UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from       to

BURGER KING HOLDINGS, INC.

Delaware		75-3095469
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)
5505 Blue Lagoon Drive, Miami, Florida		33126
(Address of Principal Executive Offices)		(Zip Code)

(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     As of April 30, 2009, there were 134,735,297 shares of the registrant’s Common Stock outstanding.

 

 

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
PART I — Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 2009 and June 30, 2008 (unaudited)			3
Condensed Consolidated Statements of Income for the three and nine months ended March 31, 2009 and 2008 (unaudited)			4
Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2009 and 2008 (unaudited)			5
Notes to Condensed Consolidated Financial Statements (unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3. Quantitative and Qualitative Disclosures About Market Risk			39
Item 4. Controls and Procedures			40
PART II — Other Information
Item 1A. Risk Factors			43
Item 6. Exhibits			43
Signatures			44
Index to Exhibits			45
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I — Financial Information

Item 1. Financial Statements

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)

		As of
		March 31,				June 30,
		2009				2008
		(In millions, except share data)
Assets
Current assets:
Cash and cash equivalents		$	140			$	166
Trade and notes receivable, net			122				139
Prepaids and other current assets			48				54
Deferred income taxes, net			38				45
Total current assets			348				404
Property and equipment, net of accumulated depreciation of $580 million and $549 million, respectively			959				961
Intangible assets, net			1,053				1,055
Goodwill			26				27
Net investment in property leased to franchisees			132				135
Other assets, net			94				105
Total assets		$	2,612			$	2,687
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts and drafts payable		$	70			$	130
Accrued advertising			73				77
Other accrued liabilities			222				242
Current portion of long term-debt and capital leases			54				7
Total current liabilities			419				456
Term debt, net of current portion			811				869
Capital leases, net of current portion			66				71
Other deferrals and liabilities			328				360
Deferred income taxes, net			59				86
Total liabilities			1,683				1,842
Commitments and Contingencies (See Note 12)
Stockholders’ equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued or outstanding			—				—
Common stock, $0.01 par value; 300,000,000 shares authorized; 134,649,156 and 135,022,753 shares issued and outstanding at March 31, 2009 and June 30, 2008, respectively			1				1
Additional paid-in capital			618				601
Retained earnings			406				290
Accumulated other comprehensive loss			(37	)			(8	)
Treasury stock, at cost; 2,873,564 and 2,042,887 shares, at March 31, 2009 and June 30, 2008, respectively			(59	)			(39	)
Total stockholders’ equity			929				845
Total liabilities and stockholders’ equity		$	2,612			$	2,687

See accompanying notes to condensed consolidated financial statements.

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
		(In millions, except per share data)
Revenues:
Company restaurant revenues		$	449			$	436			$	1,419			$	1,325
Franchise revenues			125				129				405				394
Property revenues			26				29				84				90
Total revenues			600				594				1,908				1,809
Company restaurant expenses:
Food, paper and product costs			143				135				457				412
Payroll and employee benefits			144				133				439				396
Occupancy and other operating costs			110				110				344				321
Total company restaurant expenses			397				378				1,240				1,129
Selling, general and administrative expenses			115				126				360				370
Property expenses			13				15				42				45
Other operating (income) expense, net			(1	)			(6	)			14				(7	)
Total operating costs and expenses			524				513				1,656				1,537
Income from operations			76				81				252				272
Interest expense			13				17				44				53
Interest income			—				(1	)			(2	)			(5	)
Total interest expense, net			13				16				42				48
Income before income taxes			63				65				210				224
Income tax expense			16				24				69				85
Net income		$	47			$	41			$	141			$	139
Earnings per share:
Basic		$	0.35			$	0.30			$	1.05			$	1.03
Diluted		$	0.34			$	0.30			$	1.03			$	1.01
Weighted average shares outstanding:
Basic			134.6				135.2				134.8				135.2
Diluted			136.7				137.5				136.8				137.7
Dividends per common share		$	0.06			$	0.06			$	0.19			$	0.19

See accompanying notes to condensed consolidated financial statements.

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)

		Nine Months Ended
		March 31,
		2009				2008
		(In millions)
Cash flows from operating activities:
Net income		$	141			$	139
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			72				70
Gain on hedging activities			(1	)			(2	)
Loss / (gain) on remeasurement of foreign denominated transactions			77				(57	)
Gain on asset sales and release of unfavorable lease obligation			(7	)			(17	)
Bad debt expense, net of recoveries			3				(2	)
Stock-based compensation			11				8
Deferred income taxes			(17	)			(1	)
Changes in current assets and liabilities, excluding acquisitions and dispositions:
Trade and notes receivables			4				1
Prepaids and other current assets			3				14
Accounts and drafts payable			(52	)			(30	)
Accrued advertising			—				29
Other accrued liabilities			(5	)			9
Other long-term assets and liabilities			(18	)			(11	)
Net cash provided by operating activities			211				150
Cash flows from investing activities:
Payments for property and equipment			(125	)			(88	)
Proceeds from asset disposals, refranchisings and restaurant closures			20				26
Payments for acquired franchisee operations, net of cash acquired			(68	)			(4	)
Return of investment on direct financing leases			6				5
Other investing activities			(4	)			(1	)
Net cash used for investing activities			(171	)			(62	)
Cash flows from financing activities:
Repayments of term debt and capital leases			(4	)			(54	)
Borrowings under revolving credit facility			94				—
Repayments of revolving credit facility			(104	)			—
Dividends paid on common stock			(25	)			(25	)
Proceeds from stock option exercises			2				2
Excess tax benefits from stock-based compensation			4				7
Repurchases of common stock			(20	)			(35	)
Net cash used for financing activities			(53	)			(105	)
Effect of exchange rates on cash and cash equivalents			(13	)			14
Decrease in cash and cash equivalents			(26	)			(3	)
Cash and cash equivalents at beginning of period			166				170
Cash and cash equivalents at end of period		$	140			$	167

See accompanying notes to condensed consolidated financial statements.

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)

		Nine Months Ended
		March 31,
		2009				2008
		(In millions)
Supplemental cash flow disclosures:
Interest paid		$	43			$	50
Income taxes paid		$	97			$	67
Non-cash investing and financing activities:
Acquisition of property with capital lease obligations		$	2			$	6

See accompanying notes to condensed consolidated financial statements.

BURGER KING HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1. Organization

     Burger King Holdings, Inc. (“BKH” or the “Company”) is a Delaware corporation formed on July 23, 2002. The Company is the parent of Burger King Corporation (“BKC”), a Florida corporation that franchises and operates fast food hamburger restaurants, principally under the Burger King^® brand. As of March 31, 2009, the Company was approximately 32% owned by the private equity funds controlled by TPG Capital, the Goldman Sachs Funds and Bain Capital Partners (collectively, the “Sponsors”).

     The Company generates revenues from three sources: (i) retail sales at Company restaurants; (ii) franchise revenues, consisting of royalties based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees; and (iii) property income from restaurants that the Company leases or subleases to franchisees.

