends...

  • Page 40
    ... Fiscal Years Ended June 30, 2009 2008 2007 (In millions, except per share data) 2010 Income Statement Data: Revenues: Company restaurant revenues Franchise revenues Property revenues Total revenues Company restaurant expenses: Food, paper and product costs Payroll and employee benefits Occupancy...

  • Page 41
    ...growth(6)(7)(8) Sales growth(6)(7) Average restaurant sales (in thousands)(7) (2.3)% 2.1% $ 1,244 2006 1.9% 2.1% $ 1,126 For the Fiscal Years Ended June 30, 2010 2009 2008 Segment Data: Company restaurant revenues (in millions): United States and Canada EMEA/APAC(9) Latin America(10) Total company...

  • Page 42
    ... For the Fiscal Years Ended June 30, 2010 2009 2008 Franchise revenues (in millions)(11): United States and Canada EMEA/APAC(9) Latin America(10) Total franchise revenues Income from operations (in millions): United States and Canada EMEA/APAC(9) Latin America(10) Unallocated(12) Total income from...

  • Page 43
    .... Burger King Holdings, Inc. and Subsidiaries Restaurant Count The following table presents information relating to the analysis of our restaurant count for the geographic areas and periods indicated. As of June 30, 2010 Number of Company restaurants: U.S. & Canada EMEA/APAC Latin America Total...

  • Page 44
    ... addition, our operating results are closely tied to the success of our franchisees, and we are dependent on franchisees to open new restaurants as part of our growth strategy. Our international operations are impacted by fluctuations in currency exchange rates. In Company markets located outside of...

  • Page 45
    ...Company restaurants, such as the United States, Canada, the U.K. and Germany, we manage an advertising fund for that country by collecting required advertising contributions from Company and franchise restaurants and purchasing advertising and other marketing initiatives on behalf of all Burger King...

  • Page 46
    ... value offerings such as the 1/4 lb. Double Cheeseburger and Buck Double; and • paid down $67.7 million of debt and capital leases. Key Business Measures We use three key business measures as indicators of the Company's operational performance: comparable sales growth, average restaurant sales...

  • Page 47
    ...Fiscal Years Ended June 30, 2010 2009 2008 (In constant currencies) Company Comparable Sales Growth: United States & Canada EMEA/APAC Latin America Total Company Comparable Sales Growth Franchise Comparable Sales Growth: United States & Canada EMEA/APAC Latin America Total Franchise Comparable Sales...

  • Page 48
    ... by other restaurant chains. Products and promotions featured during fiscal 2009 include BK Burger Shots ® and BK Breakfast Shots tm, Whopper sandwich limited time offers, such as "Transform your Whopper," the introduction of the new BK ® Kids Meal (including Kraft ® Macaroni and Cheese and BK...

  • Page 49
    ... openings and closures and comparable sales growth, as well as the effectiveness of our advertising and marketing initiatives and featured products. For the Fiscal Years Ended June 30, 2010 2009 2008 (In constant currencies) Sales Growth: United States and Canada EMEA/APAC Latin America Total...

  • Page 50
    ...534 restaurants in the United States and Canada as of June 30, 2009, compared to 7,512 restaurants as of June 30, 2008, reflecting a less than 1% increase in the number of restaurants. EMEA/APAC demonstrated sales growth for the fiscal year ended June 30, 2010, reflecting openings of new restaurants...

  • Page 51
    ... by positive Company comparable sales growth in China, Spain and the U.K. In Latin America, where all Company restaurants are located in Mexico, Company restaurant revenues increased by $0.5 million, or 1%, to $60.6 million for the fiscal year ended June 30, 2010, compared to the prior fiscal year...

  • Page 52
    .... As a percentage of Company restaurant revenues, total food, paper and product costs decreased by 0.3% to 31.8% for the fiscal year ended June 30, 2010, primarily due to lower commodity costs in the U.S. and Canada segment and the benefits realized from strategic pricing initiatives across all...

  • Page 53
    ... in the number of Company restaurants during the fiscal year ended June 30, 2010, partially offset by the unfavorable impact from the movement of currency exchange rates of $5.2 million. As a percentage of Company restaurant revenues, total payroll and employee benefits costs remained relatively...

  • Page 54
    ... lower utility costs and lower startâˆ'up expenses as a result of fewer Company restaurant openings and acquisitions. As a percentage of Company restaurant revenues, occupancy and other operating costs increased by 0.8% to 25.1% for the fiscal year ended June 30, 2010, compared to the prior fiscal...

