Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Description of Business and Organization
Restaurant Brands International Limited Partnership (“Partnership”, “we”, “us” or “our”) was formed on August 25, 2014 as a general partnership and was registered on October 27, 2014 as a limited partnership in accordance with the laws of the Province of Ontario. We franchise and operate quick service restaurants serving premium coffee and other beverage and food products under the Tim Hortons® brand (“Tim Hortons” or “TH”), fast food hamburgers principally under the Burger King® brand (“Burger King” or “BK”), and chicken under the Popeyes® brand (“Popeyes” or “PLK”). We are one of the world’s largest quick service restaurant, or QSR, companies as measured by total number of restaurants. As of September 30, 2019, we franchised or owned 4,887 Tim Hortons restaurants, 18,232 Burger King restaurants, and 3,192 Popeyes restaurants, for a total of 26,311 restaurants, and operate in more than 100 countries and U.S. territories. Approximately 100% of current system-wide restaurants are franchised.
We are a subsidiary of Restaurant Brands International Inc. (“RBI”). RBI is our sole general partner, and as such, RBI has the exclusive right, power and authority to manage, control, administer and operate the business and affairs and to make decisions regarding the undertaking and business of Partnership in accordance with the partnership agreement of Partnership (“partnership agreement”) and applicable laws.
All references to “$” or “dollars” are to the currency of the United States unless otherwise indicated. All references to “Canadian dollars” or “C$” are to the currency of Canada unless otherwise indicated.
Note 2. Basis of Presentation and Consolidation
We have prepared the accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. Therefore, the Financial Statements should be read in conjunction with the audited consolidated financial statements contained in our Annual Report on Form 10-K filed with the SEC and Canadian securities regulatory authorities on February 22, 2019.
The Financial Statements include our accounts and the accounts of entities in which we have a controlling financial interest, the usual condition of which is ownership of a majority voting interest. All material intercompany balances and transactions have been eliminated in consolidation. Investments in other affiliates that are owned 50% or less where we have significant influence are accounted for by the equity method.
We also consider for consolidation entities in which we have certain interests, where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity that possesses the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. Our maximum exposure to loss resulting from involvement with VIEs is attributable to accounts and notes receivable balances, outstanding loan guarantees and future lease payments, where applicable.
As our franchise and master franchise arrangements provide the franchise and master franchise entities the power to direct the activities that most significantly impact their economic performance, we do not consider ourselves the primary beneficiary of any such entity that might be a VIE.
Tim Hortons has historically entered into certain arrangements in which an operator acquires the right to operate a restaurant, but Tim Hortons owns the restaurant’s assets. We perform an analysis to determine if the legal entity in which operations are conducted is a VIE and consolidate a VIE entity if we also determine Tim Hortons is the entity’s primary beneficiary (“Restaurant VIEs”). As of September 30, 2019 and December 31, 2018, we determined that we are the primary beneficiary of 30 and 17 Restaurant VIEs, respectively, and accordingly, have consolidated the results of operations, assets and liabilities, and cash flows of these Restaurant VIEs in our Financial Statements. Material intercompany accounts and transactions have been eliminated in consolidation.
In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included in the Financial Statements. The results for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the full year.
The preparation of consolidated financial statements in conformity with U.S. GAAP and related rules and regulations of the SEC requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.
Certain prior year amounts in the accompanying Financial Statements and notes to the Financial Statements have been reclassified in order to be comparable with the current year classifications. These consist of the reclassification of $25 million from changes in Other long-term assets and liabilities in the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2018 to Tenant inducements paid to franchisees. These reclassifications had no effect on previously reported net income.
Note 3. New Accounting Pronouncements
Lease Accounting – In February 2016, the Financial Accounting Standard Board (the “FASB”) issued new guidance on leases. We adopted this new guidance on January 1, 2019. See Note 4, Leases, for further information about our transition to this new lease accounting standard.
Goodwill Impairment – In January 2017, the FASB issued guidance to simplify how an entity measures goodwill impairment by removing the second step of the two-step quantitative goodwill impairment test. An entity will no longer be required to perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured at the amount by which the carrying value exceeds the fair value of a reporting unit; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendment requires prospective adoption and is effective commencing in 2020 with early adoption permitted. The adoption of this new guidance will not have a material impact on our Financial Statements.
Reclassification of Certain Tax Effects – In February 2018, the FASB issued guidance which allows a reclassification from accumulated other comprehensive income (loss) to retained earnings for the tax effects of certain items within accumulated other comprehensive income (loss). The amendment is effective commencing in 2019 with early adoption permitted. The adoption of this new guidance did not have a material impact on our Financial Statements.
Share-based payment arrangements with nonemployees – In June 2018, the FASB issued guidance which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The amendment is effective commencing in 2019 with early adoption permitted. The adoption of this new guidance did not have a material impact on our Financial Statements.
Note 4. Leases
As of September 30, 2019, we leased or subleased 5,294 restaurant properties to franchisees and 183 non-restaurant properties to third parties under operating leases and direct financing leases where we are the lessor. Initial lease terms generally range from 10 to 20 years. Most leases to franchisees provide for fixed monthly payments and many provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent, determined as a percentage of sales, generally when annual sales exceed specified levels. Lessees typically bear the cost of maintenance, insurance and property taxes.
We lease land, buildings, equipment, office space and warehouse space. Land and building leases generally have an initial term of 10 to 30 years, while land-only lease terms can extend longer, and most leases provide for fixed monthly payments. Many of these leases provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent payments, determined as a percentage of sales, generally when annual sales exceed specified levels. Most leases also obligate us to pay, as lessee, the cost of maintenance, insurance and property taxes.
We transitioned to FASB Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), from ASC Topic 840, Leases (the “Previous Standard”) on January 1, 2019 on a modified retrospective basis using the effective date transition method. Our 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 the Previous Standard. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by finance and operating leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Our transition to ASC 842 resulted in the gross presentation of property tax and maintenance expenses and related lessee reimbursements as franchise and property expenses and franchise and property revenues, respectively. These expenses and reimbursements were presented on a net basis under the Previous Standard.
In connection with our transition to ASC 842, we elected the package of practical expedients under which we did not reassess the classification of our existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. We also elected lessee and lessor practical expedients to not separate non-lease components comprised of maintenance from lease components for real estate leases that commenced prior to our transition to ASC 842, as well as for leases that commence or that are modified subsequent to our transition to ASC 842. We did not elect the practical expedient that permitted a reassessment of lease terms for existing leases.
Financial Statement Impact of Transition to ASC 842
Transition Impact on January 1, 2019 Condensed Consolidated Balance Sheet
Our transition to ASC 842 represents a change in accounting principle. The $21 million cumulative effect of our transition to ASC 842 is reflected as an adjustment to January 1, 2019 Partners' capital.
Our transition to ASC 842 resulted in the following adjustments to our condensed consolidated balance sheet as of January 1, 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Reported
|
|
Total
|
|
Adjusted
|
|
December 31, 2018
|
|
Adjustments
|
|
January 1, 2019
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
913
|
|
|
$
|
—
|
|
|
$
|
913
|
|
Accounts and notes receivable, net
|
452
|
|
|
—
|
|
|
452
|
|
Inventories, net
|
75
|
|
|
—
|
|
|
75
|
|
Prepaids and other current assets
|
60
|
|
|
—
|
|
|
60
|
|
Total current assets
|
1,500
|
|
|
—
|
|
|
1,500
|
|
Property and equipment, net
|
1,996
|
|
|
26
|
|
(a)
|
2,022
|
|
Operating lease assets, net
|
—
|
|
|
1,143
|
|
(b)
|
1,143
|
|
Intangible assets, net
|
10,463
|
|
|
(133
|
)
|
(c)
|
10,330
|
|
Goodwill
|
5,486
|
|
|
—
|
|
|
5,486
|
|
Net investment in property leased to franchisees
|
54
|
|
|
—
|
|
|
54
|
|
Other assets, net
|
642
|
|
|
—
|
|
|
642
|
|
Total assets
|
$
|
20,141
|
|
|
$
|
1,036
|
|
|
$
|
21,177
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts and drafts payable
|
$
|
513
|
|
|
$
|
—
|
|
|
$
|
513
|
|
Other accrued liabilities
|
637
|
|
|
114
|
|
(d)
|
751
|
|
Gift card liability
|
167
|
|
|
—
|
|
|
167
|
|
Current portion of long term debt and finance leases
|
91
|
|
|
—
|
|
|
91
|
|
Total current liabilities
|
1,408
|
|
|
114
|
|
|
1,522
|
|
Term debt, net of current portion
|
11,823
|
|
|
(65
|
)
|
(e)
|
11,758
|
|
Finance leases, net of current portion
|
226
|
|
|
62
|
|
(e)
|
288
|
|
Operating lease liabilities, net of current portion
|
—
|
|
|
1,028
|
|
(f)
|
1,028
|
|
Other liabilities, net
|
1,547
|
|
|
(132
|
)
|
(g)
|
1,415
|
|
Deferred income taxes, net
|
1,519
|
|
|
8
|
|
(h)
|
1,527
|
|
Total liabilities
|
16,523
|
|
|
1,015
|
|
|
17,538
|
|
Partners' capital:
|
|
|
|
|
|
Class A common units
|
4,323
|
|
|
12
|
|
(i)
|
4,335
|
|
Partnership exchangeable units
|
730
|
|
|
9
|
|
(i)
|
739
|
|
Accumulated other comprehensive income (loss)
|
(1,437
|
)
|
|
—
|
|
|
(1,437
|
)
|
Total Partners' capital
|
3,616
|
|
|
21
|
|
|
3,637
|
|
Noncontrolling interests
|
2
|
|
|
—
|
|
|
2
|
|
Total equity
|
3,618
|
|
|
21
|
|
|
3,639
|
|
Total liabilities and equity
|
$
|
20,141
|
|
|
$
|
1,036
|
|
|
$
|
21,177
|
|
|
|
(a)
|
Represents the net change in assets recorded in connection with build-to-suit leases.
|
|
|
(b)
|
Represents the capitalization of operating lease right-of-use (“ROU”) assets equal to the amount of recognized operating lease liability, adjusted by the net carrying amounts of related favorable lease assets and unfavorable lease liabilities in which we are the lessee and straight-line rent accruals, which were reclassified to operating lease ROU assets.
|
|
|
(c)
|
Represents the net carrying amount of favorable lease assets associated with leases in which we are the lessee, which have been reclassified to operating lease ROU assets.
|
|
|
(d)
|
Represents the current portion of operating lease liabilities.
|
|
|
(e)
|
Represents the net change in liabilities recorded in connection with build-to-suit leases.
|
|
|
(f)
|
Represents the recognition of operating lease liabilities, net of current portion.
|
|
|
(g)
|
Represents the net carrying amount of unfavorable lease liabilities associated with leases in which we are the lessee and $64 million of straight-line rent accruals which have been reclassified to operating lease ROU assets.
|
|
|
(h)
|
Represents the net tax effects of the adjustments noted above, with a corresponding adjustment to Partners' capital.
|
|
|
(i)
|
Represents net change in assets and liabilities recorded in connection with built-to-suit leases and the tax effects of adjustments noted above.
|
Changes to Lease Accounting Significant Accounting Policies Under ASC 842
In all leases, whether we are the lessor or lessee, we define lease term as the noncancellable term of the lease plus any renewals covered by renewal options that are reasonably certain of exercise based on our assessment of the economic factors relevant to the lessee. The noncancellable term of the lease commences on the date the lessor makes the underlying property in the lease available to the lessee, irrespective of when lease payments begin under the contract.