Note 2. Basis of Presentation and Consolidation

     The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles (“GAAP”) for complete financial statements. Therefore, the Financial Statements should be read in conjunction with the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008 filed with the SEC on August 28, 2008 (“2008 Form 10-K”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included in the Financial Statements. The results for interim periods do not necessarily indicate the results that may be expected for any other interim period or for the full year.

     Certain prior year amounts in the accompanying Financial Statements and Notes to the Financial Statements have been reclassified in order to be comparable with the current year classifications. These reclassifications had no effect on previously reported Net Income.

     The Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

     Inventories

     Inventories, totaling $15 million and $16 million as of March 31, 2009 and June 30, 2008, respectively, are stated at the lower of cost (first-in, first-out) or net realizable value as adjusted for currencies, and consist primarily of restaurant food items and paper supplies. Inventories are included in prepaids and other current assets in the accompanying condensed consolidated balance sheets.

     Use of Estimates

     The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Management adjusts such estimates and assumptions when facts and circumstances dictate. Volatile credit, equity, foreign currency, and energy markets, and declines in consumer spending have increased and may continue to affect the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

     Change in Accounting Policy

     During the first quarter of fiscal year 2009, the Company changed its classification of transaction gains and losses resulting from the remeasurement of foreign deferred tax assets, reflected in its consolidated statements of income. In accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes” (“SFAS No. 109”), transaction gains and losses resulting from the remeasurement of foreign deferred tax assets or liabilities may be reported separately or included in deferred tax expense or benefit, if that presentation is considered more useful. In that

regard, in order to (i) reduce complexity in financial reporting by mitigating the impact that fluctuations in exchange rates have on the calculation of the Company’s effective tax rate, (ii) provide clarity by reducing the impact attributable to fluctuations in exchange rates on the Company’s effective tax rate, leaving remaining differences between expected and actual tax expense primarily related to trends in earnings, and (iii) provide transparency to its financial statements by isolating foreign exchange transaction gains and losses within the same line in the consolidated statements of income, the Company believes it to be preferable to reclassify the foreign exchange transaction gains and losses attributable to the remeasurement of foreign deferred tax assets, previously included within income tax expense, to other operating (income) expense, net. For the three and the nine months ended March 31, 2009, this change in accounting policy resulted in a decrease to income tax expense of $1 million and $9 million, respectively, with a corresponding increase in foreign exchange transaction losses included in other operating (income) expense, net. For the three and the nine months ended March 31, 2008, the impact of this change in accounting policy was insignificant. This accounting policy change had no effect on net income for the periods presented.

     Recently Adopted Accounting Pronouncements

     Fair Value Measurements

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. On July 1, 2008, the Company adopted the provisions of SFAS No. 157 related to its financial assets and financial liabilities. Also, in October 2008, the FASB issued Financial Statement of Position (“FSP”) FAS 157-3, as amended, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP FAS 157-3”), which clarified the application of SFAS No. 157 in a market that is not active and also provided an example to illustrate key considerations in determining the fair value of a financial asset when the market for the financial asset is not active. FSP FAS 157-3 did not have an effect upon the Company’s adoption of SFAS No. 157.

     In February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB No. 157", which permits a one-year deferral for the implementation of SFAS No. 157 with regard to non-financial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company elected to defer the adoption of SFAS No. 157 for such items under this provision until its quarter ending September 30, 2009. For the Company these items primarily include long-lived assets, goodwill and intangibles for which fair value would be determined as part of the related impairment tests, intangible assets measured at fair value in conjunction with the Company’s acquisition of BKC on December 12, 2002, but not measured at fair value in subsequent periods, and asset retirement obligations initially measured at fair value under SFAS No. 143, “Asset Retirement Obligations.” The Company does not currently anticipate that full adoption of SFAS No. 157 in fiscal 2010 will materially impact the Company’s results of operations or financial condition.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”), which provides companies with an option to report selected financial assets and financial liabilities at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option is elected are reported in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company adopted SFAS No. 159 on July 1, 2008. Upon adoption of SFAS No. 159, the Company did not elect to begin reporting any financial assets or financial liabilities at fair value that are not currently required to be measured at fair value.

     Disclosures about Derivative Instruments and Hedging Activities

     In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”), which provides companies with requirements for enhanced disclosures about derivative instruments and hedging activities to enable investors to better understand their effects on a company’s financial position, financial performance and cash flows. The Company adopted the disclosure provisions of SFAS No. 161 during the quarter ended March 31, 2009.

     The Company enters into derivative instruments for risk management purposes, including derivatives designated as hedging instruments under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”) and those utilized as economic hedges. The Company uses derivatives to manage exposure to fluctuations in interest rates and currency exchange rates.

     Interest Rate Swaps

     The Company enters into receive-variable, pay-fixed interest rate swap contracts to hedge a portion of the Company’s forecasted variable-rate interest payments on its underlying Term Loan A and Term Loan B debt (the “Term Debt”). Interest payments on the Term Debt are made quarterly and the variable rate on the 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 variable-rate interest payments, changes in the derivatives’ fair value are not included in current earnings but are included in accumulated other comprehensive income (AOCI) in the accompanying condensed consolidated balance sheets. These changes in fair value are subsequently reclassified into earnings as a component of interest expense each quarter as interest payments are made on the Term Debt. At March 31, 2009, interest rate swap contracts with a notional amount of $595 million were outstanding.

     In September 2006, the Company settled interest rate swaps designated as cash flow hedges, which had a fair value of $12 million, and terminated the hedge relationship. In accordance with SFAS No. 133, this fair value is recorded in AOCI and is being recognized as a reduction to interest expense each quarter over the remaining term of the Term Debt. At March 31, 2009, $2 million remained in AOCI.

     Foreign Currency Forward Contracts

     The Company enters into foreign currency forward contracts, which typically have maturities between three and fifteen months, to economically hedge the remeasurement of foreign currency-denominated intercompany loan receivables and other foreign-currency denominated assets recorded in the Company’s condensed consolidated balance sheets. Remeasurement represents changes in the expected amount of cash flows to be received or paid upon settlement of the intercompany loan receivables and other foreign-currency denominated assets and liabilities resulting from a change in foreign currency exchange rates. At March 31, 2009, foreign currency forward contracts with a notional amount of $371 million were outstanding.

     Counterparty Credit Risk

     By entering into derivative instrument contracts, the Company exposes itself, from time to time, to counterparty credit risk. Counterparty credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is in an asset position, the counterparty has a liability to the Company, which creates credit risk for the Company. The Company attempts to minimize this risk by selecting counterparties with investment grade credit ratings, limiting its exposure to any single counterparty and regularly monitoring its market position with each counterparty.

     Credit-Risk Related Contingent Features

     The Company’s derivative instruments do not contain any credit-risk related contingent features.

     The following tables present the required quantitative disclosures (in millions) under SFAS No. 157 and SFAS No. 161, on a combined basis, for the Company’s financial instruments, which include derivatives designated as cash flow hedging instruments, derivatives not designated as hedging instruments, and other investments, which consist of money market accounts and mutual funds held in a Rabbi trust established by the Company to invest compensation deferred by participants in the Company’s Executive Retirement Plan and to fund future deferred compensation obligations.

