Item 7.01 Regulation FD.
On March 30, 2020, our Chief Executive Officer issued an open letter discussing
the challenges posed by COVID-19. A copy of this letter is furnished as Exhibit
99.
Item 8.01 Other Events.
Business Update
The global crisis resulting from the spread of coronavirus (COVID-19) has had a
substantial impact on our global restaurant operations. As outlined in our Open
Letter, our number one priority is the health and safety of our team members,
guests, employees and franchise partners.
We cannot estimate the duration or negative financial impact of the coronavirus
(COVID-19) pandemic on our business, however, depending on the duration and
scope, we expect it could be material. We have provided a brief summary of the
impact to our restaurants around the world.
In North America, substantially all of our restaurants remain open, however
operations are primarily limited to Drive-thru, Takeout, and Delivery (where
applicable). As a result, comparable sales are significantly lower than prior to
the coronavirus pandemic.
In Latin America, some markets have closed most restaurants and the restaurants
that remain open across the region may have limited operations including
Drive-thru, Takeout and Delivery. Comparable sales at restaurants that remain
open are significantly lower than prior to the coronavirus pandemic.
In Europe, Middle East and Africa, several major markets including Italy, Spain,
France and the United Kingdom have closed most restaurants, and the restaurants
that remain open across the region may have limited operations including
Drive-thru, Takeout and Delivery. Comparable sales at restaurants that remain
open are significantly lower than prior to the coronavirus pandemic.
In Asia Pacific, some markets have closed most restaurants and the restaurants
that remain open may have limited operations including Drive-thru, Takeout, and
Delivery and comparable sales are lower than prior to the coronavirus pandemic.
In China, we noted in February that approximately half of our restaurants were
temporarily closed. Currently, more than 90% of restaurants in China are once
again open with comparable sales that have improved but remain lower than prior
to the coronavirus pandemic.
Financial Update
We have drawn approximately $1 billion under our existing revolving credit
facility, which matures in October 2024. These amounts may be prepaid at any
time without penalty. While we believe we had sufficient liquidity to fund
ongoing operations and meet our obligations, we chose to further enhance our
cash position and financial flexibility in light of uncertainty in financial
markets related to the coronavirus pandemic. These funds, combined with our
existing cash balance, resulted in a cash position of approximately $2.5 billion
as of March 27, 2020. The current interest rate for borrowings under the
revolving credit facility is LIBOR plus 1.25%.
Risk Factor Update
The below updates the risk factor included in our Annual Report on Form 10-K,
filed with the U.S. Securities and Exchange Commission on February 21, 2020.
Our results can be adversely affected by unforeseen events, such as adverse
weather conditions, natural disasters, terrorist attacks or threats, pandemics
or other catastrophic events.
Unforeseen events, such as adverse weather conditions, natural disasters or
catastrophic events, can adversely impact restaurant sales. Natural disasters
such as earthquakes, hurricanes, and severe adverse weather conditions and
health pandemics whether occurring in Canada, the United States or abroad, can
keep customers in the affected area from dining out, cause damage to or closure
of restaurants and result in lost opportunities for our restaurants. For
example, the COVID-19 outbreak in early 2020 led to a temporary closure of a
number of our franchised restaurants in China. As of the end of March 2020, our
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restaurants in the U.S. and Canada have closed dine-in operations, continuing to
offer drive-thru, delivery and take-out, sometimes with limited hours; several
markets in Europe (including France, Italy, Spain and the United Kingdom) have
closed all restaurants; and many other international markets also have limited
operations. In addition, COVID-19 or other events could lead to delays or
interruptions in the delivery of food or other supplies to our franchised
restaurants arising from delays or restrictions on shipping and/or manufacturing
and also could lead to difficulties in maintaining appropriate staffing of
restaurants. We cannot predict the duration or scope of the COVID-19 pandemic or
when operations will cease to be affected by it. Furthermore, we cannot predict
the effects that actual or threatened armed conflicts, terrorist attacks,
efforts to combat terrorism or heightened security requirements will have on our
future operations. Because a significant portion of our restaurant operating
costs are fixed or semi-fixed in nature, the loss of sales during these periods
hurts our and our franchisees' operating margins and can result in restaurant
operating losses and our loss of royalties. We expect the COVID-19 pandemic to
negatively impact our financial results and based on the duration and scope,
such impact could be material.
Forward-Looking Statements
This report contains certain forward-looking statements and information, which
reflect management's current beliefs and expectations regarding future events
and operating performance and speak only as of the date hereof. These
forward-looking statements are not guarantees of future performance and involve
a number of risks and uncertainties. These forward-looking statements include
statements about our expectations regarding the operations of our restaurants,
the impact of changes to operations caused by the COVID-19 pandemic, our
liquidity and the liquidity of our restaurant owners and the impact of our
initiatives on the financial health of our franchisees. The factors that could
cause actual results to differ materially from RBI's expectations are detailed
in filings of RBI with the Securities and Exchange Commission and applicable
Canadian securities regulatory authorities, such as its annual and quarterly
reports and current reports on Form 8-K, and include the following: the length
and scope of the impact of the pandemic, including stay at home orders and
business closures, other risks related to unforeseen events, such as pandemics,
risks related to its international operations; risks related to the availability
and cost of capital, risks related to RBI's ability to compete domestically and
internationally in an intensely competitive industry; risks related to
technology; and changes in applicable laws, including tax laws or
interpretations thereof. Other than as required under U.S. federal securities
laws or Canadian securities laws, we do not assume a duty to update these
forward-looking statements, whether as a result of new information, subsequent
events or circumstances, change in expectations or otherwise.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit Description
Number
99 Open letter dated March 30, 2020.
104 Cover Page Interactive Data File - the cover page XBRL tags are embedded
within the Inline XBRL document
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