Lessor Accounting
We recognize lease payments for operating leases as property revenue on a straight-line basis over the lease term and property revenue is presented net of any related sales tax. Lease incentive payments we make to lessees are amortized as a reduction in property revenue over the lease term. We account for reimbursements of maintenance and property tax costs paid to us by lessees as variable lease payment property revenue.
We also have net investments in properties leased to franchisees, which met the criteria of direct financing leases under the Previous Standard. Investments in direct financing leases are recorded on a net basis, consisting of the gross investment and estimated residual value in the lease, less unearned income. Unearned income on direct financing leases is recognized over the lease term yielding a constant periodic rate of return on the net investment in the lease. We do not remeasure the net investment in a direct financing lease unless the lease is modified and that modification is not accounted for as a separate contract.
We recognize variable lease payment income for operating and direct financing leases in the period when changes in facts and circumstances on which the variable lease payments are based occur.
Lessee Accounting
In leases where we are the lessee, we recognize an ROU asset and lease liability at lease commencement, which are measured by discounting lease payments using our incremental borrowing rate as the discount rate. We determine the incremental borrowing rate applicable to each lease by reference to our outstanding secured borrowings and implied spreads over the risk-free discount rates that correspond to the term of each lease, as adjusted for the currency of the lease. Subsequent amortization of the ROU asset and accretion of the lease liability for an operating lease is recognized as a single lease cost, on a straight-line basis, over the lease term. Amortization of the ROU asset and the change in the lease liability are included in changes in Other long-term assets and liabilities in the Condensed Consolidated Statement of Cash Flows. A finance lease ROU asset is depreciated on a straight-line basis over the lesser of the useful life of the leased asset or lease term. Interest on each finance lease liability is determined as the amount that results in a constant periodic discount rate on the remaining balance of the liability. ROU assets are assessed for impairment in accordance with our long-lived asset impairment policy. We reassess lease classification and remeasure ROU assets and lease liabilities when a lease is modified and that modification is not accounted for as a separate contract or upon certain other events that require reassessment in accordance with ASC 842. Maintenance and property tax expenses are accounted for on an accrual basis as variable lease cost.
We recognize variable lease cost for operating and finance leases in the period when changes in facts and circumstances on which the variable lease payments are based occur.
Partnership as Lessor
Assets leased to franchisees and others under operating leases where we are the lessor and which are included within our property and equipment, net are as follows (in millions):
|
|
|
|
|
|
As of
|
|
September 30, 2019
|
Land
|
$
|
903
|
|
Buildings and improvements
|
1,131
|
|
Restaurant equipment
|
21
|
|
|
2,055
|
|
Accumulated depreciation and amortization
|
(451
|
)
|
Property and equipment leased, net
|
$
|
1,604
|
|
Our net investment in direct financing leases is as follows (in millions):
|
|
|
|
|
|
As of
|
|
September 30, 2019
|
Future rents to be received:
|
|
Future minimum lease receipts
|
$
|
50
|
|
Contingent rents (a)
|
21
|
|
Estimated unguaranteed residual value
|
15
|
|
Unearned income
|
(28
|
)
|
|
58
|
|
Current portion included within accounts receivables
|
(11
|
)
|
Net investment in property leased to franchisees
|
$
|
47
|
|
|
|
(a)
|
Amounts represent estimated contingent rents recorded in connection with the acquisition method of accounting.
|
Property revenues are comprised primarily of lease income from operating leases and earned income on direct financing leases with franchisees as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2019
|
|
Nine months ended September 30, 2019
|
Lease income - operating leases
|
|
|
|
|
Minimum lease payments
|
|
$
|
112
|
|
|
$
|
335
|
|
Variable lease payments
|
|
100
|
|
|
281
|
|
Amortization of favorable and unfavorable income lease contracts, net
|
|
1
|
|
|
5
|
|
Subtotal - lease income from operating leases
|
|
213
|
|
|
621
|
|
Earned income on direct financing leases
|
|
2
|
|
|
7
|
|
Total property revenues
|
|
$
|
215
|
|
|
$
|
628
|
|
Partnership as Lessee
Lease cost and other information associated with these lease commitments is as follows (in millions):
Lease Cost (Income)
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2019
|
|
Nine months ended September 30, 2019
|
Operating lease cost
|
|
$
|
52
|
|
|
$
|
158
|
|
Operating lease variable lease cost
|
|
51
|
|
|
151
|
|
Finance lease cost:
|
|
|
|
|
Amortization of right-of-use assets
|
|
7
|
|
|
20
|
|
Interest on lease liabilities
|
|
5
|
|
|
16
|
|
Sublease income
|
|
(164
|
)
|
|
(483
|
)
|
Total lease cost (income)
|
|
$
|
(49
|
)
|
|
$
|
(138
|
)
|
Lease Term and Discount Rate as of September 30, 2019
|
|
|
|
|
Weighted-average remaining lease term (in years):
|
|
|
Operating leases
|
|
11.0 years
|
|
Finance leases
|
|
11.1 years
|
|
Weighted-average discount rate:
|
|
|
Operating leases
|
|
6.4
|
%
|
Finance leases
|
|
7.5
|
%
|
Other Information for the nine months ended September 30, 2019
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
Operating cash flows from operating leases
|
|
$
|
145
|
|
Operating cash flows from finance leases
|
|
$
|
16
|
|
Financing cash flows from finance leases
|
|
$
|
20
|
|
Right-of-use assets obtained in exchange for new finance lease obligations
|
|
$
|
5
|
|
Right-of-use assets obtained in exchange for new operating lease obligations
|
|
$
|
106
|
|
Maturity Analysis
As of September 30, 2019, future minimum lease receipts and commitments are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Receipts
|
|
Lease Commitments (a)
|
|
Direct
Financing
Leases
|
|
Operating
Leases
|
|
Finance
Leases
|
|
Operating
Leases
|
Remainder of 2019
|
$
|
3
|
|
|
$
|
106
|
|
|
$
|
12
|
|
|
$
|
49
|
|
2020
|
10
|
|
|
406
|
|
|
46
|
|
|
190
|
|
2021
|
7
|
|
|
383
|
|
|
44
|
|
|
178
|
|
2022
|
5
|
|
|
360
|
|
|
42
|
|
|
166
|
|
2023
|
5
|
|
|
337
|
|
|
39
|
|
|
151
|
|
Thereafter
|
20
|
|
|
1,899
|
|
|
270
|
|
|
961
|
|
Total minimum receipts / payments
|
$
|
50
|
|
|
$
|
3,491
|
|
|
453
|
|
|
1,695
|
|
Less amount representing interest (b)
|
|
|
|
|
(147
|
)
|
|
(518
|
)
|
Present value of minimum lease payments
|
|
|
|
|
306
|
|
|
1,177
|
|
Current portion of lease obligations
|
|
|
|
|
(27
|
)
|
|
(122
|
)
|
Long-term portion of lease obligations
|
|
|
|
|
$
|
279
|
|
|
$
|
1,055
|
|
|
|
(a)
|
Minimum lease commitments have not been reduced by minimum sublease rentals of $2,298 million due in the future under non-cancelable subleases.
|
|
|
(b)
|
Calculated using the interest rate for each lease.
|
As of December 31, 2018, future minimum lease receipts and commitments are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Receipts
|
|
Lease Commitments (a)
|
|
Direct
Financing
Leases
|
|
Operating
Leases
|
|
Finance
Leases
|
|
Operating
Leases
|
2019
|
$
|
14
|
|
|
$
|
416
|
|
|
$
|
38
|
|
|
$
|
183
|
|
2020
|
10
|
|
|
388
|
|
|
36
|
|
|
172
|
|
2021
|
7
|
|
|
360
|
|
|
34
|
|
|
158
|
|
2022
|
5
|
|
|
331
|
|
|
33
|
|
|
145
|
|
2023
|
5
|
|
|
306
|
|
|
30
|
|
|
130
|
|
Thereafter
|
19
|
|
|
1,704
|
|
|
201
|
|
|
831
|
|
Total minimum receipts / payments
|
$
|
60
|
|
|
$
|
3,505
|
|
|
372
|
|
|
$
|
1,619
|
|
Less amount representing interest
|
|
|
|
|
(125
|
)
|
|
|
Present value of minimum finance lease payments
|
|
|
|
|
247
|
|
|
|
Current portion of finance lease obligation
|
|
|
|
|
(21
|
)
|
|
|
Long-term portion of finance lease obligation
|
|
|
|
|
$
|
226
|
|
|
|
|
|
(a)
|
Minimum lease commitments have not been reduced by minimum sublease rentals of $2,290 million due in the future under non-cancelable subleases.
