Restaurant Brands International Inc.

QSR

CA76131D1033

Restaurants & Bars

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RESTAURANT BRANDS INTERNATIONAL : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

February 21, 2020 at 02:59 pm EST

You should read the following discussion together with Part II, Item 6 "Selected
Financial Data" of our Annual Report for the year ended December 31, 2019 (our
"Annual Report") and our audited Consolidated Financial Statements and the
related notes thereto included in Part II, Item 8 "Financial Statements and
Supplementary Data" of our Annual Report.
The following discussion includes information regarding future financial
performance and plans, targets, aspirations, expectations, and objectives of
management, which constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 and forward-looking
information within the meaning of the Canadian securities laws as described in
further detail under "Special Note Regarding Forward-Looking Statements" that is
set forth below. Actual results may differ materially from the results discussed
in the forward-looking statements because of a number of risks and
uncertainties, including the matters discussed in the "Special Note Regarding
Forward-Looking Statements" below. In addition, please refer to the risks set
forth under the caption "Risk Factors" included in our Annual Report for a
further description of risks and uncertainties affecting our business and
financial results. Historical trends should not be taken as indicative of future
operations and financial results. Other than as required under the U.S. Federal
securities laws or the 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, changes in expectations or otherwise.
We prepare our financial statements in accordance with accounting principles
generally accepted in the United States ("U.S. GAAP" or "GAAP"). However, this
Management's Discussion and Analysis of Financial Condition and Results of
Operations also contains certain non-GAAP financial measures to assist readers
in understanding our performance. Non-GAAP financial measures either exclude or
include amounts that are not reflected in the most directly comparable measure
calculated and presented in accordance with GAAP. Where non-GAAP financial
measures are used, we have provided the most directly comparable measures
calculated and presented in accordance with U.S. GAAP, a reconciliation to GAAP
measures and a discussion of the reasons why management believes this
information is useful to it and may be useful to investors.
Unless the context otherwise requires, all references in this section to the
"Company," "we," "us," or "our" are to Restaurant Brands International Inc. and
its subsidiaries, collectively.
Overview
We are a Canadian corporation originally formed on August 25, 2014 to serve as
the indirect holding company for Tim Hortons and its consolidated subsidiaries
and for Burger King and its consolidated subsidiaries. On March 27, 2017, we
acquired Popeyes Louisiana Kitchen, Inc. and its consolidated subsidiaries. We
are one of the world's largest quick service restaurant ("QSR") companies with
more than $34 billion in system-wide sales and over 27,000 restaurants in more
than 100 countries and U.S. territories as of December 31, 2019. Our Tim
Hortons®, Burger King®, and Popeyes® brands have similar franchise business
models with complementary daypart mixes and product platforms. Our three iconic
brands are managed independently while benefiting from global scale and sharing
of best practices.
Tim Hortons restaurants are quick service restaurants with a menu that includes
premium blend coffee, tea, espresso-based hot and cold specialty drinks, fresh
baked goods, including donuts, Timbits®, bagels, muffins, cookies and pastries,
grilled paninis, classic sandwiches, wraps, soups and more. Burger King
restaurants are quick service restaurants that feature flame-grilled hamburgers,
chicken and other specialty sandwiches, french fries, soft drinks and other
affordably-priced food items. Popeyes restaurants are quick service restaurants
featuring a unique "Louisiana" style menu that includes fried chicken, chicken
tenders, fried shrimp and other seafood, red beans and rice, and other regional
items.
We have three operating and reportable segments: (1) Tim Hortons ("TH"); (2)
Burger King ("BK"); and (3) Popeyes Louisiana Kitchen ("PLK"). Our business
generates revenue from the following sources: (i) franchise revenues, consisting
primarily of royalties based on a percentage of sales reported by franchise
restaurants and franchise fees paid by franchisees; (ii) property revenues from
properties we lease or sublease to franchisees; and (iii) sales at restaurants
owned by us ("Company restaurants"). In addition, our Tim Hortons business
generates revenue from sales to franchisees related to our supply chain
operations, including manufacturing, procurement, warehousing and distribution,
as well as sales to retailers.


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Recent Events and Factors Affecting Comparability
Transition to New Lease Accounting Standard

We transitioned to Accounting Standards Codification Topic 842, Leases ("ASC
842"), effective January 1, 2019 on a modified retrospective basis using the
effective date transition method. Our consolidated financial statements reflect
the application of ASC 842 guidance beginning in 2019, while our consolidated
financial statements for prior periods were prepared under the guidance of a
previously applicable accounting standard.

The most significant effects of this transition that affect comparability of our results of operations between 2019 and 2018 include the following:

• Beginning on January 1, 2019, we record lease income and lease cost on a

gross basis for lessee reimbursements of costs such as property taxes and

maintenance when we are the lessor in the lease. Although there was no net

impact to our consolidated statement of operations from this change, the

presentation resulted in total increases to both franchise and property

revenues and franchise and property expenses of $130 million ($85 million


       related to our TH segment, $43 million related to our BK segment and $2
       million related to our PLK segment) during 2019, compared to 2018 and
       2017, when such amounts were recorded on a net basis.

• As described in Note 10, Leases, to the accompanying audited consolidated


       financial statements, the transition provisions of ASC 842 required the
       reclassification of favorable lease assets and unfavorable lease
       liabilities where we are the lessee in the underlying lease to the

right-of-use ("ROU") asset recorded for the underlying lease. As a result

of this reclassification, the amortization period for certain favorable

lease assets and unfavorable lease liabilities was reduced, resulting in a

$5 million net increase in non-cash amortization expense during 2019

compared to 2018 and 2017. Favorable lease assets and unfavorable lease


       liabilities associated with leases where we are the lessor were not
       impacted by our transition to ASC 842.



Please refer to Note 10, Leases, to the accompanying audited consolidated
financial statements for further details of the effects of this change in
accounting principle.
Transition to New Revenue Recognition Accounting Standard
We transitioned to Accounting Standards Codification Topic 606, Revenue from
Contracts with Customers ("ASC 606"), effective January 1, 2018 using the
modified retrospective method. Our consolidated financial statements for 2019
and 2018 reflect the application of ASC 606 guidance, while our consolidated
financial statements for 2017 were prepared under the guidance of previously
applicable accounting standards.
Tax Reform
In December 2017, the U.S. government enacted comprehensive tax legislation
commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") that
significantly revised the U.S. tax code generally effective January 1, 2018 by,
among other changes, lowering the corporate income tax rate from 35% to 21%,
limiting deductibility of interest expense and performance based incentive
compensation and implementing a modified territorial tax system. As a Canadian
entity, we generally would be classified as a foreign entity (and, therefore, a
non-U.S. tax resident) under general rules of U.S. federal income taxation.
However, we have subsidiaries subject to U.S. federal income taxation and
therefore the Tax Act impacted our consolidated results of operations in 2019,
2018 and 2017, and is expected to continue to impact our consolidated results of
operations in future periods.
The impacts to our consolidated statements of operations consist of the
following ("Tax Act Impact"):
•         A provisional benefit of $420 million recorded in our provision from

income taxes for 2017 and a final favorable adjustment of $9 million

recorded for 2018, as a result of the remeasurement of net deferred tax


          liabilities.


•         Provisional charges of $103 million recorded in 2017 and a final

favorable adjustment of $3 million recorded in 2018, related to certain

deductions allowed to be carried forward before the Tax Act, which

potentially may not be carried forward and deductible under the Tax

Act.

• A provisional estimate for a one-time transitional repatriation tax on

unremitted foreign earnings (the "Transition Tax") of $119 million


          recorded in 2017, most of which had been previously accrued with
          respect to certain



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undistributed foreign earnings, and a final favorable adjustment of $15 million (primarily related to utilization of foreign tax credits) recorded in 2018. • No adjustment to these charges and benefits was made in 2019. However,


          the provisions of the Tax Act are complex and likely will be the
          subject of further regulatory and administrative guidance, which we

will evaluate as released and may require us to record an additional

charge or benefit.




We recorded $31 million, $25 million and $2 million of costs during 2019, 2018
and 2017, respectively, which are classified as selling, general and
administrative expenses in our consolidated statements of operations, arising
primarily from professional advisory and consulting services associated with
corporate restructuring initiatives related to the interpretation and
implementation of the Tax Act ("Corporate restructuring and tax advisory fees").
Popeyes Acquisition and PLK Transaction Costs
As described in Note 3 to the accompanying consolidated financial statements, on
March 27, 2017, we completed the acquisition of Popeyes Louisiana Kitchen, Inc.
(the "Popeyes Acquisition"). Our 2019 and 2018 consolidated statements of
operations includes PLK revenues and segment income for a full fiscal year. Our
2017 consolidated statements of operations includes PLK revenues and segment
income from March 28, 2017 through December 31, 2017.
In connection with the Popeyes Acquisition, we incurred certain non-recurring
fees and expenses ("PLK Transaction costs") totaling $10 million during 2018 and
$62 million during 2017 consisting primarily of professional fees and
compensation related expenses, all of which are classified as selling, general
and administrative expenses in the consolidated statements of operations. We did
not incur any PLK Transaction costs during 2019.
Office Centralization and Relocation Costs
In connection with the centralization and relocation of our Canadian and U.S.
restaurant support centers to new offices in Toronto, Ontario, and Miami,
Florida, respectively, we incurred certain non-operational expenses ("Office
centralization and relocation costs") totaling $6 million during 2019 and $20
million during 2018 consisting primarily of moving costs, relocation-driven
compensation expenses, and duplicate rent expenses during 2018, which are
classified as selling, general and administrative expenses in the consolidated
statement of operations. We do not expect to incur any additional Office
centralization and relocation costs during 2020.


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Results of Operations Tabular amounts in millions of U.S. dollars unless noted otherwise. Segment income may not calculate exactly due to rounding.


                                                                  2019 vs. 2018                             2018 vs. 2017
                                                                                   Variance                                Variance
                                                                       FX         Excluding                      FX        Excluding
Consolidated       2019        2018        2017       Variance     Impact (a)     FX Impact      Variance      Impact      FX Impact
                                                                                Favorable / (Unfavorable)
Revenues:
Sales            $ 2,362     $ 2,355     $ 2,390     $      7     $     (44 )    $       51     $    (35 )   $      1     $     (36 )
Franchise and
property
revenues           3,241       3,002       2,186          239           (52 )           291          816          (10 )         826
Total revenues     5,603       5,357       4,576          246           (96 )           342          781           (9 )         790
Operating costs
and expenses:
Cost of sales      1,813       1,818       1,850            5            34             (29 )         32            -            32
Franchise and
property
expenses             540         422         478         (118 )           7            (125 )         56            -            56
Selling, general
and
administrative
expenses           1,264       1,214         416          (50 )          10             (60 )       (798 )          -          (798 )
(Income) loss
from equity
method
investments          (11 )       (22 )       (12 )        (11 )          (3 )            (8 )         10            -            10
Other operating
expenses
(income), net        (10 )         8         109           18            (3 )            21          101           (5 )         106
Total operating
costs and
expenses           3,596       3,440       2,841         (156 )          45            (201 )       (599 )         (5 )        (594 )
Income from
operations         2,007       1,917       1,735           90           (51 )           141          182          (14 )         196
Interest
expense, net         532         535         512            3             -               3          (23 )          -           (23 )
Loss on early
extinguishment
of debt               23           -         122          (23 )           -             (23 )        122            -           122
Income before
income taxes       1,452       1,382       1,101           70           (51 )           121          281          (14 )         295
Income tax
(benefit)
expense              341         238        (134 )       (103 )          12            (115 )       (372 )        (12 )        (360 )

Net income $ 1,111 $ 1,144 $ 1,235 $ (33 ) $ (39 ) $ 6 $ (91 ) $ (26 ) $ (65 )

(a) We calculate the FX Impact by translating prior year results at current

year monthly average exchange rates. We analyze these results on a

constant currency basis as this helps identify underlying business trends,

without distortion from the effects of currency movements.




