RESTAURANT BRANDS INTERNATIONAL INC. You should read the following discussion together with our unaudited condensed consolidated financial statements and the related notes thereto included in Part I, Item 1 "Financial Statements" of this 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 Canadian securities laws as described in further detail under "Special Note Regarding Forward-Looking Statements" set forth below. Actual results may differ materially from the results discussed in the forward-looking statements. Please refer to the risks and further discussion in the "Special Note Regarding Forward-Looking Statements" below. We prepare our financial statements in accordance with accounting principles generally accepted inthe 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 withU.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. Operating results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for the fiscal year and our key business measures, as discussed below, may decrease for any future period. Unless the context otherwise requires, all references in this section to "RBI", the "Company", "we", "us" or "our" are toRestaurant Brands International Inc. and its subsidiaries, collectively.
Overview
We are one of the world's largest quick service restaurant ("QSR") companies
with over $35 billion in annual system-wide sales and over 29,000 restaurants in
more than 100 countries as of March 31, 2022 . Our Tim Hortons®, Burger King®,
Popeyes®, and Firehouse Subs® brands have similar franchised business models
with complementary daypart mixes and product platforms. Our four 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, fried
shrimp, and other seafood, red beans and rice, and other regional items.
Firehouse Subs restaurants are quick service restaurants featuring hot and
hearty subs piled high with quality meats and cheese as well as chopped salads,
chili and soups, signature and other sides, soft drinks and local specialties.
Commencing upon the acquisition of Firehouse Subs in December 2021 , we have four
operating and reportable segments: (1) Tim Hortons ("TH"); (2) Burger King
("BK"); (3) Popeyes Louisiana Kitchen ("PLK"); and (4) Firehouse Subs ("FHS").
Our business generates revenue from the following sources: (i) franchise and
advertising revenues and other services, consisting primarily of royalties and
advertising fund contributions 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 TH 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.
In September 2021 , we announced targets to reduce greenhouse gas emissions by
50% by 2030, as approved by the Science Based Targets initiative, as well as a
commitment to achieving net-zero emissions by 2050. While most of the impact is
from scope 3 emissions that are not under our direct control, reaching these
targets will require us to devote resources to support changes by suppliers and
franchisees.
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COVID-19
The global crisis resulting from the spread of coronavirus ("COVID-19") impacted
our global restaurant operations for the three months ended March 31, 2022 and
2021, though in 2022 the impact was more modest than in the prior year.
During the three months ended March 31, 2022 and 2021, substantially all
restaurants remained open, some with limited operations, such as drive-thru,
takeout and delivery (where applicable), reduced, if any, dine-in capacity,
and/or restrictions on hours of operation. Certain markets periodically required
temporary closures while implementing government mandated lockdown orders. For
example, while most regions have eased restrictions, increases in cases and new
variants at the beginning of 2022 caused certain markets to re-impose temporary
restrictions as a result of government mandates. We expect local conditions to
continue to dictate limitations on restaurant operations, capacity, and hours of
operation.
During the three months ended
With the pandemic affecting consumer behavior, the importance of digital sales, including delivery, has grown. We expect to continue to support enhancements of our digital and marketing capabilities.
War in
Burger King enteredRussia ten years ago through a joint venture, of which we own a 15% minority stake that we've recently announced intentions to dispose. Burger King is our only brand with restaurants inRussia , and in 2021, represented 2.0% of consolidated system-wide sales, 2.9% of consolidated restaurant count excluding Firehouse Subs, 4.5% of consolidated net restaurant growth, 0.6% of consolidated revenues, and 1.7% of consolidated Adjusted EBITDA. During the first quarter of 2022, we shared a number of actions that we have taken to date as a result of the tragic events related toRussia's military invasion ofUkraine . We have suspended all corporate support for the Russian market, including operations, marketing, and supply chain support in addition to refusing approvals for new investment and expansion. While we currently includeRussia within reported key business metrics, we do not expect to recognize any profits in 2022. Operating Metrics
We evaluate our restaurants and assess our business based on the following operating metrics:
•System-wide sales growth refers to the percentage change in sales at all franchise restaurants and Company restaurants (referred to as system-wide sales) in one period from the same period in the prior year.