|
Note 5. Revenue Recognition
Contract Liabilities
Contract liabilities consist of deferred revenue resulting from initial and renewal franchise fees paid by franchisees, as well as upfront fees paid by master franchisees, which are generally recognized on a straight-line basis over the term of the underlying agreement. We classify these contract liabilities as Other liabilities, net in our condensed consolidated balance sheets. The following table reflects the change in contract liabilities between December 31, 2018 and September 30, 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Liabilities
|
|
TH
|
|
BK
|
|
PLK
|
|
Consolidated
|
Balance at December 31, 2018
|
|
$
|
62
|
|
|
$
|
405
|
|
|
$
|
19
|
|
|
$
|
486
|
|
Revenue recognized that was included in the contract liability balance at the beginning of the year
|
|
(7
|
)
|
|
(30
|
)
|
|
(1
|
)
|
|
(38
|
)
|
Increase, excluding amounts recognized as revenue during the period
|
|
6
|
|
|
55
|
|
|
6
|
|
|
67
|
|
Impact of foreign currency translation
|
|
1
|
|
|
(9
|
)
|
|
—
|
|
|
(8
|
)
|
Balance at September 30, 2019
|
|
$
|
62
|
|
|
$
|
421
|
|
|
$
|
24
|
|
|
$
|
507
|
|
The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract liabilities expected to be recognized in
|
|
TH
|
|
BK
|
|
PLK
|
|
Consolidated
|
Remainder of 2019
|
|
$
|
2
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
11
|
|
2020
|
|
8
|
|
|
32
|
|
|
2
|
|
|
42
|
|
2021
|
|
7
|
|
|
31
|
|
|
2
|
|
|
40
|
|
2022
|
|
7
|
|
|
31
|
|
|
2
|
|
|
40
|
|
2023
|
|
6
|
|
|
30
|
|
|
1
|
|
|
37
|
|
Thereafter
|
|
32
|
|
|
288
|
|
|
17
|
|
|
337
|
|
Total
|
|
$
|
62
|
|
|
$
|
421
|
|
|
$
|
24
|
|
|
$
|
507
|
|
Disaggregation of Total Revenues
Total revenues consist of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Sales
|
$
|
624
|
|
|
$
|
609
|
|
|
$
|
1,735
|
|
|
$
|
1,743
|
|
Royalties
|
602
|
|
|
557
|
|
|
1,706
|
|
|
1,611
|
|
Property revenues
|
215
|
|
|
192
|
|
|
628
|
|
|
560
|
|
Franchise fees and other revenue
|
17
|
|
|
17
|
|
|
55
|
|
|
58
|
|
Total revenues
|
$
|
1,458
|
|
|
$
|
1,375
|
|
|
$
|
4,124
|
|
|
$
|
3,972
|
|
Note 6. Earnings per Unit
Partnership uses the two-class method in the computation of earnings per unit. Pursuant to the terms of the partnership agreement, RBI, as the holder of the Class A common units, is entitled to receive distributions from Partnership in an amount equal to the aggregate dividends payable by RBI to holders of RBI common shares, and the holders of Class B exchangeable limited partnership units (the “Partnership exchangeable units”) are entitled to receive distributions from Partnership in an amount per unit equal to the dividends payable by RBI on each RBI common share. Partnership’s net income available to common unitholders is allocated between the Class A common units and Partnership exchangeable units on a fully-distributed basis and reflects residual net income after noncontrolling interests and Partnership preferred unit distributions. Basic and diluted earnings per Class A common unit is determined by dividing net income allocated to Class A common unit holders by the weighted average number of Class A common units outstanding for the period. Basic and diluted earnings per Partnership exchangeable unit is determined by dividing net income allocated to the Partnership exchangeable units by the weighted average number of Partnership exchangeable units outstanding during the period.
There are no dilutive securities for Partnership as RBI equity awards will not affect the number of Class A common units or Partnership exchangeable units outstanding. However, the issuance of shares by RBI in future periods will affect the allocation of net income attributable to common unitholders between Partnership’s Class A common units and Partnership exchangeable units.
The following table summarizes the basic and diluted earnings per unit calculations (in millions, except per unit amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Allocation of net income among partner interests:
|
|
|
|
|
|
|
|
Net income allocated to Class A common unitholders
|
$
|
201
|
|
|
$
|
134
|
|
|
$
|
478
|
|
|
$
|
449
|
|
Net income allocated to Partnership exchangeable unitholders
|
150
|
|
|
116
|
|
|
376
|
|
|
393
|
|
Net income attributable to common unitholders
|
$
|
351
|
|
|
$
|
250
|
|
|
$
|
854
|
|
|
$
|
842
|
|
|
|
|
|
|
|
|
|
Denominator - basic and diluted partnership units:
|
|
|
|
|
|
|
|
Weighted average Class A common units
|
202
|
|
|
202
|
|
|
202
|
|
|
202
|
|
Weighted average Partnership exchangeable units
|
197
|
|
|
218
|
|
|
204
|
|
|
218
|
|
|
|
|
|
|
|
|
|
Earnings per unit - basic and diluted:
|
|
|
|
|
|
|
|
Class A common units (a)
|
$
|
1.00
|
|
|
$
|
0.66
|
|
|
$
|
2.37
|
|
|
$
|
2.22
|
|
Partnership exchangeable units (a)
|
$
|
0.76
|
|
|
$
|
0.53
|
|
|
$
|
1.85
|
|
|
$
|
1.81
|
|
(a) Earnings per unit may not recalculate exactly as it is calculated based on unrounded numbers.
Note 7. Intangible Assets, net and Goodwill
Intangible assets, net and goodwill consist of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
Identifiable assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
Franchise agreements
|
$
|
709
|
|
|
$
|
(214
|
)
|
|
$
|
495
|
|
|
$
|
705
|
|
|
$
|
(194
|
)
|
|
$
|
511
|
|
Favorable leases (a)
|
129
|
|
|
(64
|
)
|
|
65
|
|
|
407
|
|
|
(200
|
)
|
|
207
|
|
Subtotal
|
838
|
|
|
(278
|
)
|
|
560
|
|
|
1,112
|
|
|
(394
|
)
|
|
718
|
|
Indefinite lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
Tim Hortons brand
|
$
|
6,425
|
|
|
$
|
—
|
|
|
$
|
6,425
|
|
|
$
|
6,259
|
|
|
$
|
—
|
|
|
$
|
6,259
|
|
Burger King brand
|
2,099
|
|
|
—
|
|
|
2,099
|
|
|
2,131
|
|
|
—
|
|
|
2,131
|
|
Popeyes brand
|
1,355
|
|
|
—
|
|
|
1,355
|
|
|
1,355
|
|
|
—
|
|
|
1,355
|
|
Subtotal
|
9,879
|
|
|
—
|
|
|
9,879
|
|
|
9,745
|
|
|
—
|
|
|
9,745
|
|
Intangible assets, net
|
|
|
|
|
$
|
10,439
|
|
|
|
|
|
|
$
|
10,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
Tim Hortons segment
|
$
|
4,140
|
|
|
|
|
|
|
$
|
4,038
|
|
|
|
|
|
Burger King segment
|
593
|
|
|
|
|
|
|
602
|
|
|
|
|
|
Popeyes segment
|
846
|
|
|
|
|
|
|
846
|
|
|
|
|
|
Total
|
$
|
5,579
|
|
|
|
|
|
|
$
|
5,486
|
|
|
|
|
|
|
|
(a)
|
The decrease in favorable leases reflects the reclassification of favorable leases where we are the lessee to operating lease right-of-use assets in connection with our transition to ASC 842. See Note 4, Leases.
|
Amortization expense on intangible assets totaled $12 million for the three months ended September 30, 2019 and $17 million for the same period in the prior year. Amortization expense on intangible assets totaled $33 million for the nine months ended September 30, 2019 and $53 million for the same period in the prior year. The change in the brands and goodwill balances during the nine months ended September 30, 2019 was due to the impact of foreign currency translation.
Note 8. Equity Method Investments
The aggregate carrying amount of our equity method investments was $274 million and $259 million as of September 30, 2019 and December 31, 2018, respectively, and is included as a component of Other assets, net in our accompanying condensed consolidated balance sheets. TH and BK both have equity method investments. PLK does not have any equity method investments.
With respect to our TH business, the most significant equity method investment is our 50% joint venture interest with The Wendy’s Company (the “TIMWEN Partnership”), which jointly holds real estate underlying Canadian combination restaurants. Distributions received from this joint venture were $3 million during the three months ended September 30, 2019 and 2018. Distributions received from this joint venture were $10 million and $9 million during the nine months ended September 30, 2019 and 2018, respectively.
The aggregate market value of our 15.4% equity interest in Carrols Restaurant Group, Inc. (“Carrols”) based on the quoted market price on September 30, 2019 was approximately $78 million. The aggregate market value of our 9.9% equity interest in BK Brasil Operação e Assessoria a Restaurantes S.A. based on the quoted market price on September 30, 2019 was approximately $111 million. No quoted market prices are available for our other equity method investments.
We have equity interests in entities that own or franchise Tim Hortons or Burger King restaurants. Franchise and property revenues recognized from franchisees that are owned or franchised by entities in which we have an equity interest consist of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues from affiliates:
|
|
|
|
|
|
|
|
Royalties
|
$
|
89
|
|
|
$
|
76
|
|
|
$
|
254
|
|
|
$
|
218
|
|
Property revenues
|
8
|
|
|
8
|
|
|
25
|
|
|
26
|
|
Franchise fees and other revenue
|
1
|
|
|
3
|
|
|
7
|
|
|
7
|
|
Total
|
$
|
98
|
|
|
$
|
87
|
|
|
$
|
286
|
|
|
$
|
251
|
|
We recognized $5 million of rent expense associated with the TIMWEN Partnership during the three months ended September 30, 2019 and 2018. We recognized $14 million and $15 million of rent expense associated with the TIMWEN Partnership during the nine months ended September 30, 2019 and 2018, respectively.
At September 30, 2019 and December 31, 2018, we had $34 million and $41 million, respectively, of accounts receivable, net from our equity method investments which were recorded in Accounts and notes receivable, net in our condensed consolidated balance sheets.
(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. During the three and nine months ended September 30, 2019, we recorded an increase to the carrying value of our equity method investment balance and a non-cash dilution gain of $11 million related to the merger of one of our equity method investments. During the nine months ended September 30, 2018, we recorded an increase to the carrying value of our equity method investment balance and a non-cash dilution gain of $20 million on the initial public offering by one of our equity method investees.