                                                                    2019 vs. 2018                              2018 vs. 2017
                                                                                      Variance                                 Variance
                                                                          FX         Excluding                      FX         Excluding
TH Segment         2019        2018        2017        Variance       Impact (a)     FX Impact      Variance      Impact       FX Impact
                                                                                  Favorable / (Unfavorable)
Revenues:
Sales            $ 2,204     $ 2,201     $ 2,229     $       3       $     (44 )    $       47     $    (28 )   $      1      $     (29 )
Franchise and
property
revenues           1,140       1,091         926            49             (22 )            71          165           (2 )          167
Total revenues     3,344       3,292       3,155            52             (66 )           118          137           (1 )          138
Cost of sales      1,677       1,688       1,707            11              34             (23 )         19            -             19
Franchise and
property
expenses             358         279         336           (79 )             6             (85 )         57            1             56
Segment SG&A         309         314          91             5               6              (1 )       (223 )          -           (223 )
Segment
depreciation and
amortization (b)     106         102         103            (4 )             2              (6 )          1            1              -
Segment income
(c)                1,122       1,127       1,136            (5 )           (22 )            17           (9 )         (1 )           (8 )


(b)    Segment depreciation and amortization consists of depreciation and
       amortization included in cost of sales and franchise and property
       expenses.


(c)    TH segment income includes $16 million, $15 million and $13 million of
       cash distributions received from equity method investments for 2019, 2018
       and 2017, respectively.



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                                                                             2019 vs. 2018                                 2018 vs. 2017
                                                                                                 Variance                                  Variance
                                                                                  FX            Excluding                       FX         Excluding
BK Segment          2019          2018          2017          Variance        Impact (a)        FX Impact       Variance      Impact       FX Impact
                                                                                           Favorable / (Unfavorable)
Revenues:
Sales            $      76     $      75     $      94     $        1       $        -        $        1       $    (19 )   $      -      $     (19 )
Franchise and
property
revenues             1,701         1,576         1,125            125              (30 )             155            451           (7 )          458
Total revenues       1,777         1,651         1,219            126              (30 )             156            432           (7 )          439
Cost of sales           71            67            86             (4 )              -                (4 )           19            -             19
Franchise and
property
expenses               168           131           135            (37 )              1               (38 )            4           (1 )            5
Segment SG&A           600           577           143            (23 )              3               (26 )         (434 )         (2 )         (432 )
Segment
depreciation and
amortization (b)        49            48            47             (1 )              -                (1 )           (1 )         (1 )            -
Segment income
(d)                    994           928           903             66              (26 )              92             25           (9 )           34


(d)    BK segment income includes $6 million, $5 million and $1 million of cash
       distributions received from equity method investments for 2019, 2018 and
       2017, respectively.


                                                                        2019 vs. 2018                                2018 vs. 2017
                                                                                           Variance                                 Variance
                                                                              FX           Excluding                      FX        Excluding
PLK Segment        2019        2018        2017 (e)       Variance        Impact (a)       FX Impact      Variance      Impact      FX Impact
                                                                                      Favorable / (Unfavorable)
Revenues:
Sales            $    82     $    79     $       67     $       3       $       -        $       3       $    12      $     -      $      12
Franchise and
property
revenues             400         335            135            65              (1 )             66           200           (1 )          201
Total revenues       482         414            202            68              (1 )             69           212           (1 )          213
Cost of sales         65          63             57            (2 )             -               (2 )          (6 )          -             (6 )
Franchise and
property
expenses              14          12              7            (2 )             -               (2 )          (5 )          -             (5 )
Segment SG&A         225         193             40           (32 )             -              (32 )        (153 )          -           (153 )
Segment
depreciation and
amortization (b)      11          10              9            (1 )             -               (1 )          (1 )          -             (1 )
Segment income       188         157            107            31              (1 )             32            50           (1 )           51

(e) PLK revenues and segment income from the acquisition date of March 27,

2017 through December 31, 2017 are included in our consolidated statement

of operations for 2017.




Comparable Sales
TH comparable sales were (1.5)% during 2019, including Canada comparable sales
of (1.4)%.
BK comparable sales were 3.4% during 2019, including U.S. comparable sales of
1.7%.
PLK comparable sales were 12.1% during 2019, including U.S. comparable sales of
13.0%.


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Sales and Cost of Sales
Sales include TH supply chain sales and sales from Company restaurants. TH
supply chain sales represent sales of products, supplies and restaurant
equipment, as well as sales to retailers. In periods prior to January 1, 2018,
we classified revenues derived from sales of equipment packages at the
establishment of a restaurant and in connection with renewal or renovation as
franchise and property revenues. Sales from Company restaurants, including sales
by our consolidated TH Restaurant VIEs, represent restaurant-level sales to our
guests.
Cost of sales includes costs associated with the management of our TH supply
chain, including cost of goods, direct labor and depreciation, as well as the
cost of products sold to retailers. Cost of sales also includes food, paper and
labor costs of Company restaurants. In periods prior to January 1, 2018, we
classified costs related to sales of equipment packages at the establishment of
a restaurant and in connection with renewal or renovation as franchise and
property expenses.
During 2019, the increase in sales was driven by an increase of $47 million in
our TH segment, primarily as a result of an increase in supply chain sales, an
increase of $3 million in our PLK segment and an increase of $1 million in our
BK segment, partially offset by an unfavorable FX Impact of $44 million.
During 2018, the decrease in sales was driven by a decrease of $29 million in
our TH segment and a decrease of $19 million in our BK segment, partially offset
by an increase of $12 million in our PLK segment, primarily as a result of
including PLK for a full year in 2018 compared to nine months in 2017, and a
favorable FX Impact of $1 million. The decrease in our TH segment was driven by
a $48 million decrease in our TH Company restaurant revenue, primarily from the
conversion of Restaurant VIEs to franchise restaurants, partially offset by a
$19 million increase in supply chain sales. The increase in supply chain sales
was primarily due to the reclassification of revenue from the sales of equipment
packages from franchise and property revenues to sales beginning January 1,
2018, partially offset by the non-recurrence of the roll-out of espresso
equipment and related espresso inventory in 2017. The decrease in our BK segment
was due to Company restaurant refranchisings in prior periods.
During 2019, the decrease in cost of sales was driven primarily by a $34 million
favorable FX Impact, partially offset by an increase of $23 million in our TH
segment, an increase of $4 million in our BK segment and an increase of $2
million in our PLK segment. The increase in our TH segment was driven primarily
by an increase in supply chain cost of sales due to the increase in supply chain
sales.
During 2018, the decrease in cost of sales was driven primarily by a decrease of
$19 million in each of our TH and BK segments, partially offset by an increase
of $6 million in our PLK segment, primarily as a result of including PLK for a
full year in 2018 compared to nine months in 2017. The decrease in our TH
segment was primarily due to a decrease of $41 million in Company restaurant
cost of sales, primarily from the conversion of Restaurant VIEs to franchise
restaurants, partially offset by an increase of $22 million in supply chain cost
of sales. The increase in supply chain cost of sales was primarily due to the
reclassification of costs from the sales of equipment packages from franchise
and property expenses to costs of sales beginning January 1, 2018, partially
offset by a decrease in costs in connection with the non-recurrence of the
roll-out of espresso equipment in 2017. The decrease in our BK segment was due
to Company restaurant refranchisings in prior periods.
Franchise and Property
Franchise and property revenues consist primarily of royalties earned on
franchise sales, rents from real estate leased or subleased to franchisees,
franchise fees, and other revenue. Franchise and property expenses consist
primarily of depreciation of properties leased to franchisees, rental expense
associated with properties subleased to franchisees, amortization of franchise
agreements, and bad debt expense (recoveries). In periods prior to January 1,
2018, franchise and property revenues and franchise and property expenses
included revenues and cost of sales, respectively, related to equipment packages
sold at establishment of a restaurant and in connection with renewals or
renovations.
During 2019, the increase in franchise and property revenues was driven by an
increase of $155 million in our BK segment, an increase of $71 million in our TH
segment, and an increase of $66 million in our PLK segment, partially offset by
a $52 million unfavorable FX Impact. The increases in our BK and PLK segments
were primarily driven by increases in royalties as a result of system-wide sales
growth. Additionally, the increase in franchise and property revenues in all of
our segments during 2019 reflected the gross recognition of property income from
lessee reimbursements of costs such as property taxes and maintenance when we
are the lessor in the lease as a result of the application of ASC 842 beginning
January 1, 2019.
During 2018, the increase in franchise and property revenues was driven by an
increase of $458 million in our BK segment, an increase of $201 million in our
PLK segment, and an increase of $167 million in our TH segment, partially offset

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by a $10 million unfavorable FX Impact. The increase in our BK, TH and PLK
segments reflects the inclusion of advertising fund contributions from
franchisees as a result of the application of ASC 606 beginning January 1, 2018,
an increase in PLK franchise and property revenues as a result of including PLK
for a full year in 2018 compared to nine months in 2017, and an increase in
royalties driven by system-wide sales growth. These factors were partially
offset by a decrease in franchise fees and other revenue, primarily due to the
deferral of initial and renewal franchise fees as a result of the application of
ASC 606 and for our TH segment, the reclassification of revenue from the sales
of equipment packages from franchise and property revenues to sales beginning
January 1, 2018.
During 2019, the increase in franchise and property expenses was driven by an
increase of $85 million in our TH segment, an increase of $38 million in our BK
segment, and an increase of $2 million in our PLK segment, partially offset by a
$7 million favorable FX Impact. The increase in all of our segments during 2019
was driven by the gross recognition of property expenses for costs such as
property taxes and maintenance paid by us and reimbursed by lessees when we are
the lessor in the lease as a result of the application of ASC 842 beginning
January 1, 2019.
During 2018, the decrease in franchise and property expenses was driven by a
decrease of $56 million in our TH segment and a decrease of $5 million in our BK
segment, partially offset by an increase of $5 million in our PLK segment,
primarily as a result of including PLK for a full year in 2018 compared to nine
months in 2017. The decrease in our TH segment was primarily due to the
reclassification of expenses from sales of equipment packages from franchise and
property expenses to cost of sales beginning January 1, 2018.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses were comprised of the
following:
                                                                 2019 vs. 2018           2018 vs. 2017
                           2019        2018        2017          $           %           $           %
                                                                       Favorable / (Unfavorable)
TH Segment SG&A          $   309     $   314     $    91     $     5        1.6  %   $   (223 )       NM
BK Segment SG&A              600         577         143         (23 )     (4.0 )%       (434 )       NM
PLK Segment SG&A             225         193          40         (32 )    (16.6 )%       (153 )       NM
Share-based compensation
and non-cash incentive
compensation expense          74          55          55         (19 )    (34.5 )%          -          - %
Depreciation and
amortization                  19          20          23           1        5.0  %          3       13.0 %
PLK Transaction costs          -          10          62          10      100.0  %         52       83.9 %
Corporate restructuring
and tax advisory fees         31          25           2          (6 )       NM           (23 )       NM
Office centralization
and relocation costs           6          20           -          14         NM           (20 )       NM

Selling, general and administrative expenses $ 1,264 $ 1,214 $ 416 $ (50 ) (4.1 )% $ (798 ) NM




NM - Not Meaningful
Upon our transition to ASC 606 on January 1, 2018, segment selling, general and
administrative expenses ("Segment SG&A") include segment selling expenses, which
consist primarily of advertising fund expenses, and segment general and
administrative expenses, which are comprised primarily of salary and
employee-related costs for non-restaurant employees, professional fees,
information technology systems, and general overhead for our corporate offices.
Prior to our transition to ASC 606 on January 1, 2018, our statement of
operations did not reflect advertising fund contributions or advertising fund
expenses, since such amounts were netted under previously applicable accounting
standards. Segment SG&A excludes share-based compensation and non-cash incentive
compensation expense, depreciation and amortization, PLK Transaction costs,
Corporate restructuring and tax advisory fees, and Office centralization and
relocation costs.
During 2019, the increase in Segment SG&A in our BK and PLK segments is
primarily due to an increase in advertising fund expenses.
During 2018, TH, BK and PLK Segment SG&A increased primarily due to the
inclusion of advertising fund expenses from the application of ASC 606 beginning
January 1, 2018.