  • Page 55
    ... of Company restaurants and opening new restaurants leased to franchisees. These factors were partially offset by decreased rent expense from a reduction in the number of properties leased to franchisees in EMEA. Other operating (income) expense, net For the Fiscal Years Ended June 30, 2010 2009 Net...

  • Page 56
    ..., net, an increase in franchise revenues of $5.8 million and a $2.6 million improvement in other operating (income) expense, net. Fiscal Year Ended June 30, 2009 compared to Fiscal Year Ended June 30, 2008 Revenues Company Restaurant Revenues Company restaurant revenues increased by $84.6 million...

  • Page 57
    .... These factors were partially offset by positive worldwide franchise comparable sales growth, which resulted in increased revenues from percentage rents. In the United States and Canada, property revenues decreased by $0.6 million, or 1%, to $88.1 million for the fiscal year ended June 30, 2009...

  • Page 58
    ... Benefits Costs Total payroll and employee benefits costs increased by $47.5 million, or 9%, to $582.2 million for the fiscal year ended June 30, 2009, primarily due to the net addition of 69 Company restaurants during fiscal 2009, as well as increased labor costs in the United States and Canada...

  • Page 59
    ... the United States and Canada, partially offset by positive worldwide Company comparable sales growth of 0.3% (in constant currencies). In the United States and Canada, payroll and employee benefits costs increased by $58.2 million, or 16%, to $414.9 million for the fiscal year ended June 30, 2009...

  • Page 60
    ... of Company restaurants in the U.K. (including benefits from the release of unfavorable lease obligations), offset by increased rents. In Latin America, occupancy and other operating costs decreased by $0.2 million, or 1%, to $17.8 million for the fiscal year ended June 30, 2009, primarily...

  • Page 61
    ...23 to our audited consolidated financial statements for segment information disclosures). For fiscal 2009, the unfavorable impact on revenues from the movement of currency exchange rates was offset by the favorable impact of currency exchange rates on Company restaurant expenses and selling, general...

  • Page 62
    ...common stock in the open market from time to time prior to December 31, 2010. We may use a portion of our excess cash to repurchase shares under our share repurchase program depending on market conditions. No shares have been purchased under the new share repurchase program to date. Longâˆ'Term Debt...

  • Page 63
    ... or other corporate purposes, we could incur additional debt or raise funds through the issuance of our equity securities. Comparative Cash Flows Operating Activities Cash provided by operating activities was $310.4 million in fiscal 2010, compared to $310.8 million in fiscal 2009. The $310...

  • Page 64
    ...include investments in information technology systems and corporate furniture and fixtures. The following table presents capital expenditures by type of expenditure: For the Fiscal Years Ended June 30, 2010 2009 2008 (In millions) New restaurants Existing restaurants Other, including corporate Total...

  • Page 65
    ...30, 2010: Payment Due by Period Less Than Contractual Obligations Capital lease obligations Operating lease obligations(1) Unrecognized tax benefits(2) Longâˆ'term debt, including current portion and interest(3) Purchase commitments(4) Total $ Total 134.1 1,455.0 17.5 811.2 95.8 $ 2,513.6 $ $ 1 Year...

  • Page 66
    ... of the purchase price over the fair value of assets acquired and liabilities assumed in our acquisitions of franchise restaurants, predominately in the United States, which are accounted for as business combinations. Our indefiniteâˆ'lived intangible asset consists of the Burger King brand (the...

  • Page 67
    ... at fiscal yearâˆ'end. See Note 16 to our audited Consolidated Financial Statements included in Part II, Item 8 of this Form 10âˆ'K for additional information about accounting for income taxes. Insurance Reserves We carry insurance to cover claims such as workers' compensation, general liability...

  • Page 68
    ... rates may affect the translated value of our earnings and cash flow associated with our foreign operations, as well as the translation of net asset or liability positions that are denominated in foreign currencies. In countries outside of the United States where we operate Company restaurants...

  • Page 69
    ... to hedge commodity prices and do not have longâˆ'term pricing arrangements other than for chicken, which expires in December 2010. As a result, we purchase beef and other commodities at market prices, which fluctuate on a daily basis and may differ between different geographic regions, where...

  • Page 70
    ...Data BURGER KING HOLDINGS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Management's Report on Internal Control Over Financial Reporting Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of June 30, 2010 and 2009 Consolidated Statements...

  • Page 71
    ...of the consolidated financial statements, related notes and other information included in this annual report. The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America and include certain amounts based on management's estimates...