		As of March 31, 2009																Fair Value Measurements at March 31, 2009
		Carrying Value and Balance Sheet Location																Assets (Liabilities)
																		Quoted Prices in				Significant
		Prepaid and												Other				Active Markets				Other
		Other								Other				Deferrals				for Identical				Observable				Significant
		Current								Accrued				and				Instruments				Inputs				Unobservable Inputs
Description		Assets				Other Assets				Liabilities				Liabilities				(Level 1)				(Level 2)				(Level 3)
Derivatives designated as cash flow hedging instruments:
Interest rate swaps		$	—			$	—			$	—			$	(39	)		$	—			$	(39	)		$	—
Total		$	—			$	—			$	—			$	(39	)		$	—			$	(39	)		$	—
Derivatives not designated as hedging instruments:
Foreign currency forward contracts (asset)		$	3			$	—			$	—			$	—			$	—			$	3			$	—
Foreign currency forward contracts (liability)		$	—			$	—			$	(12	)		$	—			$	—			$	(12	)		$	—
Total		$	3			$	—			$	(12	)		$	—			$	—			$	(9	)		$	—
Other investments:
Other investments		$	—			$	15			$	—			$	—			$	15			$	—			$	—
Total		$	—			$	15			$	—			$	—			$	15			$	—			$	—

		For the Three Months Ended March 31, 2009
						Foreign Exchange
		Interest Rate Swaps				Forward Contracts				Total
Derivatives designated as cash flow hedging instruments:
Gain (loss) recognized in other comprehensive income (effective portion)		$	5			$	—			$	5
Gain (loss) reclassified from AOCI into interest expense, net (a)		$	(4	)		$	—			$	(4	)
Gain (loss) recognized in interest expense, net (ineffective portion) (b)		$	—			$	—			$	—
Derivatives not designated as hedging instruments:
Gain (loss) recognized in other (income) expense, net		$	—			$	15			$	15

		For the Nine Months Ended March 31, 2009
						Foreign Exchange
		Interest Rate Swaps				Forward Contracts				Total
Derivatives designated as cash flow hedging instruments:
Gain (loss) recognized in other comprehensive income (effective portion)		$	(41	)		$	—			$	(41	)
Gain (loss) reclassified from AOCI into interest expense, net (a)		$	6			$	—			$	6
Gain (loss) recognized in interest expense, net (ineffective portion) (b)		$	—			$	—			$	—
Derivatives not designated as hedging instruments:
Gain (loss) recognized in other (income) expense, net		$	—			$	69			$	69

Note 3. Stock-based Compensation

     In August 2008, the Company granted non-qualified stock options and performance-based restricted stock and performance-based restricted stock units (“PBRS”) covering approximately 1.2 million shares and 0.4 million shares, respectively, to eligible employees.

     The Company’s stock options generally vest ratably over a four-year service period. The grant date fair value of the stock options granted in August 2008 was estimated at $8.54 using the Black-Scholes option pricing model based on the following input assumptions: risk-free interest rate of 3.33%; expected term of 6.25 years; expected volatility of 31.80%; and expected dividend yield of 0.96%.

     The amount of PBRS granted to each eligible employee in August 2008 was based on the Company achieving 100% of the performance target set for fiscal year 2009. PBRS generally vest after a three-year service period from the grant date, which includes the performance period. The grant date fair value of each PBRS was $26.16, representing the closing share price of the Company’s common stock on the grant date.

     In November 2008, the Company granted approximately 41,000 deferred shares of restricted stock to non-employee members of the Company’s Board of Directors as an annual grant. The deferred shares primarily vest in quarterly installments over a one-year period on the first day of each calendar quarter following the grant date. The deferred shares will settle and shares of common stock will be issued upon termination of service by the board member.

     The Company recorded $3 million and $11 million of stock-based compensation expense for the three and nine months ended March 31, 2009, respectively. The Company recorded $3 million and $8 million of stock-based compensation expense for the three and nine months ended March 31, 2008, respectively.

Note 4. Acquisitions, Closures and Dispositions

     Acquisitions

     All acquisitions of franchise restaurants are accounted for using the purchase method of accounting under SFAS No. 141, “Business Combinations” and the guidance under Emerging Issues Task Force (EITF) Issue No. 04-1, “Accounting for Preexisting Relationships between the Parties to a Business Combination.” For the three and nine months ended March 31, 2009 and 2008, these acquisitions are summarized as follows (in millions, except for number of restaurants):

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
Number of restaurants acquired			5				2				81				18
Prepaids and other current assets		$	—			$	—			$	1			$	—
Property and equipment, net			—				—				14				1
Other intangible assets			1				3				56				4
Assumed liabilities			—				(1	)			(3	)			(1	)
Total purchase price		$	1			$	2			$	68			$	4

     The purchase price allocations for the acquisitions completed during the nine months ended March 31, 2009, are subject to final adjustment. Other intangible assets primarily include reacquired franchise rights.

     Closures and Dispositions

     Gains and losses on closures and dispositions represent sales of Company properties and other costs related to restaurant closures and sales of Company restaurants to franchisees, referred to as “refranchisings,” and are recorded in other operating (income) expense, net in the accompanying condensed consolidated statements of income (See Note 11). Gains and losses recognized in the current period may reflect closures and refranchisings that occurred in previous periods. For the three and nine months ended March 31, 2009 and 2008, these closures and dispositions are summarized as follows (in millions, except for number of restaurants):

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
Number of restaurant closures			3				6				9				18
Number of refranchisings			20				11				23				28
Net gain on restaurant closures, refranchisings, and dispositions of assets		$	(5	)		$	(11	)		$	(5	)		$	(13	)

     Included in the gain on restaurant closures, refranchisings, and dispositions of assets for the three and nine months ended March 31, 2009 is a $4 million gain from the refranchising of Company restaurants in the U.S. Included in the gain on restaurant closures, refranchisings, and dispositions of assets for the three and nine months ended March 31, 2008 is a $9 million gain from the refranchising of Company restaurants in Germany.

Note 5. Earnings Per Share

     Basic and diluted earnings per share are calculated as follows:

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
Numerator:
Numerator for basic and diluted earnings per share:
Net income		$	46,834,367			$	41,214,474			$	141,048,634			$	138,913,584
Denominator:
Weighted average shares — basic			134,603,718				135,207,243				134,753,071				135,231,195
Effect of dilutive securities			2,089,561				2,304,074				2,062,145				2,495,644
Weighted average shares — diluted			136,693,279				137,511,317				136,815,216				137,726,839
Basic earnings per share		$	0.35			$	0.30			$	1.05			$	1.03
Diluted earnings per share		$	0.34			$	0.30			$	1.03			$	1.01

     For the three months ended March 31, 2009 and 2008, there were 2.3 million and 0.9 million anti-dilutive stock options outstanding, respectively. For the nine months ended March 31, 2009 and 2008, there were 2.5 million and 1 million anti-dilutive stock options outstanding, respectively.