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During 2019, the increase in share-based compensation and non-cash incentive
compensation expense was primarily due to an increase in the number of equity
awards granted during 2019.
(Income) Loss from Equity Method Investments
(Income) loss from equity method investments reflects our share of investee net
income or loss, non-cash dilution gains or losses from changes in our ownership
interests in equity method investees, and basis difference amortization.
The change in (income) loss from equity method investments during 2019 was
primarily driven by the recognition of a $20 million non-cash dilution gain
during 2018 on the initial public offering by one of our equity method
investees, partially offset by an $11 million non-cash dilution gain during 2019
from the issuance of additional shares in connection with a merger by one of our
equity method investees.
The change in (income) loss from equity method investments during 2018 was
primarily driven by the recognition of a $20 million non-cash dilution gain
during 2018 (described above), partially offset by an increase in equity method
investment net losses that we recognized during 2018.
Other Operating Expenses (Income), net
Our other operating expenses (income), net were comprised of the following:
                                                     2019           2018

2017


Net losses (gains) on disposal of assets,
restaurant closures and refranchisings           $        7     $       19     $       29
Litigation settlements and reserves, net                  2             11              2
Net losses (gains) on foreign exchange                  (15 )          (33 )           77
Other, net                                               (4 )           11              1
Other operating expenses (income), net           $      (10 )   $        8

$ 109




Net losses (gains) on disposal of assets, restaurant closures, and
refranchisings represent sales of properties and other costs related to
restaurant closures and refranchisings. Gains and losses recognized in the
current period may reflect certain costs related to closures and refranchisings
that occurred in previous periods.
Litigation settlements and reserves, net primarily reflects accruals and
proceeds received in connection with litigation matters.
Net losses (gains) on foreign exchange is primarily related to revaluation of
foreign denominated assets and liabilities.
Other, net during 2018 is comprised primarily of a payment in connection with
the settlement of certain provisions associated with the 2017 redemption of our
preferred shares as a result of changes in Treasury regulations.
Interest Expense, net
                                                  2019      2018      2017
Interest expense, net                            $ 532     $ 535     $ 512

Weighted average interest rate on long-term debt 5.0 % 5.0 % 4.8 %




Interest expense, net for 2019 was consistent with 2018.
During 2018, interest expense, net increased primarily due to higher outstanding
debt from the incurrence of incremental term loans and the issuance of senior
notes during 2017 and a decrease in interest income, partially offset by a $60
million benefit during 2018 related to the amortization of amounts other than
currency movements of our net investment hedges, which is excluded from the
accounting hedge.
Loss on Early Extinguishment of Debt
During 2019, we redeemed the entire outstanding principal balance of $1,250
million of 4.625% first lien secured notes due January 15, 2022, made partial
principal amount prepayments of our existing senior secured term loan and
refinanced our

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existing senior secured term loan. In connection with these transactions, we
recorded a loss on early extinguishment of debt of $23 million that primarily
reflects the write-off of unamortized debt issuance costs and discounts and fees
incurred.
During 2017, we recorded a $122 million loss on early extinguishment of debt
which primarily reflects the payment of premiums to fully redeem our second lien
notes and the write-off of unamortized debt issuance costs and discounts in
connection with the refinancing of our Term Loan Facility.
Income Tax Expense
Our effective tax rate was 23.5% in 2019 and 17.2% in 2018. The effective tax
rate was reduced by 2.2% and 5.0% for 2019 and 2018, respectively, as a result
of benefits from stock option exercises. The comparison between 2019 and 2018
was also unfavorably impacted by 2018 reserve releases and settlements, which
reduced the 2018 effective tax rate by a net 2.8%. Additionally, the effective
tax rate for 2019 increased by 1.1% due to the impact of an increase in our tax
provision related to revaluing our Swiss net deferred tax liability due to Swiss
tax reform. In 2019, the beneficial impact of internal financing arrangements in
various jurisdictions was offset by an increase in the provision for
unrecognized tax benefits related to a financing arrangement that is not
applicable to ongoing operations.
The change in our effective income tax rate to 17.2% in 2018 from (12.1)% in
2017 is primarily due to the impact of certain aspects of the Tax Act,
realignment of certain intercompany financings and changes in foreign currency
exchange rates, partially offset by the release of a valuation allowance related
to use of capital losses.
Net Income
We reported net income of $1,111 million for 2019 compared to net income of
$1,144 million for 2018. The decrease in net income is primarily due to a $103
million increase in income tax expense, a $23 million loss on early
extinguishment of debt in the current year, a $19 million increase in
share-based compensation and non-cash incentive compensation expense, a $14
million unfavorable change from the impact of equity method investments, a $6
million increase in Corporate restructuring and tax advisory fees, and a $5
million decrease in TH segment income. These factors were partially offset by a
$66 million increase in BK segment income, a $31 million increase in PLK segment
income, an $18 million favorable change in the results from other operating
expenses (income), net, a $14 million decrease in Office centralization and
relocation costs and the non-recurrence of $10 million of PLK Transaction costs
incurred in the prior period. Amounts above include a total unfavorable FX
Impact to net income of $39 million.
We reported net income of $1,144 million for 2018 compared to net income of
$1,235 million for 2017. The decrease in net income is primarily due to a $372
million increase in income tax expense, a $23 million increase in interest
expense, net, a $23 million increase in Corporate restructuring and tax advisory
fees, the inclusion of $20 million of Office centralization and relocation
costs, and a $9 million decrease in TH segment income. These factors were
partially offset by the non-recurrence of $122 million of loss on early
extinguishment of debt recognized in the prior period, a $101 million favorable
change in results from other operating expenses (income), net, a $52 million
decrease in PLK Transaction costs, a $50 million increase in PLK segment income,
primarily as a result of including PLK for a full year in 2018 compared to nine
months in 2017, and a $25 million increase in BK segment income. Amounts above
include a total unfavorable FX Impact to net income of $26 million.
Non-GAAP Reconciliations
The table below contains information regarding EBITDA and Adjusted EBITDA, which
are non-GAAP measures. These non-GAAP measures do not have a standardized
meaning under U.S. GAAP and may differ from similar captioned measures of other
companies in our industry. We believe that these non-GAAP measures are useful to
investors in assessing our operating performance, as it provides them with the
same tools that management uses to evaluate our performance and is responsive to
questions we receive from both investors and analysts. By disclosing these
non-GAAP measures, we intend to provide investors with a consistent comparison
of our operating results and trends for the periods presented. EBITDA is defined
as earnings (net income or loss) before interest expense, net, loss on early
extinguishment of debt, income tax (benefit) expense, and depreciation and
amortization and is used by management to measure operating performance of the
business. Adjusted EBITDA is defined as EBITDA excluding the non-cash impact of
share-based compensation and non-cash incentive compensation expense and
(income) loss from equity method investments, net of cash distributions received
from equity method investments, as well as other operating expenses (income),
net. Other specifically identified costs associated with non-recurring projects
are also excluded from Adjusted EBITDA, including PLK Transaction costs,
Corporate restructuring and tax advisory fees, and Office centralization and
relocation costs. Adjusted EBITDA is used by management to measure operating
performance of the business, excluding these non-cash and other specifically
identified items that management believes are not

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relevant to management's assessment of operating performance or the performance
of an acquired business. Adjusted EBITDA, as defined above, also represents our
measure of segment income for each of our three operating segments.
                                  2019          2018          2017

2019 vs. 2018 2018 vs. 2017


                                                                              Favorable / (Unfavorable)
Segment income:
TH                             $   1,122     $   1,127     $   1,136     $         (5 )     $         (9 )
BK                                   994           928           903               66                 25
PLK                                  188           157           107               31                 50
Adjusted EBITDA                    2,304         2,212         2,146               92                 66
Share-based compensation and
non-cash incentive
compensation expense                  74            55            55              (19 )                -
PLK Transaction costs                  -            10            62               10                 52
Corporate restructuring and
tax advisory fees                     31            25             2               (6 )              (23 )
Office centralization and
relocation costs                       6            20             -               14                (20 )
Impact of equity method
investments (a)                       11            (3 )           1              (14 )                4
Other operating expenses
(income), net                        (10 )           8           109               18                101
EBITDA                             2,192         2,097         1,917               95                180
Depreciation and amortization        185           180           182               (5 )                2
Income from operations             2,007         1,917         1,735               90                182
Interest expense, net                532           535           512                3                (23 )
Loss on early extinguishment
of debt                               23             -           122              (23 )              122
Income tax (benefit) expense         341           238          (134 )           (103 )             (372 )
Net income                     $   1,111     $   1,144     $   1,235     $        (33 )     $        (91 )

(a) Represents (i) (income) loss from equity method investments and (ii) cash

distributions received from our equity method investments. Cash distributions

received from our equity method investments are included in segment income.




Segment income is affected by the application of ASC 606 beginning January 1,
2018, including the deferral of initial and renewal franchise fees and the
timing of advertising fund related revenues and expenses. The increase in
Adjusted EBITDA for 2019 and 2018 reflects the increases in segment income in
our BK and PLK segments, partially offset by decreases in our TH segment. The
increase in PLK segment for 2018 is primarily a result of including PLK for a
full year in 2018 compared to nine months in 2017.
The increase in EBITDA for 2019 is primarily due to an increase in segment
income in our BK and PLK segments, favorable results from other operating
expenses (income), net in the current period, a decrease in office
centralization and relocation costs, and the non-recurrence of PLK Transaction
costs, partially offset by an increase in share-based compensation and non-cash
incentive compensation expense, unfavorable results from the impact of equity
method investments, an increase in Corporate restructuring and tax advisory
fees, and a decrease in segment income in our TH segment.
The increase in EBITDA for 2018 is primarily due to a decrease in other
operating expenses (income), net, an increase in segment income in our BK and
PLK segments, primarily as a result of including PLK for a full year in 2018
compared to nine months in 2017, a decrease in PLK Transaction costs, and
favorable results from the impact of equity method investments in the current
period, partially offset by the increase in Corporate restructuring and tax
advisory fees, the inclusion of Office centralization and relocation costs and a
decrease in segment income in our TH segment.