  • Page 72
    ...30, 2010 and 2009, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for each of the years in the threeâˆ'year period ended June 30, 2010. These consolidated financial statements are the responsibility of Burger King Holdings' management...

  • Page 73
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Burger King Holdings as of June 30, 2010 and 2009, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for each of the years in the...

  • Page 74
    ...Net investment in property leased to franchisees Other assets, net Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts and drafts payable Accrued advertising Other accrued liabilities Current portion of long term debt and capital leases Total current liabilities Term debt...

  • Page 75
    ...40 1.38 135.1 137.6 0.25 2010 Revenues: Company restaurant revenues Franchise revenues Property revenues Total revenues Company restaurant expenses: Food, paper and product costs Payroll and employee benefits Occupancy and other operating costs Total Company restaurant expenses Selling, general and...

  • Page 76
    ... June 30, 2009 Stock option exercises Stock option tax benefits Stockâˆ'based compensation Treasury stock purchases Dividend paid on common shares ($0.25 per share) Comprehensive income: Net income Foreign currency translation adjustment Cash flow hedges: Net change in fair value of derivatives, net...

  • Page 77
    Total Comprehensive income Balances at June 30, 2010 135.8 $ 1.4 $ - $ 647.2 $ 608.0 $ (66.9) $ (61.3) 165.8 $ 1,128.4 See accompanying notes to consolidated financial statements. 74

  • Page 78
    ... and notes receivable Prepaids and other current assets Accounts and drafts payable Accrued advertising Other accrued liabilities Other longâˆ'term assets and liabilities, net Net cash provided by operating activities Cash flows from investing activities: Payments for property and equipment Proceeds...

  • Page 79
    ... of the Company's advertising, new products and promotional programs. The Company's results of operations also fluctuate from quarter to quarter as a result of seasonal trends and other factors, such as the timing of restaurant openings and closings and the acquisition of franchise restaurants, as...

  • Page 80
    ... consolidated statements of income. Cash and Cash Equivalents Cash and cash equivalents include shortâˆ'term, highly liquid investments with original maturities of three months or less and credit card receivables. Allowance for Doubtful Accounts The Company evaluates the collectibility of its trade...

  • Page 81
    ...Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) we commit to a plan to close a restaurant, we adjust the depreciable lives of the restaurants longâˆ'lived assets based on the expected date of closure. Leases The Company defines lease term...

  • Page 82
    ... of franchise agreements recorded in connection with acquisition of BKC by the Sponsors, are grouped for impairment reviews at the country level. Other longâˆ'lived assets and related liabilities are grouped together for impairment testing at the operating market level (based on geographic areas) in...

  • Page 83
    ... and losses recorded in the Company's consolidated statements of income. The fair value of these investment securities are determined using quoted market prices in active markets classified as Level 1 within the fair value hierarchy. Fair value of variable rate term debt was estimated using inputs...

  • Page 84
    ... funds managed by the Company in the United States and certain international markets where Company restaurants operate. Under the Company's franchise agreements, contributions received from franchisees must be spent on advertising, marketing and related activities, and result in no gross profit...

  • Page 85
    ... period. Stockâˆ'based Compensation The Company recognizes shareâˆ'based compensation cost based on the grant date estimated fair value of each award, net of estimated forfeitures, over the employee's requisite service period, which is generally the vesting period of the equity grant. Stock options...

  • Page 86
    ... restaurant and corporate employees for the years ended June 30, 2010, 2009 and 2008 totaled $6.7 million, $6.4 million and $6.9 million, respectively. Company contributions made on behalf of restaurant employees are classified as payroll and employee benefit expenses in our consolidated statements...

  • Page 87
    ... granted with an exercise price or market value equal to the closing price of the Company's common stock on the date of grant. The number of shares available to be granted under the Plans totaled approximately 3.6 million as of June 30, 2010. The Company satisfies shareâˆ'based exercises and vesting...

  • Page 88
    Table of Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) A summary of stock option activity under the Plans as of and for the year ended June 30, 2010 is as follows: Weighted Average Remaining Contractual Term (Yrs) 6.83 Total Number of ...

  • Page 89
    Table of Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) For the years ended June 30, 2010, 2009 and 2008, the fair value of shares withheld by the Company to meet employees' minimum statutory withholding tax requirements on the ...

  • Page 90
    ... BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) Note 5. Franchise Revenues Franchise revenues consist of the following (in millions): Years Ended June 30, 2009 2008 $ 518.2 13.8 11.4 $ 543.4 $ 512.6 13.2 11.4 $ 537.2 2010 Franchise royalties...