Note 6. Comprehensive Income

     The components of total comprehensive income are as follows (in millions):

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
Net income		$	47			$	41			$	141			$	139
Translation adjustment			(2	)			(2	)			(7	)			(4	)
Cash flow hedges:
Net change in fair value of derivatives (1)			3				(10	)			(26	)			(22	)
Amounts reclassified to earnings during the period (2)			(3	)			—				4				1
Total other comprehensive loss			(2	)			(12	)			(29	)			(25	)
Total comprehensive income		$	45			$	29			$	112			$	114

Note 7. Other Accrued Liabilities and Other Deferrals and Liabilities

     Included in other accrued liabilities as of March 31, 2009 and June 30, 2008 were accrued payroll and employee-related benefit costs totaling $63 million and $84 million, respectively. The decrease in accrued payroll and employee-related benefit costs is primarily due to the payment of the Company’s annual incentive bonus to employees during the first quarter of fiscal 2009 offset by current year accruals.

     Included in other deferrals and liabilities as of March 31, 2009 and June 30, 2008 were accrued pension liabilities of $30 million and $50 million, respectively; interest rate swap liabilities of $39 million and $10 million, respectively; casualty insurance reserves of $28 million, respectively; retiree health benefits of $22 million and $21 million, respectively; and liabilities for unfavorable leases of $158 million and $190 million, respectively. The decrease in unfavorable leases from June 30, 2008 was primarily due to $17 million of currency translation adjustment and $16 million of amortization.

Note 8. Long-Term Debt

     As of March 31, 2009 and June 30, 2008, the Company had $861 million and $871 million of long-term debt outstanding, respectively, including the current portion, consisting of $50 million and $2 million, respectively. The next scheduled principal payment on the Company’s long-term debt is June 30, 2009 in the amount of $2 million. The weighted average interest rate for the three and nine months ended March 31, 2009 was 4.8% and 5.2%, respectively, which included the benefit of interest rate swaps on 68% and 70% of our term debt, respectively (See Note 2).

Note 9. Income Taxes

     The U.S. Federal tax statutory rate reconciles to the effective tax rate as follows:

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
U.S. federal income tax rate			35.0	%			35.0	%			35.0	%			35.0	%
State income taxes, net of federal income tax benefit			2.7				2.6				2.7				2.7
Costs / benefit and taxes related to foreign operations			0.6				0.8				(1.1	)			4.2
Foreign tax rate differential			(4.5	)			(5.0	)			(4.5	)			(5.0	)
Foreign exchange differential on tax benefits			0.3				0.7				1.6				0.2
Change in valuation allowance			1.4				4.2				1.9				0.4
Change in accrual for tax uncertainties			(10.0	)			0.8				(2.2	)			1.1
Other			(0.1	)			(2.2	)			(0.5	)			(0.7	)
Effective income tax rate			25.4	%			36.9	%			32.9	%			37.9	%

     As discussed further in the Company’s 2008 Form 10-K, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”) effective July 1, 2007. The amount of unrecognized tax benefits as of June 30, 2008 was approximately $23 million which, if recognized, would affect the effective income tax rate. During the three and nine months ended March 31, 2009, the amount of additional unrecognized tax benefit was approximately $3 million and $6 million, respectively, which, if recognized, would affect the effective income tax rate.

     In the next twelve months, it is reasonably possible the Company will reduce unrecognized tax benefits by a range of approximately $2 million to $3 million, primarily as a result of the expiration of certain statutes of limitations and the completion of certain tax audits. Any increases in unrecognized tax benefits will result primarily from tax positions expected to be taken on tax returns for fiscal year 2009.

     The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. The total amount of accrued interest and penalties at June 30, 2008 was $4 million, which was included as a component of the $23 million unrecognized tax benefit at June 30, 2008. Potential interest and penalties associated with uncertain tax positions recognized during the nine months ended March 31, 2009 were less than $2 million and are included as a component of the $6 million additional unrecognized tax benefit noted above. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

     The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign jurisdictions. Generally, the Company is subject to routine examination by taxing authorities in these jurisdictions, including significant international tax jurisdictions, such as the United Kingdom, Germany, Spain, Switzerland, Singapore and Mexico. None of the foreign jurisdictions is individually material. The Company is currently under audit by the U.S. Internal Revenue Service for the years ended June 30, 2007 and 2008. The Company also has various U.S. state and foreign income tax returns in the process of examination. From time to time, these audits result in proposed assessments where the ultimate resolution may result in the Company owing additional taxes. The Company believes that its tax positions comply with applicable tax law and that it has adequately provided for these matters.

Note 10. Retirement Plan and Other Post Retirement Benefits

     The fair value of restricted investments held in a Rabbi trust (“the rabbi trust”), which the Company established to fund the Company’s current and future obligations under its Executive Retirement Plan, was $15 million and $20 million at March 31, 2009 and June 30, 2008, respectively.

     A summary of the components of net periodic benefit cost for the Company’s pension plans (retirement benefits) and postretirement plans (other benefits) is presented below (in millions):

		Pension and Other Post Retirement Benefits
		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
Service cost-benefits earned during the period		$	—			$	—			$	1			$	1
Interest costs on projected benefit obligations			3				3				9				9
Expected return on plan assets			(2	)			(2	)			(7	)			(7	)
Recognized net actuarial loss			—				—				—				—
Net periodic benefit cost		$	1			$	1			$	3			$	3

     During the three and nine months ended March 31, 2009, the Company contributed $11 million and $24 million, respectively, to the Company’s pension and post retirement plans. The increase in actual contributions for the nine months ended March 31, 2009, compared to 2009 projected contributions of $13 million, is attributable to increased funding requirements due to lower returns on pension plan assets.

Note 11. Other Operating (Income) Expense, Net

     Other operating income, net for the three months ended March 31, 2009 of $1 million includes a $4 million gain from the refranchising of Company restaurants in the U.S. and Canada, offset by $1 million of net losses on investments held in the rabbi trust, which were fully offset by a corresponding decrease in deferred compensation expense reflected in general and administrative expenses, and $1 million of net expense related to the remeasurement of foreign denominated assets and the expense related to the use of foreign currency forward contracts used to hedge the currency exchange impact on such assets.

     Other operating income, net for the three months ended March 31, 2008 of $6 million includes a net gain of $11 million from the disposal of real estate and other assets, primarily from the refranchising of Company restaurants in Germany, partially offset by $3 million in losses from vacant property provisions recorded in the U.S. and U.K. and $1 million of franchise system distress costs in the U.K.

     Other operating expense, net for the nine months ended March 31, 2009 of $14 million includes $7 million of net losses on investments held in the rabbi trust, which were fully offset by a corresponding decrease in deferred compensation expense reflected in general and administrative expenses, $2 million of charges associated with the acquisition of franchise restaurants from a large franchisee in the U.S. and $8 million of net expense related to the remeasurement of foreign denominated assets and the expense related to the use of foreign currency forward contracts used to hedge the currency exchange impact on such assets. These expenses were offset by a $4 million gain from the refranchising of Company restaurants in the U.S. and Canada.