Note 9. Other Accrued Liabilities and Other Liabilities, net
Other accrued liabilities (current) and other liabilities, net (noncurrent) consist of the following (in millions):
|
|
|
|
|
|
|
|
|
|
As of
|
|
September 30,
2019
|
|
December 31,
2018
|
Current:
|
|
|
|
Dividend payable
|
$
|
232
|
|
|
$
|
207
|
|
Interest payable
|
91
|
|
|
87
|
|
Accrued compensation and benefits
|
52
|
|
|
69
|
|
Taxes payable
|
153
|
|
|
113
|
|
Deferred income
|
35
|
|
|
27
|
|
Accrued advertising expenses
|
27
|
|
|
30
|
|
Restructuring and other provisions
|
6
|
|
|
11
|
|
Current portion of operating lease liabilities (a)
|
122
|
|
|
—
|
|
Other
|
79
|
|
|
93
|
|
Other accrued liabilities
|
$
|
797
|
|
|
$
|
637
|
|
Noncurrent:
|
|
|
|
Taxes payable
|
$
|
585
|
|
|
$
|
493
|
|
Contract liabilities
|
507
|
|
|
486
|
|
Unfavorable leases (b)
|
107
|
|
|
192
|
|
Derivatives liabilities
|
267
|
|
|
179
|
|
Accrued pension
|
62
|
|
|
64
|
|
Accrued lease straight-lining liability (b)
|
—
|
|
|
69
|
|
Deferred income
|
26
|
|
|
22
|
|
Other
|
44
|
|
|
42
|
|
Other liabilities, net
|
$
|
1,598
|
|
|
$
|
1,547
|
|
|
|
(a)
|
Represents the current portion of operating lease liabilities recognized in connection with our transition to ASC 842. See Note 4, Leases.
|
|
|
(b)
|
The decreases in unfavorable leases and accrued lease straight-lining liability reflect the reclassification of unfavorable leases and lease straight-lining liability where we are the lessee in the underlying operating lease to the right-of-use assets recorded for the underlying lease in connection with our transition to ASC 842. See Note 4, Leases.
|
Note 10. Long-Term Debt
Long-term debt consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
As of
|
|
September 30,
2019
|
|
December 31,
2018
|
Term Loan B (due February 17, 2024)
|
$
|
6,070
|
|
|
$
|
6,338
|
|
2015 4.625% Senior Notes (due January 15, 2022)
|
1,250
|
|
|
1,250
|
|
2017 4.25% Senior Notes (due May 15, 2024)
|
1,500
|
|
|
1,500
|
|
2019 3.875% Senior Notes (due January 15, 2028)
|
750
|
|
|
—
|
|
2017 5.00% Senior Notes (due October 15, 2025)
|
2,800
|
|
|
2,800
|
|
Other (a)
|
79
|
|
|
150
|
|
Less: unamortized deferred financing costs and deferred issue discount
|
(132
|
)
|
|
(145
|
)
|
Total debt, net
|
12,317
|
|
|
11,893
|
|
Less: current maturities of debt (b)
|
(749
|
)
|
|
(70
|
)
|
Total long-term debt
|
$
|
11,568
|
|
|
$
|
11,823
|
|
|
|
(a)
|
The decrease in Other reflects the de-recognition of obligations associated with build-to-suit leases recorded under the Previous Standard. Liabilities associated with build-to-suit leases were remeasured and recorded as finance lease liabilities in conjunction with our transition to ASC 842.
|
|
|
(b)
|
As of September 30, 2019, current maturities of debt includes $750 million of the total outstanding principal balance of the 2015 4.625% Senior Notes (defined below), net of related unamortized deferred financing costs, which is equal to the proceeds received from the issuance of the 2019 3.875% Senior Notes (defined below) that were used to redeem the 2015 4.625% Senior Notes on October 7, 2019.
|
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"), that was funded on October 7, 2019, 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 pricing grid, (iii) the aggregate principal amount of the commitments under our Revolving Credit Facility was increased to $1,000 million effective October 7, 2019, (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 the first lien leverage ratio. 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" and together with the Term Loan A, the "Term Loan Facilities"). During the quarter ended September 30, 2019, we prepaid $235 million principal amount of our Term Loan B and, in connection with this prepayment, we recorded a loss on early extinguishment of debt of $4 million that primarily reflects the write-off of related unamortized debt issuance costs and discounts.
As of September 30, 2019, we had no amounts outstanding under our Revolving Credit Facility. Funds available under the Revolving Credit Facility may be used to repay other debt, finance debt, make distributions to RBI for RBI to repurchase its common shares, repurchase Partnership exchangeable units, 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. 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 first lien leverage ratio. As of September 30, 2019, we had $2 million of
letters of credit issued against the Revolving Credit Facility, and our borrowing availability was $498 million. As of October 7, 2019, our borrowing availability was $998 million under our Revolving Credit Facility.
2019 Senior Notes
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. On October 7, 2019, 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. In connection with the issuance of the 2019 3.875% Senior Notes, we capitalized approximately $10 million in debt issuance costs.
Obligations under the 2019 3.875% Senior Notes are guaranteed on a senior secured basis, jointly and severally, by the Borrowers and substantially all of the Borrowers' 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 "Note Guarantors"). The 2019 3.875% Senior Notes are first lien senior secured obligations and rank equal in right of payment with all of the existing and future first lien senior debt of the Borrowers and Note Guarantors, including borrowings and guarantees of the Credit Facilities.
Our 2019 3.875% Senior Notes may be redeemed in whole or in part, on or after September 15, 2022 at the redemption prices set forth in the 2019 3.875% Senior Notes Indenture, plus accrued and unpaid interest, if any, at the date of redemption. The 2019 3.875% Senior Notes Indenture also contains optional redemption provisions related to tender offers, change of control and equity offerings, among others.
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 the three months ended June 30, 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 September 30, 2019, we had outstanding C$100 million under the TH Facility with a weighted average interest rate of 3.36%.
Fair Value Measurement
The following table presents the fair value of our variable rate term debt and senior notes, estimated using inputs based on bid and offer prices that are Level 2 inputs, and principal carrying amount (in millions):
|
|
|
|
|
|
|
|
|
|
As of
|
|
September 30,
2019
|
|
December 31,
2018
|
Fair value of our variable term debt and senior notes
|
$
|
12,557
|
|
|
$
|
11,237
|
|
Principal carrying amount of our variable term debt and senior notes
|
12,370
|
|
|
11,888
|
|
Interest Expense, net
Interest expense, net consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Debt (a)
|
$
|
130
|
|
|
$
|
125
|
|
|
$
|
382
|
|
|
$
|
375
|
|
Finance lease obligations
|
5
|
|
|
6
|
|
|
16
|
|
|
18
|
|
Amortization of deferred financing costs and debt issuance discount
|
7
|
|
|
8
|
|
|
22
|
|
|
22
|
|
Interest income
|
(5
|
)
|
|
(4
|
)
|
|
(14
|
)
|
|
(10
|
)
|
Interest expense, net
|
$
|
137
|
|
|
$
|
135
|
|
|
$
|
406
|
|
|
$
|
405
|
|
|
|
(a)
|
Amount includes $16 million and $15 million benefit during the three months ended September 30, 2019 and 2018, respectively, and $53 million and $39 million benefit during the nine months ended September 30, 2019 and 2018, respectively, related to the amortization of the Excluded Component as defined in Note 13, Derivatives.
|
Note 11. Income Taxes
Our effective tax rate was 18.3% and 21.4% for the three and nine months ended September 30, 2019. The effective tax rate during these periods reflects the mix of income from multiple tax jurisdictions, the impact of internal financing arrangements and stock option exercises. Additionally, the effective tax rate during the nine months ended September 30, 2019 reflects a $37 million increase in the provision for unrecognized tax benefits related to a prior restructuring transaction that is not applicable to ongoing operations which increased the effective tax rate by 3.4% during this period. Benefits from stock option exercises reduced the effective tax rate by 1.2% and 2.9% for the three and nine months ended September 30, 2019, respectively.
Our effective tax rate was 27.0% for the three months ended September 30, 2018. This rate was primarily a result of the mix of income from multiple tax jurisdictions, the year to date impact from the realignment of various internal financing arrangements and the increase in valuation allowance on deferred tax assets. Our effective tax rate was 15.4% for the nine months ended September 30, 2018. This rate was primarily a result of the mix of income from multiple tax jurisdictions, the benefit from reserve releases due to audit settlements during the first half of 2018, and the realignment of various internal financing arrangements. In addition, benefits from stock option exercises reduced the effective tax rate by 0.9% and 6.9% for the three and nine months ended September 30, 2018, respectively.
Note 12. Equity
During the nine months ended September 30, 2019, Partnership exchanged 41,993,769 Partnership exchangeable units pursuant to exchange notices received. In accordance with the terms of the partnership agreement, Partnership satisfied the exchange notices by exchanging these Partnership exchangeable units for the same number of newly issued RBI common shares. The issuances of shares were accounted for as capital contributions by RBI to Partnership. The exchanges of Partnership exchangeable units were recorded as increases to the Class A common units balance within partners’ capital in our consolidated balance sheet in an amount equal to the market value of the newly issued RBI common shares and a reduction to the Partnership exchangeable units balance within partners’ capital of our consolidated balance sheet in an amount equal to the cash paid by Partnership, if any, and the market value of the newly issued RBI common shares. Pursuant to the terms of the partnership agreement, upon the exchange of Partnership exchangeable units, each such Partnership exchangeable unit was cancelled concurrently with the exchange.
Accumulated Other Comprehensive Income (Loss)
The following table displays the changes in the components of accumulated other comprehensive income (loss) (“AOCI”) (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
Pensions
|
|
Foreign Currency Translation
|
|
Accumulated Other Comprehensive Income (Loss)
|
Balance at December 31, 2018
|
$
|
454
|
|
|
$
|
(27
|
)
|
|
$
|
(1,864
|
)
|
|
$
|
(1,437
|
)
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
185
|
|
|
185
|
|
Net change in fair value of derivatives, net of tax
|
(89
|
)
|
|
—
|
|
|
—
|
|
|
(89
|
)
|
Amounts reclassified to earnings of cash flow hedges, net of tax
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Balances at September 30, 2019
|
$
|
372
|
|
|
$
|
(27
|
)
|
|
$
|
(1,679
|
)
|
|
$
|
(1,334
|
)
|
Note 13. Derivative Instruments
Disclosures about Derivative Instruments and Hedging Activities
We enter into derivative instruments for risk management purposes, including derivatives designated as cash flow hedges, derivatives designated as net investment hedges and those utilized as economic hedges. We use derivatives to manage our exposure to fluctuations in interest rates and currency exchange rates.