  • Page 91
    ... Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) Note 8. Property and Equipment, net Property and equipment, net, along with their estimated useful lives, consist of the following (in millions): As of June 30, 2010 2009 Land Buildings and...

  • Page 92
    Table of Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) As of June 30, 2010 2009 Favorable leases Accumulated amortization Favorable leases, net up to 20 years 49.1 (14.6) 34.5 48.8 (12.3) 36.5 The Company recorded amortization expense ...

  • Page 93
    Table of Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) Note 12. Longâˆ'Term Debt Longâˆ'term debt is comprised of the following: As of June 30, 2010 2009 Term Loan A Term Loan Bâˆ'1 Revolving Credit Facility Other Total debt Less: ...

  • Page 94
    ...The aggregate maturities of longâˆ'term debt, including the Term Loan A, Term Loan Bâˆ'1 and other debt as of June 30, 2010, are as follows (in millions): Principal Year Ended June 30, 2011 2012 2013 2014 2015 Thereafter Total Amount $ 87.7 666.4 0.2 0.2 0.2 0.7 755.4 $ The Company also has lines...

  • Page 95
    ... (in millions) financial assets and liabilities measured at fair value on a recurring basis, which include derivatives designated as cash flow hedging instruments, derivatives not designated as hedging instruments, and other investments, which consists of money market accounts and mutual funds...

  • Page 96
    ... BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) As of June 30, 2009 Carrying Value and Balance Sheet Location Prepaid and Other Current Assets Other Accrued Liabilities Fair Value Measurements at June 30, 2009 Assets (Liabilities) Quoted Prices...

  • Page 97
    ... Term Debt is reset at the end of each fiscal quarter. The interest rate swap contracts are designated as cash flow hedges and to the extent they are effective in offsetting the variability of the variableâˆ'rate interest payments, changes in the derivatives' fair value are not included in current...

  • Page 98
    Table of Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) The following table presents the required quantitative disclosures for the Company's derivative instruments (in millions): For the Year Ended June 30, 2010 Foreign Interest Currency...

  • Page 99
    ... Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) Note 16. Income Taxes Income before income taxes, classified by source of income, is as follows (in millions): Years Ended June 30, 2009 2008 $ 241.4 43.4 $ 284.8 $ 245.1 47.9 $ 293.0 2010...

  • Page 100
    Table of Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) and tax benefits realized from the dissolution of dormant entities. The Company's effective tax rate was 35.3% for the fiscal year ended June 30, 2008, primarily as a result of the ...

  • Page 101
    ... BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in millions): As of June 30, 2010 2009...

  • Page 102
    ... should be individually material. The Company is currently under audit by the U.S. Internal Revenue Service for the years ended June 30, 2008 and June 30, 2007. The Company also has various state and foreign income tax returns in the process of examination. From time to time, these audits result in...

  • Page 103
    Table of Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) fixed payments with contingent rent when sales exceed certain levels. Lease terms generally range from 10 to 20 years. The franchisees bear the cost of maintenance, insurance and ...

  • Page 104
    Table of Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) The Company's total minimum obligations under capital leases are $134.1 million and $138.1 million as of June 30, 2010 and 2009, respectively. Of these amounts, $63.2 million and $...

  • Page 105
    ... KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) Note 19. Stockholders' Equity Dividends Paid During each of the years ended June 30, 2010, 2009, and 2008, the Company declared four quarterly cash dividends of $0.0625 per share on its common stock. Total...

  • Page 106
    ... assets at beginning of year Actual return on plan assets Employer contributions Employee Contributions Actuarial gain/loss Benefits paid Foreign currency exchange rate changes Fair value of plan assets at end of year Funded status of plan Amounts recognized in the consolidated balance sheet Current...

  • Page 107
    ...of Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) Additional yearâˆ'end information for the U.S. Pension Plans, International Pension Plans and U.S. Medical Plan with accumulated benefit obligations in excess of plan assets The following...

  • Page 108
    ...Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) Assumptions The weightedâˆ'average assumptions used in computing the benefit obligations of the U.S. Pension Plans and U.S. Medical Plan are as follows: International Pension Plans 2010 2009...

  • Page 109
    ... BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) Plan Assets The fair value of major category of pension plan assets for U.S. and International Pension Plans at June 30, 2010 is presented below: U.S. Pension Plan 2010 Level 2: Cash and Cash...