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Liquidity and Capital Resources
Our primary sources of liquidity are cash on hand, cash generated by operations
and borrowings available under our Revolving Credit Facility (as defined below).
We have used, and may in the future use, our liquidity to make required interest
and/or principal payments, to repurchase our common shares, to repurchase
Class B exchangeable limited partnership units ("Partnership exchangeable
units"), to voluntarily prepay and repurchase our or one of our affiliate's
outstanding debt, to fund our investing activities and to pay dividends on our
common shares and make distributions on the Partnership exchangeable units. As a
result of our borrowings, we are highly leveraged. Our liquidity requirements
are significant, primarily due to debt service requirements.
At December 31, 2019, we had cash and cash equivalents of $1,533 million and
working capital of $493 million. In addition, at December 31, 2019, we had
borrowing availability of $998 million under our Revolving Credit Facility
(defined below). During 2019, we issued $750 million of 3.875% first lien senior
notes and the net proceeds, as well as proceeds received from the Term Loan A
(defined below), were used to redeem the entire outstanding principal balance of
$1,250 million of our 2015 4.625% Senior Notes (defined below) and prepay $235
million of the Term Loan B (defined below) outstanding aggregate principal
balance. Also, in connection with these transactions, the aggregate principal
amount of the commitments under our Revolving Credit Facility (defined below)
were increased to $1,000 million. Additionally, during 2019, we issued $750
million of 4.375% second lien senior notes and the net proceeds were used to
repay $720 million of the Term Loan B outstanding aggregate principal balance.
Based on our current level of operations and available cash, we believe our cash
flow from operations, combined with availability under our Revolving Credit
Facility, will provide sufficient liquidity to fund our current obligations,
debt service requirements and capital spending over the next twelve months.
On August 2, 2016, our board of directors approved a share repurchase
authorization that allows us to purchase up to $300 million of our common shares
through July 2021. Repurchases under the Company's authorization will be made in
the open market or through privately negotiated transactions. On August 2, 2019,
we announced that the Toronto Stock Exchange (the "TSX") had accepted the notice
of our intention to renew the normal course issuer bid. Under this normal course
issuer bid, we are permitted to repurchase up to 24,853,565 common shares for
the one-year period commencing on August 8, 2019 and ending on August 7, 2020,
or earlier if we complete the repurchases prior to such date. Share repurchases
under the normal course issuer bid will be made through the facilities of the
TSX, the New York Stock Exchange (the "NYSE") and/or other exchanges and
alternative Canadian or foreign trading systems, if eligible, or by such other
means as may be permitted by the TSX and/or the NYSE under applicable law.
Shareholders may obtain a copy of the prior notice, free of charge, by
contacting us.
Prior to the Tax Act, we provided deferred taxes on certain undistributed
foreign earnings. Under our transition to a modified territorial tax system
whereby all previously untaxed undistributed foreign earnings were subject to a
transition tax charge at reduced rates and future repatriations of foreign
earnings generally will be exempt from U.S. tax, we wrote off the existing
deferred tax liability on undistributed foreign earnings and recorded the impact
of the new transition tax charge on foreign earnings during the fourth quarter
of 2017. We will continue to monitor available evidence and our plans for
foreign earnings and expect to continue to provide any applicable deferred taxes
based on the tax liability or withholding taxes that would be due upon
repatriation of amounts not considered permanently reinvested.
Debt Instruments and Debt Service Requirements
As of December 31, 2019, our long-term debt consists primarily of borrowings
under our Credit Facilities, amounts outstanding under our 2017 4.25% Senior
Notes, 2019 3.875% Senior Notes, 2017 5.00% Senior Notes, 2019 4.375% Senior
Notes and TH Facility (each as defined below), and obligations under finance
leases. For further information about our long-term debt, see Note 9 to the
accompanying consolidated financial statements included in Part II, Item 8
"Financial Statements and Supplementary Data" of our Annual Report.
Credit Facilities
On September 6, 2019, two of our subsidiaries (the "Borrowers") entered into a
fourth incremental facility amendment (the "Fourth Incremental Amendment") to
the credit agreement governing our senior secured term loan facilities (the
"Term Loan Facilities") and our senior secured revolving credit facility
(including revolving loans, swingline loans and letters of credit) (the
"Revolving Credit Facility" and together with the Term Loan Facilities, the
"Credit Facilities"). Under the Fourth Incremental Amendment, (i) we obtained a
new term loan in the aggregate principal amount of $750 million (the "Term Loan
A") with a maturity date of October 7, 2024 (subject to earlier maturity in
specified circumstances), (ii) the interest rate applicable to the Term Loan A
and Revolving Credit Facility is, at our option, either (a) a base rate, subject
to a floor of 1.00%, plus an applicable margin varying from 0.00% to 0.50%, or
(b) a Eurocurrency rate, subject to a floor of 0.00%, plus an applicable margin
varying between 0.75% and 1.50%, in each case, determined by reference to a net
first lien leverage based

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pricing grid, (iii) the aggregate principal amount of the commitments under our
Revolving Credit Facility was increased to $1,000 million, (iv) the maturity
date of the Revolving Credit Facility was extended from October 13, 2022 to
October 7, 2024 (subject to earlier maturity in specified circumstances), and
(v) the commitment fee on the unused portion of the Revolving Credit Facility
was decreased from 0.25% to 0.15%. The principal amount of the Term Loan A
amortizes in quarterly installments equal to $5 million until October 7, 2022
and thereafter in quarterly installments equal to $9 million until maturity,
with the balance payable at maturity. The Term Loan A will require compliance
with a net first lien leverage ratio (described below). Except as described
herein, the Fourth Incremental Amendment did not materially change the terms of
the Credit Facilities.
Prior to obtaining the Term Loan A, our Credit Facilities included only one
senior secured term loan facility (the "Term Loan B"). In September 2019, we
voluntarily prepaid $235 million principal amount of our Term Loan B.
On November 19, 2019, the Borrowers entered into a fourth amendment (the "Fourth
Amendment") to the credit agreement governing our Credit Facilities. Under the
Fourth Amendment, (i) the outstanding aggregate principal amount under our Term
Loan B was decreased to $5,350 million as a result of a repayment of $720
million from a portion of the net proceeds of the 2019 4.375% Senior Notes
(defined below), (ii) the interest rate applicable to our Term Loan B was
reduced to, at our option, either (a) a base rate, subject to a floor of 1.00%,
plus an applicable margin of 0.75%, or (b) a Eurocurrency rate, subject to a
floor of 0.00%, plus an applicable margin of 1.75%, and (iii) the maturity date
of our Term Loan B was extended from February 17, 2024 to November 19, 2026. The
principal amount of the Term Loan B amortizes in quarterly installments equal to
$13 million until maturity, with the balance payable at maturity. Except as
described herein, the Fourth Amendment did not materially change the terms of
the Credit Facilities.
As of December 31, 2019, there was $6,100 million outstanding principal amount
under the Term Loan Facilities with a weighted average interest rate of 3.49%.
Based on the amounts outstanding under the Term Loan Facilities and LIBOR as of
December 31, 2019, subject to a floor of 0.00%, required debt service for the
next twelve months is estimated to be approximately $215 million in interest
payments and $72 million in principal payments. In addition, based on LIBOR as
of December 31, 2019, net cash settlements that we expect to pay on our
$4,000 million interest rate swaps are estimated to be approximately $23 million
for the next twelve months. The Term Loan A matures on October 7, 2024 and the
Term Loan B matures on November 19, 2026, and we may prepay the Term Loan
Facilities in whole or in part at any time. Additionally, subject to certain
exceptions, the Term Loan Facilities may be subject to mandatory prepayments
using (i) proceeds from non-ordinary course asset dispositions, (ii) proceeds
from certain incurrences of debt or (iii) a portion of our annual excess cash
flows based upon certain leverage ratios.
As of December 31, 2019, we had no amounts outstanding under the Revolving
Credit Facility, had $2 million of letters of credit issued against the
Revolving Credit Facility, and our borrowing availability was $998 million.
Funds available under the Revolving Credit Facility may be used to repay other
debt, finance debt or share repurchases, fund acquisitions or capital
expenditures, and for other general corporate purposes. We have a $125 million
letter of credit sublimit as part of the Revolving Credit Facility, which
reduces our borrowing availability thereunder by the cumulative amount of
outstanding letters of credit. We are also required to pay (i) letters of credit
fees on the aggregate face amounts of outstanding letters of credit plus a
fronting fee to the issuing bank and (ii) administration fees. Under the Fourth
Incremental Amendment, the interest rate applicable to amounts drawn under each
letter of credit decreased from a range of 1.25% to 2.00% to a range of 0.75% to
1.50%, depending on our net first lien leverage ratio.
Obligations under the Credit Facilities are guaranteed on a senior secured
basis, jointly and severally, by the direct parent company of one of the
Borrowers and substantially all of its Canadian and U.S. subsidiaries, including
The TDL Group Corp., Burger King Worldwide, Inc., Popeyes Louisiana Kitchen,
Inc. and substantially all of their respective Canadian and U.S. subsidiaries
(the "Credit Guarantors"). Amounts borrowed under the Credit Facilities are
secured on a first priority basis by a perfected security interest in
substantially all of the present and future property (subject to certain
exceptions) of each Borrower and Credit Guarantor.
Senior Notes
In May 2017, the Borrowers entered into an indenture (the "2017 4.25% Senior
Notes Indenture") in connection with the issuance of $1,500 million of 4.25%
first lien senior secured notes due May 15, 2024 (the "2017 4.25% Senior
Notes"). No principal payments are due until maturity and interest is paid
semi-annually.
During 2017, the Borrowers entered into an indenture (the "2017 5.00% Senior
Notes Indenture") in connection with the issuance in August 2017 and October
2017 of an aggregate of $2,800 million of 5.00% second lien senior secured notes
due October 15, 2025 (the "2017 5.00% Senior Notes"). No principal payments are
due until maturity and interest is paid semi-annually.