     Other operating income, net for the nine months ended March 31, 2008 of $7 million includes net gains of $16 million from the disposal of real estate and other assets, primarily in Germany and the U.S. (which includes the refranchising of Company restaurants in Germany), and a gain of $2 million on forward currency contracts used to hedge intercompany loans denominated in foreign currencies. These gains were partially offset by $4 million in losses from vacant property provisions recorded in the U.S. and U.K., $3 million of franchise system distress costs in the U.K. which includes a $1 million payment made to our sole distributor, $2 million of foreign currency transaction losses and $1 million in charges for litigation reserves.

Note 12. Commitments and Contingencies

     Guarantees

     The Company guarantees certain lease payments of franchisees arising from leases assigned in connection with sales of Company restaurants to franchisees, by remaining secondarily liable for base and contingent rents under the assigned leases of varying terms. The maximum contingent rent amount is not determinable as the amount is based on future revenues. In the event of default by the franchisees, the Company has typically retained the right to acquire possession of the related restaurants, subject to landlord consent. The aggregate contingent obligation arising from these assigned lease guarantees, excluding contingent rents, was $65 million as of March 31, 2009, expiring over an average period of five years.

     Other commitments arising from normal business operations were $8 million as of March 31, 2009, of which $7 million was guaranteed under bank guarantee arrangements.

     Letters of Credit

     As of March 31, 2009, the Company had $26 million in irrevocable standby letters of credit outstanding, which were issued primarily to certain insurance carriers to guarantee payments of deductibles for various insurance programs, such as health and commercial liability insurance. Such letters of credit are secured by the collateral under the Company’s senior secured credit facility. As of March 31, 2009, no amounts had been drawn on any of these irrevocable standby letters of credit.

     As of March 31, 2009, the Company had posted bonds totaling $19 million, which related to promotional activities and certain utility deposits.

     Vendor Relationships

     In fiscal 2000, the Company entered into long-term, exclusive contracts with The Coca-Cola Company and with Dr Pepper/Seven Up, Inc. to supply 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 March 31, 2009, the Company estimates that it will take approximately 13 years to complete the Coca-Cola and Dr Pepper/Seven Up, Inc. purchase commitments. In the event of early termination of these arrangements, the Company may be required to make termination payments that could be material to the Company’s results of operations and financial position. Additionally, in connection with these contracts, the Company received upfront fees, which are being amortized over the term of the contracts. As of March 31, 2009 and June 30, 2008, the deferred amounts totaled $16 million and $17 million, respectively. These deferred amounts are amortized as a reduction to food, paper and product costs in the accompanying condensed consolidated statements of income.

     As of March 31, 2009, the Company had $3 million in aggregate contractual obligations for the year ending June 30, 2009 with vendors providing information technology and telecommunication services under multiple arrangements. These contracts extend up to

three years with a termination fee ranging from less than $1 million to $2 million during those years. The Company also has separate arrangements for telecommunication services with an aggregate contractual obligation of $5 million extending up to three years with no early termination fee.

     The Company also enters into commitments to purchase advertising. As of March 31, 2009, commitments to purchase advertising totaled $59 million. These commitments run through October 2011.

     Litigation

     On July 30, 2008, BKC was sued by four Florida franchisees over the Company’s decision to mandate extended operating hours in the United States. The plaintiffs seek damages, declaratory relief and injunctive relief. On November 3, 2008, the court granted the Company’s motion to dismiss on the grounds that BKC’s franchise agreement granted BKC the discretion to extend minimum hours. Plaintiffs have filed for reconsideration of the court’s decision to grant BKC’s motion to dismiss. While the Company believes that it has the right under its franchise agreement to mandate extended operating hours, the Company is unable to predict the ultimate outcome of the litigation.

     On September 10, 2008, the Company and BKC were named as the defendants in a class action lawsuit filed in California federal district court. The complaint alleges that all Burger King^® restaurants in California leased by BKC and operated by franchisees violate accessibility requirements of the Americans with Disabilities Act (“ADA”) as well as the California Disabled Persons Act (“CDPA”) and the Unruh Civil Rights Act (“Unruh Act”). Plaintiff, on behalf of the class, seeks injunctive relief under the ADA, minimum statutory damages per offense of $4,000 under the Unruh Act and $1,000 per incident under the CDPA, as well as attorneys’ fees and costs. The Company intends to vigorously defend against all claims in this lawsuit.

     From time to time, the Company is involved in other legal proceedings arising in the ordinary course of business relating to matters including, but not limited to, disputes with franchisees, suppliers, employees and customers, as well as disputes over the Company’s intellectual property. In the opinion of management, disposition of the matters will not materially affect the Company’s financial condition or results of operations.

     Other

     The Company carries insurance programs to cover claims such as workers’ compensation, general liability, automotive liability, executive risk and property and is self-insured for healthcare claims for eligible participating employees. Through the use of insurance program deductibles (ranging from $0.5 million to $1 million) and self insurance, the Company retains a significant portion of the expected losses under these programs. Insurance reserves have been recorded based on the Company’s estimate of the anticipated ultimate costs to settle all claims, both reported and incurred-but-not-reported (IBNR), and such reserves include judgments and independent actuarial assumptions about economic conditions, the frequency or severity of claims and claim development patterns, and claim reserve, management and settlement practices. As of March 31, 2009 and June 30, 2008, the Company had $37 million and $34 million in accrued liabilities to cover such claims, respectively.

Note 13. Segment Reporting

     The Company operates in the fast food hamburger category of the quick service segment of the restaurant industry. Revenues include retail sales at Company restaurants, franchise revenues, consisting of royalties based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees, and property revenues. The business is managed in three distinct geographic segments: (1) United States (“U.S.”) and Canada; (2) Europe, the Middle East and Africa and Asia Pacific (“EMEA/APAC”); and (3) Latin America.

     The following tables present revenues and income from operations by geographic segment (in millions):

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
Revenues:
U.S. & Canada		$	425			$	380			$	1,307			$	1,157
EMEA/APAC			151				186				518				568
Latin America			24				28				83				84
Total revenues		$	600			$	594			$	1,908			$	1,809

     Other than the U.S. and Germany, no other individual country represented 10% or more of the Company’s total revenues. Revenues in the U.S. totaled $391 million and $1,192 million for the three and nine months ended March 31, 2009, respectively, compared to $342 million and $1,035 million for the three and nine months ended March 31, 2008, respectively. Revenues in Germany totaled $69 million and $234 million for the three and nine months ended March 31, 2009, respectively, compared to $87 million and $262 million for the three and nine months ended March 31, 2008, respectively.

     The unallocated amounts reflected in the table below include corporate support costs in areas such as facilities, finance, human resources, information technology, legal, marketing and supply chain management which benefit all of the Company’s geographic segments and system-wide restaurants and are not allocated specifically to any of the geographic segments.