  • Page 110
    ... BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) The U.S. and International Pension Plans' and U.S. Medical Plan's expected contributions to be paid in the next fiscal year, the projected benefit payments for each of the next five fiscal years...

  • Page 111
    ... the Company and its franchise restaurants with their products and obligating Burger King ® restaurants in the United States to purchase a specified number of gallons of soft drink syrup. These volume commitments are not subject to any time limit. As of June 30, 2010, the Company estimates that...

  • Page 112
    ...10, 2009, and June 15, 2010, respectively, claiming to represent Burger King franchisees. The lawsuits seek a judicial declaration that the franchise agreements between BKC and its franchisees do not obligate the franchisees to comply with maximum price points set by BKC for products on the BK Value...

  • Page 113
    ... and amortization, total assets, longâˆ'lived assets and capital expenditures by geographic segment (in millions): Years Ended June 30, 2009 2008 $ 1,743.0 687.4 107.0 $ 2,537.4 $ 1,578.5 760.8 115.4 $ 2,454.7 2010 Revenues: United States and Canada EMEA/APAC Latin America Total revenues $ 1,695...

  • Page 114
    .... Years Ended June 30, 2009 2008 $ 146.9 30.7 7.6 18.8 $ 204.0 $ 121.9 28.6 9.4 18.3 $ 178.2 2010 Capital Expenditures: United States and Canada EMEA/APAC Latin America Unallocated Total capital expenditures $ 99.9 30.9 5.4 14.1 $ 150.3 The goodwill reflected in the Company's consolidated...

  • Page 115
    ... of Contents BURGER KING HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) Note 24. Quarterly Financial Data (Unaudited) Summarized unaudited quarterly financial data (in millions, except per share data): Quarters Ended December 31, 2009 March 31, 2010 $ 645...

  • Page 116
    .... For fiscal 2011, the Compensation Committee decided to bifurcate the annual performance based restricted stock grant which comprises 50% of the annual equity award into 25% restricted stock and 25% performance shares for the Chief Executive Officer and the executive vice presidents of the Company...

  • Page 117
    .... Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Part IV Item 15. (1) (2) Exhibits and Financial Statement Schedules...

  • Page 118
    ... 333âˆ'131897) Burger King Corporation Fiscal Year 2006 Executive Team Incorporated herein by reference to the Burger King Restaurant Support Incentive Plan Holdings, Inc. Registration Statement on Form Sâˆ'1 (File No. 333âˆ'131897) Form of Management Restricted Unit Agreement Incorporated herein by...

  • Page 119
    ....49†10.50†10.52†Form of Board Member Stock Option Agreement Form of Special Management Stock Option Agreement among John W. Chidsey, Burger King Holdings, Inc. and Burger King Corporation Restricted Stock Unit Award Agreement between Burger King Holdings, Inc. and John W. Chidsey, dated as...

  • Page 120
    ... Restricted Stock Units under the Burger King Holdings, Inc. 2006 Omnibus Incentive Plan Form of Performance Award Agreement for Performance Based Restricted Stock under the Burger King Holdings, Inc. 2006 Omnibus Incentive Plan First Amendment to Employment Agreement dated as of September 30, 2009...

  • Page 121
    ... by the undersigned, thereunto duly authorized. BURGER KING HOLDINGS, INC. By: /s/ John W. Chidsey Name: John W. Chidsey Title: Chairman and Chief Executive Officer Date: August 26, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 122
    ... and this Award Agreement, the provisions of the Plan will govern. Total Number of Shares of Restricted Stock: Grant Date: The number of shares underlying your Restricted Stock award is available at www.benefits.ml.com under the Grant Information section. [ ] Vesting Schedule: [ ] (subject to the...

  • Page 123
    ...the term "Good Reason", then in the event that a Change in Control occurs and, within twentyâˆ'four months following the date of such Change in Control, your employment is terminated by you for Good Reason (as defined in the employment agreement), all Restricted Stock that is unvested at the time of...

  • Page 124
    ... agreement with the Company or any of its Affiliates, (ii) a material violation by you of any of the Company's policies, procedures, rules and regulations applicable to employees generally or to employees at your grade level, including without limitation, the Burger King Companies' Code of Business...

  • Page 125
    ... Company and/or the Employer. In this regard, you authorize the Company and/or the Employer to withhold all applicable Taxâˆ'Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or the Employer or from proceeds of the sale of Restricted Stock...

  • Page 126
    ... year before the date of your termination and ending on the first anniversary of the date of your termination. The Fair Market Value of any such Shares shall be determined as of the date the Restricted Stock was settled. Company's Right of Offset If you become entitled to a distribution of benefits...