•Comparable sales refers to the percentage change in restaurant sales in one
period from the same prior year period for restaurants that have been open for
13 months or longer for TH, BK and FHS and 17 months or longer for PLK.
Additionally, if a restaurant is closed for a significant portion of a month,
the restaurant is excluded from the monthly comparable sales calculation.
•System-wide sales growth and comparable sales are measured on a constant
currency basis, which means the results exclude the effect of foreign currency
translation ("FX Impact"). For system-wide sales growth and comparable sales, we
calculate the FX Impact by translating prior year results at current year
monthly average exchange rates.
•Unless otherwise stated, system-wide sales growth, system-wide sales and
comparable sales are presented on a system-wide basis, which means they include
franchise restaurants and Company restaurants. System-wide results are driven by
our franchise restaurants, as approximately 100% of system-wide restaurants are
franchised. Franchise sales represent sales at all franchise restaurants and are
revenues to our franchisees. We do not record franchise sales as revenues;
however, our royalty revenues and advertising fund contributions are calculated
based on a percentage of franchise sales.
•Net restaurant growth refers to the net increase in restaurant count (openings,
net of permanent closures) over a trailing twelve month period, divided by the
restaurant count at the beginning of the trailing twelve month period.
These metrics are important indicators of the overall direction of our business, including trends in sales and the effectiveness of each brand's marketing, operations and growth initiatives.
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Results of Operations for the Three Months Ended
Tabular amounts in millions of
Variance
Three Months Ended FX Impact Excluding FX
Consolidated March 31, Variance (a) Impact
2022 2021 Favorable / (Unfavorable)
Revenues:
Sales $ 609 $ 507 $ 102 $ - $ 102
Franchise and property revenues 615 548 67 (8) 75
Advertising revenues and other services 227 205 22 - 22
Total revenues 1,451 1,260 191 (8) 199
Operating costs and expenses:
Cost of sales 494 401 (93) - (93)
Franchise and property expenses 130 116 (14) - (14)
Advertising expenses and other services 247 237 (10) - (10)
General and administrative expenses 133 104 (29) 1 (30)
(Income) loss from equity method investments 13 2 (11) - (11)
Other operating expenses (income), net (16) (42) (26) (3) (23)
Total operating costs and expenses 1,001 818 (183) (2) (181)
Income from operations 450 442 8 (10) 18
Interest expense, net 127 124 (3) - (3)
Income before income taxes 323 318 5 (10) 15
Income tax expense 53 47 (6) 1 (7)
Net income $ 270 $ 271 $ (1) $ (9) $ 8
(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.
Variance
Three Months Ended Excluding FX
TH Segment March 31, Variance FX Impact (a) Impact
2022 2021 Favorable / (Unfavorable)
Revenues:
Sales $ 566 $ 473 $ 93 $ - $ 93
Franchise and property revenues 206 190 16 - 16
Advertising revenues and other services 57 47 10 - 10
Total revenues 829 710 119 - 119
Cost of sales 453 370 (83) - (83)
Franchise and property expenses 81 81 - - -
Advertising expenses and other services 67 62 (5) - (5)
Segment G&A 29 24 (5) - (5)
Segment depreciation and amortization (b) 29 31 2 - 2
Segment income (c) 231 207 24 - 24
(b)Segment depreciation and amortization consists of depreciation and amortization included in cost of sales, franchise and property expenses and advertising expenses and other services.