Interest Rate Swaps
At September 30, 2019, we had outstanding a series of receive-variable, pay-fixed interest rate swaps with a total notional value of $3,500 million to hedge the variability in the interest payments on a portion of our Term Loan Facilities beginning March 29, 2018 through the expiration of the final swap on February 17, 2024, with each swap resetting each March. Additionally, at September 30, 2019, we also had outstanding receive-variable, pay-fixed interest rate swaps with a total notional value of $500 million to hedge the variability in the interest payments on a portion of our Term Loan Facilities
effective September 30, 2019 through the termination date of September 30, 2026. At inception, all of these interest rate swaps were designated as cash flow hedges for hedge accounting. 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.
During 2015, we entered into a series of receive-variable, pay-fixed interest rate swaps with a notional value of $2,500 million to hedge the variability in the interest payments on a portion of our Term Loan Facility beginning May 28, 2015. All of these interest rate swaps were settled on April 26, 2018 for an insignificant cash receipt. At inception, these interest rate swaps were designated as cash flow hedges for hedge accounting. The unrealized changes in market value were recorded in AOCI and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.
During 2015, we settled certain interest rate swaps and recognized a net unrealized loss of $85 million in AOCI at the date of settlement. This amount gets reclassified into Interest expense, net as the original hedged forecasted transaction affects earnings. The amount of pre-tax losses in AOCI as of September 30, 2019 that we expect to be reclassified into interest expense within the next 12 months is $12 million.
Cross-Currency Rate Swaps
To protect the value of our investments in our foreign operations against adverse changes in foreign currency exchange rates, we hedge a portion of our net investment in one or more of our foreign subsidiaries by using cross-currency rate swaps. At September 30, 2019, we had outstanding cross-currency rate swap contracts between the Canadian dollar and U.S. dollar and the Euro and U.S. dollar that have been designated as net investment hedges of a portion of our equity in foreign operations in those currencies. The component of the gains and losses on our net investment in these designated foreign operations driven by changes in foreign exchange rates are economically partly offset by movements in the fair value of our cross-currency swap contracts. The fair value of the swaps is calculated each period with changes in fair value reported in AOCI, net of tax. Such amounts will remain in AOCI until the complete or substantially complete liquidation of our investment in the underlying foreign operations.
At September 30, 2019, we had outstanding fixed-to-fixed cross-currency rate swaps to partially hedge the net investment in our Canadian subsidiaries. At inception, these cross-currency rate swaps were designated as a hedge and are accounted for as net investment hedges. These swaps are contracts to exchange quarterly fixed-rate interest payments we make on the Canadian dollar notional amount of C$6,754 million for quarterly fixed-rate interest payments we receive on the U.S. dollar notional amount of $5,000 million through the maturity date of June 30, 2023.
At September 30, 2019, we had outstanding cross-currency rate swaps in which we pay quarterly fixed-rate interest payments on the Euro notional value of €1,108 million and receive quarterly fixed-rate interest payments on the U.S. dollar notional value of $1,200 million. At inception, these cross-currency rate swaps were designated as a hedge and are accounted for as a net investment hedge. During 2018, we extended the term of the swaps from March 31, 2021 to the maturity date of February 17, 2024. The extension of the term resulted in a re-designation of the hedge and the swaps continue to be accounted for as a net investment hedge. Additionally, at September 30, 2019, we also had outstanding cross-currency rate swaps in which we receive quarterly fixed-rate interest payments on the U.S. dollar notional value of $400 million, entered during 2018, and $500 million, entered during 2019, through the maturity date of February 17, 2024. At inception, these cross-currency rate swaps were designated as a hedge and are accounted for as a net investment hedge.
The fixed to fixed cross-currency rate swaps hedging Canadian dollar and Euro net investments utilized the forward method of effectiveness assessment prior to March 15, 2018. On March 15, 2018, we dedesignated and subsequently redesignated the outstanding fixed to fixed cross-currency rate swaps to prospectively use the spot method of hedge effectiveness assessment. Additionally, as a result of adopting new hedge accounting guidance during 2018, we elected to exclude the interest component (the “Excluded Component”) from the accounting hedge without affecting net investment hedge accounting and elected to amortize the Excluded Component over the life of the derivative instrument. The amortization of the Excluded Component is recognized in Interest expense, net in the condensed consolidated statement of operations. The change in fair value that is not related to the Excluded Component is recorded in AOCI and will be reclassified to earnings when the foreign subsidiaries are sold or substantially liquidated.
Foreign Currency Exchange Contracts
We use foreign exchange derivative instruments to manage the impact of foreign exchange fluctuations on U.S. dollar purchases and payments, such as coffee purchases made by our Canadian Tim Hortons operations. At September 30, 2019, we had outstanding forward currency contracts to manage this risk in which we sell Canadian dollars and buy U.S. dollars with a notional value of $132 million with maturities to November 2020. We have designated these instruments as cash flow hedges, and as such, the unrealized changes in market value of effective hedges are recorded in AOCI and are reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.
Credit Risk
By entering into derivative contracts, we are exposed to counterparty credit risk. Counterparty credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is in an asset position, the counterparty has a liability to us, which creates credit risk for us. We attempt to minimize this risk by selecting counterparties with investment grade credit ratings and regularly monitoring our market position with each counterparty.
Credit-Risk Related Contingent Features
Our derivative instruments do not contain any credit-risk related contingent features.
Quantitative Disclosures about Derivative Instruments and Fair Value Measurements
The following tables present the required quantitative disclosures for our derivative instruments, including their estimated fair values (all estimated using Level 2 inputs) and their location on our condensed consolidated balance sheets (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain or (Loss) Recognized in Other Comprehensive Income (Loss)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Derivatives designated as cash flow hedges(1)
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
(35
|
)
|
|
$
|
22
|
|
|
$
|
(156
|
)
|
|
$
|
46
|
|
Forward-currency contracts
|
$
|
1
|
|
|
$
|
(5
|
)
|
|
$
|
(3
|
)
|
|
$
|
8
|
|
Derivatives designated as net investment hedges
|
|
|
|
|
|
|
|
Cross-currency rate swaps
|
$
|
180
|
|
|
$
|
(83
|
)
|
|
$
|
25
|
|
|
$
|
71
|
|
|
|
(1)
|
We did not exclude any components from the cash flow hedge relationships presented in this table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain or (Loss) Reclassified from AOCI into Earnings
|
|
Gain or (Loss) Reclassified from AOCI into Earnings
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Interest expense, net
|
|
$
|
(7
|
)
|
|
$
|
(5
|
)
|
|
$
|
(14
|
)
|
|
$
|
(16
|
)
|
Forward-currency contracts
|
|
Cost of sales
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
4
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain or (Loss) Recognized in Earnings
|
|
Gain or (Loss) Recognized in Earnings
(Amount Excluded from Effectiveness Testing)
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Derivatives designated as net investment hedges
|
|
|
|
|
|
|
|
|
|
|
Cross-currency rate swaps
|
|
Interest expense, net
|
|
$
|
16
|
|
|
$
|
15
|
|
|
$
|
53
|
|
|
$
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Balance Sheet Location
|
Assets:
|
|
|
|
|
|
Derivatives designated as cash flow hedges
|
|
|
|
|
|
Foreign currency
|
$
|
1
|
|
|
$
|
7
|
|
|
Prepaids and other current assets
|
Derivatives designated as net investment hedges
|
|
|
|
|
|
Foreign currency
|
39
|
|
|
58
|
|
|
Other assets, net
|
Total assets at fair value
|
$
|
40
|
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Derivatives designated as cash flow hedges
|
|
|
|
|
|
Interest rate
|
$
|
223
|
|
|
$
|
72
|
|
|
Other liabilities, net
|
Derivatives designated as net investment hedges
|
|
|
|
|
|
Foreign currency
|
44
|
|
|
107
|
|
|
Other liabilities, net
|
Total liabilities at fair value
|
$
|
267
|
|
|
$
|
179
|
|
|
|
Note 14. Other Operating Expenses (Income), net
Other operating expenses (income), net consist of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings
|
$
|
6
|
|
|
$
|
7
|
|
|
$
|
(1
|
)
|
|
$
|
17
|
|
Litigation settlements (gains) and reserves, net
|
1
|
|
|
5
|
|
|
1
|
|
|
(1
|
)
|
Net losses (gains) on foreign exchange
|
(35
|
)
|
|
(3
|
)
|
|
(38
|
)
|
|
(19
|
)
|
Other, net
|
(2
|
)
|
|
17
|
|
|
(6
|
)
|
|
12
|
|
Other operating expenses (income), net
|
$
|
(30
|
)
|
|
$
|
26
|
|
|
$
|
(44
|
)
|
|
$
|
9
|
|
Net losses (gains) on disposal of assets, restaurant closures, and refranchisings represent sales of properties and other costs related to restaurant closures and refranchisings.
Litigation settlements (gains) 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 the three and nine months ended September 30, 2018 is comprised primarily of an expense in connection with the settlement of certain provisions associated with the 2017 redemption of RBI's preferred shares as a result of changes in Treasury regulations.
Note 15. Commitments and Contingencies
Litigation
From time to time, we are involved in legal proceedings arising in the ordinary course of business relating to matters including, but not limited to, disputes with franchisees, suppliers, employees and customers, as well as disputes over our intellectual property.
On October 5, 2018, a class action complaint was filed against Burger King Worldwide, Inc. (“BKW”) and Burger King Corporation (“BKC”) in the U.S. District Court for the Southern District of Florida by Jarvis Arrington, individually and on behalf of all others similarly situated. On October 18, 2018, a second class action complaint was filed against the Company, BKW and BKC in the U.S. District Court for the Southern District of Florida by Monique Michel, individually and on behalf of all others similarly situated. On October 31, 2018, a third class action complaint was filed against BKC and BKW in the U.S. District Court for the Southern District of Florida by Geneva Blanchard and Tiffany Miller, individually and on behalf of all others similarly situated. On November 2, 2018, a fourth class action complaint was filed against the Company, BKW and BKC in the U.S. District Court for the Southern District of Florida by Sandra Muster, individually and on behalf of all others similarly situated. These complaints allege that the defendants violated Section 1 of the Sherman Act by incorporating an employee no-solicitation and no-hiring clause in the standard form franchise agreement all Burger King franchisees are required to sign. Each plaintiff seeks injunctive relief and damages for himself or herself and other members of the class.