		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
Income from Operations:
U.S. & Canada		$	88			$	79			$	256			$	264
EMEA/APAC			11				26				57				73
Latin America			7				9				27				29
Unallocated			(30	)			(33	)			(88	)			(94	)
Total income from operations		$	76			$	81			$	252			$	272
Interest expense, net			13				16				42				48
Income before income taxes		$	63			$	65			$	210			$	224
Income tax expense			16				24				69				85
Net income		$	47			$	41			$	141			$	139

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     You should read the following discussion together with our unaudited condensed consolidated financial statements and the related notes thereto included in Part I, Item 1 “Financial Statements.” In addition to historical consolidated financial information, this discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Actual results could differ from these expectations as a result of factors including those described in our Annual Report on Form 10-K for the year ended June 30, 2008, our Quarterly Report on Form 10-Q for the quarters ended September 30, 2008 and December 31, 2008, and under Part II, Item 1A “Risk Factors,” and “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this report. Unless the context otherwise requires, all references to “we,” “us,” “our” and “Company” refer to Burger King Holdings, Inc. and its subsidiaries.

     Operating results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for the fiscal year and our key business measures, as discussed below, for any future period may decrease. Unless otherwise stated, sales growth, comparable sales growth and average restaurant sales are presented on a system-wide basis, which means they include sales at both Company restaurants and franchise restaurants. Franchise sales represent sales at all franchise restaurants and revenues to our franchisees. We do not record franchise sales as revenues; however, our franchise revenues include royalties based on franchise

sales. System-wide results are driven primarily by our franchise restaurants, as approximately 90% of our system-wide restaurants are franchised.

Overview

     We operate in the fast food hamburger restaurant, or FFHR, category of the quick service restaurant, or QSR, segment of the restaurant industry. Our system of restaurants includes restaurants owned by us, as well as our franchisees. We are the second largest FFHR chain in the world as measured by the number of restaurants and system-wide sales. We track our results of operations and manage our business by using three key business measures: comparable sales growth, average restaurant sales and sales growth. As of March 31, 2009, we owned or franchised a total of 11,810 restaurants in 74 countries and U.S. territories, of which 7,522 were located in the U.S. and Canada. At that date, 1,438 restaurants were Company restaurants and 10,372 were owned by our franchisees. Our restaurants feature flame-broiled hamburgers, chicken and other specialty sandwiches, french fries, soft drinks and other reasonably-priced food items.

     Our business operates in three reportable segments: (1) the U.S. and Canada; (2) Europe, the Middle East, Africa and Asia Pacific, or EMEA/APAC; and (3) Latin America. We generate revenues from three sources: (1) retail sales at Company restaurants; (2) franchise revenues, consisting of royalties based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees; and (3) property income from restaurants that we lease or sublease to franchisees.

     Approximately 90% of our restaurants are franchised, and we do not expect the percentage of franchise restaurants to change significantly as we implement our growth strategy. We believe that this restaurant ownership mix is beneficial to us because the capital required to grow and maintain our system is funded primarily by franchisees while giving us a sizable base of company restaurants to demonstrate credibility with franchisees in launching new initiatives. However, our franchise dominated business model also presents a number of drawbacks and risks, such as our limited control over franchisees and limited ability to facilitate changes in restaurant ownership. In 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.

Business Highlights

     Our strategic plan has four strategic global growth pillars: marketing, products, operations and development. Guided by our strategic plan and strong executive team leadership, our accomplishments and key activities since December 31, 2008 include:

	•		the opening of 53 net new restaurants worldwide in the third quarter of fiscal 2009 and 355 net new restaurants for the trailing 12-months ended March 31, 2009;
	•		the twenty-first consecutive quarter of worldwide comparable sales growth, our best comparable sales growth trend in three decades, including comparable sales growth of 1% (in constant currencies) for the third quarter of fiscal 2009;
	•		the twentieth consecutive quarter of comparable sales growth in the U.S. and Canada, including comparable sales growth of 1.6% (in constant currencies) for the third quarter of fiscal 2009;
	•		promotional tie-ins with family focused marketing properties, such as The Pink Panther™, Cabbage Patch Kids™, Monster Jam™ and the Kid’s Choice Awards™; and
	•		the successful multi-market promotion of the Angry Whopper® sandwich in January and the U.S. launch of BK Burger Shots® and BK Breakfast Shots™ in February.

     Our focus continues to be on the following:

	•		driving further sales growth;
	•		enhancing restaurant profitability;
	•		expanding our large international platform;

	•		accelerating our new restaurant development and expansion;
	•		using proactive portfolio management, including closures of under-performing restaurants and strategic refranchisings and acquisitions, to drive financial performance and development; and
	•		employing innovative marketing strategies and expanding product offerings.

Seasonality

Restaurant sales are typically higher in the spring and summer months (our fourth and first fiscal quarters) when the weather is warmer than in the fall and winter months (our second and third fiscal quarters). Restaurant sales during the winter are typically highest in December, during the holiday shopping season. Our restaurant sales and Company restaurant margin are typically lowest during our third fiscal quarter, which occurs during the winter months and includes February, the shortest month of the year. During the three months ended March 31, 2009, the loss of a trading day in the month of February negatively impacted worldwide comparable sales by approximately 1%, as the same period in the prior year included an extra trading day due to the leap year. Comparable sales for the third quarter of fiscal 2009 were also negatively impacted by the placement of the Easter holiday, which typically drives restaurant sales. The Easter holiday occurred after the end of the third quarter in the current fiscal year as compared to March in the prior year.

Key Business Measures

     The Company uses three key business measures as indicators of the Company’s operational performance: sales growth, comparable sales growth and average restaurant sales. These measures are important indicators of the overall direction, trends of sales and the effectiveness of the Company’s advertising, marketing and operating initiatives and the impact of these on the entire Burger King^® system.

     These key business measures have been provided for the three and nine months ended March 31, 2009 and 2008. Comparable sales growth and sales growth are provided by reportable segment and are analyzed on a constant currency basis, which means they are calculated using the same exchange rates over the periods under comparison to remove the effects of currency fluctuations from these trend analyses. We believe these constant currency measures provide a more meaningful analysis of our business by identifying the underlying business trends, without distortion from the effect of currency movements.

Comparable Sales Growth

     Comparable sales growth refers to the change in restaurant sales in one period from a comparable period in the prior year for restaurants that have been open for 13 months or longer as of the end of the most recent period. Company comparable sales growth refers to comparable sales growth for Company restaurants and franchise comparable sales growth refers to comparable sales growth for franchise restaurants, in each case by reportable segment. We believe comparable sales growth is a key indicator of our brand’s performance, as influenced by our strategic initiatives and those of our competitors.