(c)TH segment income includes
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Variance
Three Months Excluding FX
BK Segment Ended March 31, Variance FX Impact (a) Impact
2022 2021 Favorable / (Unfavorable)
Revenues:
Sales $ 16 $ 16 $ - $ - $ -
Franchise and property revenues 318 289 29 (8) 37
Advertising revenues and other services 109 102 7 - 7
Total revenues 443 407 36 (8) 44
Cost of sales 17 16 (1) - (1)
Franchise and property expenses 45 33 (12) - (12)
Advertising expenses and other services 119 118 (1) - (1)
Segment G&A 45 35 (10) 1 (11)
Segment depreciation and amortization (b) 12 12 - - -
Segment income 229 217 12 (7) 19
Variance
Three Months Excluding FX
PLK Segment Ended March 31, Variance FX Impact (a) Impact
2022 2021 Favorable / (Unfavorable)
Revenues:
Sales $ 17 $ 18 $ (1) $ - $ (1)
Franchise and property revenues 71 69 2 - 2
Advertising revenues and other services 60 56 4 - 4
Total revenues 148 143 5 - 5
Cost of sales 16 15 (1) - (1)
Franchise and property expenses 2 2 - - -
Advertising expenses and other services 61 57 (4) - (4)
Segment G&A 15 14 (1) - (1)
Segment depreciation and amortization (b) 2 2 - - -
Segment income 56 56 - - -
FHS Segment Three Months Ended March 31, 2022
Revenues:
Sales $ 10
Franchise and property revenues 20
Advertising revenues and other services 1
Total revenues 31
Cost of sales 8
Franchise and property expenses 2
Segment G&A 8
Segment income 14
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Three Months Ended
March 31,
Key Business Metrics 2022 2021
System-wide sales growth
TH 12.9 % (4.9) %
BK 16.5 % 1.8 %
PLK 4.1 % 7.0 %
Consolidated (a) 13.7 % 1.4 %
FHS (b) 7.4 % 27.0 %
System-wide sales
TH $ 1,556 $ 1,379
BK $ 5,818 $ 5,173
PLK $ 1,383 $ 1,344
FHS $ 272 $ -
Consolidated (a) $ 9,029 $ 7,896
FHS (b) $ - $ 254
Comparable sales
TH 8.4 % (2.3) %
BK 10.3 % 0.7 %
PLK (3.0) % 1.5 %
FHS (b) 4.2 % 24.2 %
As of March 31,
2022 2021
Net restaurant growth
TH 6.7 % 1.3 %
BK 3.1 % (0.8) %
PLK 7.9 % 4.8 %
Consolidated (a) 4.4 % 0.2 %
FHS (b) 1.8 % 1.7 %
Restaurant count
TH 5,320 4,987
BK 19,266 18,691
PLK 3,771 3,495
FHS 1,219 -
Consolidated 29,576 27,173
FHS (b) - 1,198
(a) Consolidated system-wide sales growth and consolidated net restaurant growth
do not include the results of Firehouse Subs for all of the periods presented.
Consolidated system-wide sales do not include the results of Firehouse Subs for
2021.
(b) 2021 Firehouse Subs figures are shown for informational purposes only, consistent with its fiscal calendar.
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Comparable Sales
For TH and BK, restaurant operations were less impacted by COVID-19 during the three months endedMarch 31, 2022 than in the same period in 2021, resulting in significant increases in system-wide sales growth and comparable sales during the three months endedMarch 31, 2022 .
TH comparable sales were 8.4% during the three months ended
BK comparable sales were 10.3% during the three months endedMarch 31, 2022 , including rest of the world comparable sales of 20.1% and relatively flatU.S. comparable sales.