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On September 24, 2019, the Borrowers entered into an indenture (the "2019 3.875%
Senior Notes Indenture") in connection with the issuance of $750 million of
3.875% first lien senior notes due January 15, 2028 (the "2019 3.875% Senior
Notes"). No principal payments are due until maturity and interest is paid
semi-annually. The net proceeds from the offering of the 2019 3.875% Senior
Notes and a portion of the net proceeds from the Term Loan A were used to redeem
the entire outstanding principal balance of $1,250 million of 4.625% first lien
secured notes due January 15, 2022 (the "2015 4.625% Senior Notes") and to pay
related fees and expenses.
On November 19, 2019, the Borrowers entered into an indenture (the "2019 4.375%
Senior Notes Indenture" and together with the above indentures the "Senior Notes
Indentures") in connection with the issuance of $750 million of 4.375% second
lien senior notes due January 15, 2028 (the "2019 4.375% Senior Notes"). No
principal payments are due until maturity and interest is paid semi-annually.
The net proceeds from the offering of the 2019 4.375% Senior Notes, together
with cash on hand, were used to repay $720 million of Term Loan B outstanding
aggregate principal balance and to pay related fees and expenses in connection
with the Fourth Amendment.
The Borrowers may redeem a series of Senior Notes, in whole or in part, at any
time prior to May 15, 2020 for the 2017 4.25% Senior Notes, September 15, 2022
for the 2019 3.875% Senior Notes, October 15, 2020 for the 2017 5.00% Senior
Notes, and November 15, 2022 for the 2019 4.375% Senior Notes, at a price equal
to 100% of the principal amount redeemed plus a "make-whole" premium, plus
accrued and unpaid interest, if any, to, but excluding, the redemption date. In
addition, the Borrowers may redeem, in whole or in part, the 2017 4.25% Senior
Notes, 2019 3.875% Senior Notes, 2017 5.00% Senior Notes, and 2019 4.375% Senior
Notes on or after the applicable date noted above, at the redemption prices set
forth in the applicable Senior Notes Indenture. The Senior Notes Indentures also
contain redemption provisions related to tender offers, change of control and
equity offerings, among others.
Based on the amounts outstanding at December 31, 2019, required debt service for
the next twelve months on all of the Senior Notes outstanding is approximately
$266 million in interest payments.
TH Facility
One of our subsidiaries entered into a non-revolving delayed drawdown term
credit facility in a total aggregate principal amount of C$225 million
(increased from C$100 million during 2019) with a maturity date of October 4,
2025 (the "TH Facility"). The interest rate applicable to the TH Facility is the
Canadian Bankers' Acceptance rate plus an applicable margin equal to 1.40% or
the Prime Rate plus an applicable margin equal to 0.40%, at our option.
Obligations under the TH Facility are guaranteed by three of our subsidiaries,
and amounts borrowed under the TH Facility are secured by certain parcels of
real estate. As of December 31, 2019, we had outstanding C$100 million under the
TH Facility with a weighted average interest rate of 3.45% and we are permitted
to draw down on the TH Facility until May 23, 2020.
Restrictions and Covenants
Our Credit Facilities and the Senior Notes Indentures contain a number of
customary affirmative and negative covenants that, among other things, limit or
restrict our ability and the ability of certain of our subsidiaries to: incur
additional indebtedness; incur liens; engage in mergers, consolidations,
liquidations and dissolutions; sell assets; pay dividends and make other
payments in respect of capital stock; make investments, loans and advances; pay
or modify the terms of certain indebtedness; and engage in certain transactions
with affiliates. In addition, under the Credit Facilities, the Borrowers are not
permitted to exceed a net first lien senior secured leverage ratio of 6.50 to
1.00 when, as of the end of any fiscal quarter beginning with the first quarter
of 2020, any amounts are outstanding under the Term Loan A and/or outstanding
revolving loans, swingline loans and certain letters of credit exceed 30.0% of
the commitments under the Revolving Credit Facility.
The restrictions under the Credit Facilities and the Senior Notes Indentures
have resulted in substantially all of our consolidated assets being restricted.
As of December 31, 2019, we were in compliance with applicable debt covenants
under the Credit Facilities, the TH Facility, and the Senior Notes Indentures,
and there were no limitations on our ability to draw on the remaining
availability under our Revolving Credit Facility and TH Facility.
Cash Dividends
On January 3, 2020, we paid a dividend of $0.50 per common share and Partnership
made a distribution in respect of each Partnership exchangeable unit in the
amount of $0.50 per Partnership exchangeable unit.
On February 10, 2020, we announced that the board of directors had declared a
quarterly cash dividend of $0.52 per common share for the first quarter of 2020,
payable on April 3, 2020 to common shareholders of record on March 16, 2020.

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Partnership will also make a distribution in respect of each Partnership
exchangeable unit in the amount of $0.52 per Partnership exchangeable unit, and
the record date and payment date for distributions on Partnership exchangeable
units are the same as the record date and payment date set forth above.
We are targeting a total of $2.08 in declared dividends per common share and
distributions in respect of each Partnership exchangeable unit for 2020.
Because we are a holding company, our ability to pay cash dividends on our
common shares may be limited by restrictions under our debt agreements. Although
we do not have a formal dividend policy, our board of directors may, subject to
compliance with the covenants contained in our debt agreements and other
considerations, determine to pay dividends in the future.
Outstanding Security Data
As of February 10, 2020, we had outstanding 298,425,192 common shares and one
special voting share. The special voting share is held by a trustee, entitling
the trustee to that number of votes on matters on which holders of common shares
are entitled to vote equal to the number of Partnership exchangeable units
outstanding. The trustee is required to cast such votes in accordance with
voting instructions provided by holders of Partnership exchangeable units. At
any shareholder meeting of the Company, holders of our common shares vote
together as a single class with the special voting share except as otherwise
provided by law. For information on our share-based compensation and our
outstanding equity awards, see Note 15 to the accompanying consolidated
financial statements included in Part II, Item 8 "Financial Statements and
Supplementary Data" of our Annual Report.
There were 165,372,429 Partnership exchangeable units outstanding as of
February 10, 2020. Since December 12, 2015, the holders of Partnership
exchangeable units have had the right to require Partnership to exchange all or
any portion of such holder's Partnership exchangeable units for our common
shares at a ratio of one share for each Partnership exchangeable unit, subject
to our right as the general partner of Partnership to determine to settle any
such exchange for a cash payment in lieu of our common shares.
Comparative Cash Flows
Operating Activities
Cash provided by operating activities was $1,476 million in 2019, compared to
$1,165 million in 2018. The increase in cash provided by operating activities
was driven by a decrease in income tax payments, primarily due to the 2018
payment of accrued income taxes related to the December 2017 redemption of
preferred shares, an increase in BK and PLK segment income and a decrease in
cash used for working capital. These factors were partially offset by an
increase in interest payments and a decrease in TH segment income.
Cash provided by operating activities was $1,165 million in 2018, compared to
$1,391 million in 2017. The decrease in cash provided by operating activities
was driven by an increase in income tax payments, primarily due to the payment
of accrued income taxes related to the December 2017 redemption of preferred
shares, increases in interest payments and Corporate restructuring and tax
advisory fees and Office centralization and relocation costs incurred in the
current year. These factors were partially offset by an increase in PLK segment
income, primarily as a result of including PLK for a full year in 2018 compared
to nine months in 2017, an increase in BK segment income, a decrease in PLK
Transaction costs and a decrease in cash used for working capital.
Investing Activities
Cash used for investing activities was $30 million in 2019, compared to $44
million in 2018. The change in investing activities was driven primarily by a
decrease in capital expenditures.
Cash used for investing activities was $44 million in 2018, compared to $858
million in 2017. The change in investing activities was driven primarily by net
cash used for the Popeyes Acquisition during 2017, partially offset by proceeds
from the settlement of derivatives in 2017 and an increase in capital
expenditures during 2018.

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Financing Activities
Cash used for financing activities was $842 million in 2019, compared to $1,285
million in 2018. The change in financing activities was driven primarily by
proceeds from the Term Loan A and the issuances of the 2019 3.875% Senior Notes
and the 2019 4.375% Senior Notes during 2019, an increase in proceeds from stock
option exercises, proceeds from derivatives and the non-recurrence of the 2018
payments in connection with the December 2017 redemption of preferred shares.
These factors were partially offset by the redemption of the 2015 4.625% Senior
Notes during 2019, Term Loan B prepayments and refinancing during 2019, an
increase in RBI common share dividends and distributions on Partnership
exchangeable units and payment of financing costs.
Cash used for financing activities was $1,285 million in 2018, compared to $936
million in 2017. The change in financing activities was driven primarily by an
increase in RBI common share dividends and distributions on Partnership
exchangeable units during 2018, an increase in payments in connection with the
repurchase of Partnership exchangeable units, the 2018 payments in connection
with the December 2017 redemption of preferred shares and a decrease in proceeds
from the issuance of long-term debt. These factors were partially offset by
non-recurring uses of cash for financing activities in 2017, including the
redemption of the preferred shares, payment of financing costs, and preferred
dividend payments, a decrease in debt repayments in 2018 and an increase in
proceeds from stock option exercises in 2018.
Contractual Obligations and Commitments
Our significant contractual obligations and commitments as of December 31, 2019
are shown in the following table.

                                                            Payment Due by

Period


                                                 Less Than                                       More Than
Contractual Obligations             Total         1 Year         1-3 Years

3-5 Years 5 Years

(In

millions)


Credit Facilities, including
interest (a)                     $   7,474     $       289     $       575     $     1,422     $     5,188
Senior Notes, including interest     7,387             266             531           4,964           1,626
Other long-term debt                    91               4              12              75               -
Operating lease obligations (b)      1,760             204             371             313             872
Purchase commitments (c)               659             612              43               4               -
Finance lease obligations              462              46              88              79             249
Total                            $  17,833     $     1,421     $     1,620     $     6,857     $     7,935

(a) We have estimated our interest payments through the maturity of our Credit

Facilities based on the one-month LIBOR as of December 31, 2019.

(b) Operating lease payment obligations have not been reduced by the amount of

payments due in the future under subleases.

food ingredients and advertising expenditures, and obligations related to

information technology and service agreements.




We have not included in the contractual obligations table approximately $598
million of gross liabilities for unrecognized tax benefits relating to various
tax positions we have taken. These liabilities may increase or decrease over
time primarily as a result of tax examinations, and given the status of the
examinations, we cannot reliably estimate the period of any cash settlement with
the respective taxing authorities. For additional information on unrecognized
tax benefits, see Note 11 to the accompanying consolidated financial statements
included in Part II, Item 8 "Financial Statements and Supplementary Data" of our
Annual Report.
Other Commercial Commitments and Off-Balance Sheet Arrangements
From time to time, we enter into agreements under which we guarantee loans made
by third parties to qualified franchisees. As of December 31, 2019, no material
amounts are outstanding under these guarantees.


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Critical Accounting Policies and Estimates
This discussion and analysis of financial condition and results of operations is
based on our audited consolidated financial statements, which have been prepared
in accordance with U.S. GAAP. The preparation of these financial statements
requires our management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues, and expenses, as well as related
disclosures of contingent assets and liabilities. We evaluate our estimates on
an ongoing basis and we base our estimates on historical experience and various
other assumptions we deem reasonable to the situation. These estimates and
assumptions form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. As
future events and their effects cannot be determined with precision, actual
results could differ significantly from these estimates. Changes in our
estimates could materially impact our results of operations and financial
condition in any particular period.
We consider our critical accounting policies and estimates to be as follows
based on the high degree of judgment or complexity in their application:
Goodwill and Intangible Assets Not Subject to Amortization
Goodwill represents the excess of the purchase price over the fair value of
assets acquired and liabilities assumed in acquisitions. Our indefinite-lived
intangible assets consist of the Tim Hortons brand, the Burger King brand, and
the Popeyes brand (each a "Brand" and together, the "Brands"). Goodwill and the
Brands are tested for impairment at least annually as of October 1 of each year
and more often if an event occurs or circumstances change, which indicate
impairment might exist. Our annual impairment tests of goodwill and the Brands
may be completed through qualitative assessments. We may elect to bypass the
qualitative assessment and proceed directly to a quantitative impairment test,
for any reporting unit or Brand, in any period. We can resume the qualitative
assessment for any reporting unit or Brand in any subsequent period.
Under a qualitative approach, our impairment review for goodwill consists of an
assessment of whether it is more-likely-than-not that a reporting unit's fair
value is less than its carrying amount. If we elect to bypass the qualitative
assessment for any reporting units, or if a qualitative assessment indicates it
is more-likely-than-not that the estimated carrying value of a reporting unit
exceeds its fair value, we perform a quantitative goodwill impairment test that
requires us to estimate the fair value of the reporting unit. If the fair value
of the reporting unit is less than its carrying amount, we will measure any
goodwill impairment loss as the amount by which the carrying amount of a
reporting unit exceeds its fair value, not to exceed the total amount of
goodwill allocated to that reporting unit. We use an income approach and a
market approach, when available, to estimate a reporting unit's fair value,
which discounts the reporting unit's projected cash flows using a discount rate
we determine from a market participant's perspective under the income approach
or utilizing similar publicly traded companies as guidelines for determining
fair value under the market approach. We make significant assumptions when
estimating a reporting unit's projected cash flows, including revenue, driven
primarily by net restaurant growth, comparable sales growth and average royalty
rates, general and administrative expenses, capital expenditures and income tax
rates.
Under a qualitative approach, our impairment review for the Brands consists of
an assessment of whether it is more-likely-than-not that a Brand's fair value is
less than its carrying amount. If we elect to bypass the qualitative assessment
for any of our Brands, or if a qualitative assessment indicates it is
more-likely-than-not that the estimated carrying value of a Brand exceeds its
fair value, we estimate the fair value of the Brand and compare it to its
carrying amount. If the carrying amount exceeds fair value, an impairment loss
is recognized in an amount equal to that excess. We use an income approach to
estimate a Brand's fair value, which discounts the projected Brand-related cash
flows using a discount rate we determine from a market participant's
perspective. We make significant assumptions when estimating Brand-related cash
flows, including system-wide sales, driven by net restaurant growth and
comparable sales growth, average royalty rates, brand maintenance costs and
income tax rates.
We completed our impairment reviews for goodwill and the Brands as of October 1,
2019, 2018 and 2017 and no impairment resulted. The estimates and assumptions we
use to estimate fair values when performing quantitative assessments are highly
subjective judgments based on our experience and knowledge of our operations.
Significant changes in the assumptions used in our analysis could result in an
impairment charge related to goodwill or the Brands. Circumstances that could
result in changes to future estimates and assumptions include, but are not
limited to, expectations of lower system-wide sales growth, which can be caused
by a variety of factors, increases in income tax rates and increases in discount
rates.