  • Page 127
    ... with respect to employment or continuation of current employment, and in the event that the Employee is not an employee of the Company, Restricted Stock shall not be interpreted to form an employment contract or relationship with the Company; (h) the future value of the underlying Shares is unknown...

  • Page 128
    ... that the Company and the Employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships...

  • Page 129
    ... Resolution of Employment Disputes then in effect at the time of the arbitration. The arbitration shall be held in Miami, Florida. By signing this Award Agreement, you acknowledge receipt of a copy of the Plan and represent that you are familiar with the terms and conditions of the Plan, and hereby...

  • Page 130
    ..., the remaining provisions of this Award Agreement. Language. If you have received this Award Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different that the English version, the English version will control. Aâˆ'9

  • Page 131
    ... PLAN RESTRICTED STOCK UNIT AWARD Unless defined in this Restricted Stock Unit Award Agreement (this "Award Agreement"), capitalized terms will have the same meanings ascribed to them in the Burger King Holdings, Inc. 2006 Omnibus Incentive Plan (as it may be amended from time to time, the "Plan...

  • Page 132
    ... contrary in this Award Agreement or the Plan), if (A) any of your RSUs vest upon your Separation from Service (as defined below) with the Company and (B) you are a Specified Employee (as defined below) at the time of such Separation from Service, then delivery of any Shares in satisfaction of such...

  • Page 133
    ... you have an employment agreement with the Company or one of its Affiliates that defines the term "Good Reason", then in the event that a Change in Control occurs and, within twentyâˆ'four (24) months following the date of such Change in Control, you experience a Separation from Service due to your...

  • Page 134
    ..., procedures, rules and regulations applicable to employees generally or to employees at your grade level, including without limitation, the Burger King Companies' Code of Business Ethics and Conduct, in each case, as they may be amended from time to time in the Company's sole discretion; (iii) the...

  • Page 135
    .... In this regard, you authorize the Company and/or the Employer to withhold all applicable Taxâˆ'Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or the Employer or from proceeds of the sale of Shares issued upon settlement of the RSUs...

  • Page 136
    ... one year before the date of your termination and ending on the first anniversary of the date of your termination. The Fair Market Value of any such Shares shall be determined as of the date the RSUs were settled. Company's Right of Offset. If you become entitled to a distribution of benefits under...

  • Page 137
    ... that the Company and the Employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships...

  • Page 138
    ... to buy or sell Shares, including, without limitation, sales of Shares acquired in connection with your RSUs. You agree to comply with such securities law requirements and Company policies, as such laws and policies are amended from time to time. Entire Agreement; Dispute Resolution; Governing Law...

  • Page 139
    ... Resolution of Employment Disputes then in effect at the time of the arbitration. The arbitration shall be held in Miami, Florida. By signing this Award Agreement, you acknowledge receipt of a copy of the Plan and represent that you are familiar with the terms and conditions of the Plan, and hereby...

  • Page 140
    ...) Development Co. Limited Burger King (Gibraltar) Ltd. Burger King (Hong Kong) Limited Burger King (Luxembourg) S.a.r.l. Burger King (Shanghai) Commercial Consulting Co. Ltd. Burger King (Shanghai) Restaurant Company Ltd. Burger King (United Kingdom) Ltd. Burger King A.B Burger King B.V. Burger King...

  • Page 141
    ... Montrass Limited Moxie's, Inc. The Melodie Corporation TPC Number Four, Inc. TQW Company 2 Jurisdiction Netherlands United Kingdom Florida United Kingdom United Kingdom Canada United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom Louisiana New...

  • Page 142
    ... of Burger King Holdings, Inc. as of June 30, 2010 and 2009, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for each of the years in the threeâˆ'year period ended June 30, 2010, and the effectiveness of internal control over financial...

  • Page 143
    ... and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ John W. Chidsey John W. Chidsey Chief Executive Officer Dated: August 26, 2010

  • Page 144
    ... statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer...

  • Page 145
    ... connection with the Annual Report on Form 10âˆ'K of Burger King Holdings, Inc. (the "Company") for the period ended June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John W. Chidsey, Chief Executive Officer of the Company, certify, pursuant to...

  • Page 146
    ... In connection with the Annual Report on Form 10âˆ'K of Burger King Holdings, Inc. (the "Company") for the period ended June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ben K. Wells, Chief Financial Officer of the Company, certify, pursuant to...