PLK comparable sales were (3.0)% during the three months ended
FHS comparable sales were 4.2% during the three months ended
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. 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, including our consolidatedTH Restaurants VIEs. During the three months endedMarch 31, 2022 , the increase in sales was driven by an increase of$93 million in our TH segment and the inclusion of FHS of$10 million , partially offset by a decrease of$1 million in our PLK segment. The increase in our TH segment was driven by an increase in supply chain sales due to an increase in system-wide sales as well as increases in commodity prices and an increase in sales to retailers. During the three months endedMarch 31, 2022 , the increase in cost of sales was driven by an increase of$83 million in our TH segment, the inclusion of FHS of$8 million , an increase of$1 million in our BK segment, and an increase of$1 million in our PLK segment. The increase in our TH segment was driven by an increase in supply chain sales as well as increases in commodity prices and an increase in sales to retailers.
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). During the three months endedMarch 31, 2022 , the increase in franchise and property revenues was driven by an increase of$37 million in our BK segment, the inclusion of FHS of$20 million , an increase of$16 million in our TH segment, and an increase of$2 million in our PLK segment, partially offset by an unfavorable FX Impact of$8 million . The increases were primarily driven by increases in royalties in our TH, BK and PLK segments, and increases in rent in our TH segment, as a result of increases in system-wide sales. During the three months endedMarch 31, 2022 , the increase in franchise and property expenses was driven by an increase of$12 million in our BK segment and the inclusion of FHS of$2 million . The increase in our BK segment was primarily related to bad debt expenses in the current year, primarily related toRussia , compared to bad debt recoveries in the prior year. 31
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Advertising and other services
Advertising revenues and other services consist primarily of advertising contributions earned on franchise sales and are based on a percentage of system-wide sales and intended to fund advertising expenses. Other services consists primarily of fees that partially offset expenses related to technology initiatives. Advertising expenses and other services consist primarily of expenses relating to marketing, advertising and promotion, including market research, production, advertising costs, sales promotions, social media campaigns, technology initiatives, depreciation and amortization and other related support functions for the respective brands. We manage advertising expenses to equal advertising revenues in the long term, however in some periods there may be a mismatch in the timing of revenues and expense. During the three months endedMarch 31, 2022 , the increase in advertising revenues and other services was driven by an increase of$10 million in our TH segment, an increase of$7 million in our BK segment, an increase of$4 million in our PLK segment, and the inclusion of FHS of$1 million . The increases in our TH, BK and PLK segments were primarily driven by increases in system-wide sales. During the three months endedMarch 31, 2022 , the increase in advertising expenses and other services was driven by an increase of$5 million in our TH segment, an increase of$4 million in our PLK segment, and an increase of$1 million in our BK segment.
General and Administrative Expenses
Our general and administrative expenses consisted of the following:
Variance
Three Months Ended March 31, $ %
2022 2021 Favorable / (Unfavorable)
Segment G&A:
TH $ 29 $ 24 $ (5) (20.8) %
BK 45 35 (10) (28.6) %
PLK 15 14 (1) (7.1) %
FHS 8 - (8) NM
Share-based compensation and non-cash incentive
compensation expense 27 26 (1) (3.8) %
Depreciation and amortization 5 4 (1) (25.0) %
FHS Transaction costs 1 - (1) NM
Corporate restructuring and tax advisory fees 3 1 (2) NM
General and administrative expenses $ 133 $ 104 $ (29) (27.9) %
NM - not meaningful
Segment general and administrative expenses ("Segment G&A") consist primarily of
salary and employee-related costs for non-restaurant employees, professional
fees, information technology systems, and general overhead for our corporate
offices. Segment G&A excludes share-based compensation and non-cash incentive
compensation expense, depreciation and amortization, FHS Transaction costs and
Corporate restructuring and tax advisory fees.
During the three months ended March 31, 2022 , the increase in Segment G&A for
our TH, BK and PLK segments was primarily driven by higher salary and
employee-related costs for non-restaurant employees, largely a result of hiring
across a number of key areas.
In connection with the Firehouse Subs acquisition, we incurred certain non-recurring fees and expenses ("FHS Transaction costs") consisting of professional fees, compensation related expenses and integration costs. We expect to incur additional FHS Transaction costs during the remainder of 2022.