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Long-lived Assets
Long-lived assets (including intangible assets subject to amortization) are
tested for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Long-lived assets are
grouped for recognition and measurement of impairment at the lowest level for
which identifiable cash flows are largely independent of the cash flows of other
assets.
The impairment test for long-lived assets requires us to assess the
recoverability of our long-lived assets by comparing their net carrying value to
the sum of undiscounted estimated future cash flows directly associated with and
arising from our use and eventual disposition of the assets. If the net carrying
value of a group of long-lived assets exceeds the sum of related undiscounted
estimated future cash flows, we would be required to record an impairment charge
equal to the excess, if any, of net carrying value over fair value.
When assessing the recoverability of our long-lived assets, we make assumptions
regarding estimated future cash flows and other factors. Some of these
assumptions involve a high degree of judgment and also bear a significant impact
on the assessment conclusions. Included among these assumptions are estimating
undiscounted future cash flows, including the projection of rental income,
capital requirements for maintaining property and residual values of asset
groups. We formulate estimates from historical experience and assumptions of
future performance, based on business plans and forecasts, recent economic and
business trends, and competitive conditions. In the event that our estimates or
related assumptions change in the future, we may be required to record an
impairment charge.
Accounting for Income Taxes
We record income tax liabilities utilizing known obligations and estimates of
potential obligations. A deferred tax asset or liability is recognized whenever
there are future tax effects from existing temporary differences and operating
loss and tax credit carry-forwards. When considered necessary, we record a
valuation allowance to reduce deferred tax assets to the balance that is
more-likely-than-not to be realized. We must make estimates and judgments on
future taxable income, considering feasible tax planning strategies and taking
into account existing facts and circumstances, to determine the proper valuation
allowance. When we determine that deferred tax assets could be realized in
greater or lesser amounts than recorded, the asset balance and income statement
reflect the change in the period such determination is made. Due to changes in
facts and circumstances and the estimates and judgments that are involved in
determining the proper valuation allowance, differences between actual future
events and prior estimates and judgments could result in adjustments to this
valuation allowance.
During 2017, we recorded provisional estimates for the income tax effects of the
Tax Act in accordance with SAB 118, which established a one-year measurement
period where a provisional amount could be subject to adjustment. We finalized
these provisional estimates during 2018 and reflected such refinements as
discrete items along with the 2018 income tax effects of the Tax Act based on
applicable regulations and guidance issued to date. No further adjustments to
the charges were made in 2019. Given the complexity of the changes in the tax
law resulting from the Tax Act, further regulations and guidance are expected to
be issued by applicable authorities (e.g., Treasury, IRS, state taxing
authorities) subsequent to the date of filing. Accordingly, it is possible that
the amounts recorded may be impacted by such future developments. Any
adjustments to the amounts recorded will be reflected as discrete items in the
provision for income taxes in the period in which those adjustments become
reasonably estimable.
We file income tax returns, including returns for our subsidiaries, with
federal, provincial, state, local and foreign jurisdictions. We are subject to
routine examination by taxing authorities in these jurisdictions. We apply a
two-step approach to recognizing and measuring uncertain tax positions. The
first step is to evaluate available evidence to determine if it appears
more-likely-than-not that an uncertain tax position will be sustained on an
audit by a taxing authority, based solely on the technical merits of the tax
position. The second step is to measure the tax benefit as the largest amount
that is more than 50% likely of being realized upon settling the uncertain tax
position.
Although we believe we have adequately accounted for our uncertain tax
positions, from time to time, audits result in proposed assessments where the
ultimate resolution may result in us owing additional taxes. We adjust our
uncertain tax positions in light of changing facts and circumstances, such as
the completion of a tax audit, expiration of a statute of limitations, the
refinement of an estimate, and interest accruals associated with uncertain tax
positions until they are resolved. We believe that our tax positions comply with
applicable tax law and that we have adequately provided for these matters.
However, to the extent that the final tax outcome of these matters is different
than the amounts recorded, such differences will impact the provision for income
taxes in the period in which such determination is made.

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In prior periods, we provided deferred taxes on certain undistributed foreign
earnings. Under our transition to a modified territorial tax system whereby all
previously untaxed undistributed foreign earnings are subject to a transition
tax charge at reduced rates and future repatriations of foreign earnings will
generally be exempt from U.S. tax, we wrote off the existing deferred tax
liability on undistributed foreign earnings and recorded the impact of the new
transition tax charge on foreign earnings. We will continue to monitor available
evidence and our plans for foreign earnings and expect to continue to provide
any applicable deferred taxes based on the tax liability or withholding taxes
that would be due upon repatriation of amounts not considered permanently
reinvested.
We use an estimate of the annual effective income tax rate at each interim
period based on the facts and circumstances available at that time, while the
actual effective income tax rate is calculated at year-end.
See Note 11 to the accompanying consolidated financial statements included in
Part II, Item 8 "Financial Statements and Supplementary Data" of our Annual
Report for additional information about accounting for income taxes.
New Accounting Pronouncements
See Note 2, "Significant Accounting Policies - New Accounting Pronouncements,"
to the accompanying consolidated financial statements included in Part II, Item
8 "Financial Statements and Supplementary Data" of our Annual Report for a
discussion of new accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
We are exposed to market risks associated with currency exchange rates, interest
rates, commodity prices and inflation. In the normal course of business and in
accordance with our policies, we manage these risks through a variety of
strategies, which may include the use of derivative financial instruments to
hedge our underlying exposures. Our policies prohibit the use of derivative
instruments for speculative purposes, and we have procedures in place to monitor
and control their use.
Currency Exchange Risk
We report our results in U.S. dollars, which is our reporting currency. The
operations of each of TH, BK, and PLK that are denominated in currencies other
than the U.S. dollar are impacted by fluctuations in currency exchange rates and
changes in currency regulations. The majority of TH's operations, income,
revenues, expenses and cash flows are denominated in Canadian dollars, which we
translate to U.S. dollars for financial reporting purposes. Royalty payments
from BK franchisees in our European markets and in certain other countries are
denominated in currencies other than U.S. dollars. Furthermore, franchise
royalties from each of TH's, BK's, and PLK's international franchisees are
calculated based on local currency sales; consequently franchise revenues are
still impacted by fluctuations in currency exchange rates. Each of their
respective revenues and expenses are translated using the average rates during
the period in which they are recognized and are impacted by changes in currency
exchange rates.
We have numerous investments in our foreign subsidiaries, the net assets of
which are exposed to volatility in foreign currency exchange rates. We have
entered into cross-currency rate swaps to hedge a portion of our net investment
in such foreign operations against adverse movements in foreign currency
exchange rates. We designated cross-currency rate swaps with a notional value of
$5,000 million between Canadian dollar and U.S. dollar and cross-currency rate
swaps with a notional value of $2,100 million between the Euro and U.S. dollar,
as net investment hedges of a portion of our equity in foreign operations in
those currencies. The fair value of the cross-currency rate swaps is calculated
each period with changes in the fair value of these instruments reported in AOCI
to economically offset the change in the value of the net investment in these
designated foreign operations driven by changes in foreign currency exchange
rates. The net fair value of these derivative instruments was a liability of
$144 million as of December 31, 2019. The net unrealized losses, net of tax,
related to these derivative instruments included in AOCI totaled $122 million as
of December 31, 2019. Such amounts will remain in AOCI until the complete or
substantially complete liquidation of our investment in the underlying foreign
operations.
We use forward currency contracts to manage the impact of foreign exchange
fluctuations on U.S. dollar purchases and payments, such as coffee and certain
intercompany purchases, made by our TH Canadian operations. However, for a
variety of reasons, we do not hedge our revenue exposure in other currencies.
Therefore, we are exposed to volatility in those other currencies, and this
volatility may differ from period to period. As a result, the foreign currency
impact on our operating results for one period may not be indicative of future
results.