In July 2019, a class action complaint was filed against TDL in the Supreme Court of British Columbia by Samir Latifi, individually and on behalf of all others similarly situated. The complaint alleges that TDL violated the Canadian Competition Act by incorporating an employee no-solicitation and no-hiring clause in the standard form franchise agreement all Tim Hortons franchisees are required to sign. The plaintiff seeks damages and restitution, on behalf of himself and other members of the class.
While we currently believe these claims are without merit, we are unable to predict the ultimate outcome of these cases or estimate the range of possible loss, if any.
In March 2019, Partnership settled the two class action lawsuits filed in the Ontario Superior Court of Justice against The TDL Group Corp., a subsidiary of Partnership (“TDL”), and certain other defendants, as described in Partnership’s Annual Report on Form 10-K filed with the SEC on February 22, 2019. The court approved the settlement on April 29, 2019. Under the terms of the settlement, TDL is contributing C$6 million to the Tim Hortons Advertising Fund in Canada over two years, such amount to be spent on marketing activities. In addition, TDL has paid C$6 million for legal, administrative and other third-party expenses. These amounts were accrued by TDL during 2018.
Note 16. Segment Reporting
As stated in Note 1, Description of Business and Organization, we manage three brands. Under the Tim Hortons brand, we operate in the donut/coffee/tea category of the quick service segment of the restaurant industry. Under the Burger King brand, we operate in the fast food hamburger restaurant category of the quick service segment of the restaurant industry. Under the Popeyes brand, we operate in the chicken category of the quick service segment of the restaurant industry. 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 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. We manage each of our brands as an operating segment and each operating segment represents a reportable segment.
The following tables present revenues, by segment and by country (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues by operating segment:
|
|
|
|
|
|
|
|
TH
|
$
|
881
|
|
|
$
|
854
|
|
|
$
|
2,472
|
|
|
$
|
2,440
|
|
BK
|
457
|
|
|
416
|
|
|
1,315
|
|
|
1,224
|
|
PLK
|
120
|
|
|
105
|
|
|
337
|
|
|
308
|
|
Total revenues
|
$
|
1,458
|
|
|
$
|
1,375
|
|
|
$
|
4,124
|
|
|
$
|
3,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues by country (a):
|
|
|
|
|
|
|
|
Canada
|
$
|
805
|
|
|
$
|
776
|
|
|
$
|
2,245
|
|
|
$
|
2,214
|
|
United States
|
489
|
|
|
448
|
|
|
1,412
|
|
|
1,319
|
|
Other
|
164
|
|
|
151
|
|
|
467
|
|
|
439
|
|
Total revenues
|
$
|
1,458
|
|
|
$
|
1,375
|
|
|
$
|
4,124
|
|
|
$
|
3,972
|
|
|
|
(a)
|
Only Canada and the United States represented 10% or more of our total revenues in each period presented.
|
Our measure of segment income is Adjusted EBITDA. Adjusted EBITDA represents earnings (net income or loss) before interest expense, net, (gain) loss on early extinguishment of debt, income tax expense, and depreciation and amortization, adjusted to exclude 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 fees and expenses associated with the Popeyes Acquisition (“PLK Transaction costs”), Corporate restructuring and tax advisory fees related to the interpretation and implementation of comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act enacted by the U.S. government on December 22, 2017 and non-operational 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. 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 operating performance or the performance of an acquired business. A reconciliation of segment income to net income (loss) consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Segment income:
|
|
|
|
|
|
|
|
TH
|
$
|
301
|
|
|
$
|
299
|
|
|
$
|
825
|
|
|
$
|
830
|
|
BK
|
254
|
|
|
231
|
|
|
728
|
|
|
681
|
|
PLK
|
47
|
|
|
41
|
|
|
129
|
|
|
120
|
|
Adjusted EBITDA
|
602
|
|
|
571
|
|
|
1,682
|
|
|
1,631
|
|
Share-based compensation and non-cash incentive compensation expense
|
18
|
|
|
13
|
|
|
62
|
|
|
44
|
|
PLK Transaction costs
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
Corporate restructuring and tax advisory fees
|
5
|
|
|
5
|
|
|
22
|
|
|
19
|
|
Office centralization and relocation costs
|
—
|
|
|
4
|
|
|
6
|
|
|
16
|
|
Impact of equity method investments (a)
|
(9
|
)
|
|
—
|
|
|
1
|
|
|
(6
|
)
|
Other operating expenses (income), net
|
(30
|
)
|
|
26
|
|
|
(44
|
)
|
|
9
|
|
EBITDA
|
618
|
|
|
523
|
|
|
1,635
|
|
|
1,539
|
|
Depreciation and amortization
|
47
|
|
|
45
|
|
|
139
|
|
|
138
|
|
Income from operations
|
571
|
|
|
478
|
|
|
1,496
|
|
|
1,401
|
|
Interest expense, net
|
137
|
|
|
135
|
|
|
406
|
|
|
405
|
|
Loss on early extinguishment of debt
|
4
|
|
|
—
|
|
|
4
|
|
|
—
|
|
Income tax expense
|
79
|
|
|
93
|
|
|
232
|
|
|
153
|
|
Net income
|
$
|
351
|
|
|
$
|
250
|
|
|
$
|
854
|
|
|
$
|
843
|
|
|
|
(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.
|
Note 17. Supplemental Financial Information
On February 17, 2017, 1011778 B.C. Unlimited Liability Company (the “Parent Issuer”) and New Red Finance Inc. (the “Co-Issuer” and together with the Parent Issuer, the “Issuers”) entered into an amended credit agreement, as amended from time to time, that provides for obligations under the Credit Facilities. On September 24, 2019, the Issuers entered into the 2019 3.875% Senior Notes Indenture with respect to the 2019 3.875% Senior Notes. On August 28, 2017, the Issuers entered into the 2017 5.00% Senior Notes Indenture with respect to the 2017 5.00% Senior Notes. On May 17, 2017, the Issuers entered into the 2017 4.25% Senior Notes Indenture with respect to the 2017 4.25% Senior Notes. On May 22, 2015, the Issuers entered into the 2015 4.625% Senior Notes Indenture with respect to the 2015 4.625% Senior Notes.
The agreement governing our Credit Facilities, the 2019 3.875% Senior Notes Indenture, the 2017 5.00% Senior Notes Indenture, the 2017 4.25% Senior Notes Indenture and the 2015 4.625% Senior Notes Indenture allow the financial reporting obligation of the Parent Issuer to be satisfied through the reporting of Partnership’s consolidated financial information, provided that the consolidated financial information of the Parent Issuer and its restricted subsidiaries is presented on a standalone basis.
The following represents the condensed consolidating financial information for the Parent Issuer and its restricted subsidiaries (“Consolidated Borrowers”) on a consolidated basis, together with eliminations, as of and for the periods indicated. The condensed consolidating financial information of Partnership is combined with the financial information of its wholly-owned subsidiaries that are also parent entities of the Parent Issuer and presented in a single column under the heading “RBILP”. The consolidating financial information may not necessarily be indicative of the financial position, results of operations or cash flows had the Issuers and Partnership operated as independent entities.
RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Balance Sheets
(In millions of U.S. dollars)
As of September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Borrowers
|
|
RBILP
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,699
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,699
|
|
Accounts and notes receivable, net
|
472
|
|
|
—
|
|
|
—
|
|
|
472
|
|
Inventories, net
|
83
|
|
|
—
|
|
|
—
|
|
|
83
|
|
Prepaids and other current assets
|
86
|
|
|
—
|
|
|
—
|
|
|
86
|
|
Total current assets
|
2,340
|
|
|
—
|
|
|
—
|
|
|
2,340
|
|
Property and equipment, net
|
1,981
|
|
|
—
|
|
|
—
|
|
|
1,981
|
|
Operating lease assets, net
|
1,147
|
|
|
—
|
|
|
—
|
|
|
1,147
|
|
Intangible assets, net
|
10,439
|
|
|
—
|
|
|
—
|
|
|
10,439
|
|
Goodwill
|
5,579
|
|
|
—
|
|
|
—
|
|
|
5,579
|
|
Net investment in property leased to franchisees
|
47
|
|
|
—
|
|
|
—
|
|
|
47
|
|
Intercompany receivable
|
—
|
|
|
232
|
|
|
(232
|
)
|
|
—
|
|
Investment in subsidiaries
|
—
|
|
|
4,063
|
|
|
(4,063
|
)
|
|
—
|
|
Other assets, net
|
716
|
|
|
—
|
|
|
—
|
|
|
716
|
|
Total assets
|
$
|
22,249
|
|
|
$
|
4,295
|
|
|
$
|
(4,295
|
)
|
|
$
|
22,249
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts and drafts payable
|
$
|
510
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
510
|
|
Other accrued liabilities
|
565
|
|
|
232
|
|
|
—
|
|
|
797
|
|
Gift card liability
|
94
|
|
|
—
|
|
|
—
|
|
|
94
|
|
Current portion of long term debt and finance leases
|
776
|
|
|
—
|
|
|
—
|
|
|
776
|
|
Total current liabilities
|
1,945
|
|
|
232
|
|
|
—
|
|
|
2,177
|
|
Term debt, net of current portion
|
11,568
|
|
|
—
|
|
|
—
|
|
|
11,568
|
|
Finance leases, net of current portion
|
279
|
|
|
—
|
|
|
—
|
|
|
279
|
|
Operating lease liabilities, net of current portion
|
1,055
|
|
|
—
|
|
|
—
|
|
|
1,055
|
|
Other liabilities, net
|
1,598
|
|
|
—
|
|
|
—
|
|
|
1,598
|
|
Payables to affiliates
|
232
|
|
|
—
|
|
|
(232
|
)
|
|
—
|
|
Deferred income taxes, net
|
1,509
|
|
|
—
|
|
|
—
|
|
|
1,509
|
|
Total liabilities
|
18,186
|
|
|
232
|
|
|
(232
|
)
|
|
18,186
|
|
Partners’ capital:
|
|
|
|
|
|
|
|