In connection with certain transformational corporate restructuring initiatives
that rationalize our structure and optimize cash movement within our structure,
including services related to significant tax reform legislation, regulations
and related restructuring initiatives, we incurred expenses primarily from
professional advisory and consulting services ("Corporate
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restructuring and tax advisory fees"). We expect to incur additional Corporate restructuring and tax advisory fees during the remainder of 2022.
(Income) Loss from Equity Method Investments
(Income) loss from equity method investments reflects our share of investee net income or loss and non-cash dilution gains or losses from changes in our ownership interests in equity method investees.
The change in (income) loss from equity method investments during the three
months ended
Other Operating Expenses (Income), net
Our other operating expenses (income), net were comprised of the following:
Three Months
Ended March 31,
2022 2021Net losses (gains) on disposal of assets, restaurant closures, and refranchisings
$ 2 $ (2) Litigation settlements (gains) and reserves, net 1 2 Net losses (gains) on foreign exchange (21) (43) Other, net 2 1 Other operating expenses (income), net$ (16) $ (42)
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.
Net losses (gains) on foreign exchange is primarily related to revaluation of foreign denominated assets and liabilities.
Interest Expense, net
Our interest expense, net and the weighted average interest rate on our long-term debt were as follows:
Three Months
Ended March 31,
2022 2021
Interest expense, net $ 127 $ 124
Weighted average interest rate on long-term debt 4.0 % 4.2 %
During the three months ended
Income Tax Expense
Our effective tax rate was 16.6% and 14.7% for the three months endedMarch 31, 2022 and 2021, respectively. Our effective tax rate was unfavorably impacted by changes to the relative mix of our income from multiple tax jurisdictions and lower excess tax benefits from equity-based compensation, partially offset by favorable structural changes. There may continue to be some quarter-to-quarter volatility of our effective tax rate as our mix of income from multiple tax jurisdictions and related income forecasts change due to the effects of COVID-19. OnDecember 28, 2021 , theU.S. Treasury Department released final regulations (T.D. 9959, published in theFederal Register onJanuary 4, 2022 ) restricting the ability to credit certain foreign taxes, applicable prospectively startingJanuary 1, 2022 . Due to these new regulations, we released discretely this quarter a portion of the valuation allowance on our foreign tax credit carryforwards. Based on our current analysis, we do not expect these regulations to have a material, ongoing impact as we anticipate being in an excess credit position prospectively. 33
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Net Income
We reported net income of$270 million for the three months endedMarch 31, 2022 , compared to net income of$271 million for the three months endedMarch 31, 2021 . The decrease in net income is primarily due to a$26 million unfavorable change in the results from other operating expenses (income), net, a$12 million unfavorable change from the impact of equity method investments, a$6 million increase in income tax expense, a$3 million increase in interest expense, net, a$2 million increase in Corporate restructuring and tax advisory fees, a$1 million increase in share-based compensation and non-cash incentive compensation expense and$1 million of FHS transaction costs. These factors were partially offset by a$24 million increase in TH segment income, the inclusion of FHS segment income of$14 million , and a$12 million increase in BK segment income. Amounts above include a total unfavorable FX Impact to net income of$9 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 underU.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 they provide 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 (i) the non-cash impact of share-based compensation and non-cash incentive compensation expense, (ii) (income) loss from equity method investments, net of cash distributions received from equity method investments, (iii) other operating expenses (income), net and, (iv) income/expenses from non-recurring projects and non-operating activities. For the periods referenced, income/expenses from non-recurring projects and non-operating activities included (i) non-recurring fees and expense incurred in connection with the Firehouse Acquisition consisting of professional fees, compensation related expenses and integration costs; and (ii) costs from professional advisory and consulting services associated with certain transformational corporate restructuring initiatives that rationalize our structure and optimize cash movements, including services related to significant tax reform legislation, regulations and related restructuring initiatives. Management believes that these types of expenses are either not related to our underlying profitability drivers or not likely to re-occur in the foreseeable future and the varied timing, size and nature of these projects may cause volatility in our results unrelated to the performance of our core business that does not reflect trends of our core operations. 34
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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 relevant to management's assessment of our operating
performance. Adjusted EBITDA, as defined above, also represents our measure of
segment income for each of our four operating segments.