		For the								For the
		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
		(In constant currencies)
Company Comparable Sales Growth:
U.S. & Canada			1.6	%			3.5	%			1.7	%			2.6	%
EMEA / APAC			(4.0	)%			5.3	%			0.3	%			4.0	%
Latin America			(5.1	)%			6.2	%			(0.4	)%			1.4	%
Total Company Comparable Sales Growth			(0.2	)%			4.1	%			1.3	%			3.0	%
Franchise Comparable Sales Growth:
U.S. & Canada			1.6	%			5.7	%			2.2	%			5.8	%
EMEA / APAC			(0.1	)%			7.0	%			3.5	%			5.9	%
Latin America			1.9	%			5.7	%			3.9	%			4.2	%
Total Franchise Comparable Sales Growth			1.1	%			6.1	%			2.7	%			5.7	%
Comparable Sales Growth:
U.S. & Canada			1.6	%			5.4	%			2.2	%			5.4	%
EMEA/APAC			(0.6	)%			6.8	%			3.1	%			5.6	%
Latin America			1.3	%			5.8	%			3.6	%			4.0	%
Total Worldwide Comparable Sales Growth			1.0	%			5.8	%			2.5	%			5.4	%

     Three and nine months ended March 31, 2009

     Worldwide comparable sales growth of 1.0% and 2.5% (in constant currencies) for the three months and nine months ended March 31, 2009, respectively, was driven by our strategic pricing initiatives and our barbell menu strategy of innovative indulgent products and value menu items, including the successful multi-market promotion of the Angry Whopper^® sandwich limited time offer and the U.S. launch of BK Burger Shots^® and BK Breakfast Shots™ during the three month period. Comparable sales during the three month period were negatively impacted by significant traffic declines in the month of March across many of the markets in which we operate, with Germany and Mexico most affected. The deceleration in comparable sales was driven by continued adverse macroeconomic conditions, a slowdown in the breakfast daypart in the U.S. and heavy discounting by our major competitor in the U.S. and Germany, as well as the loss of a trading day and the shift of the Easter holiday.

     Comparable sales growth in the U.S. and Canada for the three months ended March 31, 2009 was driven primarily by our strategic pricing initiatives, a significant sales increase in the late night daypart as a result of our competitive hours initiative and successful product promotions, including the U.S. launch of BK Burger Shots^® and BK Breakfast Shots™ and the Angry Whopper^® sandwich limited time offer. SuperFamily promotions, such as The Pink Panther™, Cabbage Patch Kids™, Monster Jam™ and the Kid’s Choice Awards™, contributed to positive comparable sales. Comparable sales during the three month period were negatively impacted by significant traffic declines in the month of March, driven by continued adverse macroeconomic conditions, a slowdown in the breakfast daypart and heavy discounting by our major competitor, as well as the loss of a trading day and the shift in the Easter holiday. Positive comparable sales during the first nine months of fiscal 2009 were driven primarily by the initiatives and promotions noted for the three month period, as well as the introduction of the new BK^® Kids Meal (including Kraft^® Macaroni and Cheese and BK™ Fresh Apple Fries), the Spicy Chicken BK Wrapper™ and the Whopper^® Virgins marketing campaign. SuperFamily promotions, such as those noted for the three month period as well as The Simpsons™, iDog™ and a Nintendo™ giveaway promotional tie-in with the BK^® Crown Card, also contributed to positive comparable sales.

The EMEA/APAC segment experienced negative comparable sales growth during the three months ended March 31, 2009, primarily due to an unanticipated traffic slowdown in the month of March, particularly in Germany, caused by adverse macroeconomic factors and heavy discounting by our major competitor in Germany, as well as the loss of a trading day and the shift in the Easter holiday. However, we continued to focus during the quarter on operational improvements and high quality indulgent products, such as the Double Smoked BBQ Angus Whopper^® limited time offers in the U.K. and the new Chicken Range sandwich in Australia. Positive

comparable sales for the first nine months of fiscal 2009 were driven primarily by our strategic pricing initiatives as well as successful product promotions, such as the promotions noted for the three month period as well as Whopper^® sandwich limited time offers throughout the region, BK Fusion^™ Real Ice Cream and the Long Chicken sandwich limited time offers in Spain. SuperFamily promotions, such as The Simpsons^™, iDog^™, Crayola^™ and Secret Palazz^™, positively impacted comparable sales for the nine month period.

     Comparable sales growth in Latin America for the three and nine months ended March 31, 2009, was driven by the continued focus on our barbell menu strategy featuring everyday value platforms and affordably indulgent products. Our results were fueled by the successful promotion of indulgent products across most countries in the region, such as the introduction of the Angry Whopper^® sandwich, the Steakhouse burger platform and the new BK™ Fish Wrap for the Lenten season, as well as the continued offering of the Mushroom & Swiss Steakhouse Burger in Central America, Puerto Rico and the Caribbean, and the Whopper^® Mania promotion in Argentina. We continued to focus on value with the Come Como Rey™ (Eat Like a King) everyday value menu in Mexico and Central America, the XL double burger value promotion in Argentina, Chile and Dominican Republic and the new Apple BK™ Bites dessert. In addition, our regional Latin Billboards music promotion in selected markets in the region and strong kids properties such as Cabbage Patch Kids™, Monster Jam™ and The Pink Panther™ positively impacted comparable sales.

     Comparable sales during the three months ended March 31, 2009 were negatively impacted by significant traffic declines in Mexico during the month of March due to adverse socioeconomic conditions and the resulting slowdown in tourism, the devaluation of the local currency and the lower influx of remittances from the U.S. The loss of the trading day and the shift in the Easter holiday also negatively impacted sales performance. Comparable sales for both periods were also adversely affected by softer performance in Puerto Rico due to current socioeconomic conditions as well as the introduction of a VAT tax, which has negatively affected disposable income.

     Average Restaurant Sales

     Average restaurant sales, or ARS, is an important measure of the financial performance of our restaurants and changes in the overall direction and trends of sales. ARS is influenced mostly by comparable sales performance and restaurant openings and closures and includes the impact of movement in currency exchange rates. For the three and nine months ended March 31, 2009, ARS was $294,000 and $949,000, respectively, compared to $313,000 and $963,000 for the three and nine months ended March 31, 2008, a decrease of 6% and 1%, respectively. The trailing 12-month ARS increased to $1.29 million for the period ended March 31, 2009, as compared to $1.27 million for the period ended March 31, 2008, an increase of 1%.

     During the three and nine months ended March 31, 2009, ARS decreased primarily as a result of $22,000 and $35,000 unfavorable impact from the movement of currency exchange rates, respectively, partially offset by improved worldwide comparable sales growth. We and our franchisees opened 355 net restaurants during the twelve months ended March 31, 2009. We believe that continued improvement in the ARS of existing restaurants and strong sales at new restaurants, combined with the closure of under-performing restaurants, will result in financially stronger operators throughout our system.

     Sales Growth

     Sales growth refers to the change in sales at all Company and franchise restaurants from one period to another. Sales growth is an important indicator of the overall direction and trends of sales and income from operations on a system-wide basis. Sales growth is influenced by restaurant openings and closures and comparable sales growth, as well as the effectiveness of our advertising and marketing initiatives and featured products.

		For the								For the
		Three Months Ended								Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
						(In constant currencies)
Sales Growth:
U.S. & Canada			2.8	%			6.4	%			3.0	%			5.9	%
EMEA/APAC			6.3	%			14.6	%			9.6	%			13.1	%
Latin America			7.2	%			14.1	%			11.2	%			12.4	%
Total System-wide Sales Growth			4.1	%			9.2	%			5.5	%			8.2	%

     Sales growth continued on a positive trend during the three and nine months ended March 31, 2009, as comparable sales and restaurant count continued to increase on a system-wide basis. We expect net restaurant openings to accelerate in most regions.

