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Msg  6 of 15  at  8/1/2006 3:31:20 PM  by


BKC first public report

Burger King Disappoints
In First Public Report

August 1, 2006 2:31 p.m.

Shares of Burger King Holdings Inc. fell 11% in midday trading as the fast-food chain reported a loss and tepid sales growth for its first quarter as a public company.

The results underscore concerns that Burger King's private-equity owners took huge payments while leaving investors with a company that has not yet turned the corner. Burger King spent $30 million on a management termination fee during the fourth quarter that ended June 30 that went to owners Texas Pacific Group, the private-equity arm of Goldman Sachs Group Inc. and Bain Capital.

Burger King Chief Executive John W. Chidsey said Burger King will benefit from a slowdown in spending at sit-down restaurants that's prompting some consumers to trade down to fast-food chains. Burger King said its new value menu is performing above expectations.

For the fiscal fourth quarter, the company reported a loss of $9 million, or seven cents a share, compared with earnings of $2 million, or two cents a share, a year earlier, when it was closely held. Revenue for the quarter totaled $533 million, up 6% from $503 million previously.

The Miami company made "solid progress on improving restaurant-level economics," Mr. Chidsey said, adding that lower costs for beef and cheese helped offset higher energy bills.

Burger King intends to promote its breakfast menu, emphasize its Kids' Meals and encourage franchisees to remain open longer at night, so as to close the sales gap between it and archrival McDonald's Corp., Mr. Chidsey said, noting that about half the difference in average restaurant sales between the chains was due to McDonald's lead at breakfast.

Write to Janet Adamy at janet.adamy@wsj.com and Richard Gibson at dick.gibson@dowjones.com

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