Variance
Three Months Ended March 31, $ %
2022 2021 Favorable / (Unfavorable)
Segment income:
TH $ 231 $ 207 $ 24 11.7 %
BK 229 217 12 5.5 %
PLK 56 56 - 0.3 %
FHS 14 - 14 NM
Adjusted EBITDA 530 480 50 10.4 %
Share-based compensation and non-cash incentive
compensation expense 27 26 (1) (3.8) %
FHS Transaction costs 1 - (1) NM
Corporate restructuring and tax advisory fees 3 1 (2) NM
Impact of equity method investments (a) 16 4 (12) NM
Other operating expenses (income), net (16) (42) (26) 61.9 %
EBITDA 499 491 8 1.6 %
Depreciation and amortization 49 49 - - %
Income from operations 450 442 8 1.8 %
Interest expense, net 127 124 (3) (2.4) %
Income tax expense 53 47 (6) NM
Net income $ 270 $ 271 $ (1) (0.4) %
NM - not meaningful
(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.
The increase in Adjusted EBITDA for three months ended March 31, 2022 reflects
the increases in segment income in our TH and BK segments, the inclusion of FHS
and an unfavorable FX Impact of $7 million .
The increase in EBITDA for the three months ended March 31, 2022 is primarily
due to increases in segment income in our TH and BK segments and the inclusion
of FHS, partially offset by an unfavorable change from other operating expenses
(income) net, and an unfavorable change from the impact of equity method
investments. The increase in EBITDA includes an unfavorable FX Impact of $10
million .
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 of Partnership ("Partnership
exchangeable units"), to voluntarily prepay and repurchase our or one of our
affiliate's outstanding debt, to fund acquisitions such as the Firehouse
Acquisition and other investing activities, such as capital expenditures and
joint ventures, 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.
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As ofMarch 31, 2022 , we had cash and cash equivalents of$895 million and borrowing availability of$998 million under our senior secured revolving credit facility (the "Revolving Credit Facility"). Based on our current level of operations and available cash, we believe our cash flow from operations, combined with our 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. OnJuly 28, 2021 , our board of directors approved a share repurchase authorization that allows us to purchase up to$1,000 million of our common shares untilAugust 10, 2023 . OnAugust 6, 2021 , we announced that theToronto 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 30,382,519 common shares for the 12-month period commencing onAugust 10, 2021 and ending onAugust 9, 2022 , 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, theNew 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. During the three months endedMarch 31, 2022 , we repurchased and cancelled 2,860,002 RBI common shares on the open market for$161 million and as ofMarch 31, 2022 had$288 million remaining under the authorization. Repurchases under the Company's authorization will be made in the open market or through privately negotiated transactions. We generally provide applicable deferred taxes based on the tax liability or withholding taxes that would be due upon repatriation of cash associated with unremitted earnings. We will continue to monitor our plans for such cash and related foreign earnings but our expectation is to continue to provide taxes on unremitted earnings that we expect to distribute.