Class A common units
|
—
|
|
|
7,753
|
|
|
—
|
|
|
7,753
|
|
Partnership exchangeable units
|
—
|
|
|
(2,358
|
)
|
|
—
|
|
|
(2,358
|
)
|
Common shares
|
3,233
|
|
|
—
|
|
|
(3,233
|
)
|
|
—
|
|
Retained Earnings
|
2,162
|
|
|
—
|
|
|
(2,162
|
)
|
|
—
|
|
Accumulated other comprehensive income (loss)
|
(1,334
|
)
|
|
(1,334
|
)
|
|
1,334
|
|
|
(1,334
|
)
|
Total Partners' capital/shareholders' equity
|
4,061
|
|
|
4,061
|
|
|
(4,061
|
)
|
|
4,061
|
|
Noncontrolling interests
|
2
|
|
|
2
|
|
|
(2
|
)
|
|
2
|
|
Total equity
|
4,063
|
|
|
4,063
|
|
|
(4,063
|
)
|
|
4,063
|
|
Total liabilities and equity
|
$
|
22,249
|
|
|
$
|
4,295
|
|
|
$
|
(4,295
|
)
|
|
$
|
22,249
|
|
RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Balance Sheets
(In millions of U.S. dollars)
As of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Borrowers
|
|
RBILP
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
913
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
913
|
|
Accounts and notes receivable, net
|
452
|
|
|
—
|
|
|
—
|
|
|
452
|
|
Inventories, net
|
75
|
|
|
—
|
|
|
—
|
|
|
75
|
|
Prepaids and other current assets
|
60
|
|
|
—
|
|
|
—
|
|
|
60
|
|
Total current assets
|
1,500
|
|
|
—
|
|
|
—
|
|
|
1,500
|
|
Property and equipment, net
|
1,996
|
|
|
—
|
|
|
—
|
|
|
1,996
|
|
Intangible assets, net
|
10,463
|
|
|
—
|
|
|
—
|
|
|
10,463
|
|
Goodwill
|
5,486
|
|
|
—
|
|
|
—
|
|
|
5,486
|
|
Net investment in property leased to franchisees
|
54
|
|
|
—
|
|
|
—
|
|
|
54
|
|
Intercompany receivable
|
—
|
|
|
207
|
|
|
(207
|
)
|
|
—
|
|
Investment in subsidiaries
|
—
|
|
|
3,618
|
|
|
(3,618
|
)
|
|
—
|
|
Other assets, net
|
642
|
|
|
—
|
|
|
—
|
|
|
642
|
|
Total assets
|
$
|
20,141
|
|
|
$
|
3,825
|
|
|
$
|
(3,825
|
)
|
|
$
|
20,141
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts and drafts payable
|
$
|
513
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
513
|
|
Other accrued liabilities
|
430
|
|
|
207
|
|
|
—
|
|
|
637
|
|
Gift card liability
|
167
|
|
|
—
|
|
|
—
|
|
|
167
|
|
Current portion of long term debt and finance leases
|
91
|
|
|
—
|
|
|
—
|
|
|
91
|
|
Total current liabilities
|
1,201
|
|
|
207
|
|
|
—
|
|
|
1,408
|
|
Term debt, net of current portion
|
11,823
|
|
|
—
|
|
|
—
|
|
|
11,823
|
|
Capital leases, net of current portion
|
226
|
|
|
—
|
|
|
—
|
|
|
226
|
|
Other liabilities, net
|
1,547
|
|
|
—
|
|
|
—
|
|
|
1,547
|
|
Payables to affiliates
|
207
|
|
|
—
|
|
|
(207
|
)
|
|
—
|
|
Deferred income taxes, net
|
1,519
|
|
|
—
|
|
|
—
|
|
|
1,519
|
|
Total liabilities
|
16,523
|
|
|
207
|
|
|
(207
|
)
|
|
16,523
|
|
Partners’ capital:
|
|
|
|
|
|
|
|
Class A common units
|
—
|
|
|
4,323
|
|
|
—
|
|
|
4,323
|
|
Partnership exchangeable units
|
—
|
|
|
730
|
|
|
—
|
|
|
730
|
|
Common shares
|
3,071
|
|
|
—
|
|
|
(3,071
|
)
|
|
—
|
|
Retained Earnings
|
1,982
|
|
|
—
|
|
|
(1,982
|
)
|
|
—
|
|
Accumulated other comprehensive income (loss)
|
(1,437
|
)
|
|
(1,437
|
)
|
|
1,437
|
|
|
(1,437
|
)
|
Total Partners' capital/shareholders' equity
|
3,616
|
|
|
3,616
|
|
|
(3,616
|
)
|
|
3,616
|
|
Noncontrolling interests
|
2
|
|
|
2
|
|
|
(2
|
)
|
|
2
|
|
Total equity
|
3,618
|
|
|
3,618
|
|
|
(3,618
|
)
|
|
3,618
|
|
Total liabilities and equity
|
$
|
20,141
|
|
|
$
|
3,825
|
|
|
$
|
(3,825
|
)
|
|
$
|
20,141
|
|
RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
(In millions of U.S. dollars)
Three Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Borrowers
|
|
RBILP
|
|
Eliminations
|
|
Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
Sales
|
$
|
624
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
624
|
|
Franchise and property revenues
|
834
|
|
|
—
|
|
|
—
|
|
|
834
|
|
Total revenues
|
1,458
|
|
|
—
|
|
|
—
|
|
|
1,458
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
Cost of sales
|
475
|
|
|
—
|
|
|
—
|
|
|
475
|
|
Franchise and property expenses
|
133
|
|
|
—
|
|
|
—
|
|
|
133
|
|
Selling, general and administrative expenses
|
320
|
|
|
—
|
|
|
—
|
|
|
320
|
|
(Income) loss from equity method investments
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
Other operating expenses (income), net
|
(30
|
)
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
Total operating costs and expenses
|
887
|
|
|
—
|
|
|
—
|
|
|
887
|
|
Income from operations
|
571
|
|
|
—
|
|
|
—
|
|
|
571
|
|
Interest expense, net
|
137
|
|
|
—
|
|
|
—
|
|
|
137
|
|
Loss on early extinguishment of debt
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
Income before income taxes
|
430
|
|
|
—
|
|
|
—
|
|
|
430
|
|
Income tax expense
|
79
|
|
|
—
|
|
|
—
|
|
|
79
|
|
Net income
|
351
|
|
|
—
|
|
|
—
|
|
|
351
|
|
Equity in earnings of consolidated subsidiaries
|
—
|
|
|
351
|
|
|
(351
|
)
|
|
—
|
|
Net income (loss)
|
351
|
|
|
351
|
|
|
(351
|
)
|
|
351
|
|
Net income (loss) attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income (loss) attributable to common unitholders
|
$
|
351
|
|
|
$
|
351
|
|
|
$
|
(351
|
)
|
|
$
|
351
|
|
Comprehensive income (loss)
|
$
|
301
|
|
|
$
|
301
|
|
|
$
|
(301
|
)
|
|
$
|
301
|
|
RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
(In millions of U.S. dollars)
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Borrowers
|
|
RBILP
|
|
Eliminations
|
|
Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
Sales
|
$
|
1,735
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,735
|
|
Franchise and property revenues
|
2,389
|
|
|
—
|
|
|
—
|
|
|
2,389
|
|
Total revenues
|
4,124
|
|
|
—
|
|
|
—
|
|
|
4,124
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
Cost of sales
|
1,334
|
|
|
—
|
|
|
—
|
|
|
1,334
|
|
Franchise and property expenses
|
401
|
|
|
—
|
|
|
—
|
|
|
401
|
|
Selling, general and administrative expenses
|
948
|
|
|
—
|
|
|
—
|
|
|
948
|
|
(Income) loss from equity method investments
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
Other operating expenses (income), net
|
(44
|
)
|
|
—
|
|
|
—
|
|
|
(44
|
)
|
Total operating costs and expenses
|
2,628
|
|
|
—
|
|
|
—
|
|
|
2,628
|
|
Income from operations
|
1,496
|
|
|
—
|
|
|
—
|
|
|
1,496
|
|
Interest expense, net
|
406
|
|
|
—
|
|
|
—
|
|
|
406
|
|
Loss on early extinguishment of debt
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
Income before income taxes
|
1,086
|
|
|
—
|
|
|
—
|
|
|
1,086
|
|
Income tax expense
|
232
|
|
|
—
|
|
|
—
|
|
|
232
|
|
Net income
|
854
|
|
|
—
|
|
|
—
|
|
|
854
|
|
Equity in earnings of consolidated subsidiaries
|
—
|
|
|
854
|
|
|
(854
|
)
|
|
—
|
|
Net income (loss)
|
854
|
|
|
854
|
|
|
(854
|
)
|
|
854
|
|
Net income (loss) attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income (loss) attributable to common unitholders
|
$
|
854
|
|
|
$
|
854
|
|
|
$
|
(854
|
)
|
|
$
|
854
|
|
Comprehensive income (loss)
|
$
|
957
|
|
|
$
|
957
|
|
|
$
|
(957
|
)
|
|
$
|
957
|
|
RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
(In millions of U.S. dollars)
Three Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Borrowers
|
|
RBILP
|
|
Eliminations
|
|
Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
Sales
|
$
|
609
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
609
|
|
Franchise and property revenues
|
766
|
|
|
—
|
|
|
—
|
|
|
766
|
|
Total revenues
|
1,375
|
|
|
—
|
|
|
—
|
|
|
1,375
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
Cost of sales
|
470
|
|
|
—
|
|
|
—
|
|
|
470
|
|
Franchise and property expenses
|
107
|
|
|
—
|
|
|
—
|
|
|
107
|
|
Selling, general and administrative expenses
|
298
|
|
|
—
|
|
|
—
|
|
|
298
|
|
(Income) loss from equity method investments
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
Other operating expenses (income), net
|
26
|
|
|
—
|
|
|
—
|
|
|
26
|
|
Total operating costs and expenses
|
897
|
|
|
—
|
|
|
—
|
|
|
897
|
|
Income from operations
|
478
|
|
|
—
|
|
|
—
|
|
|
478
|
|
Interest expense, net
|
135
|
|
|
—
|
|
|
—
|
|
|
135
|
|
Income before income taxes
|
343
|
|
|
—
|
|
|
—
|
|
|
343
|
|
Income tax expense
|
93
|
|
|
—
|
|
|
—
|
|
|
93
|
|
Net income
|
250
|
|
|
—
|
|
|
—
|
|
|
250
|
|
Equity in earnings of consolidated subsidiaries
|
—
|
|
|
250
|
|
|
(250
|
)
|
|
—
|
|
Net income (loss)
|
250
|
|
|
250
|
|
|
(250
|
)
|
|
250
|
|
Net income (loss) attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income (loss) attributable to common unitholders
|
$
|
250
|
|
|
$
|
250
|
|
|
$
|
(250
|
)
|
|
$
|
250
|
|
Comprehensive income (loss)
|
$
|
346
|
|
|
$
|
346
|
|
|
$
|
(346
|
)
|
|
$
|
346
|
|
RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
(In millions of U.S. dollars)
Nine Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Borrowers
|
|
RBILP
|
|
Eliminations
|
|
Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
Sales
|
$
|
1,743
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,743
|
|
Franchise and property revenues
|
2,229
|
|
|
—
|
|
|
—
|
|
|
2,229
|
|
Total revenues
|
3,972
|
|
|
—
|
|
|
—
|
|
|
3,972
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
Cost of sales
|
1,348
|
|
|
—
|
|
|
—
|
|
|
1,348
|
|
Franchise and property expenses
|
314
|
|
|
—
|
|
|
—
|
|
|
314
|
|
Selling, general and administrative expenses
|
917
|
|
|
—
|
|
|
—
|
|
|
917
|
|
(Income) loss from equity method investments
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
Other operating expenses (income), net
|
9
|
|
|
—
|
|
|
—