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During 2019, income from operations would have decreased or increased
approximately $119 million if all foreign currencies uniformly weakened or
strengthened 10% relative to the U.S. dollar, holding other variables constant,
including sales volumes. The effect of a uniform movement of all currencies by
10% is provided to illustrate a hypothetical scenario and related effect on
operating income. Actual results will differ as foreign currencies may move in
uniform or different directions and in different magnitudes.
Interest Rate Risk
We are exposed to changes in interest rates related to our Term Loan Facilities
and Revolving Credit Facility, which bear interest at LIBOR plus a spread,
subject to a LIBOR floor. Generally, interest rate changes could impact the
amount of our interest paid and, therefore, our future earnings and cash flows,
assuming other factors are held constant. To mitigate the impact of changes in
LIBOR on interest expense for a portion of our variable rate debt, we have
entered into interest rate swaps. We account for these derivatives as cash flow
hedges, and as such, the unrealized changes in market value are recorded in AOCI
and reclassified into earnings during the period in which the hedged forecasted
transaction affects earnings. At December 31, 2019, we had a series of
receive-variable, pay-fixed interest rate swaps to hedge the variability in the
interest payments on $4,000 million of our Term Loan Facilities. The total
notional value of these interest rate swaps is $4,000 million, of which $3,500
million expire on November 19, 2026 and $500 million expire on September 30,
2026.
Based on the portion of our variable rate debt balance in excess of the notional
amount of the interest rate swaps and LIBOR as of December 31, 2019, a
hypothetical 1.00% increase in LIBOR would increase our annual interest expense
by approximately $21 million.
There is currently uncertainty about whether LIBOR will continue to exist after
2021. The discontinuation of LIBOR after 2021 and the replacement with an
alternative reference rate may adversely impact interest rates and our interest
expense could increase.
Commodity Price Risk
We purchase certain products, which are subject to price volatility that is
caused by weather, market conditions and other factors that are not considered
predictable or within our control. However, in our TH business, we employ
various purchasing and pricing contract techniques, such as setting fixed prices
for periods of up to one year with suppliers, in an effort to minimize
volatility of certain of these commodities. Given that we purchase a significant
amount of green coffee, we typically have purchase commitments fixing the price
for a minimum of six to twelve months depending upon prevailing market
conditions. We also typically hedge against the risk of foreign exchange on
green coffee prices.
We occasionally take forward pricing positions through our suppliers to manage
commodity prices. As a result, we purchase commodities and other products at
market prices, which fluctuate on a daily basis and may differ between different
geographic regions, where local regulations may affect the volatility of
commodity prices.
We do not make use of financial instruments to hedge commodity prices. As we
make purchases beyond our current commitments, we may be subject to higher
commodity prices depending upon prevailing market conditions at such time.
Generally, increases and decreases in commodity costs are largely passed through
to franchisee owners, resulting in higher or lower revenues and higher or lower
costs of sales from our business. These changes may impact margins as many of
these products are typically priced based on a fixed-dollar mark-up. We and our
franchisees have some ability to increase product pricing to offset a rise in
commodity prices, subject to acceptance by franchisees and guests.
Impact of Inflation
We believe that our results of operations are not materially impacted by
moderate changes in the inflation rate. Inflation did not have a material impact
on our operations in 2019, 2018 or 2017. However, severe increases in inflation
could affect the global, Canadian and U.S. economies and could have an adverse
impact on our business, financial condition and results of operations. If
several of the various costs in our business experience inflation at the same
time, such as commodity price increases beyond our ability to control and
increased labor costs, we and our franchisees may not be able to adjust prices
to sufficiently offset the effect of the various cost increases without
negatively impacting consumer demand.

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Disclosures Regarding Partnership Pursuant to Canadian Exemptive Relief
We are the sole general partner of Partnership. To address certain disclosure
conditions to the exemptive relief that Partnership received from the Canadian
securities regulatory authorities, we are providing a summary of certain terms
of the Partnership exchangeable units. This summary is not complete and is
qualified in its entirety by the complete text of the Amended and Restated
Limited Partnership Agreement, dated December 11, 2014, between the Company,
8997896 Canada Inc. and each person who is admitted as a Limited Partner in
accordance with the terms of the agreement (the "partnership agreement") and the
Voting Trust Agreement, dated December 12, 2014, between the Company,
Partnership and Computershare Trust Company of Canada (the "voting trust
agreement"), copies of which are available on SEDAR at www.sedar.com and at
www.sec.gov. For a description of our common shares, see the Company's
Registration Statement on Form S-4 (File No. 333-198769).
The Partnership Exchangeable Units
The capital of Partnership consists of three classes of units: the Partnership
Class A common units, the Partnership preferred units and the Partnership
exchangeable units. Our interest, as the sole general partner of Partnership, is
represented by Class A common units and preferred units. The interests of the
limited partners is represented by the Partnership exchangeable units.
Summary of Economic and Voting Rights
The Partnership exchangeable units are intended to provide economic rights that
are substantially equivalent, and voting rights with respect to us that are
equivalent, to the corresponding rights afforded to holders of our common
shares. Under the terms of the partnership agreement, the rights, privileges,
restrictions and conditions attaching to the Partnership exchangeable units
include the following:

• The Partnership exchangeable units are exchangeable at any time, at the

option of the holder (the "exchange right"), on a one-for-one basis for

our common shares (the "exchanged shares"), subject to our right as the

general partner (subject to the approval of the conflicts committee in


         certain circumstances) to determine to settle any such exchange for a
         cash payment in lieu of our common shares. If we elect to make a cash

payment in lieu of issuing common shares, the amount of the cash payment

will be the weighted average trading price of the common shares on the

NYSE for the 20 consecutive trading days ending on the last business day

prior to the exchange date (the "exchangeable units cash amount").

Written notice of the determination of the form of consideration shall

be given to the holder of the Partnership exchangeable units exercising

the exchange right no later than ten business days prior to the exchange


         date.


•        If a dividend or distribution has been declared and is payable in
         respect of our common shares, Partnership will make a distribution in
         respect of each Partnership exchangeable unit in an amount equal to the
         dividend or distribution in respect of a common share. The record date
         and payment date for distributions on the Partnership exchangeable units
         will be the same as the relevant record date and payment date for the
         dividends or distributions on our common shares.

• If we issue any common shares in the form of a dividend or distribution

on our common shares, Partnership will issue to each holder of

Partnership exchangeable units, in respect of each exchangeable unit

held by such holder, a number of Partnership exchangeable units equal to


         the number of common shares issued in respect of each common share.


•        If we issue or distribute rights, options or warrants or other
         securities or assets to all or substantially all of the holders of our
         common shares, Partnership is required to make a corresponding
         distribution to holders of the Partnership exchangeable units.


•        No subdivision or combination of our outstanding common shares is
         permitted unless a corresponding subdivision or combination of
         Partnership exchangeable units is made.


•        We and our board of directors are prohibited from proposing or
         recommending an offer for our common shares or for the Partnership

exchangeable units unless the holders of the Partnership exchangeable


         units and the holders of common shares are entitled to participate to
         the same extent and on equitably equivalent basis.

• Upon a dissolution and liquidation of Partnership, if Partnership

exchangeable units remain outstanding and have not been exchanged for

our common shares, then the distribution of the assets of Partnership

between holders of our common shares and holders of Partnership

exchangeable units will be made on a pro rata basis based on the numbers

of common shares and Partnership exchangeable units outstanding. Assets

distributable to holders of Partnership exchangeable units will be

distributed directly to such holders. Assets distributable in respect of

our common shares will be distributed to us. Prior to this pro rata

distribution, Partnership is required to pay to us sufficient amounts to


         fund our expenses or other obligations (to the extent related to our
         role as the general partner



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or our business and affairs that are conducted through Partnership or its
subsidiaries) to ensure that any property and cash distributed to us in respect
of the common shares will be available for distribution to holders of common
shares in an amount per share equal to distributions in respect of each
Partnership exchangeable unit. The terms of the Partnership exchangeable units
do not provide for an automatic exchange of Partnership exchangeable units into
our common shares upon a dissolution or liquidation of Partnership or us.
•        Approval of holders of the Partnership exchangeable units is required
         for an action (such as an amendment to the partnership agreement) that
         would affect the economic rights of a Partnership exchangeable unit
         relative to a common share.

• The holders of Partnership exchangeable units are indirectly entitled to

vote in respect of matters on which holders of our common shares are

entitled to vote, including in respect of the election of our directors,

through a special voting share of the Company. The special voting share

is held by a trustee, entitling the trustee to that number of votes on

matters on which holders of common shares are entitled to vote equal to

the number of Partnership exchangeable units outstanding. The trustee is

required to cast such votes in accordance with voting instructions

provided by holders of Partnership exchangeable units. The trustee will

exercise each vote attached to the special voting share only as directed


         by the relevant holder of Partnership exchangeable units and, in the
         absence of instructions from a holder of an exchangeable unit as to

voting, will not exercise those votes. Except as otherwise required by

the partnership agreement, voting trust agreement or applicable law, the

holders of the Partnership exchangeable units are not directly entitled


         to receive notice of or to attend any meeting of the unitholders of
         Partnership or to vote at any such meeting.


Exercise of Optional Exchange Right
In order to exercise the exchange right referred to above, a holder of
Partnership exchangeable units must deliver to Partnership's transfer agent a
duly executed exchange notice together with such additional documents and
instruments as the transfer agent and Partnership may reasonably require. The
exchange notice must (i) specify the number of Partnership exchangeable units in
respect of which the holder is exercising the exchange right and (ii) state the
business day on which the holder desires to have Partnership exchange the
subject units, provided that the exchange date must not be less than 15 business
days nor more than 30 business days after the date on which the exchange notice
is received by Partnership. If no exchange date is specified in an exchange
notice, the exchange date will be deemed to be the 15th business day after the
date on which the exchange notice is received by Partnership. An exercise of the
exchange right may be revoked by the exercising holder by notice in writing
given to Partnership before the close of business on the fifth business day
immediately preceding the exchange date. On the exchange date, Partnership will
deliver or cause the transfer agent to deliver to the relevant holder, as
applicable (i) the applicable number of exchanged shares, or (ii) a cheque
representing the applicable exchangeable units cash amount, in each case, less
any amounts withheld on account of tax.
Offers for Units or Shares
The partnership agreement contains provisions to the effect that if a take-over
bid is made for all of the outstanding Partnership exchangeable units and not
less than 90% of the Partnership exchangeable units (other than units of
Partnership held at the date of the take-over bid by or on behalf of the offeror
or its associates, affiliates or persons acting jointly or in concert with the
offeror) are taken up and paid for by the offeror, the offeror will be entitled
to acquire the Partnership exchangeable units held by unitholders who did not
accept the offer on the terms offered by the offeror. The partnership agreement
further provides that for so long as Partnership exchangeable units remain
outstanding, (i) we will not propose or recommend a formal bid for our common
shares, and no such bid will be effected with the consent or approval of our
board of directors, unless holders of Partnership exchangeable units are
entitled to participate in the bid to the same extent and on an equitably
equivalent basis as the holders of our common shares, and (ii) we will not
propose or recommend a formal bid for Partnership exchangeable units, and no
such bid will be effected with the consent or approval of our board of
directors, unless holders of the Company's common shares are entitled to
participate in the bid to the same extent and on an equitably equivalent basis
as the holders of Partnership exchangeable units. Canadian securities regulatory
authorities may intervene in the public interest (either on application by an
interested party or by staff of a Canadian securities regulatory authority) to
prevent an offer to holders of our common shares, Preferred Shares or
Partnership exchangeable units being made or completed where such offer is
abusive of the holders of one of those security classes that are not subject to
that offer.
Merger, Sale or Other Disposition of Assets
As long as any Partnership exchangeable units are outstanding, we cannot
consummate a transaction in which all or substantially all of our assets would
become the property of any other person or entity. This does not apply to a
transaction if such other person or entity becomes bound by the partnership
agreement and assumes our obligations, as long as the transaction does not
impair in any material respect the rights, duties, powers and authorities of
other parties to the partnership agreement.

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Mandatory Exchange
Partnership may cause a mandatory exchange of the outstanding Partnership
exchangeable units into our common shares in the event that (1) at any time
there remain outstanding fewer than 5% of the number of Partnership exchangeable
units outstanding as of the effective time of the Merger (other than Partnership
exchangeable units held by us and our subsidiaries and as such number of
Partnership exchangeable units may be adjusted in accordance with the
partnership agreement); (2) any one of the following occurs: (i) any person,
firm or corporation acquires directly or indirectly any voting security of the
Company and immediately after such acquisition, the acquirer has voting
securities representing more than 50% of the total voting power of all the then
outstanding voting securities of the Company on a fully diluted basis, (ii) our
shareholders shall approve a merger, consolidation, recapitalization or
reorganization of the Company, other than any transaction which would result in
the holders of outstanding voting securities of the Company immediately prior to
such transaction having at least a majority of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction, with the voting power of each such
continuing holder relative to other continuing holders not being altered
substantially in the transaction; or (iii) our shareholders shall approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition of the Company of all or substantially all of the our assets,
provided that, in each case, we, in our capacity as the general partner of
Partnership, determine, in good faith and in our sole discretion, that such
transaction involves a bona fide third-party and is not for the primary purpose
of causing the exchange of the Partnership exchangeable units in connection with
such transaction; or (3) a matter arises in respect of which applicable law
provides holders of Partnership exchangeable units with a vote as holders of
units of Partnership in order to approve or disapprove, as applicable, any
change to, or in the rights of the holders of, the Partnership exchangeable
units, where the approval or disapproval, as applicable, of such change would be
required to maintain the economic equivalence of the Partnership exchangeable
units and our common shares, and the holders of the Partnership exchangeable
units fail to take the necessary action at a meeting or other vote of holders of
Partnership exchangeable units to approve or disapprove, as applicable, such
matter in order to maintain economic equivalence of the Partnership exchangeable
units and our common shares.