Debt Instruments and Debt Service Requirements
As ofMarch 31, 2022 , our long-term debt consists primarily of borrowings under our Credit Facilities, amounts outstanding under our 3.875% FirstLien Senior Notes due 2028, 5.75% First Lien Senior Notes due 2025, 3.50% FirstLien Senior Notes due 2029, 4.375% Second Lien Senior Notes due 2028, 4.00% Second Lien Senior Notes due 2030 (together, the "Senior Notes"), TH Facility, RE Facility, and obligations under finance leases. For further information about our long-term debt, see Note 11 to the accompanying unaudited condensed consolidated financial statements included in this report. As ofMarch 31, 2022 , there was$6,480 million outstanding principal amount under our senior secured term loan facilities (the "Term Loan Facilities" and together with the Revolving Credit Facility, the "Credit Facilities") with a weighted average interest rate of 2.10%. The interest rate applicable to borrowings under our Term Loan A and Revolving Credit Facility is, at our option, either (i) a base rate, subject to a floor of 1.00%, plus an applicable margin varying from 0.00% to 0.50%, or (ii) Adjusted Term SOFR (Adjusted Term SOFR is calculated as Term SOFR plus a 0.10% adjustment), subject to a floor of 0.00%, plus an applicable margin varying between 0.75% to 1.50%, in each case, determined by reference to a net first lien leverage based pricing grid. The interest rate applicable to borrowings under our Term Loan B is, at our option, either (i) a base rate, subject to a floor of 1.00%, plus an applicable margin of 0.75% or (ii) a Eurocurrency rate, subject to a floor of 0.00%, plus an applicable margin of 1.75%. Based on the amounts outstanding under the Term Loan Facilities and LIBOR/SOFR (Secured Overnight Financing Rate) as ofMarch 31, 2022 , subject to a floor of 0.00%, required debt service for the next twelve months is estimated to be approximately$138 million in interest payments and$61 million in principal payments. In addition, based on LIBOR as ofMarch 31, 2022 , net cash settlements that we expect to pay on our$4,000 million interest rate swap are estimated to be approximately$45 million for the next twelve months. Based on the amounts outstanding atMarch 31, 2022 , required debt service for the next twelve months on all of the Senior Notes outstanding is approximately$264 million in interest payments. Based on the amounts outstanding under the TH Facility as ofMarch 31, 2022 , required debt service for the next twelve months is estimated to be approximately$4 million in interest payments and$9 million in principal payments.
Restrictions and Covenants
As of
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Cash Dividends
On
Our board of directors has declared a cash dividend of$0.54 per common share, which will be paid onJuly 6, 2022 to common shareholders of record onJune 22, 2022 . Partnership will also make a distribution in respect of each Partnership exchangeable unit in the amount of$0.54 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. In addition, 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. We expect to pay all dividends from cash generated from our operations.
Outstanding Security Data
As ofApril 26, 2022 , we had outstanding 308,777,102 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 14 to the audited consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSEC and Canadian securities regulatory authorities onFebruary 23, 2022 . There were 143,460,786 Partnership exchangeable units outstanding as ofApril 26, 2022 . During the three months endedMarch 31, 2022 , Partnership exchanged 1,525,900 Partnership exchangeable units pursuant to exchange notices received. SinceDecember 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$234 million for the three months endedMarch 31, 2022 , compared to$266 million during the same period in the prior year. The decrease in cash provided by operating activities was driven by an increase in cash used for working capital, partially offset by an increase in segment income in our TH and BK segments, the inclusion of FHS segment income and a decrease in income tax payments.
Investing Activities
Cash provided by investing activities was$1 million for the three months endedMarch 31, 2022 , compared to cash used for investing activities of$7 million during the same period in the prior year. This change was driven primarily by proceeds from other investing activities in the current year compared to payments from other investing activities in the prior year.
Financing Activities
Cash used for financing activities was$426 million for the three months endedMarch 31, 2022 , compared to$261 million during the same period in the prior year. The change in cash used for financing activities was driven primarily by cash used to repurchase RBI common shares in the current year.
Critical Accounting Policies and Estimates
For information regarding our Critical Accounting Policies and Estimates, see the "Critical Accounting Policies and Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K, filed with theU.S. Securities and Exchange Commission (the "SEC") onFebruary 23, 2022 . 37
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New Accounting Pronouncements
See Note 3 - New Accounting Pronouncements in the notes to the accompanying unaudited condensed consolidated financial statements.
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