     Our sales growth in the U.S. and Canada during the three and nine months ended March 31, 2009 reflects positive comparable sales growth. We had 7,522 restaurants in the U.S. and Canada as of March 31, 2009, compared to 7,497 restaurants as of March 31, 2008, reflecting less than 1% increase in the number of restaurants.

     EMEA/APAC demonstrated sales growth during the three and nine months ended March 31, 2009, reflecting openings of new restaurants. In addition, positive comparable sales for the nine month period also contributed to sales growth in this segment. We had 3,232 restaurants in EMEA/APAC as of March 31, 2009 compared to 2,989 restaurants as of March 31, 2008, reflecting an 8% increase in the number of restaurants.

     Latin America’s sales growth was driven by new restaurant openings and positive comparable sales during the three and nine months ended March 31, 2009. We had 1,056 restaurants in Latin America as of March 31, 2009, compared to 969 restaurants as of March 31, 2008, reflecting a 9% increase in the number of restaurants.

Other Operating Data

		As of
		March 31,
		2009				2008
Restaurant Count Data:
Number of Company restaurants:
U.S. & Canada			1,054				918
EMEA/APAC(1)			296				294
Latin America(2)			88				82
Total Company restaurants			1,438				1,294
Number of franchise restaurants:
U.S. & Canada			6,468				6,579
EMEA/APAC(1)			2,936				2,695
Latin America(2)			968				887
Total franchise restaurants			10,372				10,161
Total system-wide restaurants			11,810				11,455

		For the Three Months Ended								For the Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
Other Operating Data:
Comparable sales growth			1.0	%			5.8	%			2.5	%			5.4	%
Sales growth			4.1	%			9.2	%			5.5	%			8.2	%
Average restaurant sales (in thousands)		$	294			$	313			$	949			$	963
Segment Data:
Company restaurant revenues (in millions):
U.S. & Canada		$	328			$	283			$	1,001			$	857
EMEA/APAC(1)			108				136				371				418
Latin America(2)			13				17				47				50
Total Company restaurant revenues		$	449			$	436			$	1,419			$	1,325
Company restaurant expenses as a percentage of Company restaurant revenues (3):
U.S. & Canada
Food, paper and product costs			32.2	%			31.9	%			33.3	%			32.1	%
Payroll and employee benefits			32.2	%			31.1	%			31.2	%			30.6	%
Occupancy and other operating costs			22.9	%			23.9	%			22.9	%			22.8	%
Total Company restaurant expenses			87.3	%			86.9	%			87.4	%			85.5	%
EMEA/APAC(1)
Food, paper and product costs			29.6	%			28.8	%			28.6	%			28.5	%
Payroll and employee benefits			34.0	%			31.6	%			32.7	%			30.5	%
Occupancy and other operating costs			28.8	%			27.6	%			26.9	%			26.8	%
Total Company restaurant expenses			92.4	%			88.0	%			88.2	%			85.8	%
Latin America(2)
Food, paper and product costs			40.0	%			37.4	%			38.2	%			36.5	%
Payroll and employee benefits			12.3	%			12.1	%			12.2	%			12.0	%
Occupancy and other operating costs			27.7	%			26.9	%			28.8	%			27.3	%
Total Company restaurant expenses			80.0	%			76.4	%			79.2	%			75.8	%
Worldwide
Food, paper and product costs			31.8	%			31.1	%			32.2	%			31.1	%
Payroll and employee benefits			32.0	%			30.5	%			31.0	%			29.9	%
Occupancy and other operating costs			24.5	%			25.2	%			24.2	%			24.2	%
Total Company restaurant expenses			88.3	%			86.8	%			87.4	%			85.2	%
Franchise revenues (in millions):
U.S. & Canada		$	77			$	76			$	241			$	234
EMEA/APAC(1)			37				42				128				126
Latin America(2)			11				11				36				34
Total franchise revenues(4)		$	125			$	129			$	405			$	394
Income from operations (in millions):
U.S. & Canada		$	88			$	79			$	256			$	264
EMEA/APAC(1)			11				26				57				73
Latin America(2)			7				9				27				29
Unallocated(5)			(30	)			(33	)			(88	)			(94	)
Total Income from operations		$	76			$	81			$	252			$	272
EBITDA (in millions)(6)		$	99			$	107			$	324			$	342

	•		it does not include interest expense, net. Because we have borrowed money for general corporate purposes, interest expense is a necessary element of our costs and ability to generate profits and cash flows;
	•		it does not include depreciation and amortization expenses. Because we use capital assets, depreciation and amortization are necessary elements of our costs and ability to generate profits; and
	•		it does not include provision for taxes. The payment of taxes is a necessary element of our operations.

Management compensates for these limitations by using EBITDA as only one of its measures for evaluating the Company’s business performance. In addition, capital expenditures, which impact depreciation and amortization, interest expense and income tax expense, are reviewed separately by management. Management believes that EBITDA provides both management and investors with a more complete understanding of the underlying operating results and trends and an enhanced overall understanding of our financial performance and prospects for the future. EBITDA is not intended to be a measure of liquidity or cash flows from operations nor a measure comparable to net income, as it does not take into account certain requirements such as capital expenditures and related depreciation, principal and interest payments and tax payments.

The following table is a reconciliation of our net income to EBITDA:

		For the Three Months Ended								For the Nine Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
		(In millions)
Net income		$	47			$	41			$	141			$	139
Interest expense, net			13				16				42				48
Income tax expense			16				24				69				85
Depreciation and amortization			23				26				72				70
EBITDA		$	99			$	107			$	324			$	342

Results of Operations for the three months ended March 31, 2009 and 2008

     The following table presents our results of operations for the three months ended March 31, 2009 and 2008:

		For the Three Months Ended March 31,
		2009				2008
										Increase/
		Amount				Amount				(Decrease)
		(In millions, except per share data)
Revenues:
Company restaurant revenues		$	449			$	436				3	%
Franchise revenues			125				129				(3	)%
Property revenues			26				29				(10	)%
Total revenues			600				594				1	%
Company restaurant expenses			397				378				5	%
Selling, general and administrative expenses			115				126				(9	)%
Property expenses			13				15				(13	)%
Other operating (income) expense, net			(1	)			(6	)		NM
Total operating costs and expenses			524				513				2	%
Income from operations			76				81				(6	)%
Interest expense			13				17				(24	)%
Interest income			—				(1	)			(100	)%
Interest expense, net			13				16				(19	)%
Income before income taxes			63				65				(3	)%
Income tax expense			16				24				(33	)%
Net income		$	47			$	41				15	%
Earnings per share — basic (1)		$	0.35			$	0.30				17	%
Earnings per share — diluted (1)		$	0.34			$	0.30				13	%
Weighted average shares — basic			134.6				135.2
Weighted average shares — diluted			136.7				137.5