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Special Note Regarding Forward-Looking Statements
Certain information contained in our Annual Report, including information
regarding future financial performance and plans, targets, aspirations,
expectations, and objectives of management, constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and forward-looking information within the meaning of the Canadian
securities laws. We refer to all of these as forward-looking statements.
Forward-looking statements are forward-looking in nature and, accordingly, are
subject to risks and uncertainties. These forward-looking statements can
generally be identified by the use of words such as "believe", "anticipate",
"expect", "intend", "estimate", "plan", "continue", "will", "may", "could",
"would", "target", "potential" and other similar expressions and include,
without limitation, statements regarding our expectations or beliefs regarding
(i) our ability to become one of the most efficient franchised QSR operators in
the world; (ii) the benefits of our fully franchised business model; (iii) the
domestic and international growth opportunities for the Tim Hortons, Burger King
and Popeyes brands, both in existing and new markets; (iv) our ability to
accelerate international development through joint venture structures and master
franchise and development agreements and the impact on future growth and
profitability of our brands; (v) our continued use of joint ventures structures
and master franchise and development agreements in connection with our domestic
and international expansion; (vi) the impact of our strategies on the growth of
our Tim Hortons, Burger King and Popeyes brands and our profitability; (vii) our
commitment to technology and innovation and our plans and strategies with
respect to our information systems and technology offerings and investments;
(viii) the correlation between our sales, guest traffic and profitability to
consumer discretionary spending and the factors that influence spending;
(ix) our ability to drive traffic, expand our customer base and allow
restaurants to expand into new dayparts through new product innovation; (x) the
benefits accrued from sharing and leveraging best practices among our Tim
Hortons, Burger King and Popeyes brands; (xi) the drivers of the long-term
success for and competitive position of each of our brands as well as increased
sales and profitability of our franchisees; (xii) the impact of our cost
management initiatives at each of our brands; (xiii) the continued use of
certain franchise incentives and their impact on our financial results;
(xiv) the impact of our modern image remodel initiative; (xv) our future
financial obligations, including annual debt service requirements and capital
expenditures, the source of liquidity needed to satisfy such obligations, and
our ability to meet such obligations; (xvi) our future uses of liquidity,
including dividend payments and share repurchases; (xvii) future Corporate
restructuring and tax advisory fees; (xviii) our plans to build new warehouses
and renovate existing warehouses and the anticipated timing for completion;
(xix) our exposure to changes in interest rates and foreign currency exchange
rates and the impact of changes in interest rates and foreign currency exchange
rates on the amount of our interest payments, future earnings and cash flows;
(xx) our tax positions and their compliance with applicable tax laws;
(xxi) certain accounting matters, including the impact of changes in accounting
standards; (xxii) certain tax matters, such as our estimates with respect to tax
matters as a result of the Tax Act, including our effective tax rate for 2020
and the impacts of the Tax Act; (xxiii) the impact of inflation on our results
of operations; (xxiv) the impact of governmental regulation, both domestically
and internationally, on our business and financial and operational results;
(xxv) the adequacy of our facilities to meet our current requirements;
(xxvi) our future financial and operational results; (xxvii) certain litigation
matters; (xxviii) our target total dividend for 2020; and (xxix) our
sustainability initiatives and the impact of government sustainability
regulation and initiatives.
These forward looking statements represent management's expectations as of the
date hereof. These forward-looking statements are based on certain assumptions
and analyses that we made in light of our experience and our perception of
historical trends, current conditions and expected future developments, as well
as other factors we believe are appropriate in the circumstances. However, these
forward-looking statements are subject to a number of risks and uncertainties
and actual results may differ materially from those expressed or implied in such
statements. Important factors that could cause actual results, level of
activity, performance or achievements to differ materially from those expressed
or implied by these forward-looking statements include, among other things,
risks related to: (1) our substantial indebtedness, which could adversely affect
our financial condition and prevent us from fulfilling our obligations;
(2) global economic or other business conditions that may affect the desire or
ability of our customers to purchase our products such as inflationary
pressures, high unemployment levels, declines in median income growth, consumer
confidence and consumer discretionary spending and changes in consumer
perceptions of dietary health and food safety; (3) our relationship with, and
the success of, our franchisees and risks related to our fully franchised
business model; (4) the effectiveness of our marketing and advertising programs
and franchisee support of these programs; (5) significant and rapid fluctuations
in interest rates and in the currency exchange markets and the effectiveness of
our hedging activity; (6) our ability to successfully implement our domestic and
international growth strategy for each of our brands and risks related to our
international operations; (7) our reliance on master franchisees and
subfranchisees to accelerate restaurant growth; (8) the ability of the
counterparties to our credit facilities' and derivatives' to fulfill their
commitments and/or obligations; (9) changes in applicable tax laws or
interpretations thereof; and (10) risks related to the complexity of the Tax Act
and our ability to accurately interpret and predict its impact on our financial
condition and results.
Finally, our future results will depend upon various other risks and
uncertainties, including, but not limited to, those detailed in the section
entitled "Item 1A - Risk Factors" of our Annual Report as well as other
materials that we from time to time file with, or furnish to, the SEC or file
with Canadian securities regulatory authorities on SEDAR. All forward-looking

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statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements in this section and
elsewhere in this annual report. Other than as required under 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, changes in
expectations or otherwise.

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Table of Contents

Latest news about Restaurant Brands International Inc.

Restaurant Brands International Receives Shareholder proposal from The Accountability Board	Apr. 25	CI
Restaurant Brands International Receives Shareholder proposal from Michael Monteiro 2016 Rev Tr	Apr. 25	CI
Restaurant Brands International Receives Shareholder proposal from The Humane Society of the United States	Apr. 25	CI
Restaurant Brands International Receives Shareholder proposal from Trinity College Cambridge	Apr. 25	CI
Restaurant Brands International Receives Shareholder proposal from The Province of Saint Joseph of the Capuchin Order	Apr. 25	CI
Restaurant Brands International Receives Shareholder proposal from Accountability Standards Board	Apr. 25	CI
Citigroup Cuts Restaurant Brands International Price Target to $78 From $81, Maintains Neutral Rating	Apr. 16	MT
TD Cowen Adjusts Restaurant Brands International's Price Target to $84 From $90, Keeps Buy Rating	Apr. 12	MT
S&P Revises Outlook on Restaurant Brands International to Positive on Improving Leverage	Apr. 05	MT
Toronto Stocks Retreat; Lithium Americas Up on $2.26 Billion Financing Commitment from U.S. DOE	Mar. 14	DJ
News Highlights : Top Company News of the Day - Thursday at 11 AM ET	Mar. 14	DJ
Restaurant Brands International Names Sami Siddiqui CFO	Mar. 14	MT
Restaurant Brands International Appoints Sami Siddiqui CFO	Mar. 14	MT
Restaurant Brands International Names New Chief Financial Officer, Reports Other Changes	Mar. 14	MT
Restaurant Brands International Taps Sami Siddiqui as New CFO	Mar. 14	DJ
Restaurant Brands Brief: Thiago Santelmo Appointed President of International; Jeff Klein Appointed President of Popeyes US and Canada	Mar. 14	MT
Restaurant Brands Brief: Announcing Leadership Changes; Sami Siddiqui Appointed Chief Financial Officer	Mar. 14	MT
Restaurant Brands International Inc. Announces CFO Changes	Mar. 14	CI
Restaurant Brands International Inc. Announces Executive Changes	Mar. 14	CI
Best Buy Says Chairman J. Patrick Doyle Retiring in June, David Kenny Named Successor	Mar. 07	MT
Best Buy Chairman J. Patrick Doyle to Retire in June, David Kenny Named Successor	Mar. 07	MT
Tranche Update on Restaurant Brands International Inc.'s Equity Buyback Plan announced on August 31, 2023.	Feb. 22	CI
Restaurant Brands International Insider Sold Shares Worth $1,110,690, According to a Recent SEC Filing	Feb. 22	MT
Restaurant Brands International Insider Sold Shares Worth $891,014, According to a Recent SEC Filing	Feb. 22	MT
Restaurant Brands International Insider Sold Shares Worth $759,519, According to a Recent SEC Filing	Feb. 22	MT

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Company Profile

Restaurant Brands International Inc. is a quick-service restaurant company. It franchises and operates quick service restaurants serving premium coffee and other beverage and food products. Its segments include Tim Hortons (TH), Burger King (BK), Popeyes Louisiana Kitchen (PLK), Firehouse Subs (FHS) and International (INTL). Under the Tim Hortons brand, it operates in the donut/coffee/tea category of the quick service segment of the restaurant industry. Under the Burger King brand, it operates in the fast-food hamburger restaurant category of the quick service segment of the restaurant industry. Under the Popeyes brand, it operates in the chicken category of the quick service segment of the restaurant industry. Under the Firehouse Subs brand, it operates in the specialty subs category of the quick service segment of the restaurant industry. Its menu includes premium blend coffee, tea, espresso-based hot and cold specialty drinks, fresh baked goods, including donuts, bagels and more.

Sector

Restaurants & Bars

Calendar

2024-04-30 - Q1 2024 Earnings Release

More about the company

Income Statement Evolution

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Ratings for Restaurant Brands International Inc.

Trading Rating

Investor Rating

ESG Refinitiv

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Analysts' Consensus

Sell

Buy

Mean consensus

OUTPERFORM

Number of Analysts

Last Close Price

73.07 USD

Average target price

85.46 USD

Spread / Average Target

+16.95%

Consensus

EPS Revisions

Estimates Revisions

Quarterly earnings - Rate of surprise

Company calendar

Sector Quick Service Restaurants

	1st Jan change	Capi.
RESTAURANT BRANDS INTERNATIONAL INC.	-5.52%	22.9B
CHIPOTLE MEXICAN GRILL, INC.	+39.35%	85.48B
YUM! BRANDS, INC.	+8.50%	39.83B
RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP	-5.41%	23.94B
DOMINO'S PIZZA INC.	+21.07%	17.23B
YUM CHINA HOLDINGS, INC.	-6.55%	15.25B
WINGSTOP INC.	+49.10%	10.86B
AMERICANA RESTAURANTS INTERNATIONAL PLC	+4.47%	7.45B
MCDONALD'S HOLDINGS COMPANY (JAPAN), LTD.	+12.44%	5.86B
THE WENDY'S COMPANY	+3.39%	4.07B

Quick Service Restaurants

Restaurant Brands International Inc.

Equities

QSR

CA76131D1033

Restaurants & Bars

RESTAURANT BRANDS INTERNATIONAL : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

EPS Revisions