|
|
|
9
|
|
Total operating costs and expenses
|
2,571
|
|
|
—
|
|
|
—
|
|
|
2,571
|
|
Income from operations
|
1,401
|
|
|
—
|
|
|
—
|
|
|
1,401
|
|
Interest expense, net
|
405
|
|
|
—
|
|
|
—
|
|
|
405
|
|
Income before income taxes
|
996
|
|
|
—
|
|
|
—
|
|
|
996
|
|
Income tax expense
|
153
|
|
|
—
|
|
|
—
|
|
|
153
|
|
Net income
|
843
|
|
|
—
|
|
|
—
|
|
|
843
|
|
Equity in earnings of consolidated subsidiaries
|
—
|
|
|
843
|
|
|
(843
|
)
|
|
—
|
|
Net income (loss)
|
843
|
|
|
843
|
|
|
(843
|
)
|
|
843
|
|
Net income (loss) attributable to noncontrolling interests
|
1
|
|
|
1
|
|
|
(1
|
)
|
|
1
|
|
Net income (loss) attributable to common unitholders
|
$
|
842
|
|
|
$
|
842
|
|
|
$
|
(842
|
)
|
|
$
|
842
|
|
Comprehensive income (loss)
|
$
|
617
|
|
|
$
|
617
|
|
|
$
|
(617
|
)
|
|
$
|
617
|
|
RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Statements of Cash Flows
(In millions of U.S. dollars)
Nine months ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Borrowers
|
|
RBILP
|
|
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net income
|
$
|
854
|
|
|
$
|
854
|
|
|
$
|
(854
|
)
|
|
$
|
854
|
|
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
|
|
|
|
|
|
|
|
Equity in loss (earnings) of consolidated subsidiaries
|
—
|
|
|
(854
|
)
|
|
854
|
|
|
—
|
|
Depreciation and amortization
|
139
|
|
|
—
|
|
|
—
|
|
|
139
|
|
Non-cash loss on early extinguishment of debt
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
Amortization of deferred financing costs and debt issuance discount
|
22
|
|
|
—
|
|
|
—
|
|
|
22
|
|
(Income) loss from equity method investments
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
(Gain) loss on remeasurement of foreign denominated transactions
|
(38
|
)
|
|
—
|
|
|
—
|
|
|
(38
|
)
|
Net (gains) losses on derivatives
|
(43
|
)
|
|
—
|
|
|
—
|
|
|
(43
|
)
|
Share-based compensation expense
|
56
|
|
|
—
|
|
|
—
|
|
|
56
|
|
Deferred income taxes
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
Other
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Changes in current assets and liabilities, excluding acquisitions and dispositions:
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
Inventories and prepaids and other current assets
|
(34
|
)
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
Accounts and drafts payable
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
Other accrued liabilities and gift card liability
|
(85
|
)
|
|
—
|
|
|
—
|
|
|
(85
|
)
|
Tenant inducements paid to franchisees
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
Other long-term assets and liabilities
|
64
|
|
|
—
|
|
|
—
|
|
|
64
|
|
Net cash provided by (used for) operating activities
|
878
|
|
|
—
|
|
|
—
|
|
|
878
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Payments for property and equipment
|
(32
|
)
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
Net proceeds from disposal of assets, restaurant closures, and refranchisings
|
22
|
|
|
—
|
|
|
—
|
|
|
22
|
|
Settlement/sale of derivatives, net
|
17
|
|
|
—
|
|
|
—
|
|
|
17
|
|
Net cash provided by (used for) investing activities
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt
|
750
|
|
|
—
|
|
|
—
|
|
|
750
|
|
Repayments of long-term debt and finance leases
|
(290
|
)
|
|
—
|
|
|
—
|
|
|
(290
|
)
|
Payment of financing costs
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
Distributions on Class A common and Partnership exchangeable units
|
—
|
|
|
(669
|
)
|
|
—
|
|
|
(669
|
)
|
Capital contribution from RBI Inc.
|
99
|
|
|
—
|
|
|
—
|
|
|
99
|
|
Distributions from subsidiaries
|
(669
|
)
|
|
669
|
|
|
—
|
|
|
—
|
|
Proceeds from derivatives
|
17
|
|
|
—
|
|
|
—
|
|
|
17
|
|
Net cash provided by (used for) financing activities
|
(106
|
)
|
|
—
|
|
|
—
|
|
|
(106
|
)
|
Effect of exchange rates on cash and cash equivalents
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Increase (decrease) in cash and cash equivalents
|
786
|
|
|
—
|
|
|
—
|
|
|
786
|
|
Cash and cash equivalents at beginning of period
|
913
|
|
|
—
|
|
|
—
|
|
|
913
|
|
Cash and cash equivalents at end of period
|
$
|
1,699
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,699
|
|
RESTAURANT BRANDS INTERNATIONAL LIMITED PARTNERSHIP AND SUBSIDIARIES
Condensed Consolidating Statements of Cash Flows
(In millions of U.S. dollars)
Nine Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Borrowers
|
|
RBILP
|
|
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net income
|
$
|
843
|
|
|
$
|
843
|
|
|
$
|
(843
|
)
|
|
$
|
843
|
|
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
|
|
|
|
|
|
|
|
Equity in loss (earnings) of consolidated subsidiaries
|
—
|
|
|
(843
|
)
|
|
843
|
|
|
—
|
|
Depreciation and amortization
|
138
|
|
|
—
|
|
|
—
|
|
|
138
|
|
Amortization of deferred financing costs and debt issuance discount
|
22
|
|
|
—
|
|
|
—
|
|
|
22
|
|
(Income) loss from equity method investments
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
(Gain) loss on remeasurement of foreign denominated transactions
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
Net (gains) losses on derivatives
|
(24
|
)
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
Share-based compensation expense
|
39
|
|
|
—
|
|
|
—
|
|
|
39
|
|
Deferred income taxes
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
Other
|
11
|
|
|
—
|
|
|
—
|
|
|
11
|
|
Changes in current assets and liabilities, excluding acquisitions and dispositions:
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Inventories and prepaids and other current assets
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
Accounts and drafts payable
|
(24
|
)
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
Other accrued liabilities and gift card liability
|
(284
|
)
|
|
—
|
|
|
—
|
|
|
(284
|
)
|
Tenant inducements paid to franchisees
|
(25
|
)
|
|
—
|
|
|
—
|
|
|
(25
|
)
|
Other long-term assets and liabilities
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
Net cash provided by (used for) operating activities
|
643
|
|
|
—
|
|
|
—
|
|
|
643
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Payments for property and equipment
|
(53
|
)
|
|
—
|
|
|
—
|
|
|
(53
|
)
|
Net proceeds from disposal of assets, restaurant closures, and refranchisings
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Settlement/sale of derivatives, net
|
11
|
|
|
—
|
|
|
—
|
|
|
11
|
|
Other investing activities, net
|
12
|
|
|
—
|
|
|
—
|
|
|
12
|
|
Net cash provided by (used for) investing activities
|
(28
|
)
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Repayments of long-term debt and finance leases
|
(66
|
)
|
|
—
|
|
|
—
|
|
|
(66
|
)
|
Distributions on Class A common and Partnership exchangeable units
|
—
|
|
|
(517
|
)
|
|
—
|
|
|
(517
|
)
|
Distributions to RBI for payments in connections with redemption of preferred shares
|
—
|
|
|
(60
|
)
|
|
—
|
|
|
(60
|
)
|
Capital contribution from RBI Inc.
|
53
|
|
|
—
|
|
|
—
|
|
|
53
|
|
Distributions from subsidiaries
|
(577
|
)
|
|
577
|
|
|
—
|
|
|
—
|
|
Other financing activities, net
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Net cash (used for) provided by financing activities
|
(589
|
)
|
|
—
|
|
|
—
|
|
|
(589
|
)
|
Effect of exchange rates on cash and cash equivalents
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
Increase (decrease) in cash and cash equivalents
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
Cash and cash equivalents at beginning of period
|
1,097
|
|
|
—
|
|
|
—
|
|
|
1,097
|
|
Cash and cash equivalents at end of period
|
$
|
1,113
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,113
|
|
Note 18. Subsequent Events
Cash Distributions/Dividends
On October 3, 2019, RBI paid a cash dividend of $0.50 per RBI common share to common shareholders of record on September 17, 2019. Partnership made a distribution to RBI as holder of Class A common units in the amount of the aggregate dividends declared and paid by RBI on RBI common shares and also made a distribution in respect of each Partnership exchangeable unit in the amount of $0.50 per exchangeable unit to holders of record on September 17, 2019.
The RBI board of directors has declared a cash dividend of $0.50 per RBI common share, which will be paid on January 3, 2020 to RBI common shareholders of record on December 17, 2019. Partnership will make a distribution to RBI as holder of Class A common units in the amount of the aggregate dividends declared and paid by RBI on RBI common shares. Partnership will also make a distribution in respect of each Partnership exchangeable unit in the amount of $0.50 per Partnership exchangeable unit, and the record date and payment date for such distribution will be the same as the record date and payment date for the cash dividend per RBI common share set forth above.
Term Loan A Proceeds and Redemption of Senior Notes
As disclosed in Note 10, Long-Term Debt, the net proceeds from the Term Loan A were obtained on October 7, 2019. 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 the 2015 4.625% Senior Notes on October 7, 2019 and to pay related fees and expenses. Additionally, the aggregate principal amount of the commitments under our Revolving Credit Facility was increased to $1,000 million effective October 7, 2019.
*****